<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
_________________________
Commission file number 33-58131
_________________________
THE TRAVELERS LIFE AND ANNUITY COMPANY
(exact name of registrant as specified in its charter)
CONNECTICUT 06-0904249
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
(Address of principal executive offices) (Zip Code)
(203) 277-0111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes No X
----------- -----------
As of August 11, 1995, there were outstanding 30,000 shares of common
stock, par value $100, of the Registrant, all of which were owned by The
Travelers Insurance Company, an indirect subsidiary of Travelers Group Inc.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with
the reduced disclosure format.
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THE TRAVELERS LIFE AND ANNUITY COMPANY
FORM 10-Q
For the Quarter Ended June 30, 1995
Table of Contents
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
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<S> <C>
Item 1. Financial Statements
Condensed Statement of Operations and Retained Earnings for the Quarter and
Six Months Ended June 30, 1995 and 1994 (unaudited) .......................................................................3
Condensed Balance Sheet as of June 30, 1995 (unaudited) and
December 31, 1994..........................................................................................................4
Condensed Statement of Cash Flows for the
Six Months Ended June 30, 1995 and 1994 (unaudited)........................................................................5
Notes to Condensed Financial Statements (unaudited)........................................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................................................................................7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .................................................................................9
SIGNATURES ................................................................................................................10
</TABLE>
2
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THE TRAVELERS LIFE AND ANNUITY COMPANY
CONDENSED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Premiums $ 212 $ 338 $ 291 $ 3,330
Net investment income 15,582 16,550 31,451 31,222
Realized investment gains (losses) 944 176 (4,675) (25)
Other 4,058 3,877 7,749 7,568
-------- -------- -------- --------
20,796 20,941 34,816 42,095
-------- -------- -------- --------
BENEFITS AND EXPENSES
Current and future insurance benefits 13,452 13,700 26,782 31,755
Amortization of value of insurance in force 312 -- 625 --
General and administrative expenses 668 599 1,342 1,365
-------- -------- -------- --------
14,432 14,299 28,749 33,120
-------- -------- -------- --------
Income before federal income taxes 6,364 6,642 6,067 8,975
Federal income taxes 2,202 2,307 2,075 3,107
-------- -------- -------- --------
Net income 4,162 4,335 3,992 5,868
Retained earnings beginning of period 128,820 112,198 128,990 110,665
-------- -------- -------- --------
Retained earnings end of period $132,982 $116,533 $132,982 $116,533
======== ======== ======== ========
</TABLE>
See notes to condensed financial statements.
3
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THE TRAVELERS LIFE AND ANNUITY COMPANY
CONDENSED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Investments $ 901,898 $ 851,037
Separate accounts 826,571 820,384
Deferred federal income taxes 61,205 94,315
Other assets 44,204 35,633
---------- ----------
Total assets $1,833,878 $1,801,369
========= ==========
LIABILITIES
Future policy benefits $ 680,618 $ 691,108
Separate accounts 811,272 808,181
Other liabilities 21,763 43,960
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Total liabilities 1,513,653 1,543,249
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SHAREHOLDER'S EQUITY
Capital stock, par value $100; 100,000
shares authorized, 30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,356 167,354
Unrealized investment gains (losses), net of taxes 16,887 (41,224)
Retained earnings 132,982 128,990
---------- ----------
Total shareholder's equity 320,225 258,120
---------- ----------
Total liabilities and shareholder's equity $1,833,878 $1,801,369
========== ==========
</TABLE>
See notes to condensed financial statements.
4
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THE TRAVELERS LIFE AND ANNUITY COMPANY
CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
INCREASE (DECREASE) IN CASH
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1995 1994
---- ----
<S> <C> <C>
Net cash provided by (used in) operating activities $ (40,891) $ 8,357
---------- --------
Cash flows from investing activities
Investment repayments
Fixed maturities 3,579 15,921
Mortgage loans 10,234 40,411
Proceeds from sales of investments, including real estate held for sale
Fixed maturities 124,442 4,775
Equity securities 4,879 2,943
Mortgage loans 2,081 -
Real estate held for sale - 12,369
Investments in
Fixed maturities (90,834) (102,554)
Equity securities (71) (86)
Short-term securities, (purchases) sales, net (11,100) 7,803
Other investments, net (2,824) 3,433
Securities transactions in course of settlement 210 7,404
---------- ---------
Net cash provided by (used in) investing activities 40,596 (7,581)
---------- ----------
Net increase (decrease) in cash (295) 776
Cash at beginning of period 296 -
---------- ---------
Cash at end of period $ 1 $ 776
========== =========
Supplemental disclosure of cash flow information
Income taxes paid $ 37,510 $ 162
========== =========
</TABLE>
See notes to condensed financial statements.
5
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THE TRAVELERS LIFE AND ANNUITY COMPANY
Notes to Condensed Financial Statements (Unaudited)
June 30, 1995
1. General
The interim financial statements of The Travelers Life and Annuity Company
(the Company), a wholly owned subsidiary of The Travelers Insurance Company
(an indirect, wholly owned subsidiary of Travelers Group Inc.), have been
prepared in conformity with generally accepted accounting principles (GAAP)
and are unaudited. They reflect all adjustments (none of which were other
than normal recurring adjustments) necessary, in the opinion of management,
for a fair statement of results for the periods reported. The accompanying
condensed financial statements should be read in conjunction with the
audited financial statements and related notes for the year ended December
31, 1994 included in the Company's Form S-2 registration statement filed
July 11, 1995 (File No. 33-58677).
Certain financial information that is normally included in financial
statements prepared in accordance with GAAP but is not required for interim
reporting purposes has been condensed or omitted.
2. Changes in Accounting Principles
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan", and Statement of Financial Accounting Standards No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures,"
which describe how impaired loans should be measured when determining the
amount of a loan loss accrual. These statements amended existing guidance on
the measurement of restructured loans in a troubled debt restructuring
involving a modification of terms. Their adoption did not have a material
impact on the Company's financial condition, results of operations or
liquidity.
3. Commitments and Contingencies
The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by The Travelers Insurance Company in a
principal amount of up to $100 million. The obligation of The Travelers
Insurance Company is to pay in full to any owner or beneficiary of the TTM
Modified Guaranteed Annuity Contracts principal and interest as and when due
under the annuity contract to the extent that the Company fails to make
such payment.
The Company is a defendant in various litigation matters. Although there can
be no assurances, as of June 30, 1995, the Company believes, based on
information currently available, that the ultimate resolution of these legal
proceedings would not be likely to have a material adverse effect on its
results of operations, financial condition or liquidity.
6
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THE TRAVELERS LIFE AND ANNUITY COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's narrative analysis of the results of operations is presented in
lieu of Management's Discussion and Analysis of Financial Condition and Results
of Operations, pursuant to General Instruction H(2)(a) of Form 10-Q.
The Travelers Life and Annuity Company (the Company) primarily writes single
premium group annuity close-out contracts and individual structured settlement
annuities. The single premium group annuity contracts are typically purchased by
employer-sponsored pension plans upon termination of the plan, asset reversion
or other significant plan changes. As a result, sales activity can vary
significantly from period to period.
The individual structured settlement contracts are purchased by an affiliate,
The Travelers Indemnity Company, in connection with the settlement of certain of
its policyholder obligations. All structured settlement contracts are issued
through a separate account of the Company. Accordingly, the Company's other
revenues include structured settlement policyholder revenues net of the related
benefits and expenses.
The Company also writes a small amount of individual life insurance, which is
fully reinsured with The Travelers Insurance Company (the Company's parent).
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net income for the six months ended June 30, 1995 was $4.0 million, compared to
$5.9 million for the same period in 1994. Excluding realized losses, operating
earnings increased from $5.9 million in the six months ended June 30, 1994 to
$7.0 million in the six months ended June 30, 1995, reflecting an increase in
retained investment margin and a reduction in current and future insurance
benefits.
Premiums and deposits amounted to $19.4 million for the six months ended June
30, 1995, a 24% decrease compared to the same period for 1994, reflecting a
decline in single premium group annuities and a small decline in structured
settlement sales. (Deposits relate to separate account receipts, and are thus
excluded from revenue).
Policyholder benefit reserves, including separate accounts, aggregated $1.5
billion at June 30, 1995, down from $1.6 billion at June 30, 1994 primarily as a
result of an $82.0 million decrease in separate account liabilities.
INSURANCE REGULATIONS
Risk-based capital requirements are used as early warning tools by the National
Association of Insurance Commissioners and the states to identify companies that
merit further regulatory action. At June 30, 1995, the Company had adjusted
capital in excess of amounts requiring any regulatory action.
7
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The Company is subject to various regulatory restrictions that limit the maximum
amount of dividends available to its parent without prior approval of insurance
regulatory authorities in the state of domicile. No statutory surplus is
available in 1995 for dividends to the Company's shareholder without prior
approval of the Connecticut Insurance Department.
ACCOUNTING STANDARDS NOT YET ADOPTED
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for Long-Lived Assets and for
Long-Lived Assets to be Disposed Of (FAS 121). This statement establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. This statement requires write down to fair value when long-lived
assets to be held and used are impaired. The statement also requires long-lived
assets to be disposed of (e.g., real estate held for sale) to be carried at the
lower of cost or fair value less cost to sell and does not allow such assets to
be depreciated. This statement will be effective for 1996 financial statements,
although earlier adoption is permissible. The Company has not yet determined
when it will adopt FAS 121; however, the impact is not expected to be material
to its results of operations, financial condition or liquidity.
8
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description Filing Method
--- ----------- -------------
<S> <C> <C>
3. Articles of Incorporation and By-laws
a. Charter of The Travelers Life and Annuity Company (the "Company"),
as amended on April 10, 1990, incorporated herein by reference
to Exhibit 6(a) to the Registration Statement on Form N-4, File
No. 33-58131, filed on March 17, 1995.
b. By-laws of the Company as amended October 20, 1994, incorporated
herein by reference to Exhibit 6(b) to the Registration Statement
on Form N-4, File No. 33-58131, filed on March 17, 1995.
27. Financial Data Schedule Electronic
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed by the Company during the quarter ended
June 30, 1995.
9
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SIGNATURES
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 thereunto duly authorized.
THE TRAVELERS LIFE AND ANNUITY COMPANY
--------------------------------------
(Registrant)
Date August 14, 1995 /s/ Jay S. Fishman
------------------- --------------------------------------
Jay S. Fishman
Chief Financial Officer
Date August 14, 1995 /s/ Christine B. Mead
------------------- --------------------------------------
Christine B. Mead
Vice President - Finance
and Controller
10
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Filing Method
--- ----------- -------------
<S> <C> <C>
3. Articles of Incorporation and By-laws
a. Charter of The Travelers Life and Annuity Company (the "Company"),
as amended on April 10, 1990, incorporated herein by reference
to Exhibit 6(a) to the Registration Statement on Form N-4, File
No. 33-58131, filed on March 17, 1995.
b. By-laws of the Company as amended October 20, 1994, incorporated
herein by reference to Exhibit 6(b) to the Registration Statement
on Form N-4, File No. 33-58131, filed on March 17, 1995.
27. Financial Data Schedule Electronic
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1995 FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000929498
<NAME> TRAVELERS LIFE & ANNUITY COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 901,898
<CASH> 1
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1,833,878
<POLICY-LOSSES> 680,618
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 811,272
<NOTES-PAYABLE> 0
<COMMON> 3,000
0
0
<OTHER-SE> 317,225
<TOTAL-LIABILITY-AND-EQUITY> 1,833,878
291
<INVESTMENT-INCOME> 31,451
<INVESTMENT-GAINS> (4,675)
<OTHER-INCOME> 7,749
<BENEFITS> 26,782
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 1,967
<INCOME-PRETAX> 6,067
<INCOME-TAX> 2,075
<INCOME-CONTINUING> 3,992
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,992
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
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<RESERVE-CLOSE> 0
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</TABLE>
