Standard & Poor's Affirms Ratings on Citigroup's Insurance Units

Strategic Insights -

Standard & Poor's today affirmed its ratings on the insurance units of Citigroup, Inc., citing extremely strong capitalization and improved earnings. The ratings reflect the companies' strong financial performance, including a consolidated risk-based capital ratio of 383% and a GAAP operating income of $496 million in 1998. Travelers Insurance Co. and its subsidiary, Travelers Life & Annuity Co., demonstrated improvements in asset risk management, with foreclosed real estate comprising only 0.5% of assets, commercial mortgage loans reduced to 10.4% of assets, and restructured loans as a percent of total mortgages reduced to 6.9%. Primerica Life Insurance Co. also showed excellent profitability and strong capitalization, with a risk-based capital ratio of 356%.

Key Takeaways:

  • The ratings on Travelers Insurance Co. and its subsidiary, Travelers Life & Annuity Co., are based on the companies' extremely strong capitalization with a consolidated risk-based capital ratio of 383%.
  • Travelers has demonstrated improved earnings, with a GAAP operating income of $496 million in 1998.
  • Travelers has reduced asset risk, with foreclosed real estate comprises only 0.5% of assets, commercial mortgage loans reduced to 10.4% of assets, and restructured loans as a percent of total mortgages reduced to 6.9%.
  • Primerica Life Insurance Co. has shown excellent profitability, with statutory and GAAP earnings adequacy ratios of over 1,000% under Standard & Poor's model.
  • Primerica has strong capitalization, with a risk-based capital ratio of 356% on Standard & Poor's model.
  • TAPCO has shown strong growth in personal lines, resulting from its success in cross-selling among affiliated distribution systems.
  • TAPCO has a strong brand name, contributing to its leadership position in the property/casualty market.
  • Gulf Insurance Co. and its affiliated insurers have a niche business profile that generates combined ratios below 100%, extremely strong capitalization, and effective use of reinsurance to manage risk.

Statistics:

  • Consolidated risk-based capital ratio under Standard & Poor's model: 383%
  • GAAP operating income in 1998: $496 million
  • Foreclosed real estate as a percent of assets: 0.5%
  • Commercial mortgage loans as a percent of assets: 10.4%
  • Restructured loans as a percent of total mortgages: 6.9%
  • Statutory and GAAP earnings adequacy ratios of over 1,000% under Standard & Poor's model: Yes
  • Risk-based capital ratio on Standard & Poor's model: 356%
  • Returns on revenue in the 18% to 20% range: Yes
  • Deferred annuity deposits in 1998: $3.4 billion
  • New periodic life premium in 1998: $52.8 million
  • Group annuity deposits in 1998: $4.1 billion

Sources:

  • Standard & Poor's
  • Citigroup, Inc.
  • Travelers Insurance Co.
  • Primerica Life Insurance Co.
  • TAPCO
  • Gulf Insurance Co.