UNITED STATES 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 33-33691
THE TRAVELERS INSURANCE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CONNECTICUT 06-0566090
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE TOWER SQUARE, HARTFORD, CONNECTICUT 06183
(Address of principal executive offices) (Zip Code)
(860) 277-0111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of the date hereof, there were outstanding 40,000,000 shares of common stock,
par value $2.50 per share, of the registrant, all of which were owned by
Citigroup Insurance Holding Corporation, an indirect wholly owned subsidiary of
Citigroup Inc.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format.
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Income for the
three months ended March 31, 2002 and 2001 (unaudited)................................3
Condensed Consolidated Balance Sheets as of March 31, 2002 (unaudited) and
December 31, 2001.....................................................................4
Condensed Consolidated Statements of Changes in
Shareholder's Equity for the three months ended March 31, 2002 and 2001 (unaudited)...5
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2002 and 2001 (unaudited)................................6
Notes to Condensed Consolidated Financial Statements (unaudited)......................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................17
SIGNATURES...........................................................................18
2
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
($ in millions)
THREE MONTHS ENDED
MARCH 31,
--------------------
2002 2001
REVENUES
Premiums $ 420 $ 621
Net investment income 691 724
Realized investment gains 26 93
Fee income 144 132
Other revenues 27 27
------- -------
Total Revenues 1,308 1,597
------- -------
BENEFITS AND EXPENSES
Current and future insurance benefits 381 565
Interest credited to contractholders 282 286
Amortization of deferred acquisition costs 75 92
General and administrative expenses 104 108
------- -------
Total Benefits and Expenses 842 1,051
------- -------
Income from operations before federal income taxes and
cumulative effect of change in accounting principle 466 546
Federal income taxes 145 184
------- -------
Income before cumulative effect of change in accounting
principle 321 362
Cumulative effect of change in accounting principle for
derivative instruments and hedging activities,
net of tax -- (6)
------- -------
Net Income $ 321 $ 356
======= =======
See Notes to Condensed Consolidated Financial Statements.
3
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
MARCH 31, 2002 DECEMBER 31, 2001
(UNAUDITED)
-----------------------------
ASSETS
Investments (including $2,666 and
$2,309 subject to securities
lending agreements) $ 45,958 $ 43,220
Separate and variable accounts 25,259 24,837
Reinsurance recoverable 4,186 4,163
Deferred acquisition costs 3,608 3,461
Other assets 2,549 2,185
-------- --------
Total Assets $ 81,560 $ 77,866
-------- --------
LIABILITIES
Contractholder funds $ 23,432 $ 22,810
Future policy benefits and claims 14,332 14,221
Separate and variable accounts 25,259 24,837
Other liabilities 7,965 6,813
-------- --------
Total Liabilities 70,988 68,681
-------- --------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million shares authorized,
issued and outstanding 100 100
Additional paid-in capital 5,469 3,869
Retained earnings 5,192 5,142
Accumulated other changes in equity from nonowner sources (189) 74
-------- --------
Total Shareholder's Equity 10,572 9,185
-------- --------
Total Liabilities and Shareholder's Equity $ 81,560 $ 77,866
======== ========
See Notes to Condensed Consolidated Financial Statements.
4
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(UNAUDITED)
($ in millions)
THREE MONTHS ENDED
MARCH 31,
COMMON STOCK 2002 2001
Balance, beginning of period $ 100 $ 100
Changes in common stock -- --
------- -------
Balance, end of period $ 100 $ 100
======= =======
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period $ 3,869 $ 3,848
Stock option tax benefit 4 7
Capital contributed by Parent 1,596 --
------- -------
Balance, end of period $ 5,469 $ 3,855
======= =======
RETAINED EARNINGS
Balance, beginning of period $ 5,142 $ 4,342
Net income 321 356
Dividends to parent (271) (157)
------- -------
Balance, end of period $ 5,192 $ 4,541
======= =======
STATEMENT OF ACCUMULATED OTHER CHANGES
IN EQUITY FROM NONOWNER SOURCES
Balance, beginning of period $ 74 $ 104
Cumulative effect of change in accounting principle
for derivative instruments and hedging
activities, net of tax -- (29)
Foreign currency translation, net of tax 1 --
Unrealized (losses) gains, net of tax (312) 187
Derivative instrument hedging activity gains (losses),
net of tax 48 (17)
------- -------
Balance, end of period $ (189) $ 245
======= =======
SUMMARY OF CHANGES IN EQUITY
FROM NONOWNER SOURCES
Net income $ 321 $ 356
Other changes in equity from nonowner sources (263) 141
------- -------
Total changes in equity from nonowner sources $ 58 $ 497
======= =======
See Notes to Condensed Consolidated Financial Statements.
5
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(UNAUDITED)
($ in millions)
THREE MONTHS ENDED
MARCH 31,
2002 2001
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 709 $ 240
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 941 639
Equity securities 11 --
Mortgage loans 34 69
Proceeds from sales of investments
Fixed maturities 3,721 4,293
Equity securities 3 29
Real estate held for sale -- 2
Purchases of investments
Fixed maturities (5,949) (6,797)
Equity securities (7) (12)
Mortgage loans (92) (19)
Policy loans, net 13 7
Short-term securities sales (purchases), net 478 (86)
Other investment (purchases) sales, net (22) 4
Securities transactions in course of settlement, net (333) 753
------ ------
Net cash used in investing activities (1,202) (1,118)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 2,085 2,597
Contractholder fund withdrawals (1,529) (1,546)
Capital contribution by parent 172 --
Dividends to parent company (271) (157)
------ ------
Net cash provided by financing activities 457 894
------ ------
Net (decrease) increase in cash (36) 16
Cash at beginning of period 146 150
------ ------
Cash at end of period $ 110 $ 166
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ 12 $ 13
======= =======
See Notes to Condensed Consolidated Financial Statements.
6
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The Travelers Insurance Company (TIC, together with its subsidiaries, the
Company), is a wholly owned subsidiary of Citigroup Insurance Holding
Corporation (CIHC), an indirect wholly owned subsidiary of Citigroup Inc.
(Citigroup). Citigroup is a diversified global financial services holding
company whose businesses provide a broad range of financial services to
consumer and corporate customers around the world. The condensed
consolidated financial statements and accompanying footnotes of the Company
are prepared in conformity with accounting principles generally accepted in
the United States of America (GAAP) and are unaudited. The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
benefits and expenses during the reporting period. Actual results could
differ from those estimates. The condensed consolidated financial
statements include the accounts of the Company and its insurance and
non-insurance subsidiaries on a fully consolidated basis. In the opinion of
management, the interim financial statements reflect all adjustments
necessary (all of which were normal recurring adjustments) for a fair
presentation of results for the periods reported. The accompanying
condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2001.
On March 27, 2002, Travelers Property Casualty Corp. (TPC), the Company's
parent at December 31, 2001, completed its initial public offering (IPO).
Citigroup has announced its plan to make a tax-free distribution of a
significant portion of its remaining interest in TPC by the end of 2002.
Prior to the IPO the following transactions occurred:
- The common stock of the Company was distributed by TPC to CIHC
so the Company would remain an indirect wholly owned
subsidiary of Citigroup.
- The Company sold to TPC its home office buildings in Hartford,
Connecticut and a building housing TPC's information systems
in Norcross, Georgia to TPC for $68 million.
- TLA Holdings LLC, a non-insurance subsidiary valued at $142
million, was contributed to the Company by TPC.
- The Company assumed pension, post-retirement and
post-employment benefits payable to all inactive employees of
the former Travelers Insurance entities and received $189
million of cash from TPC and other assets to offset these
benefit liabilities.
- The Company received 2,225 shares of Citigroup's 6.767%
Cumulative Preferred Stock, Series YYY, with a par value of
$1.00 per share and a liquidation value of $1 million per
share as a contribution from TPC.
Currently, the Company and its subsidiaries share services with TPC and its
subsidiaries. These services, which include leasing arrangements,
facilities management, banking and financial functions, benefit coverages,
data processing services, a short-term investment pool and others, will be
phased out over a brief period of time if the tax-free distribution occurs.
If the tax-free distribution does not occur, these services will likely
continue for the foreseeable future. The Company will have the right to
continue to use the names "Travelers Life & Annuity," "The Travelers
Insurance Company," "The Travelers Life and Annuity Company" (TLAC) and
related names in connection with the Company's business.
7
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Certain financial information that is normally included in annual financial
statements prepared in accordance with GAAP, but is not required for
interim reporting purposes, has been condensed or omitted.
Certain prior year amounts have been reclassified to conform to the 2002
presentation.
2. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 2002, the Company adopted the Financial Accounting
Standards Board (FASB) Statements of Financial Accounting Standards No.
141, "Business Combinations" (FAS 141) and No. 142, "Goodwill and Other
Intangible Assets" (FAS 142). These standards change the accounting for
business combinations by, among other things, prohibiting the prospective
use of pooling-of-interests accounting and requiring companies to stop
amortizing goodwill and certain intangible assets with an indefinite useful
life created by business combinations accounted for using the purchase
method of accounting. Instead, goodwill and intangible assets deemed to
have an indefinite useful life will be subject to an annual review for
impairment. Other intangible assets that are not deemed to have an
indefinite useful life will continue to be amortized over their useful
lives.
The Company stopped amortizing goodwill on January 1, 2002. Net income
adjusted to exclude goodwill amortization expense for the three months
ended March 31, 2001 is as follows:
Three Months
Ended
($ in millions) March 31, 2001
- ------------------------------------------------------------------------
Net income:
Reported net income $356
Goodwill amortization 1
- -----------------------------------------------------------------------
Adjusted net income $357
- -----------------------------------------------------------------------
The Company had a gross carrying amount of $551 million of contract-based
intangible assets as of March 31, 2002 and 2001, with accumulated
amortization of $413 million and $388 million as of March 31, 2002 and
2001, respectively. Amortization expense was $6 million and $7 million for
the three months ended March 31, 2002 and 2001, respectively. Intangible
assets amortization expense is estimated to be $19 million for the
remainder of 2002, $23 million in 2003, $18 million in 2004, $17 million in
2005 and $15 million in each of 2006 and 2007.
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
Effective January 1, 2002, the Company adopted the FASB Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (FAS 144). FAS 144 establishes a single
accounting model for long-lived assets to be disposed of by sale. A
long-lived asset classified as held for sale is to be measured at the lower
of its carrying amount or fair value less cost to sell. Depreciation
(amortization) is to cease. Impairment is recognized only if the carrying
amount of a long-lived asset is not recoverable from its undiscounted cash
flows and is measured as the difference between the carrying amount
8
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
and fair value of the asset. Long-lived assets to be abandoned, exchanged
for a similar productive asset, or distributed to owners in a spin-off are
considered held and used until disposed of. Accordingly, discontinued
operations are no longer to be measured on a net realizable value basis,
and future operating losses are no longer recognized before they occur. The
provisions of the new standard are to be applied prospectively.
3. SHAREHOLDER'S EQUITY
In connection with the TPC IPO and the proposed distribution, the Company's
additional paid-in capital increased $1,596 million as follows:
($ in millions)
Citigroup Series YYY Preferred Stock $2,225
TLA Holdings LLC 142
Cash and other assets 189
Pension, post-retirement, and post-
employment benefits payable (279)
Deferred tax assets 98
Deferred tax liabilities (779)
--------
$1,596
========
Statutory capital and surplus of the Company was $5.09 billion at December
31, 2001. The Company is currently subject to various regulatory
restrictions that limit the maximum amount of dividends available to be
paid to its parent without prior approval of insurance regulatory
authorities. A maximum of $586 million is available by the end of the year
2002 for such dividends without prior approval of the State of Connecticut
Insurance Department, depending upon the amount and timing of the payments.
The Company paid $271 million and $157 million in dividends to its parent
during the three months ended March 31, 2002 and 2001, respectively.
9
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
4. COMMITMENTS AND CONTINGENCIES
TIC and its subsidiaries are defendants or co-defendants in various other
litigation matters in the normal course of business. These include civil
actions, arbitration proceedings and other matters arising in the normal
course of business out of activities as an insurance company, a broker and
dealer in securities or otherwise. 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 Company's consolidated
results of operations, financial condition or liquidity.
5. OPERATING SEGMENTS
The Company has two reportable business segments that are separately
managed due to differences in products, services, marketing strategy and
resource management. The business of each segment is maintained and
reported through separate legal entities within the Company. The management
groups of each segment report separately to the Company's ultimate parent,
Citigroup.
TRAVELERS LIFE & ANNUITY (TLA) core offerings include individual annuity,
individual life, corporate owned life insurance (COLI) and group annuity
insurance products distributed by TIC and The Travelers Life and Annuity
Company (TLAC) principally under the Travelers name. Among the range of
individual products offered are fixed and variable deferred annuities,
payout annuities and term, universal and variable life insurance. The COLI
product is a variable universal life product distributed through
independent specialty brokers. The group products include institutional
pensions, including guaranteed investment contracts (GICs), payout
annuities, group annuities sold to employer-sponsored retirement and
savings plans and structured finance funding agreements. 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
deposits collected are reported as liabilities and are not included in
revenues.
The PRIMERICA LIFE INSURANCE business segment consolidates primarily the
business of Primerica Life, Primerica Life Insurance Company of Canada,
CitiLife and National Benefit Life Insurance Company. The Primerica Life
Insurance business segment offers individual life products, primarily term
insurance, to customers through a nationwide sales force of approximately
98,000 full and part-time licensed Personal Financial Analysts.
10
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
BUSINESS SEGMENT INFORMATION:
AT AND FOR THE THREE MONTHS ENDED TRAVELERS LIFE & PRIMERICA LIFE
MARCH 31, 2002 ($ in millions) ANNUITY INSURANCE TOTAL
BUSINESS VOLUME:
Premiums $ 126 $ 294 $ 420
Deposits 3,174 -- 3,174
------- ------- -------
Total business volume 3,300 294 3,594
Net investment income 618 73 691
Interest credited to contractholders 282 -- 282
Amortization of deferred acquisition costs 22 53 75
Total expenditures for deferred acquisition costs 148 74 222
Federal income taxes on Operating Income 87 49 136
Operating Income (1) $ 209 $ 95 $ 304
Segment Assets $73,405 $ 8,155 $81,560
------- ------- -------
AT AND FOR THE THREE MONTHS ENDED TRAVELERS LIFE & PRIMERICA LIFE
MARCH 31, 2001 ($ in millions) ANNUITY INSURANCE TOTAL
BUSINESS VOLUME:
Premiums $ 337 $ 284 $ 621
Deposits 3,920 -- 3,920
------- ------- -------
Total business volume 4,257 284 4,541
Net investment income 646 78 724
Interest credited to contractholders 286 -- 286
Amortization of deferred acquisition costs 42 50 92
Total expenditures for deferred acquisition costs 135 66 201
Federal income taxes on Operating Income 101 50 151
Operating Income (1) $ 205 $ 97 $ 302
Segment Assets $64,279 $ 7,633 $71,912
------- ------- -------
(1) Excludes realized gains or losses, net of tax and the cumulative effect of
the changes in accounting principles, net of tax.
11
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
BUSINESS SEGMENT RECONCILIATION:
FOR THE THREE MONTHS ENDED
MARCH 31, ($ in millions) 2002 2001
INCOME:
Total operating income of segments $ 304 $ 302
Realized investment gains, net of tax 17 60
Cumulative effect of change in accounting for
derivative instruments and hedging activity,
net of tax -- (6)
----- -----
Net Income $ 321 $ 356
===== =====
12
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's narrative analysis of the results of operations is presented in
lieu of Management's Discussion and Analysis of Financial Condition and Results
of Operations, pursuant to General Instruction H(2)(a) of Form 10-Q.
CONSOLIDATED OVERVIEW ($ in millions)
FOR THE THREE MONTHS
ENDED MARCH 31,
2002 2001
---- ----
Revenues $1,308 $1,597
====== ======
Net income (1) $ 321 $ 356
====== =====
(1) Includes net realized investment gains of $17 million in 2002 and net
realized investment gains of $60 million and a $6 million charge from the
cumulative effect of change in accounting principle in 2001.
The Travelers Insurance Company (TIC, together with its subsidiaries, the
Company), is comprised of two business segments, Travelers Life & Annuity and
Primerica Life Insurance. Operating income, defined as income before net
realized investment gains or losses and cumulative effect of changes in
accounting principles, was $304 million for the quarter ended March 31, 2002, up
from $302 million in the prior year quarter. The 1% increase in 2002 reflects
increased business volumes and reduced general and administrative expenses,
partially offset by lower net investment income for the three months ended March
31, 2002 versus the same period in 2001. Revenues decreased 18% from the prior
year quarter primarily due to a one-time large pension closeout contract that
occurred in the first quarter of 2001.
The following discussion presents in more detail each business segment's
performance.
TRAVELERS LIFE & ANNUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2002 2001
---- ----
($ in millions)
Revenues $908 $1,164
==== ======
Net income (1) $221 $ 230
==== =====
(1) Includes net realized investment gains of $12 million in 2002 and net
realized investment gains of $30 million and a $5 million charge from the
cumulative affect of change in accounting principle in 2001.
Travelers Life & Annuity (TLA) core offerings include individual annuity,
individual life, corporate owned life insurance (COLI) and group annuity
insurance products distributed by TIC and The Travelers Life and Annuity Company
(TLAC) principally under the Travelers name. Among the range of individual
products offered are fixed and variable deferred annuities, payout annuities and
term, universal and variable life insurance. The COLI product is a variable
universal life product distributed through independent specialty brokers. The
group products include institutional pensions, including guaranteed investment
contracts (GICs), payout annuities, group annuities sold to employer-sponsored
retirement and savings plans and structured finance funding agreements. 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 deposits collected are reported as liabilities and are not included in
revenues.
13
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
Operating income was $209 million in the first quarter of 2002 compared to $205
million in the first quarter of 2001. The 2% increase in 2002 reflects double
digit growth in individual annuity and group annuity account balances and
individual life net written premiums versus the prior year quarter and reduced
expenses, substantially offset by lower net investment income, which was due to
a declining interest rate environment. The increased business volumes reflect
growth in retirement savings and estate planning products, success in certain
non-proprietary distribution channels and continued sales from cross-selling
initiatives. The 22% decrease in revenues reflects lower net investment income
and a one-time 2001 group annuity pension closeout contract. Amortization of
deferred acquisition costs in the individual annuity product line decreased 18%
from 2001 due to changes in underlying assumptions.
The cross-selling of TLA products through CitiStreet Retirement Services,
Primerica Financial Services (Primerica), Citibank and Salomon Smith Barney
(SSB) distribution channels, along with improved sales through a nationwide
network of independent financial professionals, outside broker-dealers and
strong group sales through various intermediaries, reflect ongoing efforts to
build market share by strengthening relationships in key distribution channels.
BUSINESS VOLUME ($ IN MILLIONS)
MARCH 31, MARCH 31,
2002 2001 % CHANGE
Individual Annuity Account Balances $29,517 $26,601 11%
Group Annuity Account Balances $21,303 $18,873 13%
Life Direct Periodic Premiums and Deposits $ 233 $ 187 25%
Individual annuity account balances reached $29.5 billion at March 31, 2002,
compared to $28.9 billion at December 31, 2001 and $26.6 billion at March 31,
2001, reflecting good in-force policy retention. Premiums and deposits of $1.5
billion in the first quarter of 2002 remained level with the first quarter of
2001. Fixed annuity premiums and deposits grew 38% while variable annuity
premiums and deposits decreased 19%. Sales continue to reflect the cross-selling
initiatives at the Citigroup affiliates, and also reflect continued penetration
into outside broker-dealer channels.
Group annuity account balances and benefits reserves reached $21.3 billion at
March 31, 2002, up 1% from $21.0 billion at December 31, 2001 and up 13% from
$18.9 billion at March 31, 2001. This volume growth reflects 2001 strong sales
momentum in all products. Net premiums and deposits (excluding Citigroup's
employee pension plan deposits) of $1.5 billion in the first quarter of 2002
were down 40% from $2.5 billion in the comparable period of 2001, which
experienced extremely high structured finance funding agreements in the first
quarter of 2001.
Direct periodic premiums for individual life insurance and COLI of $233.0
million in the first quarter of 2002 were up 25% from $187.0 million in the
comparable period of 2001, driven by increased sales through independent agents
in the high-end retirement and estate planning markets. New periodic and single
premium life insurance sales, excluding COLI, were $93.2 million for the three
months ended March 31, 2002 versus $58.6 million in the comparable period of
2001, reflecting strong core agency sales results. Life insurance in force was
$78.1 billion at March 31, 2002, up from $75.7 billion at December 31, 2001.
14
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PRIMERICA LIFE INSURANCE
FOR THE THREE MONTHS ENDED MARCH 31, 2002 2001
---- ----
($ in millions)
Revenues $400 $433
==== ====
Net income (1) $100 $126
==== ====
(1) Includes realized investment gains of $5 million in 2002 and net realized
investment gains of $30 million and a $1 million charge from the cumulative
effect of change in accounting principle in 2001.
The Primerica Life business segment offers individual life products, primarily
term insurance, to customers through a nationwide sales force of approximately
98,000 full and part-time licensed Personal Financial Analysts.
Operating income was $95 million in the first quarter of 2002 compared to $97
million in the first quarter of 2001. The 2% decline in 2002 reflects lower net
investment income. The 8% decrease in revenues reflects a decrease in pre-tax
investment gains and lower net investment income, partially offset by improved
term life sales.
Earned premiums net of reinsurance were $294 million in the first quarter of
2002 compared to $284 million in the prior year period, including $279 million
and $268 million, respectively, for Primerica individual term life policies.
Total life insurance in force reached $441.3 billion at March 31, 2002, up from
$434.8 billion at December 31, 2001, reflecting good in-force policy retention
and higher sales. The face amount of new term life insurance sales was $18.3
billion for the three-month period ended March 31, 2002, compared to $16.3
billion for the prior year period.
INSURANCE REGULATIONS
Risk-based capital requirements are used as minimum capital requirements by the
National Association of Insurance Commissioners and the states to identify
companies that merit further regulatory action. At December 31, 2001, the
Company had adjusted capital in excess of amounts requiring any regulatory
action.
The Company is subject to various regulatory restrictions that limit the maximum
amount of dividends available to be paid to its parent without prior approval of
insurance regulatory authorities in the state of domicile. A maximum of $586
million is available by the end of 2002 for such dividends without prior
approval of the State of Connecticut Insurance Department, depending upon the
amount and timing of the payments. The Company paid $271 million and $157
million in dividends to its parent during the three months ended March 31, 2002
and 2001, respectively.
FUTURE APPLICATIONS OF ACCOUNTING STANDARDS
See Note 2 of Notes to Condensed Consolidated Financial Statements for a
discussion of recently issued accounting pronouncements.
15
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
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 the words "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, regulatory matters, and the resolution of legal proceedings.
16
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION
3.01 Charter of The Travelers Insurance Company (the
"Company"), as effective October 19, 1994, incorporated
by reference to Exhibit 3.01 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended
September 30, 1994 (File No. 33-33691) (the "Company's
September 30, 1994 10-Q").
3.02 By-laws of the Company, as effective October 20, 1994,
incorporated by reference to Exhibit 3.02 to the
Company's September 30, 1994 10-Q.
(b) REPORTS ON FORM 8-K
None
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE TRAVELERS INSURANCE COMPANY
-------------------------------
(Registrant)
Date May 14, 2002 /s/ Glenn D. Lammey
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Glenn D. Lammey
Executive Vice President,
Chief Financial Officer and Chief
Accounting Officer (Principal
Financial Officer and Principal
Accounting Officer)
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