News -- Citigroup/Travelers

[Arlie_Proctor]

Interesting news -- CNBC just ran the story:

http://dailynews.yahoo.com/h/nm/20011219/bs/financial_citigroup_spinoff_dc_3.html

[Ducky]

Lovin' the fact that I still have my old Travelers 401(k) loaded up with Citigroup stock.

[frummie]

Anyone in the know about what happened here? I mean the stuff you don't read in the papers...

[frummie]

Anyone in the know about what happened here? I mean the stuff you don't read in the papers...

[Ducky]

Possibly a reaction to the Enron fiasco, but more likely in the works for some time. As an additional Christmas present, Travelers employees have been notified of a salary freeze.

[Maphisto's Sidekick]

I think this one is pretty much as the papers are reporting. Sandy Weil doesn't think the P&C industry is going to have a high enough ROE going forward to interest him, and the cross-sell of banking and investment products with P&C insurance didn't happen as quickly as had been hyped.

[Anonymous]

Mephisto's right.

Sandy Weill has never been enamored with the insurance industry. He is very earnings driven, and Travelers just wasn't doing it for him. He was looking for ROE greater than 20% and it just wasn't happening. Travelers P&C has always been the red-headed stepchild of the Citigroup "family."

People spread all kinds of rumors like he wants the extra capital to make some other big acquisition.

The question on everyone's minds at Travelers seems to be "who gets the Umbrella?"

It'll probably end up being good for Travelers now that it doesn't have to think about Citigroup when making high-level decisions and strategy. The pressure to earn will not longer be as intense.

[Don Quijote]

I don´t think Citigroup will be the last to so this, both Met and Pru will be under analyst pressure to spin off their P&C operations as well.

[Anonymous]

I think the comments posted previously are correct. I work at Travelers and the consensus is that earnings volatility, the 20% ROE requirement (which we only ever came close to by releasing margin and that well is getting dry), and the desire to free up capital to expand internationally were the reasons behind this move. Also, I think that it is thought when Jay Fishman left, our chief advocate in NYC left too.

In the trenches at Travelers, it's hard to gauge yet whether this is a good or bad thing. One rumor running around was that this was not supposed to "pop" so soon, but was leaked and thus admitted to...

There are, of course, a lot of questions out there now, none of which have answers. These include:

1) What happens to our stock options?

2) What about the salary freeze (which was a Citi directive)? BTW, the skinny on this is over 75K no raise, only bonus... Under 75K, either raise or bonus, but not both and no choice...

And, of course...

3) Who gets to use the umbrella? (probably Travelers Life & Annuity, which is staying with Citi, but we'll see...)

I think everyone thinks that we're in an OK position overall, hopefully that will hold as we move forward...

Willie