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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 SEPTEMBER 30, 2003
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 33-03094
--------------------------
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 CITYPLACE, HARTFORD, CONNECTICUT 06103-3415
(Address of principal executive offices) (Zip Code)
(860) 308-1000
(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 by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
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
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Income for the
three and nine months ended September 30, 2003 and 2002 (unaudited)................................................... 3
Condensed Consolidated Balance Sheets as of September 30, 2003 and
December 31, 2002 (unaudited)......................................................................................... 4
Condensed Consolidated Statements of Changes in
Shareholder's Equity for the three and nine months ended September 30, 2003 and 2002 (unaudited)...................... 5
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2003 and 2002 (unaudited)............................................................. 6
Notes to Condensed Consolidated Financial Statements (unaudited)...................................................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................................................................... 15
ITEM 4. CONTROLS AND PROCEDURES...................................................................................... 22
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................................. 23
Signatures............................................................................................................ 24
Exhibit 31.01......................................................................................................... 25
Exhibit 31.02......................................................................................................... 26
Exhibit 32.01......................................................................................................... 27
2
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
($ in millions)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- ----------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
---- ---- ---- ----
REVENUES
Premiums $ 741 $ 497 $ 1,707 $ 1,457
Net investment income 782 717 2,297 2,142
Realized investment gains (losses) 43 (161) 45 (317)
Fee income 158 129 447 414
Other revenues 40 40 96 94
- ----------------------------------------------------------------------------------------------------------------
Total Revenues 1,764 1,222 4,592 3,790
- ----------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Current and future insurance benefits 683 450 1,537 1,300
Interest credited to contractholders 311 316 933 899
Amortization of deferred acquisition costs 128 97 373 270
General and administrative expenses 115 101 337 296
- ----------------------------------------------------------------------------------------------------------------
Total Benefits and Expenses 1,237 964 3,180 2,765
- ----------------------------------------------------------------------------------------------------------------
Income from operations before federal income taxes 527 258 1,412 1,025
- ----------------------------------------------------------------------------------------------------------------
Federal income taxes 155 61 364 285
- ----------------------------------------------------------------------------------------------------------------
Net Income $ 372 $ 197 $ 1,048 $ 740
================================================================================================================
See Notes to Condensed Consolidated Financial Statements.
3
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
($ in millions)
SEPTEMBER 30, 2003 DECEMBER 31, 2002
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investments (including $2,334 and $2,687 subject to securities
lending agreements) $ 55,923 $ 50,809
Separate and variable accounts 24,652 21,620
Reinsurance recoverable 4,428 4,301
Deferred acquisition costs 4,244 3,936
Other assets 2,711 2,329
- ---------------------------------------------------------------------------------------------------------------------
Total Assets $ 91,958 $ 82,995
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES
Contractholder funds $ 29,734 $ 26,634
Future policy benefits and claims 15,707 15,009
Separate and variable accounts 24,652 21,620
Deferred federal income taxes 2,004 1,448
Other liabilities 6,523 6,649
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities 78,620 71,360
- ---------------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common stock, par value $2.50; 40 million shares authorized,
issued and outstanding 100 100
Additional paid-in capital 5,444 5,443
Retained earnings 6,406 5,638
Accumulated other changes in equity from nonowner sources 1,388 454
- ---------------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 13,338 11,635
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholder's Equity $ 91,958 $ 82,995
=====================================================================================================================
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- ----------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------
COMMON STOCK
Balance, beginning of period $ 100 $ 100 $ 100 $ 100
Changes in common stock - - - -
Balance, end of period $ 100 $ 100 $ 100 $ 100
================================================================================================================
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period $ 5,444 $ 5,471 $ 5,443 $ 3,869
Stock option tax benefit - - 1 6
Capital contributed by parent - - - 1,596
- ----------------------------------------------------------------------------------------------------------------
Balance, end of period $ 5,444 $ 5,471 $ 5,444 $ 5,471
================================================================================================================
RETAINED EARNINGS
Balance, beginning of period $ 6,151 $ 5,257 $ 5,638 $ 5,142
Net income 372 197 1,048 740
Dividends to parent (117) (158) (280) (586)
- ----------------------------------------------------------------------------------------------------------------
Balance, end of period $ 6,406 $ 5,296 $ 6,406 $ 5,296
================================================================================================================
ACCUMULATED OTHER CHANGES
IN EQUITY FROM NONOWNER SOURCES
Balance, beginning of period $ 1,598 $ (2) $ 454 $ 74
Foreign currency translation, net of tax - 2 2 4
Unrealized gains (losses), net of tax (242) 380 870 300
Derivative instrument hedging activity gains (losses),
net of tax 32 (96) 62 (94)
- ----------------------------------------------------------------------------------------------------------------
Balance, end of period $ 1,388 $ 284 $ 1,388 $ 284
================================================================================================================
SUMMARY OF CHANGES IN EQUITY
FROM NONOWNER SOURCES
Net income $ 372 $ 197 $ 1,048 $ 740
Other changes in equity from nonowner sources (210) 286 934 210
- ----------------------------------------------------------------------------------------------------------------
Total changes in equity from nonowner sources $ 162 $ 483 $ 1,982 $ 950
================================================================================================================
TOTAL SHAREHOLDER'S EQUITY
Balance, beginning of period $ 13,293 $ 10,826 $ 11,635 $ 9,185
Changes in nonowner sources 162 483 1,982 950
Dividends (117) (158) (280) (586)
Changes in additional paid-in capital - - 1 1,602
- ----------------------------------------------------------------------------------------------------------------
Balance, end of period $ 13,338 $ 11,151 $ 13,338 $ 11,151
================================================================================================================
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)
NINE MONTHS ENDED
SEPTEMBER 30,
2003 2002
- -------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 476 $ 751
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investments
Fixed maturities 5,300 3,101
Equity securities 28 19
Mortgage loans 273 161
Proceeds from sales of investments
Fixed maturities 9,957 11,484
Equity securities 121 937
Real estate held for sale 5 15
Purchases of investments
Fixed maturities (18,249) (17,980)
Equity securities (178) (871)
Mortgage loans (193) (197)
Policy loans, net 20 30
Short-term securities sales, net 45 1,170
Other investment sales (purchases), net 112 (16)
Securities transactions in course of settlement, net (543) (1,568)
- -------------------------------------------------------------------------------------------
Net cash used in investing activities (3,302) (3,715)
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 6,647 6,966
Contractholder fund withdrawals (3,588) (3,575)
Capital contribution by parent - 172
Dividends to parent company (280) (586)
- -------------------------------------------------------------------------------------------
Net cash provided by financing activities 2,779 2,977
- -------------------------------------------------------------------------------------------
Net increase (decrease) in cash (47) 13
Cash at beginning of period 186 146
- -------------------------------------------------------------------------------------------
Cash at end of period $ 139 $ 159
===========================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 1 $ 2
Income taxes paid $ 305 $ 265
===========================================================================================
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
condensed 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 Company's two reportable business segments are Travelers Life &
Annuity and Primerica Life Insurance. The primary insurance entities of
the Company are TIC and its subsidiaries The Travelers Life and Annuity
Company (TLAC), included in the Travelers Life & Annuity segment, and
Primerica Life Insurance Company (Primerica Life) and its subsidiaries,
Primerica Life Insurance Company of Canada, CitiLife Financial Limited
(CitiLife) and National Benefit Life Insurance Company (NBL), included
in the Primerica Life Insurance segment. The condensed consolidated
financial statements include the accounts of the insurance entities of
the Company and Tribeca Citigroup Investments Ltd., among others, on a
fully consolidated basis.
In the opinion of management, the interim financial statements reflect
all adjustments necessary 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, 2002. The condensed
consolidated balance sheet as of December 31, 2002 was derived from the
audited balance sheet included in the Form 10-K.
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
2003 presentation.
2. ACCOUNTING STANDARDS
CHANGES IN ACCOUNTING PRINCIPLES
CONSOLIDATION OF VARIABLE INTEREST ENTITIES
In January 2003, the Financial Accounting Standards Board (FASB)
released FASB Interpretation No. 46, "Consolidation of Variable
Interest Entities" (FIN 46). The provisions of FIN 46 are to be applied
immediately to variable interest entities (VIEs) created after January
31, 2003, and to VIEs in which an enterprise obtains an interest after
that date. In October 2003, the FASB announced that the effective date
of FIN 46 was deferred from July 1, 2003 to periods ending after
December 15, 2003 for VIEs created prior to February 1, 2003. The
Company elected to adopt the remaining provisions of FIN 46 in the
third quarter of 2003. FIN 46 changes the method of determining whether
certain entities, including securitization
7
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
entities, should be included in the company's consolidated financial
statements. An entity is subject to FIN 46 and is called a VIE if it
has (1) equity that is insufficient to permit the entity to finance its
activities without additional subordinated financial support from other
parties, or (2) equity investors that cannot make significant decisions
about the entity's operations, or that do not absorb the expected
losses or receive the expected returns of the entity. All other
entities are evaluated for consolidation under Statement of Financial
Accounting Standards (SFAS) No. 94, "Consolidation of All
Majority-Owned Subsidiaries" (SFAS 94). A VIE is consolidated by its
primary beneficiary, which is the party involved with the VIE that
absorbs a majority of the expected losses, receives a majority of the
expected residual returns, or both.
For any VIEs that must be consolidated under FIN 46 that were created
before February 1, 2003, the assets, liabilities and noncontrolling
interest of the VIE would be initially measured at their carrying
amounts with any difference between the net amount added to the balance
sheet and any previously recognized interest being recognized as the
cumulative effect of an accounting change. If determining the carrying
amounts is not practicable, fair value at the date FIN 46 first applies
may be used to measure the assets, liabilities and noncontrolling
interest of the VIE. The implementation of FIN 46 on July 1, 2003
resulted in the consolidation of VIEs increasing both total assets and
total liabilities by approximately $407 million.
The FASB continues to provide additional guidance on implementing FIN
46 through FASB staff positions. In addition, a draft interpretation of
FIN 46 has been issued for comment. As this guidance is finalized, the
Company will continue to review the status of VIEs it is involved with.
As a result of changes in the guidance, additional VIEs may ultimately
be required to be consolidated. See Note 4.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" (SFAS 149). SFAS
149 amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts,
and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." In particular, this
Statement clarifies under what circumstances a contract with an initial
net investment meets the characteristic of a derivative and when a
derivative contains a financing component that warrants special
reporting in the statement of cash flows. This Statement is generally
effective for contracts entered into or modified after June 30, 2003
and did not have a significant impact on the Company's consolidated
financial statements.
COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
On January 1, 2003, the Company adopted SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities" (SFAS 146). SFAS 146
requires that a liability for costs associated with exit or disposal
activities, other than in a business combination, be recognized when
the liability is incurred. Previous generally accepted accounting
principles provided for the recognition of such costs at the date of
management's commitment to an exit plan. In addition, SFAS 146 requires
that the liability be measured at fair value and be adjusted for
changes in estimated cash flows. The provisions of the new standard are
effective for exit or disposal activities initiated after December 31,
2002. The adoption of SFAS 146 did not affect the Company's
consolidated financial statements.
8
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
STOCK-BASED COMPENSATION
On January 1, 2003, the Company adopted the fair value recognition
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation"
(SFAS 123), prospectively for all awards granted, modified, or settled
after January 1, 2003. The prospective method is one of the adoption
methods provided for under SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," issued in December 2002.
SFAS 123 requires that compensation cost for all stock awards be
calculated and recognized over the service period (generally equal to
the vesting period). This compensation cost is determined using option
pricing models, intended to estimate the fair value of the awards at
the grant date. Similar to Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," the alternative method of
accounting, an offsetting increase to stockholders' equity under SFAS
123 is recorded equal to the amount of compensation expense charged.
Had the Company applied SFAS 123 in accounting for Citigroup stock
option plans for all options granted, net income would have been the
pro forma amounts indicated below:
THIRD QUARTER YEAR-TO-DATE
------------- ------------
IN MILLIONS OF DOLLARS 2003 2002 2003 2002
---- ---- ---- ----
Compensation expense related to As reported $ 1 $ - $ 1 $ -
stock option plans, net of tax Pro forma 2 2 5 7
Net income As reported 372 197 1,048 740
Pro forma 371 195 1,044 733
ACCOUNTING STANDARDS NOT YET ADOPTED
ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN
NONTRADITIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS
In July 2003, Statement of Position 03-01, "Accounting and Reporting by
Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts" (SOP 03-01) was released. SOP
03-01 provides guidance on accounting and reporting by insurance
enterprises for separate account presentation, accounting for an
insurer's interest in a separate account, transfers to a separate
account, valuation of certain liabilities, contracts with death or
other benefit features, contracts that provide annuitization benefits,
and sales inducements to contract holders. SOP 03-01 is effective for
financial statements for fiscal years beginning after December 15,
2003. The Company is currently evaluating the impact that SOP 03-01
will have on its consolidated financial statements.
3. INVESTMENTS
The Company participates in dollar roll repurchase transactions as a
way to generate investment income. These transactions involve the sale
of mortgage-backed securities with the agreement to repurchase
substantially the same securities from the same counterparty. Cash is
received from the sale, which is invested in the Company's short-term
money market pool. The cash is returned at the end of the roll period
when the mortgage-backed securities are repurchased. The Company will
generate additional investment income based upon the difference between
the sale and repurchase prices.
This transaction is recorded as a secured borrowing. The
mortgage-backed securities remain recorded as assets. The cash proceeds
are reflected in short-term investments and a liability is established
to reflect the
9
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Company's obligation to repurchase the securities at the end of the
roll period. The collateral amount is classified as Other Liabilities
in the condensed consolidated balance sheets and fluctuates based upon
the timing of the repayments. The balances were $111 million, $1,012
million and $.5 million at September 30, 2003, June 30, 2003 and
December 31, 2002, respectively.
4. VARIABLE INTEREST ENTITIES
In January 2003, the FASB released FIN 46, which changes the method of
determining whether certain entities, including securitization
entities, should be included in the Company's consolidated financial
statements.
The implementation of FIN 46 encompassed a review of numerous entities
to determine the impact of adoption and considerable judgment was used
in evaluating whether or not a VIE should be consolidated. The FASB
continues to provide additional guidance on implementing FIN 46 through
FASB staff positions. In addition, a draft interpretation of FIN 46 has
been issued for comment. As this guidance is finalized, the Company
will continue to review the status of VIEs it is involved with. As a
result of changes in the guidance, additional VIEs may ultimately be
required to be consolidated.
The following table represents the carrying amounts and classification
of consolidated assets that are collateral for VIE obligations. The
assets in this table represent two investment vehicles that the Company
was involved with prior to February 1, 2003. These two VIEs are a
collateralized debt obligation and a real estate joint venture:
In millions of dollars SEPTEMBER 30, 2003
------------------------------------------------------
Cash $ 3
Investments 396
Other 8
----
Total assets of consolidated VIEs $407
-----------------------------------------------
The debt holders of these VIEs have no recourse to the Company. The
Company's maximum exposure to loss is limited to its investment of
approximately $8 million. The Company regularly becomes involved with
VIEs through its investment activities. This involvement is generally
restricted to small passive debt and equity investment. In addition to
the VIEs that are consolidated in accordance with FIN 46, the Company
has no significant variable interests in other VIEs that are not
consolidated because the Company is not the primary beneficiary.
10
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
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 TLAC
principally under the Travelers Life & Annuity 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, payout annuities,
group annuities sold to employer-sponsored retirement and savings
plans, structured settlements and 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 NBL. The Primerica Life Insurance business segment
offers individual life products, primarily term insurance, to customers
through a sales force of approximately 107,000 agents. A great majority
of the domestic licensed sales force works on a part-time basis. NBL
also provides statutory disability benefit insurance and other
insurance, primarily in New York, as well as direct response student
term life insurance nationwide. CitiLife was established in September
2000 to underwrite insurance in Europe.
11
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
SEPTEMBER 30, 2003 ($ in millions) & ANNUITY INSURANCE TOTAL
- -----------------------------------------------------------------------------------------------------
Premiums $ 428 $ 313 $ 741
Net investment income 706 76 782
Interest credited to contractholders 311 - 311
Amortization of deferred acquisition costs 68 60 128
Total expenditures for deferred acquisition costs 156 90 246
Federal income taxes 100 55 155
Net income $ 265 $ 107 $ 372
Segment assets $ 82,746 $ 9,212 $ 91,958
- -----------------------------------------------------------------------------------------------------
AT AND FOR THE THREE MONTHS ENDED TRAVELERS LIFE PRIMERICA LIFE
SEPTEMBER 30, 2002 ($ in millions) & ANNUITY INSURANCE TOTAL
- -----------------------------------------------------------------------------------------------------
Premiums $ 197 $ 300 $ 497
Net investment income 645 72 717
Interest credited to contractholders 316 - 316
Amortization of deferred acquisition costs 41 56 97
Total expenditures for deferred acquisition costs 132 74 206
Federal income taxes 12 49 61
Net income $ 101 $ 96 $ 197
Segment assets $ 71,266 $ 8,369 $ 79,635
- -----------------------------------------------------------------------------------------------------
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. Deposits represent a statistic
integral to managing TLA operations, which management uses for
measuring business volumes, and may not be comparable to similarly
captioned measurements used by other life insurance companies. For the
three months ended September 30, 2003 and 2002, deposits collected
amounted to $3.5 billion and $2.7 billion, respectively.
12
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
BUSINESS SEGMENT INFORMATION:
FOR THE NINE MONTHS ENDED TRAVELERS LIFE PRIMERICA LIFE
SEPTEMBER 30, 2003 ($ in millions) & ANNUITY INSURANCE TOTAL
- -----------------------------------------------------------------------------------------------------
Premiums $ 780 $ 927 $ 1,707
Net investment income 2,065 232 2,297
Interest credited to contractholders 933 - 933
Amortization of deferred acquisition costs 200 173 373
Total expenditures for deferred acquisition costs 406 276 682
Federal income taxes 197 167 364
Net income $ 725 $ 323 $ 1,048
Segment assets $ 82,746 $ 9,212 $ 91,958
- -----------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED TRAVELERS LIFE PRIMERICA LIFE
SEPTEMBER 30, 2002 ($ in millions) & ANNUITY INSURANCE TOTAL
- -----------------------------------------------------------------------------------------------------
Premiums $ 567 $ 890 $ 1,457
Net investment income 1,927 215 2,142
Interest credited to contractholders 899 - 899
Amortization of deferred acquisition costs 106 164 270
Total expenditures for deferred acquisition costs 426 236 662
Federal income taxes 135 150 285
Net income $ 448 $ 292 $ 740
Segment assets $ 71,266 $ 8,369 $ 79,635
- -----------------------------------------------------------------------------------------------------
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. Deposits represent a statistic
integral to managing TLA operations, which management uses for
measuring business volumes, and may not be comparable to similarly
captioned measurements used by other life insurance companies. For the
nine months ended September 30, 2003 and 2002, deposits collected
amounted to $9.2 billion and $9.7 billion, respectively.
13
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
6. SHAREHOLDER'S EQUITY
Statutory capital and surplus of the Company was $6.9 billion at
December 31, 2002. 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 $966 million is available by the
end of the year 2003 for such dividends without prior approval of the
State of Connecticut Insurance Department, depending upon the amount
and timing of the payments. TLAC may not pay a dividend to TIC without
such approval. Primerica Life may pay up to $148 million in dividends
to TIC in 2003 without prior approval of the Massachusetts Insurance
Department. Primerica Life paid $88 million and $165 million in
dividends to TIC during the nine months ended September 30, 2003 and
2002, respectively. The Company paid $280 million and $586 million in
dividends to its parent during the nine months ended September 30, 2003
and 2002, respectively.
7. COMMITMENTS AND CONTINGENCIES
The Company is a defendant or co-defendant in various 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.
The Company is a member of the Federal Home Loan Bank of Boston (the
"Bank"), and in this capacity has entered into a funding agreement (the
"agreement") with the Bank where a blanket-lien has been granted to
collateralize the Bank's deposits. The Company maintains control of
these assets, and may use, commingle, encumber or dispose of any
portion of the collateral as long as there is no event of default and
the remaining qualified collateral is sufficient to satisfy the
collateral maintenance level. The agreement further states that upon
any event of default, the Bank's recovery is limited to the amount of
the member's outstanding funding agreement. The amount of the Company's
liability for funding agreements with the Bank as of September 30, 2003
is $1 billion, included in contractholder funds.
14
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's narrative analysis of the results of operations is presented in
lieu of Management's Discussion and Analysis of Financial Condition and Results
of Operations, pursuant to General Instruction H(2)(a) of Form 10-Q.
The Company's Annual Report on Form 10-K, its quarterly reports on Form 10-Q and
any current reports on Form 8-K, and all amendments to these reports, are
available on the Citigroup website at http://www.citigroup.com by selecting the
"Investor Relations" page and selecting "SEC Filings."
CONSOLIDATED OVERVIEW ($ in millions)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002
---- ---- ---- ----
Revenues $1,764 $1,222 $4,592 $3,790
Insurance benefits and interest credited 994 766 2,470 2,199
Operating expenses 243 198 710 566
------ ------ ------ ------
Income before taxes 527 258 1,412 1,025
Income taxes 155 61 364 285
------ ------ ------ ------
Net income $ 372 $ 197 $1,048 $ 740
====== ====== ====== ======
The Travelers Insurance Company (TIC, together with its subsidiaries, the
Company), is comprised of two business segments, Travelers Life & Annuity and
Primerica Life Insurance.
Net income increased 89% to $372 million for the quarter ended September 30,
2003 from $197 million in the prior year quarter, primarily related to increased
revenues due to higher investment income, higher individual annuity account
balances, group annuity account balances and net written individual life
premiums (business volumes) better after-tax realized investment gain (loss)
activity, partially offset by higher deferred acquisition costs (DAC)
amortization. Net income included net after-tax realized investment gains of $28
million in the third quarter of 2003, which included after-tax impairment losses
of $12 million, compared to net after-tax realized investment losses of $107
million in the third quarter of 2002. The third quarter 2002 losses were
primarily related to the impairments of investments in the energy and
communications sectors.
Net income for the nine months ended September 30, 2003 increased 42% to $1,048
million, from $740 million in the prior year period, primarily related to better
after-tax realized investment gain (loss) activity, and a $39 million tax
benefit related to an adjustment to the Dividends Received Deduction (DRD) in
the first quarter of 2003, partially offset by higher DAC amortization. Net
after-tax realized investment gains were $29 million for the nine months ended
September 30, 2003 and losses were $209 million for the prior year period,
primarily related to the third quarter 2002 energy sector impairments and to the
second quarter 2002 impairment of investments in debt securities of WorldCom
Inc. in the amount of $126 million, after-tax.
15
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
The following discussion presents in more detail each business segment's
performance.
TRAVELERS LIFE & ANNUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 2002
($ in millions) ---- ----
Revenues $1,352 $ 839
Insurance benefits and interest credited 859 635
Operating expenses 128 91
------ ------
Income before taxes 365 113
Income taxes 100 12
------ ------
Net income $ 265 $ 101
====== ======
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 Life & Annuity name. The Company has a
license from Travelers Property Casualty Corp. to use the names "Travelers Life
& Annuity," "The Travelers Insurance Company," "The Travelers Life and Annuity
Company" and related names in connection with the Company's business. Among the
range of individual products offered are fixed and variable deferred annuities,
payout annuities and term, universal and variable life insurance. These products
are primarily distributed through CitiStreet Retirement Services, Smith Barney,
Primerica Financial Services, Citibank, and a nationwide network of independent
agents and the growing outside broker dealer channel. 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, structured settlements and
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.
TLA's business is significantly affected by movements in the U.S. equity and
fixed income credit markets. U.S. equity and credit market events can have both
positive and negative effects on the deposit, revenue and policy retention
performance of the business. A sustained weakness in the equity markets will
decrease revenues and earnings in variable products. Declines in credit quality
of issuers will have a negative effect on earnings. These statements are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. See "Forward-Looking Statements" on page 21.
Net income of $265 million in the third quarter of 2003 increased 162% from $101
million, primarily related to increased revenues due to higher investment
income, favorable business volumes and better after-tax realized investment gain
(loss) activity, partially reduced by higher DAC amortization. Included in net
income are current year after-tax realized investment gains of $29 million and
prior year investment losses of $102 million for the third quarter of 2003 and
2002, respectively, primarily related to the third quarter 2002 impairments of
investments in the energy and communication sectors of the fixed maturity
portfolio.
Net investment income (NII) increased 9% to $706 million and $645 million for
the three months ended September 30, 2003 and 2002, respectively. This increase
was driven by a larger invested asset base from increased business volumes, and
higher equity investment returns as a result of risk arbitrage activity in the
Company's trading portfolio.
16
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
The following table shows net written premiums and deposits by product type for
the quarters ended September 30, 2003 and 2002. The majority of the annuity
business and a substantial portion of the life business written by TLA are
accounted for as investment contracts, such that the premiums are considered
deposits and are not included in revenues. Deposits represent a statistic
integral to managing TLA operations, which management uses for measuring
business volumes, and may not be comparable to similarly captioned measurements
used by other life insurance companies.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 2002
IN MILLIONS OF DOLLARS Premiums Deposits Premiums Deposits
-------- -------- -------- --------
Individual annuities
Fixed $ - $ 115 $ - $ 324
Variable - 1,097 - 949
Individual payout 5 6 7 7
------- ------- ------- -------
Total individual annuities 5 1,218 7 1,280
Group annuities 389 2,020 154 1,243
Individual life insurance:
Direct periodic premiums &
deposits 35 168 34 110
Single premium deposits - 125 - 64
Reinsurance (10) (26) (7) (22)
------- ------- ------- -------
Total individual life insurance 25 267 27 152
Other 9 - 9 -
------- ------- ------- -------
Total $ 428 $ 3,505 $ 197 $ 2,675
======= ======= ======= =======
Individual annuity deposits in the third quarter of 2003 decreased 5% from the
third quarter of 2002, reflecting a decline in fixed annuity production due to
competitive pressures and the current low interest rate environment, partially
offset by higher variable annuity production due to the increase in equity
market conditions and competitive product features. Individual annuity account
balances increased 17% to $30.8 billion at September 30, 2003, from $26.4
billion at September 30, 2002, reflecting market appreciation of variable
annuity investments in the second and third quarters of 2003, and improved
in-force retention related to lower surrender rates and positive net sales.
Group Annuity written premiums increased 153% primarily related to strong
current quarter production. Deposits (excluding Citigroup's employee pension
plan deposits) in the third quarter of 2003 were up 63% from the comparable
period of 2002, which reflects strong variable GIC sales, an additional $200
million funding agreement sold to the Federal Home Loan Bank of Boston and the
sale of a group pension close out contract of $290 million. Group Annuity
account balances and benefit reserves reached $24.9 billion at September 30,
2003, up 10% from $22.7 billion at September 30, 2002. This volume growth
reflects strong 2003 first quarter fixed GIC production and continued strong
retention in all products.
Deposits for the life insurance business in the third quarter of 2003 were up
76% from the comparable period of 2002, driven by very strong single premium
sales and higher direct periodic deposits. Life insurance in force was $87.1
billion at September 30, 2003, up from $82.3 billion at December 31, 2002.
In the third quarter of 2003, TLA operating expenses increased 41% from the
prior year quarter primarily due to volume-related insurance expenses, and an
increase of $27 million in DAC amortization. The amortization of capitalized DAC
is a significant component of TLA expenses. TLA's recording of DAC varies based
upon product type. DAC for deferred annuities, both fixed and variable, and
payout annuities employs a level yield methodology. DAC for universal life and
COLI are amortized in relation to estimated gross profits, with traditional
life, including term insurance and other products, amortized in relation to
anticipated premiums. Amortization expense has primarily increased due to a
higher amortization rate resulting from the 2002 decrease in market value of
individual annuity account balances.
17
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
PRIMERICA LIFE INSURANCE
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 2002
($ in millions) ---- ----
Revenues $ 412 $ 383
Insurance benefits 135 131
Operating expenses 115 107
---------- ----------
Income before taxes 162 145
Income taxes 55 49
---------- ----------
Net income $ 107 $ 96
========== ==========
The Primerica Life Insurance business segment offers individual life products,
primarily term insurance, to customers through a sales force of approximately
107,000 agents. A great majority of the domestic licensed sales force works on a
part-time basis.
Net income of $107 million in the third quarter of 2003 increased 11% from $96
million, primarily related to growth in life insurance in force and volume-
related investment income. Included in net income are net after-tax realized
investment losses of $1 million and $6 million in the third quarter of 2003 and
2002, respectively. The prior year losses were primarily due to impairments of
investments in the energy sector of the fixed maturity portfolio.
Total life insurance in force reached $494.2 billion at September 30, 2003, up
from $466.8 billion at December 31, 2002, reflecting good in-force policy
retention and higher volume of sales. The face amount of new term life insurance
sales was $20.3 billion for the three-month period ended September 30, 2003,
compared to $19.6 billion for the prior year period.
NII increased 6% to $76 million in the third quarter of 2003 from the prior year
quarter, primarily related to a larger invested asset base, offset by lower
yields.
The amortization of capitalized DAC, which increased to $60 million in the third
quarter of 2003 from $56 million in the third quarter of 2002, is a significant
component of Primerica Life's expenses. All of Primerica Life's DAC is
associated with term insurance products, which are amortized in relation to
anticipated premiums. Amortized DAC has remained level as a percentage of direct
premiums. The increase in the amount of amortization over 2002 is associated
with growth in sales and in-force business.
Earned premiums net of reinsurance were $313 million in the third quarter of
2003 compared to $300 million in the prior year period, including $297 million
and $283 million, respectively, for Primerica Life individual term life
policies.
TRAVELERS LIFE & ANNUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 2002
($ in millions) ---- ----
Revenues $ 3,359 $ 2,625
Insurance benefits and interest credited 2,070 1,805
Operating expenses 367 237
---------- ----------
Income before taxes 922 583
Income taxes 197 135
---------- ----------
Net income $ 725 $ 448
========== ==========
18
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
Net income for the nine months ended September 30, 2003 increased 62% to $725
million from $448 million from the prior year period, primarily related to
better after-tax realized investment gain (loss) activity, and a $39 million tax
benefit related to an adjustment to the DRD in the first quarter of 2003,
partially offset by higher DAC amortization. Net income included current year
realized investment gains of $26 million and prior year investment losses of
$202 million for the nine months ended September 30, 2003 and 2002,
respectively, primarily related to the third quarter 2002 energy sector
impairments and second quarter 2002 impairment of investments in debt securities
of WorldCom Inc. in the amount of $122 million, after tax. The DRD benefit
reduced the effective tax rate from 23% for the prior year nine month period
ended September 30, 2002 to 21% in the current year nine month period ended
September 30, 2003.
NII was $2.1 billion and $1.9 billion for the nine months ended September 30,
2003 and 2002, respectively. NII includes dividends from Citigroup Inc. Series
YY and Series YYY preferred stock totaling $137 million and $112 million in 2003
and 2002, respectively. Excluding these dividends NII increased 6% to $1.9
billion for the nine months ended September 30, 2003 compared to $1.8 million in
the prior year period. This increase was driven by a larger invested asset base
from increased business volumes, and higher equity investment returns as a
result of risk arbitrage activity in the Company's trading portfolio.
The following table shows net written premiums and deposits by product type for
the nine months ended September 30, 2003 and 2002. The majority of the annuity
business and a substantial portion of the life business written by TLA are
accounted for as investment contracts, such that the premiums are considered
deposits and are not included in revenues. Deposits represent a statistic
integral to managing TLA operations, which management uses for measuring
business volumes, and may not be comparable to similarly captioned measurements
used by other life insurance companies.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 2002
IN MILLIONS OF DOLLARS Premiums Deposits Premiums Deposits
-------- -------- -------- --------
Individual annuities
Fixed $ - $ 431 $ - $1,099
Variable - 2,853 - 3,148
Individual payout 20 22 19 21
---- ------ ----- ------
Total individual annuities 20 3,306 19 4,268
Group annuities 658 5,223 439 4,833
Individual life insurance:
Direct periodic premiums &
deposits 104 494 102 452
Single premium deposits - 254 - 212
Reinsurance (28) (72) (21) (62)
---- ------ ----- ------
Total individual life insurance 76 676 81 602
Other 26 - 28 -
---- ------ ----- ------
Total $780 $9,205 $ 567 $9,703
==== ====== ===== ======
Individual annuity deposits in the first nine months of 2003 decreased 23% from
the prior year period, reflecting a decline in fixed annuity production due to
competitive pressures and the current low interest rate environment, and lower
variable annuity production due to declining equity market conditions in the
first six months of the year, partially offset by competitive product features.
Group Annuity written premiums increased 50% for the first nine months of 2003,
compared to the 2002 period, primarily related to strong third quarter
production. Deposits (excluding Citigroup's employee pension plan deposits) of
$5.2 billion in the first nine months of 2003 were up 8% from $4.8 billion in
the comparable period of 2002, driven by $1 billion in funding agreements sold
to the Federal Home Loan Bank of Boston.
19
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
Deposits for the life insurance business in the first nine months of 2003 were
up 12% from the comparable period of 2002, driven by very strong single premium
sales and higher direct periodic deposits.
For the first nine months of 2003, TLA operating expenses increased 55% from the
comparable prior year nine-month period, primarily due to an increase of $94
million of DAC amortization. Amortization has primarily increased due to a
higher amortization rate resulting from the 2002 decrease in market value of
individual annuity account balances. Also, during the first quarter of 2002, TLA
had a one-time decrease in DAC amortization of $22 million related to changes in
the underlying lapse and interest rate assumptions in the individual annuity
business.
PRIMERICA LIFE INSURANCE
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 2002
($ in millions) ---- ----
Revenues $1,233 $1,165
Insurance benefits 400 394
Operating expenses 343 329
------ ------
Income before taxes 490 442
Income taxes 167 150
------ ------
Net income $ 323 $ 292
====== ======
Net income for the nine months ended September 30, 2003 increased 11% to $323
million from $292 million for the nine-months ended September 30, 2002. Included
in net income are net after-tax realized investment gains (losses) of $3 million
and $(7) million for the 2003 and 2002 nine-month periods, respectively.
NII increased 8% to $232 million for the nine months of 2003 from the prior
year, primarily related to a larger invested asset base, offset by lower yields.
The amortization of capitalized DAC, increased to $173 million in the first nine
months of 2003 from $164 million in the prior year period. Amortized DAC has
remained level as a percentage of direct premiums. The increase in the amount of
amortization over 2002 is associated with growth in sales and in-force business.
Earned premiums net of reinsurance were $927 million in the first nine months of
2003 compared to $890 million in the prior year period, including $879 million
and $842 million, respectively, for Primerica Life individual term life
policies.
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, 2002, 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 $966
million is available by the end of 2003 for such dividends without prior
approval of the State of Connecticut Insurance Department, depending upon the
amount and timing of the payments. TLAC may not pay a dividend to TIC without
such approval. Primerica Life may pay up to $148 million in dividends to TIC
without prior approval of the Massachusetts Insurance Department. Primerica Life
paid $88 million and $165 million in dividends to TIC during the nine months
ended September 30, 2003 and 2002, respectively. The Company paid $280 million
and $586 million in dividends to its parent during the nine months ended
September 30, 2003 and 2002, respectively.
20
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
LEGISLATIVE DEVELOPMENTS
In May 2003, the Jobs and Growth Tax Relief Reconciliation Act of 2003 was
enacted into law. This act makes various changes in individual tax rates. Most
significantly, the legislation extends the 15% maximum capital gains tax rate to
corporate dividends received by individuals, including dividends received by
mutual funds and passed through to mutual fund shareholders. The legislation
also lowers the capital gains tax rate and accelerates the individual income tax
rate reductions enacted in 2001. These changes could have a negative impact on
demand for life and annuity products. This statement is a forward-looking
statement within the meaning of the Private Securities Litigation Reform Act.
See "Forward-Looking Statements" on this page.
FUTURE APPLICATIONS OF ACCOUNTING STANDARDS
See Note 2 of Notes to Condensed Consolidated Financial Statements for a
discussion of recently issued accounting pronouncements.
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, the resolution of legal proceedings, the impact
that the adoption of recent legislation may have on the demand for life and
annuity products and the potential impact of the decline in credit quality of
investments on earnings.
21
THE TRAVELERS INSURANCE COMPANY AND SUBSIDIARIES
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended ("Exchange Act")) as of the end of the period covered by this report.
Based on such evaluation, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act.
INTERNAL CONTROL OVER FINANCIAL REPORTING
There have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
22
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.
31.01+ Certification of chief financial officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.02+ Certification of chief executive officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.01+ Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) REPORTS ON FORM 8-K
None
- -----------------------
+Filed herewith
23
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 November 14, 2003 /s/ Glenn D. Lammey
-----------------------------------------------------
Glenn D. Lammey
Senior Executive Vice President,
Chief Financial Officer and Chief Accounting Officer
(Principal Financial Officer and Principal Accounting
Officer)
24