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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 20, 1998
-----------------------
Travelers Group Inc.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9924 52-1568099
--------- --------------- -------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
388 Greenwich Street, New York, New York 10013
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 816-8000
- ---------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
Travelers Group Inc. (the Company) reported a 25% increase in operating
earnings for the first quarter ended March 31, 1998 to a record $1.007 billion,
or $0.87 per share (basic) and $0.84 (diluted). This is up from $806.2 million,
or $0.70 per share (basic) and $0.66 (diluted), in the comparable 1997 quarter.
Revenues were a record $10.4 billion, a 19% rise from $8.7 billion in 1997.
Net income for the quarter reached $1.093 billion, or $0.95 per share
(basic) and $0.91 (diluted), up from $815.1 million, or $0.71 per share
(basic) and $0.67 (diluted), in the 1997 period. The current quarter
includes net investment portfolio gains of $86.5 million, while the prior
year period included net investment portfolio gains of $8.9 million. Basic
earnings per share are based on 1.116 billion weighted average common shares
outstanding in the current quarter and 1.104 billion in the 1997 period.
Diluted earnings per share are based on 1.173 billion adjusted weighted
average shares in the 1998 quarter and 1.182 billion in the year earlier
period.
As previously announced, on April 5, 1998, the Company and Citicorp
agreed to merge, subject to customary conditions including approvals of
regulators and stockholders. Information about Citicorp is included in its
periodic reports and other materials filed with the Securities and Exchange
Commission. On April 21, 1998, Citicorp reported net income for the first
quarter of 1998 of $1.065 billion, or $2.28 per share (basic) and $2.23 per
share (diluted). Revenues adjusted for the effect of credit card
securitization activity were $6.065 billion for the period.
INVESTMENT SERVICES
SALOMON SMITH BARNEY OPERATING EARNINGS:
$502.8 MILLION, UP 22% FROM $411.9 MILLION IN 1997 PERIOD
Salomon's Smith Barney's revenues increased in every category compared with
a strong first quarter in 1997. Net revenues reached $3.1 billion, up 16%.
Return on equity from operating earnings was 23.1%, up from last year and
significantly better than the previous quarter's 12.5%. The pretax profit
margin at 25.9% was also significantly improved from the previous quarter.
Robust securities markets resulted in an increase of 11% in commission
revenues, as the average annualized retail gross production per Financial
Consultant continued to rise to $452,000, up 15% from last year's first quarter
and up 9% from the previous quarter. Total client assets passed the $700
billion mark, increasing 29%. Total assets under fee-based management increased
to $245 billion, up 32%. Included in assets under fee-based management are
those assets discussed in the next section of this report as well as assets in
accounts managed by the Consulting Group, which rose almost 44% to $67.1
billion, and assets in FC managed accounts, which reached $13.3 billion, up more
than 56%. Revenues from asset management and administration fees increased by
$109 million to almost $500 million for the 1998 quarter.
2
<PAGE>
Investment banking revenues jumped 30% to $628.1 million, primarily
reflecting an increase in merger and acquisition advisory fees as well as
revenue growth from unit trust, equities, high yield and investment grade debt
underwriting.
Principal transaction revenues were up slightly from last year to $779.5
million and significantly improved from $243.2 million in the previous quarter.
Positive results from commodities trading conducted by Phibro Inc. were somewhat
offset by a decline in equities and fixed income trading. Net interest revenues
totaled $395.3 million, up 23% from $321.9 million in the 1997 period.
Total expenses increased almost 15% quarter-over-quarter to $2.3
billion, principally as a result of higher compensation and other expenses
related to greater production. The ratio of compensation and benefits to net
revenues was 54.9%, down from 59.5% in the previous quarter. The majority of
the expected future cost savings from the Salomon Inc combination are real
estate-related and will begin to be realized toward the end of 1998 as space
is consolidated.
SALOMON SMITH BARNEY ASSET MANAGEMENT OPERATING EARNINGS: $60.3 MILLION, UP
36% FROM $44.4 MILLION IN 1997 PERIOD
Although included in Salomon Smith Barney's overall results, this division
is being focused upon as a separate corporate business line.
The division's excellent earnings growth reflects continued strength in
mutual funds, managed accounts, and its share of unit trust revenues, as well as
the acquisition of $5.9 billion of Common Sense Trust assets at year-end 1997.
Its $165 billion in assets under management break down to 31% in money
market funds, 34% in mutual funds and 35% in accounts managed for high net worth
individuals, pension funds, corporations and other institutions. Investment
advisory, administration and distribution fees rose 20% to $201.7 million in the
quarter, reflecting a 26% increase in assets under management since the
comparable period last year. The pre-tax profit margin from this unit was
44.4%, up from 39.5% in the prior year period, and among the highest in the
industry.
In the mutual fund sector, there was a significant increase not only in
dollar inflows but also in performance, with the number of Morningstar 4- and 5-
star funds rising to 23, up from 15 in the prior year period. In addition,
sales of proprietary mutual funds rose 60%, and they account for an increasing
percentage - 28.2% versus 24.6% in the 1997 quarter - of Salomon Smith Barney's
total mutual fund sales.
New products successfully introduced recently include the TOTAL RETURN BOND
FUND as well as a unit investment trust consisting of Real Estate Investment
Trusts.
3
<PAGE>
CONSUMER FINANCE
CONSUMER FINANCE OPERATING EARNINGS:
$59.4 MILLION, UP 26% FROM $47.3 MILLION IN 1997 PERIOD
This segment's performance, in a traditionally slow quarter, reflects the
integration of Security Pacific Financial Services into the Commercial Credit
branch system since July 1997, continued internal receivables growth and an
improved charge-off rate.
Net receivables owned reached a record $11.4 billion, up 35% from the prior
year period and up $335 million or 3% since year-end 1997. This excludes $255.1
million in credit card receivables securitized on March 6, 1998. Most of the
receivables growth was in real estate-secured loans, which particularly reflects
the strength of this product among Primerica Financial Services (PFS)
representatives. On a managed basis, including securitized assets, receivables
totaled $11.6 billion, an increase of $404 million since year-end 1997.
The average yield on owned receivables, at 14.18%, was down from 14.65% in
the 1997 quarter, reflecting the shift in the portfolio mix toward lower-risk
real estate loans which have lower margins. At quarter-end, the owned portfolio
consisted of 47% real estate-secured loans, 35% personal loans, 11% credit cards
and 7% sales finance and other.
Delinquencies over 60 days on owned receivables were 2.33% of receivables,
down slightly from 2.35% at year-end 1997, but up from 2.25% at the end of the
comparable quarter last year. The charge-off rate on owned receivables of 2.75%
was improved from the prior year period. As expected, it was up from 2.42% in
the previous quarter, which contained a short-term benefit from the transition
of Security Pacific's portfolio to the Company's charge-off policies. The
charge-off rate is expected to return to lower levels during the second half of
1998.
LIFE INSURANCE
PRIMERICA FINANCIAL SERVICES OPERATING EARNINGS:
$94.6 MILLION, UP 21% FROM $78.1 MILLION IN 1997 PERIOD
The quarter's record performance reflects PFS's continued success at
cross-selling a range of products, growth in life insurance in force, favorable
mortality experience and disciplined expense management.
Life insurance in force reached a record $372.5 billion, up 3% from the
prior year quarter, reflecting good policy persistency and stable sales growth.
New term life insurance sales were $13.0 billion in face value, up from $12.0
billion in the 1997 quarter. Although the number of policies issued declined
quarter-over-quarter, the average face amount per policy issued rose 16% to
$222,600.
4
<PAGE>
Cross-selling ventures demonstrated continued success. Distribution of
non-life insurance products accounted for $19.6 million, or 21%, of PFS's
operating earnings, an increase of 39% from the prior year quarter.
Sales of mutual funds rose more than 6% to $768.7 million (at net asset
value), despite some softness in the Canadian mutual fund market. Salomon
Smith Barney funds accounted for almost 60% of PFS's U.S. sales and
approximately 44% of total sales.
Cash advanced on $.M.A.R.T. loan -Registered Trademark- and
$.A.F.E.-Registered Trademark- loan products underwritten by Commercial Credit
was up 15% to $332.5 million. The TRAVELERS SECURE line of property casualty
insurance products showed strong growth, with premiums up almost four-fold to
$38 million and the number of policies sold in the quarter up 123% to 37,192.
The number of agents licensed to sell auto and homeowners insurance jumped 51%
to over 10,000 people. Variable annuity sales also climbed, reaching net
written premiums and deposits of $126.3 million.
One of the primary factors in PFS's cross-selling success, the FINANCIAL
NEEDS ANALYSIS, continues to help the company's Personal Financial Analysts
define and address their client's needs. They submitted more than 140,000 FNA'S
in the quarter, indicating the potential that more than one-half million people
will have an analysis done for them before year-end 1998.
TRAVELERS LIFE & ANNUITY OPERATING EARNINGS:
$118.1 MILLION, UP 17% FROM $101.1 MILLION IN 1997 PERIOD
These record earnings were largely driven by strong investment income and
double-digit growth in individual and group annuity account balances as well as
long term care premiums. Positive earnings momentum attributable to strong
sales growth of less capital-intensive products - including variable life
insurance and annuities - continues to be partially offset by a gradual decline
in the amount of higher margin business written in prior years.
In deferred annuities, significant sales through Salomon Smith Barney
Financial Consultants and The Copeland Companies, combined with favorable market
returns from variable annuities, drove account balances to $17.5 billion at
March 31, 1998, up 29% or $4.0 billion from a year ago. Premium deposits for
the quarter were up 43% to $819.8 million, of which more than 80% was generated
by cross-selling through Salomon Smith Barney Financial Consultants and The
Copeland Companies. Premium deposits through the former rose 94% to $348
million, reflecting the momentum of a fourth quarter 1997 cross-selling
initiative, while Copeland's premium deposits increased 31% to $319 million,
reflecting growth in its core business and continued success with the Salomon
Smith Barney joint venture in the small company segment of the 401(k) market.
Payout and group annuity account balances and benefit reserves reached
$12.2 billion at March 31, 1998, up 10%. The revitalization of this business is
reflected in the 33% increase in net written premiums and deposits (excluding
Travelers Group employee pension plan deposits) to $859.9 million, up from
$647.1 million in the 1997 period.
5
<PAGE>
For individual life insurance, net premiums and deposits were $85.2
million, up 22%. Single deposits doubled to $23.8 million, and new periodic
premium sales increased 22%, reflecting a doubling of sales at Salomon Smith
Barney. For the quarter, Salomon Smith Barney life sales increased to over 40%
of new periodic premium and single deposits. Life insurance in force was $52.4
billion at March 31, 1998, up $1.9 billion from a year ago.
Earned premiums for the growing long term care insurance product line
increased 31% to $45.6 million. New sales through Salomon Smith Barney
increased to over 15% of total sales.
PROPERTY CASUALTY INSURANCE
(Travelers Property Casualty Corp. is 83.3% owned by the Company.)
TRAVELERS PROPERTY CASUALTY OPERATING EARNINGS:
$303.9 MILLION, BEFORE MINORITY INTEREST
TRAVELERS GROUP'S SHARE:
$253.1 MILLION, UP 15% FROM $219.6 MILLION IN 1997 PERIOD
Travelers Property Casualty Corp.'s results for the quarter were strong,
reflecting higher net investment income and continued productivity gains.
Operating earnings include financing and other corporate costs of $28.7 million
and were further reduced by minority interest of $50.8 million.
COMMERCIAL LINES OPERATING EARNINGS (before minority interest):
$224.6 MILLION, UP 16% FROM $193.5 MILLION IN 1997 PERIOD
Performance improvement in this segment reflects strong net investment
income, continued expense savings and no catastrophe losses versus $4.9 million
in catastrophe losses, after taxes and reinsurance, in the prior year period.
While the company continues its disciplined approach to underwriting, it
has also maintained strong retention rates and captured new business in the
markets and product and service areas where it makes sense to do so. This
includes an increase in sales to small businesses and increased sales of
claim service-only business.
The statutory combined ratio for the quarter was 106.8% compared to 110.5%,
as adjusted, in the 1997 period. Total net written premiums were $1.212
billion, up slightly from $1.196 billion, excluding a one-time adjustment of
$142.4 million in the prior year period.
PERSONAL LINES OPERATING EARNINGS (before minority interest):
$108.0 MILLION VERSUS $107.5 MILLION IN 1997 PERIOD
Operating results were driven by growth in premium income and strong net
investment income. These were offset by catastrophe losses, after taxes and
reinsurance, of $8.6 million, compared to no such losses in the 1997 quarter,
and investments in service centers and market expansions.
6
<PAGE>
Personal Lines achieved strong growth in new business among all
distribution channels and continued to lay the foundation for future market
expansion. Total net written premiums grew 14% over the prior year to $806.0
million, excluding a one-time reinsurance adjustment in 1997 of $68.7 million.
Market expansion also continued in the quarter with entry into the New York
non-standard auto market, and there are now over 1,500 licensed producers in
California for the company's recently established TravCal subsidiary.
The statutory combined ratio for the quarter was 93.2% compared to 89.8%,
as adjusted, in the 1997 first quarter. The increase was primarily due to the
increase in catastrophe losses.
CORPORATE AND OTHER
OPERATING EXPENSE: ($21.1 MILLION) VERSUS ($51.8 MILLION) IN 1997 PERIOD
Net treasury and corporate staff expenses for the quarter were up slightly
from the prior year period. The decline in total operating expense for the
segment reflects income from the disposition of a real estate development
property.
INVESTMENT PORTFOLIO
The Company's $64 billion investment portfolio consists primarily of
fixed income investments with average quality ratings of A+/A1. The
effective duration of the fixed income portfolio, including short-term fixed
income investments, is 5.0 years.
_____________________________
The Company, which as of March 31, 1998 had assets of $400 billion, is a
diversified, integrated financial services company engaged in investment
services, asset management, consumer finance and life and property casualty
insurance services. Book value per share at quarter-end was $17.50 -- which
includes unrealized gains in the investment portfolio of $1.121 billion.
Excluding the mark-to-market requirement for the investment portfolio, the book
value for the period would have been $16.53 per share.
FORWARD LOOKING STATEMENTS
Certain of the statements contained herein that are not historical facts
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements.
7
<PAGE>
Forward-looking statements are typically identified by the words "believe,"
"expect," "anticipate," "intend," "estimate," and similar expressions. These
forward-looking statements involve risks and uncertainties including, but not
limited to, the following: changes in general economic conditions, including
changes in the interest rate environment and the level of personal bankruptcies;
customer responsiveness to both new products and distribution channels; and the
possibility that the Company will be unable to achieve anticipated levels of
operational efficiencies related to recently acquired companies, as well as
achieving its other cost-savings initiatives.
8
<PAGE>
TRAVELERS GROUP - SUMMARY OF EARNINGS
(In millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
For the quarter ended
March 31,
------------------------------------------------------
1998 1997
----------------------- ----------------------
<S> <C> <C>
REVENUES $ 10,367.6 $ 8,699.9
-------- ======================= ======================
INCOME AFTER TAX AND MINORITY INTEREST:
--------------------------------------
OPERATING EARNINGS $ 1,006.9 $ 806.2
Portfolio gains 86.5 8.9
----------------------- -----------------------
NET INCOME $ 1,093.4 $ 815.1
======================= =======================
BASIC EARNINGS PER SHARE:
OPERATING EARNINGS $ 0.87 $ 0.70
Portfolio gains 0.08 0.01
----------------------- -----------------------
NET INCOME $ 0.95 $ 0.71
======================= =======================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, APPLICABLE TO BASIC EPS 1,116.2 1,103.9
======================= =======================
DILUTED EARNINGS PER SHARE:
--------------------------
OPERATING EARNINGS $ 0.84 $ 0.66
Portfolio gains 0.07 0.01
----------------------- -----------------------
NET INCOME $ 0.91 $ 0.67
======================= =======================
ADJUSTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, APPLICABLE TO DILUTED EPS 1,173.1 1,182.0
======================= =======================
COMMON SHARES ISSUED AND
------------------------
OUTSTANDING AT PERIOD END 1,151.9 1,146.6
------------------------- ======================= =======================
PREFERRED DIVIDENDS - BASIC $ (31.1) $ (35.8)
--------------------------- ======================= =======================
PREFERRED DIVIDENDS - DILUTED $ (24.8) $ (26.1)
----------------------------- ======================= =======================
</TABLE>
9
<PAGE>
TRAVELERS GROUP - SEGMENT REVENUES
(In millions of dollars)
<TABLE>
<CAPTION>
For the quarter ended
March 31,
-------------------------------------------------------
1998 1997
----------------------- -----------------------
REVENUES
INVESTMENT SERVICES
-------------------
<S> <C> <C>
Investment banking and brokerage $ 5,831.8 $ 4,691.3
Asset management 224.9 186.1
----------------------- ------------------------
Total Investment Services 6,056.7 4,877.4
----------------------- ------------------------
CONSUMER FINANCE SERVICES
-------------------------
485.0 377.1
----------------------- ------------------------
LIFE INSURANCE SERVICES
-----------------------
Travelers Life and Annuity 771.9 617.9
Primerica Financial Services 401.4 375.2
----------------------- ------------------------
Total Life Insurance Services 1,173.3 993.1
----------------------- ------------------------
PROPERTY AND CASUALTY INSURANCE SERVICES
----------------------------------------
Commercial Lines 1,696.7 1,624.1
Personal Lines 893.0 805.0
Other 4.5 2.2
----------------------- ------------------------
Total P&C Insurance Services 2,594.2 2,431.3
----------------------- ------------------------
CORPORATE AND OTHER 58.4 21.0
------------------- ----------------------- ------------------------
Total revenues $ 10,367.6 $ 8,699.9
======================= ========================
</TABLE>
10
<PAGE>
TRAVELERS GROUP - SEGMENT OPERATING EARNINGS
(In millions of dollars)
<TABLE>
<CAPTION>
For the quarter ended
March 31,
--------------------------------------------------------
1998 1997
----------------------- ------------------------
OPERATING EARNINGS
INVESTMENT SERVICES
-------------------
<S> <C> <C>
Investment banking and brokerage $ 442.5 $ 367.5
Asset management 60.3 44.4
------------------------- ---------------------
Total Investment Services 502.8 411.9
------------------------- ---------------------
CONSUMER FINANCE SERVICES 59.4 47.3
------------------------- ------------------------- ---------------------
LIFE INSURANCE SERVICES
-----------------------
Travelers Life and Annuity 118.1 101.1
Primerica Financial Services 94.6 78.1
------------------------- ---------------------
Total Life Insurance Services 212.7 179.2
------------------------- ---------------------
PROPERTY AND CASUALTY INSURANCE SERVICES
----------------------------------------
Commercial Lines 224.6 193.5
Personal Lines 108.0 107.5
------------------------- ---------------------
332.6 301.0
Financing costs and other (28.7) (33.1)
Minority interest (50.8) (48.3)
------------------------- ---------------------
Total P&C Insurance Services 253.1 219.6
------------------------- ---------------------
Total business income 1,028.0 858.0
------------------------- ---------------------
CORPORATE AND OTHER (21.1) (51.8)
------------------- ------------------------- ---------------------
Total operating earnings $ 1,006.9 $ 806.2
========================= =====================
</TABLE>
11
<PAGE>
INVESTMENT SERVICES -- PAGE 1
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter
ended March 31,
-------------------------------------------------------
1998 1997
------------------------- ---------------------
SALOMON SMITH BARNEY
Revenues:
<S> <C> <C>
Commissions $ 795.2 $ 716.3
Asset management and administration fees 497.6 389.1
Investment banking 628.1 483.8
Principal transactions 779.5 762.3
Other income 38.7 35.1
--------------------- ---------------------
Total noninterest revenues 2,739.1 2,386.6
--------------------- ---------------------
Interest and dividends 3,317.6 2,490.8
Interest expense 2,922.3 2,168.9
--------------------- ---------------------
Net interest and dividends 395.3 321.9
--------------------- ---------------------
Total revenues, net of interest expense 3,134.4 2,708.5
--------------------- ---------------------
Noninterest expenses:
Compensation and benefits 1,721.9 1,479.2
Communications 116.9 120.9
Occupancy and equipment 105.0 106.4
Floor brokerage and other production 109.6 85.8
Advertising and market development 69.7 62.5
Professional services 50.9 40.8
Other operating and administrative expenses 149.5 132.4
--------------------- ---------------------
Total noninterest expenses 2,323.5 2,028.0
--------------------- ---------------------
Income before income taxes 810.9 680.5
Provision for income taxes 308.1 268.6
--------------------- ---------------------
Net income $ 502.8 $ 411.9
===================== =====================
Total equity (in billions) $ 8.9 $ 7.9
Return on equity 23.1% 21.7%
Pre-tax profit margin 25.9% 25.1%
Non-compensation expenses as a
percent of net revenue 19.2% 20.3%
CLIENT ASSETS
-------------
ASSETS UNDER FEE-BASED MANAGEMENT (IN BILLIONS):
Money market funds $ 51.6 $ 43.9
Mutual funds 56.0 40.5
Managed accounts 57.4 46.3
--------------------- ---------------------
Salomon Smith Barney Asset Management 165.0 130.7
Financial Consultant managed accounts 13.3 8.5
--------------------- ---------------------
Total internally managed accounts 178.3 139.2
Consulting Group externally managed assets 67.1 46.7
--------------------- ---------------------
Total assets under fee-based management $ 245.4 $ 185.9
===================== =====================
PRIVATE CLIENT
--------------
Registered Financial Consultants 10,321 10,430
Annualized retail gross production per FC (000) $ 452 $ 392
Domestic retail offices 432 443
</TABLE>
12
<PAGE>
INVESTMENT SERVICES -- PAGE 2
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter
ended March 31,
---------------------------------------------------
1998 1997
--------------------- ---------------------
SALOMON SMITH BARNEY
ASSET MANAGEMENT DIVISION (SSBAM)
Revenues:
<S> <C> <C>
Investment advisory, admin. & distribution fees $ 201.7 $ 168.0
Unit Investment Trust revenues - net 12.6 8.7
Other revenues 10.6 9.4
------------------ --------------------
Total revenues 224.9 186.1
------------------ --------------------
Expenses:
Employee compensation and benefits 41.9 35.4
Deferred commission amortization 34.8 32.8
Other expenses 48.4 44.4
------------------ --------------------
Total expenses 125.1 112.6
------------------ --------------------
Operating income before income taxes 99.8 73.5
Provision for income taxes 39.5 29.1
------------------ --------------------
Operating earnings $ 60.3 $ 44.4
================== ====================
Pre-tax profit margin 44.4% 39.5%
SSBAM ASSETS UNDER MANAGEMENT (IN BILLIONS):
-------------------------------------------
Money market funds $ 51.6 $ 43.9
------------------ --------------------
Mutual funds:
Equity 29.9 18.6
Taxable Fixed 13.3 11.5
Tax Exempt Fixed 9.2 8.0
Annuities 3.6 2.4
------------------ --------------------
Total mutual funds 56.0 40.5
------------------ --------------------
Managed accounts 57.4 46.3
------------------ --------------------
Salomon Smith Barney Asset Management $ 165.0 $ 130.7
================== ====================
Unit Investment Trusts held in client accounts $ 13.1 $ 9.4
Number of Morningstar 4- and 5- star funds 23 15
CONSOLIDATED TRAVELERS GROUP
ASSETS UNDER MANAGEMENT (IN BILLIONS)
-------------------------------------
Salomon Smith Barney Asset Management $ 165.0 $ 130.7
Financial consultant managed accounts 13.3 8.5
Travelers Life and Annuity (1) 25.2 21.4
------------------ --------------------
Total assets managed for third parties $ 203.5 $ 160.6
================== ====================
</TABLE>
(1) Part of the Life Insurance Services segment.
13
<PAGE>
CONSUMER FINANCE SERVICES
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter
ended March 31,
-----------------------------------------------
1998 1997
------------------ --------------------
<S> <C> <C>
REVENUES $ 485.0 $ 377.1
OPERATING EARNINGS $ 59.4 $ 47.3
OWNED BASIS:
------------
NET RECEIVABLES:
Real estate-secured loans (1) $ 5,325.8 $ 3,698.2
Personal loans (2) 3,960.5 3,257.2
Credit cards - owned 1,225.4 972.2
Sales finance and other 874.8 519.0
----------------- ----------------
Consumer finance receivables,
net of unearned finance charges 11,386.5 8,446.6
Accrued interest receivable 88.9 51.7
Allowance for credit losses (331.4) (250.9)
----------------- ----------------
Consumer finance receivables, net $ 11,144.0 $ 8,247.4
================= ================
Number of offices 1,025 857
Number of credit card accounts 1,079,200 836,400
Average yield 14.18% 14.65%
Average net interest margin 7.77% 8.17%
Charge-off rate 2.75% 2.95%
60+ days past due as % of receivables 2.33% 2.25%
Reserves as % of net receivables 2.91% 2.97%
MANAGED BASIS:
--------------
Consumer finance receivables, net of unearned
finance charges $ 11,386.5 $ 8,446.6
Credit card receivables securitized or held for sale (3) 255.1 -
----------------- ----------------
Managed receivables $ 11,641.6 $ 8,446.6
================= ================
Managed credit card receivables $ 1,480.5 $ 972.2
Average yield 14.13% 14.65%
Average net interest margin 7.74% 8.17%
Charge-off rate 2.76% 2.95%
60+ days past due as % of receivables 2.31% 2.25%
(1) Includes fully secured $.M.A.R.T. receivables,
as follows: $ 2,052.8 $ 1,307.8
(2) Includes $.A.F.E. and partially secured
$.M.A.R.T. receivables, as follows: $ 367.7 $ 391.3
(3) On March 6, 1998, the company securitized
$255.1 million of credit card receivables.
</TABLE>
Note: Financial data for Security Pacific Financial Services
is included from date of acquisition (July 31, 1997).
14
<PAGE>
LIFE INSURANCE SERVICES -- PAGE 1
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter
ended March 31,
--------------------------------------------
1998 1997
------------------- ----------------
<S> <C> <C>
REVENUES $ 1,173.3 $ 993.1
OPERATING EARNINGS
Travelers Life and Annuity $ 118.1 $ 101.1
Primerica Financial Services 94.6 78.1
------------------- ----------------
Total $ 212.7 $ 179.2
=================== ================
</TABLE>
15
<PAGE>
LIFE INSURANCE SERVICES -- PAGE 2
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter
ended March 31,
--------------------------------------------
1998 1997
------------------- ----------------
TRAVELERS LIFE AND ANNUITY
<S> <C> <C>
REVENUES $ 771.9 $ 617.9
OPERATING EARNINGS $ 118.1 $ 101.1
PRE-TAX CONTRIBUTION BY SOURCE:
-------------------------------
Deferred and payout annuities $ 87.6 $ 75.8
Group annuities 31.5 22.7
Life and long term care insurance 37.9 35.0
Other (includes run-off and return on excess capital) 24.1 19.7
----------------- ------------------
Total $ 181.1 $ 153.2
================= ==================
DEFERRED ANNUITIES:
-------------------
Number of annuities in force (000):
Fixed 404.9 402.9
Variable 413.1 293.5
----------------- ------------------
Total 818.0 696.4
================= ==================
Number of annuities issued (000):
Fixed 5.4 7.8
Variable 37.7 29.1
----------------- ------------------
Total 43.1 36.9
================= ==================
Net written premiums & deposits:
Fixed $ 232.7 $ 144.1
Variable 587.1 429.7
----------------- ------------------
Total $ 819.8 $ 573.8
================= ==================
Policyholder account balances & benefit reserves (1):
Fixed $ 7,411.6 $ 7,240.8
Variable 10,132.8 6,308.7
----------------- ------------------
Total $ 17,544.4 $ 13,549.5
================= ==================
PAYOUT ANNUITIES:
----------------
Net written premiums & deposits $ 81.0 $ 54.7
Policyholder account balances & benefit
reserves $ 4,558.1 $ 4,403.6
GIC AND OTHER ANNUITIES:
-----------------------
Net written premiums & deposits (2) $ 778.9 $ 592.4
Policyholder account balances & benefit
reserves: (1)
Guaranteed investment contracts $ 2,633.2 $ 1,697.6
Other group annuities 5,040.1 4,991.3
----------------- ------------------
Total $ 7,673.3 $ 6,688.9
================= ==================
</TABLE>
(1) Includes general account, separate accounts
and managed funds.
(2) Excludes deposits of $13.0 million and $33.0
million in the 1998 and 1997 first quarters,
respectively, related to the transfer
in-house of old Travelers pension fund
assets previously managed externally.
16
<PAGE>
LIFE INSURANCE SERVICES -- PAGE 3
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter
ended March 31,
--------------------------------------------
1998 1997
----------------- ------------------
TRAVELERS LIFE AND ANNUITY (CONT'D)
INDIVIDUAL LIFE INSURANCE:
-------------------------
<S> <C> <C>
Life insurance in force (in billions, face amt.):
Term $ 30.6 $ 29.5
Permanent (universal & whole life) 21.8 21.0
------------------ ------------------
Total $ 52.4 $ 50.5
================== ==================
Number of life policies in force (000) 525.2 540.2
Life insurance issued (in billions, face amt.) $ 2.0 $ 1.5
Number of life policies issued (000) 7.1 5.4
Net written premiums & deposits:
Direct periodic premiums and deposits $ 76.2 $ 71.2
Single premium deposits 23.8 11.9
Reinsurance (14.8) (13.3)
------------------ ------------------
Total $ 85.2 $ 69.8
================== ==================
Policyholder account balances & benefit
reserves $ 2,327.1 $ 2,192.8
INDIVIDUAL LONG TERM CARE INSURANCE:
-----------------------------------
Number of policies in force (000) 107.7 84.3
Net earned premiums $ 45.6 $ 34.9
Net written premiums $ 44.5 $ 42.5
ALL BUSINESSES:
--------------
Net investment income $ 480.3 $ 439.9
Interest credited to contractholders $ 215.0 $ 197.6
</TABLE>
17
<PAGE>
LIFE INSURANCE SERVICES -- PAGE 4
(In millions of dollars)
<TABLE>
<CAPTION>
As of, or for the quarter
ended March 31,
----------------------------------------------
1998 1997
------------------- ------------------
PRIMERICA FINANCIAL SERVICES
<S> <C> <C>
REVENUES $ 401.4 $ 375.2
OPERATING EARNINGS:
Life insurance $ 75.0 $ 64.0
Other financial products 19.6 14.1
------------------ ----------------
Total operating earnings $ 94.6 $ 78.1
================== ================
Face value (in billions) of:
Life insurance issued $ 13.0 $ 12.0
Life insurance in force $ 372.5 $ 361.5
Number of life policies issued (000) 51.1 54.3
Number of life policies in force (000) 2,141.6 2,141.0
Annualized issued premiums $ 40.8 $ 41.1
Direct premiums $ 306.2 $ 300.3
Earned premiums:
PFS Individual term life $ 244.7 $ 241.2
Other 15.5 17.8
------------------ ----------------
Total earned premiums $ 260.2 $ 259.0
================== ================
Mutual fund sales at NAV:
Salomon Smith Barney Asset Management funds $ 335.6 $ 317.3
Other funds 228.8 203.8
------------------ ----------------
Total U.S. mutual fund sales 564.4 521.1
Mutual fund sales - Canada 204.3 200.9
------------------ ----------------
Total mutual fund sales $ 768.7 $ 722.0
================== ================
Cash advanced on $.M.A.R.T. and $.A.F.E. Loans (1) $ 332.5 $ 289.4
Variable annuity net written premiums and deposits $ 126.3 $ 54.2
Travelers SECURE net written premiums (2) $ 38.0 $ 9.7
</TABLE>
(1) The $.M.A.R.T. and $.A.F.E. loan products are
marketed by PFS; the receivables are
reflected in the assets of Consumer Finance
Services.
(2) The Travelers SECURE property casualty
insurance products are marketed by PFS; the
premiums are reflected in the operating
earnings of Travelers Property Casualty Corp.
18
<PAGE>
PROPERTY & CASUALTY INSURANCE SERVICES -- PAGE 1
(In millions of dollars)
<TABLE>
<CAPTION>
For the quarter
ended March 31,
--------------------------------------------
1998 1997
-------------------- -----------------
TOTAL P&C INSURANCE
REVENUES
<S> <C> <C>
Commercial Lines $ 1,696.7 $ 1,624.1
Personal Lines 893.0 805.0
Other 4.5 2.2
----------------- ------------------
Total $ 2,594.2 $ 2,431.3
================= ==================
OPERATING EARNINGS
Commercial Lines $ 224.6 $ 193.5
Personal Lines 108.0 107.5
----------------- ------------------
332.6 301.0
Financing costs and other (28.7) (33.1)
Minority interest (50.8) (48.3)
----------------- ------------------
Total $ 253.1 $ 219.6
================= ==================
GAAP CONSOLIDATED STATEMENT OF OPERATIONS
-----------------------------------------
Revenues:
Premiums $ 1,898.2 $ 1,799.9
Net investment income 507.9 499.7
Fee income 82.0 97.0
Realized investment gains 66.4 8.1
Other revenues 35.2 24.4
----------------- ------------------
Total revenues 2,589.7 2,429.1
----------------- ------------------
Claims and expenses:
Claims and claim adjustment expenses* 1,427.9 1,366.0
Policyholder dividends 13.0 7.1
Amortization of deferred acquisition costs 285.9 283.1
General and administrative expenses 332.6 332.0
----------------- ------------------
Total expenses 2,059.4 1,988.2
----------------- ------------------
Income before federal income taxes 530.3 440.9
Federal income taxes 154.5 134.7
----------------- ------------------
Net income from property casualty operations 375.8 306.2
Financing costs and other (28.7) (33.1)
----------------- ------------------
Total net income** $ 347.1 $ 273.1
================= ==================
* Includes pre-tax:
Catastrophe losses, net of reinsurance $ 13.2 $ 7.5
Asbestos and environmental losses $ 31.0 $ 30.0
** Includes, net of taxes:
Net investment income $ 364.8 $ 347.3
Realized investment gains $ 43.2 $ 5.2
STATUTORY COMBINED RATIO: (3)
-----------------------------
Loss and loss adjustment expense ratio 72.9% 73.7%
Other underwriting expense ratio 28.3% 28.0%
----------------- ------------------
Combined ratio 101.2% 101.7%
================= ==================
STATUTORY COMBINED RATIO, AS ADJUSTED: (1), (3)
-----------------------------------------------
Loss and loss adjustment expense ratio 72.9% 73.7%
Other underwriting expense ratio 28.3% 28.8%
----------------- ------------------
Combined ratio 101.2% 102.5%
================= ==================
</TABLE>
(1) The 1997 first quarter net written premiums
include an increase of $142.4 million due to
a change to conform Aetna P&C's and
Travelers P&C's methods of recording net
written premiums, and an increase of $68.7
million due to an adjustment associated with a
reinsurance transaction. The statutory
combined ratio, as adjusted, excludes
these transactions.
(2) Based on 12 month rolling net written premiums.
(3) Before policyholder dividends.
19
<PAGE>
PROPERTY & CASUALTY INSURANCE SERVICES -- PAGE 2
(In millions of dollars)
<TABLE>
<CAPTION>
For the quarter
ended March 31,
---------------------------------------------
1998 1997
----------------- ----------------
COMMERCIAL LINES
NET WRITTEN PREMIUMS BY MARKET: (1)
-----------------------------------
<S> <C> <C>
National accounts $ 186.6 $ 221.6
Commercial accounts 462.6 560.5
Select accounts 378.6 363.7
Specialty accounts 184.0 192.6
------------------ -------------------
Total net written premiums $ 1,211.8 $ 1,338.4
================== ===================
STATUTORY COMBINED RATIO: (2)
-----------------------------
Loss and loss adjustment expense ratio 78.2% 81.7%
Other underwriting expense ratio 28.6% 27.4%
------------------ -------------------
Combined ratio 106.8% 109.1%
================== ===================
STATUTORY COMBINED RATIO, AS ADJUSTED: (1), (2)
-----------------------------------------------
Loss and loss adjustment expense ratio 78.2% 81.7%
Other underwriting expense ratio 28.6% 28.8%
------------------ -------------------
Combined ratio 106.8% 110.5%
================== ===================
Catastrophe losses, net of reinsurance (after-tax) $ - $ 4.9
PERSONAL LINES
NET WRITTEN PREMIUMS BY PRODUCT LINE: (3)
-----------------------------------------
Auto $ 555.7 $ 478.0
Homeowners and other 250.3 296.9
------------------ -------------------
Total net written premiums $ 806.0 $ 774.9
================== ===================
NET WRITTEN PREMIUMS BY DISTRIBUTION CHANNEL: (3)
-------------------------------------------------
Independent agents $ 682.5 $ 707.4
Affinity group marketing 53.4 36.7
Joint marketing arrangements 32.1 21.1
SECURE 38.0 9.7
------------------ -------------------
Total net written premiums $ 806.0 $ 774.9
================== ===================
STATUTORY COMBINED RATIO:
-------------------------
Loss and loss adjustment expense ratio 65.2% 61.2%
Other underwriting expense ratio 28.0% 28.9%
------------------ -------------------
Combined ratio 93.2% 90.1%
================== ===================
STATUTORY COMBINED RATIO, AS ADJUSTED: (3)
------------------------------------------
Loss and loss adjustment expense ratio 65.2% 61.2%
Other underwriting expense ratio 28.0% 28.6%
------------------ -------------------
Combined ratio 93.2% 89.8%
================== ===================
Catastrophe losses, net of reinsurance (after-tax) $ 8.6 $ -
</TABLE>
(1) The 1997 first quarter net written premiums
include an increase of $142.4 million due to
a change to conform Aetna P&C's and
Travelers P&C's methods of recording net
written premiums. The statutory combined
ratio, as adjusted, excludes this transaction.
(2) Before policyholder dividends.
(3) The 1997 first quarter net written premiums
include an adjustment associated with a
reinsurance transaction, which increased
premiums written by independent agents
by $68.7 million. The statutory combined
ratio, as adjusted, excludes this transaction.
20
<PAGE>
SELECTED OTHER DATA
(In millions of dollars)
<TABLE>
<CAPTION>
At March 31, At December 31,
1998 1997
----------------------- ---------------------
INVESTMENT PORTFOLIO (AT CARRYING VALUE) (1)
--------------------------------------------
<S> <C> <C>
Fixed-income investments:
Available for sale, at market:
Mortgage-backed securities - principally
obligations of U.S. Government agencies $ 8,726 $ 8,998
U.S. Treasury securities and
obligations of U.S. Government corporations
and agencies 3,912 3,962
Corporates (including redeemable preferreds) 27,428 27,025
Obligations of states and political subdivisions 9,124 8,110
Debt securities issued by foreign governments 1,339 1,326
Held to maturity, at amortized cost 38 41
---------------------- --------------------
Total fixed income 50,567 49,462
Equity securities, at market 1,541 1,624
Mortgage loans and real estate held for sale 3,470 3,799
Policy loans 1,869 1,872
Short-term and other 6,709 5,077
---------------------- --------------------
Total invested assets $ 64,156 $ 61,834
====================== ====================
After tax unrealized gains on invested assets $ 1,121 $ 1,157
====================== ====================
DETAIL OF MORTGAGE LOANS & REAL ESTATE
--------------------------------------
Performing mortgages $ 3,230 $ 3,541
Performing real estate (2) 593 607
---------------------- --------------------
Total $ 3,823 $ 4,148
Yield 11.6% 10.7%
Underperforming mortgages $ 49 $ 19
Underperforming real estate (2) 31 31
---------------------- --------------------
Total $ 80 $ 50
Yield 1.3% 3.5%
Total (2) $ 3,903 $ 4,198
====================== ====================
Yield 11.4% 10.5%
====================== ====================
Proceeds from sales (year to date) $ 106 $ 944
====================== ====================
</TABLE>
(1) Represents Travelers Group's consolidated
investments, which primarily support the
company's insurance operations but also
include corporate investments and
investments managed on behalf of Consumer
Finance Services.
(2) Includes real estate joint ventures.
21
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRAVELERS GROUP INC.
Dated: April 22, 1998 By /s/ William T. Bozarth
-----------------------
William T. Bozarth
Vice President
22
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