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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 21, 1995
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THE TRAVELERS INSURANCE COMPANY
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(Exact name of registrant as specified in its charter)
Connecticut 33-33691 06-0566090
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
One Tower Square, Hartford, Connecticut 06183
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 277-0111
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Item 5. Other Events
In order to update the information to be included in certain registration
statements that it has filed with the Securities and Exchange Commission, The
Travelers Insurance Company (the "Company") is including in this Current Report
on Form 8-K certain pro forma financial information related to the previously
reported sale of its group life and related businesses to Metropolitan Life
Insurance Company ("MetLife") and the formation of The MetraHealth Companies,
Inc., the joint venture of the health care benefits businesses of the Company
and MetLife.
The following unaudited pro forma financial statements of The Travelers
Insurance Company and its consolidated subsidiaries are collectively included
in this Current Report on Form 8-K:
Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1994
(Unaudited);
Pro Forma Consolidated Statements of Operations for the year ended December
31, 1994 (Unaudited);
and Notes to Pro Forma Consolidated Financial Statements (Unaudited).
Such pro forma financial statements give effect to the transactions described
below and other matters as more fully described in the accompanying notes. All
of these transactions have previously been reported by the Company.
In December 1994 the Company sold its group dental insurance business, and on
January 3, 1995 the Company completed the sale of its group life business and
the remaining related non-medical group insurance business (Life) to MetLife
for $350 million. The assets transferred included customer lists, books and
records, and furniture and equipment. In connection with the sale, the Company
agreed to cede 100% of its risks in the Life business to MetLife on an
indemnity reinsurance basis, effective January 1, 1995. In connection with the
reinsurance transaction, the Company transferred assets with a fair market
value of approximately $1.5 billion to MetLife, estimated to equal the
statutory reserves and other liabilities transferred.
On January 3, 1995, the Company and MetLife, and certain of their affiliates,
contributed their health care benefits businesses to MetraHealth or its
subsidiaries, in exchange for shares of common stock of MetraHealth. The
assets transferred included cash, fixed assets, customer lists, books and
records, certain trademarks and other assets used exclusively or primarily in
the health care benefits businesses. The Company also contributed all of the
capital stock of the Company's wholly owned subsidiary, The Travelers Employee
Benefits Company, to MetraHealth. The Company's total contribution amounted to
approximately $340 million. In March 1995, MetraHealth acquired HealthSpring,
Inc. for common stock of MetraHealth. HealthSpring, Inc. builds and manages
primary care physician practices and serves approximately 32,000 patients
through seven sites in Pennsylvania, Ohio and Illinois. This acquisition
resulted in a reduction in the ownership percentage of the Company in the
MetraHealth venture to 41.1%. The Company and its affiliates, which together
own 48.25% of MetraHealth, are equal partners in the joint venture with MetLife
and its affiliates.
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(Unaudited)
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As Previously Less: Pro Forma
(in millions) Reported Life & Medical Adjustments Pro Forma
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REVENUES
Premiums $3,861 $(2,369) $ 1,492
Net investment income 1,849 (147) 1,702
Realized investment gains (losses) 14 14
Other revenues 1,023 (825) $35(c,d) 233
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6,747 (3,341) 35 3,441
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BENEFITS AND EXPENSES
Current and future insurance benefits 3,421 (2,206) 1,215
Interest credited to contractholders 967 (54) 913
Claim settlement expenses 193 (191) 2
Amortization of deferred acquisition costs
and value of insurance in force 284 (5) 279
General and administrative expenses 1,025 (625) 1(e) 401
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5,890 (3,081) 1 2,810
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Income before federal income taxes 857 (260) 34 631
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Federal income taxes 312 (101) 0(f,g) 211
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Net income $ 545 $ (159) $34 $ 420
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See notes to pro forma consolidated financial statements.
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(Unaudited)
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As Previously Less: Pro Forma
(in millions) Reported Life Adjustments Pro Forma
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ASSETS
Bonds, available for sale $17,260 $(1,459) $15,801
Mortgage loans 4,938 4,938
Other investments 5,297 $191 (a,b) 5,488
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Total investments 27,495 (1,459) 191 26,227
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Separate and variable accounts 5,160 5,160
Other assets 7,880 1,379 (187)(a,b) 9,072
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Total assets $40,535 $ (80) $ 4 $40,459
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LIABILITIES
Contractholder funds $16,354 $16,354
Benefit and other insurance reserves 12,702 $ (62)(a,b) 12,640
Separate and variable accounts 5,128 5,128
Other liabilities 1,997 (34)(a,b) 1,963
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Total liabilities 36,181 (96) 36,085
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SHAREHOLDER'S EQUITY
Common stock, par value $2.50;
40 million shares authorized, issued
and outstanding 100 100
Additional paid-in capital 3,452 3,452
Unrealized investment gains (losses),
net of taxes (760) $ (80) 80 (a) (760)
Retained earnings 1,562 20 (a) 1,582
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Total shareholder's equity 4,354 (80) 100 4,374
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Total liabilities and
shareholder's equity $40,535 $ (80) $ 4 $40,459
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See notes to pro forma consolidated financial statements.
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Assumptions:
In December 1994 the Company sold its group dental insurance business, and on
January 3, 1995 the Company completed the sale of its group life business and
the remaining related non-medical group insurance business (Life) to MetLife
for $350 million and, effective January 1, 1995, entered into an agreement with
MetLife to cede 100% of the Company's risks in the Life business to MetLife
through indemnity reinsurance in connection with the sale. The pretax gain on
the sale of the group dental business was $28 million in 1994, and the pretax
gain on the other group life and related businesses was $31 million ($20
million after tax). On January 3, 1995, the Company and MetLife also
completed the formation of MetraHealth, a joint venture of the health care
businesses of the Company and MetLife.
The pro forma consolidated financial information presented in the accompanying
financial statements gives effect to the consummation of the above described
transactions (the "Transactions"), which are assumed to have occurred on
December 31, 1994 in the case of the pro forma condensed consolidated balance
sheet and on the first day of the year for the pro forma consolidated statement
of operations. The pro forma consolidated financial statements are presented
for informational purposes only and should not be construed to be indicative of
the actual financial position and results of operations of the Company after
giving effect to the Transactions described above. The pro forma consolidated
financial statements should be read in conjunction with the historical
consolidated financial statements of the Company, including the notes thereto.
Pro Forma Condensed Consolidated Balance Sheet:
Life Column - reflects transfer of assets and liabilities pursuant to the
agreement to cede 100% of the Company's risks in the Life business to MetLife
through indemnity reinsurance. This column also reflects establishment of a
reinsurance recoverable in accordance with FAS 113.
Adjustments (a) and (b) are to reflect the pro forma effects of the following:
(a) To record the sale of the Life businesses.
(b) To record the Company's investment in MetraHealth.
Pro Forma Consolidated Statement of Operations:
Life & Medical Column - reflects the elimination of the earnings of the Life
businesses sold to MetLife and the group health care business (Medical)
contributed to MetraHealth.
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THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Adjustments (c) through (g) are to reflect the pro forma effects of the
following:
(c) To eliminate the pretax gain on the sale of the dental business of $28
million which was recorded in the year ended December 31, 1994.
(d) To record the Company's earnings on its investment in MetraHealth of $63
million for the year ended December 31, 1994, representing the Company's
share of the combined results of the Company's and MetLife's health care
businesses contributed to MetraHealth. (See pro forma income statement
for MetraHealth for the year ended December 31, 1994 included herein).
(e) To record the amortization of goodwill arising from the difference
between the Company's contribution to MetraHealth and the Company's
equity interest in the net assets of MetraHealth.
(f) To eliminate the tax effect recorded in 1994 on adjustment (c) above.
(g) To record the estimated tax effect on adjustment (d) at the estimated
effective tax rate of 29.54%.
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METRAHEALTH
PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(in millions)
Company's
MetLife Travelers Total share
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REVENUES
Premiums $ 1,998 $ 1,962 $ 3,960 $ 1,628
Fees/other income 524 596 1,120 460
Net investment income 40 48 88 36
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TOTAL REVENUES 2,562 2,606 5,168 2,124
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BENEFITS AND EXPENSES
Current and future insurance benefits 1,644 1,614 3,258 1,339
Claim settlement expenses 224 154 378 155
Commission expenses 16 105 121 50
General and administrative expenses 584 592 1,176 483
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TOTAL BENEFITS AND EXPENSES 2,468 2,465 4,933 2,027
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Income before federal income taxes 94 141 235 97
Federal income taxes 33 49 82 34
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Net income $ 61 $ 92 $ 153 $ 63
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SIGNATURE
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 hereunto duly authorized.
THE TRAVELERS INSURANCE COMPANY
(Registrant)
/s/ James L. Morgan
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James L. Morgan
Senior Vice President - Finance
and Chief Accounting Officer
April 21, 1995