Citigroup Merger

Merger Travelers Group

The merger took place in 1998. This was illegal because the remaining provisions of the Glass-Steagall Act (legislation stemming from the United States' Great Depression era) did not allow banks to merge with insurance underwriters. Chuck Prince and his team of lawyers, studying the law, found that the Federal Reserve could grant the companies a two year trial period before they would have to divest the insurance underwriting businesss. The CEO's bet that they could change the law before the expiration date. The law was finally changed in 1999 when Glass-Steagall was invalidated by the passing of the Gramm-Leach-Bliley Financial Services Modernization Act.

Post Merger History

In order to convince Citicorp to merge, Weill proposed a structure of Co-CEO's, consisting of himself and John Reed. This strategy was denounced immediately by many in the press and many research analysts, as being unworkable. Conflicts within the company did eventually lead to Reed getting fired.

The company spun off its Travelers Property and Casualty insurance underwriting business, because it always caused a drag on the Citigroup stock price because it's earnings were seen as more seasonal and vunerable to large disasters. Citigroup retained the life insurance and annuities underwriting business.

Overview Citigroup / Travelers Group

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