<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, 1996
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>
<CAPTION>
Connecticut 06-0904249
<S> <C>
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
One Tower Square, Hartford, Connecticut 06183
(Address of principal executive offices) (Zip Code)
</TABLE>
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 the date hereof 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 I(1)(a) and
(b) of Form 10-K and is therefore filing this Form with the reduced disclosure
format.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE> 2
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 1996
Table of Contents
<TABLE>
<CAPTION>
Form 10-K
Item Number PART I Page
- ----------- ------ ----
<S> <C> <C>
1. Business...............................................................1
2. Properties.............................................................3
3. Legal Proceedings......................................................3
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....................................4
8. Financial Statements and Supplementary Data............................7
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................31
PART III
10. Directors and Executive Officers of the Registrant.....................31
11. Executive Compensation.................................................31
12. Security Ownership of Certain Beneficial Owners and Management ....... 31
13. Certain Relationships and Related Transactions.........................31
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ..... 32
</TABLE>
<PAGE> 3
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 1996
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 Group), a financial services
holding company engaged, through its subsidiaries, principally in four business
segments: (i) Investment Services; (ii) Consumer Finance Services; (iii)
Property & Casualty Insurance Services; and (iv) Life Insurance Services through
(TIC and its subsidiaries). The periodic reports of Travelers Group provide
additional business and financial information concerning that company and its
consolidated subsidiaries. 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 and
annuity 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 Company offers fixed and variable deferred annuities and individual life
insurance to individuals and small businesses. It also provides single premium
group annuity close-out contracts and individual structured settlement
annuities.
The Company commenced writing individual life and deferred annuity business in
1995. These products are marketed primarily through the Financial Consultants of
Smith Barney Inc., an affiliate of the Company, and a core group of
approximately 500 independent agencies. The majority of the annuity business and
a substantial portion of the individual life business written by the Company is
accounted for as investment contracts, with the result that the amounts
collected from contractholders are not included in revenues.
The single premium group annuity contracts are typically purchased by
employer-sponsored pension plans upon termination of the plan, asset reversion
or other significant plan changes. As a result, sales activity can vary
significantly from period to period.
The individual structured settlement contracts are purchased by an affiliate,
Travelers Property Casualty Corp. (TAP), formerly Travelers/Aetna Property
Casualty Corp., 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.
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.
1
<PAGE> 4
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 1996
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 and one-half of the policyholder dividend liability.
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.
At December 31, 1996, the Company had adjusted capital in excess of amounts
requiring any Company or 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 $14.8 million in 1997 without
prior approval of the Connecticut Insurance Department.
2
<PAGE> 5
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 1996
Item 2. Properties.
The Company's executive offices are located in Hartford, Connecticut. TIC owns
buildings containing approximately 1.5 million square feet of office space
located in Hartford, Connecticut serving as the home office for the Company, TIC
and TAP.
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 in the
normal course of business. Although there can be no assurances, as of December
31, 1996, 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.
Item 4. Submission of Matters to a Vote of Security Holders.
Omitted pursuant to General Instruction I(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, 1996. All shares are held by TIC, and
there exists no established public trading market for the common equity of the
Company. The Company paid a dividend of $16 million to TIC in 1996, no dividend
was paid in 1995. See Note 5 of Notes to Financial Statements for dividend
restrictions.
Item 6. Selected Financial Data.
Omitted pursuant to General Instruction I(2)(a) of Form 10-K.
3
<PAGE> 6
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 1996
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 I(2)(a) of Form 10-K.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
For the year ended December 31, 1996 1995
- ------------------------------- ---- ----
(in millions)
<S> <C> <C>
Revenues (1) $ 105.0 $ 102.0
======= =======
Net income (2) $ 25.8 $ 28.9
======= =======
</TABLE>
(1) Revenues include pre-tax realized gains (losses) of ($9.6) million and
$18.7 million in 1996 and 1995, respectively.
(2) Net income includes after-tax realized gains (losses) of ($6.2) million
and $12.2 million in 1996 and 1995, respectively.
The Company offers fixed and variable deferred annuities and individual life
insurance to individuals and small businesses. It also provides single premium
group annuity close-out contracts and individual structured settlement
annuities.
The Company commenced writing individual life and deferred annuity business in
the fourth quarter of 1995. These products are marketed primarily through the
Financial Consultants of Smith Barney Inc., an affiliate of the Company and a
core group of approximately 500 independent agencies. The majority of the
annuity business and a substantial portion of the individual life business
written by the Company is accounted for as investment contracts, with the result
that the amounts collected from contractholders are not included in revenues.
The individual structured settlement contracts are purchased by TAP, 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.
RESULTS OF OPERATIONS:
Net income for 1996 was $25.8 million, compared to $28.9 million for 1995.
Excluding net realized investment gains and losses, operating earnings increased
from $16.7 million in 1995 to $32.0 million in 1996. This increase was primarily
driven by an increase in investment income reflective of the timing of limited
partnership activity, partially offset by increased expenses related to
increased volume of sales.
4
<PAGE> 7
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 1996
<TABLE>
<CAPTION>
PREMIUMS AND DEPOSITS: 1996 1995
----- -----
(in thousands)
<S> <C> <C>
Deferred annuities $302,001 $28,512
Structured settlements 36,907 36,609
Universal life 28,504 2,304
Traditional life 7,248 2,207
Single premium group close-out 2,109 445
-------- -------
$376,769 $70,077
======== =======
</TABLE>
The increase in deferred annuity deposits is attributable to sales of
Vintage(R), the variable annuity product distributed exclusively by Financial
Consultants of Smith Barney Inc., an affiliate of the Company. The growth in
universal life reflects the selling initiative begun in the fourth quarter of
1995.
Policyholder benefit reserves, contractholder funds and separate account
reserves totaled $1.842 billion at December 31, 1996, up from $1.540 billion at
December 31, 1995, primarily as a result of growth in the individual life and
deferred annuity business which commenced in 1995.
OUTLOOK
The Company should benefit from 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 take advantage of the favorable
long-term demographic trends through its strong financial position, widespread
brand name recognition and competitive life and annuity products sold through
established distribution channels.
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 reform of restrictions on entry into the insurance business, will
likely accelerate this trend. Also, the annuities business is interest
sensitive, and swings in interest rates could influence sales and retention of
in-force policies. 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 and maintenance of an efficient cost structure.
5
<PAGE> 8
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 1996
FUTURE APPLICATION OF ACCOUNTING STANDARDS
In June 1996, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 125 (FAS 125), "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities". FAS 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. These standards are based
on consistent application of a financial-components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered
and derecognizes liabilities when extinguished. FAS 125 provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. The requirements of FAS 125 are effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996, and are to be applied
prospectively. However, in December 1996 the FASB issued FAS 127, "Deferral of
the Effective Date of Certain Provisions of FASB Statement No. 125," which
delays until January 1, 1998 the effective date for certain provisions. The
adoption of the provisions of this statement effective January 1, 1997 will not
have a material impact on results of operations, financial condition or
liquidity and the Company is currently evaluating the impact of the provisions
whose effective date has been delayed until January 1, 1998.
6
<PAGE> 9
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report 8
Financial Statements:
Statements of Income and Retained Earnings for the
years ended December 31, 1996, 1995 and 1994 9
Balance Sheets - December 31, 1996 and 1995 10
Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994 11
Notes to Financial Statements 12-30
</TABLE>
7
<PAGE> 10
Independent Auditors' Report
The Board of Directors and Shareholder
The Travelers Life and Annuity Company:
We have audited the accompanying balance sheets of The Travelers Life and
Annuity Company as of December 31, 1996 and 1995, and the related statements of
income and retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1996. 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, 1996 and 1995, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
January 17, 1997
8
<PAGE> 11
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
(for the year ended December 31, in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums $ 9,357 $ 2,652 $ 3,498
Net investment income 89,040 63,209 66,093
Realized investment gains (losses) (9,613) 18,713 (2,074)
Other 16,223 17,466 18,702
- ----------------------------------------------------------------------------------------------------------
Total revenues 105,007 102,040 86,219
- ----------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 56,448 52,390 55,596
Amortization of deferred acquisition costs
and value of insurance in force 3,286 1,563 -
Other operating expenses 5,691 4,651 2,758
- ----------------------------------------------------------------------------------------------------------
Total benefits and expenses 65,425 58,604 58,354
- ----------------------------------------------------------------------------------------------------------
Income before federal income taxes 39,582 43,436 27,865
- ----------------------------------------------------------------------------------------------------------
Federal income taxes:
Current 29,456 2,555 4,742
Deferred expense (benefit) (15,665) 11,964 4,798
- ----------------------------------------------------------------------------------------------------------
Total federal income taxes 13,791 14,519 9,540
- ----------------------------------------------------------------------------------------------------------
Net income 25,791 28,917 18,325
Retained earnings beginning of year 157,907 128,990 110,665
Dividends to parent 16,000 - -
- ----------------------------------------------------------------------------------------------------------
Retained earnings end of year $167,698 $157,907 $128,990
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
9
<PAGE> 12
THE TRAVELERS LIFE AND ANNUITY COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
(at December 31, in thousands) 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Fixed maturities, available for sale at fair value
(cost, $672,173; $678,293) $ 694,535 $ 724,639
Equity securities, at fair value (cost, $6,654; $9,453) 9,554 13,099
Mortgage loans 90,542 125,813
Real estate held for sale, net of accumulated depreciation of $0; $524 10,111 8,995
Policy loans 1,750 -
Short-term securities 70,755 51,381
Other investments 69,754 65,805
- -----------------------------------------------------------------------------------------------------------------
Total investments 947,001 989,732
- -----------------------------------------------------------------------------------------------------------------
Separate accounts 1,187,812 886,688
Deferred acquisition costs and value of insurance in force 40,027 22,560
Deferred federal income taxes 57,616 41,158
Other assets 21,827 24,501
- -----------------------------------------------------------------------------------------------------------------
Total assets $2,254,283 $1,964,639
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 654,534 $ 671,027
Contractholder funds 86,097 11,947
Separate accounts 1,124,605 856,867
Other liabilities 17,179 61,247
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 1,882,415 1,601,088
- -----------------------------------------------------------------------------------------------------------------
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 167,314 167,314
Retained earnings 167,698 157,907
Unrealized investment gains, net of taxes 33,856 35,330
- -----------------------------------------------------------------------------------------------------------------
Total shareholder's equity 371,868 363,551
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $2,254,283 $1,964,639
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
10
<PAGE> 13
THE TRAVELERS LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
(for the year ended December 31, in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums collected $ 6,472 $ 1,950 $ 3,498
Net investment income received 71,083 66,219 57,240
Benefits and claims paid (70,331) (71,710) (72,298)
Interest credited to contractholders (813) - -
Operating expenses paid (5,482) (3,013) (4,400)
Income taxes refunded (paid) (23,931) (35,305) 1,030
Other (6,857) (6,772) 22,507
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (29,859) (48,631) 7,577
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 20,301 11,752 29,043
Mortgage loans 37,789 24,137 60,260
Proceeds from sales of investments
Fixed maturities 978,970 459,971 41,671
Equity securities 12,818 11,823 9,373
Mortgage loans 22,437 7,013 23,327
Real estate held for sale - - 34,181
Purchases of investments
Fixed maturities (994,443) (515,098) (204,412)
Equity securities (5,412) (156) (375)
Mortgage loans (21,450) (4,890) (5,607)
Policy loans (1,750) - -
Short-term securities, (purchases) sales, net (19,688) (5,051) (1,146)
Other investments, (purchases) sales, net (6,160) 9,274 682
Securities transactions in course of settlement (51,703) 45,727 5,722
- -------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (28,291) 44,502 (7,281)
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 96,490 5,707 -
Contractholder fund withdrawals (22,340) (1,874) -
Dividends to parent company (16,000) - -
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 58,150 3,833 -
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash $ - $ (296) $ 296
- -------------------------------------------------------------------------------------------------------------
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 a wholly
owned subsidiary of The Travelers Insurance Group Inc. (TIGI), which is
an indirect wholly owned subsidiary of Travelers Group Inc. (Travelers
Group), a financial services holding company engaged, through its
subsidiaries, principally in four business segments: (i) Investment
Services; (ii) Consumer Finance Services; (iii) Property & Casualty
Insurance Services; and (iv) Life Insurance Services (through TIC and its
subsidiaries). The periodic reports of Travelers Group provide additional
business and financial information concerning that company and its
consolidated subsidiaries.
The Company offers fixed and variable deferred annuities and individual
life insurance to individuals and small businesses. It also provides
single premium group annuity close-out contracts and individual
structured settlement annuities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the
accompanying financial statements follow.
Basis of presentation
The financial statements and accompanying footnotes of the Company are
prepared in conformity with generally accepted accounting principles. 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
1996 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 investment 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 classified as "available for sale" and are carried at fair
value based primarily on quoted market prices. Changes in fair values of
equity securities are charged or credited directly to shareholder's
equity, net of income taxes.
12
<PAGE> 15
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Mortgage loans are carried at amortized cost. A mortgage loan is
considered impaired when it is probable that the Company will be unable
to collect principal and interest amounts due. 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. In estimating fair value, the Company uses
interest rates reflecting the higher returns required in the current real
estate financing market. Impaired loans were insignificant at December
31, 1996 and 1995.
Real estate held for sale is carried at the lower of cost or fair value
less estimated costs to sell. Fair value of foreclosed properties is
established at the time of foreclosure by internal analysis or external
appraisers, 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, 1996 and 1995.
Short-term securities, consisting primarily of money market instruments
and other debt issues purchased with a maturity of less than one year,
are carried at amortized cost which approximates market.
Accrual of income, included in other assets, 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
pre-tax revenues based upon specific identification of the investments
sold on the trade date. 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.
Policy Loans
Policy loans are carried at the amount of the unpaid balances that are
not in excess of the net cash surrender values of the related insurance
policies. The carrying value of policy loans, which have no defined
maturities, is considered to be fair value.
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 primarily
carried at fair value. Earnings on structured settlement contracts,
generally net investment income less policyholder benefits and operating
expenses, are included in other revenues.
13
<PAGE> 16
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
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 fair 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 in relation
to 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 20-year period is employed for annuities. Deferred acquisition costs
are reviewed periodically for recoverability to determine if any
adjustment is required. Adjustments, if any are charged to income.
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 acquisition 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 using
current interest crediting rates to accrete interest and amortized
employing a level yield method. The value of insurance in force is
reviewed periodically for recoverability to determine if any adjustment
is required. Adjustments, if any are charged to income.
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. 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. Contractholder Fund
balances are increased by such receipts and credited interest and reduced
by withdrawals, mortality charges and administrative expenses charged to
the contractholders. Interest rates credited to contractholder funds
range from 3.9% to 7.0%.
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 certain 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
Future Application of Accounting Standards
In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 125 (FAS 125),
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." FAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. These standards are based on consistent
application of a financial-components approach that focuses on control.
Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control
has been surrendered and derecognizes liabilities when extinguished. FAS
125 provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured
borrowings. The requirements of FAS No. 125 are effective for transfers
and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and are to be applied prospectively.
However, in December 1996 the FASB issued FAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125," which
delays until January 1, 1998 the effective date for certain provisions.
The adoption of the provisions of this statement effective January 1,
1997 will not have a material impact on results of operations, financial
condition or liquidity and the Company is currently evaluating the impact
of the provisions whose effective date has been delayed until January 1,
1998.
3. CHANGES IN ACCOUNTING PRINCIPLES
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement establishes accounting standards for the impairment of
long-lived assets and certain identifiable intangibles to be disposed.
This statement requires a write down to fair value when long-lived assets
to be held and used are impaired. The statement also requires long-lived
assets to be disposed (e.g., real estate held for sale) 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 standard did not have a
material impact on the Company's financial condition, results of
operations or liquidity.
Accounting for Stock-Based Compensation
The Company participates in a stock option plan sponsored by Travelers
Group that provides for the granting of stock options in Travelers Group
common stock to officers and key employees. The Company applies
Accounting Principles Board Opinion No. 25 (APB 25) and related
interpretations in accounting for stock options. Since stock options are
issued at fair market value on the date of award, no compensation cost
has been recognized for these awards. 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 provides an alternative to APB 25 whereby fair values may
be ascribed to options using a valuation model and amortized to
compensation cost over the vesting period of the options. Had the Company
applied FAS 123 in accounting for stock options, net income would have
been reduced by an insignificant amount in 1996 and 1995.
16
<PAGE> 19
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
3. CHANGES IN ACCOUNTING PRINCIPLES, Continued
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.
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 TIC at December 31, 1996 and 1995 was
$90.7 million and $97.7 million, respectively. At December 31, 1996 and
1995, $2.2 billion and $601.2 million, 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.
Shareholder's Equity and Dividend Availability
The Company's statutory net income was $17.9 million, $23.0 million and
$5.7 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
Statutory capital and surplus was $254.1 million and $257.8 million at
December 31, 1996 and 1995, 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 $14.8 million is available in 1997 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 does not hold or issue derivative instruments for trading
purposes. The carrying value of derivative instruments was not
significant at December 31, 1996 and 1995.
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, 1996, investments in fixed maturities had a carrying
value and a fair value of $694.5 million, compared with a carrying value
and a fair value of $724.6 million at December 31, 1995. See Note 12.
At December 31, 1996 and 1995, mortgage loans had a carrying value of
$90.5 million and $125.8 million, respectively, which approximates fair
value. In estimating fair value, the Company used interest rates
reflecting the higher returns required in the current real estate
financing market.
The carrying values of $2.1 million and $1.9 million of financial
instruments classified as other assets approximated their fair values at
December 31, 1996 and 1995, respectively. The carrying values of $13.3
million and $55.3 million of financial instruments classified as other
liabilities also approximated their fair values at December 31, 1996 and
1995, 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 $896.9 million and $901.0 million,
respectively, at December 31, 1996, compared to a carrying value and a
fair value of $869.1 million and $923.0 million, respectively, at
December 31, 1995. The liabilities of separate accounts providing a
guaranteed return had a carrying value and a fair value of $808.7 million
and $695.3 million, respectively, at December 31, 1996, compared to a
carrying value and a fair value of $839.1 million and $766.3 million,
respectively, at December 31, 1995.
The carrying values of short-term securities and policy loans
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
The Company has, in the normal course of business, provided fixed rate
loan commitments and commitments to partnerships.
The off-balance sheet risks of fixed rate loan commitments, commitments
to partnerships and forward contracts were not significant at December
31, 1996 and 1995.
Litigation
The Company is a defendant in various litigation matters in the normal
course of business. Although there can be no assurances, as of December
31, 1996, 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 a qualified, noncontributory defined benefit
pension plan sponsored by Travelers Group covering the majority of
Travelers Group's U.S. employees. 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.
The Company also participates in a nonqualified, noncontributory defined
benefit pension plan sponsored by an affiliate covering the majority of
the Company's U.S. employees. Contributions are based on benefits paid.
The Company's share of net pension expense was not significant for 1996,
1995 or 1994.
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. Retirees may elect certain prepaid health care benefit
plans. Life insurance benefits are generally set at a fixed amount.
Beginning January 1, 1996, these plans were amended to restrict benefit
eligibility to retirees and certain retiree-eligible employees. The cost
recognized by the Company for these benefits represents its allocated
share of the total costs of the plan, net of retiree contributions. The
Company's share of the total cost of the plan for 1996, 1995 and 1994 was
not significant.
19
<PAGE> 22
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
8. BENEFIT PLANS, Continued
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 through
December 31, 1995. Effective January 1, 1996, the match remained at 50%
of an employee's first 5% contribution with a maximum of $1,000.
Effective January 1, 1997, employee contributions will be matched with
Travelers Group stock options. The Company's expense was not significant
for 1996, 1995 or 1994.
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, 1996 and 1995,
the pool totaled approximately $2.9 billion and $2.2 billion,
respectively. The Company's share of the pool amounted to $68.2 million
and $49.5 million at December 31, 1996 and 1995, 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 $250
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 an affiliate,
Travelers Property Casualty Corp., (TAP), formerly Travelers/Aetna
Property Casualty Corp. Such deposits were $36.9 million, $36.6 million
and $37.6 million for 1996, 1995 and 1994, respectively.
The Company began marketing variable annuity products through its
affiliate, Smith Barney, Inc., in 1995. Deposits related to these
products were $300.0 million and $20.5 million in 1996 and 1995,
respectively.
Most leasing functions for TIGI and its subsidiaries are handled by TAP.
Rent expense related to these leases are shared by the companies on a
cost allocation method based generally on estimated usage by department.
The company's rent expense was insignificant in 1996, 1995 and 1994.
20
<PAGE> 23
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
10. FEDERAL INCOME TAXES
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Effective tax rate
Income before federal income taxes $ 39,582 $43,436 $27,865
Statutory tax rate 35% 35% 35%
-------------------------------------------------------------------------------------------
Expected federal income taxes $ 13,854 $15,203 $ 9,753
Tax effect of:
Nontaxable investment income (15) (13) (90)
Adjustments to benefit and other reserves - - (117)
Other, net (48) (671) (6)
--------------------------------------------------------------------------------------------
Federal income taxes $ 13,791 $14,519 $ 9,540
--------------------------------------------------------------------------------------------
Effective tax rate 35% 33% 34%
-------------------------------------------------------------------------------------------
Composition of federal income taxes
Current:
United States $ 29,435 $ 2,555 $ 4,742
Foreign 21 - -
--------------------------------------------------------------------------------------------
Total 29,456 2,555 4,742
--------------------------------------------------------------------------------------------
Deferred:
United States (15,665) 11,964 4,798
--------------------------------------------------------------------------------------------
Federal income taxes $ 13,791 $14,519 $ 9,540
--------------------------------------------------------------------------------------------
</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, 1996 and 1995 were comprised
of the tax effects of temporary differences related to the following
assets and liabilities:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Benefit, reinsurance and other reserves $79,484 $ 67,104
Other 3,043 2,570
------------------------------------------------------------------------------------------
Total 82,527 69,674
------------------------------------------------------------------------------------------
Deferred tax liabilities:
Investments, Net 12,113 19,625
Deferred acquisition costs and
value of insurance in force 10,066 6,285
Other 662 536
------------------------------------------------------------------------------------------
Total 22,841 26,446
------------------------------------------------------------------------------------------
Net deferred tax asset before valuation allowance 59,686 43,228
Valuation allowance for deferred tax assets (2,070) (2,070)
------------------------------------------------------------------------------------------
Net deferred tax asset after valuation allowance $57,616 $41,158
------------------------------------------------------------------------------------------
</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 Group 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 1996. 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 $57.6 million "net deferred tax asset after
valuation allowance" as of December 31, 1996, is fully recoverable
against expected future years' taxable ordinary income and capital gains.
At December 31, 1996, 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) 1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross investment income
Fixed maturities $54,029 $49,486 $44,354
Equity securities 411 497 827
Mortgage loans 15,491 11,644 17,178
Real estate held for sale 3,480 2,476 6,299
Other 19,770 2,552 4,480
---------------------------------------------------------------------------------------
93,181 66,655 73,138
---------------------------------------------------------------------------------------
Investment expenses 4,141 3,446 7,045
---------------------------------------------------------------------------------------
Net investment income $89,040 $63,209 $66,093
---------------------------------------------------------------------------------------
</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) 1996 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realized
Fixed maturities $(11,491) $(4,240) $ (908)
Equity securities 4,613 6,138 1,675
Mortgage loans 1,979 725 36
Real estate held for sale (73) (35) -
Other (4,641) 16,125 (2,877)
-----------------------------------------------------------------------------------------
Realized investment gains (losses) $ (9,613) $18,713 $(2,074)
-----------------------------------------------------------------------------------------
</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) 1996 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized
Fixed maturities $(23,953) $111,551 $(65,205)
Equity securities (746) 1,834 (27)
Other 22,431 4,390 (28)
------------------------------------------------------------------------------------------
(2,268) 117,775 (65,260)
Related taxes (794) 41,221 (22,841)
------------------------------------------------------------------------------------------
Change in unrealized investment gains (losses) (1,474) 76,554 (42,419)
Balance beginning of year 35,330 (41,224) 1,195
------------------------------------------------------------------------------------------
Balance end of year $ 33,856 $ 35,330 $(41,224)
------------------------------------------------------------------------------------------
</TABLE>
Fixed Maturities
Proceeds from sales of fixed maturities classified as available for sale
were $979.0 million and $460.0 million in 1996 and 1995, respectively.
Gross gains of $8.4 million and $7.9 million and gross losses of $19.9
million and $10.3 million in 1996 and 1995, 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
The amortized cost and fair values of investments in fixed maturities
were as follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
(in thousands) cost gains losses value
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
Mortgage-backed securities -
CMOs and pass through
securities $ 88,138 $ 1,637 $ 629 $ 89,146
U.S. Treasury securities
and obligations of U.S.
Government and
government agencies
and authorities 115,059 10,371 61 125,369
Obligations of states and
political subdivisions 3,500 255 -- 3,755
Debt securities issued
by foreign governments 56,097 1,473 1,269 56,301
All other corporate bonds 409,294 13,862 3,277 419,879
Redeemable preferred stock 85 -- -- 85
----------------------------------------------------------------------------------------------------
Total $672,173 $27,598 $5,236 $694,535
----------------------------------------------------------------------------------------------------
</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, 1995
------------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
(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>
The amortized cost and fair value of fixed maturities available for sale
at December 31, 1996, 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 Fair
(in thousands) cost value
-------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 11,184 $ 11,204
Due after 1 year through 5 years 50,397 50,366
Due after 5 years through 10 years 169,634 173,049
Due after 10 years 352,820 370,770
-------------------------------------------------------------------------
584,035 605,389
Mortgage-backed securities 88,138 89,146
-------------------------------------------------------------------------
Total $672,173 $694,535
-------------------------------------------------------------------------
</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,
including planned amortization class (PAC) tranches. Prepayment protected
tranches are preferred because they provide stable cash flows in a
variety of interest rate 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, 1996 and 1995, the Company held CMOs with a market value
of $67.7 million and $68.6 million, respectively. The Company's CMO
holdings are 100% and approximately 94% collateralized by GNMA, FNMA or
FHLMC securities at December 31, 1996 and 1995, respectively.
Equity Securities
The cost and market values of investments in equity securities were as
follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Fair
(in thousands) Cost gains losses value
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stocks $1,630 $2,845 $83 $4,392
Nonredeemable preferred stocks 5,024 138 - 5,162
----------------------------------------------------------------------------------------------------
Total $6,654 $2,983 $83 $9,554
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------------------------------------------------
Gross Gross
unrealized unrealized Fair
(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>
Proceeds from sales of equity securities were $12.8 million and $11.8
million in 1996 and 1995, respectively. Gross gains of $4.7 million and
$4.9 million and gross losses of $155 thousand and $474 thousand in 1996
and 1995, respectively, were realized on those sales.
Real estate held for sale and mortgage loans
Underperforming assets include delinquent mortgage loans, loans in the
process of foreclosure, foreclosed loans and loans modified at interest
rates below market.
27
<PAGE> 30
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
12. INVESTMENTS AND INVESTMENT GAINS (LOSSES), Continued
At December 31, 1996 and 1995, the Company's real estate held for sale
and mortgage loan portfolios consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
---------------------------------------------------------------------------
<S> <C> <C>
Current mortgage loans $ 90,394 $108,142
Underperforming mortgage loans 148 17,671
---------------------------------------------------------------------------
Total 90,542 125,813
---------------------------------------------------------------------------
Real estate held for sale 10,111 8,995
---------------------------------------------------------------------------
Total $100,653 $134,808
---------------------------------------------------------------------------
</TABLE>
Aggregate annual maturities on mortgage loans at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------------------
<S> <C>
Past maturity $ 1,677
1997 5,662
1998 316
1999 5,088
2000 5,734
2001 5,678
Thereafter 66,387
---------------------------------------------------
Total $90,542
---------------------------------------------------
</TABLE>
Concentrations
At December 31, 1996 the Company had investments of $75.1 million in the
State of Israel and $40.6 million in Merrill Lynch Trust Series 45. In
1995, 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 an
affiliate. See Note 9.
Included in fixed maturities are below investment grade assets totaling
$40.7 million and $59.0 million at December 31, 1996 and 1995,
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 concentrations of investments, primarily fixed
maturities, in the following industries:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign governments $108,850 $ -
Finance 90,222 25,853
Transportation 86,819 44,118
------------------------------------------------------------------------------------------
</TABLE>
Below investment grade assets included in the totals of the previous
table were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
----------------------------------------------------------------------------------------
<S> <C> <C>
Foreign governments $6,567 $ -
Finance 2,386 451
Transportation 776 18,648
----------------------------------------------------------------------------------------
</TABLE>
Concentrations of mortgage loans by property type at December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
-----------------------------------------------------------------------------------------
<S> <C> <C>
Agricultural $33,501 $29,820
Office 22,533 32,024
Retail 20,024 27,870
-----------------------------------------------------------------------------------------
</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.
Non-Income Producing Investments
Investments included in the balance sheets that were non-income 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 $1.0 million and $17.7
million at December 31, 1996 and 1995, respectively. 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 was insignificant in
1996 and amounted to $4.9 million in 1995. Interest on these assets,
included in net investment income, was insignificant in 1996 and amounted
to $2.0 million in 1995.
29
<PAGE> 32
THE TRAVELERS LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS, Continued
13. LIFE AND ANNUITY DEPOSIT FUNDS AND RESERVES
At December 31, 1996, the Company had $740.6 million of life and annuity
deposit funds and reserves. Of that total, $659.0 million were not
subject to discretionary withdrawal based on contract terms. The
remaining $81.6 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 $50.4 million of
liabilities that are surrenderable with market value adjustments. An
additional $31.2 million of the life insurance and individual annuity
liabilities are subject to discretionary withdrawals with an average
surrender charge of 6.7%. 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) 1996 1995 1994
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income from continuing operations $ 25,791 $ 28,917 $ 18,325
Adjustments to reconcile net income to
cash provided by operating activities
Realized (gains) losses 9,613 (18,713) 2,074
Deferred federal income taxes (15,665) 11,964 4,798
Amortization of deferred policy acquisition
costs and value of insurance in force 3,286 1,563 -
Additions to deferred policy acquisition costs (20,753) (3,109) (21,014)
Investment income accrued 1,308 (819) 1,085
Premium balances receivable (3,561) (2,277) -
Insurance reserves and accrued expenses (16,459) (20,081) (16,062)
Other (13,419) (46,076) 18,371
------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $(29,859) $(48,631) $ 7,577
------------------------------------------------------------------------------------------------------------
</TABLE>
15. NONCASH INVESTING AND FINANCING ACTIVITIES
Significant noncash investing and financing activities include: a) the
transfer of $2.6 million of real estate held for sale and mortgage loans
from one of the Company's separate accounts to the general account in
1995, b) acquisition of real estate through foreclosures of mortgage
loans amounting to $1.1 million, $0 and $10.3 million in 1996, 1995 and
1994, respectively.
30
<PAGE> 33
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1996
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 I(2)(c) of Form 10-K.
Item 11. Executive Compensation.
Omitted pursuant to General Instruction I(2)(c) of Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Omitted pursuant to General Instruction I(2)(c) of Form 10-K.
Item 13. Certain Relationships and Related Transactions.
Omitted pursuant to General Instruction I(2)(c) of Form 10-K.
31
<PAGE> 34
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1996
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed
(1) Financial Statements. See index on page 7 of this report.
(2) Financial Statement Schedules. See index on page 35 of this
report.
(3) Exhibits. See Exhibit Index on page 33.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of 1996.
32
<PAGE> 35
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1996
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>
33
<PAGE> 36
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 26th day of March,
1997.
THE TRAVELERS LIFE AND ANNUITY COMPANY
(Registrant)
By: /s/ Ian R. Stuart
------------------
Ian R. Stuart
Senior Vice President and
Chief Financial Officer and Chief Accounting 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 26th day of March, 1997.
<TABLE>
<CAPTION>
Signature Capacity
- --------- --------
<S> <C>
/s/ Michael A. Carpenter Director and Chairman of the Board and President and Chief Executive Officer
- ---------------------------------- (Principal Executive Officer)
(Michael A. Carpenter)
/s/ Ian R. Stuart Director and Senior Vice President and Chief Financial Officer
- ---------------------------------- (Principal Financial Officer and Principal Accounting Officer)
(Ian R. Stuart)
/s/ Katherine M. Sullivan Director and Senior Vice President and General Counsel
- ----------------------------------
(Katherine M. Sullivan)
/s/ Marc P. Weill Director and Senior Vice President and
- ---------------------------------- Chief Investment Officer
(Marc P. Weill)
/s/ Robert I. Lipp Director
- ----------------------------------
(Robert I. Lipp)
/s/ Jay S. Benet Director and Senior Vice President
- ----------------------------------
(Jay S. Benet)
/s/ George C. Kokulis Director and Senior Vice President
- ----------------------------------
(George C. Kokulis)
</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.
34
<PAGE> 37
THE TRAVELERS LIFE AND ANNUITY COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1996
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
<S> <C> <C>
The Travelers Life and Annuity Company
Independent Auditors' Report *
Statements of Income and Retained Earnings *
Balance Sheets *
Statements of Cash Flows *
Notes to Financial Statements *
Independent Auditors' Report 36
Schedule I -Summary of Investments - Other than Investments in Related Parties 1996 37
Schedule III -Supplementary Insurance Information 1994-1996 38
Schedule IV -Reinsurance 1994-1996 39
All other schedules are inapplicable for this filing.
* See index on page 7
</TABLE>
35
<PAGE> 38
Independent Auditors' Report
The Board of Directors and Shareholder
The Travelers Life and Annuity Company:
Under date of January 17, 1997, we reported on the balance sheets of The
Travelers Life and Annuity Company as of December 31, 1996 and 1995, and the
related statements of income and retained earnings and cash flows for each of
the years in the three-year period ended December 31, 1996, which are included
in this Form 10-K. In connection with our audits of the aforementioned financial
statements, we also audited the related financial statement schedules as listed
in the accompanying index. 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 17, 1997
36
<PAGE> 39
SCHEDULE I
THE TRAVELERS LIFE AND ANNUITY COMPANY
Summary of Investments - Other Than
Investments in Related Parties
December 31, 1996
(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 $149,220 $160,487 $160,487
States, municipalities and political subdivisions 3,500 3,755 3,755
Foreign governments 56,097 56,301 56,301
Public utilities 60,078 60,107 60,107
Convertible bonds and bonds with warrants attached 3,000 3,210 3,210
All other corporate bonds 400,193 410,590 410,590
-------- -------- --------
Total bonds 672,088 694,450 694,450
Redeemable preferred stocks 85 85 85
-------- -------- --------
Total fixed maturities 672,173 694,535 694,535
-------- -------- --------
Equity securities:
Common stock
Banks, trust and insurance companies - - -
Industrial, miscellaneous and all other 1,630 4,392 4,392
-------- -------- --------
Total common stocks 1,630 4,392 4,392
Nonredeemable preferred stocks 5,024 5,162 5,162
-------- -------- --------
Total equity securities 6,654 9,554 9,554
-------- -------- --------
Mortgage loans 90,542 90,542
-------- --------
Real estate held for sale 10,111 10,111
-------- --------
Policy loans 1,750 1,750
-------- --------
Short-term securities 70,755 70,755
-------- --------
Other investments 65,460 69,754
-------- --------
Total investments $917,445 $947,001
======== ========
</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
(See Accompanying Independent Auditors' Report)
37
<PAGE> 40
SCHEDULE III
THE TRAVELERS LIFE AND ANNUITY COMPANY
Supplementary Insurance Information
1994-1996
(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
in force (a) expenses in force
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $40,027 $740,631 $9,357 $89,040 $56,448 $3,286 $5,691 $9,357
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
</TABLE>
(a) Includes contractholder funds.
(See Accompanying Independent Auditors' Report)
38
<PAGE> 41
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
------ --------- --------- ------ ------
1996
<S> <C> <C> <C> <C> <C>
Life insurance in force $3,123,183 $2,328,683 $ - $794,500 -%
Life insurance premiums:
Group annuity $ 2,109 $ - $ 2,109
Individual life 8,201 953 7,248
---------- ---------- --------
Totals $ 10,310 $ 953 $ - $ 9,357 -%
---------- ---------- --------
</TABLE>
<TABLE>
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 -%
---------- ---------- --------
</TABLE>
<TABLE>
1994
<S> <C> <C> <C> <C> <C>
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 -%
---------- ---------- --------
</TABLE>
(See Accompanying Independent Auditors' Report)
39
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary of financial information extracted from the
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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 694,535
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 9,554
<MORTGAGE> 90,542
<REAL-ESTATE> 10,111
<TOTAL-INVEST> 947,001
<CASH> 0
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 40,027
<TOTAL-ASSETS> 2,254,283
<POLICY-LOSSES> 654,534
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 1,210,702
<NOTES-PAYABLE> 0
0
0
<COMMON> 3,000
<OTHER-SE> 368,868
<TOTAL-LIABILITY-AND-EQUITY> 2,254,483
9,357
<INVESTMENT-INCOME> 89,040
<INVESTMENT-GAINS> (9,613)
<OTHER-INCOME> 16,223
<BENEFITS> 56,448
<UNDERWRITING-AMORTIZATION> 3,286
<UNDERWRITING-OTHER> 5,691
<INCOME-PRETAX> 39,582
<INCOME-TAX> 13,791
<INCOME-CONTINUING> 25,791
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,791
<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>
