<Page>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
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 1-9924
CITIGROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1568099
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
399 PARK AVENUE, NEW YORK, NEW YORK 10043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 559-1000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES |X| NO |_|
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK AS OF THE LATEST PRACTICABLE DATE:
COMMON STOCK OUTSTANDING AS OF OCTOBER 31, 2001: 5,144,813,541
AVAILABLE ON THE WEB AT www.citigroup.com
<Page>
CITIGROUP INC.
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements: Page No.
--------
Consolidated Statement of Income (Unaudited) -
Three and Nine Months Ended September 30, 2001 and 2000 40
Consolidated Statement of Financial Position -
September 30, 2001 (Unaudited) and December 31, 2000 41
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) - Nine Months Ended September 30, 2001 and 2000 42
Consolidated Statement of Cash Flows (Unaudited) -
Nine Months Ended September 30, 2001 and 2000 43
Notes to Consolidated Financial Statements (Unaudited) 44
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 1 - 39
Item 3. Quantitative and Qualitative Disclosures About Market Risk 32 - 35
47 - 48
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 53
Signatures 54
Exhibit Index 55
<Page>
CITIGROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ACQUISITION OF BANAMEX
On August 6, 2001, Citicorp, an indirect wholly-owned subsidiary of Citigroup
Inc. (Citigroup or the Company), completed its acquisition of 99.86% of the
issued and outstanding ordinary shares of Grupo Financiero Banamex-Accival
(Banamex), a leading Mexican financial institution, for approximately $12.5
billion in cash and Citigroup stock. Citicorp completed the acquisition by
settling transactions that were conducted on the Mexican Stock Exchange on
Friday, August 3, 2001. Those transactions comprised both the acquisition of
Banamex shares tendered in response to Citicorp's offer to acquire all of
Banamex's outstanding shares and the simultaneous sale of 126,705,281 Citigroup
shares to the tendering Banamex shareholders. On September 24, 2001, Citicorp
became the holder of 100% of the issued and outstanding ordinary shares of
Banamex following a share redemption by Banamex. The results of Banamex are
included from August 2001 forward within the Global Consumer -- Mexico and
Investment Activities segments. Banamex's and Citicorp's banking operations in
Mexico are being integrated and will conduct business under the "Banamex" brand
name.
SEPTEMBER 11TH EVENTS
The September 11, 2001 terrorist attack financially impacted the Company in
several areas. After-tax losses related to insurance claims (net of reinsurance
impact) totaled $502 million. Revenues were reduced due to the disruption to
Citigroup's businesses and additional expenses incurred as a result of the
attack resulted in after-tax losses of approximately $200 million. The Company
also experienced significant property loss, for which it is insured. The Company
has recorded insurance recoveries up to the net book value of the assets written
off. Additional insurance recoveries will be booked when they are realized.
Reductions in equity values during the 2001 third quarter were further impacted
by the September 11th attack, which reduced Citigroup's Investment Activities
results in the third quarter. Losses attributable to insurance claims are based
in part on estimates by the Company of insurance losses and related reinsurance
recoverables. The associated reserves and related reinsurance recoverables
represent the estimated ultimate net costs of all incurred claims and claim
adjustment expenses. Since the reserve and related reinsurance recoverables are
based on estimates, the ultimate net liability may be more or less than such
amounts. This statement is a forward-looking statement within the meaning of the
Private Securities Litigation Reform Act. See "Forward-Looking Statements" on
page 32.
BUSINESS FOCUS
The table below shows the core income (loss) for each of Citigroup's businesses:
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA 2001 2000(1) 2001 2000(1)
- --------------------------------------------------------------------------------------------
GLOBAL CONSUMER
Citibanking North America $ 151 $ 121 $ 440 $ 368
Mortgage Banking 92 77 257 214
North America Cards 573 492 1,495 1,260
CitiFinancial 308 213 806 597
-----------------------------------------
Total Banking/Lending 1,124 903 2,998 2,439
-----------------------------------------
Travelers Life and Annuity 178 179 619 568
Primerica Financial Services 125 124 378 368
Personal Lines 29 68 155 224
-----------------------------------------
Total Insurance 332 371 1,152 1,160
-----------------------------------------
Japan 244 204 671 527
Western Europe 124 94 340 281
Asia 160 139 452 419
Mexico 124 (3) 139 46
Latin America 63 57 188 174
Central & Eastern Europe, Middle East and Africa 24 12 63 42
-----------------------------------------
Total Emerging Markets Consumer Banking 371 205 842 681
-----------------------------------------
Total International 739 503 1,853 1,489
-----------------------------------------
e-Consumer (14) (31) (60) (127)
Other 15 (7) 11 (80)
-----------------------------------------
TOTAL GLOBAL CONSUMER $ 2,196 $ 1,739 $ 5,954 $ 4,881
- --------------------------------------------------------------------------------------------
</Table>
(Business Focus continues on the following page)
1
<Page>
BUSINESS FOCUS (CONTINUED)
The table below shows the core income (loss) for each of Citigroup's businesses:
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ---------------------
IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA 2001 2000(1) 2001 2000(1)
- ----------------------------------------------------------------------------------------------------
GLOBAL CORPORATE
Corporate and Investment Bank $ 867 $ 888 $ 2,808 $ 3,071
Emerging Markets Corporate Banking
and Global Transaction Services 428 372 1,293 996
Commercial Lines (136) 317 428 836
-------------------------------------------
TOTAL GLOBAL CORPORATE 1,159 1,577 4,529 4,903
-------------------------------------------
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
Citigroup Asset Management 93 93 262 273
The Citigroup Private Bank 93 79 283 238
-------------------------------------------
TOTAL GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING 186 172 545 511
-------------------------------------------
INVESTMENT ACTIVITIES (120) 284 251 1,189
CORPORATE/OTHER (159) (243) (572) (675)
-------------------------------------------
CORE INCOME 3,262 3,529 10,707 10,809
Restructuring-Related Items, after-tax (2) (85) (45) (298) (130)
Cumulative Effect of Accounting Changes (3) -- -- (158) --
-------------------------------------------
NET INCOME $ 3,177 $ 3,484 $ 10,251 $ 10,679
- ---------------------------------------------------------===========================================
DILUTED EARNINGS PER SHARE
CORE INCOME $ 0.63 $ 0.68 $ 2.07 $ 2.09
NET INCOME $ 0.61 $ 0.67 $ 1.98 $ 2.07
- ---------------------------------------------------------===========================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Restructuring-related items in the 2001 first quarter related principally
to severance and costs associated with the reduction of staff in the
Global Corporate businesses, in the 2001 second quarter related
principally to severance and costs associated with the reduction of staff
primarily in the Global Corporate and Global Consumer businesses, and in
the 2001 third quarter related to the acquisition of Banamex and the
integration of its operations within the Global Consumer business. See
Note 9 of Notes to Consolidated Financial Statements. The 2000 nine-month
period includes a $71 million (after-tax) charge associated with the
discontinuation of the loan origination operations of the Associates
Housing Finance unit.
(3) Accounting changes refer to the 2001 first quarter adoption of Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended (SFAS 133), and the 2001
second quarter adoption of EITF Issue No. 99-20, "Recognition of Interest
Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets" (EITF 99-20). See Notes 3 and 7 of Notes to
Consolidated Financial Statements.
- --------------------------------------------------------------------------------
2
<Page>
RESULTS OF OPERATIONS
MANAGED BASIS REPORTING
The discussion that follows includes amounts reported in the financial
statements (owned basis) adjusted to include certain effects of securitization
activities, receivables held for securitization, and receivables sold with
servicing retained (managed basis). On a managed basis, these earnings are
reclassified and presented as if the receivables had neither been held for
securitization nor sold.
The income analysis below reconciles amounts shown in the Consolidated Statement
of Income on page 40 to the basis presented in the business segment discussions.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------
IN MILLIONS OF DOLLARS 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 19,387 $ 18,835 $ 59,053 $ 56,185
Effect of securitization activities 907 573 2,603 1,809
Housing Finance unit charge -- -- -- 47
---------------------------------------------
ADJUSTED REVENUES, NET OF INTEREST EXPENSE 20,294 19,408 61,656 58,041
---------------------------------------------
Total operating expenses 9,523 9,620 29,616 28,277
Restructuring-related items (134) (70) (479) (93)
Housing Finance unit charge -- -- -- (25)
---------------------------------------------
ADJUSTED OPERATING EXPENSES 9,389 9,550 29,137 28,159
--------------------------------------------
Benefits, claims, and credit losses 4,983 3,760 13,350 11,198
Effect of securitization activities 907 573 2,603 1,809
Housing Finance unit charge -- -- -- (40)
---------------------------------------------
ADJUSTED BENEFITS, CLAIMS, AND CREDIT LOSSES 5,890 4,333 15,953 12,967
---------------------------------------------
CORE INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 5,015 5,525 16,566 16,915
Taxes on core income 1,727 1,983 5,809 6,018
Minority interest, net of income taxes 26 13 50 88
---------------------------------------------
CORE INCOME 3,262 3,529 10,707 10,809
Restructuring-related items, after-tax (85) (45) (298) (130)
---------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 3,177 3,484 10,409 10,679
Cumulative effect of accounting changes -- -- (158) --
---------------------------------------------
NET INCOME $ 3,177 $ 3,484 $ 10,251 $ 10,679
- --------------------------------------------------------=============================================
</Table>
INCOME AND EARNINGS PER SHARE
Citigroup reported core income of $3.262 billion or $0.63 per diluted common
share in the 2001 third quarter, down 8% and 7%, respectively, from $3.529
billion or $0.68 per diluted share in the 2000 third quarter. Core income in the
2001 third quarter excluded an after-tax charge of $85 million for
restructuring-related items. Net income for the quarter was $3.177 billion or
$0.61 per diluted share, both down 9% from $3.484 billion or $0.67 per diluted
share in the year-ago quarter. Core income return on common equity was 17.5%
compared to 22.9% a year ago.
Core income for the 2001 nine months of $10.707 billion or $2.07 per diluted
share were both down 1% from $10.809 billion or $2.09 per diluted share in the
2000 nine months. Net income in the 2001 nine months was $10.251 billion or
$1.98 per diluted share, both down 4% from $10.679 billion or $2.07 per diluted
share a year ago. Core income return on common equity was 20.7% and 24.4% in the
nine months of 2001 and 2000, respectively.
Global Consumer core income increased $457 million or 26% and $1.073 billion or
22% in the 2001 third quarter and nine months, respectively, compared to the
2000 periods, including third quarter and nine-month comparative increases of
$127 million and $93 million in Mexico, reflecting the acquisition of Banamex,
45% and 35% in CitiFinancial, 16% and 19% in North America Cards, and 20% and
27% in Japan, partially offset by 57% and 31% decreases in Personal Lines.
Global Corporate decreased $418 million or 27% and $374 million or 8% from the
2000 third quarter and nine-month periods, reflecting third quarter and
nine-month period comparable declines in Commercial Lines of $453 million and
$408 million. Global Investment Management and Private Banking grew $14 million
or 8% and $34 million or 7%, while Investment Activities decreased $404 million
or 142% and $938 million or 79% from the 2000 third quarter and nine-month
periods, primarily due to lower venture capital results.
REVENUES, NET OF INTEREST EXPENSE
Adjusted revenues, net of interest expense, of $20.3 billion and $61.7 billion
in the 2001 third quarter and nine months were up $886 million or 5% and $3.6
billion or 6%, respectively, from the 2000 periods. Global Consumer revenues
were up $1.8 billion or 19% in the 2001 third quarter to $11.7 billion, and were
up $4.0 billion or 14% in the 2001 nine months to $33.0 billion, led by 2001
third quarter and nine-month increases in Banking/Lending of $972 million or 20%
and $2.4 billion or 17% from the 2000 third quarter
3
<Page>
and nine months. Compared to the 2000 periods, North America Cards was up $615
million or 22% in the 2001 third quarter and $1.6 billion or 21% in the 2001
nine months, while CitiFinancial experienced growth of $174 million or 14% in
the 2001 third quarter and $412 million or 11% in the 2001 nine months, both
businesses reflecting strong growth in receivables and lower cost of funding.
International Consumer revenues were up $838 million or 34% in the 2001 third
quarter and $1.3 billion or 17% in the 2001 nine months compared to the 2000
periods, primarily reflecting acquisitions in Mexico and Japan. Insurance
businesses were up $69 million or 3% in the 2001 third quarter and $319 million
or 4% in the 2001 nine months, reflecting increases in Personal Lines and
Primerica as well as Life and Annuity in the nine-month period.
Compared to the 2000 periods, Global Corporate revenues were down $422 million
or 5% in the 2001 third quarter and were up $889 million or 4% in the 2001 nine
months. Corporate and Investment Bank revenues were down $592 million or 12% in
the 2001 third quarter and were down $328 million or 2% in the 2001 nine-month
period, reflecting lower principal transactions activity and commissions and
fees activity, offset by investment banking revenues in the nine-month period.
Emerging Markets and Global Transaction Services increased $121 million or 8% in
the 2001 third quarter and $687 million or 15% in the 2001 nine months.
Global Investment Management and Private Banking revenues of $888 million in the
2001 third quarter and $2.6 billion in the 2001 nine months were up $80 million
and $241 million, respectively, each up 10% from the comparable 2000 periods,
primarily due to growth in asset-based fee revenues and the impact of
acquisitions in the nine-month period. Revenues in Investment Activities
decreased $660 million and $1.5 billion from the 2000 third quarter and nine
months, respectively, primarily reflecting lower venture capital results,
partially offset by higher gains in insurance-related and other proprietary
investments.
SELECTED REVENUE ITEMS
Net interest revenue as calculated from the Consolidated Statement of Income
rose $1.7 billion or 24% from the 2000 third quarter to $8.8 billion and
increased $3.9 billion or 19% from the 2000 nine months to $24.7 billion,
reflecting the impact of Banamex, lower cost of funding, and growth in
receivables. Net interest revenue, including the effect of securitization
activities, increased $1.9 billion or 22% from the 2000 third quarter and $4.4
billion or 18% from the 2000 nine months. Total commissions, asset management,
and administration fees of $5.2 billion were down $197 million or 4% from the
2000 third quarter, primarily as a result of lower Private Client transactional
activity, partially offset by volume-related growth in customer activities and
assets under fee-based management. Insurance premiums of $3.3 billion and $9.9
billion were up $203 million or 7% and $772 million or 8% from the 2000 third
quarter and nine months, reflecting growth in both Personal Lines and Commercial
Lines.
Principal transactions revenues of $1.0 billion and $4.8 billion for the 2001
third quarter and nine months were down $528 million or 34% from the 2000 third
quarter and up $56 million or 1% from the 2000 nine-month period, reflecting
strong Fixed Income trading results in the 2001 nine months, offset by declines
in Global Equities, Commodities, and Foreign Exchange in the 2001 third quarter.
Realized gains from sales of investments were down $295 million from the 2000
third quarter and up $109 million from the 2000 nine-months, resulting primarily
from the Company's insurance investment portfolio. Other income as shown in the
Consolidated Statement of Income of $845 million in the 2001 third quarter was
down $320 million from the year-ago quarter, and was down $1.6 billion from the
2000 nine months, primarily reflecting venture capital activity and an increase
in securitized card losses.
OPERATING EXPENSES
Adjusted operating expenses, which exclude restructuring-related items, were
$9.4 billion and $29.1 billion in the 2001 third quarter and nine months,
respectively, down $161 million or 2% in the 2001 third quarter and up $1.0
billion or 3% in the 2001 nine months, compared to year-ago levels. Global
Corporate expenses were down 10% in the 2001 third quarter, reflecting lower
compensation and benefits, and were up $404 in the 2001 nine months, primarily
attributable to increased compensation and benefits in the first quarter of
2001, investment spending to expand product platforms, and the acquisitions of
Schroders and Copelco.
Compared to the 2000 periods, Global Consumer expenses increased 8% in the 2001
third quarter and 5% in the 2001 nine months, primarily reflecting the impact of
acquisitions and volume-related increases. Global Investment Management and
Private Banking expenses increased 6% and 10% from the year-ago quarter and
nine-month period, primarily reflecting increased compensation and benefits and
investments in sales and marketing initiatives, as well as the impact of
acquisitions in the nine-month comparison. Corporate/Other expenses decreased
$141 million in the 2001 nine months, which primarily reflected a 2000 first
quarter $108 million pretax expense for the contribution of appreciated venture
capital securities to Citigroup's Foundation.
RESTRUCTURING-RELATED ITEMS
Restructuring-related items of $134 million ($85 million after-tax) in the 2001
third quarter and $479 million ($298 million after-tax) in the 2001 nine months
related primarily to the acquisition of Banamex in the third quarter of 2001 and
severance and costs associated with the reduction of staff primarily in the
Global Corporate and Global Consumer businesses in the nine-month period.
Restructuring-related items of $70 million ($45 million after-tax) in the 2000
third quarter and $93 million ($59 million after-tax) in
4
<Page>
the 2000 nine months primarily represented charges for Global Consumer
initiatives and accelerated depreciation. Included in other operating expenses
for the 2000 nine-month period is a $71 million (after-tax) charge associated
with the discontinuation of the loan origination operations of the Associates
Housing Finance unit.
BENEFITS, CLAIMS, AND CREDIT LOSSES
Adjusted benefits, claims, and credit losses were $5.9 billion and $16.0 billion
in the 2001 third quarter and nine months, up $1.6 billion and $3.0 billion from
the 2000 third quarter and nine months, respectively. Policyholder benefits and
claims in the 2001 third quarter increased 34% from the 2000 third quarter to
$3.4 billion, and were up 20% to $8.8 billion in the 2001 nine months, primarily
as a result of increases in Personal Lines and Commercial Lines primarily
related to the September 11th events. The adjusted provision for credit losses
increased 40% from the 2000 third quarter to $2.5 billion in the 2001 third
quarter and increased 28% from the 2000 nine months to $7.1 billion in the 2001
nine months, primarily reflecting portfolio growth and the impact of
acquisitions.
Global Consumer adjusted provisions for benefits, claims, and credit losses of
$3.9 billion in the 2001 third quarter were up 26% from the 2000 third quarter,
primarily reflecting increases in North America Cards, Personal Lines and
CitiFinancial. Total managed net credit losses were $2.3 billion and the related
loss ratio was 2.88% in the 2001 third quarter, as compared to $2.2 billion and
2.85% in the preceding quarter and $1.6 billion and 2.24% in the year-ago
quarter. The managed consumer loan delinquency ratio (90 days or more past due)
increased to 2.28% at September 30, 2001 from 2.10% at June 30, 2001 and 1.69% a
year ago.
Global Corporate provisions for benefits, claims, and credit losses of $2.0
billion in the 2001 third quarter increased 59% from a year ago, primarily due
to losses in Commercial Lines related to the September 11th events and higher
loss rates in the transportation portfolio in the Corporate and Investment Bank.
Emerging Markets Corporate Banking & Global Transaction Services provision for
credit losses improved in most regions compared to year-ago levels.
Commercial cash-basis loans at September 30, 2001 and 2000 were $3.4 billion and
$1.9 billion, respectively, while the commercial Other Real Estate Owned (OREO)
portfolio totaled $261 million and $277 million, respectively. The increase in
cash-basis loans from the 2000 third quarter was primarily related to the
acquisition of Banamex, the transportation portfolio, and increases attributable
to borrowers in the retail and telecommunication industries. The improvements in
OREO were primarily related to the North America real estate portfolio.
CAPITAL
Total capital (Tier 1 and Tier 2) was $74.1 billion or 10.77% of net
risk-adjusted assets, and Tier 1 capital was $56.4 billion or 8.20% at September
30, 2001, compared to $76.2 billion or 11.49% and $58.5 billion or 8.82% at June
30, 2001.
- --------------------------------------------------------------------------------
The Income line in each of the following business segment discussions excludes
the cumulative effect of adopting EITF 99-20 and SFAS 133. See Notes 3 and 7 of
Notes to Consolidated Financial Statements.
GLOBAL CONSUMER
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- % --------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ---------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 10,754 $ 9,264 16 $ 30,435 $ 27,229 12
Effect of securitization activities 907 573 58 2,603 1,809 44
--------------------- ---------------------
ADJUSTED REVENUES,
NET OF INTEREST EXPENSE 11,661 9,837 19 33,038 29,038 14
--------------------- ---------------------
Adjusted operating expenses (2) 4,369 4,039 8 12,577 12,005 5
--------------------- ---------------------
Provisions for benefits, claims,
and credit losses 2,974 2,510 18 8,540 7,550 13
Effect of securitization activities 907 573 58 2,603 1,809 44
--------------------- ---------------------
Adjusted provisions for benefits,
claims, and credit losses 3,881 3,083 26 11,143 9,359 19
--------------------- ---------------------
CORE INCOME BEFORE TAXES
AND MINORITY INTEREST 3,411 2,715 26 9,318 7,674 21
Income taxes 1,200 970 24 3,337 2,760 21
Minority interest, after-tax 15 6 NM 27 33 (18)
--------------------- ---------------------
CORE INCOME 2,196 1,739 26 5,954 4,881 22
Restructuring-related items, after-tax (87) (19) -- (159) (12) --
--------------------- ---------------------
INCOME $ 2,109 $ 1,720 23 $ 5,795 $ 4,869 19
=======================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
5
<Page>
Global Consumer -- which provides banking, consumer lending, including credit
and charge cards, and investment and personal insurance products and services to
customers around the world -- reported core income of $2.196 billion and $5.954
billion in the 2001 third quarter and nine months, up $457 million or 26% and
$1.073 billion or 22% from the comparable 2000 periods, reflecting growth in
most businesses. Banking/Lending core income increased $221 million or 24% in
the 2001 third quarter and $559 million or 23% in the 2001 nine months from the
prior-year periods, reflecting strong performance across all businesses. In the
International businesses, core income increased $236 million or 47% in the 2001
third quarter and $364 million or 24% in the 2001 nine months compared to the
2000 periods, marked by the acquisition of Banamex and growth in all regions. In
the Insurance segment, core income decreased $39 million or 11% and $8 million
or 1% in the 2001 third quarter and nine months compared to the 2000 periods,
primarily driven by catastrophe losses associated with the events of September
11th in Personal Lines. Income of $2.109 billion and $5.795 billion in the 2001
third quarter and nine months included restructuring-related items of $87
million ($133 million pretax) and $159 million ($247 million pretax),
respectively. Income of $1.720 billion and $4.869 billion in the 2000 third
quarter and nine months included restructuring-related items of $19 million ($28
million pretax) and $12 million ($15 million pretax), respectively. See Note 9
of Notes to Consolidated Financial Statements for a discussion of the
restructuring-related items.
BANKING/LENDING
CITIBANKING NORTH AMERICA
<Table>
<Caption>
THREE MONTHS
ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- % ------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- -----------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $714 $566 26 $ 1,989 $1,711 16
Adjusted operating expenses (2) 439 356 23 1,219 1,071 14
Provision for credit losses 28 7 NM 48 23 NM
-------------- -------------------
CORE INCOME BEFORE TAXES 247 203 22 722 617 17
Income taxes 96 82 17 282 249 13
-------------- -------------------
CORE INCOME 151 121 25 440 368 20
Restructuring-related items, after-tax -- -- -- (3) 8 NM
-------------- -------------------
INCOME $151 $121 25 $ 437 $ 376 16
- -------------------------------------------==================================================
Average assets (IN BILLIONS OF DOLLARS) 17 9 89 12 9 33
Return on assets 3.52% 5.35% 4.87% 5.58%
- -------------------------------------------==================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 3.52% 5.35% 4.90% 5.46%
- -------------------------------------------==================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Citibanking North America -- which delivers banking, lending, and investment
services to customers through Citibank's branches and electronic delivery
systems -- reported core income of $151 million and $440 million in the 2001
third quarter and nine months, respectively, up $30 million or 25% and $72
million or 20% from the 2000 periods, as revenue growth and the acquisition of
European American Bank (EAB) in July 2001 were partially offset by increased
advertising and marketing costs. Income of $437 million and $376 million in the
2001 and 2000 nine months, respectively, included restructuring-related items of
$3 million ($5 million pretax) in 2001 and restructuring-related credits of $8
million ($14 million pretax) in 2000.
As shown in the following table, Citibanking grew customer deposits, accounts,
and loans from 2000, including the acquisition of EAB which added $9.0 billion
to customer deposits, $4.2 billion to average loans and 0.9 million to accounts.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------ %
IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- -------------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 7.8 6.5 20 7.8 6.5 20
Average customer deposits $56.0 $45.0 24 $50.7 $44.4 14
Average loans $11.6 $ 6.9 68 $ 8.5 $ 7.0 21
- -------------------------------============================================================
</Table>
Revenues, net of interest expense, of $714 million and $1.989 billion in the
2001 third quarter and nine months, respectively, increased $148 million or 26%
and $278 million or 16% from the 2000 periods. Revenue growth in the 2001 third
quarter and nine months was driven by the acquisition of EAB along with higher
treasury results, growth in customer deposits, and debit card fees. This was
partially offset by reduced investment product fees, reflecting current market
conditions and the disruption of business following the September 11th terrorist
attack. Revenues in the 2001 nine months include a realized investment gain
resulting from the disposition of an equity investment. Adjusted operating
expenses for the 2001 third quarter and nine months increased $83 million or 23%
and $148 million or 14% compared to the 2000 third quarter and nine months,
primarily reflecting the addition of EAB and higher advertising and marketing
costs.
6
<Page>
The provision for credit losses was $28 million and $48 million in the 2001
third quarter and nine months up from $7 million and $23 million in the 2000
periods. The net credit loss ratio was 1.12% in the 2001 third quarter, compared
to 1.03% in the 2001 second quarter and 0.86% in the prior-year quarter. Loans
delinquent 90 days or more were $69 million or 0.55% of loans at September 30,
2001, compared to $41 million or 0.58% at June 30, 2001 and $33 million or 0.46%
a year ago. Increases from the prior quarter and prior year are mainly due to
the acquisition of EAB.
Average assets of $17 billion and $12 billion in the 2001 third quarter and nine
months increased $8 billion and $3 billion from the comparable 2000 periods,
primarily reflecting the acquisition of EAB. Return on assets was 3.52% and
4.87% in the 2001 third quarter and nine months, down from 5.35% and 5.58% in
the 2000 third quarter and nine months. The decline in return on assets is due
to the addition of EAB.
MORTGAGE BANKING
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ---------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 260 $225 16 $ 770 $674 14
Adjusted operating expenses (2) 104 92 13 329 293 12
(Benefit) provision for credit losses (4) 1 NM (7) 9 NM
------------------ ------------------
CORE INCOME BEFORE TAXES
AND MINORITY INTEREST 160 132 21 448 372 20
Income taxes 62 49 27 173 141 23
Minority interest, after-tax 6 6 -- 18 17 6
------------------ ------------------
CORE INCOME 92 77 19 257 214 20
Restructuring-related items, after-tax -- -- -- (2) -- --
------------------ ------------------
INCOME $ 92 $ 77 19 $ 255 $214 19
- ---------------------------------------------==========================================================
Average assets (IN BILLIONS OF DOLLARS) $ 47 $ 42 12 $ 47 $ 38 24
Return on assets 0.78% 0.73% 0.73% 0.75%
- ---------------------------------------------==========================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Mortgage Banking -- which originates and services mortgages and student loans
for customers across the United States -- reported core income of $92 million
and $257 million in the 2001 third quarter and nine months, respectively, up $15
million or 19% and $43 million or 20% from the 2000 periods, as increased
mortgage originations and securitization activity combined with growth in
student loans was partially offset by lower servicing revenue. Income of $255
million in the 2001 nine months included restructuring-related items of $2
million ($3 million pretax).
As shown in the following table, accounts in the 2001 third quarter increased 9%
while average managed loans increased 16% from the 2000 third quarter,
reflecting strong growth in both mortgage loans held for sale and student loans.
Mortgage originations were up significantly from the 2000 periods, reflecting
increased refinancing activity due to lower interest rates.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------ %
IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- ----------------------------------------------------------------------------------------
Accounts (IN MILLIONS) (1) 4.7 4.3 9 4.7 4.3 9
Average managed loans (1) $44.8 $38.7 16 45.0 35.0 29
Mortgage originations $ 8.1 $ 5.7 42 $22.8 $14.5 57
- --------------------------------========================================================
</Table>
(1) Includes student loans.
- --------------------------------------------------------------------------------
Revenues, net of interest expense, of $260 million and $770 million in the 2001
third quarter and nine months, respectively, grew $35 million or 16% and $96
million or 14% from the 2000 third quarter and nine months, mainly due to higher
securitization income and growth in on-balance sheet loans, partially offset by
lower servicing revenue, primarily reflecting increased prepayment activity
driven by lower interest rates. Adjusted operating expenses increased $12
million or 13% and $36 million or 12% in the 2001 third quarter and nine months,
which reflects volume-related increases.
The (benefit) provision for credit losses was ($4) million and ($7) million in
the 2001 third quarter and nine months compared to $1 million and $9 million in
the 2000 third quarter and nine months, respectively. The net credit loss ratio
was 0.10% in the 2001 third quarter compared to 0.08% in the 2001 second quarter
and 0.09% in the 2000 third quarter. Loans delinquent 90 days or more were
$1.204 billion or 2.74% of loans at September 30, 2001, up from $1.191 billion
or 2.61% at June 30, 2001 and $723 million or 1.88% a year ago. The increase in
delinquencies from the prior year reflects an increase in mortgage and student
loans guaranteed by the U.S. government.
7
<Page>
NORTH AMERICA CARDS
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- % -------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $2,470 $2,172 14 $6,940 $6,066 14
Effect of securitization activities 882 565 56 2,515 1,779 41
-------------------- --------------------
ADJUSTED REVENUES,
NET OF INTEREST EXPENSE 3,352 2,737 22 9,455 7,845 21
-------------------- --------------------
Adjusted operating expenses (2) 1,004 1,005 -- 3,048 2,937 4
Adjusted provision for credit losses (3) 1,434 957 50 4,026 2,908 38
-------------------- --------------------
CORE INCOME BEFORE TAXES 914 775 18 2,381 2,000 19
Income taxes 341 283 20 886 740 20
-------------------- --------------------
CORE INCOME 573 492 16 1,495 1,260 19
Restructuring-related items, after-tax -- -- -- -- 4 (100)
-------------------- --------------------
INCOME $ 573 $ 492 16 $1,495 $1,264 18
- ----------------------------------------------====================================================================
Average assets (IN BILLIONS OF DOLLARS) (4) $ 48 $ 50 (4) $ 47 $ 42 12
Return on assets (4) 4.74% 3.91% 4.25% 4.01%
- ----------------------------------------------====================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
(3) Adjusted for the effect of securitization activities.
(4) Adjusted for the effect of securitization activities, managed average
assets and the related return on assets for North America Cards were $109
billion and 2.09% and $107 billion and 1.87% in the 2001 third quarter and
nine months, respectively, compared to $101 billion and 1.94% and $95
billion and 1.77% in the 2000 third quarter and nine months, respectively.
- --------------------------------------------------------------------------------
North America Cards -- which includes Citi Cards (bankcards and private-label
cards) and Diners Club -- reported core income of $573 million and $1.495
billion in the 2001 third quarter and nine months, respectively, up $81 million
or 16% and $235 million or 19% from the 2000 periods, driven by strong revenue
growth that was partially offset by higher credit costs. Income of $1.264
billion in the 2000 nine months included restructuring-related credits of $4
million ($5 million pretax).
Adjusted revenues, net of interest expense, of $3.352 billion and $9.455 billion
in the 2001 third quarter and nine months, respectively, were up $615 million or
22% and $1.610 billion or 21% from the 2000 periods, reflecting spread
improvements, resulting from lower interest rates and repricing actions,
combined with receivable growth. Adjusted operating expenses decreased $1
million in the 2001 third quarter and increased $111 million or 4% in the 2001
nine months from the comparable 2000 periods, reflecting volume-related
increases and higher advertising and marketing costs, offset by disciplined
expense management. Citi Cards adjusted operating expenses as a percentage of
average managed loans were 3.61% and 4.03% in the 2001 third quarter and nine
months, respectively, down from 3.93% and 4.41% in the comparable prior-year
periods.
As shown in the following table, on a managed basis, the Citi Cards portfolio
experienced continued growth in receivables and accounts in the 2001 third
quarter, reflecting strong growth in the base business. Total sales in the 2001
third quarter were essentially flat compared to the prior year, reflecting
current economic conditions and the impact of the events of September 11th.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------ %
IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- ---------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 93.4 89.4 4 93.4 89.4 4
Total sales $ 55.0 $ 55.2 -- $161.8 $158.9 2
Average managed loans $103.0 $ 94.8 9 $101.2 $ 89.3 13
- ----------------------------===========================================================
</Table>
Risk adjusted margin is a measure of profitability calculated as adjusted
revenues less managed net credit losses as a percentage of average managed loans
and is consistent with the goal of matching the revenues generated by the loan
portfolio with the credit risk undertaken. As shown in the following table, the
Citi Cards risk adjusted margin of 7.13% and 6.85% in the 2001 third quarter and
nine months declined 1 and 17 basis points, respectively, from the 2000 periods,
as higher spreads were more than offset by higher net credit losses.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------------------
IN BILLIONS OF DOLLARS 2001 2000 2001 2000
- -------------------------------------------------------------------------------
Risk adjusted revenues (1) $1.850 $1.701 $5.186 $4.688
Risk adjusted margin % (2) 7.13% 7.14% 6.85% 7.02%
- ----------------------------------=============================================
</Table>
(1) Citi Cards adjusted revenues less managed net credit losses.
(2) Risk adjusted revenues as a percentage of average managed loans.
- --------------------------------------------------------------------------------
8
<Page>
The adjusted provision for credit losses was $1.434 billion and $4.026 billion
in the 2001 third quarter and nine months, up from $957 million and $2.908
billion in the comparable 2000 periods. Citi Cards managed net credit losses in
the 2001 third quarter were $1.423 billion and the related loss ratio was 5.48%
compared to $1.383 billion and 5.51% in the 2001 second quarter and $942 million
and 3.95% in the 2000 third quarter. Net credit losses in the 2001 second
quarter included a recovery of $55 million from the sale of certain bankrupt
accounts which resulted in a 22 basis point reduction of the managed net credit
loss ratio. The increase in net credit losses from the prior year reflects
current U.S. economic conditions and a rise in bankruptcy filings. Citi Cards
managed loans delinquent 90 days or more were $1.908 billion or 1.82% of loans
at September 30, 2001, up from $1.775 billion or 1.72% at June 30, 2001 and
$1.295 billion or 1.34% at September 30, 2000. Net credit losses and the related
ratio may increase from the 2001 third quarter as a result of continued economic
weakness including rising bankruptcy filings and delinquent loans. This
statement is a forward-looking statement within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 32.
CITIFINANCIAL
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- % ---------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ----------------------------------------------------------------------------------------------------------------------
ADJUSTED REVENUES,
NET OF INTEREST EXPENSE (2) $ 1,436 $1,262 14 $ 4,165 $3,753 11
Adjusted operating expenses (3) 492 568 (13) 1,563 1,675 (7)
Adjusted provisions for benefits, claims,
and credit losses (2) 451 362 25 1,313 1,139 15
---------------------- ----------------------
CORE INCOME BEFORE TAXES 493 332 48 1,289 939 37
Income taxes 185 119 55 483 342 41
---------------------- ----------------------
CORE INCOME 308 213 45 806 597 35
Restructuring-related items, after-tax (2) -- -- (24) -- --
---------------------- ----------------------
INCOME $ 306 $ 213 44 $ 782 $ 597 31
- -----------------------------------------------=======================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 66 $ 58 14 $ 65 $ 55 18
Return on assets 1.84% 1.46% -- 1.61% 1.45% --
- -----------------------------------------------=======================================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 1.85% 1.46% 1.66% 1.45%
- -----------------------------------------------=======================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Adjusted for the effect of securitization activities of $25 million and
$88 million in the 2001 third quarter and nine months, respectively, and
$8 million and $30 million in the 2000 third quarter and nine-month
period, respectively.
(3) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
CitiFinancial - which provides community-based lending services, including real
estate-secured loans, through its branch network, regional sales offices, and
cross-selling initiatives with other Citigroup businesses - reported core income
of $308 million and $806 million in the 2001 third quarter and nine months,
respectively, up $95 million or 45% and $209 million or 35% from the 2000
periods, principally reflecting strong growth in receivables, operating expense
savings, and lower cost of funds. Income of $306 million and $782 million in the
2001 third quarter and nine months, respectively, included restructuring-related
items of $2 million ($3 million pretax) and $24 million ($39 million pretax),
respectively.
As shown in the following table, average receivables in the 2001 third quarter
grew 11% compared to the 2000 third quarter, partially due to the cross selling
of products through other Citigroup distribution channels. At September 30,
2001, the portfolio consisted of 69% real estate-secured loans, 16% personal
loans, 11% auto loans, and 4% sales finance and other loans compared with 69%,
18%, 8%, and 5%, respectively, in 2000. The average net interest margin of 7.95%
and 7.83% in the 2001 third quarter and nine months, respectively, increased 34
basis points and decreased 5 basis points compared to the 2000 periods as growth
in lower-risk real estate loans that have lower yields was offset by lower cost
of funds.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- Increase/ ------------------- Increase/
2001 2000 Decrease 2001 2000 Decrease
- ------------------------------------------------------------------------------------------------------------------
Average managed receivables (IN BILLIONS) $ 59.1 $ 53.1 11% $ 58.2 $ 50.9 14%
Average net interest margin % 7.95% 7.61% 34 bp 7.83% 7.88% (5) bp
- ------------------------------------------------------------------------------------------------------------------
</Table>
Adjusted revenues, net of interest expense, of $1.436 billion and $4.165 billion
in the 2001 third quarter and nine months, respectively, increased $174 million
or 14% and $412 million or 11% from the comparable 2000 periods, reflecting
strong growth in receivables and a lower cost of funds. Adjusted operating
expenses of $492 million and $1.563 billion in the 2001 third quarter and nine
months, respectively, decreased $76 million or 13% and $112 million or 7% from
the prior-year periods, mainly reflecting efficiencies resulting from the
consolidation of Associates branches, partially offset by volume-related
increases.
9
<Page>
Adjusted provisions for benefits, claims, and credit losses were $451 million
and $1.313 billion in the 2001 third quarter and nine months, respectively, up
from $362 million and $1.139 billion in the comparable 2000 periods. The net
credit loss ratio was 2.53% in the 2001 third quarter, down from 2.55% in the
2001 second quarter and up from 2.33% in the 2000 third quarter. Loans
delinquent 90 days or more were $1.909 billion or 3.20% of loans at September
30, 2001, up from $1.757 billion or 3.00% at June 30, 2001 and $1.084 billion or
2.00% a year ago, primarily due to the alignment of credit and collection
policies in the Associates real estate portfolio to those of CitiFinancial
combined with the impact of current U.S. economic conditions. Net credit losses
and the related loss ratio may increase from the 2001 third quarter as a result
of economic conditions and credit performance of the portfolios, including
bankruptcy filings. This statement is a forward-looking statement within the
meaning of the Private Securities Litigation Reform Act. See "Forward-Looking
Statements" on page 32.
INSURANCE
TRAVELERS LIFE AND ANNUITY
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------ %
IN MILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- --------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $875 $899 (3) $2,980 $2,892 3
Provision for benefits and claims 549 531 3 1,824 1,720 6
Total operating expenses 69 103 (33) 244 326 (25)
-------------- ------------------
INCOME BEFORE TAXES 257 265 (3) 912 846 8
Income taxes 79 86 (8) 293 278 5
-------------- ------------------
INCOME (1) $178 $179 (1) $ 619 $ 568 9
- ---------------------------------------------===========================================================
</Table>
(1) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Travelers Life and Annuity -- whose core offerings include individual annuity,
group annuity, and individual life insurance -- reported income of $178 million
and $619 million in the 2001 third quarter and nine months, respectively, versus
$179 million and $568 million in the comparable periods of 2000. Income in the
2001 third quarter was down 1% compared to the 2000 third quarter as lower net
investment income and the impact from the events of September 11th was mostly
offset by strong growth in group annuity and life volumes and expense
reductions. The improvement in the 2001 nine-month period compared to the 2000
nine-month period reflects higher net investment income principally driven by
increased group annuity volumes. During the 2001 third quarter and nine months,
Travelers Life and Annuity also achieved double-digit growth in group annuity
net written premiums and deposits and account balances versus the prior-year
periods. Total operating expenses decreased in the 2001 third quarter and nine
months compared to the prior-year third quarter and nine months due to continued
expense management and the absence of expenses related to the long-term care
insurance business sold during the third quarter of 2000. The long-term care
transaction also reduced the amount of premium revenue reported.
The cross-selling initiatives of Travelers Life and Annuity products through
Primerica Financial Services (Primerica), Citibank, Salomon Smith Barney
Financial Consultants, and CitiStreet, as well as strong sales through various
intermediaries and a nationwide network of independent agents, reflect the
ongoing effort to build market share by strengthening relationships in key
distribution channels.
The following table shows net written premiums and deposits by product line,
excluding long-term care insurance written premiums:
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- % ---------------------- %
IN MILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- ---------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL ANNUITIES
Fixed $ 465 $ 320 45 $ 1,463 $ 916 60
Variable 952 1,274 (25) 3,119 3,777 (17)
Individual payout 14 21 (33) 48 63 (24)
GICS AND OTHER GROUP ANNUITIES 1,717 1,482 16 5,616 4,378 28
INDIVIDUAL LIFE INSURANCE
Direct periodic premiums and deposits 127 136 (7) 456 366 25
Single premium deposits 36 22 64 132 62 NM
Reinsurance (25) (21) (19) (72) (61) (18)
---------------------- -----------------------
$ 3,286 $ 3,234 2 $ 10,762 $ 9,501 13
- ----------------------------------------------=============================================================================
</Table>
The majority of the annuity business and a substantial portion of the life
business written by Travelers Life and Annuity are accounted for as investment
contracts, with the result that the premiums are considered deposits and are not
included in revenues.
Decreased individual annuities sales and declining market values brought account
balances to $27.5 billion at September 30, 2001, compared to $29.4 billion at
December 31, 2000 and $30.2 billion at the end of the 2000 third quarter. Net
written premiums and
10
<Page>
deposits for individual annuities in the third quarter and nine months of 2001
were $1.43 billion and $4.63 billion, respectively, compared to $1.61 billion
and $4.76 billion in the comparable periods of 2000. The decrease in individual
annuity net written premiums and deposits was driven by a decline in variable
annuity sales due to current market conditions, but was offset by significant
fixed annuity sales increases over the prior-year periods of 45% and 60% in the
quarter and nine-month period, respectively. Sales continue to reflect the
cross-selling initiatives at all of the Citigroup affiliates, and also reflect
the continued penetration of outside broker-dealer channels.
Group annuity account balances and benefit reserves reached $20.2 billion at
September 30, 2001, up from $17.5 billion at December 31, 2000 and $16.7 billion
at the end of the 2000 third quarter. The group annuity business experienced
continued strong sales momentum in all products, particularly fixed and variable
rate guaranteed investment contracts. Net written premiums and deposits
(excluding Citigroup's employee pension plan deposits) were $1.72 billion and
$5.62 billion in the third quarter and nine months of 2001, respectively,
compared to $1.48 billion and $4.38 billion in the comparable periods of 2000.
Individual life insurance net written premiums and deposits reflect continued
strong core agency sales in both the third quarter and nine-month periods, as
well as significant sales growth in the corporate-owned life insurance product
for the 2001 nine-month period compared to the prior-year period. Direct
periodic premiums and deposits for individual life insurance were $127 million
and $456 million in the third quarter and nine months of 2001, respectively,
compared to $136 million and $366 million in the comparable periods of 2000.
Life insurance in force was $72.5 billion at September 30, 2001, up from $66.9
billion at year-end 2000 and $65.2 billion at September 30, 2000.
PRIMERICA FINANCIAL SERVICES
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------ %
IN MILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- -----------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $493 $474 4 $1,480 $1,425 4
Provision for benefits and claims 129 106 22 384 357 8
Adjusted operating expenses (1) 171 177 (3) 512 498 3
-------------- ------------------
CORE INCOME BEFORE TAXES 193 191 1 584 570 2
Income taxes 68 67 1 206 202 2
-------------- ------------------
CORE INCOME (2) 125 124 1 378 368 3
Restructuring-related items, after-tax -- -- -- -- 1 (100)
-------------- ------------------
INCOME $125 $124 1 $ 378 $ 369 2
- ---------------------------------------------==============================================================
</Table>
(1) Excludes restructuring-related items.
(2) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Primerica Financial Services -- which sells life insurance as well as other
products originated by the Company, including Salomon Smith Barney mutual funds,
CitiFinancial mortgages and personal loans, and Travelers Insurance Company
annuity products -- reported core income of $125 million and $378 million in the
2001 third quarter and nine months, respectively, up from $124 million and $368
million in the comparable periods of 2000. The improvement in 2001 reflects
strong net investment income and $.M.A.R.T. loan(R) sales, partially offset by
lower mutual fund sales and less favorable mortality. Earned premiums, net of
reinsurance, were $287 million and $856 million in the 2001 third quarter and
nine months, respectively, up from $275 million and $823 million in the
comparable periods of 2000.
Total face amount of issued term life insurance was $17.6 billion and $52.5
billion in the 2001 third quarter and nine months, respectively, compared to
$16.8 billion and $50.3 billion in the prior-year periods. Life insurance in
force reached $427.7 billion at September 30, 2001, up from $412.7 billion at
year-end 2000 and $408.4 billion at September 30, 2000, and continued to reflect
good policy persistency.
In recent years, Primerica has leveraged cross selling through the Financial
Needs Analysis (FNA) -- the diagnostic tool that enhances the ability of the
Personal Financial Analysts to address client needs -- to expand its business
beyond life insurance by offering its clients a greater array of financial
products and services, delivered personally through its sales force. During the
2001 nine months, 356,000 FNAs were submitted. Primerica sales of Travelers
variable annuities generated net written premiums and deposits of $222 million
and $707 million in the 2001 third quarter and nine months, respectively,
compared to $271 million and $769 million in the prior-year periods. Cash
advanced on $.M.A.R.T. loan(R) and $.A.F.E.(R) loan products underwritten by
CitiFinancial was $1.006 billion and $2.793 billion in the 2001 third quarter
and nine months, respectively, compared to $457 million and $1.425 billion in
the comparable periods last year. The increase in cash advanced reflects rate
reductions implemented during 2001. Mutual fund sales were $777 million and
$2.64 billion for the 2001 third quarter and nine months, respectively, 19% and
20% below last year's third quarter and nine months, reflecting a difficult
market environment. During the first nine months of 2001, proprietary mutual
funds accounted for 65% of Primerica's U.S. sales and 56% of total sales.
11
<Page>
PERSONAL LINES
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- % --------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 1,132 $1,058 7 $ 3,318 $3,142 6
Claims and claim adjustment expenses 820 717 14 2,301 2,049 12
Adjusted operating expenses (2) 276 246 12 804 752 7
-------------------- --------------------
CORE INCOME BEFORE TAXES
AND MINORITY INTEREST 36 95 (62) 213 341 (38)
Income taxes 7 27 (74) 58 101 (43)
Minority interest, after-tax -- -- -- -- 16 (100)
-------------------- --------------------
CORE INCOME (3) 29 68 (57) 155 224 (31)
Restructuring-related items, after-tax (1) -- -- (3) -- --
-------------------- --------------------
INCOME $ 28 $ 68 (59) $ 152 $ 224 (32)
- ---------------------------------------------=====================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
(3) Excludes investment gains/losses included in Investment Activities
segment.
- --------------------------------------------------------------------------------
Personal Lines -- which writes all types of property and casualty insurance
covering personal risks -- reported core income of $29 million and $155 million
in the third quarter and nine months of 2001, respectively, compared to $68
million and $224 million in the prior-year periods. The decrease in the 2001
third quarter and nine months over the 2000 third quarter and nine months
reflects the catastrophe losses associated with the events of September 11th,
increased loss cost trends primarily due to inflationary pressures, lower
favorable prior-year reserve development, and lower net investment income,
offset in part by premium growth driven by improving rates.
The following table shows net written premiums by product line:
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------ %
IN MILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- --------------------------------------------------------------------------------------------
Personal automobile $ 682 $ 609 12 $1,990 $1,812 10
Homeowners and other 415 397 5 1,142 1,084 5
------------------ ------------------
Total net written premiums $1,097 $1,006 9 $3,132 $2,896 8
- --------------------------------============================================================
</Table>
Personal Lines net written premiums for the 2001 third quarter and nine months
were $1.097 billion and $3.132 billion, respectively, compared to $1.006 billion
and $2.896 billion in the comparable periods of 2000. The increase in net
written premiums in the 2001 third quarter and nine months compared to the 2000
third quarter and nine months, primarily reflects growth in target markets
served by independent agents and growth in affinity group marketing and joint
marketing arrangements, partially offset by continued emphasis on disciplined
underwriting and risk management. Rate increases implemented in both the
automobile and homeowners product lines were the primary contributors to the
growth in net written premiums. The business retention ratio in 2001 is
comparable to the 2000 ratio.
Catastrophe losses, net of taxes and reinsurance, were $42 million and $84
million in the third quarter and nine-month periods of 2001 compared to $2
million and $50 million in the third quarter and nine-month periods of 2000.
Catastrophe losses in 2001 were primarily due to the events of September 11th in
the third quarter and Tropical Storm Allison and wind and hailstorms in Texas
and the Midwest in the second quarter. Catastrophe losses in 2000 were primarily
due to wind and hailstorms in Texas, the Midwest and the Northeast in the second
quarter and hailstorms in Louisiana and Texas in the first quarter.
The statutory combined ratio for Personal Lines in the 2001 third quarter and
nine months was 105.8% and 103.0%, respectively, compared to 102.6% and 99.9% in
the comparable periods of 2000. The GAAP combined ratio for Personal Lines in
the 2001 third quarter and nine months was 105.5% and 103.1%, respectively,
compared to 100.8% and 99.4% in the comparable periods of 2000. GAAP combined
ratios for Personal Lines differ from statutory combined ratios primarily due to
the deferral and amortization of certain expenses for GAAP reporting purposes
only.
The 2001 third quarter and nine months statutory and GAAP combined ratios
include the effects of the events of September 11th. Excluding the effects of
these events, the 2001 third quarter and nine-month statutory combined ratios
would have been 99.6% and 100.8%, respectively, and the 2001 third quarter and
nine-month GAAP combined ratios would have been 99.3% and 101.0%, respectively.
The statutory and GAAP combined ratios, excluding the related adjustment above,
for the 2001 third quarter and the statutory and GAAP combined ratios for the
2000 third quarter continue to reflect the impact of increased loss cost trends
and lower unfavorable development.
12
<Page>
The increase in the statutory and GAAP combined ratios, excluding the related
adjustment above, for the 2001 nine months compared to the statutory and GAAP
combined ratios for the 2000 nine months reflects increased loss cost trends and
lower favorable prior-year reserve development, partially offset by the growth
in premiums due to rate increases.
INTERNATIONAL CONSUMER
JAPAN
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ---------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $859 $713 20 $ 2,502 $1,966 27
Adjusted operating expenses (2) 316 274 15 982 790 24
Provision for credit losses 163 127 28 472 353 34
---------------- ----------------------
CORE INCOME BEFORE TAXES 380 312 22 1,048 823 27
Income taxes 136 108 26 377 296 27
---------------- ----------------------
CORE INCOME 244 204 20 671 527 27
Restructuring-related items, after-tax -- -- -- (6) -- --
---------------- ----------------------
INCOME $244 $204 20 $ 665 $ 527 26
- ---------------------------------------------=============================================================
Average assets (IN BILLIONS OF DOLLARS) $ 21 $ 18 17 $ 20 $ 16 25
Return on assets 4.61% 4.51% -- 4.45% 4.40% --
- ---------------------------------------------=============================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 4.61% 4.51% 4.49% 4.40%
- ---------------------------------------------=============================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
Japan - which provides banking, community-based lending, including credit and
charge cards, and investment products and services - reported core income of
$244 million and $671 million in the 2001 third quarter and nine months,
respectively, up $40 million or 20% and $144 million or 27% from the 2000
periods, reflecting growth in the consumer finance business, including the
impact of the acquisition of Unimat in September 2000. Income of $665 million in
the 2001 nine months included restructuring-related items of $6 million ($12
million pretax).
The net effect of foreign currency translation in the 2001 third quarter reduced
revenue, expense, and provision for credit losses growth rates by 5, 10, and 14
percentage points, respectively, compared to the 2000 third quarter. For the
nine months ended September 30, 2001, the net effect of foreign currency
translation reduced revenue, expense, and provision for credit losses growth
rates by 7, 9, and 14 percentage points, respectively, compared to the
prior-year period.
As shown in the following table, the Japan business experienced strong growth in
accounts, customer deposits and loans from 2000, including the Unimat
acquisition which added approximately $1.6 billion to average loans in the 2001
third quarter.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- ---------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 5.2 4.6 13 5.2 4.6 13
Average customer deposits $15.4 $13.9 11 $14.8 $13.5 10
Average loans $14.7 $12.2 20 $14.1 $10.9 29
- -------------------------------========================================================
</Table>
Revenues, net of interest expense, of $859 million and $2.502 billion in the
2001 third quarter and nine months increased $146 million or 20% and $536
million or 27% from the respective 2000 periods, primarily reflecting growth in
consumer finance revenues and foreign exchange fees along with the impact of
acquisitions, partially offset by the effect of foreign currency translation.
Adjusted operating expenses in the 2001 third quarter and nine months increased
15% and 24%, respectively, from the 2000 periods, reflecting volume-related
increases and the impact of acquisitions, partially offset by the effect of
foreign currency translation.
The provision for credit losses was $163 million and $472 million in the 2001
third quarter and nine months, up $36 million and $119 million from the
comparable 2000 periods. Net credit losses in the 2001 third quarter were $149
million and the related loss ratio was 4.04%, compared to $130 million and 3.74%
in the 2001 second quarter and $99 million and 3.15% in the 2000 third quarter.
The increase in net credit losses was primarily due to higher loan volumes,
including the impact of acquisitions, and increased bankruptcy filings. Loans
delinquent 90 days or more were $174 million or 1.12% of loans at September 30,
2001, compared to $129 million or 0.91% at June 30, 2001 and $105 million or
0.76% a year ago. Net credit losses and the related loss ratio may increase from
the 2001 third quarter should bankruptcy filings and unemployment rates in Japan
increase in the future. This statement is a forward-looking statement within the
meaning of the Private Securities Litigation Reform Act. See "Forward-Looking
Statements" on page 32.
13
<Page>
WESTERN EUROPE
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- % ---------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- -------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $651 $579 12 $ 1,875 $1,797 4
Adjusted operating expenses (2) 353 333 6 1,035 1,061 (2)
Provisions for benefits, claims,
and credit losses 106 97 9 306 293 4
---------------- ----------------------
CORE INCOME BEFORE TAXES 192 149 29 534 443 21
Income taxes 68 55 24 194 162 20
---------------- ----------------------
CORE INCOME 124 94 32 340 281 21
Restructuring-related items, after-tax -- -- -- (2) -- --
---------------- ----------------------
INCOME $124 $ 94 32 $ 338 $ 281 20
- ---------------------------------------------================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 23 $ 21 10 $ 22 $ 21 5
Return on assets 2.14% 1.78% 2.05% 1.79%
- ---------------------------------------------================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
Western Europe -- which provides banking, community-based lending, including
credit and charge cards, and investment products and services -- reported core
income of $124 million and $340 million in the 2001 third quarter and nine
months, respectively, up $30 million or 32% and $59 million or 21% from the 2000
periods, mainly reflecting growth in the branch and consumer finance businesses
across the region, particularly in Germany and the UK. Income of $338 million in
the 2001 nine months included restructuring-related items of $2 million ($3
million pretax).
The net effect of foreign currency translation reduced income growth by
approximately $38 million in the 2001 nine months, which corresponded to a
reduction in revenue, expense, and provision for benefits, claims, and credit
losses growth by approximately 6, 3, and 3 percentage points, respectively, from
the 2000 nine months.
As shown in the following table, Western Europe accounts were up slightly from a
year ago. Growth in both deposit and loan volumes in the 2001 third quarter and
nine months was driven by increases in Germany and the UK and, in the nine-month
comparison, was partially reduced by foreign currency translation.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- ---------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 10.1 10.0 1 10.1 10.0 1
Average customer deposits $13.6 $12.1 12 $13.2 $12.5 6
Average loans $18.6 $16.7 11 $17.7 $16.8 5
- -------------------------------========================================================
</Table>
Revenues, net of interest expense, of $651 million and $1.875 billion in the
2001 third quarter and nine months increased $72 million or 12% and $78 million
or 4% from the comparable 2000 periods, respectively, principally due to growth
in consumer finance and branch lending revenues, reflecting increased volumes
and spreads, partially offset by reduced investment product fees and, in the
nine-month comparison, the adverse effects of foreign currency translation.
Adjusted operating expenses increased $20 million or 6% in the 2001 third
quarter and decreased $26 million or 2% in the 2001 nine months compared to the
2000 periods, mainly reflecting the costs associated with higher business
volumes that were more than offset, in the nine-month comparison, by the effect
of foreign currency translation and lower expenses due to management
initiatives. Revenue and expense growth in the 2001 third quarter and nine
months was impacted by the 2001 first quarter sale of the Diners Club franchises
in the region.
The provisions for benefits, claims, and credit losses were $106 million and
$306 million in the 2001 third quarter and nine months, up from $97 million and
$293 million in the respective 2000 periods. The net credit loss ratio was 1.82%
in the 2001 third quarter, down from 1.98% in the 2001 second quarter and 2.01%
in the 2000 third quarter. Loans delinquent 90 days or more were $817 million or
4.29% of loans at September 30, 2001 compared with $740 million or 4.34% at June
30, 2001 and $829 million or 5.09% a year ago. The increase in loans delinquent
90 days or more from the prior quarter primarily reflects the effect of foreign
currency translation. Net credit losses and the related loss ratio may increase
from the 2001 third quarter as a result of economic conditions, statutory
changes in the region, and future credit performance of the portfolios. This
statement is a forward-looking statement within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 32.
14
<Page>
ASIA
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ---------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- -------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $554 $ 521 6 $ 1,630 $ 1,579 3
Adjusted operating expenses (2) 235 235 -- 720 723 --
Provisions for benefits, claims,
and credit losses 67 71 (6) 196 207 (5)
----------------- -----------------------
CORE INCOME BEFORE TAXES 252 215 17 714 649 10
Income taxes 92 76 21 262 230 14
----------------- -----------------------
CORE INCOME 160 139 15 452 419 8
Restructuring-related items, after-tax -- (1) 100 (3) (5) 40
----------------- -----------------------
INCOME $160 $ 138 16 $ 449 $ 414 8
- ---------------------------------------------======================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 25 $ 27 (7) $ 25 $ 27 (7)
Return on assets 2.54% 2.03% 2.40% 2.05%
- ---------------------------------------------======================================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 2.54% 2.05% 2.42% 2.07%
- ---------------------------------------------======================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
Asia (excluding Japan) -- which provides banking, lending, including credit and
charge cards, and investment products and services -- reported core income of
$160 million and $452 million in the 2001 third quarter and nine months,
respectively, up $21 million or 15% and $33 million or 8% from the 2000 periods,
as volume growth across most countries and products and disciplined expense
management was partially offset by the net effects of foreign currency
translation. Core income in the 2001 nine months also included gains on the
contribution of Citigroup's insurance operations in Taiwan to its joint venture
with Fubon. Income of $449 million in the 2001 nine months included
restructuring-related charges of $3 million ($4 million pretax). Income of $138
million in the 2000 third quarter and $414 million in the 2000 nine months
included restructuring-related charges of $1 million ($1 million pretax) and $5
million ($7 million pretax), respectively.
The net effect of foreign currency translation reduced income growth by
approximately $15 million and $42 million in the 2001 third quarter and nine
months from the 2000 periods and reduced revenue growth by 8 percentage points
in both periods, reduced the provisions for benefits, claims and credit losses
growth rates by 7 percentage points in both periods and reduced expense growth
by 6 and 7 percentage points, respectively, from the 2000 periods.
As shown in the following table, Asia experienced strong growth in accounts,
primarily in cards; however, both loan and deposit volumes were reduced by
foreign currency translation effects.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- ----------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 9.3 7.8 19 9.3 7.8 19
Average customer deposits $35.3 $35.1 1 $35.6 $34.6 3
Average loans $21.3 $22.3 (4) $21.4 $22.4 (4)
- -------------------------------=========================================================
</Table>
Revenues, net of interest expense, of $554 million and $1.630 billion in the
2001 third quarter and nine months, respectively, were up $33 million or 6% and
$51 million or 3% from the 2000 periods, reflecting improvements in most
countries driven by growth in cards, investment products, and deposits, as well
as Fubon-related gains in the nine-month comparison, partially offset by foreign
currency translation effects. Adjusted operating expenses were flat in the 2001
third quarter and declined $3 million in the 2001 nine months compared to the
2000 periods due to expense control initiatives across the region as well as
foreign currency translation effects, partially offset by new branch
initiatives.
The provisions for benefits, claims, and credit losses were $67 million in the
2001 third quarter and $196 million in the 2001 nine months compared with $71
million and $207 million in the 2000 periods. Net credit losses in the 2001
third quarter were $65 million and the related loss ratio was 1.21%, essentially
flat compared to $65 million and 1.23% in the 2001 second quarter and $64
million and 1.14% a year ago, reflecting weaker economic conditions in the
region. Loans delinquent 90 days or more totaled $348 million or 1.65% of loans
at September 30, 2001, compared to $338 million or 1.59% at June 30, 2001 and
$350 million or 1.57% a year ago, primarily due to an increase in delinquent
mortgages in Taiwan and Malaysia.
Net credit losses and loans delinquent 90 days or more may increase from 2001
third quarter levels due to economic weakness in Asia, whose exporting economies
have been impacted by the slowdown in the U.S. This statement is a
forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 32.
15
<Page>
MEXICO
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
IN MILLIONS OF DOLLARS 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 683 $ 119 $ 995 $452
Adjusted operating expenses (1) 460 113 721 341
Provisions for benefits, claims, and credit losses 57 7 75 32
------------------- ------------------
CORE INCOME (LOSS) BEFORE TAXES AND MINORITY INTEREST 166 (1) 199 79
Income taxes 33 2 51 33
Minority interest, after-tax 9 -- 9 --
------------------- ------------------
CORE INCOME (LOSS) $ 124 ($ 3) $ 139 $ 46
Restructuring-related items, after-tax (84) -- (84) --
------------------- ------------------
INCOME (LOSS) $ 40 ($ 3) $ 55 $ 46
- -----------------------------------------------------------===========================================
Average assets (IN BILLIONS OF DOLLARS) $ 49 $ 8 $ 24 $ 9
Return on assets 0.32% NM 0.31% 0.68%
- -----------------------------------------------------------===========================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 1.00% NM 0.77% 0.68%
- -----------------------------------------------------------===========================================
</Table>
(1) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Mexico - which includes the results of Banamex as well as Citigroup's consumer
banking, corporate banking, and retirement services businesses in Mexico and
provides a wide array of banking, insurance, and financial services products -
reported core income of $124 million and $139 million in the 2001 third quarter
and nine months, respectively, compared with a loss of $3 million and income of
$46 million in the 2000 periods, primarily reflecting the acquisition of
Banamex. Income of $40 million and $55 million in the 2001 third quarter and
nine months included restructuring related charges of $84 million ($129 million
pretax) in both periods.
On October 31, 2001, Citibank Mexico's banking operations merged into Banamex,
with Banamex being the surviving entity.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------
IN BILLIONS OF DOLLARS 2001 2000 2001 2000
- --------------------------------------------------------------------------------
Accounts (IN MILLIONS) 16.5 1.7 16.5 1.7
Average customer deposits $23.7 $ 3.2 $ 9.8 $ 3.3
Average loans
CONSUMER $ 3.8 $ 0.3 $ 1.5 $ 0.3
CORPORATE 9.6 3.2 5.5 3.4
GOVERNMENT/GOVERNMENT AGENCIES 2.9 -- 1.0 --
--------------------------------------
TOTAL $16.3 $ 3.5 $ 8.0 $ 3.7
- ------------------------------------------======================================
</Table>
Revenues, net of interest expense, of $683 million and $995 million in the 2001
third quarter and nine months increased $564 million and $543 million from the
2000 periods, primarily reflecting the acquisition of Banamex. Revenues reflect
strong volume growth from the underlying customer business, offset by declining
spreads and trading weakness. The consumer business was impacted by lower
interest rates that reduced spreads on deposits.
Adjusted operating expenses in the 2001 third quarter increased $347 million and
increased $380 million in the 2001 nine months compared to the 2000 periods,
primarily reflecting the acquisition of Banamex. The business has initiated
actions to rationalize headcount, branches, and systems.
The provisions for benefits, claims, and credit losses were $57 million and $75
million in the 2001 third quarter and nine months, up from $7 million and $32
million in the 2000 third quarter and nine months, reflecting the acquisition of
Banamex. Consumer net credit losses in the 2001 third quarter were $33 million
with a related loss ratio of 3.43%, up from 3.20% in the 2001 second quarter and
down from 3.54% a year ago. Consumer loans delinquent 90 days or more were $507
million or 9.06% of loans at September 30, 2001 compared with 6.33% of loans at
June 30, 2001 and 5.75% of loans a year ago, reflecting the acquisition of
Banamex.
Commercial cash basis loans were $600 million at September 30, 2001, $164
million at June 30, 2001, $79 million at December 31, 2000, and $80 million at
September 30, 2000. The increase in commercial cash basis loans is primarily due
to the acquisition of Banamex.
Net credit losses, cash basis loans, and loans delinquent 90 days or more may
increase from 2001 third quarter levels, due to economic weakness in Mexico,
whose exports have been impacted by the slowdown in the U.S. This statement is a
forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 32.
16
<Page>
LATIN AMERICA
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- % ----------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $396 $ 401 (1) $ 1,211 $ 1,238 (2)
Adjusted operating expenses (2) 225 247 (9) 718 748 (4)
Provisions for benefits, claims,
and credit losses 82 66 24 225 226 --
------------------- -----------------------
CORE INCOME BEFORE TAXES 89 88 1 268 264 2
Income taxes 26 31 (16) 80 90 (11)
------------------- -----------------------
CORE INCOME 63 57 11 188 174 8
Restructuring-related items, after-tax -- (18) 100 (19) (29) 34
------------------- -----------------------
INCOME $ 63 $ 39 62 $ 169 $ 145 17
- ---------------------------------------------=======================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 8 $ 9 (11) $ 8 $ 9 (11)
Return on assets 3.12% 1.72% -- 2.82% 2.15% --
- ---------------------------------------------=======================================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 3.12% 2.52% -- 3.14% 2.58% --
- ---------------------------------------------=======================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
Latin America (excluding Mexico) -- which provides banking, lending, including
credit and charge cards, and insurance and investment services -- reported core
income of $63 million and $188 million in the 2001 third quarter and nine
months, respectively, compared with $57 million and $174 million in the 2000
periods. Income of $169 million in the 2001 nine months includes
restructuring-related charges of $19 million ($28 million pretax). Income of $39
million and $145 million in the 2000 third quarter and nine months included
restructuring-related charges of $18 million ($27 million pretax) and $29
million ($41 million pretax), respectively.
The net effects of foreign currency translation reduced income by approximately
$9 million and $22 million, reduced revenue growth by approximately 8 and 6
percentage points, reduced expense growth by 6 and 5 percentage points, and
reduced the provision for benefits, claims, and credit losses growth rates by 5
and 3 percentage points in the 2001 third quarter and nine months, respectively,
from the comparable 2000 periods.
As shown in the following table, Latin America accounts declined as decreases in
deposits and loan products were partially offset by growth in banking-related
insurance products and cards. Average customer deposits declined in the 2001
third quarter, reflecting continued weak economic conditions in the region,
strategy changes in certain countries, and foreign currency translation effects.
Average loans declined 15% in the 2001 third quarter and 11% in the 2001 nine
months, reflecting continued credit risk management initiatives and foreign
currency translation effects.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- ----------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 7.1 7.3 (3) 7.1 7.3 (3)
Average customer deposits $10.2 $10.6 (4) $10.6 $10.6 --
Average loans $ 5.8 $ 6.8 (15) $ 6.2 $ 7.0 (11)
- -------------------------------=========================================================
</Table>
Revenues, net of interest expense, of $396 million in the 2001 third quarter
were down $5 million or 1% from 2000, primarily reflecting weak economic
conditions in Argentina and Chile as well as foreign currency translation
effects, partially offset by increases in Puerto Rico. Revenues of $1.211
billion in the 2001 nine months declined $27 million or 2% from 2000, reflecting
decreases in Chile and Brazil as well as foreign currency translation effects,
partially offset by higher revenues in Venezuela and Peru. Adjusted operating
expenses in the 2001 third quarter declined $22 million or 9% and decreased $30
million or 4% in the 2001 nine months compared to the 2000 periods, due to
expense rationalization initiatives in Argentina, Brazil, and Chile as well as
foreign currency translation effects.
The provisions for benefits, claims, and credit losses were $82 million and $225
million in the 2001 third quarter and nine months, up from $66 million in the
third quarter of 2000 and essentially flat to $226 million in the 2000 nine
months. Net credit losses in the 2001 third quarter were $76 million with a
related loss ratio of 5.20%, up from $66 million and 4.28% in the 2001 second
quarter and $67 million or 3.90% a year ago. The increase in net credit losses
primarily reflects continued weakness in Argentina. Loans delinquent 90 days or
more were $255 million or 4.51% of loans at September 30, 2001 compared with
$285 million or 4.69% at June 30, 2001 and $303 million or 4.49% a year ago. The
decrease in loans delinquent 90 days or more relates primarily to Puerto Rico
due to the gradual liquidation of the auto loan portfolio.
17
<Page>
Net credit losses and loans delinquent 90 days or more may increase from 2001
third quarter levels due to continued economic weakness in Argentina and the
possible impact on the region from Argentina's difficulty in meeting its debt
obligations. This statement is a forward-looking statement within the meaning of
the Private Securities Litigation Reform Act. See "Forward-Looking Statements"
on page 32.
CENTRAL & EASTERN EUROPE, MIDDLE EAST & AFRICA
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------ %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ---------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $140 $112 25 $ 405 $318 27
Adjusted operating expenses (2) 91 88 3 278 231 20
Provision for credit losses 10 7 43 29 25 16
------------------ ------------------
CORE INCOME BEFORE TAXES 39 17 NM 98 62 58
Income taxes 15 5 NM 35 20 75
------------------ ------------------
CORE INCOME 24 12 100 63 42 50
Restructuring-related items, after-tax -- -- -- (1) 7 NM
------------------ ------------------
INCOME $ 24 $ 12 100 $ 62 $ 49 27
- ---------------------------------------------============================================================
Average assets (IN BILLIONS OF DOLLARS) $ 4 $ 3 33 $ 4 $ 3 33
Return on assets 2.38% 1.59% 2.07% 2.18%
- ---------------------------------------------============================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on Assets 2.38% 1.59% 2.11% 1.87%
- ---------------------------------------------============================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Central & Eastern Europe, Middle East & Africa (CEEMEA -- including India and
Pakistan) -- which provides banking, lending, including credit and charge cards,
and investment services -- reported core income of $24 million and $63 million
in the 2001 third quarter and nine months, respectively, up $12 million or 100%
and $21 million or 50% from the 2000 periods, reflecting continued growth in
loans and deposits across the region, partially offset by investments in new
initiatives. Income of $62 million in the 2001 nine months included
restructuring-related charges of $1 million ($1 million pretax). Income of $49
million in the 2000 nine months included restructuring-related credits of $7
million ($11 million pretax).
As shown in the following table, CEEMEA reported 37% account growth from a year
ago, primarily reflecting growth in customer deposits, cards, and other lending
as franchise growth efforts continued across the region.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------ %
IN BILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- ----------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 3.7 2.7 37 3.7 2.7 37
Average customer deposits $ 6.0 $ 3.9 54 $ 5.8 $ 3.7 57
Average loans $ 2.3 $ 1.9 21 $ 2.3 $ 1.9 21
- -------------------------------=========================================================
</Table>
Revenues, net of interest expense, of $140 million and $405 million in the 2001
third quarter and nine months increased $28 million or 25% and $87 million or
27% from the comparable 2000 periods, while total operating expenses increased
$3 million or 3% in the 2001 third quarter and $47 million or 20% in the 2001
nine months, reflecting franchise growth in the region, particularly deposits
and cards.
The provision for credit losses of $10 million and $29 million in the 2001 third
quarter and nine months was up from $7 million and $25 million in the comparable
2000 periods, primarily due to loan growth. The net credit loss ratio was 1.62%
in the 2001 third quarter, down from 1.70% in the 2001 second quarter and up
from 1.45% a year ago. Loans delinquent 90 days or more were $32 million or
1.30% of loans at September 30, 2001, essentially flat to $32 million or 1.31%
at June 30, 2001 and down from $34 million or 1.73% at September 30, 2000.
Net credit losses and loans delinquent 90 days or more may increase from 2001
third quarter levels due to weakening global economic conditions. This statement
is a forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 32.
18
<Page>
E-CONSUMER
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- -----------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 54 $ 76 (29) $ 136 $ 135 1
Adjusted operating expenses (2) 80 122 (34) 235 337 (30)
------------------ -----------------
CORE LOSS BEFORE TAX BENEFITS (26) (46) 43 (99) (202) 51
Income tax benefits (12) (15) 20 (39) (75) 48
------------------ -----------------
CORE LOSS (14) (31) 55 (60) (127) 53
Restructuring-related items, after-tax -- -- -- (8) -- --
------------------ -----------------
LOSS ($14) ($ 31) 55 ($ 68) ($127) 46
- ---------------------------------------------==============================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
e-Consumer -- the business responsible for developing and implementing Global
Consumer Internet financial services products and e-commerce solutions --
reported losses before restructuring-related items of $14 million and $60
million in the 2001 third quarter and nine months, compared to losses of $31
million and $127 million in the 2000 third quarter and nine months. The loss of
$68 million in the 2001 nine months included restructuring-related items of $8
million ($13 million pre-tax).
Revenues, net of interest expense, in the 2001 third quarter and nine months
decreased $22 million and increased $1 million from the comparable 2000 periods,
mainly reflecting lower realized investment gains, partially offset by revenue
growth associated with both new and established product offerings. Adjusted
operating expenses declined $42 million or 34% and $102 million or 30% from the
2000 third quarter and nine months, primarily due to the effect of initiatives
discontinued in 2000, partially offset by continued investment spending on
Internet financial services and products.
OTHER CONSUMER
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
IN MILLIONS OF DOLLARS 2001 2000(1) 2001 2000(1)
- ------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 62 $ 95 $ 127 $ 111
Adjusted operating expenses (2) 54 80 169 222
Provisions for benefits, claims, and credit losses (11) 27 (49) 18
------------------- ------------------
CORE INCOME (LOSS) BEFORE TAX BENEFITS 19 (12) 7 (129)
Income taxes (benefits) 4 (5) (4) (49)
------------------- ------------------
CORE INCOME (LOSS) 15 (7) 11 (80)
Restructuring-related items, after tax -- -- (4) 2
------------------- ------------------
INCOME (LOSS) $ 15 ($ 7) $ 7 ($ 78)
- --------------------------------------------------------========================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
Other Consumer -- which includes certain treasury and unallocated staff
functions, global marketing, and other programs -- reported core income of $15
million and $11 million for the 2001 third quarter and nine months compared to
losses before restructuring-related items of $7 million and $80 million in the
2000 third quarter and nine months. The improvement compared to the prior-year
quarter was primarily due to a pension curtailment gain. The nine-month
comparison also reflects higher treasury results. Income of $7 million in the
2001 nine months included restructuring-related items of $4 million ($6 million
pretax). The loss of $78 million in the 2000 nine months included
restructuring-related credits of $2 million ($3 million pretax). Revenues,
expenses, and the provisions for benefits, claims, and credit losses reflect
offsets to certain line-item reclassifications reported in other Global Consumer
operating segments.
CONSUMER PORTFOLIO REVIEW
In the consumer portfolio, credit loss experience is expressed in terms of
annualized net credit losses as a percentage of average loans. Pricing and
credit policies reflect the loss experience of each particular product. Consumer
loans are generally written off no later than a predetermined number of days
past due on a contractual basis, or earlier in the event of bankruptcy. The
number of days is set at an appropriate level according to loan product and
country.
19
<Page>
The following table summarizes delinquency and net credit loss experience in
both the managed and on-balance sheet loan portfolios in terms of loans 90 days
or more past due, net credit losses, and as a percentage of related loans.
CONSUMER LOAN DELINQUENCY AMOUNTS, NET CREDIT LOSSES, AND RATIOS
<Table>
<Caption>
TOTAL AVERAGE
IN MILLIONS LOANS 90 DAYS OR MORE PAST DUE(1) LOANS NET CREDIT LOSSES(1)
OF DOLLARS, ------------------------------------------------------------------------------------------------------------
EXCEPT LOAN AMOUNTS SEPT. 30, SEPT. 30, June 30, Sept. 30, 3RD QTR. 3RD QTR. 2ndt Qtr. 3rd Qtr.
IN BILLIONS 2001 2001 2001(2) 2000(2) 2001 2001 2001(2) 2000(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Citibanking North
America $ 12.6 $ 69 $ 41 $ 33 $ 11.6 $ 33 $ 18 $ 15
RATIO 0.55% 0.58% 0.46% 1.12% 1.03% 0.86%
Mortgage Banking 44.0 1,204 1,191 723 44.8 12 9 9
RATIO 2.74% 2.61% 1.88% 0.10% 0.08% 0.09%
Citi Cards 104.7 1,908 1,775 1,295 103.0 1,423 1,383 942
RATIO 1.82% 1.72% 1.34% 5.48% 5.51% 3.95%
Other North America
Cards 1.4 5 5 20 1.5 10 12 13
RATIO 0.36% 0.29% 1.05% 2.80% 2.92% 3.00%
CitiFinancial 59.7 1,909 1,757 1,084 59.1 376 369 311
RATIO 3.20% 3.00% 2.00% 2.53% 2.55% 2.33%
Japan 15.5 174 129 105 14.7 149 130 99
RATIO 1.12% 0.91% 0.76% 4.04% 3.74% 3.15%
Western Europe 19.1 817 740 829 18.6 85 84 84
RATIO 4.29% 4.34% 5.09% 1.82% 1.98% 2.01%
Asia (excluding
Japan) 21.1 348 338 350 21.3 65 65 64
RATIO 1.65% 1.59% 1.57% 1.21% 1.23% 1.14%
Mexico 5.6 507 25 15 3.8 33 3 2
RATIO 9.06% 6.33% 5.75% 3.43% 3.20% 3.54%
Latin America 5.7 255 285 303 5.8 76 66 67
RATIO 4.51% 4.69% 4.49% 5.20% 4.28% 3.90%
CEEMEA 2.4 32 32 34 2.3 10 10 7
RATIO 1.30% 1.31% 1.73% 1.62% 1.70% 1.45%
The Citigroup
Private Bank 25.3 78 64 90 25.0 2 3 2
RATIO 0.31% 0.26% 0.36% 0.03% 0.04% 0.03%
Other 3.5 20 22 14 3.5 10 2 (17)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MANAGED $ 320.6 $ 7,326 $ 6,404 $ 4,895 $ 315.0 $ 2,284 $ 2,154 $ 1,598
RATIO 2.28% 2.10% 1.69% 2.88% 2.85% 2.24%
- -----------------------============================================================================================================
Securitized
receivables (66.8) (1,214) (1,115) (911) (63.0) (812) (838) (502)
Loans held for sale (11.3) (106) (144) (68) (15.3) (95) (92) (59)
- -----------------------------------------------------------------------------------------------------------------------------------
CONSUMER LOANS $ 242.5 $ 6,006 $ 5,145 $ 3,916 $ 236.7 $ 1,377 $ 1,224 $ 1,037
RATIO 2.48% 2.29% 1.76% 2.31% 2.19% 1.89%
- -----------------------============================================================================================================
</Table>
(1) The ratios of 90 days or more past due and net credit losses are
calculated based on end-of-period and average loans, respectively, both
net of unearned income.
(2) Reclassified to conform to current period's presentation.
- --------------------------------------------------------------------------------
CONSUMER LOAN BALANCES, NET OF UNEARNED INCOME
<Table>
<Caption>
END OF PERIOD AVERAGE
------------------------------------ ------------------------------------
SEPT. 30, June 30, Sept. 30, 3RD QTR. 2nd Qtr. 3rd Qtr.
IN BILLIONS OF DOLLARS 2001 2001 2000 2001 2001 2000
- -----------------------------------------------------------------------------------------------------
TOTAL MANAGED $ 320.6 $ 305.1 $ 289.4 $ 315.0 $ 302.6 $ 283.3
Securitized receivables (66.8) (63.6) (58.4) (63.0) (62.3) (56.3)
Loans held for sale (11.3) (16.6) (9.0) (15.3) (16.5) (10.0)
------------------------------------ ------------------------------------
CONSUMER LOANS $ 242.5 $ 224.9 $ 222.0 $ 236.7 $ 223.8 $ 217.0
- --------------------------===========================================================================
</Table>
Total delinquencies 90 days or more past due in the managed portfolio were
$7.326 billion or 2.28% of loans at September 30, 2001, compared with $6.404
billion or 2.10% at June 30, 2001 and $4.895 billion or 1.69% at September 30,
2000. Total managed net credit losses in the 2001 third quarter were $2.284
billion and the related loss ratio was 2.88%, compared with $2.154 billion and
2.85% in the 2001 second quarter and $1.598 billion and 2.24% in the 2000 third
quarter. For a discussion on trends by business, see the business discussions on
pages 6 -19.
Citigroup's allowance for credit losses of $9.918 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citigroup's allowance for credit losses attributed to the
consumer portfolio was $5.239 billion at September 30, 2001, $4.914 billion at
June 30, 2001 and $5.105 billion at September 30, 2000. The increase in the
allowance for credit losses from the prior quarter is primarily due to the
acquisitions of Banamex and EAB. The allowance as a percentage of loans on the
balance sheet was 2.16% at September 30, 2001, down from 2.18% at June 30, 2001
and 2.30% a year
20
<Page>
ago. The decline in the allowance as a percentage of loans primarily reflects
the growth in consumer loans. On-balance sheet consumer loans of $242.5 billion
grew 9% from a year ago, primarily driven by the impact of the acquisitions of
Banamex and EAB, as well as growth in Mortgage Banking, mainly student loans and
mortgages, and CitiFinancial, mostly real-estate secured loans. On balance sheet
loans in Citi Cards declined in the 2001 third quarter as growth in managed
receivables was more than offset by increased securitization activity. In
addition, loans increased in Japan and Western Europe, mainly in consumer
finance, and decreased in Asia and Latin America. The attribution of the
allowance is made for analytical purposes only and may change from time to time.
Consumer net credit losses and loans 90 days or more past due may increase from
2001 third quarter levels as a result of portfolio growth and seasonal factors
and as uncertain global economic conditions persist. This statement is a
forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 32.
GLOBAL CORPORATE
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- % ------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 8,014 $8,436 (5) $ 25,951 $25,062 4
Adjusted operating expenses (2) 4,274 4,761 (10) 14,309 13,905 3
Provisions for benefits, claims,
and credit losses 1,975 1,246 59 4,747 3,585 32
------------------- -------------------
CORE INCOME BEFORE TAXES
AND MINORITY INTEREST 1,765 2,429 (27) 6,895 7,572 (9)
Income taxes 600 844 (29) 2,348 2,605 (10)
Minority interest, after-tax 6 8 (25) 18 64 (72)
------------------- -------------------
CORE INCOME 1,159 1,577 (27) 4,529 4,903 (8)
Restructuring-related items, after-tax (1) -- -- (135) 3 --
------------------- -------------------
INCOME $ 1,158 $1,577 (27) $ 4,394 $ 4,906 (10)
- ------------------------------------------======================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
The Global Corporate business serves corporations, financial institutions,
governments, investors, and other participants in capital markets throughout the
world and consists of the Corporate and Investment Bank, Emerging Markets
Corporate Banking & Global Transaction Services (EM Corporate & GTS), and the
Commercial Lines business of Travelers Property Casualty Corp. (TPC).
Global Corporate core income of $1.159 billion and $4.529 billion in the 2001
third quarter and nine months decreased $418 million or 27% and $374 million or
8% from the respective 2000 periods. The 2001 third quarter reflects core income
declines from the comparable 2000 quarter of $453 million in Commercial Lines
and $21 million or 2% in the Corporate and Investment Bank, partially offset by
growth of $56 million or 15% in EM Corporate & GTS. The 2001 nine months
reflects core income declines from the comparable 2000 period of $408 million or
49% in Commercial Lines and $263 million or 9% in the Corporate and Investment
Bank, partially offset by growth of $297 million or 30% in EM Corporate & GTS.
EM Corporate & GTS core income growth reflects broad-based growth in
trading-related revenues, the impact of net investment hedging, and disciplined
expense management. The increase in the 2001 nine months also reflects lower net
credit losses and the impact of a building sale in Asia during the second
quarter of 2001. The decrease in the Corporate and Investment Bank primarily
reflects lower income in Global Equities and Private Client, lower earnings from
the investment in Nikko Securities, and higher net credit losses, partially
offset by increases in Fixed Income, the gain on the sale of certain municipal
bonds, as well as gains on sales of Associates Relocation and Canadian Fleet
businesses. The decrease also reflects the loss of revenue and increased
expenses resulting from the September 11th events. Commercial Lines decreased
primarily due to the catastrophe losses associated with the events of September
11th, increased loss cost trends primarily due to inflationary pressures, and
lower net investment income, offset in part by the benefit of rate increases and
higher favorable prior-year reserve development.
Income of $1.158 billion in the 2001 third quarter and $4.394 billion in the
2001 nine months included net restructuring-related charges of $1 million and
$135 million, respectively. Income of $4.906 billion in the 2000 nine months
included net restructuring-related credits of $3 million. See Note 9 of Notes to
Consolidated Financial Statements for a discussion of the restructuring-related
items.
The businesses of Global Corporate are significantly affected by the levels of
activity in the global capital markets which, in turn, are influenced by
macro-economic and political policies and developments, among other factors, in
the 100 countries in which the businesses operate. Global economic and market
events can have both positive and negative effects on the revenue performance of
the businesses and can affect credit performance. Losses on commercial lending
activities and the level of cash-basis loans can vary widely with respect to
timing and amount, particularly within any narrowly-defined business or loan
type. Net credit losses and cash-basis loans may increase from the 2001 third
quarter levels due to weakening global economic conditions, sovereign or
regulatory actions and other factors. A variety of factors continue to affect
the property and casualty insurance market, including the
21
<Page>
competitive pressures affecting pricing and profitability, inflation in the cost
of medical care, and litigation. This paragraph contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 32.
CORPORATE AND INVESTMENT BANK
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ----------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $4,338 $4,930 (12) $ 14,713 $15,041 (2)
Adjusted operating expenses (2) 2,800 3,420 (18) 9,719 9,890 (2)
Provision for credit losses 181 113 60 641 363 77
------------------ -------------------
CORE INCOME BEFORE TAXES
AND MINORITY INTEREST 1,357 1,397 (3) 4,353 4,788 (9)
Income taxes 490 509 (4) 1,545 1,714 (10)
Minority interest, after-tax -- -- -- -- 3 (100)
------------------ -------------------
CORE INCOME 867 888 (2) 2,808 3,071 (9)
Restructuring-related items, after tax -- -- -- (105) -- --
------------------ -------------------
INCOME $ 867 $ 888 (2) $ 2,703 $ 3,071 (12)
- ------------------------------------------====================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
The Corporate and Investment Bank delivers a full range of financial services
and products including investment banking, brokerage, research and advisory
services, foreign exchange, structured products, derivatives, loans, and
leasing.
The Corporate and Investment Bank core income of $867 million and $2.808 billion
in the 2001 third quarter and nine months was down $21 million or 2% and $263
million or 9% from the respective 2000 periods. The decrease primarily reflects
lower income in Global Equities and Private Client, lower earnings from the
investment in Nikko Securities, and higher net credit losses, partially offset
by increases in Fixed Income, the gain on the sale of certain municipal bonds,
and gains on sale of Associates Relocation and Canadian Fleet businesses. The
decrease also reflects the impact of the September 11th events, which
resulted in market closures, reduced private client trading volumes when
markets reopened, as well as additional expenses to relocate employees to a
contingency site. Income of $2.703 billion in the 2001 nine months includes
net restructuring-related charges of $105 million ($176 million pretax).
On May 1, 2000, the Corporate and Investment Bank completed the acquisition of
the global investment banking business and related net assets of Schroders PLC
(Schroders), including all corporate finance, financial markets, and securities
activities. During the second quarter of 2000, the Corporate and Investment Bank
strengthened its position in the U.S. leasing market through the purchase of
Copelco.
Revenues by category were as follows:
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ---------------------------------------------------------------------------------------------
Commissions and fees $ 844 $1,019 (17) $ 2,825 $ 3,402 (17)
Investment banking 930 1,125 (17) 3,307 3,093 7
Principal transactions 451 1,114 (60) 2,847 3,396 (16)
Asset management and administration fees 526 551 (5) 1,565 1,597 (2)
Interest and dividend income, net 1,203 941 28 3,351 2,791 20
Other income 384 180 NM 818 762 7
------------------ -----------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $4,338 $4,930 (12) $14,713 $15,041 (2)
- -------------------------------------------==================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
NM Not meaningful
- --------------------------------------------------------------------------------
Revenues, net of interest expense, of $4.338 billion and $14.713 billion in the
2001 third quarter and 2001 nine months decreased $592 million or 12% and $328
million or 2% from the comparable 2000 periods, respectively. Commissions and
fees in the 2001 third quarter and nine months decreased $175 million or 17% and
$577 million or 17%, respectively, mainly reflecting decreases in
over-the-counter securities and mutual fund commissions. Investment banking
revenues decreased $195 million or 17% in the 2001 third quarter but increased
$214 million or 7% in the 2001 nine months. The decrease in the 2001 third
quarter reflects declines in mergers and acquisitions fees and equity
underwritings, partially offset by growth in high-grade debt underwritings. The
increase in the 2001 nine months was primarily due to growth in high-grade debt
underwritings, partially offset by declines in equity and unit trust
underwritings. Principal transactions revenues decreased $663 million or 60% in
the 2001 third quarter and $549 million or
22
<Page>
16% in the 2001 nine months compared to the respective 2000 periods. The
decrease in the 2001 third quarter primarily reflects declines in Global
Equities and Fixed Income. The decrease in the 2001 nine months primarily
reflects declines in Global Equities and Commodities, partially offset by
increases in Fixed Income. Net interest and dividend income increased $262
million or 28% and $560 million or 20% in the 2001 third quarter and nine
months, respectively, primarily reflecting growth in U.S. mortgages and Loans.
Other income increased $204 million and $56 million in the 2001 third quarter
and nine months, respectively. The increase primarily reflects gains on the sale
of the Associates Relocation and Canadian Fleet businesses, gains on the sale of
municipal bonds from the available-for-sale portfolio and growth in other
customer fees partially offset by lower earnings from the investment in Nikko
securities. The increase in the 2001 nine months also includes an offset due to
a change in intercompany billing practices that had the effect of reducing other
income and other expense. Asset management and administration fees include
results from assets managed by the Financial Consultants and other
internally-managed assets as well as those that are managed through the
Consulting Group. For the 2001 third quarter and nine months, asset management
and administration fees decreased $25 million or 5% and $32 million or 2% from
the respective 2000 periods, primarily due to a decrease in assets under
fee-based management.
Total assets under fee-based management at September 30 were as follows:
<Table>
<Caption>
SEPTEMBER 30, September 30, %
IN BILLIONS OF DOLLARS 2001 2000 Change
- --------------------------------------------------------------------------------
Financial Consultant managed accounts $ 49.4 $ 62.2 (21)
Consulting Group internally managed assets 134.9 140.2 (4)
------ ------
TOTAL ASSETS UNDER FEE-BASED MANAGEMENT (1) $184.3 $202.4 (9)
- ------------------------------------------------================================
</Table>
(1) Includes assets managed jointly with Citigroup Asset Management.
- --------------------------------------------------------------------------------
Adjusted operating expenses were $2.800 billion and $9.719 billion in the 2001
third quarter and nine months, down $620 million or 18% and $171 million or 2%,
respectively, from the comparable 2000 periods, driven by lower compensation and
benefits and other operating and administrative expenses. Compensation and
benefits decreased primarily as a result of declines in production-related
compensation and savings from restructuring actions initiated in the first
quarter of 2001. Other operating and administrative expenses declined $157
million and $231 million in the 2001 third quarter and nine months,
respectively, from the comparable 2000 periods, primarily due to tight expense
controls, a change in intercompany billing practices that had the effect of
reducing other income and other expense, and the release of a rent reserve that
was no longer required.
The provision for credit losses was $181 million in the 2001 third quarter and
$641 million in the 2001 nine months, up $68 million and $278 million from the
respective 2000 periods. The increase was primarily due to higher net credit
losses in the transportation portfolio and asbestos-related bankruptcies
combined with higher net credit losses in the retail, telecommunication, and
airline industries.
Cash-basis loans were $1.225 billion at September 30, 2001, $1.149 billion at
June 30, 2001, $776 million at December 31, 2000, and $648 million at September
30, 2000, reflecting increases in the transportation portfolio, asbestos-related
bankruptcies, and borrowers in the retail and telecommunication industries. The
OREO portfolio totaled $110 million, down $5 million from December 31, 2000 and
$12 million from September 30, 2000. The improvements in OREO were primarily
related to the North America real estate portfolio. Other Repossessed Assets at
September 30, 2001 were $479 million, up $187 million from December 31, 2000 and
$232 million from September 30, 2000. The increase in Other Repossessed Assets
was primarily due to increased repossessed transportation equipment. Losses on
commercial lending activities and the level of cash-basis loans can vary widely
with respect to timing and amount, particularly within any narrowly-defined
business or loan type. Net credit losses and cash-basis loans may increase from
the 2001 third quarter levels due to the further impact of the September 11th
events on a weakening U.S. economy. This statement is a forward-looking
statement within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 32.
23
<Page>
EMERGING MARKETS CORPORATE BANKING AND GLOBAL TRANSACTION SERVICES
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- % ------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- --------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 1,699 $1,578 8 $ 5,273 $4,586 15
Adjusted operating expenses (2) 995 961 4 3,106 2,835 10
Provision for credit losses 32 19 68 125 168 (26)
------------------- -------------------
CORE INCOME BEFORE TAXES
AND MINORITY INTEREST 672 598 12 2,042 1,583 29
Income taxes 238 218 9 731 576 27
Minority interest, after-tax 6 8 (25) 18 11 64
------------------- -------------------
CORE INCOME 428 372 15 1,293 996 30
Restructuring-related items, after-tax (1) -- -- (30) 3 --
------------------- -------------------
INCOME $ 427 $ 372 15 $ 1,263 $ 999 26
- ------------------------------------------========================================================
Average assets (IN BILLIONS OF DOLLARS) $ 114 $ 100 14 $ 112 $ 96 17
Return on assets 1.49% 1.48% 1.51% 1.39%
- ------------------------------------------========================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 1.49% 1.48% 1.54% 1.39%
- ------------------------------------------========================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
- --------------------------------------------------------------------------------
Citigroup's EM Corporate & GTS business offers a wide array of banking and
financial services products in the emerging markets (excluding Mexico) and also
includes the global operations of Transaction Services. In June 2000, EM
Corporate & GTS completed the acquisition of a majority interest in Bank
Handlowy, a leading bank in Poland.
EM Corporate & GTS core income of $428 million and $1.293 billion in the 2001
third quarter and nine months was up $56 million or 15% and $297 million or 30%
from the comparable 2000 periods. The improvements reflect growth in
trading-related revenues across all regions, the impact of net investment
hedging, and disciplined expense management. The increase in the 2001 nine
months also reflects lower net credit losses and the impact of a building sale
in Asia in the second quarter of 2001. Income of $427 million in the 2001 third
quarter and $1.263 billion for the 2001 nine months included
restructuring-related charges of $1 million ($1 million pretax) and $30 million
($43 million pretax), respectively. Income of $999 million in the 2000 nine
months included a restructuring-related credit of $3 million ($3 million
pretax).
Revenues, net of interest expense, were $1.699 billion and $5.273 billion in the
2001 third quarter and nine months, up $121 million or 8% and $687 million or
15% from the respective 2000 periods. Revenue growth primarily reflects higher
trading-related revenues and loan portfolio revenues across all regions and
benefits from net investment hedging in CEEMEA and Latin America. The increase
in the 2001 nine months also reflects the impact of a building sale in Asia.
Adjusted operating expenses increased $34 million or 4% to $995 million in the
2001 third quarter and $271 million or 10% to $3.106 billion in the 2001 nine
months compared to the respective 2000 periods. The increases reflect
volume-related increases, partially offset by cost controls in all regions and
benefits from foreign currency translation effects. The increase in the 2001
nine months also reflects the impact of the acquisition of Bank Handlowy.
The provision for credit losses totaled $32 million and $125 million in the 2001
third quarter and nine months, up $13 million or 68% from the 2000 third
quarter, but down $43 million or 26% from the 2000 nine months, respectively.
The increase in the 2001 third quarter reflects higher net credit losses in
Australia, Malaysia and Argentina. The decrease in the 2001 nine months was
primarily caused by net credit losses in Indonesia in the 2000 first quarter and
Bolivia in the 2000 second quarter. Cash-basis loans were $1.563 billion at
September 30, 2001, $1.279 billion at June 30, 2001, $1.069 billion at December
31, 2000, and $1.091 billion at September 30, 2000, primarily reflecting
increases in Argentina, Australia, and New Zealand. Losses on commercial lending
activities and the level of cash-basis loans can vary widely with respect to
timing and amount, particularly within any narrowly-defined business or loan
type. Net credit losses and cash-basis loans may increase from the 2001 third
quarter levels due to weakening global economic conditions, sovereign or
regulatory actions, and other factors. This statement is a forward-looking
statement within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 32.
24
<Page>
COMMERCIAL LINES
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- -------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 1,977 $1,928 3 $5,965 $5,435 10
Claims and claim adjustment expenses 1,762 1,114 58 3,981 3,054 30
Total operating expenses 479 380 26 1,484 1,180 26
------------------ -----------------
INCOME (LOSS) BEFORE TAXES
AND MINORITY INTEREST (264) 434 NM 500 1,201 (58)
Income taxes (benefits) (128) 117 NM 72 315 (77)
Minority interest, after-tax -- -- -- -- 50 (100)
------------------ -----------------
INCOME (LOSS) (2) ($ 136) $ 317 NM $ 428 $ 836 (49)
- ------------------------------------------=================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes investment gains/losses included in Investment Activities
segment.
NM Not meaningful
- --------------------------------------------------------------------------------
Commercial Lines -- which offers a broad array of property and casualty
insurance and insurance-related services through brokers and independent
agencies -- reported a loss of $136 million and income of $428 million in the
2001 third quarter and nine months, respectively, compared to income of $317
million and $836 million in the comparable periods of 2000. The decrease in the
2001 third quarter and nine months over the 2000 third quarter and nine months
reflects the catastrophe losses associated with the events of September 11th,
increased loss cost trends primarily due to inflationary pressures, and lower
net investment income, offset in part by the benefit of rate increases and
higher favorable prior-year reserve development. Results for the third quarter
of 2000 reflect a benefit of $43 million (after-tax) resulting from legislative
action in the state of New York that changed the manner in which New York
finances its workers' compensation second-injury funds. The Company continues to
maintain its discipline in the competitive commercial lines marketplace and to
grow business only where market conditions warrant.
On May 31, 2000, the Company completed the acquisition of the surety business of
Reliance Group Holdings, Inc. (Reliance Surety). In the third quarter of 2000,
the Company purchased the renewal rights to a portion of Reliance Group
Holdings, Inc.'s commercial lines middle-market book of business (Reliance
Middle Market) and also acquired the renewal rights to Frontier Insurance Group,
Inc.'s (Frontier) environmental, excess, and surplus lines casualty businesses
and certain classes of surety business.
Net written premiums by market were as follows:
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN MILLIONS OF DOLLARS 2001 2000 Change 2001 2000 Change
- ----------------------------------------------------------------------------
National Accounts $ 116 $ 131 (11) $ 319 $ 282 13
Commercial Accounts 529 563 (6) 1,603 1,508 6
Select Accounts 412 382 8 1,281 1,176 9
Specialty Accounts 457 464 (2) 1,527 1,277 20
------------------ -----------------
TOTAL NET WRITTEN PREMIUMS $1,514 $1,540 (2) $4,730 $4,243 11
- -----------------------------===============================================
</Table>
Commercial Lines net written premiums in the 2001 third quarter and nine months
totaled $1.514 billion and $4.730 billion, respectively, compared to $1.540
billion and $4.243 billion in the comparable periods of 2000. Included in
Specialty Accounts net written premiums in the 2000 nine months is an increase
of $131 million due to a reinsurance transaction associated with the acquisition
of the Reliance Surety business. The trend in written premiums for all lines
reflects the impact of an improving rate environment as evidenced by the
continued favorable pricing on new and renewal business. The increase in
National Accounts net written premiums for the nine-month period comparison is
due to the purchase of less reinsurance, reflecting the shift in business mix
from guaranteed-cost products to loss-sensitive products, combined with the
re-population of the involuntary pools, while the decrease in the third quarter
comparison reflects the loss of a large account in the 2001 third quarter due to
repricing. The decrease in Commercial Accounts net written premiums for the 2001
third quarter compared to the 2000 comparable period is due primarily to the
issuance of short-term renewal policies during the 2000 third quarter for
acquired Reliance Middle Market business. Also contributing to the net written
premium increases are the impact of the acquisition of the renewal rights for
the Reliance Middle Market business in Commercial Accounts, the impact on
Specialty Accounts of the Reliance Surety acquisition, and the acquisition of
the renewal rights for the Frontier business.
National Accounts new business was significantly higher in the 2001 third
quarter than in the 2000 third quarter and was marginally higher in the 2001
nine months than in the 2000 nine months, reflecting the re-population of the
involuntary pools. National Accounts business retention ratio in the 2001 third
quarter and nine months was significantly lower than in the 2000 comparable
periods, reflecting the loss of one large account in the 2001 third quarter.
25
<Page>
Commercial Accounts new business in the 2001 third quarter and nine months was
significantly lower than in the comparable periods of 2000, reflecting the
continued focus on selective underwriting. Commercial Accounts business
retention ratio in the 2001 third quarter was moderately lower than in the 2000
third quarter and significantly lower in the 2001 nine-month period compared to
the 2000 nine-month period, reflecting the continued disciplined approach to
achieving acceptable levels of account profitability.
New business in Select Accounts in the 2001 third quarter was moderately lower
and in the nine months was marginally higher than in the comparable periods of
2000, reflecting selective underwriting. Select Accounts business retention
ratio in the 2001 third quarter was marginally higher and for the nine months
was marginally lower than in the comparable periods of 2000.
Catastrophe losses, net of taxes and reinsurance, were $448 million and $468
million in the 2001 third quarter and nine months, respectively. There were no
catastrophe losses in the 2000 periods. Catastrophe losses in 2001 were
primarily due to the events of September 11th in the third quarter, Tropical
Storm Allison in the second quarter, and the Seattle earthquake in the first
quarter.
The statutory combined ratios before policyholder dividends for Commercial Lines
in the 2001 third quarter and nine months were 144.1% and 115.3%, respectively,
compared to 103.6% and 103.2% in the comparable periods of 2000. The GAAP
combined ratios before policyholder dividends for Commercial Lines in the 2001
third quarter and nine months were 142.7% and 114.2%, respectively, compared to
96.8% and 98.9% in the comparable periods of 2000. GAAP combined ratios for
Commercial Lines differ from statutory combined ratios primarily due to the
deferral and amortization of certain expenses for GAAP reporting purposes only.
The 2001 third quarter and nine months statutory and GAAP combined ratios
include the effects of the events of September 11th. Excluding the effect of
these events, the statutory combined ratios before policyholder dividends in the
2001 third quarter and nine months would have been 98.2% and 100.1%,
respectively, and the GAAP combined ratios before policyholder dividends in the
2001 third quarter and nine months would have been 96.7% and 98.8%,
respectively.
The 2000 nine months statutory and GAAP combined ratios include an adjustment
due to a reinsurance transaction associated with the acquisition of the Reliance
Surety business. Excluding this adjustment, the 2000 nine-month statutory and
GAAP combined ratios before policyholder dividends would have been 102.8% and
99.7%, respectively.
The decrease in the 2001 third quarter and nine-month statutory and GAAP
combined ratios before policyholder dividends, excluding the related adjustment
above, compared to the 2000 third quarter and nine-month statutory and GAAP
combined ratios before policyholder dividends, excluding the related adjustment
above, was primarily due to premium growth related to rate increases, the impact
of the business associated with the Reliance Surety acquisition, the purchase of
the renewal rights for the Reliance Middle Market and Frontier businesses, and
higher favorable prior-year reserve development, partially offset by increased
loss cost trends and catastrophe losses due to Tropical Storm Allison in the
2001 second quarter and the Seattle earthquake in the 2001 first quarter.
UNCERTAINTY REGARDING ADEQUACY OF ENVIRONMENTAL AND ASBESTOS RESERVES
The reserves for environmental claims are not established on a claim-by-claim
basis. An aggregate bulk reserve is carried for all of the environmental claims
that are in the dispute process, until the dispute is resolved. This bulk
reserve is established and adjusted based upon the aggregate volume of
in-process environmental claims and the experience in resolving such claims. At
September 30, 2001, approximately 78% of the net aggregate reserve (i.e.,
approximately $339 million) is carried in a bulk reserve and includes unresolved
as well as incurred but not reported environmental claims for which the Company
has not received any specific claims. The balance, approximately 22% of the net
environmental loss reserve (i.e., approximately $93 million), consists of case
reserves for resolved claims.
In general, the Company posts case reserves for pending asbestos claims within
approximately 30 business days of receipt of such claims. At September 30, 2001,
approximately 82% (i.e., approximately $659 million) of the net asbestos reserve
represents incurred but not reported losses for which the Company has not
received any specific claims. The balance, approximately 18% of the net
aggregate reserve (i.e., approximately $149 million), is for pending asbestos
claims.
It is difficult to estimate the reserves for environmental and asbestos-related
claims due to the vagaries of court coverage decisions, plaintiffs' expanded
theories of liability, the risks inherent in major litigation, and other
uncertainties. Conventional actuarial techniques are not used to estimate such
reserves.
The reserves carried for environmental and asbestos claims at September 30, 2001
are the Company's best estimate of ultimate claims and claim adjustment expenses
based upon known facts and current law. However, the uncertainties surrounding
the final resolution of these claims continue. These include, without
limitation, any impact from the bankruptcy protection sought by various asbestos
producers, a further increase or decrease in asbestos and environmental claims
which cannot now be anticipated as well as the role of any umbrella or excess
policies issued by the Company for such claims, the resolution or adjudication
of certain disputes pertaining to asbestos non-products/operations claims in a
manner inconsistent with the Company's previous assessment of such claims as
well as unanticipated developments pertaining to the Company's ability to
recover reinsurance for environmental and asbestos claims.
26
<Page>
It is also not possible to predict changes in the legal and legislative
environment and their impact on the future development of asbestos and
environmental claims. Such development will be affected by future court
decisions and interpretations, as well as changes in legislation applicable to
such claims. Because of these future unknowns, and the uncertainties set forth
above, additional liabilities may arise for amounts in excess of the current
reserves. These additional amounts, or a range of these additional amounts,
cannot now be reasonably estimated, and could result in a liability exceeding
reserves by an amount that would be material to the Company's operating results
in a future period. However, in the opinion of the Company's management, it is
not likely that these claims will have a material adverse effect on its
financial condition or liquidity. This paragraph contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on page 32.
COMMERCIAL PORTFOLIO REVIEW
Commercial loans are identified as impaired and placed on a nonaccrual basis
when it is determined that the payment of interest or principal is doubtful of
collection or when interest or principal is past due for 90 days or more, except
when the loan is well-secured and in the process of collection. Impaired
commercial loans are written down to the extent that principal is judged to be
uncollectible. Impaired collateral-dependent loans are written down to the lower
of cost or collateral value. The following table summarizes commercial
cash-basis loans at period-end and net credit losses for the three months ended.
<Table>
<Caption>
SEPT. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
IN MILLIONS OF DOLLARS 2001 2001 2001 2000 2000
- -------------------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
Corporate and Investment Bank $ 1,225 $ 1,149 $ 1,149 $ 776 $ 648
EM Corporate & GTS 1,563 1,279 1,137 1,069 1,091
Mexico 600 164 68 79 80
---------------------------------------------------------
Total Global Corporate 3,388 2,592 2,354 1,924 1,819
Insurance and Investment Activities 32 37 63 46 44
---------------------------------------------------------
TOTAL COMMERCIAL CASH-BASIS LOANS (1) $ 3,420 $ 2,629 $ 2,417 $ 1,970 $ 1,863
- ----------------------------------------=========================================================
NET CREDIT LOSSES
Corporate and Investment Bank $ 244 $ 230 $ 229 $ 201 $ 104
EM Corporate & GTS 32 53 40 32 18
Mexico 7 4 8 5 5
---------------------------------------------------------
Total Global Corporate $ 283 $ 287 $ 277 $ 238 $ 127
Insurance and Investment Activities -- -- -- -- 7
---------------------------------------------------------
TOTAL NET CREDIT LOSSES $ 283 $ 287 $ 277 $ 238 $ 134
- ----------------------------------------=========================================================
</Table>
(1) Prior period cash-basis loans were restated to change the policy of the
Associates Commercial Leasing business for suspending accrual of interest
on past due loans to conform with other leasing businesses in the
Corporate & Investment Bank. The prior policy of placing loans that are 60
days or more past due into cash-basis, was changed to 90 days or more past
due.
- --------------------------------------------------------------------------------
Total commercial cash-basis loans were $3.420 billion at September 30, 2001,
$2.629 billion at June 30, 2001, $2.417 billion at March 31, 2001, $1.970
billion at December 31, 2000, and $1.863 billion at September 30, 2000.
Cash-basis loans in the Corporate and Investment Bank were $1.225 billion at
September 30, 2001, $1.149 billion at June 30, 2001 and March 31, 2001, $776
million at December 31, 2000, and $648 million at September 30, 2000, reflecting
increases in the transportation portfolio, asbestos-related bankruptcies, and
borrowers in the retail and telecommunication industries.
EM Corporate & GTS cash-basis loans were $1.563 billion at September 30, 2001,
$1.279 billion at June 30, 2001, $1.137 billion at March 31, 2001, $1.069
billion at December 31, 2000, and $1.091 billion at September 30, 2000,
primarily reflecting increases in Argentina, Australia, and New Zealand. Mexico
cash basis loans were $600 million at September 30, 2001, $164 million at June
30, 2001, $68 million at March 31, 2001, $79 million at December 31, 2000, and
$80 million at September 30, 2000. The increase is primarily due to the
acquisition of Banamex.
Other Repossessed Assets at September 30, 2001 were $479 million, up $187
million from December 31, 2000 and up $232 million from September 30, 2000. The
increase in Other Repossessed Assets was primarily due to increased repossessed
transportation equipment in CitiCapital and the acquisition of Banamex.
Total commercial loans outstanding at September 30, 2001 were $157 billion
compared to $138 billion at December 31, 2000.
Total commercial net credit losses of $283 million in the third quarter of 2001
increased $149 million compared to the third quarter of 2000, primarily
reflecting increases in the Corporate and Investment Bank and EM Corporate &
GTS. Corporate and Investment Bank net credit losses of $244 million in the 2001
third quarter were up $140 million compared to the third quarter of 2000,
primarily reflecting higher net credit losses in the transportation portfolio
and asbestos-related bankruptcies combined with higher net credit losses in the
retail, telecommunication, and airline industries. EM Corporate & GTS net credit
losses of $32 million in the 2001 third quarter were up $14 million from the
respective 2000 period,
27
<Page>
primarily due to higher net credit losses in Australia, Malaysia and Argentina.
Mexico net credit losses of $7 million in the 2001 third quarter were up $2
million from the respective 2000 period, primarily reflecting the acquisitions
of Banamex and EAB. For a further discussion of trends by business, see the
business discussions on pages 16 and 21 - 24.
Citigroup's allowance for credit losses of $9.918 billion is available to absorb
probable credit losses inherent in the entire portfolio. For analytical purposes
only, the portion of Citigroup's allowance for credit losses attributed to the
commercial portfolio was $4.679 billion at September 30, 2001 compared to $4.003
billion at June 30, 2001, $4.001 billion at March 31, 2001, $4.015 billion at
December 31, 2000, and $3.795 billion at September 30, 2000. The increase in the
allowance at December 31, 2000 primarily reflects additional provisions related
to the transportation portfolio. The increase in the allowance at September 30,
2001 primarily reflects the acquisitions of Banamex and EAB. Losses on
commercial lending activities and the level of cash-basis loans can vary widely
with respect to timing and amount, particularly within any narrowly-defined
business or loan type. Commercial net credit losses and cash-basis loans may
increase from 2001 third quarter levels due to the impact of the September 11th
terrorist attack on a weakening global economy. This statement is a
forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 32.
<Table>
<Caption>
SEPT. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
IN BILLIONS OF DOLLARS 2001 2001 2001 2000 2000
- ---------------------------------------------------------------------------------------------------------
COMMERCIAL ALLOWANCE FOR CREDIT LOSSES $ 4.679 $ 4.003 $ 4.001 $ 4.015 $ 3.795
As a percentage of total commercial loans 2.98% 2.79% 2.75% 2.90% 2.72%
- --------------------------------------------=============================================================
</Table>
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ----------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ----------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $888 $ 808 10 $ 2,635 $2,394 10
Adjusted operating expenses (2) 562 532 6 1,694 1,543 10
Provision for benefits, claims
and credit losses 32 (3) NM 62 22 NM
------------------ -----------------
CORE INCOME BEFORE TAXES
AND MINORITY INTEREST 294 279 5 879 829 6
Income taxes 108 107 1 333 318 5
Minority interest, after-tax -- -- -- 1 -- NM
------------------ -----------------
CORE INCOME 186 172 8 545 511 7
Restructuring-related items, after-tax -- -- -- (7) 1 NM
------------------ -----------------
INCOME $186 $ 172 8 $ 538 $ 512 5
- ---------------------------------------=================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
Global Investment Management and Private Banking is composed of Citigroup Asset
Management and The Citigroup Private Bank. These businesses offer a broad range
of asset management products and services including mutual funds, closed-end
funds, managed accounts, unit investment trusts, variable annuities, pension
administration, and personalized wealth management services distributed to
institutional, high net worth, and retail clients.
Global Investment Management and Private Banking core income of $186 million in
the 2001 third quarter and $545 million in the 2001 nine months was up $14
million or 8% and $34 million or 7% from the year-ago periods. The increase in
core income reflects growth in The Citigroup Private Bank, primarily due to
increased customer activity including higher loan volumes and spreads, as well
as the impact of lower interest rates.
Income of $538 million in the 2001 nine months included a restructuring-related
charge of $7 million ($13 million pretax). Income of $512 million in the 2000
nine months included a restructuring-related credit of $1 million ($2 million
pretax). See Note 9 of Notes to Consolidated Financial Statements for a
discussion of the restructuring-related items.
28
<Page>
CITIGROUP ASSET MANAGEMENT
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % -------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- --------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $523 $471 11 $ 1,505 $1,355 11
Adjusted operating expenses (2) 341 317 8 1,012 903 12
Provision for benefits and claims (3) 28 -- NM 55 -- NM
------------------ --------------------
CORE INCOME BEFORE TAXES
AND MINORITY INTEREST 154 154 -- 438 452 (3)
Income taxes 61 61 -- 175 179 (2)
Minority interest, after-tax -- -- -- 1 -- NM
------------------ --------------------
CORE INCOME 93 93 -- 262 273 (4)
Restructuring-related items, after-tax -- -- -- (3) -- NM
------------------ --------------------
INCOME $ 93 $ 93 -- $ 259 $ 273 (5)
- -------------------------------------------=============================================================
Assets under management
(IN BILLIONS OF DOLLARS) (4) (5) $401 $395 2 $ 401 $ 395 2
- -------------------------------------------=============================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
(3) In the fourth quarter of 2000, a year-to-date reclassification occurred
which increased both revenues and provision for benefits and claims.
(4) Includes $29 billion and $31 billion in 2001 and 2000, respectively, for
The Citigroup Private Bank clients.
(5) Includes Unit Investment Trusts held in client accounts of $7 billion and
$11 billion and Emerging Markets Pension Administration assets under
management of $6 billion and $4 billion in 2001 and 2000, respectively.
NM Not meaningful
- --------------------------------------------------------------------------------
Citigroup Asset Management comprises the substantial resources that are
available through its three primary asset management business platforms -- Smith
Barney Asset Management, Salomon Brothers Asset Management, and Citibank Asset
Management -- along with the pension administration businesses of Global
Retirement Services. These businesses offer institutional, high net worth, and
retail clients a broad range of investment alternatives from investment centers
located around the world. Products and services offered include mutual funds,
closed-end funds, separately managed accounts, unit investment trusts, variable
annuities (through affiliated and third party insurance companies), and pension
administration.
Core income of $93 million in the 2001 third quarter was flat to the prior-year
quarter, reflecting the impact of the Generar acquisition in Argentina and
growth in asset-based and performance fee revenues, offset by increased
expenses, the impact of negative market action on assets under management, and
the transfer of assets to the SSB Bank Deposit Program. The Generar acquisition,
consisting of pension fund, retirement services/annuities, and death and
disability insurance companies, was effective January 1, 2001. Core income of
$262 million in the 2001 nine months was down $11 million to the prior-year
period, reflecting the growth in expenses and the impact of the SSB Bank Deposit
Program, partially offset by the impact of the Generar acquisition and growth in
asset-based and performance fee revenues.
Assets under management for the 2001 third quarter rose 2% from the year-ago
quarter to $401 billion, reflecting strong net flows that were partially offset
by negative market activity and the transfer of retail Money Market assets to
the SSB Bank Deposit Program. Institutional client assets were $180 billion at
September 30, 2001, up 19% compared to the year-ago quarter aided by
cross-selling efforts, including $9.1 billion in client assets raised from
Global Corporate customers. Retail client assets were $215 billion, down 11%
compared to a year ago, primarily reflecting lower market values and the impact
of the SSB Bank Deposit Program on money market funds, partially offset by
strong net flows.
Sales of proprietary mutual funds and managed account products at SSB were $6.3
billion in the third quarter of 2001, up 20% from the 2000 third quarter,
primarily driven by growth in managed account products. These sales represented
59% of SSB's retail channel sales. Sales of mutual and money funds through
Global Consumer's banking network were $3.2 billion in the 2001 third quarter,
representing 58% of total sales, including $1.9 billion in International and
$1.3 billion in the U.S. Primerica sold $495 million of proprietary U.S. mutual
and money funds, representing 71% of Primerica's total sales in the 2001 third
quarter compared to 53% in the year-ago quarter.
Revenues, net of interest expense, of $523 million in the 2001 third quarter
increased $52 million or 11% from the 2000 third quarter, primarily due to the
Generar acquisition, increased asset-based and performance fees, and the impact
of a benefits and claims reclassification for Siembra, partially offset by the
impact of lower market values of assets under management and the transfer of
assets to the SSB Bank Deposit Program. Revenues, net of interest expense, of
$1.505 billion in the 2001 nine-month period increased $150 million or 11% from
the 2000 nine months, primarily due to the Generar acquisition and growth in
asset-based and performance fee revenues, partially offset by the impact of
lower market values of assets under management and the transfer of assets to the
SSB Bank Deposit Program. For the nine-month comparison, revenues from the
acquisitions of Siembra and Colfondos in the Global Retirement Services business
also contributed to the increase.
29
<Page>
Adjusted operating expenses of $341 million in the 2001 third quarter increased
$24 million or 8% over the 2000 period, primarily reflecting the Generar
acquisition. Operating expenses of $1.012 billion in the 2001 nine-month period
increased $109 million or 12% from the 2000 period, primarily reflecting
increased compensation and benefits, and the Generar acquisition. Other
acquisitions in the Global Retirement Services business also contributed to the
increase for the nine-month comparison.
THE CITIGROUP PRIVATE BANK
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % --------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- ----------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $365 $ 337 8 $ 1,130 $1,039 9
Adjusted operating expenses (2) 221 215 3 682 640 7
Provision (benefit) for credit losses 4 (3) NM 7 22 (68)
------------------ ---------------------
CORE INCOME BEFORE TAXES 140 125 12 441 377 17
Income taxes 47 46 2 158 139 14
------------------ ---------------------
CORE INCOME 93 79 18 283 238 19
Restructuring-related items, after-tax -- -- -- (4) 1 NM
------------------ ---------------------
INCOME $ 93 $ 79 18 $ 279 $ 239 17
- ---------------------------------------------===================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 26 $ 26 -- $ 26 $ 25 4
Return on assets 1.42% 1.21% 1.43% 1.28%
- ----------------------------------------------------------------------------------------------------------------
Client business volumes under
management (IN BILLIONS OF DOLLARS) 149 154 (3) 149 154 (3)
- ---------------------------------------------===================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
- --------------------------------------------------------------------------------
The Citigroup Private Bank provides personalized wealth management services for
high net worth clients around the world. The Citigroup Private Bank core income
was $93 million in the 2001 third quarter and $283 million in the 2001 nine
months, up $14 million or 18% and $45 million or 19% from the 2000 periods,
primarily reflecting increased customer activity across most products. Income of
$279 million for the 2001 nine months included a restructuring-related charge of
$4 million ($7 million pretax). Income of $239 million in the 2000 nine months
included a restructuring-related credit of $1 million ($2 million pretax).
Client business volumes under management, which include custody accounts, client
assets under fee-based management, deposits, and loans, were $149 billion at the
end of the 2001 third quarter, down $5 billion or 3% from $154 billion at the
end of the year-ago quarter. The decrease primarily reflects declines in CEEMEA
and Europe, partially offset by growth in Asia.
Revenues, net of interest expense, were $365 million in the 2001 third quarter
and $1.130 billion in the nine months, up $28 million or 8% and $91 million or
9% from the 2000 periods. Revenue growth was driven by the impact of lower
interest rates, increased fee revenue, and higher loan volumes and spreads. In
the 2001 third quarter and nine months, the increase in revenues reflects
continued favorable trends in the U.S., up $15 million or 12% and $41 million or
11%, respectively, from the comparable 2000 periods. International revenues
increased $13 million or 6% from the 2000 third quarter and $50 million or 7%
from the 2000 nine months, primarily due to growth in Asia and Japan.
Adjusted operating expenses of $221 million and $682 million in the 2001 third
quarter and nine months were up $6 million or 3% and $42 million or 7% from the
respective 2000 periods, primarily reflecting higher levels of revenues and
investment spending in front-end sales and servicing capabilities.
The provision for credit losses was $4 million in the 2001 third quarter and $7
million in the 2001 nine months, up $7 million from the 2000 third quarter and
down $15 million from the 2000 nine-month period. The 2001 nine-month decline
from the 2000 period was primarily related to a provision taken in the 2000
periods for a loan in Europe. Loans 90 days or more past due at the 2001
quarter-end were $78 million or 0.31% of total loans outstanding, compared with
$90 million or 0.36% at the end of the 2000 third quarter.
30
<Page>
CORPORATE/OTHER
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % ------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- -----------------------------------------------------------------------------------------------------------------
ADJUSTED REVENUES,
NET OF INTEREST EXPENSE (2) ($105) ($169) 38 ($397) ($ 417) 5
Adjusted operating expenses (2) 158 182 (13) 481 622 (23)
Adjusted provision (credit) for benefits,
claims, and credit losses (2) 2 -- NM 1 (6) NM
------------------ -------------------
CORE LOSS BEFORE TAX BENEFITS
AND MINORITY INTEREST (265) (351) 25 (879) (1,033) 15
Income tax benefits (111) (108) (3) (312) (358) 13
Minority interest, after-tax 5 -- NM 5 -- NM
------------------ -------------------
CORE LOSS (159) (243) 35 (572) (675) 15
Restructuring-related items, after-tax (3) 3 (26) NM 3 (122) NM
------------------ -------------------
LOSS ($156) ($269) 42 ($569) ($ 797) 29
- ------------------------------------------------=================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes Housing Finance unit charge and restructuring-related items.
(3) The 2000 nine-month period includes a $71 million (after-tax) charge
associated with the discontinuation of the loan origination operations of
the Associates Housing Finance unit.
NM Not meaningful
- --------------------------------------------------------------------------------
Corporate/Other includes net corporate treasury results, corporate staff and
other corporate expenses, certain inter-segment eliminations, and the remainder
of Internet-related development activities not allocated to the individual
businesses.
Core loss of $159 million and $572 million in the 2001 third quarter and nine
months decreased $84 million or 35% and $103 million or 15% over the respective
prior-year periods. The 2001 third quarter results, as compared to the
prior-year third quarter, included lower net treasury and other costs primarily
related to reduced rates, lower employee-related costs, and certain income tax
benefits, partially offset by increases in inter-segment eliminations. The
nine-month 2001 results, as compared to the prior-year nine-month period, also
included lower expenses primarily related to a 2000 first quarter $108 million
pretax expense for the contribution of appreciated venture capital securities to
Citigroup's Foundation, which had minimal impact on Citigroup's earnings after
related tax benefits and investment gains. The decrease in expenses was
partially offset by increased funding costs primarily related with the
Associates acquisition.
INVESTMENT ACTIVITIES
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ % -------------------- %
IN MILLIONS OF DOLLARS 2001 2000(1) Change 2001 2000(1) Change
- --------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE ($164) $ 496 NM $ 429 $ 1,964 (78)
Total operating expenses 26 36 (28) 76 84 (10)
Provision for credit losses -- 7 (100) -- 7 (100)
------------------ --------------------
INCOME (LOSS) BEFORE TAXES
AND MINORITY INTEREST (190) 453 NM 353 1,873 (81)
Income taxes (benefits) (70) 170 NM 103 693 (85)
Minority interest, after-tax -- (1) 100 (1) (9) 89
------------------ --------------------
INCOME (LOSS) ($120) $ 284 NM $ 251 $ 1,189 (79)
- ---------------------------------------------=================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
NM Not meaningful
- --------------------------------------------------------------------------------
Investment Activities comprises Citigroup's venture capital activities, realized
investment gains (losses) related to certain corporate and insurance-related
investments, the results of certain investments in countries that refinanced
debt under the 1989 Brady Plan or plans of a similar nature, and the investment
portfolio related to Banamex.
Losses for the 2001 third quarter of $120 million, as compared to income of $284
million in the 2000 third quarter primarily reflects lower venture capital
results, lower realized gains in the LDC Debt Sales/Refinancing portfolios, and
impairment write-downs in the 2001 third quarter in insurance-related and other
proprietary investments, partially offset by increases in gains in
insurance-related and other proprietary investments. For the 2001 nine months,
income of $251 million declined $938 million or 79% from the 2000 nine months,
primarily reflecting lower venture capital results and impairment write-downs in
insurance-related and other proprietary investments, partially offset by higher
gains in insurance-related and other proprietary investments. The 2000 first
quarter included losses in insurance-related investments from repositioning
activities designed to improve yields and maturity profiles, and write-
31
<Page>
downs in the refinancing portfolio. Investment Activities results may fluctuate
in the future as a result of market and asset-specific factors. This statement
is a forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" below.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements. Forward-looking statements are
typically identified by words or phrases such as "believe," "expect,"
"anticipate," "intend," "estimate," "may increase," "may fluctuate," and similar
expressions or future or conditional verbs such as "will," "should," "would,"
and "could." These forward-looking statements involve risks and uncertainties
including, but not limited to, global political conditions, sovereign or
regulatory actions, the impact of the September 11th attack, levels of activity
in the global capital markets, portfolio growth, the credit performance of the
portfolios, including bankruptcies, and seasonal factors; weakening global
economic conditions, Argentina's difficulty in meeting its debt obligations, the
performance of global financial markets, prevailing inflation and interest
rates, and the rising cost of medical care; the effects of competitors' pricing
policies; the impact of proposed rules that would govern the regulatory
treatment of merchant banking investments and certain similar equity investments
in nonfinancial companies; possible amendments to, and interpretations of,
risk-based capital guidelines and reporting instructions; the resolution of
legal proceedings and related matters; insurance losses and related insurance
recoverables, the actual amount of liabilities associated with certain
environmental and asbestos-related insurance claims, the role of any umbrella or
excess policies issued by the Company for such claims, the Company's ability to
recover reinsurance for such claims, and any impact from the bankruptcy
protection sought by various asbestos producers; and the Company's success in
managing the costs associated with the expansion of existing distribution
channels and developing new ones, and in realizing increased revenues from such
distribution channels, including cross-selling initiatives and electronic
commerce-based efforts.
MANAGING GLOBAL RISK
The Citigroup Risk Management framework recognizes the wide range and diversity
of global business activities by balancing strong corporate oversight with
defined independent risk management functions at the business level. The
Citigroup Risk Management Framework is described in detail in Citigroup's 2000
Annual Report and Form 10-K.
THE CREDIT RISK MANAGEMENT PROCESS
The credit risk management process at Citigroup relies on corporate-wide
standards to ensure consistency and integrity, with business-specific policies
and practices to ensure applicability and ownership. Citigroup's credit risk
management process is described in detail in Citigroup's 2000 Annual Report and
Form 10-K.
THE MARKET RISK MANAGEMENT PROCESS
Market risk encompasses liquidity risk and price risk, both of which arise in
the normal course of business of a global financial intermediary. Liquidity risk
is the risk that some entity, in some location, and in some currency, may be
unable to meet a financial commitment to a customer, creditor, or investor when
due. Price risk is the risk to earnings that arises from changes in interest
rates, foreign exchange rates, equity and commodity prices, and in their implied
volatilities. Price risk arises in Non-Trading Portfolios as well as in Trading
Portfolios.
Market risk at Citigroup is managed through corporate-wide standards and
business-specific policies and procedures which are described more fully in
Citigroup's 2000 Annual Report and Form 10-K.
NON-TRADING PORTFOLIOS
Price risk in non-trading portfolios is measured predominantly through
Earnings-at-Risk and Factor Sensitivity techniques. These measurement techniques
are supplemented with additional tools, including stress testing and
cost-to-close analysis.
Business units manage the potential earnings effect of interest rate movements
by managing the asset and liability mix, either directly or through the use of
derivative financial products. These include interest rate swaps and other
derivative instruments which are either designated and effective as hedges or
designated and effective in modifying the interest rate characteristics of
specified assets or liabilities. The utilization of derivatives is managed in
response to changing market conditions as well as to changes in the
characteristics and mix of the related assets and liabilities. Citigroup does
not utilize instruments with leverage features in connection with its
non-trading risk management activities.
Earnings-at-Risk is the primary method for measuring price risk in Citigroup's
non-trading portfolios (excluding the Travelers Insurance Companies).
Earnings-at-Risk measures the pretax earnings impact of a specified upward and
downward shift in the yield curve for the appropriate currency. Earnings-at-Risk
is calculated separately for each currency and reflects the repricing gaps in
the
32
<Page>
position as well as option positions, both explicit and embedded. U.S. dollar
exposures are calculated by multiplying the gap between interest-sensitive
items, including assets, liabilities, derivative instruments, and other
off-balance sheet instruments, by 100 basis points. Non-U.S. dollar exposures
are calculated utilizing the statistical equivalent of a 100 basis point change
in interest rates and assumes no correlation between exposures in different
currencies.
Citigroup's primary non-trading price risk exposure is to movements in U.S.
dollar interest rates. Citigroup also has Earnings-at-Risk in various other
currencies.
The following table illustrates the impact to Citigroup pretax earnings from a
100 basis point increase or decrease in the U.S. dollar yield curve. As of
September 30, 2001, a 100 basis point increase in U.S. dollar interest rates
would have a potential negative impact on pretax earnings within the next twelve
months of $337 million and the negative impact ranged from $172 million to $337
million at each month-end during the 2001 third quarter. A 100 basis point
decrease in U.S. dollar interest rates would have a potential positive impact on
pretax earnings over the next 12 months of $352 million and the positive impact
ranged from $235 million to $352 million at each month-end during the 2001 third
quarter. The potential impact on pretax earnings for periods beyond the first 12
months was an increase of $941 million from a 100 basis point increase in U.S.
dollar interest rates and a decrease of $1.175 billion from a 100 basis point
decrease in U.S. dollar interest rates. The change in Earnings-at-Risk from the
prior year and from the prior year-end reflects the growth in Citigroup's fixed
funding, the reduction in the use of derivatives in managing our risk portfolio,
the cancellation of receive fixed swaps, as well as the change in mortgage
prepayment characteristics in our portfolio, offset by the acquisition of
Banamex and the change in the asset/liability mix to reflect Citigroup's current
view of interest rates.
As of September 30, 2001, the statistical equivalent of a 100 basis point
increase in non-U.S. dollar interest rates would have a potential positive
impact on Citigroup's pretax earnings over the next 12 months of $92 million and
ranged from a negative impact of $313 million to a positive impact of $92
million at each month-end during the 2001 third quarter. The statistical
equivalent of a 100 basis point decrease in non-U.S. dollar interest rates would
have a potential negative impact on Citigroup's pretax earnings over the next 12
months of $89 million and ranged from a negative impact of $89 million to a
positive impact of $316 million at each month-end during the 2001 third quarter.
The potential impact on pretax earnings for periods beyond the first 12 months
was a decrease of $1.015 billion for the statistical equivalent of a 100 basis
point increase in non-U.S. dollar interest rates and an increase of $1.031
billion for the statistical equivalent of a 100 basis point decrease in non-U.S.
dollar interest rates. The sensitivity to rising rates in the non-U.S. dollar
Earnings-at-Risk from the prior year and from the prior year-end reflects the
change in the use of derivatives in managing the risk portfolio, the acquisition
of Banamex and the change in the asset/liability mix to reflect Citigroup's
current view of interest rates.
CITIGROUP EARNINGS-AT-RISK (IMPACT ON PRETAX EARNINGS) (1) (2)
<Table>
<Caption>
IN MILLIONS OF SEPTEMBER 30, 2001 December 31, 2000
DOLLARS U.S. DOLLAR NON-U.S. DOLLAR(3)(4) U.S. Dollar Non-U.S. Dollar
-------------------- -------------------- -------------------- --------------------
INCREASE DECREASE INCREASE DECREASE Increase Decrease Increase Decrease
--------------------------------------------------------------------------------------------
Twelve months
And less ($ 337) $ 352 $ 92 ($ 89) ($ 243) $ 270 ($ 187) $ 189
Thereafter 941 (1,175) (1,015) 1,031 778 (883) (98) 115
--------------------------------------------------------------------------------------------
Total $ 604 ($ 823) ($ 923) $ 942 $ 535 ($ 613) ($ 285) $ 304
- ----------------============================================================================================
<Caption>
IN MILLIONS OF September 30, 2000
DOLLARS U.S. Dollar Non-U.S. Dollar
-------------------- --------------------
Increase Decrease Increase Decrease
--------------------------------------------
Twelve months
And less ($ 327) $ 345 ($ 207) $ 210
Thereafter 67 (132) (161) 178
--------------------------------------------
Total ($ 260) ($ 213) ($ 368) $ 388
- ----------------============================================
</Table>
(1) Excludes the Travelers Insurance Companies (see below).
(2) Prior-year information has been restated to reflect reorganizations and a
change in assumptions (specifically revising the measurement of
Earnings-at-Risk from a two standard deviation change in interest rates to
a 100 basis point change). This change was made to reflect a more
consistent view for managing price risk throughout the organization.
(3) Primarily results from Earnings-at-Risk in the Japanese Yen, the Euro, and
the Mexican Peso.
(4) The impact of the Banamex acquisition on Earnings-at-Risk is included in
the non-U.S. dollar Increase/Decrease totals for September 30, 2001 only
and was ($253) million and $253 million, respectively.
- --------------------------------------------------------------------------------
TRAVELERS INSURANCE COMPANIES
The table below reflects the estimated decrease in the fair value of financial
instruments held in the Travelers Insurance Companies as a result of a 100 basis
point increase in interest rates.
<Table>
<Caption>
SEPTEMBER 30, December 31, September 30,
IN MILLIONS OF DOLLARS 2001 2000 2000
- -------------------------------------------------------------------------------------------------
Assets
Investments $3,116 $2,715 $2,695
- -------------------------------------------------------------------------------------------------
Liabilities
Long-term debt $ 28 $ 28 $ 28
Contractholder funds 741 542 547
Redeemable securities of subsidiary trusts 63 44 94
- ---------------------------------------------------==============================================
</Table>
33
<Page>
A significant portion of Travelers Insurance Companies liabilities (e.g.,
insurance policy and claims reserves) are not financial instruments and are
excluded from the above sensitivity analysis. Corresponding changes in fair
value of these accounts, based on the present value of estimated cash flows,
would materially mitigate the impact of the net decrease in values implied
above. The analysis reflects the estimated gross change in value resulting from
a change in interest rates only and is not comparable to the Earnings-at-Risk
used for the Citigroup non-trading portfolios described above or the
Value-at-Risk used for the trading portfolios described below.
TRADING PORTFOLIOS
Price risk in trading portfolios is measured through a complementary set of
tools, including Factor Sensitivities, Value-at-Risk, and Stress Testing. Each
trading portfolio has its own market risk limit framework, encompassing these
measures and other controls, including permitted product lists and a new product
approval process for complex products, established by the business and approved
by independent market risk management.
Factor Sensitivities are defined as the change in the value of a position for a
defined change in a market risk factor (e.g., the change in the value of a
Treasury bill for a 1 basis point change in interest rates). It is the
responsibility of independent market risk management to ensure that factor
sensitivities are calculated, monitored, and, in some cases, limited for all
relevant risks taken in a trading portfolio. Value-at-Risk estimates the
potential decline in the value of a position or a portfolio, under normal market
conditions, over a one-day holding period, at a 99% confidence level. The
Value-at-Risk method incorporates the Factor Sensitivities of the trading
portfolio with the volatilities and correlations of those factors.
Stress Testing is performed on trading portfolios on a regular basis to estimate
the impact of extreme market movements. Stress Testing is performed on
individual trading portfolios, as well as on aggregations of portfolios and
businesses, as appropriate. It is the responsibility of independent market risk
management, in conjunction with the businesses, to develop stress scenarios,
review the output of periodic stress testing exercises, and utilize the
information to make judgments as to the ongoing appropriateness of exposure
levels and limits.
New and/or complex products in trading portfolios are required to be reviewed
and approved by the Global Corporate Capital Markets Approval Committee (CMAC).
The CMAC is responsible for ensuring that all relevant risks are identified and
understood and can be measured, managed, and reported in accordance with
applicable Global Corporate policies and practices. The CMAC is made up of
senior representatives from market and credit risk management, legal,
accounting, operations, and other support areas, as required.
The level of price risk exposure at any given point in time depends on the
market environment and expectations of future price and market movements, and
will vary from period to period.
For Citigroup's major trading centers, the aggregate pretax Value-at-Risk in the
trading portfolios was $64 million at September 30, 2001. Daily exposures
averaged $72 million during the 2001 third quarter and ranged from $63 million
to $84 million.
The following table summarizes Value-at-Risk in the trading portfolios as of
September 30, 2001 and December 31, 2000, along with the averages.
<Table>
<Caption>
2001 Full
THIRD Year
SEPTEMBER 30, QUARTER December 30, 2000
IN MILLIONS OF DOLLARS 2001 AVERAGE 2000 Average(1)
- -------------------------------------------------------------------------------------------
Interest rate $ 54 $ 58 $ 53 $ 43
Foreign exchange 10 12 11 10
Equity 14 13 24 20
All other (primarily commodity) 15 21 15 14
Covariance adjustment (29) (32) (39) (35)
-------------------------------------------------------
Total $ 64 $ 72 $ 64 $ 52
- ------------------------------------=======================================================
</Table>
(1) Prior-year information has been restated from that previously presented to
reflect reorganizations and a change in assumptions made to reflect a more
consistent view for managing price risk throughout the organization.
- --------------------------------------------------------------------------------
34
<Page>
The table below provides the range of Value-at-Risk in the trading portfolios
that was experienced during the third quarter of 2001 and all of 2000.
<Table>
<Caption>
2001 2000(1)
---------------------------------------
IN MILLIONS OF DOLLARS LOW HIGH Low High
- -------------------------------------------------------------------------------
Interest rate $51 $71 $36 $55
Foreign exchange 6 17 6 19
Equity 9 19 11 47
All other (primarily commodity) 14 26 6 30
- ----------------------------------------=======================================
</Table>
(1) Prior-year information has been restated from that previously presented to
reflect reorganizations and a change in assumptions made to reflect a more
consistent view for managing price risk throughout the organization.
- --------------------------------------------------------------------------------
MANAGEMENT OF CROSS-BORDER RISK
Cross-border risk is the risk that Citigroup will be unable to obtain payment
from customers on their contractual obligations as a result of actions taken by
foreign governments such as exchange controls, debt moratoria, and restrictions
on the remittance of funds. Citigroup manages cross-border risk as part of the
risk management framework described in Citigroup's 2000 Annual Report and Form
10-K.
Except as described below for cross-border resale agreements and the netting of
certain long and short securities positions, the following table presents total
cross-border outstandings and commitments on a regulatory basis in accordance
with Federal Financial Institutions Examination Council (FFIEC) guidelines. In
regulatory reports under FFIEC guidelines, cross-border resale agreements are
presented based on the domicile of the issuer of the securities that are held as
collateral. However, for purposes of the following table, cross-border resale
agreements are presented based on the domicile of the counterparty because the
counterparty has the legal obligation for repayment. Similarly, under FFIEC
guidelines, long securities positions are required to be reported on a gross
basis. However, for purposes of the following table, certain long and short
securities positions are presented on a net basis consistent with internal
cross-border risk management policies, reflecting a reduction of risk from
offsetting positions.
Total cross-border outstandings include cross-border claims on third parties as
well as investments in and funding of local franchises. Countries with FFIEC
outstandings greater than 0.75% of Citigroup assets at September 30, 2001 and
December 31, 2000 include:
<Table>
<Caption>
SEPTEMBER 30, 2001 December 31, 2000
- ------------------------------------------------------------------------------------------------------- ----------------------
CROSS-BORDER CLAIMS ON THIRD PARTIES
----------------------------------------------------- INVESTMENTS
IN AND
TRADING AND CROSS- FUNDING OF TOTAL Total
IN BILLIONS OF SHORT-TERM BORDER RESALE LOCAL CROSS-BORDER COMMIT- Cross-Border Commit-
DOLLARS CLAIMS(1) AGREEMENTS ALL OTHER TOTAL FRANCHISES OUTSTANDINGS MENTS(2) Outstandings ments(2)
- ------------------------------------------------------------------------------------------------------- -----------------------
Germany $7.5 $4.3 $1.3 $13.1 $2.0 $15.1 $4.7 $12.4 $7.1
France 6.1 5.1 1.7 12.9 0.4 13.3 8.4 13.4 8.4
United Kingdom 4.6 5.0 3.3 12.9 -- 12.9 16.3 10.9 15.4
Mexico (3) 4.5 0.1 5.0 9.6 3.3 12.9 0.8 3.9 1.7
Japan 2.6 3.7 2.2 8.5 3.5 12.0 0.5 7.4 0.8
Italy 6.7 1.6 1.5 9.8 1.7 11.5 4.9 9.9 5.7
Brazil 3.1 -- 2.9 6.0 4.7 10.7 0.3 8.1 0.2
Netherlands 5.4 1.9 1.6 8.9 -- 8.9 2.6 10.6 1.9
Canada 3.2 0.2 2.7 6.1 2.4 8.5 4.1 8.9 5.0
- -----------------====================================================================================== =======================
</Table>
(1) Trading and short-term claims include cross-border debt and equity
securities held in the trading account, trade finance receivables, net
revaluation gains on foreign exchange and derivative contracts, and other
claims with a maturity of less than one year.
(2) Commitments (not included in total cross-border outstandings) include
legally binding cross-border letters of credit and other commitments and
contingencies as defined by the FFIEC.
(3) Increase from December 31, 2000 primarily represents inclusion of
Banamex's Mexican exposure.
- --------------------------------------------------------------------------------
Total cross-border outstandings for September 30, 2001 under FFIEC guidelines,
including cross-border resale agreements based on the domicile of the issuer of
the securities that are held as collateral and long securities positions
reported on a gross basis, amounted to $19.3 billion for Germany, $14.5 billion
for France, $9.8 billion for the United Kingdom, $14.5 billion for Mexico, $14.0
billion for Japan, $12.8 billion for Italy, $12.2 billion for Brazil, $8.8
billion for the Netherlands, and $9.0 billion for Canada.
Total cross-border outstandings for December 31, 2000 under FFIEC guidelines,
including cross-border resale agreements based on the domicile of the issuer of
the securities that are held as collateral and long securities positions
reported on a gross basis, amounted to $16.8 billion for Germany, $13.5 billion
for France, $9.6 billion for the United Kingdom, $4.7 billion for Mexico, $9.1
billion for Japan, $13.9 billion for Italy, $9.8 billion for Brazil, $7.7
billion for the Netherlands, and $9.0 billion for Canada.
35
<Page>
LIQUIDITY AND CAPITAL RESOURCES
Citigroup services its obligations primarily with dividends and advances that it
receives from subsidiaries. The subsidiaries' dividend paying abilities are
limited by certain covenant restrictions in credit agreements and/or by
regulatory requirements. Citigroup believes it will have sufficient funds to
meet current and future commitments. Each of Citigroup's major operating
subsidiaries finances its operations on a basis consistent with its
capitalization and ratings.
Citigroup, Citicorp and certain of its subsidiaries, TPC, and The Travelers
Insurance Company (TIC) issue commercial paper directly to investors. Citigroup
and Citicorp, both of which are bank holding companies, maintain combined
liquidity reserves of cash, securities, and unused bank lines of credit to
support their combined outstanding commercial paper. TPC and TIC each maintains
unused credit availability under their respective bank lines of credit at least
equal to the amount of outstanding commercial paper.
Citigroup has unutilized revolving credit facilities in the amount of $750
million that expire in 2002. Under these facilities, Citigroup is required to
maintain a certain level of consolidated stockholders' equity (as defined in the
agreements). Citigroup exceeded this requirement by approximately $53.4 billion
at September 30, 2001.
Associates, a subsidiary of Citicorp, has a combination of unutilized bilateral
and syndicated credit facilities of $17.5 billion as of September 30, 2001.
These facilities, which have maturities ranging from 2001 to 2005, are all
guaranteed by Citicorp. CitiFinancial Credit Company (CCC), an indirect
subsidiary of Citicorp, has unutilized revolving credit facilities in the amount
of $3.4 billion that expire in 2002 and are guaranteed by Citicorp. In
connection with the facilities for both Associates and CCC, Citicorp is required
to maintain a certain level of consolidated stockholder's equity (as defined in
the agreements). At September 30, 2001, this requirement was exceeded by
approximately $48.5 billion. Citicorp has also guaranteed various other debt
obligations of Associates and CCC.
Borrowings under bank lines of credit may be at interest rates based on LIBOR,
CD rates, the prime rate, or bids submitted by the banks. Each company pays its
banks' commitment fees for its lines of credit.
Citicorp, Salomon Smith Barney, and some of their nonbank subsidiaries have
credit facilities with Citicorp's subsidiary banks, including Citibank, N.A.
Borrowings under these facilities must be secured in accordance with Section 23A
of the Federal Reserve Act.
CITIGROUP INC. (CITIGROUP)
Citigroup is subject to risk-based capital guidelines issued by the Board of
Governors of the Federal Reserve System (FRB). These guidelines are used to
evaluate capital adequacy based primarily on the perceived credit risk
associated with balance sheet assets, as well as certain off-balance sheet
exposures such as unused loan commitments, letters of credit, and derivative and
foreign exchange contracts. The risk-based capital guidelines are supplemented
by a leverage ratio requirement.
CITIGROUP RATIOS
<Table>
<Caption>
SEPTEMBER 30, June 30, Dec. 31,
2001 2001 2000
- --------------------------------------------------------------------------------
Tier 1 capital 8.20% 8.82% 8.38%
Total capital (Tier 1 and Tier 2) 10.77 11.49 11.23
Leverage (1) 5.65 6.17 5.97
Common stockholders' equity 7.17 7.21 7.14
- ----------------------------------------------==================================
</Table>
(1) Tier 1 capital divided by adjusted average assets.
- --------------------------------------------------------------------------------
Citigroup maintained a strong capital position during the third quarter of 2001.
Total capital (Tier 1 and Tier 2) amounted to $74.1 billion at September 30,
2001, representing 10.77% of net risk-adjusted assets. This compares with $76.2
billion and 11.49% at June 30, 2001 and $73.0 billion and 11.23% at December 31,
2000. Tier 1 capital of $56.4 billion at September 30, 2001 represented 8.20% of
net risk-adjusted assets, compared to $58.5 billion and 8.82% at June 30, 2001
and $54.5 billion and 8.38% at December 31, 2000. Citigroup's leverage ratio was
5.65% at September 30, 2001 compared to 6.17% at June 30, 2001 and 5.97% at
December 31, 2000.
36
<Page>
COMPONENTS OF CAPITAL UNDER REGULATORY GUIDELINES
<Table>
<Caption>
SEPTEMBER 30, June 30, Dec. 31,
IN MILLIONS OF DOLLARS 2001 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------
TIER 1 CAPITAL
Common stockholders' equity $ 76,625 $ 68,765 $ 64,461
Perpetual preferred stock 1,774 1,763 1,745
Mandatorily redeemable securities of subsidiary trusts 7,125 4,575 4,920
Minority interest 743 343 334
Accumulated net (gains) losses on cash flow hedges, net of tax (38) 42 --
Less: Net unrealized gains on securities available for sale (1) (920) (949) (973)
Intangible assets:
Goodwill (2) (23,327) (11,975) (11,972)
Other intangible assets (2) (4,945) (3,556) (3,572)
Net unrealized losses on available-for-sale equity securities, net of tax (1) (218) (87) (68)
50% investment in certain subsidiaries (3) (89) (92) (82)
Other (306) (302) (295)
--------------------------------------------
TOTAL TIER 1 CAPITAL $ 56,424 $ 58,527 $ 54,498
- -----------------------------------------------------------------------------------------------------------------------------
TIER 2 CAPITAL
Allowance for credit losses (4) 8,615 8,299 8,140
Qualifying debt (5) 9,110 9,490 10,492
Less: 50% investment in certain subsidiaries (3) (89) (92) (82)
--------------------------------------------
TOTAL TIER 2 CAPITAL 17,636 17,697 18,550
--------------------------------------------
TOTAL CAPITAL (TIER 1 AND TIER 2) $ 74,060 $ 76,224 $ 73,048
- ---------------------------------------------------------------------------------============================================
NET RISK-ADJUSTED ASSETS (6) $ 687,812 $ 663,235 $ 650,351
- ---------------------------------------------------------------------------------============================================
</Table>
(1) Tier 1 capital excludes unrealized gains and losses on debt securities
available for sale in accordance with regulatory risk-based capital
guidelines. The federal bank regulatory agencies permit institutions to
include in Tier 2 capital up to 45% of pretax net unrealized holding gains
on available-for-sale equity securities with readily determinable fair
values. Institutions are required to deduct from Tier 1 capital net
unrealized holding losses on available-for-sale equity securities with
readily determinable fair values net of tax.
(2) Increase during the third quarter primarily due to the acquisitions of
Banamex and EAB.
(3) Represents investment in certain overseas insurance activities and
unconsolidated banking and finance subsidiaries.
(4) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is
deducted from risk-adjusted assets.
(5) Includes qualifying senior and subordinated debt in an amount not
exceeding 50% of Tier 1 capital, and subordinated capital notes subject to
certain limitations.
(6) Includes risk-weighted credit equivalent amounts, net of applicable
bilateral netting agreements, of $26.7 billion for interest rate,
commodity, and equity derivative contracts and foreign exchange contracts
as of September 30, 2001, compared to $25.0 billion as of June 30, 2001
and $27.7 billion as of December 31, 2000. Market risk-equivalent assets
included in net risk-adjusted assets amounted to $35.8 billion at
September 30, 2001, $45.0 billion at June 30, 2001, and $39.6 billion at
December 31, 2000. Net risk-adjusted assets also includes the effect of
other off-balance sheet exposures such as unused loan commitments and
letters of credit and reflects deductions for intangible assets and any
excess allowance for credit losses.
- --------------------------------------------------------------------------------
Common stockholders' equity increased a net $12.2 billion during the first nine
months of 2001 to $76.6 billion at September 30, 2001, representing 7.17% of
assets, compared to $64.5 billion and 7.14% at year-end 2000. The net increase
in common stockholders' equity during the first nine months of 2001 principally
reflected net income of $10.3 billion, the issuance of shares to effect the
Banamex acquisition of $6.3 billion and issuance of shares pursuant to employee
benefit plans and other activity of $0.6 billion which was partially offset by
treasury stock acquired of $2.7 billion and dividends declared on common and
preferred stock of $2.3 billion. The increase in the common stockholders' equity
ratio during the first nine months of 2001 also reflected the above items,
partially offset by the increase in total assets.
All of the mandatorily redeemable securities of subsidiary trusts (trust
securities) outstanding at September 30, 2001 qualify as Tier 1 capital. The
amount outstanding at September 30, 2001 includes $4.850 billion of
parent-obligated securities and $2.275 billion of subsidiary-obligated
securities.
On October 16, 2001, the Board of Directors of Citigroup granted approval for
the repurchase of an additional $5 billion of Citigroup common stock, continuing
the Company's program of buying back its shares. Under its long-standing
repurchase program, the Company buys back shares in the market from time to
time.
On October 22, 2001, Citigroup announced that on November 21, 2001, it will
redeem for cash all outstanding shares of its 8.40% Cumulative Preferred Stock,
Series K. The redemption price will be $25.00 per depositary share plus accrued
dividends to the date of redemption. As of September 30, 2001, $250 million of
this preferred stock was outstanding.
Citigroup's subsidiary depository institutions are subject to the risk-based
capital guidelines issued by their respective primary federal bank regulatory
agencies, which are generally similar to the FRB's guidelines. At September 30,
2001, all of Citigroup's subsidiary depository institutions were "well
capitalized" under the federal bank regulatory agencies' definitions.
On January 18, 2001, the FRB issued new proposed rules that would govern the
regulatory treatment of merchant banking investments and certain similar equity
investments, including investments made by venture capital subsidiaries, in
nonfinancial
37
<Page>
companies held by bank holding companies. The new proposal generally would
impose a capital charge that would increase in steps as the banking
organization's level of concentration in equity investments increased. An 8
percent Tier 1 capital deduction would apply on covered investments that in the
aggregate represent up to 15 percent of an organization's Tier 1 capital. For
covered investments that aggregate more than 25 percent of the organization's
Tier 1 capital, a top marginal charge of 25 percent would be set. The Company is
monitoring the status and progress of the proposed rule, which, at the present
time, is not expected to have a significant impact on Citigroup. This statement
is a forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 32.
In June 2001, the Basel Committee on Banking Supervision (Committee) announced
that it would issue a new consultative package on the new Basel Capital Accord
(new Accord) in early 2002. The new Accord, which will apply to all
"significant" banks, as well as to holding companies that are parents of banking
groups, is intended to be finalized by year-end 2002, with implementation of the
new framework beginning in 2005. The Company is monitoring the status and
progress of the proposed rule.
Additionally, from time-to-time, the FRB and the FFIEC propose amendments to,
and issue interpretations of, risk-based capital guidelines and reporting
instructions. Such proposals or interpretations could, if implemented in the
future, affect reported capital ratios and net risk-adjusted assets. This
statement is a forward-looking statement within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 32.
CITICORP
Citicorp manages liquidity through a well-defined process described in
Citigroup's 2000 Annual Report and Form 10-K.
A diversity of funding sources, currencies, and maturities is used to gain broad
access to the investor base. Citicorp's deposits, which represented 56% of its
total funding at September 30, 2001 and 55% of its total funding at December 31,
2000, are broadly diversified by both geography and customer segments.
Stockholder's equity, which grew $15.0 billion during the first nine months of
2001 to $62.9 billion at September 30, 2001, continues to be an important
component of the overall funding structure. In addition, long-term debt is
issued by Citicorp and its subsidiaries. Total Citicorp long-term debt
outstanding at September 30, 2001 was $88.8 billion, up from $80.3 billion at
2000 year-end. Asset securitization programs remain an important source of
liquidity. Loans securitized during the first nine months of 2001 included $19.1
billion of U.S. credit cards and $19.0 billion of U.S. consumer mortgages. As
previous credit card securitizations amortize, newly-originated receivables are
recorded on Citicorp's balance sheet and become available for asset
securitization. During the first nine months of 2001, the scheduled amortization
of certain credit card securitization transactions made available $10.3 billion
of new receivables. In addition, at least $1.3 billion of credit card
securitization transactions are scheduled to amortize during the rest of 2001.
Citicorp is a legal entity separate and distinct from Citibank, N.A. and its
other subsidiaries and affiliates. As discussed in Citigroup's 2000 Annual
Report and Form 10-K, there are various legal limitations on the extent to which
Citicorp's subsidiaries may extend credit, pay dividends, or otherwise supply
funds to Citicorp. As of September 30, 2001, under their applicable dividend
limitations, Citicorp's national and state-chartered bank subsidiaries could
have declared dividends to their respective parent companies without regulatory
approval of approximately $9.2 billion. In determining whether and to what
extent to pay dividends, each bank subsidiary must also consider the effect of
dividend payments on applicable risk-based capital and leverage ratio
requirements, as well as policy statements of the federal regulatory agencies
that indicate that banking organizations should generally pay dividends out of
current operating earnings. Consistent with these considerations, Citicorp
estimates that as of September 30, 2001, its bank subsidiaries could have
distributed dividends to Citicorp, directly or through their parent holding
company, of approximately $6.9 billion of the available $9.2 billion.
Citicorp also receives dividends from its nonbank subsidiaries. These nonbank
subsidiaries are generally not subject to regulatory restrictions on their
payment of dividends except that the approval of the Office of Thrift
Supervision may be required if total dividends declared by a savings association
in any calendar year exceed amounts specified by that agency's regulations.
Citicorp is subject to risk-based capital guidelines issued by the FRB.
CITICORP RATIOS
<Table>
<Caption>
SEPTEMBER 30, June 30, Dec. 31,
2001 2001 2000
- --------------------------------------------------------------------------------
Tier 1 capital 8.37% 8.43% 8.41%
Total capital (Tier 1 and Tier 2) 12.55 12.58 12.29
Leverage (1) 7.10 7.41 7.54
Common stockholder's equity 9.71 8.66 8.68
- ---------------------------------------------===================================
</Table>
(1) Tier 1 capital divided by adjusted average assets.
- --------------------------------------------------------------------------------
38
<Page>
Citicorp maintained a strong capital position during the 2001 third quarter.
Total capital (Tier 1 and Tier 2) amounted to $63.1 billion at September 30,
2001, representing 12.55% of net risk-adjusted assets. This compares with $60.1
billion and 12.58% at June 30, 2001 and $58.0 billion and 12.29% at December 31,
2000. Tier 1 capital of $42.1 billion at September 30, 2001 represented 8.37% of
net risk-adjusted assets, compared with $40.3 billion and 8.43% at June 30, 2001
and $39.7 billion and 8.41% at December 31, 2000. Citicorp's Tier 1 capital
ratio at September 30, 2001 was above Citicorp's target range of 8.00% to 8.30%.
SALOMON SMITH BARNEY HOLDINGS INC. (SSBHI)
SSBHI manages liquidity and monitors and evaluates capital adequacy through a
well-defined process described in Citigroup's 2000 Annual Report and Form 10-K.
Total assets were $314 billion at September 30, 2001, up from $238 billion at
year-end 2000. Due to the nature of SSBHI's trading activities, it is not
uncommon for asset levels to fluctuate from period to period.
SSBHI has a $5.0 billion 364-day revolving credit agreement that extends to May
2002. SSBHI may borrow under this revolving credit facility at various interest
rate options (LIBOR, CD, or base rate) and compensates the banks for this
facility through commitment fees. Under this facility, SSBHI is required to
maintain a certain level of consolidated adjusted net worth (as defined in the
agreements). At September 30, 2001, this requirement was exceeded by
approximately $4.1 billion. At September 30, 2001, there were no borrowings
outstanding under this facility. SSBHI also has substantial borrowing
arrangements consisting of facilities that it has been advised are available,
but where no contractual lending obligation exists. These arrangements are
reviewed on an ongoing basis to ensure flexibility in meeting short-term
requirements.
Unsecured term debt is a significant component of SSBHI's long-term capital.
Long-term debt totaled $25.3 billion at September 30, 2001 and $19.7 billion at
December 31, 2000. SSBHI utilizes interest rate swaps to convert the majority of
its fixed rate long-term debt used to fund inventory-related working capital
requirements into variable rate obligations. Long-term debt issuances
denominated in currencies other than the U.S. dollar that are not used to
finance assets in the same currency are effectively converted to U.S. dollar
obligations through the use of cross-currency swaps and forward currency
contracts.
TRAVELERS PROPERTY CASUALTY CORP. (TPC)
TPC has a five-year revolving credit facility in the amount of $250 million with
a syndicate of banks that expires in December 2001. Under this facility, TPC is
required to maintain a certain level of consolidated stockholder's equity (as
defined in the agreement). At September 30, 2001, this requirement was exceeded
by approximately $5.6 billion. At September 30, 2001, there were no borrowings
outstanding under this facility.
TPC's insurance subsidiaries are subject to various regulatory restrictions that
limit the maximum amount of dividends available to be paid to their parent
without prior approval of insurance regulatory authorities. A maximum of $1.2
billion is available by the end of the year 2001 for such dividends without
prior approval of the Connecticut Insurance Department. TPC received $650
million of dividends from its insurance subsidiaries during the first nine
months of 2001.
THE TRAVELERS INSURANCE COMPANY (TIC)
At September 30, 2001, TIC had $33.0 billion of life and annuity product deposit
funds and reserves. Of that total, $18.4 billion is not subject to discretionary
withdrawal based on contract terms. The remaining $14.6 billion is for life and
annuity products that are subject to discretionary withdrawal by the
contractholder. Included in the amount that is subject to discretionary
withdrawal is $3.9 billion of liabilities that are surrenderable with market
value adjustments. Also included is an additional $5.0 billion of the life
insurance and individual annuity liabilities which are subject to discretionary
withdrawals and have an average surrender charge of 4.62%. In the payout phase,
these funds are credited at significantly reduced interest rates. The remaining
$5.7 billion of liabilities is surrenderable without charge. Insurance
liabilities that are surrendered or withdrawn are reduced by outstanding policy
loans and related accrued interest prior to payout.
TIC is subject to various regulatory restrictions that limit the maximum amount
of dividends available to its parent without prior approval of the Connecticut
Insurance Department. A maximum of $984 million of statutory surplus is
available by the end of the year 2001 for such dividends without the prior
approval of the Connecticut Insurance Department, of which $472.5 million was
paid during the first nine months of 2001.
39
<Page>
CONSOLIDATED FINANCIAL STATEMENTS
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------------------
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------
REVENUES
Loan interest, including fees $10,289 $ 9,717 $ 30,046 $27,293
Other interest and dividends 6,827 7,172 21,009 19,832
Insurance premiums 3,310 3,107 9,888 9,116
Commissions and fees 3,840 4,077 11,724 12,236
Principal transactions 1,019 1,547 4,761 4,705
Asset management and administration fees 1,371 1,331 4,091 3,947
Realized gains from sales of investments 213 508 724 615
Other income 845 1,165 3,129 4,754
------------------------------------------------
TOTAL REVENUES 27,714 28,624 85,372 82,498
Interest expense 8,327 9,789 26,319 26,313
------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE 19,387 18,835 59,053 56,185
------------------------------------------------
BENEFITS, CLAIMS, AND CREDIT LOSSES
Policyholder benefits and claims expense 3,403 2,539 8,811 7,366
Provision for credit losses 1,580 1,221 4,539 3,832
------------------------------------------------
TOTAL BENEFITS, CLAIMS, AND CREDIT LOSSES 4,983 3,760 13,350 11,198
------------------------------------------------
OPERATING EXPENSES
Non-insurance compensation and benefits 4,525 4,838 14,616 14,055
Insurance underwriting, acquisition, and operating 956 876 2,945 2,677
Restructuring-related items 134 70 479 93
Other operating 3,908 3,836 11,576 11,452
------------------------------------------------
TOTAL OPERATING EXPENSES 9,523 9,620 29,616 28,277
------------------------------------------------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 4,881 5,455 16,087 16,710
Provision for income taxes 1,678 1,958 5,628 5,943
Minority interest, net of income taxes 26 13 50 88
------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 3,177 3,484 10,409 10,679
Cumulative effect of accounting changes (1) -- -- (158) --
------------------------------------------------
NET INCOME $ 3,177 $ 3,484 $ 10,251 $10,679
- -----------------------------------------------------------================================================
BASIC EARNINGS PER SHARE
Income before cumulative effect of accounting changes $ 0.62 $ 0.69 $ 2.06 $ 2.13
Cumulative effect of accounting changes (1) -- -- (0.03) --
------------------------------------------------
NET INCOME $ 0.62 $ 0.69 $ 2.03 $ 2.13
================================================
Weighted average common shares outstanding 5,060.8 4,978.7 5,008.4 4,977.1
- -----------------------------------------------------------================================================
DILUTED EARNINGS PER SHARE
Income before cumulative effect of accounting changes $ 0.61 $ 0.67 $ 2.01 $ 2.07
Cumulative effect of accounting changes (1) -- -- (0.03) --
------------------------------------------------
NET INCOME $ 0.61 $ 0.67 $ 1.98 $ 2.07
================================================
Adjusted weighted average common shares outstanding 5,169.0 5,134.8 5,126.3 5,123.9
- -----------------------------------------------------------================================================
</Table>
(1) Refers to the 2001 first quarter adoption of SFAS 133 and the 2001 second
quarter adoption of EITF 99-20.
- --------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
40
<Page>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<Table>
<Caption>
SEPTEMBER 30,
2001 December 31,
IN MILLIONS OF DOLLARS (UNAUDITED) 2000
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks (including segregated cash and other deposits) $ 21,877 $ 14,621
Deposits at interest with banks 17,488 16,164
Federal funds sold and securities borrowed or purchased under agreements to resell 138,582 105,877
Brokerage receivables 50,004 25,696
Trading account assets (including $46,862 and $30,502 pledged to creditors at September 30, 2001
and December 31, 2000 respectively) 155,292 132,513
Investments (including $10,010 and $3,354 pledged to creditors at September 30, 2001
and December 31, 2000, respectively) 147,879 120,122
Loans, net of unearned income
Consumer 242,502 228,879
Commercial 156,913 138,143
-----------------------------
Loans, net of unearned income 399,415 367,022
Allowance for credit losses (9,918) (8,961)
-----------------------------
Total loans, net 389,497 358,061
Reinsurance recoverables 12,064 10,716
Separate and variable accounts 23,080 24,947
Other assets 112,486 93,493
-----------------------------
TOTAL ASSETS $ 1,068,249 $ 902,210
- ------------------------------------------------------------------------------------------------------=============================
LIABILITIES
Non-interest-bearing deposits in U.S. offices $ 20,598 $ 21,694
Interest-bearing deposits in U.S. offices 102,572 58,913
Non-interest-bearing deposits in offices outside the U.S. 16,463 13,811
Interest-bearing deposits in offices outside the U.S. 217,537 206,168
----------- ---------
Total deposits 357,170 300,586
Federal funds purchased and securities loaned or sold under agreements to repurchase 154,709 110,625
Brokerage payables 45,643 15,882
Trading account liabilities 74,508 85,107
Contractholder funds and separate and variable accounts 45,714 44,884
Insurance policy and claims reserves 48,667 44,666
Investment banking and brokerage borrowings 9,975 18,227
Short-term borrowings 50,632 51,675
Long-term debt 128,276 111,778
Other liabilities 67,431 47,654
Citigroup or subsidiary obligated mandatorily redeemable securities of subsidiary
trusts holding solely junior subordinated debt securities of -- Parent 4,850 2,300
-- Subsidiary 2,275 2,620
- ------------------------------------------------------------------------------------------------------=============================
STOCKHOLDERS' EQUITY
Preferred stock ($1.00 par value; authorized shares: 30 million), at aggregate liquidation value 1,774 1,745
Common stock ($.01 par value; authorized shares: 15 billion), issued shares -- --
5,477,409,696 at September 30, 2001 and 5,351,143,583 at December 31, 2000 55 54
Additional paid-in capital 23,150 16,504
Retained earnings 66,781 58,862
Treasury stock, at cost: September 30, 2001 -- 333,185,392 shares
and December 31, 2000 -- 328,921,189 shares (11,170) (10,213)
Accumulated other changes in equity from nonowner sources (559) 123
Unearned compensation (1,632) (869)
-----------------------------
TOTAL STOCKHOLDERS' EQUITY 78,399 66,206
-----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,068,249 $ 902,210
- ------------------------------------------------------------------------------------------------------=============================
</Table>
See Notes to Consolidated Financial Statements.
41
<Page>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
IN MILLIONS OF DOLLARS EXCEPT SHARES IN THOUSANDS 2001 2000
- ----------------------------------------------------------------------------------------------------------------
PREFERRED STOCK AT AGGREGATE LIQUIDATION VALUE
Balance, beginning of period $ 1,745 $ 1,895
Redemption of preferred stock -- (149)
Other (1) 29 --
--------------------------------
Balance, end of period 1,774 1,746
- ----------------------------------------------------------------------------------------------------------------
COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period 16,558 15,361
Employee benefit plans 350 768
Other (2) 6,297 68
--------------------------------
Balance, end of period 23,205 16,197
- ----------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance, beginning of period 58,862 47,997
Net income 10,251 10,679
Common dividends (3) (2,248) (1,858)
Preferred dividends (84) (88)
--------------------------------
Balance, end of period 66,781 56,730
- ----------------------------------------------------------------------------------------------------------------
TREASURY STOCK, AT COST
Balance, beginning of period (10,213) (7,662)
Issuance of shares pursuant to employee benefit plans 1,555 1,294
Treasury stock acquired (2,688) (3,282)
Other 176 50
--------------------------------
Balance, end of period (11,170) (9,600)
- ----------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER SOURCES
Balance, beginning of period 123 1,155
Cumulative effect of accounting changes (4) 118 --
Net change in unrealized gains and losses on investment securities, net of tax (154) (1,076)
Net change for cash flow hedges, net of tax 41 --
Net change in foreign currency translation adjustment, net of tax (687) (410)
--------------------------------
Balance, end of period (559) (331)
- ----------------------------------------------------------------------------------------------------------------
UNEARNED COMPENSATION
Balance, beginning of period (869) (456)
Issuance of restricted stock, net of amortization (763) (560)
--------------------------------
Balance, end of period (1,632) (1,016)
- ----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKHOLDERS' EQUITY (SHARES OUTSTANDING: 5,144,224 IN 2001
and 5,026,226 in 2000) 76,625 61,980
- ----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 78,399 $ 63,726
- --------------------------------------------------------------------------------================================
SUMMARY OF CHANGES IN EQUITY FROM NONOWNER SOURCES
Net income $ 10,251 $ 10,679
Other changes in equity from nonowner sources, net of tax (682) (1,486)
--------------------------------
TOTAL CHANGES IN EQUITY FROM NONOWNER SOURCES $ 9,569 $ 9,193
- --------------------------------------------------------------------------------================================
</Table>
(1) Represents shares previously held by affiliates that have subsequently
been traded on the open market to third parties.
(2) Represents the issuance of shares to effect the Banamex acquisition of
$6.3 billion. See Note 2 of Notes to Consolidated Financial Statements.
(3) Common dividends declared were 14 cents per share in both the first and
second quarters of 2001 and 16 cents per share in the third quarter of
2001, and 12 cents per share in both the first and second quarters of 2000
and 14 cents per share in the third quarter of 2000.
(4) Refers to the adoption of SFAS 133 in the first quarter of 2001 and the
adoption of EITF 99-20 in the second quarter of 2001, resulting in
increases to equity from nonowner sources of $25 million and $93 million,
respectively.
- --------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
42
<Page>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
IN MILLIONS OF DOLLARS 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 10,251 $ 10,679
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred policy acquisition costs and value of insurance in force 1,400 1,235
Additions to deferred policy acquisition costs (1,827) (1,579)
Depreciation and amortization 2,035 1,982
Provision for credit losses 4,539 3,832
Change in trading account assets (22,779) (13,297)
Change in trading account liabilities (10,599) (11,622)
Change in federal funds sold and securities borrowed or purchased under agreements to resell (32,705) (10,009)
Change in federal funds purchased and securities loaned or sold under agreements to
repurchase 44,084 35,302
Change in brokerage receivables net of brokerage payables 5,453 (7,690)
Change in insurance policy and claims reserves 4,001 848
Net gains from sales of investments (724) (615)
Venture capital activity 752 (954)
Restructuring-related items 479 93
Cumulative effect of accounting changes, net of tax 158 --
Other, net 8,891 (3,602)
-------------------------------
TOTAL ADJUSTMENTS 3,158 (6,076)
-------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,409 4,603
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in deposits at interest with banks (1,324) (3,067)
Change in loans (31,259) (71,334)
Proceeds from sales of loans 18,516 25,876
Purchases of investments (261,119) (71,716)
Proceeds from sales of investments 232,959 46,310
Proceeds from maturities of investments 22,418 27,831
Other investments, primarily short-term, net (738) (2,541)
Capital expenditures on premises and equipment (1,291) (1,504)
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed
assets 1,621 1,056
Business acquisitions (7,067) (10,172)
-------------------------------
NET CASH USED IN INVESTING ACTIVITIES (27,284) (59,261)
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (2,332) (1,946)
Issuance of common stock 666 847
Redemption of preferred stock -- (149)
Issuance of mandatorily redeemable securities of parent trusts 2,550 --
Redemption of mandatorily redeemable securities (345) --
Treasury stock acquired (2,688) (3,282)
Stock tendered for payment of withholding taxes (429) (469)
Issuance of long-term debt 37,473 30,466
Payments and redemptions of long-term debt (23,493) (18,225)
Change in deposits 22,834 32,099
Change in short-term borrowings and investment banking and brokerage borrowings (15,055) 13,349
Contractholder fund deposits 6,521 4,725
Contractholder fund withdrawals (4,289) (3,824)
-------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 21,413 53,591
- -----------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (282) (481)
- -----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND DUE FROM BANKS 7,256 (1,548)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 14,621 14,650
-------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 21,877 $ 13,102
- ----------------------------------------------------------------------------------------------------===============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for income taxes $ 4,885 $ 5,187
Cash paid during the period for interest $ 27,183 $ 22,145
NON-CASH INVESTING ACTIVITIES
Transfers to repossessed assets $ 458 $ 429
Non-cash effects of accounting for the conversion of investments in Nikko Securities Co., Ltd. $ -- $ 702
- ----------------------------------------------------------------------------------------------------===============================
</Table>
See Notes to Consolidated Financial Statements.
43
<Page>
CITIGROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements as of September 30, 2001 and
for the three- and nine-month periods ended September 30, 2001 and 2000 are
unaudited and include the accounts of Citigroup Inc. (Citigroup) and its
subsidiaries (collectively, the Company). In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation have been reflected. The accompanying consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes included in Citigroup's 2000 Annual Report and Form
10-K.
Certain financial information that is normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, but is not required for interim reporting
purposes, has been condensed or omitted.
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
2. BUSINESS DEVELOPMENTS
ACQUISITION OF BANAMEX
On August 6, 2001, Citicorp completed its acquisition of 99.86% of the issued
and outstanding ordinary shares of Grupo Financiero Banamex-Accival (Banamex), a
leading Mexican financial institution, for approximately $12.5 billion in cash
and Citigroup stock. Citicorp completed the acquisition by settling transactions
that were conducted on the Mexican Stock Exchange on Friday, August 3, 2001.
Those transactions comprised both the acquisition of Banamex shares tendered in
response to Citicorp's offer to acquire all of Banamex's outstanding shares and
the simultaneous sale of 126,705,281 Citigroup shares to the tendering Banamex
shareholders. On September 24, 2001, Citicorp became the holder of 100% of the
issued and outstanding ordinary shares of Banamex following a share redemption
by Banamex. Banamex's and Citicorp's banking operations in Mexico are being
integrated and will conduct business under the "Banamex" brand name.
ACQUISITION OF EAB
On July 17, 2001, Citibank completed its acquisition of European American Bank
(EAB), a state-chartered bank with 97 branches in the New York area, for $1.6
billion plus the assumption of $350 million in EAB preferred stock.
3. ACCOUNTING CHANGES
ADOPTION OF EITF 99-20
During the second quarter of 2001, the Company adopted Emerging Issues Task
Force (EITF) Issue No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets"
(EITF 99-20). EITF 99-20 provides new guidance regarding income recognition and
identification and determination of impairment on certain asset-backed
securities. The initial adoption resulted in a cumulative adjustment of $116
million after-tax, recorded as a charge to earnings.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
TRANSFERS AND SERVICING OF FINANCIAL ASSETS. In September 2000, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, a replacement of FASB Statement No. 125"
(SFAS 140). In July 2001, FASB issued Technical Bulletin No. 01-1, "Effective
Date for Certain Financial Institutions of Certain Provisions of Statement 140
Related to the Isolation of Transferred Assets."
Certain provisions of SFAS 140 require that the structure for transfers of
financial assets to certain securitization vehicles be modified to comply with
revised isolation guidance for institutions subject to receivership by the
Federal Deposit Insurance Corporation. These provisions will become effective
for transfers taking place after December 31, 2001, with an additional
transition period ending no later than September 30, 2006 for transfers to
certain master trusts. SFAS 140 also provides revised guidance for an entity to
be considered a qualifying special purpose entity. It is not expected that SFAS
140 will materially affect the financial statements.
BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS. In July 2001, the
FASB issued Statements of Financial Accounting Standards No. 141, "Business
Combinations," and No. 142, "Goodwill and Other Intangible Assets," which
require that all business combinations initiated after June 30, 2001 be
accounted for under the purchase method. Under the new rules, goodwill and
intangible
44
<Page>
assets deemed to have indefinite lives will no longer be amortized, but will be
subject to annual impairment tests. Other intangible assets will continue to be
amortized over their useful lives. The nonamortization provisions of the new
rules are effective for fiscal years beginning after December 15, 2001, and
immediately for any purchase business combinations completed after June 30,
2001.
Based on current levels of goodwill, the nonamortization provisions of the new
standards will reduce other expense by approximately $510 million and increase
net income by approximately $420 million in 2002.
The Company is in the process of evaluating whether certain intangible assets
have indefinite lives. During 2002, the Company also will perform the required
impairment tests of goodwill and any indefinite lived intangible assets as of
January 1, 2002, and has not yet determined what the effect of these tests will
be on the earnings and financial position of the Company.
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. In August 2001, the FASB issued
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 establishes
additional criteria as compared to existing generally accepted accounting
principles to determine when a long-lived asset is held for sale. It also
broadens the definition of "discontinued operations," but does not allow for the
accrual of future operating losses, as was previously permitted.
Citigroup will adopt SFAS 144 effective January 1, 2002. The provisions of the
new standard are generally to be applied prospectively. It is not expected that
SFAS 144 will materially affect the financial statements.
4. BUSINESS SEGMENT INFORMATION
The following table presents certain information regarding the Company's
industry segments:
<Table>
<Caption>
INCOME (LOSS)
BEFORE CUMULATIVE
EFFECT OF
TOTAL REVENUES, NET PROVISION (BENEFIT) ACCOUNTING
OF INTEREST EXPENSE FOR INCOME TAXES CHANGES(1)(2) IDENTIFIABLE ASSETS
------------------------------------------------------------------------------------
IN MILLIONS OF DOLLARS, THREE MONTHS ENDED SEPTEMBER 30,
EXCEPT IDENTIFIABLE -------------------------------------------------------------- SEPT. 30, Dec. 31,
ASSETS IN BILLIONS 2001 2000(3) 2001 2000(3) 2001 2000(3) 2001 2000(3)
- --------------------------------------------------------------------------------------------------------------------------
Global Consumer $ 10,754 $ 9,264 $ 1,154 $ 961 $ 2,109 $ 1,720 $ 423 $337
Global Corporate 8,014 8,436 600 844 1,158 1,577 593 506
Global Investment Management
and Private Banking 888 808 108 107 186 172 29 31
Investment Activities (164) 496 (70) 170 (120) 284 9 10
Corporate/Other (105) (169) (114) (124) (156) (269) 14 18
------------------------------------------------------------------------------------
TOTAL $ 19,387 $ 18,835 $ 1,678 $ 1,958 $ 3,177 $ 3,484 $1,068 $902
- --------------------------------------====================================================================================
</Table>
<Table>
<Caption>
INCOME (LOSS)
BEFORE CUMULATIVE
TOTAL REVENUES, NET PROVISION (BENEFIT) EFFECT OF ACCOUNTING
OF INTEREST EXPENSE FOR INCOME TAXES CHANGES(1)(2)
-----------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
IN MILLIONS OF DOLLARS 2001 2000(3) 2001 2000(3) 2001 2000(3)
- ----------------------------------------------------------------------------------------------------------------------
Global Consumer $ 30,435 $ 27,229 $ 3,249 $ 2,757 $ 5,795 $ 4,869
Global Corporate 25,951 25,062 2,264 2,605 4,394 4,906
Global Investment Management and Private Banking 2,635 2,394 327 319 538 512
Investment Activities 429 1,964 103 693 251 1,189
Corporate/Other (397) (464) (315) (431) (569) (797)
-----------------------------------------------------------------
TOTAL $ 59,053 $ 56,185 $ 5,628 $ 5,943 $ 10,409 $ 10,679
- -----------------------------------------------------=================================================================
</Table>
(1) Results in the 2001 third quarter and nine-month periods reflect after-tax
restructuring-related charges (credits) of $87 million and $159 million in
Global Consumer, $1 million and $135 million in Global Corporate,
respectively, ($3) million in both periods in Corporate/Other, and $7
million in the nine-month period in Global Investment Management and
Private Banking. The 2000 third quarter and nine-month results reflect
after-tax restructuring-related charges (credits) of $19 million and $12
million in Global Consumer, respectively, and ($3) million in Global
Corporate and ($1) million in Global Investment Management and Private
Banking in the nine-month period ended September 30, 2000. The 2000 third
quarter and nine-month results reflect after-tax restructuring-related
charges (and after-tax Housing Finance unit charges in the 2000 nine-month
results only) of $26 million and $122 million, respectively, in
Corporate/Other.
(2) Results in the 2001 third quarter and nine-month periods include pretax
provisions for benefits, claims, and credit losses in Global Consumer of
$3.0 billion and $8.5 billion, in Global Corporate of $2.0 billion and
$4.7 billion, in Global Investment Management and Private Banking of $32
million and $62 million, and in Corporate/Other of $2 million and $1
million, respectively. The 2000 third quarter and nine-month results
reflect pretax provisions (credits) for benefits, claims, and credit
losses in Global Consumer of $2.5 billion and $7.6 billion, in Global
Corporate of $1.2 billion and $3.6 billion, in Global Investment
Management and Private Banking of ($3) million and $22 million,
respectively, in Investment Activities of $7 million in both periods, and
in Corporate/Other of $34 million for the nine-month period ended
September 30, 2000.
(3) Reclassified to conform to the current period's presentation.
- --------------------------------------------------------------------------------
45
<Page>
5. INVESTMENTS
<Table>
<Caption>
SEPTEMBER 30, December 31,
IN MILLIONS OF DOLLARS 2001 2000
- ------------------------------------------------------------------------------------------
Fixed maturities, primarily available for sale at fair value $126,228 $ 99,484
Equity securities, primarily at fair value 7,493 6,652
Venture capital, at fair value (1) 4,452 5,204
Short-term and other 9,706 8,782
------------------------
$147,879 $120,122
- ------------------------------------------------------------------========================
</Table>
(1) For the nine months ended September 30, 2001, net pretax losses on
investments held by venture capital subsidiaries totaled $226 million, of
which $538 million and $847 million represented gross unrealized gains and
losses, respectively. For the nine months ended September 30, 2000, net
pretax gains on investments held by venture capital subsidiaries totaled
$1.73 billion, of which $1.46 billion and $321 million represented gross
unrealized gains and losses, respectively.
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in fixed maturities and equity
securities at September 30, 2001 and December 31, 2000 were as follows:
<Table>
<Caption>
SEPTEMBER 30, 2001 December 31, 2000(1)
---------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR Amortized Fair
IN MILLIONS OF DOLLARS COST GAINS LOSSES VALUE Cost Value
- -----------------------------------------------------------------------------------------------------------------------------
FIXED MATURITY SECURITIES HELD TO MATURITY,
PRINCIPALLY MORTGAGE-BACKED SECURITIES (2) $ 27 $ -- $ -- $ 27 $ 28 $ 28
---------------------------------------------------------------------------
FIXED MATURITY SECURITIES AVAILABLE FOR SALE
Mortgage-backed securities, principally
obligations of U.S. Federal agencies $ 20,440 $ 680 $ 140 $ 20,980 $ 16,196 $ 16,314
U.S. Treasury and Federal agency 4,829 113 18 4,924 5,680 5,836
State and municipal 16,009 737 14 16,732 15,314 15,903
Foreign government 42,274 487 544 42,217 25,934 25,928
U.S. corporate 29,263 1,036 866 29,433 25,143 25,185
Other debt securities (3) 11,494 599 178 11,915 9,633 10,290
---------------------------------------------------------------------------
$ 124,309 $ 3,652 $ 1,760 $ 126,201 $ 97,900 $ 99,456
---------------------------------------------------------------------------
TOTAL FIXED MATURITIES $ 124,336 $ 3,652 $ 1,760 $ 126,228 $ 97,928 $ 99,484
- --------------------------------------------------===========================================================================
EQUITY SECURITIES (4) $ 7,829 $ 90 $ 426 $ 7,493 $ 6,757 $ 6,652
- --------------------------------------------------===========================================================================
</Table>
(1) At December 31, 2000, gross pretax unrealized gains and losses on fixed
maturities and equity securities totaled $3.070 billion and $1.619
billion, respectively.
(2) Recorded at amortized cost.
(3) Investments in convertible debt of Nikko are included in other debt
securities.
(4) Includes non-marketable equity securities carried at cost, which are
reported in both the amortized cost and fair value columns.
- --------------------------------------------------------------------------------
6. TRADING ACCOUNT ASSETS AND LIABILITIES
Trading account assets and liabilities at market value consisted of the
following:
<Table>
<Caption>
SEPTEMBER 30, December 31,
IN MILLIONS OF DOLLARS 2001 2000
- -----------------------------------------------------------------------------------
TRADING ACCOUNT ASSETS
U.S. Treasury and Federal agency securities $ 53,149 $ 30,939
State and municipal securities 3,433 2,439
Foreign government securities 18,298 13,308
Corporate and other debt securities 20,671 17,046
Derivative and other contractual commitments (1) 29,837 35,177
Equity securities 14,670 17,174
Mortgage loans and collateralized mortgage securities 6,938 6,024
Other 8,296 10,406
--------------------------
$155,292 $132,513
- ---------------------------------------------------------==========================
TRADING ACCOUNT LIABILITIES
Securities sold, not yet purchased $ 44,772 $ 48,489
Derivative and other contractual commitments (1) 29,736 36,618
--------------------------
$ 74,508 $ 85,107
- ---------------------------------------------------------==========================
</Table>
(1) Net of master netting agreements and securitization.
- --------------------------------------------------------------------------------
46
<Page>
7. DERIVATIVES ACTIVITIES
On January 1, 2001, Citigroup adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended (SFAS 133). These new rules
changed the accounting treatment of derivative contracts (including foreign
exchange contracts) that are employed to manage risk outside of Citigroup's
trading activities, as well as certain derivative-like instruments embedded in
other contracts. SFAS 133 requires that all derivatives be recorded on the
balance sheet at their fair value. The treatment of changes in the fair value of
derivatives depends on the character of the transaction, including whether it
has been designated and qualifies as part of a hedging relationship, as
discussed below. The cumulative effect of adopting SFAS 133 at January 1, 2001
was an after-tax charge of $42 million included in net income and an increase of
$25 million included in other changes in stockholders' equity from nonowner
sources.
To qualify as a hedge, the hedge relationship is designated and formally
documented at inception detailing the particular risk management objective and
strategy for the hedge which includes the item and risk that is being hedged,
the derivative that is being used, as well as how effectiveness is being
assessed. A derivative must be highly effective in accomplishing the objective
of offsetting either changes in fair value or cash flows for the risk being
hedged. The effectiveness of these hedging relationships is evaluated on a
retrospective and prospective basis using quantitative measures of correlation.
If a hedge relationship is found to be ineffective, it no longer qualifies as a
hedge and any excess gains or losses attributable to such ineffectiveness, as
well as subsequent changes in fair value, are recognized in other income.
The foregoing criteria are applied on a decentralized basis, consistent with the
level at which market risk is managed, but are subject to various limits and
controls. The underlying asset, liability, firm commitment or forecasted
transaction may be an individual item or a portfolio of similar items.
For fair value hedges, in which derivatives hedge the fair value of assets and
liabilities, changes in the fair value of derivatives are reflected in other
income, together with changes in the fair value of the related hedged item. The
net amount, representing hedge ineffectiveness, is reflected in current
earnings. Citigroup's fair value hedges are primarily the hedges of fixed-rate
long-term debt, loans and available-for-sale securities. During the 2001 third
quarter and nine months, the amount of hedge ineffectiveness recognized in other
income related to fair value hedges was ($12) million and $125 million,
respectively. The amount of gains or losses on derivatives designated as fair
value hedges that were excluded from the assessment of effectiveness during the
2001 third quarter and nine months was ($4) million and $67 million,
respectively.
For cash flow hedges, in which derivatives hedge the variability of cash flows
related to floating rate assets, liabilities or forecasted transactions, the
accounting treatment depends on the effectiveness of the hedge. To the extent
these derivatives are effective in offsetting the variability of the hedged cash
flows, changes in the derivatives' fair value will not be included in current
earnings but are reported as other changes in stockholders' equity from nonowner
sources. These changes in fair value will be included in earnings of future
periods when earnings are also affected by the variability of the hedged cash
flows. To the extent these derivatives are not effective, changes in their fair
values are immediately included in other income. Citigroup's cash flow hedges
primarily include hedges of floating rate credit card receivables and loans,
rollovers of commercial paper and foreign currency denominated funding. Cash
flow hedges also include hedges of certain forecasted transactions up to a
maximum tenor of 30 years, although a substantial majority of the tenor is under
5 years. During the 2001 third quarter and nine months, the amount of hedge
ineffectiveness recognized in other income related to cash flow hedges was $10
million and $16 million, respectively. No amounts have been excluded from the
assessment of effectiveness for derivatives designated as cash flow hedges.
For net investment hedges, in which derivatives hedge the foreign currency
exposure of a net investment in a foreign operation, the accounting treatment
will similarly depend on the effectiveness of the hedge. The effective portion
of the change in fair value of the derivative, including any forward premium or
discount, is reflected in other changes in stockholders' equity from nonowner
sources as part of the foreign currency translation adjustment. During the 2001
third quarter and nine months, the after-tax amounts included in other changes
in stockholders' equity from nonowner sources from these hedges were $50 million
and $284 million, respectively.
Non-trading derivatives that are either hedging instruments that are carried at
fair value or do not qualify as hedges under the new rules are also carried at
fair value with changes in value included either as an element of the yield or
return on the hedged item or in other income.
For those hedge relationships that are terminated, hedge designations that are
removed, or forecasted transactions that are no longer expected to occur, the
hedge accounting treatment described in the paragraphs above is no longer
applied. The end-user derivative is terminated or transferred to the trading
account. For fair value hedges, any changes to the hedged item remain as part of
the basis of the asset or liability and are ultimately reflected as an element
of the yield. For cash flow hedges, any changes in fair value of the end-user
derivative remain in other changes in stockholders' equity from nonowner sources
and are included in earnings of future periods when earnings are also affected
by the variability of the hedged cash flow. If the hedged relationship was
discontinued or a forecasted transaction is not expected to occur when
scheduled, any changes in fair value of the end-user derivative are immediately
reflected in other income.
47
<Page>
The accumulated other changes in equity from nonowner sources from cash flow
hedges for the 2001 nine months can be summarized as follows (net of taxes):
<Table>
<Caption>
IN MILLIONS OF DOLLARS NINE MONTHS ENDED SEPTEMBER 30, 2001
- --------------------------------------------------------------------------------
BEGINNING BALANCE (1) ($ 3)
Net gains from cash flow hedges 118
Net amounts reclassified to earnings (77)
------------------------------------
ENDING BALANCE $ 38
- --------------------------------------------------------------------------------
</Table>
(1) Results from the cumulative effect of accounting change for cash flow
hedges.
- --------------------------------------------------------------------------------
Additional information concerning Citigroup's derivative and foreign exchange
products and activities, including a further description of accounting policies,
and the credit and market risk management process is provided in Citigroup's
2000 Annual Report and Form 10-K, in the Notes to Consolidated Financial
Statements, and in the Managing Global Risk section.
8. DEBT
Investment banking and brokerage borrowings consisted of the following:
<Table>
<Caption>
SEPTEMBER 30, December 31,
IN MILLIONS OF DOLLARS 2001 2000
- --------------------------------------------------------------------------------
Commercial paper $ 9,056 $16,705
Bank borrowings 394 429
Other 525 1,093
------------------------------
$ 9,975 $18,227
- --------------------------------------------------==============================
</Table>
Short-term borrowings consisted of commercial paper and other short-term
borrowings as follows:
<Table>
<Caption>
SEPTEMBER 30, December 31,
IN MILLIONS OF DOLLARS 2001 2000
- --------------------------------------------------------------------------------
COMMERCIAL PAPER
Citigroup Inc. $ 522 $ 496
Citicorp 35,303 37,656
Travelers Property Casualty Corp. 212 --
------------------------------
36,037 38,152
OTHER SHORT-TERM BORROWINGS 14,595 13,523
------------------------------
$50,632 $51,675
- --------------------------------------------------==============================
</Table>
Long-term debt, including its current portion, consisted of the following:
<Table>
<Caption>
SEPTEMBER 30, December 31,
IN MILLIONS OF DOLLARS 2001 2000
- --------------------------------------------------------------------------------
Citigroup Inc. $ 35,246 $ 18,197
Citicorp 67,400 73,060
Salomon Smith Barney Holdings Inc. 25,264 19,652
Travelers Property Casualty Corp. 350 850
The Travelers Insurance Group Inc. 16 19
------------------------------
$128,276 $111,778
- --------------------------------------------------==============================
</Table>
9. RESTRUCTURING-RELATED ITEMS
<Table>
<Caption>
RESTRUCTURING INITIATIVES
---------------------------------------------------------------
3RD QTR. 2nd Qtr. 1st Qtr.
IN MILLIONS OF DOLLARS 2001 2001 2001 2000 Total
- --------------------------------------------------------------------------------------------------
Restructuring Charges $ 129 $ 209 $ 110 $ 579 $ 1,027
Acquisitions (1) 112 -- -- 23 135
Utilization (2) (50) (137) (92) (454) (733)
Changes in estimates -- -- (18) -- (18)
---------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2001 $ 191 $ 72 $ -- $ 148 $ 411
- -----------------------------------===============================================================
</Table>
(1) Represents additions to restructuring liabilities arising from
acquisitions.
(2) Utilization amounts include translation effects on the restructuring
reserve.
- --------------------------------------------------------------------------------
During the 2001 third quarter, Citigroup recorded a restructuring reserve of
$129 million related to the acquisition of Banamex and the integration of its
operations within the Global Consumer business. This was expensed in the
third quarter and is included in "Restructuring-related items" in the
consolidated statement of income. In addition, a restructuring reserve of
$112 million was recorded by Banamex and recognized as a liability in the
purchase price allocation of Banamex.
48
<Page>
The total Banamex reserves of $241 million includes costs related to
downsizings, the reconfiguration of branch operations in Mexico, and the
integration of operations and operating platforms. These restructuring
initiatives aee expected to be implemented over the next year. The reserve
consists of $145 million related to employee severance, $48 million related
to exiting leasehold and other contractual obligations, and $48 million of
asset impairment charges. Approximately $32 million of the charge related to
operations in the United States.
The $129 million reserve includes a severance portion for the elimination of
approximately 4,200 positions by Citigroup. The $112 million reserve includes
a severance portion for the elimination of approximately 3,600 positions by
Banamex. Approximately 50 of these positions relate to the United States.
Through September 30, 2001, approximately 40 gross staff positions have been
eliminated under these programs.
Utilization of these third quarter reserves included $48 million of asset
impairment charges and $2 million of severance paid, together with
translation effects.
During the second quarter of 2001, Citigroup recorded restructuring charges of
$209 million, primarily related to the downsizing of various functions in the
Global Corporate and Global Consumer businesses. These initiatives are expected
to be implemented within 12 months. The charge consisted of $177 million related
to employee severance, $17 million related to asset impairment charges and $15
million related to exiting leasehold and other contractual obligations.
The $177 million portion of the charge related to employee severance reflects
the costs of eliminating approximately 3,500 positions. Approximately 2,150 of
these positions relate to the United States.
The 2001 second quarter restructuring reserve utilization included $17 million
of asset impairment charges as well as $120 million of severance and other exit
costs (of which $50 million related to employee severance and $6 million related
to leasehold and other exit costs have been paid in cash and $64 million is
legally obligated), together with translation effects. Utilization of the 2001
second quarter restructuring reserve in the 2001 third quarter and nine-month
periods ended September 30, 2001 was $98 million and $137 million,
respectively. Through September 30, 2001, approximately 2,600 gross staff
positions have been eliminated under these programs, including approximately
2,100 in the 2001 third quarter.
During the first quarter of 2001, Citigroup recorded restructuring charges of
$110 million, primarily consisting of the downsizing of certain front office and
back office functions at the Corporate and Investment Bank in order to align its
cost structure with current market conditions. The charge consisted of $101
million related to employee severance and $9 million related to exiting
leasehold and other contractual obligations. The $101 million portion of the
charge related to employee severance reflects the costs of eliminating
approximately 1,200 positions. Approximately 1,000 of these positions relate to
the United States.
The 2001 first quarter restructuring reserve was fully utilized at September 30,
2001 including $92 million of severance, of which $61 million was paid in cash
and $31 million is legally obligated. Utilization of the 2001 first quarter
restructuring reserve in the 2001 third quarter and nine-month periods was $55
million and $92 million, respectively. Through September 30, 2001,
approximately 1,200 gross staff positions have been eliminated under these
programs, including approximately 950 in the 2001 third quarter.
Changes in estimates are attributable to facts and circumstances arising
subsequent to an original restructuring charge. During the second quarter of
2001, changes in estimates resulted in reductions in the reserve for first
quarter 2001 restructuring initiatives of $18 million, primarily attributable to
the sale of certain businesses. The restructuring costs related to these
businesses will not be borne by the Company as a result of the sale which closed
in the third quarter of 2001. Additionally, during the 2000 second quarter,
changes in estimates resulted in reductions of $43 million of reserves related
to prior restructuring initiatives.
During 2000, Citigroup recorded restructuring charges of $579 million primarily
consisting of exit costs related to the acquisition of Associates. These
initiatives are expected to be implemented this year. The charges included $241
million related to employee severance, $154 million related to exiting leasehold
and other contractual obligations and $184 million of asset impairment charges.
Restructuring charges and other merger-related costs of $58 million and $75
million occurred in the 2000 third quarter and nine-month periods, respectively.
Of the $579 million charge, $474 million related to the acquisition of
Associates (primarily in the Global Consumer business) includes the
reconfiguration of certain branch operations, the exit from non-strategic
businesses and from activities as mandated by Federal bank regulations and the
consolidation and integration of Corporate and middle and back office functions.
In the Global Consumer business, $51 million includes the reconfiguration of
certain branch operations outside the U.S. and the downsizing and consolidation
of certain back office functions in the U.S. Approximately $440 million of the
$579 million charge related to operations in the United States.
49
<Page>
The $241 million portion of the charge related to employee severance reflects
the costs of eliminating approximately 5,800 positions, including approximately
4,600 related to the acquisition of Associates and 700 in the Global Consumer
business. Approximately 5,000 of these positions related to the United States.
In 2000, an additional reserve of $23 million was recorded, $20 million of which
related to the elimination of 1,600 non-U.S. positions of an acquired entity.
The 2000 restructuring reserve utilization included $184 million of asset
impairment charges and $270 million of severance and other exit costs (of which
$131 million related to employee severance and $87 million related to leasehold
and other exit costs have been paid in cash and of which $52 million is legally
obligated), together with translation effects. Utilization of the 2000
restructuring reserve in the 2001 third quarter and nine-month periods was $74
million and $199 million, respectively. Through September 30, 2001,
approximately 3,700 gross staff positions have been eliminated under these
programs, including approximately 600 in the 2001 third quarter.
The implementation of these restructuring initiatives also caused certain
related premises and equipment assets to become redundant. The remaining
depreciable lives of these assets were shortened, and accelerated depreciation
charges (in addition to normal scheduled depreciation on these assets) are being
recognized over these shortened lives, $5 million and $49 million of which were
recorded in the 2001 third quarter and nine-month periods, respectively, and $12
million and $61 million of which were recorded in the 2000 third quarter and
nine-month periods, respectively.
Additional information about restructuring-related items, including the business
segments affected, may be found in Citigroup's 2000 Annual Report and Form 10-K.
10. EARNINGS PER SHARE
The following reflects the income and share data used in the basic and diluted
earnings per share computations for the three-and-nine months ended September
30, 2001 and 2000.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- ------------------------------------------------------------------------------------------------------------------------
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES $3,177 $3,484 $10,409 $10,679
Cumulative effect of accounting changes -- -- (158) --
Preferred dividends (28) (29) (84) (88)
-----------------------------------------------------------
INCOME AVAILABLE TO COMMON STOCKHOLDERS FOR BASIC EPS 3,149 3,455 10,167 10,591
Effect of dilutive securities -- -- -- --
-----------------------------------------------------------
INCOME AVAILABLE TO COMMON STOCKHOLDERS FOR DILUTED EPS $3,149 $3,455 $10,167 $10,591
- -------------------------------------------------------------===========================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
APPLICABLE TO BASIC EPS 5,060.8 4,978.7 5,008.4 4,977.1
Effect of dilutive securities:
Options 74.4 120.9 85.6 113.3
Restricted stock 32.7 34.1 31.2 32.4
Convertible securities 1.1 1.1 1.1 1.1
-----------------------------------------------------------
ADJUSTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
APPLICABLE TO DILUTED EPS 5,169.0 5,134.8 5,126.3 5,123.9
- -------------------------------------------------------------===========================================================
BASIC EARNINGS PER SHARE
Income before cumulative effect of accounting changes $0.62 $0.69 $2.06 $2.13
Cumulative effect of accounting changes -- -- (0.03) --
-----------------------------------------------------------
NET INCOME $0.62 $0.69 $2.03 $2.13
- -------------------------------------------------------------===========================================================
DILUTED EARNINGS PER SHARE
Income before cumulative effect of accounting changes $0.61 $0.67 $2.01 $2.07
Cumulative effect of accounting changes -- -- (0.03) --
-----------------------------------------------------------
NET INCOME $0.61 $0.67 $1.98 $2.07
- -------------------------------------------------------------===========================================================
</Table>
11. CONTINGENCIES
It is difficult to estimate the reserves for environmental and asbestos-related
claims due to the vagaries of court coverage decisions, plaintiffs' expanded
theories of liability, the risks inherent in major litigation, and other
uncertainties. Conventional actuarial techniques are not used to estimate such
reserves.
The reserves carried for environmental and asbestos claims at September 30, 2001
are the Company's best estimate of ultimate claims and claim adjustment
expenses, based upon known facts and current law. However, the uncertainties
surrounding the final resolution of these claims continue. Currently, it is not
possible to predict changes in the legal and legislative environment and their
impact on the future development of asbestos and environmental claims. Such
development will be affected by future court
50
<Page>
decisions and interpretations as well as changes in legislation applicable to
such claims. Because of these future unknowns and the uncertainties set forth
above, additional liabilities may arise for amounts in excess of the current
reserves. These additional amounts, or a range of these additional amounts,
cannot now be reasonably estimated, and could result in a liability exceeding
reserves by an amount that would be material to the Company's operating results
in a future period. However, the Company believes that it is not likely that
these claims will have a material adverse effect on the Company's financial
condition or liquidity.
In the ordinary course of business, Citigroup and its subsidiaries are
defendants or co-defendants in various litigation matters incidental to and
typical of the businesses in which they are engaged. In the opinion of the
Company's management, the ultimate resolution of these legal proceedings would
not be likely to have a material adverse effect on the results of the Company
and its subsidiaries' operations, financial condition, or liquidity.
FINANCIAL DATA SUPPLEMENT
CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS
<Table>
<Caption>
SEPT. 30, June 30, March 31, Dec. 31, Sept. 30,
IN MILLIONS OF DOLLARS 2001 2001 2001 2000 2000
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
Collateral dependent
(at lower of cost or collateral value) (1) $ 699 $ 527 $ 528 $ 390 $ 348
Other 2,721 2,102 1,889 1,580 1,515
---------------------------------------------------------------------------------------
TOTAL (2) $3,420 $2,629 $2,417 $ 1,970 $ 1,863
- ---------------------------------------------=======================================================================================
COMMERCIAL CASH-BASIS LOANS
In U.S. offices $1,089 $1,108 $1,052 $ 700 $ 510
In offices outside the U.S. 2,331 1,521 1,365 1,270 1,353
---------------------------------------------------------------------------------------
TOTAL (2) $3,420 $2,629 $2,417 $ 1,970 $ 1,863
- ---------------------------------------------=======================================================================================
COMMERCIAL RENEGOTIATED LOANS
In U.S. offices $ 605 $ 700 $ 740 $ 634 $ 638
In offices outside the U.S. 143 164 169 151 93
---------------------------------------------------------------------------------------
TOTAL (3) $ 748 $ 864 $ 909 $ 785 $ 731
- ---------------------------------------------=======================================================================================
CONSUMER LOANS ON WHICH ACCRUAL OF INTEREST
HAD BEEN SUSPENDED (4)
In U.S. offices $2,614 $2,480 $2,146 $ 2,182 $ 1,861
In offices outside the U.S. 1,801 1,631 1,658 1,626 1,706
---------------------------------------------------------------------------------------
TOTAL $4,415 $4,111 $3,804 $ 3,808 $ 3,567
- ---------------------------------------------=======================================================================================
ACCRUING LOANS 90 OR MORE DAYS
DELINQUENT (4) (5)
In U.S. offices $1,761 $1,694 $1,475 $1,090 $ 914
In offices outside the U.S. 832 433 393 385 383
---------------------------------------------------------------------------------------
TOTAL $2,593 $2,127 $1,868 $1,475 $1,297
- ---------------------------------------------=======================================================================================
</Table>
(1) A cash-basis loan is defined as collateral dependent when repayment is
expected to be provided solely by the underlying collateral and there are
no other available and reliable sources of repayment, in which case the
loans are written down to the lower of cost or collateral value.
(2) Prior period cash-basis loans were restated to change the policy of the
Associates Commercial Leasing business for suspending accrual of interest
on past due loans to conform with other leasing businesses in the
Corporate and Investment Bank. The prior policy of placing loans that are
60 days or more past due into cash-basis, was changed to 90 days or more
past due.
(3) Prior period commercial renegotiated loans were restated to remove
Associates cash-basis loans already included above.
(4) Prior periods have been restated to conform Associates cash-basis and
accruing loans 90 or more days delinquent.
(5) Substantially all consumer loans, of which $980 million, $973 million,
$755 million, $503 million, and $413 million are government-guaranteed
student loans and mortgages at September 30, 2001, June 30, 2001, March
31, 2001, December 31, 2000, and September 30, 2000, respectively.
- --------------------------------------------------------------------------------
OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
<Table>
<Caption>
SEPT. 30, June 30, March 31, Dec. 31, Sept. 30,
IN MILLIONS OF DOLLARS 2001 2001 2001 2000 2000
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER REAL ESTATE OWNED
Consumer (1) $407 $289 $268 $366 $423
Commercial (1) 261 280 296 291 277
Other 9 8 8 8 8
---------------------------------------------------------------------------------------
TOTAL OTHER REAL ESTATE OWNED $677 $577 $572 $665 $708
- ---------------------------------------------=======================================================================================
OTHER REPOSSESSED ASSETS (2) $479 $409 $419 $292 $247
- ---------------------------------------------=======================================================================================
</Table>
(1) Represents repossessed real estate, carried at lower of cost or fair
value, less costs to sell.
(2) Primarily commercial transportation equipment and manufactured housing,
carried at lower of cost or fair value, less costs to sell.
51
<Page>
DETAILS OF CREDIT LOSS EXPERIENCE
<Table>
<Caption>
3RD QTR. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
IN MILLIONS OF DOLLARS 2001 2001 2001 2000 2000
- ------------------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES
AT BEGINNING OF PERIOD $8,917 $8,957 $8,961 $8,900 $8,852
---------------------------------------------------------------------------------------
PROVISION FOR CREDIT LOSSES
Consumer 1,360 1,196 1,197 1,113 1,078
Commercial 220 289 277 394 143
---------------------------------------------------------------------------------------
1,580 1,485 1,474 1,507 1,221
---------------------------------------------------------------------------------------
GROSS CREDIT LOSSES
CONSUMER
In U.S. offices 1,041 945 915 946 812
In offices outside the U.S. 547 462 449 566 454
COMMERCIAL
In U.S. offices 303 285 241 204 120
In offices outside the U.S. 99 84 90 83 49
---------------------------------------------------------------------------------------
1,990 1,776 1,695 1,799 1,435
---------------------------------------------------------------------------------------
CREDIT RECOVERIES
CONSUMER
In U.S. offices 109 81 101 140 128
In offices outside the U.S. 102 102 98 105 101
COMMERCIAL
In U.S. offices 78 56 35 26 9
In offices outside the U.S. 41 26 19 23 26
---------------------------------------------------------------------------------------
330 265 253 294 264
---------------------------------------------------------------------------------------
NET CREDIT LOSSES
In U.S. offices 1,157 1,093 1,020 984 795
In offices outside the U.S. 503 418 422 521 376
---------------------------------------------------------------------------------------
1,660 1,511 1,442 1,505 1,171
---------------------------------------------------------------------------------------
Other -- net (1) 1,081 (14) (36) 59 (2)
---------------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES AT END OF PERIOD $9,918 $8,917 $8,957 $8,961 $8,900
- ---------------------------------------------=======================================================================================
Net consumer credit losses $1,377 $1,224 $1,165 $1,267 $1,037
As a percentage of average consumer loans 2.31% 2.19% 2.10% 2.25% 1.89%
- ---------------------------------------------=======================================================================================
Net commercial credit losses $283 $287 $277 $238 $134
As a percentage of average commercial loans 0.73% 0.82% 0.81% 0.69% 0.40%
- ---------------------------------------------=======================================================================================
</Table>
(1) The third quarter 2001 includes the addition of $1 billion of credit loss
reserves related to the acquisition of Banamex. Also includes foreign
currency translation effects and the addition of allowance for credit
losses related to acquisitions.
- --------------------------------------------------------------------------------
52
<Page>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
On July 17, 2001, the Company filed a Current Report on Form 8-K, dated July 16,
2001, reporting under Item 5 thereof the results of its operations for the
quarter ended June 30, 2001, and certain other selected financial data.
On August 9, 2001, the Company filed a Current Report on Form 8-K, dated August
2, 2001, filing as exhibits under Item 7 thereof the Terms Agreement, dated
August 2, 2001, and the Form of Note relating to the offer and sale of the
Company's 5.50% Notes due August 9, 2006.
On September 17, 2001, the Company filed a Current Report on Form 8-K, dated
September 17, 2001, reporting under Item 5 thereof its expected earnings for the
third quarter of 2001, excluding the financial impact of the September 11th
terrorist attack, together with (i) its anticipated losses related to the
payment of insurance claims, including claims on property in lower Manhattan,
business interruption insurance claims, workers compensation exposure and life
insurance claims and (ii) its expected reduced earnings due to the closing of
the stock exchange as well as a number of the Company's branches for much of
that week.
No other reports on Form 8-K were filed during the third quarter of 2001;
however,
On October 18, 2001, the Company filed a Current Report on Form 8-K, dated
October 17, 2001, reporting under Item 5 thereof the results of its operations
for the quarter ended September 30, 2001, and certain other selected financial
data.
On October 29, 2001, the Company filed a Current Report on Form 8-K, dated
October 26, 2001, (a) noting under Item 5 thereof that Citigroup had previously
changed its operating segments presentation to include the various Associates
businesses within the other existing operating segments of Citigroup, and (b)
filing as an exhibit under Item 7 thereof the restated Historical Annual
Supplement of Citigroup.
53
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 13th day of November, 2001.
CITIGROUP INC.
(Registrant)
By /s/Todd S. Thomson
-------------------------------------
Todd S. Thomson
Chief Financial Officer
Principal Financial Officer
By /s/Irwin R. Ettinger By /s/Roger W. Trupin
-------------------------------- -------------------------------------
Irwin R. Ettinger Roger W. Trupin
Principal Accounting Officer Principal Accounting Officer
54
<Page>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- ----------------------
3.01.1 Restated Certificate of Incorporation of Citigroup Inc. (the
Company), incorporated by reference to Exhibit 4.01 to the
Company's Registration Statement on Form S-3 filed December
15, 1998 (No. 333-68949).
3.01.2 Certificate of Designation of 5.321% Cumulative Preferred
Stock, Series YY, of the Company, incorporated by reference to
Exhibit 4.45 to Amendment No. 1 to the Company's Registration
Statement on Form S-3 filed January 22, 1999 (No. 333-68949).
3.01.3 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company dated April 18, 2000,
incorporated by reference to Exhibit 3.01.3 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2000 (File No. 1-9924).
3.01.4 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company dated April 17, 2001,
incorporated by reference to Exhibit 3.01.4 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2001 (File No. 1-9924).
3.02 By-Laws of the Company, as amended, effective October 26,
1999, incorporated by reference to Exhibit 3.02 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999 (File No. 1-9924).
12.01+ Calculation of Ratio of Income to Fixed Charges.
12.02+ Calculation of Ratio of Income to Fixed Charges (including
preferred stock dividends).
- ----------
The total amount of securities authorized pursuant to any instrument defining
rights of holders of long-term debt of the Company does not exceed 10% of the
total assets of the Company and its consolidated subsidiaries. The Company will
furnish copies of any such instrument to the Securities and Exchange Commission
upon request.
- ----------
+ Filed herewith
55