-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QlX8L8Gb67JG4MrWUZnNeGpmONsMdfH0SrRR5b2OA8draH71iKCIPs0bzRETncRT HV8kM7XQoSujbQ6pkdkxpA== 0001005477-00-002089.txt : 20000313 0001005477-00-002089.hdr.sgml : 20000313 ACCESSION NUMBER: 0001005477-00-002089 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIGROUP INC CENTRAL INDEX KEY: 0000831001 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 521568099 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-09924 FILM NUMBER: 566799 BUSINESS ADDRESS: STREET 1: 153 EAST 53RD CITY: NEW YORK STATE: NY ZIP: 10043 BUSINESS PHONE: 2125591000 MAIL ADDRESS: STREET 1: 250 WEST ST STREET 2: 7TH FL CITY: NEW YORK STATE: NY ZIP: 10013 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS GROUP INC DATE OF NAME CHANGE: 19950519 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS INC DATE OF NAME CHANGE: 19940103 FORMER COMPANY: FORMER CONFORMED NAME: PRIMERICA CORP /NEW/ DATE OF NAME CHANGE: 19920703 10-K405 1 FORM 10-K405 FINANCIAL INFORMATION THE COMPANY 2 Global Consumer 2 Global Corporate and Investment Bank 3 Global Investment Management and Private Banking 4 Corporate/Other 4 Investment Activities 4 FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6 GLOBAL CONSUMER 8 Banking/Lending 8 Citibanking North America 8 Mortgage Banking 9 Cards 10 CitiFinancial 11 Insurance 11 Travelers Life and Annuity 11 Primerica Financial Services 12 Personal Lines 13 International Consumer 14 Europe, Middle East & Africa 14 Asia Pacific 15 Latin America 15 e-Citi 16 Other Consumer 16 Consumer Portfolio Review 17 Global Consumer Outlook 18 GLOBAL CORPORATE AND INVESTMENT BANK 20 Salomon Smith Barney 21 Global Corporate Bank 22 Emerging Markets 22 Global Relationship Banking 22 Commercial Lines 23 Commercial Portfolio Review 29 Global Corporate and Investment Bank Outlook 29 GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING 31 SSB Citi Asset Management Group 31 Citibank Private Bank 32 Global Investment Management and Private Banking Outlook 32 CORPORATE/OTHER 33 INVESTMENT ACTIVITIES 33 FUTURE APPLICATION OF ACCOUNTING STANDARDS 33 YEAR 2000 34 FORWARD-LOOKING STATEMENTS 34 MANAGING GLOBAL RISK 34 The Credit Process 35 The Market Risk Management Process 36 Management of Cross-Border Risk 38 LIQUIDITY AND CAPITAL RESOURCES 40 REPORT OF MANAGEMENT 44 INDEPENDENT AUDITORS' REPORT 44 CONSOLIDATED FINANCIAL STATEMENTS 45 Consolidated Statement of Income 45 Consolidated Statement of Financial Position 46 Consolidated Statement of Changes in Stockholders' Equity 47 Consolidated Statement of Cash Flows 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 49 FINANCIAL DATA SUPPLEMENT 80 Average Balances and Interest Rates, Taxable Equivalent Basis 80 Analysis of Changes in Net Interest Revenue 82 Ratios 83 Foregone Interest Revenue on Loans 83 Loan Maturities and Sensitivity to Changes in Interest Rates 83 Loans Outstanding 83 Cash-Basis, Renegotiated, and Past Due Loans 84 Other Real Estate Owned and Assets Pending Disposition 84 Details of Credit Loss Experience 84 Average Deposit Liabilities in Offices Outside the U.S. 85 Maturity Profile of Time Deposits ($100,000 or more) in U.S. Offices 85 Short-Term and Other Borrowings 85 10-K CROSS-REFERENCE INDEX 93 CITIGROUP BOARD OF DIRECTORS 96 1 THE COMPANY Citigroup Inc. (together with its subsidiaries, the Company) is a diversified holding company whose businesses provide a broad range of financial services to consumer and corporate customers in 101 countries and territories. The Company's activities are conducted through Global Consumer, Global Corporate and Investment Bank, Global Investment Management and Private Banking, and Investment Activities. On October 8, 1998, Citicorp merged with and into a newly formed, wholly owned subsidiary of Travelers Group Inc. (TRV) (the Merger). Following the Merger, TRV changed its name to Citigroup Inc. (Citigroup). Under the terms of the Merger, 1.698 billion shares (adjusted to reflect the three-for-two stock split in May 1999) of Citigroup's common stock were issued in exchange for all of the outstanding shares of Citicorp common stock. The merger was accounted for under the pooling of interests method. Upon consummation of the Merger, Citigroup became a bank holding company. In November 1999, President Clinton signed into law the Gramm-Leach-Bliley Act (the GLB Act), which will become effective in most significant respects on March 11, 2000. Under the GLB Act, bank holding companies, such as Citigroup, all of whose controlled depository institutions are "well capitalized" and "well managed" as defined in Federal Reserve Regulation Y and which obtain satisfactory Community Reinvestment Act ratings, will have the ability to declare themselves to be "financial holding companies" and engage in a broader spectrum of activities than those currently permitted, including insurance underwriting and brokerage (including annuities), and underwriting and dealing in securities without a revenue limit. The Company anticipates that its declaration to become a financial holding company will become effective shortly after the effective date of the GLB Act, and that as a result, it will be permitted to continue to operate its insurance businesses as currently structured and, if it so determines, to expand those businesses. Because the GLB Act repeals Section 20 of the Glass-Steagall Act, Citigroup will be permitted to operate without regard to revenue limits on "ineligible" securities activities and to acquire other securities firms without regard to such limits. Subject to certain limitations, new merchant banking rules will permit Citigroup to make investments in companies that engage in activities that are not financial in nature without regard to the existing 5% limit for domestic investments and 20% limit for overseas investments. On November 28, 1997, a newly formed, wholly owned subsidiary of TRV merged with and into Salomon Inc (Salomon) (the Salomon Merger). Under the terms of the Salomon Merger, approximately 282.8 million shares (adjusted to reflect the three-for-two stock split in May 1999) of Citigroup common stock were issued in exchange for all of the outstanding shares of Salomon common stock. Thereafter, Smith Barney Holdings Inc. (Smith Barney), a wholly owned subsidiary of Citigroup, was merged with and into Salomon to form Salomon Smith Barney Holdings Inc. (Salomon Smith Barney). The Salomon Merger was accounted for under the pooling of interests method. The Company's Global Consumer segment includes a global, full-service consumer franchise encompassing, among other things, branch and electronic banking, consumer lending services, investment services, credit and charge card services, and life, auto and homeowners insurance. The businesses included in the Company's Global Corporate and Investment Bank segment serve corporations, financial institutions, governments, and other participants in developed and emerging markets throughout the world. These businesses provide, among other things, investment banking, retail brokerage, corporate banking, cash management products and services, and commercial insurance. Global Investment Management and Private Banking includes asset management services provided to mutual funds, institutional, and individual investors, and personalized wealth management services for high net worth clients. Corporate/Other includes net corporate treasury results, unallocated expenses and corporate administration. The Investment Activities segment includes the Company's venture capital activities, the realized investment gains and losses related to certain corporate- and insurance-related investments, and the results of certain investments in countries that refinanced debt under the 1989 Brady plan or plans of a similar nature. GLOBAL CONSUMER Global Consumer delivers a wide array of banking, lending, and investment services, including the issuance of credit and charge cards, and personal insurance products in 52 countries and territories. Global Consumer creates products and platforms to meet the expanding needs of the world's growing middle class. Citibanking North America delivers banking, lending, and investment services to customers through 370 branches and through electronic delivery systems. Through its Mortgage Banking unit, Global Consumer originates and services mortgages and student loans for customers across North America. The Cards unit offers products such as MasterCard and VISA, and Diners Club across North America. As of December 31, 1999, the U.S. bankcards business had 41 million accounts and $74 billion of managed receivables, which represented approximately 16% of the U.S. credit card receivables market. New accounts are primarily acquired through direct marketing efforts, portfolio acquisitions, and over the Internet. The CitiFinancial unit of Global Consumer provides community-based lending services through its branch network system. As of December 31, 1999, CitiFinancial maintained 1,174 loan offices in 47 states and Canada, including 19 servicing centers for $.M.A.R.T. loans(R) and $.A.F.E.(R) loans sold through the independent agents (the Primerica sales force) of Primerica Financial Services (Primerica), a subsidiary of Citigroup. Loans to consumers include real estate-secured loans, unsecured and partially secured personal loans, and loans to finance consumer goods purchases. 2 The Insurance units of Global Consumer through Travelers Life and Annuity offer individual annuity, group annuity, and individual life insurance. The individual products include fixed and variable deferred annuities, payout annuities, and term and universal life insurance. These products are primarily distributed through Citigroup businesses and a nationwide network of independent agents. The group annuity products offered include institutional pension products, including guaranteed investment contracts, payout annuities, structured finance, and group annuities to U.S. employer-sponsored retirement and savings plans through direct sales and various intermediaries. The business operations of Primerica involve the sale in North America of life insurance, and other products manufactured by its affiliates, including Salomon Smith Barney (SSB) mutual funds, CitiFinancial mortgages and personal loans, The Travelers Insurance Company (TIC) annuity products, and Travelers Property Casualty Corp. (TAP) automobile and homeowners insurance. The Primerica sales force is composed of over 100,000 independent representatives. A great majority of the sales force is employed on a part-time basis. Through TAP, a subsidiary in which Citigroup has an approximate 85% interest, Global Consumer writes virtually all types of property and casualty insurance covering personal risks. The Personal Lines unit of TAP had approximately 5.3 million policies in force at December 31, 1999. The primary coverages are personal automobile and homeowners insurance sold to individuals, and are distributed through approximately 5,400 independent agencies located throughout the United States. Personal Lines also uses alternative distribution channels, including sponsoring organizations such as employee and affinity groups, and joint marketing arrangements with other insurers, and are marketed through other Citigroup businesses. The International unit of Global Consumer provides full-service banking and lending, including credit and charge cards, and investment services in Europe, Middle East & Africa, Asia Pacific (including Japan and Australia), and Latin America through more than 1,000 branches in 50 countries and territories. Outside North America, Global Consumer has approximately 11 million credit and charge card member accounts. e-Citi is the business responsible for developing and implementing Citigroup's Internet financial services products and e-commerce solutions. e-Citi's mission is to build and deliver new forms of financial services that meet the changing needs of customers and to facilitate all aspects of e-commerce as it grows with the new digital economy. GLOBAL CORPORATE AND INVESTMENT BANK Global Corporate and Investment Bank provides corporations, governments, institutions, and investors in 100 countries and territories with a broad range of financial products and services, including investment advice, financial planning and retail brokerage services, banking and financial services, and commercial insurance products. Global Corporate and Investment Bank, through Salomon Smith Barney, delivers investment banking services that encompass a full range of global capital market activities, including the underwriting and distribution of fixed income and equity securities for United States and foreign corporations and for state, local and other governmental and government-sponsored authorities. Global Corporate and Investment Bank also provides capital raising, advisory, research, and other brokerage services to its customers, acts as a market-maker, and executes securities and commodities futures brokerage transactions on all major United States and international exchanges on behalf of customers and for its own account. It also executes proprietary trading strategies on its own behalf, principally in fixed income securities and in commodities. In 1999 and 1998, SSB restructured and significantly decreased the risk profile of the global fixed income arbitrage groups because of lessening profit opportunities and growing risk and volatility. On February 26, 1999, SSB and The Nikko Securities Co. Ltd., formed a joint venture, to provide investment banking, sales and trading, and research services for corporate and institutional clients in Japan and overseas markets. In January 2000, SSB agreed to acquire the global investment banking business and related assets of Schroders PLC, including all corporate financial markets and securities activities, subject to Schroders PLC shareholder approval, various regulatory approvals and other customary closing conditions. Global Corporate and Investment Bank is a major participant in foreign exchange and in the over-the-counter (OTC) market for derivative instruments involving a wide range of products, including interest rate, equity and currency swaps, caps and floors, options, warrants and other derivative products. It also creates and sells various types of structured securities. Citibank has a long-standing presence in emerging markets, which include all locations outside North America, Western Europe, and Japan. Citigroup's Emerging Markets business offers a wide array of banking and financial services products and services that help multinational and local companies fulfill their financial goals or needs. Citigroup's Embedded Bank and Emerging Local Corporate strategies focus on its plans to gain market share in selected emerging market countries and to establish Citibank as a local bank as well as a leading international bank. Citibank typically enters a country to serve global customers, providing them with cash management, trade services, short-term loans, and foreign-exchange services. Then, Citibank offers project finance, fixed-income issuance and trading and, later, introduces securities custody, loan syndications and derivatives services. Finally, as a brand image is established and services for locally headquartered companies become significant, consumer banking services may be offered. 3 The Global Relationship Bank (GRB) provides banking and financial services to multinational companies and their subsidiaries around the world. A dedicated relationship team serves each parent company and its subsidiaries everywhere they operate. Product offerings are determined by the demands of these sophisticated customers. Core products include cash management, foreign exchange, structured products, securities custody, trade services, and loan products. SSB investment bankers and GRB and Emerging Markets corporate relationship managers also jointly market to their customers. SSB's investment banking products are sold to corporate relationships in GRB and Emerging Markets. In addition, Citibank's capabilities in foreign exchange, lending and liquidity, and transaction services are sold to SSB's customers. TAP's Commercial Lines unit offers a broad array of property and casualty insurance and insurance-related services, which it distributes through approximately 5,200 brokers and independent agencies located throughout the United States. TAP is the third largest writer of commercial lines insurance in the U.S. based on 1998 direct written premiums published by A.M. Best Company. Commercial Lines is organized into four marketing and underwriting groups that are designed to focus on a particular client base or industry segment to provide products and services that specifically address customers' needs: National Accounts, primarily serving large national corporations; Commercial Accounts, serving mid-size businesses; Select Accounts, serving small businesses; and Specialty Accounts, providing a variety of specialty coverages. Environmental, asbestos and other cumulative injury claims are segregated from other claims and are handled separately by TAP's Special Liability Group, a special unit staffed by dedicated legal, claim, finance, and engineering professionals. GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING The Global Investment Management and Private Banking group is comprised of the SSB Citi Asset Management Group and the Citibank Private Bank. The SSB Citi Asset Management Group includes Salomon Brothers Asset Management, Smith Barney Asset Management, and Citibank Global Asset Management. These businesses offer a broad range of asset management products and services from global investment centers around the world, including mutual funds, closed-end funds, managed accounts, unit investment trusts, variable annuities, and personalized wealth management services to institutional, high net worth, and retail clients. Clients include private and public retirement plans, endowments, foundations, banks, central banks, insurance companies, other corporations, government agencies, and high net worth and other individuals. Client relationships may be introduced through the cross marketing and distribution opportunities within Citigroup, through SSB Citi Asset Management Group's own sales force, or through independent sources. The Citibank Private Bank provides personalized wealth management services for high net worth clients through 100 offices in 31 countries and territories, generating fee and interest income from investment funds management and customer trading activity, trust and fiduciary services, custody services, and banking and lending activities. Its Relationship Managers and Product Specialists use their knowledge about their clients' individual needs and goals to bring them an array of personal wealth management services. CORPORATE/OTHER Corporate/Other includes net corporate treasury results, and corporate staff and other corporate expenses. INVESTMENT ACTIVITIES The Company's Investment Activities segment consists primarily of its venture capital activities, the realized investment gains and losses related to certain corporate- and insurance-related investments, and the results of certain investments in countries that refinanced debt under the 1989 Brady Plan or plans of a similar nature. The periodic reports of Citicorp, Salomon Smith Barney, TAP, The Student Loan Corporation (STU), TIC, and Travelers Life and Annuity Company (TLAC), subsidiaries of the Company that make filings pursuant to the Securities Exchange Act of 1934, as amended (the Exchange Act), provide additional business and financial information concerning those companies and their consolidated subsidiaries. The principal executive offices of the Company are located at 153 East 53rd Street, New York, New York 10043; telephone number 212-559-1000. 4 FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA Citigroup Inc. and Subsidiaries
In Millions of Dollars, Except Per Share Amounts 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- Total revenues $ 82,005 $ 76,431 $ 72,306 $ 65,101 $ 58,957 Total revenues, net of interest expense 57,237 48,936 47,782 43,765 36,567 Provisions for benefits, claims, and credit losses 11,508 11,116 9,911 9,566 7,193 Operating expenses(1) 29,781 28,551 27,121 23,475 20,460 Income from continuing operations(1) 9,994 5,807 6,705 7,073 5,610 Discontinued operations -- -- -- (334) 150 Cumulative effect of accounting changes(2) (127) -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 9,867 $ 5,807 $ 6,705 $ 6,739 $ 5,760 =================================================================================================================================== Earnings per share(3) Basic earnings per share: Income from continuing operations $ 2.95 $ 1.66 $ 1.91 $ 1.98 $ 1.60 Net income 2.91 1.66 1.91 1.88 1.65 Diluted earnings per share: Income from continuing operations 2.86 1.62 1.83 1.89 1.46 Net income 2.83 1.62 1.83 1.80 1.50 Dividends declared per common share 0.540 0.370 0.267 0.200 0.178 - ----------------------------------------------------------------------------------------------------------------------------------- At December 31, Total assets $ 716,937 $ 668,641 $ 697,384 $ 626,906 $ 559,146 Total deposits 261,091 228,649 199,121 184,955 167,131 Long-term debt 47,092 48,671 47,387 43,246 40,723 Mandatorily redeemable securities of subsidiary trusts 4,920 4,320 2,995 2,545 -- Redeemable preferred stock -- 140 280 420 560 Common stockholders' equity 47,761 40,395 38,498 35,213 31,000 Total stockholders' equity 49,686 42,708 41,851 38,416 35,183 =================================================================================================================================== Ratio of earnings to fixed charges and preferred stock dividends 1.62X 1.32X 1.41X 1.48X 1.35X Return on average common stockholders' equity(4) 22.49% 13.95% 17.49% 19.42% 18.88% Common stockholders' equity to assets 6.66% 6.04% 5.52% 5.62% 5.54% Total stockholders' equity to assets 6.93% 6.39% 6.00% 6.13% 6.29% =================================================================================================================================== Income Analysis(5) Total revenues, net of interest expense $ 57,237 $ 48,936 $ 47,782 $ 43,765 $ 36,567 Effect of credit card securitization activity 2,269 2,187 1,713 1,392 917 - ----------------------------------------------------------------------------------------------------------------------------------- Adjusted revenues, net of interest expense 59,506 51,123 49,495 45,157 37,484 - ----------------------------------------------------------------------------------------------------------------------------------- Adjusted operating expenses(6) 29,869 27,756 25,403 23,489 20,460 - ----------------------------------------------------------------------------------------------------------------------------------- Provisions for benefits, claims, and credit losses 11,508 11,116 9,911 9,566 7,193 Effect of credit card securitization activity 2,269 2,187 1,713 1,392 917 Acquisition-related costs -- -- -- (541) -- - ----------------------------------------------------------------------------------------------------------------------------------- Adjusted provisions for benefits, claims, and credit costs 13,777 13,303 11,624 10,417 8,110 - ----------------------------------------------------------------------------------------------------------------------------------- Restructuring-related items and merger-related costs 88 (795) (1,718) -- -- Acquisition-related costs -- -- -- (650) -- Operating loss from discontinued operations -- -- -- 123 -- Gain on sale of stock by subsidiary -- -- -- 363 -- - ----------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before taxes and minority interest 15,948 9,269 10,750 11,087 8,914 - ----------------------------------------------------------------------------------------------------------------------------------- Provision for income taxes 5,703 3,234 3,833 3,967 3,304 Minority interest, net of income taxes 251 228 212 47 -- - ----------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations 9,994 5,807 6,705 7,073 5,610 Discontinued operations, net of tax -- -- -- (334) 150 Cumulative effect of accounting changes(2) (127) -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 9,867 $ 5,807 $ 6,705 $ 6,739 $ 5,760 ===================================================================================================================================
(1) The years ended December 31, 1999, 1998 and 1997 include net restructuring-related items (and in 1998 merger-related costs) of ($88) million (($47) million after-tax), $795 million ($535 million after-tax) and $1,718 million ($1,046 million after-tax), respectively. See Note 14 of Notes to Consolidated Financial Statements. (2) Accounting changes include the adoption of Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" of ($135) million; SOP 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk" of $23 million; and SOP 98-5, "Reporting on the Costs of Start-Up Activities" of ($15) million. See Note 1 of Notes to Consolidated Financial Statements. (3) All amounts have been adjusted to reflect stock splits. (4) The return on average common stockholders' equity is calculated using net income after deducting preferred stock dividend requirements. (5) The income analysis reconciles amounts shown in the Consolidated Statement of Income on page 45 to the basis presented in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. (6) Excludes restructuring-related items and merger-related costs, and in 1996, operating loss from discontinued operations and acquisition-related costs. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF Citigroup Inc. and Subsidiaries FINANCIAL CONDITION AND RESULTS OF OPERATIONS Business Focus The table below shows the core income (loss) for each of Citigroup's businesses for the three years ended December 31: In Millions of Dollars 1999 1998(1) 1997(1) - ---------------------------------------------------------------------------- Global Consumer Citibanking North America $ 414 $ 107 $ 111 Mortgage Banking 231 212 163 Cards 1,172 808 573 CitiFinancial 392 222 174 - ---------------------------------------------------------------------------- Total Banking/Lending 2,209 1,349 1,021 - ---------------------------------------------------------------------------- Travelers Life and Annuity 623 493 421 Primerica Financial Services 452 400 335 Personal Lines 279 319 300 - ---------------------------------------------------------------------------- Total Insurance 1,354 1,212 1,056 - ---------------------------------------------------------------------------- Europe, Middle East & Africa 327 225 203 Asia Pacific 443 383 407 Latin America 228 160 243 - ---------------------------------------------------------------------------- Total International 998 768 853 - ---------------------------------------------------------------------------- e-Citi (179) (141) (78) Other (86) (77) 8 - ---------------------------------------------------------------------------- Total Global Consumer 4,296 3,111 2,860 - ---------------------------------------------------------------------------- Global Corporate and Investment Bank Salomon Smith Barney 2,354 408 1,438 - ---------------------------------------------------------------------------- Emerging Markets 1,190 748 917 Global Relationship Banking 686 490 711 - ---------------------------------------------------------------------------- Total Global Corporate Bank 1,876 1,238 1,628 - ---------------------------------------------------------------------------- Commercial Lines Insurance 845 723 632 - ---------------------------------------------------------------------------- Total Global Corporate and Investment Bank 5,075 2,369 3,698 - ---------------------------------------------------------------------------- Global Investment Management and Private Banking SSB Citi Asset Management Group 324 256 222 Citibank Private Bank 278 251 263 - ---------------------------------------------------------------------------- Total Global Investment Management and Private Banking 602 507 485 - ---------------------------------------------------------------------------- Corporate/Other (686) (478) (392) Investment Activities 660 833 1,100 - ---------------------------------------------------------------------------- Core Income 9,947 6,342 7,751 Restructuring-related items and merger-related costs, after-tax 47 (535) (1,046) Cumulative effect of accounting changes (127) -- -- - ---------------------------------------------------------------------------- Net Income $ 9,867 $ 5,807 $ 6,705 ============================================================================ Diluted earnings per share Core income $ 2.85 $ 1.77 $ 2.12 Net income 2.83 1.62 1.83 ============================================================================ (1) Reclassified to conform to the 1999 presentation, including changes in capital and tax allocations among the segments. Results of Operations Citigroup reported 1999 core income of $9.947 billion or $2.85 per diluted common share, up 57% and 61%, respectively, from $6.342 billion or $1.77 in 1998. Core income in 1999 excluded a credit of $47 million for after-tax restructuring-related items and a charge of $127 million reflecting the cumulative effect of adopting several new accounting standards as described in Notes 1 and 14 of Notes to the Consolidated Financial Statements. Core income in 1998 excluded a charge of $535 million for after-tax restructuring-related items and merger-related costs. Net income was $9.867 billion or $2.83 per diluted share, up 70% and 75%, respectively, from $5.807 billion or $1.62 in 1998. Citigroup's 1998 core income was down $1.409 billion or 18% from 1997. Net income in 1998 was down $898 million or 13% from 1997. Core income return on common equity was 22.7% compared to 14.9% for 1998 and 20.2% for 1997. Core income growth in 1999 was led by Global Corporate and Investment Bank which improved $2.706 billion or 114%, reflecting a rebound from global economic turmoil in 1998 and strong 1999 growth across the franchise, and reflected increases of $1.946 billion or 477% in Salomon Smith Barney (SSB), $442 million or 59% in Emerging Markets, $196 million or 40% in Global Relationship Banking (GRB), and $122 million or 17% in Commercial Lines. Global Consumer increased $1.185 billion or 38%, led by Banking/Lending where Cards was up $364 million or 45%; Citibanking North America up $307 million or 287%; and CitiFinancial up $170 million or 77%. Core income in the International businesses was up $230 million or 30%, reflecting increases across all regions. Insurance businesses core income grew $142 million or 12%, led by Travelers Life and Annuity (up $130 million or 26%) and Primerica (up $52 million or 13%), partially offset by Personal Lines (down $40 million or 13%). Global Investment Management and Private Banking improved $95 million or 19%, while Investment Activities decreased $173 million or 21%. Core income in 1998 was sharply impacted by the global economic turmoil experienced during the year as income decreased $1.329 billion or 36% in Global Corporate and Investment Bank, and decreased $267 million or 24% in Investment Activities. Partially offsetting this was a $251 million or 9% increase in Global Consumer complemented by a $22 million or 5% increase in Global Investment Management and Private Banking. Adjusted revenues, net of interest expense of $59.5 billion in 1999 were up $8.4 billion or 16% from 1998. Revenues in 1998 were up $1.6 billion or 3% from 1997. Global Corporate and Investment Bank revenues of $27.4 billion in 1999 were up $5.0 billion or 22%, led by an increase of $4.3 billion or 52% in SSB, largely due to significantly improved principal transactions, up $2.7 billion, and investment banking, up $689 million. Reflecting the 1998 economic turmoil and strong 1999 results, Emerging Markets was up $695 million or 19%, and GRB was up $169 million or 4%. Partially offsetting these increases was a decrease of $216 million or 3% in Commercial Lines, 6 reflecting lower production. In 1998 Global Corporate and Investment Bank revenues of $22.4 billion were down $1.5 billion or 6%, principally reflecting a decline in SSB of $1.9 billion or 18% to $8.3 billion, driven by a sharp drop in principal transactions revenues due to economic turmoil. Emerging Markets increased by 4% to $3.6 billion, and GRB was up 3% to $3.9 billion. Commercial Lines was up 3% to $6.5 billion. Global Consumer revenues increased strongly in almost all businesses and were up $3.4 billion or 13% in 1999 to $28.6 billion, including acquisitions. The Global Consumer revenue growth was led by a $1.5 billion or 13% increase in Banking/Lending (Cards up $846 million or 12%), a $976 million or 17% increase in International, and an $880 million or 11% increase in Insurance. Revenues in Global Consumer in 1998 increased $3.1 billion or 14% to $25.2 billion, led by Cards, up $1.6 billion or 30%, primarily reflecting the Universal Card Services (UCS) acquisition, growth in the Insurance businesses, up $857 million or 11%, and increases in CitiFinancial, up $268 million or 27%. Global Investment Management and Private Banking revenues of $2.7 billion and $2.4 billion grew $305 million or 13% and $247 million or 12% in 1999 and 1998, and reflected continued growth in assets under management. Investment Activities revenues in 1999 decreased $233 million primarily reflecting lower realized gains from sales of investments and net asset gains, partially offset by higher venture capital revenues, and decreased $410 million in 1998 primarily due to lower venture capital revenues. Net interest revenue as calculated from the Consolidated Statement of Income was $20.1 billion in 1999, up $1.4 billion or 7% from 1998, which was up $1.2 billion or 7% from 1997, reflecting business volume growth in most markets and Global Consumer acquisitions. Net interest revenue, adjusted for the effect of credit card securitization, of $24.3 billion was up $2.0 billion or 9% in 1999 and $2.4 billion or 12% in 1998. Adjusted commissions, asset management and administration fees, and other fee revenues of $16.8 billion were up $2.7 billion or 19% in 1999 and $1.4 billion or 11% in 1998, primarily reflecting continued growth in assets under management. Insurance premiums of $10.4 billion in 1999 were up $591 million or 6%, and were up $855 million or 10% in 1998, reflecting solid growth in the Global Consumer Insurance businesses, partially offset by lower premiums in Commercial Lines. Principal transactions revenues rebounded strongly to $5.2 billion in 1999, up from $1.8 billion in 1998 and $4.2 billion in 1997, reflecting the difficult trading conditions in 1998. Realized gains from sales of investments of $557 million were down from $840 million in 1998 and $995 million in 1997. Other income as shown on the Consolidated Statement of Income of $4.1 billion increased $548 million from 1998, which was up $454 million from 1997. The 1999 improvement reflected increased revenues related to credit card securitization activity, and higher venture capital revenues, partially offset by lower net asset gains. Other income, adjusted for the effect of credit card securitization activity, of $2.2 billion was up slightly from 1998, and compared to $2.5 billion in 1997. Adjusted operating expenses in 1999 of $29.9 billion, which exclude the restructuring-related items, and in 1998 merger-related costs, were up $2.1 billion or 8% in 1999 and grew $2.4 billion or 9% in 1998. Citigroup achieved its target of $2 billion in annualized expense reductions for 1999. Global Corporate and Investment Bank expenses were up 7% in 1999 and 2% in 1998, primarily attributable to production-related compensation at SSB, partially offset by lower year 2000 and European Economic Monetary Union (EMU) expenses in the GRB, and Commercial Lines' benefit from an assessment change in workers compensation. Expenses increased in Global Consumer by 7% in 1999 and 17% in 1998, reflecting acquisitions, business volume growth, and higher spending in e-Citi. Global Consumer expense growth in 1999 was reduced by a decline in fixed costs due to expense control initiatives. Global Investment Management and Private Banking expenses increased 9% in 1999 and 14% in 1998 driven by investments in technology, and sales and marketing capabilities. Adjusted provisions for benefits, claims, and credit costs were $13.8 billion in 1999 compared with $13.3 billion and $11.6 billion in 1998 and 1997, respectively. Policyholder benefits and claims increased 4% to $8.7 billion in 1999 and 8% to $8.4 billion in 1998. The adjusted provision for credit losses increased 3% to $5.1 billion in 1999 and 26% to $4.9 billion in 1998. Global Consumer adjusted provisions for benefits, claims, and credit losses of $9.9 billion were up 8% in 1999 and 14% in 1998. Managed net credit losses in 1999 were $4.7 billion and the related loss ratio was 2.49%, compared with $4.4 billion and 2.70% in 1998 and $3.8 billion and 2.61% in 1997. The increase in the 1998 net credit losses from 1997 primarily reflects the UCS acquisition. The managed consumer loan delinquency ratio (90 days or more past due) was 1.91%, a decrease from 2.12% and 2.23% at the end of 1998 and 1997. Global Corporate and Investment Bank provisions for benefits, claims, and credit losses decreased to $3.9 billion from $4.2 billion in 1998, which was up from $3.7 billion in 1997. The decrease in 1999 reflected economic improvements in Russia and Asia, partially offset by increased losses in Latin America, and a lower provision for credit losses resulting from an improved credit outlook in Emerging Markets. Commercial Lines prior-year loss development and weather-related catastrophes in 1999 both improved from the prior year. The increase in 1998 primarily reflected the turmoil in Asia and Russia. Commercial cash-basis loans and other real estate owned (OREO) of $1.9 billion at December 31, 1999 were down from $2.1 billion a year earlier, primarily reflecting the improved economic conditions in Asia, and compared to $1.8 billion in 1997. Total capital (Tier 1 and Tier 2) was $61.4 billion or 12.43% of net risk-adjusted assets, and Tier 1 capital was $47.6 billion or 9.64% at December 31, 1999. See page 40 for the components of Tier 1 and Tier 2 capital. 7 GLOBAL CONSUMER
In Millions of Dollars 1999 1998(1) 1997(1) - ----------------------------------------------------------------------------------- Total revenues, net of interest expense $ 26,282 $ 23,004 $ 20,348 Effect of credit card securitization activity 2,269 2,187 1,713 - ----------------------------------------------------------------------------------- Adjusted revenues, net of interest expense 28,551 25,191 22,061 - ----------------------------------------------------------------------------------- Total operating expenses 11,900 11,634 9,984 Restructuring-related items (87) (636) (552) - ----------------------------------------------------------------------------------- Adjusted operating expenses 11,813 10,998 9,432 - ----------------------------------------------------------------------------------- Provisions for benefits, claims, and credit losses 7,611 6,962 6,328 Effect of credit card securitization activity 2,269 2,187 1,713 - ----------------------------------------------------------------------------------- Adjusted provisions for benefits, claims, and credit losses 9,880 9,149 8,041 - ----------------------------------------------------------------------------------- Core income before taxes and minority interest 6,858 5,044 4,588 Income taxes 2,489 1,864 1,666 Minority interest, after-tax 73 69 62 - ----------------------------------------------------------------------------------- Core income 4,296 3,111 2,860 Restructuring-related items, after-tax 56 403 333 - ----------------------------------------------------------------------------------- Net income $ 4,240 $ 2,708 $ 2,527 ===================================================================================
(1) Reclassified to conform to the 1999 presentation. Global Consumer--which provides banking, lending, investment and personal insurance products and services, including credit and charge cards, to customers around the world--reported core income of $4.296 billion in 1999, up $1.185 billion or 38% from 1998, reflecting strong growth in virtually all businesses, particularly in Banking/Lending where Cards increased $364 million or 45%, Citibanking grew $307 million or 287%, and CitiFinancial increased $170 million or 77%. In the Insurance businesses, core income grew $142 million or 12% from 1998, while the International businesses grew $230 million or 30%, reflecting increases across all regions. Core income in 1998 of $3.111 billion increased $251 million or 9% from 1997 reflecting double-digit growth in Banking/Lending and in the Insurance businesses, offset by a 10% decline in International due to economic conditions in Latin America and Asia Pacific. Net income of $4.240 billion in 1999, $2.708 billion in 1998, and $2.527 billion in 1997 included restructuring-related items of $56 million ($87 million pretax), $403 million ($636 million pretax), and $333 million ($552 million pretax), respectively. During 1999, Global Consumer recorded restructuring-related items totaling $87 million ($56 million after-tax), including charges of $104 million (pretax), of which $82 million related to new initiatives primarily for the reconfiguration of certain consumer branch operations outside the U.S., downsizing of certain marketing operations, and costs associated with exiting a non-strategic business. The 1999 items also include accelerated depreciation charges on assets associated with restructuring initiatives of $114 million (pretax), offset by a reduction of restructuring reserves due to changes in estimates attributable to facts and circumstances arising subsequent to the original restructuring charge of $131 million (pretax). In 1998, Global Consumer recorded a net restructuring charge totaling $636 million ($403 million after-tax) for regional consolidation of call centers and other back office functions worldwide, reduction of management layers, sales force restructuring, integration of overlapping marketing and product management groups and exiting several non-strategic operations. In 1997, Global Consumer recorded a restructuring charge of $552 million ($333 million after-tax) for the consolidation of data centers and operations processing and customer service facilities, the reconfiguration of electronic and other distribution channels, the outsourcing of various technological functions, and the rationalization of administrative and management functions. See Note 14 of Notes to Consolidated Financial Statements for a discussion of restructuring-related items. BANKING/LENDING Citibanking North America In Millions of Dollars 1999 1998(1) 1997(1) - ---------------------------------------------------------------------------- Total revenues, net of interest expense $ 2,109 $ 1,974 $ 1,864 Adjusted operating expenses(2) 1,338 1,672 1,568 Provision for credit losses 64 100 105 - ---------------------------------------------------------------------------- Core income before taxes 707 202 191 Income taxes 293 95 80 - ---------------------------------------------------------------------------- Core income 414 107 111 Restructuring-related items, after-tax (1) 89 124 - ---------------------------------------------------------------------------- Net income (loss) $ 415 $ 18 $ (13) ============================================================================ Average assets (in billions of dollars) $ 10 $ 10 $ 10 Return on assets 4.15% 0.18% NM ============================================================================ Excluding restructuring-related items Return on assets 4.14% 1.07% 1.11% ============================================================================ (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. NM Not meaningful. 8 Citibanking North America--which delivers banking, lending and investment services to customers through Citibank's branches and electronic delivery systems--reported core income of $414 million in 1999, up $307 million or 287% from 1998 due to expense reduction initiatives, revenue growth, and credit cost improvements. Core income of $107 million in 1998 was down from $111 million in 1997 as business volume growth was more than offset by a higher effective tax rate. Net income (loss) of $415 million in 1999, $18 million in 1998, and ($13) million in 1997 included restructuring-related credits in 1999 of $1 million ($4 million pretax), and restructuring charges of $89 million ($139 million pretax) and $124 million ($203 million pretax) in 1998 and 1997, respectively. As shown in the following table, Citibanking grew accounts and customer deposits in both 1999 and 1998. The decline in loans reflects a decrease in home equity loans due to increased industry-wide mortgage refinancing activity during 1998 and the first half of 1999. See also the Mortgage Banking discussion below. In Billions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Accounts (in millions) 6.3 5.8 5.6 Average customer deposits $ 42.1 $ 39.6 $ 37.1 Average loans 7.6 7.9 8.1 ================================================================================ Revenues, net of interest expense, of $2.109 billion increased $135 million or 7% in 1999 and grew $110 million or 6% in 1998, reflecting growth in customer deposits and higher investment product fees and commissions, offset by lower loan revenues. The 1999 increase also reflects higher spreads on customer deposits. Adjusted operating expenses of $1.338 billion in 1999 declined $334 million or 20% from 1998, reflecting the impact of significant expense management initiatives that reduced staff and other fixed expenses as well as lower marketing program spending. Expenses grew $104 million or 7% in 1998, principally reflecting business volume growth. The provision for credit losses declined to $64 million in 1999 from $100 million in 1998 and $105 million in 1997. The net credit loss ratio of 1.18% in 1999 declined from 1.34% in 1998 and 1.36% in 1997. Loans delinquent 90 days or more of $55 million or 0.75% at December 31, 1999 declined from $93 million or 1.20% at December 31, 1998 and $133 million or 1.59% at December 31, 1997. The declines in the provision for credit losses and delinquencies reflect continued improvement in the portfolio and a decline in loan volumes. Mortgage Banking In Millions of Dollars 1999 1998(1) 1997(1) - ----------------------------------------------------------------------------- Total revenues, net of interest expense $747 $619 $590 Adjusted operating expenses(2) 320 242 233 Provision for credit losses 17 20 89 - ----------------------------------------------------------------------------- Core income before taxes and minority interest 410 357 268 Income taxes 160 140 105 Minority interest, after-tax 19 5 -- - ----------------------------------------------------------------------------- Core income 231 212 163 Restructuring-related items, after-tax -- 6 12 - ----------------------------------------------------------------------------- Net income $231 $206 $151 ============================================================================= Average assets (in billions of dollars) $ 29 $ 25 $ 24 Return on assets 0.80% 0.82% 0.63% ============================================================================= Excluding restructuring-related items Return on assets 0.80% 0.85% 0.68% ============================================================================= (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. Mortgage Banking--which originates and services mortgages and student loans for customers across North America--reported core income of $231 million in 1999, up $19 million or 9% from 1998, reflecting growth in student loans and credit improvement in the mortgage portfolio. Core income in 1998 of $212 million increased $49 million or 30% from 1997, reflecting lower credit costs and higher revenues resulting from increased business volumes. Net income of $206 million in 1998 and $151 million in 1997 included restructuring-related items of $6 million ($9 million pretax) and $12 million ($20 million pretax), respectively. The acquisition of the principal operating assets and certain liabilities of Source One Mortgage Services Corporation (Source One) in April 1999 added approximately $25 billion to the mortgage servicing/subservicing portfolio. As shown in the following table, Mortgage Banking accounts, loans, and mortgage originations increased in both 1999 and 1998, including the effect of the Source One acquisition. Excluding Source One, mortgage originations declined in 1999 reflecting the industry-wide slowdown in mortgage refinancing activity in the second half of 1999. In Billions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Accounts (in millions) 3.4 2.8 2.5 Average loans $ 27.4 $ 23.9 $ 22.3 Mortgage originations 18.3 16.4 8.2 ================================================================================ 9 Revenues, net of interest expense, of $747 million in 1999 grew $128 million or 21% from 1998, reflecting the Source One acquisition and growth in the student loan portfolio. Revenues in 1998 increased $29 million or 5% from 1997, reflecting growth in the student loan portfolio and increased mortgage originations, including refinancing activity. Adjusted operating expenses increased $78 million or 32% in 1999 and grew $9 million or 4% in 1998, reflecting additional business volumes, including the Source One acquisition in 1999. The provision for credit losses of $17 million in 1999 declined from $20 million in 1998 and $89 million in 1997. The 1999 net credit loss ratio of 0.16% declined from 0.31% and 0.51% in 1998 and 1997, respectively, and the ratio of loans delinquent 90 days or more of 2.31% declined from 2.44% at December 31, 1998 and 3.13% at December 31, 1997. The declines in the provision, the net credit loss ratio, and the delinquency ratio reflect improvement in the mortgage portfolio. The 1999 improvement in mortgage delinquencies was partially offset by higher student loan delinquencies as a result of a statutory increase in the length of time Citigroup must hold delinquent government-guaranteed student loans prior to submitting a claim under the government guarantee. Cards
In Millions of Dollars 1999 1998(1) 1997(1) - -------------------------------------------------------------------------------- Total revenues, net of interest expense $ 5,729 $ 4,965 $ 3,790 Effect of credit card securitization activity 2,269 2,187 1,713 - -------------------------------------------------------------------------------- Adjusted revenues, net of interest expense 7,998 7,152 5,503 - -------------------------------------------------------------------------------- Adjusted operating expenses(2) 2,886 2,595 1,759 Adjusted provision for credit losses(3) 3,259 3,264 2,828 - -------------------------------------------------------------------------------- Core income before taxes 1,853 1,293 916 Income taxes 681 485 343 - -------------------------------------------------------------------------------- Core income 1,172 808 573 Restructuring-related items, after-tax (12) 39 36 - -------------------------------------------------------------------------------- Net income $ 1,184 $ 769 $ 537 ================================================================================ Average assets (in billions of dollars)(4) $ 28 $ 28 $ 25 Return on assets 4.23% 2.75% 2.15% ================================================================================ Excluding restructuring-related items Return on assets(5) 4.19% 2.89% 2.29% ================================================================================
(1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. (3) Adjusted for the effect of credit card securitization activity. (4) Adjusted for the effect of credit card securitization activity, managed average assets were $75 billion, $64 billion, and $50 billion in 1999, 1998, and 1997, respectively. (5) Adjusted for the effect of credit card securitization activity, the return on managed assets, excluding restructuring-related items was 1.56% in 1999, 1.26% in 1998, and 1.15% in 1997. Cards--U.S. bankcards, Canada bankcards, and North America Diners Club--reported core income of $1.172 billion, up $364 million or 45% from 1998 and in 1998 was up $235 million or 41% from 1997, reflecting significant increases in the U.S. bankcards business, despite competitive pricing pressures. Net income of $1.184 billion in 1999, $769 million in 1998, and $537 million in 1997 included restructuring-related credits in 1999 of $12 million ($18 million pretax), and restructuring charges of $39 million ($58 million pretax) and $36 million ($59 million pretax) in 1998 and 1997, respectively. Universal Card Services (UCS), which was acquired in April 1998, contributed approximately $52 million to core income in 1999 compared with a loss of $72 million in 1998. Risk adjusted margin is a measure of profitability that takes adjusted revenues less managed net credit losses as a percentage of average managed loans, consistent with the goal of matching the revenues generated by the loan portfolio with the credit risk undertaken. As shown in the following table, U.S. bankcards risk adjusted margin of 6.37% increased 27 basis points from 1998 and 120 basis points from 1997. In Billions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Risk adjusted revenues(1) $ 4.4 $ 3.6 $ 2.4 Risk adjusted margin %(2) 6.37% 6.10% 5.17% =============================================================================== (1) Adjusted revenues less managed net credit losses. (2) Risk adjusted revenues as a percentage of average managed loans. Adjusted revenues, net of interest expense, of $7.998 billion increased $846 million or 12% from 1998, reflecting receivable growth, including acquisitions, higher interchange fee revenues due to sales volume growth and pricing changes, and risk-based pricing actions, offset by changes in portfolio mix and lower spreads. Excluding the effect of UCS and 1999 acquisitions, revenues increased approximately 5%. Revenues in 1998 increased $1.649 billion or 30% primarily reflecting the acquisition of UCS. As shown in the following table, on a managed basis, the U.S. bankcard portfolio experienced a 15% growth in sales volumes and a 7% increase in receivables, including the effect of portfolio acquisitions. Portfolio acqui- sitions during 1999 added approximately 1.3 million accounts and $2.6 billion of receivables. Accounts increased only slightly in the year reflecting management initiatives that resulted in the closing of inactive and/or high-risk accounts. Growth in 1998 from 1997 reflects the acquisition of UCS. In Billions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Accounts (in millions) 40.6 40.5 25.8 Cards in force (in millions) 69 69 41 Total sales $ 162.3 $ 140.6 $ 106.3 End-of-period managed receivables 74.2 69.6 49.6 ================================================================================ 10 Adjusted operating expenses of $2.886 billion increased $291 million or 11% in 1999 and grew $836 million or 48% in 1998, reflecting acquisitions and increased target marketing efforts in U.S. bankcards. The adjusted provision for credit losses in 1999 was $3.259 billion compared with $3.264 billion in 1998 and $2.828 billion in 1997. U.S. bankcards managed net credit losses in 1999 were $3.143 billion and the related loss ratio was 4.56%, compared with $3.123 billion and 5.33% in 1998 and $2.662 billion and 5.74% in 1997. U.S. bankcards managed loans delinquent 90 days or more were $1.061 billion or 1.44% at December 31, 1999 compared with $1.001 billion or 1.45% at December 31, 1998 and $868 million or 1.77% at December 31, 1997. The improvement in the 1999 net credit loss ratio reflects declining industry-wide bankruptcy trends and credit risk management initiatives. CitiFinancial
In Millions of Dollars 1999 1998(1) 1997(1) - --------------------------------------------------------------------------------- Total revenues, net of interest expense $1,619 $1,275 $1,007 Adjusted operating expenses(2) 617 505 422 Provisions for benefits, claims, and credit losses 385 419 316 - --------------------------------------------------------------------------------- Core income before taxes 617 351 269 Income taxes 225 129 95 - --------------------------------------------------------------------------------- Core income 392 222 174 Restructuring-related items, after-tax 2 1 -- - --------------------------------------------------------------------------------- Net income $ 390 $ 221 $ 174 ================================================================================= Average assets (in billions of dollars) $ 16 $ 12 $ 9 Return on assets 2.44% 1.84% 1.93% ================================================================================= Excluding restructuring-related items Return on assets 2.45% 1.85% 1.93% =================================================================================
(1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. CitiFinancial (formerly Consumer Finance Services) includes the consumer lending operations (including secured and unsecured personal loans, real estate-secured loans and consumer goods financing) of CitiFinancial Credit Company (CCC). Also included are related credit insurance services provided through subsidiaries. Core income was $392 million in 1999 compared to $222 million in 1998 and $174 million in 1997. The 77% increase in 1999 reflects strong receivables growth in all major products, an improved credit environment, and the 1999 acquisition of certain Associates First Capital (Associates) branches. The 28% increase in 1998 reflects continued internal receivables growth in all major products, an improved charge-off rate, and the integration of Security Pacific Financial Services (Security Pacific) into the CitiFinancial branch system since July 1997. Net receivables at December 31, 1999 reached a record $15.5 billion compared to $11.9 billion at year-end 1998 and $9.8 billion at year- end 1997. The receivables growth in 1999 was due to increased business flow at CitiFinancial branches (including portfolio acquisitions), cross-selling of CitiFinancial products through Primerica distribution channels, and the Associates acquisition. Much of the growth in 1998 was in real estate-secured loans which resulted from the continued strong performance of the $.M.A.R.T. loan(R) program, as well as solid sales in the branch network. The internal growth during 1999 and 1998 was led by the Primerica generated portfolio, which grew 39% to $4.1 billion in 1999 and 31% to $2.95 billion in 1998. At December 31, 1999, CitiFinancial had 1,174 branches, up from 980 at year-end 1998. The increase in adjusted operating expenses was primarily attributable to the acquisitions. The average yield on receivables was 14.45% in 1999 compared to 14.88% in 1998 and 15.24% in 1997. The decline in the average yield resulted from a shift in the portfolio mix towards lower yielding, higher quality real estate loans, particularly first mortgage loans. At December 31,1999, the portfolio consisted of 58% real-estate secured loans, 34% personal loans and 8% sales finance and other compared to 56% real-estate secured loans, 36% personal loans and 8% sales finance and other at December 31, 1998. The provisions for benefits, claims, and credit losses was $385 million in 1999 compared to $419 million in 1998 and $316 million in 1997, reflecting the continued strong credit environment. The net credit loss ratio of 2.18% in 1999 was down from 2.74% in 1998 and 2.82% in 1997. Loans delinquent 90 days or more were $203 million or 1.31% in 1999 compared to $172 million or 1.44% in 1998 and $133 million or 1.36% in 1997. INSURANCE Travelers Life and Annuity In Millions of Dollars 1999 1998(1) 1997(1) - ----------------------------------------------------------------------------- Total revenues, net of interest expense $3,394 $3,012 $2,677 Provision for benefits and claims 1,997 1,863 1,677 Adjusted operating expenses(2) 451 396 362 - ----------------------------------------------------------------------------- Core income before taxes 946 753 638 Income taxes 323 260 217 - ----------------------------------------------------------------------------- Core income(3) 623 493 421 Restructuring-related items, after-tax -- 8 -- - ----------------------------------------------------------------------------- Net income $ 623 $ 485 $ 421 ============================================================================= (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. (3) Excludes investment gains/losses included in Investment Activities segment. 11 Travelers Life and Annuity offers individual annuity, group annuity, individual life and long-term care products marketed by The Travelers Insurance Company (TIC) and its wholly owned subsidiary The Travelers Life and Annuity Company (TLAC) under the Travelers name. Among the range of individual products offered are fixed and variable deferred annuities, payout annuities and term, universal and variable life and long-term care insurance. These products are primarily distributed through The Copeland Companies (Copeland), an indirect wholly owned subsidiary of TIC, Salomon Smith Barney Financial Consultants, Primerica, Citibank, and a nationwide network of independent agents. The group products include institutional pensions, including guaranteed investment contracts (GICs), payout annuities, group annuities to employer-sponsored retirement and savings plans and structured finance transactions. Core income was $623 million in 1999 compared to $493 million in 1998 and $421 million in 1997. The 26% improvement in 1999 was largely driven by increases in business volumes and strong investment income. During 1999, this business achieved double-digit growth in individual and group annuity account balances and direct periodic life and long-term care insurance premiums reflecting both greater popularity of these products with an aging American population and strong momentum from cross-selling initiatives. The 17% improvement in 1998 reflects strong double-digit business volume growth in annuity account balances and life and long term care premiums, and an increase in net investment income despite a decline in investment income yields during 1998, resulting primarily from participation in partnership investment interests being negatively impacted by a downturn in market conditions. This decline in yields was substantially offset by earnings on an increased capital base created by business volume growth. The successful cross-selling initiatives of Travelers Life and Annuity products through the Primerica, Citibank, Copeland, and Salomon Smith Barney Financial Consultants distribution channels, along with improved sales through a nationwide network of independent agents, reflect the ongoing effort to build market share by strengthening relationships in key distribution channels. The following table shows net written premiums and deposits by product for the three years ended December 31, 1999: In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Deferred annuities Fixed $ 1,008 $ 908 $ 779 Variable 4,265 2,892 1,775 Payout annuities 448 429 310 GIC and other annuities 5,249 3,690 2,109 Individual life insurance Direct periodic premiums and deposits 409 322 290 Single premium deposits 84 85 56 Reinsurance (71) (66) (58) Individual long-term care insurance 240 213 184 - ------------------------------------------------------------------------------- $ 11,632 $ 8,473 $ 5,445 =============================================================================== The majority of the annuity business and a substantial portion of the life business written by Travelers Life and Annuity is accounted for as investment contracts, with the result that the premiums and deposits collected are not included in revenues. Significant deferred annuities sales, combined with favorable market returns from variable annuities, drove account balances to $27.3 billion at December 31, 1999, from $20.9 billion at year-end 1998 (up 31%) and $16.1 billion at year-end 1997. Net written premiums and deposits increased in 1999 to $5.27 billion from $3.80 billion in 1998 (up 39%) and $2.55 billion in 1997. The strong sales reflect the marketing initiatives at Salomon Smith Barney, Primerica and Citibank as well as Copeland's continued success in the small company segment of the 401(k) market and very strong agency results. Payout and group annuity account balances and benefit reserves reached $15.73 billion at December 31, 1999, up from $13.84 billion at year-end 1998 (up 14%), and $11.94 billion at year-end 1997. This substantial volume growth reflects strong sales of GICs and structured finance transactions. Net written premiums and deposits (excluding the Company's employee pension plan deposits) in 1999 were $5.70 billion, up from $4.12 billion in 1998 (up 38%) and $2.42 billion in 1997. Direct periodic premiums and deposits for individual life insurance were $409 million in 1999 compared to $322 million in 1998 (up 27%) and $290 million in 1997. Life insurance in force was $60.6 billion at December 31, 1999, up from $55.4 billion at year-end 1998 and $51.6 billion at year-end 1997. Net written premiums for the long-term care insurance line reached $240 million in 1999 compared to $213 million in 1998 and $184 million in 1997. Primerica Financial Services In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Total revenues, net of interest expense $1,775 $1,654 $1,522 Provision for benefits and claims 487 484 497 Adjusted operating expenses(1) 586 546 502 - -------------------------------------------------------------------------------- Core income before taxes 702 624 523 Income taxes 250 224 188 - -------------------------------------------------------------------------------- Core income(2) 452 400 335 Restructuring-related items, after-tax -- 2 -- - -------------------------------------------------------------------------------- Net income $ 452 $ 398 $ 335 ================================================================================ (1) Excludes restructuring-related items. (2) Excludes investment gains/losses included in Investment Activities. 12 Core income was $452 million in 1999 compared to $400 million in 1998 and $335 million in 1997. The 13% increase in 1999 results reflects continued success at cross-selling a range of products (particularly mutual funds, variable annuities and debt consolidation loans), growth in life insurance in force, improved investment income, and disciplined expense management. The 19% improvement in 1998 reflects success at cross-selling, growth in life insurance in force, favorable mortality experience and disciplined expense management. Increases in production and cross-selling initiatives were achieved during 1999. Earned premiums net of reinsurance were $1.071 billion, $1.057 billion, and $1.035 billion in 1999, 1998, and 1997, including $1.008 billion, $987 million, and $967 million for Primerica individual term life policies. Total face amount of issued term life insurance was $56.2 billion in 1999 compared to $57.4 billion in 1998 and $52.6 billion in 1997. The number of policies issued was 209,900 in 1999, compared to 223,600 in 1998 and 228,900 in 1997. The average face value per policy issued was $229,000 in 1999 compared to $223,000 in 1998 and $200,000 in 1997. Life insurance in force at year-end 1999 reached $394.9 billion, up from $383.7 billion at year-end 1998 and $369.9 billion at year-end 1997, and continued to reflect good policy persistency. In recent years, Primerica has leveraged cross-selling through the Financial Needs Analysis (FNA)--the diagnostic tool that enhances the ability of the Personal Financial Analysts to address client needs--to expand its business beyond life insurance and now offers its clients a greater array of financial products and services, delivered personally through its sales force. More than 490,000 FNAs were submitted during 1999. In addition, Primerica has traditionally offered mutual funds to clients as a means to invest the relative savings realized through the purchase of term life insurance as compared to traditional whole life insurance. Sales of mutual funds were $3.124 billion in 1999 compared to $2.942 billion in 1998 and $2.689 billion in 1997. Salomon Smith Barney mutual funds accounted for 60% of Primerica's U.S. sales in 1999 and 1998 and 53% and 50% of Primerica's total sales in 1999 and 1998, respectively. Variable annuity sales continued to show momentum, reaching net written premiums and deposits of $990 million in 1999, up from $652 million in 1998 and $347 million in 1997. The growth reflects the increased emphasis placed on cross-selling initiatives in the latter part of 1998, with the current period sales predominately reflecting sales of Travelers Life and Annuity variable annuity products. Cash advanced on $.M.A.R.T. loan(R) and $.A.F.E.(R) loan products underwritten by Travelers Bank & Trust, fsb and CitiFinancial was $1.92 billion in 1999, up 31% from $1.46 billion in 1998 and $1.30 billion in 1997. The TRAVELERS SECURE(R) line of property and casualty insurance products (sales in this program were curtailed during the latter part of 1999) showed premiums of $225 million in 1999 compared to $213 million in 1998 and $73 million in 1997. Personal Lines In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Total revenues, net of interest expense $4,043 $3,666 $3,276 Claims and claim adjustment expenses 2,554 2,181 1,853 Total operating expenses 1,013 930 884 - -------------------------------------------------------------------------------- Income before taxes and minority interest 476 555 539 Income taxes 143 172 177 Minority interest, after-tax 54 64 62 - -------------------------------------------------------------------------------- Net income(1) $ 279 $ 319 $ 300 ================================================================================ (1) Excludes investment gains/losses included in Investment Activities segment. Net income was $279 million in 1999 compared to $319 million in 1998 and $300 million in 1997. The 1999 decrease primarily reflects higher catastrophe losses due to Hurricane Floyd, higher loss ratios in the TRAVELERS SECURE(R) program, a charge related to curtailing the sale of TRAVELERS SECURE(R) auto and homeowners products, and lower prior-year favorable reserve development, partially offset by growth in earned premiums. The 1998 increase was primarily due to higher net investment income and increased production, partially offset by higher catastrophe losses and a decrease in favorable prior-year reserve development. The following table shows net written premiums by product line for the three years ended December 31: In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Personal automobile $2,369 $2,328 $1,950 Homeowners and other 1,436 1,162 1,124 - -------------------------------------------------------------------------------- $3,805 $3,490 $3,074 ================================================================================ Personal Lines net written premiums for 1999 were $3.805 billion compared to $3.490 billion in 1998 and $3.074 billion in 1997. The 1999 net written premiums include an increase of $72 million due to the termination of a quota share reinsurance arrangement. The 1997 net written premiums include an increase of $69 million due to an adjustment associated with the quota share reinsurance arrangement. The 1999 and 1998 increases compared to 1998 and 1997, respectively, primarily reflected growth 13 in independent agents business and growth in affinity marketing and joint marketing arrangements. During the third quarter of 1999, TAP decided to curtail the sale of its TRAVELERS SECURE(R) auto and homeowners products because insured losses exceeded levels anticipated in the pricing of the products. The growth in premiums from the independent agent distribution channel has been partially due to pursuing transfers of books of business to the Company within certain independent insurance agencies. Frequently, Personal Lines will pay these agencies an incentive to cover their expenses related to the transfer and include a competitive inducement to move the book. Many independent agencies are consolidating their business to a smaller number of insurance carriers resulting in transfers of business to their preferred carriers. Catastrophe losses, net of taxes and reinsurance, were $79 million in 1999 compared to $44 million in 1998 and $10 million in 1997. Catastrophe losses in 1999 were primarily due to Hurricane Floyd in the third quarter, wind and hail storms on the East Coast and tornadoes in the Midwest in the second quarter and a wind and ice storm in the Midwest and Northeast in the first quarter. Catastrophe losses in 1998 were primarily due to Hurricanes Bonnie and Georges, severe first quarter winter storms and second and third quarter wind and hail storms. Statutory and generally accepted accounting principles (GAAP) combined ratios (before allocation of corporate expenses) for Personal Lines were as follows: 1999 1998 1997 - ------------------------------------------------------------------------------- Statutory Loss and LAE ratio(1) 70.0% 66.7% 63.5% Underwriting expense ratio 26.7 27.2 28.7 Combined ratio 96.7 93.9 92.2 - ------------------------------------------------------------------------------- GAAP Loss and LAE ratio(1) 70.3% 66.7% 63.5% Underwriting expense ratio 26.5 26.5 28.3 Combined ratio 96.8 93.2 91.8 =============================================================================== (1) LAE represents loss adjustment expenses. GAAP combined ratios for Personal Lines differ from statutory combined ratios primarily due to the deferral and amortization of certain expenses for GAAP reporting purposes only. The 1999 statutory and GAAP combined ratios for Personal Lines include an adjustment associated with the termination of a quota share reinsurance arrangement. Excluding this adjustment the 1999 statutory and GAAP combined ratios were 96.5% and 97.3%, respectively. The increase in the 1999 statutory and GAAP combined ratios excluding this adjustment compared to the 1998 statutory and GAAP combined ratios was due to higher catastrophe losses due to Hurricane Floyd, higher loss ratios in the TRAVELERS SECURE(R) program, the TRAVELERS SECURE(R) charge, and lower favorable prior-year reserve development in the automobile bodily injury line. The 1997 statutory and GAAP combined ratios for Personal Lines include an adjustment associated with a change in a quota share reinsurance arrangement. Excluding this adjustment, the 1997 statutory and GAAP combined ratios would have been 92.1% and 92.5%, respectively. The increase in the 1998 statutory and GAAP combined ratios compared to the 1997 statutory and GAAP combined ratios excluding this adjustment was primarily due to higher catastrophe and other weather-related losses and a decrease in favorable prior-year reserve development, partially offset by a decrease in the underwriting expense ratio due to a lower commission expense ratio associated with the alternative distribution channels. INTERNATIONAL CONSUMER Europe, Middle East & Africa
In Millions of Dollars 1999 1998(1) 1997(1) - --------------------------------------------------------------------------------- Total revenues, net of interest expense $2,335 $2,143 $2,047 Adjusted operating expenses(2) 1,501 1,473 1,440 Provisions for benefits, claims, and credit losses 312 299 282 - --------------------------------------------------------------------------------- Core income before taxes 522 371 325 Income taxes 195 146 122 - --------------------------------------------------------------------------------- Core income 327 225 203 Restructuring-related items, after-tax 15 125 65 - --------------------------------------------------------------------------------- Net income $ 312 $ 100 $ 138 ================================================================================= Average assets (in billions of dollars) $ 22 $ 22 $ 22 Return on assets 1.42% 0.45% 0.63% ================================================================================= Excluding restructuring-related items Return on assets 1.49% 1.02% 0.92% =================================================================================
(1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. Europe, Middle East & Africa (EMEA--including India and Pakistan)--which provides banking, lending and investment services, including credit and charge cards, to customers throughout the region--reported core income of $327 million in 1999, up $102 million or 45% from 1998, reflecting growth across the region, particularly Germany, and a $16 million ($25 million pretax) gain related to an investment in an affiliate. Core income in 1998 was up $22 million or 11% from 1997, reflecting business volume growth. Net income of $312 million in 1999, $100 million in 1998, and $138 million in 1997 included restructuring-related items of $15 million ($23 million pretax), $125 million ($239 million pretax), and $65 million ($112 million pretax), respectively. The net effect of foreign currency translation on core income was minimal; however, the impact on revenue growth was a reduction of approximately 3 and 2 percentage points and on expense growth was a reduction of approximately 4 and 2 percentage points in 1999 and 1998, respectively. As shown in the following table, EMEA reported 8% account growth in 1999 and 4% in 1998 primarily reflecting loan growth, including credit cards. However, loans and customer deposits were reduced by the effect of foreign currency translation. In Billions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Accounts (in millions) 11.1 10.2 9.8 Average customer deposits $ 17.0 $ 17.3 $ 16.8 Average loans 16.9 16.3 15.6 ================================================================================ 14 Revenues, net of interest expense, of $2.335 billion in 1999 grew $192 million or 9% from 1998 reflecting loan growth, improved spreads, and higher insurance and investment product fees. Revenues in 1999 also reflected the $25 million gain associated with an investment in an affiliate. Revenues in 1998 increased $96 million or 5% from 1997 reflecting growth across all countries except India and Pakistan where revenues declined as a result of economic conditions. Adjusted operating expenses increased $28 million or 2% in 1999 and grew $33 million or 2% in 1998. Excluding the effect of foreign currency translation, expenses in 1999 and 1998 reflect higher business volumes and costs associated with franchise growth in Central and Eastern Europe. The provisions for benefits, claims, and credit losses in 1999 were $312 million, compared to $299 million in 1998 and $282 million in 1997. The net credit loss ratio of 1.67% in 1999 declined from 1.70% in 1998 and 1.75% in 1997. Loans delinquent 90 days or more were $914 million or 5.33% at December 31, 1999, down from $955 million or 5.46% at December 31, 1998 and $919 million or 5.92% at December 31, 1997. Asia Pacific
In Millions of Dollars 1999 1998(1) 1997(1) - --------------------------------------------------------------------------------- Total revenues, net of interest expense $2,248 $1,849 $1,878 Adjusted operating expenses(2) 1,186 976 1,025 Provisions for benefits, claims, and credit losses 353 251 198 - --------------------------------------------------------------------------------- Core income before taxes 709 622 655 Income taxes 266 239 248 - --------------------------------------------------------------------------------- Core income 443 383 407 Restructuring-related items, after-tax 13 64 60 - --------------------------------------------------------------------------------- Net income $ 430 $ 319 $ 347 ================================================================================= Average assets (in billions of dollars) $ 31 $ 28 $ 27 Return on assets 1.39% 1.14% 1.29% ================================================================================= Excluding restructuring-related items Return on assets 1.43% 1.37% 1.51% =================================================================================
(1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. Asia Pacific (including Japan and Australia)--which provides banking, lending and investment services, including credit and charge cards, to customers throughout the region--reported core income of $443 million in 1999, up from $383 million and $407 million in 1998 and 1997, respectively, reflecting business growth and expansion as the region rebounds from weak 1998 results. Net income of $430 million in 1999, $319 million in 1998, and $347 million in 1997 included restructuring-related items of $13 million ($22 million pretax), $64 million ($83 million pretax), and $60 million ($97 million pretax), respectively. Strengthening currencies across the region resulted in net foreign currency translation effects that increased core income by approximately $10 million in 1999 and revenue and expense growth was increased by approximately 5 and 6 percentage points, respectively. In 1998, the net effect of foreign currency translation reduced core income by approximately $112 million and revenue and expense growth was reduced by approximately 22 and 16 percentage points, respectively. As shown in the following table, Asia Pacific accounts grew 21% in both 1999 and 1998. The growth in 1999 reflects significant increases in Japan, growth in the Cards business across the region, and economic stabilization in most countries. The 1998 increase in accounts and customer deposits reflects the "flight to quality" in the region. In Billions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Accounts (in millions) 9.2 7.6 6.3 Average customer deposits $ 42.1 $ 36.1 $ 30.5 Average loans 23.3 20.2 20.8 ================================================================================ Revenues, net of interest expense, of $2.248 billion increased $399 million or 22% from 1998 reflecting strong performance in Japan and business volume growth and higher spreads in most other countries. Revenues in 1998 declined $29 million from 1997 reflecting the effect of foreign currency translation and spread compression in certain countries, offset by higher deposit volumes due to the "flight to quality" in the region. Adjusted operating expenses of $1.186 billion increased $210 million or 22% from 1998 reflecting higher marketing spending across the region and costs associated with new branches and additional product offerings, particularly in Japan. Expenses in 1998 declined $49 million or 5% from 1997 reflecting the effect of foreign currency translation, partially offset by costs associated with business volume growth. The provisions for benefits, claims, and credit losses in 1999 of $353 million increased from $251 million in 1998 and $198 million in 1997. The net credit loss ratio was 1.28% in 1999, up from 1.12% in 1998 and 0.82% in 1997. Loans delinquent 90 days or more were $453 million or 1.80% at December 31, 1999, compared with $498 million or 2.28% at December 31, 1998 and $259 million or 1.34% at December 31, 1997. The increases in the provision and the net credit loss ratio from 1998 primarily reflect increases in Taiwan and Hong Kong; however, the delinquency ratio declined in 1999 reflecting the economic stabilization across the region. Latin America In Millions of Dollars 1999 1998(1) 1997(1) - ----------------------------------------------------------------------------- Total revenues, net of interest expense $1,983 $1,598 $1,475 Adjusted operating expenses(2) 1,193 1,068 921 Provision for credit losses 447 265 192 - ----------------------------------------------------------------------------- Core income before taxes 343 265 362 Income taxes 115 105 119 - ----------------------------------------------------------------------------- Core income 228 160 243 Restructuring-related items, after-tax 27 67 20 - ----------------------------------------------------------------------------- Net income $ 201 $ 93 $ 223 ============================================================================= Average assets (in billions of dollars) $ 14 $ 12 $ 8 Return on assets 1.44% 0.78% 2.79% ============================================================================= Excluding restructuring-related items Return on assets 1.63% 1.33% 3.04% ============================================================================= (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. 15 Latin America--which provides banking, lending and investment services, including credit and charge cards, to customers throughout the region--reported core income of $228 million in 1999, up $68 million or 43% from 1998, reflecting an increase in earnings from Credicard, a 33%-owned Brazilian Card affiliate, and the effect of certain acquisitions, partially offset by a higher provision for credit losses. Core income of $160 million in 1998 declined from $243 million in 1997 primarily reflecting lower earnings from Credicard. Net income of $201 million in 1999, $93 million in 1998, and $223 million in 1997 included restructuring-related items of $27 million ($42 million pretax), $67 million ($88 million pretax), and $20 million ($33 million pretax), respectively. The Brazilian currency devaluation in the beginning of 1999 significantly contributed to the 1999 foreign currency translation effects that reduced core income by approximately $34 million. Foreign currency translation effects reduced revenue and expense growth by approximately 10 and 7 percentage points, respectively. The effect of foreign currency translation in 1998 reduced revenue and expense growth by approximately 4 and 5 percentage points, respectively, however the impact on core income was minimal. As shown in the following table, Latin America experienced strong business volume growth in 1999 and 1998, including the effect of acquisitions. Average loan growth of 1% in 1999 was reduced by credit risk management initiatives. Customer deposit growth also reflects a "flight to quality" in the region. In Billions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Accounts (in millions) 8.8 7.3 5.4 Average customer deposits $ 13.5 $ 10.2 $ 8.2 Average loans 7.9 7.8 6.6 ================================================================================ Revenues, net of interest expense, of $1.983 billion increased $385 million or 24% from 1998 reflecting acquisitions in the region and increased earnings from Credicard. Revenues in 1998 increased $123 million or 8% from 1997, reflecting acquisitions in the region and business volume growth, offset by lower earnings from Credicard. Adjusted operating expenses of $1.193 billion increased $125 million or 12% from 1998 reflecting acquisitions in the region. Efficiency efforts in 1999 contributed to a 3% decline in expenses excluding the effect of acquisitions and foreign currency translation. Expenses in 1998 grew $147 million or 16% from 1997 reflecting acquisitions in the region, spending on new strategic alliances, and increased collection efforts. The provision for credit losses of $447 million in 1999 increased from $265 million in 1998 and $192 million in 1997. The net credit loss ratio was 5.30% in 1999, up from 3.07% in 1998 and 2.66% in 1997. Loans delinquent 90 days or more of $320 million or 4.10% at December 31, 1999 increased from $288 million or 3.60% at December 31, 1998 and $173 million or 2.34% at December 31, 1997. The increases in the provision and the net credit loss ratio from 1998 reflect economic conditions in the region, particularly in Argentina and Chile, and the effect of recent acquisitions. e-CITI In Millions of Dollars 1999 1998(1) 1997(1) - ---------------------------------------------------------------------------- Total revenues, net of interest expense $ 233 $ 149 $ 114 Adjusted operating expenses(2) 527 378 236 Provision for credit losses 5 3 4 - ---------------------------------------------------------------------------- Loss before tax benefits (299) (232) (126) Income tax benefits (120) (91) (48) - ---------------------------------------------------------------------------- Loss (179) (141) (78) Restructuring-related items, after-tax -- 2 16 - ---------------------------------------------------------------------------- Net loss $(179) $(143) $ (94) ============================================================================ (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. e-Citi--the business responsible for developing and implementing the Company's internet financial services products and e-commerce solutions--reported losses before restructuring-related items of $179 million in 1999, compared to $141 million in 1998 and $78 million in 1997. Net losses of $143 million in 1998 and $94 million in 1997 included restructuring-related items of $2 million ($3 million pretax) and $16 million ($28 million pretax), respectively. Revenues, net of interest expense, were $233 million in 1999, up from $149 million in 1998 and $114 million in 1997, reflecting business volume increases in certain electronic banking services. Adjusted operating expenses of $527 million increased from $378 million and $236 million in 1998 and 1997, respectively, reflecting continued investment in Internet-based and other electronic financial services as well as other e-commerce solutions and volume increases associated with electronic banking services. OTHER CONSUMER In Millions of Dollars 1999 1998(1) 1997(1) - ----------------------------------------------------------------------------- Total revenues, net of interest expense $ 67 $ 100 $ 108 Adjusted operating expenses(2) 195 217 80 - ----------------------------------------------------------------------------- (Loss) income before taxes (128) (117) 28 Income taxes (benefits) (42) (40) 20 - ----------------------------------------------------------------------------- (Loss) income (86) (77) 8 Restructuring-related items, after-tax 12 -- -- - ----------------------------------------------------------------------------- Net (loss) income $ (98) $ (77) $ 8 ============================================================================= (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. Other Consumer--which includes certain treasury operations and global marketing and other programs--reported losses before restructuring-related items of $86 million in 1999, compared with $77 million in 1998, reflecting higher costs associated with global distribution initiatives and lower treasury results reflecting the higher interest rate environment, offset by lower marketing costs and reduced staff levels. The loss of $77 million in 1998 as compared to income of $8 million in 1997 reflects higher spending on global advertising, marketing, and distribution development initiatives. The net loss of $98 million in 1999 included restructuring-related items of $12 million ($19 million pretax). 16 CONSUMER PORTFOLIO REVIEW In the consumer portfolio, credit loss experience is often expressed in terms of annualized net credit losses as a percentage of average loans. Pricing and credit policies reflect the loss experience of each particular product. Consumer loans are generally written off no later than a predetermined number of days past due on a contractual basis, or earlier in the event of bankruptcy. The number of days is set at an appropriate level according to loan product and country. The table below summarizes delinquency and net credit loss experience in both the managed and on-balance sheet loan portfolios in terms of loans 90 days or more past due, net credit losses, and as a percentage of related loans. Consumer Loan Delinquency Amounts, Net Credit Losses, and Ratios
Total Average Loans 90 Days or More Past Due(1) Loans -------- ------------------------------- -------- In Millions of Dollars, Except Loan Amounts in Billions 1999 1999 1998 1997 1999 - ------------------------------------------------------------------------------------------------------------------ Citibanking North America $ 7.4 $ 55 $ 93 $ 133 $ 7.6 Ratio 0.75% 1.20% 1.59% Mortgage Banking 30.1 696 625 715 27.4 Ratio 2.31% 2.44% 3.13% U.S. Bankcards 73.7 1,061 1,001 868 69.0 Ratio 1.44% 1.45% 1.77% Other Cards 2.2 30 28 32 2.4 Ratio 1.38% 1.23% 1.56% CitiFinancial 15.5 203 172 133 13.6 Ratio 1.31% 1.44% 1.36% Europe, Middle East & Africa 17.2 914 955 919 16.9 Ratio 5.33% 5.46% 5.92% Asia Pacific 25.1 453 498 259 23.3 Ratio 1.80% 2.28% 1.34% Latin America 7.8 320 288 173 7.9 Ratio 4.10% 3.60% 2.34% Citibank Private Bank (2) 22.4 120 193 110 19.2 Ratio 0.54% 1.14% 0.72% Other 0.8 3 2 1 0.9 - ------------------------------------------------------------------------------------------------------------------ Total managed 202.2 3,855 3,855 3,343 188.2 Ratio 1.91% 2.12% 2.23% - ------------------------------------------------------------------------------------------------------------------ Securitized credit card receivables (49.0) (725) (658) (481) (46.9) Loans held for sale (4.5) (32) (38) (35) (5.2) - ------------------------------------------------------------------------------------------------------------------ Total loans $ 148.7 $ 3,098 $ 3,159 $ 2,827 $ 136.1 Ratio 2.08% 2.39% 2.36% ================================================================================================================== Net Credit Losses(1) ------------------------------- In Millions of Dollars, Except Loan Amounts in Billions 1999 1998 1997 - ----------------------------------------------------------------------------------------- Citibanking North America $ 90 $ 106 $ 109 Ratio 1.18% 1.34% 1.36% Mortgage Banking 43 75 115 Ratio 0.16% 0.31% 0.51% U.S. Bankcards 3,143 3,123 2,662 Ratio 4.56% 5.33% 5.74% Other Cards 87 79 81 Ratio 3.70% 3.51% 3.88% CitiFinancial 295 291 233 Ratio 2.18% 2.74% 2.82% Europe, Middle East & Africa 281 277 273 Ratio 1.67% 1.70% 1.75% Asia Pacific 298 227 171 Ratio 1.28% 1.12% 0.82% Latin America 419 239 175 Ratio 5.30% 3.07% 2.66% Citibank Private Bank (2) 19 5 (13) Ratio 0.10% 0.03% NM Other 5 3 4 - ----------------------------------------------------------------------------------------- Total managed 4,680 4,425 3,810 Ratio 2.49% 2.70% 2.61% - ----------------------------------------------------------------------------------------- Securitized credit card receivables (2,159) (2,053) (1,587) Loans held for sale (110) (134) (126) - ----------------------------------------------------------------------------------------- Total loans $ 2,411 $ 2,238 $ 2,097 Ratio 1.77% 1.82% 1.79% =========================================================================================
(1) The ratios of 90 days or more past due and net credit losses are calculated based on end-of-period and average loans, respectively, both net of unearned income. (2) Citibank Private Bank results are reported as part of the Global Investment Management and Private Banking segment. Consumer Loan Balances, Net of Unearned Income
End of Period Average ----------------------------- ----------------------------- In Billions of Dollars 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------- Managed $ 202.2 $ 181.6 $ 149.8 $ 188.2 $ 163.8 $ 145.7 Securitized credit card receivables (49.0) (44.3) (26.8) (46.9) (36.5) (25.2) Loans held for sale (4.5) (5.0) (3.5) (5.2) (4.6) (3.6) - ---------------------------------------------------------------------------------------------------------- On-balance sheet $ 148.7 $ 132.3 $ 119.5 $ 136.1 $ 122.7 $ 116.9 ==========================================================================================================
17 Total delinquencies 90 days or more past due in the managed portfolio were $3.9 billion with a related delinquency ratio of 1.91% at December 31, 1999, compared with $3.9 billion or 2.12% at December 31, 1998 and $3.3 billion or 2.23% at December 31, 1997. Total managed net credit losses in 1999 were $4.7 billion and the related loss ratio was 2.49%, compared with $4.4 billion and 2.70% in 1998 and $3.8 billion and 2.61% in 1997. For a discussion on trends by business, see business discussions on pages 8-16. Citigroup's allowance for credit losses of $6.7 billion is available to absorb all probable credit losses inherent in the portfolio. For analytical purposes only, the portion of Citigroup's allowance for credit losses attributed to the consumer portfolio was $3.4 billion as of December 31, 1999, up from $3.3 billion and $2.8 billion as of December 31, 1998 and 1997, respectively. The increase in 1998 from 1997 reflects the addition of $320 million of credit loss reserves related to the acquisition of UCS. The allowance as a percentage of loans on the balance sheet was 2.31% as of December 31, 1999, down from 2.50% at December 31, 1998 reflecting improved credit performance in the portfolio. The attribution of the allowance is made for analytical purposes only and may change from time to time. In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------ Allowance for credit losses $3,435 $3,310 $2,808 As a percentage of total consumer loans 2.31% 2.50% 2.35% ============================================================================== GLOBAL CONSUMER OUTLOOK The statements below are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 34. In 2000, Citigroup will adopt the Federal Financial Institutions Examination Council's (FFIEC) revised Uniform Retail Credit Classification and Account Management Policy. The policy provides guidance on the reporting of delinquent consumer loans and the timing of associated credit charge-offs for Citigroup's financial institution subsidiaries. The revised policy is not expected to have a material effect on financial results since Citigroup maintains adequate reserves for probable credit losses inherent in its loan portfolios. However, net credit losses, delinquencies and the related ratios may increase from 1999 levels as a result of portfolio growth, global economic conditions, and the credit performance of the portfolios, including bankruptcies. Banking/Lending Citibanking North America. 1999 was a year of major transformation and success. The business significantly changed its expense structure, reducing operating expenses by $334 million or 20%. Citibanking invested in training and licensing programs and implemented new compensation programs to enable and motivate associates to sell a full range of financial products that meet clients' needs. By the end of 1999, the majority of sales associates became licensed and Citibanking introduced Citipro, a complimentary financial analysis to assess clients' financial needs and recommend appropriate financial products to meet those needs. This new sales strategy and culture has accelerated revenue growth through increased sales of banking products and higher investment product fees. As a result, revenues grew 11% in the second half of 1999 as compared to 3% in the first half of 1999. Revenue growth in 2000 is expected to exceed the growth experienced in 1999. Mortgage Banking. In 1999 Mortgage Banking, which includes the student loan business, expanded its product set and geographic presence through the acquisition of Source One and distribution through Citigroup affiliates. Continued growth is expected in 2000 through improved returns on the mortgage servicing portfolio, expanded Internet and cross-sell opportunities, and the introduction of new lending products. Student loan growth will be driven by increased presence in the wholesale business and Internet lending. Cards. The Cards business delivered outstanding performance in 1999 within a challenging business environment, led by growth in receivables and sales volume and improved risk adjusted margins despite competitive pressures. Additionally, the business successfully executed two portfolio acquisitions in the year. As a result, the business is moving into 2000 with solid momentum. While competitive pressures will continue, the business will leverage its size in meeting the needs of existing customers and gain wallet share by continuing to grow existing profitable relationships and testing new value propositions and channels, including the Internet. Further, Cards will meet its customers broader needs through cross-selling and financial facilitation opportunities that will provide for continued business growth. Improved credit performance significantly contributed to earnings growth in 1999. Credit performance is not expected to improve further in 2000 and credit costs and delinquencies may increase from 1999 levels as a result of the economic environment and continued business growth. 18 CitiFinancial. During 1999, CitiFinancial acquired operations in Florida that had access to significant correspondent and broker networks, as well as purchased approximately 200 branches. CitiFinancial is also pursuing other sources of new volume through its affiliates within Citigroup. In addition, the number of competitors in consumer finance lending has changed over the past few years. CitiFinancial believes that the industry will continue to consolidate and this may present an opportunity to grow via acquisitions both domestically and internationally. Utilizing the existing and recently acquired new channels, CitiFinancial expects continued growth in 2000. CitiFinancial believes that its secured lending products will produce above average returns should interest rates continue to rise. Increases in interest rates could possibly have an adverse effect on the economy. Credit losses are expected to increase modestly in 2000 given that they were at historical lows in 1999. Insurance Industry Changes in the general interest rate environment affect the return received by the insurance subsidiaries on newly invested and reinvested funds. While a rising interest rate environment enhances the returns available, it reduces the market value of existing fixed maturity investments and the availability of gains on disposition. A decline in interest rates reduces the return available on investment of funds, but creates the opportunity for realized investment gains on disposition of fixed maturity investments. As required by various state laws and regulations, the Company's insurance subsidiaries are subject to assessments from state-administered guaranty associations, second injury funds and similar associations. Certain social, economic, political, and litigation issues have led to an increased number of legislative and regulatory proposals aimed at addressing the cost and availability of certain types of insurance, as well as the claim and coverage obligations of insurers. While most of these provisions have failed to become law, these initiatives may continue as legislators and regulators try to respond to the public availability, affordability, and claims concerns, and the resulting laws, if any, could adversely affect the Company's ability to write business with appropriate returns. Travelers Life and Annuity should benefit from growth in the aging population who are becoming more focused on the need to accumulate adequate savings for retirement, to protect these savings and to plan for the transfer of wealth to the next generation. Travelers Life and Annuity is well positioned to take advantage of the favorable long-term demographic trends through its strong financial position, widespread brand name recognition and broad array of competitive life, annuity and retirement and estate planning products sold through established distribution channels. However, competition in both product pricing and customer service is intensifying. While there has been some consolidation within the industry, other financial services organizations are increasingly involved in the sale and/or distribution of insurance products. Financial Services reform is likely to have many effects on the life insurance industry and the results will take time to assess; however, heightened competition is expected. Also, the annuities business is interest sensitive, and swings in interest rates could influence sales and retention of in force policies. In order to strengthen its competitive position, Travelers Life and Annuity expects to maintain a current product portfolio, further diversify its distribution channels, and retain its healthy financial position through strong sales growth and maintenance of an efficient cost structure. Primerica. During the last few years Primerica has instituted programs including sales and product training that are designed to maintain high compliance standards, increase the number of producing agents and customer contacts and, ultimately, increase production levels. Additionally, increased effort has been made to provide all Primerica customers full access to all Primerica marketed lines. Insurance in force continues to grow. A continuation of these trends could positively influence future operations. Primerica continues to expand cross-selling with other Company subsidiaries of products such as loans, mutual funds, and annuity products. Personal Lines strategy includes control of operating expenses to improve competitiveness and profitability, growth in sales through independent agents and continued expansion of alternative marketing channels to broaden distribution to a wider customer base. Personal Lines is continuing its state by state rollout of nonstandard auto insurance to broaden its product capabilities. These growth strategies also provide opportunities to leverage the existing cost structure and achieve economies of scale. In addition, Personal Lines continues to take action to control its exposure to catastrophe losses, including limiting the writing of new homeowners business in certain markets and implementing price increases in certain hurricane-prone areas, subject to restrictions imposed by insurance regulatory authorities. The personal auto insurance marketplace has become more competitive in 1999 as some personal auto carriers have reduced prices in selected markets. Additionally, auto loss costs have deteriorated slightly. These trends are expected to continue in 2000. Personal Lines will continue to emphasize underwriting discipline in this competitive marketplace and pursue a strategy of flat to modest increases in auto rates. Market conditions for homeowners insurance have remained stable with the industry experiencing modest rate increases. Personal Lines expects homeowner rate increases to continue in 2000. Homeowners loss cost trends have held at modest levels. The property and casualty insurance industry in the United States continues to consolidate. The Company's strategic objectives are to enhance its position as a consistently profitable market leader and to become a low-cost provider of property and casualty insurance in the United States, as the industry consolidates. In relation to the Company's objective of being a low-cost provider of property and casualty insurance, an emphasis on claim payout and performance and enhanced productivity efforts are expected to continue. However, some of the insurance industry's methods have been challenged in litigation. 19 International Consumer Europe, Middle East & Africa. The newly unified Europe represents a large market whose size and strong demographic characteristics rival that of the U.S. Additional growth opportunity comes from the developing markets of Central and Eastern Europe where an emerging middle class is expected to fuel the demand for financial services. In 2000, the region will focus on the development of Internet banking and investment products, including e-brokerage services. Not unlike the U.S., as the social reforms take hold, an increasing recognition on the part of consumers that they will need to fund their own retirements is fueling a substantial investment product opportunity. Although the European Economic Monetary Union represents great opportunity, the challenges are substantial. A single market requires pan-European product offerings, brings increased competition, and creates a greater ability on the part of consumers to comparison shop across borders. Citigroup's strengths in distribution and consistent global advertising and marketing efforts will provide a strong platform to expand beyond the current European presence. Asia Pacific. Asia's economic crisis has highlighted the need for a deep, rapid restructuring of the banking industry across the region. 1999 was one of the industry's most challenging years on record. Local banks consolidated, competition intensified with the growing presence of foreign banks and non-bank financial institutions, and market dynamics changed due to structural shifts, including the rapid development of the Internet across Asia. In 1999, the business embarked on a number of strategic cost management initiatives to support a strengthened franchise. Both revenues and earnings experienced healthy growth in 1999. Asia's economic recovery is expected to broaden in 2000. As a result of the economic outlook and the business momentum built in 1999, Asia Pacific is well positioned in 2000 for continued franchise growth. Latin America. The region experienced deteriorating economic conditions during 1999 in many of its countries, which resulted in contracting Gross Domestic Product, currency volatility, and a difficult credit environment. The macroeconomic outlook is expected to remain challenging in 2000, with most countries returning to only modest growth. The business will focus its growth on less risky products and population segments, and continue to implement operating expense reduction programs. Tight controls on loan underwriting and collections implemented in 1999, coupled with a moderately improved economic climate in 2000, should result in improved credit performance. GLOBAL CORPORATE AND INVESTMENT BANK
In Millions of Dollars 1999 1998(1) 1997(1) - ---------------------------------------------------------------------------------------- Total revenues, net of interest expense $ 27,355 $ 22,360 $ 23,819 Adjusted operating expenses(2) 15,476 14,462 14,177 Provisions for benefits, claims, and credit losses 3,852 4,160 3,667 - ---------------------------------------------------------------------------------------- Core income before taxes and minority interest 8,027 3,738 5,975 Income taxes 2,785 1,226 2,145 Minority interest, after-tax 167 143 132 - ---------------------------------------------------------------------------------------- Core income 5,075 2,369 3,698 Restructuring-related items, after-tax (121) (26) 664 - ---------------------------------------------------------------------------------------- Net income(3) $ 5,196 $ 2,395 $ 3,034 ========================================================================================
(1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. (3) The 1999 period excludes cumulative effect of accounting changes. Citigroup's Global Corporate and Investment Bank business serves corporations, financial institutions, governments, investors, and other participants in capital markets throughout the world and consists of SSB, Emerging Markets, GRB, and the Commercial Lines business of TAP. SSB is one of the largest investment banking, underwriting and brokerage firms in the world, with a significant presence in most major financial products. Emerging Markets provides a wide array of banking products and services to multinational and large and emerging local corporations in 78 emerging market countries. GRB focuses on providing banking, capital markets, and transaction processing services to large multinational companies in 22 developed countries and to their subsidiaries around the world. TAP is one of the largest property and casualty insurers in the United States offering, among other products, workers' compensation, commercial multi-peril, commercial auto, other liability, fidelity and surety, and property and other lines, which it distributes through independent agents and brokers. Earnings generated from businesses outside the U.S. represented about 35% of total Global Corporate and Investment Bank core income in 1999. The Global Corporate and Investment Bank reported core income of $5.075 billion in 1999, up $2.706 billion or 114%, reflecting a rebound from 1998 economic turmoil and strong 1999 growth across the franchise. The growth in core income was led by SSB, up $1.946 billion to $2.354 billion, Emerging Markets, up $442 million to $1.190 billion, and GRB, up $196 million to $686 million. Excluding the 1998 severe market conditions, core income growth reflected strong revenue momentum across SSB, revenue growth and improved credit in Emerging Markets, and lower expenses combined with revenue growth in GRB. Commercial Lines' core income growth reflected favorable legislation benefits and prior-year reserve development, along with lower weather-related losses. Net income of $5.196 billion, $2.395 billion, and $3.034 billion in 1999, 1998 and 1997, respectively, included net restructuring-related credits of $121 million ($207 million pretax) and $26 million ($62 million pretax) in 1999 and 1998, respectively, and in 1997, a charge of $664 million ($1.119 billion 20 pretax). Restructuring-related items in 1999 included reductions in the restructuring reserve of $150 million ($255 million pretax) of which $127 million ($214 million pretax) related to the 1997 reserve that resulted from SSB's reassessment of space needs due to the Citicorp merger. Restructuring-related items in 1998 included a reduction of the 1997 restructuring reserve of $191 million ($324 million pretax) that resulted from SSB's favorable negotiations on a sublease on the Seven World Trade Center location. Also included in 1998 is a restructuring charge of $165 million ($262 million pretax) related to initiatives designed to realize synergies and operating efficiencies. Included in 1997 are charges recorded by SSB related to the Salomon Smith Barney merger and by Emerging Markets and GRB related to cost-management programs and customer service initiatives. See Note 14 of Notes to Consolidated Financial Statements for further discussion of restructuring-related items. SALOMON SMITH BARNEY The following data does not include the Asset Management division of Salomon Smith Barney. The division's results are included in the SSB Citi Asset Management Group segment. In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Total revenues, net of interest expense $ 12,680 $ 8,333 $ 10,218 Adjusted operating expenses(1) 8,973 7,702 7,895 - -------------------------------------------------------------------------------- Core income before taxes 3,707 631 2,323 Income taxes 1,353 223 885 - -------------------------------------------------------------------------------- Core income 2,354 408 1,438 Restructuring-related items, after-tax (143) (163) 496 - -------------------------------------------------------------------------------- Net income(2) $ 2,497 $ 571 $ 942 ================================================================================ (1) Excludes restructuring-related items. (2) 1999 excludes cumulative effect of accounting change. Core income was $2.354 billion in 1999 compared to $408 million in 1998 and $1.438 billion in 1997. Salomon Smith Barney's earnings during 1999 reflect a rebound from 1998 economic turmoil losses and strong growth in commission income from the Private Client group, investment banking fees and principal transactions. During the latter part of 1998 Salomon Smith Barney's performance was depressed by extreme economic turmoil in much of the world. Revenues for the three years ended December 31, 1999 by category were as follows: In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Commissions $ 3,630 $ 3,203 $ 2,956 Investment banking 2,970 2,281 2,082 Principal transactions 2,544 (115) 2,501 Asset management and administration fees(1) 1,638 1,325 998 Interest income, net(2) 1,614 1,460 1,533 Other income 284 179 148 - -------------------------------------------------------------------------------- Total revenues, net of interest expense(2) $12,680 $ 8,333 $10,218 ================================================================================ (1) Excludes the revenues of SSB Asset Management, which are reported in the SSB Citi Asset Management Group results. (2) Net of interest expense of $9,652 million, $11,433 million, and $10,496 million in 1999, 1998, and 1997, respectively. Revenues, net of interest expense, increased 52% in 1999 to $12.680 billion from $8.333 billion in 1998 and $10.218 billion in 1997. The 1999 increase compared to 1998 reflects strong growth in all businesses as well as a rebound from the prior year's economic turmoil. The 1998 decrease compared to 1997 primarily reflects a decline in principal transaction revenues from fixed income and global arbitrage offset, to an extent, by increases in commissions, asset management and administration fees, and investment banking revenues. Commissions revenue increased 13% in 1999 to $3.630 billion from $3.203 billion in 1998 and $2.956 billion in 1997. The 1999 and 1998 increases reflect growth in sales of listed and over-the-counter (OTC) securities. Investment banking revenues were $2.970 billion in 1999 compared to $2.281 billion in 1998 and $2.082 billion in 1997. The increases in 1999 reflect growth in equity and high grade debt underwritings and mergers and acquisitions fees. The increases in 1998 reflect revenue growth in unit trust, public finance and high grade debt underwritings, and mergers and acquisitions fees. This was offset somewhat by a decline in equity underwritings. Investment banking revenues in 1998 were also favorably impacted by increased high yield underwriting revenues. Principal transactions revenues were $2.544 billion in 1999 compared to a loss of $115 million in 1998 and $2.501 billion in 1997. The 1999 period reflects strong growth in institutional global fixed income and global equities. The 1998 period reflects decreases in fixed income trading results including losses due to risk reductions in the U.S. fixed income arbitrage business. These decreases in 1998 were partially offset by an increase in equity trading results. In 1998 fixed income trading results were adversely impacted by significant dislocations in the global fixed income markets, including greatly reduced liquidity and widening credit spreads. Included in these results were Russia-related losses. Asset management and administration fees were $1.638 billion in 1999 compared to $1.325 billion in 1998 and $998 million in 1997. The year to year increases reflect growth in assets under fee-based management. These fees include results from assets managed by the Financial Consultants as well as assets that are externally managed through the consulting group. Total assets under fee-based management at December 31, were as follows: In Billions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Financial Consultant managed accounts $ 27.4 $ 16.5 $ 11.6 Consulting Group externally managed assets 83.0 71.9 59.7 - -------------------------------------------------------------------------------- Total assets under fee-based management(1) $ 110.4 $ 88.4 $ 71.3 ================================================================================ (1) Excludes the assets under management of SSB Asset Management, which are reported in the SSB Citi Asset Management Group business segment. Interest income, net was $1.614 billion in 1999 compared to $1.460 billion in 1998 and $1.533 billion in 1997. The increase in 1999 compared to 1998 is primarily due to increases in margin lending to clients. Adjusted operating expenses were $8.973 billion in 1999 compared to $7.702 billion in 1998 and $7.895 billion in 1997. Adjusted operating expenses increased 17% in 1999 over 1998 primarily due to an increase in production-related compensation and employee benefits expense, reflecting increased revenues. Adjusted operating expenses were relatively unchanged in 1998 as compared to 1997. Salomon Smith Barney continues to maintain its focus on controlling fixed expenses. 21 GLOBAL CORPORATE BANK Emerging Markets In Millions of Dollars 1999 1998(1) 1997(1) - ----------------------------------------------------------------------------- Total revenues, net of interest expense $4,327 $3,632 $3,483 Adjusted operating expenses(2) 2,062 2,015 1,898 Provision for credit losses 347 424 120 - ----------------------------------------------------------------------------- Core income before taxes and minority interest 1,918 1,193 1,465 Income taxes 722 445 548 Minority interest, after-tax 6 -- -- - ----------------------------------------------------------------------------- Core income 1,190 748 917 Restructuring-related items, after-tax 10 50 32 - ----------------------------------------------------------------------------- Net income $1,180 $ 698 $ 885 ============================================================================= Average assets (in billions of dollars) $ 82 $ 78 $ 64 Return on assets 1.44% 0.89% 1.38% ============================================================================= Excluding restructuring-related items Return on assets 1.45% 0.96% 1.43% ============================================================================= (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. Emerging Markets core income totaled $1.190 billion in 1999, up $442 million or 59% from 1998, reflecting Russia-related losses in 1998 and strong 1999 revenue growth in Latin America, along with an improved credit outlook that resulted in a lower provision for credit losses. In Asia (including Australia and New Zealand but excluding Japan and the Indian subcontinent), improved net write-offs and lower expenses offset revenue declines from lower trading activity. Core income in 1998 of $748 million declined $169 million or 18% from 1997. Net income of $1.180 billion, $698 million and $885 million in 1999, 1998 and 1997, respectively, included restructuring-related items of $10 million ($17 million pretax), $50 million ($73 million pretax) and $32 million ($54 million pretax), respectively. Revenues, net of interest expense, of $4.327 billion grew $695 million or 19% compared with 1998 reflecting double-digit growth in loan product revenues, structured products revenues and trade services and an $86 million improvement in trading-related revenues. Revenue growth in 1999 included double-digit growth in Latin America and CEEMEA (Central and Eastern Europe, Middle East and Africa) that was partially offset by a decline in trading-related revenues in Asia. Revenues of $3.632 billion in 1998 grew $149 million or 4% compared with 1997, as double-digit growth in transaction banking revenues was partially offset by losses attributable to the Russia related market turmoil. Revenues attributed to the Embedded Bank and Emerging Local Corporate strategies (Citigroup's plans to gain market share in selected emerging market countries), together with new franchises, grew 30% in 1999 and 66% in 1998. These revenues accounted for 7%, 7% and 4% of the Emerging Markets revenues in 1999, 1998, and 1997, respectively. Revenues in the Emerging Markets business that were attributable to business from multinational companies managed jointly with GRB grew 18% in 1999 and 15% in 1998. These revenues accounted for approximately 28%, 28%, and 29% of total Emerging Markets revenues in 1999, 1998, and 1997, respectively. Adjusted operating expenses in 1999 were well controlled, increasing $47 million or 2% to $2.062 billion as investment spending to gain market share in selected emerging market countries and volume growth were essentially funded by savings from the 1997 and 1998 restructuring actions and other expense initiatives. Expenses in 1998 were $2.015 billion, up $117 million or 6% compared to 1997, primarily due to investment spending to build the franchise, together with volume growth. The provision for credit losses totaled $347 million in 1999, down $77 million compared with 1998. The decrease in 1999 was primarily attributable to lower net write-offs in Russia and Asia, partially offset by an increase in Latin America, as well as an overall improved credit outlook that resulted in a lower provision for credit losses. The provision for credit losses in 1998 of $424 million was up $304 million compared with 1997. The increase in 1998 was concentrated in Indonesia and Russia and reflected the effects of economic turmoil experienced in those countries. Cash-basis loans at December 31, 1999, 1998, and 1997 were $1.044 billion, $1.062 billion and $649 million. The 1999 balance reflected decreases in Asia partially offset by increases in Latin America. The increase in 1998 was concentrated in Indonesia and several other Asian countries. Average assets of $82 billion in 1999 rose $4 billion or 5% from 1998 reflecting growth across all regions. The growth was concentrated in the loan portfolio and structured products. Average assets of $78 billion in 1998 rose $14 billion or 22% from 1997 reflecting growth across all regions, primarily in loan portfolio, trade finance, and treasury products. Global Relationship Banking In Millions of Dollars 1999 1998(1) 1997(1) - ---------------------------------------------------------------------------- Total revenues, net of interest expense $ 4,083 $ 3,914 $ 3,815 Adjusted operating expenses(2) 3,008 3,170 2,756 Provision (benefit) for credit losses 1 (30) (84) - ---------------------------------------------------------------------------- Core income before taxes 1,074 774 1,143 Income taxes 388 284 432 - ---------------------------------------------------------------------------- Core income 686 490 711 Restructuring-related items, after-tax 12 87 136 - ---------------------------------------------------------------------------- Net income $ 674 $ 403 $ 575 ============================================================================ Average assets (in billions of dollars) $ 81 $ 92 $ 83 Return on assets 0.83% 0.44% 0.69% ============================================================================ Excluding restructuring-related items Return on assets 0.85% 0.53% 0.86% ============================================================================ (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. 22 Core income from Global Relationship Banking in North America, Europe, and Japan was $686 million in 1999, up $196 million or 40% from 1998 primarily reflecting current year revenue growth, prior year economic turmoil and lower expenses. Core income in 1998 was $490 million, down $221 million or 31% from 1997. Net income of $674 million, $403 million, and $575 million in 1999, 1998 and 1997, respectively, included restructuring-related items of $12 million ($18 million pretax), $87 million ($141 million pretax) and $136 million ($227 million pretax), respectively. Revenues, net of interest expense, in 1999 of $4.083 billion increased $169 million or 4% from 1998. Revenues in 1998 included losses attributable to global economic turmoil as well as gains related to the disposition of real estate investments. Excluding these items, the 1999 results reflect growth in structured products, global equities and transaction services, partially offset by a decline in loan portfolio revenues. Revenues in 1998 of $3.914 billion increased $99 million or 3% from 1997 as double-digit growth in foreign exchange and transaction services revenues was partially offset by the effect of the 1998 global economic turmoil. Adjusted operating expenses were $3.008 billion in 1999, down $162 million or 5% from 1998. The decline in expenses from 1998 to 1999 was primarily the result of decreased costs related to the year 2000 and the EMU, coupled with restructuring actions and business integration initiatives with SSB. Expenses of $3.170 billion in 1998 were $414 million or 15% higher than 1997. The 1998 increase was primarily attributable to increased technology spending, including year 2000 and EMU expenses, along with volume-related expense growth. The provision for credit losses was $1 million in 1999 compared to net benefits of $30 million and $84 million in 1998 and 1997, respectively. Net benefits in 1998 were primarily the result of real estate recoveries partially offset by write-offs resulting from the financial market turmoil in Russia. Net benefits in 1997 resulted from recoveries in real estate and corporate loan portfolios. Cash-basis loans at December 31, 1999, 1998 and 1997 were $304 million, $268 million and $401 million while the OREO portfolio totaled $156 million, $235 million and $440 million, respectively. The increase in cash-basis loans in 1999 was due to an increase in North America partially offset by improvements in the real estate portfolio. The improvements in cash-basis loans in 1998 and in OREO in 1999 and 1998 were primarily related to the real estate portfolio. Average assets of $81 billion in 1999 declined $11 billion or 12% from 1998, primarily reflecting the transfer of certain fixed income businesses to SSB. Average assets of $92 billion in 1998 increased $9 billion or 11% from 1997 primarily reflecting higher lending to target market clients and higher volumes in transaction banking services. COMMERCIAL LINES In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Total revenues, net of interest expense $6,265 $6,481 $6,303 Claims and claim adjustment expenses 3,504 3,766 3,631 Total operating expenses 1,433 1,575 1,628 - -------------------------------------------------------------------------------- Income before taxes and minority interest 1,328 1,140 1,044 Income taxes 322 274 280 Minority interest, after-tax 161 143 132 - -------------------------------------------------------------------------------- Net income(1)(2) $ 845 $ 723 $ 632 ================================================================================ (1) Excludes investment gains/losses included in Investment Activities segment. (2) 1999 excludes cumulative effect of accounting changes. Net income was $845 million in 1999 compared to $723 million in 1998 and $632 million in 1997. The 1999 increase compared to 1998 reflects a benefit resulting from legislative actions by the states of New York and Pennsylvania that changed the manner in which these states finance their workers' compensation second-injury funds, and favorable prior-year reserve development. Also contributing to the earnings improvement in 1999 were lower weather- related losses and lower operating expenses, partially offset by lower fee income. Operating results in 1999 reflected TAP's long-standing insistence on maintaining discipline in the highly competitive commercial lines marketplace and on growing business only where market conditions warrant. During 1999, the Company began to see modest price increases on renewal business. However, these increases varied significantly and reinforced the fact that rates in many areas still have not improved to the point of producing acceptable returns. The 1998 increase compared to 1997 was due to increased after-tax net investment income, expense reductions, and lower environmental and cumulative injury incurred losses, partially offset by increased losses from catastrophes and other weather-related events. Operating results during this period also reflected market conditions characterized by difficult pricing and increased competition. The impact of this trend in market conditions on 1998 and 1997 operating results was offset by the factors previously indicated, as well as a disciplined approach to underwriting and risk management. Net written premiums by market for the three years ended December 31, 1999 were as follows: In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- National accounts $ 488 $ 625 $ 657 Commercial accounts 1,816 1,800 1,986 Select accounts 1,494 1,494 1,432 Specialty accounts 610 695 682 - -------------------------------------------------------------------------------- $4,408 $4,614 $4,757 ================================================================================ 23 Commercial Lines net written premiums were $4.408 billion in 1999 compared to $4.614 billion in 1998 and $4.757 billion in 1997. The 1997 net written premiums reflect a $142 million adjustment ($127 million in Commercial Accounts and $15 million in Select accounts) in the first quarter of 1997 due to a change to conform the method of recording certain net written premiums of the domestic property and casualty insurance subsidiaries acquired from Aetna Services Inc. (Aetna P&C) to the method employed by Travelers Indemnity and its subsidiaries (Travelers P&C). The trend in net written premiums for all lines continues to reflect the highly competitive marketplace and the Company's continued disciplined approach to underwriting and risk management. Also contributing to the 1999 decrease in net written premiums in National Accounts and Specialty Accounts is the impact of additional reinsurance coverage. The slight increase in Commercial Accounts net written premiums in 1999 reflects growth in specific business segments and an improving rate environment. The slight increase in Specialty Accounts net written premiums in 1998 reflects strong production in excess and surplus lines. Fee income was $275 million in 1999 compared to $306 million in 1998 and $365 million in 1997. The decreases in fee income were the result of the depopulation of involuntary pools serviced by the Company and the Company's continued success in lowering workers' compensation losses of service customers. National Accounts new business in 1999 was significantly lower than in 1998 reflecting the Company's continued disciplined approach to the highly competitive marketplace. National Accounts business retention ratio was moderately higher in 1999 than in 1998, primarily reflecting the loss of one large account in 1998. National Accounts new business and business retention ratio were virtually the same in 1998 as they were in 1997. National Accounts experienced an increase in claim service-only business as well as favorable results from continued product development efforts, especially in workers' compensation cost containment programs. In 1999, new business in Commercial Accounts was significantly lower than in 1998, reflecting the Company's continued focus on obtaining new business accounts only where it can maintain its selective underwriting policy. The Commercial Accounts business retention ratio in 1999 was virtually the same as in 1998. For 1998, new premium business in Commercial Accounts significantly declined compared to 1997, reflecting TAP's focus on maintaining its selective underwriting policy. The Commercial Accounts business retention ratio remained strong in 1998 and was virtually the same as 1997, reflecting TAP's focus on retaining profitable business. New premium business in Select Accounts was significantly lower in 1999 compared to 1998 and continued to reflect its selective underwriting policy in the highly competitive marketplace. New premium business in Select Accounts was moderately lower in 1998 compared to 1997 reflecting the highly competitive marketplace and the Company's continued disciplined approach to underwriting and risk management. Select Accounts business retention ratio remained strong in 1999 and was virtually the same as 1998 and 1997. Catastrophe losses, net of tax and reinsurance, were $27 million in 1999 compared to $25 million in 1998 and $5 million in 1997. The 1999 catastrophe losses were primarily due to Hurricane Floyd in the third quarter and tornadoes in Oklahoma in the second quarter. The 1998 catastrophe losses were primarily due to Hurricane Georges in the third quarter and tornadoes in Nashville, Tennessee in the second quarter. The 1997 catastrophe losses were primarily due to tornadoes in the Midwest in the first quarter. Statutory and GAAP combined ratios (before allocation of corporate expenses) for Commercial Lines were as follows:
1999 1998 1997 - ------------------------------------------------------------------------------- Statutory Loss and LAE ratio 77.9% 78.5% 78.4% Underwriting expense ratio 30.7 29.7 30.6 Combined ratio before policyholder dividends 108.6 108.2 109.0 Combined ratio 109.7 109.1 111.0 - ------------------------------------------------------------------------------- GAAP Loss and LAE ratio 75.2% 78.4% 78.3% Underwriting expense ratio 29.8 31.1 30.4 Combined ratio before policyholder dividends 105.0 109.5 108.7 Combined ratio 106.1 110.4 109.9 ===============================================================================
GAAP combined ratios for Commercial Lines differ from statutory combined ratios primarily due to the deferral and amortization of certain expenses for GAAP reporting purposes only. For purposes of computing GAAP combined ratios, fee income is allocated as a reduction of losses and loss adjustment expenses and other underwriting expenses. The 1999 statutory combined ratio for Commercial Lines reflected the treatment of the commutation of an asbestos liability to an insured. Excluding this commutation, the statutory combined ratio before policyholder dividends for 1999 would have been 106.1% compared to 108.2% in 1998. The improvement was primarily due to favorable prior-year reserve development and lower weather-related losses. The decrease in the 1999 GAAP combined ratio before policyholder dividends compared to 1998 was due to favorable prior-year reserve development, lower weather-related losses, and the benefit of the New York and Pennsylvania legislative actions, partially offset by lower fee income. The 1997 statutory and GAAP combined ratios for Commercial Lines included an adjustment due to a change to conform the Aetna P&C method with the Travelers P&C method of recording certain net written premiums. Excluding this adjustment, the statutory and GAAP combined ratios before policyholder dividends for 1997 would have been 109.5% and 109.6%, respectively. The decrease in the 1998 statutory and GAAP combined ratios before policyholder dividends compared to the 1997 statutory and GAAP combined ratios before policyholder dividends excluding this adjustment was due to expense reductions and lower environmental and cumulative injury incurred losses, partially offset by higher catastrophe and other weather-related losses and lower fee income. 24 Environmental Claims As a result of various state and federal legislative and regulatory efforts aimed at environmental remediation, the insurance industry has been, and continues to be, involved in litigation involving policy coverage and liability issues. The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") enacted in 1980 and later modified, enables private parties as well as federal and state governments to take action with respect to releases and threatened releases of hazardous substances. This federal statute permits both the recovery of response costs from certain liable parties and may require liable parties to directly undertake their own remedial action. Liability under CERCLA may be joint and several with other responsible persons. In addition to the regulatory pressures, the Company believes that certain court decisions have expanded insurance coverage beyond the original intent of the insurers and insureds. These decisions often pertain to insurance policies that were issued by TAP prior to the mid-1970s. The court decisions affecting the industry's coverage positions continue to be inconsistent. Accordingly, the ultimate responsibility and liability for environmental remediation costs remain uncertain. The Company continues to receive claims alleging liability exposures arising out of insureds' alleged disposition of toxic substances. These claims when submitted rarely indicate the monetary amount being sought by the claimant from the insured and the Company does not keep track of the monetary amount being sought in those few claims which indicated such a monetary amount. The Company's reserves for environmental claims are not established on a claim-by-claim basis. An aggregate bulk reserve is carried for all of the Company's environmental claims that are in the dispute process, until the dispute is resolved. This bulk reserve is established and adjusted based upon the aggregate volume of in-process environmental claims and the Company's experience in resolving such claims. At December 31, 1999, approximately 22% of the net environmental loss reserve (approximately $149 million) consists of case reserves for resolved claims. The balance, approximately 78% of the net aggregate reserve (approximately $527 million), is carried in a bulk reserve and includes incurred but not reported environmental claims for which the Company has not received any specific claims. The Company's reserving methodology is preferable to one based on "identified claims" since the resolution of environmental exposures by the Company generally occurs by settlement on an insured-by-insured basis as opposed to a claim-by-claim basis. Generally, the settlement between the Company and the insured extinguishes any obligation the Company may have under any policy issued to the insured for past, present and future environmental liabilities as well as extinguishes any pending coverage litigation dispute with the insured. This form of settlement is commonly referred to as a "buy-back" of policies for future environmental liability. Additional provisions of these agreements include appropriate indemnities and hold harmless provisions to protect the Company. The Company's general purpose in executing such agreements is to reduce its potential environmental exposure and eliminate both the risks presented by coverage litigation with the insured and the cost of such litigation. The reserving methodology includes an analysis by the Company of the exposure presented by each insured and the anticipated cost of resolution, if any, for each insured. This analysis is completed by the Company on a quarterly basis. In the course of its analysis, an assessment of the probable liability, available coverage, judicial interpretations and historical value of similar exposures is considered by the Company. In addition, due consideration is given to the many variables presented, such as the nature of the alleged activities of the insured at each site; the allegations of environmental damage at each site; the number of sites; the total number of potentially responsible parties at each site; the nature of environmental harm and the corresponding remedy at a site; the nature of government enforcement activities at each site; the ownership and general use of each site; the overall nature of the insurance relationship between the Company and the insured; the identification of other insurers; the potential other coverage available, if any, including the number of years of coverage, if any; and the applicable law in each jurisdiction. Analysis of these and other factors, including the potential for future claims, results in the establishment of the bulk reserve. The duration of the Company's investigation and review of such claims and the extent of time necessary to determine an appropriate estimate, if any, of the value of the claim to the Company, vary significantly and are dependent upon a number of factors. These factors include, but are not limited to, the cooperation of the insured in providing claim information, the pace of underlying litigation or claim processes, the pace of coverage litigation between the insured and the Company and the willingness of the insured and the Company to negotiate, if appropriate, a resolution of any dispute between them pertaining to such claims. Since the foregoing factors vary from claim to claim and insured by insured, the Company cannot provide a meaningful average of the duration of an environmental claim. However, based upon the Company's experience in resolving such claims, the duration may vary from months to several years. The property and casualty insurance industry does not have a standard method of calculating claim activity for environmental losses. Generally for Superfund remediation-type environmental claims, the Company establishes a claim file for each insured on a per site, per claimant basis. If there is more than one claimant such as a federal and a state agency, this method will result in two claims being set up for a policyholder at that one site. The Company adheres to this method of calculating claim activity on all environmental-related claims, whether such claims are tendered on primary, excess or umbrella policies. 25 In addition, the Company establishes claim files for environmental claims brought by individual claimants who allege injury or damage as a result of the discharge of wastes or pollutants allegedly by the policyholder. As it pertains to such claims tendered on policies issued by Travelers P&C, the Company establishes a claim file on a per claim, per insured, per site basis. For example, if one hundred claimants file a lawsuit against five policyholders alleging bodily injury and property damage as a result of the discharge of wastes or pollutants, one thousand claims (five hundred for the bodily injury claims and five hundred for the property damage claims) would be established. As it pertains to environmental claims brought by individual claimants and tendered on Aetna P&C policies, the Company establishes claim files on a per insured, per site basis due to current claim system limitations. For example, if one hundred claimants file a lawsuit against five policyholders alleging bodily injury and property damage as a result of the discharge of wastes or pollutants, five claims for the bodily injury claims and five for the property damage claims would be established. As of December 31, 1999, calculated as described above, the Company had approximately 39,000 pending environmental-related claims tendered by 968 active policyholders. Of the total pending environmental-related claims, 28,800 claims relate to Travelers P&C policies tendered by 413 policyholders and 10,200 claims relate to Aetna P&C policies tendered by 646 policyholders. Approximately 91 of these Aetna P&C policyholders are also included in the 413 Travelers P&C policyholders' count. The pending environmental-related claims represent federal or state EPA-type claims as well as plaintiffs' claims alleging bodily injury and property damage due to the discharge of waste or pollutants allegedly by the policyholder. The following table displays activity for environmental losses and loss expenses and reserves for the years ended December 31: Environmental Losses In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Beginning reserves Direct $ 928 $ 1,193 $ 1,369 Ceded (96) (74) (127) - ------------------------------------------------------------------------------- Net 832 1,119 1,242 Incurred losses and loss expenses Direct 139 123 79 Ceded (82) (73) (14) Losses paid Direct 266 388 271 Ceded (53) (51) (67) Other(1) Direct -- -- 16 Ceded -- -- -- - ------------------------------------------------------------------------------- Ending reserves Direct 801 928 1,193 Ceded (125) (96) (74) - ------------------------------------------------------------------------------- Net $ 676 $ 832 $ 1,119 =============================================================================== (1) Represents reallocation of general liability reserves to environmental reserves. Over the past two years the Company has experienced a substantial reduction in the number of policyholders with pending coverage litigation disputes pertaining to environmental claims as well as a continued reduction in the number of policyholders with active environmental claims. As of December 31, 1999, the number of policyholders with pending coverage litigation disputes pertaining to environmental claims was 270, approximately 33% less than the number pending as of December 31,1998 and approximately 50% less than the number pending as of December 31, 1997. As of December 31, 1999 the Company, for approximately $1.57 billion (before reinsurance), has resolved the environmental liabilities presented by 4,953 of the 5,921 policyholders who have tendered environmental claims to the Company. This resolution comprises 84% of the policyholders who have tendered such claims. The Company generally has been successful in resolving its coverage litigation disputes and continues to reduce its potential exposure through favorable settlements with certain insureds. Generally the settlement dollars paid in disputed coverage claims are a percentage of the total coverage sought by such insureds. The Company has direct environmental reserves (before reinsurance) of approximately $801 million, $530 million of which relates to 968 policyholders with unresolved environmental claims (the remaining 16% of the 5,921 policyholders who have tendered environmental claims); policyholders that may tender an environmental claim in the future; and for the anticipated cost of coverage litigation disputes pertaining to such environmental claims. Based upon the Company's reserving methodology and the experience of its historical resolution of environmental exposures, it believes that the environmental reserve is appropriate. Asbestos Claims In the area of asbestos claims, the Company believes that the property and casualty insurance industry has suffered from judicial interpretations that have attempted to maximize insurance availability from both a coverage and liability standpoint far beyond the intent of the contracting parties. These policies generally were issued prior to 1980. The Company continues to receive asbestos claims alleging insureds' liability from claimants' asbestos-related injuries. These claims, when submitted, rarely indicate the monetary amount being sought by the claimant from the insured and the Company does not keep track of the monetary amount being sought in those few claims that indicated such a monetary amount. Originally the cases involved mainly plant workers and traditional asbestos manufacturers and distributors. However, in the mid-1980s, a new group of plaintiffs, whose 26 exposure to asbestos was less direct and whose injuries were often speculative, began to file lawsuits in increasing numbers against the traditional defendants as well as peripheral defendants who had produced products that may have contained small amounts of some form of encapsulated asbestos. These claims continue to arise and on an individual basis generally involve smaller companies with smaller limits of potential coverage. Also, there has emerged a group of non-product claims by plaintiffs, mostly independent labor union workers, mainly against companies, alleging exposure to asbestos while working at these companies' premises. The Company continues to receive this type of asbestos claim. Various classes of asbestos defendants, such as major product manufacturers, peripheral and regional product defendants as well as premises owners, are tendering asbestos-related claims to the industry. Because each insured presents different liability and coverage issues, including whether such claims qualify as products or non-products claims, the Company evaluates those issues on an insured-by-insured basis. The Company's evaluations have not resulted in any meaningful data from which an average asbestos defense or indemnity payment may be determined. The varying defense and indemnity payments made by the Company on behalf of its insureds have also precluded the Company from deriving any meaningful data by which it can predict whether its defense and indemnity payments for asbestos claims (on average or in the aggregate) will remain the same or change in the future. Based upon the Company's experience with asbestos claims, the duration period of an asbestos claim from the date of submission to resolution is approximately two years. At December 31, 1999, approximately 11% of the net aggregate reserve (approximately $94 million) is for pending asbestos claims. The balance, approximately 89% (approximately $733 million) of the net asbestos reserve, represents incurred but not reported losses for which the Company has not received any specific claims. In general, the Company posts case reserves for pending asbestos claims within approximately 30 business days of receipt of such claims. The following table displays activity for asbestos losses and loss expenses and reserves for the years ended December 31: Asbestos Losses
In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Beginning reserves Direct $ 1,252 $ 1,363 $ 1,443 Ceded (266) (249) (370) - ------------------------------------------------------------------------------- Net 986 1,114 1,073 Incurred losses and loss expenses Direct 128 135 87 Ceded (71) (69) (18) Losses paid Direct 330 246 174 Ceded (114) (52) (140) Other(1) Direct -- -- 7 Ceded -- -- (1) - ------------------------------------------------------------------------------- Ending reserves Direct 1,050 1,252 1,363 Ceded (223) (266) (249) - ------------------------------------------------------------------------------- Net $ 827 $ 986 $ 1,114 ===============================================================================
(1) Represents reallocation of reserves. Uncertainty Regarding Adequacy of Environmental and Asbestos Reserves It is difficult to estimate the reserves for environmental and asbestos-related claims due to the vagaries of court coverage decisions, plaintiffs' expanded theories of liability, the risks inherent in major litigation and other uncertainties. Conventional actuarial techniques are not used to estimate such reserves. For environmental claims, the Company estimates its financial exposure and establishes reserves based upon an analysis of its historical claim experience and the facts of the individual underlying claims. The unique facts presented in each claim are evaluated individually and collectively. Due consideration is given to the many variables presented in each claim, as discussed above. The following factors are evaluated in projecting the ultimate reserve for asbestos-related claims: available insurance coverage; limits and deductibles; an analysis of each policyholder's potential liability; jurisdictional involvement; past and projected future claim activity; past settlement values of similar claims; allocated claim adjustment expense; potential role of other insurance; and applicable coverage defenses, if 27 any. Once the gross ultimate exposure for indemnity and allocated claim adjustment expense is determined for a policyholder by policy year, a ceded projection is calculated based on any applicable facultative and treaty reinsurance, and past ceded experience. As a result of these processes and procedures, the reserves carried for environmental and asbestos claims at December 31, 1999 are the Company's best estimate of ultimate claims and claim adjustment expenses based upon known facts and current law. However, the conditions surrounding the final resolution of these claims continue to change. Currently, it is not possible to predict changes in the legal and legislative environment and their impact on the future development of asbestos and environmental claims. Such development will be affected by future court decisions and interpretations, as well as changes in legislation applicable to such claims. Because of these future unknowns, additional liabilities may arise for amounts in excess of the current reserves. These additional amounts, or a range of these additional amounts, cannot now be reasonably estimated, and could result in a liability exceeding reserves by an amount that would be material to the Company's operating results in a future period. However, the Company believes that it is not likely that these claims will have a material adverse effect on the Company's financial condition or liquidity. Cumulative Injury Other Than Asbestos (CIOTA) Claims CIOTA claims are generally submitted to the Company under general liability policies and often involve an allegation by a claimant against an insured that the claimant has suffered injuries as a result of long-term or continuous exposure to potentially harmful products or substances. Such potentially harmful products or substances include, but are not limited to, lead paint, pesticides, pharmaceutical products, silicone-based personal products, solvents and other deleterious substances. Due to claimants' allegations of long-term bodily injury in CIOTA claims, numerous complex issues regarding such claims are presented. The claimants' theories of liability must be evaluated, evidence pertaining to a causal link between injury and exposure to a substance must be reviewed, the potential role of other causes of injury must be analyzed, the liability of other defendants must be explored, an assessment of a claimant's damages must be made, and the law of the jurisdiction must be applied. In addition, the Company must review the number of policies issued by the Company to the insured and whether such policies are triggered by the allegations, the terms and limits of liability of such policies, the obligations of other insurers to respond to the claim, and the applicable law in each jurisdiction. To the extent disputes exist between the Company and a policyholder regarding the coverage available for CIOTA claims, the Company resolves the disputes, where feasible, through settlements with the policyholder or through coverage litigation. Generally, the terms of a settlement agreement set forth the nature of the Company's participation in resolving CIOTA claims, the scope of coverage to be provided by the Company and contain the appropriate indemnities and hold harmless provisions to protect the Company. These settlements generally eliminate uncertainties for the Company regarding the risks extinguished, including the risk that losses would be greater than anticipated due to evolving theories of tort liability or unfavorable coverage determinations. The Company's approach also has the effect of determining losses at a date earlier than would have occurred in the absence of such settlement agreements. On the other hand, in cases where future developments are favorable to insurers, this approach could have the effect of resolving claims for amounts in excess of those that would ultimately have been paid had the claims not been settled in this manner. No inference should be drawn that because of the Company's method of dealing with CIOTA claims, its reserves for such claims are more conservatively stated than those of other insurers. At December 31, 1999, approximately 21% of the net aggregate reserve (approximately $179 million) is for pending CIOTA claims. The balance, approximately 79% (approximately $692 million) of the net CIOTA reserve, represents incurred but not reported losses for which the Company has not received any specific claims. In general, the Company posts case reserves for pending CIOTA claims within approximately 30 business days of receipt of such claims. The following table displays activity for CIOTA losses and loss expenses and reserves for the years ended December 31: CIOTA Losses In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Beginning reserves Direct $ 1,346 $ 1,520 $ 1,560 Ceded (392) (432) (446) - ------------------------------------------------------------------------------- Net 954 1,088 1,114 Incurred losses and loss expenses Direct (36) (31) 32 Ceded 28 29 (6) Losses paid Direct 126 143 72 Ceded (51) (11) (20) - ------------------------------------------------------------------------------- Ending reserves Direct 1,184 1,346 1,520 Ceded (313) (392) (432) - ------------------------------------------------------------------------------- Net $ 871 $ 954 $ 1,088 =============================================================================== 28 COMMERCIAL PORTFOLIO REVIEW Commercial loans are identified as impaired and placed on a nonaccrual basis when it is determined that the payment of interest or principal is doubtful of collection or when interest or principal is past due for 90 days or more, except when the loan is well secured and in the process of collection. Impaired commercial loans are written down to the extent that principal is judged to be uncollectible. Impaired collateral-dependent loans are written down to the lower of cost or collateral value. The following table summarizes commercial cash-basis loans and net credit losses (recoveries). In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Commercial cash-basis loans at year-end Emerging Markets $ 1,044 $ 1,062 $ 649 Global Relationship Banking 304 268 401 - ------------------------------------------------------------------------------- Total Global Corporate Bank 1,348 1,330 1,050 Insurance and Investment Activities 55 265 14 - ------------------------------------------------------------------------------- Total commercial cash-basis loans $ 1,403 $ 1,595 $ 1,064 =============================================================================== Net credit losses (recoveries) Emerging Markets $ 406 $ 446 $ 120 Global Relationship Banking 1 (30) (84) - ------------------------------------------------------------------------------- Total Global Corporate Bank 407 416 36 Investment Activities -- (10) (64) - ------------------------------------------------------------------------------- Total net credit losses (recoveries) $ 407 $ 406 $ (28) =============================================================================== The 1999 decrease in Insurance cash-basis loans reflected a transfer to OREO during the year. The increase in 1998 Insurance cash-basis loans was primarily due to a limited number of commercial real estate loans. Net recoveries in Investment Activities in 1997 included $50 million from the refinancing agreement concluded with Peru. For a further discussion of trends by business, see the business discussions on pages 22-23. Citigroup's allowance for credit losses of $6.7 billion is available to absorb all probable credit losses inherent in the portfolio. For analytical purposes only, the portion of Citigroup's allowance for credit losses attributed to the commercial portfolio was $3.2 billion at December 31, 1999 compared to $3.3 billion at both December 31, 1998 and 1997. The decline in the allowance in 1999 primarily reflected an improved credit outlook in Emerging Markets. In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Commercial allowance for credit losses $3,244 $3,307 $3,329 As a percentage of total commercial loans 3.40% 3.69% 4.21% =============================================================================== GLOBAL CORPORATE AND INVESTMENT BANK OUTLOOK The statements below are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 34. The businesses of Global Corporate and Investment Bank are significantly affected by the levels of activity in the global capital markets which, in turn, are influenced by macro-economic and political policies and developments, among other factors, in the 100 countries in which the businesses operate. Global economic events can have both positive and negative effects on the revenue performance of the businesses and can negatively affect credit performance. In particular, levels of principal transactions, realized gains from sales of investments, and gains from asset sales may fluctuate in the future as a result of market and asset-specific factors. Losses on commercial lending activities and the level of cash-basis loans can vary widely with respect to timing and amount, particularly within any narrowly defined business or loan type. A variety of factors continue to affect the property and casualty insurance market, including the competitive pressures affecting pricing and profitability, inflation in the cost of medical care, and litigation. Salomon Smith Barney and Global Corporate Bank. In 1998, the global capital markets experienced economic turmoil not seen in at least a decade, as currency crises sparked economic turmoil that began in Asia Pacific and spread to Russia and, in early 1999, to Latin America. In response to the turmoil, the businesses undertook a number of initiatives to mitigate the negative effects of global instability. These initiatives include significantly reducing the risk profile, particularly in SSB's global arbitrage operation where, at December 31, 1999, assets were down over 95% from their peak in 1998. Risk management is a priority with the goal of deriving a higher percentage of earnings from controllable business operations. Investments are expected to continue in 2000 to expand CitiDirect, which gives clients Internet-based access to cash management and trade capabilities, and CitiFX Interactive, an online tool for foreign exchange services. Further increases in the Financial Consultants sales force are planned, as well as expanding the integration of Internet services with personal advice through the Salomon Smith Barney Access web site. In January 2000, SSB agreed to acquire the global investment banking business and related assets of Schroders PLC, including all corporate financial markets and securities activities, subject to Schroders PLC shareholder approval, various regulatory approvals, and other customary closing conditions. The announced acquisition, when completed, is expected to enhance the investment banking and equities platforms in Europe. 29 Commercial Lines. In 1999, Commercial Lines began to see higher rates on renewal business. This is an improvement over the past few years where the trend in market conditions, characterized by difficult pricing and increased competition, was evidenced by pricing declines in all markets. In National Accounts, where programs include risk service, such as claims settlement, loss control and risk management information services, which is generally offered in connection with a large deductible or self-insured program, and risk transfer, which is typically provided through a guaranteed cost or retrospectively rated insurance policy, pricing declines have continued. This business continues to reflect the negative impact of price declines as evidenced by the decrease in premium and fee levels and, more importantly, in the narrowing of profit margins earned on this business. Although National Accounts believes that pricing will continue to be very competitive in 2000, recent data has suggested that the pricing environment may be stabilizing. However, National Accounts will continue to reject business that is not expected to produce acceptable returns, which is reflected in a decline in anticipated business volumes. Commercial Accounts began to see modest price increases on renewal business during 1999. However, these increases varied significantly by region and industry, reinforcing the fact that rates in many areas and business segments still have not improved to the point of producing acceptable returns. In this environment, Commercial Accounts continues to reject unprofitable business, as reflected in the decline in new business. For Select Accounts, the highly competitive marketplace and soft underwriting cycle continue to pressure the pricing of guaranteed cost products. Premiums on this business continue to reflect price declines, and have not kept pace with loss cost inflation in recent years. The impact of this negative trend in market conditions and resultant price declines has been partially offset by a continued disciplined approach to underwriting and risk management by the Company. The Company's focus is to retain existing profitable business and obtain new accounts only where it can maintain its selective underwriting policy. The Company continues to adhere to strict guidelines to maintain high quality underwriting and to focus on its core product lines and markets, with particular emphasis on both product and industry specialization. In the last six months of 1999, Select Accounts began to see small price increases on renewal business. However, as noted above in Commercial Accounts, these increases varied significantly by region and industry. Specialty Accounts also operates within a highly competitive marketplace characterized by pressure on both price and terms. The Company's focus in this market is to sustain its emphasis on strict adherence to underwriting standards, to continue using reinsurance judiciously, and to increase its efforts to cross-sell its expanding array of specialty products to existing customers of National Accounts, Commercial Accounts, Select Accounts, Personal Lines and various other Citigroup units where it believes it has the greatest sales and profit opportunities. The highly competitive marketplace and the Company's selective underwriting criteria continued to have an adverse impact on premium and fee levels during 1999. However the Company did begin to achieve modest price increases, primarily in the middle market. Although the increases vary significantly by region and industry, the Company believes that pricing environment is stabilizing. In December 1998, TAP announced a global strategic relationship with Winterthur International, called Travelers/Winterthur International, which markets a variety of commercial lines products to multinational corporations. The Company expects that Travelers/Winterthur International will allow it to participate in business requiring international underwriting and insurance services. The property and casualty insurance industry in the United States continues to consolidate. The Company's strategic objectives are to enhance its position as a consistently profitable market leader and to become a low-cost provider of property and casualty insurance in the United States, as the industry consolidates. In relation to the Company's objective of being a low-cost provider of property and casualty insurance, an emphasis on claim payout and performance and enhanced productivity efforts are expected to continue. However, some of the insurance industry's methods have been challenged in litigation. Changes in the general interest rate environment affect the return received by the insurance subsidiaries on newly invested and reinvested funds. While a rising interest rate environment enhances the returns available, it reduces the market value of existing fixed maturity investments and the availability of gains on disposition. A decline in interest rates reduces the return available on investment of funds, but also creates the opportunity for realized investment gains on disposition of fixed maturity investments. As required by various state laws and regulations, the Company's insurance subsidiaries are subject to assessments from state-administered guaranty associations, second injury funds and similar associations. Management believes that such assessments will not have a material impact on the Company's results of operations, financial condition or liquidity. Certain social, economic, political and litigation issues have led to an increased number of legislative and regulatory proposals aimed at addressing the cost and availability of certain types of insurance as well as the claim and coverage obligations of insurers. While most of these provisions have failed to become law, these initiatives may continue as legislators and regulators try to respond to public availability, affordability and claim concerns and the resulting laws, if any, could adversely affect the Company's ability to write business with appropriate returns. 30 GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING In Millions of Dollars 1999 1998(1) 1997(1) - ---------------------------------------------------------------------------- Total revenues, net of interest expense $ 2,686 $ 2,381 $ 2,134 Adjusted operating expenses(2) 1,693 1,549 1,357 Provision (benefit) for credit losses 12 5 (13) - ---------------------------------------------------------------------------- Core income before taxes 981 827 790 Income taxes 379 320 305 - ---------------------------------------------------------------------------- Core income 602 507 485 Restructuring-related items, after-tax (2) 53 18 - ---------------------------------------------------------------------------- Net income $ 604 $ 454 $ 467 ============================================================================ (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. The Global Investment Management and Private Banking group is comprised of the SSB Citi Asset Management Group and the Citibank Private Bank. These companies offer a broad range of asset management products and services from global investment centers around the world, including mutual funds, closed-end funds, managed accounts, unit investment trusts, variable annuities, and personalized wealth management services to institutional, high net worth, and retail clients. Global Investment Management and Private Banking core income in 1999 of $602 million, up $95 million or 19% from 1998, reflected improving revenue momentum, which outpaced moderate increases in expenses and the provision for credit losses. Revenue growth was primed by the continued growth in managed assets in most sectors, while expense increases were driven by investments in technology, and sales and marketing capabilities. Core income of $507 million in 1998 was up $22 million or 5% from $485 million in 1997, reflecting the above, partially offset by lower earnings in Asia Pacific in the Citibank Private Bank. Net income of $604 million in 1999, $454 million in 1998, and $467 million in 1997 included a restructuring-related credit of $2 million ($4 million pretax), and restructuring-related charges of $53 million ($87 million pretax) and $18 million ($28 million pretax), respectively. SSB CITI ASSET MANAGEMENT GROUP In Millions of Dollars 1999 1998(1) 1997(1) - ----------------------------------------------------------------------------- Total revenues, net of interest expense $ 1,485 $ 1,259 $ 1,065 Adjusted operating expenses(2) 950 835 696 - ----------------------------------------------------------------------------- Core income before taxes 535 424 369 Income taxes 211 168 147 - ----------------------------------------------------------------------------- Core income 324 256 222 Restructuring-related items, after-tax (1) 10 -- - ----------------------------------------------------------------------------- Net income $ 325 $ 246 $ 222 ============================================================================= Assets under management (in billions of dollars)(3) $ 364 $ 327 $ 261 ============================================================================= (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. (3) Includes $31 billion, $34 billion, and $28 billion in 1999, 1998, and 1997, respectively, for Citibank Private Bank clients. SSB Citi Asset Management Group is comprised of the substantial resources that are available through its three primary asset management business platforms: Salomon Brothers Asset Management, Smith Barney Asset Management, and Citibank Global Asset Management. These businesses offer institutional, high net worth, and retail clients a broad range of investment disciplines from global investment centers around the world. Products and services offered include mutual funds, closed-end funds, separately managed accounts, unit investment trusts, and variable annuities (through affiliated and third party insurance companies). Core income of $324 million and $256 million in 1999 and 1998 was up $68 million or 27% and $34 million or 15% from 1998 and 1997, respectively, primarily reflecting an increase in assets under management and a corresponding increase in revenues. Net income of $325 million in 1999 and $246 million in 1998 included a restructuring-related credit of $1 million ($2 million pretax) and a restructuring-related charge of $10 million ($17 million pretax), respectively. Aggregate assets under management totaled $364 billion as of December 31, 1999, up 11% from $327 billion in 1998, and included $156 billion in equity, $112 billion in fixed income, and $96 billion in liquidity products. Approximately $269 billion is managed in the United States, $58 billion in Europe, $23 billion in Japan, $8 billion in Latin America, $5 billion in Australia, and $1 billion in Asia Pacific. Cross-selling efforts helped fuel a 12% increase in institutional client assets to $155 billion, with the Corporate Bank channel generating $8 billion in sales. Sales of proprietary mutual funds represented 34% of SSB's retail channel mutual fund sales for the year versus 31% in 1998. Sales of Smith Barney Private Client separately managed accounts were up 117% from the prior year. SSB Citi Asset Management Group sold $3.0 billion of mutual and money funds through the Citibank consumer bank in Europe during 1999. In Japan, 1999 sales through both the Citibank consumer bank and non-proprietary channels generated $2.0 billion in mutual and money funds. Revenues, net of interest expense, increased $226 million or 18% to $1.485 billion in 1999, compared to $1.259 billion in 1998, up $194 million or 18% from 1997. The increase in both years was predominantly in advisory fee revenues and reflected the broad growth in assets under management. Revenue growth in 1999 also benefited from higher levels of investment gains, unit investment trust revenue, and the full year's impact of the JP Morgan Australia business acquisition in 1998. Assets under management grew at a faster pace than revenue in 1998 as a result of a larger proportion of the growth occurring in lower yielding liquidity funds. Adjusted operating expenses of $950 million in 1999 were up $115 million or 14% from $835 million in 1998, which was up $139 million or 20% from 1997. The increases in both years primarily reflected higher costs associated with building the business' global sales and marketing capabilities, and continued investments in research, quantitative, and technology expertise. This investment management build-out is now more than 75% complete. Expenses also increased from the JP Morgan acquisition, and in 1998, from incremental technology spending related to year 2000 and EMU. 31 CITIBANK PRIVATE BANK In Millions of Dollars 1999 1998(1) 1997(1) - ---------------------------------------------------------------------------- Total revenues, net of interest expense $ 1,201 $ 1,122 $ 1,069 Adjusted operating expenses(2) 743 714 661 Provision (benefit) for credit losses 12 5 (13) - ---------------------------------------------------------------------------- Core income before taxes 446 403 421 Income taxes 168 152 158 - ---------------------------------------------------------------------------- Core income 278 251 263 Restructuring-related items, after-tax (1) 43 18 - ---------------------------------------------------------------------------- Net income $ 279 $ 208 $ 245 ============================================================================ Average assets (in billions of dollars) $ 20 $ 17 $ 17 Return on assets 1.40% 1.22% 1.44% ============================================================================ Excluding restructuring-related items Return on assets 1.39% 1.48% 1.55% ============================================================================ Client business volumes under management (in billions of dollars) $ 140 $ 116 $ 101 ============================================================================ (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items. Citibank Private Bank--which provides personalized wealth management services for high net worth clients around the world--reported core income in 1999 of $278 million, up $27 million or 11% from 1998, reflecting improving revenue momentum, which outpaced moderate increases in expenses and the provision for credit losses. Core income of $251 million in 1998 was down $12 million or 5% from $263 million in 1997, primarily reflecting lower earnings in Asia Pacific. Net income of $279 million in 1999, $208 million in 1998, and $245 million in 1997 included a restructuring-related credit of $1 million ($2 million pretax), and restructuring-related charges of $43 million ($70 million pretax) and $18 million ($28 million pretax), respectively. Client business volumes under management, which include loans, deposits, and other client assets under management and custody, were $140 billion at the end of the year, up from $116 billion in 1998 and $101 billion in 1997, reflecting growth in all regions. Business volumes grew in all product lines, led by the custody and lending businesses. Revenues in 1999 were $1.201 billion, up $79 million or 7% from 1998, reflecting particularly strong growth in the U.S. and Japan. This growth was driven by strong lending and asset management activity, partially offset by lower fees from customer trading-related activities. Revenues for 1998 were $1.122 billion, up $53 million or 5% from 1997, primarily reflecting growth in customer-related fee revenues. Adjusted operating expenses of $743 million in 1999 were up $29 million or 4% from 1998, reflecting increased spending related to growth in the sales force and technology platform development, partially offset by lower employee-related costs associated with restructuring initiatives. Expenses of $714 million in 1998 were up $53 million or 8% from 1997, reflecting an increased sales force and higher product management costs. The provision (benefit) for credit losses for 1999 was $12 million, compared with $5 million in 1998 and ($13) million in 1997. Net credit losses in 1999 remained at a nominal level of 0.10% of average loans outstanding. Loans 90 days or more past due at year-end were $120 million or 0.54% of total loans outstanding, compared with 1.14% at the end of 1998 and 0.72% at the end of 1997. The increase in the provision in 1998 reflected both the high level of credit recoveries in 1997 and the worsening credit picture in 1998 related to the global economic turmoil in Asia Pacific. GLOBAL INVESTMENT MANAGEMENT AND PRIVATE BANKING OUTLOOK The statements below are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 34. The market for investment management and private banking services is extremely attractive because the "wealth" segment has been growing faster than the overall market, and the prospects for the overall market continue to be positive over the longer term. While competition for this attractive and dynamic market segment is increasing, the global market is highly fragmented with no dominant competitors. This presents Global Investment Management and Private Banking with an extremely attractive business opportunity because it is one of the few providers that can claim to offer a full range of services on a global basis. 32 CORPORATE/OTHER In Millions of Dollars 1999 1998(1) 1997(1) - ---------------------------------------------------------------------------- Total revenues, net of interest expense $ (176) $ (132) $ (252) Adjusted operating expenses(2) 823 697 397 Provisions for benefits, claims, and credit losses 33 (1) (7) - ---------------------------------------------------------------------------- Loss before tax benefits (1,032) (828) (642) Tax benefits (346) (350) (250) - ---------------------------------------------------------------------------- Loss (686) (478) (392) Restructuring-related items and merger-related costs, after-tax 20 105 31 - ---------------------------------------------------------------------------- Net loss $ (706) $ (583) $ (423) ============================================================================ (1) Reclassified to conform to the 1999 presentation. (2) Excludes restructuring-related items and merger-related costs. Corporate/Other includes net corporate treasury results and corporate staff and other corporate expenses. Revenues in 1999 included higher corporate treasury costs and in 1998 included income from the disposition of a real estate development property. Expenses in 1999 included certain technology costs associated with year 2000 remediation, partially offset by decreases in corporate staff expenses as a result of headcount reductions in 1999. Expenses in 1998 included a $100 million contribution of appreciated venture capital securities to the Company's Foundation, which had minimal impact on Citigroup's earnings after related tax benefits and investment gains. Performance-based options granted in 1998 to a group of key Citicorp employees vested in 1999 as certain pre-determined price levels were met. All expenses related to these options have been recognized. 1999, 1998 and 1997 expenses included $108 million, $70 million and $72 million, respectively, associated with performance-based stock options granted in 1998 and prior years. The 1999 after-tax restructuring-related items of $20 million primarily included accelerated depreciation charges on the planned disposition of certain premises and equipment assets, in excess of the normal scheduled depreciation on those assets. The 1998 amounts included $69 million of restructuring-related items ($40 million after-tax) to streamline and integrate corporate staff functions, as well as $65 million (before and after-tax) of one-time expenses associated with merging Citigroup's predecessor organizations. The 1997 charge related to the reorganization of various Citicorp corporate support functions. See Note 14 of Notes to the Consolidated Financial Statements for additional information on restructuring-related items and merger-related costs. INVESTMENT ACTIVITIES In Millions of Dollars 1999 1998(1) 1997(1) - ---------------------------------------------------------------------------- Total revenues, net of interest expense $ 1,090 $ 1,323 $ 1,733 Total operating expenses 64 50 40 Benefit for credit losses -- (10) (64) - ---------------------------------------------------------------------------- Income before taxes and minority interest 1,026 1,283 1,757 Income taxes 355 434 639 Minority interest, after-tax 11 16 18 - ---------------------------------------------------------------------------- Net income $ 660 $ 833 $ 1,100 ============================================================================ (1) Reclassified to conform to the 1999 presentation. Investment Activities comprises Citigroup's venture capital activities, realized investment gains (losses) related to certain corporate and insurance related investments, and the results of certain investments in countries that refinanced debt under the 1989 Brady Plan or plans of a similar nature. Revenues in 1999 of $1.090 billion declined $233 million or 18% from 1998, primarily reflecting declines in realized gains from sales of Brady bonds and insurance-related investments, partially offset by an increase in venture capital results and realized investment gains on certain corporate-related investments. Revenues in 1998 of $1.323 billion declined $410 million or 24% from 1997 primarily reflecting a decrease in venture capital revenues and lower realized gains from sales of investments. Revenues in 1999, 1998, and 1997 included net gains (write-downs) of ($14) million, $29 million, and ($39) million related to investments in Latin America. Credit benefits in 1997 included $50 million from the refinancing agreement concluded with Peru. Levels of venture capital revenues and realized gains from sales of investments may fluctuate in the future as a result of market and asset-specific factors. This statement is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" on page 34. FUTURE APPLICATION OF ACCOUNTING STANDARDS See Note 1 of Notes to the Consolidated Financial Statements for a discussion of recently issued accounting pronouncements. 33 YEAR 2000 Reflecting the work done around the world to complete Citigroup's year 2000 program, the Company's computer systems and business processes successfully handled the date change from December 31, 1999 to January 1, 2000. The Company is not aware of any significant year 2000 problems encountered internally or with the third parties with which it interfaces, including customers and counterparties, the global financial market infrastructure, and the utility infrastructure on which all corporations rely. Based on operations since January 1, 2000, Citigroup does not expect any significant impact to its ongoing business as a result of the year 2000 issue. However, it is possible that the full impact of year 2000 issues has not been fully recognized, including any potential impact of claims for coverage from property casualty insurance customers, and no assurances can be given that year 2000 problems or claims will not emerge. The pretax cost associated with the required systems modifications and conversions totaled approximately $970 million, including approximately $310 million in 1999. Citigroup had previously estimated the cost at approximately $950 million. The cost was funded from a combination of a reprioritization of technology development initiatives and incremental costs and was expensed as incurred. The Company's expectations with respect to remediation of and claims from customers with respect to year 2000 issues constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See "Forward-Looking Statements" below. 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. Many of these statements appear under the heading "Global Consumer Outlook," "Global Corporate and Investment Bank Outlook," and "Global Investment Management and Private Banking Outlook." The Company's actual results may differ materially from those included in the forward-looking statements. Forward-looking statements are typically identified by words or phrases such as "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 global economic conditions, portfolio growth, the credit performance of the portfolios, and seasonal factors; changes in general economic conditions including the performance of global financial markets, prevailing inflation and interest rates, realized gains from sales of investments, gains from asset sales, and losses on commercial lending activities; results of various Investment Activities; the effects of competitors' pricing policies, of changes in laws and regulations on competition and of demographic changes on target market populations' savings and financial planning needs; the resolution of legal proceedings and related matters; the actual amount of liabilities associated with certain environmental and asbestos-related insurance claims; the actual costs associated with year 2000-related claims; and the Company's success in managing the costs associated with the expansion of existing distribution channels and developing new ones, and in realizing increased revenues from such distribution channels, including cross-selling initiatives and electronic commerce-based efforts. MANAGING GLOBAL RISK Risk management is the cornerstone of Citigroup's business. Risks arise from lending, underwriting, trading, insurance and other activities routinely undertaken around the world. Outlined below is the process that management employs to provide oversight and direction of risk taking, followed by discussions of the credit and market risk management processes in place across the Company. The Windows on Risk Committee is the most senior corporate forum for reviewing the corporation's risk tolerance and practices. It provides top-down examination and review of material corporate-wide risks. The Committee is chaired by Citigroup's Senior Risk Manager and includes the Chairmen of Citigroup and other senior officers in the Company. The Windows on Risk process has three major components: an assessment of the global external environment, drawing on our own knowledge and frequently on the knowledge of outside experts; an assessment of the Company's exposures in terms of the various risk windows, with special focus on potentially material risks to Citigroup; and decisions on desired exposure levels and determination of follow-up actions required to adjust exposure. The review of the external environment encompasses the outlook for major country and regional economies; significant consumer markets and global industries; potential near-term critical economic and political events; and the implications of potential unfavorable developments as they relate to specific businesses. The review of the risk profile covers the following 18 windows: o Risk ratings, including trends in client creditworthiness together with a comparison of risk against return; o Industry concentrations, globally and within regions; o Limits assigned to relationship concentrations and consumer programs; o Product concentrations in consumer managed receivables, by product and by region; o Global real estate limits and exposure, including commercial and consumer portfolios; o Country risk, encompassing political and cross-border risk; o Counterparty risk, evaluating presettlement risk on foreign exchange, derivative products, and securities trades; o Dependency, linking and evaluating specific industry and consumer product exposure to external environmental factors; o Distribution and underwriting risk, capturing the risk that arises when Citigroup commits to purchase an instrument from an issuer for subsequent sale; o Audit and Risk Review, evaluating and measuring defects in our business processes; o Price risk, evaluating the earnings risk resulting from changing levels and implied volatilities of interest rates, foreign exchange rates, and commodity and security prices; o Liquidity risk, evaluating funding exposure; o Commodities risk, evaluating earnings risk resulting from changing levels and volatilities of commodity prices; o Life Insurance, evaluating the risks that result from the underwriting, sale, and reinsurance of life insurance policies; 34 o Property & Casualty, evaluating the risks that result from the underwriting, sale, and reinsurance of commercial, personal, and performance bonds insurance policies; o Equity and subordinated debt investment risk, monitored against portfolio limits; o Legal, evaluating vulnerability and business implications of legal issues; and o Technology, assessing vulnerability to the electronic environment. The review is intended to provide Citigroup with a view of the environment in which it operates and of the risk inherent in its businesses. Based on this review, the Windows on Risk Committee formulates recommendations and assigns responsibility for recommended actions. The following sections summarize the processes that were in place during 1999 for managing credit and market risks within Citigroup's major businesses. As Citigroup's businesses become more closely integrated, it is expected that these management processes will also be more closely integrated within the overall framework provided by Windows on Risk. THE CREDIT PROCESS Within Citicorp, line management conducts the day-to-day credit process in accordance with core policies established by the Credit Policy Committee which are guided by the overall risk appetite and portfolio targets set by senior management. Line management initiates and approves all extensions of credit and is responsible for credit quality. Line managers must also establish supplementary credit policies specific to each business, deploy the credit talent needed, and monitor portfolio and process quality. The managers are required to identify problem credits or programs as they develop, and to correct deficiencies as needed through remedial management. Audit and Risk Review conducts independent periodic examinations of both portfolio quality and the credit process at the individual business level. Citicorp's credit policies are organized around two basic approaches--Credit Programs and Credit Transactions. Credit Programs, used primarily for the Consumer businesses, focus on the decision to extend credit to sets of customers with similar characteristics and/or product needs. Approvals under this approach cover the expected level of aggregate exposure, the terms, risk acceptance criteria, operating systems, and reporting mechanisms. This is a cost-effective way of handling high-volume, small-dollar amount transactions. Credit Programs are reviewed annually, with approvals tiered on the basis of projected outstandings as well as the maturity and performance of the product. Citicorp's Credit Transaction approach focuses on the decision to extend credit to an individual customer or customer relationship. It starts with target market definition and risk acceptance criteria, and requires detailed customized financial analysis. Approval requirements for each decision are tiered based on the transaction amount, the customer's aggregate facilities, credit risk ratings, and the banking business serving the customer. Credit Programs and Credit Transactions are approved by three line credit officers, with one designated as responsible to ensure that all aspects of the credit process are properly coordinated and executed. As the size or risk increases, the three approvals may include one or two Senior Credit or Securities Officers. These include over 500 of Citicorp's most experienced lenders and underwriters appointed by the Credit Policy Committee, with their designation reviewed annually. In addition, approvals from underwriting, product, industry, or functional specialists may be required. At certain higher levels of risk, Credit Policy Committee members as well as senior management review individual credit decisions. Within Salomon Smith Barney, the office of the Chief Credit Officer, through established credit policies and control procedures, assesses, approves, monitors, and coordinates the extension of credit. The office evaluates the risk/return trade-offs as well as current and potential credit exposures to a counterparty, or to groups of counterparties, that are related because of industry, geographic, or economic characteristics. At Phibro Inc., a wholly-owned subsidiary, the credit department determines the credit limits for counterparties in its commodities-related activities. Both Citicorp and Salomon Smith Barney manage credit exposure on derivative and foreign exchange instruments as part of the overall extension of credit to individual customer relationships, subject to the same credit approvals, limits, and monitoring procedures used for other activities. The extension of credit in a derivative or foreign exchange contract is the loss that could result if the counterparty were to default. The current replacement cost of a derivative or foreign exchange contract is equal to the amount, if any, of Citigroup's unrealized gain on the contract. In the aggregate, for all contracts, this represents a balance sheet exposure of $31.6 billion at December 31, 1999, which is reflected in Trading Account Assets. See Note 7 of Notes to Consolidated Financial Statements for additional details on the combined Citigroup exposures. A substantial portion of the total balance sheet exposure is to counterparties considered by Citigroup to be investment grade and under three years tenor. In managing the credit risk associated with derivative and foreign exchange contracts, the amount at risk is measured as the sum of the current replacement cost (the balance sheet credit exposure) plus the potential increase in the replacement cost over the remaining life of the instrument should market rates change. The potential increase in replacement cost of a contract is estimated based on a statistical simulation of values that would result from changing market rates. In the course of its insurance activities, TAP reinsures a portion of the risks it underwrites in an effort to control its exposure to losses, stabilize earnings and protect capital resources. TAP cedes to reinsurers a portion of these risks and pays premiums based upon the risk and exposure of the policies subject to such reinsurance. Reinsurance involves credit risk and is subject to aggregate loss limits. Although the reinsurer is liable to TAP to the extent of the reinsurance ceded, TAP remains primarily liable as the direct insurer on all risks reinsured. TAP also holds collateral, including escrow funds and letters of credit, under certain reinsurance agreements. TAP monitors the financial condition of reinsurers on an ongoing basis, and reviews its reinsurance arrangements periodically. Reinsurers are selected based on their financial condition, business practices and the price of their product offerings. For additional information concerning reinsurance, see Note 13 of Notes to Consolidated Financial Statements. 35 THE MARKET RISK MANAGEMENT PROCESS Market risk encompasses liquidity risk and price risk, both of which arise in the normal course of business of a global financial intermediary. Liquidity risk is the risk that some entity, in some location and in some currency, may be unable to meet a financial commitment to a customer, creditor, or investor when due. Price risk is the risk to earnings that arises from changes in interest rates, foreign exchange rates, equity and commodity prices, and in their implied volatilities. Citigroup's business and corporate oversight groups have well-defined market risk management responsibilities. Within each business, a process is in place to control market risk exposure. The risk management process includes the establishment of appropriate market controls, policies and procedures, appropriate senior management risk oversight with thorough risk analysis and reporting, and independent risk management with capabilities to evaluate and monitor risk limits. Management of this process begins with the professionals nearest to Citigroup's customers, products, and markets, and extends up to the senior executives who manage these businesses and to the country level. Market risk management is an evolutionary process that integrates changes in markets, products, and technologies into policies and practices. Periodic reviews are conducted by Audit Risk and Review to ensure compliance with institutional policies and procedures for the assessment, management, and control of market risk. Across Citigroup, price risk is measured using various tools, including Earnings-at-Risk (EAR) and sensitivity analysis, which are applied to interest rate risk in the non-trading portfolios and Value-at-Risk (VAR), stress and scenario analysis which are applied to the trading portfolios. Non-Trading Portfolios Business units manage the potential earnings effect of interest rate movements by managing the asset and liability mix, either directly or through the use of derivative financial products. These include interest rate swaps and other derivative instruments which are either designated and effective as hedges or designated and effective in modifying the interest rate characteristics of specified assets or liabilities. The utilization of derivatives is managed in response to changing market conditions as well as to changes in the characteristics and mix of the related assets and liabilities. Additional information about non-trading derivatives is located in Note 22 of Notes to Consolidated Financial Statements. Citigroup does not utilize instruments with leverage features in connection with its risk management activities. Price risk in the non-trading portfolios is measured using Earnings-at-Risk within Citicorp (excluding CitiFinancial Credit Company). All other non-trading portfolios measure price risk using sensitivity analysis. At Citicorp, Earnings-at-Risk measures the discounted pretax earnings impact over a specified time horizon of a specified shift in the interest rate yield curve for the appropriate currency. The yield curve shift is statistically derived as a two standard deviation change in a short-term interest rate over the period required to defease the position (usually four weeks). Earnings-at-Risk is calculated separately for each currency and reflects the repricing gaps in the position, as well as option positions, both explicit and embedded. As part of the annual planning process, limits are set for Earnings-at-Risk on a business, country and total Citicorp basis, with exposures reviewed on a regular basis by the Finance and Capital Committee in relation to limits and the current interest rate environment. Citicorp's primary non-trading price risk exposure is to movements in U.S. dollar interest rates. As of December 31, 1999, the rate shift over a four-week defeasance period applied to the U.S. dollar yield curve for purposes of calculating Earnings-at-Risk was 45 basis points. Citicorp also has Earnings-at-Risk in various other currencies; however, there are no significant risk concentrations in any individual non-U.S. dollar currency. As of December 31, 1999, the rate shifts applied to these currencies for purposes of calculating Earnings-at-Risk over a one-to four-week defeasance period ranged from 20 to 1,781 basis points, depending on the currency. The following table illustrates that, as of December 31, 1999, a 45 basis point increase in the U.S. dollar yield curve would have a potential negative impact on Citicorp's pretax earnings of approximately $166 million for 2000, and approximately $177 million for the total five-year period 2000-2004. A two standard deviation increase in non-U.S. dollar interest rates would have a potential negative impact on Citicorp's pretax earnings of approximately $119 million for 2000, and approximately $278 million for the five-year period 2000-2004. Citicorp Earnings-at-Risk (impact on pretax earnings) Assuming a U.S. Assuming a Non-U.S. Dollar Rate Move of Dollar Rate Move of(1) -------------------- --------------------- Two Standard Two Standard Deviations Deviations(2) In Millions of -------------------- --------------------- Dollars at December 31, 1999 Increase Decrease Increase Decrease - ---------------------------------------------------------------------------- Overnight to three months $ (70) $ 75 $ (18) $ 18 Four to six months (44) 50 (30) 30 Seven to twelve months (52) 53 (71) 72 - ---------------------------------------------------------------------------- Total overnight to twelve months (166) 178 (119) 120 - ---------------------------------------------------------------------------- Year two (67) 66 (125) 126 Year three (19) 13 (34) 34 Year four 23 (28) (15) 16 Year five 57 (70) (12) 12 Effect of discounting (5) 10 27 (27) - ---------------------------------------------------------------------------- Total $(177) $ 169 $(278) $ 281 ============================================================================ (1) Primarily results from Earnings-at-risk in Singapore dollar, Hong Kong dollar and Thai baht. (2) Total assumes a two standard deviation increase or decrease for every currency, not taking into account any covariance between currencies. The table above also illustrates that Citicorp's risk profile in the one-to three-year time horizon was directionally similar, but generally tends to reverse in subsequent periods. This reflects the fact that the majority of the 36 derivative instruments utilized to modify repricing characteristics as described above will mature within three years. Additional detail regarding these derivative instruments may be found in Note 22 of Notes to Consolidated Financial Statements. The following table summarizes Citicorp's worldwide Earnings-at-Risk over the next 12 months from changes in interest rates and illustrates that Citicorp's pretax earnings in its non-trading activities over the next 12 months would be reduced by an increase in interest rates and would benefit from a decrease in interest rates. Citicorp Twelve Month Earnings-at-Risk (impact on pretax earnings)
U.S. Dollar Non-U.S. Dollar ---------------------------- ----------------------------- In Millions of Dollars at December 31, 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------------------------- Assuming a two standard deviation rate Increase $(166) $(148) $(180) $(119) $ (93) $ (25) Decrease 178 156 211 120 93 25 ==============================================================================================
Interest rate swaps and similar instruments effectively modify the repricing characteristics of certain consumer and commercial loan portfolios, deposits, and long-term debt. Excluding the effects of these instruments, Citicorp's Earnings-at-Risk over the next twelve months in its non-trading activities would be as follows: Citicorp Twelve Month Earnings-at-Risk (excluding effect of derivatives) U.S. Dollar Non-U.S. Dollar ---------------------- ---------------------- In Millions of Dollars at December 31, 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------- Assuming a two standard deviation rate Increase $ (30) $ 10 $ 64 $(120) $ (94) $ (26) Decrease 42 (3) (44) 121 94 27 =============================================================================== During 1999, Citicorp's U.S. dollar Earnings-at-Risk for the following 12 months assuming a two standard deviation increase in rates would have had a potential negative impact ranging from approximately $73 million to $166 million in the aggregate at each month end, compared with a range from $65 million to $173 million during 1998 and a range from $142 million to $209 million during 1997. The U.S. dollar Earnings-at-Risk experienced during 1999 was comparable to 1998 and relatively lower than 1997 primarily due to a reduction in the level of received fixed swaps. A two standard deviation increase in non-U.S. dollar interest rates for the following twelve months would have had a potential negative impact ranging from approximately $95 million to $121 million in the aggregate at each month end during 1999, compared with a range from $53 million to $98 million during 1998 and a range from $15 million to $33 million during 1997. The higher non-U.S. dollar Earnings-at-Risk primarily reflected the higher interest rate volatility seen across the Asia Pacific region. Other Non-Trading Portfolios The table below reflects the estimated decrease in the fair value of financial instruments held in other non-trading portfolios, as a result of a 100 basis point increase in interest rates (including the effect of derivatives). In Millions of Dollars at December 31, 1999(1) 1998(1) - ----------------------------------------------------------------------------- Assets Investments $2,594 $2,841 Net consumer finance receivables 184 256 - ----------------------------------------------------------------------------- Liabilities Long-term debt $ 493 $ 497 Contractholder funds 427 415 Redeemable securities of subsidiary trusts 314 127 ============================================================================= (1) Includes CitiFinancial Credit Company. A significant portion of the liabilities, e.g. insurance policy and claims reserves, are not financial instruments and are excluded from the above sensitivity analysis. Corresponding changes in fair value of these accounts, based on the present value of estimated cash flows, would materially mitigate the impact of the net decrease in values implied above. The analysis also excludes all financial instruments, including long-term debt, identified with trading activities. The analysis reflects the estimated gross change in value resulting from a change in interest rates only and is not comparable to the Earnings-at-Risk used for the Citicorp non-trading portfolios or the Value-at-Risk used for the trading portfolios, described on page 38. 37 Trading Portfolios A tool for measuring the price risk of trading activities is the Value-at-Risk method, which estimates the potential pretax loss in market value that could occur over a one day holding period, at a 99% confidence level. The Value-at-Risk method incorporates the market factors to which the market value of the trading position is exposed (interest rates, foreign exchange rates, equity and commodity prices, and their implied volatilities), the sensitivity of the position to changes in those market factors, and the volatilities and correlation of those factors. The Value-at-Risk measurement includes the foreign exchange risks that arise in traditional banking businesses as well as in explicit trading positions. In addition to Value-at-Risk, stress and scenario analysis are also applied to the trading portfolios. The level of exposure taken depends on the market environment and expectations of future price and market movements, and will vary from period to period. For Citicorp's major trading centers, the aggregate pretax Value-at-Risk in the trading portfolios was $24 million at December 31, 1999. Daily exposures at Citicorp averaged $18 million in 1999 and ranged from $14 million to $24 million. At Salomon Smith Barney the aggregate pretax Value-at-Risk in the trading portfolios was $23 million at December 31, 1999. Quarterly exposures at Salomon Smith Barney averaged $39 million in 1999 and ranged from $17 million to $72 million. The following table summarizes Value-at-Risk in the trading portfolios as of December 31, 1999 and 1998 along with the averages.
Citicorp Salomon Smith Barney ---------------------------------------- ---------------------------------------- Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998 In Millions of Dollars 1999 Average 1998 Average 1999 Average 1998 Average - ---------------------------------------------------------------------------------------------------------------------- Interest rate $ 15 $ 13 $ 13 $ 16 $ 20 $ 37 $ 75 $ 67 Foreign exchange 17 9 7 8 -- 5 3 17 Equity 11 9 5 7 6 5 15 9 All other (primarily commodity) 2 1 1 1 8 10 11 11 Covariance adjustment (21) (14) (11) (14) (11) (18) (33) (34) - ---------------------------------------------------------------------------------------------------------------------- Total $ 24 $ 18 $ 15 $ 18 $ 23 $ 39 $ 71 $ 70 ======================================================================================================================
The table below provides the range of Value-at-Risk in the trading portfolios that was experienced during 1999 and 1998.
Citicorp Salomon Smith Barney --------------------------- --------------------------- 1999 1998 1999 1998 ----------------------------------------------------------- In Millions of Dollars Low High Low High Low High Low High - ----------------------------------------------------------------------------------------------- Interest rate 9 18 10 25 17 71 62 75 Foreign exchange 5 17 3 16 -- 13 3 26 Equity 5 16 4 13 1 16 5 15 All other (primarily commodity) 1 3 1 5 5 16 9 12 ===============================================================================================
MANAGEMENT OF CROSS-BORDER RISK Cross-border risk is the risk that Citigroup will be unable to obtain payment from customers on their contractual obligations as a result of actions taken by foreign governments such as exchange controls, debt moratoria, and restrictions on the remittance of funds. Citigroup manages cross-border risk as a part of the Windows on Risk process described on page 34. Except as described below for cross-border resale agreements and the netting of certain long and short securities positions, the following table presents total cross-border outstandings and commitments on a regulatory basis in accordance with Federal Financial Institutions Examination Council ("FFIEC") guidelines. In regulatory reports under FFIEC guidelines, cross-border resale agreements are presented based on the domicile of the issuer of the securities that are held as collateral. However, for purposes of the following table, cross-border resale agreements are presented based on the domicile of the counterparty because the counterparty has the legal obligation for repayment. Similarly, under FFIEC guidelines, long securities positions are required to be reported on a gross basis. However, for purposes of the following table, certain long and short securities positions are presented on a net basis consistent with internal cross-border risk management policies, reflecting a reduction of risk from offsetting positions. 38 Cross-Border Outstandings and Commitments Total cross-border outstandings include cross-border claims on third parties as well as investments in and funding of local franchises. Countries with FFIEC outstandings greater than 0.75% of Citigroup assets at December 31, 1999 or 1998 include:
December 31, 1999 December 31, 1998(1) -------------------------------------------------------------------------------- --------------------- Cross-Border Claims on Third Parties Investments -------------------------------------------- in and Trading and Cross-Border Funding Total Cross- Total Cross- Short-Term Resale of Local Border Commit- Border Commit- In Billions of Dollars Claims(2) Agreements All Other Total Franchises Outstandings ments(3) Outstandings ments(3) - ------------------------------------------------------------------------------------------------------------------------------- United Kingdom $ 5.1 $12.2 $ 2.2 $19.5 $ -- $19.5 $15.5 $10.4 $ 8.9 Germany 7.4 3.0 0.5 10.9 -- 10.9 3.7 16.0 1.4 Japan 2.6 4.9 2.3 9.8 -- 9.8 0.1 9.1 0.1 France 5.5 1.7 0.6 7.8 0.1 7.9 2.2 7.7 1.1 Italy 5.9 0.9 0.3 7.1 -- 7.1 0.4 6.7 0.3 Mexico 1.9 0.1 1.8 3.8 0.6 4.4 0.1 4.3 0.2 Brazil 1.1 -- 1.7 2.8 1.0 3.8 0.1 3.9 0.1 Spain 1.2 0.4 0.1 1.7 1.5 3.2 0.6 3.2 0.4 Sweden 1.5 0.2 0.4 2.1 0.1 2.2 0.9 3.4 0.9 ================================================================================================================================
(1) Reclassified to conform to the current year's presentation. (2) Trading and short-term claims include cross-border debt and equity securities held in the trading account, trade finance receivables, net revaluation gains on foreign exchange and derivative contracts, and other claims with a maturity of less than one year. (3) Commitments (not included in total cross-border outstandings) include legally binding cross-border letters of credit and other commitments and contingencies as defined by the FFIEC. Total cross-border outstandings under FFIEC guidelines, including cross-border resale agreements based on the domicile of the issuer of the securities that are held as collateral, and long securities positions reported on a gross basis, at December 31, 1999, 1998, and 1997 were (in billions) the United Kingdom ($8.7, $7.9, and $6.5), Germany ($14.9, $17.4, and $15.1), Japan ($10.5, $14.4, and $12.7), France ($7.7, $8.7, and $9.5), Italy ($10.2, $8.7, and $15.9), Mexico ($5.1, $5.9, and $6.4), Brazil ($4.9, $4.5, and $7.3), Spain ($3.8, $3.8, and $6.0), and Sweden ($2.3, $3.7, and $5.9), respectively. Cross-border commitments (in billions) at December 31, 1997 were $7.8 for the United Kingdom, $1.7 for Germany, $1.1 for Japan, $0.6 for France, $0.5 for Italy, $0.6 for Mexico, $0.1 for Brazil, $0.4 for Spain, and $0.7 for Sweden. The sector percentage allocation for bank, public, and private cross-border claims on third parties under FFIEC guidelines at December 31, 1999 was United Kingdom (23%, 12%, and 65%), Germany (25%, 51%, and 24%), Japan (8%, 41%, and 51%), France (36%, 26%, and 38%), Italy (9%, 81%, and 10%), Mexico (1%, 57%, and 42%), Brazil (16%, 45%, and 39%), Spain (24%, 46%, and 30%), and Sweden (24%, 39%, and 37%), respectively. 39 LIQUIDITY AND CAPITAL RESOURCES Citigroup services its obligations primarily with dividends and advances that it receives from subsidiaries. The subsidiaries' dividend paying abilities are limited by certain covenant restrictions in credit agreements and/or by regulatory requirements. Citigroup believes it will have sufficient funds to meet current and future commitments. Each of Citigroup's major operating subsidiaries finances its operations on a basis consistent with its capitalization and ratings. Citigroup, Citicorp, TAP, and The Travelers Insurance Company (TIC) issue commercial paper directly to investors. CCC, which had previously issued commercial paper, became an indirect subsidiary of Citicorp on August 4, 1999 and, thereafter, ceased such issuance. Citigroup and Citicorp, both of which are bank holding companies, maintain combined liquidity reserves of cash, securities, and unused bank lines of credit at least equal to their combined outstanding commercial paper. TAP and TIC each maintains unused credit availability under their bank lines of credit at least equal to the amount of outstanding commercial paper. Borrowings under bank lines of credit may be at interest rates based on LIBOR, CD rates, the prime rate, or bids submitted by the banks. Each company pays its banks commitment fees for its lines of credit. Citicorp, Salomon Smith Barney, and some of their nonbank subsidiaries have credit facilities with Citicorp's subsidiary banks, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act. Citigroup Inc. (Citigroup) Citigroup and TIC have an agreement with a syndicate of banks to provide $1.0 billion of revolving credit, to be allocated to either of Citigroup or TIC. The participation of TIC in this agreement is limited to $250 million. The revolving credit facility consists of a five-year revolving credit facility that expires in June 2001. At December 31, 1999, all of the facility was allocated to Citigroup. Under this facility, the Company is required to maintain a certain level of consolidated stockholders' equity (as defined in the agreement). The Company exceeded this requirement by approximately $30.6 billion at December 31, 1999. Citigroup also has $300 million in 364-day facilities which expire in the third quarter of 2000. At December 31, 1999 there were no borrowings outstanding under either of these facilities. Citigroup is subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System (FRB). These guidelines are used to evaluate capital adequacy based primarily on the perceived credit risk associated with balance sheet assets, as well as certain off-balance sheet exposures such as unused loan commitments, letters of credit, and derivative and foreign exchange contracts. The risk-based capital guidelines are supplemented by a leverage ratio requirement. Citigroup Ratios At Year-End 1999 1998 - ------------------------------------------------------------------------------- Tier 1 capital 9.64% 8.68% Total capital (Tier 1 and Tier 2) 12.43 11.43 Leverage(1) 6.80 6.03 Common stockholders' equity 6.66 6.04 =============================================================================== (1) Tier 1 capital divided by adjusted average assets. Citigroup maintained a strong capital position during 1999. Total capital (Tier 1 and Tier 2) amounted to $61.4 billion at December 31, 1999, representing 12.43% of net risk-adjusted assets. This compares to $55.0 billion and 11.43% at December 31, 1998. Tier 1 capital of $47.6 billion at December 31, 1999 represented 9.64% of net risk-adjusted assets, compared to $41.8 billion and 8.68% at December 31, 1998. Citigroup's leverage ratio was 6.80% at December 31, 1999 compared to 6.03% at December 31, 1998. See Note 17 of Notes to Consolidated Financial Statements. Components of Capital Under Regulatory Guidelines In Millions of Dollars at Year-End 1999 1998 - ------------------------------------------------------------------------------- Tier 1 Capital Common stockholders' equity $ 47,761 $ 40,395 Perpetual preferred stock 1,925 2,313 Mandatorily redeemable securities of subsidiary trusts 4,920 4,320 Minority interest(1) 1,501 1,602 Less: Net unrealized gains on securities available for sale(2) (2,545) (1,359) Intangible assets: Goodwill (4,209) (3,764) Other intangible assets (1,655) (1,620) 50% investment in certain subsidiaries(3) (107) (110) - ------------------------------------------------------------------------------- Total Tier 1 capital 47,591 41,777 - ------------------------------------------------------------------------------- Tier 2 Capital Allowance for credit losses(4) 6,178 6,024 Qualifying debt(5) 6,728 7,296 Unrealized marketable equity securities gains(2) 990 21 Less: 50% investment in certain subsidiaries(3) (107) (110) - ------------------------------------------------------------------------------- Total Tier 2 capital 13,789 13,231 - ------------------------------------------------------------------------------- Total capital (Tier 1 and Tier 2) $ 61,380 $ 55,008 =============================================================================== Net risk-adjusted assets(6) $ 493,672 $ 481,208 =============================================================================== (1) Primarily related to Travelers Property Casualty Corp. (2) Tier 1 capital excludes unrealized gains and losses on debt securities available for sale in accordance with regulatory risk-based capital guidelines. The federal bank regulatory agencies permit institutions to include in Tier 2 capital up to 45% of pretax net unrealized holding gains on available-for-sale equity securities with readily determinable fair values. (3) Represents investment in certain overseas insurance activities and unconsolidated banking and finance subsidiaries. (4) Includable up to 1.25% of risk-adjusted assets. Any excess allowance is deducted from risk-adjusted assets. (5) Includes qualifying senior and subordinated debt in an amount not exceeding 50% of Tier 1 capital, and subordinated capital notes subject to certain limitations. (6) Includes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $32.8 billion for interest rate, commodity and equity derivative contracts and foreign exchange contracts, as of December 31, 1999, compared to $37.3 billion as of December 31, 1998. Market risk-equivalent assets included in net risk-adjusted assets amounted to $43.1 billion and $51.5 billion at December 31, 1999 and 1998, respectively. Net risk-adjusted assets also includes the effect of other off-balance sheet exposures such as unused loan commitments and letters of credit and reflects deductions for intangible assets and any excess allowance for credit losses. 40 Common stockholders' equity increased a net $7.4 billion during the year to $47.8 billion at December 31, 1999, representing 6.66% of assets, compared to $40.4 billion and 6.04% at year-end 1998. The increase in common stockholders' equity during the year principally reflected net income of $9.9 billion and $3.4 billion related to the issuance of shares pursuant to employee benefit plans, change in unrealized gains on investment securities and conversion of redeemable preferred stock and other activity, partially offset by treasury stock acquired of $3.9 billion and dividends declared on common and preferred stock of $2.0 billion. The increase in the common stockholders' equity ratio during the year reflected the above items, partially offset by the increase in total assets. During 1999, preferred stock redemptions included $200 million Series J perpetual preferred stock, $63 million Series O perpetual preferred stock, and $125 million Series S perpetual preferred stock. In October 1999, the remaining 140,000 shares ($140 million redemption value) of Citigroup's Series I Cumulative Convertible Preferred Stock was converted into 9.4 million shares of common stock. On February 15, 2000, Citigroup redeemed its Series T perpetual preferred stock for $150 million. All of the mandatorily redeemable securities of subsidiary trusts (trust securities) outstanding at December 31, 1999 and 1998 qualify as Tier 1 capital. The amount outstanding at year-end 1999 includes $2.3 billion of parent-obligated securities and $2.62 billion of subsidiary-obligated securities. The increase in trust securities outstanding during 1999 of $600 million represents parent company-obligated securities. Citigroup's subsidiary depository institutions are subject to the risk-based capital guidelines issued by their respective primary federal bank regulatory agencies, which are generally similar to the FRB's guidelines. At December 31, 1999, all of Citigroup's subsidiary depository institutions were "well capitalized" under the federal bank regulatory agencies' definitions. From time-to-time, the FRB and the Federal Financial Institutions Examination Council propose amendments to, and issue interpretations of, risk-based capital guidelines and reporting instructions. Such proposals or interpretations could, if implemented in the future, affect reported capital ratios and net risk-adjusted assets. Citicorp Management of liquidity at Citicorp is the responsibility of the Corporate Treasurer. The Country Corporate Officer and the Country Treasurer ensure that all funding obligations in each country are met when due. The Country Treasurer is appointed by the Corporate Treasurer. The in-country forum for liquidity issues is the Asset/Liability Management Committee (ALCO), which includes senior executives within each country. The ALCO reviews the current and prospective funding requirements for all businesses and legal entities within the country, as well as the capital position and balance sheet. All businesses within the country are represented on the committee with the focal point being the Country Treasurer. Each Country Treasurer must prepare a liquidity plan at least annually that is approved by the Country Corporate Officer, the Regional Treasurer, and the Corporate Treasurer. The liquidity profile is monitored on an on-going basis and reported monthly. Limits are established on the extent to which businesses in a country can take liquidity risk. The size of the limit depends on the depth of the market, experience level of local management, the stability of the liabilities, and liquidity of the assets. Regional Treasurers generally have responsibility for monitoring liquidity risk across a number of countries within a defined geography. They are also available for consultation and special approvals, especially in unusual or volatile market conditions. Citicorp's assets and liabilities are diversified across many currencies, geographic areas, and businesses. Particular attention is paid to those businesses which for tax, sovereign risk, or regulatory reasons cannot be freely and readily funded in the international markets. A diversity of funding sources, currencies, and maturities is used to gain a broad access to the investor base. Citicorp's deposits, which represent 67% and 64% of total funding at December 31, 1999 and 1998, respectively, are broadly diversified by both geography and customer segments. Stockholder's equity, which grew $1.4 billion during the year to $26.0 billion at year-end 1999, continues to be an important component of the overall funding structure. In addition, long-term debt is issued by Citicorp and its subsidiaries. Total Citicorp long-term debt outstanding at year-end 1999 was $26.4 billion, compared with $26.8 billion at year-end 1998. Asset securitization programs remain an important source of liquidity. Loans securitized during 1999 included $7.6 billion of U.S. credit cards, $7.8 billion of U.S. consumer mortgages, and $0.4 billion of non-U.S. consumer loans. As credit card securitization transactions amortize, newly originated receivables are recorded on Citicorp's balance sheet and become available for asset securitization. In 1999, the scheduled amortization of certain credit card securitization transactions made available $4.0 billion of new receivables. In addition, $6.4 billion of credit card securitization transactions are scheduled to amortize during 2000. Citicorp is a legal entity separate and distinct from Citibank, N.A. and its other subsidiaries and affiliates. There are various legal limitations on the extent to which Citicorp's banking subsidiaries may extend credit, pay 41 dividends or otherwise supply funds to Citicorp. The approval of the Office of the Comptroller of the Currency is required if total dividends declared by a national bank in any calendar year exceed net profits (as defined) for that year combined with its retained net profits for the preceding two years. In addition, dividends for such a bank may not be paid in excess of the bank's undivided profits. State-chartered bank subsidiaries are subject to dividend limitations imposed by applicable state law. Citicorp's national and state-chartered bank subsidiaries can declare dividends to their respective parent companies in 2000, without regulatory approval, of approximately $3.6 billion, adjusted by the effect of their net income (loss) for 2000 up to the date of any such dividend declaration. In determining whether and to what extent to pay dividends, each bank subsidiary must also consider the effect of dividend payments on applicable risk-based capital and leverage ratio requirements as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Consistent with these considerations, Citicorp estimates that its bank subsidiaries can distribute dividends to Citicorp of approximately $3.0 billion of the available $3.6 billion, adjusted by the effect of their net income (loss) up to the date of any such dividend declaration. Citicorp also receives dividends from its nonbank subsidiaries. These nonbank subsidiaries are generally not subject to regulatory restrictions on their payment of dividends except that the approval of the Office of Thrift Supervision (OTS) may be required if total dividends declared by a savings association in any calendar year exceed amounts specified by that agency's regulations. Citicorp is subject to risk-based capital and leverage guidelines issued by the FRB. Citicorp Ratios At Year-End 1999 1998(1) - ----------------------------------------------------------------------------- Tier 1 capital 8.11% 8.59% Total capital (Tier 1 and Tier 2) 12.10 12.40 Leverage(2) 6.83 6.88 Common stockholder's equity 6.70 6.94 ============================================================================= (1) Restated to include CitiFinancial Credit Company. (2) Tier 1 capital divided by adjusted average assets. Citicorp maintained a strong capital position during 1999. Total capital (Tier 1 and Tier 2) amounted to $37.4 billion at December 31, 1999, representing 12.10% of net risk-adjusted assets. This compares with $35.6 billion and 12.40% at December 31, 1998. Tier 1 capital of $25.0 billion at year-end 1999 represented 8.11% of net risk-adjusted assets, compared with $24.7 billion and 8.59% at year-end 1998. The Tier 1 capital ratio at year-end 1999 was within Citicorp's target range of 8.00% to 8.30%. See Note 17 of Notes to Consolidated Financial Statements. CitiFinancial Credit Company (CCC) At December 31, 1999, CCC had committed and available revolving credit facilities of $3.4 billion, consisting of five-year facilities which expire in 2002. At December 31, 1999, there were no borrowings outstanding under these facilities. In connection with the August 4,1999 reorganization of CCC as a subsidiary of Citicorp, Citicorp guaranteed various debt obligations of CCC, including those arising under these facilities. Under this facility, Citicorp is required to maintain a certain level of consolidated stockholder's equity (as defined in the agreement). At December 31, 1999, this requirement was exceeded by approximately $10.3 billion. Travelers Property Casualty Corp. (TAP) TAP has a five-year revolving credit facility in the amount of $250 million with a syndicate of banks that expires in December 2001. Under this facility TAP is required to maintain a certain level of consolidated stockholders' equity (as defined in the agreement). At December 31, 1999, this requirement was exceeded by approximately $4.8 billion. At December 31, 1999, there were no borrowings outstanding under this facility. TAP's insurance subsidiaries are subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid to their parent without prior approval of insurance regulatory authorities. Dividend payments to TAP from its insurance subsidiaries are limited to $1.2 billion in 2000 without prior approval of the Connecticut Insurance Department. Salomon Smith Barney Holdings Inc. (Salomon Smith Barney) Salomon Smith Barney's total assets were $224 billion at December 31,1999, compared to $212 billion at year-end 1998. Due to the nature of Salomon Smith Barney's trading activities it is not uncommon for asset levels to fluctuate from period to period. Approximately 35% of these assets represent trading securities, commodities, and derivatives used for proprietary trading and to facilitate customer transactions, and approximately 49% of these assets were related to collateralized financing transactions where securities are bought, borrowed, sold, and lent in generally offsetting amounts. A significant portion of the remainder of the assets represented receivables from brokers, dealers, clearing organizations, and customers that relate to securities transactions in the process of being settled. The carrying values of the majority of Salomon Smith Barney's securities inventories are adjusted daily to reflect current prices. See Notes 1, 5, 6, 7, 8, and 22 of Notes to the Consolidated Financial Statements for a further description of these assets. Salomon Smith Barney's assets are financed through a number of sources including long and short-term unsecured borrowings, the financing transactions described above, and payables to brokers, dealers, and customers. The highly liquid nature of these assets provides Salomon Smith Barney with flexibility in financing and managing its business. Salomon Smith Barney monitors and evaluates the adequacy of its capital and borrowing base on a daily basis in order to allow for flexibility in its funding, to maintain liquidity, and to ensure that its capital base supports the regulatory capital requirements of its subsidiaries. Salomon Smith Barney funds its operations through the use of secured and unsecured short-term borrowings, long-term borrowings and TruPS.(R) Secured short-term financing, including repurchase agreements and secured 42 loans, is Salomon Smith Barney's principal funding source. Unsecured short-term borrowings provide a source of short-term liquidity and are also utilized as an alternative to secured financing when they represent a cheaper funding source. Sources of short-term unsecured borrowings include commercial paper, unsecured bank borrowings and letters of credit, deposit liabilities, promissory notes, and corporate loans. At December 31, 1999, Salomon Smith Barney had a $1.5 billion revolving credit agreement with a bank syndicate that extends through May 2001, and a $3.5 billion, 364-day revolving credit agreement that extends through May 2000. Salomon Smith Barney may borrow under its revolving credit facilities at various interest rate options (LIBOR, CD, or base rate) and compensates the banks for the facilities through commitment fees. Under these facilities Salomon Smith Barney is required to maintain a certain level of consolidated adjusted net worth (as defined in the agreement). At December 31, 1999, this requirement was exceeded by approximately $3.5 billion. At December 31, 1999, there were no borrowings outstanding under either facility. Salomon Smith Barney also has substantial borrowing arrangements consisting of facilities that it has been advised are available, but where no contractual lending obligation exists. These arrangements are reviewed on an ongoing basis to ensure flexibility in meeting short-term requirements. Unsecured term debt is a significant component of Salomon Smith Barney's long-term capital. Long-term debt totaled $18.0 billion at December 31, 1999 and $19.1 billion at December 31,1998. Salomon Smith Barney utilizes interest rate swaps to convert the majority of its fixed rate long-term debt used to fund inventory-related working capital requirements into variable rate obligations. Long-term debt issuances denominated in currencies other than the U.S. dollar that are not used to finance assets in the same currency are effectively converted to U.S. dollar obligations through the use of cross-currency swaps and forward currency contracts. The average remaining maturity of Salomon Smith Barney's long-term debt was 3.25 years at December 31, 1999 and 4.0 years at December 31, 1998. See Note 11 of Notes to the Consolidated Financial Statements for additional information regarding debt and an analysis of the impact of interest rate swaps on debt. Salomon Smith Barney's borrowing relationships are with a broad range of banks, financial institutions and other firms from which it draws funds. The volume of borrowings generally fluctuates in response to changes in the level of financial instruments, commodities and contractual commitments, customer balances, the amount of reverse repurchase transactions outstanding, and securities borrowed transactions. As Salomon Smith Barney's activities increase, borrowings generally increase to fund the additional activities. Availability of financing can vary depending upon market conditions, credit ratings, and the overall availability of credit to the securities industry. Salomon Smith Barney seeks to expand and diversify its funding mix as well as its creditor sources. Concentration levels for these sources, particularly for short-term lenders, are closely monitored both in terms of single investor limits and daily maturities. Salomon Smith Barney monitors liquidity by tracking asset levels, collateral and funding availability to maintain flexibility to meet its financial commitments. As a policy, Salomon Smith Barney attempts to maintain sufficient capital and funding sources in order to have the capacity to finance itself on a fully collateralized basis in the event that access to unsecured financing was temporarily impaired. Salomon Smith Barney's liquidity management process includes a contingency funding plan designed to ensure adequate liquidity even if access to unsecured funding sources is severely restricted or unavailable. This plan is reviewed periodically to keep the funding options current and in line with market conditions. The management of this plan includes an analysis that is utilized to determine the ability to withstand varying levels of stress, which could impact Salomon Smith Barney's liquidation horizons and required margins. In addition, Salomon Smith Barney monitors its leverage and capital ratios on a daily basis. The Travelers Insurance Company (TIC) At December 31, 1999, TIC had $27.0 billion of life and annuity product deposit funds and reserves. Of that total, $13.8 billion is not subject to discretionary withdrawal based on contract terms. The remaining $13.2 billion is for life and annuity products that are subject to discretionary withdrawal by the contractholder. Included in the amount that is subject to discretionary withdrawal are $2.1 billion of liabilities that are surrenderable with market value adjustments. Also included are an additional $4.9 billion of the life insurance and individual annuity liabilities which are subject to discretionary withdrawals, and have an average surrender charge of 4.6%. In the payout phase, these funds are credited at significantly reduced interest rates. The remaining $6.2 billion of liabilities are surrenderable without charge. More than 12.7% of these relate to individual life products. These risks would have to be underwritten again if transferred to another carrier, which is considered a significant deterrent against withdrawal by long-term policyholders. Insurance liabilities that are surrendered or withdrawn are reduced by outstanding policy loans, and related accrued interest prior to payout. Scheduled maturities of guaranteed investment contracts (GICs) in 2000, 2001, 2002, 2003, and thereafter are $2.75 billion, $864.2 million, $667.4 million, $491.1 million, and $1.92 billion, respectively. At December 31, 1999, the interest rates credited on GICs had a weighted average rate of 5.77%. TIC is subject to various regulatory restrictions that limit the maximum amount of dividends available to its parent without prior approval of the Connecticut Insurance Department. A maximum of $679 million of statutory surplus is available in 2000 for such dividends without Department approval. Insurance Industry--Risk Based Capital The National Association of Insurance Commissioners (NAIC) adopted risk-based capital (RBC) requirements for life insurance companies and for property and casualty insurance companies. The RBC requirements are to be used as minimum capital requirements by the NAIC and states to identify companies that merit further regulatory action. The formulas have not been designed to differentiate among adequately capitalized companies that operate with levels of capital higher than RBC requirements. Therefore, it is inappropriate and ineffective to use the formulas to rate or to rank such companies. At December 31, 1999 and 1998, all of the Company's life and property & casualty companies had adjusted capital in excess of amounts requiring any regulatory action. 43 REPORT OF MANAGEMENT The management of Citigroup is responsible for the preparation and fair presentation of the financial statements and other financial information contained in this annual report. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances. Where amounts must be based on estimates and judgments, they represent the best estimates and judgments of management. The financial information appearing throughout this annual report is consistent with that in the financial statements. The management of Citigroup is also responsible for maintaining effective internal control over financial reporting . Management establishes an environment that fosters strong controls, and it designs business processes to identify and respond to risk. Management maintains a comprehensive system of controls intended to ensure that transactions are executed in accordance with management's authorization, assets are safeguarded, and financial records are reliable. Management also takes steps to see that information and communication flows are effective and to monitor performance, including performance of internal control procedures. Citigroup's accounting policies and internal control are under the general oversight of the Board of Directors, acting through the Audit Committee of the Board. The Committee is composed entirely of directors who are not officers or employees of Citigroup. The Committee reviews reports by internal audit covering its extensive program of audits and business risk reviews worldwide. In addition, KPMG LLP, independent auditors, are engaged to audit Citigroup's financial statements. KPMG LLP obtains and maintains an understanding of Citigroup's internal control and procedures for financial reporting and conducts such tests and other auditing procedures as it considers necessary in the circumstances to express the opinion in its report that follows. KPMG LLP has free access to the Audit Committee, with no members of management present, to discuss its audit and its findings as to the integrity of Citigroup's financial reporting and the effectiveness of internal control. Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation. However, management believes that Citigroup maintained effective internal control over financial reporting as of December 31, 1999. /s/ John S. Reed /s/ Sandford I. Weill John S. Reed Sanford I. Weill Chairman and Co-Chief Chairman and Co-Chief Executive Officer Executive Officer /s/ Heidi G. Miller Heidi G. Miller Chief Financial Officer INDEPENDENT AUDITOR'S REPORT [LOGO] KPMG The Board of Directors and Stockholders Citigroup Inc.: We have audited the accompanying consolidated statement of financial position of Citigroup Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Citigroup Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, in 1999 the Company changed its methods of accounting for insurance-related assessments, accounting for insurance and reinsurance contracts that do not transfer insurance risk, and accounting for the costs of start-up activities. /s/ KPMG LLP New York, New York January 18, 2000 44 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF INCOME Citigroup Inc. and Subsidiaries
Year Ended December 31, ------------------------------- In Millions, Except Per Share Amounts 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- Revenues Loan interest, including fees $ 23,172 $ 22,928 $ 20,765 Other interest and dividends 21,728 23,311 21,336 Insurance premiums 10,441 9,850 8,995 Commissions and fees 12,723 11,918 11,211 Principal transactions 5,160 1,780 4,231 Asset management and administration fees 4,164 2,292 1,715 Realized gains from sales of investments 557 840 995 Other income 4,060 3,512 3,058 - --------------------------------------------------------------------------------------------------------------------------- Total revenues 82,005 76,431 72,306 Interest expense 24,768 27,495 24,524 - --------------------------------------------------------------------------------------------------------------------------- Total revenues, net of interest expense 57,237 48,936 47,782 - --------------------------------------------------------------------------------------------------------------------------- Provisions for benefits, claims, and credit losses Policyholder benefits and claims 8,671 8,365 7,714 Provision for credit losses 2,837 2,751 2,197 - --------------------------------------------------------------------------------------------------------------------------- Total provisions for benefits, claims, and credit losses 11,508 11,116 9,911 - --------------------------------------------------------------------------------------------------------------------------- Operating expenses Non-insurance compensation and benefits 14,536 13,336 12,942 Insurance underwriting, acquisition, and operating 3,289 3,274 3,236 Restructuring-related items and merger-related costs (88) 795 1,718 Other operating expenses 12,044 11,146 9,225 - --------------------------------------------------------------------------------------------------------------------------- Total operating expenses 29,781 28,551 27,121 - --------------------------------------------------------------------------------------------------------------------------- Income before income taxes, minority interest and cumulative effect of accounting changes 15,948 9,269 10,750 Provision for income taxes 5,703 3,234 3,833 Minority interest, net of income taxes 251 228 212 - --------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting changes 9,994 5,807 6,705 - --------------------------------------------------------------------------------------------------------------------------- Cumulative effect of accounting changes (127) -- -- - --------------------------------------------------------------------------------------------------------------------------- Net income $ 9,867 $ 5,807 $ 6,705 =========================================================================================================================== Basic earnings per share Income before cumulative effect of accounting changes $ 2.95 $ 1.66 $ 1.91 Cumulative effect of accounting changes (0.04) -- -- - --------------------------------------------------------------------------------------------------------------------------- Net income $ 2.91 $ 1.66 $ 1.91 =========================================================================================================================== Weighted average common shares outstanding 3,333.9 3,363.6 3,371.9 - --------------------------------------------------------------------------------------------------------------------------- Diluted earnings per share Income before cumulative effect of accounting changes $ 2.86 $ 1.62 $ 1.83 Cumulative effect of accounting changes (0.03) -- -- - --------------------------------------------------------------------------------------------------------------------------- Net income $ 2.83 $ 1.62 $ 1.83 =========================================================================================================================== Adjusted weighted average common shares outstanding 3,443.5 3,472.8 3,536.6 ===========================================================================================================================
See Notes to Consolidated Financial Statements. 45 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Citigroup Inc. and Subsidiaries
December 31, ---------------------- In Millions of Dollars 1999 1998 - ------------------------------------------------------------------------------------------------------------------------- Assets Cash and cash equivalents (including segregated cash and other deposits) $ 14,158 $ 13,837 Deposits at interest with banks 13,429 11,643 Investments 113,126 105,176 Federal funds sold and securities borrowed or purchased under agreements to resell 112,655 94,831 Brokerage receivables 22,973 21,413 Trading account assets 109,155 119,845 Loans, net Consumer 148,715 132,255 Commercial 95,491 89,703 - ------------------------------------------------------------------------------------------------------------------------- Loans, net of unearned income 244,206 221,958 Allowance for credit losses (6,679) (6,617) - ------------------------------------------------------------------------------------------------------------------------- Total loans, net 237,527 215,341 Reinsurance recoverables 9,704 9,492 Separate and variable accounts 23,118 15,820 Other assets 61,092 61,243 - ------------------------------------------------------------------------------------------------------------------------- Total assets $ 716,937 $ 668,641 ========================================================================================================================= Liabilities Non-interest-bearing deposits in U.S. offices $ 19,492 $ 17,058 Interest-bearing deposits in U.S. offices 48,584 44,169 Non-interest-bearing deposits in offices outside the U.S. 12,021 10,856 Interest-bearing deposits in offices outside the U.S. 180,994 156,566 - ------------------------------------------------------------------------------------------------------------------------- Total deposits 261,091 228,649 Federal funds purchased and securities loaned or sold under agreements to repurchase 92,591 81,025 Brokerage payables 15,744 21,055 Trading account liabilities 91,104 94,584 Contractholder funds and separate and variable accounts 41,335 33,037 Insurance policy and claims reserves 43,822 43,990 Investment banking and brokerage borrowings 13,719 14,040 Short-term borrowings 17,086 16,112 Long-term debt 47,092 48,671 Other liabilities 38,747 40,450 Citigroup or subsidiary obligated mandatorily redeemable securities of subsidiary trusts holding solely junior subordinated debt securities of--Parent 2,300 1,700 --Subsidiary 2,620 2,620 - ------------------------------------------------------------------------------------------------------------------------- Stockholders' equity Preferred stock ($1.00 par value; authorized shares: 30 million), at aggregate liquidation value 1,925 2,313 Common stock ($.01 par value; authorized shares: 6.0 billion), issued shares: 1999--3,612,385,458 shares and 1998--3,603,106,368 shares 36 36 Additional paid-in capital 10,036 8,893 Retained earnings 43,865 35,971 Treasury stock, at cost: 1999--244,860,127 shares and 1998--216,143,199 shares (7,627) (4,789) Accumulated other changes in equity from nonowner sources 1,907 781 Unearned compensation (456) (497) - ------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 49,686 42,708 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 716,937 $ 668,641 =========================================================================================================================
See Notes to Consolidated Financial Statements. 46 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Citigroup Inc. and Subsidiaries
Year Ended December 31, -------------------------------------- Amounts -------------------------------------- In Millions of Dollars Except Shares in Thousands 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- Preferred stock at aggregate liquidation value Balance, beginning of year $ 2,313 $ 3,353 $ 3,203 Issuance of preferred stock -- -- 1,000 Redemption or retirement of preferred stock (388) (1,040) (850) - ----------------------------------------------------------------------------------------------------------------------- Balance, end of year 1,925 2,313 3,353 - ----------------------------------------------------------------------------------------------------------------------- Common stock and additional paid-in capital Balance, beginning of year 8,929 12,496 14,940 Conversion of redeemable preferred stock to common stock 140 293 140 Exercise of common stock warrants -- 131 14 Employee benefit plans 1,028 531 756 Retirement of treasury stock -- (4,497) (3,347) Other (25) (25) (7) - ----------------------------------------------------------------------------------------------------------------------- Balance, end of year 10,072 8,929 12,496 - ----------------------------------------------------------------------------------------------------------------------- Retained earnings Balance, beginning of year 35,971 32,002 26,989 Net income 9,867 5,807 6,705 Common dividends (1,824) (1,622) (1,409) Preferred dividends (149) (216) (283) - ----------------------------------------------------------------------------------------------------------------------- Balance, end of year 43,865 35,971 32,002 - ----------------------------------------------------------------------------------------------------------------------- Treasury stock, at cost Balance, beginning of year (4,789) (6,595) (7,073) Issuance of shares pursuant to employee benefit plans and other 1,063 408 578 Treasury stock acquired (3,906) (3,085) (3,447) Retirement of treasury stock -- 4,497 3,347 Other 5 (14) -- - ----------------------------------------------------------------------------------------------------------------------- Balance, end of year (7,627) (4,789) (6,595) - ----------------------------------------------------------------------------------------------------------------------- Accumulated other changes in equity from nonowner sources Balance, beginning of year 781 1,057 662 Net change in unrealized gains and losses on investment securities, net of tax 1,186 (333) 547 Foreign currency translations adjustment, net of tax (60) 57 (152) - ----------------------------------------------------------------------------------------------------------------------- Balance, end of year 1,907 781 1,057 - ----------------------------------------------------------------------------------------------------------------------- Unearned compensation Balance, beginning of year (497) (462) (305) Net issuance of restricted stock (380) (420) (467) Restricted stock amortization 421 385 310 - ----------------------------------------------------------------------------------------------------------------------- Balance, end of year (456) (497) (462) - ----------------------------------------------------------------------------------------------------------------------- Total common stockholders' equity and common shares outstanding 47,761 40,395 38,498 - ----------------------------------------------------------------------------------------------------------------------- Total stockholders' equity $ 49,686 $ 42,708 $ 41,851 ======================================================================================================================= Summary of changes in equity from nonowner sources Net income $ 9,867 $ 5,807 $ 6,705 Other changes in equity from nonowner sources, net of tax 1,126 (276) 395 - ----------------------------------------------------------------------------------------------------------------------- Total changes in equity from nonowner sources $ 10,993 $ 5,531 $ 7,100 ======================================================================================================================= Year Ended December 31, ------------------------------------- Shares ------------------------------------- In Millions of Dollars Except Shares in Thousands 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------- Preferred stock at aggregate liquidation value Balance, beginning of year 8,475 14,831 20,231 Issuance of preferred stock -- -- 4,000 Redemption or retirement of preferred stock (1,525) (6,356) (9,400) - --------------------------------------------------------------------------------------------------------------------- Balance, end of year 6,950 8,475 14,831 - --------------------------------------------------------------------------------------------------------------------- Common stock and additional paid-in capital Balance, beginning of year 3,603,106 3,769,020 3,994,712 Conversion of redeemable preferred stock to common stock 9,367 19,781 9,367 Exercise of common stock warrants -- 15,195 1,670 Employee benefit plans -- 33 -- Retirement of treasury stock -- (200,888) (236,754) Other (88) (35) 25 - --------------------------------------------------------------------------------------------------------------------- Balance, end of year 3,612,385 3,603,106 3,769,020 - --------------------------------------------------------------------------------------------------------------------- Retained earnings Balance, beginning of year Net income Common dividends Preferred dividends - -------------------------------------------------------------------------------- Balance, end of year - -------------------------------------------------------------------------------- Treasury stock, at cost Balance, beginning of year (216,143) (349,136) (546,116) Issuance of shares pursuant to employee benefit plans and other 57,888 27,047 75,035 Treasury stock acquired (86,770) (94,246) (114,809) Retirement of treasury stock -- 200,888 236,754 Other 165 (696) -- - --------------------------------------------------------------------------------------------------------------------- Balance, end of year (244,860) (216,143) (349,136) - --------------------------------------------------------------------------------------------------------------------- Accumulated other changes in equity from nonowner sources Balance, beginning of year Net change in unrealized gains and losses on investment securities, net of tax Foreign currency translations adjustment, net of tax - -------------------------------------------------------------------------------- Balance, end of year - -------------------------------------------------------------------------------- Unearned compensation Balance, beginning of year Net issuance of restricted stock Restricted stock amortization - --------------------------------------------------------------------------------------------------------------------- Balance, end of year - --------------------------------------------------------------------------------------------------------------------- Total common stockholders' equity and common shares outstanding 3,367,525 3,386,963 3,419,884 - --------------------------------------------------------------------------------------------------------------------- Total stockholders' equity ===================================================================================================================== Summary of changes in equity from nonowner sources Net income Other changes in equity from nonowner sources, net of tax - --------------------------------------------------------------------------------------------------------------------- Total changes in equity from nonowner sources =====================================================================================================================
See Notes to Consolidated Financial Statements. 47 CONSOLIDATED STATEMENT OF CASH FLOWS Citigroup Inc. and Subsidiaries
Year Ended December 31, ----------------------------------- In Millions of Dollars 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 9,867 $ 5,807 $ 6,705 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred policy acquisition costs and value of insurance in force 1,613 1,509 1,424 Additions to deferred policy acquisition costs (1,961) (1,784) (1,685) Depreciation and amortization 1,714 1,470 1,218 Deferred tax provision (benefit) 485 (194) (1,430) Provision for credit losses 2,837 2,751 2,197 Change in trading account assets 10,690 60,243 (22,730) Change in trading account liabilities (3,480) (32,568) 13,008 Change in Federal funds sold and securities purchased under agreements to resell (17,824) 25,136 (10,849) Change in Federal funds purchased and securities sold under agreements to repurchase 11,566 (51,078) 18,536 Change in brokerage receivables net of brokerage payables (6,871) 2,506 (1,291) Change in insurance policy and claims reserves (168) 208 381 Net gain on sale of securities (557) (840) (995) Venture capital activity (863) (698) (475) Restructuring-related items and merger-related costs (88) 795 1,718 Cumulative effect of accounting changes, net of tax 127 -- -- Other, net 2,067 (8,977) 2,021 - ---------------------------------------------------------------------------------------------------------------------------- Total adjustments (713) (1,521) 1,048 - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 9,154 4,286 7,753 - ---------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities Change in deposits at interest with banks (1,786) 1,406 (1,401) Change in loans (112,500) (165,237) (117,921) Proceeds from sales of loans 87,391 146,477 104,119 Purchases of investments (90,007) (88,229) (78,594) Proceeds from sales of investments 48,612 45,717 46,927 Proceeds from maturities of investments 35,126 33,819 23,026 Other investments, primarily short-term, net (1,009) (427) (501) Capital expenditures on premises and equipment (1,572) (1,805) (1,533) Proceeds from sales of premises and equipment, subsidiaries and affiliates, and other real estate owned 1,885 764 1,164 Business acquisitions (2,150) (3,890) (1,618) - ---------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (36,010) (31,405) (26,332) - ---------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities Dividends paid (1,973) (1,846) (1,692) Issuance of common stock 758 418 434 Issuance of preferred stock -- -- 1,000 Issuance of mandatorily redeemable securities of subsidiary trusts 600 1,325 450 Redemption of preferred stock (388) (1,040) (850) Treasury stock acquired (3,906) (3,085) (3,447) Stock tendered for payment of withholding taxes (496) (520) (384) Issuance of long-term debt 8,644 14,295 15,333 Payments and redemptions of long-term debt (9,819) (12,307) (10,713) Change in deposits 32,442 29,528 14,166 Change in short-term borrowings including investment banking and brokerage borrowings 699 (304) 6,636 Contractholder fund deposits 5,933 4,422 3,544 Contractholder fund withdrawals (5,028) (2,579) (2,757) - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 27,466 28,307 21,720 - ---------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents (289) 31 (688) - ---------------------------------------------------------------------------------------------------------------------------- Change in cash and cash equivalents 321 1,219 2,453 Cash and cash equivalents at beginning of period 13,837 12,618 10,165 - ---------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 14,158 $ 13,837 $ 12,618 ============================================================================================================================ Supplemental disclosure of cash flow information Cash paid during the period for income taxes $ 3,673 $ 2,860 $ 3,917 Cash paid during the period for interest 23,613 26,292 23,016 Non-cash investing activities--transfers to other real estate owned 468 350 395 ============================================================================================================================
See Notes to Consolidated Financial Statements. 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Citigroup Inc. and Subsidiaries 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation. The consolidated financial statements include the accounts of Citigroup and its subsidiaries (the Company). Twenty-to-fifty percent-owned affiliates, other than investments of designated venture capital subsidiaries, are accounted for under the equity method, and the pro rata share of their income (loss) is included in other income. Income from investments in less than twenty percent-owned companies is generally recognized when dividends are received. Gains and losses on disposition of branches, subsidiaries, affiliates, and other investments and charges for management's estimate of impairment in their value that is other than temporary, such that recovery of the carrying amount is deemed unlikely, are included in other income. Goodwill and other intangible assets are amortized over their estimated useful lives, subject to periodic review for impairment that is other than temporary. If it is determined that enterprise level goodwill is unlikely to be recovered, impairment is measured on a discounted cash flow basis. Minority interest principally represents the interest in Travelers Property Casualty Corp. (TAP) not held by the Company, and is included in other liabilities. The Company recognizes a gain or loss in the consolidated statement of income when a subsidiary issues its own stock to a third party at a price higher or lower than the Company's proportionate carrying amount. Foreign currency translation. Assets and liabilities denominated in non-U.S. dollar currencies are translated into U.S. dollar equivalents using year-end spot foreign exchange rates. Revenues and expenses are translated monthly at amounts which approximate weighted average exchange rates, with resulting gains and losses included in income. The effects of translating operations with a functional currency other than the U.S. dollar are included in stockholders' equity along with related hedge and tax effects. The effects of translating operations with the U.S. dollar as the functional currency, including those in highly inflationary environments, are included in other income along with related hedge effects. Hedges of foreign currency exposures include forward currency contracts and designated issues of non-U.S. dollar debt. Risks and uncertainties. The preparation of the consolidated financial statements 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents include cash on hand and due from banks, cash segregated under federal and brokerage regulations, cash deposited with clearing organizations and short-term highly liquid investments with maturities of three months or less when purchased, other than those held for sale in the ordinary course of business. Cash flows from risk management activities are classified in the same category as the related assets and liabilities. Investments include fixed maturity and equity securities. Fixed maturities includes bonds, notes and redeemable preferred stocks, as well as certain loan-backed and structured securities subject to prepayment risk. Equity securities include common and non-redeemable preferred stocks. Fixed maturities classified as "held to maturity" represent securities that the Company has both the ability and the intent to hold until maturity and are carried at amortized cost. Fixed maturity securities classified as "available for sale" and marketable equity securities are carried at fair values, based primarily on quoted market prices or if quoted market prices are not available, discounted expected cash flows using market rates commensurate with the credit quality and maturity of the investment, with unrealized gains and losses and related hedge effects reported in a separate component of stockholders' equity, net of applicable income taxes. Declines in fair value that are determined to be other than temporary are charged to earnings. Accrual of income is suspended on fixed maturities that are in default, or on which it is likely that future interest payments will not be made as scheduled. Fixed maturities subject to prepayment risk are accounted for using the retrospective method, where the principal amortization and effective yield are recalculated each period based on actual historical and projected future cash flows. Realized gains and losses on sales of investments are included in earnings on a specific identified cost basis. Citigroup's venture capital subsidiaries include subsidiaries registered as Small Business Investment Companies and other subsidiaries that engage exclusively in venture capital activities. Venture capital investments are carried at fair value, with changes in fair value recognized in other income. The fair values of publicly-traded securities held by these subsidiaries are generally based upon quoted market prices. In certain situations, including thinly-traded securities, large-block holdings, restricted shares or other special situations, the quoted market price is adjusted to produce an estimate of the attainable fair value for the securities. For securities held by these subsidiaries that are not publicly traded, estimates of fair value are made based upon review of the investee's financial results, condition, and prospects, together with comparisons to similar companies for which quoted market prices are available. 49 Securities borrowed and securities loaned are recorded at the amount of cash advanced or received. With respect to securities loaned, the Company receives cash collateral in an amount in excess of the market value of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis with additional collateral obtained as necessary. Repurchase and resale agreements are treated as collateralized financing transactions and are carried at the amounts at which the securities will be subsequently reacquired or resold, including accrued interest, as specified in the respective agreements. The Company's policy is to take possession of securities purchased under agreements to resell. The market value of securities to be repurchased and resold is monitored, and additional collateral is obtained where appropriate to protect against credit exposure. Trading account assets and liabilities include securities, commodities and derivatives and are recorded at either market value or, when market prices are not readily available, fair value, which is determined under an alternative approach, such as matrix or model pricing. Obligations to deliver securities sold but not yet purchased are also valued at market and included in trading account liabilities. The determination of market or fair value considers various factors, including: closing exchange or over-the-counter market price quotations; time value and volatility factors underlying options, warrants and derivatives; price activity for equivalent or synthetic instruments; counterparty credit quality; the potential impact on market prices or fair value of liquidating the Company's positions in an orderly manner over a reasonable period of time under current market conditions; and derivatives transaction maintenance costs during that period. Interest expense on trading account liabilities is reported as a reduction of interest revenues. Commodities include physical quantities of commodities involving future settlement or delivery, and related gains or losses are reported as principal transactions. Derivatives used for trading purposes include interest rate, currency, equity, credit, and commodity swap agreements, options, caps and floors, warrants, and financial and commodity futures and forward contracts. The fair values (unrealized gains and losses) associated with derivatives are reported net by counterparty, provided a legally enforceable master netting agreement exists, and are netted across products and against cash collateral when such provisions are stated in the master netting agreement. Derivatives in a net receivable position, as well as options owned and warrants held, are reported as trading account assets. Similarly, derivatives in a net payable position, as well as options written and warrants issued, are reported as trading account liabilities. Revenues generated from derivative instruments used for trading purposes are reported as principal transactions and include realized gains and losses as well as unrealized gains and losses resulting from changes in the market or fair value of such instruments. Commissions, underwriting and principal transactions revenues and related expenses are recognized in income on a trade date basis. Consumer loans includes loans managed by the Global Consumer business and the Citibank Private Bank. Consumer loans are generally written off not later than a predetermined number of days past due, or earlier in the event of bankruptcy. The number of days is set at an appropriate level by loan product and by country. The policy for suspending accruals of interest on consumer loans varies depending on the terms, security and loan loss experience characteristics of each product, and in consideration of write-off criteria in place. Commercial loans represent loans managed by the Global Corporate and Investment Bank. Commercial loans are identified as impaired and placed on a cash (nonaccrual) basis when it is determined that the payment of interest or principal is doubtful of collection, or when interest or principal is past due for 90 days or more, except when the loan is well secured and in the process of collection. Any interest accrued is reversed and charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there is doubt regarding the ultimate collectibility of principal, all cash receipts are thereafter applied to reduce the recorded investment in the loan. Impaired commercial loans are written down to the extent that principal is judged to be uncollectible. Impaired collateral-dependent loans where repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment are written down to the lower of cost or collateral value. Cash-basis loans are returned to an accrual status when all contractual principal and interest amounts are reasonably assured of repayment and there is a sustained period of repayment performance in accordance with the contractual terms. Lease financing transactions. Loans include the Company's share of aggregate rentals on lease financing transactions and residual values net of related unearned income. Lease financing transactions substantially represent direct financing leases and also include leveraged leases. Unearned income is amortized under a method which substantially results in an approximate level rate of return when related to the unrecovered lease investment. Gains and losses from sales of residual values of leased equipment are included in other income. 50 Loans held for sale. Credit card receivables and mortgage loans originated for sale are classified as loans held for sale, which are accounted for at the lower of cost or market value in other assets with net credit losses charged to other income. Allowance for credit losses represents management's estimate of probable losses inherent in the portfolio. This evaluation includes an assessment of the ability of borrowers with foreign currency obligations to obtain the foreign exchange necessary for orderly debt servicing. Attribution of the allowance is made for analytical purposes only, and the entire allowance is available to absorb probable credit losses inherent in the portfolio. Additions to the allowance are made by means of the provision for credit losses. Credit losses are deducted from the allowance, and subsequent recoveries are added. Securities received in exchange for loan claims in debt restructurings are initially recorded at fair value, with any gain or loss reflected as a recovery or charge-off to the allowance, and are subsequently accounted for as securities available for sale. Larger-balance, non-homogenous exposures representing significant individual credit exposures are evaluated based upon the borrower's overall financial condition, resources, and payment record; the prospects for support from any financially responsible guarantors; and, if appropriate, the realizable value of any collateral. The allowance for loan losses attributed to these loans is established via a process which begins with estimates of probable loss inherent in the portfolio based upon various statistical analyses. These analyses consider historical and projected default rates and loss severities; internal risk ratings; geographic, industry, and other environmental factors; and model imprecision. Management also considers overall portfolio indicators including trends in internally risk rated exposures, classified exposures, cash-basis loans, and historical and forecasted write-offs; a review of industry, geographic, and portfolio concentrations, including current developments within those segments; and the current business strategy and credit process including credit limit setting and compliance, credit approvals, loan underwriting criteria, and loan workout procedures. Within the allowance for credit losses, a valuation allowance is maintained for larger-balance, non-homogenous loans that have been individually determined to be impaired. This estimate considers all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan's contractual effective rate, the secondary market value of the loan, the fair value of collateral, and environmental factors. Each portfolio of smaller balance, homogenous loans, including consumer mortgage, installment, revolving credit and most other consumer loans, is collectively evaluated for impairment. The allowance for loan losses attributed to these loans is established via a process which begins with estimates of probable losses inherent in the portfolio, based upon various statistical analyses. These include migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analyses which reflect current trends and conditions. Management also considers overall portfolio indicators including historical credit losses, delinquent, non-performing and classified loans, and trends in volumes and terms of loans; an evaluation of overall credit quality and the credit process, including lending policies and procedures; consideration of economic, geographical, product, and other environmental factors; and model imprecision. Other real estate owned. Upon repossession, loans are adjusted if necessary to the estimated fair value of the underlying collateral and transferred to Other Real Estate Owned, which is reported in other assets net of a valuation allowance for selling costs and net declines in value as appropriate. Risk management activities--derivatives used for non-trading purposes. The Company manages its exposures to market rate movements outside of its trading activities by modifying the asset and liability mix, either directly or through the use of derivative financial products including interest rate swaps, futures, forwards, and purchased option positions such as interest rate caps, floors, and collars. These end-user derivative contracts include qualifying hedges and qualifying positions that modify the interest rate characteristics of specified financial instruments. Derivative instruments not qualifying as end-user positions are treated as trading positions and carried at fair value. To qualify as a hedge, the swap, futures, forward, or purchased option position must be designated as a hedge and be effective in reducing the market risk of an existing asset, liability, firm commitment, or identified anticipated transaction which is probable to occur. To qualify as a position modifying the interest rate characteristics of an instrument, there must be a documented and approved objective to synthetically alter the market risk characteristics of an existing asset, liability, firm commitment or identified anticipated transaction which is probable to occur, and the swap, forward or purchased option position must be designated as such a position and effective in accomplishing the underlying objective. 51 The foregoing criteria are applied on a decentralized basis, consistent with the level at which market risk is managed, but are subject to various limits and controls. The underlying asset, liability, firm commitment or anticipated transaction may be an individual item or a portfolio of similar items. The effectiveness of these contracts is evaluated on an initial and ongoing basis using quantitative measures of correlation. If a contract is found to be ineffective, it no longer qualifies as an end-user position and any excess gains and losses attributable to such ineffectiveness as well as subsequent changes in fair value are recognized in earnings. End-user contracts are primarily employed in association with on-balance sheet instruments accounted for at amortized cost, including loans, deposits, and long-term debt, and with credit card securitizations. These qualifying end-user contracts are accounted for consistent with the risk management strategy as follows. Amounts payable and receivable on interest rate swaps and options are accrued according to the contractual terms and included currently in the related revenue and expense category as an element of the yield on the associated instrument (including the amortization of option premiums). Amounts paid or received over the life of futures contracts are deferred until the contract is closed; accumulated deferred amounts on futures contracts and amounts paid or received at settlement of forward contracts are accounted for as elements of the carrying value of the associated instrument, affecting the resulting yield. End-user contracts related to instruments that are carried at fair value are also carried at fair value, with amounts payable and receivable accounted for as an element of the yield on the associated instrument. When related to securities available for sale, fair value adjustments are reported in stockholders' equity, net of tax. If an end-user derivative contract is terminated, any resulting gain or loss is deferred and amortized over the original term of the agreement provided that the effectiveness criteria have been met. If the underlying designated items are no longer held, or if an anticipated transaction is no longer likely to occur, any previously unrecognized gain or loss on the derivative contract is recognized in earnings and the contract is accounted for at fair value with subsequent changes recognized in earnings. Foreign exchange contracts which qualify under applicable accounting guidelines as hedges of foreign currency exposures, including net capital investments outside the U.S., are revalued at the spot rate with any forward premium or discount recognized over the life of the contract in net interest revenue. Gains and losses on foreign exchange contracts which qualify as a hedge of a firm commitment are deferred and recognized as part of the measurement of the related transaction, unless deferral of a loss would lead to recognizing losses on the transaction in later periods. Insurance premiums from long-duration contracts, principally life insurance, are earned when due. Premiums from short-duration insurance contracts are earned over the related contract period. Short-duration contracts include primarily property and casualty, credit life and accident and health policies, including estimated ultimate premiums on retrospectively rated policies. Benefits and expenses are associated with premiums by means of the provision for future policy benefits, unearned premiums and the deferral and amortization of policy acquisition costs. Receivables related to retrospectively rated policies on property-casualty business are reported in other assets. Value of insurance in force, included in other assets, represents the actuarially determined present value of anticipated profits to be realized from life and accident and health business on insurance in force at the date of the Company's acquisition of its insurance subsidiaries using the same assumptions that were used for computing related liabilities where appropriate. The value of insurance in force acquired prior to December 31, 1993 is amortized over the premium paying periods in relation to anticipated premiums. The value of insurance in force relating to the 1993 acquisition of The Travelers Corporation (old Travelers) was the actuarially determined present value of the projected future profits discounted at interest rates ranging from 14% to 18% for the business acquired. The value of insurance in force is amortized over the contract period using current interest crediting rates to accrete interest and using amortization methods based on the specified products. Traditional life insurance is amortized over the period of anticipated premiums; universal life in relation to estimated gross profits; and annuity contracts employing a level yield method. The value of insurance in force is reviewed periodically for recoverability to determine if any adjustment is required. Deferred policy acquisition costs, included in other assets, for the life business represent the costs of acquiring new business, principally commissions, certain underwriting and agency expenses and the cost of issuing policies. Deferred policy acquisition costs for traditional life business are amortized over the premium-paying periods of the related policies, in proportion to the ratio of the annual premium revenue to the total anticipated premium revenue. Deferred policy acquisition costs of other business lines are generally amortized over the life of the insurance contract or at a constant rate based upon the present value of estimated gross profits expected to be realized. For certain property and casualty lines, acquisition costs (primarily commissions and premium taxes) have been deferred to the extent recoverable from future earned premiums and are amortized ratably over the terms of the related policies. Deferred policy acquisition costs are reviewed to determine if they are recoverable from future income, including investment income, and, if not recoverable, are charged to expense. All other acquisition expenses are charged to operations as incurred. Separate and variable accounts primarily represent funds for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholders. Each account has specific investment objectives. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company. The assets of these accounts are generally carried at market value. Amounts assessed to the contractholders for management services are included in revenues. Deposits, net investment income and realized investment gains and losses for these accounts are excluded from revenues, and related liability increases are excluded from benefits and expenses. 52 Insurance policy and claims reserves represent liabilities for future insurance policy benefits. Insurance reserves for traditional life insurance, annuities, and accident and health policies have been computed based upon mortality, morbidity, persistency and interest rate assumptions (ranging from 2.5% to 10.0%) applicable to these coverages, including adverse deviation. These assumptions consider Company experience and industry standards and may be revised if it is determined that future experience will differ substantially from that previously assumed. Property-casualty reserves include (1) unearned premiums representing the unexpired portion of policy premiums, and (2) estimated provisions for both reported and unreported claims incurred and related expenses. The reserves are adjusted regularly based on experience. In determining insurance policy and claims reserves, the Company performs a continuing review of its overall position, its reserving techniques and its reinsurance. Reserves for property-casualty insurance losses represent the estimated ultimate cost of all incurred claims and claim adjustment expenses. Since the reserves are based on estimates, the ultimate liability may be more or less than such reserves. The effects of changes in such estimated reserves are included in the results of operations in the period in which the estimates are changed. Such changes may be material to the results of operations and could occur in a future period. Contractholder funds represent receipts from the issuance of universal life, pension investment and certain individual annuity contracts. Such receipts are considered deposits on investment contracts that do not have substantial mortality or morbidity risk. Account balances are increased by deposits received and interest credited and are reduced by withdrawals, mortality charges and administrative expenses charged to the contractholders. Calculations of contractholder account balances for investment contracts reflect lapse, withdrawal and interest rate assumptions (ranging from 3.8% to 8.6%) based on contract provisions, the Company's experience and industry standards. Contractholder funds also include other funds that policyholders leave on deposit with the Company. Employee benefits expense includes prior and current service costs of pension and other postretirement benefit plans, which are accrued on a current basis, contributions and unrestricted awards under other employee plans, the amortization of restricted stock awards, and costs of other employee benefits. There are no charges to earnings upon the grant or exercise of fixed stock options or the subscription for or purchase of stock under stock purchase agreements. Compensation expense related to performance-based stock options is recorded over the period to the estimated vesting dates. Upon issuance of previously unissued shares under employee plans, proceeds received in excess of par value are credited to additional paid-in capital. Upon issuance of treasury shares, the difference between the proceeds received and the average cost of treasury shares is recorded in additional paid-in capital. Income taxes. Deferred taxes are recorded for the future tax consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management's judgment that realization is more likely than not. The Company and its wholly owned domestic non-life insurance subsidiaries file a consolidated federal income tax return. The major life insurance subsidiaries are included in their own consolidated federal income tax return. Earnings per common share is computed after recognition of preferred stock dividend requirements. Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding restricted stock. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised and has been computed after giving consideration to the weighted average dilutive effect of the Company's convertible securities, common stock warrants, stock options and the shares issued under the Company's Capital Accumulation Plan and other restricted stock plans. The Board of Directors on April 19, 1999 declared a three-for-two split in Citigroup's common stock, which was paid in the form of a 50% stock dividend on May 28, 1999. Prior year information has been restated to reflect the stock split. Accounting Changes Insurance-related assessments. During the first quarter of 1999, the Company adopted Statement of Position ("SOP") 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments." SOP 97-3 provides guidance for determining when an entity should recognize a liability for guaranty-fund and other insurance-related assessments, how to measure that liability, and when an asset may be recognized for the recovery of such assessments through premium tax offsets or policy surcharges. The initial adoption resulted in a cumulative catch-up adjustment recorded as a charge to earnings of $135 million after-tax and minority interest. Deposit Accounting. During the first quarter of 1999, the Company adopted SOP 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk." SOP 98-7 provides guidance on how to account for insurance and reinsurance contracts that do not transfer insurance risk and applies to all entities and all such contracts, except for long-duration life and health insurance contracts. The method used to account for such contracts is referred to as deposit accounting. The initial adoption resulted in a cumulative catch-up adjustment recorded as a credit to earnings of $23 million after-tax and minority interest. Start-up costs. During the first quarter of 1999, the Company adopted SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. The initial adoption resulted in a cumulative catch-up adjustment recorded as a charge to earnings of $15 million after-tax. 53 Asset management fees. For periods prior to 1999, asset management and administration fees earned by Citicorp subsidiaries are classified as commissions and fees in the consolidated statement of income. Future Application of Accounting Standards Derivatives and hedge accounting. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133). In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133," which delayed the effective date of SFAS No. 133 to January 1, 2001 for calendar year companies such as the Company. The new standard will significantly change the accounting treatment of end-user derivative and foreign exchange contracts used by the Company and its customers. Depending on the underlying risk management strategy, these accounting changes could affect reported earnings, assets, liabilities, and stockholders' equity. As a result, the Company and the customers to which it provides derivatives and foreign exchange products will have to reconsider their risk management strategies, since the new standard will not reflect the results of many of those strategies in the same manner as current accounting practice. The Company continues to evaluate the potential impact of implementing the new accounting standard, which will depend, among other things, on the possibility of additional amendments and interpretations of the standard prior to the effective date. 2. BUSINESS COMBINATIONS Merger with Citicorp On October 8, 1998, Citicorp merged with and into a newly formed, wholly owned subsidiary of Travelers Group, Inc. (TRV) (the Merger). Following the Merger, TRV changed its name to Citigroup Inc. (Citigroup). Under the terms of the Merger, 1.698 billion shares (adjusted to reflect the three-for-two stock split in May 1999) of Citigroup common stock were issued in exchange for all of the outstanding shares of Citicorp common stock. The Merger was accounted for under the pooling of interests method. Certain reclassifications and adjustments have been recorded to conform the accounting policies and presentations of Citicorp and Travelers. Acquisition of Universal Card Services On April 2, 1998, Citicorp completed its acquisition of Universal Card Services from AT&T for $3.5 billion in cash. This purchase added $15 billion in customer receivables and 13.5 million accounts. In addition, Citicorp entered into a ten-year cobranding and joint marketing agreement with AT&T. Merger with Salomon On November 28, 1997, a newly formed, wholly owned subsidiary of TRV merged with and into Salomon (the Salomon Merger). Under the terms of the Salomon Merger, approximately 282.8 million shares (adjusted to reflect the three-for-two stock split in May 1999) of Citigroup common stock were issued in exchange for all of the outstanding shares of Salomon common stock. Thereafter, Smith Barney Holdings Inc. (Smith Barney) was merged with and into Salomon to form Salomon Smith Barney Holdings Inc. (Salomon Smith Barney). The Salomon Merger was accounted for under the pooling of interests method. 3. BUSINESS SEGMENT INFORMATION Citigroup is a diversified holding company whose businesses provide a broad range of financial services to consumer and corporate customers around the world. The Company's activities are conducted through Global Consumer, Global Corporate and Investment Bank, Global Investment Management and Private Banking, and Investment Activities. The Global Consumer segment includes a global, full-service consumer franchise encompassing, among other things, branch and electronic banking, consumer lending services, investment services, credit and charge card services, and life, auto and homeowners insurance. The businesses included in the Company's Global Corporate and Investment Bank segment provide corporations, governments, institutions, and investors in 100 countries and territories with a broad range of financial products and services, including investment advice, financial planning and retail brokerage services, banking and financial services, and commercial insurance products. The Global Investment Management and Private Banking segment offers a broad range of asset management products and services from global investment centers around the world, including mutual funds, closed-end funds, managed accounts, unit investment trusts, variable annuities, and personalized wealth management services to institutional, high net worth, and retail clients. The Investment Activities segment includes the Company's venture capital activities, the realized investment gains and losses related to certain corporate- and insurance-related investments, and the results of certain investments in countries that refinanced debt under the 1989 Brady Plan or plans of a similar nature. Corporate/Other includes net corporate treasury results, and corporate staff and other corporate expenses. 54 The following table presents certain information regarding these industry segments:
Total Revenues, Net Provision for of Interest Expense(1) Income Taxes In Millions of Dollars, Except --------------------------------- ------------------------------ Identifiable Assets in Billions 1999 1998(3) 1997(3) 1999 1998(3) 1997(3) - ------------------------------------------------------------------------------------------------------ Global Consumer(4) $ 26,282 $ 23,004 $ 20,348 $ 2,458 $ 1,631 $ 1,447 Global Corporate and Investment Bank(4) 27,355 22,360 23,819 2,871 1,262 1,690 Global Investment Management and Private Banking 2,686 2,381 2,134 379 286 295 Corporate/Other (176) (132) (252) (360) (379) (238) Investment Activities 1,090 1,323 1,733 355 434 639 - ------------------------------------------------------------------------------------------------------ Total $ 57,237 $ 48,936 $ 47,782 $ 5,703 $ 3,234 $ 3,833 ====================================================================================================== Identifiable Net Income (loss)(2) Assets at Year-End In Millions of Dollars, Except ------------------------------ ------------------- Identifiable Assets in Billions 1999 1998(3) 1997(3) 1999 1998(3) 1997(3) - ---------------------------------------------------------------------------------------- Global Consumer(4) $ 4,240 $ 2,708 $ 2,527 $237 $217 $186 Global Corporate and Investment Bank(4) 5,069 2,395 3,034 429 415 478 Global Investment Management and Private Banking 604 454 467 26 20 18 Corporate/Other (706) (583) (423) 14 9 6 Investment Activities 660 833 1,100 11 8 9 - ---------------------------------------------------------------------------------------- Total $ 9,867 $ 5,807 $ 6,705 $717 $669 $697 ========================================================================================
(1) Includes total revenues, net of interest expense in the United States of $41.5 billion, $37.3 billion, and $34.4 billion in 1999, 1998, and 1997, respectively. Total revenues, net of interest expense attributable to individual foreign countries are not material to the total. (2) For the 1999 period, Global Consumer, Global Corporate and Investment Bank, Global Investment Management and Private Banking, and Corporate/Other results reflect after-tax restructuring charges (credits) of $56 million, ($121) million, ($2) million, and $20 million, respectively. For the 1998 period, Global Consumer, Global Corporate and Investment Bank, Global Investment Management and Private Banking, and Corporate/Other results reflect after-tax restructuring-related charges (credits) and merger-related costs of $403 million, ($26) million, $53 million, and $105 million, respectively. For the 1997 period, Global Consumer, Global Corporate and Investment Bank, Global Investment Management and Private Banking, and Corporate/Other results reflect after-tax restructuring-related charges of $333 million, $664 million, $18 million, and $31 million, respectively. (3) Reclassified to conform to the 1999 presentation, including changes in capital and tax allocations among the segments. (4) Includes provisions for benefits, claims, and credit losses in the Global Consumer results of $7.6 billion, $7.0 billion, and $6.3 billion, and in the Global Corporate and Investment Bank results of $3.9 billion, $4.2 billion, and $3.7 billion for 1999, 1998, and 1997, respectively. 4. INVESTMENTS In Millions of Dollars at Year-End 1999 1998 - -------------------------------------------------------------------------------- Fixed maturities, primarily available for sale at fair value $ 95,849 $ 91,547 Equity securities, primarily at fair value 7,795 4,574 Venture capital, at fair value 4,160 3,297 Short-term and other 5,322 5,758 - -------------------------------------------------------------------------------- $113,126 $105,176 ================================================================================ The amortized cost and fair value of investments in fixed maturities and equity securities at December 31, were as follows:
1999 ----------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair In Millions of Dollars at Year-End Cost Gains Losses Value - --------------------------------------------------------------------------------------------------------- Fixed maturity securities held to maturity, principally mortgage-backed securities $ 33 $ 3 $ -- $ 36 - --------------------------------------------------------------------------------------------------------- Fixed maturity securities available for sale Mortgage-backed securities, principally obligations of U.S. Federal agencies $14,165 $ 55 $ 485 $13,735 U.S. Treasury and Federal agency 7,082 36 120 6,998 State and municipal 13,733 255 499 13,489 Foreign government 25,565 522 326 25,761 U.S. corporate 24,386 200 698 23,888 Other debt securities(1) 9,083 3,015 153 11,945 - --------------------------------------------------------------------------------------------------------- $94,014 $4,083 $ 2,281 $95,816 ========================================================================================================= Equity securities(1)(2) $ 5,594 $2,404 $ 203 $ 7,795 - --------------------------------------------------------------------------------------------------------- Fixed maturity securities available for sale include: Government of Brazil Brady Bonds $ 688 $ 302 $ -- $ 990 Government of Venezuela Brady Bonds 422 -- 91 331 ========================================================================================================= 1998 ----------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair In Millions of Dollars at Year-End Cost Gains Losses Value - --------------------------------------------------------------------------------------------------------- Fixed maturity securities held to maturity, principally mortgage-backed securities $ 30 $ 6 $ -- $ 36 - --------------------------------------------------------------------------------------------------------- Fixed maturity securities available for sale Mortgage-backed securities, principally obligations of U.S. Federal agencies $12,646 $ 350 $ 14 $12,982 U.S. Treasury and Federal agency 5,250 455 4 5,701 State and municipal 13,714 799 227 14,286 Foreign government 26,444 424 600 26,268 U.S. corporate 23,424 1,213 302 24,335 Other debt securities(1) 7,669 354 78 7,945 - --------------------------------------------------------------------------------------------------------- $89,147 $3,595 $ 1,225 $91,517 ========================================================================================================= Equity securities(1)(2) $ 4,528 $ 311 $ 265 $ 4,574 - --------------------------------------------------------------------------------------------------------- Fixed maturity securities available for sale include: Government of Brazil Brady Bonds $ 660 $ 26 $ -- $ 686 Government of Venezuela Brady Bonds 478 -- 174 304 =========================================================================================================
(1) Investments in convertible debt and common stock of Nikko Securities, Inc., are included in other debt securities and equity securities, respectively. (2) Includes non-marketable equity securities carried at cost which are reported in both the amortized cost and fair value columns. 55 The accompanying table shows components of interest and dividends on investments, realized gains and losses from sales of investments, and net gains on investments held by venture capital subsidiaries. In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Taxable interest $6,770 $6,000 $5,486 Interest exempt from U.S. federal income tax 684 636 496 Dividends 250 159 144 - -------------------------------------------------------------------------------- Gross realized investments gains(1) $1,273 $1,507 $1,414 Gross realized investments losses(1) 716 667 419 - -------------------------------------------------------------------------------- Net realized and unrealized venture capital gains $ 816 $ 487 $ 749 which included: Gross unrealized gains 999 709 612 Gross unrealized losses 587 412 82 ================================================================================ (1) Includes net realized gains related to insurance subsidiaries sale of OREO and mortgage loans of $215 million, $67 million, and $86 million in 1999, 1998, and 1997, respectively. The following table presents the amortized cost, fair value, and average yield on amortized cost of fixed maturity securities by contractual maturity dates as of December 31, 1999: Amortized Fair In Millions of Dollars Cost Value Yield - ------------------------------------------------------------------------------ U.S. treasury and federal agency(1) Due within 1 year $ 2,980 $ 2,981 5.23% After 1 but within 5 years 1,460 1,437 5.55 After 5 but within 10 years 2,167 2,142 6.65 After 10 years(2) 11,422 11,126 6.90 - ------------------------------------------------------------------------------ Total $18,029 $17,686 6.48 ============================================================================== State and municipal Due within 1 year $ 80 $ 79 5.00% After 1 but within 5 years 886 904 5.76 After 5 but within 10 years 2,831 2,859 5.33 After 10 years(2) 9,936 9,647 5.62 - ------------------------------------------------------------------------------ Total $13,733 $13,489 5.56 ============================================================================== All other(3) Due within 1 year $13,923 $12,774 7.30% After 1 but within 5 years 23,940 28,012 9.86 After 5 but within 10 years 11,730 11,423 7.58 After 10 years(2) 12,692 12,468 7.66 - ------------------------------------------------------------------------------ Total $62,285 $64,677 8.41 ============================================================================== (1) Includes mortgage-backed securities of U.S. federal agencies. (2) Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment rights. (3) Includes foreign government, U.S. corporate, mortgage-backed securities issued by U.S. corporations, and other debt securities. Yields reflect the impact of local interest rates prevailing in countries outside the U.S. 5. FEDERAL FUNDS, SECURITIES BORROWED, LOANED, AND SUBJECT TO REPURCHASE AGREEMENTS Federal funds sold and securities borrowed or purchased under agreements to resell, at their respective carrying values, consisted of the following at December 31: In Millions of Dollars 1999 1998 - -------------------------------------------------------------------------------- Federal funds sold and resale agreements $76,675 $45,439 Deposits paid for securities borrowed 35,980 49,392 - -------------------------------------------------------------------------------- $112,655 $94,831 ================================================================================ Federal funds purchased and securities loaned or sold under agreements to repurchase, at their respective carrying values, consisted of the following at December 31: In Millions of Dollars 1999 1998 - -------------------------------------------------------------------------------- Federal funds purchased and repurchase agreements $81,375 $71,399 Deposits received for securities loaned 11,216 9,626 - -------------------------------------------------------------------------------- $92,591 $81,025 ================================================================================ The resale and repurchase agreements represent collateralized financing transactions used to generate net interest income and facilitate trading activity. These instruments are collateralized principally by government and government agency securities and generally have terms ranging from overnight to up to a year. It is the Company's policy to take possession of the underlying collateral, monitor its market value relative to the amounts due under the agreements, and, when necessary, require prompt transfer of additional collateral or reduction in the loan balance in order to maintain contractual margin protection. In the event of counterparty default, the financing agreement provides the Company with the right to liquidate the collateral held. Resale agreements and repurchase agreements are reported net by counterparty, when applicable, pursuant to FASB Interpretation 41, "Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements" (FIN 41). Excluding the impact of FIN 41, resale agreements totaled $122.4 billion and $100.2 billion at December 31, 1999 and 1998, respectively. Deposits paid for securities borrowed (securities borrowed) and deposits received for securities loaned (securities loaned) are recorded at the amount of cash advanced or received and are collateralized principally by government and government agency securities, corporate debt and equity securities. Securities borrowed transactions require the Company to deposit cash with the lender. With respect to securities loaned, the Company receives cash collateral in an amount generally in excess of the market value of securities loaned. The Company monitors the market value of securities borrowed and securities loaned daily, and additional collateral is obtained as necessary. Securities borrowed and securities loaned are reported net by counterparty, when applicable, pursuant to FIN 41. Excluding the impact of FIN 41, securities borrowed totaled $36.0 billion and $50.2 billion at December 31, 1999 and 1998, respectively. 56 6. BROKERAGE RECEIVABLES AND BROKERAGE PAYABLES The Company has receivables and payables for financial instruments purchased from and sold to brokers and dealers and customers. The Company is exposed to risk of loss from the inability of brokers and dealers or customers to pay for purchases or to deliver the financial instrument sold, in which case the Company would have to sell or purchase the financial instruments at prevailing market prices. Credit risk is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transaction. The Company seeks to protect itself from the risks associated with customer activities by requiring customers to maintain margin collateral in compliance with regulatory and internal guidelines. Margin levels are monitored daily, and customers deposit additional collateral as required. Where customers cannot meet collateral requirements, the Company will liquidate sufficient underlying financial instruments to bring the customer into compliance with the required margin level. Exposure to credit risk is impacted by market volatility, which may impair the ability of clients to satisfy their obligations to the Company. Credit limits are established and closely monitored for customers and brokers and dealers engaged in forward and futures and other transactions deemed to be credit-sensitive. Brokerage receivables and brokerage payables, which arise in the normal course of business, consisted of the following at December 31: In Millions of Dollars 1999 1998 - -------------------------------------------------------------------------------- Receivables from customers $20,451 $14,075 Receivables from brokers, dealers and clearing organizations 2,522 7,338 - -------------------------------------------------------------------------------- Total brokerage receivables $22,973 $21,413 ================================================================================ Payables to customers $12,323 $13,153 Payables to brokers, dealers, and clearing organizations 3,421 7,902 - -------------------------------------------------------------------------------- Total brokerage payables $15,744 $21,055 ================================================================================ 7. TRADING ACCOUNT ASSETS AND LIABILITIES Trading account assets and liabilities at market value consisted of the following at December 31: In Millions of Dollars 1999 1998 - -------------------------------------------------------------------------------- Trading Account Assets U.S. Treasury and Federal agency securities $ 25,865 $ 24,729 State and municipal securities 2,121 3,165 Foreign government securities 9,243 21,240 Corporate and other debt securities 13,858 12,595 Derivative and other contractual commitments(1) 31,646 37,431 Equity securities 11,910 7,291 Mortgage loans and collateralized mortgage securities 5,663 6,082 Other 8,849 7,312 - -------------------------------------------------------------------------------- $109,155 $119,845 ================================================================================ Trading Account Liabilities Securities sold, not yet purchased $ 52,051 $ 53,228 Derivative and other contractual commitments(1) 39,053 41,356 - -------------------------------------------------------------------------------- $ 91,104 $ 94,584 ================================================================================ (1) Net of master netting agreements and securitization. The average fair value of derivative and other contractual commitments in trading account assets during 1999 and 1998 was $36.8 billion and $39.6 billion, respectively. The average fair value of derivative and other contractual commitments in trading account liabilities during 1999 and 1998 was $38.9 billion and $39.4 billion, respectively. See Note 22 for a discussion of trading securities, commodities, derivatives and related risks. 8. PRINCIPAL TRANSACTIONS REVENUES Principal transactions revenues, consisting of realized and unrealized gains and losses from trading activities, were as follows for the years ended December 31: In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Salomon Smith Barney(1) Fixed income(2) $1,378 $(869) $1,882 Equities(3) 954 536 397 Commodities(4) 192 205 218 Other 38 15 7 - -------------------------------------------------------------------------------- 2,562 (113) 2,504 - -------------------------------------------------------------------------------- Global Corporate Bank Foreign exchange(5) 1,025 1,187 876 Derivatives(6) 771 379 259 Fixed income(7) 43 (57) 124 Other 165 (1) 153 - -------------------------------------------------------------------------------- 2,004 1,508 1,412 - -------------------------------------------------------------------------------- Global Consumer and other 594 385 315 - -------------------------------------------------------------------------------- Total principal transactions revenues $5,160 $1,780 $4,231 ================================================================================ (1) Includes SSB Asset Management principal transactions revenues. (2) Includes revenues from government securities and corporate debt, municipal securities, preferred stock, mortgage securities, and other debt instruments. Also includes spot and forward trading of currencies and exchange-traded and over-the-counter (OTC) currency options, options on fixed income securities, interest rate swaps, currency swaps, swap options, caps and floors, financial futures, OTC options, forward contracts on fixed income securities, and revenues related to fixed income securities utilized in arbitrage strategies. (3) Includes revenues from common and convertible preferred stock, convertible corporate debt, equity-linked notes, and exchange-traded and OTC equity options and warrants. Also includes revenues on equity securities and related derivatives utilized in arbitrage strategies. (4) Includes revenues from the results of Phibro Inc. (Phibro), which trades crude oil, refined oil products, natural gas, electricity, metals, and other commodities. (5) Includes revenues from foreign exchange spot, forward, and option contracts. (6) Includes revenues from interest rate and currency swaps, options, financial futures, and equity and commodity contracts. (7) Includes revenues from government and corporate debt, mortgage assets, and other debt instruments. 57 9. LOANS In Millions of Dollars at Year-End 1999 1998 - ------------------------------------------------------------------------------- Consumer In U.S. offices Mortgage and real estate(1)(2) $ 37,261 $ 29,962 Installment, revolving credit, and other 51,570 47,869 - ------------------------------------------------------------------------------- 88,831 77,831 - ------------------------------------------------------------------------------- In offices outside the U.S. Mortgage and real estate(1)(3) 21,529 19,456 Installment, revolving credit, and other 39,306 36,048 Lease financing 475 484 - ------------------------------------------------------------------------------- 61,310 55,988 - ------------------------------------------------------------------------------- 150,141 133,819 Unearned income (1,426) (1,564) - ------------------------------------------------------------------------------- Consumer loans, net of unearned income $ 148,715 $ 132,255 =============================================================================== Commercial In U.S. offices Commercial and industrial(4) $ 13,697 $ 12,452 Mortgage and real estate(1) 3,659 5,344 Lease financing 3,392 2,951 - ------------------------------------------------------------------------------- 20,748 20,747 - ------------------------------------------------------------------------------- In offices outside the U.S. Commercial and industrial(4) 60,652 55,828 Mortgage and real estate(1) 1,728 1,792 Loans to financial institutions 7,692 8,008 Governments and official institutions 3,250 2,132 Lease financing 1,648 1,386 - ------------------------------------------------------------------------------- 74,970 69,146 - ------------------------------------------------------------------------------- 95,718 89,893 Unearned income (227) (190) - ------------------------------------------------------------------------------- Commercial loans, net of unearned income $ 95,491 $ 89,703 =============================================================================== (1) Loans secured primarily by real estate. (2) Includes $3.4 billion in 1999 and $3.3 billion in 1998 of commercial real estate loans related to community banking and private banking activities. (3) Includes $2.9 billion in 1999 and $2.4 billion in 1998 of loans secured by commercial real estate. (4) Includes loans not otherwise separately categorized. The following table presents information about impaired loans. Impaired loans are those on which Citigroup believes it is not probable that it will be able to collect all amounts due according to the contractual terms of the loan, excluding smaller-balance homogeneous loans that are evaluated collectively for impairment, and are carried on a cash basis. Valuation allowances for these loans are estimated considering all available evidence including, as appropriate, the present value of the expected cash flows discounted at the loan's contractual effective rate, the secondary market value of the loan, the fair value of collateral, and environmental factors. Amounts for 1998 have been adjusted to a basis consistent with 1999. In Millions of Dollars at Year-End 1999 1998 - -------------------------------------------------------------------------------- Impaired commercial loans $1,326 $1,536 Other impaired loans(1) 185 218 - -------------------------------------------------------------------------------- Total impaired loans(2) $1,511 $1,754 ================================================================================ Impaired loans with valuation allowances $1,156 $1,210 Total valuation allowances(3) 344 360 ================================================================================ During the year(4): Average balance of impaired loans $1,689 $1,498 Interest income recognized on impaired loans 75 68 ================================================================================ (1) Primarily commercial real estate loans related to community and private banking activities. (2) At year-end 1999, approximately 23% of these loans were measured for impairment using the fair value of the collateral, with the remaining 77% measured using the present value of the expected future cash flows, discounted at the loan's effective interest rate, compared with approximately 31% and 69%, respectively, at year-end 1998. (3) Included in the allowance for credit losses. (4) For the year ended December 31, 1997, the average balance of impaired loans was $1.2 billion and interest income recognized on impaired loans was $62 million. 10. ALLOWANCE FOR CREDIT LOSSES In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Allowance for credit losses at beginning of year $6,617 $6,137 $5,743 Additions Consumer provision for credit losses 2,489 2,367 2,225 Commercial provision for credit losses 348 384 (28) - ------------------------------------------------------------------------------- Total provision for credit losses 2,837 2,751 2,197 - ------------------------------------------------------------------------------- Deductions Consumer credit losses 2,950 2,735 2,604 Consumer credit recoveries (539) (497) (507) - ------------------------------------------------------------------------------- Net consumer credit losses 2,411 2,238 2,097 - ------------------------------------------------------------------------------- Commercial credit losses 524 576 191 Commercial credit recoveries (117) (170) (219) - ------------------------------------------------------------------------------- Net commercial credit losses (recoveries) 407 406 (28) - ------------------------------------------------------------------------------- Other--net(1) 43 373 266 - ------------------------------------------------------------------------------- Allowance for credit losses at end of year $6,679 $6,617 $6,137 =============================================================================== (1) In 1999, primarily includes the addition of allowance for credit losses related to acquisitions and foreign currency translation effects. In 1998, reflects the addition of $320 million of credit loss reserves related to the acquisition of the Universal Card portfolio. In 1997, $373 million was restored to the allowance for credit losses that had previously been attributed to credit card securitization transactions where the exposure to credit losses was contractually limited to the cash flows from the securitized receivables, $50 million attributable to standby letters of credit and guarantees was reclassified to other liabilities, and $50 million attributable to derivative and foreign exchange contracts was reclassified as a deduction from trading account assets. 58 11. DEBT Investment Banking and Brokerage Borrowings Investment banking and brokerage borrowings and the corresponding weighted average interest rates at December 31 are as follows: 1999 1998 ----------------- ------------------ Weighted Weighted Average Average Interest Interest In Millions of Dollars Balance Rate Balance Rate - ------------------------------------------------------------------------------- Commercial paper $12,578 6.0% $10,493 5.3% Bank borrowings 536 5.8% 556 5.1% Other 605 2,991 - ------------------------------------------------------------------------------- $13,719 $14,040 =============================================================================== Investment banking and brokerage borrowings are short-term in nature and include commercial paper, bank borrowings and other borrowings used to finance SSB's operations, including the securities settlement process. Outstanding bank borrowings include both U.S. dollar and non-U.S. dollar denominated loans. The non-U.S. dollar loans are denominated in multiple currencies including the Japanese yen, British pound, and European Monetary Unit. All commercial paper outstanding at December 31, 1999 and 1998 was U.S. dollar denominated. At December 31, 1999, Salomon Smith Barney Holdings Inc. (Salomon Smith Barney) had a $1.5 billion revolving credit agreement with a bank syndicate that extends through May 2001, and a $3.5 billion, 364-day revolving credit agreement that extends through May 2000. Salomon Smith Barney may borrow under its revolving credit facilities at various interest rate options (LIBOR, CD, or base rate) and compensates the banks for the facilities through commitment fees. Under these facilities SSB is required to maintain a certain level of consolidated adjusted net worth (as defined in the agreements). At December 31, 1999, this requirement was exceeded by approximately $3.5 billion. At December 31, 1999, there were no borrowings outstanding under either facility. Salomon Smith Barney also has substantial borrowing arrangements consisting of facilities that it has been advised are available, but where no contractual lending obligation exists. Short-Term Borrowings At December 31, short-term borrowings consisted of commercial paper and other borrowings with weighted average interest rates as follows: 1999 1998 ----------------- ------------------ Weighted Weighted In Millions of Dollars Balance Average Balance Average - ------------------------------------------------------------------------------- Commercial paper Citigroup $ -- --% $ 991 5.40% Citicorp 5,027 6.12 3,040 5.36 - ------------------------------------------------------------------------------- 5,027 4,031 Other borrowings 12,059 8.28 12,081 12.14 - ------------------------------------------------------------------------------- $17,086 $16,112 =============================================================================== Citigroup, Citicorp, TAP, and TIC issue commercial paper directly to investors. CitiFinancial Credit Company (CCC), which had previously issued commercial paper, became an indirect subsidiary of Citicorp on August 4,1999 and, thereafter, ceased such issuance. Citigroup and Citicorp, both of which are bank holding companies, maintain combined liquidity reserves of cash, securities, and unused bank lines of credit at least equal to their combined outstanding commercial paper. TAP and TIC each maintains unused credit availability under their bank lines of credit at least equal to the amount of outstanding commercial paper. Borrowings under bank lines of credit may be at interest rates based on LIBOR, CD rates, the prime rate or bids submitted by the banks. Each company pays its banks commitment fees for its lines of credit. Citicorp, Salomon Smith Barney, and some of their nonbank subsidiaries have credit facilities with Citicorp's subsidiary banks, including Citibank, N.A. Borrowings under these facilities must be secured in accordance with Section 23A of the Federal Reserve Act. Citigroup and TIC have an agreement with a syndicate of banks to provide $1.0 billion of revolving credit, to be allocated to Citigroup and TIC. The participation of TIC in this agreement is limited to $250 million. The revolving credit facility consists of a five-year revolving credit facility that expires in June 2001. At December 31, 1999, all of the facility was allocated to Citigroup. Under this facility the Company is required to maintain a certain level of consolidated stockholders' equity (as defined in the agreement). The Company exceeded this requirement by approximately $30.6 billion at December 31, 1999. Citigroup also has $300 million in 364-day facilities that expire in the third quarter of 2000. At December 31, 1999, there were no borrowings outstanding under either of these facilities. At December 31, 1999, CCC had committed and available revolving credit facilities of $3.4 billion, consisting of five-year facilities which expire in 2002. At December 31, 1999, there were no borrowings outstanding under these facilities. In connection with the August 4,1999 reorganization of CCC as a subsidiary of Citicorp, Citicorp guaranteed various debt obligations of CCC, including those arising under these facilities. Under this facility Citicorp is required to maintain a certain level of consolidated stockholder's equity (as defined in the agreement). At December 31, 1999, this requirement was exceeded by approximately $10.3 billion. TAP has a five-year revolving credit facility in the amount of $250 million with a syndicate of banks that expires in December 2001. Under this facility TAP is required to maintain a certain level of consolidated stockholders' equity (as defined in the agreement). At December 31, 1999, this requirement was exceeded by approximately $4.8 billion. At December 31, 1999, there were no borrowings outstanding under this facility. 59 Long-Term Debt At December 31, long-term debt was as follows: Weighted Average In Millions of Dollars Coupon Maturities 1999 1998 - -------------------------------------------------------------------------------- Citigroup Inc. Senior Notes(1) 6.52% 2000-2028 $ 4,181 $ 2,422 Salomon Smith Barney Holdings Inc. Senior Notes 6.02% 2000-2026 17,970 19,092 Citicorp Senior Notes 7.39% 2000-2025 16,708 17,515 Subordinated Notes 6.92% 2000-2035 7,360 8,359 Travelers Property Casualty Corp. Senior Notes 6.99% 2001-2026 850 1,250 The Travelers Insurance Group Inc.(2) 23 33 - -------------------------------------------------------------------------------- Senior Notes 39,709 40,279 Subordinated Notes 7,360 8,359 Other 23 33 - -------------------------------------------------------------------------------- Total $47,092 $48,671 ================================================================================ (1) Also includes $250 million of notes maturing in 2098. (2) Principally 12% GNMA/FNMA-collateralized obligations. The Company issues both U.S. dollar and non-U.S. dollar denominated fixed and variable rate debt. The Company utilizes derivative contracts, primarily interest rate swaps, to effectively convert a portion of its fixed rate debt to variable rate debt. The maturity structure of the derivatives generally corresponds with the maturity structure of the debt being hedged. At December 31, 1999, the Company entered into interest rate swaps to convert $21.1 billion of its $29.9 billion of fixed rate debt to variable rate obligations. At December 31, 1999, the Company's overall weighted average interest rate for long-term debt was 6.71% on a contractual basis and 6.51% including the effects of derivative contracts. In addition, the Company utilizes other derivative contracts to manage the foreign exchange impact of certain debt issuances. Aggregate annual maturities on long-term debt obligations (based on final maturity dates) are as follows:
In Millions of Dollars 2000 2001 2002 2003 2004 Thereafter - -------------------------------------------------------------------------------------------- Citigroup Inc. $ 650 $ -- $ 300 $ -- $ 750 $ 2,481 Salomon Smith Barney Holdings Inc. 3,508 2,731 3,571 3,334 1,635 3,191 Citicorp 3,849 3,350 3,516 2,572 1,519 9,262 Travelers Property Casualty Corp. -- 500 -- -- -- 350 The Travelers Insurance Group Inc. -- -- -- -- -- 23 - -------------------------------------------------------------------------------------------- $8,007 $6,581 $7,387 $5,906 $3,904 $15,307 ============================================================================================
12. INSURANCE POLICY AND CLAIMS RESERVES At December 31, insurance policy and claims reserves consisted of the following: In Millions of Dollars 1999 1998 - -------------------------------------------------------------------------------- Benefit and loss reserves: Property-casualty(1) $28,055 $28,624 Accident and health 920 803 Life and annuity 9,400 9,398 Unearned premiums 4,949 4,702 Policy and contract claims 498 463 - -------------------------------------------------------------------------------- $43,822 $43,990 ================================================================================ (1) Included at December 31, 1999 and 1998 are $1.5 billion and $1.3 billion, respectively, of reserves related to workers' compensation that have been discounted using an interest rate of 5%. 60 The following table is a reconciliation of beginning and ending property-casualty reserve balances for claims and claim adjustment expenses for the years ended December 31:
In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------------------------------ Claims and claim adjustment expense reserves at beginning of year $28,624 $29,343 $29,967 Less reinsurance recoverables on unpaid losses 7,861 7,937 8,151 - ------------------------------------------------------------------------------------------------------ Net balance at beginning of year 20,763 21,406 21,816 - ------------------------------------------------------------------------------------------------------ Provision for claims and claim adjustment expenses for claims arising in current year 6,194 6,057 5,730 Estimated claims and claim adjustment expenses for claims arising in prior years (242) (323) (492) - ------------------------------------------------------------------------------------------------------ Total increases 5,952 5,734 5,238 - ------------------------------------------------------------------------------------------------------ Claims and claim adjustment expense payments for claims arising in: Current year 2,573 2,352 1,944 Prior years 4,159 4,025 3,704 - ------------------------------------------------------------------------------------------------------ Total payments 6,732 6,377 5,648 - ------------------------------------------------------------------------------------------------------ Net balance at end of year 19,983 20,763 21,406 Plus reinsurance recoverables on unpaid losses 8,072 7,861 7,937 - ------------------------------------------------------------------------------------------------------ Claims and claim adjustment expense reserves at end of year $28,055 $28,624 $29,343 ======================================================================================================
The decreases in the claims and claim adjustment expense reserves in 1999 and 1998, from 1998 and 1997, respectively, were primarily attributable to net payments of $504 million and $663 million, respectively, for environmental and cumulative injury claims. In 1999, estimated claims and claim adjustment expenses for claims arising in prior years included approximately $205 million primarily relating to net favorable development in certain Personal Lines coverages, predominantly automobile coverages, and in certain Commercial Lines coverages, predominantly in the general liability and commercial multi-peril lines of business. In addition, in 1999 Commercial Lines experienced favorable loss development on loss sensitive policies in the workers' compensation line; however, since the business to which it relates is subject to premium adjustments, there was no impact on results of operations. In 1998, estimated claims and claim adjustment expenses for claims arising in prior years included approximately $176 million primarily relating to net favorable developments in certain Personal Lines coverages, predominantly automobile coverages. In addition, in 1998 Commercial Lines experienced favorable prior-year loss development on loss sensitive policies in the workers' compensation line; however, since the business to which it relates is subject to premium adjustments, there was no impact on results of operations. In 1997, estimated claims and claim adjustment expenses for claims arising in prior years included $154 million of net favorable development in certain Personal Lines coverages and Commercial Lines coverages, predominantly automobile coverages. In addition, in 1997 Commercial Lines experienced $122 million of favorable prior-year loss development in the workers' compensation line; however, since the business to which it relates is subject to premium adjustments, there was no impact on results of operations. Also in 1997, the Company adopted newly prescribed statutory allocations of certain claim adjustment expenses. The new allocations resulted in favorable prior-year loss development of $216 million offset by an increase in the current accident year provision of the same amount. The property-casualty claims and claim adjustment expense reserves include $1.503 billion and $1.818 billion for asbestos and environmental-related claims net of reinsurance at December 31,1999 and 1998, respectively. It is difficult to estimate the reserves for environmental and asbestos-related claims due to the vagaries of court coverage decisions, plaintiffs' expanded theories of liability, the risks inherent in major litigation and other uncertainties. Conventional actuarial techniques are not used to estimate such reserves. For environmental claims, the Company estimates its financial exposure and establishes reserves based upon an analysis of its historical claim experience and the facts of the individual underlying claims. The unique facts presented in each claim are evaluated individually and collectively. Due consideration is given to the many variables presented in each claim. The following factors are evaluated in projecting the ultimate reserve for asbestos-related claims: available insurance coverage; limits and deductibles; an analysis of each policyholder's potential liability; jurisdictional involvement; past and projected future claim activity; past settlement values of similar claims; allocated claim adjustment expense; potential role of other insurance, and applicable coverage defenses, if any. Once the gross ultimate exposure for indemnity and allocated claim adjustment expense is determined for a policyholder by policy year, a ceded projection is calculated based on any applicable facultative and treaty reinsurance and past ceded experience. As a result of these processes and procedures, the reserves carried for environmental and asbestos claims at December 31, 1999 are the Company's best estimate of ultimate claims and claim adjustment expenses, based upon known facts and current law. However, the conditions surrounding the final resolution of these claims continue to change. Currently, it is not possible to predict changes in the legal and legislative environment and their impact on the future development of asbestos and environmental claims. Such development will be impacted by future court decisions and interpretations as well as changes in legislation applicable to such claims. Because of these future unknowns, additional liabilities may arise for amounts in excess of the current reserves. These additional amounts, or a range of these additional amounts, cannot now be reasonably estimated, and could result in a liability exceeding reserves by an amount that would be material to the Company's operating results in a future period. However, the Company believes that it is not likely that these claims will have a material adverse effect on the Company's financial condition or liquidity. The Company has a geographic exposure to catastrophe losses in certain areas of the country. Catastrophes can be caused by various events including hurricanes, windstorms, earthquakes, hail, severe winter weather, explosions and fires, and the incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophes are restricted to small geographic areas; however, hurricanes and earthquakes may produce significant damage in large, heavily populated areas. The Company generally seeks to reduce its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance. 61 13. REINSURANCE The Company's insurance operations participate in reinsurance in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and effect business-sharing arrangements. Life reinsurance is accomplished through various plans of reinsurance, primarily coinsurance, modified coinsurance and yearly renewable term. Property-casualty reinsurance is placed on both a quota-share and excess of loss basis. The property-casualty insurance subsidiaries also participate as a servicing carrier for, and a member of, several pools and associations. Reinsurance ceded arrangements do not discharge the insurance subsidiaries as the primary insurer, except for cases involving a novation. Reinsurance amounts included in the Consolidated Statement of Income for the years ended December 31 were as follows: Gross Net In Millions of Dollars Amount Ceded Amount - -------------------------------------------------------------------------------- 1999 Premiums Property-casualty insurance $ 9,795 $ (1,620) $ 8,175 Life insurance 2,190 (314) 1,876 Accident and health insurance 444 (54) 390 - -------------------------------------------------------------------------------- $ 12,429 $ (1,988) $10,441 ================================================================================ Claims incurred $ 9,510 $ (1,815) $ 7,695 ================================================================================ 1998 Premiums Property-casualty insurance $ 9,579 $ (1,689) $ 7,890 Life insurance 1,915 (304) 1,611 Accident and health insurance 410 (61) 349 - -------------------------------------------------------------------------------- $ 11,904 $ (2,054) $ 9,850 ================================================================================ Claims incurred $ 9,024 $ (1,560) $ 7,464 ================================================================================ 1997 Premiums Property-casualty insurance $ 9,045 $ (1,751) $ 7,294 Life insurance 1,669 (279) 1,390 Accident and health insurance 373 (62) 311 - -------------------------------------------------------------------------------- $ 11,087 $ (2,092) $ 8,995 ================================================================================ Claims incurred $ 8,226 $ (1,357) $ 6,869 ================================================================================ Reinsurance recoverables, net of valuation allowance, at December 31 include amounts recoverable on unpaid and paid losses and were as follows: In Millions of Dollars 1999 1998 - -------------------------------------------------------------------------------- Life business $1,228 $1,303 Property-casualty business: Pools and associations 2,781 3,070 Other reinsurance 5,695 5,119 - -------------------------------------------------------------------------------- Total $9,704 $9,492 ================================================================================ 14. RESTRUCTURING-RELATED ITEMS AND MERGER-RELATED COSTS In Millions of Dollars 1999 1998 1997 - -------------------------------------------------------------------------------- Restructuring charges $ 131 $ 1,122 $1,718 Changes in estimates (401) (392) -- Merger-related costs -- 65 -- Accelerated depreciation 182 -- -- - -------------------------------------------------------------------------------- Total $ (88) $ 795 $1,718 ================================================================================ During 1999, Citigroup recorded restructuring charges of $131 million, including additional severance charges of $49 million as a result of the continuing implementation of 1998 restructuring initiatives, as well as $82 million of exit costs associated with new initiatives in the Global Consumer business primarily related to the reconfiguration of certain branch operations outside the U.S., the downsizing of certain marketing operations, and the exit of a non-strategic business. These initiatives will be fully implemented during 2000. The charge included $62 million related to employee severance, $14 million related to exiting leasehold and other contractual obligations, and $6 million related to the write-down to estimated salvage value of assets available for immediate disposal. The $62 million portion of the charge related to employee severance reflects the costs of eliminating approximately 750 positions. In 1998, Citigroup recorded a restructuring charge of $1.122 billion, reflecting exit costs associated with business improvement and integration initiatives to be implemented over a 12 to 18 month period. The charge included $760 million related to employee severance for the elimination of approximately 11,900 positions, after considering attrition and redeployment within the Company. Approximately 4,200 of these positions related to the United States. The overall workforce reduction, net of anticipated rehires to fill relocated positions, is expected to be approximately 10,400 positions worldwide. The charge also included $327 million related to exiting leasehold and other contractual obligations, and $35 million related to the write-down to estimated salvage value of assets that were available for immediate disposal. Also recorded in the 1998 fourth quarter were $65 million of merger-related costs which included the direct and incremental costs of administratively closing the Citicorp merger. The implementation of these restructuring initiatives also caused certain related premises and equipment assets to become redundant. The remaining depreciable lives of these assets were shortened, and accelerated depreciation charges of $182 million (in addition to normal scheduled depreciation on those assets) were recognized over the shortened lives in 1999. Of the $1.122 billion charge, $642 million in the Global Consumer business included regional consolidation of call centers and other back office functions worldwide, reduction of management layers, sales force restructuring, integration of overlapping marketing and product management groups, and exiting several non-strategic operations; $324 million in the Global Corporate and Investment Bank business included rationalization of operations in countries with multiple operations, consolidation of Citibank and Salomon Smith Barney locations, integration of trading platforms, and exiting non-strategic businesses; $87 million in the Global Investment Management and Private Banking business included elimination of redundancies; and the remaining $69 million included 62 streamlining and integration of Corporate and other staff functions. Approximately $507 million of the $1.122 billion charge related to operations in the United States. In 1997, Citigroup recorded restructuring charges of $1.718 billion, con sisting of an $880 million restructuring charge related to cost-management programs and customer service initiatives to improve operational efficiency and productivity in the Citicorp businesses, and an $838 million charge related to the Salomon Merger. The Citicorp charge included $487 million for severance benefits (associated with approximately 9,000 positions expected to be reduced), $245 million related to write-downs of equipment and premises which management committed to dispose of, and $148 million of lease termination and other exit costs. The Salomon Smith Barney charge included $161 million for severance benefits (associated with approximately 1,900 positions expected to be reduced), $663 million of costs associated with the planned abandonment of certain facilities, premises, and other assets, principally those related to the Seven World Trade Center lease, and $14 million of other costs related directly to the Salomon Merger. The status of the 1999, 1998, and 1997 restructuring initiatives is summarized in the following table: Restructuring Reserve Activity Restructuring Initiatives -------------------------------------------- 1999 1998 1997 1997 In Millions of Dollars Citigroup Citigroup SSB Citicorp - ------------------------------------------------------------------------------- Original charges $82 $1,122 $838 $880 Additional charges -- 49 -- -- -------------------------------------------- 82 1,171 838 880 -------------------------------------------- Utilization(1) 1999 (31) (744) (99) (165) 1998 -- (69) (158) (357) 1997 -- -- (13) (284) -------------------------------------------- (31) (813) (270) (806) -------------------------------------------- Changes in estimates 1999 -- (151) (214) (36) 1998 -- -- (354) (38) -------------------------------------------- -- (151) (568) (74) - ------------------------------------------------------------------------------- Reserve balance at December 31, 1999 $51 $ 207 $ -- $ -- =============================================================================== (1) Utilization amounts include translation effects on the restructuring reserve. The 1999 restructuring reserve utilization included $6 million related to the write-down to estimated salvage value of assets available for immediate disposal and $25 million that is legally obligated. At December 31, 1999, approximately 60 gross staff positions have been eliminated under these programs. The 1998 restructuring reserve utilization included $35 million of non-cash charges for equipment and premises write-downs as well as $743 million of severance and other exit costs, occurring primarily in 1999 (of which $382 million related to employee severance and $146 million related to leasehold and other exit costs have been paid in cash and $215 million is legally obligated), together with translation effects. Through December 31, 1999, approximately 5,900 gross staff positions have been eliminated under these programs, occurring primarily in 1999. The utilization of 1997 restructuring reserves included $314 million of non-cash charges for equipment and premises write-downs as well as $751 million of severance and other exit costs (of which $499 million related to employee severance and $184 million related to leasehold and other exit costs have been paid in cash and $68 million is legally obligated), together with translation effects. Approximately 7,300 gross staff positions have been eliminated under these programs, including 1,700 positions in 1999, 4,950 positions in 1998, and 650 positions in 1997. Changes in estimates are attributable to facts and circumstances arising subsequent to an original restructuring charge. During 1999, changes in estimates resulted in a $151 million reduction in the reserve for 1998 restructuring initiatives, attributable to lower than anticipated costs of implementing certain projects and a reduction in the scope of certain initiatives. Changes in estimates related to the 1997 restructuring initiatives included $568 million of reductions related to the Salomon Smith Barney reserve, primarily related to the Seven World Trade Center lease, and $74 million related to the Citicorp reserve. Adjustments related to the Seven World Trade Center lease during 1999 were attributable to the reassessment of space needed due to the Citicorp merger, which indicated the need for increased occupancy and the utilization of space previously considered excessive; adjustments during 1998 resulted from negotiations on a sublease which indicated that excess space could be disposed of on terms more favorable than had been originally estimated. Other changes in estimates are attributable to lower severance costs due to higher than anticipated levels of attrition and redeployment within the Company, and other unforeseen changes including those resulting from the Citicorp merger. 15. INCOME TAXES In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Current Federal $2,911 $2,081 $3,259 Foreign 1,961 1,022 1,539 State 346 325 465 - ------------------------------------------------------------------------------- 5,218 3,428 5,263 - ------------------------------------------------------------------------------- Deferred Federal 599 (149) (1,095) Foreign (213) 104 (109) State 99 (149) (226) - ------------------------------------------------------------------------------- 485 (194) (1,430) - ------------------------------------------------------------------------------- Provision for income tax before minority interest(1) 5,703 3,234 3,833 Provision for income tax on cumulative effect of accounting changes (84) -- -- Income tax expense (benefit) reported in stockholders' equity related to: Foreign currency translation (3) 11 26 Securities available for sale 556 (175) 370 Employee stock plans (1,008) (701) (728) Other (1) (1) 9 - ------------------------------------------------------------------------------- Income taxes before minority interest $5,163 $2,368 $3,510 =============================================================================== (1) Includes the effect of securities transactions resulting in a provision of $195 million in 1999, $270 million in 1998, and $376 million in 1997. 63 The reconciliation of the federal statutory income tax rate to the Company's effective income tax rate applicable to income (before minority interest and cumulative effect of accounting changes) for the years ended December 31 was as follows: 1999 1998 1997 - ------------------------------------------------------------------------------ Federal statutory rate 35.0% 35.0% 35.0% Limited taxability of investment income (1.5) (2.4) (1.7) State income taxes, net of federal benefit 1.8 1.2 1.4 Other, net 0.5 1.1 1.0 - ------------------------------------------------------------------------------ Effective income tax rate 35.8% 34.9% 35.7% ============================================================================== Deferred income taxes at December 31 related to the following: In Millions of Dollars 1999 1998 - ------------------------------------------------------------------------------- Deferred tax assets Credit loss deduction $2,312 $2,327 Differences in computing policy reserves 1,988 2,066 Unremitted foreign earnings 1,512 1,257 Deferred compensation 1,264 1,222 Employee benefits 645 865 Interest-related items 349 412 Foreign and state loss carryforwards 311 256 Other deferred tax assets 1,061 1,094 - ------------------------------------------------------------------------------- Gross deferred tax assets 9,442 9,499 Valuation allowance 314 394 - ------------------------------------------------------------------------------- Deferred tax assets after valuation allowance 9,128 9,105 - ------------------------------------------------------------------------------- Deferred tax liabilities Investments (2,017) (1,244) Deferred policy acquisition costs and value of insurance in force (960) (858) Leases (784) (648) Investment management contracts (201) (218) Other deferred tax liabilities (1,202) (1,116) - ------------------------------------------------------------------------------- Gross deferred tax liabilities (5,164) (4,084) - ------------------------------------------------------------------------------- Net deferred tax asset $3,964 $5,021 =============================================================================== Foreign pretax earnings approximated $4.7 billion in 1999, $2.4 billion in 1998, and $4.8 billion in 1997. As a U.S. corporation, Citigroup is subject to U.S. taxation currently on all foreign pretax earnings earned by a foreign branch. Pretax earnings of a foreign subsidiary or affiliate are taxed when effectively repatriated. In addition, certain of Citigroup's U.S. income is subject to foreign income tax where the payor of such income is domiciled outside the United States. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the extent that such earnings are indefinitely invested outside the United States. At December 31, 1999, $1.3 billion of accumulated undistributed earnings of non-U.S. subsidiaries was indefinitely invested. At the existing U.S. federal income tax rate, additional taxes of $399 million would have to be provided if such earnings were remitted. Income taxes are not provided for on the Company's life insurance subsidiaries' "policyholders' surplus account" because under current U.S. tax rules such taxes will become payable only to the extent such amounts are distributed as a dividend or exceed limits prescribed by federal law. Distributions are not contemplated from this account, which aggregated $982 million (subject to a tax effect of $344 million) at December 31, 1999. The 1999 net change in the valuation allowance related to deferred tax assets was a decrease of $80 million primarily relating to the utilization of tax carryforwards in foreign jurisdictions. The valuation allowance of $314 million includes $100 million to cover any capital losses on investments that may exceed the capital gains able to be generated in the life insurance group's consolidated federal income tax return based upon management's best estimate of the character of the reversing temporary differences. Reversal of the valuation allowance is contingent upon the recognition of future capital gains or a change in circumstances which causes the recognition of the benefits to become more likely than not. The initial recognition of any benefit produced by the reversal of this portion of the valuation allowance will be recognized by reducing goodwill. The remaining valuation allowance of $214 million at December 31, 1999 is primarily reserved for specific state and local, and foreign tax carryforwards or tax law restrictions on benefit recognition in the U.S. federal tax return and in the above jurisdictions. Management believes that the realization of the recognized net deferred tax asset of $3.964 billion is more likely than not based on existing carryback ability and expectations as to future taxable income. The Company has reported pretax financial statement income of approximately $12 billion, on average, over the last three years and has generated federal taxable income exceeding $8 billion, on average, each year during this same period. 16. MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY TRUSTS The Company formed statutory business trusts under the laws of the state of Delaware, which exist for the exclusive purposes of (i) issuing Trust Securities representing undivided beneficial interests in the assets of the Trust; (ii) investing the gross proceeds of the Trust securities in junior subordinated deferrable interest debentures (subordinated debentures) of its parent; and (iii) engaging in only those activities necessary or incidental thereto. These subordinated debentures and the related income effects are eliminated in the consolidated financial statements. Distributions on the mandatorily redeemable securities of subsidiary trusts below have been classified as interest expense in the Consolidated Statement of Income. 64 The following tables summarize the financial structure of each of the Company's subsidiary trusts at December 31, 1999:
Common Trust Securities Shares with Distributions Issuance Securities Liquidation Coupon Issued Guaranteed by Date Issued Value Rate to Parent - -------------------------------------------------------------------------------------------------------------------------- Dollars in Millions Citigroup: Citigroup Capital I Oct. 1996 16,000,000 $ 400 8.00% 494,880 Citigroup Capital II Dec. 1996 400,000 400 7.75% 12,372 Citigroup Capital III Dec. 1996 200,000 200 7.625% 6,186 Citigroup Capital IV Jan. 1998 8,000,000 200 6.85% 247,440 Citigroup Capital V Nov. 1998 20,000,000 500 7.00% 618,557 Citigroup Capital VI Mar. 1999 24,000,000 600 6.875% 742,269 ------ Total Parent Obligated $2,300 - -------------------------------------------------------------------------------------------------------------------------- Subsidiaries: Travelers P&C Capital I April 1996 32,000,000 $ 800 8.08% 989,720 Travelers P&C Capital II May 1996 4,000,000 100 8.00% 123,720 Salomon Inc Financing Trust I July 1996 13,800,000 345 9.25% 426,800 Salomon Smith Barney Holdings Inc. Capital I Jan. 1998 16,000,000 400 7.20% 494,880 Citicorp Capital I Dec. 1996 300,000 300 7.933% 9,000 Citicorp Capital II Jan. 1997 450,000 450 8.015% 13,500 Citicorp Capital III June 1998 9,000,000 225 7.10% 270,000 ------ Total Subsidiary Obligated $2,620 ========================================================================================================================== Junior Subordinated Debentures Owned by Trust --------------------------------------------- Trust Securities Redeemable with Distributions by Issuer Guaranteed by Amount Maturity Beginning - --------------------------------------------------------------------------------------------------------- Dollars in Millions Citigroup: Citigroup Capital I $412 Sept. 30, 2036 Oct. 7, 2001 Citigroup Capital II 412 Dec. 1, 2036 Dec. 1, 2006 Citigroup Capital III 206 Dec. 1, 2036 Not redeemable Citigroup Capital IV 206 Jan. 22, 2038 Jan. 22, 2003 Citigroup Capital V 515 Nov. 15, 2028 Nov. 15, 2003 Citigroup Capital VI 619 Mar. 15, 2029 Mar. 15, 2004 Total Parent Obligated - --------------------------------------------------------------------------------------------------------- Subsidiaries: Travelers P&C Capital I 825 April 30, 2036 April 30, 2001 Travelers P&C Capital II 103 May 15, 2036 May 15, 2001 Salomon Inc Financing Trust I 356 June 30, 2026 June 30, 2001 Salomon Smith Barney Holdings Inc. Capital I 412 Jan. 28, 2038 Jan. 28, 2003 Citicorp Capital I 309 Feb. 15, 2027 Feb. 15, 2007 Citicorp Capital II 464 Feb. 15, 2027 Feb. 15, 2007 Citicorp Capital III 232 Aug. 15, 2028 Aug. 15, 2003 Total Subsidiary Obligated =========================================================================================================
In each case, the coupon rate on the debentures is the same as that on the trust securities. Distributions on the trust securities and interest on the debentures are payable quarterly, except for Citigroup Capital II and III and Citicorp Capital I and II, on which distributions are payable semiannually. SI Financing Trust I, a wholly owned subsidiary of Salomon Smith Barney, issued TRUPS(R) units to the public. Each TRUPS(R) unit includes a security of SI Financing Trust I, and a purchase contract that requires the holder to purchase, in 2021 (or earlier if Salomon Smith Barney elects to accelerate the contract), one depositary share representing a one-twentieth interest in a share of the Company's 9.50% Cumulative Preferred Stock, Series L. Salomon Smith Barney is obligated under the terms of each purchase contract to pay contract fees of 0.25% per annum. 17. PREFERRED STOCK AND STOCKHOLDERS' EQUITY Redeemable Preferred Stock At December 31, 1998 there were 140,000 shares of Series I cumulative Convertible Preferred Stock (Series I Preferred) with a carrying value of $140 million included in other liabilities. Each share of Series I Preferred had a redemption value of $1,000 and was convertible into 66.9079 shares of Citigroup common stock. In October 1999, all of the outstanding shares of the Series I Preferred were converted into 9.4 million shares of common stock. Perpetual Preferred Stock The following table sets forth the Company's perpetual preferred stock outstanding at December 31:
Redeemable, in Redemption Carrying Value (In Millions) whole or in part Price Number of --------------------------- Rate on or after(1) Per Share (2) Shares 1999 1998 - ------------------------------------------------------------------------------------------------------------------------- Series F(3) 6.365% June 16, 2007 $250 1,600,000 $ 400 $ 400 Series G(3) 6.213% July 11, 2007 $250 800,000 200 200 Series H(3) 6.231% September 8, 2007 $250 800,000 200 200 Series J(4) 8.08% March 31, 1998 $500 400,000 -- 200 Series K(4) 8.40% March 31, 2001 $500 500,000 250 250 Series M(3) 5.864% October 8, 2007 $250 800,000 200 200 Series O(5) Graduated August 15, 2004 $100 625,000 -- 63 Series Q(6) Adjustable May 31, 1999 $250 700,000 175 175 Series R(6) Adjustable August 31, 1999 $250 400,000 100 100 Series S(6) 8.30% November 15, 1999 $250 500,000 -- 125 Series T(6) 8.50% February 15, 2000 $250 600,000 150 150 Series U(6) 7.75% May 15, 2000 $250 500,000 125 125 Series V(6) Fixed/Adjustable February 15, 2006 $500 250,000 125 125 - ------------------------------------------------------------------------------------------------------------------------- $1,925 $2,313 =========================================================================================================================
(1) Under various circumstances, the Company may redeem certain series of preferred stock at times other than described above. (2) Liquidation preference per share equals redemption price per share. (3) Issued as depositary shares, each representing a one-fifth interest in the corresponding series of preferred stock. (4) Issued as depositary shares, each representing a one-twentieth interest in the corresponding series of preferred stock. (5) Also redeemable on any of the dividend repricing dates through August 15, 2004. (6) Issued as depositary shares, each representing a one-tenth interest in the corresponding series of preferred stock. 65 All dividends on the Company's perpetual preferred stock are payable quarterly and are cumulative. Only the holders of Series J and K Preferred Stock have voting rights. Holders of Series J and K Preferred Stock are entitled to three votes per share when voting together as a class with the Citigroup common stock on all matters submitted to a vote of the Company's stockholders. Dividends on Series Q and R Preferred Stock are payable at rates determined quarterly by formulas based on interest rates of certain U.S. Treasury obligations, subject to certain minimum and maximum rates as specified in the certificates of designation. The weighted-average dividend rate on the Series Q and R Preferred Stock was 4.76% for 1999. Dividends on the Series V Preferred Stock are payable at 5.86% through February 15, 2006, and thereafter at rates determined quarterly by a formula based on certain interest rate indices, subject to a minimum rate of 6% and a maximum rate of 12%. The rate of dividends on the Series V Preferred Stock is subject to adjustment based upon the applicable percentage of the dividends received deduction. Citigroup redeemed Series J Preferred Stock in February 1999, Series O Preferred Stock in August 1999, and Series S Preferred Stock in November 1999. During the first quarter of 2000, Citigroup redeemed Series T Preferred Stock. Regulatory capital Citigroup and Citicorp are subject to risk-based capital and leverage guidelines issued by the Board of Governors of the Federal Reserve System (FRB), and their U.S. insured depository institution subsidiaries, including Citibank, N.A., are subject to similar guidelines issued by their respective primary regulators. These guidelines are used to evaluate capital adequacy and include the required minimums shown in the following table. To be "well capitalized" under federal bank regulatory agency definitions, a depository institution must have a Tier 1 ratio of at least 6%, a combined Tier 1 and Tier 2 ratio of at least 10%, and a leverage ratio of at least 5%, and not be subject to a directive, order, or written agreement to meet and maintain specific capital levels. The regulatory agencies are required by law to take specific prompt actions with respect to institutions that do not meet minimum capital standards. As of December 31, 1999 and 1998, all of Citigroup's U.S. insured subsidiary depository institutions were "well capitalized." At December 31, 1999, regulatory capital as set forth in guidelines issued by the U.S. federal bank regulators is as follows:
Minimum Citibank, In Millions of Dollars Requirement Citigroup Citicorp N.A. - ---------------------------------------------------------------------------------------- Tier 1 capital $47,591 $25,034 $20,389 Total capital(1) 61,380 37,351 30,414 Tier 1 capital ratio 4.00% 9.64% 8.11% 8.25% Total capital ratio(1) 8.00% 12.43% 12.10% 12.31% Leverage ratio(2) 3.00%+ 6.80% 6.83% 6.53% ========================================================================================
(1) Total capital includes Tier 1 and Tier 2. (2) Tier 1 capital divided by adjusted average assets. There are various legal limitations on the extent to which Citigroup's banking subsidiaries may pay dividends to their parents. Citigroup's national and state-chartered bank subsidiaries can declare dividends to their respective parent companies in 2000, without regulatory approval, of approximately $3.6 billion, adjusted by the effect of their net income (loss) for 2000 up to the date of any such dividend declaration. In determining whether and to what extent to pay dividends, each bank subsidiary must also consider the effect of dividend payments on applicable risk-based capital and leverage ratio requirements as well as policy statements of the federal regulatory agencies that indicate that banking organizations should generally pay dividends out of current operating earnings. Consistent with these considerations, Citigroup estimates that its bank subsidiaries can distribute dividends to Citigroup of approximately $3.0 billion of the available $3.6 billion, adjusted by the effect of their net income (loss) up to the date of any such dividend declaration. The property-casualty insurance subsidiaries' statutory capital and surplus at December 31, 1999 and 1998 was $7.758 billion and $7.161 billion, respectively. The life insurance subsidiaries' statutory capital and surplus at December 31, 1999 and 1998 was $5.836 billion and $5.681 billion, respectively. Statutory capital and surplus are subject to certain restrictions imposed by state insurance departments as to the transfer of funds and payment of dividends. The property-casualty insurance subsidiaries' net income for the years ended December 31, 1999, 1998, and 1997 was $1.500 billion, $1.426 billion, and $1.158 billion, respectively. The life insurance subsidiaries' net income for the years ended December 31, 1999 and 1998 was $988 million and $829 million, respectively, and for the year ended December 31, 1997 (which excluded Citicorp Life Insurance Company) was $636 million. Statutory capital and surplus and statutory net income are determined in accordance with statutory accounting practices. TIC is subject to various regulatory restrictions that limit the maximum amount of dividends available to its parent without prior approval of the Connecticut Insurance Department. A maximum of $679 million of statutory surplus is available in 2000 for such dividends without the prior approval of the Connecticut Insurance Department. 66 TAP's insurance subsidiaries are subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid to their parent without prior approval of insurance regulatory authorities. Dividend payments to TAP from its insurance subsidiaries are limited to $1.2 billion in 2000 without prior approval of the Connecticut Insurance Department. Certain of the Company's U.S. and non-U.S. broker-dealer subsidiaries are subject to various securities and commodities regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. The principal regulated subsidiaries, their net capital requirement or equivalent and excess over the minimum requirement as of December 31, 1999 are as follows:
Excess over Net Capital minimum Subsidiary Jurisdiction or equivalent requirement - --------------------------------------------------------------------------------------------------------------------------- In Millions of Dollars Salomon Smith Barney Inc. U.S. Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1) $3,204 $2,732 Salomon Brothers International Limited United Kingdom's Securities and Futures Authority 3,675 963 ===========================================================================================================================
18. CHANGES IN EQUITY FROM NONOWNER SOURCES Changes in each component of "Accumulated Other Changes in Equity from Nonowner Sources" for the three-year period ended December 31, 1999 are as follows: Accumulated Net Other Unrealized Foreign Changes in Gains on Currency Equity from Investment Translation Nonowner In Millions of Dollars Securities Adjustment Sources - ------------------------------------------------------------------------------- Balance, Jan. 1, 1997 $1,145 $(483) $ 662 Unrealized gains on investment securities, net of tax of $746 1,166 1,166 Less: Reclassification adjustment for gains included in net income, net of tax of ($376) (619) (619) Foreign currency translation adjustment, net of tax of $26 (152) (152) - ------------------------------------------------------------------------------- Current period change 547 (152) 395 - ------------------------------------------------------------------------------- Balance, Dec. 31, 1997 1,692 (635) 1,057 Unrealized gains on investment securities, net of tax of $95 237 237 Less: Reclassification adjustment for gains included in net income, net of tax of ($270) (570) (570) Foreign currency translation adjustment, net of tax of $11 57 57 - ------------------------------------------------------------------------------- Current period change (333) 57 (276) - ------------------------------------------------------------------------------- Balance, Dec. 31, 1998 1,359 (578) 781 Unrealized gains on investment securities, net of tax of $751 1,548 1,548 Less: Reclassification adjustment for gains included in net income, net of tax of ($195) (362) (362) Foreign currency translation adjustment, net of tax of ($3) (60) (60) - ------------------------------------------------------------------------------- Current period change 1,186 (60) 1,126 - ------------------------------------------------------------------------------- Balance, Dec. 31, 1999 $2,545 $(638) $1,907 =============================================================================== 19. EARNINGS PER SHARE Earnings per share has been computed in accordance with the provisions of SFAS No. 128. Shares have been adjusted to give effect to the three-for-two stock split in Citigroup's common stock in May 1999. The following is a reconciliation of the income and share data used in the basic and diluted earnings per share computations for the years ended December 31: In Millions, Except Per Share Amounts 1999 1998 1997 - ------------------------------------------------------------------------------- Income before cumulative effect of accounting changes $ 9,994 $ 5,807 $ 6,705 Cumulative effect of accounting changes (127) -- -- Preferred dividends (149) (216) (279) - ------------------------------------------------------------------------------- Income available to common stockholders for basic EPS 9,718 5,591 6,426 Effect of dilutive securities 10 24 36 - ------------------------------------------------------------------------------- Income available to common stockholders for diluted EPS $ 9,728 $ 5,615 $ 6,462 =============================================================================== Weighted average common shares outstanding applicable to basic EPS 3,333.9 3,363.6 3,371.9 - ------------------------------------------------------------------------------- Effect of dilutive securities: Options 75.6 60.3 78.6 Restricted stock 26.1 27.8 37.8 Convertible securities 7.9 17.7 37.8 Warrants -- 3.4 10.5 - ------------------------------------------------------------------------------- Adjusted weighted average common shares outstanding applicable to diluted EPS 3,443.5 3,472.8 3,536.6 =============================================================================== Basic earnings per share Income before cumulative effect of accounting changes $ 2.95 $ 1.66 $ 1.91 Cumulative effect of accounting changes (0.04) -- -- - ------------------------------------------------------------------------------- Net income $ 2.91 $ 1.66 $ 1.91 =============================================================================== Diluted earnings per share Income before cumulative effect of accounting changes $ 2.86 $ 1.62 $ 1.83 Cumulative effect of accounting changes (0.03) -- -- - ------------------------------------------------------------------------------- Net income $ 2.83 $ 1.62 $ 1.83 =============================================================================== 67 During 1999, 1998, and 1997, weighted average options of 19.5 million shares, 28.7 million shares and 12.8 million shares with weighted average exercise prices of $48.71 per share, $41.71 per share, and $30.53 per share, respectively, were excluded from the computation of diluted EPS because the options' exercise price was greater than the average market price of the Company's common stock. 20. INCENTIVE PLANS The Company has adopted a number of compensation plans to attract, retain and motivate officers and employees, to compensate them for their contributions to the growth and profits of the Company, and to encourage employee stock ownership. At December 31, 1999, approximately 290 million shares were available for grant under Citigroup's stock option and restricted stock plans. Stock Option Plans The Company has a number of stock option plans that provide for the granting of stock options to officers and employees. Options are granted at the fair market value of Citigroup common stock at the time of grant for a period of ten years. Generally, options granted under Travelers predecessor plans and options granted since the date of the merger vest over a five-year period. Generally, 50% of the options granted under Citicorp predecessor plans prior to the merger are exercisable beginning on the third anniversary and 50% beginning on the fourth anniversary of the date of grant. Certain of the plans also permit an employee exercising an option to be granted new options (reload options) in an amount equal to the number of common shares used to satisfy the exercise price and the withholding taxes due upon exercise. The reload options are granted for the remaining term of the related original option and vest after six months. To further encourage employee stock ownership the Company's eligible employees participate in either the WealthBuilder or CitiBuilder stock option programs. Options granted under the WealthBuilder program vest over a five-year period whereas options granted under the CitiBuilder program vest after five years. These options do not have a reload feature. Options granted in 1995 and 1996 included five-year performance-based stock options granted to key Citicorp employees. Performance-based options granted in 1995 and 1996 were at prices ranging from equivalent Citigroup stock prices of $17.30 to $18.70, equal to Citicorp market prices on the respective dates of grant, and expire in 2000 and 2001. One-half of these options vested in 1996 when Citicorp's stock price reached an equivalent Citigroup stock price of $26.67 per share, and the balance vested in 1997 when Citicorp's stock price reached an equivalent Citigroup stock price of $30.67 per share. During 1998, a group of key Citicorp employees was granted 9,510,000 performance-based stock options at an equivalent Citigroup strike price of $32.17. These performance-based options vested in 1999 when Citigroup's stock price reached $53.33 per share. Vesting and expense related to performance-based options are summarized in the following table (all options are equivalent Citigroup options). 1999 1998 1997 - -------------------------------------------------------------------------------- Options vested during the year 9,007,500 -- 8,976,563 After-tax expense recognized for all grants (in millions of dollars) $68 $43 $45 Options unvested at year-end -- 9,075,000 -- ================================================================================ The cost of performance-based options is measured as the difference between the exercise price and market price required for vesting. This expense is recognized over the period to the estimated vesting dates and in full for options that have vested, by a charge to expense with an offsetting increase in common stockholders' equity. All of the expense related to these grants has been recognized. Information with respect to stock option activity under Citigroup stock option plans for the years ended December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997 ------------------------ --------------------------- ------------------------ Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price - ------------------------------------------------------------------------------------------------------------------------------ Outstanding, beginning of year 307,044,077 $26.97 202,813,920 $18.65 217,266,464 $11.59 Granted-original 18,071,698 43.45 146,281,370(1) 32.60 52,479,821 29.28 Granted-reload 29,514,592 50.15 30,072,696 41.36 50,937,393 27.41 Forfeited (12,870,793) 25.97 (12,982,605) 23.83 (4,968,905) 18.32 Exercised (69,095,811) 24.89 (59,141,304) 20.20 (112,900,853) 13.98 - ------------------------------------------------------------------------------------------------------------------------------ Outstanding, end of year 272,663,763 $31.14 307,044,077 $26.97 202,813,920 $18.65 - ------------------------------------------------------------------------------------------------------------------------------ Exercisable at year end 82,354,408 72,836,012 66,947,117 ==============================================================================================================================
(1) Original grants in 1998 included approximately 97 million options granted in November 1998 to retain key employees and to encourage stock ownership in the newly merged Citigroup. 68 The following table summarizes the information about stock options outstanding under Citigroup stock option plans at December 31, 1999:
Options Outstanding Options Exercisable ---------------------------------------- ----------------------- Weighted Average Weighted Weighted Contractual Average Average Number Life Exercise Number Exercise Range of Exercise Prices Outstanding Remaining Price Exercisable Price - --------------------------------------------------------------------------------------------------------------------- $ 2.53--$ 9.99 17,483,787 3.2 years $ 6.59 15,323,385 $ 6.42 $10.00--$19.99 36,346,861 5.0 years 14.12 22,009,355 14.62 $20.00--$29.99 35,485,328 7.0 years 27.94 5,209,680 26.83 $30.00--$39.99 128,005,297 8.3 years 31.90 22,578,954 31.98 $40.00--$49.99 36,237,894 7.4 years 44.85 10,697,729 46.02 $50.00--$58.00 19,104,596 5.0 years 53.01 6,535,305 50.18 - --------------------------------------------------------------------------------------------------------------------- 272,663,763 7.0 years $31.14 82,354,408 $25.53 =====================================================================================================================
The Restricted Stock Plans The Company through its Capital Accumulation Plan and other restricted stock programs, issues shares of Citigroup common stock in the form of restricted stock to participating officers and employees. The restricted stock generally vests after a two or three-year period. Except under limited circumstances, during this period the stock cannot be sold or transferred by the participant, who is required to render service during the restricted period. Participants may elect to receive part of their awards in restricted stock and part in stock options. Unearned compensation expense associated with the restricted stock grants represents the market value of Citigroup common stock at the date of grant and is recognized as a charge to income ratably over the vesting period. Information with respect to restricted stock awards is as follows: 1999 1998 1997 - -------------------------------------------------------------------------------- Shares awarded 10,933,324 15,667,010 21,513,404 Weighted average fair market value per share $38.02 $33.41 $23.19 After-tax compensation cost charged to earnings (in millions of dollars) $269 $243 $188 ================================================================================ In 1998 certain employees of SSB received Deferred Stock Awards (DSA's). A DSA award is an unfunded promise to deliver shares at the end of a three-year deferral period. It is comprised of a basic award representing a portion of the participant's prior year incentive award, and an additional premium award amounting to 33% of the basic award which vests one-third per year over a three-year period. The entire award is forfeited if the participant leaves SSB to join a competitor within three years after the award date. Participants may elect to receive a portion of their award in the form of stock options. The basic portion of the award is expensed in the bonus year that it was earned. The expense associated with the additional 33% premium award is amortized over the appropriate vesting period. After-tax expense of approximately $150 million was recognized during 1998 for 1998 awards that were granted in January of 1999. Savings Incentive Plan Prior to 1999, eligible Citicorp employees received awards equal to 3% of their covered salary. Employees had the option of receiving their award in cash or deferring some or all of it in various investment funds. The Company granted an additional award equal to the amount elected to be deferred by the employee. The after-tax expense associated with the plan amounted to $68 million in 1998 and $63 million in 1997. During 1999, the CitiBuilder 401(k) plan replaced the Savings Incentive Plan. Under the CitiBuilder 401(k) plan, eligible employees receive awards up to 3% of their total compensation deferred into the Citigroup common stock fund. The after-tax expense associated with this plan amounted to $31 million in 1999. Stock Purchase Plan The 1997 offering under the Stock Purchase Plan allowed eligible employees of Citicorp to enter into fixed subscription agreements to purchase shares at the market value on the date of the agreements. Such shares could be purchased from time to time through the expiration date. Shares of Citigroup's common stock delivered under the Stock Purchase Plan were sourced from treasury shares. Following is the share activity under the 1997 fixed-price offering for the purchase of shares at the equivalent Citigroup price of $30.20 per share. The 1997 offering expired on June 30, 1999. 1999 1998 1997 - -------------------------------------------------------------------------------- Outstanding subscribed shares at beginning of year 11,317,659 15,284,070 -- Subscriptions entered into -- -- 16,758,687 Shares purchased 10,324,229 2,585,958 952,560 Canceled or terminated 993,430 1,380,453 522,057 - -------------------------------------------------------------------------------- Outstanding subscribed shares at end of year -- 11,317,659 15,284,070 ================================================================================ 69 Pro Forma Impact of SFAS No. 123 The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock-based compensation plans under which there is generally no charge to earnings for employee stock option awards (other than performance-based options) and the dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share. Alternatively, Financial Accounting Standards Board (FASB) rules would permit a method under which a compensation cost for all stock awards would be calculated and recognized over the service period (generally equal to the vesting period). This compensation cost would be determined in a manner prescribed by the FASB using option pricing models, intended to estimate the fair value of the awards at the grant date. Earnings per share dilution would be recognized as well. Under both methods, an offsetting increase to stockholders' equity is recorded equal to the amount of compensation expense charged. Had the Company applied SFAS No. 123 in accounting for the Company's stock option plans, net income and net income per share would have been the pro forma amounts indicated below:
In Millions of Dollars, Except Per Share Amounts 1999 1998 1997 - --------------------------------------------------------------------------------------- Compensation expense related to stock option plans As reported $ 108 $ 70 $ 72 Pro forma 756 486 329 - --------------------------------------------------------------------------------------- Net income As reported $9,867 $5,807 $6,705 Pro forma 9,437 5,522 6,516 - --------------------------------------------------------------------------------------- Basic earnings per share As reported $ 2.91 $ 1.66 $ 1.91 Pro forma 2.78 1.57 1.85 - --------------------------------------------------------------------------------------- Diluted earnings per share As reported $ 2.83 $ 1.62 $ 1.83 Pro forma 2.71 1.54 1.77 =======================================================================================
The pro forma adjustments relate to stock options granted from 1995 through 1999, for which a fair value on the date of grant was determined using a Black-Scholes option pricing model. No effect has been given to options granted prior to 1995. The pro forma information above reflects the compensation expense that would have been recognized under SFAS No. 123 for both Travelers and Citicorp. The fair values of stock-based awards are based on assumptions that were determined at the grant date. SFAS No. 123 requires that reload options be treated as separate grants from the related original grants. Under the Company's reload program, upon exercise of an option, employees generally tender previously owned shares to pay the exercise price and related tax withholding, and receive a reload option covering the same number of shares tendered for such purposes. New reload options are only granted if the Company's stock price has increased at least 20% over the exercise price of the option being reloaded, and vest at the end of a six-month period. Reload options are intended to encourage employees to exercise options at an earlier date and to retain the shares so acquired, in furtherance of the Company's long-standing policy of encouraging increased employee stock ownership. The result of this program is that employees generally will exercise options as soon as they are able and, therefore, these options have shorter expected lives. Shorter option lives result in lower valuations using a Black-Scholes option model. However, such values are expensed more quickly due to the shorter vesting period of reload options. In addition, since reload options are treated as separate grants, the existence of the reload feature results in a greater number of options being valued. Shares received through option exercises under the reload program are subject to restrictions on sale. Discounts (as measured by the estimated cost of protection) have been applied to the fair value of options granted to reflect these sale restrictions. Additional valuation and related assumption information for Citigroup option plans, Travelers option plans (including options granted after the merger date), and Citicorp option plans prior to the merger date are presented below.
Citigroup Option Plans Travelers Options Plans Citicorp Option Plans ------------ ----------------------- --------------------- For options granted during 1999 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------- Weighted average fair value Option $10.65 $7.21 $4.29 $8.59 $8.40 1998 performance option -- -- -- 6.41 -- 1997 stock purchase offering -- -- -- -- $4.47 Weighted average expected life Original grants 3 years 3 years 3 years 6 years 6 years Reload grants 1 year 1 year 1 year -- -- 1997 stock purchase offering -- -- -- -- 2 years Valuation assumptions Expected volatility 46.1% 37.0% 32.3% 25% 25% Risk-free interest rate 5.17% 4.72% 5.75% 5.51% 6.30% Expected annual dividends per share $0.63 $0.43 $0.31 $0.78 $0.73 Expected annual forfeitures 5% 5% 5% 5% 5% ====================================================================================================
70 21. RETIREMENT BENEFITS The Company has several non-contributory defined benefit pension plans covering substantially all U.S. employees and has various defined benefit pension termination indemnity plans covering employees outside the United States. During the 1999 first quarter, the U.S. defined benefit plan was amended to convert the benefit formula for certain employees of Citicorp to a cash balance formula effective January 1, 2000. Employees satisfying certain age and service requirements remain covered by the prior final pay formula. The Company also offers postretirement health care and life insurance benefits to certain eligible U.S. retired employees, as well as to certain eligible employees outside the United States. The following tables summarize the components of net benefit expense recognized in the consolidated statement of income and the funded status and amounts recognized in the consolidated balance sheet for the Company's U.S. plans and significant plans outside the U.S. Net Benefit Expense
Postretirement Pension Plans Benefit Plans(1) -------------------------------------------------------- ------------------------ U.S. Plans Plans Outside U.S. U.S. Plans -------------------------- ------------------------ ------------------------ In Millions of Dollars 1999 1998 1997 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------- Benefits earned during the year $228 $232 $197 $80 $76 $59 $ 7 $13 $12 Interest cost on benefit obligation 456 443 412 94 88 76 58 62 63 Expected return on plan assets (645) (557) (496) (87) (84) (65) (16) (14) (11) Amortization of unrecognized: Net transition (asset) obligation (17) (18) (21) 4 3 6 -- -- -- Prior service cost (6) 18 14 -- -- -- (4) -- (2) Net actuarial loss (gain) 9 5 4 6 3 2 2 (6) (5) Curtailment (gain) loss -- (15) -- -- 2 -- (29) -- -- - ------------------------------------------------------------------------------------------------------------------------------- Net benefit expense $25 $108 $110 $97 $88 $78 $18 $55 $57 ===============================================================================================================================
(1) For plans outside the U.S., net postretirement benefit expense totaled $13 million in 1999, $10 million in 1998, and $8 million in 1997. 71 Prepaid Benefit Cost (Benefit Liability)
Postretirement Pension Plans Benefit Plans(3) --------------------------------------------- --------------- U.S. Plans(1) Plans Outside U.S.(2) U.S. Plans ------------------- ------------------- --------------- In Millions of Dollars at Year-End 1999 1998 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------- Change in benefit obligation Benefit obligation at beginning of year $ 7,027 $ 6,248 $ 1,574 $ 1,281 $ 952 $ 915 Benefits earned during the year 228 232 80 76 7 13 Interest cost on benefit obligation 456 443 94 88 58 62 Plan amendments (236) 31 10 3 -- 3 Actuarial (gain) loss (1,070) 385 (14) 127 (110) 22 Benefits paid (299) (287) (96) (71) (61) (63) Acquisitions -- -- 4 27 -- -- Expenses (9) (10) -- -- -- -- Curtailment -- (15) -- (7) (32) -- Settlements -- -- (5) -- -- -- Foreign exchange impact -- -- (121) 50 -- -- - ------------------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year $ 6,097 $ 7,027 $ 1,526 $ 1,574 $ 814 $ 952 ========================================================================================================================= Change in plan assets Plan assets at fair value at beginning of year $ 7,404 $ 6,675 $ 1,210 $ 940 $ 191 $ 163 Actual return on plan assets 866 1,004 189 119 26 28 Company contributions 21 22 76 153 62 63 Employee contributions -- -- 4 5 -- -- Acquisitions -- -- -- 24 -- -- Settlements -- -- (5) -- -- -- Benefits paid (299) (287) (74) (58) (62) (63) Expenses (9) (10) -- -- -- -- Foreign exchange impact -- -- (82) 27 -- -- - ------------------------------------------------------------------------------------------------------------------------- Plan assets at fair value at end of year $ 7,983 $ 7,404 $ 1,318 $ 1,210 $ 217 $ 191 ========================================================================================================================= Reconciliation of prepaid (accrued) benefit cost and total amount recognized Funded status of the plan $ 1,886 $ 377 $ (208) $ (364) $(597) $(761) Unrecognized: Net transition obligation (asset) 1 (16) 18 20 -- -- Prior service cost (124) 105 17 2 (10) (11) Net actuarial (gain) loss (1,454) (153) (21) 107 (181) (59) - ------------------------------------------------------------------------------------------------------------------------- Net amount recognized $ 309 $ 313 $ (194) $ (235) $(788) $(831) ========================================================================================================================= Amounts recognized in the statement of financial position consist of Prepaid benefit cost $ 684 $ 646 $ 107 $ 76 $ -- $ -- Accrued benefit liability (416) (406) (320) (338) (788) (831) Intangible asset 41 73 19 27 -- -- - ------------------------------------------------------------------------------------------------------------------------- Net amount recognized $ 309 $ 313 $ (194) $ (235) $(788) $(831) =========================================================================================================================
(1) For unfunded U.S. plans, the aggregate benefit obligation was $454 million and $512 million, and the aggregate accumulated benefit obligation was $387 million and $393 million at December 31, 1999 and 1998, respectively. (2) For plans outside the U.S., the aggregate benefit obligation was $524 million and $1.176 billion, and the fair value of plan assets was $145 million and $732 million at December 31, 1999 and 1998, respectively, for plans whose benefit obligation exceeds plan assets. The aggregate accumulated benefit obligation was $309 million and $308 million, and the fair value of plan assets was $46 million and $3 million at December 31, 1999 and 1998, respectively, for plans whose accumulated benefit obligation exceeds plan assets. (3) For plans outside the U.S., the accumulated postretirement benefit obligation was $82 million and $96 million and the postretirement benefit liability was $20 million and $33 million at December 31, 1999 and 1998, respectively. 72 The expected long-term rates of return on assets used in determining the Company's pension and postretirement expense are shown below. 1999 1998 1997 - ------------------------------------------------------------------------------- Rate of return on assets U.S. plans 9.5% 9.0% to 9.5% 9.0% Plans outside the U.S.(1) 3.5% to 12.5% 4.0% to 12.0% 4.5% to 13.0% =============================================================================== (1) Excluding highly inflationary countries. The principal assumptions used in determining pension and postretirement benefit obligations for the Company's plans are shown in the following table. At Year-End 1999 1998 - ------------------------------------------------------------------------------- Discount rate U.S. plans 8.0% 6.75% Plans outside the U.S.(1) 3.0% to 12.0% 3.0% to 12.0% Future compensation increase rate U.S. plans 4.5% 4.5% Plans outside the U.S.(1) 2.5% to 12.0% 1.5% to 10.0% Health care cost increase rate--U.S. plans Following year 6.0% to 8.0% 7.0% to 11% Decreasing to the year 2001 5.0% 5.0% to 5.5% =============================================================================== (1) Excluding highly inflationary countries. As an indicator of sensitivity, increasing the assumed health care cost trend rate by 1% in each year would have increased the accumulated postretirement benefit obligation as of December 31, 1999 by $27 million and the aggregate of the benefits earned and interest components of 1999 net postretirement benefit expense by $3 million. Decreasing the assumed health care cost trend rate by 1% in each year would have decreased the accumulated postretirement benefit obligation as of December 31, 1999 by $26 million and the aggregate of the benefits earned and interest components of 1999 net postretirement benefit expense by $3 million. 22. TRADING SECURITIES, COMMODITIES, DERIVATIVES, AND RELATED RISKS Derivative and Foreign Exchange Contracts
Notional Balance Sheet Principal Amounts Credit Exposure(1)(2) ---------------------- ---------------------------- In Billions of Dollars at Year-End 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------------- Interest rate products Futures contracts $ 631.6 $ 998.1 $ -- $ -- Forward contracts 701.8 698.8 0.9 0.8 Swap agreements 3,401.2 3,181.4 8.9 15.6 Options 616.4 674.2 0.4 0.6 Foreign exchange products Futures contracts 4.1 5.1 -- -- Forward contracts 1,401.1 1,644.0 7.4 9.1 Cross-currency swaps 166.6 132.4 2.9 2.0 Options 225.3 440.6 1.1 2.4 Equity products 144.2 163.5 9.3 6.1 Commodity products 34.9 20.0 0.4 0.6 Credit derivative products 46.0 28.7 0.3 0.2 - ----------------------------------------------------------------------------------------------- $ 31.6 $ 37.4 ===============================================================================================
(1) There is no balance sheet credit exposure for futures contracts because they settle daily in cash, and none for written options because they represent obligations (rather than assets) of Citigroup. (2) The balance sheet credit exposure reflects $65.4 billion and $90.0 billion of master netting agreements in effect at December 31, 1999 and December 31, 1998, respectively. Master netting agreements mitigate credit risk by permitting the offset of amounts due from and to individual counterparties in the event of counterparty default. In addition, Citibank has securitized and sold net receivables, and the associated credit risk related to certain derivative and foreign exchange contracts via Markets Assets Trust, which amounted to $2.2 billion and $2.7 billion at December 31, 1999 and December 31, 1998, respectively. Citigroup enters into derivative and foreign exchange futures, forwards, options, and swaps, which enable customers to transfer, modify, or reduce their interest rate, foreign exchange, and other market risks, and also trades these products for its own account. In addition, Citigroup uses derivatives and other instruments, primarily interest rate products, as an end-user in connection with its risk management activities. Derivatives are used to manage interest rate risk relating to specific groups of on-balance sheet assets and liabilities, including investments, commercial and consumer loans, deposit liabilities, long-term debt, and other interest-sensitive assets and liabilities, as well as credit card securitizations, redemptions and sales. In addition, foreign exchange contracts are used to hedge non-U.S. dollar denominated debt, net capital exposures, and foreign exchange transactions. Through the effective use of derivatives, Citigroup has been able to modify the volatility of its revenue from asset and liability positions. Derivative instruments with leverage features are not utilized in connection with risk management activities. The preceding table presents the aggregate notional principal amounts of Citigroup's outstanding derivative and foreign exchange contracts at December 31, 1999 and 1998, along with the related balance sheet credit exposure. The table includes all contracts with third parties, including both trading and end-user positions. 73 Futures and forward contracts are commitments to buy or sell at a future date a financial instrument, commodity, or currency at a contracted price, and may be settled in cash or through delivery. Swap contracts are commitments to settle in cash at a future date or dates which may range from a few days to a number of years, based on differentials between specified financial indices, as applied to a notional principal amount. Option contracts give the purchaser, for a fee, the right, but not the obligation, to buy or sell within a limited time, a financial instrument or currency at a contracted price that may also be settled in cash, based on differentials between specified indices. Citigroup also sells various financial instruments that have not been purchased (short sales). In order to sell securities short, the securities are borrowed or received as collateral in conjunction with short-term financing agreements and, at a later date, must be delivered (i.e. replaced) with like or substantially the same financial instruments or commodities to the parties from which they were originally borrowed. Derivatives and short sales may expose Citigroup to market risk or credit risk in excess of the amounts recorded on the balance sheet. Market risk on a derivative, short sale, or foreign exchange product is the exposure created by potential fluctuations in interest rates, foreign exchange rates, and other values, and is a function of the type of product, the volume of transactions, the tenor and terms of the agreement, and the underlying volatility. Credit risk is the exposure to loss in the event of nonperformance by the other party to the transaction and if the value of collateral held, if any, was not adequate to cover such losses. The recognition in earnings of unrealized gains on these transactions is subject to management's assessment as to collectibility. Liquidity risk is the potential exposure that arises when the size of the derivative position may not be able to be rapidly adjusted in times of high volatility and financial stress at a reasonable cost. End-User Interest Rate, Foreign Exchange, and Credit Derivative Contracts
Notional Principal Amounts Percentage of 1999 Amount Maturing -------------------------- --------------------------------------------------------- Dec. 31, Dec. 31, Within 1 to 2 to 3 to 4 to After In Billions of Dollars 1999 1998 1 Year 2 Years 3 Years 4 Years 5 Years 5 Years - ------------------------------------------------------------------------------------------------------------------------- Interest rate products Futures contracts $ 7.1 $ 28.6 100% --% --% --% --% --% Forward contracts 3.3 6.5 100 -- -- -- -- -- Swap agreements 104.7 113.7 28 16 9 14 10 23 Option contracts 7.1 9.9 34 10 31 3 -- 22 Foreign exchange products Futures and forward contracts 50.6 68.2 95 4 1 -- -- -- Cross-currency swaps 7.0 4.8 12 18 20 17 16 17 Credit derivative products 29.2 19.6 2 2 8 7 34 47 =========================================================================================================================
End-User Interest Rate Swaps and Net Purchased Options as of December 31, 1999
Remaining Contracts Outstanding--Notional Principal Amounts ----------------------------------------------------------------- In Billions of Dollars at Year-End 1999 2000 2001 2002 2003 2004 - ------------------------------------------------------------------------------------------------------------------------ Receive fixed swaps $72.5 $60.3 $48.8 $41.5 $28.6 $18.5 Weighted-average fixed rate 6.3% 6.3% 6.3% 6.3% 6.4% 6.5% Pay fixed swaps 15.6 12.1 9.2 7.3 5.9 5.4 Weighted-average fixed rate 5.9% 5.8% 5.9% 6.0% 6.0% 6.1% Basis swaps 16.6 3.2 0.8 0.7 0.5 0.4 Purchased caps (including collars) 1.6 -- -- -- -- -- Weighted-average cap rate purchased 7.1% --% --% --% --% --% Purchased floors 3.0 2.4 1.9 0.1 0.1 0.1 Weighted-average floor rate purchased 6.6% 6.6% 6.7% 5.8% 5.8% 5.8% Written floors related to purchased caps (collars) 0.2 -- -- -- -- -- Weighted-average floor rate written 8.2% --% --% --% --% --% Written caps related to other purchased caps(1) 2.3 2.3 2.1 1.7 1.5 1.5 Weighted-average cap rate written 9.8% 9.8% 9.8% 10.6% 10.7% 10.7% - ------------------------------------------------------------------------------------------------------------------------ Three-month forward LIBOR rates(2) 6.0% 6.9% 7.1% 7.2% 7.3% 7.4% ========================================================================================================================
(1) Includes written options related to purchased options embedded in other financial instruments. (2) Represents the implied forward yield curve for three-month LIBOR as of December 31, 1999, provided for reference. 74 The tables above provide data on the notional principal amounts and maturities of end-user (non-trading) derivatives, along with additional data on end-user interest rate swaps and net purchased option positions at year-end 1999 with three-month LIBOR forward rates included for reference. The tables are intended to provide an overview of these components of the end-user portfolio, but should be viewed only in the context of Citigroup's related assets and liabilities. Contract maturities are related to the underlying risk management strategy. The majority of derivative positions used in Citigroup's asset and liability management activities are established via intercompany transactions with independently managed Citigroup dealer units, with the dealer acting as a conduit to the marketplace. Citigroup's utilization of these instruments is modified from time to time in response to changing market conditions as well as changes in the characteristics and mix of the related assets and liabilities. In this connection, during 1999 interest rate futures, swaps, and options with a notional principal amount of $14.6 billion were closed out which resulted in a net deferred gain of approximately $92 million. Total unamortized net deferred gains, including those from prior year close-outs, were approximately $184 million at December 31, 1999, which will be amortized into earnings over the remaining life of the original contracts (approximately 29% in 2000, 20% in 2001, and 51% in subsequent years), consistent with the risk management strategy. 23. CONCENTRATIONS OF CREDIT RISK Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to Citigroup's total credit exposure. Although Citigroup's portfolio of financial instruments is broadly diversified along industry, product, and geographic lines, material transactions are completed with other financial institutions, particularly in the securities trading, derivative, and foreign exchange businesses. 24. FAIR VALUE OF FINANCIAL INSTRUMENTS Estimated Fair Value of Financial Instruments
1999 1998 ----------------------------------- ---------- Carrying Estimated In Billions of Dollars at Year-End Value Fair Value Difference Difference - ------------------------------------------------------------------------------------------ Assets $688.5 $695.9 $ 7.4 $ 7.3 Liabilities 612.7 612.2 0.5 (1.4) End-user derivative and foreign exchange contracts 0.5 (0.6) (1.1) 2.1 Credit card securitizations -- 0.8 0.8 (0.6) - ------------------------------------------------------------------------------------------ 7.6 7.4 Deposits with no fixed maturity(1) 4.6 2.8 - ------------------------------------------------------------------------------------------ Total $12.2 $10.2 ==========================================================================================
(1) Represents the estimated excess fair value related to the expected time period until runoff of existing deposits with no fixed maturity on the balance sheet at year-end, without assuming any regeneration of balances, based on the estimated difference between the cost of funds on these deposits and the cost of funds from alternative sources. The increase during 1999 was primarily due to higher spreads between the cost of funds on the deposits and the cost of funds from alternative sources. Under applicable requirements, excess fair values of these deposits are excluded from amounts included under the Liabilities caption above and from the following table, in which the estimated fair value is shown as being equal to the carrying value. Citigroup's financial instruments, as defined in accordance with applicable requirements, include financial assets and liabilities recorded on the balance sheet as well as off-balance sheet instruments such as derivative and foreign exchange contracts and credit card securitizations. To better reflect Citigroup's values subject to market risk and to illustrate the interrelationships that characterize risk management strategies, the table above also provides estimated fair value data for the expected time period until runoff of existing deposits with no fixed maturity. In the aggregate, estimated fair values exceeded the carrying values by approximately $12.2 billion at December 31, 1999. Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value, and as existing assets and liabilities run off and new items are entered into. The changes from the prior year are a result of an increase in the fair value of deposits with no fixed maturity, credit card securitizations, long-term debt and deposits primarily due to the higher interest rate environment in the U.S., offset by a decline in the fair value of derivative contracts which were affected by the same interest rate environment. Additional detail is provided in the following table. In accordance with applicable requirements, the disclosures exclude leases, affiliate investments, and pension and benefit obligations, and contractholder funds amounts exclude certain insurance contracts. Also in accordance with the applicable requirements the disclosures exclude the effect of taxes, do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, as well as other expenses that would be incurred in a market transaction. In addition, the table excludes the values of nonfinancial assets and liabilities, as well as a wide range of franchise, relationship, and intangible values, which are integral to a full assessment of Citigroup's financial position and the value of its net assets. The data represents management's best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used for most investments, for loans where available, and for both trading and end-user derivative and foreign exchange contracts, as well as for liabilities, such as long-term debt, with quoted prices. For performing loans where no quoted market prices are available, contractual cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. For loans with doubt as to collectibility, expected cash flows are discounted using an appropriate rate considering the time of collection and a premium for the uncertainty of the flows. The value of collateral is also considered. For liabilities such as long-term debt without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows. 75 Fair values of credit card securitizations reflect the various components of these transactions but principally arise from fixed rates payable to certificate holders. Under the applicable requirements, the estimated fair value of deposits with no fixed maturity in the following table excludes the premium values available in the market for such deposits, and the estimated value is shown in the table as being equal to the carrying value.
1999 1998 ---------------------- ---------------------- Carrying Estimated Carrying Estimated In Billions of Dollars at Year-End Value Fair Value Value Fair Value - --------------------------------------------------------------------------------------- Assets and related instruments Investments $113.1 $113.1 $105.2 $105.2 Federal funds sold and securities borrowed or purchased under agreements to resell 112.7 112.7 94.8 94.8 Trading account assets 109.2 109.2 119.8 119.8 Loans(1) 232.0 239.4 210.5 217.9 Related derivatives 0.2 (0.3) 0.2 0.6 Other financial assets(2) 121.5 121.5 101.3 101.2 Credit card securitizations -- 0.8 -- (0.6) Related derivatives -- (0.2) 0.1 0.5 - --------------------------------------------------------------------------------------- Liabilities and related instruments Deposits 261.1 260.8 228.6 229.0 Related derivatives (0.2) -- (0.3) (0.6) Federal funds purchased and securities loaned or sold under agreements to repurchase 92.6 92.6 81.0 81.0 Trading account liabilities 91.1 91.1 94.6 94.6 Contractholder funds With defined maturities 5.0 4.7 3.3 3.3 Without defined maturities 10.1 10.3 10.4 10.2 Long-term debt 47.1 47.1 48.7 50.1 Related derivatives (0.1) 0.1 (0.1) (1.1) Other financial liabilities(3) 105.7 105.6 92.8 92.6 Related derivatives -- -- 0.1 0.1 =======================================================================================
(1) The carrying value of loans is net of the allowance for credit losses and also excludes $5.5 billion and $4.8 billion of lease finance receivables in 1999 and 1998, respectively. (2) Includes cash and cash equivalents, deposits at interest with banks, brokerage receivables, reinsurance recoverables and separate and variable accounts for which the carrying value is a reasonable estimate of fair value, and the carrying value and estimated fair value of financial instruments included in other assets on the Consolidated Statement of Financial Position. (3) Includes investment banking and brokerage borrowings, short-term borrowings, brokerage payables, and separate and variable accounts for which the carrying value is a reasonable estimate of fair value, and the carrying value and estimated fair value of financial instruments included in other liabilities on the Consolidated Statement of Financial Position. The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The estimated fair values of Citigroup's loans, in the aggregate, exceeded carrying values (reduced by the allowance for credit losses) by $7.4 billion at year-end 1999 and 1998. Within these totals, estimated fair values exceeded carrying values for consumer loans net of the allowance by $4.5 billion, a decline of $0.1 billion from year-end 1998, and for commercial loans net of the allowance by $2.9 billion, which was an improvement of $0.1 billion from year-end 1998. The decline in estimated fair values in excess of carrying values of consumer loans is primarily due to the higher interest rate environment. The improvement in estimated fair value over the carrying values for commercial loans from year-end 1998 is a result of improved credit conditions in Latin America and Asia. The estimated fair value of credit card securitizations was $0.8 billion more than their carrying value at December 31, 1999, which is $1.4 billion higher than December 31, 1998, when the carrying value exceeded the estimated fair value by $0.6 billion. This increase is due to the effects of a higher interest rate environment on the fixed-rate investor certificates. The estimated fair value of interest-bearing deposits was $0.3 billion less than the carrying value at December 31, 1999, which was a result of higher market interest rates since the deposits were taken. For all derivative and foreign exchange contracts in the previous tables, the gross difference between the fair value and carrying amount as of December 31, 1999 and 1998 was $0.4 billion and $2.5 billion, respectively, for contracts whose fair value exceeds carrying value, and $1.5 billion and $0.4 billion at December 31, 1999 and 1998, respectively, for contracts whose carrying value exceeds fair value. 25. PLEDGED ASSETS AND COMMITMENTS Pledged Assets At December 31,1999, the approximate market values of securities sold under agreements to repurchase and other assets pledged, excluding the impact of FIN 41, or pledged by the Company were as follows: In Millions of Dollars 1999 1998 - -------------------------------------------------------------------------------- For securities sold under agreements to repurchase $141,298 $119,206 As collateral for securities borrowed of approximately equivalent value 69,329 82,796 As collateral on bank loans 3,975 3,584 To clearing organizations or segregated under securities laws and regulations 8,696 10,793 For securities loaned 11,995 7,752 Other 15,497 9,393 - -------------------------------------------------------------------------------- $250,790 $233,524 ================================================================================ In addition, included in cash and cash equivalents at December 31, 1999 and 1998 is $2.421 billion and $2.358 billion, respectively, of cash segregated under federal and other brokerage regulations or deposited with clearing organizations. At December 31, 1999 the Company had $2.2 billion of outstanding letters of credit from banks to satisfy various collateral and margin requirements. Lease Commitments Rental expense (principally for offices and computer equipment) was $1.187 billion, $1.058 billion and $1.030 billion for the years ended December 31, 1999, 1998 and 1997, respectively. Future minimum annual rentals under noncancellable leases, net of sublease income, are as follows: In Millions of Dollars at Year-End - -------------------------------------------------------------------------------- 2000 $ 904 2001 817 2002 691 2003 570 2004 500 Thereafter 2,936 - -------------------------------------------------------------------------------- $6,418 ================================================================================ 76 The Company and certain of Salomon Smith Barney's subsidiaries together have an option to purchase the buildings presently leased for Salomon Smith Barney's executive offices and New York City operations at the expiration of the lease term. Loan Commitments In Billions of Dollars at Year-End 1999 1998 - -------------------------------------------------------------------------------- Unused commercial commitments to make or purchase loans, to purchase third-party receivables, and to provide note issuance or revolving underwriting facilities $175.4 $132.6 Unused credit card and other consumer revolving commitments $255.3 $227.8 ================================================================================ The majority of unused commitments are contingent upon customers maintaining specific credit standards. Commercial commitments generally have floating interest rates and fixed expiration dates and may require payment of fees. Such fees (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of the loan or, if exercise is deemed remote, amortized over the commitment period. The table does not include commercial letters of credit issued on behalf of customers and collateralized by the underlying shipment of goods which totaled $5.3 billion at both December 31, 1999 and 1998. Loans Sold with Credit Enhancements
In Billions of Dollars at Year-End 1999 1998 Form of Credit Enhancement - ----------------------------------------------------------------------------------------- Residential mortgages and other loans sold with recourse(1) $ 3.6 $ 6.1 Recourse obligation $1.8 in 1999 and $2.4 in 1998 GNMA sales/servicing agreements(2) 19.3 1.0 Secondary recourse obligation Securitized credit card receivables 49.0 44.3 Primarily net revenue over the life of the transaction =========================================================================================
(1) Residential mortgages represent 74% of amounts in 1999 and 57% in 1998. (2) Government National Mortgage Association sales/servicing agreements covering securitized residential mortgages. Citigroup and its subsidiaries are obligated under various credit enhancements related to certain sales of loans or sales of participations in pools of loans, summarized above. Net revenue on securitized credit card receivables is collected over the life of each sale transaction. The net revenue is based upon the sum of finance charges and fees received from cardholders and interchange revenue earned on cardholder transactions, less the sum of the yield paid to investors, credit losses, transaction costs, and a contractual servicing fee, which is also retained by certain Citigroup subsidiaries as servicers. As specified in certain of the sale agreements, the net revenue collected each month is deposited in an account, up to a predetermined maximum amount, and is available over the remaining term of that transaction to make payments of yield, fees, and transaction costs in the event that net cash flows from the receivables are not sufficient. When the account reaches the predetermined amount, net revenue is passed directly to the Citigroup subsidiary that sold the receivables. The amount contained in these accounts is included in other assets and was $60 million at December 31, 1999 and $30 million at December 31, 1998. Net revenue from securitized credit card receivables included in other income was $1.8 billion, $1.3 billion, and $559 million for the years ended December 31, 1999, 1998, and 1997, respectively. Financial Guarantees Financial guarantees are used in various transactions to enhance the credit standing of Citigroup customers. They represent irrevocable assurances that Citigroup will make payment in the event that the customer fails to fulfill its obligations to third parties. Citicorp issues financial standby letters of credit which are obligations to pay a third-party beneficiary when a customer fails to repay an outstanding loan or debt instrument, such as assuring payments by a foreign reinsurer to a U.S. insurer, to act as a substitute for an escrow account, to provide a payment mechanism for a customer's third-party obligations, and to assure payment of specified financial obligations of a customer. Fees are recognized ratably over the term of the standby letter of credit. The following table summarizes financial standby letters of credit issued by Citicorp. The table does not include securities lending indemnifications issued to customers, which are fully collateralized and totaled $23.0 billion at December 31, 1999 and $11.1 billion at December 31, 1998, and performance standby letters of credit.
1999 1998 ----------------------------------------- ------------ Expire Within Expire After Total Amount Total Amount In Billions of Dollars at Year-End 1 Year 1 Year Outstanding Outstanding - ------------------------------------------------------------------------------------------- Insurance, surety $ 1.6 $5.4 $ 7.0 $ 6.7 Options, purchased securities, and escrow 0.6 0.1 0.7 0.8 Clean payment 2.3 1.0 3.3 2.3 Backstop state, county, and municipal securities 0.1 0.2 0.3 0.5 Other debt related 6.3 2.5 8.8 6.5 - ------------------------------------------------------------------------------------------- Total(1) $10.9 $9.2 $20.1 $16.8 ===========================================================================================
(1) Total is net of cash collateral of $2.6 billion in 1999 and $2.0 billion in 1998. Collateral other than cash covered 21% of the total in 1999 and 27% in 1998. Other Commitments Salomon Smith Barney and a principal broker-dealer subsidiary have each provided a portion of a residual value guarantee in the amount of $586 million in connection with the lease of the buildings occupied by Salomon Smith Barney's executive offices and New York operations. The Company makes commitments to fund partnership investments and transfers receivables to third parties with recourse from time to time. The off-balance sheet risks of these financial instruments were not significant at December 31, 1999 or 1998. 26. CONTINGENCIES In the ordinary course of business, Citigroup and/or its subsidiaries are defendants or co-defendants in various litigation matters, other than environmental and asbestos property and casualty insurance claims as discussed in Note 12. Although there can be no assurances, the Company believes, based on information currently available, that the ultimate resolution of these legal proceedings would not be likely to have a material adverse effect on its results of operations, financial condition, or liquidity. 77 27. CITIGROUP (PARENT COMPANY ONLY) Condensed Statement of Income Year Ended December 31, ------------------------------- In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------------------------- Revenues $ 80 $ 29 $ 1 - ------------------------------------------------------------------------------- Expenses: Interest 389 218 171 Other 133 158 143 - ------------------------------------------------------------------------------- Total 522 376 314 - ------------------------------------------------------------------------------- Pre-tax loss (442) (347) (313) Income tax benefit 156 130 112 - ------------------------------------------------------------------------------- Loss before equity in net income of subsidiaries (286) (217) (201) Equity in net income of subsidiaries 10,153 6,024 6,906 - ------------------------------------------------------------------------------- Net income $ 9,867 $5,807 $6,705 =============================================================================== Condensed Statement of Financial Position
December 31, -------------------- In Millions of Dollars 1999 1998(1) - ---------------------------------------------------------------------------------- Assets Cash $ 855 $ -- Investments 1,763 107 Investment in and advances to: Bank and bank holding company subsidiaries 28,310 24,686 Other subsidiaries 26,809 25,227 Cost of acquired businesses in excess of net assets 395 409 Other 205 193 - ---------------------------------------------------------------------------------- Total $58,337 $50,622 ================================================================================== Liabilities Advances from and payables to subsidiaries $ 887 $ 2,078 Short-term borrowings -- 991 Junior subordinated debentures, held by subsidiary trusts 2,367 1,748 Long-term debt 4,181 2,422 Other liabilities 990 309 Redeemable preferred stock, held by subsidiary 226 226 Redeemable preferred stock--Series I -- 140 Stockholders' equity Preferred stock ($1.00 par value; authorized shares: 30 million), at aggregate liquidation value 1,925 2,313 Common stock ($.01 par value; authorized shares: 6.0 billion; issued shares: 1999--3,612,385,458 shares and 1998--3,603,106,368 shares) 36 36 Additional paid-in capital 10,036 8,893 Retained earnings 43,865 35,971 Treasury stock, at cost (1999--244,860,127 shares; 1998--216,143,199 shares) (7,627) (4,789) Accumulated other changes in equity from nonowner sources 1,907 781 Unearned compensation (456) (497) - ---------------------------------------------------------------------------------- Stockholders' equity 49,686 42,708 - ---------------------------------------------------------------------------------- Total $58,337 $50,622 ==================================================================================
(1) Reclassified to conform to the 1999 presentation. Condensed Statement of Cash Flows
Year Ended December 31, -------------------------------- In Millions of Dollars 1999 1998 1997 - ----------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 9,867 $ 5,807 $ 6,705 Adjustments to reconcile net income to cash provided by operating activities: Equity in net income of subsidiaries (10,153) (6,024) (6,906) Dividends received from: Bank and bank holding company subsidiaries 4,625 16 198 Other subsidiaries 2,285 2,980 1,126 Other, net 1,998 1,034 4,220 - ----------------------------------------------------------------------------------- Net cash provided by operating activities 8,622 3,813 5,343 - ----------------------------------------------------------------------------------- Cash flows from investing activities Capital contributions to subsidiary (321) (1,276) (521) Change in investments (425) (1,130) 240 Advances to subsidiaries, net (1,206) -- -- - ----------------------------------------------------------------------------------- Net cash used in investing activities (1,952) (2,406) (281) - ----------------------------------------------------------------------------------- Cash flows from financing activities (Repayment of) proceeds from advances from subsidiaries, net (1,197) 2,049 -- Dividends paid (1,973) (1,846) (1,692) Issuance of common stock 758 418 434 Issuance of preferred stock -- -- 1,000 Redemption of preferred stock (388) (1,040) (850) Stock tendered for payment of withholding taxes (496) (520) (384) Treasury stock acquired (3,906) (3,085) (3,447) Issuance of long-term debt 1,859 1,000 -- Issuance of junior subordinated debentures 619 722 -- Payments and redemptions of long-term debt (100) (250) (185) Change in short-term borrowings (991) 991 -- Other, net -- 154 62 - ----------------------------------------------------------------------------------- Net cash used in financing activities (5,815) (1,407) (5,062) - ----------------------------------------------------------------------------------- Change in cash and cash equivalents 855 -- -- Cash and cash equivalents at beginning of period -- -- -- - ----------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 855 $ -- $ -- =================================================================================== Supplemental disclosure of cash flow information Cash paid during the period for interest $ 400 $ 202 $ 180 Cash received during the period for taxes 1,251 712 569 ===================================================================================
78 28. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
1999 ---------------------------------------- In Millions of Dollars, Except Per Share Amounts Fourth Third Second First - ---------------------------------------------------------------------------------------------------- Total revenues $20,951 $20,097 $20,436 $20,521 Total revenues, net of interest expense 14,766 14,021 14,380 14,070 Total provisions for benefits, claims, and credit losses 2,900 2,890 2,941 2,777 Total operating expenses 7,675 7,261 7,524 7,321 Income before income taxes, minority interest, and cumulative effect of accounting changes 4,191 3,870 3,915 3,972 Provision for income taxes 1,499 1,379 1,402 1,423 Minority interest, net of income taxes 70 56 65 60 Income before cumulative effect of accounting changes 2,622 2,435 2,448 2,489 Cumulative effect of accounting changes(1) -- -- -- (127) - ---------------------------------------------------------------------------------------------------- Net income $ 2,622 $ 2,435 $ 2,448 $ 2,362 - ---------------------------------------------------------------------------------------------------- Basic earnings per share(2) $ 0.78 $ 0.72 $ 0.72 $ 0.70 - ---------------------------------------------------------------------------------------------------- Diluted earnings per share(2) $ 0.75 $ 0.70 $ 0.70 $ 0.68 - ---------------------------------------------------------------------------------------------------- Common stock price per share(2) High $58.250 $50.938 $51.750 $44.297 Low 42.063 41.188 40.125 32.672 Close 55.688 44.000 47.500 42.578 Dividends per share of common stock 0.140 0.140 0.140 0.120 ==================================================================================================== 1998 ---------------------------------------- In Millions of Dollars, Except Per Share Amounts Fourth Third Second First - ---------------------------------------------------------------------------------------------------- Total revenues $19,439 $17,594 $19,961 $19,437 Total revenues, net of interest expense 12,754 10,421 12,965 12,796 Total provisions for benefits, claims, and credit losses 2,899 2,925 2,703 2,589 Total operating expenses 8,793 6,339 6,680 6,739 Income before income taxes, minority interest, and cumulative effect of accounting changes 1,062 1,157 3,582 3,468 Provision for income taxes 320 375 1,290 1,249 Minority interest, net of income taxes 65 53 52 58 Income before cumulative effect of accounting changes 677 729 2,240 2,161 Cumulative effect of accounting changes(1) -- -- -- -- - ---------------------------------------------------------------------------------------------------- Net income $ 677 $ 729 $ 2,240 $ 2,161 - ---------------------------------------------------------------------------------------------------- Basic earnings per share(2) $ 0.19 $ 0.20 $ 0.65 $ 0.62 - ---------------------------------------------------------------------------------------------------- Diluted earnings per share(2) $ 0.19 $ 0.20 $ 0.63 $ 0.60 - ---------------------------------------------------------------------------------------------------- Common stock price per share(2) High $35.500 $48.625 $49.000 $42.250 Low 19.000 24.750 39.417 30.083 Close 33.125 25.000 40.417 40.000 Dividends per share of common stock 0.120 0.083 0.083 0.083 ====================================================================================================
(1) Accounting changes include the 1999 first quarter adoption of Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" of ($135) million; SOP 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk" of $23 million; and SOP 98-5, "Reporting on the Costs of Start-Up Activities" of ($15) million. See Note 1 of Notes to Consolidated Financial Statements. (2) Per share data have been adjusted to give effect to the three-for-two split in Citigroup's common stock as discussed in Note 1 of Notes to Consolidated Financial Statements. Due to changes in the number of average shares outstanding, quarterly earnings per share of common stock may not add to the totals for the years. The fourth quarters of 1999 and 1998 include $51 million after-tax ($82 million pretax) and $703 million after-tax ($1.122 billion pretax), respectively, of restructuring charges associated with business improvement and integration initiatives, and in the 1998 fourth quarter, includes $65 million of merger-related costs. The third quarter of 1999 includes a charge of $31 million after-tax ($49 million pretax) related to severance. The fourth, third, and first quarters of 1999 include credits for reductions of prior charges of $76 million after-tax ($122 million pretax), $41 million after-tax ($68 million pretax), and $125 million after-tax ($211 million pretax), respectively. The fourth and second quarters of 1998 include credits for reversals of prior charges of $42 million after-tax ($68 million pretax) and $191 million after-tax ($324 million pretax), respectively. The 1999 fourth, third, second, and first quarters also include $8 million after-tax ($13 million pretax), $25 million after-tax ($41 million pretax), $29 million after-tax ($47 million pretax), and $51 million after-tax ($81 million pretax), respectively, of accelerated depreciation. 79 FINANCIAL DATA SUPPLEMENT Average Balances and Interest Rates, Taxable Equivalent Basis(1)(2)(3)
Average Volume Interest Revenue % Average Rate ---------------------------- ---------------------- ---------------------- In Millions of Dollars 1999 1998 1997 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------ Assets Cash and cash equivalents In U.S. offices $ 3,038 $ 3,199 $ 2,416 $ -- $ 1 $ -- -- 0.03 -- In offices outside the U.S.(4) 917 1,087 1,114 13 21 16 1.42 1.93 1.44 - --------------------------------------------------------------------------------------------------- Total 3,955 4,286 3,530 13 22 16 0.33 0.51 0.45 - --------------------------------------------------------------------------------------------------- Deposits at interest with banks(4) 12,293 14,313 14,003 992 1,070 995 8.07 7.48 7.11 - --------------------------------------------------------------------------------------------------- Investments In U.S. offices Taxable 63,351 59,254 57,661 4,130 3,731 3,828 6.52 6.30 6.64 Exempt from U.S. income tax 13,858 13,059 8,613 996 946 724 7.19 7.24 8.41 In offices outside the U.S.(4) 28,087 24,628 20,729 2,902 2,441 1,661 10.33 9.91 8.01 - --------------------------------------------------------------------------------------------------- Total 105,296 96,941 87,003 8,028 7,118 6,213 7.62 7.34 7.14 - --------------------------------------------------------------------------------------------------- Federal funds sold and securities borrowed or purchased under agreements to resell In U.S. offices 82,778 78,096 76,034 6,120 6,087 5,326 7.39 7.79 7.00 In offices outside the U.S.(4) 32,635 57,122 51,074 1,549 2,511 2,527 4.75 4.40 4.95 - --------------------------------------------------------------------------------------------------- Total 115,413 135,218 127,108 7,669 8,598 7,853 6.64 6.36 6.18 - --------------------------------------------------------------------------------------------------- Brokerage receivables In U.S. offices 17,464 14,307 7,643 1,212 1,087 857 6.94 7.60 11.21 In offices outside the U.S.(4) 4,504 8,742 5,934 188 200 73 4.17 2.29 1.23 - --------------------------------------------------------------------------------------------------- Total 21,968 23,049 13,577 1,400 1,287 930 6.37 5.58 6.85 - --------------------------------------------------------------------------------------------------- Trading account assets(5)(6) In U.S. offices 59,062 71,307 75,916 2,245 3,171 2,899 3.80 4.45 3.82 In offices outside the U.S.(4) 32,032 59,211 71,539 989 1,624 2,160 3.09 2.74 3.02 - --------------------------------------------------------------------------------------------------- Total 91,094 130,518 147,455 3,234 4,795 5,059 3.55 3.67 3.43 - --------------------------------------------------------------------------------------------------- Loans (net of unearned income)(7) Consumer loans In U.S. offices 78,726 71,068 65,652 8,211 7,820 7,250 10.43 11.00 11.04 In offices outside the U.S.(4) 57,341 51,664 51,274 6,377 6,384 6,308 11.12 12.36 12.30 - --------------------------------------------------------------------------------------------------- Total consumer loans 136,067 122,732 116,926 14,588 14,204 13,558 10.72 11.57 11.60 - --------------------------------------------------------------------------------------------------- Commercial loans In U.S. offices Commercial and industrial 13,474 11,539 10,670 1,141 942 916 8.47 8.16 8.58 Mortgage and real estate 4,238 6,017 6,386 414 616 678 9.77 10.24 10.62 Lease financing 3,087 2,958 3,048 201 189 205 6.51 6.39 6.73 In offices outside the U.S.(4) 71,970 64,639 50,791 6,832 6,981 5,411 9.49 10.80 10.65 - --------------------------------------------------------------------------------------------------- Total commercial loans 92,769 85,153 70,895 8,588 8,728 7,210 9.26 10.25 10.17 - --------------------------------------------------------------------------------------------------- Total loans 228,836 207,885 187,821 23,176 22,932 20,768 10.13 11.03 11.06 - --------------------------------------------------------------------------------------------------- Other interest-earning assets 6,863 6,577 4,338 716 747 511 10.43 11.36 11.78 - --------------------------------------------------------------------------------------------------- Total interest-earning assets 585,718 618,787 584,835 $45,228 $46,569 $42,345 7.72 7.53 7.24 ==================================================== Non-interest-earning assets(5) 111,311 111,755 93,485 - ------------------------------------------------------------------------ Total assets $697,029 $730,542 $678,320 ==============================================================================================================================
(1) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (2) Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories. See Note 22 of Notes to Consolidated Financial Statements. (3) For certain amounts associated with Travelers, monthly or quarterly averages have been used as daily averages are unavailable. (4) Average rates reflect prevailing local interest rates including inflationary effects and monetary correction in certain countries. (5) The fair value carrying amounts of derivative and foreign exchange contracts are reported in non-interest earning assets and other non-interest bearing liabilities. (6) Interest expense on trading account liabilities of Salomon Smith Barney is reported as a reduction of interest revenue. (7) Includes cash-basis loans. 80 Average Balances and Interest Rates, Taxable Equivalent Basis(1)(2)(3)
Average Volume Interest Expense % Average Rate ---------------------------- ------------------------- ---------------------- In Millions of Dollars 1999 1998 1997 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- Liabilities Deposits In U.S. offices Savings deposits(7) $ 33,422 $ 31,179 $ 27,149 $ 928 $ 919 $ 811 2.78 2.95 2.99 Other time deposits 11,566 10,997 12,302 265 498 610 2.29 4.53 4.96 In offices outside the U.S.(4) 169,138 149,982 128,546 9,519 10,229 8,192 5.63 6.82 6.37 - ------------------------------------------------------------------------------------------------------ Total 214,126 192,158 167,997 10,712 11,646 9,613 5.00 6.06 5.72 - ------------------------------------------------------------------------------------------------------ Federal funds purchased and securities loaned or sold under agreements to repurchase In U.S. offices 79,669 83,094 85,817 6,172 6,612 6,251 7.75 7.96 7.28 In offices outside the U.S.(4) 30,326 51,649 55,321 1,778 2,860 2,969 5.86 5.54 5.37 - ------------------------------------------------------------------------------------------------------ Total 109,995 134,743 141,138 7,950 9,472 9,220 7.23 7.03 6.53 - ------------------------------------------------------------------------------------------------------ Brokerage payables In U.S. offices 13,421 11,555 6,103 219 264 155 1.63 2.28 2.54 In offices outside the U.S.(4) 3,309 13,454 5,394 3 24 57 0.09 0.18 1.06 - ------------------------------------------------------------------------------------------------------ Total 16,730 25,009 11,497 222 288 212 1.33 1.15 1.84 - ------------------------------------------------------------------------------------------------------ Trading account liabilities(5)(6) In U.S. offices 28,409 34,037 44,881 54 165 147 0.19 0.48 0.33 In offices outside the U.S.(4) 21,754 40,178 42,882 31 112 178 0.14 0.28 0.42 - ------------------------------------------------------------------------------------------------------ Total 50,163 74,215 87,763 85 277 325 0.17 0.37 0.37 - ------------------------------------------------------------------------------------------------------ Investment banking and brokerage borrowings In U.S. offices 11,656 13,554 8,259 663 587 543 5.69 4.33 6.57 In offices outside the U.S.(4) 593 1,773 3,369 86 151 104 14.50 8.52 3.09 - ------------------------------------------------------------------------------------------------------ Total 12,249 15,327 11,628 749 738 647 6.11 4.82 5.56 - ------------------------------------------------------------------------------------------------------ Short-term borrowings In U.S. offices 9,449 9,641 7,663 542 669 578 5.74 6.94 7.54 In offices outside the U.S.(4) 6,782 5,948 5,101 1,104 951 713 16.28 15.99 13.98 - ------------------------------------------------------------------------------------------------------ Total 16,231 15,589 12,764 1,646 1,620 1,291 10.14 10.39 10.11 - ------------------------------------------------------------------------------------------------------ Long-term debt In U.S. offices 43,932 44,440 41,394 2,545 2,812 2,568 5.79 6.33 6.20 In offices outside the U.S.(4) 4,480 3,528 4,448 491 347 412 10.96 9.84 9.26 - ------------------------------------------------------------------------------------------------------ Total 48,412 47,968 45,842 3,036 3,159 2,980 6.27 6.59 6.50 - ------------------------------------------------------------------------------------------------------ Mandatorily redeemable securities of subsidiary trusts 4,920 3,687 2,958 368 295 236 7.48 8.00 7.98 - ------------------------------------------------------------------------------------------------------=========================== Demand deposits in U.S. offices 10,761 10,747 11,166 Other non-interest-bearing liabilities(5) 168,036 168,088 145,185 Redeemable preferred stock 105 246 403 Total stockholders' equity 45,301 42,765 39,979 - ------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $697,029 $730,542 $678,320 $24,768 $27,495 $24,524 ================================================================================================================================= NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE INTEREST-EARNING ASSETS In U.S. offices(8) $345,829 $337,168 $318,353 $12,596 $11,730 $10,675 3.64 3.48 3.35 In offices outside the U.S.(8) 239,889 281,619 266,482 7,864 7,344 7,146 3.28 2.61 2.68 - ------------------------------------------------------------------------------------------------------ Total $585,718 $618,787 $584,835 $20,460 $19,074 $17,821 3.49 3.08 3.05 =================================================================================================================================
(1) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (2) Interest rates and amounts include the effects of risk management activities associated with the respective asset and liability categories. See Note 22 of Notes to Consolidated Financial Statements. (3) For certain amounts associated with Travelers, monthly or quarterly averages have been used as daily averages are unavailable. (4) Average rates reflect prevailing local interest rates including inflationary effects and monetary correction in certain countries. (5) The fair value carrying amounts of derivative and foreign exchange contracts are reported in non-interest earning assets and other non-interest bearing liabilities. (6) Interest expense on trading account liabilities of Salomon Smith Barney is reported as a reduction of interest revenue. (7) Savings deposits consist of Insured Money Market Rate accounts, NOW accounts, and other savings deposits. (8) Includes allocations for capital and funding costs based on the location of the asset. 81 Analysis of Changes in Net Interest Revenue
1999 vs. 1998 1998 vs. 1997 ------------------------------- ------------------------------- Increase (Decrease) Increase (Decrease) Due to Change In: Due to Change In: ------------------- ------------------- Average Average Net Average Average Net In Millions of Dollars on a Taxable Equivalent Basis (1) Volume Rate Change(2) Volume Rate Change(2) - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents $ (3) $ (6) $ (9) $ -- $ 6 $ 6 - ----------------------------------------------------------------------------------------------------------------------------- Deposits at interest with banks(3) (159) 81 (78) 22 53 75 - ----------------------------------------------------------------------------------------------------------------------------- Investments In U.S. offices 323 126 449 400 (275) 125 In offices outside the U.S.(3) 354 107 461 345 435 780 - ----------------------------------------------------------------------------------------------------------------------------- Total 677 233 910 745 160 905 - ----------------------------------------------------------------------------------------------------------------------------- Federal funds sold and securities borrowed or purchased under agreements to resell In U.S. offices 355 (322) 33 148 613 761 In offices outside the U.S.(3) (1,149) 187 (962) 282 (298) (16) - ----------------------------------------------------------------------------------------------------------------------------- Total (794) (135) (929) 430 315 745 - ----------------------------------------------------------------------------------------------------------------------------- Brokerage receivables In U.S. offices 225 (100) 125 571 (341) 230 In offices outside the U.S.(3) (127) 115 (12) 45 82 127 - ----------------------------------------------------------------------------------------------------------------------------- Total 98 15 113 616 (259) 357 - ----------------------------------------------------------------------------------------------------------------------------- Trading account assets(4) In U.S. offices (502) (424) (926) (184) 456 272 In offices outside the U.S.(3) (819) 184 (635) (350) (186) (536) - ----------------------------------------------------------------------------------------------------------------------------- Total (1,321) (240) (1,561) (534) 270 (264) - ----------------------------------------------------------------------------------------------------------------------------- Loans--consumer In U.S. offices 813 (422) 391 596 (26) 570 In offices outside the U.S.(3) 665 (672) (7) 48 28 76 - ----------------------------------------------------------------------------------------------------------------------------- Total 1,478 (1,094) 384 644 2 646 - ----------------------------------------------------------------------------------------------------------------------------- Loans--commercial In U.S. offices 24 (15) 9 36 (88) (52) In offices outside the U.S.(3) 746 (895) (149) 1,495 75 1,570 - ----------------------------------------------------------------------------------------------------------------------------- Total 770 (910) (140) 1,531 (13) 1,518 - ----------------------------------------------------------------------------------------------------------------------------- Total loans 2,248 (2,004) 244 2,175 (11) 2,164 - ----------------------------------------------------------------------------------------------------------------------------- Other interest-earning assets 32 (63) (31) 255 (19) 236 - ----------------------------------------------------------------------------------------------------------------------------- Total interest revenue 778 (2,119) (1,341) 3,709 515 4,224 ============================================================================================================================= Deposits In U.S. offices 90 (314) (224) 95 (99) (4) In offices outside the U.S.(3) 1,210 (1,920) (710) 1,433 604 2,037 - ----------------------------------------------------------------------------------------------------------------------------- Total 1,300 (2,234) (934) 1,528 505 2,033 - ----------------------------------------------------------------------------------------------------------------------------- Federal funds purchased and securities loaned or sold under agreements to repurchase In U.S. offices (268) (172) (440) (203) 564 361 In offices outside the U.S.(3) (1,242) 160 (1,082) (201) 92 (109) - ----------------------------------------------------------------------------------------------------------------------------- Total (1,510) (12) (1,522) (404) 656 252 - ----------------------------------------------------------------------------------------------------------------------------- Brokerage payables In U.S. offices 39 (84) (45) 126 (17) 109 In offices outside the U.S.(3) (13) (8) (21) 40 (73) (33) - ----------------------------------------------------------------------------------------------------------------------------- Total 26 (92) (66) 166 (90) 76 - ----------------------------------------------------------------------------------------------------------------------------- Trading account liabilities(4) In U.S. offices (24) (87) (111) (41) 59 18 In offices outside the U.S.(3) (39) (42) (81) (11) (55) (66) - ----------------------------------------------------------------------------------------------------------------------------- Total (63) (129) (192) (52) 4 (48) - ----------------------------------------------------------------------------------------------------------------------------- Investment banking and brokerage borrowings In U.S. offices (90) 166 76 271 (227) 44 In offices outside the U.S.(3) (135) 70 (65) (68) 115 47 - ----------------------------------------------------------------------------------------------------------------------------- Total (225) 236 11 203 (112) 91 - ----------------------------------------------------------------------------------------------------------------------------- Short-term borrowings In U.S. offices (13) (114) (127) 140 (49) 91 In offices outside the U.S.(3) 135 18 153 127 111 238 - ----------------------------------------------------------------------------------------------------------------------------- Total 122 (96) 26 267 62 329 - ----------------------------------------------------------------------------------------------------------------------------- Long-term debt In U.S. offices (32) (235) (267) 192 52 244 In offices outside the U.S.(3) 102 42 144 (89) 24 (65) - ----------------------------------------------------------------------------------------------------------------------------- Total 70 (193) (123) 103 76 179 - ----------------------------------------------------------------------------------------------------------------------------- Mandatorily redeemable securities of subsidiary trusts 93 (20) 73 58 1 59 - ----------------------------------------------------------------------------------------------------------------------------- Total interest expense (187) (2,540) (2,727) 1,869 1,102 2,971 ============================================================================================================================= Net interest revenue $ 965 $ 421 $ 1,386 $ 1,840 $ (587) $ 1,253 =============================================================================================================================
(1) The taxable equivalent adjustment is based on the U.S. federal statutory tax rate of 35%. (2) Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total net change. (3) Changes in average rates reflect changes in prevailing local interest rates including inflationary effects and monetary correction in certain countries. (4) Interest expense on trading account liabilities of Salomon Smith Barney is reported as a reduction of interest revenue. 82 Ratios 1999 1998 1997 - -------------------------------------------------------------------------------- Net income to average assets 1.42% 0.79% 0.99% Return on common stockholders' equity(1) 22.49% 13.95% 17.49% Return on total stockholders' equity(2) 21.75% 13.52% 16.70% Total average equity to average assets 6.50% 5.85% 5.89% Dividends declared per common share as a percentage of income per common share, assuming dilution 19.1% 22.8% 14.6% ================================================================================ (1) Based on income less total preferred stock dividends as a percentage of average common stockholders' equity. (2) Based on net income less redeemable preferred stock dividends as a percentage of average total stockholders' equity. Foregone Interest Revenue on Loans(1) In U.S In Non-U.S. 1999 In Millions of Dollars Offices Offices Total - -------------------------------------------------------------------------------- Interest revenue that would have been accrued at original contractual rates(2) $111 $435 $546 Amount recognized as interest revenue(2) 45 101 146 - -------------------------------------------------------------------------------- Foregone interest revenue $ 66 $334 $400 ================================================================================ (1) Relates to commercial cash-basis and renegotiated loans and consumer loans on which accrual of interest had been suspended. (2) Interest revenue in offices outside the U.S. may reflect prevailing local interest rates, including the effects of inflation and monetary correction in certain countries. Loan Maturities and Sensitivity to Changes in Interest Rates
Due Over 1 Within 1 but Within Over In Millions of Dollars at Year-End Year 5 Years 5 Years Total - --------------------------------------------------------------------------------------------- Maturities of the gross commercial loan portfolio In U.S. offices Commercial and industrial loans $ 4,636 $ 6,705 $2,356 $13,697 Mortgage and real estate 552 1,156 1,951 3,659 Lease financing 761 1,689 942 3,392 In offices outside the U.S. 53,875 16,975 4,120 74,970 - --------------------------------------------------------------------------------------------- Total commercial loan portfolio $59,824 $26,525 $9,369 $95,718 ============================================================================================= Sensitivity of loans due after one year to changes in interest rates(1) Loans at predetermined interest rates $ 6,356 $3,943 Loans at floating or adjustable interest rates 20,169 5,426 - --------------------------------------------------------------------------------------------- Total $26,525 $9,369 =============================================================================================
(1) Based on contractual terms. Repricing characteristics may effectively be modified from time to time using derivative contracts. See Notes 22 and 24 of Notes to Consolidated Financial Statements. Loans Outstanding
In Millions of Dollars at Year-End 1999 1998 1997 1996 1995 - -------------------------------------------------------------------------------------------------- Consumer loans In U.S. offices Mortgage and real estate $ 37,261 $ 29,962 $ 28,084 $ 27,173 $ 25,862 Installment, revolving credit, and other 51,570 47,869 42,415 41,489 37,321 - -------------------------------------------------------------------------------------------------- 88,831 77,831 70,499 68,662 63,183 - -------------------------------------------------------------------------------------------------- In offices outside the U.S. Mortgage and real estate 21,529 19,456 17,685 18,379 18,240 Installment, revolving credit, and other 39,306 36,048 32,179 33,905 32,521 Lease financing 475 484 544 754 765 - -------------------------------------------------------------------------------------------------- 61,310 55,988 50,408 53,038 51,526 - -------------------------------------------------------------------------------------------------- 150,141 133,819 120,907 121,700 114,709 Unearned income (1,426) (1,564) (1,417) (1,532) (1,606) - -------------------------------------------------------------------------------------------------- Consumer loans--net 148,715 132,255 119,490 120,168 113,103 - -------------------------------------------------------------------------------------------------- Commercial loans In U.S. offices Commercial and industrial 13,697 12,452 11,212 9,493 9,620 Mortgage and real estate 3,659 5,344 5,960 6,789 8,729 Lease financing 3,392 2,951 3,087 3,017 3,239 - -------------------------------------------------------------------------------------------------- 20,748 20,747 20,259 19,299 21,588 - -------------------------------------------------------------------------------------------------- In offices outside the U.S. Commercial and industrial 60,652 55,828 47,417 36,901 32,966 Mortgage and real estate 1,728 1,792 1,651 1,815 1,901 Loans to financial institutions 7,692 8,008 6,480 4,837 4,229 Governments and official institutions 3,250 2,132 2,376 2,252 2,180 Lease financing 1,648 1,386 1,092 1,294 1,098 - -------------------------------------------------------------------------------------------------- 74,970 69,146 59,016 47,099 42,374 - -------------------------------------------------------------------------------------------------- 95,718 89,893 79,275 66,398 63,962 Unearned income (227) (190) (159) (110) (169) - -------------------------------------------------------------------------------------------------- Commercial loans--net 95,491 89,703 79,116 66,288 63,793 - -------------------------------------------------------------------------------------------------- Total loans--net of unearned income 244,206 221,958 198,606 186,456 176,896 Allowance for credit losses (6,679) (6,617) (6,137) (5,743) (5,561) - -------------------------------------------------------------------------------------------------- Total loans--net of unearned income and allowance for credit losses $ 237,527 $ 215,341 $ 192,469 $ 180,713 $ 171,335 ==================================================================================================
83 Cash-Basis, Renegotiated, and Past Due Loans In Millions of Dollars at Year-End 1999 1998 1997 1996 1995 - -------------------------------------------------------------------------------- Commercial cash-basis loans Collateral dependent (at lower of cost or collateral value)(1) $ 241 $ 394 $ 258 $ 263 $ 779 Other 1,162 1,201 806 642 755 - -------------------------------------------------------------------------------- Total $1,403 $1,595 $1,064 $ 905 $1,534 ================================================================================ Commercial cash-basis loans In U.S. offices $ 256 $ 463 $ 296 $ 292 $ 925 In offices outside the U.S. 1,147 1,132 768 613 609 - -------------------------------------------------------------------------------- Total $1,403 $1,595 $1,064 $ 905 $1,534 ================================================================================ Commercial renegotiated loans In U.S. offices $ 16 $ -- $ 20 $ 264 $ 309 In offices outside the U.S. 43 45 39 57 112 - -------------------------------------------------------------------------------- Total $ 59 $ 45 $ 59 $ 321 $ 421 ================================================================================ Consumer loans on which accrual of interest had been suspended In U.S. offices(2) $ 724 $ 825 $1,009 $1,184 $1,466 In offices outside the U.S. 1,506 1,458 993 1,071 1,247 - -------------------------------------------------------------------------------- Total $2,230 $2,283 $2,002 $2,255 $2,713 ================================================================================ Accruing loans 90 or more days delinquent(3) In U.S. offices(2) $ 732 $ 592 $ 633 $ 696 $ 499 In offices outside the U.S. 452 532 467 422 498 - -------------------------------------------------------------------------------- Total $1,184 $1,124 $1,100 $1,118 $ 997 ================================================================================ (1) A cash-basis loan is defined as collateral dependent when repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment, in which case the loans are written down to the lower of cost or collateral value. (2) Includes $12 million, $10 million, and $11 million of consumer loans on which accrual of interest had been suspended and $22 million, $30 million, and $27 million of accruing loans 90 or more days delinquent related to loans held for sale at December 31, 1999, 1998 and 1997, respectively. (3) Substantially all consumer loans of which $379 million, $267 million, $240 million, $239 million, and $208 million are government-guaranteed student loans at December 31, 1999, 1998, 1997, 1996, and 1995, respectively. Other Real Estate Owned and Assets Pending Disposition In Millions of Dollars at Year-End 1999 1998 1997 1996 1995 - -------------------------------------------------------------------------------- Consumer(1) $204 $254 $275 $ 459 $ 535 Commercial(1) 486 488 690 1,303 941 Corporate/Other 14 8 8 6 5 - -------------------------------------------------------------------------------- Total $704 $750 $973 $1,768 $1,481 ================================================================================ Assets pending disposition(2) $ 86 $100 $ 96 $ 160 $ 205 ================================================================================ (1) Represents repossessed real estate, carried at lower of cost or collateral value. (2) Represents consumer residential mortgage loans that have a high probability of foreclosure, carried at lower of cost or collateral value. Details of Credit Loss Experience
In Millions of Dollars 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------- Allowance for credit losses at beginning of year $6,617 $6,137 $ 5,743 $ 5,561 $ 5,337 - ----------------------------------------------------------------------------------- Provision for credit losses Consumer 2,489 2,367 2,225 2,207 1,935 Commercial 348 384 (28) (7) 241 - ----------------------------------------------------------------------------------- 2,837 2,751 2,197 2,200 2,176 - ----------------------------------------------------------------------------------- Gross credit losses Consumer(1) In U.S. offices 1,680 1,726 1,736 1,562 1,347 In offices outside the U.S. 1,270 1,009 868 876 825 Commercial Mortgage and real estate In U.S. offices -- 13 21 27 118 In offices outside the U.S. 10 58 47 32 25 Governments and official institutions outside the U.S. -- 3 -- -- 37 Loans to financial institutions in offices outside the U.S. 11 97 7 12 11 Commercial and industrial In U.S. offices 37 62 7 29 40 In offices outside the U.S. 466 343 109 159 137 - ----------------------------------------------------------------------------------- 3,474 3,311 2,795 2,697 2,540 - ----------------------------------------------------------------------------------- Credit recoveries Consumer(1) In U.S. offices 245 235 273 257 260 In offices outside the U.S. 294 262 234 216 187 Commercial Mortgage and real estate In U.S. offices 12 83 47 88 26 In offices outside the U.S. 2 10 7 8 21 Governments and official institutions outside the U.S. -- 10 36 81 52 Loans to financial institutions in offices outside the U.S. 5 16 17 1 1 Commercial and industrial In U.S. offices 5 21 58 44 80 In offices outside the U.S. 93 30 54 44 46 - ----------------------------------------------------------------------------------- 656 667 726 739 673 - ----------------------------------------------------------------------------------- Net credit losses In U.S. offices 1,455 1,462 1,386 1,229 1,139 In offices outside the U.S. 1,363 1,182 683 729 728 - ----------------------------------------------------------------------------------- 2,818 2,644 2,069 1,958 1,867 - ----------------------------------------------------------------------------------- Other--net(2) 43 373 266 (60) (85) - ----------------------------------------------------------------------------------- Allowance for credit losses at end of year $6,679 $6,617 $ 6,137 $ 5,743 $ 5,561 =================================================================================== Net consumer credit losses $2,411 $2,238 $ 2,097 $ 1,965 $ 1,725 As a percentage of average consumer loans 1.77 1.82 1.79 1.74 1.61 =================================================================================== Net commercial credit losses (recoveries) $ 407 $ 406 $ (28) $ (7) $ 142 As a percentage of average commercial loans 0.44 0.48 NM NM 0.23 ===================================================================================
(1) Consumer credit losses and recoveries primarily relate to revolving credit and installment loans. (2) In 1999, primarily includes the addition of allowance for credit losses related to acquisitions and foreign currency translation effects. In 1998, reflects the addition of $320 million of credit loss reserves related to the acquisition of the Universal Card portfolio. In 1997, $373 million was restored to the allowance for credit losses that had previously been attributed to credit card securitization transactions where the exposure to credit losses was contractually limited to the cash flows from the securitized receivables, $50 million attributable to standby letters of credit and guarantees was reclassified to other liabilities, and $50 million attributable to derivative and foreign exchange contracts was reclassified as a deduction from trading account assets. NM Not meaningful. 84 Average Deposit Liabilities in Offices Outside the U.S.(1)
1999 1998 1997 ------------------------- ------------------------- ------------------------- Average Average Average Average Average Average In Millions of Dollars at Year-End Balance Interest Rate Balance Interest Rate Balance Interest Rate - ------------------------------------------------------------------------------------------------------------------------------ Banks(2) $ 21,993 7.10% $ 18,559 8.46% $ 15,326 7.33% Other demand deposits 38,798 3.14 33,466 3.49 31,833 2.99 Other time and savings deposits(2) 119,581 5.64 107,999 6.94 90,610 6.75 - ------------------------------------------------------------------------------------------------------------------------------ Total $180,372 5.28 $160,024 6.39 $137,769 5.95 ==============================================================================================================================
(1) Interest rates and amounts include the effects of risk management activities, and also reflect the impact of the local interest rates prevailing in certain countries. See Note 22 of Notes to Consolidated Financial Statements. (2) Primarily consists of time certificates of deposit and other time deposits in denominations of $100,000 or more. Maturity Profile of Time Deposits ($100,000 or more) in U.S. Offices In Millions of Dollars Under 3 Over 3 to 6 Over 6 to 12 Over 12 at Year-End 1999 Months Months Months Months - ----------------------------------------------------------------------------- Certificates of deposit $5,289 $451 $640 $596 Other time deposits 620 225 110 82 ============================================================================= Short-Term and Other Borrowings(1)
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase Commercial Paper Other Funds Borrowed(2) -------------------------------- -------------------------- ---------------------------- In Millions of Dollars 1999 1998 1997 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------- Amounts outstanding at year-end $ 92,591 $ 81,025 $132,103 $5,027 $4,031 $5,920 $12,059 $12,081 $8,108 Average outstanding during the year 109,995 134,743 141,138 4,730 6,010 4,366 11,501 9,579 8,398 Maximum month-end outstanding 129,112 163,421 170,110 6,375 9,393 6,090 16,405 12,081 9,949 - ------------------------------------------------------------------------------------------------------------------------------- Weighted-average interest rate During the year(3) 7.23% 7.03% 6.53% 5.35% 5.57% 5.57% 12.11% 13.26% 12.47% At year-end(4) 4.34% 4.94% 5.92% 6.12% 5.36% 5.71% 8.28% 12.14% 9.04% =============================================================================================================================== Investment Banking and Brokerage Borrowings ----------------------------- In Millions of Dollars 1999 1998 1997 - ------------------------------------------------------------ Amounts outstanding at year-end $13,719 $14,040 $11,464 Average outstanding during the year 12,249 15,327 11,628 Maximum month-end outstanding 14,048 20,576 13,174 - ------------------------------------------------------------ Weighted-average interest rate During the year(3) 6.11% 4.82% 5.56% At year-end(4) 6.00% 4.59% 5.80% ============================================================
(1) Original maturities of less than one year. (2) Rates reflect the impact of local interest rates prevailing in countries outside the United States. (3) Interest rates include the effects of risk management activities. See Notes 11 and 22 of Notes to Consolidated Financial Statements. (4) Based on contractual rates at year-end. 85 Cross-Marketing Citigroup has a number of distribution channels for the sale of the various companies' products. Those distribution channels range from Travelers Property Casualty agents to the Citibank branches; Citibank credit card representatives to Primerica Financial Services (PFS) agents; and Salomon Smith Barney Financial Consultants (SSB FCs) to CitiFinancial branches. The current cross-marketing efforts include: o PFS agents are marketing Salomon Smith Barney mutual funds, CitiFinancial personal loans and Travelers Bank & Trust, fsb real-estate secured loans ($.A.F.E.(R) loans and $.M.A.R.T. loans(R)), and Travelers Life & Annuity variable annuities. o Investment employees at Citibank branches are marketing Travelers Life & Annuity variable annuities and SSB Citi Asset Management Group mutual funds. o SSB FCs are marketing Travelers Life & Annuity annuities, Citibank mortgage loans, including loans using SSB equities as the down payment, and SSB Citi Asset Management Group mutual funds. o The call centers for Citibank's credit card operation refer cardholders to Travelers Property Casualty for auto and homeowners insurance, to CitiFinancial for debt consolidation loans, and to Travelers Bank & Trust, fsb for real-estate secured loans. o Insurance agents representing Travelers Property Casualty refer customers interested in student loans, credit cards, mortgage loans, commercial leasing, and small business loans to Citibank. o Salomon Smith Barney institutional sales representatives and Citibank corporate relationship managers jointly market their transaction services, asset management, lending and liquidity, trading, and underwriting capabilities. Property-Casualty Insurance Services- Other Information Selected Product Information The following table sets forth by product line net written premiums for Commercial Lines and Personal Lines for the year ended 1999. Many larger National Accounts customers often demand service-type products, primarily for workers' compensation coverage and to a lesser extent general liability and commercial automobile coverages. These types of products include risk management services such as claims settlement, loss control and engineering. Many of these products generate fee income rather than net written premiums, and are not reflected in the following table. 1999 Net Written Premiums Amount of Percentage of Net Written Total Net Written In Millions of Dollars Premiums Premiums - -------------------------------------------------------------------------------- Product Line Commercial Lines Commercial multi-peril $1,469 33.3% Workers' compensation 1,078 24.4 Commercial automobile 724 16.4 Property 507 11.5 General liability 422 9.6 Fidelity, surety, and other 208 4.8 - ------------------------------------------------------------------------------- Total Commercial Lines $4,408 100.0% - ------------------------------------------------------------------------------- Personal Lines Automobile $2,369 62.3% Homeowners and other 1,436 37.7 - ------------------------------------------------------------------------------- Total Personal Lines $3,805 100.0% =============================================================================== Property and Casualty Reserves Property and casualty claim reserves are established to account for the estimated ultimate costs of claims and claim adjustment expenses for claims that have been reported but not yet settled and claims that have been incurred but not reported. The Company establishes reserves by line of business, coverage and year. The following table sets forth the year-end reserves from 1989 through 1999, and the subsequent changes in those reserves, presented on a historical basis for the Company. The original estimates, cumulative amounts paid, and reestimated reserves in the table for the years 1989-1995 have not been restated to include the property-casualty insurance businesses acquired by the Company from Aetna Services, Inc. in 1996 (Aetna P&C). Beginning in 1996, the table includes the reserve activity of Aetna P&C. The data in the table is presented in accordance with reporting requirements of the Securities and Exchange Commission. Care must be taken to avoid misinterpretation by those unfamiliar with such information or familiar with other data commonly reported by the insurance industry. The following data is not accident year data, but rather a display of 1989-1999 year-end reserves and the subsequent changes in those reserves. For instance, the "cumulative deficiency or redundancy" shown in the following table for each year represents the aggregate amount by which original estimates of reserves as of that year-end have changed in subsequent years. Accordingly, the cumulative deficiency for a year relates only to reserves at that year-end and such amounts are not additive. Expressed another way, if the original reserves at the end of 1989 included $4 million for a loss that is finally settled in 1999 for $5 million, the $1 million deficiency (the excess of the actual settlement of $5 million over the original estimate of $4 million) would be included in the cumulative deficiencies in each of the years 1989-1998 shown in the following table. Certain factors may distort the reestimated reserves and cumulative deficiency or redundancy shown in the following table. For example, a substantial portion of the cumulative deficiencies in each of the years 1989-1999 arises from claims on policies written prior to the mid-1970s involving liability exposures such as environmental, asbestos, and other cumulative injury claims. In the post-1984 period, the Company 86 developed more stringent underwriting standards and policy exclusions and significantly contracted or terminated the writing of such risks. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Environmental Claims, Asbestos Claims and Cumulative Injury Other than Asbestos Claims." General conditions and trends that have affected the development of these liabilities in the past will not necessarily recur in the future. Other factors that affect the data in the following table include the discounting of workers' compensation reserves and the use of retrospectively rated insurance policies. To the extent permitted under applicable accounting practices, workers' compensation reserves are discounted to reflect the time value of money, due to the relatively long time period over which these claims are to be paid. Apparent deficiencies will continue to occur as the discount on these workers' compensation reserves is accreted at the appropriate interest rates. Also, a portion of National Accounts business is underwritten with retrospectively rated insurance policies in which the ultimate loss experience is primarily borne by the insured. For this business, increases in loss experience result in an increase in reserves, and an offsetting increase in amounts recoverable from insureds. Likewise, decreases in loss experience result in a decrease in reserves, and an offsetting decrease in amounts recoverable from these insureds. The amounts recoverable on these retrospectively rated policies mitigate the impact of the cumulative deficiencies or redundancies but are not reflected in the following table. Because of these and other factors, it is difficult to develop a meaningful extrapolation of estimated future redundancies or deficiencies in loss reserves from the data in the following table. The differences between the reserves for claims and claim adjustment expenses shown in the following table, which is prepared in accordance with GAAP, and those reported in the annual statements of the Company's subsidiaries filed with state insurance departments, which are prepared in accordance with statutory accounting practices, were: $38 million, $37 million and $31 million for the years 1999, 1998 and 1997, respectively.
Year Ended December 31, ---------------------------------------------------------------------------------- In Millions of Dollars 1989(1) 1990(1) 1991(1) 1992(1) 1993(1) 1994(1) 1995(1) - -------------------------------------------------------------------------------------------------------------------------------- Reserves for Loss and Loss Adjustment Expense Originally Estimated $ 8,947 $ 9,239 $ 9,406 $ 9,873 $10,190 $ 10,251 $ 10,102 Cumulative amounts paid as of One year later 2,430 2,419 2,135 2,206 1,900 1,852 1,521 Two years later 3,992 3,932 3,584 3,554 3,221 2,888 2,809 Three years later 5,095 4,993 4,594 4,561 3,988 4,055 3,903 Four years later 5,878 5,755 5,375 5,160 4,941 4,933 4,761 Five years later 6,479 6,351 5,851 5,963 5,652 5,645 Six years later 6,966 6,746 6,547 6,576 6,260 Seven years later 7,304 7,325 7,090 7,116 Eight years later 7,822 7,812 7,582 Nine years later 8,258 8,267 Ten years later 8,678 Reserves reestimated as of One year later 9,099 9,358 9,446 10,013 10,151 9,942 9,848 Two years later 9,220 9,470 9,755 10,112 10,116 9,766 9,785 Three years later 9,408 9,897 10,038 10,142 9,990 9,851 9,789 Four years later 9,953 10,325 10,154 10,148 10,153 9,883 9,735 Five years later 10,421 10,478 10,251 10,364 10,180 9,919 Six years later 10,616 10,614 10,495 10,399 10,231 Seven years later 10,755 10,870 10,524 10,467 Eight years later 11,019 10,905 10,605 Nine years later 11,043 10,988 Ten years later 11,133 - -------------------------------------------------------------------------------------------------------------------------------- Cumulative deficiency (redundancy) $ 2,186 $ 1,749 $ 1,199 $ 594 $ 41 $ (332) $ (367) ================================================================================================================================ Gross liability--end of year $13,805 $ 13,872 $ 14,715 Reinsurance recoverables 3,615 3,621 4,613 - -------------------------------------------------------------------------------------------------------------------------------- Net liability--end of year $10,190 $ 10,251 $ 10,102 ================================================================================================================================ Gross reestimated liability--latest $14,026 $ 13,972 $ 14,357 Reestimated reinsurance recoverables--latest 3,795 4,053 4,622 - -------------------------------------------------------------------------------------------------------------------------------- Net reestimated liability--latest $10,231 $ 9,919 $ 9,735 ================================================================================================================================ Gross cumulative deficiency (redundancy) $ 221 $ 100 $ (358) ================================================================================================================================ Year Ended December 31, ------------------------------------------------- In Millions of Dollars 1996(2) 1997(2) 1998(2) 1999(2) - ----------------------------------------------------------------------------------------------- Reserves for Loss and Loss Adjustment Expense Originally Estimated $ 21,816 $ 21,406 $ 20,763 $19,983 Cumulative amounts paid as of One year later 3,704 4,025 4,159 Two years later 6,600 6,882 Three years later 8,841 Four years later Five years later Six years later Seven years later Eight years later Nine years later Ten years later Reserves reestimated as of One year later 21,345 21,083 20,521 Two years later 21,160 20,697 Three years later 20,816 Four years later Five years later Six years later Seven years later Eight years later Nine years later Ten years later - ----------------------------------------------------------------------------------------------- Cumulative deficiency (redundancy) $ (1,000) $ (709) $ (242) =============================================================================================== Gross liability--end of year $ 29,967 $ 29,343 $ 28,624 $28,055 Reinsurance recoverables 8,151 7,937 7,861 8,072 - ----------------------------------------------------------------------------------------------- Net liability--end of year $ 21,816 $ 21,406 $ 20,763 $19,983 =============================================================================================== Gross reestimated liability--latest $ 29,065 $ 28,685 $ 28,503 Reestimated reinsurance recoverables--latest 8,249 7,988 7,982 - ----------------------------------------------------------------------------------------------- Net reestimated liability--latest $ 20,816 $ 20,697 $ 20,521 =============================================================================================== Gross cumulative deficiency (redundancy) $ (902) $ (658) $ (121) ===============================================================================================
(1) Reflects reserves of Travelers P&C, excluding Aetna P&C reserves which were acquired on April 2, 1996. Accordingly, the reserve development (net reserves for loss and loss adjustment expense recorded at the end of the year, as originally estimated, less net reserves reestimated as of subsequent years) relates only to losses recorded by Travelers P&C and does not include reserve development recorded by Aetna P&C. (2) Includes Aetna P&C gross reserves of $16,775 million and net reserves of $11,752 million acquired on April 2, 1996 and subsequent development recorded by Aetna P&C. 87 Property and Casualty Reinsurance TAP reinsures a portion of the risks it underwrites in order to control its exposure to losses, stabilize earnings, and protect capital resources. TAP cedes to reinsurers a portion of these risks and pays premiums based upon the risk and exposure of the policies subject to such reinsurance. Reinsurance involves credit risk and is generally subject to aggregate loss limits. Although the reinsurer is liable to TAP to the extent of the reinsurance ceded, TAP remains primarily liable as the direct insurer on all risks reinsured. TAP also holds collateral, including escrow funds and letters of credit, under certain reinsurance agreements. TAP monitors the financial condition of reinsurers on an ongoing basis, and reviews its reinsurance arrangements periodically. Reinsurers are selected based on their financial condition, business practices, and the price of their product offerings. For additional information concerning reinsurance, see Note 13 of Notes to Consolidated Financial Statements. TAP utilizes a variety of reinsurance agreements to control its exposure to large property and casualty losses. Net Retention Policy. The descriptions below relate to reinsurance arrangements of TAP in effect at January 1, 2000. For third-party liability, including automobile no-fault, the reinsurance agreements used by Commercial Accounts, Construction, and Select Accounts limit the net retention to a maximum of $4 million per insured, per occurrence with a $5 million annual aggregate deductible. Gulf Insurance Company, a wholly-owned subsidiary, in its specialty lines of business utilizes various reinsurance mechanisms and has limited its net retention to a maximum of $3.75 million per risk for any line of business. For commercial property insurance, there is a $5 million maximum retention per risk with 100% reinsurance coverage for risks with higher limits. The reinsurance agreement in place for workers' compensation policies written by Commercial Accounts, Construction, National Accounts, Select Accounts, and some segments of Alternative Markets and Gulf Specialty covers 100% of each loss between $1 million and $10 million. For National Accounts, reinsurance arrangements are typically tiered, or layered, such that only levels of risk acceptable to TAP are retained. Personal Lines retains the first $5 million of umbrella policies and purchases facultative reinsurance for limits over $5 million. For personal property insurance, there is a $6 million maximum retention per risk. For directors' and officers' liability, employment practices liability and blended insurance, Bond Specialty retains up to $5 million per risk. For surety protection, Bond Specialty has reinsurance coverage for 95% of up to $50 million of liability in excess of $50 million of liability. The risk tolerance of Bond Specialty varies by line of business and by risk. Bond Specialty purchases an accident year aggregate cover attaching at a 40% loss ratio to lower its exposure to large losses or loss frequency. The first layer of the aggregate provides 96% of approximately $40 million and the second layer provides 80% of approximately $35 million of reinsurance coverage in excess of a $92 million retention. Catastrophe Reinsurance. TAP utilizes reinsurance agreements with nonaffiliated reinsurers to control its exposure to losses resulting from one occurrence. For the accumulation of net property losses arising out of one occurrence, reinsurance agreements cover 44% of total losses between $250 million and $750 million. For multiple workers' compensation losses arising from a single occurrence, reinsurance agreements cover 100% of losses between $10 million and $250 million and, for workers' compensation losses caused by property perils, reinsurance agreements cover 44% of losses between $250 million and $750 million. For the accumulation of net casualty losses arising out of one occurrence, a casualty clash agreement covers 85% of losses between $10 million and $50 million. Regulation and Supervision Bank Holding Company Regulation. The Company is a bank holding company within the meaning of the U.S. Bank Holding Company Act of 1956 (BHC Act) registered with, and subject to examination by, the Federal Reserve Board (FRB). The subsidiary depository institutions of the Company (the banking subsidiaries), including its principal bank subsidiary, Citibank, N.A. (Citibank), are subject to supervision and examination by their respective federal and state banking authorities. The nationally chartered subsidiary banks, including Citibank, are supervised and examined by the Office of the Comptroller of the Currency (OCC); federal savings association subsidiaries are regulated by the Office of Thrift Supervision (OTS); and state-chartered depository institutions are supervised by the banking departments within their respective states (New York, Delaware, and Utah), as well as the Federal Deposit Insurance Corporation (FDIC). The FDIC also has back-up enforcement authority with respect to each of the banking subsidiaries, the deposits of which are insured by the FDIC, up to applicable limits. The Company also controls (either directly or indirectly) overseas banks, branches, and agencies. In general, the Company's overseas activities are regulated by the FRB and OCC, and are also regulated by supervisory authorities of the host countries. The Company's banking subsidiaries are also subject to requirements and restrictions under federal, state, and foreign law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be made and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the Company's banking subsidiaries. 88 The activities of U.S. bank holding companies are generally limited to the business of banking, managing or controlling banks, and other activities that the FRB determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In addition, under the Gramm-Leach-Bliley Act (the GLB Act), which will become effective in most significant respects on March 11, 2000, bank holding companies, such as the Company, all of whose controlled depository institutions are "well capitalized" and "well managed", as defined in Federal Reserve Regulation Y, and which obtain satisfactory Community Reinvestment Act ratings, will have the ability to declare themselves to be "financial holding companies" and engage in a broader spectrum of activities than those generally permitted, including insurance underwriting and brokerage (including annuities), and underwriting and dealing securities without a revenue limit and without limits on the amounts of equity securities it may hold in conducting its underwriting and dealing activities. The Company anticipates that its declaration to become a financial holding company will become effective shortly after the effective date of the GLB Act and that as a result, it will be permitted to continue to operate its insurance businesses as currently structured and, if it so determines, to expand those businesses. Financial holding companies that do not continue to meet all of the requirements for such status will, depending on which requirement they fail to meet, face not being able to undertake new activities or acquisitions that are financial in nature, or losing their ability to continue those activities that are not generally permissible for bank holding companies. Under the BHC Act in its current form, after two years from the date as of which the Company became a bank holding company, the Company will be required to conform any activities that are not considered to be closely related to banking or financial in nature under the BHC Act. This two-year period may be extended by the FRB for three additional one-year periods, upon application by the Company and finding by the FRB that such an extension would not be detrimental to the public interest. Section 20 of the Glass-Steagall Act, which prohibited a member bank of the Federal Reserve System, such as Citibank, from being affiliated with a company that is principally engaged in underwriting and dealing in securities, will be repealed, effective March 11, 2000, as part of the GLB Act. Accordingly, the Company will be permitted to operate without regard to revenue limits on "ineligible" securities activities and to acquire other securities firms without regard to such limits. The repeal of Section 20 will also permit the Company's securities subsidiaries to organize, sponsor, distribute, and advise open-end mutual funds in the United States, as well as outside the United States. Under the BHC Act, nonbank acquisitions in the U.S. have generally been limited to 5% of voting shares unless the FRB determines that the acquisition is so closely related to banking as to be a proper incident to banking or managing or controlling banks. Under the GLB Act, financial holding companies will be able to make acquisitions in companies that engage in activities that are financial in nature, both in the U.S. and outside of the United States. No prior approval of the FRB will be required for such acquisitions, although it is possible that the FRB will issue regulations imposing some limitations or conditions on such acquisitions. In addition, under a new merchant banking authority added by the GLB Act, financial holding companies will be authorized to invest in companies that engage in activities that are not financial in nature, as long as the financial holding company makes its investment with the intention of limiting the investment in duration, does not manage the company on a day-to-day basis, and the investee company does not cross-market with any of the financial holding company's controlled depository institutions. This authority applies to investments both in the U.S. and outside the United States. It is possible that regulations interpreting and conditioning this authority may be promulgated. Bank holding companies will also retain their authority, subject to prior specific or general FRB consent, to acquire less than 20 percent of the voting securities of a company that does not do business in the United States, and 20 percent or more of the voting securities of any such company if the FRB finds by regulation or order that its activities are usual in connection with banking or finance outside the United States. In general, bank holding companies that are not financial holding companies may engage in a broader range of activities outside the United States than they may engage in inside the United States, including sponsoring, distributing, and advising open-end mutual funds, and underwriting and dealing in debt, and to a limited extent, equity securities, subject to local country laws. Subject to certain limitations and restrictions, a U.S. bank holding company, with the prior approval of the FRB, may acquire an out-of-state bank. Banks in states that do not prohibit out-of-state mergers may merge with the approval of the appropriate federal bank regulatory agency. A national or state bank may establish a de novo branch out of state if such branching is expressly permitted by the other state. A federal savings association is generally permitted to open a de novo branch in any state. Outside the U.S., subject to certain requirements for prior FRB consent or notice, the Company may acquire banks and Citibank may establish branches subject to local laws and to U.S. laws prohibiting companies from doing business in certain countries. The Company's earnings and activities are affected by legislation, by actions of its regulators, and by local legislative and administrative bodies and decisions of courts in the foreign and domestic jurisdictions in which the Company and its subsidiaries conduct business. For example, these include limitations on the ability of certain subsidiaries to pay dividends to their intermediate holding companies and on the abilities of those holding companies to pay dividends to the Company (see Note 17 of Notes to Consolidated Financial Statements). It is the policy of the FRB that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company's ability to serve as a source of strength to its banking subsidiaries. 89 Various federal and state statutory provisions limit the amount of dividends that subsidiary banks and savings associations can pay to their holding companies without regulatory approval. In addition to these explicit limitations, the federal regulatory agencies are authorized to prohibit a banking subsidiary or bank holding company from engaging in an unsafe or unsound banking practice. Depending upon the circumstances, the agencies could take the position that paying a dividend would constitute an unsafe or unsound banking practice. Numerous other federal and state laws also affect the Company's earnings and activities including federal and state consumer protection laws. Legislation may be enacted or regulation imposed in the U.S. or its political subdivisions, or in any other jurisdiction in which the Company does business, to further regulate banking and financial services or to limit finance charges or other fees or charges earned in such activities. There can be no assurance whether any such legislation or regulation will place additional limitations on the Company's operations or adversely affect its earnings. There are various legal restrictions on the extent to which a bank holding company and certain of its nonbank subsidiaries can borrow or otherwise obtain credit from banking subsidiaries or engage in certain other transactions with or involving those banking subsidiaries. In general, these restrictions require that any such transactions must be on terms that would ordinarily be offered to unaffiliated entities and secured by designated amounts of specified collateral. Transactions between a banking subsidiary and the holding company or any nonbank subsidiary are limited to 10 percent of the banking subsidiary's capital stock and surplus, and as to the holding company and all such nonbank subsidiaries in the aggregate, to 20 percent of the bank's capital stock and surplus. The Company's right to participate in the distribution of assets of any subsidiary upon the subsidiary's liquidation or reorganization will be subject to the prior claims of the subsidiary's creditors. In the event of a liquidation or other resolution of an insured depository institution, the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over the claims of holders of any obligation of the institution to its stockholders, including any depository institution holding company (such as the Company) or any stockholder or creditor thereof. In the liquidation or other resolution of a failed U.S. insured depository institution, deposits in U.S. offices and certain claims for administrative expenses and employee compensation are afforded a priority over other general unsecured claims, including deposits in offices outside the U.S., non-deposit claims in all offices, and claims of a parent such as the Company. Such priority creditors would include the FDIC, which succeeds to the position of insured depositors. A financial institution insured by the FDIC that is under common control with a failed or failing FDIC-insured institution can be required to indemnify the FDIC for losses resulting from the insolvency of the failed institution, even if this causes the affiliated institution also to become insolvent. Any obligations or liability owed by a subsidiary depository institution to its parent company is subordinate to the subsidiary's cross-guarantee liability with respect to commonly controlled insured depository institutions and to the rights of depositors. Under FRB policy, a bank holding company is expected to act as a source of financial strength to each of its banking subsidiaries and commit resources to their support. As a result of that policy, the Company may be required to commit resources to its subsidiary banks in certain circumstances. However, under the GLB Act, the FRB will not be able to compel a bank holding company to remove capital from its regulated securities or insurance subsidiaries in order to commit such resources to its subsidiary banks. The Company and its U.S. insured depository institution subsidiaries are subject to risk-based capital and leverage guidelines issued by U.S. regulators for banks, savings associations, and bank holding companies. The regulatory agencies are required by law to take specific prompt actions with respect to institutions that do not meet minimum capital standards and have defined five capital tiers, the highest of which is "well-capitalized." As of December 31, 1999, the Company's bank and thrift subsidiaries, including Citibank, were "well capitalized." See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for capital analysis. A bank is not required to repay a deposit at a branch outside the U.S. if the branch cannot repay the deposit due to an act of war, civil strife, or action taken by the government in the host country, unless the bank has expressly agreed in writing to do so. The GLB Act included the most extensive consumer privacy provisions ever enacted by Congress. These provisions, among other things, require full disclosure of the Company's privacy policy to consumers and mandate offering the consumer the ability to "opt out" of having non-public customer information disclosed to third parties. In addition, these provisions require the federal banking regulators to adopt privacy regulations and permit the states to adopt more extensive privacy protections through legislation or regulation. There can be no assurance whether any such legislation or regulation will place additional limitations on the Company's operations or adversely affect its earnings. The earnings of the Company, Citibank, and their subsidiaries and affiliates are affected by general economic conditions and the conduct of monetary and fiscal policy by the U.S. government and by governments in other countries in which they do business. Legislation is from time to time introduced in Congress that may change banking statutes and the operating environment of the Company and its banking subsidiaries in substantial and unpredictable ways. The Company cannot determine whether any such proposed legislation will be enacted, and if enacted, the ultimate effect that any such potential legislation or implementing regulations would have upon the financial condition or results of operations of the Company or its subsidiaries. 90 Insurance--State Regulation The Company's insurance subsidiaries are subject to regulation in the various states and jurisdictions in which they transact business. The regulation, supervision and administration relate, among other things, to the standards of solvency that must be met and maintained, the licensing of insurers and their agents, the lines of insurance in which they may engage, the nature of and limitations on investments, premium rates, restrictions on the size of risks that may be insured under a single policy, reserves and provisions for unearned premiums, losses and other obligations, deposits of securities for the benefit of policyholders, approval of policy forms and the regulation of market conduct including the use of credit information in underwriting as well as other underwriting and claims practices. In addition, many states have enacted variations of competitive rate-making laws which allow insurers to set certain premium rates for certain classes of insurance without having to obtain the prior approval of the state insurance department. State insurance departments also conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to the financial condition of companies and other matters. Although the Company is not regulated as an insurance company, it is the owner, through various holding company subsidiaries, of the capital stock of its insurance subsidiaries and as such is subject to state insurance holding company statutes, as well as certain other laws, of each of the states of domicile of its insurance subsidiaries. All holding company statutes, as well as certain other laws, require disclosure and, in some instances, prior approval of material transactions between an insurance company and an affiliate. The Company's insurance subsidiaries are subject to various state statutory and regulatory restrictions in each company's state of domicile, which limit the amount of dividends or distributions by an insurance company to its stockholders. See Note 17 of Notes to Consolidated Financial Statements. The Company's property and casualty insurance subsidiaries are also required to participate in various involuntary assigned risk pools, principally involving workers' compensation and automobile insurance, which provide various insurance coverages to individuals or other entities that otherwise are unable to purchase such coverage in the voluntary market. Participation in these pools in most states is generally in proportion to voluntary writings of related lines of business in that state. Many state insurance regulatory laws intended primarily for the protection of policyholders contain provisions that require advance approval by state agencies of any change in control of an insurance company that is domiciled (or, in some cases, having such substantial business that it is deemed to be commercially domiciled) in that state. "Control" is generally presumed to exist through the ownership of 10% or more of the voting securities of a domestic insurance company or of any company that controls a domestic insurance company. In addition, many state insurance regulatory laws contain provisions that require prenotification to state agencies of a change in control of a nondomestic admitted insurance company in that state. Such requirements may deter, delay or prevent certain transactions affecting the control of or the ownership of the Company's common stock, including transactions that could be advantageous to the stockholders of the Company. Securities Regulation Certain U.S. and non-U.S. subsidiaries are subject to various securities and commodities regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the jurisdictions in which they operate. The Company's registered broker-dealer subsidiaries are subject to the Securities and Exchange Commission's (the SEC) net capital rule, Rule 15c3-1 (the Net Capital Rule), promulgated under the Exchange Act. These companies compute net capital under the alternative method of the Net Capital Rule, which requires the maintenance of minimum net capital, as defined. The Net Capital Rule also limits the ability of broker-dealers to transfer large amounts of capital to parent companies and other affiliates. Compliance with the Net Capital Rule could limit those operations of the Company that require the intensive use of capital, such as underwriting and trading activities and the financing of customer account balances, and also could restrict Salomon Smith Barney Holdings Inc's ability to withdraw capital from its broker-dealer subsidiaries, which in turn could limit Salomon Smith Barney Holdings Inc's ability to pay dividends and make payments on its debt. See Note 17 of Notes to Consolidated Financial Statements. Certain of the Company's broker-dealer subsidiaries are also subject to regulation in the countries outside of the U.S. in which they do business. Such regulations include requirements to maintain specified levels of net capital or its equivalent. The Company is the indirect parent of investment advisers registered and regulated under the Investment Advisers Act of 1940 who provide investment advice to investment companies subject to regulation under the Investment Company Act of 1940. Under these Acts, advisory contracts between the Company's investment adviser subsidiaries and these investment companies (Affiliated Funds) would automatically terminate upon an assignment of such contracts by the investment adviser. Such an assignment would be presumed to have occurred if any party were to acquire more than 25% of the Company's voting securities. In that event, consent to the assignment from the shareholders of the Affiliated Funds involved would be needed for the advisory relationship to continue. In addition, subsidiaries of the Company and the Affiliated Funds are subject to certain restrictions in their dealings with each other. Competition The Company and its subsidiaries are subject to intense competition in all aspects of their businesses from both bank and non-bank institutions that provide financial services and, in some of their activities, from government agencies. General Business Factors In the judgment of the Company, no material part of the business of the Company and its subsidiaries is dependent upon a single customer or group of customers, the loss of any one of which would have a materially adverse effect on the Company, and no one customer or group of affiliated customers accounts for as much as 10% of the Company's consolidated revenues. At December 31, 1999, the Company had approximately 108,800 full-time and 6,200 part-time employees in the United States and approximately 65,000 employees outside of the United States. 91 Properties The Company's executive offices are located in Citigroup Center, a 59-story building located at 153 East 53rd Street of which one-third is owned by Citibank. The Company and certain of its subsidiaries occupy all of such owned space. Offices and other properties used by the Company's subsidiaries are located throughout the United States and in various cities outside of the United States. The principal offices of Citicorp and Citibank are located at 399 Park Avenue, New York, New York, a 39-story building of which two-thirds is owned by Citibank. The Company occupies all of the space it owns in such building. Citibank owns a building in Long Island City, New York and leases a building located at 111 Wall Street in New York City, which are totally occupied by the Company and certain of its subsidiaries. The Company's property-casualty insurance subsidiaries lease 180 field offices throughout the United States. The principal offices of TIC, TLAC, and TAP are located in Hartford, Connecticut. All of such occupied space is owned by TIC. TAP also rents space from Aetna Services, Inc. at CityPlace, located in Hartford, Connecticut. The Company's life insurance subsidiaries lease office space at approximately 20 locations throughout the United States. TIC and/or The Travelers Insurance Group Inc. lease two other buildings in Hartford, Connecticut, most of which is subleased to third parties. TIC also owns a building in Norcross, Georgia that is occupied by its information systems department. Salomon Smith Barney leases two buildings located at 388 and 390 Greenwich Street in New York City. These leases, which expire in 2003, include a purchase option with respect to the related properties. The principal offices of Salomon Smith Barney are located at 388 Greenwich Street, New York, New York. Other offices and certain warehouse space are owned, none of which is material to the Company's financial condition or operations. The Company believes its properties are adequate and suitable for its business as presently conducted and are adequately maintained. For further information concerning leases, see Note 25 of Notes to Consolidated Financial Statements. Legal Proceedings In the ordinary course of business, Citigroup and its subsidiaries are defendants or co-defendants in various litigation matters incidental to and typical of the businesses in which they are engaged. These include civil actions, arbitration proceedings and other matters in which the Company's broker-dealer subsidiaries have been named, arising in the normal course of business out of activities as a broker and dealer in securities, as an underwriter of securities, as an investment banker or otherwise. These also include numerous matters in which the Company's insurance subsidiaries are named, arising in the normal course of their business. 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 results of the Company and its subsidiaries' operations, financial condition, or liquidity. Executive Officers The following information with respect to each executive officer of Citigroup is set forth below as of March 10, 2000: name, age and the position held with Citigroup. Name Age Position and Office Held - ----------------------------------------------------------------------------- Michael A. Carpenter 52 Co-Chief Executive Officer, Global Corporate and Investment Bank Paul J. Collins 63 Vice Chairman Michael D'Ambrose 42 Senior Human Resources Officer Jay S. Fishman 47 Chief Executive Officer, Travelers Property Casualty Corp. Edward D. Horowitz 52 e-Citi Thomas W. Jones 50 Chairman and Chief Executive Officer, Global Investment Management and Private Banking Group Robert I. Lipp 61 Chairman and Chief Executive Officer, Global Consumer Business Deryck C. Maughan 52 Vice Chairman Victor J. Menezes 50 Co-Chief Executive Officer, Global Corporate and Investment Bank Heidi G. Miller 46 Chief Financial Officer Charles O. Prince, III 50 General Counsel and Corporate Secretary John S. Reed 61 Chairman and Co-Chief Executive Officer William R. Rhodes 64 Vice Chairman Robert E. Rubin 61 Member of the Office of the Chairman and Chairman of the Executive Committee Petros Sabatacakis 53 Senior Risk Officer Todd S. Thomson 39 Chief Executive Officer, Citibank Private Bank Marc P. Weill 43 Citigroup Investments, Inc. Sanford I. Weill 66 Chairman and Co-Chief Executive Officer Robert B. Willumstad 54 Global Consumer Lending - ----------------------------------------------------------------------------- Except as described below, each executive officer has been employed in such position or in other executive or management positions within the Company for at least five years. Mr. D'Ambrose joined Citigroup in 1997, and was in charge of Executive Resources of Citibank until September 1999. Prior to that time, he served as Chief Operating Officer of Westwood One, Inc. and President and Chief Executive Officer of Shadow Broadcast Services. Mr. Horowitz joined Citigroup in January 1997 and, prior to that time, was a Senior Vice President--Technology at Viacom, Inc. and Chairman and Chief Executive Officer of Viacom Interactive Media. Mr. Jones joined Citigroup in August 1997 and, prior to that time, he was Vice Chairman, President, Chief Operating Officer, and a director of the Teachers Insurance and Annuity Association--College Retirement Equities Fund. Mr. Rubin joined Citigroup in October 1999 and served as Secretary of the Treasury of the United States from 1995 to 1999. Mr. Sabatacakis joined Citigroup in August 1999 and prior to that time, was Senior Vice President--Financial Services for American International Group. Previously, he was senior risk manager and head of Global Treasury and Capital Markets at Chemical Bank. Mr. Thomson joined Citigroup in July 1998 and, prior to that time, was Senior Vice President, Strategic Planning and Business Development for GE Capital Services. Previously, Mr. Thomson held management positions at Barents Group LLC and Bain and Company. 92 10-K CROSS-REFERENCE INDEX This Annual Report and Form 10-K incorporate into a single document the requirements of the accounting profession and the Securities and Exchange Commission, including a comprehensive explanation of 1999 results. Form 10-K - -------------------------------------------------------------------------------- Item Number Page Part I 1. Business.................................... 2-4, 6-43, 86-91 2. Properties.................................. 92 3. Legal Proceedings........................... 92 4. Submission of Matters to a Vote of Security Holders............................ Not Applicable - -------------------------------------------------------------------------------- Part II 5. Market for Registrant's Common Equity and Related Stockholder Matters............. 79, 94-95 6. Selected Financial Data..................... 5 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................... 6-43 7A. Quantitative and Qualitative Disclosures About Market Risk........................... 34-38, 55-60, 73-77 8. Financial Statements and Supplementary Data.......................... 44-85 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................ Not Applicable - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Part III 10. Directors and Executive Officers of the Registrant........................... 92* 11. Executive Compensation...................... ** 12. Security Ownership of Certain Beneficial Owners and Management....................... *** 13. Certain Relationships and Related Transactions........................ **** - -------------------------------------------------------------------------------- Part IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................ 94 - -------------------------------------------------------------------------------- * For information regarding Citigroup Directors, see the material under "Election of directors" in the definitive Proxy Statement for Citigroup's Annual Meeting of Stockholders to be held on April 18, 2000, filed with the SEC (the "Proxy Statement"), incorporated herein by reference. ** See the material under "Executive compensation" and "How we have done" of the Proxy Statement, incorporated herein by reference. *** See the material under the captions "About the annual meeting" and "Stock ownership" of the Proxy Statement, incorporated herein by reference. **** See the material under the captions "Election of directors" and "Executive compensation" of the Proxy Statement, incorporated herein by reference. None of the foregoing incorporation by reference shall include the information referred to in Item 402(a)(8) of Regulation S-K. 93 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The following exhibits are either filed herewith or have been previously filed with the Securities and Exchange Commission and are filed herewith by incorporation by reference: o Citigroup's Restated Certificate of Incorporation, as amended, o Citigroup's By-Laws, o Instruments Defining the Rights of Security Holders, Including Indentures, o Material Contracts, including certain compensatory plans available only to officers and/or directors, o Statements re Computation of Ratios, o Subsidiaries of the Registrant, o Consents of Experts and Counsel, o Powers of Attorney of Directors Armstrong, Belda, Bialkin, Derr, Deutch, Jordan, Mark, Masin, Mecum, Parsons, Pearson, Rubin, Thomas, Woolard, and Zankel, o Financial Data Schedules A more detailed exhibit index has been filed with the SEC. Stockholders may obtain copies of that index, or any of the documents on that index by writing to Citigroup, Corporate Governance, 425 Park Avenue, 2nd Floor, New York, New York 10043 or on the Internet @ http://www.sec.gov. Financial Statements filed for Citigroup Inc. and Subsidiaries: Consolidated Statement of Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Stockholders' Equity Consolidated Statement of Cash Flows The Company filed a Current Report on Form 8-K dated October 18, 1999, reporting under Item 5 thereof the results of its operations for the quarter and nine months ended September 30, 1999. The Company filed a Current Report on Form 8-K dated October 26, 1999, reporting under Item 5 thereof the election of Robert E. Rubin to the Company's Board of Directors. No other reports on Form 8-K were filed during the 1999 fourth quarter; however, the Company filed a Current Report on Form 8-K dated January 18, 2000, reporting under Item 5 thereof the results of its operations for the quarter and year ended December 31, 1999, a Current Report on Form 8-K dated February 16, 2000, filing under Items 5 and 7 thereof the Company's 1998 Financial Supplement, and a Current Report on Form 8-K dated February 28, 2000, reporting under Items 5 and 7 thereof the retirement of John S. Reed, Chairman and Co-Chief Executive Officer. - -------------------------------------------------------------------------------- Securities and Exchange Commission Washington, DC 20549 Form 10-K Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1999 Commission File Number 1-9924 Citigroup Inc. Incorporated in the State of Delaware IRS Employer Identification Number: 52-1568099 Address: 153 East 53rd Street New York, New York 10043 Telephone: (212) 559-1000 - -------------------------------------------------------------------------------- Stockholder Information Citigroup common stock is listed on the New York Stock Exchange and the Pacific Exchange under the ticker symbol "C." Citigroup Preferred Stocks Series F, G, H, K, M, Q, R, and U are also listed on the New York Stock Exchange. Annual Meeting The annual meeting will be held at 9:00 a.m. on April 18, 2000, at Carnegie Hall, 881 Seventh Avenue, New York, NY. Transfer Agent Stockholder address changes and inquiries regarding stock transfers, dividend replacement, 1099-DIV reporting, and lost securities for common and preferred stocks should be directed to: Citibank Shareholder Services P. O. Box 2502 Jersey City, NJ 07303-2502 Telephone No. (201) 536-8057 Toll-free No. (888) 250-3985 Facsimile No. (201) 324-3284 E-mail address: Citibank@em.fcnbd.com 94 Exchange Agent Holders of Citicorp, Citigroup Preferred Stock Series J, S, and T, Salomon Inc, The Travelers Corporation, or Travelers Group Preferred Stock Series A or D should arrange to exchange their certificates by contacting: Citibank Shareholder Services P. O. Box 2502 Jersey City, NJ 07303-2502 Telephone No. (201) 536-8057 Toll-free No. (888) 250-3985 Facsimile No. (201) 324-3284 E-mail address: citibank@em.fcnbd.com The 1999 Forms 10-K filed with the Securities and Exchange Commission for the Company and certain subsidiaries, as well as Annual and Quarterly reports, are available from Citigroup Document Services toll free at (877) 936-2737 (outside the United States at (718) 765-6460) or by writing to: Citigroup Document Services 140 58th Street, Suite 5I Brooklyn, NY 11220 To view or retrieve copies of this annual report and other Citigroup financial reports on the Internet: http://www.citigroup.com or http://www.sec.gov. Securities Registered pursuant to Section 12(b) and (g) of the Act A list of Citigroup securities registered pursuant to Section 12(b) and (g) of the Securities Exchange Act of 1934 is available from Citigroup Corporate Governance, 425 Park Avenue, 2nd Floor, New York, New York 10043 or on the Internet @ http://www.sec.gov. As of February 7, 2000, Citigroup had 3,366,858,616 shares of common stock outstanding. As of February 7, 2000, Citigroup had approximately 95,700 common stockholders of record. This figure does not represent the actual number of beneficial owners of common stock because shares are frequently held in "street name" by securities dealers and others for the benefit of individual owners who may vote the shares. Citigroup (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. Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein nor in Citigroup's 2000 Proxy Statement incorporated by reference in Part III of this Form 10-K. The aggregate market value of Citigroup common stock held by non-affiliates of Citigroup on February 7, 2000 was approximately $183 billion. Certain information has been incorporated by reference as described herein into Part III of this annual report from Citigroup's 2000 Proxy Statement. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on the 10th day of March, 2000. CITIGROUP INC. (Registrant) /s/ Heidi G. Miller Heidi G. Miller Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on the 10th day of March, 2000. Citigroup's Principal Executive Officers: /s/ John S. Reed /s/ Sanford I. Weill John S. Reed Sanford I. Weill Citigroup's Principal Financial Officer: /s/ Heidi G. Miller Heidi G. Miller Citigroup's Principal Accounting Officers: /s/ Irwin R. Ettinger /s/ Roger W. Trupin Irwin R. Ettinger Roger W. Trupin The Directors of Citigroup (listed below) executed a power of attorney appointing Heidi G. Miller their attorney-in-fact, empowering her to sign this report on their behalf. C. Michael Armstrong Dudley C. Mecum Alain J.P. Belda Richard D. Parsons Kenneth J. Bialkin Andrall E. Pearson Kenneth T. Derr Robert E. Rubin John M. Deutch Franklin A. Thomas Ann Dibble Jordan Edgar S. Woolard, Jr. Reuben Mark Arthur Zankel Michael T. Masin 95 CITIGROUP BOARD OF DIRECTORS C. Michael Armstrong Chairman and Chief Executive Officer AT&T Corp. Alain J.P. Belda President and Chief Executive Officer Alcoa Inc. Kenneth J. Bialkin Partner Skadden, Arps, Slate, Meagher & Flom LLP Kenneth T. Derr Chairman of the Board, Retired Chevron Corporation John M. Deutch Institute Professor Massachusetts Institute of Technology Ann Dibble Jordan Consultant Reuben Mark Chairman and Chief Executive Officer Colgate-Palmolive Company Michael T. Masin Vice Chairman and Director GTE Corporation Designated President and Vice Chairman of Company to be formed by merger of GTE Corporation and Bell Atlantic Dudley C. Mecum Managing Director Capricorn Holdings, LLC Richard D. Parsons President Time Warner Inc. Andrall E. Pearson Chairman and Chief Executive Officer Tricon Global Restaurants, Inc. John S. Reed Chairman and Co-Chief Executive Officer Citigroup Inc. Robert E. Rubin Director, Member of the Office of the Chairman and Chairman of the Executive Committee Citigroup Inc. Franklin A. Thomas Former President The Ford Foundation Sanford I. Weill Chairman and Co-Chief Executive Officer Citigroup Inc. Edgar S. Woolard, Jr. Former Chairman and Chief Executive Officer E.I. du Pont de Nemours and Company Arthur Zankel General Partner Zankel Capital Advisors, LLC HONORARY DIRECTOR The Honorable Gerald R. Ford Former President of the United States 96 EXHIBIT INDEX Exhibit Number Description of Exhibit - -------- ---------------------- 3.01.1 Restated Certificate of Incorporation of Citigroup Inc. (the "Company"), incorporated by reference to Exhibit 4.01 to the Company's Registration Statement on Form S-3 filed December 15, 1998 (No. 333-68949). 3.01.2 Certificate of Designation of 5.321% Cumulative Preferred Stock, Series YY, of the Company, incorporated by reference to Exhibit 4.45 to Amendment No. 1 to the Company's Registration Statement on Form S-3 filed January 22, 1999 (No. 333-68949). 3.02 Restated By-Laws of the Company effective October 26, 1999, incorporated by reference to Exhibit 3.02 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1999 (File No. 1-9924). 10.01* Employment Protection Agreement, dated as of December 31, 1987, between the Company (as successor to Commercial Credit Company ("CCC")) and Sanford I. Weill, incorporated by reference to Exhibit 10.03 to CCC's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No. 1-6594). 10.02.1* Travelers Group Stock Option Plan (as amended and restated as of April 24, 1996), incorporated by reference to Exhibit 10.02.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (File No. 1-9924). 10.02.2* Amendment No. 14 to the Travelers Group Stock Option Plan, incorporated by reference to Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996 (File No. 1-9924). 10.02.3* Amendment No. 15 to the Travelers Group Stock Option Plan (effective July 23, 1997), incorporated by reference to Exhibit 10.04 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997 (File No. 1-9924) (the "Company's September 30, 1997 10-Q"). 10.02.4*+ Amendment No. 16 to the Travelers Group Stock Option Plan. 10.03.1* Travelers Group 1996 Stock Incentive Plan (as amended through July 23, 1997), incorporated by reference to Exhibit 10.03 to the Company's September 30, 1997 10-Q. 10.03.2*+ Amendment to Travelers Group 1996 Stock Incentive Plan (as amended through July 23, 1997). 10.04* Travelers Group Inc. Retirement Benefit Equalization Plan (as amended and restated as of January 2, 1996), incorporated by reference to Exhibit 10.04 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-9924). 10.05* Citigroup Inc. Amended and Restated Compensation Plan for Non-Employee Directors (as of October 20, 1998), incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-9924). 10.06.1* Supplemental Retirement Plan of the Company, incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-9924). 10.06.2* Amendment to the Company's Supplemental Retirement Plan, incorporated by reference to Exhibit 10.06.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 1-9924). 10.07* Citigroup 1999 Executive Performance Plan (effective January 1, 1999), incorporated by reference to Annex B to Citigroup's Proxy Statement dated March 8, 1999 (File No. 1-9924). 10.08.1* Travelers Group Capital Accumulation Plan (as amended through July 23, 1997), incorporated by reference to Exhibit 10.02 to the Company's September 30, 1997 10-Q. 10.08.2*+ Amendment to the Travelers Group Capital Accumulation Plan (as amended through July 23, 1997). 10.09* The Travelers Inc. Deferred Compensation and Partnership Participation Plan, incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K/A-1 for the fiscal year ended December 31, 1994 (File No. 1-9924). 10.10* The Travelers Insurance Deferred Compensation Plan (formerly The Travelers Corporation TESIP Restoration and Non-Qualified Savings Plan) (as amended through December 10, 1998), incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-9924). 10.11* The Travelers Corporation Directors' Deferred Compensation Plan (as amended November 7, 1986), incorporated by reference to Exhibit 10(d) to the Annual Report on Form 10-K of The Travelers Corporation for the fiscal year ended December 31, 1986 (File No. 1-5799). 10.12.1* Travelers Property Casualty Corp. Capital Accumulation Plan (as amended through July 23, 1997), incorporated by reference to Exhibit 10.01 to the Quarterly Report on Form 10-Q of Travelers Property Casualty Corp. for the fiscal quarter ended September 30, 1997 (File No. 1-14328). 10.12.2*+ Amendment to the Travelers Property Casualty Corp. Capital Accumulation Plan (as amended through July 23, 1997). 10.13* Letter Agreement, dated as of August 14, 1997, between the Company and Thomas W. Jones, incorporated by reference to Exhibit 10.01 to the Company's September 30, 1997 10-Q (File No. 1-09924). 10.14.1* Salomon Inc Equity Partnership Plan for Key Employees (as amended through March 25, 1998), incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-9924). 10.14.2*+ Amendment to the Salomon Inc Equity Partnership Plan for Key Employees (as amended through March 25, 1998). 10.15.1* Citicorp Executive Incentive Compensation Plan, incorporated by reference to Citicorp's Registration Statement on Form S-8 filed April 25, 1988 (No. 2-47648). 10.15.2*+ Amendment to the Citicorp Executive Incentive Compensation Plan. 10.16.1* Citicorp 1988 Stock Incentive Plan, incorporated by reference to Exhibit 4 to Citicorp's Registration Statement on Form S-8 filed April 25, 1988 (No. 2-47648). 10.16.2*+ Amendment to the Citicorp 1988 Stock Incentive Plan. 10.17* 1994 Citicorp Annual Incentive Plan for Selected Executive Officers, incorporated by reference to Exhibit 10 to Citicorp's March 30, 1994 Form 10-Q (File No. 01-05378). 10.18.1* Citicorp Deferred Compensation Plan, incorporated by reference to Exhibit 10 to Citicorp's Registration Statement on Form S-8 filed February 15, 1996 (No. 333-0983). 10.18.2*+ Amendment to the Citicorp Deferred Compensation Plan. 10.19.1* Citicorp 1997 Stock Incentive Plan, incorporated by reference to Citicorp's 1997 Proxy Statement filed February 26, 1997 (File No. 01-05378). 10.19.2*+ Amendment to the Citicorp 1997 Stock Incentive Plan. 10.20.1*+ Supplemental Executive Retirement Plan of Citicorp and Affiliates (as amended and restated effective January 1, 1998). 10.20.2*+ First Amendment to the Supplemental Executive Retirement Plan of Citicorp and Affiliates (as amended and restated effective January 1, 1998). 10.21.1* Supplemental ERISA Compensation Plan of Citibank, N.A. and Affiliates, as amended and restated, incorporated by reference to Exhibit 10.(G) to Citicorp's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-05378). 10.21.2*+ Amendment to the Supplemental ERISA Compensation Plan of Citibank, N.A. and Affiliates, as amended and restated. 10.22* Supplemental ERISA Excess Plan of Citibank, N.A. and Affiliates, as amended and restated, incorporated by reference to Exhibit 10.(H) to Citicorp's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-05378). 10.23* Directors' Deferred Compensation Plan, Restated May 1, 1988, incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-9924). 10.24*+ Letter Agreement, dated as of October 26, 1999, between the Company and Robert E. Rubin. 10.25* Citigroup 1999 Stock Incentive Plan (effective April 30, 1999), incorporated by reference to Annex A to Citigroup's Proxy Statement dated March 8, 1999 (File No. 1-9924). 12.01+ Computation of Ratio of Earnings to Fixed Charges. 21.01+ Subsidiaries of the Company. 23.01+ Consent of KPMG LLP, Independent Auditors. 24.01+ Powers of Attorney. 27.01+ Financial Data Schedule. 99.01+ List of Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act of 1934. - -------------- The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does not exceed 10% of the total assets of the Company and its consolidated subsidiaries. The Company will furnish copies of any such instrument to the SEC upon request. The financial statements required by Form 11-K for 1999 for the Company's employee savings plans will be filed as an exhibit by amendment to this Form 10-K pursuant to Rule 15d-21 of the Securities Exchange Act of 1934, as amended. Copies of any of the exhibits referred to above will be furnished at a cost of $0.25 per page (although no charge will be made for the 1999 Annual Report on Form 10-K) to security holders who make written request therefor to Corporate Governance, Citigroup Inc., 425 Park Avenue, 2nd Floor, New York, New York 10043. -------------- * Denotes a management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. + Filed herewith. EX-10.02.4 2 EXHIBIT 10.02.4 Exhibit 10.02.4 AMENDMENT NO. 16 TO THE TRAVELERS GROUP STOCK OPTION PLAN - -------------------------------------------------------------------------------- Section 9 (d) of the Travelers Group Stock Option Plan is hereby amended to add the following sentence at the end of such Section: "The value of any shares allowed to be withheld or tendered for tax withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with generally accepted accounting principles." EX-10.03.2 3 EXHIBIT 10.03.2 Exhibit 10.03.2 AMENDMENT TO THE TRAVELERS GROUP 1996 STOCK INCENTIVE PLAN (AS AMENDED THROUGH JULY 23, 1997) - -------------------------------------------------------------------------------- Section 17 of the Travelers Group 1996 Stock Incentive Plan is hereby amended to add the following sentence at the end of such Section: "The value of any shares allowed to be withheld or tendered for tax withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with generally accepted accounting principles." EX-10.08.2 4 EXHIBIT 10.08.2 Exhibit 10.08.2 AMENDMENT TO THE TRAVELERS GROUP CAPITAL ACCUMULATION PLAN (AS AMENDED THROUGH JULY 23, 1997) - -------------------------------------------------------------------------------- Section 2 (e) of the Travelers Group Capital Accumulation Plan is hereby amended to add the following sentence at the end of such Section: "The value of any shares allowed to be withheld or tendered for tax withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with generally accepted accounting principles." EX-10.12.2 5 EXHIBIT 10.12.2 Exhibit 10.12.2 AMENDMENT TO THE TRAVELERS PROPERTY CASUALTY CORP. CAPITAL ACCUMULATION PLAN (AS AMENDED THROUGH JULY 23, 1997) - -------------------------------------------------------------------------------- Section 10 (e) of the Travelers Property Casualty Corp. Capital Accumulation Plan is hereby amended to add the following sentence at the end of such Section: "The value of any shares allowed to be withheld or tendered for tax withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with generally accepted accounting principles." EX-10.14.2 6 EXHIBIT 10.14.2 Exhibit 10.14.2 AMENDMENT TO THE SALOMON INC EQUITY PARTNERSHIP PLAN FOR KEY EMPLOYEES (AS AMENDED THROUGH MARCH 25, 1998) - -------------------------------------------------------------------------------- Section 17 (c) of the Salomon Inc Equity Partnership Plan for Key Employees is hereby amended to add the following sentence at the end of such Section: "The value of any shares allowed to be withheld or tendered for tax withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with generally accepted accounting principles." EX-10.15.2 7 EXHIBIT 10.15.2 Exhibit 10.15.2 AMENDMENT TO THE CITICORP EXECUTIVE INCENTIVE COMPENSATION PLAN - -------------------------------------------------------------------------------- Section 10.12 of the Citicorp Executive Incentive Compensation Plan is hereby amended to add the following sentence at the end of such Section: "The value of any shares allowed to be withheld or tendered for tax withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with generally accepted accounting principles." EX-10.16.2 8 EXHIBIT 10.16.2 Exhibit 10.16.2 AMENDMENT TO THE CITICORP 1988 STOCK INCENTIVE PLAN - -------------------------------------------------------------------------------- Section 7(e) of the Citicorp 1988 Stock Incentive Plan is hereby amended to add the following sentence at the end of such Section: "The value of any shares allowed to be withheld or tendered for tax withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with generally accepted accounting principles." EX-10.18.2 9 EXHIBIT 10.18.2 Exhibit 10.18.2 AMENDMENT TO THE CITICORP DEFERRED COMPENSATION PLAN - -------------------------------------------------------------------------------- Section 8.3 of the Citicorp Deferred Compensation Plan is hereby amended to add the following sentence at the end of such Section: "In the event the Company permits shares to be withheld or tendered to satisfy any tax withholding obligations, the value of any shares allowed to be withheld or tendered for tax withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with generally accepted accounting principles." EX-10.19.2 10 EXHIBIT 10.19.2 Exhibit 10.19.2 AMENDMENT TO THE CITICORP 1997 STOCK INCENTIVE PLAN - -------------------------------------------------------------------------------- Section 13 of the Citicorp 1997 Stock Incentive Plan is hereby amended to add the following sentence at the end of such Section: "The value of any shares allowed to be withheld or tendered for tax withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with generally accepted accounting principles." EX-10.20.1 11 EXHIBIT 10.20.1 Exhibit 10.20.1 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF CITICORP AND AFFILIATES (As amended and restated effective January 1, 1998) 1. Purposes. The purposes of the Plan are to provide specified retirement benefits to certain officers and senior executives of Citicorp and its affiliates who are designated in accordance with the terms of the Plan and who are members of a select group of management or highly compensated employees within the meaning of Sections 201, 301 and 401 of ERISA. 2. Definitions and Rules of Construction. (a) The following capitalized words have the meanings set forth below: "Approved Separation" means a termination of employment with Citicorp and its affiliates other than for Gross Misconduct that occurs (i) after the later of the Participant's completion of one Year of Service and attaining Retirement Age or (ii) as a result of the Participant's death while employed by Citicorp or one of its affiliates. "Board" means the Board of Directors of Citicorp. "Bonus Pay" means the Individual Variable Compensation Award paid to a Participant. "Chairman" means the Chairman of the Board. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable rules and regulations thereunder. "Committee" means the Personnel Committee of the Board or any successor committee appointed for purposes of the Plan by the Board. "Covered Compensation" of a Participant for a Plan Year shall mean the amount of base salary and Bonus Pay taken into account under the Plan in accordance with Sections 3 and 4. "Covered Position" means a senior-level position with Citicorp or one of its affiliates that is designated as such for a Plan Year by the Committee. "Current-Year Participant" means each Protected Participant and each other Participant designated by the Committee whose Bonus Pay may be taken into account under the Plan for the current Plan Year in accordance with Sections 3 and 4. "Effective Date" means January 1, 1998. "Eligible Employee" means an employee of Citicorp or one of its affiliates who (i) is an "executive officer" (within the meaning of Rule 3b-7 as promulgated under the Securities Exchange Act of 1934, as amended) of Citicorp or one of its affiliates, (ii) has been designated by the Chairman and the Committee or (iii) is employed in a Covered Position. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the applicable rules and regulations thereunder. "Gross Misconduct" means (i) any conviction of a Participant of any serious criminal offense, (ii) the willful failure or refusal of a Participant to perform the material duties of the Participant's position in a manner reasonably acceptable to the Committee, (iii) any intentional or grossly negligent disclosure or misappropriation of confidential or proprietary information of Citicorp or one of its affiliates by the Participant, (iv) an act of fraud against Citicorp or one of its affiliates by the Participant and (v) any other act or omission that the Committee determines in good faith is a basis for terminating a Participant's employment for cause. "Non-U.S. Retirement Plan" means The Retirement Plan for Specified Non-United States International Staff of Citibank, N.A. and Participating Companies. "Offset Plan" means each of (i) the Retirement Plan, (ii) the Supplemental ERISA Excess Plan of Citibank, N.A. and Affiliates, (iii) the Supplemental ERISA Compensation Plan of Citibank, N.A. and Affiliates, (iv) the Non-U.S. Retirement Plan and (v) each Other Retirement Plan. "Other Retirement Plan" means any other retirement plan, system or program (i) (a) which is sponsored or maintained by Citicorp or one of its affiliates or (b) to which Citicorp or one of its affiliates contributes, including, without limitation, a retirement plan, system or program (other than Social Security or a plan determined by the Committee to be a counterpart thereto) sponsored, offered, maintained or mandated by a government or other public jurisdiction and (ii) which provides retirement or disability income to a Participant or the spouse or beneficiary thereof; provided, however, that the term Other Retirement Plan does not include any plan described in clauses (i) through (iv) of the definition of Offset Plan. "Participant" means an Eligible Employee who has an accrued benefit under the Plan, and includes each Current-Year Participant and Protected Participant. "Plan" means the Supplemental Executive Retirement Plan of Citicorp and Affiliates, as the same may be amended from time to time. "Plan Year" means the calendar year. "Prior Plan" means the Supplemental Executive Retirement Plan of Citicorp and Affiliates, as amended and restated effective October 16, 1990 and as in effect immediately prior to the Effective Date. Benefits accrued under the Prior Plan as of the Effective Date shall be paid under the Plan. "Protected Participant" means an Eligible Employee that the Committee determines to be either (i) identified as of October 16, 1990 under the Prior Plan or (ii) subject to an employment contract, offer letter or similar agreement with Citicorp or one of its affiliates that requires such Eligible Employee to participate in the Plan in accordance with the terms in effect prior to the Effective Date. "Retirement Age" means (i) for Participants who are eligible to participate in the Retirement Plan or the Non-U.S. Retirement Plan, age fifty-five, and (ii) for all other Participants, the earliest retirement age under the Other Retirement Plan specified by the Committee for this purpose and in which the Participant participates; provided, however, that a Participant who becomes permanently disabled and who retires and commences receiving retirement benefits as of a disability retirement date under the Retirement Plan or the Non-U.S. Retirement Plan, as the case may be, shall be deemed to have attained his Retirement Age for purposes of the Plan as of the disability retirement date. "Retirement Plan" means The Retirement Plan of Citibank, N.A. and Participating Companies, as the same may be amended from time to time, and any successor plan thereto. "Year of Service" means a Year of Service as defined in Article I of the Retirement Plan. (b) As used herein, the masculine gender shall be deemed to include the feminine gender, and the singular form of a word shall be deemed to encompass the plural form, unless the context requires otherwise. Except as otherwise provided herein, section references are to sections of the Plan. 3. Benefit Payable to Participants. (a) Subject to the further provisions of this Section 3 and Section 4, there shall be paid under the Plan on behalf of a Participant whose employment with Citicorp and its affiliates ends in an Approved Separation, the Retirement Benefit (as defined in Article I of the Retirement Plan) that would have been paid on behalf of the Participant or, in the event of an Approved Separation caused by the death of the Participant, the death benefit under Article VI of the Retirement Plan that would have been paid to the Participant's spouse, if the Retirement Plan: (i) Included within the definitions of Compensation and Average Compensation (as defined in Article I of the Retirement Plan) any Bonus Pay paid to the Participant for each year that the Participant is a Current-Year Participant; provided, however, that Bonus Pay relating to service prior to 1991 shall be so included only in the case of Participants who were members of the Policy Committee of Citicorp/Citibank immediately prior to its discontinuance on October 16, 1990 and only for bonuses payable pursuant to the Citicorp Executive Incentive Compensation Plan; and (ii) Excluded the limitation on benefits imposed by Section 415 of the Code and the limitation imposed by Section 401(a)(17) of the Code. (b) The amount of the Plan benefit computed in accordance with Section 3(a) shall be reduced by the benefits payable to or in respect of the Participant under the Offset Plans. The offset contemplated by this Section 3(b) shall not result in a benefit under the Plan of less than zero. (c) If a Participant is not a participant in the Retirement Plan, then the Non-U.S. Retirement Plan shall be substituted for the Retirement Plan for purposes of Section 3(a) and the Participant's benefit under Section 3 shall be calculated in accordance with the corresponding provisions of the Non-U.S. Retirement Plan, regardless of whether the Participant is eligible for benefits under such plan. (d) The payment of the benefits described above shall commence at the same time and shall be paid in the same form as the retirement benefit paid to a Participant (or the Participant's spouse or beneficiary, as the case may be) under the Retirement Plan. In accordance with the procedures established by the Committee for this purpose, the benefit of a Participant (or the spouse or beneficiary thereof) who was not a participant in the Retirement Plan at the time of such Participant's Approved Separation shall be paid at the time and in the form that benefits are paid to such Participant (or to the spouse or beneficiary thereof) under the Non-U.S. Retirement Plan (or, if the Participant is not a participant in the Non-U.S. Retirement Plan, at the time and in the form that benefits are paid to the Participant under the Other Retirement Plan specified by the Committee for this purpose and in which the Participant participates). The Committee may alter the payment provisions described in the previous sentence on a case-by-case basis if the Committee determines that such modification is in the best interests of Citicorp or one of its affiliates or if such change is necessary to avoid adverse tax or other consequences to the Participant or to Citicorp or one of its affiliates. (e) For purposes of this Section 3, the term "spouse" shall be construed in accordance with the Retirement Plan or, if Section 3(c) applies to a Participant, in accordance with the Non-U.S. Retirement Plan. 4. Committee Discretion with Respect to Continued Participation and Bonus Pay. (a) The Committee shall determine a Participant's status as a Current-Year Participant separately for each Plan Year after 1997; provided, however, that Section 4(c) (and not this sentence) shall apply to Protected Participants. The Covered Compensation for a Current-Year Participant shall include base salary and Bonus Pay in accordance with the provisions of Section 4(b). Covered Compensation shall only include base salary (and not Bonus Pay) for Participants who are not Current-Year Participants for a given Plan Year. The Committee shall also determine for each Plan Year the positions with Citicorp and its affiliates that will be treated as Covered Positions for purposes of the Plan for such year. Any determination by the Committee under this Section 4(a) or Section 4(b) for a given Plan Year shall not be controlling on the Committee's determination for any subsequent Plan Year. (b) The amount of the Bonus Pay eligible to be taken into account under the Plan for Current-Year Participants (other than Protected Participants) for a given Plan Year after 1997 shall be specified by the Committee. The Committee may establish separate limits for each Current-Year Participant (other than a Protected Participant) or for separate classes of Current-Year Participants (other than Protected Participants) in a given Plan Year after 1997 and may establish different limits for Bonus Pay for each Plan Year after 1997. The Committee may establish the limits described above applicable to a Current-Year Participant at any time prior to the payment to the Current-Year Participant of the Bonus Pay for the applicable Plan Year. Unless the Committee determines otherwise, Covered Compensation shall not include the amount of any signing bonus or similar-type payment paid to a Current-Year Participant. For purposes of Section 3, Bonus Pay payable in respect of any part of a Plan Year will not be annualized. (c) The Covered Compensation of Protected Participants for each Plan Year shall include base salary and Bonus Pay, and there shall be no limit on the Bonus Pay taken into account under the Plan for Protected Participants. (d) For purposes of the provisions of Section 3(a), Covered Compensation shall be taken into account under the Plan in the Plan Year for which it is earned, regardless of whether such Covered Compensation is paid in a later Plan Year (including, without limitation, where such delayed payment is a result of a voluntary or mandatory deferral of Covered Compensation). 5. Limitations and Other Conditions on Plan Benefits. (a) If a Participant's employment with Citicorp and its affiliates terminates under circumstances other than an Approved Separation, then, unless the Committee determines otherwise, no benefits will be payable to the Participant (or the Participant's spouse or beneficiary) under the Plan. (b) Unless the Committee determines otherwise, a Participant will immediately forfeit all benefits under the Plan if (i) the Participant's employment with Citicorp or its affiliates is terminated for Gross Misconduct or if the Participant engages in conduct after his termination of employment with Citicorp and its affiliates that would have been a basis for the Participant's termination of employment for Gross Misconduct if such Participant were then so employed, (ii) the Participant's employment with Citicorp and its affiliates ends in an Approved Separation and, following such separation, the Committee becomes aware of conduct of the Participant prior to such separation that would have been a basis for a termination of employment for Gross Misconduct or (iii) the Committee determines in good faith that the Participant has breached a material term of any agreement described in Section 5(c) on or after the Participant's termination of employment. (c) Prior to the payment of any benefits to a Participant, Citicorp or its applicable affiliate shall enter into a written agreement with the Participant (or spouse or beneficiary entitled to such payment) which stipulates the amount and terms of payments to be made under this Plan. The Committee may also condition the payment of benefits under the Plan on a Participant delivering a written agreement to Citicorp and its affiliates which, among other things, (i) contains a release of all claims that the Participant (and the Participant's spouse, beneficiaries, heirs and assigns) may have against Citicorp and its affiliates and their respective current and former employees, officers, agents, directors and shareholders, (ii) sets forth an agreement by the Participant not to compete with Citicorp and its affiliates or to solicit the employees or customers and clients thereof for a specified period of time determined by the Committee, (iii) contains provisions related to the return of property of Citicorp and affiliates and an agreement by the Participant not to disclose confidential or proprietary information and (iv) sets forth such other terms as the Committee determines to be appropriate based on the facts and circumstances involved. (d) Benefits under the Plan shall be calculated in U.S. dollars but may, if the Committee so determines, be paid in another currency in accordance with procedures established by the Committee for this purpose. Where retirement benefits under the Plan and any applicable Offset Plan are payable to a Participant in different currencies, at different times or in different forms, the Committee shall establish procedures to determine the manner and extent to which the benefits and the other terms of the Offset Plan shall affect the determination of the benefits under the Plan and the amount of the offset made in accordance with Section 3(b). Any such determination by the Committee shall be final and binding on all interested persons. 6. Administration. (a) The Plan shall be administered by the Committee. The Committee shall have the authority to construe and interpret the terms of the Plan, to promulgate rules for the orderly administration of the Plan, to construe and interpret each agreement or documents issued under or related to the Plan, to investigate and make factual determinations necessary or advisable to administer or manage the Plan, and to take any such other action as the Committee may determine to be necessary or advisable for the administration and management of the Plan. All actions by the Committee shall be final and binding on all interested persons. (b) The Committee shall have the authority to appoint agents to effect the administration of the Plan and may delegate its authority under the Plan to one or more officers of Citicorp or one of its affiliates. (c) In administering the Plan, the Committee shall maintain sufficient records and lists to record each Participant (and the sub-categories of Current-Year Participants and Protected Participants) and the amount of Covered Compensation taken into account under the Plan for each Participant for each Plan Year. (d) To the fullest extent permitted by law, no member of the Committee, no agent appointed by the Committee and no person to whom the Committee delegates any authority under the Plan shall be held liable for any act or failure to act in connection with the Plan. 7. Claims Procedure. (a) A Participant may make a claim for benefits under this Plan by filing a claim in writing with the Senior Human Resources Officer (or such officer's delegate) or such other individual as may be appointed by the Committee for this purpose from time to time (the "Claims Administrator"). Within ninety days after receipt of such claim, the Claims Administrator will notify the Participant in writing as to whether the claim has been granted or denied in whole or in part. If the claim is denied in whole or in part, the written notification shall describe (i) the specific reason or reasons for denying the claim, (ii) the specific reference to any Plan provisions upon which such denial is based, (iii) a description of any additional material or information necessary for the Participant to perfect the claim and an explanation of why such material or information is necessary, and (iv) an explanation of the review procedures described in Section 7(b). (b) Within sixty days after the claim has been denied, the affected Participant may file a written request for review of the denied claim with the Committee. The review of a denied claim shall be undertaken by the Committee. Any decision by the Committee on review shall be in writing, shall include specific reasons for the decision (including reference to any Plan provisions on which the decision is based) and shall be written in a manner calculated to be understood by the Participant. Such decision shall generally be made not later than sixty days after receipt of the Participant's request for review; provided, however, that, if the Committee or the Claims Administrator determines that special circumstances require an extension of the review period, the Committee shall have an additional sixty days to complete its review of the claim and to communicate its conclusions to the Participant. Any such decision to extend the review period shall be communicated in writing to the Participant prior to the expiration of the initial sixty-day period. (c) The decision of the Committee under Section 7(b) above shall be final and binding under the Plan upon all interested persons. 8. Amendment and Termination. (a) The Board or the Committee may amend, modify or terminate this Plan at any time; provided, however, that no such amendment, modification or termination shall adversely affect the benefits accrued by a Participant prior to the date of such amendment, modification or termination. (b) Minor or clarifying amendments to the Plan which (i) do not increase benefits under the Plan and (ii) do not increase the cost of the Plan to Citicorp and its affiliates may be adopted by any officer of Citicorp or one of its affiliates to whom such amendment authority is delegated by the Committee. 9. Miscellaneous. (a) The Plan shall be an unfunded plan maintained by Citicorp and its affiliates for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of Sections 201, 301 and 401 of ERISA. Citicorp and its affiliates shall be under no obligation to set aside any funds for the purpose of making payments under this Plan. Any payments hereunder shall be made out of the general assets of Citicorp and its affiliates. (b) Nothing in the Plan shall in any way be construed as giving any individual a right to be employed or to continue to be employed by Citicorp and its affiliates. The Plan does not constitute a contract of employment with any individual. Nothing in the Plan shall be construed in any way as obligating Citicorp and its affiliates to provide benefits under the Retirement Plan, the Non-U.S. Retirement Plan, or any Offset Plan to any person who is not otherwise eligible to participate therein and receive benefits therefrom in accordance with the terms thereof or to provide any benefits under the Retirement Plan, the Non-U.S. Retirement Plan, or any Offset Plan which are not otherwise contemplated by the express terms thereof. The Plan shall in no way be construed as an amendment to the Retirement Plan, the Non-U.S. Retirement Plan or any Offset Plan. In no event shall the Plan be construed as requiring or permitting the accrual or payment of duplicate benefits or as requiring or permitting Covered Compensation or service with Citicorp and its affiliates to be taken into account more than once in calculating the total benefits payable under the Plan. Nothing in the Plan should be construed as establishing a floor or minimum guaranteed benefit for any Participant under the Plan. (c) Section headings are included solely for convenience of reference and are not to be considered in construing the meaning of the terms of the Plan. (d) To the extent not governed by ERISA or other United States federal law, the Plan shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts to be performed entirely within such State without regard to the choice of law provisions thereof. EX-10.20.2 12 EXHIBIT 10.20.2 Exhibit 10.20.2 FIRST AMENDMENT TO THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN The Supplemental Executive Retirement Plan of Citicorp and Affiliates, as amended and restated effective January 1, 1998 (the "Plan"), is hereby amended as follows: 1. The definition of Covered Compensation in Section 2(a) of the Plan is amended by deleting the period (".") and adding at the end thereof the following: "; provided, however, that, for each Plan Year beginning after 1998, a Participant's Covered Compensation for such year may not exceed an amount determined in accordance with the formula A x (1.06)N, where "A" is a Participant's Target Cash Compensation for 1998 and "N" is the difference that results from subtracting 1998 from the then current calendar year." 2. The definition of "Current-Year Participant" in Section 2(a) of the Plan is amended by deleting the period (".") and adding at the end thereof the following: "; provided, however, that, for Plan Years beginning after 1999, (i) only Protected Participants shall be Current-Year Participants and (ii) unless the Committee determines otherwise, no Eligible Employee other than a Protected Participant shall earn additional benefits under the Plan." 3. The definition of "Retirement Plan" in Section 2(a) of the Plan is amended by deleting the words "as the same may be amended from time to time, and any successor plan thereto." and replacing such words with the following: "as in effect on December 31, 1999." 4. Section 2(a) of the Plan is amended by adding after the definition of "Retirement Plan" the following: "Target Cash Compensation for 1998" means, with respect to each Participant, the amount determined by the Committee equal to the sum of the Participant's annual rate of base salary as of December 31, 1998 and target Bonus Pay for 1998." 5. Section 3(d) of the Plan is amended by adding at the end thereof the following: "Anything in the Plan to the contrary notwithstanding, benefits under the Plan shall not be payable in a lump sum unless (i) the Participant participates after December 31, 1999 in the tax qualified cash account balance retirement plan which is the successor to the Retirement Plan (the "CBP"), (ii) the Participant has the right to elect to receive under the CBP the portion of his Retirement Benefit accrued under the Retirement Plan as of December 31, 1999 in a lump sum (the "Pre-2000 Benefit") and (iii) at the time of the Participant's retirement, the Participant elects under the CBP to receive the Pre-2000 Benefit in a lump sum." 6. The Plan is amended by adding at the end thereof the following: "10. Closed to New Participants. Anything in the Plan to the contrary notwithstanding, unless the Committee determines otherwise, effective as of December 31, 1999, the Plan shall be closed to new Participants." 7. This amendment to the Plan shall be effective as of January 1, 1999. Except as amended hereby, the Plan shall remain in full force and effect. EX-10.21.2 13 EXHIBIT 10.21.2 Exhibit 10.21.2 Amendment to the Supplemental ERISA Compensation Plan of Citibank, N.A. and Affiliates, as amended and restated - -------------------------------------------------------------------------------- The first sentence of the Supplemental ERISA Compensation Plan of Citibank, N.A. and Affiliates (the "Plan") is amended and restated as follows: "The Purpose of this Plan is solely to provide benefits to an individual whose participation in the Citigroup Pension Plan (a/k/a Citibuilder Retirement Plan) ("Plan") is attributable to employment with an entity which was a participating employer in the Retirement Plan of Citibank, N.A. and Affiliates and a member of a select group of management or highly compensated employees for purposes of Sections 201, 301, and 401 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")." Section 2 of the Plan is amended by adding the following language: "Notwithstanding the foregoing, for purposes of computing the benefits under this Plan for individuals whose benefit in the Retirement Plan is determined by reference to the cash balance formula, compensation in excess of $500,000 shall be disregarded." EX-10.24 14 EXHIBIT 10.24 Exhibit 10.24 October 26, 1999 PERSONAL AND CONFIDENTIAL - ------------------------- Mr. Robert E. Rubin Citigroup 153 East 53rd Street C 4th Floor New York, NY 10043 Dear Bob: We are pleased to offer you employment as Director, Chairman of the Executive Committee of the Board of Directors and member of the Office of the Chairman of Citigroup Inc. (together with its direct and indirect successors, the "COMPANY" and, together with its subsidiaries, "CITIGROUP"). Your employment will commence as soon as possible and will continue until terminated by you, by the Company or by reason of your death. Working with us in the newly constituted Office of the Chairman consisting exclusively of you and the Chairmen of the Board of Directors of the Company, you will participate in strategic managerial and operational matters of Citigroup worldwide, but will not have line responsibilities or any other reporting relationships. Your compensation will consist of the following: o Salary, paid in accordance with the Company's standard policies in effect from time to time (currently semi-monthly), at an annual rate of not less than $1.0 million. o Guaranteed level of incentive compensation for calendar years 1999 (subject to proration as described below), 2000 and, subject to any extraordinary circumstances drastically negatively affecting Citigroup reported operating results and in the event of such circumstances and results only to the extent of any similar effect on total compensation (including incentive compensation awards) made to the other members of the Office of the Chairman, 2001 of not less than $14.0 million, of which up to 25% (or, to the extent the other members of the Office of the Chairman are similarly affected, an amount equal to 25% of total compensation) shall be paid to you in the form of awards of restricted stock (or, at your election, deferred stock and/or options) pursuant to the Travelers Group Capital Accumulation Plan, as in effect from time to time ("CAP"), including the discounted price provisions thereof; provided that the vesting period with respect to any such awards shall be the period applicable to contemporary such awards made to the other members of the Office of the Chairman, but in no event more than three years. Such incentive compensation shall be paid and awarded at the same time as other such incentive compensation and awards made for the respective year to senior executives of the Company, but in no event later than paid or awarded to the other members of the Office of the Chairman. Notwithstanding the foregoing, to the extent necessary to avoid any loss of deduction with respect thereto under Section 162(m) of the Internal Revenue Code or any applicable successor provision, payment of such incentive compensation (other than CAP awards) shall be deferred as described in Schedule A attached hereto. Your incentive compensation for the year 1999 will be a prorated portion (i.e., 18.36%) of the foregoing annual guaranteed amount. Incentive compensation with respect to any calendar year after 2001 will be paid in accordance with the Citigroup 1999 Executive Performance Plan or any applicable successor plan. o A grant made to you on the date hereof of 1.5 million options on Citigroup common stock, pursuant to the Citigroup 1999 Stock Incentive Plan ("SIP"), with an exercise price equal to the closing market price (composite transactions) on October 25, 1999. In addition, an additional grant of 1.5 million options of Citigroup common stock (or, if a stock split, recapitalization or other event has occurred prior to such additional grant, an amount of such options adjusted to reflect such event) ("SECOND OPTION"), also pursuant to SIP (as then in effect), with an exercise price equal to the closing market price (composite transactions) on the day before the date of grant, which will be made not later than October 2000 by the Personnel, Compensation and Directors Committee. o All options granted to you shall have a term of not less than ten years, shall vest and become exercisable at a rate of at least 20% per year and the shares received upon exercise shall be fully vested, except as required in connection with reload eligibility or pursuant to CAP to the same extent in either case as applicable to the other members of the Office of the Chairman. o In the event of a Change of Control, as defined in either CAP or SIP, you will be accorded not less favorable treatment in terms of compensation and awards under the Citigroup compensation and benefit plans and arrangements, as applies to the other members of the Office of the Chairman, and, in light of your unique circumstances, you will also be entitled to payments sufficient to reimburse you fully on an after-tax basis 2 for any tax under Section 4999 of the Internal Revenue Code or any applicable successor provision, as well as any costs, including professional fees, associated with determining and resolving the application of such tax to you. Notwithstanding anything to the contrary in CAP, SIP, the Citigroup 1999 Executive Performance Plan, any successor plans or any award agreements executed pursuant to those plans, we have also agreed on the following provisions: o If any of the events listed in Part A of Schedule B attached hereto should occur, you shall be entitled to terminate your employment by notice in writing delivered after you have had a reasonable opportunity to evaluate such event and you will receive (i) continued payment of salary through the later of December 31, 2001 or 12 months following such date of termination (the "SEVERANCE PERIOD"), (ii) continued payment with respect to the Severance Period of incentive compensation equal to the guaranteed incentive compensation for calendar years 2000 and 2001 (if not already paid) and with respect to any period after December 31, 2001 equal to the amount of incentive compensation for the most recent calendar year (prorated for a partial calendar year), (iii) the grant on a fully vested basis, not later than October, 2000, of the Second Option, if not previously granted, (iv) the immediate lapse of all restrictions on and vesting of any restricted or deferred stock, options or other awards made or received under CAP, SIP or otherwise ("AWARDS"), (v) continued benefits during the Severance Period and (vi) any payment due to you under Schedule A attached hereto. In connection with the foregoing, (a) any incentive compensation paid after the date of termination will be paid without participation in CAP or any similar program, (b) payments to you of incentive compensation in respect of any year during the Severance Period shall be made when similar payments are made to the other members of the Office of the Chairman, but in no event later than March 31 of the following year and will not be subject to the deferred arrangement described above, (c) stock options will be exercisable for two years following termination of employment and (d) exercise of options following the date of termination will not be eligible to participate in reload grants. o If any of the events listed in Part B of Schedule B attached hereto should occur, then your employment will be automatically terminated and you (or your estate) will receive (i) payment of salary through the date of termination, (ii) guaranteed unpaid incentive compensation prorated through the date of termination and, if such termination occurs after December 31, 2001, such incentive compensation payment shall be based on the amount of incentive compensation for the most recent 3 calendar year and (iii) the immediate lapse of restrictions on and vesting of all Awards and the grant on a fully vested basis, not later than October 2000, of the Second Option if not previously granted; and in this connection, clauses (a) through (d) of the preceding paragraph shall also apply. o If you leave employment for any reason other than a reason specified in Schedule B attached hereto, you will receive no continuing compensation or option vesting or exercisability after the date of your leaving, including with respect to any awards granted under CAP. o Your rights, following any leaving, under any other programs and policies of Citigroup shall be governed by the terms of such programs and policies. o Following any leaving of employment, you agree to maintain the confidentiality of proprietary Citigroup information and to not solicit any of our senior employees to leave their employment for at least two years following the date of your leaving. o The provisions of CAP, SIP and any successor plans with respect to the vesting, payment and exercisability of awards thereunder and the treatment of such awards upon and following termination of employment, including forfeiture and deferral provisions, are superseded by the provisions of this letter to the extent inconsistent herewith, except to the extent consented to by you in writing. 4 We have also agreed that, separate from your role with Citigroup and notwithstanding anything to the contrary in any policy of the Company, including the Citigroup Employee Handbook and the Citigroup Principles of Employment, you will be free to continue your long personal history of involvement in public policy issues and to engage in other charitable and civic activities; to serve on corporate or advisory boards or in similar capacities, including with respect to investment partnerships, (and to be compensated for the same); and to manage your personal investments, provided that such separate activities do not materially conflict with your new responsibilities at Citigroup. Except as otherwise provided herein or as necessary and appropriate in terms of governance, as a member of the Office of the Chairman, you will be accorded the same status as the other members of the Office of the Chairman (except with respect to non-material matters such as security and administrative support). Thus, from the onset of your employment, you will be covered by the same policies and be eligible to participate in the same compensation programs and to receive the same benefits that have been or are enjoyed by other senior executives and employees of Citigroup, including the other members of the Office of the Chairman. Without limiting the foregoing, you will have the use of a personal car and driver, as well as access to the Company's planes for your business and personal needs to the same extent as the same are available to the other members of the Office of the Chairman. You will also be eligible to participate in a comprehensive employee benefits program, which includes medical and dental coverage, life insurance, disability insurance, retirement plan and 401(k) savings plan, in accordance with their terms, most of which permit participation on the first day of your employment. This letter describes Citigroup's offer of employment. Any other discussions that you have had with us are not part of our offer unless they are described in this letter, CAP, the Citigroup 1999 Executive Performance Plan, SIP, the Citigroup Employee Handbook or the Citigroup Principles of Employment or are agreed upon in writing by you and the Company. Welcome to Citigroup! Sincerely, /s/ John S. Reed /s/ Sanford I. Weill - ---------------------- ------------------------ John S. Reed Sanford I. Weill Agreed: /s/ Robert E. Rubin Date: January 11, 2000 --------------------- --------------------- Schedule B Schedule of Termination Events Part A o any failure by the Company to comply with any of the provisions of the foregoing letter or the Trust Agreement, other than an isolated, insubstantial and/or inadvertent failure not occurring in bad faith and which is promptly remedied by the Company after receipt of written notice thereof given by Mr. Rubin, including any diminution of Mr. Rubin's position, including status, offices, titles, reporting relationships or lack of meaningful participation in the strategic managerial and operational matters of Citigroup worldwide o any failure of the Company to nominate or recommend for election Mr. Rubin as a Director, any failure of the shareholders of the Company to so elect Mr. Rubin or any failure of the Board of Directors to elect Mr. Rubin as Chairman of the Executive Committee of the Board of Directors o change in the composition of the Office of the Chairman to include anyone other than Mr. Rubin and the Chairman or Chairmen of the Board of Directors of the Company in office from time to time o resignation with the written consent of the Company o at the written request of the Company or following receipt of written notice from the Company of termination of Mr. Rubin's employment o a relocation of Mr. Rubin's office more than 25 miles outside of New York City Part B o retirement, for which Mr. Ruhin shall be eligible after completing 5 years of service with the Company, whereupon Mr. Rubin's combined age and service shall be deemed to equal 75 for purposes of all plans and programs of Citigroup (other than any pension plans sponsored by the Company or any of its affiliates) o death or disability EX-12.01 15 EXHIBIT 12.01 Exhibit 12.01 CITIGROUP, INC. CALCULATION OF RATIO OF INCOME TO FIXED CHARGES (In Millions)
YEAR ENDED DECEMBER 31, EXCLUDING INTEREST ON DEPOSITS: 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) 13,894 15,849 14,911 12,362 13,488 INTEREST FACTOR IN RENT EXPENSE 262 394 301 282 275 ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 14,156 16,243 15,212 12,644 13,763 ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 15,948 9,269 10,750 11,087 8,914 OTHER -- -- -- 1 -- FIXED CHARGES 14,156 16,243 15,212 12,644 13,763 ------ ------ ------ ------ ------ TOTAL INCOME 30,104 25,512 25,962 23,732 22,677 ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS 2.13 1.57 1.71 1.88 1.65 ====== ====== ====== ====== ====== INCLUDING INTEREST ON DEPOSITS: FIXED CHARGES: INTEREST EXPENSE 24,768 27,495 24,524 21,336 22,390 INTEREST FACTOR IN RENT EXPENSE 262 394 301 282 275 ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 25,030 27,889 24,825 21,618 22,665 ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 15,948 9,269 10,750 11,087 8,914 OTHER -- -- -- 1 -- FIXED CHARGES 25,030 27,889 24,825 21,618 22,665 ------ ------ ------ ------ ------ TOTAL INCOME 40,978 37,158 35,575 32,706 31,579 ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS 1.64 1.33 1.43 1.51 1.39 ====== ====== ====== ====== ======
CITIGROUP, INC. CALCULATION OF RATIO OF INCOME TO FIXED CHARGES INCLUDING PREFERRED STOCK DIVIDENDS (In Millions)
YEAR ENDED DECEMBER 31, EXCLUDING INTEREST ON DEPOSITS: 1999 1998 1997 1996 1995 - ------------------------------- ---- ---- ---- ---- ---- FIXED CHARGES: INTEREST EXPENSE (OTHER THAN INTEREST ON DEPOSITS) 13,894 15,849 14,911 12,362 13,488 INTEREST FACTOR IN RENT EXPENSE 262 394 301 282 275 DIVIDENDS--PREFERRED STOCK 232 332 433 505 800 ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 14,388 16,575 15,645 13,149 14,563 ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 15,948 9,269 10,750 11,087 8,914 OTHER -- -- -- 1 -- FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) 14,156 16,243 15,212 12,644 13,763 ------ ------ ------ ------ ------ TOTAL INCOME 30,104 25,512 25,962 23,732 22,677 ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES EXCLUDING INTEREST ON DEPOSITS 2.09 1.54 1.66 1.80 1.56 ====== ====== ====== ====== ====== INCLUDING INTEREST ON DEPOSITS: FIXED CHARGES: INTEREST EXPENSE 24,768 27,495 24,524 21,336 22,390 INTEREST FACTOR IN RENT EXPENSE 262 394 301 282 275 DIVIDENDS--PREFERRED STOCK 232 332 433 505 800 ------ ------ ------ ------ ------ TOTAL FIXED CHARGES 25,262 28,221 25,258 22,123 23,465 ------ ------ ------ ------ ------ INCOME: INCOME BEFORE TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 15,948 9,269 10,750 11,087 8,914 OTHER -- -- -- 1 -- FIXED CHARGES (EXCLUDING PREFERRED STOCK DIVIDENDS) 25,030 27,889 24,825 21,618 22,665 ------ ------ ------ ------ ------ TOTAL INCOME 40,978 37,158 35,575 32,706 31,579 ====== ====== ====== ====== ====== RATIO OF INCOME TO FIXED CHARGES INCLUDING INTEREST ON DEPOSITS 1.62 1.32 1.41 1.48 1.35 ====== ====== ====== ====== ======
EX-21.01 16 EXHIBIT 21.01 Exhibit 21.01 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Associated Madison Companies, Inc. Delaware Mid-America Insurance Services, Inc. Georgia PFS Services, Inc. Georgia PFS Shareholder Services * Georgia The Travelers Insurance Group Inc. Connecticut The Prospect Company Delaware One Twenty Five High Street Limited Partnership Massachusetts Panther Valley, Inc. New Jersey The Travelers Asset Funding Corporation Connecticut The Travelers Insurance Company Connecticut 440 South LaSalle LLC Delaware American Financial Life Insurance Company Texas Carlton Arms of Bradenton Florida Crest Funding Partners LP Delaware Cripple Creek Venture Partner II L.P. * Colorado Greenwich Street Capital Partners II, L.P. * Delaware Greenwich Street Capital Partners, L.P. * Delaware Greenwich Street Investments, L.L.C. Delaware Greenwich Street Investments, L.P. New York Greenwich Street Investments II, L.L.C. Delaware Hollow Creek, L.L.C. Connecticut Station Hill, L.L.C. Connecticut Oakbrook Hotel Venture Illinois Primerica Life Insurance Company Massachusetts National Benefit Life Insurance Company New York Primerica Financial Services (Canada) Ltd. Canada
(1) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION PFSL Investments Canada Ltd. Canada Primerica Life Insurance Company of Canada Canada Primerica Client Services Inc. (Canada) Canada Primerica Financial Services Ltd. Canada Prospect/Nissei 190 Limited Partnership Illinois 190 S. LaSalle Associates Limited Partnership * Illinois Ryan/Travelers Kierland, LLC Delaware SSB Private Selections, LLC * Delaware Salomon Smith Barney Private Selection Fund I, LLC New York Tandem EGI/C Investments, L.P. * Delaware The Greenwich Street Fund L.P. New York The Plaza Corporation Connecticut Keeper Holdings LLC * Delaware The Copeland Companies (Holding Company) New Jersey American Odyssey Funds Management, Inc. New Jersey Copeland Associates, Inc. Delaware Copeland Associates Agency of Ohio, Inc. Ohio Copeland Associates of Alabama, Inc. Alabama Copeland Associates of Montana, Inc. Montana Copeland Associates of Nevada, Inc. Nevada Copeland Equities, Inc. New Jersey Donald F. Smith & Associates New Jersey H.C. Copeland Associates, Inc. of Massachusetts Massachusetts H.C. Copeland and Associates, Inc. of Texas Texas Smith Annuity Services, Inc. New Jersey Copeland Financial Services, Inc. New Jersey
(2) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Copeland Mortgage Services, Inc. New Jersey Travelers/Net Plus Insurance Agency, Inc. Massachusetts Travelers/Net Plus, Inc. Connecticut Travelers/Net Plus Agency of Ohio, Inc. Ohio Tower Square Securities, Inc. Connecticut Tower Square Securities Insurance Agency of Alabama, Inc. Alabama Tower Square Securities Insurance Agency of Massachusetts Massachusetts, Inc. Tower Square Securities Insurance Agency of New New Mexico Mexico, Inc. Tower Square Securities Insurance Agency of Ohio, Inc. Ohio Tower Square Securities Insurance Agency of Texas, Inc. Texas Travelers Asset Management International Corporation New York Travelers Distribution Company Delaware Travelers Investment Advisers, Inc. Delaware The Travelers Life and Annuity Company Connecticut Travelers Annuity UK Investments, LLC Delaware Travelers/Nissei 190 S. LaSalle Company Illinois WT Equipment Partners LP Delaware Tishman Speyer/Travelers Associates III, L.L.C. Delaware TowerMark of New York New York Travelers Highland Park, LLC Colorado Highland Park Ventures, LLC Colorado Travelers Insurance UK Investments, LLC Delaware Travelers International Investments Ltd. Cayman Is. Travelers Opportunity Fund I, LLC Delaware Tishman Speyer/Travelers Associates Delaware Travelers Opportunity Fund II, LLC Delaware
(3) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Tishman Speyer/Travelers Real Estate Venture, L.P. Delaware 125 High Street, L.P. Delaware TST 2010 N. First, L.L.C. Delaware TST 375 Hudson, L.L.C. Delaware TST 525 West Monroe, L.L.C. Delaware TST 745 Atlantic, L.L.C. Delaware TST Mountain Bay, L.L.C. Delaware TST One Indiana, L.L.C. Delaware TST Tower, L.L.C. Delaware TST Wilshire, L.L.C. Delaware Travelers Schaumberg Windy Point LLC Delaware Windy Point of Schaumberg LLC Delaware Travelers/NLI 190 South LaSalle Street, L.L.C. * Delaware Travelers York Road LLC Delaware York Road Properties LLC Delaware Travko 1999-1, L.P. Texas Tribeca Distressed Securities, L.L.C. * Delaware Tribeca Management, L.L.C. Delaware TriCounty Grove Florida Umbrella Capital Company LLC Delaware WT Equipment Partners LP Delaware Travelers Mortgage Securities Corporation Delaware Travelers Property Casualty Corp. ** Delaware The Standard Fire Insurance Company Connecticut AE Properties, Inc. California AE Town and Country Limited Partnership Arizona
(4) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Bayhill Associates California Bayhill Restaurant II Associates California Industry Land Development Company California Industry Partners * California Community Rehabilitation Investment Corporation Connecticut Pratt Street, L.P. * Connecticut The Automobile Insurance Company of Hartford, Connecticut Connecticut TravCal Secure Insurance Company California TravCal Indemnity Company California Travelers Alpha Holdings, Inc. * Connecticut TIMCO ALPHA I, LLC * Connecticut Travelers Personal Security Insurance Company Connecticut Travelers Property Casualty Insurance Company Connecticut Travelers Property Casualty Insurance Company of Illinois Illinois The Travelers Indemnity Company Connecticut Commercial Insurance Resources, Inc. Delaware Gulf Insurance Company Missouri Atlantic Insurance Company Texas Gulf Group Lloyds Texas Gulf Insurance Holdings UK Limited England Gulf Insurance Company U.K. Limited England Gulf Underwriting Holdings Limited England Gulf Risk Services, Inc. Delaware Gulf Underwriters Insurance Company Missouri Select Insurance Company Texas Countersignature Agency, Inc. Florida
(5) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Crest Funding Partners LP Delaware Cripple Creek Venture Partner L.P. * Colorado European GREIO/TINDC Real Estate Investments LLC Delaware First Floridian Auto and Home Insurance Company Florida First Trenton Indemnity Company New Jersey Red Oak Insurance Company New Jersey Midkiff Development Drilling Program, L.P. * Texas Secure Affinity Agency, Inc. Delaware The Charter Oak Fire Insurance Company Connecticut The Phoenix Insurance Company Connecticut Constitution State Service Company Montana Constitution State Services LLC * Delaware Phoenix UK Investments, LLC Connecticut The Travelers Indemnity Company of America Connecticut The Travelers Indemnity Company of Connecticut Connecticut WT Equipment Partners LP Delaware The Travelers Indemnity Company of Illinois Illinois The Premier Insurance Company of Massachusetts Massachusetts The Travelers Home and Marine Insurance Company Connecticut The Travelers Indemnity Company of Missouri Missouri The Travelers Lloyds Insurance Company Texas The Travelers Marine Corporation California TravCo Insurance Company Connecticut Travelers Bond Investments, Inc. Connecticut Travelers Foreign Bond Partnership * Connecticut Travelers General Agency of Hawaii, Inc. Hawaii
(6) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Travelers Medical Management Services Inc. Delaware Triple T Diamond Gateway LLC Connecticut WT Equipment Partners LP Delaware TPC Investments, Inc. Connecticut Travelers (Bermuda) Limited Bermuda Travelers Casualty and Surety Company Connecticut 2677 Main Street Associates LLC Delaware AE Development Group, Inc. Connecticut Farmington Casualty Company Connecticut Travelers MGA, Inc. Texas Ponderosa Homes * Connecticut T-W Master LLC Delaware T-W Santa Clara LLC Delaware TCS European Investments, Inc. Connecticut TCS International Investments, Ltd. Cayman Islands Travelers Casualty & Surety Company of Canada Canada Travelers Casualty and Surety Company of America Connecticut Travelers Casualty and Surety Company of Illinois Illinois Travelers Casualty Company of Connecticut Connecticut Travelers Casualty UK Investments, LLC Connecticut Travelers Commercial Insurance Company Connecticut Travelers Excess and Surplus Lines Company Connecticut Travelers Lloyds of Texas Insurance Company Texas Travelers Tribeca Investments, Inc. * New York Tribeca Investments, L.L.C. * Delaware Triple T Brentwood, L.L.C. Delaware Travelers P&C Capital I Delaware Travelers P&C Capital II Delaware
(7) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Travelers P&C Capital III Delaware Tribeca Alternative Strategies, Inc. Connecticut Primerica Client Services, Inc. (USA) Delaware Primerica Convention Services, Inc. Georgia Primerica Finance Corporation Delaware PFS Distributors, Inc. Georgia PFS Investments Inc. Georgia PFS T.A., Inc. Delaware Primerica Financial Services Home Mortgages, Inc. Georgia Primerica Financial Services Home Mortgages Limited Partnership of Arizona Delaware Primerica Financial Services Home Mortgages Limited Partnership of North Carolina North Carolina Primerica Financial Services Home Mortgages Limited Partnership of Ohio Ohio Primerica Financial Services, Inc. Nevada Primerica Financial Insurance Services of Texas, Inc. Texas Primerica Financial Services Agency of New York, Inc. New York Primerica Financial Services Insurance Marketing of Idaho, Inc. Idaho Primerica Financial Services Insurance Marketing of Maine, Inc. Maine Primerica Financial Services Insurance Marketing of Nevada, Inc. Nevada Primerica Financial Services Insurance Marketing of Pennsylvania, Inc. Pennsylvania Primerica Financial Services Insurance Marketing of the Virgin Islands, Inc. U.S. Virgin Islands Primerica Financial Services Insurance Marketing of Wyoming, Inc. Wyoming Primerica Financial Services Insurance Marketing, Inc. Delaware Primerica Financial Services of Alabama, Inc. Alabama Primerica Financial Services of Arizona, Inc. Arizona Primerica Financial Services of Kentucky, Inc. Kentucky Primerica Financial Services of New Mexico, Inc. New Mexico
(8) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Primerica Insurance Agency of Massachusetts, Inc. Massachusetts Primerica Insurance Marketing Services of Puerto Rico, Inc. Puerto Rico Primerica Insurance Services of Louisiana, Inc. Louisiana Primerica Services, Inc. Georgia SL&H Reinsurance, Ltd. Leeward Islands Southwest Service Agreements, Inc. North Carolina Southwest Warranty Corporation Florida CCC Fairways, Inc. Delaware Citigroup Capital I Delaware Citigroup Capital II Delaware Citigroup Capital III Delaware Citigroup Capital IV Delaware Citigroup Capital V Delaware Citigroup Capital VI Delaware Citigroup Capital VII Delaware Citigroup Holdings Company Delaware Citicorp Delaware Citibank (Florida), National Association USA Citibank Mortgage Corp. Florida Citibank Commercial Properties, Inc. Florida Income Service Group, Inc. Florida Land Service Group, Inc. Florida RRR Property Management, Inc. Florida Thirteen Property Management, Inc. Florida Citibank (Nevada), National Association U.S.A. Citibank (New York State) New York
(9) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citicorp Development Center, Inc. Delaware Diners Club International Ltd. New York Student Loan Corporation, The Delaware Citibank (South Dakota), N.A. U.S.A. CDC Holdings Inc. Delaware Citicorp Diners Club Inc. Delaware Citicorp Trust South Dakota South Dakota CitiHousing, Inc. South Dakota Citibank Delaware Delaware Citibank Insurance Agency, Inc. New York Citicorp Delaware Equity, Inc. Delaware Fairfax Holdings, Inc. Delaware Citicorp Del-Lease, Inc. Delaware Citicorp Aircraft Management, Inc. Delaware Citicorp Bankers Leasing Corporation Delaware Bankers Leasing Corporation Massachusetts BLC Corporation Utha Citicorp Bankers Leasing Finance Corporation Delaware Commetro Leasing, Inc. Delaware Commonwealth Control, Inc. Delaware Commonwealth Plan, Inc., The Massachusetts Commonwealth System, Inc., The Massachusetts Financial Leasing Corporation Massachusetts Pacific Plan, Inc., The Massachusetts Worcester Plan, Inc., The Massachusetts CBL Capital Corporation Delaware
(10) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citicorp Delaware Properties, Inc. Delaware Citicorp Nevada Credit, Inc. Nevada Citicorp Nevada Leasing, Inc. California G.W.L. Leasing Company, Incorporated California GXW Corporation California Palm Defeasance Company Delaware Citicorp Insurance Agency, Inc. Delaware Citicorp Insurance Agency, Inc. Missouri Citicorp Insurance Agency, Inc. California Citicorp Life Insurance Company * Arizona Citicorp Assurance Co. Delaware First Citicorp Life Insurance Company New York Citicorp Railmark, Inc. Delaware Citicorp U.S. Holdings Netherlands, Inc. Delaware Citicorp Holdings Netherlands B.V. Netherlands Citibank, N.A. U.S.A. 399 Venture Partners, Inc. Delaware Banco de Honduras S.A. Honduras Camwil Lease, Inc. Delaware Citicorp Investor Lease, Inc. Delaware Citicorp Multilease (SEF), Inc. Delaware Citi (Nominees) Limited Hong Kong Citi Center Building Corporation Philippines Citi Tower Building Corporation Philippines CitiAch, Inc. * Delaware Citibank (Channel Islands) Limited Channel Islands
(11) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION CCIL (Nominees) Limited Channel Islands CCIL Pension Scheme Trustees Limited Channel Islands Citibank (Zaire) S.A.R.L. Congo Citibank Consumers Nominee Pte. Ltd. Singapore Citibank International USA Citibank-Maghreb Morocco Citibank Mortgage Reinsurance, Inc. Vermont Citibank Chile Corredores de Seguros S.A. * Chile Citibank Nominees (Ireland) Limited Ireland Citibank Nominees Singapore Pte. Ltd. Singapore Citibank Overseas Investment Corporation USA Asia Pacific Technology Services Pte. Limited Singapore Banco Citibank S.A. Brazil Citibank-Corretora de Cambio, Titulos e Valores Mobiliarios Brazil S.A. Citibank-Distribuidora de Titulos e Valores Mobiliarios S.A. Brazil Citibank Companhia Hipotecaria S.A. Brazil Banco de Desarrollo Citicorp, S.A. Dominican Republic Citinversiones de Titulos y Valores (Puesto de Bolsa) S.A. Dominican Republic Berlin Real Estate B.V. Netherlands CCSCI, Inc. Puerto Rico Centaur Investment Corporation Delaware Citi Chrematodotikes Misthosis S.A. Greece Citi Inversiones, S.A. de C.V. El Salvador Citi Valores de El Salvador S.A. de C.V. El Salvador Citi Mutual Funds Management Company S.A. Greece Citi-Info, S.A. de C.V. Mexico
(12) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citi-Inmobiliaria e Inversiones, S.A. de C.V. Honduras Citibank (Poland) S.A. Poland Citibrokerage S.A. Poland Citileasing Sp. z o.o. Poland Citibank (Slovakia) a.s. Slovakia Citibank a.s. Czech Republic Citicorp Securities (CR), s.r.o. Czech Republic Citibank Belgium S.A./N.V. Belgium Citibank Berhad Malaysia Citicorp Nominee (Malaysia) Sendirian Berhad Malaysia Citicorp Nominees (Asing) Sdn. Bhd. Malaysia Citicorp Nominees (Tempatan) Sdn. Bhd. Malaysia Citibank Canada Canada 1084851 Ontario Inc. Canada 1169513 Ontario Inc. Canada 2490827 Nova Scotia Limited Canada 3121615 Canada Inc. Canada Palace Place Limited Partnership Canada 3278662 Canada Inc. Canada 598299 Alberta Limited Canada Avenida Place Shopping Centre Ltd. Canada Bershaw & Company Canada Chudleigh Funding Inc. Canada Citibank Canada Investment Funds Limited Canada Citibank Nominees Ltd. Canada Citicorp Capital Investors Ltd. Canada
(13) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION CitiFinancial Canada, Inc. Canada Citibank Capital Corporation Cayman Is. Citibank Colombia * Colombia Cititrust Colombia S.A. Sociedad Fiduciaria * Colombia Citibank-Colombia (Nassau) Limited Bahamas Leasing Citibank S.A. Compania de Financiamiento Comercial * Colombia Citibank Espana S.A. Spain Cantabra de Aviacion, Sociedad Limitada Spain Citi Operaciones A.I.E. * Spain Citi Recovery, A.I.E. * Spain Citibank Broker Correduria de Seguros S.A. Spain Citiconsulting A.I.E. * Spain Citigestion, Sociedad Gestora de Instituciones de Inversion Spain Colectiva, S.A. Citihouse, S.A. Spain CITIPENSIONES, ENTIDAD GESTORA DE FONDOS DE PENSIONES, S.A. Spain Citibank Finance Limited Singapore Citibank Housing Finance Company Limited Pakistan Citibank Investment and Securities Rt. Hungary Citibank Investment Services Ireland Ltd. Ireland Citi Institutional Liquidity Fund plc Ireland Citibank Investment Services Limited Hong Kong Citibank Investments Limited England Channel Collections Limited England CIB Properties Limited England Citi Pensions & Trustees Limited England Citibank International plc England
(14) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citi-Immobilier S.A. France Citibank, S.A. France Citi Chanzy S.A. France Citi Churchill S.A. France Leadair Assurances France Leadair Selection France Vidacos Nominees Limited England Citibank London Nominees Limited England Citibank Pensions Trustees Ireland Ltd. Ireland Citicorp Capital Limited England Citicorp Trustee Company Limited England Norwich Property Trust Limited England Citicorporate Limited England Citidealings Limited England CitiFriends Nominee Limited England CITILOANS PLC England Citinet Limited England Citivic Nominees Limited England CUIM NOMINEE LIMITED England N.C.B. Trust Limited England National City Nominees Limited England New York London Finance Co. Limited England SNC CITI GESTION * France SNC CITI MANAGEMENT * France Citibank Malaysia (L) Limited Malaysia CITIBANK MERCADO DE CAPITALES, CITIMERCA C.A. Venezuela
(15) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citibank Nigeria Nigeria Citibank Romania S.A. Romania Citibank Rt. Hungary European Commercial Bank Ltd. * Hungary EKB Kereskedelmi es Szolgaltato Kft. Hungary Citibank Securities Investment Trust Company Limited Taiwan Citibank Shipping Bank S.A. Greece Citibank T/O Russia Citibank Tanzania Limited Tanzania Citibank Trustees (Ireland), Limited Ireland Citibank Uganda Limited Uganda CitiCapital Limited Thailand Citicard S.A. Argentina CITICO, SGPS, Lda. * Portugal Citibank Portugal, S.A. Portugal Citicorp (B) Sdn. Bhd. Brunei Citicorp Administradora de Inversiones S.A. Argentina Citicorp Asesora de Seguros S.A. Argentina Citicorp Capital Asia (Taiwan) Ltd. Taiwan Citicorp Capital Asia Limited Bahamas Citicorp China Investment Management (BVI) Limited British Virgin Is. Citicorp China Investment Management Limited Hong Kong CVC Asia Pacific Limited Hong Kong Citicorp Capital Markets Sociedad Anonima Argentina Citicorp Valores S.A. Sociedad de Bolsa * Argentina Citicorp Capital Markets Uruguay S.A. Uruguay
(16) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citicorp Capital Philippines, Inc. * Philippines Citicorp Capital Sdn. Bhd. Malaysia Citicorp Chile S.A. Chile Citicorp Chile Administradora de Fondos de Inversion S.A. Chile Citicorp Chile Administradora de Fondos Mutuos S.A. Chile Citicorp Chile S.A. Corredores de Bolsa Chile Citicorp Chile Servicios y Asesorias Limitada Chile Empresa de Cobranzas y Verificaciones Afines S.A. Chile Finauto S.A. Chile Inversiones y Financiamientos Comerciales S.A. Chile Sociedad Comercial Citibank Leasing S.A. Chile Citicorp Commercial Finance (H.K.) Ltd. Hong Kong Citicorp Credit Guam Citicorp Deutschland Aktiengesellschaft Germany CCD Immobilien Beteiligungs GmbH Germany CCD Immobilien Beteiligungs GmbH & Co. Frankfurt Buero KG * Germany CCD Immobilien Beteiligungs GmbH & Co. Frankfurt Hotel KG * Germany Citibank Beteiligungen Aktiengesellschaft Germany Citi Services GmbH Germany Citibank Aktiengesellschaft * Germany Citibank Privatkunden AG Germany Citicorp Card Operations GmbH Germany Citicorp Dienstleistungs GmbH Germany Citicorp Kartenservice GmbH Germany Citicorp Leasing (Deutschland) GmbH Germany Achtundzwanzigste Gamma Trans Leasing Verwaltungs GmbH Germany & Co. Finanzierungs-Management KG *
(17) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Achtzehnte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG * Beta Trans Leasing Verwaltungs GmbH Germany Dreissigste Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG * Dreiundzwanzigste Gamma Trans Leasing Verwaltungs GmbH & Germany Co. Finanzierungs-Management KG * Dritte Beta Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG * Einunddreissigste Gamma Trans Leasing Verwaltungs GmbH & Germany Co. Finanzierungs-Management KG * Einundzwanzigste Gamma Trans Leasing Verwaltungs GmbH & Germany Co. Finanzierungs-Management KG * Fuenfte Beta Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG * Fuenfundzwanzigste Gamma Trans Leasing Verwaltungs GmbH & Germany Co. Finanzierungs-Management KG * Gamma Trans Leasing Verwaltungs GmbH Germany Dreizehnte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG Elfte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG Fuenfzehnte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG Gamma Trans Leasing Verwaltungs GmbH & Co. Achte Germany Finanzierungs-Management KG Gamma Trans Leasing Verwaltungs GmbH & Co. Dritte Germany Finanzierungs-Management KG Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG Gamma Trans Leasing Verwaltungs GmbH & Co. Fuenfte Germany Finanzierungs-Management KG Gamma Trans Leasing Verwaltungs GmbH & Co. Neunte Germany Finanzierungs-Management KG Gamma Trans Leasing Verwaltungs GmbH & Co. Sechste Germany Finanzierungs-Management KG Gamma Trans Leasing Verwaltungs GmbH & Co. Siebte Germany Finanzierungs-Management KG Gamma Trans Leasing Verwaltungs GmbH & Co. Vierte Germany Finanzierungs-Management KG Gamma Trans Leasing Verwaltungs GmbH & Co. Zweite Germany Finanzierungs-Management KG Sechzehnte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG Siebzehnte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG Vierzehnte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG Zehnte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG
(18) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Zwoelfte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG Neunundzwanzigste Gamma Trans Leasing Verwaltungs GmbH & Germany Co. Finanzierungs-Management KG * Neunzehnte Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG * Sechsundzwanzigste Gamma Trans Leasing Verwaltungs GmbH & Germany Co. Finanzierungs-Management KG * Siebenundzwanzigste Gamma Trans Leasing Verwaltungs GmbH & Germany Co. Finanzierungs-Management KG * Vierte Beta Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG * Vierundzwanzigste Gamma Trans Leasing Verwaltungs GmbH & Germany Co. Finanzierungs-Management KG * Zwanzigste Gamma Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG * Zweite Beta Trans Leasing Verwaltungs GmbH & Co. Germany Finanzierungs-Management KG * Zweiundzwanzigste Gamma Trans Leasing Verwaltungs GmbH & Germany Co. Finanzierungs-Management KG * Citicorp Operations Consulting GmbH Germany Citifinanzberatung GmbH Germany Citicorp Diners Club Switzerland Ltd. Switzerland Citicorp European Service Center B.V. Netherlands Citicorp Finance (India) Limited India Citicorp Maruti Finance Ltd. India Citicorp Finance & Securities (Thailand) Ltd. Thailand Citicorp Finance International Ltd. Bermuda Citicorp Finance Ireland Limited Ireland Citicorp (Dublin) Finance Ireland Citicorp Financial Services Corporation Puerto Rico Citicorp Financial Services Limited Hong Kong Citicorp Finanziaria S.p.A. Italy Citicorp FSC I Ltd. Bermuda Citicorp General Insurance Agency Corporation Taiwan Citicorp Gulf Finance Ltd. United Arab Emirates
(19) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citicorp Insurance Agency Co., Ltd. Taiwan Citicorp International Limited Hong Kong Citicorp International Securities Finance Ltd England Citicorp International Securities Ltd England Citicorp Inversora S.A. Gerente de Fondos Comunes de Inversion Argentina Citicorp Investicni Spolecnost, a.s. Czech Republic Citicorp Investment Bank (Singapore) Limited Singapore Citicorp Investment Services Limited Hong Kong Citicorp Leasing (Thailand) Limited Thailand Citicorp Leasing Argentina S.A. Argentina Citicorp Leasing International, Inc. Delaware Citicorp Card Services, Inc. Delaware Citicorp Credit, Inc. Japan Citilease Company Ltd. Japan Aarhus Aircraft Ltd. Japan Alpha Aircraft Ltd. Japan AMS Aircraft Ltd. Japan Andromeda Citiaircraft Ltd. Japan Arboga Aircraft Ltd. Japan Arizona Aircraft Ltd. Japan Arlanda Aircraft Ltd. Japan Ascot Aircraft Ltd. Japan Atlanta Aircraft Ltd. Japan BALTIC AIRCRAFT LTD. Japan Beta Aircraft Ltd. Japan Birmingham Aircraft Ltd. Japan
(20) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Bishop Aircraft Ltd. Japan Boston Aircraft Ltd. Japan Bristol Aircraft Ltd. Japan Bromma Aircraft Ltd. Japan Bunga Emas Ltd. Japan California Aircraft Ltd. Japan Cambridge Aircraft Ltd. Japan Castle Aircraft Ltd. Japan Charlie Aircraft Ltd. Japan Chicago Aircraft Ltd. Japan Colorado Aircraft Ltd. Japan Condor Aircraft Ltd. Japan Coventry Aircraft Ltd. Japan Crane Aircraft Ltd. Japan Crown Aircraft Ltd. Japan Crux Leasing Co. Ltd. Japan CSA ROBIN AIRCRAFT LTD. Japan CSA SWAN AIRCRAFT LTD. Japan Curie Aircraft Ltd. Japan Daini Citiaircraft Ltd. Japan Dallas Aircraft Ltd. Japan Delta Aircraft Ltd. Japan Denver Aircraft Ltd. Japan Detroit Aircraft Ltd. Japan Donau Aircraft Ltd. Japan Durham Aircraft Ltd. Japan
(21) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Eagle Aircraft Ltd. Japan Echo Aircraft Ltd. Japan Eiffel Aircraft Ltd. Japan Elbe Aircraft Ltd. Japan Elysee Aircraft Ltd. Japan EMS Aircraft Ltd. Japan ENNS Lease Co., Ltd. Japan Epsilon Aircraft Ltd. Japan Erie Aircraft Ltd. Japan Europe Aircraft Ltd. Japan Fairfield Aircraft Ltd. Japan Florida Aircraft Ltd. Japan Fornebu Aircraft Ltd. Japan Foxtrot Aircraft Ltd. Japan Gamma Aircraft Ltd. Japan Goteborg Aircraft Ltd. Japan Hague Aircraft Ltd. Japan Havel Aircraft Ltd. Japan Honolulu Aircraft Ltd. Japan Houston Aircraft Ltd. Japan Huron Aircraft Ltd. Japan Huskvarna Aircraft Ltd. Japan Illinois Aircraft Ltd. Japan Indiana Aircraft Ltd. Japan Isar Aircraft Ltd. Japan Ithaca Aircraft Ltd. Japan
(22) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Jota Aircraft Ltd. Japan Jupiter Aircraft Ltd. Japan King Aircraft Ltd. Japan Knight Aircraft Ltd. Japan LA Aircraft Ltd. Japan Lahn Aircraft Ltd. Japan Lambda Aircraft Ltd. Japan LEONE LEASE LTD. Japan Linden Citiaircraft Ltd. Japan Liverpool Aircraft Ltd. Japan Loire Aircraft Ltd. Japan London Aircraft Ltd. Japan Louvre Aircraft Ltd. Japan Madrid Aircraft Ltd. Japan Main Aircraft Ltd. Japan Manchester Aircraft Ltd. Japan Maple Aircraft Ltd. Japan Marseilles Aircraft Ltd. Japan Mette Aircraft Ltd. Japan Miami Aircraft Ltd. Japan Michigan Aircraft Ltd. Japan Milwaukee Aircraft Ltd. Japan Minnesota Aircraft Ltd. Japan Molen Aircraft Ltd. Japan Mosel Aircraft Ltd. Japan Nashville Aircraft Ltd. Japan
(23) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Neckar Aircraft Ltd. Japan NS Cititrain Ltd. Japan Oder Aircraft Ltd. Japan Ohio Aircraft Ltd. Japan Oregon Aircraft Ltd. Japan Ottawa Aircraft Ltd. Japan Oxford Aircraft Ltd. Japan Paris Aircraft Ltd. Japan Pegasus Leasing Co. Ltd. Japan Phoenix Aircraft Ltd. Japan Quebec Aircraft Ltd. Japan Queen Aircraft Ltd. Japan Rhein Aircraft Ltd. Japan Rotter Aircraft Ltd. Japan Saale Aircraft Ltd. Japan Sakura FA Citiaircraft Ltd. Japan Seagull Aircraft Ltd. Japan Seattle Aircraft Ltd. Japan Seine Aircraft Ltd. Japan Sigma Aircraft Ltd. Japan St. Louis Aircraft Ltd. Japan Stamford Aircraft Ltd. Japan Stockholm Aircraft Ltd. Japan Tachibana FA Citiaircraft Ltd. Japan Tampa Aircraft Ltd. Japan Theta Aircraft Ltd. Japan
(24) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Tokyo FA Citiaircraft Ltd. Japan Toronto Aircraft Ltd. Japan Uppsala Aircraft Ltd. Japan Utrecht Aircraft Ltd. Japan Vancouver Aircraft Ltd. Japan VENUS AIRCRAFT LTD. Japan Versailles Aircraft Ltd. Japan Washington Aircraft Ltd. Japan Windsor Aircraft Ltd. Japan Zwolle Aircraft Ltd. Japan Citicorp Menkul Kiymetler Anonim Sirketi Turkey Citicorp Merchant Bank Limited Trinidad & Tobago Citibank (Trinidad & Tobago) Limited Trinidad & Tobago Citicorp Overseas Software Limited * India Citicorp Brokerage (India) Limited India Citicorp P.R. Mortgage, Inc. Puerto Rico Citicorp Pension Management Ltd. Bahamas CITICORP SECURITIES BOLIVIA S.A. Bolivia Citicorp Securities International (RP) Inc. Philippines Citicorp Financial Services and Insurance Brokerage Philippines Philippines, Inc. Veritas Holdings Limited British Virgin Islands Citicorp Services Limited New Zealand Advanced Futures Limited New Zealand Citibank Global Asset Management Limited New Zealand Citibank Nominees (New Zealand) Limited New Zealand Citicorp Capital Markets New Zealand Limited New Zealand
(25) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citicorp New Zealand Limited New Zealand Future Technology Limited New Zealand Optional Development Holdings Limited New Zealand Seabird Limited New Zealand Citicorp Servium S.A. Peru Citicorp Peru S.A. Sociedad Agente de Bolsa * Peru Citicorp Peru Sociedad Titulizadora S.A. Peru Citileasing S.A. * Peru Citicorp Subsahara Investments, Inc. Delaware Citicorp Trade Services (Malaysia) Sendirian Berhad Malaysia Citicorp Trustee (Singapore) Limited Singapore Citicorp Ventures Philippines, Inc. Philippines Citicredito S.A. Honduras Citidatos S.A. Ecuador Citifinance Limited Jamaica Citimerchant Bank Limited Jamaica Citinversiones, S.A. Guatemala Citinvest S.p.A. Italy Citilease, S.A. Belgium Citilease Finansal Kiralama Anonim Sirketi Turkey CitiLeasing (Hungary) Ltd. Hungary Citileasing s.r.o. Czech Republic Citinvest Casa de Bolsa Sociedad Anonima Paraguay Citinvestment Chile Limited Bahamas Citiportfolio Limited Channel Islands CitiProperties (BVI) Limited British Virgin Is.
(26) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION CitiRealty (BVI) Limited British Virgin Is. CitiRealty (Hong Kong) Limited Hong Kong CitiRealty China (BVI) Limited Tortola, Britisn Virgn Is. Garden Road (BVI) Limited British Virgin Is. CitiProperties (Hong Kong) Limited Hong Kong CitiService S.p.A. Italy Cititarjetas de Guatemala, S.A. Guatemala Cititrust (Bahamas) Limited Bahamas Albacore Investments, Ltd. Bahamas Antares Associates Limited Bahamas Astaire Associates Limited Bahamas Beaconsfield Holdings Limited Bahamas Cititrust Services Limited Bahamas Donat Investments S.A. Bahamas First National Nominees, Ltd. Bahamas Hitchcock Investments S.A. Bahamas Madeleine Investments S.A. Bahamas Providence Associates, Ltd. Bahamas Cititrust (Cayman) Limited Cayman Is. Brennan Limited Switzerland Buchanan Limited Switzerland Tyler Limited Switzerland Cititrust (Jersey) Limited Channel Islands Secundus Nominees (Jersey) Limited Channel Islands Tertius Nominees (Jersey) Limited Channel Islands Cititrust (Kenya) Limited Kenya
(27) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Cititrust (Switzerland) Limited Switzerland Cititrust and Banking Corporation Japan Citivalores de Honduras, S.A. Honduras Citivalores, S.A. Guatemala Citivalores, S.A. Panama CJSC Citibank Kazakhstan Kazakhstan CORPIFEXSA, Corporacion de Inversiones y Fomento de Exportaciones Ecuador S.A. Cititrading S.A. Casa de Valores Ecuador Inmociti S.A. Ecuador Corporacion Citibank G.F.C. S.A. Costa Rica Asesores Corporativos de Costa Rica, S.A. Costa Rica Citibank (Costa Rica) Sociedad Anonima Costa Rica Citiseguros de Costa Rica, S.A. Costa Rica Cititarjetas, S.A. Costa Rica Citivalores Puesto de Bolsa, S.A. Costa Rica Creinvest B.V. Netherlands Decajo Finance ApS Denmark Diners Club (Thailand) Limited, The Thailand Diners Club Argentina S.A.C. y de T. Argentina Diners Travel S.A.C. y de T. Argentina Servicios Comerciales S.A.C.I.M. y F. Argentina Diners Club Benelux S.A., The Belgium Diners Club de Mexico S.A. de C.V. Mexico Diners Club Deutschland GmbH Germany Diners Club International (Hong Kong) Limited Hong Kong Diners Club International (Taiwan) Limited Taiwan
(28) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Diners Club of Greece, S.A. Greece Diners Club Uruguay S.A. Uruguay Fimen S.A. Belgium Citicorp Insurance Services S.A./N.V. Belgium Citibank Insurance Services S.A. Greece FNC-Comercio e Participacoes Ltda. Brazil Chelsea-Empreendimentos e Participacoes Limitada Brazil Citi CP Mercantil S.A. Brazil Citibank Leasing S.A.-Arrendamento Mercantil Brazil Citicorp Corretora de Seguros S.A. Brazil Mibrak S.A. Uruguay FOFIP S.A. Uruguay Foremost Investment Corporation Delaware FREPERP 1 LLC Delaware FREPERP 2 LLC Delaware Grupo Financiero Citibank, S.A. de C.V. Mexico Arrendadora Citibank, S.A. de C.V., Organizacion Auxiliar del Mexico Credito, Grupo Financiero Citibank Casa de Bolsa Citibank, S.A. de C.V., Grupo Financiero Citibank Mexico Citibank Mexico, S.A., Grupo Financiero Citibank Mexico Desarrolladora Mexicana de Inmuebles, S.A. de C.V. Mexico Hacienda El Campanario, S.A. de C.V. Mexico Imref S.A. de C.V. Mexico Inmobiliaria Confia, S.A. de C.V. Mexico Trust Number F193-4 Mexico Hanseatic Real Estate B.V. * Netherlands Inarco International Bank N.V. Aruba
(29) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Interco (Intermediaciones Comerciales) S.A. Bolivia International Finance Associates, B.V. Netherlands Citicorp Investment Bank (The Netherlands) N.V. Netherlands Citicorp Leasing Nederland, B.V. Netherlands Inversiones Citicorp (R.D.), S.A. Dominican Republic Inversiones y Adelantos, C.A. Venezuela JSCB Citibank (Ukraine) Ukraine Latin American Investment Bank Bahamas Limited Bahamas Brazil Bond Trust New York Citibrazil Bond Fund-Fundo de Renda Fixa Capital Brazil Estrangeiro Citibank Brazilian Annex VI Trust New York Foreign Investment Fundo Renda Fixa Capital Estrangeiro Brazil Matrix Ltd. Bermuda Menara Citi Holding Company Sdn. Bhd. Malaysia Nessus Investment Corporation Delaware Citibank Limited Australia Outsourcing Investments Pty. Limited Australia Citicorp Capital Markets Australia Limited Australia Citifutures Limited Australia Citisecurities Limited Australia Citicorp Equity Capital Limited Australia Citicorp Group Superannuation Limited Australia Citicorp Investments Limited * Australia Citicorp Limited Australia Citicorp General Insurance Limited Australia Citicorp Life Insurance Limited Australia
(30) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Margaret Street Nominees Pty. Limited Australia Citicorp Nominees Pty. Limited Australia Citicorp Regional Service Centre Pty. Ltd. Australia Phinda Pty. Limited Australia Remittance Collection Services Limited Australia Tarwood Pty. Limited Australia Diners Club Pty. Ltd. * Australia Nostro Investment Corporation Delaware P.T. Citicorp Finance Indonesia Indonesia P.T. Citicorp Securities Indonesia Indonesia Pavec Developments Limited Ireland Premium Finance No. 3 C.V. Netherlands Provencred 1 Cayman Islands Provencred 2 Cayman Islands Silefed S.R.L. Argentina Repfin Ltda. Colombia Citivalores S.A. Comisionista de Bolsa * Colombia Compania Exportadora Cityexport S.A. * Colombia Salomon Smith Barney Securities (Taiwan) Limited Taiwan Scottish Provident (Irish Holdings) Limited Ireland Tarjetas de Chile S.A. Chile Universal Holdcorp, Inc. Delaware Vialattea LLC Delaware Buconero LLC Delaware Yonder Investment Corporation Delaware Citibank Premium Finance No. 1, Ltd. Channel Islands
(31) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citibank Premium Finance No. 2, Ltd. Channel Islands Citibank Strategic Technology Inc. Delaware Citibank Zambia Limited Zambia Citibureau Zambia Limited Zambia CitiCal, Inc. California One Sansome Street Associates California Sansome Land Associates California Citicorp Capital Investors, Limited Delaware Citicorp Mezzanine Partners III, L.P. Delaware CVC Capital Funding, Inc. Delaware CVC Capital Funding, LLC Delaware World Subordinated Debt Partners, L.P. Delaware Citicorp Electronic Commerce, Inc. New York Citicorp Finance Puerto Rico, Inc. Puerto Rico Citicorp Financial Guaranty Holdings, Inc. Delaware Citicorp Insurance Services, Inc. Delaware Citicorp Interim Services, Inc. Delaware ADV Eleven, Inc. Delaware AZ Notes Corp. Arizona Monaco Art Corp. New York MBBT Corp. Florida Mr Ables Inc. New York Citicorp Investment Services Delaware Citicorp Leasing, Inc. Delaware ADV Three, Inc. Delaware CM FSC II Limited Bermuda
(32) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION CM FSC III Limited Bermuda CM FSC IV, Ltd. Bermuda CPI Leasing Corp. Connecticut Citicorp Mortgage, Inc. Delaware Citicorp Credit Services, Inc. (Maryland) Delaware Citicorp Mortgage Securities, Inc. Delaware EKS Corp. Delaware Source One Mortgage Corporation Delaware Central Pacific Mortgage Company California CMC Insurance Agency, Inc. Michigan SOMSC Services, Inc. Michigan Citicorp Payment Services, Inc. Delaware Citicorp Real Estate, Inc. Delaware Citicorp Trust, N.A. (Florida) USA Citicorp Trust, National Association USA Citicorp USA, Inc. Delaware Citicorp Venture Capital Ltd. New York Haydon Corporation New Jersey International Media Group California Citiflight, Inc. Delaware CitiMae, Inc. Delaware Citipartners Services Group A.I.E. * Spain Groupement d'Interet Economique "Paris Citicorp Center" * France International Equity Investments, Inc. Delaware Corporacion Inversora de Capitales S.R.L. Argentina Celulosa Argentina S.A. Argentina
(33) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Cartulinas Argentinas S.A. Argentina Tissucel S.A. Argentina Usina Bernal S.A. Argentina 525 Participacoes S.A. Brazil Sweet River Fund Cayman Is. Belapart S.A. Brazil Opportunity Prime Fundo Mutuo de Investimento em Brazil Acoes-Carteira Livre * Eletron S.A. Brazil Valetron S.A.. Brazil Matin Realty, Inc. New York Perennially Green, Inc. New York R de VR Investments (Pty) Ltd. South Africa Universal Card Services Corp. Delaware Universal Bancorp Services, Inc. Delaware Universal Bank, N.A. Delaware Citicorp Banking Corporation Delaware Citi Islamic Investment Bank Bahrain Citi Islamic Portfolios S.A. Luxembourg Citiacciones Flexible, S.A. de C.V., Sociedad de Inversion Comun * Mexico Citiacciones Patrimonial, S.A. de C.V., Sociedad de Inversion Comun * Mexico Citibank (Luxembourg) S.A. Luxembourg Citibank (Switzerland) Switzerland Citibank, Federal Savings Bank USA Citibank Insurance Agency, Inc. Illinois Citibank Mortgage Services, Inc. Florida Citibank Service Corporation California
(34) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citicorp Financial Services Corporation (D.C.) District of Columbia Citicorp Insurance Agency, Inc. District of Columbia First Savings Corporation Illinois Holiday Harbor Management Corporation Florida West Suburban Investments, Inc. Illinois First Paddle Creek, Inc. Florida West Florida Investments, Inc. Florida West Suburban Investments, Inc. of California California West Suburban Investments, Inc. of Colorado Colorado Citicorp (Jersey) Limited Channel Islands Citicorp Administradora de Inversiones S.A. Uruguay Citicorp Capital Investors Europe Limited Delaware Citicorp Community Development, Inc. New York Mission Park Corporation Massachusetts Citicorp Data Systems Incorporated Delaware Citicorp Delaware Services, Inc. Delaware Citicorp Funding, Inc. Delaware Citicorp Global Holdings, Inc. Delaware Citicorp Global Technology, Inc. Delaware Citicorp Information Technology, Inc. Delaware Citicorp Insurance USA, Inc. Vermont Citicorp International Finance Corporation Delaware Brazil Holdings Inc. Limited Bahamas CHL Comercio e Participacoes Ltda. Brazil Citicorp Mercantil-Participacoes e Investimentos S.A. Brazil Citicorp International Insurance Company, Ltd. Bermuda
(35) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citicorp International Technology, Inc. Delaware Citicorp International Trading Company, Inc. Delaware Advanx S.A. Uruguay Citicom de Mexico, S.A. de C.V. Mexico Citicorp International Trade Indemnity, Inc. New Jersey Citicorp Marine Management, Inc. New Jersey Citicorp International Trading Company (Bahamas) Ltd. Bahamas Citicorp International Trading Company Argentina S.A. Argentina Citicorp Trading S.A. Brazil Comercializadora Citicorp, S.A. Dominican Republic Esmeril Trading Lda Portugal Marchante Trading Lda Portugal Richemont Servicos Lda Portugal Trevano Servicos e Gestao Lda Portugal Turbante Comercio Internacional Lda Portugal Vilacete Investimentos e Gestao Lda Portugal Citicorp Investment Management (Luxembourg) S.A. Luxembourg Citicorp Investment Partners, Inc. Delaware Citicorp Securities Asia Pacific Limited Hong Kong Citibank Global Asset Management (Asia) Limited Hong Kong Citicorp Securities Investment Consulting Inc. Taiwan Citicorp Strategic Technology Corporation Delaware Trade Credit Management Company Limited England Citicorp Trust Company (Maryland) Maryland Citicorp Washington, Inc. District of Columbia Citicurrencies S.A. Luxembourg
(36) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION CitiDel, Inc. Delaware CitiEmpresa, S.A. de C.V., Sociedad de Inversion en Instrumentos de Deuda Mexico para Personas Morales CitiFinancial Credit Company Delaware American Health and Life Insurance Company Texas Brookstone Insurance Company Vermont CC Credit Card Corporation Delaware CC Finance System Incorporated Delaware Chesapeake Appraisal and Settlement Services Inc. Maryland Chesapeake Appraisal and Settlement Services Agency of Ohio Inc. Ohio Chesapeake West Escrow Services Inc. California Citibank USA Delaware CitiFinancial Alabama, Inc. Alabama CitiFinancial Company Delaware CitiFinancial Consumer Services, Inc. Delaware CitiFinancial Corporation (CO) Colorado CitiFinancial Management Corporation Maryland CitiFinancial Mortgage Company Delaware CitiFinancial Mortgage Securities Inc. Delaware CitiFinancial of Virginia, Inc. Virginia CitiFinancial Services, Inc. (CA) California CitiFinancial Services, Inc. (DE) Delaware CitiFinancial Services, Inc. (GA) Georgia CitiFinancial Services, Inc. (MA) Massachusetts CitiFinancial Services, Inc. (MN) Minnesota CitiFinancial Services, Inc. (MO) Missouri CitiFinancial Services, Inc. (OH) Ohio
(37) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION CitiFinancial Services, Inc. (UT) Utah CitiFinancial Services, Inc. (VA) Virginia CitiFinancial, Inc. (HI) Hawaii CitiFinancial, Inc. (IA) Iowa CitiFinancial Corporation (DE) Delaware CitiFinancial of Mississippi, Inc. Delaware CitiFinancial, Inc. (KY) Kentucky CitiFinancial Services, Inc. (KY) Kentucky CitiFinancial, Inc. (MD) Maryland CitiFinancial Services, Inc. (OK) Oklahoma CitiFinancial, Inc. (NY) New York CitiFinancial, Inc. (OH) Ohio CitiFinancial, Inc. (SC) South Carolina CitiFinancial, Inc. (TN) Tennessee CitiFinancial, Inc. (WV) West Virginia CitiFinancial, Inc. NC North Carolina Commercial Credit Insurance Services, Inc. Maryland Commercial Credit Insurance Agency (P&C) of Mississippi, Inc. Mississippi Commercial Credit Insurance Agency of Alabama, Inc. Alabama Commercial Credit Insurance Agency of Hawaii, Inc. Hawaii Commercial Credit Insurance Agency of Kentucky, Inc. Kentucky Commercial Credit Insurance Agency of Massachusetts, Inc. Massachusetts Commercial Credit Insurance Agency of Nevada, Inc. Nevada Commercial Credit Insurance Agency of New Mexico, Inc. New Mexico Commercial Credit Insurance Agency of Ohio, Inc. Ohio Commercial Credit International, Inc. Delaware
(38) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Commercial Credit International Banking Corporation Oregon Park Tower Holdings, Inc. Delaware CC Retail Services, Inc. Delaware Travelers Home Mortgage Services of Alabama, Inc. Delaware Resource Deployment, Inc. Texas Travelers Bank & Trust, fsb Delaware Travelers Home Equity, Inc. North Carolina CC Consumer Services of Alabama, Inc. Alabama CC Home Lenders Financial, Inc. Georgia CC Home Lenders, Inc. Ohio CitiFinancial of West Virginia, Inc. West Virginia CitiFinancial Services, Inc. (PA) Pennsylvania CitiFinancial, Inc. (TX) Texas Travelers Home Mortgage Services, Inc. North Carolina Travelers Home Mortgage Services of Pennsylvania, Inc. Pennsylvania Triton Insurance Company Missouri World Service Life Insurance Company Colorado Citilandmark S.A. Luxembourg Citilife S.A./N.V. Belgium Citifund Balance Greece Citimarkets S.A. Luxembourg CitiMortgages, Inc. Delaware Citinvest S.A. Luxembourg Citiplazo, S.A. de C.V., Sociedad de Inversion en Instrumentos Mexico de Deuda * Citiportfolios S.A. Luxembourg Citirenta, S.A. de C.V., Sociedad de Inversion en Instrumentos de Mexico Deuda
(39) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citishare Corporation Delaware Cititrust S.p.A.-Istituto Fiduciario Italy Court Square Capital Limited Delaware CrossMar, Inc. Delaware Housing Securities, Inc. Delaware Inversiones Citiminera S.A. Chile Mortgage Capital Funding Inc. Delaware Plantbrass Limited England Universal Financial Corp. Utah Citicorp Capital I Delaware Citicorp Capital II Delaware Citicorp Capital III Delaware Citicorp Credit Services, Inc. Delaware Citicorp National Services, Inc. Delaware Citicorp North America, Inc. Delaware ADV One, Inc. Delaware Asset D Vehicle, Inc. Delaware Citicorp Churchill Lease, Inc. Delaware Citicorp Epic Finance, Inc. Delaware Citicorp FSC II Ltd. Bermuda Citicorp Global Lease, Inc. Delaware Citicorp MT Aquarius Ship, Inc. Delaware Citicorp MT Aries Ship, Inc. Delaware Citicorp Sierra Lease, Inc. Delaware Citicorp Translease, Inc. Delaware CGI Capital, Inc. Delaware
(40) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Citicorp Leasing (Alyeska), Inc. Delaware Citicorp Lescaman, Inc. New York Citicorp Petrolease, Inc. Delaware Citicorp Tulip Lease, Inc. Delaware CM Leasing Member 1995 Trust-A2 Delaware Citimarlease (Burmah I), Inc. Delaware Citimarlease (Burmah I), Inc. UTA (9/28/72) * Delaware Citimarlease (Burmah Liquegas), Inc. Delaware Citimarlease (Burmah Liquegas), Inc. UTA (9/28/72) * Delaware Citimarlease (Burmah LNG Carrier), Inc. Delaware Citimarlease (Burmah LNG Carrier), Inc. UTA (9/28/72) * Delaware Citimarlease (Fulton), Inc. Delaware Citimarlease (Whitney), Inc. Delaware CM Leasing Member 1995 Trust-A1 Delaware CM North America Holding Company * Canada CM Leasing Company * Canada CM Tulip Holding Company * Canada ESSL 1, Inc. Delaware ESSL 2, Inc. Delaware FCL Ship One, Inc. Delaware FCL Ship Three, Inc. Delaware FCL Ship Two, Inc. Delaware POP Trophy I Inc. New York POP Trophy Inc. New York S.P.L., Inc. Delaware Science Defeasance Corp. Delaware
(41) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION SOMANAD 1 LLC Delaware SOMANAD 2 LLC Delaware Citicorp Retail Services, Inc. Delaware Citicorp Services Inc. New York Citigroup Investments Inc. Delaware Greenwich Street Capital Partners, Inc. Delaware MRC Holdings, Inc. Delaware Citigroup Management Corp. Delaware Salomon Smith Barney Holdings Inc. New York 1345 Media Corp. Delaware Corporate Realty Advisors, Inc. Delaware Genesis Crude Oil, L.P. * Delaware Genesis Pipeline TX, L.P. * Texas Genesis Pipeline USA, L.P. * Texas Genesis Energy, L.L.C. Delaware Genesis Energy, L.P. Delaware IPO Holdings Inc. Delaware MLA 50 Corporation Delaware Nextco Inc. Delaware Phibro Energy Production, Inc. Delaware Anglo-Suisse (U.S.S.R.) L.P. * Delaware Phibro Energy Production G.P. Inc Delaware Phibro Inc. Delaware MC2 Technologies, Inc. Delaware Phibro Commodities England Phibro Energy Clearing, Inc. Delaware
(42) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Phibro GmbH Switzerland Phibro (Asia) Pte Ltd Singapore Scanports Limited England Turavent Oil AG Switzerland Phibro Holdings Limited England Phibro Futures and Metals Limited England Scanports Shipping, Inc. Delaware Phibro Power LLC Delaware Phibro Resources Corp. Delaware R-H Capital, Inc. Delaware R-H/Travelers, L.P. * Delaware R-H Capital Partners, L.P. Delaware Salomon Brothers Holding Company Inc. Delaware Citicorp Securities Services, Inc. Delaware Grove Street Film Corp Delaware Huwest Company Inc Delaware Loan Participation Holding Corporation Delaware Home Mortgage Access Corporation District of Columbia Home MAC Government Financial Corporation District of Columbia Home MAC Government Financial Corporation West District of Columbia Home MAC Mortgage Securities Corporation District of Columbia LT Investment I, LLC New York LT Investment II, LLC New York PB-SB Investments, Inc Delaware PB-SB 1983 I New York PB-SB 1983 III New York
(43) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION PB-SB Ventures, Inc Delaware PB-SB 1985 VII New York PB-SB 1988 III New York PB-SB 1988 VIII New York PT Salomon Smith Barney Nusa Securities Indonesia Salomon (International) Finance AG Switzerland Salomon Brothers Asia Limited Hong Kong Salomon Brothers Holdings GmbH * Switzerland Salomon Contractuals Limited Cayman Is. Salomon International Financial Products LLC Delaware Salomon Brothers Overseas Inc Cayman Is. Salomon Smith Barney Hong Kong Holdings Limited * Hong Kong Salomon Brothers Asset Management Asia Pacific Limited Hong Kong Salomon Smith Barney Hong Kong Futures, Limited Hong Kong Salomon Smith Barney Hong Kong Nominee Limited * Hong Kong Salomon Smith Barney Hong Kong Limited Hong Kong Salomon-Shanghai Industrial Greater China Fund * Cayman Islands Salomon Analytics Inc Delaware Salomon Brothers Asia Capital Corp Ireland Darkland International Limited Ireland Ilshin No. 4 Venture Investment Partnership Korea Solom International Limited Ireland Salomon Brothers Asset Management (Ireland) Ltd Ireland Salomon Brothers Asset Management Inc Delaware SBAM G.P. Inc. Delaware Salomon Brothers Asset Management Japan Ltd Japan
(44) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION SSB Citi Asset Management Co., Ltd. * Japan Salomon Brothers Capital Structure Arbitrage Fund I, L.P. * New York Salomon Brothers Finance AG Switzerland Salomon Brothers Housing Investment Inc Delaware Salomon Brothers International Operations (Japan) Inc Delaware Salomon Brothers International Operations (Jersey) Limited Channel Islands Salomon Brothers International Operations (Overseas) Limited Channel Islands Salomon Brothers International Operations Inc Delaware Salomon Brothers Mortgage Securities II, Inc Delaware Salomon Brothers Mortgage Securities III, Inc Delaware Salomon Brothers Mortgage Securities VI, Inc Delaware Salomon Brothers Mortgage Securities VII, Inc Delaware Salomon Brothers Pacific Holding Company Inc Delaware Salomon Brothers Properties Inc Delaware Salomon Brothers Investments Inc Delaware Salomon Brothers Real Estate Development Corp Delaware Crow Wood Terrace Associates Georgia Salomon Brothers Realty Corp New York Liquidation Properties Holding Company Inc. New York Liquidation Properties Inc. New York MacA Inn LLC Delaware Salomon Brothers Russia Holding Company Inc Delaware ZAO Salomon Brothers Russia Salomon Brothers Services Inc Delaware Salomon Brothers Taiwan Limited Taiwan Salomon Brothers Tosca Inc Delaware
(45) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Salomon Capital Access for Savings Institutions, Inc. Delaware Salomon Capital Access Corporation District of Columbia Salomon Forex Inc Delaware Salomon Brothers Finance Corporation Delaware Salomon International LLC Delaware Salomon Brothers Europe Limited * England Ion Trading Systems Limited England Salomon Brothers Eastern Europe Limited England Salomon Brothers International Limited * England Salomon Brothers Nominees Limited England Salomon Brothers UK Equity Limited England Salomon Brothers UK Limited * England Wavendown Limited England SSB Citi Asset Management Limited England Salomon Northpoint Corp Delaware Salomon Plaza Holdings Inc Delaware Plaza Holdings Inc. Delaware Salomon Brothers Finance Corporation and Co beschranthaftende KG * Germany Salomon Brothers AG Germany Salomon Brothers Kapitalanlage-Gesellschaft mbH Germany Salomon Reinvestment Company, Inc Delaware Salomon Smith Barney (Malaysia) Sdn Bhd Malaysia Salomon Smith Barney Asia Pacific Limited Delaware Salomon Smith Barney Australia Pty Ltd Australia Salomon Smith Barney Australia Broker Holdings Pty Limited Australia Salomon Smith Barney Australia Securities Pty Limited Australia
(46) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Bowyang Nominees Pty Limited Australia Calex Nominees Pty Limited Australia Dervat Nominees Pty Limited Australia Feta Nominees Pty Limited Australia Gymkhana Nominees Pty Limited Australia Salomon Smith Barney New Zealand Limited New Zealand Palliser Nominees Limited New Zealand Salomon Smith Barney Australia Capital Markets Pty Limited Australia Salomon Smith Barney Australia Corporate Finance Pty Limited Australia Salomon Smith Barney Australia Nominees No. 2 Pty Limited Australia Salomon Smith Barney Australia Nominees Pty Limited Australia Salomon Smith Barney Australia Superannuation Fund Pty Limited Australia Salomon Smith Barney Canada Holding Company * Canada Salomon Smith Barney Canada Inc. Canada Salomon Smith Barney China Limited Hong Kong Salomon Smith Barney Inc. New York Salomon Smith Barney KEB Securities Co., Ltd. South Korea Salomon Smith Barney/Travelers REF GP, LLC Delaware Salomon Smith Barney/Travelers Real Estate Fund, L.P. Delaware SBHU Life Agency, Inc. Delaware Robinson-Humphrey Insurance Services Inc. Georgia Robinson-Humphrey Insurance Services of Alabama, Inc. Alabama Salomon Smith Barney Life Agency Inc. New York SBHU Life Agency of Arizona, Inc. Arizona SBHU Life Agency of Indiana, Inc. Indiana SBHU Life Agency of Ohio, Inc. Ohio
(47) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION SBHU Life Agency of Oklahoma, Inc. Oklahoma SBHU Life Agency of Texas, Inc. Texas SBHU Life Agency of Utah, Inc. Utah SBHU Life Insurance Agency of Massachusetts, Inc. Massachusetts SBS Insurance Agency of Hawaii, Inc. Hawaii SBS Insurance Agency of Idaho, Inc. Idaho SBS Insurance Agency of Maine, Inc. Maine SBS Insurance Agency of Montana, Inc. Montana SBS Insurance Agency of Nevada, Inc. Nevada SBS Insurance Agency of Ohio, Inc. Ohio SBS Insurance Agency of South Dakota, Inc. South Dakoba SBS Insurance Agency of Wyoming, Inc. Wyoming SBS Insurance Brokerage Agency of Arkansas, Inc. Arkansas SBS Insurance Brokers of Kentucky, Inc. Kentucky SBS Insurance Brokers of New Hampshire, Inc. New Hampshire SBS Insurance Brokers of North Dakota, Inc. North Dakota SBS Life Insurance Agency of Puerto Rico, Inc. Puerto Rico SLB Insurance Agency of Maryland, Inc. Maryland Smith Barney International Incorporated Oregon Smith Barney Pacific Holdings, Inc. British Virgin Islands Smith Barney Puerto Rico Inc. Puerto Rico The Robinson-Humphrey Company, LLC Delaware Patrimonia Foreign Fund 1 Funda de Renta Fixa Capital Estrangeiro Brazil Salomon Smith Barney S.A. * France Salomon Smith Barney Singapore Holdings Pte. Ltd. Singapore
(48) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Salomon Smith Barney Singapore Futures Pte. Ltd. Singapore Salomon Smith Barney Singapore Pte. Ltd. Singapore Salomon Swapco Inc Delaware SB Funding Corp. Delaware SB Management Services Inc Delaware SB Motel Corp. Delaware SB Motel Mortgage Corp Delaware Seven World Holdings LLC Delaware Mosenergia Holdings Limited Cyprus LLC Beloye Ozero * Russia LLC Mudraya Sova * Russia Seven World Technologies, Inc Delaware SSB Irish Investor LLC Delaware SSB Vehicle Securities Inc. Delaware Structured Products Corp Delaware TCEP Participation Corp. New York TCP Corp. Delaware Salomon Brothers Services GmbH Germany SB Cayman Holdings I Inc. Delaware Smith Barney Private Trust Company (Cayman) Limited * Cayman Is. Greenwich (Cayman) I Limited Cayman Is. Greenwich (Cayman) II Limited Cayman Is. Greenwich (Cayman) III Limited Cayman Is. SB Cayman Holdings II Inc. Delaware SB Cayman Holdings III Inc. Delaware Smith Barney Credit Services (Cayman) Ltd. * Cayman Is. SB Cayman Holdings IV Inc. Delaware
(49) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION SI Financing Trust I New York Smith Barney (Ireland) Limited Ireland Smith Barney Capital Services Inc. Delaware Smith Barney Commercial Corp. Delaware Smith Barney Europe Holdings, Ltd. England Smith Barney Futures Management LLC Delaware F-1000 Futures Fund L.P., Michigan Series I New York F-1000 Futures Fund L.P., Michigan Series II New York F-1000 Futures Fund L.P., Series IX New York Hutton Investors Futures Fund, L.P. II Delaware Salomon Smith Barney Global Diversified Futures Fund L.P. New York SB/Michigan Futures Fund L.P. New York Shearson Mid-West Futures Fund New York Shearson Select Advisors Futures Fund L.P. Delaware Smith Barney AAA Energy Fund L.P. New York Smith Barney Diversified Futures Fund L.P. New York Smith Barney Diversified Futures Fund L.P. II New York Smith Barney Global Markets Futures Fund L.P. New York Smith Barney Great Lakes Futures Fund L.P. New York Smith Barney International Advisors Currency Fund L.P. New York Smith Barney Mid-West Futures Fund LP II New York Smith Barney Potomac Futures Fund L.P. New York Smith Barney Principal Plus Futures Fund L.P. II New York Smith Barney Principal Plus Futures Fund LP New York Smith Barney Telesis Futures Fund L.P. New York Smith Barney Tidewater Futures Fund L.P. New York
(50) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Smith Barney Westport Futures Fund L.P. New York Smith Barney Global Capital Management, Inc. Delaware Smith Barney Mortgage Capital Group, Inc. Delaware Smith Barney Offshore, Inc. Delaware Smith Barney Private Trust GmbH Switzerland Smith Barney Risk Investors, Inc. Delaware Smith Barney Consulting Partnership, LP Delaware Smith Barney Investors L.P. Delaware Smith Barney Securities Investment Consulting Co. Ltd. Taiwan Smith Barney Venture Corp. Delaware First Century Management Company New York SSB Citi Fund Management LLC Delaware SSB Greenwich Street Partners LLC Delaware Salomon Smith Barney/Greenwich Street Capital Partners II, L.P. Delaware SSB Private Management LLC Delaware Salomon Smith Barney Hicks Muse Partners L. P. Delaware Salomon Smith Barney Asset Management Australia Ltd. Australia Smith Barney Management Company (Ireland) Limited Ireland Smith Barney Strategy Advisers Inc. Delaware SSB Keeper Holdings LLC Delaware SSBH Capital I Delaware SSBH Capital II Delaware SSBH Capital III Delaware SSBH Capital IV Delaware Targets Trust I Delaware Targets Trust II Delaware
(51) 1 2 3 4 5 6 7 8 9 10 11 12 13 CITIGROUP INC. as of 31-Dec-1999
1 2 3 4 5 6 7 8 9 10 11 12 13 PLACE OF JURISDICTION Targets Trust III Delaware The Travelers Investment Management Company Connecticut Smith Barney Corporate Trust Company Delaware Smith Barney Private Trust Bank of Michigan Michigan Smith Barney Private Trust Company New York Smith Barney Private Trust Company of Florida Florida Smith Barney Private Trust Company of New Jersey New Jersey Smith Barney Private Trust Company of Texas Texas Travelers Auto Leasing Corporation Delaware Travelers Group 401(k) Savings Plan New York Travelers Group Diversified Distribution Services, Inc. Delaware Travelers Group Exchange, Inc. Delaware Travelers Group International Inc. Delaware TRV Employees Investments, Inc. Delaware TRV Employees Fund, L.P. Delaware
- ------------------ * Indicates that the given subsidiary is partially owned by more than one subsidiary of Citigroup Inc. ** Citigroup Inc. owns approximately 85% of Travelers Property Casualty Corp. through The Travelers Insurance Group Inc. (52) 1 2 3 4 5 6 7 8 9 10 11 12 13 EX-23.01 17 EXHIBIT 23.01 Exhibit 23.01 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Citigroup Inc.: We consent to the incorporation by reference in the Registration Statements on: o Form S-3 Nos. 33-49280, 33-55542, 33-56940, 33-68760, 33-51101, 33-52281, 33-54093, 33-62903, 33-63663, 333-04809, 333-12439, 333-27155, 333-42575, 333-44549, 333-68949 and 333-68989; and o Form S-8 Nos. 33-32130, 33-43997, 33-59524, 33-28110, 33-43883, 33-21099, 33-29711, 33-47437, 33-39025, 33-40469, 33-38109, 33-50206, 33-51201, 33-51353, 33-51769, 33-51783, 33-52027, 33-52029, 33-64985, 333-02809, 333-02811, 333-12697, 333-25603, 333-38647, 333-41865, 333-56589, 333-65487, 333-77425 and 333-94905 of Citigroup Inc. of our report dated January 18, 2000, with respect to the consolidated statement of financial position of Citigroup Inc. and subsidiaries ("Citigroup") as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1999, which report is included in the annual report and Form 10-K of Citigroup Inc. for the year ended December 31, 1999. Our report refers to changes, in 1999, in Citigroup's methods of accounting for insurance-related assessments, accounting for insurance and reinsurance contracts that do not transfer insurance risk, and accounting for the costs of start-up activities. /s/KPMG LLP New York, New York March 10, 2000 EX-24.01 18 EXHIBIT 24.01 Exhibit 24.01 POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ C. Michael Armstrong - ------------------------ (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Alain J.P. Belda - -------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Kenneth J. Bialkin - ---------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Kenneth T. Derr - ------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ John M. Deutch - ------------------ (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Ann Dibble Jordan - --------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Reuben Mark - --------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Michael T. Masin - -------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Dudley C. Mecum - ------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Richard D. Parsons - ---------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Andrall E. Pearson - ---------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Robert E. Rubin - ------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Franklin A. Thomas - ---------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Edgar S. Woolard, Jr. - ------------------------- (Signature) POWER OF ATTORNEY Annual Report on Form 10-K KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of CITIGROUP INC., a Delaware corporation (the "Company"), does hereby constitute and appoint John S. Reed, Sanford I. Weill, Heidi G. Miller, Charles O. Prince, III and Stephanie B. Mudick and each of them, to be my true and lawful attorneys-in-fact and agents, each acting alone with full power of substitution and re-substitution, to sign, in the name and on behalf of the undersigned as a director of the Company, an Annual Report on Form 10-K of the Company for the Company's fiscal year ended December 31, 1999, and all amendments thereto as said attorneys-in-fact and agents may deem advisable or necessary and to file, or cause to be filed, the same with all exhibits thereto (including this power of attorney), and other documents in connection therewith with the Securities and Exchange Commission, provided that such Annual Report on Form 10-K in final form, and any amendment or amendments thereto and such other documents, be approved by said attorneys-in-fact and agents or by any one of them; and the undersigned does hereby grant unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in or about the premises, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents as of this 18th day of January, 2000. /s/ Arthur Zankel - ----------------- (Signature) EX-27.01 19 EXHIBIT 27.01
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CITIGROUP'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND ACCOMPANYING DISCLOSURES. 1,000,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 14,158 13,429 112,655 109,155 113,126 0 0 244,206 6,679 716,937 261,091 17,086 38,747 47,092 4,920 1,925 36 47,725 716,937 23,172 0 21,728 44,900 0 24,768 20,132 2,837 557 12,044 15,948 9,994 0 (127) 9,867 2.91 2.83 3.49 3,633 1,184 59 0 6,617 3,474 656 6,679 0 0 0 Includes securities borrowed or purchased under agreements to resell. Allowance activity for 1999 includes $43MM in other changes, principally foreign currency translation effects. Commercial paper and other short-term borrowings. The Board of Directors on April 19, 1999 declared a three-for-two split in Citigroup's common stock, effective May 28, 1999. Current and prior year information have been restated to reflect the stock split. Not disclosed. First quarter 1999 accounting changes include the adoption of Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" of $(135) million; SOP 98-7, "Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk" of $23 million; and SOP 98-5, "Reporting on the Costs of Start-Up Activities" of $(15) million. Includes $1,403MM of cash-basis commercial loans and $2,230MM of consumer loans on which accrual of interest has been suspended. Accruing loans 90 or more days delinquent. No portion of Citigroup's credit loss allowance is specifically allocated to any individual loan or group of loans.
EX-99.01 20 EXHIBIT 99.01 Exhibit 99.01 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which Title of each class registered - ------------------- ------------------------------ Common Stock, par value $ .01 New York Stock Exchange and per share Pacific Exchange Depositary Shares, each representing New York Stock Exchange 1/5th of a share of 6.365% Cumulative Preferred Stock, Series F Depositary Shares, each representing New York Stock Exchange 1/5th of a share of 6.213% Cumulative Preferred Stock, Series G Depositary Shares, each representing New York Stock Exchange 1/5th of a share of 6.231% Cumulative Preferred Stock, Series H Depositary Shares, each representing New York Stock Exchange 1/20th of a share of 8.40% Cumulative Preferred Stock, Series K Depositary Shares, each representing New York Stock Exchange 1/5th of a share of 5.864% Cumulative Preferred Stock, Series M Depositary Shares, each representing New York Stock Exchange 1/10th of a share of Adjustable Rate Cumulative Preferred Stock, Series Q Depositary Shares, each representing New York Stock Exchange 1/10th of a share of Adjustable Rate Cumulative Preferred Stock, Series R Depositary Shares, each representing New York Stock Exchange 1/10th of a share of 7 3/4% Cumulative Preferred Stock, Series U 7 3/4% Notes Due June 15, 1999 New York Stock Exchange 8% Trust Securities of Subsidiary Trust New York Stock Exchange (and registrant's guaranty with respect thereto) 7 3/4% Trust Securities of Subsidiary Trust New York Stock Exchange (and registrant's guaranty with respect thereto) 7 5/8% Trust Securities of Subsidiary Trust New York Stock Exchange (and registrant's guaranty with respect thereto) 6.850% Trust Securities (TRUPS(R)) of New York Stock Exchange Subsidiary Trust (and registrant's guaranty with respect thereto) 7% Trust Securities (TRUPS(R)) of New York Stock Exchange Subsidiary Trust (and registrant's guaranty with respect thereto) 6 7/8% Trust Securities (TRUPS(R)) of New York Stock Exchange Subsidiary Trust (and registrant's guaranty with respect thereto) -----END PRIVACY-ENHANCED MESSAGE-----