<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 MARCH 31, 2002
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 APRIL 30, 2002: 5,147,065,889
AVAILABLE ON THE WEB AT WWW.CITIGROUP.COM
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CITIGROUP INC.
TABLE OF CONTENTS
<Table>
<Caption>
Part I - Financial Information
PAGE NO.
Item 1. Financial Statements:
Consolidated Statement of Income (Unaudited) -
Three Months Ended March 31, 2002 and 2001 44
Consolidated Statement of Financial Position -
March 31, 2002 (Unaudited) and December 31, 2001 45
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited) - Three Months Ended March 31, 2002 and 2001 46
Consolidated Statement of Cash Flows (Unaudited) -
Three Months Ended March 31, 2002 and 2001 47
Notes to Consolidated Financial Statements (Unaudited) 48
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 1 - 43
Item 3. Quantitative and Qualitative Disclosures About Market Risk 33 - 35
56
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders 59
Item 6. Exhibits and Reports on Form 8-K 60
Signatures 61
Exhibit Index 62
</Table>
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CITIGROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
IMPACT FROM ARGENTINA'S ECONOMIC CHANGES
During the first quarter of 2002, Argentina continued to experience
significant political and economic changes. The government of Argentina
implemented substantial economic changes, including abandoning the country's
fixed U.S. dollar-to-peso exchange rate, as well as the redenomination of
substantially all remaining loans and deposits and certain other assets and
liabilities denominated in U.S. dollars into pesos. As a result of the impact
of these government actions on operations, the Company changed its functional
currency in Argentina from the U.S. dollar to the Argentine peso.
Additionally, the government announced the terms of certain compensation
instruments it has committed to issue to financial institutions, to
compensate them in part for losses incurred as a result of the redenomination
events. The government also announced a 180 day moratorium against creditors
filing foreclosures or bankruptcy proceedings against borrowers. The
government actions, combined with the severe recessionary economic situation
and the devaluation of the peso, have adversely impacted Citigroup's consumer
and commercial borrowers in Argentina.
To reflect the impact of the economic situation in Argentina, Citigroup
recorded a total of $858 million in pretax charges in the 2002 first quarter,
as follows: a $475 million addition to the allowance for credit losses, $269
million in loan and investment write-downs, a $72 million net charge for
currency redenomination and other foreign currency items, and a $42 million
restructuring charge. The $72 million net charge includes a benefit from the
compensation instruments the Argentine government has committed to issue.
<Table>
<Caption>
FIRST QUARTER 2002 PRETAX CHARGES
--------------------------------------------------------------------
Global Global Investment
IN MILLIONS OF DOLLARS TOTAL Corporate Consumer Activities
- ----------------------------------------------------------------------------------------------------------
Provision for credit losses $ (475) $ (240) $ (235) $ -
Credit and investment write-downs (269) (117) (52) (100)
Redenomination charge - net (72) (101) 29 -
--------------------------------------------------------------------
Pretax impact - core income (816) (458) (258) (100)
Restructuring charge (42) (9) (33) -
--------------------------------------------------------------------
Total pretax income impact $ (858) $ (467) $ (291) $ (100)
==========================================================================================================
</Table>
In addition, the impact of the devaluation of the peso since January 1, 2002
produced foreign currency translation losses that reduced Citigroup's equity by
$512 million.
As the economic situation, financial regulations and implementation issues in
Argentina remain fluid, we continue to work with the government and our
customers and will continue to monitor conditions closely. Additional losses may
be incurred. This statement is a forward-looking statement within the meaning of
the Private Securities Litigation Reform Act. See "Forward-Looking Statements"
on page 32.
INITIAL PUBLIC OFFERING AND TAX-FREE DISTRIBUTION OF TRAVELERS PROPERTY CASUALTY
CORP.
Travelers Property Casualty Corp. (TPC) (an indirect wholly-owned subsidiary
of Citigroup on December 31, 2001) sold 231 million shares of its class A
common stock representing approximately 23.1% of its outstanding equity
securities at $18.50 per share in an initial public offering on March 27,
2002. Citigroup recognized an after-tax gain of $1.061 billion as a result of
the TPC offering. Citigroup plans to make a tax-free distribution to its
stockholders of a portion of its remaining ownership interest in TPC by
year-end 2002, such that following the distribution, Citigroup would remain a
holder of approximately 9.9% of TPC's outstanding equity securities. This
statement is a forward-looking statement within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page
32. Income statement minority interest will be recognized on the initial
public offering portion beginning on April 1, 2002.
The distribution is subject to receipt of a private letter ruling from the
Internal Revenue Service that the distribution will be tax-free to Citigroup,
its stockholders and TPC, as well as various other conditions. These other
conditions may include receipt of any necessary third-party consents and
regulatory approvals, the existence of satisfactory market conditions and the
satisfaction of any conditions which may be imposed by the Internal Revenue
Service. Citigroup has no obligation to consummate the distribution by the end
of 2002 or at all, whether or not these conditions are satisfied.
The distribution of TPC, if it occurs, will be treated as a dividend to
stockholders for accounting purposes that will reduce stockholders' equity by an
amount in excess of $7 billion. Prior to the initial public offering during
2002, TPC paid dividends to Citigroup in the form of notes in the aggregate
amount of $5.095 billion.
In connection with the initial public offering, Citigroup entered into an
agreement with TPC that provides that, in any fiscal year in which TPC records
asbestos-related income statement charges in excess of $150 million, net of any
reinsurance, Citigroup will pay to
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TPC the amount of any such excess up to a cumulative aggregate of $800 million,
reduced by the tax effect of the highest applicable federal income tax rate. A
portion of the gain as a result of the offering was deferred to offset any
payments arising in connection with this agreement.
Citigroup and TPC are currently reviewing whether Citigroup business units will
continue to offer certain TPC products. The two companies plan to enter into an
agreement under which Citigroup businesses will provide investment advisory and
certain back office services to TPC during a transition period. Ongoing revenues
on our remaining ownership in TPC following the distribution are not expected to
be significant.
ACCOUNTING CHANGES
BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
Effective July 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations" (SFAS No.
141) and certain provisions of SFAS No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142), as required for goodwill and indefinite-lived intangible
assets resulting from business combinations consummated after June 30, 2001. The
new rules require that all business combinations consummated after June 30, 2001
be accounted for under the purchase method. The nonamortization provisions of
the new rules affecting goodwill and intangible assets deemed to have indefinite
lives are effective for all purchase business combinations completed after June
30, 2001.
On January 1, 2002, Citigroup adopted the remaining provisions of SFAS No. 142,
when the rules became effective for calendar year companies. Under the new
rules, effective January 1, 2002, goodwill and intangible assets deemed to have
indefinite lives are no longer amortized, but are subject to annual impairment
tests. Other intangible assets will continue to be amortized over their useful
lives. During the first quarter of 2001, the after-tax amortization expense
related to goodwill and indefinite-lived intangible assets which are no longer
amortized was as follows:
<Table>
<Caption>
FIRST QUARTER
IN MILLIONS OF DOLLARS 2001
- ---------------------------------------------------------------------------------------
GLOBAL CONSUMER
NORTH AMERICA
Citibanking North America $ 4
North America Cards 3
CitiFinancial 19
Primerica Financial Services 2
--------------
Total North America 28
--------------
INTERNATIONAL
Western Europe 2
Japan 14
Latin America 5
Mexico 5
--------------
Total Emerging Markets Consumer Banking 10
--------------
Total International 26
Other 3
--------------
TOTAL GLOBAL CONSUMER 57
--------------
GLOBAL CORPORATE
Corporate and Investment Bank 20
Emerging Markets Corporate Banking and Global Transaction Services 8
--------------
TOTAL GLOBAL CORPORATE 28
--------------
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
Travelers Life and Annuity (1)
Citigroup Asset Management 11
--------------
TOTAL GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING 10
--------------
PROPERTY AND CASUALTY
Personal Lines 5
Commercial Lines 15
--------------
Total Property and Casualty 20
CORPORATE/OTHER 5
--------------
TOTAL AFTER-TAX AMORTIZATION EXPENSE $ 120
=======================================================================================
</Table>
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The Company has performed the required impairment tests of goodwill and
indefinite-lived intangible assets as of January 1, 2002. There was no
impairment of goodwill upon adoption of SFAS No. 142. The initial adoption
resulted in a cumulative adjustment of $47 million after-tax recorded as a
charge to earnings related to the impairment of certain intangible assets
related to the Property and Casualty and Global Investment Management and
Private Banking businesses. See Note 2 to the Consolidated Financial Statements
for additional information about this accounting change.
DERIVATIVES AND HEDGE ACCOUNTING
On January 1, 2001, Citigroup adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 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 instruments embedded in other
contracts. SFAS No. 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. The
majority of Citigroup's derivatives are entered into for trading purposes and
were not impacted by the adoption of SFAS No. 133. The cumulative effect of
adopting SFAS No. 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.
BUSINESS FOCUS
The table below shows the core income (loss) for each of Citigroup's businesses:
<Table>
<Caption>
FIRST QUARTER
---------------------------------
IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS 2002 2001(1)
- ----------------------------------------------------------------------------------------------------------
GLOBAL CONSUMER
NORTH AMERICA
Citibanking North America $ 183 $ 149
Mortgage Banking 93 75
North America Cards 520 472
CitiFinancial 320 220
Primerica Financial Services 128 125
---------------------------------
Total North America 1,244 1,041
---------------------------------
INTERNATIONAL
Western Europe 155 112
Japan 238 205
Asia 149 147
Latin America (89) 68
Mexico 280 4
Central & Eastern Europe, Middle East and Africa 24 18
---------------------------------
Total Emerging Markets Consumer Banking 364 237
---------------------------------
Total International 757 554
---------------------------------
e-Consumer (20) (24)
Other (29) (17)
---------------------------------
TOTAL GLOBAL CONSUMER 1,952 1,554
---------------------------------
GLOBAL CORPORATE
Corporate and Investment Bank 987 1,023
Emerging Markets Corporate Banking and Global Transaction Services 195 421
---------------------------------
TOTAL GLOBAL CORPORATE 1,182 1,444
---------------------------------
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
Travelers Life and Annuity 200 210
The Citigroup Private Bank 112 95
Citigroup Asset Management 94 79
---------------------------------
TOTAL GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING $ 406 $ 384
---------------------------------
</Table>
(Business Focus table continues on the following page)
3
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(BUSINESS FOCUS TABLE CONTINUED)
<Table>
<Caption>
FIRST QUARTER
-----------------------------------
IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS 2002 2001(1)
- -------------------------------------------------------------------------------------------------------------
PROPERTY AND CASUALTY (EXCLUDING REALIZED PORTFOLIO GAINS AND LOSSES)
Personal Lines $ 65 $ 87
Commercial Lines 261 278
Interest and Other 1 (23)
-----------------------------------
TOTAL PROPERTY AND CASUALTY 327 342
-----------------------------------
INVESTMENT ACTIVITIES 70 132
CORPORATE/OTHER (78) (196)
-----------------------------------
TOTAL CORE INCOME 3,859 3,660
Restructuring-Related Items, After-Tax(2) (30) (80)
Gain on Sale of Stock by Subsidiary, After-Tax(3) 1,061 -
Cumulative Effect of Accounting Changes(4) (47) (42)
-----------------------------------
NET INCOME $ 4,843 $ 3,538
=============================================================================================================
DILUTED EARNINGS PER SHARE:
CORE INCOME $ 0.74 $ 0.71
NET INCOME $ 0.93 $ 0.69
=============================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Restructuring-related items in the 2002 first quarter related principally
to severance and costs associated with the reduction of staff in Argentina
within the Latin America consumer and corporate businesses, and in the 2001
first quarter related principally to severance and costs associated with
the reduction of staff in the Global Corporate businesses. See Note 8 to
the Consolidated Financial Statements.
(3) TPC sold 231 million shares of its class A common stock at $18.50 per share
in an initial public offering on March 27, 2002. Citigroup recognized an
after-tax gain of $1.061 billion as a result of the TPC offering. See Note
3 to the Consolidated Financial Statements.
(4) Accounting Changes refer to the first quarter 2002 adoption of the
remaining provisions of SFAS No. 142, and the first quarter 2001 adoption
of SFAS No. 133. See Note 2 to the Consolidated Financial Statements.
4
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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
activity and receivables held for securitization (managed basis). On a managed
basis, these earnings are reclassified and presented as if the receivables had
neither been held for securitization nor sold.
INCOME ANALYSIS
The income analysis below reconciles amounts shown in the Consolidated
Statement of Income on page 44 to the basis presented in the business segment
discussions.
<Table>
<Caption>
FIRST QUARTER
--------------------------------
IN MILLIONS OF DOLLARS 2002 2001
- --------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 20,995 $ 20,281
Effect of securitization activities 1,021 766
--------------------------------
ADJUSTED REVENUES, NET OF INTEREST EXPENSE 22,016 21,047
--------------------------------
Total operating expenses 9,812 10,501
Restructuring-related items (47) (132)
--------------------------------
ADJUSTED OPERATING EXPENSES 9,765 10,369
--------------------------------
Benefits, claims, and credit losses 5,348 4,201
Effect of securitization activities 1,021 766
--------------------------------
ADJUSTED BENEFITS, CLAIMS, AND CREDIT LOSSES 6,369 4,967
--------------------------------
CORE INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 5,882 5,711
Taxes on core income 2,006 2,042
Minority interest, net of tax 17 9
--------------------------------
CORE INCOME 3,859 3,660
Restructuring-related items, after-tax (30) (80)
Gain on sale of stock by subsidiary, after-tax 1,061 -
Cumulative effect of accounting changes (47) (42)
--------------------------------
NET INCOME $ 4,843 $ 3,538
==================================================================================================
</Table>
INCOME AND EARNINGS PER SHARE
Citigroup reported core income of $3.859 billion or $0.74 per diluted common
share in the 2002 first quarter, up 5% and 4% from $3.660 billion or $0.71 in
the 2001 first quarter. Core income in the 2002 first quarter excluded the
after-tax gain on sale of TPC's stock, an after-tax charge of $30 million for
restructuring-related items and an after-tax charge of $47 million reflecting
the cumulative effect of adopting SFAS No. 142 (as described in Notes 2, 3 and 8
of Notes to Consolidated Financial Statements). Net income for the quarter was
$4.843 billion or $0.93 per diluted share, up 37% and 35% from $3.538 billion or
$0.69 in the year-ago quarter. Core income return on common equity was 19.1%
compared to 22.5% a year ago.
Global Consumer core income increased $398 million or 26% while Global Corporate
declined $262 million or 18%. Global Investment Management and Private Banking
grew $22 million or 6%, while Property and Casualty decreased $15 million or 4%
and Investment Activities decreased $62 million or 47% from the 2001 first
quarter.
REVENUES, NET OF INTEREST EXPENSE
Adjusted revenues, net of interest expense, of $22.0 billion in the 2002 first
quarter were up $1.0 billion or 5% from the 2001 first quarter. Global Consumer
revenues were up $1.7 billion or 20% in the 2002 first quarter to $10.2 billion,
led by a $932 million increase in Mexico, reflecting the Banamex acquisition.
North America (excluding Mexico) was up $810 million or 14%, including increases
of $426 million or 14% in North America Cards, $153 million or 25% in
Citibanking North America, and $149 million or 11% in CitiFinancial. Property
and Casualty revenues increased $150 million or 5% from the year-ago quarter.
Global Corporate revenues of $6.7 billion decreased $830 million or 11% from the
2001 first quarter, including a $637 million or 11% decrease in the Corporate
and Investment Bank, reflecting decreases in global equities. Additionally,
Emerging Markets Corporate Banking and Global Transaction Services revenues were
down $193 million or 11%, reflecting declines in all regions.
Global Investment Management and Private Banking revenues of $1.7 billion in the
2002 first quarter were down $230 million or 12% from the 2001 first quarter,
reflecting declines in Travelers Life and Annuity (TLA). Revenues from
Investment Activities in the 2002 first quarter declined $87 million or 37% from
year-ago levels, primarily reflecting higher impairment write-downs in
insurance-
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related and other proprietary investments, and write-downs on certain
investments in Argentina, partially offset by higher venture capital results.
SELECTED REVENUE ITEMS
Net interest revenue was $9.7 billion in the 2002 first quarter, up $2.1 billion
or 27% from the comparable 2001 period, reflecting acquisitions and business
volume growth. Total commissions, asset management and administration fees, and
other fee revenues of $5.4 billion were down $169 million or 3%, primarily as a
result of lower Private Client transactional activity, partially offset by
volume-related growth in other customer activities and assets under fee-based
management. Insurance premiums of $3.4 billion were flat to year-ago levels.
Principal transactions revenues of $1.7 billion were down $659 million or 28%
from a year ago, primarily reflecting declines in global equities. Realized
gains from sales of investments were down $397 million to $54 million in the
2002 quarter, primarily in the Company's insurance portfolio. Other income as
shown in the Consolidated Statement of Income of $856 million decreased $177
million from 2001, primarily reflecting an increase in securitized card losses,
partially offset by higher venture capital results.
OPERATING EXPENSES
Adjusted operating expenses, which exclude restructuring-related items, were
$9.8 billion for the 2002 first quarter, down $604 million or 6% from the
comparable 2001 period. The decrease reflects expense control initiatives, lower
incentive compensation, and the absence of goodwill and indefinite-lived
intangible asset amortization in the 2002 first quarter due to the adoption of
SFAS No. 141 and SFAS No. 142, partially offset by the impact of acquisitions.
Global Consumer expenses were up 6% from the 2001 first quarter, while Global
Corporate expenses were down 17% and Global Investment Management and Private
Banking expenses decreased 8% from the year-ago quarter.
RESTRUCTURING-RELATED ITEMS
Restructuring-related items of $47 million ($30 million after-tax) in the 2002
first quarter primarily related to severance and costs associated with the
reduction of staff in Argentina within the Latin America consumer and corporate
businesses. Restructuring-related items of $132 million ($80 million after-tax)
in the 2001 first quarter primarily represented severance charges related to
downsizing certain front and back office functions in the Corporate and
Investment Bank in order to align its cost structure with market conditions.
BENEFITS, CLAIMS, AND CREDIT LOSSES
Adjusted benefits, claims, and credit losses were $6.4 billion in the 2002 first
quarter, up $1.4 billion or 28% from the 2001 first quarter. Policyholder
benefits and claims increased 2% from the 2001 first quarter to $2.8 billion,
primarily as a result of increased volume in Property and Casualty, partially
offset by declines in TLA. The adjusted provision for credit losses increased
23% from a year ago.
Global Consumer adjusted provisions for benefits, claims, and credit losses of
$3.2 billion were up 45% from the 2001 first quarter, reflecting increases in
North America Cards, Latin America, Mexico and CitiFinancial. Managed net credit
losses were $2.654 billion and the related loss ratio was 3.36% in the 2002
first quarter, as compared to $2.580 billion and 3.20% in the preceding quarter
and $1.931 billion and 2.61% a year ago. The managed consumer loan delinquency
ratio (90 days or more past due) increased to 2.44% from 2.37% at December 31,
2001 and 2.04% a year ago.
Global Corporate provisions for benefits, claims, and credit losses of $680
million in the 2002 first quarter increased $411 million from year-ago levels,
primarily due to an addition to the loan loss reserve and write-offs in Emerging
Markets Corporate Banking and Global Transaction Services reflecting the
economic deterioration in Argentina and higher loss rates in the transportation
leasing portfolio in the Corporate and Investment Bank.
Commercial cash-basis loans at March 31, 2002 and 2001 were $4.5 billion and
$2.4 billion, respectively, while the commercial Other Real Estate Owned (OREO)
portfolio totaled $270 million and $301 million, respectively. The increase in
cash-basis loans from March 31, 2001 was primarily related to the acquisition of
Banamex, the transportation portfolio, and increases attributable to borrowers
in the telecommunication and energy industries. Commercial cash-basis loans at
March 31, 2002 increased $458 million from December 31, 2001. The improvements
in OREO were primarily related to the North America real estate portfolio.
6
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CAPITAL
Total capital (Tier 1 and Tier 2) was $78.9 billion or 11.59% of net
risk-adjusted assets, and Tier 1 capital was $62.2 billion or 9.13% at March 31,
2002, compared to $75.8 billion or 10.92% and $58.4 billion or 8.42%,
respectively, at December 31, 2001.
The Income line in each of the following business segment discussions excludes
the cumulative effect of adopting SFAS No. 133. See Note 2 of Notes to
Consolidated Financial Statements.
GLOBAL CONSUMER
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 9,199 $ 7,718 19
Effect of securitization activities 1,021 766 33
-----------------------------------
ADJUSTED REVENUES, NET OF INTEREST EXPENSE 10,220 8,484 20
-----------------------------------
Adjusted operating expenses(2) 4,071 3,829 6
-----------------------------------
Provisions for benefits, claims, and credit losses 2,152 1,417 52
Effect of securitization activities 1,021 766 33
-----------------------------------
ADJUSTED PROVISIONS FOR BENEFITS, CLAIMS, AND CREDIT LOSSES 3,173 2,183 45
-----------------------------------
CORE INCOME BEFORE TAXES AND MINORITY INTEREST 2,976 2,472 20
Income taxes 1,014 913 11
Minority interest, after-tax 10 5 100
-----------------------------------
CORE INCOME 1,952 1,554 26
Restructuring-related items, after-tax (18) (12) (50)
-----------------------------------
INCOME $ 1,934 $ 1,542 25
====================================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
GLOBAL CONSUMER -- which provides banking, lending, including credit and charge
cards, and investment and personal insurance products and services to customers
around the world -- reported core income of $1.952 billion in the 2002 first
quarter, up $398 million or 26% from 2001. North America core income increased
$203 million or 20%, marked by double-digit growth in CitiFinancial, Mortgage
Banking, Citibanking North America and North America Cards. The developed
markets businesses of Western Europe and Japan reported core income of $393
million, up $76 million or 24%, primarily reflecting the impact of higher
business volumes, partially offset by increased credit losses. Core income in
Emerging Markets Consumer increased $127 million or 54% to $364 million in the
first quarter of 2002, as the impact of the Banamex acquisition was partially
offset by losses in Argentina. Income of $1.934 billion in the 2002 first
quarter and $1.542 billion in the 2001 first quarter included
restructuring-related charges of $18 million ($29 million pretax) and $12
million ($19 million pretax), respectively. See Note 8 of Notes to Consolidated
Financial Statements for a discussion of the restructuring-related items.
NORTH AMERICA
CITIBANKING NORTH AMERICA
<Table>
<Caption>
FIRST QUARTER
---------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ---------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 768 $ 615 25
Total operating expenses 453 368 23
Provision for credit losses 24 7 NM
----------------------------------
INCOME BEFORE TAXES 291 240 21
Income taxes 108 91 19
----------------------------------
INCOME $ 183 $ 149 23
- ------------------------------------------------------------------------------------
Average assets (IN BILLIONS OF DOLLARS) $ 16 $ 9 78
Return on assets 4.64% 6.71%
===================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
NM Not meaningful
CITIBANKING NORTH AMERICA -- which delivers banking, lending, and investment and
insurance services to customers through Citibank's branches and electronic
delivery systems -- reported income of $183 million in the 2002 first quarter,
up $34 million or 23% from 2001, primarily reflecting the July 2001 acquisition
of European American Bank (EAB) along with growth in revenues.
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As shown in the following table, Citibanking grew loans, customer deposits, and
accounts compared to the first quarter of 2001, reflecting, in part, the
acquisition of EAB which added $8.1 billion to average customer deposits, $4.2
billion to average loans and 0.7 million to accounts.
<Table>
<Caption>
FIRST QUARTER
---------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- -----------------------------------------------------------------------------
Accounts (IN MILLIONS) 7.7 6.7 15
Average customer deposits $ 59.0 $ 47.9 23
Average loans $ 12.0 $ 7.4 62
=============================================================================
</Table>
Revenues, net of interest expense, of $768 million in the 2002 first quarter
increased $153 million or 25% from the 2001 period. Revenue growth in 2002
reflected the acquisition of EAB, the benefit of customer deposit growth and
improved net funding spreads. Total operating expenses of $453 million in the
first quarter of 2002 increased $85 million or 23% from the prior year,
primarily due to the acquisition of EAB and higher advertising and marketing
costs.
The provision for credit losses was $24 million in the 2002 first quarter, up
from $7 million in the 2001 first quarter. The net credit loss ratio was 0.90%
in the 2002 first quarter, compared to 0.97% in the 2001 fourth quarter and
0.80% in the prior-year first quarter. Loans delinquent 90 days or more were $85
million or 0.71% of loans at March 31, 2002, compared to $96 million or 0.78% at
December 31, 2001 and $41 million or 0.56% a year ago. Increases from the
prior-year first quarter are mainly due to the acquisition of EAB.
Average assets of $16 billion in the 2002 first quarter increased $7 billion
from the 2001 first quarter, primarily reflecting the acquisition of EAB. Return
on assets was 4.64% in the 2002 first quarter, down from 6.71% in the prior-year
quarter. The decline in return on assets was due to the addition of EAB.
MORTGAGE BANKING
<Table>
<Caption>
FIRST QUARTER
---------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- --------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 299 $ 239 25
Total operating expenses 115 109 6
Provision for credit losses 16 - NM
----------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST 168 130 29
Income taxes 65 50 30
Minority interest, after-tax 10 5 100
----------------------------------
INCOME $ 93 $ 75 24
==================================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 49 $ 47 4
Return on assets 0.77% 0.65%
==================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
NM Not meaningful
MORTGAGE BANKING -- which originates and services mortgages and student loans
for customers across the United States -- reported income of $93 million in the
2002 first quarter, up $18 million or 24% from the first quarter of 2001,
primarily reflecting revenue growth in the student loan business, partially
offset by an increased provision for credit losses.
As shown in the following table, accounts grew 9% from 2001, primarily
reflecting growth in student loans. Average on balance sheet loans grew 6%,
driven by increases in mortgage loans held for sale and student loans, partially
offset by higher prepayments in adjustable rate mortgages which are typically
held in the portfolio rather than securitized. Other serviced loans and total
originations increased 7% and 65%, respectively, from 2001, reflecting continued
increases in mortgage refinancing activity due to lower interest rates.
<Table>
<Caption>
FIRST QUARTER
--------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- ----------------------------------------------------------------------------------------------
Average loans-on balance sheet(1) $ 47.2 $ 44.6 6
Other serviced loans 68.7 64.2 7
------------------------------------------------
Total owned and serviced loans $ 115.9 $ 108.8 7
Total originations $ 12.7 $ 7.7 65
Accounts (IN MILLIONS) 4.9 4.5 9
==============================================================================================
</Table>
(1) Includes loans held for sale.
8
<Page>
Revenues, net of interest expense, of $299 million in the 2002 first quarter
grew $60 million or 25% from the 2001 first quarter. The increase in revenue was
primarily due to spread improvements in student loans and higher mortgage
securitization-related activity, including increased net interest revenue on
mortgage loans held for sale. Revenue growth in 2002 was partially offset by
spread compression in the mortgage portfolio. Total operating expenses increased
$6 million or 6% from the 2001 first quarter, mainly reflecting additional
business volumes.
The provision for credit losses increased $16 million from the first quarter of
2001. Net credit losses in the 2002 first quarter were $16 million and the
related loss ratio was 0.14%, compared to $13 million and 0.12% in the 2001
fourth quarter and $7 million or 0.06% in the 2001 first quarter. Loans
delinquent 90 days or more were $1.344 billion or 2.87% of loans at March 31,
2002, compared to $1.157 billion or 2.53% at December 31, 2001 and $957 million
or 2.12% a year ago. The increase in delinquencies from both the 2001 fourth
quarter and 2001 first quarter mainly reflects a higher level of buy backs from
GNMA pools where the credit risk is maintained by government agencies. The
increase in delinquencies from the prior quarter also reflects a seasonal
increase in government-guaranteed student loans.
NORTH AMERICA CARDS
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ----------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $2,425 $2,281 6
Effect of securitization activities 1,013 731 39
-----------------------------------
ADJUSTED REVENUES, NET OF INTEREST EXPENSE 3,438 3,012 14
-----------------------------------
Total operating expenses 953 1,040 (8)
-----------------------------------
Provision for credit losses 646 490 32
Effect of securitization activities 1,013 731 39
-----------------------------------
Adjusted provision for credit losses 1,659 1,221 36
-----------------------------------
INCOME BEFORE TAXES 826 751 10
Income taxes 306 279 10
-----------------------------------
INCOME $ 520 $ 472 10
====================================================================================================
Average assets (IN BILLIONS OF DOLLARS)(2) $ 44 $ 49 (10)
Return on assets(2) 4.79% 3.91%
====================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Adjusted for the effect of securitization activities, managed average
assets and the related return on assets for North America Cards were $110
billion and 1.92% in the first quarter of 2002, compared to $106 billion
and 1.81% in the first quarter of 2001.
NORTH AMERICA CARDS -- which includes Citi Cards (bankcards and private-label
cards) and Diners Club -- reported income of $520 million in the 2002 first
quarter, up $48 million or 10% from the 2001 period, as revenue growth and
expense management were partially offset by higher credit costs.
Adjusted revenues, net of interest expense, of $3.438 billion in the 2002
first quarter were up $426 million or 14% from the 2001 first quarter,
reflecting spread improvements due to lower cost of funds and repricing
actions, combined with the benefit of receivable growth. In addition,
revenues benefited during the 2002 first quarter as a result of an increase in
the amortization period for certain direct loan origination costs, which had a
minor impact in the 2002 first quarter and which is also expected to benefit
the 2002 second quarter. This statement is a forward-looking statement within
the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" on page 32. Total operating expenses of $953
million in the 2002 first quarter decreased $87 million or 8% from the 2001
first quarter, primarily reflecting disciplined expense management including a
decline in advertising and marketing costs.
As shown in the following table, on a managed basis, the Citi Cards portfolio
experienced growth in the 2002 first quarter of 5% in end-of-period receivables
and slight declines in accounts and total sales.
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- ----------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 91.6 93.2 (2)
Total sales $ 50.8 $ 51.2 (1)
End-of-period managed receivables $ 105.4 $ 100.5 5
========================================================================================
</Table>
9
<Page>
Risk adjusted margin is a measure of profitability calculated as adjusted
revenues less managed net credit losses divided by average managed loans. This
measure 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,
Citi Cards risk adjusted margin of 6.64% in the 2002 first quarter decreased 31
basis points from the 2001 period as higher net interest revenue was more than
offset by higher net credit losses.
<Table>
<Caption>
FIRST QUARTER
-----------------------------------
IN BILLIONS OF DOLLARS 2002 2001
- -----------------------------------------------------------------------------
Risk adjusted revenues(1) $ 1.705 $ 1.716
Risk adjusted margin %(2) 6.64% 6.95%
=============================================================================
</Table>
(1) Citi Cards adjusted revenues less managed net credit losses.
(2) Risk adjusted revenues as a percentage of average managed loans.
The adjusted provision for credit losses in the 2002 first quarter was $1.659
billion, compared to $1.221 billion in the 2001 first quarter. Citi Cards
managed net credit losses rose in the 2002 first quarter to $1.646 billion with
the related loss ratio increasing to 6.41%, compared to $1.554 billion and 5.91%
in the 2001 fourth quarter and $1.196 billion and 4.84% in the 2001 first
quarter. Citi Cards managed loans delinquent 90 days or more were $2.219 billion
or 2.13% of loans at March 31, 2002, compared to $2.135 billion or 1.98% at
December 31, 2001 and $1.836 billion or 1.84% at March 31, 2001. Net credit
losses and the related ratio are expected to increase from the 2002 first
quarter as a result of continued economic weakness. 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>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ------------------------------------------------------------------------------------------------------------------
ADJUSTED REVENUES, NET OF INTEREST EXPENSE(2) $ 1,479 $ 1,330 11
Adjusted operating expenses(3) 475 569 (17)
Adjusted provisions for benefits, claims, and credit losses(2) 500 408 23
-----------------------------------
CORE INCOME BEFORE TAXES 504 353 43
Income taxes 184 133 38
-----------------------------------
CORE INCOME 320 220 45
Restructuring-related items, after-tax - (8) (100)
-----------------------------------
INCOME $ 320 $ 212 51
==================================================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 68 $ 64 6
Return on assets 1.91% 1.34%
==================================================================================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 1.91% 1.39%
==================================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Adjusted for the effect of securitization activities of $15 million in the
2001 first quarter.
(3) Excludes restructuring-related items.
CITIFINANCIAL -- which provides community-based lending services through its
branch network, regional sales offices and cross-selling initiatives with other
Citigroup businesses -- reported core income of $320 million in the 2002 first
quarter, up $100 million or 45% from the 2001 first quarter, principally
reflecting growth in net interest revenue and efficiencies resulting from the
integration of Associates First Capital Corporation (Associates), partially
offset by higher credit costs. Core income growth in the first quarter of 2002
also included a $19 million after-tax benefit due to the absence of goodwill and
other indefinite-lived intangible asset amortization.
10
<Page>
As shown in the following table, average loans grew 6% compared to the 2001
first quarter resulting from the cross selling of products through other
Citigroup distribution channels and an increase in auto loans. Average auto
loans increased $1.9 billion or 54% from 2001, reflecting a shift in strategy to
fund business volumes internally rather than externally through the
securitization of receivables. The average net interest margin of 8.41% in the
2002 first quarter increased 65 basis points from the 2001 first quarter, mainly
due to lower cost of funds.
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- --------------------------------------------------------------------------------------------------
AVERAGE LOANS
Real estate-secured loans - other $ 33.3 $ 34.5 (3)
Real estate-secured loans - PFS sourced 8.2 5.4 52
Personal loans 9.6 9.7 (1)
Auto 5.4 3.5 54
Sales finance and other 2.7 2.6 4
-----------------------------------
TOTAL AVERAGE LOANS $ 59.2 $ 55.7 6
Average net interest margin % 8.41% 7.76% 65 bps
==================================================================================================
</Table>
Adjusted revenues, net of interest expense, of $1.479 billion in the 2002 first
quarter increased $149 million or 11% from the 2001 first quarter, reflecting
lower cost of funds which was mainly due to a lower interest rate environment
and growth in receivables, partially offset by lower yields. Adjusted operating
expenses of $475 million in the 2002 first quarter decreased $94 million or 17%
from the prior-year quarter, primarily reflecting efficiencies resulting from
the integration of Associates and a $23 million benefit due to the absence of
goodwill and other indefinite-lived intangible asset amortization.
Adjusted provisions for benefits, claims, and credit losses were $500 million in
the 2002 first quarter, up from $408 million in the prior-year quarter. The net
credit loss ratio of 2.97% in the 2002 first quarter was down from 3.06% in the
2001 fourth quarter and up from 2.50% in the 2001 first quarter. Net credit
losses in the 2001 fourth quarter included losses of $42 million from the sales
of certain underperforming loans, which were charged against the allowance for
credit losses and resulted in a 28 basis point increase in the net credit loss
ratio. Excluding the sales, the 2002 first quarter net credit loss ratio
increased 19 basis points from the 2001 fourth quarter. Loans delinquent 90 days
or more were $1.969 billion or 3.30% of loans at March 31, 2002, compared to
$1.991 billion or 3.38% at December 31, 2001 and $1.580 billion or 2.82% a year
ago. The increase in delinquencies versus the prior year was partly due to the
impact of 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 2002 first 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.
PRIMERICA FINANCIAL SERVICES
<Table>
<Caption>
FIRST QUARTER
------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001 Change
- ----------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 512 $ 490 4
Provision for benefits and claims 134 128 5
Total operating expenses 181 169 7
-------------------------------
INCOME BEFORE TAXES 197 193 2
Income taxes 69 68 1
-------------------------------
INCOME(1) $ 128 $ 125 2
==============================================================================================
</Table>
(1) Excludes investment gains/losses included in Investment Activities segment.
PRIMERICA FINANCIAL SERVICES -- which sells life insurance as well as other
products manufactured by the Company, including Salomon Smith Barney mutual
funds, CitiFinancial mortgages and personal loans, and Travelers Insurance
Company (TIC) annuity products -- reported income of $128 million in the 2002
first quarter, up from $125 million in the comparable period of 2001. The
improvement in 2002 reflects strong $.M.A.R.T. loan(R) sales, partially offset
by lower net investment income. Earned premiums, net of reinsurance, were $294
million in the 2002 first quarter, up from $284 million in the comparable period
of 2001.
Total face amount of issued term life insurance was $18.3 billion in the 2002
first quarter, compared to $16.3 billion in the prior-year period. Life
insurance in force reached $441.3 billion at March 31, 2002, up from $434.8
billion at year-end 2001 and $415.4 billion at March 31, 2001, and continued to
reflect good policy persistency.
Primerica leverages its cross selling efforts 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 2002 first
quarter, 109,000
11
<Page>
FNAs were submitted. Primerica sales of variable annuities predominately
underwritten by TLA generated net written premiums and deposits of $225 million
in the 2002 first quarter, compared to $248 million in the prior-year period.
Cash advanced on loan products primarily underwritten by CitiFinancial was
$1.254 billion in the 2002 first quarter, up 81% from the comparable period last
year. The increase in cash advanced reflects rate reductions implemented during
2001 and increased sales efforts through higher levels of agents licensed for
$.M.A.R.T. loan(R) and $.A.F.E. loan(R) products. Sales of mutual funds were
$937 million for the 2002 first quarter, 6% below last year's first quarter,
reflecting a difficult market environment. During the 2002 first quarter,
proprietary mutual funds accounted for 70% of Primerica's U.S. sales and 57% of
total sales, compared to 59% and 48%, respectively, in the 2001 first quarter.
INTERNATIONAL CONSUMER
WESTERN EUROPE
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ----------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 682 $ 626 9
Total operating expenses 352 350 1
Provisions for benefits, claims, and credit losses 99 99 -
-----------------------------------
INCOME BEFORE TAXES 231 177 31
Income taxes 76 65 17
-----------------------------------
INCOME $ 155 $ 112 38
==========================================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 24 $ 23 4
Return on assets 2.62% 1.97%
==========================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
WESTERN EUROPE -- which provides banking, community-based lending, including
credit and charge cards, and investment products and services -- reported income
of $155 million in the 2002 first quarter, up $43 million or 38% from the 2001
first quarter, mainly reflecting growth in the branch and consumer finance
businesses across the region, particularly in the U.K. and Germany.
The net effect of foreign currency translation reduced income growth by
approximately $5 million in the 2002 first quarter. Revenues, expenses and the
provisions for benefits, claims, and credit losses growth rates were also
reduced by approximately 4, 3, and 4 percentage points, respectively, from the
2001 first quarter.
As shown in the following table, Western Europe accounts increased 4% and
deposit volumes increased 1% from a year ago. Growth in loan volumes in the 2002
first quarter was driven by increases in Germany, Italy, Spain and in the U.K.,
which also benefited from the impact of acquisitions.
<Table>
<Caption>
FIRST QUARTER
---------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- ------------------------------------------------------------------------------------
Accounts (IN MILLIONS) 10.8 10.4 4
Average customer deposits $ 13.0 $ 12.9 1
Average loans $ 19.7 $ 18.3 8
====================================================================================
</Table>
Revenues, net of interest expense, of $682 million in the 2002 first quarter
increased $56 million or 9% from the 2001 first quarter, principally due to
growth in branch lending, bankcard and consumer finance revenues, reflecting
increased volumes and spreads. Revenue growth in 2002 was partially offset by
the first quarter 2001 sale of Diners Club franchises in the region and foreign
currency translation. Total operating expenses of $352 million in the 2002 first
quarter increased $2 million or 1% from the 2001 first quarter as volume-related
increases were essentially offset by foreign currency translation and
expense-reduction initiatives.
The provisions for benefits, claims, and credit losses were $99 million in the
2002 first quarter, unchanged from the 2001 first quarter. The net credit loss
ratio was 1.99% in the 2002 first quarter, compared to 2.00% in the 2001 fourth
quarter and 2.01% in the 2001 first quarter. Loans delinquent 90 days or more
were $817 million or 4.10% of loans at March 31, 2002, compared to $824 million
or 4.07% at December 31, 2001 and $811 million or 4.52% at March 31, 2001. Net
credit losses and the related loss ratio may increase in the future 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.
12
<Page>
JAPAN
<Table>
<Caption>
FIRST QUARTER
---------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -----------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 826 $ 835 (1)
Total operating expenses 259 353 (27)
Provision for credit losses 195 162 20
-------------------------------
INCOME BEFORE TAXES 372 320 16
Income taxes 134 115 17
-------------------------------
INCOME $ 238 $ 205 16
============================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 20 $ 19 5
Return on assets 4.83% 4.38%
===============================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
JAPAN -- which provides banking, community-based lending, including credit
cards, and investment products and services -- reported income of $238 million
in the 2002 first quarter, up $33 million or 16% from 2001, reflecting a $15
million after-tax benefit due to the absence of goodwill and other
indefinite-lived intangible asset amortization and growth in business volumes,
including the impact of the acquisition of Taihei Co., Ltd. (Taihei), partially
offset by higher credit losses and the net effect of foreign currency
translation. On February 28, 2002, CitiFinancial Japan acquired the consumer
finance business of Taihei, which added approximately $650 million in
end-of-period receivables.
The net effect of foreign currency translation reduced income growth by
approximately $27 million in the 2002 first quarter. Revenues, expenses, and
provision for credit losses growth rates were also reduced by 17, 15, and 29
percentage points, respectively, from the 2001 first quarter.
As shown in the following table, the Japan business experienced growth in
accounts, customer deposits, and loans from 2001. Growth in 2002 benefited from
the acquisition of Taihei, which added approximately $0.2 billion to average
loans and 0.2 million to accounts. Excluding the impact of foreign currency
translation, average customer deposits and average loans increased 23 and 16
percentage points, respectively from the prior year.
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- ----------------------------------------------------------------------------------
Accounts (IN MILLIONS) 5.4 4.9 10
Average customer deposits $ 15.8 $ 14.3 10
Average loans $ 14.2 $ 13.5 5
==================================================================================
</Table>
Total revenues, net of interest expense, of $826 million in the 2002 first
quarter decreased $9 million or 1% from 2001, reflecting the adverse impact of
foreign currency translation and lower spreads, partially offset by growth in
business volumes, including the acquisition of Taihei, and increased foreign
exchange fees. Total operating expenses of $259 million were down $94 million or
27% from the 2001 first quarter, reflecting the impact of foreign currency
translation and a $19 million benefit due to the absence of goodwill and other
indefinite-lived intangible asset amortization.
The provision for credit losses in the 2002 first quarter was $195 million, up
$33 million or 20% from the 2001 first quarter. The net credit loss ratio of
5.57% in the 2002 first quarter increased from 4.53% in the 2001 fourth quarter
and 4.06% in the prior-year quarter. The increase in net credit losses was
primarily due to increased bankruptcy filings and deteriorating credit quality.
Loans delinquent 90 days or more were $187 million or 1.26% of loans at March
31, 2002, compared to $178 million or 1.24% at December 31, 2001 and $107
million or 0.81% a year ago. Net credit losses and the related ratio are
expected to increase from the 2002 first quarter as a result of continued
increases in bankruptcy filings and higher unemployment rates in Japan. This is
a forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 32.
13
<Page>
ASIA
<Table>
<Caption>
FIRST QUARTER
------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -----------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 562 $ 540 4
Total operating expenses 248 245 1
Provisions for benefits, claims, and credit losses 82 62 32
-------------------------------
INCOME BEFORE TAXES 232 233 -
Income taxes 83 86 (3)
-------------------------------
INCOME $ 149 $ 147 1
======================================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 26 $ 25 4
Return on assets 2.32% 2.38%
======================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
ASIA (EXCLUDING JAPAN) -- which provides banking, lending, including credit and
charge cards, and investment services to customers throughout the region --
reported income of $149 million in the 2002 first quarter, up $2 million or 1%
from 2001, reflecting volume growth across the region especially in investment
product fees, cards, treasury results and branch lending, partially offset by
higher credit losses and the effects of foreign currency translation. Income of
$147 million in the 2001 first quarter included a gain related to the
contribution of Citigroup's insurance operations in Taiwan to its joint venture
with Fubon.
The net effect of foreign currency translation reduced income growth by
approximately $7 million in the 2002 first quarter and reduced revenues,
expenses, and the provisions for benefits, claims, and credit losses growth by
4, 2, and 5 percentage points, respectively, from the 2001 first quarter.
As shown in the following table, Asia experienced strong growth in accounts from
the 2001 first quarter, reflecting growth in the cards business across the
region. Foreign currency translation effects reduced growth in loan and deposit
volumes.
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- --------------------------------------------------------------------------------
Accounts (IN MILLIONS) 10.0 8.6 16
Average customer deposits $ 35.0 $ 36.1 (3)
Average loans $ 21.2 $ 21.6 (2)
================================================================================
</Table>
Revenues, net of interest expense, of $562 million in the 2002 first quarter
increased $22 million or 4% from 2001, reflecting growth in investment product
fees, cards, treasury revenue and branch lending, partially offset by the
January 2001 gain related to Fubon and foreign currency translation effects.
Total operating expenses increased $3 million or 1% from the 2001 first quarter
reflecting expansion initiatives across the region, partially offset by foreign
currency translation effects.
The provisions for benefits, claims, and credit losses were $82 million in the
2002 first quarter, up $20 million from the 2001 first quarter. Net credit
losses in the 2002 first quarter were $79 million and the related loss ratio was
1.51%, up from $68 million and 1.28% in the 2001 fourth quarter and $61 million
and 1.14% a year ago. Loans delinquent 90 days or more were $374 million or
1.79% of loans at March 31, 2002, compared with $367 million or 1.73% at
December 31, 2001 and $334 million or 1.58% a year ago. The increases in the net
credit loss ratio and loans delinquent 90 days or more are primarily in Taiwan,
Hong Kong and South Korea. Net credit losses and loans delinquent 90 days or
more may increase from 2002 first 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.
14
<Page>
LATIN AMERICA
<Table>
<Caption>
FIRST QUARTER
------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 383 $ 472 (19)
Adjusted operating expenses(2) 218 287 (24)
Provisions for benefits, claims, and credit losses 324 84 NM
-------------------------------
CORE INCOME (LOSS) BEFORE TAXES (159) 101 NM
Income taxes (70) 33 NM
-------------------------------
CORE INCOME (LOSS) (89) 68 NM
Restructuring-related items, after-tax (15) - NM
-------------------------------
INCOME (LOSS) $ (104) $ 68 NM
=======================================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 7 $ 9 (22)
Return on assets NM 3.06%
=======================================================================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets NM 3.06%
=======================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
LATIN AMERICA (EXCLUDING MEXICO) -- which provides banking, lending, including
credit and charge cards, insurance and pension fund administration and
investment services to customers throughout the region -- reported losses before
restructuring-related items, of $89 million in the 2002 first quarter, compared
to core income of $68 million a year ago, primarily reflecting charges taken in
Argentina and the net effects of foreign currency translation due to the
devaluation of the Argentine Peso. Losses of $104 million in the 2002 first
quarter included restructuring-related charges of $15 million ($25 million
pretax), which reflects initiatives to downsize headcount and branches in
Argentina.
As shown in the following table, average customer deposits and average loans
decreased primarily reflecting foreign currency translation effects due to the
devaluation of the Argentine Peso.
<Table>
<Caption>
FIRST QUARTER
------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- -----------------------------------------------------------------------------------
Accounts (IN MILLIONS) 8.4 8.2 2
Average customer deposits $ 9.1 $ 11.0 (17)
Average loans 4.8 6.5 (26)
===================================================================================
</Table>
Revenues, net of interest expense, of $383 million in the 2002 first quarter
were down $89 million or 19% from 2001, primarily reflecting weakness in
Argentina, due to reduced business activity as well as the unfavorable foreign
currency translation effects from the devaluation of the Argentine Peso,
partially offset by higher regional treasury results. Adjusted operating
expenses of $218 million decreased $69 million or 24% from the 2001 first
quarter, primarily reflecting the benefit of foreign currency translation and
expense reduction initiatives across the region.
The provisions for benefits, claims, and credit losses were $324 million in the
2002 first quarter, compared with $84 million in the prior year. The increase in
the provisions for benefits, claims, and credit losses was mainly due to an
addition of $235 million to the loan loss reserve, due to deteriorating credit
in Argentina. The increase in the loan loss reserve for Argentina reflects
management's estimate of the impact on the consumer portfolio of the economic
and political events which occurred in the first quarter, including the
limitations imposed on withdrawals of funds, the bankruptcy moratorium, and the
rising unemployment rate. The net credit loss ratio in the 2002 first quarter
was 6.50%, compared with 4.93% in the 2001 fourth quarter and 4.24% a year ago,
primarily reflecting write-downs in Argentina. Loans delinquent 90 days or more
were $171 million or 4.03% of loans at March 31, 2002, compared with $248
million or 4.71% at December 31, 2001 and $302 million or 4.74% a year ago.
Loans delinquent 90 days or more declined, primarily reflecting foreign currency
translation effects due to the devaluation of the Argentine Peso. The ratio of
loans delinquent 90 days or more declined from the 2001 fourth quarter as
Argentina now reflects a smaller proportion of the Latin American loan
portfolio, primarily reflecting the devaluation of the Argentine Peso. Net
credit losses and loans delinquent 90 days or more may increase from 2002 first
quarter levels due to the continuing economic crisis in Argentina and may be
impacted by further unemployment and instability of prices. Income may also be
impacted by government decrees and judicial orders in Argentina. These
statements are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. See "Forward-Looking Statements" on page 32.
15
<Page>
MEXICO
<Table>
<Caption>
FIRST QUARTER
----------------------------------
IN MILLIONS OF DOLLARS 2002 2001(1)
- -----------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 1,085 $ 153
Adjusted operating expenses(2) 614 129
Provisions for benefits, claims, and credit losses 121 11
----------------------------------
CORE INCOME BEFORE TAXES 350 13
Income taxes 70 9
----------------------------------
CORE INCOME 280 4
Restructuring-related items, after-tax (3) -
----------------------------------
INCOME $ 277 $ 4
=========================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 69 $ 11
Return on assets 1.63% 0.15%
=========================================================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 1.65% 0.15%
=========================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
MEXICO -- which includes the results of Grupo Financiero Banamex (Banamex) from
August 2001, as well as Citigroup's legacy 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
$280 million in the 2002 first quarter, up $276 million compared to 2001,
primarily reflecting the acquisition of Banamex. Income of $277 million in the
2002 first quarter includes a restructuring-related charge of $3 million ($4
million pretax).
On August 6, 2001, Citicorp completed its acquisition of Banamex with the
transaction being accounted for as a purchase. In the 2001 fourth quarter,
Citibank Mexico's banking operations merged into Banamex, with Banamex being the
surviving entity. In February 2002, Banamex completed the purchase of AEGON's
48% interest in Seguros Banamex (Life Insurance) and AFORE Banamex (Pension Fund
Manager) for $1.24 billion. The business also finalized the sale of Bansud (a
subsidiary of Banamex) in Argentina in January 2002.
<Table>
<Caption>
FIRST QUARTER
-------------------------------
IN BILLIONS OF DOLLARS 2002 2001
- -------------------------------------------------------------------
Accounts (IN MILLIONS) 17.5 1.7
Average customer deposits $ 30.2 $ 3.0
Average loans 19.5 3.7
===================================================================
</Table>
Revenues, net of interest expense, of $1.085 billion in the 2002 first quarter
increased $932 million from 2001, primarily reflecting the acquisition of
Banamex. Revenues reflect strong volume growth from the underlying customer
deposit business and cards, combined with improvements in trading revenue
primarily due to interest rate positioning, partially offset by declining
spreads. The customer deposit business was impacted by lower interest rates that
reduced spreads on deposits. Adjusted operating expenses of $614 million in the
2002 first quarter increased $485 million from 2001, primarily reflecting the
acquisition of Banamex. The business continues to take actions to rationalize
headcount, branches and systems.
The provisions for benefits, claims, and credit losses in the 2002 first quarter
were $121 million compared with $11 million in 2001. The consumer net credit
loss ratio was 3.89% in the 2002 first quarter, compared with 3.88% in the 2001
fourth quarter and 4.13% a year ago. Consumer loans delinquent 90 days or more
were $470 million or 7.89% of loans at March 31, 2002, compared with $523
million or 8.75% at December 31, 2001 and $16 million or 5.19% a year ago. The
improvement in consumer loans delinquent 90 days or more from the 2001 fourth
quarter primarily reflects improved collections. The increase from March 31,
2001 primarily results from the acquisition of Banamex.
Commercial cash-basis loans were $1.095 billion at March 31, 2002, compared with
$1.030 billion at December 31, 2001 and $68 million a year ago. The increase in
the 2002 first quarter versus March 31, 2001 reflects the acquisition of Banamex
whose commercial cash-basis loans include exposures in steel, textile, food
products and other industries.
Net credit losses, cash-basis loans, and loans delinquent 90 days or more may
increase from first quarter 2002 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>
CENTRAL & EASTERN EUROPE, MIDDLE EAST & AFRICA
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ----------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 149 $ 130 15
Total operating expenses 100 93 8
Provision for credit losses 11 9 22
-----------------------------------
INCOME BEFORE TAXES 38 28 36
Income taxes 14 10 40
-----------------------------------
INCOME $ 24 $ 18 33
====================================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 4 $ 4 -
Return on assets 2.43% 1.83%
====================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
CENTRAL & EASTERN EUROPE, MIDDLE EAST & AFRICA (CEEMEA--INCLUDING INDIA AND
PAKISTAN) -- which provides banking, lending, including credit and charge cards,
and investment services to customers throughout the region -- reported income of
$24 million in the 2002 first quarter, up $6 million or 33% from 2001,
reflecting continued growth in cards, investment product fees and branch lending
across the region, particularly in India and Poland, partially offset by lower
results in Turkey and Pakistan and due to increased spending on branch expansion
and marketing initiatives.
As shown in the following table, CEEMEA reported 21% account growth from the
2001 first quarter, primarily reflecting growth in cards, customer deposits, and
other lending, as franchise growth efforts continued across the region.
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- ----------------------------------------------------------------------------------
Accounts (IN MILLIONS) 4.0 3.3 21
Average customer deposits $ 6.1 $ 5.6 9
Average loans 2.5 2.2 14
==================================================================================
</Table>
Revenues, net of interest expense, of $149 million in the 2002 first quarter
increased $19 million or 15% from 2001, primarily reflecting volume growth in
cards, investment product fees and branch lending across the region,
particularly in India and Poland, partially offset by lower results in Turkey
and Pakistan. Total operating expenses of $100 million increased $7 million or
8% from the 2001 first quarter, reflecting higher business volumes and franchise
expansion initiatives in the region.
The provision for credit losses was $11 million in the 2002 first quarter,
compared with $9 million in 2001. The net credit loss ratio was 1.75% in the
2002 first quarter, compared with 1.60% in the 2001 fourth quarter and 1.66% a
year ago. The increase in the net credit loss ratio primarily reflects higher
losses in certain segments in the Middle East and economic slowdown in Eastern
Europe. Loans delinquent 90 days or more of $36 million or 1.42% of loans at
March 31, 2002 were essentially unchanged from $36 million or 1.41% at December
31, 2001 and increased from $33 million or 1.40% at March 31, 2001.
e-CONSUMER
<Table>
<Caption>
FIRST QUARTER
---------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ----------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 40 $ 47 (15)
Total operating expenses 73 86 (15)
----------------------------------
LOSS BEFORE TAX BENEFITS (33) (39) 15
Income tax benefits (13) (15) 13
----------------------------------
LOSS $ (20) $ (24) 17
==============================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
e-CONSUMER -- the business responsible for developing and implementing Global
Consumer Internet financial services products and e-commerce solutions --
reported a loss of $20 million in the 2002 first quarter, compared to a loss of
$24 million in the 2001 first quarter.
Revenues, net of interest expense, in the 2002 first quarter decreased $7
million or 15% from 2001 as a prior year realized investment gain was partially
offset by growth in Citicorp Electronic Financial Services, which provides
electronic benefit transfer services to states throughout the country. Total
operating expenses declined $13 million or 15% from the 2001 first quarter,
mainly reflecting lower depreciation, amortization and compensation costs.
17
<Page>
OTHER CONSUMER
<Table>
<Caption>
FIRST QUARTER
---------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ------------------------------------------------------------------------------------------------------------------
ADJUSTED REVENUES, NET OF INTEREST EXPENSE $ (3) $ (5) 40
Adjusted operating expenses(2) 30 31 (3)
Adjusted provisions for benefits, claims, and credit losses 8 (8) NM
----------------------------------
CORE LOSS BEFORE TAX BENEFITS (41) (28) (46)
Income tax benefits (12) (11) 9
----------------------------------
CORE INCOME (LOSS) (29) (17) (71)
Restructuring-related items, after-tax - (4) 100
----------------------------------
LOSS $ (29) $ (21) (38)
==================================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
OTHER CONSUMER -- which includes certain treasury and other unallocated staff
functions and global marketing and other programs --reported losses before
restructuring-related items of $29 million in the 2002 first quarter and $17
million in the 2001 first quarter. The increase in losses from 2001 was
primarily due to lower foreign currency hedge gains and treasury results. The
loss of $21 million in the 2001 first quarter included restructuring-related
items of $4 million ($6 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 businesses.
18
<Page>
CONSUMER PORTFOLIO REVIEW
In the consumer portfolio, credit loss experience is often 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.
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
LOANS 90 DAYS OR MORE PAST DUE(1) LOANS NET CREDIT LOSSES(1)
-------------------------------------------------------------------------------------------------
IN MILLIONS OF DOLLARS, MAR. 31, MAR. 31, Dec. 31, Mar. 31, 1ST QTR. 1ST QTR. 4th Qtr. 1st Qtr.
EXCEPT LOAN AMOUNTS IN BILLIONS 2002 2002 2001(2) 2001(2) 2002 2002 2001(2) 2001(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Citibanking North America $ 12.0 $ 85 $ 96 $ 41 $ 12.0 $ 27 $ 30 $ 15
RATIO 0.71% 0.78% 0.56% 0.90% 0.97% 0.80%
Mortgage Banking 46.9 1,344 1,157 957 47.2 16 13 7
RATIO 2.87% 2.53% 2.12% 0.14% 0.12% 0.06%
Citi Cards 104.2 2,219 2,135 1,836 104.2 1,646 1,554 1,196
RATIO 2.13% 1.98% 1.84% 6.41% 5.91% 4.84%
Other North America Cards 1.4 5 6 6 1.2 12 13 12
RATIO 0.40% 0.61% 0.32% 4.08% 4.39% 2.90%
CitiFinancial 59.7 1,969 1,991 1,580 59.2 434 452 344
RATIO 3.30% 3.38% 2.82% 2.97% 3.06% 2.50%
Western Europe 19.9 817 824 811 19.7 97 101 91
RATIO 4.10% 4.07% 4.52% 1.99% 2.00% 2.01%
Japan 14.9 187 178 107 14.2 195 174 135
RATIO 1.26% 1.24% 0.81% 5.57% 4.53% 4.06%
Asia (excluding Japan) 20.9 374 367 334 21.2 79 68 61
RATIO 1.79% 1.73% 1.58% 1.51% 1.28% 1.14%
Mexico 6.0 470 523 16 6.0 57 57 3
RATIO 7.89% 8.75% 5.19% 3.89% 3.88% 4.13%
Latin America 4.3 171 248 302 4.8 77 69 68
RATIO 4.03% 4.71% 4.74% 6.50% 4.93% 4.24%
CEEMEA 2.6 36 36 33 2.5 11 10 9
RATIO 1.42% 1.41% 1.40% 1.75% 1.60% 1.66%
The Citigroup Private Bank(3) 27.5 143 135 65 27.0 2 10 (1)
RATIO 0.52% 0.53% 0.27% 0.04% 0.15% (0.01)%
Other 0.6 - 5 17 1.2 1 29 (9)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL MANAGED $320.9 $7,820 $7,701 $6,105 $320.4 $2,654 $2,580 $ 1,931
RATIO 2.44% 2.37% 2.04% 3.36% 3.20% 2.61%
====================================================================================================================================
Securitized receivables (65.9) (1,351) (1,282) (1,243) (66.9) (935) (897) (691)
Loans held for sale (12.5) (122) (110) (148) (12.5) (78) (69) (75)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER LOANS $242.5 $6,347 $6,309 $4,714 $241.0 $1,641 $1,614 $ 1,165
RATIO 2.62% 2.58% 2.14% 2.76% 2.66% 2.10%
====================================================================================================================================
</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 the current period's presentation.
(3) The Citigroup Private Bank results are reported as part of the Global
Investment Management and Private Banking segment.
CONSUMER LOAN BALANCES, NET OF UNEARNED INCOME
<Table>
<Caption>
END OF PERIOD AVERAGE
-------------------------------- -------------------------------
MAR. 31, Dec. 31, Mar. 31, 1ST QTR. 4th Qtr. 1st Qtr.
IN BILLIONS OF DOLLARS 2002 2001 2001 2002 2001 2001
- -----------------------------------------------------------------------------------------------------
TOTAL MANAGED $ 320.9 $ 324.4 $ 299.6 $ 320.4 $ 320.2 $ 300.0
Securitized receivables (65.9) (68.4) (63.7) (66.9) (67.6) (62.2)
Loans held for sale (12.5) (11.9) (15.3) (12.5) (11.6) (13.4)
-------------------------------- -------------------------------
ON-BALANCE SHEET $ 242.5 $ 244.1 $ 220.6 $ 241.0 $ 241.0 $ 224.4
=====================================================================================================
</Table>
19
<Page>
Total delinquencies 90 days or more past due in the managed portfolio were
$7.820 billion or 2.44% of loans at March 31, 2002, compared to $7.701
billion or 2.37% at December 31, 2001 and $6.105 billion or 2.04% at March
31, 2001. Total managed net credit losses in the 2002 first quarter were
$2.654 billion and the related loss ratio was 3.36%, compared to $2.580
billion and 3.20% in the 2001 fourth quarter and $1.931 billion and 2.61% in
the 2001 first quarter. For a discussion of trends by business, see business
discussions on pages 7 - 18.
Citigroup's allowance for credit losses of $10.520 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 $5.401 billion at March 31, 2002, $5.169 billion
at December 31, 2001, and $4.956 billion at March 31, 2001. The increase in the
allowance for credit losses from December 31, 2001 was due to increases related
to Argentina. The increase in the allowance for credit losses from a year ago
also includes the impact of the acquisitions of Banamex and EAB. The allowance
as a percentage of loans on the balance sheet was 2.23% at March 31, 2002, up
from 2.13% at December 31, 2001 and down from 2.24% at March 31, 2001. The
increase in the allowance as a percentage of loans from December 31, 2001 was
primarily due to the increase in the allowance related to Argentina combined
with declines in loans in Citi Cards, mainly due to increased securitizations,
and Latin America, primarily reflecting the devaluation of the Argentine Peso.
The decline in the allowance as a percentage of loans from a year ago primarily
reflects the growth in consumer loans as well as stricter lending standards in
individual businesses. On-balance sheet consumer loans of $242.5 billion grew
$22 billion or 10% from March 31, 2001, primarily driven by the impact of the
acquisitions of Banamex and EAB and increases in CitiFinancial's real estate and
auto loans. On-balance sheet loans in Citi Cards declined in 2002 as growth in
managed receivables was more than offset by increased securitization activity.
In addition, loans in 2002 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.
Net credit losses, delinquencies, and the related ratios may increase from the
2002 first quarter as a result of the credit performance of the portfolios,
including bankruptcies, global economic conditions, portfolio growth, and
seasonal 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.
GLOBAL CORPORATE
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -----------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 6,650 $ 7,480 (11)
Adjusted operating expenses(2) 4,131 4,959 (17)
Provisions for benefits, claims, and credit losses 680 269 NM
-----------------------------------
CORE INCOME BEFORE TAXES AND MINORITY INTEREST 1,839 2,252 (18)
Income taxes 654 804 (19)
Minority interest, after-tax 3 4 (25)
-----------------------------------
CORE INCOME 1,182 1,444 (18)
Restructuring-related items, after-tax (8) (68) 88
-----------------------------------
INCOME $ 1,174 $ 1,376 (15)
===========================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
GLOBAL CORPORATE serves corporations, financial institutions, governments,
investors, and other participants in capital markets throughout the world. It
consists of the Corporate and Investment Bank (CIB) and Emerging Markets
Corporate Banking & Global Transaction Services (EM Corporate & GTS).
Global Corporate reported core income of $1.182 billion in the 2002 first
quarter, down $262 million or 18% from the 2001 first quarter. The decline in
core income resulted from a decrease in EM Corporate & GTS, down $226 million or
54% to $195 million and a decrease in the CIB, down $36 million or 4% to $987
million. EM Corporate & GTS core income decreased primarily due to charges
reflecting the impact of economic conditions in Argentina, partially offset by
growth in trading-related revenue in all regions and expense control
initiatives. The CIB decline reflects decreases in equities trading-related
revenues and higher net credit losses, partially offset by expense control
initiatives.
Income of $1.174 billion in the 2002 first quarter included a
restructuring-related charge of $8 million ($13 million pretax). See Note 8 to
the 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
20
<Page>
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 2002 first
quarter levels due to weak global economic conditions, sovereign or regulatory
actions and other factors. 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>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -----------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 5,045 $ 5,682 (11)
Adjusted operating expenses(2) 3,185 3,868 (18)
Provision for credit losses 312 230 36
-----------------------------------
CORE INCOME BEFORE TAXES 1,548 1,584 (2)
Income taxes 561 561 -
-----------------------------------
CORE INCOME 987 1,023 (4)
Restructuring-related items, after-tax - (66) 100
-----------------------------------
INCOME $ 987 $ 957 3
===============================================================================================
</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, leasing and
equipment finance.
The CIB reported core income of $987 million in the 2002 first quarter, down $36
million or 4% from $1.023 billion in the 2001 first quarter. The decline
primarily reflects decreases in equities trading-related revenues and higher net
credit losses, partially offset by expense control initiatives.
Revenues by category were as follows:
<Table>
<Caption>
FIRST QUARTER
---------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ----------------------------------------------------------------------------------------------------
Commissions and fees $ 992 $ 1,072 (7)
Investment banking 1,043 1,239 (16)
Principal transactions 928 1,561 (41)
Asset management and administration fees 513 536 (4)
Interest and dividend income, net 1,509 1,003 50
Other income 60 271 (78)
----------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 5,045 $ 5,682 (11)
====================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
Revenues, net of interest expense, decreased $637 million or 11% to $5.045
billion in the 2002 first quarter from $5.682 billion in the 2001 first quarter.
Commissions and fees of $992 million decreased $80 million or 7% from the 2001
first quarter, primarily reflecting lower customer transaction activity.
Declines in listed securities and options commissions were partially offset by
increases in commissions from over-the-counter securities.
Investment banking revenues were $1.043 billion in the 2002 first quarter, down
$196 million or 16% from the 2001 first quarter, primarily due to declines in
merger and acquisition fees and high-grade debt underwriting, partially offset
by increases in equity underwriting which included fees on the TPC initial
public offering.
Principal transactions revenues were $928 million in the 2002 first quarter,
down $633 million or 41% from the 2001 first quarter, primarily reflecting
decreases in fixed income and equities. Fixed income principal transactions
decreases were more than offset by an associated increase in net interest
revenue.
Asset management and administration fees of $513 million decreased $23 million
or 4% from the 2001 first quarter. The decrease primarily reflects a shift in
the mix of asset levels whose billings are calculated on a one quarter lag.
These 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.
21
<Page>
Net interest and dividend income of $1.509 billion increased $506 million or 50%
compared to the 2001 first quarter, primarily due to wider spreads in fixed
income products, particularly mortgage-backed securities, as well as in loans.
Other income of $60 million decreased $211 million or 78% compared to the 2001
first quarter, primarily due to lower earnings from the Nikko Salomon Smith
Barney joint-venture and the effect of a change in the second quarter of 2001 in
the presentation of intercompany balances that had the effect of reducing other
income and other expense.
Total assets under fee-based management at March 31, were as follows:
<Table>
<Caption>
MARCH 31,
----------------------------------- %
IN BILLIONS OF DOLLARS 2002 2001 Change
- --------------------------------------------------------------------------------------------------
Financial Consultant managed accounts $ 55.2 $ 51.9 6
Consulting Group internally managed assets 154.3 134.4 15
-----------------------------------
TOTAL ASSETS UNDER FEE-BASED MANAGEMENT(1) $ 209.5 $ 186.3 12
==================================================================================================
</Table>
(1) Includes assets managed jointly with Citigroup Asset Management.
Adjusted operating expenses were $3.185 billion in the 2002 first quarter, down
$683 million or 18% compared to the prior-year quarter. The decrease primarily
reflects 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 2001. Other operating and administrative expenses declined
primarily due to tight expense controls, a change in the presentation of
intercompany balances that had the effect of reducing other income and other
expense, and the absence of goodwill and other indefinite-lived intangible asset
amortization.
The provision for credit losses was $312 million in the 2002 first quarter, up
$82 million from $230 million in the 2001 first quarter, primarily due to higher
net credit losses in the telecommunications and energy industries.
Cash-basis loans were $1.598 billion at March 31, 2002, $1.525 billion at
December 31, 2001, and $1.149 billion at March 31, 2001, primarily reflecting
increases in the transportation leasing portfolio and borrowers in the
telecommunication and energy industries. 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 2002 first
quarter levels due to weak economic conditions in the U.S., Japan and Europe
as well as stress in the telecommunications industry. This statement is a
forward-looking statement within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 32.
EMERGING MARKETS CORPORATE BANKING AND GLOBAL TRANSACTION SERVICES
<Table>
<Caption>
FIRST QUARTER
---------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ----------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 1,605 $ 1,798 (11)
Adjusted operating expenses(2) 946 1,091 (13)
Provision for credit losses 368 39 NM
----------------------------------
CORE INCOME BEFORE TAXES AND MINORITY INTEREST 291 668 (56)
Income taxes 93 243 (62)
Minority interest, after-tax 3 4 (25)
----------------------------------
CORE INCOME 195 421 (54)
Restructuring-related items, after-tax (8) (2) NM
----------------------------------
INCOME $ 187 $ 419 (55)
====================================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 112 $ 109 3
Return on assets 0.68% 1.56%
====================================================================================================
EXCLUDING RESTRUCTURING-RELATED ITEMS
Return on assets 0.71% 1.57%
====================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
NM Not meaningful
EM CORPORATE BANKING & GTS -- which 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 -- reported core income of $195
million in the 2002 first quarter, down $226 million or 54% from the 2001 first
quarter due to charges reflecting the impact of economic conditions in
Argentina, partially offset by growth in trading-related revenue in all regions
and expense control initiatives. The decline in core income was driven by Latin
America, which was down $244 million, and CEEMEA, which was down $22 million,
partially offset by expense improvements in Transaction Services operations in
North America and Europe. Income of $187 million in the 2002 first
22
<Page>
quarter included a restructuring-related charge of $8 million ($13 million
pretax), primarily related to the downsizing of operations in Argentina.
Total revenues, net of interest expense, of $1.605 billion in the 2002 first
quarter declined $193 million or 11% compared to the 2001 first quarter. The
decline in revenue was primarily due to Latin America, which was down 15%
mainly due to the redenomination losses and the adverse impact of currency
translation in Argentina, partially offset by the benefit recorded for the
compensation instruments. CEEMEA revenues were down 11% from the 2001 first
quarter primarily reflecting a Bank Handlowy merger-related gain in the 2001
first quarter. Asia revenues were down 4% primarily due to weakness in
Transaction Services, partially offset by strong growth in trading-related
revenue.
Adjusted operating expenses of $946 million in the 2002 first quarter decreased
$145 million or 13% primarily due to expense reduction initiatives in
Transaction Services operations in North America and Europe, the benefit of
restructuring actions initiated in the 2001 second quarter across all regions
and foreign currency translation benefits in Argentina.
The provision for credit losses of $368 million in the 2002 first quarter
increased $329 million compared to the 2001 first quarter, primarily due to an
addition to the loan loss reserve of $240 million and write-offs of $100 million
in Argentina. The reserve additions and write-offs in Argentina reflect the
impairment of loans in the first quarter due to the impact of the devaluation,
redenomination, economic conditions and other factors. Cash-basis loans
(excluding Mexico) were $1.767 billion at March 31, 2002, up $630 million from
March 31, 2001 principally due to the increases in Latin America, mainly
Argentina, and increases in Asia, mainly Australia and New Zealand. Cash-basis
loans were up $302 million from December 31, 2001 principally due to the
increases in Latin America, mainly Argentina. 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 2002 first
quarter levels due to weak global economic conditions, the economic crisis in
Argentina, sovereign or regulatory actions and other factors. Income may also be
impacted by government decrees and judicial orders in Argentina. This statement
is a forward-looking statement 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 corresponding
three-month period.
<Table>
<Caption>
MAR. 31, Dec. 31, Mar. 31,
IN MILLIONS OF DOLLARS 2002 2001 2001(1)
- --------------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
Corporate and Investment Bank $ 1,598 $ 1,525 $ 1,149
EM Corporate & GTS 1,767 1,465 1,137
Mexico(2) 1,095 1,030 68
Insurance and Investment Activities 39 21 63
------------------------------------------------
TOTAL COMMERCIAL CASH-BASIS LOANS $ 4,499 $ 4,041 $ 2,417
============================================================================================
NET CREDIT LOSSES
Corporate and Investment Bank $ 357 $ 560 $ 229
EM Corporate & GTS 128 195 40
Mexico(2) 2 46 8
------------------------------------------------
TOTAL COMMERCIAL NET CREDIT LOSSES $ 487 $ 801 $ 277
============================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Includes Banamex cash-basis loans and net credit losses in the 2002 first
quarter and 2001 fourth quarter.
Total commercial cash-basis loans were $4.499 billion at March 31, 2002, $4.041
billion at December 31, 2001, and $2.417 billion at March 31, 2001. Cash-basis
loans in the CIB of $1.598 billion at March 31, 2002, $1.525 billion at December
31, 2001, and $1.149 billion at March 31, 2001 primarily reflect increases in
the transportation leasing portfolio and borrowers in the telecommunications and
energy industries. EM Corporate & GTS cash-basis loans (excluding Mexico) were
$1.767 billion at March 31, 2002, up $630 million from March 31, 2001
principally due to the increases in Latin America, mainly Argentina, and
increases in Asia, mainly Australia and New Zealand. EM Corporate & GTS
cash-basis loans were up $302 million from December 31, 2001 principally due to
the increases in Latin America, mainly Argentina. Mexico cash-basis loans were
$1.095 billion at March 31, 2002, compared with $1.030 billion at December 31,
2001 and $68 million at March 31, 2001. The increases primarily reflect the
acquisition of Banamex whose commercial cash-basis loans include exposures in
steel, textile, food products and other industries.
23
<Page>
Total commercial net credit losses of $487 million in the first quarter of 2002
increased $210 million compared to the first quarter of 2001, primarily
reflecting increases in the CIB and in EM Corporate & GTS. CIB net credit losses
of $357 million increased $128 million compared to the first quarter of 2001,
primarily due to higher net credit losses in the telecommunications and energy
industries and the transportation leasing portfolio. EM Corporate & GTS net
credit losses of $128 million increased $88 million compared to the first
quarter of 2001 primarily due to write-offs in Argentina. For a further
discussion of trends by business, see the business discussions on pages 20--23.
Citigroup's allowance for credit losses of $10.520 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 $5.119 billion at March 31, 2002 compared to
$4.919 billion and $4.001 billion at December 31, 2001 and March 31, 2001,
respectively. The increase in the allowance in the first quarter of 2002
primarily reflects an addition to the allowance of $240 million for Argentina.
The reserve addition for Argentina reflects the impairment caused in the first
quarter due to the impact on borrowers in the commercial portfolio from the
devaluation, redenomination, economic conditions and other factors. The increase
in the allowance from the 2001 first quarter also reflects the acquisition of
Banamex. 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 2002 first quarter levels due to weak global
economic conditions, the economic crisis in Argentina, 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.
<Table>
<Caption>
MAR. 31, Dec. 31, Mar. 31,
IN BILLIONS OF DOLLARS 2002 2001 2001
- -----------------------------------------------------------------------------------------------
Commercial allowance for credit losses $ 5.119 $ 4.919 $ 4.001
As a percentage of total commercial loans 3.49% 3.31% 2.75%
===============================================================================================
</Table>
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 1,736 $ 1,966 (12)
Adjusted operating expenses(2) 589 639 (8)
Provision for benefits, claims, and credit losses 540 731 (26)
-----------------------------------
CORE INCOME BEFORE TAXES 607 596 2
Income taxes 201 212 (5)
-----------------------------------
CORE INCOME 406 384 6
Restructuring-related items, after-tax (3) - -
-----------------------------------
INCOME $ 403 $ 384 5
=======================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING comprises Travelers Life and
Annuity (TLA), The Citigroup Private Bank and Citigroup Asset Management. These
businesses offer a broad range of life insurance, annuity and asset management
products and services including individual annuity, group annuity, individual
life insurance products, Corporate Owned Life Insurance (COLI) products, 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 reported core income of $406
million in the 2002 first quarter, up $22 million or 6% from the 2001 first
quarter. The increase reflects higher core income from The Citigroup Private
Bank of $17 million or 18%, and Citigroup Asset Management, up $15 million or
19%, partially offset by lower income from TLA of $10 million, a decrease of
5% from the 2001 first quarter. The increase at The Citigroup Private Bank
primarily reflects continued customer revenue momentum across a range of
products including client trading activity, investments and lending, and the
impact of lower interest rates, partially offset by increased expenses due to
higher variable, employee-related and technology costs and an increase in the
provision for credit losses. The increase at Citigroup Asset Management
primarily reflects decreased expenses and strong net flows, partially offset
by the impact of prior year one-time fees and weak global equity markets. The
decrease at TLA primarily reflects lower net investment income and was
partially offset by the impact of expense management and business volumes.
24
<Page>
TRAVELERS LIFE AND ANNUITY
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001 Change
- ------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 888 $ 1,130 (21)
Provision for benefits and claims 534 729 (27)
Total operating expenses 65 88 (26)
-----------------------------------
INCOME BEFORE TAXES 289 313 (8)
Income taxes 89 103 (14)
-----------------------------------
INCOME(1) $ 200 $ 210 (5)
================================================================================================
</Table>
(1) Excludes investment gains/losses included in Investment Activities segment.
TLA -- whose core offerings include individual annuity, group annuity, and
individual life insurance and corporate-owned life insurance (COLI) products --
reported income of $200 million in the 2002 first quarter compared to $210
million in the comparable period of 2001. The 5% decline reflects lower net
investment income which was partially offset by continued expense management.
Business volumes were strong with double-digit growth in individual annuity and
group annuity account balances and individual life net written premiums versus
the prior-year first quarter. These increases reflected growth in retirement
savings and estate planning products and continued sales from cross-selling
initiatives. Total operating expenses decreased 26% in the 2002 first quarter
compared to the prior-year first quarter due to continued expense management and
a change in deferred policy acquisition costs.
The cross-selling initiative of TLA products through Primerica Financial
Services (Primerica), Citibank, Salomon Smith Barney Financial Consultants, and
CitiStreet, as well as strong sales through various intermediaries, a nationwide
network of independent agents and outside broker dealers, 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:
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001 Change
- -------------------------------------------------------------------------------------------------
INDIVIDUAL ANNUITIES
Fixed $ 614 $ 427 44
Variable 898 1,099 (18)
Individual payout 14 19 (26)
GICS AND OTHER GROUP ANNUITIES 1,525 2,502 (39)
INDIVIDUAL LIFE INSURANCE
Direct periodic premiums and deposits 233 187 25
Single premium deposits 76 47 62
Reinsurance (26) (22) (18)
-----------------------------------
TOTAL $ 3,334 $ 4,259 (22)
=================================================================================================
</Table>
The majority of the annuity business and a substantial portion of the life
business written by TLA are accounted for as investment contracts, with the
result that the premiums are considered deposits and are not included in
revenues.
Individual annuities account balances reached $30.7 billion at March 31, 2002,
up from $27.9 billion at March 31, 2001, reflecting good in force policy
retention. Net written premiums and deposits for individual annuities in the
2002 first quarter were $1.526 billion, slightly below the $1.545 billion in the
comparable period of 2001, primarily driven by a decline in variable annuity
sales due to current market conditions, partially offset by significant fixed
annuity sales increases over the prior-year period. Sales continue to reflect
the cross-selling initiatives at all of the Citigroup affiliates, and reflect
continued penetration of outside broker-dealer channels.
Group annuity account balances and benefit reserves reached $21.3 billion at
March 31, 2002, up 13% from $18.9 billion at the end of the 2001 first quarter.
This volume growth reflects 2001 strong sales momentum in all products. Net
written premiums and deposits (excluding Citigroup's employee pension plan
deposits) were $1.525 billion in the 2002 first quarter, compared to $2.502
billion in the comparable period of 2001, which included higher levels of
structured finance transactions.
Direct periodic premiums and deposits for individual life insurance of $233
million in the 2002 first quarter were 25% ahead of the $187 million for the
comparable period of 2001, driven by independent agent, high end, and retirement
and estate planning. Life insurance in force was $77.8 billion at March 31,
2002, up from $75.0 billion at year-end 2001 and $69.4 billion at March 31,
2001.
25
<Page>
THE CITIGROUP PRIVATE BANK
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 423 $ 392 8
Adjusted operating expenses(2) 254 239 6
Provision for credit losses 6 2 NM
-----------------------------------
CORE INCOME BEFORE TAXES 163 151 8
Income taxes 51 56 (9)
-----------------------------------
CORE INCOME 112 95 18
Restructuring-related items, after-tax (2) - -
-----------------------------------
INCOME $ 110 $ 95 16
=========================================================================================================================
Average assets (IN BILLIONS OF DOLLARS) $ 28 $ 25 12
Return on assets 1.62% 1.54%
=========================================================================================================================
Client business volumes under management (IN BILLIONS OF DOLLARS) $ 166 $ 146 14
=========================================================================================================================
</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 $112 million in the 2002 first quarter, up $17 million or 18% from the 2001
first quarter, primarily reflecting continued customer revenue momentum and the
impact of lower rates, partially offset by increased expenses and an increase in
the provision for credit losses.
Client business volumes under management, which include custody accounts, client
assets under fee-based management, deposits, and loans, were $166 billion at the
end of the 2002 first quarter, up 14% from $146 billion at the end of the prior
year quarter and reflects increases in each major product line. Regionally, the
increase primarily reflects continued growth in Asia and the U.S.
Revenues, net of interest expense, were $423 million in the 2002 first quarter,
up $31 million or 8% from the 2001 first quarter, primarily reflecting continued
customer revenue momentum across a range of products including client trading
activity, investments and lending, and the impact of lower interest rates. The
increase in revenues reflected strong growth in Japan and North America, up 35%
and 30%, respectively, from the prior year quarter, partially offset by a 28%
decline in Europe primarily due to lower performance fees and client trading
activity.
Adjusted operating expenses of $254 million in the 2002 first quarter were up
$15 million or 6% from the prior-year quarter, primarily reflecting higher
levels of revenues and employee-related expenses, partially due to investment
spending in technology and front-end sales and servicing capabilities.
The provision for credit losses was $6 million in the 2002 first quarter,
compared with $2 million in the 2001 first quarter. The increase primarily
reflects higher write-offs and lower recoveries in the 2002 first quarter. Loans
90 days or more past due at the 2002 quarter-end were $143 million or 0.52% of
total loans outstanding, compared with $65 million or 0.27% at the end of the
2001 first quarter.
Average assets of $28 billion in the 2002 first quarter increased $3 billion or
12% from $25 billion in the 2001 first quarter, primarily due to higher mortgage
financing, margin and tailored lending.
26
<Page>
CITIGROUP ASSET MANAGEMENT
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -------------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 425 $ 444 (4)
Adjusted operating expenses(2) 270 312 (13)
-----------------------------------
CORE INCOME BEFORE TAXES 155 132 17
Income taxes 61 53 15
-----------------------------------
CORE INCOME 94 79 19
Restructuring-related items, after-tax (1) - -
-----------------------------------
INCOME $ 93 $ 79 18
=============================================================================================================
Assets under management (IN BILLIONS OF DOLLARS)(3)(4) $ 455 $ 403 13
=============================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Excludes restructuring-related items.
(3) Includes $31 billion and $29 billion in 2002 and 2001, respectively, for
The Citigroup Private Bank clients.
(4) Includes Unit Investment Trusts held in client accounts of $7 billion and
$8 billion and Latin America Affiliates assets under management of $21
billion and $7 billion in 2002 and 2001, respectively.
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. 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 and alternative
investments.
Core income of $94 million in the 2002 first quarter was up $15 million or 19%
compared to the 2001 first quarter, primarily due to decreased expenses and
strong net flows, partially offset by the impact of negative market action,
prior year one-time fees and the cumulative impact of outflows of retail Money
Market funds to the SSB Bank Deposit Program.
Assets under management rose 13% from the year-ago quarter to $455 billion,
reflecting strong net flows and an increase in Latin America Affiliates assets,
partially offset by negative market action and the transfer of retail Money
Market assets to the SSB Bank Deposit Program. Institutional client assets of
$155 billion at March 31, 2002, were up 33% compared to a year ago, reflecting
an increase in institutional money market funds and long-term product flows,
partially offset by negative market action. Retail client assets were $231
billion, down 1% compared to a year ago, primarily due to the SSB Bank Deposit
Program and negative market action, partially offset by strong net flows.
Citigroup Alternative Investments and Latin America Affiliates assets were $49
billion and $21 billion, respectively, at March 31, 2002, up 6% and 212%,
respectively, from the year-ago quarter. The increase in Latin America
Affiliates assets primarily relates to the Banamex acquisition.
Sales of proprietary mutual funds and managed account products at SSB declined
6% to $7.2 billion in the first quarter of 2002, compared to the prior-year
quarter, and represented 56% of SSB's retail channel sales. Sales of mutual and
money funds through Global Consumer's banking network decreased 23% to $2.2
billion in the 2002 first quarter compared to the prior-year quarter,
representing 45% of total sales, including $1.4 billion in International and
$0.8 billion in the U.S., of which Primerica sold $0.5 billion of proprietary
U.S. mutual and money funds, representing 70% of Primerica's total U.S. mutual
and money fund sales in the 2002 first quarter compared to 59% in the year-ago
quarter.
Revenues, net of interest expense, decreased $19 million or 4% from the year-ago
quarter to $425 million in the 2002 first quarter. The decrease was primarily
due to the cumulative impact of the outflows of retail Money Market funds to the
SSB Bank Deposit Program and the impacts of negative market action and prior
year one-time fees, partially offset by strong net flows.
Adjusted operating expenses of $270 million in the 2002 first quarter were down
$42 million or 13% from the 2001 first quarter, primarily reflecting continued
expense management, the absence of goodwill and indefinite-lived intangible
asset amortization in the 2002 first quarter, and reduced advertising and
marketing costs.
27
<Page>
PROPERTY AND CASUALTY
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001 Change
- ---------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 3,168 $ 3,018 5
Claims and claim adjustment expenses 1,976 1,783 11
Adjusted operating expenses(1) 756 769 (2)
-----------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST 436 466 (6)
Income taxes 109 124 (12)
Minority interest, after-tax - - -
-----------------------------------
CORE INCOME(2) 327 342 (4)
Restructuring-related items, after-tax (1) - -
-----------------------------------
INCOME $ 326 $ 342 (5)
===================================================================================================
</Table>
(1) Excludes restructuring-related items.
(2) Excludes investment gains/losses included in Investment Activities segment.
PROPERTY AND CASUALTY -- which reflects the Property and Casualty operations of
Travelers Property Casualty Corp. including the results of its Personal lines
business, Commercial lines business and Interest and Other which includes
interest expense and certain corporate income and expenses which have not been
allocated to the business lines -- reported core income of $327 million in the
2002 first quarter compared to $342 million in the prior-year period. The
decrease in core income in 2002 was primarily due to increased loss cost trends,
primarily due to inflationary pressures, favorable prior-year reserve
development in the 2001 first quarter and lower net investment income, partially
offset by the benefit of rate increases and lower interest expense. Core income
in the 2002 first quarter has benefited from rate increases in excess of loss
cost trends in both Commercial Lines and Personal Lines. Personal lines core
income declined 25% in the 2002 first quarter compared to the 2001 first
quarter, reflecting increased weather-related losses, continued higher loss cost
trends and a decline in net investment income which were offset in part by an 8%
increase in earned premiums. Commercial lines income declined 6% in the 2002
first quarter compared to the 2001 first quarter, largely resulting from a
decrease in net investment income and favorable prior year reserve development
in the 2001 first quarter. Interest and Other income in the 2002 first quarter
was $1 million compared to a loss of $23 million in the 2001 first quarter. The
primary component of Interest and Other is interest expense. The increase in
income in the 2002 first quarter compared to the 2001 first quarter is due to
lower average interest bearing debt levels and lower interest rates. The
decrease in interest bearing debt levels was primarily due to repayments of debt
obligations to Citigroup.
In late March 2002, TPC completed its initial public offering of 231 million
shares of its class A common stock, representing approximately 23.1% of its
outstanding equity securities, for net proceeds after underwriting discount of
$4.1 billion. Citigroup recognized an after-tax gain of $1.061 billion ($1.270
billion pretax) as a result of the TPC offering. Citigroup plans to make a
tax-free distribution to its stockholders of a portion of its remaining interest
in TPC by year-end 2002, such that following the distribution, Citigroup would
remain a holder of approximately 9.9% of TPC's outstanding equity securities.
Citigroup has no obligation to consummate the distribution by the end of 2002 or
at all. Income statement minority interest will be recognized on the initial
public offering portion beginning on April 1, 2002.
PERSONAL LINES
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001 Change
- --------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $1,146 $1,080 6
Claims and claim adjustment expenses 786 688 14
Adjusted operating expenses(1) 271 267 1
-----------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST 89 125 (29)
Income taxes 24 38 (37)
Minority interest, after-tax - - -
-----------------------------------
CORE INCOME(2) 65 87 (25)
Restructuring-related items, after-tax (1) - -
-----------------------------------
INCOME $ 64 $ 87 (26)
==================================================================================================
</Table>
(1) Excludes restructuring-related items.
(2) 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 $65 million in the 2002
first quarter compared to $87 million in the prior-year period. The decline
in the 2002 first quarter compared to the 2001 first quarter reflects the
effects of increased loss cost trends, favorable prior-year reserve
development in the 2001 first quarter, higher catastrophe losses and lower
net investment income, partially offset by the benefit of rate increases.
Rate increases and the benefits of underwriting actions initiated in 2001
exceeded the rise in loss cost trends in the 2002 first quarter.
28
<Page>
The following table shows net written premiums by product line:
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001 Change
- ----------------------------------------------------------------------------------------
Personal automobile $ 687 $ 639 8
Homeowners and other 350 323 8
-----------------------------------
Total net written premiums $ 1,037 $ 962 8
========================================================================================
</Table>
Personal Lines net written premiums for the 2002 first quarter were $1.037
billion compared to $962 million in the comparable period of 2001. The increase
in net written premiums in the 2002 first quarter compared to the 2001 first
quarter 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.
Catastrophe losses, net of taxes and reinsurance, were $10 million in the 2002
first quarter and were primarily due to ice storms in the Midwest and New York.
There were no catastrophe losses in the 2001 first quarter.
The statutory combined ratio for Personal Lines in the 2002 first quarter was
101.5% compared to 98.4% in the comparable period of 2001. The GAAP combined
ratio for Personal Lines in the 2002 first quarter was 102.5% compared to 99.4%
in the comparable period of 2001. 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 increase in the statutory and GAAP combined ratios for the 2002 first
quarter compared to the statutory and GAAP combined ratios for the 2001 first
quarter was primarily due to increased loss cost trends, favorable prior-year
reserve development in the 2001 first quarter and higher catastrophe losses,
partially offset by rate increases.
COMMERCIAL LINES
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001 Change
- --------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 2,011 $ 1,970 2
Claims and claim adjustment expenses 1,190 1,095 9
Total operating expenses 485 499 (3)
-----------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST 336 376 (11)
Income taxes 75 98 (23)
Minority interest, after-tax - - -
-----------------------------------
INCOME(1) $ 261 $ 278 (6)
==================================================================================================
</Table>
(1) Excludes investment gains/losses included in Investment Activities segment.
COMMERCIAL LINES -- which offers a broad array of property and casualty
insurance and insurance-related services through brokers and independent
agencies -- reported income of $261 million in the 2002 first quarter compared
to $278 million in the comparable period of 2001. The decline in the 2002 first
quarter compared to the 2001 first quarter reflects favorable prior-year reserve
development in the 2001 first quarter and lower net investment income, largely
offset by the benefit of rate increases in excess of loss cost trends, the
absence of goodwill and indefinite-lived intangible asset amortization in the
2002 first quarter, and no catastrophe losses in the 2002 first quarter
(compared to $8 million in the 2001 first quarter).
Net written premiums by market were as follows:
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -----------------------------------------------------------------------------------
National Accounts $ 97 $ 126 (23)
Commercial Accounts 849 761 12
Select Accounts 455 429 6
Bond 131 168 (22)
Gulf 145 175 (17)
-----------------------------------
TOTAL NET WRITTEN PREMIUMS $ 1,677 $ 1,659 1
===================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
Commercial Lines net written premiums in the 2002 first quarter totaled $1.677
billion, slightly ahead of the $1.659 billion in the comparable period of 2001.
The trend in written premiums for Commercial Accounts and Select Accounts
reflects the impact of an improving rate environment as evidenced by the
favorable pricing on new and renewal business. The increase in Commercial
Accounts net written premiums also reflects favorable new business in national
property. The decrease in National Accounts net
29
<Page>
written premiums was primarily due to a shift in current year business from
retrospective to deductible and prior year retrospective premium true-up
adjustments, partially offset by the repopulation of the involuntary pools.
National Accounts new business was significantly higher in the 2002 first
quarter than in the comparable period of 2001, reflecting National Accounts
being favorably impacted in its target loss-sensitive market by businesses
seeking quality insurers while still maintaining a strict underwriting
discipline. National Accounts business retention ratio in the 2002 first quarter
was moderately lower than in the 2001 first quarter, reflecting a focus on
account profitability and an increase in lost business due to renewal price
increases in 2002.
Commercial Accounts new business in the 2002 first quarter was significantly
higher than in the 2001 first quarter, reflecting the favorable impact of
businesses seeking quality insurers. Commercial Accounts business retention
ratio in the 2002 first quarter was moderately higher than in the 2001 first
quarter, reflecting the aggressive pricing strategy which has become more
prevalent in the overall marketplace.
New premium business in Select Accounts was moderately lower in the 2002 first
quarter than in the comparable period of 2001, reflecting the continued
disciplined approach to underwriting and risk management. Select Accounts
business retention ratio in the 2002 first quarter was marginally lower than in
the comparable period of 2001, reflecting an increase in lost business due to
renewal price increases in 2002.
Bond provides a variety of fidelity and surety bonds and executive liability
coverages to clients of all sizes through independent agents and brokers. The
2002 net written premium amount is lower by $18 million due to a reinsurance
change in Bond Executive Liability Excess of Loss Reinsurance Treaty that was
effective January 1, 2002. In addition, the 2001 amount is higher by $34 million
due to the termination of the Master Bond Liability Treaty effective January 1,
2001. Excluding these two reinsurance adjustments, Bond net written premiums
increased $15 million during the first quarter of 2002 compared to 2001
reflecting growth across all markets, partially offset by higher reinsurance
costs.
Gulf markets products to national, mid-size and small customers and distributes
them through both wholesale brokers and retail agents and brokers throughout the
United States. The decrease in Gulf net written premiums primarily reflects a
scale-back of assumed reinsurance business and the restructuring of its
transportation and property business.
There were no catastrophe losses in the 2002 first quarter. Catastrophe losses,
net of taxes and reinsurance, were $8 million in the 2001 first quarter due to
the Seattle earthquake.
The statutory combined ratio before policyholder dividends for Commercial Lines
in the 2002 first quarter was 101.6% compared to 100.5% in the comparable period
of 2001. The GAAP combined ratio before policyholder dividends for Commercial
Lines in the 2002 first quarter was 99.3% compared to 98.4% in the comparable
period of 2001. 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 increase in the 2002 first quarter statutory and GAAP combined ratios before
policyholder dividends compared to the 2001 first quarter statutory and GAAP
combined ratios before policyholder dividends was primarily due to increased
loss cost trends and favorable prior-year reserve development in the 2001 first
quarter, partially offset by the benefit of rate increases, underwriting
discipline and expense management.
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 dispute, 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 March 31,
2002, approximately 78% of the net environmental reserve (approximately $284
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 as well as for the anticipated cost of coverage
litigation disputes relating to these claims. The balance, approximately 22% of
the net environmental loss reserve (approximately $80 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 March 31, 2002,
approximately 79% (approximately $629 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 21% of the net asbestos
reserve (approximately $165 million), is for pending asbestos claims.
30
<Page>
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 March 31, 2002
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, the risks inherent in major litigation, any impact from
the bankruptcy protection sought by various asbestos producers and other
asbestos defendants, a further increase or decrease in asbestos and
environmental claims which cannot now be anticipated, the role of any
umbrella or excess policies the Company has issued for these claims, whether
or not an asbestos claim is a product/completed operation claim subject to an
aggregate limit and the available coverage, if any, for that claim, the
resolution or adjudication of some disputes pertaining to the amount of
available coverage for asbestos claims in a manner inconsistent with the
Company's previous assessment of these claims, the number and outcome of
direct actions against the Company, unanticipated developments pertaining to
the Company's ability to recover reinsurance for environmental and asbestos
claims and the willingness of parties, including the Company, to related
litigation to settle. 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. This development will be affected by
future court decisions and interpretations, as well as changes in applicable
legislation. In addition, particularly during the last few months of 2001 and
continuing into 2002, the asbestos-related trends have both accelerated and
become more visible. These trends include, but are not limited to, the filing
of additional claims, more intensive advertising by lawyers seeking asbestos
claimants, more aggressive litigation based on novel theories of liability
and litigation against new and previously peripheral defendants, including
insurers, and developments in existing and pending bankruptcy proceedings.
Because of the uncertainties set forth above, additional liabilities may arise
for amounts in excess of the current related reserves. These additional amounts,
or a range of these additional amounts, cannot now be reasonably estimated and
could result in a liability exceeding those reserves by an amount that could be
material to the Company's operating results in future periods. 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.
INVESTMENT ACTIVITIES
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- -------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 146 $ 233 (37)
Total operating expenses 33 32 3
-----------------------------------
INCOME BEFORE TAXES AND MINORITY INTEREST 113 201 (44)
Income taxes 44 70 (37)
Minority interest, after-tax (1) (1) -
-----------------------------------
INCOME $ 70 $ 132 (47)
=================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
INVESTMENT ACTIVITIES comprises Citigroup's venture capital activities, realized
investment gains (losses) from certain insurance-related investments, results
from certain proprietary investments, the results of certain investments in
countries that refinanced debt under the 1989 Brady Plan or plans of a similar
nature, and since August 2001, the investment portfolio related to Banamex.
Revenues, net of interest expense, are comprised of $88 million and ($94)
million from proprietary investments, $4 million and $20 million from LDC Debt
Sales/Refinancing portfolios and $54 million and $307 million from net realized
gains from insurance-related investments for the 2002 first quarter and 2001
first quarter, respectively.
Revenues, net of interest expense, of $146 million for the 2002 first quarter
decreased $87 million or 37% from the 2001 first quarter, primarily reflecting
higher impairment write-downs in insurance-related and other proprietary
investments, including $100 million in pretax write-downs on certain investments
in Argentina, and lower realized gains in insurance-related investments,
partially offset by higher venture capital results and a mark to market gain on
an investment in India.
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" on page 32.
31
<Page>
CORPORATE/OTHER
<Table>
<Caption>
FIRST QUARTER
----------------------------------- %
IN MILLIONS OF DOLLARS 2002 2001(1) Change
- ---------------------------------------------------------------------------------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE $ 96 $ (134) NM
Total operating expenses 185 141 31
Provision for benefits, claims, and credit losses - 1 NM
-----------------------------------
LOSS BEFORE TAX BENEFITS AND MINORITY INTEREST (89) (276) 68
Income tax benefits (16) (81) 80
Minority interest, after-tax 5 1 NM
-----------------------------------
LOSS $ (78) $ (196) 60
=========================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
NM Not meaningful
CORPORATE/OTHER includes net corporate treasury results, corporate staff and
other corporate expenses, certain intersegment eliminations, and the remainder
of Internet-related development activities not allocated to the individual
businesses.
Revenues, net of interest expense, were $96 million in the 2002 first quarter,
up $230 million from the 2001 first quarter, primarily due to lower net treasury
costs and the impact of higher intersegment eliminations. The lower net treasury
results are primarily related to reduced rates and the recognized benefits from
interest rate hedging activities, partially offset by increased funding costs
related to the Banamex acquisition.
Operating expenses were $185 million in the 2002 first quarter, up $44 million
from the 2001 first quarter, primarily due to the impact of higher intersegment
eliminations, partially offset by a decrease in certain net unallocated
corporate costs.
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, weakening global economic conditions; the
economic crisis in Argentina; government decrees and judicial orders in
Argentina; higher unemployment rates and the continued increase in bankruptcy
filings in Japan; sovereign or regulatory actions, and political conditions and
developments; credit performance of the portfolios, including bankruptcies,
portfolio growth, and seasonal factors; stress in the telecommunications
industry; subsidiaries' dividending capability; an increase in the amortization
period for certain direct loan origination costs; asbestos-related and
environmental-related developments including any impact from the bankruptcy
protection sought by various asbestos producers and other asbestos defendants,
the role of any umbrella or excess policies the Company has issued,
unanticipated developments pertaining to the Company's ability to recover
reinsurance for asbestos and environmental claims, changes in the legal and
legislative environment and their impact on the future development of asbestos
and environmental claims, more intensive advertising by lawyers seeking asbestos
claimants and the increasing focus by plaintiffs on new and previously
peripheral defendants, including insurers; the effect of banking and financial
services reforms, of rules governing the regulatory treatment of merchant
banking investments, and of rules regarding the regulatory capital treatment of
recourse, direct credit substitutes and residual interest in asset
securitizations; possible amendments to, and interpretations of, risk-based
capital guidelines and reporting instructions; the ability of states to adopt
more extensive consumer privacy protections through legislation or regulation;
the resolution of legal proceedings and related matters; 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.
32
<Page>
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 2001
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 2001 Annual Report and
Form 10-K.
THE MARKET RISK MANAGEMENT PROCESS
Market risk at Citigroup - like credit risk - is managed through corporate-wide
standards and business policies and procedures.
- - Market risks are measured in accordance with established standards to ensure
consistency across businesses and the ability to aggregate like risks at the
Citigroup-level.
- - Each business is required to establish, and have approved by independent
Market Risk Management, a market risk limit framework, including risk
measures, limits and controls, that clearly defines approved risk profiles
and is within the parameters of Citigroup's overall risk appetite.
- - Businesses, working in conjunction with independent Market Risk Management,
must ensure that market risks are independently measured, monitored and
reported, to ensure transparency in risk-taking activities and integrity in
risk reports.
In all cases, the businesses are ultimately responsible for the market risks
that they take, and for remaining within their defined limits. 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.
Liquidity Risk is discussed in the Liquidity and Capital Resources section.
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.
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 that are designated and effective as hedges. 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.
Earnings-at-Risk is the primary method for measuring price risk in Citigroup's
non-trading portfolios (excluding the insurance companies). Earnings-at-Risk
measures the pretax earnings impact of a specified upward and downward parallel
shift in the yield curve for the appropriate currency. The Earnings-at-Risk is
calculated separately for each currency and reflects the repricing gaps in the
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 assuming no correlation between exposures in different
currencies.
Citigroup's primary non-trading price risk exposure is to movements in the U.S.
dollar and Mexican peso interest rates. Citigroup also has Earnings-at-Risk in
various other currencies, however, there are no significant risk concentrations
in any other individual non-U.S. dollar currency.
The following table illustrates the impact to Citigroup's pretax earnings from a
100 basis point increase or decrease in the U.S. dollar yield curve. As of March
31, 2002, the potential impact on pretax earnings over the next 12 months is a
decrease of $611 million from an interest rate increase and an increase of $499
million from an interest rate decrease. The potential impact on pretax earnings
for periods beyond the first 12 months is an increase of $154 million from an
increase in interest rates and a decrease of $771 million from an interest rate
decrease. The change in Earnings-at-Risk from the prior year and prior-year end
primarily reflects an increase in the proportion of floating rate funding.
The statistical equivalent of a 100 basis point increase in Mexican peso
interest rates would have a potential positive impact on Citigroup's pretax
earnings of approximately $348 million over the next 12 months and a potential
positive impact of $34 million for
33
<Page>
the years thereafter. The statistical equivalent of a 100 basis points decrease
in Mexican peso interest rates would have a potential negative impact on
Citigroup's pretax earnings of approximately $348 million for the next 12 months
and potential negative impact of $34 million for the years thereafter. The
change in Earnings-at-Risk from the prior year primarily represents the
inclusion of Banamex's Mexican peso exposure while the change in
Earnings-at-Risk from the prior year-end reflects the repricing characteristics
of the portfolio.
Excluding the impact of changes in Mexican peso interest rates, the statistical
equivalent of a 100 basis point increase in other non-U.S. dollar interest rates
would have a potential negative impact on Citigroup's pretax earnings of $176
million over the next twelve months and potential negative impact of $26 million
for the years thereafter. The statistical equivalent of a 100 basis point
decrease in other non-U.S. dollar interest rates would have a potential positive
impact on Citigroup's pretax earnings of $178 million over the next twelve
months and a potential positive impact of $39 million for the years thereafter.
The change in Earnings-at-Risk from the prior year and the prior year-end
primarily represents changes in the asset and liability mix across a range of
currencies to reflect Citigroup's current view of interest rates.
CITIGROUP EARNINGS-AT-RISK (IMPACT ON PRETAX EARNINGS)(1)(2)
<Table>
<Caption>
MARCH 31, 2002 DECEMBER 31, 2001
IN MILLIONS OF OTHER NON-U.S. OTHER NON-U.S.
DOLLARS U.S. DOLLAR MEXICAN PESO DOLLAR U.S. DOLLAR MEXICAN PESO DOLLAR
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE DECREASE INCREASE DECREASE INCREASE DECREASE Increase Decrease Increase Decrease Increase Decrease
----------------------------------------------------------------------------------------------------------------
Twelve months and
less $ (611) $ 499 $ 348 $ (348) $ (176) $ 178 $(241) $ 244 $ 208 $ (208) $ (275) $ 278
Thereafter 154 (771) 34 (34) (26) 39 898 (1,082) 207 (207) (236) 250
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ (457) $(272) $ 382 $ (382) $ (202) $ 217 $ 657 $ (838) $ 415 $ (415) $ (511) $ 528
===================================================================================================================================
<Caption>
MARCH 31, 2001
OTHER NON-U.S.
IN MILLIONS OF DOLLARS U.S. DOLLAR MEXICAN PESO DOLLAR
- -------------------------------------------------------------------------------------------------------
Increase Decrease Increase Decrease Increase Decrease
--------------------------------------------------------------------
Twelve months and
less $ (171) $ 186 $ (20) $ 20 $ (214) $ 216
Thereafter 1,042 (1,229) (26) 26 (192) 206
- -------------------------------------------------------------------------------------------------------
Total $ 871 $ (1,043) $ (46) $ 46 $ (406) $ 422
=======================================================================================================
</Table>
(1) Excludes the insurance companies (see below).
(2) Prior year amounts have been restated to conform with the current period's
presentation.
INSURANCE COMPANIES
The table below reflects the estimated decrease in the fair value of financial
instruments held in the insurance companies, as a result of a 100 basis point
increase in interest rates.
<Table>
<Caption>
MARCH 31, December 31, March 31,
IN MILLIONS OF DOLLARS 2002 2001 2001
- --------------------------------------------------------------------------------------------------
ASSETS
Investments $ 3,659 $ 3,404 $ 2,980
- --------------------------------------------------------------------------------------------------
LIABILITIES
Long-term debt $ 47 $ 18 $ 26
Contractholder funds 774 775 557
Redeemable securities of subsidiary trusts 48 1 86
==================================================================================================
</Table>
A significant portion of 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,
complex product approval process, 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
34
<Page>
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 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
business 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 $71 million at March 31, 2002. Daily exposures averaged
$69 million during the first quarter and ranged from $57 million to $97 million.
The following table summarizes Value-at-Risk in the trading portfolios as of
March 31, 2002 and December 31, 2001, along with the averages.
<Table>
<Caption>
2002 Full
FIRST Year
MARCH 31, QUARTER December 31 2001
IN MILLIONS OF DOLLARS 2002 AVERAGE 2001 Average
- ----------------------------------------------------------------------------------------------------------
Interest rate $ 50 $ 50 $ 44 $ 55
Foreign exchange 11 10 9 12
Equity 27 22 10 15
All other (primarily commodity) 26 20 21 18
Covariance adjustment (43) (33) (30) (37)
---------------------------------------------------------------------
Total $ 71 $ 69 $ 54 $ 63
==========================================================================================================
</Table>
The table below provides the range of Value-at-Risk in the trading portfolios
that was experienced during the first quarter of 2002 and all of 2001.
<Table>
<Caption>
FIRST QUARTER Full-Year
2002 2001
--------------------------------------------------------------------
IN MILLIONS OF DOLLARS LOW HIGH Low High
- ----------------------------------------------------------------------------------------------------------
Interest rate $ 42 $ 67 $ 33 $ 90
Foreign exchange 5 16 6 22
Equity 13 51 9 53
All other (primarily commodity) 17 26 8 52
==========================================================================================================
</Table>
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 the 2001 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's (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.
35
<Page>
CROSS-BORDER OUTSTANDINGS AND COMMITMENTS
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 March 31, 2002 and
December 31, 2001 include:
<Table>
<Caption>
MARCH 31, 2002 December 31, 2001
- ----------------------------------------------------------------------------------------------------------- ----------------------
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 COMMITMENTS Cross-Border Commit-
DOLLARS CLAIMS(1) AGREEMENTS ALL OTHER TOTAL FRANCHISES OUTSTANDINGS (2) Outstandings ments(2)
- ----------------------------------------------------------------------------------------------------------- ---------------------
Germany $ 7.3 $ 6.2 $ 1.5 $ 15.0 $ 1.7 $ 16.7 $ 6.1 $ 13.5 $ 7.3
Mexico 4.2 - 5.5 9.7 2.3 12.0 0.8 12.3 0.6
Brazil 2.9 - 3.3 6.2 5.2 11.4 0.2 10.7 0.3
France 5.0 3.2 1.3 9.5 0.1 9.6 7.6 10.9 8.7
Italy 4.9 1.2 1.3 7.4 1.3 8.7 2.5 9.7 2.4
Japan 2.4 4.8 1.4 8.6 - 8.6 1.6 7.9 3.3
United Kingdom 3.4 1.6 3.5 8.5 - 8.5 17.2 11.2 16.8
Canada 2.4 0.6 2.3 5.3 2.2 7.5 3.4 7.9 3.4
====================================================================================================================================
</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.
Total cross-border outstandings for March 31, 2002 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 $27.4 billion for Germany, $13.3
billion for Mexico, $12.8 billion for Brazil, $10.2 billion for France, $12.6
billion for Italy, $8.0 billion for Japan, $8.8 billion for the United
Kingdom, and $8.4 billion for Canada.
Total cross-border outstandings for December 31, 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 $19.5 billion for Germany, $13.2 billion
for Mexico, $11.9 billion for Brazil, $13.5 billion for France, $12.8 billion
for Italy, $6.5 billion for Japan, $9.3 billion for the United Kingdom, and $8.9
billion for Canada.
LIQUIDITY AND CAPITAL RESOURCES
Citigroup's primary source of capital resources is its net earnings. Other
sources include proceeds from the issuance of trust preferred securities, senior
debt, subordinated debt and commercial paper. Citigroup can also generate funds
by securitizing various financial assets including credit card receivables and
other receivables generally secured by collateral such as automobiles and
single-family residences.
Citigroup uses these capital resources to pay dividends to its stockholders, to
repurchase its shares in the market pursuant to Board-of-Directors approved
plans, to support organic growth, to make acquisitions and to service its debt
obligations. As a financial holding company, substantially all of Citigroup's
net earnings are generated within its operating subsidiaries including Citibank,
Salomon Smith Barney Inc., TIC and TPC. Each of these subsidiaries makes these
funds available to Citigroup in the form of dividends. The subsidiaries'
dividend paying abilities are limited by certain covenant restrictions in credit
agreements and/or by regulatory requirements. Certain of these subsidiaries are
also subject to rating agency considerations that also impact their
capitalization levels.
During 2002, it is not anticipated that any restrictions on the subsidiaries'
dividending capability will restrict Citigroup's ability to meet its obligations
as and when they become due. It is also anticipated that Citigroup will maintain
its share repurchase program during 2002.
In late March 2002, TPC completed its initial public offering of 231 million
shares of its class A common stock, representing approximately 23.1% of its
outstanding equity securities, for net proceeds after underwriting discount
of $4.1 billion. Citigroup recognized an after-tax gain of $1.061 billion
($1.270 billion pretax) as a result of the TPC offering. Citigroup plans to
make a tax-free distribution to its stockholders of a portion of its
remaining ownership interest in TPC by year-end 2002, such that following the
distribution, Citigroup would remain a holder of approximately 9.9% of TPC's
outstanding equity securities. Citigroup has no obligation to consummate the
distribution by the end of 2002 or at all. The distribution of TPC, if it
occurs, will be treated as a dividend to stockholders for accounting purposes
that will reduce stockholders' equity by an amount in excess of $7 billion.
This paragraph and the preceding paragraph contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" on page 32.
36
<Page>
Citigroup, Citicorp and certain other subsidiaries 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.
Citigroup has unutilized bilateral committed revolving credit facilities in the
amount of $950 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
$58.6 billion at March 31, 2002.
Associates, a subsidiary of Citicorp, has a combination of unutilized credit
facilities of $6.8 billion as of March 31, 2002 which have maturities ranging
from 2002 to 2005. All of these facilities are guaranteed by Citicorp. In
connection with the facilities, Citicorp is required to maintain a certain level
of consolidated stockholder's equity (as defined in the agreements). At March
31, 2002, this requirement was exceeded by approximately $51.3 billion. Citicorp
has also guaranteed various debt obligations of Associates and CitiFinancial
Credit Company (CCC), an indirect subsidiary of Citicorp.
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 facility 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.
MANAGEMENT OF LIQUIDITY
Management of liquidity at Citigroup is the responsibility of the Corporate
Treasurer. A uniform liquidity risk management policy exists for Citigroup and
its major operating subsidiaries. Under this policy, there is a single set of
standards for the measurement of liquidity risk in order to ensure consistency
across businesses, stability in methodologies and transparency of risk.
Management of liquidity at each operating subsidiary and/or country is performed
on a daily basis and is monitored by Corporate Treasury. Each major operating
subsidiary and/or country must prepare an annual liquidity and funding plan for
the approval by the Corporate Treasurer. Under the annual liquidity and funding
plan, liquidity limits, targets and ratios are established. Contingency Funding
Plans are prepared on a periodic basis for Citigroup and each major operating
subsidiary and country. These plans include stress testing of assumptions about
significant changes in key funding sources, credit ratings, contingent uses of
funding, and political and economic conditions in Emerging Markets countries.
Citigroup's funding sources are well-diversified across funding types and
geography, a benefit of the strength of the global franchise. Funding for the
Parent and its major operating subsidiaries includes a large geographically
diverse retail and corporate deposit base, a significant portion of which is
considered core. Other sources of funding include collateralized borrowings,
securitizations (primarily credit card and mortgages), long-term debt, and
purchased/wholesale funds. This funding is significantly enhanced by Citigroup's
strong capital position. Each of Citigroup's major operating subsidiaries
finances its operations on a basis consistent with its capitalization,
regulatory structure and the operating environment in which it operates.
Other liquidity and capital resource considerations for Citigroup and its major
operating facilities follow.
OFF-BALANCE SHEET ARRANGEMENTS
Citigroup and its subsidiaries are involved with several types of off-balance
sheet arrangements, including special purpose entities (SPEs), lines and letters
of credit, and loan commitments. The principal uses of SPEs are to obtain
sources of liquidity by securitizing certain of Citigroup's financial assets, to
assist our clients in securitizing their financial assets, and to create other
investment products for our clients.
SPEs may be organized as trusts, partnerships, or corporations. In a
securitization, the company transferring assets to an SPE converts those assets
into cash before they would have been realized in the normal course of business.
The SPE obtains the cash needed to pay the transferor for the assets received by
issuing securities to investors in the form of debt instruments, certificates,
commercial paper, and other notes of indebtedness. Investors usually have
recourse to the assets in the SPE and often benefit from other credit
enhancements, such as a cash collateral account, overcollateralization in the
form of excess assets in the SPE, or a liquidity facility, such as a line of
credit or asset purchase agreement. Accordingly, the SPE can typically obtain a
more favorable credit rating from rating agencies, such as Standard and Poor's
and Moody's Investors Service, than the transferor could obtain for its own debt
issuances, resulting in less expensive financing costs. The transferor can use
the cash proceeds from the sale to extend credit to additional customers or for
other business purposes. The SPE may also enter into a derivative contract in
order to convert the yield or currency of the underlying assets to match the
needs of the SPE's investors or to limit the credit risk of the SPE. The Company
may be the counterparty to any such derivative. The securitization process
enhances the liquidity of the financial markets, may spread credit risk among
several market participants, and makes new funds available to extend credit to
consumers and commercial entities.
37
<Page>
SECURITIZATION OF CITIGROUP'S ASSETS
Citigroup securitizes credit card receivables, mortgage, home equity and auto
loans, and certain other financial assets that it originates or purchases.
CREDIT CARD RECEIVABLES
Credit card receivables are securitized through a trust, which is established to
purchase the receivables. Citigroup sells receivables into the trust on a
non-recourse basis.
After securitization of credit card receivables, the Company continues to
maintain credit card customer account relationships and provides servicing for
receivables transferred to the SPE trusts. As a result, the Company considers
both the securitized and unsecuritized credit card receivables to be part of the
business it manages. The documents establishing the trusts generally require the
Company to maintain an ownership interest in the trusts. The Company also
arranges for third parties to provide credit enhancement to the trusts,
including cash collateral accounts, subordinated securities, and letters of
credit. As specified in certain of the sale agreements, the net revenue with
respect to the investors' interest collected by the trusts each month is
accumulated up to a predetermined maximum amount, and is available over the
remaining term of that transaction to make payments of interest to trust
investors, fees, and transaction costs in the event that net cash flows from the
receivables are not sufficient. If the net cash flows are insufficient,
Citigroup's loss is limited to its retained interest. When the predetermined
amount is reached, net revenue with respect to the investors' interest is passed
directly to the Citigroup subsidiary that sold the receivables. Credit card
securitizations are revolving securitizations; that is, as customers pay their
credit card balances, the cash proceeds are used to replenish the receivables in
the trust. Salomon Smith Barney is one of several underwriters that distribute
securities issued by the trusts to investors. The Company relies on
securitizations to fund approximately 60% of its Card business.
At March 31, 2002, total assets in the credit card trusts were $81 billion. Of
that amount, $66 billion has been sold to investors via trust-issued securities,
and the remaining seller's interest of $15 billion is recorded in Citigroup's
Consolidated Statement of Financial Position as Consumer Loans. Citigroup
retains credit risk on its seller's interests. Amounts receivable from the
trusts were $996 million and amounts due to the trusts were $813 million at
March 31, 2002. During the quarter ended March 31, 2002, finance charges and
interchange fees of $2.5 billion were collected by the trusts. Also for the
quarter ended March 31, 2002, the trusts recorded $1.5 billion in coupon
interest paid to third-party investors, servicing fees, and other costs.
The following table summarizes certain cash flows received from and paid to
securitization trusts during the quarter ended March 31, 2002:
<Table>
<Caption>
IN BILLIONS OF DOLLARS CREDIT CARDS
- ----------------------------------------------------------------------------------------
Proceeds from new securitizations $ 3.5
Proceeds from collections reinvested in new receivables 33.9
Servicing fees received 0.3
Cash flows received on retained interest and other net cash flows 0.9
========================================================================================
</Table>
MORTGAGES, HOME EQUITY AND AUTO LOANS
The Company provides a wide range of mortgage, home equity and auto loan
products to a diverse customer base. In addition to providing a source of
liquidity and less expensive funding, securitizing these assets also reduces the
Company's credit exposure to the borrowers. In connection with the
securitization of these loans, servicing rights entitle the Company to a future
stream of cash flows based on the outstanding principal balances of the loans
and the contractual servicing fee. Failure to service the loans in accordance
with contractual servicing obligations may lead to a termination of the
servicing rights and the loss of future servicing fees. In non-recourse
servicing, the principal credit risk to the servicer arises from temporary
advances of funds. In recourse servicing, the servicer agrees to share credit
risk with the owner of the mortgage loans, such as FNMA, FHLMC, GNMA, or with a
private investor, insurer or guarantor. Our mortgage loan securitizations are
primarily non-recourse, thereby effectively transferring the risk of future
credit losses to the purchasers of the securities issued by the trust. Home
equity loans may be revolving lines of credit under which borrowers have the
right to draw on the line of credit up to their maximum amount for a specified
number of years. In addition to servicing rights, the Company also retains a
residual interest in its home equity, manufactured housing and auto loan
securitizations, consisting of seller's interest and interest-only strips that
arise from the calculation of gain or loss at the time assets are sold to the
SPE. At March 31, 2002, total loans securitized and outstanding were $78
billion.
SECURITIZATIONS OF CLIENT ASSETS
The Company acts as intermediary or agent for its corporate clients, assisting
them in obtaining sources of liquidity, by selling the clients' trade
receivables or other financial assets to an SPE.
38
<Page>
The Company administers several third-party owned, special purpose, multi-seller
finance companies that purchase pools of trade receivables, credit cards, and
other financial assets from third-party clients of the Company. As
administrator, the Company provides accounting, funding, and operations services
to these conduits. The Company has no ownership interest in the conduits. The
clients continue to service the transferred assets. The conduits' asset
purchases are funded by issuing commercial paper and medium-term notes. Clients
absorb the first losses of the conduit by providing collateral in the form of
excess assets. The Company along with other financial institutions provides
liquidity facilities, such as commercial paper back-stop lines of credit to the
conduits. The Company also provides second loss enhancement in the form of
letters of credit and other guarantees. All fees are charged on a market basis.
At March 31, 2002, total assets in the conduits were $53 billion.
The Company also securitizes clients' debt obligations in transactions involving
SPEs that issue collateralized debt obligations (CDOs). A majority of the
transactions are on behalf of clients where the Company first purchases the
assets at the request of the clients and warehouses them until the
securitization transaction is executed. Other CDOs are structured where the
underlying debt obligations are purchased directly in the open market or from
issuers. Some CDOs have static unmanaged portfolios of assets, while others have
a more actively managed portfolio of financial assets. The Company receives fees
for structuring and distributing the CDO securities to investors.
CREATION OF OTHER INVESTMENT PRODUCTS
The Company packages and securitizes assets purchased in the financial markets
in order to create new security offerings, including hedge funds, mutual funds,
and other investment funds, for institutional and private bank clients as well
as retail customers, that match the clients' investment needs and preferences.
The SPEs may be credit-enhanced by excess assets in the investment pool or by
third party insurers assuming the risks of the underlying assets, thus reducing
the credit risk assumed by the investors and diversifying investors' risk to a
pool of assets as compared with investments in individual assets. The Company
typically manages the SPE for market-rate fees. In addition, the Company may be
one of several liquidity providers to the SPE and may place the securities with
investors. The Company has no ownership interest in these entities.
CREDIT COMMITMENTS AND LINES OF CREDIT
The table below summarizes Citigroup's credit commitments as of March 31, 2002
and December 31, 2001.
<Table>
<Caption>
IN MILLIONS OF DOLLARS MARCH 31, 2002 December 31, 2001
- ----------------------------------------------------------------------------------------------------------------------------
Financial standby letters of credit and foreign office guarantees $ 31,799 $ 29,541
Performance standby letters of credit and foreign office guarantees 7,376 7,749
Commercial and similar letters of credit 4,730 5,681
One-to-four family residential mortgages 4,438 5,470
Revolving open-end loans secured by 1-4 family residential properties 7,996 7,107
Commercial real estate, construction and land development 1,912 1,882
Credit card lines(1) 401,891 387,396
Commercial and other consumer loan commitments(2) 199,509 210,909
---------------------------------------------------
TOTAL $ 659,651 $ 655,735
============================================================================================================================
</Table>
(1) Credit card lines are unconditionally cancelable by the issuer.
(2) Includes $127 billion and $138 billion with original maturity less than one
year at March 31, 2002 and December 31, 2001, respectively.
CAPITAL
CITIGROUP INC.
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>
MARCH 31, 2002 December 31, 2001
- -------------------------------------------------------------------------------------------
Tier 1 capital 9.13% 8.42%
Total capital (Tier 1 and Tier 2) 11.59 10.92
Leverage(1) 5.89 5.64
Common stockholders' equity 7.78 7.58
===========================================================================================
</Table>
(1) Tier 1 capital divided by adjusted average assets.
39
<Page>
Citigroup maintained a strong capital position during the first quarter of 2002.
Total capital (Tier 1 and Tier 2) amounted to $78.9 billion at March 31, 2002,
representing 11.59% of risk-adjusted assets. This compares to $75.8 billion and
10.92% at December 31, 2001. Tier 1 capital of $62.2 billion at March 31, 2002
represented 9.13% of risk-adjusted assets, compared to $58.4 billion and 8.42%
at December 31, 2001. Citigroup's leverage ratio was 5.89% at March 31, 2002
compared to 5.64% at December 31, 2001.
COMPONENTS OF CAPITAL UNDER REGULATORY GUIDELINES
<Table>
<Caption>
IN MILLIONS OF DOLLARS MARCH 31, 2002 December 31, 2001
- -----------------------------------------------------------------------------------------------------------------------
Tier 1 capital
Common stockholders' equity $ 82,238 $ 79,722
Qualifying perpetual preferred stock 1,400 1,400
Qualifying mandatorily redeemable securities of subsidiary trusts 6,725 6,725
Minority interest(1) 2,971 803
Less: Net unrealized gains on securities available-for-sale(2) (264) (852)
Accumulated net gains on cash flow hedges, net of tax (233) (168)
Intangible assets:
Goodwill (25,506) (23,861)
Other intangible assets (4,798) (4,944)
50% investment in certain subsidiaries(3) (67) (72)
Other (306) (305)
---------------------------------------------------
Total Tier 1 capital $ 62,160 $ 58,448
- -----------------------------------------------------------------------------------------------------------------------
Tier 2 capital
Allowance for credit losses(4) 8,538 8,694
Qualifying debt(5) 8,207 8,648
Unrealized marketable equity securities gains(2) 79 79
Less: 50% investment in certain subsidiaries(3) (67) (72)
---------------------------------------------------
Total Tier 2 capital 16,757 17,349
---------------------------------------------------
Total capital (Tier 1 and Tier 2) $ 78,917 $ 75,797
=======================================================================================================================
RISK-ADJUSTED ASSETS(6) $680,984 $694,035
=======================================================================================================================
</Table>
(1) The increase from December 31, 2001 primarily reflects the minority
interest related to the TPC Initial Public Offering.
(2) 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.
(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 $25.0 billion for interest rate, commodity
and equity derivative contracts and foreign exchange contracts, as of March
31, 2002, compared to $26.2 billion as of December 31, 2001. Market
risk-equivalent assets included in risk-adjusted assets amounted to $34.4
billion at March 31, 2002 and $31.4 billion at December 31, 2001.
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 $2.5 billion during the first
quarter of 2002 to $82.2 billion at March 31, 2002, representing 7.78% of
assets, compared to $79.7 billion and 7.58% at year-end 2001. The net
increase in common stockholders' equity during the first quarter of 2002
principally reflected net income of $4.8 billion and issuance of shares
pursuant to employee benefit plans and other activity of $1.3 billion which
was offset by the net issuance of restricted stock of $1.1 billion, $0.9
billion related to foreign currency translation adjustment, change in hedging
activities and unrealized gains and losses on investment securities, common
and preferred stock dividends of $0.8 billion, and treasury stock acquired of
$0.8 billion. The increase in the common stockholders' equity ratio during
the first quarter of 2002 also reflected the above items, partially offset by
the increase in total assets.
During the 2001 fourth quarter, 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 January 7, 2002, Citigroup redeemed for cash all outstanding shares of its
Series U cumulative preferred stock.
The total mandatorily redeemable securities of subsidiary trusts (trust
securities) which qualify as Tier 1 capital at both March 31, 2002 and December
31, 2001 were $6.725 billion. The amount outstanding at March 31, 2002 includes
$4.450 billion of parent-obligated securities and $2.275 billion of
subsidiary-obligated securities, and at December 31, 2001 includes $4.85 billion
of parent-obligated securities and $2.275 billion of subsidiary-obligated
securities. On January 7, 2002, Citigroup redeemed for cash the $400 million
Citigroup Capital I Trust Preferred Securities (16 million 8% Trust Preferred
Securities at the redemption price of $25 per Preferred Security plus any
accrued and unpaid distribution thereon).
40
<Page>
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 March 31,
2002, all of Citigroup's subsidiary depository institutions were "well
capitalized" under the Federal bank regulatory agencies' definitions.
On January 8, 2002, the FRB issued final rules that govern the regulatory
treatment of merchant banking investments and certain similar equity
investments, including investments made by venture capital subsidiaries, in
nonfinancial companies held by bank holding companies with certain exclusions.
The new rules impose a capital charge that would increase in steps as the
banking organization's level of concentration in equity investments increases.
An 8% Tier 1 capital deduction applies on covered investments that in the
aggregate represent up to 15% of an organization's Tier 1 capital. For covered
investments that aggregate more than 25% of the organization's Tier 1 capital, a
top marginal charge of 25% applies. The rules are not expected to have a
significant impact on Citigroup.
In December 2001, the Basel Committee on Banking Supervision (Committee)
announced that a new consultative package on the new Basel Capital Accord (new
Accord) would not be issued in early 2002, as previously indicated. Instead, the
Committee will first seek to complete a comprehensive impact assessment of the
draft proposal, after which a new consultative package will be issued. The new
Accord, which will apply to all "significant" banks, as well as to holding
companies that are parents of banking groups, is still 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.
On November 29, 2001, the FRB issued final rules regarding the regulatory
capital treatment of recourse, direct credit substitutes and residual interest
in asset securitizations. The rules require a deduction from Tier 1 capital for
the amount of credit-enhancing interest-only strips (a type of residual
interest) that exceeds 25% of Tier 1 capital, as well as requiring
dollar-for-dollar capital for residual interests not deducted for Tier 1
capital. These rules, which require adoption in the fourth quarter of 2002, are
not expected to have a significant impact on Citigroup.
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
paragraph and the preceding three paragraphs contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act. See
"Forward-Looking Statements" on page 32.
CITICORP
The in-country forum for liquidity issues is the Asset/Liability Management
Committee (ALCO), which includes senior executives within each country. The ALCO
reviews the current and prospective funding requirements for all businesses and
legal entities within the country, as well as the capital position and balance
sheet. All businesses within the country are represented on the committee with
the focal point being the Country Treasurer. The Country Corporate Officer and
the Country Treasurer ensure that all funding obligations in each country are
met when due. The Citigroup Corporate Treasurer, in concert with the Country
Corporate Officer and the Regional Market Risk Manager, appoints the Country
Treasurer.
Each Country Treasurer must prepare a liquidity plan at least annually that is
approved by the Country Corporate Officer, the Regional Treasurer, and the
Citigroup Corporate Treasurer. The liquidity profile is monitored on an on-going
basis and reported monthly. Limits are established on the extent to which
businesses in a country can take liquidity risk. The size of the limit depends
on the depth of the market, experience level of local management, the stability
of the liabilities, and liquidity of the assets. Finally, the limits are subject
to the evaluation of the entities' stress test results. Generally, limits are
established such that in stress scenarios, entities need to be self-funded or
providers of liquidity to Citicorp.
Regional Treasurers generally have responsibility for monitoring liquidity risk
across a number of countries within a defined geography. They are also available
for consultation and special approvals, especially in unusual or volatile market
conditions.
Citicorp's assets and liabilities are diversified across many currencies,
geographic areas, and businesses. Particular attention is paid to those
businesses which for tax, sovereign risk, or regulatory reasons cannot be freely
and readily funded in the international markets.
A diversity of funding sources, currencies, and maturities is used to gain a
broad access to the investor base. Citicorp's deposits, which represent 60% of
total funding at March 31, 2002 and 59% of funding at December 31, 2001, are
broadly diversified by both geography and customer segments.
Stockholders' equity, which grew $1.6 billion during the first three months of
2002 to $65.0 billion at March 31, 2002, 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 the
end of the 2002 first quarter was $74.6 billion, compared with $81.1 billion at
year-end 2001.
41
<Page>
Asset securitization programs remain an important source of liquidity. Loans
securitized during the first three months of 2002 included $3.5 billion of U.S.
credit cards and $6.4 billion of U.S. consumer mortgages. As credit card
securitization transactions amortize, newly originated receivables are recorded
on Citicorp's balance sheet and become available for asset securitization.
During the first quarter of 2002, the scheduled amortization of certain credit
card securitization transactions made available $3.5 billion of new receivables.
In addition, at least $5.9 billion of credit card securitization transactions
are scheduled to amortize during the rest of 2002.
Citicorp is a legal entity separate and distinct from Citibank, N.A. and its
other subsidiaries and affiliates. There are various legal limitations on the
extent to which Citicorp's banking subsidiaries may extend credit, pay dividends
or otherwise supply funds to Citicorp. The approval of the Office of the
Comptroller of the Currency is required if total dividends declared by a
national bank in any calendar year exceed net profits (as defined) for that year
combined with its retained net profits for the preceding two years. In addition,
dividends for such a bank may not be paid in excess of the bank's undivided
profits. State-chartered bank subsidiaries are subject to dividend limitations
imposed by applicable state law.
Citicorp's national and state-chartered bank subsidiaries can declare dividends
to their respective parent companies in 2002, without regulatory approval, of
approximately $5.7 billion, adjusted by the effect of their net income (loss)
for 2002 up to the date of any such dividend declaration. 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 its bank subsidiaries could have distributed dividends to
Citicorp, directly or through their parent holding company, of approximately
$5.4 billion of the available $5.7 billion, adjusted by the effect of their net
income (loss) up to the date of any such dividend declaration.
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 and leverage guidelines issued by the
FRB.
CITICORP RATIOS
<Table>
<Caption>
MARCH 31, 2002 December 31, 2001
- ------------------------------------------------------------------------------------------
Tier 1 capital 8.55% 8.33%
Total capital (Tier 1 and Tier 2) 12.82 12.41
Leverage(1) 6.83 6.85
Common stockholders' equity 10.17 9.81
==========================================================================================
</Table>
(1) Tier 1 capital divided by adjusted average assets.
Citicorp maintained a strong capital position during the 2002 first quarter.
Total capital (Tier 1 and Tier 2) amounted to $63.2 billion at March 31, 2002,
representing 12.82% of net risk-adjusted assets. This compares with $62.9
billion and 12.41% at December 31, 2001. Tier 1 capital of $42.2 billion at
March 31, 2002 represented 8.55% of net risk-adjusted assets, compared with
$42.2 billion and 8.33% at December 31, 2001. Citicorp's Tier 1 capital ratio at
March 31, 2002 was above Citicorp's target range of 8.00% to 8.30%.
SALOMON SMITH BARNEY HOLDINGS INC. (SALOMON SMITH BARNEY)
Salomon Smith Barney manages liquidity and monitors and evaluates capital
adequacy through a well-defined process described in Citigroup's 2001 Annual
Report and Form 10-K. Total assets were $308 billion at March 31, 2002, compared
to $301 billion at year-end 2001. Due to the nature of Salomon Smith Barney's
trading activities, it is not uncommon for asset levels to fluctuate from period
to period.
Salomon Smith Barney has a $5.0 billion 364-day committed uncollateralized
revolving line of credit with unaffiliated banks that extends through May 21,
2002, with repayment on any borrowings due by May 21, 2004. Salomon Smith Barney
may borrow under this revolving credit facility at various interest rate options
(LIBOR or base rate) and compensates the banks for this facility through
facility fees. At March 31, 2002, there were no borrowings outstanding under
this facility. Salomon Smith Barney also has committed long-term financing
facilities with unaffiliated banks. At March 31, 2002, Salomon Smith Barney had
drawn down the full $950 million then available under these facilities. A bank
can terminate its facility by giving Salomon Smith Barney one year's notice.
Salomon Smith Barney compensates the banks for the facilities through facility
fees. Under all of these facilities, Salomon Smith Barney is required to
maintain a certain level of consolidated adjusted net worth (as defined in the
respective agreements). At March 31, 2002, these requirements were exceeded by
approximately $4.7 billion. Salomon Smith Barney 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.
42
<Page>
Unsecured term debt is a significant component of Salomon Smith Barney's
long-term capital. Long-term debt totaled $26.2 billion at March 31, 2002 and
$26.8 billion at December 31, 2001. Salomon Smith Barney 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'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 $1.0
billion is available by the end of 2002 for such dividends without prior
approval of the Connecticut Insurance Department. However, the payment of a
significant portion of this amount is likely to be subject to such approval
depending upon the amount and timing of the payments. TPC received $275 million
of dividends from its insurance subsidiaries during the first three months of
2002.
THE TRAVELERS INSURANCE COMPANY (TIC)
At March 31, 2002, TIC had $34.8 billion of life and annuity product deposit
funds and reserves. Of that total, $19.3 billion is not subject to discretionary
withdrawal based on contract terms. The remaining $15.5 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 $4.6 billion of liabilities that is surrenderable with market
value adjustments. Also included is an additional $5.0 billion of the life
insurance and individual annuity liabilities which is subject to discretionary
withdrawals and an average surrender charge of 4.63%. In the payout phase, these
funds are credited at significantly reduced interest rates. The remaining $5.9
billion of liabilities is surrenderable without charge. More than 9.58% of this
relates to individual life products. These risks would have to be underwritten
again if transferred to another carrier, which is considered a significant
deterrent against withdrawal by long-term policyholders. 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 $586 million of statutory surplus is
available by the end of the year 2002 for such dividends without the prior
approval of the Connecticut Insurance Department, of which $271 million was paid
during the first three months of 2002.
43
<Page>
CONSOLIDATED FINANCIAL STATEMENTS
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2002 2001
- -------------------------------------------------------------------------------------------------
REVENUES
Loan interest, including fees $ 9,166 $ 10,004
Other interest and dividends 5,436 7,169
Insurance premiums 3,364 3,361
Commissions and fees 4,032 4,132
Principal transactions 1,666 2,325
Asset management and administration fees 1,320 1,389
Realized gains from sales of investments 54 451
Other income 856 973
-----------------------------------
TOTAL REVENUES 25,894 29,804
Interest expense 4,899 9,523
-----------------------------------
TOTAL REVENUES, NET OF INTEREST EXPENSE 20,995 20,281
-----------------------------------
BENEFITS, CLAIMS, AND CREDIT LOSSES
Policyholder benefits and claims expense 2,789 2,727
Provision for credit losses 2,559 1,474
-----------------------------------
TOTAL BENEFITS, CLAIMS, AND CREDIT LOSSES 5,348 4,201
-----------------------------------
OPERATING EXPENSES
Non-insurance compensation and benefits 5,090 5,329
Insurance underwriting, acquisition, and operating 992 999
Restructuring-related items 47 132
Other operating 3,683 4,041
-----------------------------------
TOTAL OPERATING EXPENSES 9,812 10,501
-----------------------------------
GAIN ON SALE OF STOCK BY SUBSIDIARY 1,270 -
-----------------------------------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 7,105 5,579
Provision for income taxes 2,198 1,990
Minority interest, net of income taxes 17 9
-----------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 4,890 3,580
Cumulative effect of accounting changes (47) (42)
-----------------------------------
NET INCOME $ 4,843 $ 3,538
=================================================================================================
BASIC EARNINGS PER SHARE
Income before cumulative effect of accounting changes $ 0.95 $ 0.71
Cumulative effect of accounting changes (0.01) (0.01)
-----------------------------------
NET INCOME $ 0.94 $ 0.70
===================================
Weighted average common shares outstanding 5,110.5 4,984.7
=================================================================================================
DILUTED EARNINGS PER SHARE
Income before cumulative effect of accounting changes $ 0.94 $ 0.70
Cumulative effect of accounting changes (0.01) (0.01)
-----------------------------------
NET INCOME $ 0.93 $ 0.69
===================================
Adjusted weighted average common shares outstanding 5,209.8 5,110.0
=================================================================================================
</Table>
See Notes to Consolidated Financial Statements.
44
<Page>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<Table>
<Caption>
MARCH 31,
2002 December 31,
IN MILLIONS OF DOLLARS (UNAUDITED) 2001
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks (including segregated cash and other deposits) $ 15,984 $ 18,515
Deposits at interest with banks 17,189 19,216
Federal funds sold and securities borrowed or purchased under agreements to resell 150,605 134,809
Brokerage receivables 26,848 35,155
Trading account assets (including $22,977 and $36,351 pledged to creditors at March 31, 2002
and December 31, 2001, respectively) 145,059 144,904
Investments (including $13,821 and $15,475 pledged to creditors at March 31, 2002
and December 31, 2001, respectively) 172,085 160,837
Loans, net of unearned income
Consumer 242,463 244,159
Commercial 146,498 147,774
----------------------------------
Loans, net of unearned income 388,961 391,933
Allowance for credit losses (10,520) (10,088)
----------------------------------
Total loans, net 378,441 381,845
Goodwill 25,506 23,861
Intangible assets 8,885 9,003
Reinsurance recoverables 12,531 12,373
Separate and variable accounts 25,981 25,569
Other assets 78,543 85,363
----------------------------------
TOTAL ASSETS $ 1,057,657 $ 1,051,450
====================================================================================================================================
LIABILITIES
Non-interest-bearing deposits in U.S. offices $ 21,652 $ 23,054
Interest-bearing deposits in U.S. offices 119,083 110,388
Non-interest-bearing deposits in offices outside the U.S. 18,488 18,779
Interest-bearing deposits in offices outside the U.S. 223,166 222,304
----------------------------------
Total deposits 382,389 374,525
Federal funds purchased and securities loaned or sold under agreements to repurchase 165,120 153,511
Brokerage payables 25,790 32,891
Trading account liabilities 81,537 80,543
Contractholder funds and separate and variable accounts 49,992 48,932
Insurance policy and claims reserves 49,840 49,294
Investment banking and brokerage borrowings 17,091 14,804
Short-term borrowings 24,805 24,461
Long-term debt 117,757 121,631
Other liabilities 52,992 62,486
----------------------------------
Citigroup or subsidiary obligated mandatorily redeemable securities of subsidiary
trusts holding solely junior subordinated debt securities of -- Parent 4,326 4,850
-- Subsidiary 2,380 2,275
----------------------------------
TOTAL LIABILITIES 974,019 970,203
- ------------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock ($1.00 par value; authorized shares: 30 million), at aggregate liquidation value 1,400 1,525
Common stock ($.01 par value; authorized shares: 15 billion), issued shares --
5,477,416,254 AT MARCH 31, 2002 and at December 31, 2001 55 55
Additional paid-in capital 23,860 23,196
Retained earnings 73,798 69,803
Treasury stock, at cost: MARCH 31, 2002 -- 312,056,455 shares
and December 31, 2001 -- 328,727,790 shares (11,194) (11,099)
Accumulated other changes in equity from nonowner sources (1,770) (844)
Unearned compensation (2,511) (1,389)
----------------------------------
TOTAL STOCKHOLDERS' EQUITY 83,638 81,247
----------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,057,657 $ 1,051,450
====================================================================================================================================
</Table>
See Notes to Consolidated Financial Statements.
45
<Page>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
----------------------------------
IN MILLIONS OF DOLLARS EXCEPT SHARES IN THOUSANDS 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK AT AGGREGATE LIQUIDATION VALUE
Balance, beginning of period $ 1,525 $ 1,745
Redemption of preferred stock (125) -
Other - 2
-----------------------------------
Balance, end of period 1,400 1,747
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period 23,251 16,558
Employee benefit plans 658 471
Other 6 75
----------------------------------
Balance, end of period 23,915 17,104
- ----------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance, beginning of period 69,803 58,862
Net income 4,843 3,538
Common dividends(1) (827) (711)
Preferred dividends (21) (29)
----------------------------------
Balance, end of period 73,798 61,660
- ----------------------------------------------------------------------------------------------------------------------
TREASURY STOCK, AT COST
Balance, beginning of period (11,099) (10,213)
Issuance of shares pursuant to employee benefit plans 733 992
Treasury stock acquired (828) (1,239)
Other - 161
----------------------------------
Balance, end of period (11,194) (10,299)
- ----------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER CHANGES IN EQUITY FROM NONOWNER SOURCES
Balance, beginning of period (844) 123
Cumulative effect of accounting change, net of tax(2) - 25
Net change in unrealized gains and losses on investment securities, net of tax (588) 147
Net change for cash flow hedges, net of tax 65 (49)
Net change in foreign currency translation adjustment, net of tax (403) (11)
----------------------------------
Balance, end of period (1,770) 235
- ----------------------------------------------------------------------------------------------------------------------
UNEARNED COMPENSATION
Balance, beginning of period (1,389) (869)
Net issuance of restricted stock (1,122) (919)
----------------------------------
Balance, end of period (2,511) (1,788)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKHOLDERS' EQUITY (SHARES OUTSTANDING: 5,165,360 IN 2002
and 5,033,745 in 2001) 82,238 66,912
- ----------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 83,638 $ 68,659
======================================================================================================================
SUMMARY OF CHANGES IN EQUITY FROM NONOWNER SOURCES
Net income $ 4,843 $ 3,538
Other changes in equity from nonowner sources, net of tax (926) 112
----------------------------------
TOTAL CHANGES IN EQUITY FROM NONOWNER SOURCES $ 3,917 $ 3,650
======================================================================================================================
</Table>
(1) Common dividends declared were 16 cents per share in the first quarter of
2002 and 14 cents per share in the first quarter of 2001.
(2) Refers to the first quarter 2001 adoption of SFAS No. 133.
See Notes to Consolidated Financial Statements.
46
<Page>
CITIGROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
----------------------------------
IN MILLIONS OF DOLLARS 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,843 $ 3,538
Adjustments to reconcile net income to net cash used in operating activities:
Amortization of deferred policy acquisition costs and value of insurance in force 462 445
Additions to deferred policy acquisition costs (619) (605)
Depreciation and amortization 376 673
Provision for credit losses 2,559 1,474
Change in trading account assets (155) (4,624)
Change in trading account liabilities 994 (324)
Change in federal funds sold and securities borrowed or purchased under agreements to resell (15,796) (28,311)
Change in federal funds purchased and securities loaned or sold under agreements to 11,609 25,614
repurchase
Change in brokerage receivables net of brokerage payables 1,206 (1,363)
Change in insurance policy and claims reserves 546 491
Net gains from sales of investments (54) (451)
Gain on sale of stock by subsidiary (1,270) -
Venture capital activity (44) 339
Restructuring-related items 47 132
Cumulative effect of accounting changes, net of tax 47 42
Other, net (8,340) (2,067)
----------------------------------
TOTAL ADJUSTMENTS (8,432) (8,535)
----------------------------------
NET CASH USED IN OPERATING ACTIVITIES (3,589) (4,997)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in deposits at interest with banks 2,027 (3,120)
Change in loans (9,218) (8,135)
Proceeds from sales of loans 11,548 6,831
Purchases of investments (186,257) (40,769)
Proceeds from sales of investments 162,924 26,617
Proceeds from maturities of investments 10,776 7,001
Other investments, primarily short-term, net 124 490
Capital expenditures on premises and equipment (342) (461)
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and repossessed 157 483
assets
Business acquisitions (2,071) (198)
----------------------------------
NET CASH USED IN INVESTING ACTIVITIES (10,332) (11,261)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (848) (740)
Issuance of common stock 205 428
Redemption of preferred stock (125) -
Issuance of mandatorily redeemable securities of subsidiary trust 105 -
Redemption of mandatorily redeemable securities of parent trust (524) -
Treasury stock acquired (828) (1,239)
Stock tendered for payment of withholding taxes (330) (272)
Proceeds from sale of stock by subsidiary 4,093 -
Issuance of long-term debt 8,842 13,956
Payments and redemptions of long-term debt (10,726) (6,728)
Change in deposits 7,864 12,699
Change in short-term borrowings and investment banking and brokerage borrowings 3,078 (3,018)
Contractholder fund deposits 2,088 2,598
Contractholder fund withdrawals (1,503) (1,485)
----------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,391 16,199
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1) (189)
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND DUE FROM BANKS (2,531) (248)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 18,515 14,621
----------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 15,984 $ 14,373
====================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for income taxes $ 3,312 $ 209
Cash paid during the period for interest 5,201 9,117
NON-CASH INVESTING ACTIVITIES
Transfers to repossessed assets 263 173
====================================================================================================================================
</Table>
See Notes to Consolidated Financial Statements.
47
<Page>
CITIGROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements as of March 31, 2002 and for
the three-month periods ended March 31, 2002 and 2001 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 2001 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. ACCOUNTING CHANGES
BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
Effective July 1, 2001, the Company adopted the provisions of SFAS No. 141 and
certain provisions of SFAS No. 142 as required for goodwill and intangible
assets resulting from business combinations consummated after June 30, 2001. The
new rules require that all business combinations consummated after June 30, 2001
be accounted for under the purchase method. The nonamortization provisions of
the new rules affecting goodwill and intangible assets deemed to have indefinite
lives are effective for all purchase business combinations completed after June
30, 2001.
On January 1, 2002, Citigroup adopted the remaining provisions of SFAS No. 142,
when the rules became effective for calendar year companies. Under the new
rules, effective January 1, 2002, goodwill and intangible assets deemed to have
indefinite lives are no longer amortized, but are subject to annual impairment
tests. Other intangible assets will continue to be amortized over their useful
lives.
The Company has performed the required impairment tests of goodwill and
indefinite-lived intangible assets as of January 1, 2002. There was no
impairment of goodwill upon adoption of SFAS No. 142. The initial adoption
resulted in a cumulative adjustment of $47 million after-tax recorded as a
charge to earnings related to the impairment of certain intangible assets in the
Property and Casualty and Global Investment Management and Private Banking
businesses.
48
<Page>
Net income and earnings per share for the first quarter of 2002 and 2001
adjusted to exclude amortization expense (net of taxes) related to goodwill and
indefinite lived intangible assets which are no longer amortized are as follows:
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
------------------------------------
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2002 2001
- -----------------------------------------------------------------------------------------------
NET INCOME:
Reported net income $ 4,843 $ 3,538
Goodwill amortization - 109
Indefinite-lived intangible assets amortization - 11
- -----------------------------------------------------------------------------------------------
Adjusted net income $ 4,843 $ 3,658
- -----------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Reported basic earnings per share $ 0.94 $ 0.70
Goodwill amortization - 0.03
Indefinite-lived intangible assets amortization - -
- -----------------------------------------------------------------------------------------------
Adjusted basic earnings per share $ 0.94 $ 0.73
- -----------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
Reported diluted earnings per share $ 0.93 $ 0.69
Goodwill amortization - 0.02
Indefinite-lived intangible assets amortization - -
- -----------------------------------------------------------------------------------------------
Adjusted diluted earnings per share $ 0.93 $ 0.71
===============================================================================================
</Table>
During the first quarter of 2002, no goodwill was impaired or written off. In
February 2002, Banamex completed the purchase of the remaining 48% interest in
Seguros Banamex, a life insurance business, and AFORE Banamex, a pension fund
management business, from AEGON for $1.24 billion which resulted in additional
goodwill of $1.07 billion in the Consumer segment. In addition, $74 million of
goodwill was recorded in the Consumer segment in connection with CitiFinancial
Japan's acquisition of the consumer finance business of Taihei Co., Ltd.
The changes in goodwill during the first quarter of 2002 were as follows:
<Table>
<Caption>
GLOBAL
INVESTMENT
MANAGEMENT AND
GLOBAL GLOBAL PRIVATE PROPERTY AND INVESTMENT CORPORATE/
IN MILLIONS OF DOLLARS CONSUMER CORPORATE BANKING CASUALTY ACTIVITIES OTHER TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at
January 1, 2002 $ 17,738 $ 3,315 $ 234 $ 2,574 $ - $ - $ 23,861
Goodwill acquired
during the period 1,144 - - - - - 1,144
Other(1) 256 171 - 74 - - 501
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT
MARCH 31, 2002 $ 19,138 $ 3,486 $ 234 $ 2,648 $ - $ - $ 25,506
====================================================================================================================================
</Table>
(1) Other changes in goodwill includes foreign exchange effects on non-dollar
denominated goodwill and certain other reclassifications.
At March 31, 2002, $1,265 million of the Company's acquired intangible assets,
including $760 million of asset management and administration contracts, $460
million of trade names and $45 million of other intangible assets, were
considered to be indefinite- lived and not subject to amortization. All other
acquired intangible assets are subject to amortization.
49
<Page>
The components of intangible assets were as follows:
<Table>
<Caption>
MARCH 31, 2002 December 31, 2001
----------------------------------------------------------------------------------------------
GROSS CARRYING ACCUMULATED NET CARRYING Gross Carrying Accumulated Net Carrying
(IN MILLIONS) AMOUNT AMORTIZATION AMOUNT Amount Amortization Amount
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased credit card relationships $ 4,084 $ 1,233 $ 2,851 $ 4,084 $ 1,136 $ 2,948
Mortgage servicing rights 2,440 1,126 1,314 2,248 1,075 1,173
Core deposit intangibles 1,032 74 958 975 38 937
Other customer relationships 1,310 275 1,035 1,176 249 927
Present value of future profits 622 416 206 587 410 177
Other(1) 1,644 388 1,256 3,782 941 2,841
----------------------------------------------------------------------------------------------
TOTAL AMORTIZING INTANGIBLE ASSETS $ 11,132 $ 3,512 $ 7,620 $ 12,852 $ 3,849 $ 9,003
Indefinite-lived intangible assets 1,265 -
----------------------------------------------------------------------------------------------
TOTAL INTANGIBLE ASSETS $ 8,885 $ 9,003
====================================================================================================================================
</Table>
(1) Primarily contract-related intangible assets.
The intangible assets recorded during the first quarter of 2002 and their
respective amortization periods were as follows:
<Table>
<Caption>
(IN MILLIONS) FIRST QUARTER WEIGHTED-AVERAGE
2002 AMORTIZATION PERIOD IN YEARS
- ------------------------------------------------------------------------------------------------------------------
MORTGAGE SERVICING RIGHTS $ 141 15
PRESENT VALUE OF FUTURE PROFITS(1) 35 22
OTHER CUSTOMER RELATIONSHIPS 137 6
---------------------------------------------------------
Total intangible assets recorded during the period(2) $ 313
==================================================================================================================
</Table>
(1) Present value of future profits acquired during the first quarter of
2002 will be amortized on an accelerated basis over 22 years.
(2) There was no significant residual value estimated for the intangible assets
recorded during the first quarter of 2002.
Intangible assets amortization expense was $204 million and $202 million for the
first three months of 2002 and 2001, respectively. Intangible assets
amortization expense is estimated to be $690 million for the remainder of 2002,
$840 million in 2003, $800 million in 2004, $760 million in 2005, $720 million
in 2006, and $660 million in 2007.
DERIVATIVES AND HEDGE ACCOUNTING
On January 1, 2001, Citigroup adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133
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 instruments embedded in
other contracts. SFAS No. 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. The majority of Citigroup's derivatives are entered into for
trading purposes and were not impacted by the adoption of SFAS No. 133. The
cumulative effect of adopting SFAS No. 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.
TRANSFERS AND SERVICING OF FINANCIAL ASSETS
In September 2000, the Financial Accounting Standards Board (FASB) issued
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, a replacement of FASB Statement No. 125"
(SFAS No. 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 No. 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 were 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. It is not expected that these provisions will materially affect the
financial statements. SFAS No. 140 also provides revised guidance for an entity
to be considered a qualifying special purpose entity.
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
On January 1, 2002, Citigroup adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144), when the rule
became effective for calendar year companies. SFAS No. 144 established
additional criteria as compared to previous 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.
50
<Page>
The provisions of the new standard are generally to be applied prospectively.
The provisions of SFAS No. 144 will affect the timing of discontinued operations
treatment for the planned tax-free distribution of Travelers Property Casualty
Corp.
3. BUSINESS DEVELOPMENTS
INITIAL PUBLIC OFFERING AND TAX-FREE DISTRIBUTION OF TRAVELERS PROPERTY CASUALTY
CORP.
Travelers Property Casualty Corp. (TPC) (an indirect wholly-owned subsidiary of
Citigroup on December 31, 2001) sold 231 million shares of its class A common
stock representing approximately 23.1% of its outstanding equity securities at
$18.50 per share in an initial public offering on March 27, 2002. Citigroup
recognized an after-tax gain of $1.061 billion as a result of the TPC offering.
Citigroup plans to make a tax-free distribution to its stockholders of a portion
of its remaining ownership interest in TPC by year-end 2002, such that following
the distribution, Citigroup would remain a holder of approximately 9.9% of TPC's
outstanding equity securities. Income statement minority interest will be
recognized on the initial public offering portion beginning on April 1, 2002.
The distribution is subject to receipt of a private letter ruling from the
Internal Revenue Service that the distribution will be tax-free to Citigroup,
its stockholders and TPC, as well as various other conditions. These other
conditions may include receipt of any necessary third-party consents and
regulatory approvals, the existence of satisfactory market conditions and the
satisfaction of any conditions which may be imposed by the Internal Revenue
Service. Citigroup has no obligation to consummate the distribution by the end
of 2002 or at all, whether or not these conditions are satisfied.
The distribution of TPC, if it occurs, will be treated as a dividend to
stockholders for accounting purposes that will reduce stockholders' equity by
an amount in excess of $7 billion. Prior to the initial public offering
during 2002, TPC paid dividends to Citigroup in the form of notes in the
aggregate amount of $5.095 billion.
In connection with the initial public offering, Citigroup entered into an
agreement with TPC that provides that, in any fiscal year in which TPC records
asbestos-related income statement charges in excess of $150 million, net of any
reinsurance, Citigroup will pay to TPC the amount of any such excess up to a
cumulative aggregate of $800 million, reduced by the tax effect of the highest
applicable federal income tax rate. A portion of the gain as a result of the
offering was deferred to offset any payments arising in connection with this
agreement.
Citigroup and TPC are currently reviewing whether Citigroup business units will
continue to offer certain TPC products. The two companies plan to enter into an
agreement under which Citigroup businesses will provide investment advisory and
certain back office services to TPC during a transition period. Ongoing revenues
on our remaining ownership in TPC following the distribution are not expected to
be significant.
51
<Page>
4. BUSINESS SEGMENT INFORMATION
The following table presents certain information regarding the Company's
industry segments. The Property and Casualty segment was created during the
first quarter of 2002 encompassing the property and casualty operations of
Travelers Property and Casualty Corp. Prior periods have been reclassified to
conform to the current period's presentation.
<Table>
<Caption>
INCOME (LOSS)
BEFORE CUMULATIVE
EFFECT OF
TOTAL REVENUES, NET PROVISION FOR ACCOUNTING CHANGE
OF INTEREST EXPENSE INCOME TAXES (1)(2) IDENTIFIABLE ASSETS
-----------------------------------------------------------------------------------
FIRST QUARTER
IN MILLIONS OF DOLLARS, EXCEPT IDENTIFIABLE --------------------------------------------------------------- MAR. 31, Dec. 31,
ASSETS IN BILLIONS 2002 2001 2002 2001 2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Global Consumer $ 9,199 $ 7,718 $1,003 $ 906 $1,934 $1,542 $ 344 $ 351
Global Corporate 6,650 7,480 649 759 1,174 1,376 532 524
Global Investment Management
and Private Banking 1,736 1,966 200 212 403 384 102 98
Property and Casualty 3,168 3,018 109 124 326 342 56 56
Investment Activities 146 233 44 70 70 132 9 9
Corporate/Other(3) 96 (134) 193 (81) 983 (196) 15 13
-----------------------------------------------------------------------------------
TOTAL $20,995 $20,281 $2,198 $1,990 $4,890 $3,580 $1,058 $1,051
====================================================================================================================================
</Table>
(1) The 2002 first quarter results reflect after-tax restructuring-related
items of $18 million in Global Consumer, $8 million in Global Corporate,
$3 million in Global Investment Management and Private Banking, and $1
million in Property and Casualty. The 2001 first quarter results reflect
after-tax restructuring-related items of $12 million in Global Consumer
and $68 million in Global Corporate.
(2) Includes pretax provisions for benefits, claims, and credit losses in the
Global Consumer results of $2.2 billion and $1.4 billion, in the Global
Corporate results of $0.7 billion and $0.3 billion, in the Global
Investment Management and Private Banking results of $0.5 billion and $0.7
billion, and in the Property and Casualty results of $2.0 billion and $1.8
billion for the first quarters of 2002 and 2001, respectively. The 2001
first quarter also includes pretax provisions for benefits, claims, and
credit losses in the Corporate/Other results of $1 million.
(3) Includes the gain on sale of stock by TPC of $1.270 billion ($1.061 billion
after-tax).
5. INVESTMENTS
<Table>
<Caption>
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2002 2001
- ---------------------------------------------------------------------------------------------------
Fixed maturities, primarily available for sale, at fair value $ 150,940 $ 139,344
Equity securities, primarily at fair value 7,606 7,577
Venture capital, at fair value 4,360 4,316
Short-term and other 9,179 9,600
-----------------------------------
$ 172,085 $ 160,837
===================================================================================================
</Table>
The amortized cost and fair value of investments in fixed maturities and equity
securities at March 31, 2002 and December 31, 2001 were as follows:
<Table>
<Caption>
MARCH 31, 2002 December 31, 2001
-----------------------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR Amortized Fair
IN MILLIONS OF DOLLARS COST GAINS LOSSES VALUE Cost Value
- ------------------------------------------------------------------------------------------------------------------------------------
FIXED MATURITY SECURITIES HELD TO MATURITY(1) $ 184 $ - $ - $ 184 $ 26 $ 26
===================================================================================
FIXED MATURITY SECURITIES AVAILABLE FOR SALE
Mortgage-backed securities, principally
obligations of U.S. Federal agencies $ 34,006 $ 272 $ 267 $ 34,011 $ 28,614 $ 28,802
U.S. Treasury and Federal agencies 13,358 181 221 13,318 6,136 6,113
State and municipal 17,042 399 156 17,285 16,712 17,001
Foreign government 42,886 301 129 43,058 44,942 45,129
U.S. corporate 31,527 636 747 31,416 30,097 30,349
Other debt securities 11,361 426 119 11,668 11,516 11,924
-----------------------------------------------------------------------------------
150,180 2,215 1,639 150,756 138,017 139,318
-----------------------------------------------------------------------------------
TOTAL FIXED MATURITIES $ 150,364 $2,215 $1,639 $150,940 $138,043 $139,344
====================================================================================================================================
EQUITY SECURITIES(2) $ 7,430 $ 399 $ 223 $ 7,606 $ 7,401 $ 7,577
====================================================================================================================================
</Table>
(1) Recorded at amortized cost.
(2) Includes non-marketable equity securities carried at cost, which are
reported in both the amortized cost and fair value columns.
52
<Page>
6. TRADING ACCOUNT ASSETS AND LIABILITIES
Trading account assets and liabilities at market value consisted of the
following:
<Table>
<Caption>
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2002 2001
- ----------------------------------------------------------------------------------------------------
TRADING ACCOUNT ASSETS
U.S. Treasury and Federal agency securities $ 40,641 $ 46,218
State and municipal securities 3,527 4,517
Foreign government securities 16,251 12,450
Corporate and other debt securities 28,055 21,318
Derivative and other contractual commitments(1) 25,836 29,762
Equity securities 16,407 15,619
Mortgage loans and collateralized mortgage securities 6,214 6,869
Other 8,128 8,151
-----------------------------------
$ 145,059 $144,904
====================================================================================================
TRADING ACCOUNT LIABILITIES
Securities sold, not yet purchased $ 56,827 $ 51,815
Derivative and other contractual commitments(1) 24,710 28,728
-----------------------------------
$ 81,537 $ 80,543
====================================================================================================
</Table>
(1) Net of master netting agreements and securitization.
7. DEBT
Investment banking and brokerage borrowings consisted of the following:
<Table>
<Caption>
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2002 2001
- ------------------------------------------------------------------------
Commercial paper $ 15,965 $ 13,858
Bank borrowings 450 565
Other 676 381
-----------------------------------
$ 17,091 $ 14,804
========================================================================
</Table>
Short-term borrowings consisted of commercial paper and other short-term
borrowings as follows:
<Table>
<Caption>
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2002 2001
- --------------------------------------------------------------------------------
COMMERCIAL PAPER
Citigroup Inc. $ 511 $ 481
Citicorp and Subsidiaries 12,808 12,215
-----------------------------------
13,319 12,696
OTHER SHORT-TERM BORROWINGS 11,486 11,765
-----------------------------------
$24,805 $24,461
================================================================================
</Table>
Long-term debt, including its current portion, consisted of the following:
<Table>
<Caption>
MARCH 31, December 31,
IN MILLIONS OF DOLLARS 2002 2001
- -----------------------------------------------------------------------------------
Citigroup Inc. $ 37,191 $ 34,794
Citicorp and Subsidiaries 53,151 59,628
Salomon Smith Barney Holdings Inc. 26,152 26,813
Travelers Insurance Group Holdings Inc. 380 380
Travelers Property Casualty Corp. 867 16
Travelers Insurance Company 16 -
-----------------------------------
$ 117,757 $121,631
===================================================================================
</Table>
53
<Page>
8. RESTRUCTURING-RELATED ITEMS
<Table>
<Caption>
RESTRUCTURING INITIATIVES
--------------------------------------------------------------------
IN MILLIONS OF DOLLARS 2002 2001 2000 Total
- ------------------------------------------------------------------------------------------------------
Restructuring Charges $ 42 $ 448 $ 579 $ 1,069
Acquisitions(1) - 112 23 135
Utilization(2) - (367) (516) (883)
Changes in estimates - (18) (29) (47)
- ------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2002 $ 42 $ 175 $ 57 $ 274
======================================================================================================
</Table>
(1) Represents additions to restructuring liabilities arising from
acquisitions.
(2) Utilization amounts include translation effects on the restructuring
reserve.
During the first quarter of 2002, Citigroup recorded restructuring charges of
$42 million, primarily consisting of the downsizing of Global Consumer and
Global Corporate operations in Argentina.
During 2001, Citigroup recorded restructuring charges of $448 million. Of the
$448 million, $319 million related to the downsizing of certain functions in the
Global Corporate and Global Consumer businesses in order to align their cost
structures with current market conditions and $129 million related to the
acquisition of Banamex and the integration of its operations within the Global
Consumer business. In addition, a restructuring reserve of $112 million was
recorded in connection with the acquisition of Banamex and recognized as a
liability in the purchase price allocation of Banamex. The total Banamex
reserves of $241 million include costs related to downsizings, the
reconfiguration of branch operations in Mexico, and the integration of
operations and operating platforms. These restructuring initiatives are expected
to be implemented this year. The reserves included $423 million related to
employee severance, $72 million related to exiting leasehold and other
contractual obligations, and $65 million of asset impairment charges.
The $423 million related to employee severance reflects the cost of eliminating
approximately 12,500 positions, including 4,200 in Citigroup's Global Consumer
business and 3,600 in Banamex related to the acquisition, and 1,300 in the
Global Consumer business and 3,400 in the Global Corporate business related to
other restructuring initiatives. Approximately 3,200 of these positions were in
the United States.
Through March 31, 2002, the 2001 restructuring reserve utilization included $65
million of asset impairment charges as well as $302 million of severance and
other costs (of which $243 million of employee severance and $18 million of
leasehold and other exit costs have been paid in cash and $41 million is legally
obligated), together with translation effects. Utilization of the 2001
restructuring reserve in the 2002 first quarter was $15 million. Through March
31, 2002, approximately 9,500 gross staff positions have been eliminated under
these programs, including approximately 900 in the 2002 first quarter.
During 2000, Citigroup recorded restructuring charges of $579 million, primarily
consisting of exit costs related to the acquisition of Associates. 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.
Of the $579 million charge, $474 million related to the acquisition of
Associates and included 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, 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.
The $241 million portion of the charge related to employee severance reflects
the costs of eliminating approximately 5,800 positions, including approximately
4,600 in 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.
Through March 31, 2002, the 2000 restructuring reserve utilization included $184
million of asset impairment charges and $332 million of severance and other exit
costs (of which $167 million of employee severance and $114 million of leasehold
and other exit costs have been paid in cash and $51 million is legally
obligated), together with translation effects. Utilization of the 2000
restructuring reserve in the 2002 first quarter was $30 million. Through March
31, 2002, approximately 5,850 staff positions have been eliminated under these
programs including approximately 400 in the 2002 first 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 those assets) of $5
million and $22 million were recognized in the first three months of 2002 and
2001, respectively.
54
<Page>
Changes in estimates are attributable to facts and circumstances arising
subsequent to an original restructuring charge. Changes in estimates
attributable to lower than anticipated costs of implementing certain projects
and a reduction in the scope of certain initiatives during 2001 resulted in the
reduction of the reserve for 2001 restructuring initiatives of $18 million
during the second quarter of 2001 and a reduction of $29 million for 2000
restructuring initiatives during the fourth quarter of 2001.
Additional information about restructuring-related items, including the business
segments affected, may be found in Citigroup's 2001 Annual Report and Form 10-K.
9. CHANGES IN EQUITY FROM NONOWNER SOURCES
Changes in each component of "Accumulated Other Changes in Equity from Nonowner
Sources" for the three-month period ended March 31, 2002 are as follows:
<Table>
<Caption>
NET UNREALIZED FOREIGN ACCUMULATED
GAINS ON CURRENCY OTHER CHANGES IN
INVESTMENT TRANSLATION EQUITY FROM
IN MILLIONS OF DOLLARS SECURITIES ADJUSTMENT CASH FLOW HEDGES NONOWNER SOURCES
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001 $ 852 $ (1,864) $ 168 $ (844)
Unrealized gains on investment securities, net of tax (1) (588) - - (588)
Foreign currency translation adjustment, net of tax (2) - (403) - (403)
Cash flow hedges, net of tax - - 65 65
- ------------------------------------------------------------------------------------------------------------------------------------
Current period change (588) (403) 65 (926)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2002 $ 264 $ (2,267) $ 233 $ (1,770)
====================================================================================================================================
</Table>
(1) Primarily reflects the impact of a rising interest rate yield curve on
fixed-income securities.
(2) Includes the $512 million after-tax impact of translating Argentina's
operations into the U.S. dollar equivalent. As a result of government
actions in Argentina, which began in the fourth quarter of 2001 and
continue, the functional currency of the Argentine branch and subsidiaries
has been changed from the U.S. dollar to the Argentine peso.
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 months ended March 31, 2002 and
2001.
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 2002 2001
- -----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES $ 4,890 $ 3,580
Cumulative effect of accounting changes (47) (42)
Preferred dividends (21) (28)
-----------------------------------
INCOME AVAILABLE TO COMMON STOCKHOLDERS FOR BASIC EPS 4,822 3,510
Effect of dilutive securities - -
-----------------------------------
INCOME AVAILABLE TO COMMON STOCKHOLDERS FOR DILUTED EPS $ 4,822 $ 3,510
=======================================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING APPLICABLE TO BASIC EPS 5,110.5 4,984.7
Effect of dilutive securities:
Options 65.2 95.9
Restricted stock 33.0 28.3
Convertible securities 1.1 1.1
-----------------------------------
ADJUSTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING APPLICABLE TO DILUTED EPS 5,209.8 5,110.0
=======================================================================================================================
BASIC EARNINGS PER SHARE
Income before cumulative effect of accounting changes $ 0.95 $ 0.71
Cumulative effect of accounting changes (0.01) (0.01)
-----------------------------------
NET INCOME $ 0.94 $ 0.70
=======================================================================================================================
DILUTED EARNINGS PER SHARE
Income before cumulative effect of accounting changes $ 0.94 $ 0.70
Cumulative effect of accounting changes (0.01) (0.01)
-----------------------------------
NET INCOME $ 0.93 $ 0.69
=======================================================================================================================
</Table>
55
<Page>
11. DERIVATIVES AND OTHER ACTIVITIES
The following table summarizes certain information related to the Company's
hedging activities for the three months ended March 31, 2002 and 2001:
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
----------------------------------
IN MILLIONS OF DOLLARS 2002 2001
- -------------------------------------------------------------------------------------------------------------
FAIR VALUE HEDGES:
Hedge ineffectiveness recognized in earnings $ (28) $ 72
Net gain (loss) excluded from assessment of effectiveness (5) 47
CASH FLOW HEDGES:
Hedge ineffectiveness recognized in earnings 5 (3)
Amount excluded from assessment of effectiveness - -
NET INVESTMENT HEDGES:
Net gain (loss) included in foreign currency translation adjustment
within accumulated other changes in equity from nonowner sources (60) 248
- -------------------------------------------------------------------------------------------------------------
</Table>
The accumulated other changes in equity from nonowner sources from cash flow
hedges for the three months ended March 31, 2002 and 2001 can be summarized as
follows (net of taxes):
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
----------------------------------
IN MILLIONS OF DOLLARS 2002 2001
- ---------------------------------------------------------------------------------------
BEGINNING BALANCE(1) $ 168 $ (3)
Net gain (loss) from cash flow hedges 164 (22)
Net amounts reclassified to earnings (99) (27)
----------------------------------
ENDING BALANCE $ 233 $ (52)
=======================================================================================
</Table>
(1) Beginning balance of 2001 results from the cumulative effect of the
accounting change for cash-flow hedges.
12. 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 March 31, 2002
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, the risks inherent in major litigation, any impact from
the bankruptcy protection sought by various asbestos producers and other
asbestos defendants, a further increase or decrease in asbestos and
environmental claims which cannot now be anticipated, the role of any
umbrella or excess policies the Company has issued for these claims, whether
or not an asbestos claim is a product/completed operation claim subject to an
aggregate limit and the available coverage, if any, for that claim, the
resolution or adjudication of some disputes pertaining to the amount of
available coverage for asbestos claims in a manner inconsistent with the
Company's previous assessment of these claims, the number and outcome of
direct actions against the Company, unanticipated developments pertaining to
the Company's ability to recover reinsurance for environmental and asbestos
claims and the willingness of parties, including the Company, to related
litigation to settle. 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. This development will be affected by
future court decisions and interpretations, as well as changes in applicable
legislation. In addition, particularly during the last few months of 2001 and
continuing into 2002, the asbestos-related trends have both accelerated and
become more visible. These trends include, but are not limited to, the filing
of additional claims, more intensive advertising by lawyers seeking asbestos
claimants, more aggressive litigation based on novel theories of liability
and litigation against new and previously peripheral defendants, including
insurers, and developments in existing and pending bankruptcy proceedings.
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.
56
<Page>
FINANCIAL DATA SUPPLEMENT
CASH-BASIS, RENEGOTIATED, AND PAST DUE LOANS
<Table>
<Caption>
MAR. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
IN MILLIONS OF DOLLARS 2002 2001 2001(1) 2001 2001(1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL CASH-BASIS LOANS
Collateral dependent (at lower of cost
or collateral value)(2) $ 493 $ 699 $ 699 $ 527 $ 528
Other 4,006 3,342 2,721 2,102 1,889
---------------------------------------------------------------------------------------
TOTAL $ 4,499 $ 4,041 $ 3,420 $ 2,629 $ 2,417
====================================================================================================================================
COMMERCIAL CASH-BASIS LOANS
In U.S. offices $ 1,468 $ 1,315 $ 1,089 $ 1,108 $ 1,052
In offices outside the U.S. 3,031 2,726 2,331 1,521 1,365
---------------------------------------------------------------------------------------
TOTAL $ 4,499 $ 4,041 $ 3,420 $ 2,629 $ 2,417
====================================================================================================================================
COMMERCIAL RENEGOTIATED LOANS
In U.S. offices $ 514 $ 551 $ 605 $ 700 $ 740
In offices outside the U.S. 116 130 143 164 169
---------------------------------------------------------------------------------------
TOTAL $ 630 $ 681 $ 748 $ 864 $ 909
====================================================================================================================================
CONSUMER LOANS ON WHICH ACCRUAL
OF INTEREST HAD BEEN SUSPENDED
In U.S. offices $ 2,428 $ 2,501 $ 2,630 $ 2,480 $ 2,146
In offices outside the U.S. 2,114 1,733 1,801 1,631 1,658
---------------------------------------------------------------------------------------
TOTAL $ 4,542 $ 4,234 $ 4,431 $ 4,111 $ 3,804
====================================================================================================================================
ACCRUING LOANS 90 OR MORE
DAYS DELINQUENT(3)
In U.S. offices $ 2,101 $ 1,822 $ 1,761 $ 1,694 $ 1,475
In offices outside the U.S. 716 776 832 433 393
---------------------------------------------------------------------------------------
TOTAL $ 2,817 $ 2,598 $ 2,593 $ 2,127 $ 1,868
====================================================================================================================================
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) 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.
(3) Substantially all consumer loans, of which $1,106 million, $920 million,
and $755 million are government-guaranteed student loans and mortgages at
March 31, 2002, December 31, 2001, and March 31, 2001, respectively.
OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
<Table>
<Caption>
MAR. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
IN MILLIONS OF DOLLARS 2002 2001(1) 2001(1) 2001(1) 2001(1)
- -------------------------------------------------------------------------------------------------------------------------
OTHER REAL ESTATE OWNED
Consumer(2) $ 384 $ 393 $ 407 $ 289 $ 268
Commercial(2) 270 265 301 310 301
Other - 8 9 8 8
---------------------------------------------------------------------------------------
TOTAL OTHER REAL ESTATE OWNED $ 654 $ 666 $ 717 $ 607 $ 577
- -------------------------------------------------------------------------------------------------------------------------
OTHER REPOSSESSED ASSETS(3) $ 381 $ 439 $ 479 $ 409 $ 419
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Reclassified to conform to the current period's presentation.
(2) Represents repossessed real estate, carried at lower of cost or fair value,
less costs to sell.
(3) Primarily commercial transportation equipment and manufactured housing,
carried at lower of cost or fair value, less costs to sell.
57
<Page>
DETAILS OF CREDIT LOSS EXPERIENCE
<Table>
<Caption>
1ST QTR. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
IN MILLIONS OF DOLLARS 2002 2001 2001 2001 2001
- ------------------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES
AT BEGINNING OF PERIOD $10,088 $ 9,918 $8,917 $8,957 $8,961
---------------------------------------------------------------------------------------
PROVISION FOR CREDIT LOSSES
Consumer 1,876 1,563 1,360 1,196 1,197
Commercial 683 698 220 289 277
---------------------------------------------------------------------------------------
2,559 2,261 1,580 1,485 1,474
---------------------------------------------------------------------------------------
GROSS CREDIT LOSSES
CONSUMER
In U.S. offices 1,281 1,284 1,041 945 915
In offices outside the U.S. 615 590 547 462 449
COMMERCIAL
In U.S. offices 316 572 303 285 241
In offices outside the U.S. 243 381 99 84 90
---------------------------------------------------------------------------------------
2,455 2,827 1,990 1,776 1,695
---------------------------------------------------------------------------------------
CREDIT RECOVERIES
CONSUMER
In U.S. offices 148 144 109 81 101
In offices outside the U.S. 107 116 102 102 98
COMMERCIAL(1)
In U.S. offices 30 94 78 56 35
In offices outside the U.S. 42 58 41 26 19
---------------------------------------------------------------------------------------
327 412 330 265 253
---------------------------------------------------------------------------------------
NET CREDIT LOSSES
In U.S. offices 1,419 1,618 1,157 1,093 1,020
In offices outside the U.S. 709 797 503 418 422
---------------------------------------------------------------------------------------
2,128 2,415 1,660 1,511 1,442
---------------------------------------------------------------------------------------
Other -- net(2) 1 324 1,081 (14) (36)
---------------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES AT END OF PERIOD $10,520 $10,088 $9,918 $8,917 $8,957
====================================================================================================================================
Net consumer credit losses $ 1,641 $ 1,614 $1,377 $1,224 $1,165
As a percentage of average consumer loans 2.76% 2.66% 2.31% 2.19% 2.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Net commercial credit losses $ 487 $ 801 $ 283 $ 287 $ 277
As a percentage of average commercial loans 1.38% 2.14% 0.73% 0.82% 0.81%
====================================================================================================================================
</Table>
(1) Includes amounts received under credit default swaps purchased from third
parties.
(2) Includes foreign currency translation effects and the addition of reserves
for credit losses related to acquisitions.
58
<Page>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
Citigroup's Annual Meeting of Stockholders was held on April 16, 2002. At the
meeting:
(1) 17 persons were elected to serve as directors of Citigroup;
(2) the selection of KPMG LLP to serve as the independent auditors of
Citigroup for 2002 was ratified;
(3) a stockholder proposal regarding political neutrality was defeated;
(4) a stockholder proposal regarding an employee and retiree matching gift
program was defeated;
(5) a stockholder proposal regarding the number of candidates for each
board position was defeated;
(6) a stockholder proposal regarding executive pay and predatory lending
performance was defeated;
(7) a stockholder proposal regarding severance agreements was defeated;
and
(8) a stockholder proposal regarding climate change was defeated.
The number of votes cast for, against or withheld, and the number of abstentions
with respect to each such matter is set forth below, as are the number of broker
non-votes, where applicable.
<Table>
<Caption>
FOR AGAINST/WITHHELD ABSTAINED BROKER NON-VOTES
(1) Election of Directors:
NOMINEE
C. Michael Armstrong 4,321,975,511 82,410,050
Alain J.P. Belda 4,332,599,775 71,785,786
George David 4,357,747,178 46,638,383
Kenneth T. Derr 4,331,672,374 72,713,187
John M. Deutch 4,316,351,715 88,033,846
Alfredo Harp Helu 4,358,514,951 45,870,610
Roberto Hernandez Ramirez 4,358,379,274 46,006,287
Ann Dibble Jordan 4,356,172,941 48,212,620
Reuben Mark 4,332,355,120 72,030,441
Michael T. Masin 4,359,419,117 44,966,444
Dudley C. Mecum 4,318,473,762 85,911,799
Richard D. Parsons 4,358,903,248 45,482,313
Andrall E. Pearson 4,357,022,208 47,363,353
Robert E. Rubin 4,355,005,323 49,380,238
Franklin A. Thomas 4,356,543,961 47,841,600
Sanford I. Weill 4,357,516,914 46,868,647
Arthur Zankel 4,356,448,106 47,937,455
(2) Ratification of Auditors 4,238,397,032 144,216,912 25,022,066
(3) Approval of Stockholder
Proposal Regarding 245,218,415 3,018,587,880 300,224,227 840,355,039
Political Neutrality
(4) Approval of Stockholder
Proposal Regarding
Employee and Retiree
Matching Gift Program 128,848,835 3,272,927,484 181,446,976 821,162,266
</Table>
59
<Page>
<Table>
<Caption>
FOR AGAINST/WITHHELD ABSTAINED BROKER NON-VOTES
(5) Approval of Stockholder
Proposal Regarding the
Number of Candidates for
each Board Position 146,004,719 3,301,499,107 95,335,130 861,546,605
(6) Approval of Stockholder
Proposal Regarding
Executive Pay and Predatory
Lending Performance 252,110,742 3,203,939,624 108,103,398 840,231,797
(7) Approval of Stockholder
Proposal Regarding
Severance Agreements 1,646,806,428 1,805,942,544 88,087,540 863,549,049
(8) Approval of Stockholder
Proposal Regarding
Climate Change 194,341,322 3,055,241,163 314,466,335 840,336,741
</Table>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
On January 18, 2002, the Company filed a Current Report on Form 8-K, dated
January 17, 2002, reporting under Item 5 thereof the results of its
operations for the quarter and year ended December 31, 2001, and certain
other selected financial data.
On February 22, 2002, the Company filed a Current Report on Form 8-K, dated
February 13, 2002, filing as exhibits under Item 7 thereof the Terms Agreement,
dated February 13, 2002, and the Form of Note relating to the offer and sale of
the Company's 6.00% Notes due February 21, 2012.
On March 7, 2002, the Company filed a Current Report on Form 8-K, dated February
27, 2002, filing as exhibits under Item 7 thereof the Terms Agreement, dated
February 27, 2002, and the Form of Note relating to the offer and sale of the
Company's 5.00% Notes due March 6, 2007.
On March 22, 2002, the Company filed a Current Report on Form 8-K, dated March
21, 2002, filing as an exhibit under Item 7 thereof the Historical Annual
Supplement of Citigroup Inc. and subsidiaries.
No other reports on Form 8-K were filed during the first quarter of 2002;
however,
On April 16, 2002, the Company filed a Current Report on Form 8-K, dated April
15, 2002, reporting under Item 5 thereof the results of its operations for the
quarter ended March 31, 2002, and certain other selected financial data.
60
<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 May, 2002.
CITIGROUP INC.
(Registrant)
By /s/Todd S. Thomson
------------------
Todd S. Thomson
Chief Financial Officer
Principal Financial Officer
By /s/Irwin R. Ettinger By /s/William P. Hannon
-------------------- --------------------
Irwin R. Ettinger William P. Hannon
Principal Accounting Officer Controller
61
<Page>
EXHIBIT INDEX
<Table>
<Caption>
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).
3.01.5 Certificate of Designation of 6.767% Cumulative Preferred
Stock, Series YYY, of the Company, incorporated by reference
to Exhibit 3.01.5 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2001 (File 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).
</Table>
- ----------
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
62