TRAVELERS LIFE & ANNUITY CO, 10-K, 1996-03-28

TRAVELERS LIFE & ANNUITY CO
10-K, 1996-03-28

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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-------------------

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 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

-------------------

THE TRAVELERS LIFE AND ANNUITY COMPANY
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
Connecticut 06-0904249
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>

One Tower Square, Hartford, Connecticut 06183
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (860) 277-0111

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

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
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K /X/.

As of March 28, 1996 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 wholly owned subsidiary of Travelers Group Inc.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction J(1)(a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
<PAGE> 2
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

Table of Contents

<TABLE>
<CAPTION>
Form 10-K
Item Number PART I Page
- ----------- ------
<S> <C> <C>
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . 3

PART II
-------

5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . 6

9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

PART III
--------

10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . 34

11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . 34

13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . 34

PART IV
-------

14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . 35
</TABLE>
<PAGE> 3
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

PART I

Item 1. Business.
GENERAL

The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), which is an indirect
wholly owned subsidiary of Travelers Group Inc. (Travelers). The Company
is a stock insurance company chartered in 1973 in the State of Connecticut and
has been continuously engaged in the insurance business since that time. The
Company is licensed to conduct life insurance business in a majority of the
states of the United States, and intends to seek licensure in the remaining
states, except New York.

The individual structured settlement contracts are purchased by affiliates, The
Travelers Indemnity Company and its subsidiaries, in connection with the
settlement of certain of their 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.

In 1995, the Company commenced writing individual life and deferred annuity
business in certain states and is in the process of obtaining further
regulatory approvals to write these products in additional states.

The Company is an indirect wholly owned subsidiary of Travelers, a
financial services holding company engaged, through its subsidiaries,
principally in four business segments: (i) Investment Services; (ii) Consumer
Finance Services; (iii) Life Insurance Services; and (iv) Property & Casualty
Insurance Services. The periodic reports of Travelers provide additional
business and financial information concerning that company and its consolidated
subsidiaries.

Insurance Regulations

The National Association of Insurance Commissioners (the NAIC) risk-based
capital (RBC) requirements are used as early warning tools by the NAIC and
states to identify companies that merit further regulatory action.

For this purpose, an insurer's surplus is measured in relation to its specific
asset and liability profiles. A company's risk-based capital is calculated by
applying factors to various asset, premium and reserve items, where the factor
is higher for those items with greater underlying risk and lower for less risky
items.

The formula for life insurers calculates baseline life risk-based capital
(LRBC) as a mathematical combination of amounts for the following four
categories of risk: asset risk (i.e., the risk of asset default), insurance
risk (i.e., the risk of adverse mortality and morbidity experience), interest
rate risk (i.e., the risk of loss due to changes in interest rates) and
business risk (i.e., normal business and management risk). Fifty percent of
the baseline LRBC calculation is defined as Authorized Control Level RBC. The
insurer's ratio of adjusted capital to Authorized Control Level RBC (the RBC
ratio) can then be calculated from data contained in the annual statement.
Adjusted capital is defined as the sum of statutory capital, statutory surplus,
asset valuation reserve, voluntary investment reserves and one-half of the
policyholder dividend liability.

1
<PAGE> 4
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

Within certain ratio ranges, regulators have increasing authority to take
action as the RBC ratio decreases. There are four levels of regulatory action.
The first of these levels is the "company action level." The RBC ratio for
this level is less than 200% but greater than 150%. Insurers within this level
must submit a comprehensive plan (an RBC plan) to the commissioner. The next
level is the "regulatory action level." The RBC ratio for this level is less
than 150% but greater than 100%. An insurer within this level must submit an
RBC plan, is subject to an examination of assets, liabilities and operations by
the commissioner, and is subject to provisions of any corrective order
subsequently issued by the commissioner. The third level is the "authorized
control level." The RBC ratio for this level is less than 100% but greater
than 70%. At this level, the commissioner takes action as described under
"regulatory action level" and may cause the insurer to be placed under
regulatory control if such action is deemed to be in the best interests of
policyholders. The fourth level is the "mandatory control level." The RBC
ratio for this level is less than 70%, and the commissioner takes actions
necessary to place the insurer under regulatory control.

The RBC formula has not been designed to differentiate among adequately
capitalized companies which operate with higher levels of capital. Therefore,
it is inappropriate and ineffective to use the formulas to rate or to rank such
companies. At December 31, 1995, the Company had adjusted capital in excess of
amounts requiring any regulatory action at any of the four levels.

The Company is domiciled in the State of Connecticut. Connecticut law requires
notice to and prior approval by the Connecticut Insurance Department for the
declaration or payment of any dividend, which together with other distributions
made within the preceding twelve months, exceeds the greater of (i) 10% of the
insurer's surplus or (ii) the insurer's net gain from operations for the
twelve-month period ending on the preceding December 31st, in each case
determined in accordance with statutory accounting practices. Such declaration
or payment is further limited by adjusted unassigned funds (surplus), as
determined in accordance with statutory accounting practices. Dividend
payments from the Company to its parent are limited to $16 million in 1996
without prior approval of the Connecticut Insurance Department.

Item 2. Properties.

TIC, the Company's parent, owns buildings containing approximately 1,426,000
square feet of office space located in Hartford, Connecticut and vicinity,
serving as the home office of The Travelers Insurance Group Inc. (TIGI).

TIC also owns a building in Norcross, Georgia. TIGI's information systems
department occupies the entire building which is approximately 147,000 square
feet of space.

In addition, as of December 31, 1995, TIC leases a total of approximately
4,950,000 square feet of office space at 247 locations throughout the United
States.

Management believes that these facilities are suitable and adequate for the
Company's current needs. The Company reimburses TIC for use of this space on a
cost allocation method based generally on estimated usage by department.

The foregoing discussion does not include information on investment properties.

Item 3. Legal Proceedings.

The Company is a defendant or co-defendant in various litigation matters.
Although there can be no assurances, as of December 31, 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.

2
<PAGE> 5
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

Item 4. Submission of Matters to a Vote of Security Holders.

Omitted pursuant to General Instruction J(2)(c) of Form 10-K.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

The Company has 100,000 authorized shares of common stock, of which 30,000 are
issued and outstanding as of December 31, 1995. All shares are held by TIC,
and there exists no established public trading market for the common equity of
the Company. The Company paid no dividends to its parent in 1995 and 1994.
See Note 5 of Notes to Consolidated Financial Statements for dividend
restrictions.

Item 6. Selected Financial Data.

Omitted pursuant to General Instruction J(2)(a) of Form 10-K.

Item 7. 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 J(2)(a) of Form 10-K.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
For the year ended December 31, 1995 1994
- ------------------------------- ---- ----
(in millions)
- -------------
<S> <C> <C>
Revenues $102.0 $86.2
====== =====

Net income $ 28.9 $18.3
====== =====
</TABLE>

3
<PAGE> 6
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

Net income for 1995 was $28.9 million, compared to $18.3 million for 1994.
Excluding realized investment gains and losses, operating earnings decreased
from $19.8 million in 1994 to $16.8 million in 1995, reflecting decreased net
investment income yields on the invested assets supporting both structured
settlement and group annuity contracts, and an increase in administrative
expenses largely associated with expansion of distribution channels, partially
offset by improved mortality experience.

Premiums and deposits amounted to $41.6 million for 1995, level with the $41.1
million of production for 1994, reflecting the writing of new business,
partially offset by a decline in structured settlement and group annuity sales.
(Deposits relate to universal life, individual deferred annuity and separate
account receipts, and are excluded from revenue).

Policyholder benefit reserves, which includes future policy benefits,
contractholder funds and separate accounts, aggregated $1.540 billion at
December 31, 1995, up from $1.499 billion at December 31, 1994 primarily as a
result of accumulated growth in the structured settlement separate account and
1995 sales of individual life and deferred annuity products.

At December 31, 1995 and 1994, the Company had real estate held for sale and
mortgage loan investments totaling $134.8 million and $159.2 million,
respectively. The Company is continuing its strategy to dispose of these real
estate assets and some of the mortgage loans and to reinvest the proceeds to
obtain current market yields. Underperforming assets include delinquent
mortgage loans, loans in the process of foreclosure, foreclosed loans and loans
modified at interest rates below market. In 1995 and 1994, the Company had
sales of real estate held for sale and mortgage loans of approximately $4.7
million and $6.3 million, respectively.

OUTLOOK

The Company should benefit from the growth in the aging population who are
becoming more focused on the need to accumulate adequate savings for
retirement, to protect these savings and to plan for the transfer of wealth to
the next generation. The Company is well-positioned to benefit from the
favorable long-term demographic trends through its strong financial position,
widespread brand name recognition and array of competitive life and annuity
products.

However, competition in both product pricing and customer service is
intensifying. While there has been some consolidation within the industry,
other financial services organizations are increasingly involved in the sale
and/or distribution of insurance products. Deregulation of the banking
industry, including possible reform of restrictions on entry into the insurance
business, will likely accelerate this trend. In order to strengthen its
competitive position, The Company expects to maintain a current product
portfolio, further diversify its distribution channels, and retain its healthy
financial position through strong sales growth in a cost-efficient manner.

In addition, during the past year significant tax reform discussions have
occurred. Some of the proposed discussions could reduce or eliminate the need
for tax deferral features and thus the need for products that are currently in
the Company's portfolio. New legislation could also create the need for new
products or increase the demand for some existing products. At this time it is
not clear what the eventual outcome of this national debate will be or what
impact, if any, it may have on the Company's sales and business retention.

4
<PAGE> 7
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

FUTURE APPLICATION OF ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 121, "Accounting for Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" 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 the write down to fair value when long-lived assets to be
held and used are impaired. It 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. The
adoption of this statement, effective January 1, 1996, did not have a material
effect on 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
Travelers. The Company is currently evaluating the disclosure requirements and
expense recognition alternatives addressed by this statement.

5
<PAGE> 8
THE TRAVELERS LIFE AND ANNUITY COMPANY

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995

Item 8. Financial Statements and Supplementary Data

Index

<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Reports 7-8

Financial Statements:

Statement of Operations and Retained Earnings for the
years ended December 31, 1995, 1994 and 1993 9

Balance Sheet - December 31, 1995 and 1994 10

Statement of Cash Flows for the
years ended December 31, 1995, 1994 and 1993 11

Notes to Financial Statements 12-31

Glossary of Insurance Terms 32-33
</TABLE>

6
<PAGE> 9
Independent Auditors' Report

The Board of Directors and Shareholder of
The Travelers Life and Annuity Company:

We have audited the accompanying balance sheet of The Travelers Life and
Annuity Company as of December 31, 1995 and 1994, and the related statements of
operations and retained earnings and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Travelers Life and Annuity
Company as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.

As discussed in note 3 to the financial statements, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," in 1994.

/s/KPMG Peat Marwick LLP
Hartford, Connecticut
January 16, 1996

7
<PAGE> 10

Report of Independent Accountants

To the Board of Directors and Shareholder of
The Travelers Life and Annuity Company:

We have audited the statements of operations and retained earnings and cash
flows of The Travelers Life and Annuity Company for the year ended December 31,
1993. These financial statements are the responsibility of Company
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of The
Travelers Life and Annuity Company for the year ended December 31, 1993 in
conformity with generally accepted accounting principles.

/s/ COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
September 16, 1994

8
<PAGE> 11
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENT OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(for the year ended December 31, in thousands) 1995 1994 | 1993
- --------------------------------------------------------------------------------------------|-----------
<S> <C> <C> | <C>
REVENUES |
Premiums $ 2,652 $ 3,498 | $ 4,524
Net investment income 63,209 66,093 | 58,044
Realized investment gains (losses) 18,713 (2,074) | 11,955
Other 17,466 18,702 | 9,102
- --------------------------------------------------------------------------------------------|-----------
102,040 86,219 | 83,625
- --------------------------------------------------------------------------------------------|-----------
|
BENEFITS AND EXPENSES |
Current and future insurance benefits 52,390 55,596 | 67,489
Amortization of deferred acquisition costs |
and value of insurance in force 1,563 - | -
Other operating expenses 4,651 2,758 | 3,075
- --------------------------------------------------------------------------------------------|-----------
58,604 58,354 | 70,564
- --------------------------------------------------------------------------------------------|-----------
|
Income before federal income taxes 43,436 27,865 | 13,061
- --------------------------------------------------------------------------------------------|-----------
|
Federal income taxes: |
Current 2,555 4,742 | 22,124
Deferred 11,964 4,798 | (22,672)
- --------------------------------------------------------------------------------------------|-----------
14,519 9,540 | (548)
- --------------------------------------------------------------------------------------------|-----------
Net income 28,917 18,325 | 13,609
Retained earnings beginning of year 128,990 110,665 | 97,034
Preference stock tax benefit allocated by parent - - | 22
- --------------------------------------------------------------------------------------------|-----------
Retained earnings end of year $ 157,907 $ 128,990 | $ 110,665
- --------------------------------------------------------------------------------------------------------
</TABLE>

See notes to financial statements.

9
<PAGE> 12
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEET

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(at December 31, in thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at market
(cost, $678,293; $624,347) $ 724,639 $ 559,142
Equity securities, at market (cost, $9,453; $14,252) 13,099 16,064
Mortgage loans 125,813 152,359
Real estate held for sale, net of accumulated depreciation of $524; $337 8,995 6,810
Short-term securities 51,381 44,472
Other investments 65,805 72,190
- ---------------------------------------------------------------------------------------------------------------
Total investments 989,732 851,037
- ---------------------------------------------------------------------------------------------------------------
Cash - 296
Investment income accrued 11,030 10,211
Premium balances receivable 2,277 -
Reinsurance recoverables 718 573
Deferred acquisition costs and value of insurance in force 22,560 21,014
Deferred federal income taxes 41,158 94,315
Separate accounts 886,688 820,384
Current federal income taxes 6,691 -
Other assets 3,785 3,539
- ---------------------------------------------------------------------------------------------------------------
Total assets $ 1,964,639 $ 1,801,369
- ---------------------------------------------------------------------------------------------------------------

LIABILITIES
Future policy benefits $ 671,027 $ 691,108
Contractholder funds 11,947 -
Current federal income taxes - 26,071
Separate accounts 856,867 808,181
Other liabilities 61,247 17,889
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 1,601,088 1,543,249
- ---------------------------------------------------------------------------------------------------------------

SHAREHOLDER'S EQUITY
Common stock, par value $100; 100,000
shares authorized, 30,000 issued and outstanding 3,000 3,000
Additional paid-in capital 167,314 167,354
Retained earnings 157,907 128,990
Unrealized investment gains (losses), net of taxes 35,330 (41,224)
- ---------------------------------------------------------------------------------------------------------------
Total shareholder's equity 363,551 258,120
- ---------------------------------------------------------------------------------------------------------------

Total liabilities and shareholder's equity $ 1,964,639 $ 1,801,369
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to financial statements.

10
<PAGE> 13
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(for the year ended December 31, in thousands) 1995 1994 | 1993
- ------------------------------------------------------------------------------------------|-------------
<S> <C> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES |
Premiums collected $ 1,950 $ 3,498 | $ 4,524
Net investment income received 66,219 57,240 | 53,944
Benefits and claims paid (71,710) (72,298) | (74,660)
Operating expenses paid (3,013) (4,400) | (3,249)
Income taxes refunded (paid) (35,305) 1,030 | (10,661)
Trading account investments, (purchases) sales, net - - | 35,093
Other (6,772) 22,507 | (683)
- ------------------------------------------------------------------------------------------|-------------
Net cash provided by (used in) operating activities (48,631) 7,577 | 4,308
- ------------------------------------------------------------------------------------------|-------------
CASH FLOWS FROM INVESTING ACTIVITIES |
Investment repayments |
Fixed maturities 11,752 29,043 | 29,479
Mortgage loans 24,137 60,260 | 53,835
Proceeds from investments sold, including real estate |
held for sale |
Fixed maturities 459,971 41,671 | 46,001
Equity securities 11,823 9,373 | 7,676
Mortgage loans 7,013 23,327 | 11,835
Real estate held for sale - 34,181 | 26,014
Investments in |
Fixed maturities (515,098) (204,412) | (206,682)
Equity securities (156) (375) | (5,280)
Mortgage loans (4,890) (5,607) | -
Short-term securities, (purchases) sales, net (5,051) (1,146) | (16,430)
Other investments, (purchases) sales, net 9,274 682 | 46,595
Securities transactions in course of settlement 45,727 5,722 | 1,133
- ------------------------------------------------------------------------------------------|-------------
Net cash provided by (used in) investing activities 44,502 (7,281) | (5,824)
- ------------------------------------------------------------------------------------------|-------------
CASH FLOWS FROM FINANCING ACTIVITIES |
Contractholder fund deposits 5,707 - | -
Contractholder fund withdrawals (1,874) - | -
- ------------------------------------------------------------------------------------------|-------------
Net cash provided by financing activities 3,833 - | -
- ------------------------------------------------------------------------------------------|-------------
Net increase (decrease) in cash $ (296) $ 296 | $ (1,516)
- --------------------------------------------------------------------------------------------------------
Cash at December 31 $ - $ 296 $ -
- --------------------------------------------------------------------------------------------------------
</TABLE>

See notes to financial statements.

11
<PAGE> 14
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

The Travelers Life and Annuity Company (the Company) is a wholly owned
subsidiary of The Travelers Insurance Company (TIC), which is an
indirect, wholly owned subsidiary of Travelers Group Inc. (Travelers).

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. The individual structured
settlement contracts are purchased by affiliates, The Travelers
Indemnity Company and its subsidiaries, in connection with the
settlement of certain of its policyholder obligations. In 1995, the
Company also commenced writing individual life and deferred annuity
business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies used in the preparation of the
accompanying financial statements follow.

Basis of presentation

In December 1992, Primerica Corporation (Primerica) acquired
approximately 27% of The Travelers Corporation's common stock (the 27%
Acquisition). The 27% Acquisition was accounted for as a purchase.
Effective December 31, 1993, Primerica acquired the approximately 73% of
The Travelers Corporation common stock which it did not already own, and
The Travelers Corporation was merged into Primerica, which was renamed
Travelers Group Inc. This was effected through the exchange of .80423
shares of Travelers common stock for each share of The Travelers
Corporation common stock (the Merger). All subsidiaries of The
Travelers Corporation were contributed to The Travelers Insurance Group
Inc. (TIGI).

The 27% Acquisition and the Merger were accounted for as a "step
acquisition", and the purchase accounting adjustments were "pushed down"
as of December 31, 1993 to the subsidiaries of TIGI, including the
Company, and reflect adjustments of assets and liabilities of the
Company to their fair values determined at each acquisition date (i.e.,
27% of values at December 31, 1992 as carried forward and 73% of the
values at December 31, 1993). These assets and liabilities were
recorded at December 31, 1993 based upon management's then best estimate
of their fair values at the respective dates. Evaluation and appraisal
of assets and liabilities, including investments, the value of insurance
in force, other insurance assets and liabilities and related deferred
federal income taxes was completed during 1994. The excess of the 27%
share of assigned value of identifiable net assets over cost at December
31, 1992, which was allocated to the Company through "pushdown"
accounting, was approximately $1.3 million and is being amortized over
ten years on a straight-line basis.

The statements of operations and retained earnings and of cash flows and
the related accompanying notes for the years ended December 31, 1995 and
1994, which are presented on a purchase accounting basis, are separated
from the corresponding 1993 information, which is presented on a
historical accounting basis, to indicate the difference in valuation
bases.

12
<PAGE> 15
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and benefits
and expenses during the reporting period. Actual results could differ
from those estimates.

Certain prior year amounts have been reclassified to conform with the
1995 presentation.

Investments

Fixed maturities include bonds, notes and redeemable preferred stocks.
Fixed maturities are valued based upon quoted market prices, or if
quoted market prices are not available, discounted expected cash flows
using market rates commensurate with the credit quality and maturity of
the investment. Fixed maturities are classified as "available for sale"
and are reported at fair value, with unrealized gains and losses, net of
income taxes, charged or credited directly to shareholder's equity.

Equity securities, which include common and nonredeemable preferred
stocks, are carried at market values that are based primarily on quoted
market prices. Changes in market values of equity securities are
charged or credited directly to shareholder's equity, net of applicable
income taxes.

Mortgage loans are carried at amortized cost. For mortgage loans that
are determined to be impaired, a reserve is established for the
difference between the amortized cost and fair market value of the
underlying collateral. Impaired loans were insignificant at December
31, 1995.

Real estate held for sale is carried at the lower of cost or fair value
less estimated costs to sell. Fair value was established at time of
foreclosure by appraisers, either internal or external, using discounted
cash flow analyses and other acceptable techniques. Thereafter, an
allowance for losses on real estate held for sale is established if the
carrying value of the property exceeds its current fair value less
estimated costs to sell. There was no such allowance at December 31,
1995.

Accrual of income is suspended on fixed maturities or mortgage loans
that are in default, or on which it is likely that future payments will
not be made as scheduled. Interest income on investments in default is
recognized only as payment is received.

Investment Gains and Losses

Realized investment gains and losses are included as a component of
pretax revenues based upon specific identification of the investments
sold on the trade date and, prior to the Merger, included adjustments to
investment valuation reserves. These adjustments reflected changes
considered to be other than temporary in the net realizable value of
investments. Also included are gains and losses arising from the
remeasurement of the local currency value of foreign investments to U.S.
dollars, the functional currency of the Company.

13
<PAGE> 16
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Separate Accounts

Separate account liabilities primarily represent structured settlement
annuity obligations, which provide guaranteed levels of return or
benefits to contractholders. The separate account assets supporting
these obligations, which are legally segregated and are not subject to
claims that arise out of any other business of the Company, are carried
at amortized cost. Earnings on structured settlement contracts,
generally net investment income less policyholder benefits and operating
expenses, are included in other revenues.

In addition, the Company has other separate accounts, representing funds
for which investment income and investment gains and losses accrue
directly to, and investment risk is borne by, the contractholders. Each
of these accounts have specific investment objectives. The assets and
liabilities of these accounts are carried at market value, and amounts
assessed to the contractholders for management services are included in
revenues. Deposits, net investment income and realized investment gains
and losses for these accounts are excluded from revenues, and related
liability increases are excluded from benefits and expenses.

Deferred Acquisition Costs and Value of Insurance In Force

Costs of acquiring individual life insurance and annuity business,
principally commissions and certain expenses related to policy issuance,
underwriting and marketing, all of which vary with and are primarily
related to the production of new business, are deferred. Acquisition
costs relating to traditional life insurance are amortized over the
period of anticipated premiums; universal life in relation to estimated
gross profits; and annuity contracts employing a level yield method. A
10- to 25-year amortization period is used for life insurance, and a 10-
to 15-year period is employed for annuities. Deferred acquisition costs
are reviewed periodically for recoverability to determine if any
adjustment is required.

The value of insurance in force represents the actuarially determined
present value of anticipated profits to be realized from annuities
contracts at the date of the Merger using the same assumptions that were
used for computing related liabilities where appropriate. The value of
insurance in force was the actuarially determined present value of the
projected future profits discounted at an interest rate of 16% for the
business acquired. The value of the business in force is amortized over
the contract period using current interest crediting rates to accrete
interest and using an amortization method based on a level yield method.
The value of insurance in force is reviewed periodically for
recoverability to determine if any adjustment is required.

Future Policy Benefits

Benefit reserves represent liabilities for future insurance policy
benefits. Benefit reserves for life insurance and annuity policies have
been computed based upon mortality, morbidity, persistency and interest
assumptions applicable to these coverages, which range from 4.5% to
7.5%, including a provision for adverse deviation. These assumptions
consider Company experience and industry standards and may be revised if
it is determined that the future experience will differ substantially
from that previously assumed. The assumptions vary by plan, age at
issue, year of issue and duration.

14
<PAGE> 17
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Contractholder Funds

Contractholder funds represent receipts from the issuance of universal
life and certain individual annuity contracts. Such receipts are
considered deposits on investment contracts that do not have substantial
mortality or morbidity risk. Account balances are also increased by
interest credited and reduced by withdrawals, mortality charges and
administrative expenses charged to the contractholders. Calculations of
contractholder account balances reflect lapse, withdrawal and interest
rate assumptions based on contract provisions, the Company's experience
and industry standards. Interest rates credited to contractholder funds
range from 4.2% to 6.5%.

Permitted Statutory Accounting Practices

The Company, domiciled in the State of Connecticut, prepares statutory
financial statements in accordance with the accounting practices
prescribed or permitted by the State of Connecticut Insurance
Department. Prescribed statutory accounting practices include a variety
of publications of the National Association of Insurance Commissioners
as well as state laws, regulations, and general administrative rules.
Permitted statutory accounting practices encompass all accounting
practices not so prescribed. The impact of any permitted accounting
practices on the statutory surplus of the Company is not material.

Premiums

Premiums are recognized as revenues when due. Reserves are established
for the portion of premiums that will be earned in future periods.

Other Revenues

Other revenues include surrender, mortality and administrative charges
and fees as earned on investment and other insurance contracts. Other
revenues also include structured settlement policyholder revenues, which
relate to contracts issued through a separate account of the Company,
net of the related policyholder benefits and expenses.

Federal Income Taxes

The provision for federal income taxes is comprised of two components,
current income taxes and deferred income taxes. Deferred federal income
taxes arise from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and
liabilities. The deferred federal income tax asset is recognized to the
extent that future realization of the tax benefit is more likely than
not, with a valuation allowance for the portion that is not likely to be
recognized.

15
<PAGE> 18
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Accounting Standards not yet Adopted

Statement of Financial Accounting Standards No. 121, "Accounting for
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
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 the
write down to fair value when long-lived assets to be held and used are
impaired. It 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. The adoption of this statement, effective January 1, 1996,
did not have a material effect on 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 Travelers. The Company is currently evaluating the
disclosure requirements and expense recognition alternatives addressed
by this statement.

3. CHANGES IN ACCOUNTING PRINCIPLES

Accounting by Creditors for Impairment of a Loan

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.

Accounting for Certain Debt and Equity Securities

Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (FAS 115), which addresses accounting and
reporting for investments in equity securities that have a readily
determinable fair value and for all debt securities. Investment
securities have been classified as "available for sale" and are reported
at fair value, with unrealized gains and losses, net of income taxes,
charged or credited directly to shareholder's equity. Previously,
securities classified as available for sale were carried at the lower of
aggregate cost or market value. Initial adoption of this standard
resulted in an increase of approximately $530 thousand (net of taxes) to
net unrealized gains in shareholder's equity. See note 12 for
additional disclosures.

16
<PAGE> 19
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

4. REINSURANCE

The Company participates in reinsurance in order to limit losses,
minimize exposure to large risks, provide capacity for future growth and
to effect business-sharing arrangements. The Company remains primarily
liable as the direct insurer on all risks reinsured.

Life insurance in force ceded to affiliates at December 31, 1995 and
1994 was $97.7 million and $106.0 million, respectively. At December
31, 1995 and 1994, $601.2 million and $0, respectively, was ceded to
non-affiliates.

5. SHAREHOLDER'S EQUITY

Unrealized Investment Gains (Losses)

An analysis of the change in unrealized gains and losses on investments
is shown in note 12.

Additional Paid-in Capital

As a result of the finalization of the evaluations and appraisals used
to assign fair value to assets and liabilities under purchase
accounting, additional paid-in capital was increased by $1.3 million in
1994. It was decreased by $70.4 million in 1993 based upon the initial
evaluations and appraisals.

Shareholder's Equity and Dividend Availability

Statutory net income was $23.0 million and $5.7 million for the years
ended December 31, 1995 and 1994, respectively. Statutory net loss was
$23.0 million for the year ended December 31, 1993.

Statutory capital and surplus was $257.8 million and $233.0 million at
December 31, 1995 and 1994, respectively.

The Company is currently subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to its parent
without prior approval of insurance regulatory authorities. Statutory
surplus of $16.4 million is available in 1996 for dividend payments by
the Company without prior approval of the Connecticut Insurance
Department.

17
<PAGE> 20
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

6. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has, in the normal course of business, provided fixed rate
loan commitments and commitments to partnerships. The Company does not
hold or issue derivative instruments for trading purposes.

The off-balance-sheet risks of fixed rate loan commitments, commitments
to partnerships and forward contracts were not significant at December
31, 1995 and 1994.

Fair Value of Certain Financial Instruments

The Company uses various financial instruments in the normal course of
its business. Fair values of financial instruments which are considered
insurance contracts are not required to be disclosed and are not
included in the amounts discussed.

At December 31, 1995, investments in fixed maturities had a carrying
value and a fair value of $724.6 million, compared with a carrying value
and a fair value of $559.1 million at December 31, 1994. See note 12.

At December 31, 1995 and 1994, mortgage loans had a carrying value of
$125.8 million and $152.4 million, respectively, which approximates fair
value. In estimating fair value, the Company used interest rates
reflecting the higher returns required in the real estate financing
market.

The carrying values of $1.9 million and $2.4 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1995 and 1994, respectively. The carrying values of $55.3
million and $14.2 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1995 and
1994, respectively. Fair value is determined using various methods
including discounted cash flows, as appropriate for the various
financial instruments.

The assets of separate accounts providing a guaranteed return had a
carrying value and a fair value of $869.1 million and $923.0 million,
respectively, at December 31, 1995, compared to a carrying value and a
fair value of $820.4 million and $757.2 million, respectively, at
December 31, 1994. The liabilities of separate accounts providing a
guaranteed return had a carrying value and a fair value of $839.1
million and $766.3 million, respectively, at December 31, 1995, compared
to a carrying value and a fair value of $808.2 million and $681.4
million, respectively, at December 31, 1994.

The carrying values of short-term securities and investment income
accrued approximated their fair values.

18
<PAGE> 21
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

7. COMMITMENTS AND CONTINGENCIES

Financial Instruments with Off-Balance-Sheet Risk

See note 6 for a discussion of financial instruments with off-balance-
sheet risk.

Litigation

The Company is a defendant in various litigation matters. Although
there can be no assurances, as of December 31, 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.

8. BENEFIT PLANS

Pension Plans

The Company participates in qualified and nonqualified, noncontributory
defined benefit pension plans sponsored by an affiliate. Benefits for
the qualified plan are based on an account balance formula. Under this
formula, each employee's accrued benefit can be expressed as an account
that is credited with amounts based upon the employee's pay, length of
service and a specified interest rate, all subject to a minimum benefit
level. This plan is funded in accordance with the Employee Retirement
Income Security Act of 1974 and the Internal Revenue Code. For the
nonqualified plan, contributions are based on benefits paid. The
Company's share of net pension expense was not significant for 1995,
1994 or 1993.

Other Benefit Plans

In addition to pension benefits, the Company provides certain health
care and life insurance benefits for retired employees through a plan
sponsored by TIGI. Covered employees may become eligible for these
benefits if they reach retirement age while working for the Company.
These retirees may elect certain prepaid health care benefit plans.
Life insurance benefits generally are set at a fixed amount. The cost
recognized by the Company for these benefits represents its allocated
share of the total costs of the plan, net of employee contributions.
The Company's share of the total cost of the plan for 1995, 1994 and
1993 was not significant.

The Merger resulted in a change in control of The Travelers Corporation
as defined in the applicable plans, and provisions of some employee
benefit plans secured existing compensation and benefit entitlements
earned prior to the change in control, and provided a salary and benefit
continuation floor for employees whose employment was affected. These
merger-related costs were assumed by TIGI.

19
<PAGE> 22
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

8. BENEFIT PLANS

Savings, Investment and Stock Ownership Plan

Under the savings, investment and stock ownership plan available to
substantially all employees of TIGI, the Company matches a portion of
employee contributions. Effective April 1, 1993, the match decreased
from 100% to 50% of an employee's first 5% contribution and a variable
match based on the profitability of TIGI and its subsidiaries was added.
The Company's matching obligation was not significant for 1995, 1994 or
1993.

9. RELATED PARTY TRANSACTIONS

The principal banking functions, including payment of salaries and
expenses, for certain subsidiaries and affiliates of TIGI, including the
Company, are handled by TIC. Settlements for these functions between
TIC and its affiliates are made regularly. TIC provides various
employee benefit coverages to certain subsidiaries of TIGI. The
premiums for these coverages were charged in accordance with cost
allocation procedures based upon salaries or census. In addition,
investment advisory and management services, data processing services
and claims processing services are provided by affiliated companies.
Charges for these services are shared by the companies on cost
allocation methods based generally on estimated usage by department.

TIGI and its subsidiaries maintain a short-term investment pool in which
the Company participates. The position of each company participating in
the pool is calculated and adjusted daily. At December 31, 1995 and
1994, the pool totaled approximately $2.2 billion and $1.5 billion,
respectively. The Company's share of the pool amounted to $49.5 million
and $44.5 million at December 31, 1995 and 1994, respectively, and is
included in short-term securities in the balance sheet.

The Company's TTM Modified Guaranteed Annuity Contracts are subject to a
limited guarantee agreement by TIC in a principal amount of up to $100
million. TIC's obligation 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. In addition, TIC guarantees that
the Company will maintain a minimum statutory capital and surplus level.

The Company sells structured settlement annuities to its affiliates, The
Travelers Indemnity Company and its subsidiaries. Such deposits were
$36.6 million, $37.6 million and $48.4 million for 1995, 1994 and 1993,
respectively.

The Company began marketing variable annuity products through its
affiliate, Smith Barney, Inc., in 1995. Deposits related to these
products were $20.5 million in 1995.

Most leasing functions for TIGI and its subsidiaries are handled by TIC.
Leasing expenses are shared by the companies on a cost allocation method
based generally on estimated usage by department.

20
<PAGE> 23
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

10. FEDERAL INCOME TAXES

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
(in thousands) 1995 1994 | 1993
----------------------------------------------------------------------------|-------------
<S> <C> <C> | <C>
Effective tax rate |
------------------ |
|
Income before federal income taxes $ 43,436 $ 27,865 | $ 13,061
Statutory tax rate 35% 35% | 35%
----------------------------------------------------------------------------|-------------
|
Expected federal income taxes $ 15,203 $ 9,753 | $ 4,571
Tax effect of: |
Nontaxable investment income (13) (90) | (85)
Adjustments to benefit and other reserves - (117) | (4,705)
Adjustment to deferred tax asset for |
enacted change in tax rates from |
34% to 35% - - | (255)
Other, net (671) (6) | (74)
----------------------------------------------------------------------------|-------------
Federal income taxes $ 14,519 $ 9,540 | $ (548)
----------------------------------------------------------------------------|-------------
|
Effective tax rate 33% 34% | (4)%
----------------------------------------------------------------------------|-------------
|
Composition of federal income taxes |
----------------------------------- |
Current: |
United States $ 2,555 $ 4,742 | $ 22,124
----------------------------------------------------------------------------|-------------
|
Deferred: |
United States 11,964 4,798 | (22,672)
----------------------------------------------------------------------------|-------------
Federal income taxes $ 14,519 $ 9,540 | $ (548)
------------------------------------------------------------------------------------------
</TABLE>

21
<PAGE> 24
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

10. FEDERAL INCOME TAXES, Continued

The net deferred tax assets at December 31, 1995 and 1994 were comprised
of the tax effects of temporary differences related to the following
assets and liabilities:

<TABLE>
<CAPTION>
(in thousands) 1995 1994
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Benefit, reinsurance and other reserves $ 67,104 $ 70,729
Investments - 30,908
Other 2,570 2,766
-----------------------------------------------------------------------------------------------
Total 69,674 104,403
-----------------------------------------------------------------------------------------------

Deferred tax liabilities:
Investments 19,625 -
Deferred acquisition costs and
value of insurance in force 6,285 7,355
Other 536 663
-----------------------------------------------------------------------------------------------
Total 26,446 8,018
-----------------------------------------------------------------------------------------------

Net deferred tax asset before valuation allowance 43,228 96,385
Valuation allowance for deferred tax assets (2,070) (2,070)
-----------------------------------------------------------------------------------------------

Net deferred tax asset after valuation allowance $ 41,158 $ 94,315
-----------------------------------------------------------------------------------------------
</TABLE>

Starting in 1994 and continuing for at least five years, TIC and its
life insurance subsidiaries, including the Company, will file a
consolidated federal income tax return. Federal income taxes are
allocated to each member on a separate return basis adjusted for credits
and other amounts required by the consolidation process. Any resulting
liability will be paid currently to TIC. Any credits for losses will be
paid by TIC to the extent that such credits are for tax benefits that
have been utilized in the consolidated federal income tax return.

A net deferred tax asset valuation allowance of $2.1 million has been
established to reduce the deferred tax asset on investment losses to the
amount that, based upon available evidence, is more likely than not to
be realized. Reversal of the valuation allowance is contingent upon the
recognition of future capital gains in the Company's consolidated life
insurance company federal income tax return through 1998, and the
consolidated federal income tax return of Travelers commencing in 1999,
or a change in circumstances which causes the recognition of the
benefits to become more likely than not. There was no change in the
valuation allowance during 1995. The initial recognition of any benefit
provided by the reversal of the valuation allowance will be recognized
by reducing goodwill.

22
<PAGE> 25
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

10. FEDERAL INCOME TAXES, Continued

In management's judgment, the $41.2 million "net deferred tax asset after
valuation allowance" as of December 31, 1995, is fully recoverable
against expected future years' taxable ordinary income and capital gains.
At December 31, 1995, the Company has no ordinary or capital loss
carryforwards.

The "policyholders surplus account", which arose under prior tax law, is
generally that portion of the gain from operations that has not been
subjected to tax, plus certain deductions. The balance of this account,
which, under provisions of the Tax Reform Act of 1984, will not increase
after 1983, is estimated to be $2.0 million. This amount has not been
subjected to current income taxes but, under certain conditions that
management considers to be remote, may become subject to income taxes in
future years. At current rates, the maximum amount of such tax (for
which no provision has been made in the financial statements) would be
approximately $700 thousand.

11. NET INVESTMENT INCOME

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(For the year ended December 31, in thousands) 1995 1994 | 1993
---------------------------------------------------------------------------------|--------------
<S> <C> <C> | <C>
Gross investment income |
----------------------- |
Fixed maturities $ 49,486 $ 44,354 | $ 39,189
Equity securities 497 827 | 930
Mortgage loans 11,644 17,178 | 25,258
Real estate held for sale 2,476 6,299 | 19,028
Other 2,552 4,480 | (4,062)
---------------------------------------------------------------------------------|--------------
66,655 73,138 | 80,343
---------------------------------------------------------------------------------|--------------
|
Investment expenses 3,446 7,045 | 22,299
---------------------------------------------------------------------------------|--------------
Net investment income $ 63,209 $ 66,093 | $ 58,044
------------------------------------------------------------------------------------------------
</TABLE>

23
<PAGE> 26
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

12. INVESTMENTS AND INVESTMENT GAINS (LOSSES)

Realized investment gains (losses) for the periods were as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(For the year ended December 31, in thousands) 1995 1994 | 1993
----------------------------------------------------------------------------------|-------------
<S> <C> <C> | <C>
Realized |
-------- |
|
Fixed maturities $ (4,240) $ (908) | $ 8,659
Equity securities 6,138 1,675 | 1,580
Mortgage loans 725 36 | (1,564)
Real estate held for sale (35) - | (8,310)
Other 16,125 (2,877) | 11,590
----------------------------------------------------------------------------------|-------------
Realized investment gains (losses) $ 18,713 $ (2,074) | $ 11,955
------------------------------------------------------------------------------------------------
</TABLE>

Changes in net unrealized investment gains (losses) that are included
as a separate component of shareholder's equity were as follows:

<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1995 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> | <C>
Unrealized |
---------- |
|
Fixed maturities $ 111,551 $ (65,205) | $ (20,059)
Equity securities 1,834 (27) | (1,389)
Other 4,390 (28) | 8,524
----------------------------------------------------------------------------------|-------------
117,775 (65,260) | (12,924)
Related taxes 41,221 (22,841) | (3,445)
----------------------------------------------------------------------------------|-------------
Change in unrealized investment gains (losses) 76,554 (42,419) | (9,479)
Balance beginning of year (41,224) 1,195 | 10,674
------------------------------------------------------------------------------------------------
Balance end of year $ 35,330 $ (41,224) $ 1,195
------------------------------------------------------------------------------------------------
</TABLE>

The initial adoption of FAS 115 resulted in an increase of approximately
$530 thousand (net of taxes) to net unrealized investment gains in 1994.

Fixed Maturities

Proceeds from sales of fixed maturities classified as available for sale
were $460.0 million and $41.7 million in 1995 and 1994, respectively.
Gross gains of $7.9 million and $869 thousand and gross losses of $10.3
million and $1.9 million in 1995 and 1994, respectively, were realized
on those sales.

24
<PAGE> 27
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued

Prior to December 31, 1993, fixed maturities that were intended to be
held to maturity were recorded at amortized cost and classified as held
for investment. Proceeds from sales of such securities were $16.4
million in 1993, resulting in gross realized gains of $617 thousand.

Prior to December 31, 1993, the carrying values of the trading portfolio
fixed maturities were adjusted to market value as it was likely they
would be sold prior to maturity. Sales of trading portfolio fixed
maturities were $96.6 million in 1993, resulting in gross realized gains
of $12.4 million.

The amortized cost and market values of investments in fixed maturities
were as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
December 31, 1995
------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
(in thousands) cost gains losses value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 89,044 $ 2,545 $ 378 $ 91,211
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 160,988 24,267 1 185,254
Obligations of states and
political subdivisions 3,500 499 - 3,999
All other corporate bonds 424,676 21,576 2,162 444,090
Redeemable preferred stock 85 - - 85
------------------------------------------------------------------------------------------------
Total $ 678,293 $ 48,887 $ 2,541 $ 724,639
------------------------------------------------------------------------------------------------
</TABLE>

25
<PAGE> 28
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
December 31, 1994
------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Market
(in thousands) cost gains losses value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 60,102 $ 14 $ 4,624 $ 55,492
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 188,043 25 24,301 163,767
Obligations of states and
political subdivisions 3,000 - 184 2,816
Debt securities issued by
foreign governments 20,076 - 2,157 17,919
All other corporate bonds 352,197 1,140 35,055 318,282
Redeemable preferred stock 929 13 76 866
------------------------------------------------------------------------------------------------
Total $ 624,347 $ 1,192 $ 66,397 $ 559,142
------------------------------------------------------------------------------------------------
</TABLE>

The amortized cost and market value of fixed maturities available for
sale at December 31, 1995, by contractual maturity, are shown below.
Actual maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Maturity Amortized Market
(in thousands) cost value
------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 7,858 $ 8,245
Due after 1 year through 5 years 28,392 29,022
Due after 5 years through 10 years 172,831 178,526
Due after 10 years 380,168 417,635
------------------------------------------------------------------------------------------------
589,249 633,428
Mortgage-backed securities 89,044 91,211
------------------------------------------------------------------------------------------------
Total $ 678,293 $ 724,639
------------------------------------------------------------------------------------------------
</TABLE>

The Company makes significant investments in collateralized mortgage
obligations (CMOs). CMOs typically have high credit quality, offer good
liquidity, and provide a significant advantage in yield and total return
compared to U.S. Treasury securities. The Company's investment strategy
is to purchase CMO tranches which are protected against prepayment risk,
primarily planned amortization class (PAC) tranches. Prepayment
protected tranches are preferred because they provide stable cash flows
in a variety of scenarios. The Company does invest in other types of
CMO tranches if a careful assessment indicates a favorable risk/return
tradeoff. The Company does not purchase residual interests in CMOs.

26
<PAGE> 29
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued

At December 31, 1995 and 1994, the Company held CMOs with a market value
of $68.6 million and $55.5 million, respectively. Approximately 94% and
96% of the Company's CMO holdings are fully collateralized by
GNMA, FNMA or FHLMC securities at December 31, 1995 and 1994,
respectively. Virtually all of these securities are rated AAA.

Equity Securities

The cost and market values of investments in equity securities were as
follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
December 31, 1995
------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Market
(in thousands) Cost gains losses value
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $ 3,310 $ 3,374 $ 68 $ 6,616
Nonredeemable preferred stocks 6,143 340 - 6,483
------------------------------------------------------------------------------------------------
Total $ 9,453 $ 3,714 $ 68 $ 13,099
------------------------------------------------------------------------------------------------
</TABLE>

Common stocks $ 6,141 $ 3,177 $ 654 $ 8,664
Nonredeemable preferred stocks 8,111 7 718 7,400
------------------------------------------------------------------------------------------------
Total $ 14,252 $ 3,184 $ 1,372 $ 16,064
------------------------------------------------------------------------------------------------
</TABLE>

Proceeds from sales of equity securities were $11.8 million and $9.4
million in 1995 and 1994, respectively. Gross gains of $4.9 million and
$2.8 million and gross losses of $474 thousand and $369 thousand in
1995 and 1994, respectively, were realized on those sales.

Mortgage loans and real estate held for sale

Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure, foreclosed loans and loans modified at interest
rates below market. The Company continues its strategy, adopted in
conjunction with the Merger, to dispose of these real estate assets and
some of the mortgage loans and to reinvest the proceeds to obtain
current market yields.

27
<PAGE> 30
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued

At December 31, 1995 and 1994, the Company's mortgage loan and real
estate held for sale portfolios consisted of the following:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------
(in thousands) 1995 1994
------------------------------------------------------------------------------
<S> <C> <C>
Current mortgage loans $ 108,142 $ 134,868
Underperforming mortgage loans 17,671 17,491
------------------------------------------------------------------------------
Total 125,813 152,359
------------------------------------------------------------------------------

Real estate held for sale 8,995 6,810
------------------------------------------------------------------------------
Total $ 134,808 $ 159,169
------------------------------------------------------------------------------
</TABLE>

Aggregate annual maturities on mortgage loans at December 31, 1995 are
as follows:

<TABLE>
<CAPTION>
(in thousands)
-----------------------------------------------------
<S> <C>
Past maturity $ 3,437
1996 21,927
1997 5,966
1998 21,237
1999 9,700
2000 6,016
Thereafter 57,530
-----------------------------------------------------
Total $ 125,813
-----------------------------------------------------
</TABLE>

Concentrations

At December 31, 1995 and 1994, the Company had no concentration of
credit risk in a single investee exceeding 10% of shareholder's equity.

The Company participates in a short-term investment pool maintained by
TIGI and its subsidiaries. See note 9.

Included in fixed maturities are below investment grade assets totaling
$59.0 million and $51.1 million at December 31, 1995 and 1994,
respectively. The Company defines its below investment grade assets as
those securities rated "Ba1" or below by external rating agencies, or
the equivalent by internal analysts when a public rating does not exist.
Such assets include publicly traded below investment grade bonds and
certain other privately issued bonds that are classified as below
investment grade loans.

28
<PAGE> 31
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued

The Company also had significant concentrations of investments,
primarily fixed maturities, in the following industries:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
(in thousands) 1995 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Oil and gas $ 63,835 $ 39,749
Transportation 44,119 38,523
Banking 33,168 42,191
Chemical manufacturing 16,032 27,326
--------------------------------------------------------------------------------------------------
</TABLE>

Below investment grade assets included in the totals of the previous
table were as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
(in thousands) 1995 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Oil and gas $ 3,469 $ 4,002
Transportation 18,648 2,678
Banking 632 5,124
--------------------------------------------------------------------------------------------------
</TABLE>

Concentrations of mortgage loans by property type at December 31, 1995
and 1994 were as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
(in thousands) 1995 1994
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Office $ 32,024 $ 40,559
Agricultural 29,820 32,890
Retail 27,870 31,712
-------------------------------------------------------------------------------------------------
</TABLE>

The Company monitors creditworthiness of counterparties to all financial
instruments by using controls that include credit approvals, limits and
other monitoring procedures. Collateral for fixed maturities often
includes pledges of assets, including stock and other assets, guarantees
and letters of credit. The Company's underwriting standards with
respect to new mortgage loans generally require loan to value ratios of
75% or less at the time of mortgage origination.

29
<PAGE> 32
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued

Investment Valuation Reserves

There were no investment valuation reserves at December 31, 1995, 1994
and 1993. Investment valuation reserve activity during 1993 was as
follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(in thousands) 1993
------------------------------------------------------------------------------------------------
<S> <C>
Beginning of year $ 41,443
Increase 8,355
Impairments, net of gains/recoveries (6,887)
Purchase accounting adjustment (42,911)
------------------------------------------------------------------------------------------------
End of year $ -
------------------------------------------------------------------------------------------------
</TABLE>

Increases in the investment valuation reserves were reflected as
realized investment losses.

Nonincome Producing

Investments included in the balance sheets that were nonincome producing
for the preceding 12 months were insignificant.

Restructured Investments

The Company had mortgage loan and debt securities which were restructured
at below market terms totaling approximately $17.7 million and $17.4
million at December 31, 1995 and 1994, respectively. At December 31,
1993, the Company's restructured assets were recorded at purchase
accounting value. The new terms typically defer a portion of contract
interest payments to varying future periods. The accrual of interest is
suspended on all restructured assets, and interest income is reported
only as payment is received. Gross interest income on restructured
assets that would have been recorded in accordance with the original
terms of such assets amounted to $4.9 million in 1995 and $5.2 million in
1994. Interest on these assets, included in net investment income,
aggregated $2.0 million in 1995 and $1.4 million in 1994.

30
<PAGE> 33
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued

13. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES

At December 31, 1995, the Company had $683.0 million of life and annuity
deposit funds and reserves. Of that total, $671.2 million were not
subject to discretionary withdrawal based on contract terms. The
remaining $11.8 million were life and annuity products that were subject
to discretionary withdrawal by the contractholders. Included in the
amount that is subject to discretionary withdrawal were $8.2 million of
liabilities that are surrenderable with market value adjustments. An
additional $3.6 million of the life insurance and individual annuity
liabilities are subject to discretionary withdrawals with an average
surrender charge of 6.6%. The life insurance risks would have to be
underwritten again if transferred to another carrier, which is considered
a significant deterrent for long-term policyholders. Insurance
liabilities that are surrendered or withdrawn from the Company are
reduced by outstanding policy loans and related accrued interest prior to
payout.

14. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES

The following table reconciles net income to net cash provided by (used
in) operating activities:

<TABLE>
<CAPTION>
(For the year ended December 31, in thousands) 1995 1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C> | <C>
Net income $ 28,917 $ 18,325 | $ 13,609
Reconciling adjustments |
Realized (gains) losses (18,713) 2,074 | (11,955)
Deferred federal income taxes 11,964 4,798 | (22,672)
Amortization of deferred policy acquisition costs and |
value of insurance in force 1,563 - | -
Deferred policy acquisition costs (3,109) (21,014) | -
Investment income accrued (819) 1,085 | (9,607)
Insurance reserves (20,081) (16,062) | 80,238
Trading account investments, (purchases) sales, net - - | 35,093
Other (48,353) 18,371 | (80,398)
-----------------------------------------------------------------------------------------|-------------
|
Net cash provided by (used in) operating activities $ (48,631) $ 7,577 | $ 4,308
-------------------------------------------------------------------------------------------------------
</TABLE>

15. NONCASH INVESTING AND FINANCING ACTIVITIES

Significant noncash investing and financing activities include: a) the
transfer of $2.6 million and $5.6 million of mortgage loans and real
estate held for sale from one of the Company's separate accounts to the
general account in 1995 and 1994, respectively; b) acquisition of real
estate through foreclosures of mortgage loans amounting to $10.3 million
and $7.7 million in 1994 and 1993, respectively; and c) increases in
investment valuation reserves in 1993 for mortgage loans and real estate
held for sale (see note 12).

31
<PAGE> 34
THE TRAVELERS LIFE AND ANNUITY COMPANY

GLOSSARY OF INSURANCE TERMS

ANNUITY - A contract that pays a periodic income benefit for the life of
a person (the annuitant), the lives of two or more persons or for a specified
period of time.

CLAIM - Request by an insured for indemnification by an insurance company
for loss incurred from an insured peril.

CONTRACTHOLDER FUNDS - Receipts from the issuance of universal life,
pension investment and certain individual annuity contracts. Such receipts are
considered deposits on investment contracts that do not have substantial
mortality or morbidity risks.

DEFERRED ACQUISITION COSTS - Commissions and other selling expenses,
which vary with and are primarily related to the production of business, are
deferred and amortized to achieve a matching of revenues and expenses when
reported in financial statements prepared in accordance with GAAP.

DEFINED BENEFIT PLANS - Type of pension plan under which benefits are
fixed in advance by formula, and contributions vary.

DEPOSITS AND OTHER CONSIDERATIONS - Consist of cash value deposits and
charges for mortality risk and expenses associated with universal life
insurance, annuities and group pensions.

GENERAL ACCOUNT - All of an insurer's assets other than those allocated
to separate accounts.

INSURANCE - Mechanism for contractually shifting burdens of a number of
risks by pooling them.

MORBIDITY - The rate at which people become diseased, mentally or
physically, or physically impaired.

MORTALITY - The rate at which people die.

REINSURANCE - The practice whereby one insurer, called the reinsurer, in
consideration of a premium paid to such insurer, agrees to indemnify another
insurer, called the ceding company, for part or all of the liability assumed by
the ceding company under one or more policies or contracts of insurance which
it has issued.

RETENTION - The amount of exposure an insurance company retains on any
one risk or group of risks.

SEPARATE ACCOUNTS - Funds for which investment income and investment
gains and losses accrue directly to, and investment risk is borne by, the
contractholders. The assets of these separate accounts are legally segregated
and not subject to claims that arise out of any other business of the insurance
company.

STATUTORY ACCOUNTING PRACTICES - The rules and procedures prescribed or
permitted by United States state insurance regulatory authorities for recording
transactions and preparing financial statements. Statutory accounting
practices generally reflect a modified going concern basis of accounting.

32
<PAGE> 35
THE TRAVELERS LIFE AND ANNUITY COMPANY

STATUTORY CAPITAL AND SURPLUS - As determined under statutory accounting
practices, the amount remaining after all liabilities, including loss reserves,
are subtracted from all admitted assets. Admitted assets are assets of an
insurer prescribed or permitted by a state to be taken into account in
determining the insurer's financial condition for statutory purposes.
Statutory surplus is also referred to as "surplus" or "surplus as regards
policyholders" for statutory accounting purposes.

STRUCTURED SETTLEMENTS - Periodic payments to an injured person or
survivor for a determined number of years or for life, typically in settlement
of a claim under a liability policy.

UNDERWRITING - The insurer's or reinsurer's process of reviewing
applications for insurance coverage, and the decision whether to accept all or
part of the coverage and determination of the applicable premiums; also refers
to the acceptance of such coverage.

33
<PAGE> 36
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant.

Omitted pursuant to General Instruction J(2)(c) of Form 10-K.

Item 11. Executive Compensation.

Omitted pursuant to General Instruction J(2)(c) of Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Omitted pursuant to General Instruction J(2)(c) of Form 10-K.

Item 13. Certain Relationships and Related Transactions.

Omitted pursuant to General Instruction J(2)(c) of Form 10-K.

34
<PAGE> 37
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) Documents filed
(1) Financial Statements. See index on page 6 of this report.
(2) Financial Statement Schedules. See index on page 37 of this
report.
(3) Exhibits. See Exhibit Index on page 43.

(b) Reports on Form 8-K:

No reports on Form 8-K were filed during the fourth quarter of 1995.

35
<PAGE> 38
SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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, on the 28th day of March,
1996.

THE TRAVELERS LIFE AND ANNUITY COMPANY
(Registrant)

By: /s/Jay S. Fishman
-----------------
Jay S. Fishman
Vice Chairman and
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities indicated on the 28th day of March, 1996.

<TABLE>
<CAPTION>
Signature Capacity
- --------- --------
<S> <C>
/s/Robert I. Lipp Director and Chairman of the Board
- -----------------------------
(Robert I. Lipp)

/s/Jay S. Fishman Director and Vice Chairman and Chief Financial Officer
- -----------------------------
(Jay S. Fishman) (Principal Financial Officer)

/s/Michael A. Carpenter Director and President and Chief Executive Officer
- -----------------------------
(Michael A. Carpenter) (Principal Executive Officer)

/s/Donald T. DeCarlo Director
- -----------------------------
(Donald T. DeCarlo)

/s/Irwin R. Ettinger Director
- -----------------------------
(Irwin R. Ettinger)

/s/Charles O. Prince, III Director
- -----------------------------
(Charles O. Prince, III)

/s/Marc P. Weill Director
- -----------------------------
(Marc P. Weill)

/s/Christine B. Mead Vice President - Finance and Controller
- -----------------------------
(Christine B. Mead) (Principal Accounting Officer)
</TABLE>

Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities pursuant
to Section 12 of the Act: NONE

No Annual Report to Security Holders covering the registrant's last fiscal year
or proxy material with respect to any meeting of security holders has been
sent, or will be sent, to security holders.

36
<PAGE> 39
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
<S> <C>
The Travelers Life and Annuity Company

Statement of Operations and Retained Earnings *
Balance Sheet *
Statement of Cash Flows *
Notes to Financial Statements *
Independent Auditors' Reports *

Reports of Independent Accountants 38-39

Schedule I -Summary of Investments - Other than Investments in Related Parties 1995 40

Schedule III -Supplementary Insurance Information 1993-1995 41

Schedule IV -Reinsurance 1993-1995 42
</TABLE>

All other schedules are inapplicable for this filing.

* See index on page 6

37
<PAGE> 40
Independent Auditors' Report

The Board of Directors and Shareholder of
The Travelers Life and Annuity Company:

Under date of January 16, 1996, we reported on the balance sheet of The
Travelers Life and Annuity Company as of December 31, 1995 and 1994, and the
related statements of operations and retained earnings and cash flows for each
of the years in the two-year period ended December 31, 1995, as contained in
this Form 10-K. In connection with our audits of the aforementioned financial
statements, we also audited the related financial statement schedules appearing
on pages 40, 41 and 42 in this Form 10-K. These financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statement schedules based on our audits.

In our opinion, such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

/s/ KPMG PEAT MARWICK LLP

Hartford, Connecticut
January 16, 1996

38
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholder of
The Travelers Life and Annuity Company:

In connection with our audit of the statements of operations and retained
earnings and cash flows of The Travelers Life and Annuity Company for the
year ended December 31, 1993, which financial statements are included in
this Form 10-K, we have also audited those portions of the financial statements
schedules listed in the index on page 37 of this Form 10-K which pertain to the
operations of The Travelers Life and Annuity Company for the year ended
December 31, 1993.

In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.

/s/ COOPERS & LYBRAND L.L.P.

Hartford, Connecticut
January 24, 1994

39
<PAGE> 42
SCHEDULE I
THE TRAVELERS LIFE AND ANNUITY COMPANY
Summary of Investments - Other Than
Investments in Related Parties
December 31, 1995
(in thousands)

<TABLE>
<CAPTION>
Amount at which
shown in the
Type of Investment Cost Value balance sheet(1)
- ------------------ ---- ----- ----------------
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States Government and government agencies and
authorities $ 192,651 $ 218,727 $ 218,727
States, municipalities and political subdivisions 3,500 3,999 3,999
Public utilities 54,541 57,087 57,087
Convertible bonds and bonds with warrants attached 3,000 3,269 3,269
All other corporate bonds 424,516 441,472 441,472
------------ ------------ ------------
Total bonds 678,208 724,554 724,554
Redeemable preferred stocks 85 85 85
------------ ------------ ------------
Total fixed maturities 678,293 724,639 724,639
------------ ------------ ------------

Equity securities:
Common stock
Banks, trust and insurance companies 64 104 104
Industrial, miscellaneous and all other 3,246 6,512 6,512
------------ ------------ ------------
Total common stocks 3,310 6,616 6,616
Nonredeemable preferred stocks 6,143 6,483 6,483
------------ ------------ ------------
Total equity securities 9,453 13,099 13,099
------------ ------------ ------------

Mortgage loans 125,813 125,813
------------ ------------

Real estate held for sale 8,995 8,995
------------ ------------

Short-term securities 51,381 51,381
------------ ------------

Other investments 61,511 65,805
------------ ------------

Total investments $ 935,446 $ 989,732
============ ============
</TABLE>

(1) Determined in accordance with methods described in notes 2 and 12 on pages
12 and 24 of the notes to the financial statements.

40
<PAGE> 43
SCHEDULE III

THE TRAVELERS LIFE AND ANNUITY COMPANY

Supplementary Insurance Information

1993-1995
(in thousands)

<TABLE>
<CAPTION>
AMORTIZATION
OF DEFERRED
DEFERRED POLICY FUTURE POLICY PREMIUM NET BENEFITS, POLICY OTHER PREMIUMS
ACQUISITION COSTS BENEFITS, REVENUE INVESTMENT CLAIMS, ACQUISITION OPERATING WRITTEN
AND VALUE OF LOSSES, CLAIMS INCOME LOSSES & COSTS AND VALUE EXPENSES
INSURANCE & LOSS EXPENSES SETTLEMENT OF INSURANCE (b)
IN FORCE (a) EXPENSES IN FORCE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 22,560 $ 682,974 $ 2,652 $ 63,209 $ 52,390 $ 1,563 $ 4,651 $ 2,652

1994 $ 21,014 $ 691,108 $ 3,498 $ 66,093 $ 55,596 $ - $ 2,758 $ 3,498

-------------------------------------------------------------------------------

1993 $ - $ 707,916 $ 4,524 $ 58,044 $ 67,489 $ - $ 3,075 $ 4,524
</TABLE>

(a) Includes contractholder funds.
(b) Expense allocations are determined in accordance with the guidelines and
principles published in Regulation 33 from the Insurance Department of the
State of New York. This regulation makes a reasonable allocation of all
expenses to those product lines with which they are associated.

41
<PAGE> 44
SCHEDULE IV
THE TRAVELERS LIFE AND ANNUITY COMPANY
Reinsurance
(in thousands)

<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
------ --------- --------- ------ ------

1995
----
<S> <C> <C> <C> <C> <C>
Life insurance in force $874,859 $698,948 $ -- $175,911 -%

Life insurance premiums:
Group annuity $ 445 $ -- $ 445
Individual life 2,693 486 2,207
-------- -------- --------
Totals $ 3,138 $ 486 $ -- $ 2,652 -%
======== ======== ========

1994
----

Life insurance in force $106,026 $106,026 $ -- $ -- -%

Life insurance premiums:
Group annuity $ 3,498 $ -- $ 3,498
Individual life 401 401 --
-------- -------- --------
Totals $ 3,899 $ 401 $ -- $ 3,498 -%
======== ======== ========

1993
----

Life insurance in force $111,726 $111,726 $ -- $ -- -%

- -----------------------------------------------------------------------------------------------------

Life insurance premiums:
Group annuity $ 4,524 $ -- $ 4,524
Individual life 256 256 --
-------- -------- --------
Totals $ 4,780 $ 256 $ -- $ 4,524 -%
======== ======== ========
</TABLE>

42
<PAGE> 45
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995

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>

<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1995 FINANCIAL STATEMENTS OF THE TRAVELERS LIFE AND ANNUITY COMPANY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000929498
<NAME> THE TRAVELERS LIFE AND ANNUITY COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 724,639
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 13,099
<MORTGAGE> 125,813
<REAL-ESTATE> 8,995
<TOTAL-INVEST> 989,732
<CASH> 0
<RECOVER-REINSURE> 718
<DEFERRED-ACQUISITION> 22,560
<TOTAL-ASSETS> 1,964,639
<POLICY-LOSSES> 671,027
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 11,947
<NOTES-PAYABLE> 0
0
0
<COMMON> 3,000
<OTHER-SE> 360,551
<TOTAL-LIABILITY-AND-EQUITY> 1,964,639
2,652
<INVESTMENT-INCOME> 63,209
<INVESTMENT-GAINS> 18,713
<OTHER-INCOME> 17,466
<BENEFITS> 52,390
<UNDERWRITING-AMORTIZATION> 1,563
<UNDERWRITING-OTHER> 4,651
<INCOME-PRETAX> 43,436
<INCOME-TAX> 14,519
<INCOME-CONTINUING> 28,917
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,917
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0

</TABLE>