Travelers Group and J.P. Morgan Form Partnership for Property and Casualty Insurance Venture

Strategic Insights -

Travelers Group, the nation's largest diversified financial services company, has announced a major partnership with J.P. Morgan & Co. for a new holding company formed from the combined property and casualty insurance operations of Travelers Insurance and Aetna Life & Casualty. J.P. Morgan has committed $200 million of its own capital for an equity participation in the new company, providing a 3% ownership position. This investment is matched by Aetna's similar investment of $200 million, with Travelers Group maintaining an ownership level of approximately 82% in the new company.

Key Takeaways:

  • The new holding company will be formed from the combined property and casualty insurance operations of Travelers Insurance and Aetna Life & Casualty.
  • J.P. Morgan's investment of $200 million provides a 3% ownership position in the new company, matching a similar investment by Aetna.
  • The new company expects to raise approximately $900 million through the issuance of preferred stock and $1.5 billion of senior debt in public offerings.
  • The company also expects to raise $1.3 billion of equity through a public offering of common stock, with no Travelers Group common stock to be issued.
  • The transaction is subject to various regulatory approvals and is expected to close by the end of March 1996.
  • Travelers Group expects to maintain an ownership level of approximately 82% in the new company.
  • J.P. Morgan's investment is seen as a demonstration of confidence in the market potential of the combined Travelers/Aetna property and casualty operations.
  • The company aims to achieve at least $300 million in expense savings over a two-year period by eliminating duplication and increasing efficiency.

Statistics:

  • $4.0 billion: Transaction value of the combined property and casualty insurance operations of Travelers and Aetna.
  • $200 million: Investment by J.P. Morgan in the new company, providing a 3% ownership position.
  • $200 million: Similar investment by Aetna in the new company.
  • $900 million: Amount raised through the issuance of preferred stock.
  • $1.5 billion: Amount of senior debt raised in public offerings.
  • $1.3 billion: Expected equity raised through a public offering of common stock.
  • $1.1 billion: Amount injected by Travelers Group into the new company, including $800 million from an issuance of senior debt and commercial paper.
  • $111 billion: Travelers Group's assets.
  • 82%: Travelers Group's ownership level in the new company.
  • March 1996: Expected closing date of the transaction.

Sources:

  • "Travelers Group and J.P. Morgan Form Partnership for Property and Casualty Insurance Venture" (PRNewswire, Dec. 11, 1995)
  • Travelers Group: Gordon G. Andrew, 212-816-8853; or Investors: Bill Pike, 212-816-8874.