<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 September 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 33-58677
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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)
(860) 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 X No
------- --------
As of November 13, 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 September 30, 1995
Table of Contents
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Condensed Statement of Operations and Retained Earnings for the Quarter and
Nine Months Ended September 30, 1995 and 1994 (unaudited) . . . . . . . . . 3
Condensed Balance Sheet as of September 30, 1995 (unaudited) and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Statement of Cash Flows for the
Nine Months Ended September 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
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 Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Premiums $ 1,043 $ 61 $ 1,334 $ 3,391
Net investment income 15,311 17,277 46,762 48,499
Realized investment gains (losses) 7,006 (73) 2,331 (98)
Other 1,829 3,300 9,578 10,868
--------- --------- --------- ---------
25,189 20,565 60,005 62,660
--------- --------- --------- ---------
BENEFITS AND EXPENSES
Current and future insurance benefits 13,857 13,869 40,639 45,624
Amortization of value of insurance in force 313 -- 938 --
General and administrative expenses 1,433 1,088 2,775 2,453
--------- --------- --------- ---------
15,603 14,957 44,352 48,077
--------- --------- --------- ---------
Income before federal income taxes 9,586 5,608 15,653 14,583
Federal income taxes 3,363 1,958 5,438 5,065
--------- --------- --------- ---------
Net income 6,223 3,650 10,215 9,518
Retained earnings beginning of period 132,982 116,533 128,990 110,665
--------- --------- --------- ---------
Retained earnings end of period $ 139,205 $ 120,183 $ 139,205 $ 120,183
========= ========= ========= =========
</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>
September 30, December 31,
1995 1994
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(Unaudited)
<S> <C> <C>
ASSETS
Investments $ 918,597 $ 851,037
Separate accounts 835,672 820,384
Deferred federal income taxes 61,701 94,315
Other assets 66,504 35,633
----------- -----------
Total assets $ 1,882,474 $ 1,801,369
=========== ===========
LIABILITIES
Future policy benefits $ 676,824 $ 691,108
Separate accounts 817,191 808,181
Other liabilities 63,988 43,960
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Total liabilities 1,558,003 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 167,308 167,354
Unrealized investment gains (losses), net of taxes 14,958 (41,224)
Retained earnings 139,205 128,990
----------- -----------
Total shareholder's equity 324,471 258,120
----------- -----------
Total liabilities and shareholder's equity $ 1,882,474 $ 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>
Nine Months Ended
September 30,
---------------------------
1995 1994
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (54,523) $ 8,876
--------- ---------
Cash flows from investing activities
Investment repayments
Fixed maturities 6,961 20,851
Mortgage loans 14,793 44,017
Proceeds from sales of investments, including real estate held for sale
Fixed maturities 274,469 24,403
Equity securities 10,266 6,684
Mortgage loans 2,497 23,181
Real estate held for sale -- 22,865
Investments in
Fixed maturities (250,182) (166,645)
Equity securities (71) (123)
Short-term securities, (purchases) sales, net (26,438) 7,677
Other investments, net (1,582) (2,109)
Securities transactions in course of settlement 23,514 12,164
--------- ---------
Net cash provided by (used in) investing activities 54,227 (7,035)
--------- ---------
Net increase (decrease) in cash (296) 1,841
Cash at beginning of period 296 --
--------- ---------
Cash at end of period $ -- $ 1,841
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Supplemental disclosure of cash flow information
Income taxes paid (refunded) $ 34,726 $ (30)
========= =========
</TABLE>
See notes to condensed financial statements.
5
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THE TRAVELERS LIFE AND ANNUITY COMPANY
Notes to Condensed Financial Statements (Unaudited)
September 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 on 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 in the aggregate. 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 September 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
<PAGE> 7
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 has obtained and is in the process of obtaining further regulatory
approvals to write individual life and deferred annuity business in additional
states, as well as for additional products.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Net income for the nine months ended September 30, 1995 was $10.2 million,
compared to $9.5 million for the same period in 1994. Excluding realized
investment gains and losses, operating earnings decreased from $9.6 million in
the nine months ended September 30, 1994 to $8.7 million in the nine months
ended September 30, 1995, reflecting unfavorable annuity mortality results and
an increase in administrative expenses.
Premiums and deposits amounted to $35.7 million for the nine months ended
September 30, 1995, a 6% increase compared to the same period for 1994,
reflecting the writing of new business partially offset by a 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 September 30, 1995, down from $1.6 billion at September 30, 1994
primarily as a result of an $94.5 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 September 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.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). This statement addresses alternative accounting
treatments for stock-based compensation, such as stock options and restricted
stock. FAS 123 permits either expensing the value of stock-based compensation
over the period earned or disclosing in the financial statement footnotes the
pro forma impact to net income as if the value of stock-based compensation
awards had been expensed. The value of awards would be measured at the grant
date based upon estimated fair value, using option pricing models. The
requirements of this statement will be effective for 1996 financial statements,
although earlier adoption is permissible if an entity elects to expense the cost
of stock-based compensation. The Company along with affiliated companies
participates in stock option and incentive plans sponsored by the parent. The
Company is currently evaluating the disclosure requirements and expense
recognition alternatives addressed by this statement.
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
September 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 November 13, 1995 /s/ Jay S. Fishman
---------------------------------------
Jay S. Fishman
Vice Chairman and
Chief Financial Officer
Date November 13, 1995 /s/ Christine B. Mead
---------------------------------------
Christine B. Mead
Vice President - Finance
and Controller
10
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1995 Financial Statements of The Travelers Life & Annuity Company
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000929498
<NAME> THE TRAVELERS LIFE & ANNUITY COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 0
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