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CITIGROUP INC Annual Report, Year Ended Dec 31, 1994

Filing Date
Filed March 31, 1995
Period End
December 31, 1994
Securities
CC-PNC-PR
In the record · 2016–202610-K1110-Q328-K279

C filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 279 current reports (8-K) between 2016 and 2026.

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01—Abstract

Summary

Summary of the 10-K filed March 31, 1995. Cited figures are marked; the original filing is the authoritative source.

The Travelers Inc. (NYSE: TRV), formerly Primerica Corporation, reported 1994 net income of $1.326 billiona, or $3.86 per share, up from $916 million ($3.74 per share) in 1993, on revenues of $18.5 billion versus $6.8 billion.

The comparison is distorted by the December 31, 1993 merger with The Travelers Corporation and the July 1993 acquisition of Shearson's domestic retail brokerage (now Smith Barney), so 1994 reflects a full year of both businesses, while 1993 included only five months of Shearson. Excluding one-time items, management said 1994 pre-tax-of-gains income rose about 47% to $1.321 billionb, driven mainly by Consumer Finance, Primerica Financial Services and the inclusion of the Travelers Insurance Group. The company is a diversified financial services holding company organized into four segments: Investment Services (Smith Barney, the second-largest U.S. brokerage with about 11,000 financial consultants), Consumer Finance Services (Commercial Credit), Life Insurance Services (Travelers Life and Annuities, Primerica Financial Services) and Property & Casualty Insurance Services.

Return on average common equity fell to 15.6% from 18.4%, and book value per share declined to $24.77c from $26.06, largely because of a $1.3 billion after-tax unrealized loss on investment securities recorded when FAS 115 was adopted. Total assets rose to $115.3 billion.

Investors should weigh several items: the property-casualty combined ratio was 114.2% excluding special charges (124.7% reported), environmental and asbestos reserves remain uncertain, and the company is restructuring its portfolio by selling group life to MetLife and contributing its medical business to the MetraHealth joint venture, in which it holds 48.25%. Dividends per share rose to $0.575d from $0.490, and the company repurchased about 15.9 million shares in 1994.

02—Key points

Key Highlights

  1. Net income rose 45% to $1.326 billion ($3.86 per share) from $916 million ($3.74 per share) in 1993, though the comparison is inflated by the Shearson acquisition and merger timing.
  2. Total revenues nearly tripled to $18.5 billion from $6.8 billion, reflecting full-year consolidation of Smith Barney and the Travelers Insurance Group.
  3. Smith Barney's net income reached $390 million on revenues of $5.5 billion, but earnings were pressured by a difficult 1994 securities market and integration costs.
  4. Consumer Finance net income was $227 million; average receivables grew 11%, and the 60+ day delinquency rate improved to 1.88% from 2.21%.
  5. Book value per share fell to $24.77 from $26.06 and ROE dropped to 15.6%, largely due to a $1.3 billion unrealized investment loss under FAS 115.
  6. The property-casualty combined ratio was 124.7% including a $225 million statutory purchase-accounting charge and environmental reserve strengthening, versus 114.2% excluding special items.
  7. Portfolio restructuring: group life sold to MetLife for $350 million and medical business moved into MetraHealth (48.25% owned), while ACMR was sold for about $430 million.

03—Questions

Frequently Asked Questions

  1. Why did reported earnings rise so sharply in 1994?

    Much of the increase reflects acquisitions rather than organic growth alone. The Shearson brokerage business was included for only five months in 1993 but a full year in 1994, and the Travelers Insurance Group merger on December 31, 1993 also added a large block of earnings. The company said that excluding gains and portfolio losses, income before accounting changes rose about 47%.

  2. What caused the drop in book value and return on equity?

    Stockholders' equity fell to $8.64 billion from $9.33 billion, mainly because the company adopted FAS 115 and recorded about $1.3 billion of net unrealized losses on investment securities. Share repurchases of $543 million also reduced equity. Return on average common equity declined to 15.6% from 18.4%.

  3. What are the main risks flagged in the filing?

    Key risks include environmental and asbestos claim reserves ($471 million environmental and $383 million net asbestos reserves), which management says could prove materially inadequate in a future period; the securities industry slowdown affecting Smith Barney; rising interest rates that could hurt annuity and brokerage activity; reinsurance recoverables from Lloyd's of London, which is restructuring; and pending federal health care and Glass-Steagall reform legislation.

  4. How is the company's portfolio changing?

    The company is exiting some businesses and focusing on core franchises. It sold its group life business to MetLife in January 1995, combined its medical operations into the MetraHealth joint venture, sold American Capital Management & Research to Van Kampen Merritt, and sold Bankers and Shippers Insurance. It is also reducing underperforming mortgage loans, which fell to $511 million from $1.3 billion.

04—Continue

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