10-Q 1 c89612e10vq.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number 033-71690 FIRST FORTIS LIFE INSURANCE COMPANY (Exact name of registrant as specified in its charter) NEW YORK 13-2699219 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 308 MALTBIE STREET, SUITE 200 SYRACUSE, NEW YORK 13204 (Address of Principal Executive Offices) (Zip Code) (315) 451-0066 (Registrant's Telephone Number, Including Area Code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant: (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. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X] The number of shares of the registrant's common stock outstanding at October 29, 2004, was 100,000, all of which are owned directly by Assurant, Inc. THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT. FIRST FORTIS LIFE INSURANCE COMPANY QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004 TABLE OF CONTENTS

ITEM PAGE NUMBER NUMBER ------ PART I FINANCIAL INFORMATION 1. Financial Statements................................................................... 2 Unaudited interim balance sheets of First Fortis Life Insurance Company at September 30, 2004 and December 31, 2003............................................ 2-3 Unaudited interim statements of operations of First Fortis Life Insurance Company for the three and nine months ended September 30, 2004 and 2003...... 4 Unaudited interim statements of changes in stockholder's equity of First Fortis Life Insurance Company for the nine months ended September 30, 2004....... 5 Unaudited interim statements of cash flows of First Fortis Life Insurance Company for the nine months ended September 30, 2004 and 2003.......................... 6 Notes to the unaudited financial statements of First Fortis Life Insurance Company..... 7 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................................. 10 3. Quantitative and Qualitative Disclosures About Market Risk *........................... 13 4. Controls and Procedures................................................................ 13 PART II OTHER INFORMATION 2. Unregistered Sale of Equity Securities and Use of Proceeds *........................... 13 3. Defaults Upon Senior Securities *...................................................... 13 4. Submission of Matters to a Vote of Security Holders *.................................. 13 5. Other Information...................................................................... 13 6. Exhibits .............................................................................. 14 Signatures................................................................................... 15

* Not required under reduced disclosure pursuant to General Instruction H(1) (a) and (b) of Form 10Q FIRST FORTIS LIFE INSURANCE COMPANY BALANCE SHEETS AT SEPTEMBER 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003

SEPTEMBER 30, DECEMBER 31, ------------- ----------- 2004 2003 ------------- ----------- (IN THOUSANDS EXCEPT NUMBER OF SHARES) ASSETS Investments: Fixed maturities available for sale, at fair value (amortized cost- $116,249 in 2004 and $157,032 in 2003) $ 125,074 $ 167,712 Equity securities available for sale, at fair value (cost- $11,520 in 2004 and $9,574 in 2003) 11,520 9,784 Commercial mortgage loans on real estate at amortized cost 7,121 3,800 Policy loans 75 37 Short-term investments 1,280 8,091 Other investments - 275 ----------- ----------- Total investments 145,070 189,699 Cash and cash equivalents 1,547 1,060 Premiums and accounts receivable 4,884 2,777 Reinsurance recoverables 99,292 100,451 Accrued investment income 1,914 2,185 Deferred acquisition costs 1,122 942 Deferred income taxes, net 2,738 3,040 Goodwill 2,038 2,038 Other assets 92 82 Assets held in separate accounts 31,251 39,678 ----------- ----------- Total assets $ 289,948 $ 341,952 =========== ===========

See the accompanying notes to the financial statements 2 FIRST FORTIS LIFE INSURANCE COMPANY BALANCE SHEETS AT SEPTEMBER 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003

SEPTEMBER 30, DECEMBER 31, ------------- ----------- 2004 2003 ------------- ----------- (IN THOUSANDS EXCEPT NUMBER OF SHARES) LIABILITIES Future policy benefits and expenses $ 27,748 $ 24,143 Unearned premiums 27,460 35,798 Claims and benefits payable 136,694 137,233 Commissions payable 4,475 3,811 Reinsurance balances payable 2,074 1,935 Funds held under reinsurance 88 94 Deferred gain on disposal of businesses 6,885 8,067 Due to affiliates 772 2,407 Accounts payable and other liabilities 3,930 6,264 Tax payable 293 1,771 Liabilities related to separate accounts 31,251 39,678 ----------- ----------- Total liabilities 241,670 261,201 Commitment & Contingencies (Note 5) -- -- STOCKHOLDER'S EQUITY Common stock, $20 par value: authorized, issued and outstanding shares - 100,000 2,000 2,000 Additional paid-in capital 43,006 43,006 Retained (deficit) earnings (2,563) 28,663 Accumulated other comprehensive income 5,835 7,082 ----------- ----------- Total stockholder's equity 48,278 80,751 ----------- ----------- Total liabilities and stockholder's equity $ 289,948 $ 341,952 =========== ===========

See the accompanying notes to the financial statements 3 FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED ------------------------- ------------------------- SEPTEMBER 30, SEPTEMBER 30, ------------------------- ------------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- (IN THOUSANDS) REVENUES Net earned premiums and other considerations $ 14,906 $ 15,625 $ 47,007 $ 50,479 Net investment income 2,280 2,563 7,569 7,742 Net realized gain (loss) on investments 500 (89) 702 652 Amortization of deferred gain on disposal of businesses 395 471 1,182 1,423 Fees and other income 62 11 180 189 ---------- ---------- ---------- ---------- Total revenues 18,143 18,581 56,640 60,485 BENEFITS, LOSSES AND EXPENSES Policyholder benefits 9,761 11,297 29,582 32,757 Amortization of deferred acquisition costs 88 184 225 270 Underwriting, general and administrative expenses 4,501 6,984 14,193 19,140 ---------- ---------- ---------- ---------- Total benefits, losses and expenses 14,350 18,465 44,000 52,167 ---------- ---------- ---------- ---------- Income before income taxes 3,793 116 12,640 8,318 Income taxes 771 40 3,869 2,911 ---------- ---------- ---------- ---------- Net income $ 3,022 $ 76 $ 8,771 $ 5,407 ========== ========== ========== ==========

See the accompanying notes to the financial statements 4 FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY FROM DECEMBER 31, 2003 THROUGH SEPTEMBER 30, 2004 (UNAUDITED)

ACCUMULATED ADDITIONAL RETAINED OTHER COMMON PAID-IN (DEFICIT) COMPREHENSIVE STOCK CAPITAL EARNINGS INCOME (LOSS) TOTAL ------ ---------- -------- ------------- -------- (IN THOUSANDS) Balance, December 31, 2003 $2,000 $43,006 $ 28,663 $ 7,082 $ 80,751 Comprehensive income: Net income - - 8,771 - 8,771 Net change in unrealized gains (losses) on securities - - - (1,244) (1,244) -------- Total comprehensive income - - - - 7,527 Dividends - - (40,000) - (40,000) Other - - 3 (3) - ------ ------- -------- ------- -------- Balance, September 30, 2004 $2,000 $43,006 $ (2,563) $ 5,835 $ 48,278 ====== ======= ======== ======= ========

See the accompanying notes to the financial statements 5 FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)

NINE MONTHS ENDED ------------------------ SEPTEMBER 30, ------------------------ 2004 2003 -------- -------- (IN THOUSANDS) NET CASH (USED IN) OPERATING ACTIVITIES $ (2,897) $ (5,638) INVESTING ACTIVITIES Sales of: Fixed maturities available for sale 52,062 26,634 Equity securities available for sale 1,088 2,193 Other invested assets 275 44 Maturities, prepayments and scheduled redemption of: Fixed maturities available for sale 8,017 18,658 Purchase of: Fixed maturities available for sale (18,441) (31,150) Equity securities available for sale (3,069) (8,322) Change in commercial mortgage loans on real estate (3,321) - Change in short term investments 6,811 (4,450) Change in policy loans (38) (10) -------- -------- Net cash provided by investing activities 43,384 3,597 FINANCING ACTIVITIES Dividends paid (40,000) - -------- -------- Net cash (used in) financing activities (40,000) - Change in cash and cash equivalents 487 (2,041) Cash and cash equivalents at beginning of period 1,060 2,041 -------- -------- Cash and cash equivalents at end of period $ 1,547 $ - ======== ========

See the accompanying notes to the financial statements 6 FIRST FORTIS LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED) 1. NATURE OF OPERATIONS First Fortis Life Insurance Company (the "Company") is a provider of life and health insurance products. At January 1, 2004, the Company was a wholly owned subsidiary of Assurant, Inc. (formerly Fortis, Inc.), which itself was an indirect, wholly owned subsidiary of Fortis N.V of the Netherlands and Fortis SA/NV of Belgium (collectively, "Fortis") through their affiliates, including their wholly owned subsidiary, Fortis Insurance N.V. On February 5, 2004, Fortis sold approximately 65% of its ownership interest in Assurant, Inc. via an Initial Public Offering ("IPO"). In connection with the IPO, Fortis, Inc. was merged into Assurant, Inc., a Delaware corporation, which was formed solely for the purpose of the redomestication of Fortis, Inc. After the merger, Assurant, Inc. became the successor to the business, operations and obligations of Fortis, Inc. Assurant, Inc. is traded on the New York Stock Exchange under the symbol AIZ. The Company is incorporated in New York and is qualified to sell life, health and annuity insurance in the state of New York. The Company's revenues are derived principally from group employee benefits, credit, and health products. The Company offers insurance products, including life insurance policies, annuity contracts, group life, credit, and accident and health insurance policies. 2. BASIS OF PRESENTATION The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial statements have been included. Certain prior period amounts have been reclassified to conform to the 2004 presentation. Dollar amounts are in thousands except for number of shares. The financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant inter-company transactions and balances are eliminated in consolidation. Operating results for the three and nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. The accompanying interim financial statements should be read in conjunction with the audited financial statements and related notes included in the Company's annual report on form 10K for the fiscal year ended December 31, 2003. 3. RECENT ACCOUNTING PRONOUNCEMENTS On July 7, 2003, the Accounting Standards Executive Committee ("AcSEC") of the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long Duration Contracts and for Separate Accounts ("SOP 03-1"). SOP 03-1 provides guidance on a number of topics unique to insurance enterprises, including separate account presentation, interest in separate accounts, gains and losses on the transfer of assets from the general account to a separate account, liability valuation, returns based on a contractually referenced pool of assets or index, accounting for contracts that contain death or other insurance benefit features, accounting for reinsurance and other similar contracts, accounting for annuitization benefits and sales inducements to contract holders. SOP 03-1 was adopted by the Company 7 FIRST FORTIS LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED) on January 1, 2004. The adoption of this statement did not have a material impact on the Company's financial position or the results of operations. In March 2004, the Emerging Issues Task Force ("EITF") reached a final consensus on Issue 03-1, "The Meaning of Other Than Temporary Impairment and Its Application to Certain Investments" ("EITF 03-1"). EITF 03-1 provides guidance on the disclosure requirements for other than temporary impairments of debt and marketable equity investments that are accounted for under Financial Accounting Standard 115 ("FAS 115"). EITF 03-1 also provides guidance for evaluating whether an investment is other than temporarily impaired. The adoption of EITF 03-1 required the Company to include certain quantitative and qualitative disclosures for debt and marketable equity securities classified as available-for-sale or held-to-maturity under FAS 115 that are impaired at the balance sheet date but for which an other than temporary impairment has not been recognized. The disclosures were effective for financial statements for fiscal years ending after December 15, 2003. The Company adopted the disclosure requirements of EITF 03-1 at December 31, 2003. The guidance for evaluating whether an investment is other than temporarily impaired is effective for reporting periods beginning after June 15, 2004; however, the Financial Accounting Standards Board ("FASB") has issued two new proposed Staff Positions. EITF 03-1a, which would defer the June 15, 2004 effective date of the requirement to record impairment losses caused by the effect of increases in interest rates or sector spreads on debt securities subject to paragraph 16 of EITF 03-1 until further guidance is provided and EITF 03-1b, which would exclude minor impairments from the requirement. Both Staff Positions are still in the comment period phase. The Company is continuing to evaluate the impact of adoption of this issue given the fact that portions of the issue are still in the comment period. The Company currently follows the guidance on other than temporary impairments provided by staff accounting bulletin ("SAB") 59, Accounting for Noncurrent Marketing Equity Securities. In May 2004, the FASB issued FASB Staff Position ("FSP") FAS 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("FAS 106- 2"). This statement provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("The Act") for employers that sponsor postretirement health care plans that provide prescription drug benefits. FAS 106-2 also requires employers to provide certain disclosures regarding the effect of the federal subsidy provided by The Act. The Company's Retirement and Other Employees Benefits plan's Accumulated Pension Benefit Obligation and net periodic postretirement benefit cost do not reflect any amounts associated with the subsidy due to the fact that the Company is unable to determine whether the benefits provided by its' Retirement and Other Employee Benefits plans are actuarially equivalent to Medicare Part D under the Act. The adoption of this statement did not have a material impact on the Company's financial position or the results of operations. 4. RETIREMENT AND OTHER EMPLOYEE BENEFITS The Company is an indirect wholly-owned subsidiary of Assurant, Inc., which sponsors a defined benefit pension plan covering employees and certain agents who meet eligibility requirements as to age and length of service. Pension cost allocated to the Company amounted to approximately $28 and $15 for three months ended September 30, 2004 and 2003, respectively, and $85 and $46 for the nine months ended September 30, 2004 and 2003, respectively. The Company participates in a contributory profit sharing plan, sponsored by Assurant, Inc. covering employees and certain agents who meet eligibility requirements as to age and length of service. The amount expensed was approximately $6 and $14 for three months ended September 30, 2004 and 2003, respectively, and $4 and $37 for the nine months ended September 30, 2004 and 2003, respectively. In addition to retirement benefits, the Company participates in other health care and life insurance benefit plans (postretirement benefits) for retired employees, sponsored by Assurant, Inc. 8 FIRST FORTIS LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED) There were no net postretirement benefit costs allocated to the Company for the three and nine months ended September 30, 2004 and 2003. The Company made contributions to the postretirement benefit plans of approximately $8 and $8 for three months ended September 30, 2004 and 2003, respectively, and $24 and $17 for the nine months ended September 30, 2004 and 2003, respectively, as claims were incurred. 5. COMMITMENTS AND CONTINGENCIES The Company is regularly involved in litigation in the ordinary course of business, both as a defendant and as a plaintiff. The Company may from time to time be subject to a variety of legal and regulatory actions relating to the Company's current and past business operations. While the Company cannot predict the outcome of any pending or future litigation, examination or investigation, the Company does not believe that any pending matter will have a material adverse effect on the Company's financial condition or results of operations. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (Dollar amounts in thousands except share data) Management's Discussion and Analysis of Financial Condition and Results of Operations addresses the financial condition of First Fortis Life Insurance Company (which we refer to as FFLIC) as of September 30, 2004, compared with December 31, 2003, and our results of operations for the three and nine months ended September 30, 2004, and 2003. This discussion should be read in conjunction with our MD&A and annual audited financial statements as of December 31, 2003 included in our Form 10-K for the year ended December 31, 2003 filed with the U.S. Securities and Exchange Commission and the September 30, 2004 unaudited financial statements and related notes included elsewhere in this Form 10-Q. Some of the statements in this MD&A and elsewhere in this report may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as "outlook", "believes", "expects", "potential", "continues", "may", "will", "should", "seeks", "approximately", "predicts", "intends", "plans", "estimates", "anticipates" or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in this report. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statements you read in this report reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, financial condition, growth strategy and liquidity. 10 RESULTS OF OPERATIONS CONSOLIDATED OVERVIEW The tables below present information regarding our consolidated results of operations:

FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ ------------------------ 2004 2003 2004 2003 -------- -------- -------- -------- (IN THOUSANDS) (IN THOUSANDS) ------------------------ ------------------------ REVENUES: Net earned premiums and other considerations $ 14,906 $ 15,625 $ 47,007 $ 50,479 Net investment income 2,280 2,563 7,569 7,742 Net realized gain (loss) on investments 500 (89) 702 652 Amortization of deferred gain on disposal of businesses 395 471 1,182 1,423 Fees and other income 62 11 180 189 -------- -------- -------- -------- Total revenues 18,143 18,581 56,640 60,485 -------- -------- -------- -------- BENEFITS, LOSSES AND EXPENSES: Policyholder benefits (9,761) (11,297) (29,582) (32,757) Selling, underwriting and general expenses(1) (4,589) (7,168) (14,418) (19,410) -------- -------- -------- -------- Total benefits, losses and expenses (14,350) (18,465) (44,000) (52,167) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 3,793 116 12,640 8,318 Income taxes (771) (40) (3,869) (2,911) -------- -------- -------- -------- NET INCOME $ 3,022 $ 76 $ 8,771 $ 5,407 ======== ======== ======== ========

--------------- (1) Includes amortization of DAC. FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 Total Revenues Total revenues decreased by $438, or 2%, from $18,581 for the three months ended September 30, 2003, to $18,143 for the three months ended September 30, 2004. Total revenues decreased by $3,845, or 6%, from $60,485 for the nine months ended September 30, 2003, to $56,640 for the nine months ended September 30, 2004. Net earned premiums and other considerations decreased by $719, or 5%, from $15,625 for the three months ended September 30, 2003, to $14,906 for the three months ended September 30, 2004. Net earned premiums and other considerations decreased by $3,472, or 7%, from $50,479 for the nine months ended September 30, 2003, to $47,007 for the nine months ended September 30, 2004. The decreases in net earned premiums and other considerations for the three and nine months ended September 30, 2004, were primarily due to decreases of $801 and $5,004, respectively, in group life and dental premiums and $1,414 and $4,546, respectively, in credit life premiums. These decreases were offset by increases of $1,499 and $6,087 for the three and nine months ended September 30, 2004, respectively, in disability insurance premiums. The decline in renewals for the life and dental business resulted primarily from our continued pricing discipline in an increasingly competitive market which has resulted in lower sales and renewals. The decline in renewals for the credit life business is primarily due to an adverse regulatory climate that has affected this line of business. The increases in disability premiums are primarily driven by an increase in business written through alternative distribution sources. Our total net 11 earned premiums were derived 87% and 79% from the life, dental and disability business in 2004 and 2003, respectively, and 13% and 21% from the credit line business in 2004 and 2003, respectively. Net investment income decreased by $283, or 11%, from $2,563 for the three months ended September 30, 2003, to $2,280 for the three months ended September 30, 2004. Net investment income decreased by $173, or 2%, from $7,742 for the nine months ended September 30, 2003, to $7,569 for the nine months ended September 30, 2004. The three and nine month decline is attributable to the decrease in invested assets. Net realized gains on investments increased by $589 from net realized losses of $89 for the three months ended September 30, 2003, to net realized gains of $500 for the three months ended September 30, 2004. Net realized gains on investments increased by $50, or 8%, from net realized gains of $652 for the nine months ended September 30, 2003, to net realized gains of $702 for the nine months ended September 30, 2004. Net realized gains on investments are comprised of both other-than-temporary impairments and realized gains/(losses) on sales of securities. For the three and nine months ended September 30, 2004 and 2003, we had no other-than-temporary impairments. Amortization of deferred gain on disposal of businesses decreased by $76, or 16%, from $471 for the three months ended September 30, 2003, to $395 for the three months ended September 30, 2004. Amortization of deferred gain on disposal of businesses decreased by $241, or 17%, from $1,423 for the nine months ended September 30, 2003, to $1,182 for the nine months ended September 30, 2004. The decreases are consistent with the run-off of the businesses ceded to The Hartford in 2001 and John Hancock in 2000. Fees and other income increased by $51 from $11 for the three months ended September 30, 2003, to $62 for the three months ended September 30, 2004. Fees and other income decreased by $9, from $189 for the nine months ended September 30, 2003, to $180 for the nine months ended September 30, 2004. The nine month decrease is predominantly related to the run-off of credit line business. Total Benefits, Losses and Expenses Total benefits, losses and expenses decreased by $4,115, or 22%, from $18,465 for the three months ended September 30, 2003, to $14,350 for the three months ended September 30, 2004. Total benefits, losses and expenses decreased by $8,167 or 16%, from $52,167 for the nine months ended September 30, 2003, to $44,000 for the nine months ended September 30, 2004. Policyholder benefits decreased by $1,536, or 14%, from $11,297 for the three months ended September 30, 2003, to $9,761 for the three months ended September 30, 2004. Policyholder benefits decreased by $3,175, or 10%, from $32,757 for the nine months ended September 30, 2003, to $29,582 for the nine months ended September 30, 2004. The decrease in policyholder benefits for the three months ended September 30, 2004, was primarily due to a decrease of $891 in disability insurance benefits and $603 in credit life benefits. These decreases were offset by an increase of $346 in group life and dental benefits. The decrease in policyholder benefits for the nine months ended September 30, 2004, was primarily due to decreases of $5,084 in group life and dental benefits and $1,608 in credit life benefits. The decrease in group life and dental benefits is predominantly attributable to favorable mortality experience in group life. These decreases were offset by an increase of $3,896 in disability insurance benefits resulting from alternate distribution sources, as well as unfavorable experience on a large case. Selling, underwriting and general expenses decreased by $2,579, or 36%, from $7,168 for the three months ended September 30, 2003, to $4,589 for the three months ended September 30, 2004. Selling, underwriting and general expenses decreased by $4,992, or 26%, from $19,410 for the nine months ended September 30, 2003, to $14,418 for the nine months ended September 30, 2004. Decreased expense levels are driven by the runoff of credit life business. 12 Net Income Net income increased by $2,946, from $76 for the three months ended September 30, 2003, to $3,022 for the three months ended September 30, 2004. Net income increased by $3,364, from $5,407 for the nine months ended September 30, 2003, to $8,771 for the nine months ended September 30, 2004. Income taxes increased by $731, from $40 for the three months ended September 30, 2003, to $771 for the three months ended September 30, 2004. Income taxes increased by $958, from $2,911 for the nine months ended September 30, 2003, to $3,869 for the nine months ended September 30, 2004. During the three months ended September 30, 2004, we recognized the release of approximately $400 of previously provided tax accruals which were no longer necessary. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not required under reduced disclosure format. ITEM 4. CONTROLS AND PROCEDURES. Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2004. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of that date in providing a reasonable level of assurance that information we are required to disclose in reports we file or furnish under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods in SEC rules and forms. Further, our disclosure controls and procedures were effective in providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. PART II OTHER INFORMATION ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS. Not required under reduced disclosure format. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not required under reduced disclosure format. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not required under reduced disclosure format. ITEM 5. OTHER INFORMATION. (a) Because all of the Company's outstanding common stock is held directly by Assurant, Inc., the Company does not file a Schedule 14A and has not adopted any procedures by which security holders may recommend nominees to the registrant's board of directors. 13 ITEM 6 EXHIBITS The following exhibits either (a) are filed with this report or (b) have previously been filed with the SEC and are incorporated herein by reference to those prior filings. Exhibits are available upon request at the investor relations section of our website, located at www.assurant.com. EXHIBIT NUMBER EXHIBIT DESCRIPTION ------- ------------------- 3.1 Articles of Incorporation of First Fortis Life Insurance Company (incorporated by reference from the Registrant's Form 10-K filed, File No. 33-71690, filed on March 29, 1996). 3.2 By-laws of First Fortis Life Insurance Company (incorporated by reference from the Registrant's Registration Statement on Form N-4, File No. 33-71686, and Separate Account A filed on November 15, 1993). 4.1 Form of Combination Fixed and Variable Group Annuity Contract; (incorporated by reference from the Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-4, File No. 33-71686, and Separate Account A filed on April 27, 1995). 4.2 Form of Application to be used in connection with Form of Combination Fixed and Variable Group Annuity Contract filed as Exhibit 4.1 to this report (incorporated by reference from the Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-4, File No. 33-71686, and Separate Account A filed on April 27, 1995). 4.3 Form of IRA Endorsement (incorporated by reference from the Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-4, File No. 33-71686, and Separate Account A filed on April 27, 1995). 4.4 Form of Section 403(b) Annuity Endorsement (incorporated by reference from Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-4, File No. 33-71686, and Separate Account A filed on April 27, 1995). 10.1 Amendment Number One to the Assurant, Inc. Amended and Restated 2004 Employee Stock Repurchase Plan. 10.2 Amendment Number One to the Fortis Executive Pension and 401K Plan. 10.3 Amendment Number Two to the Fortis, Inc. Supplemental Executive Retirement Plan. 31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. 32.1 Certification of Chief Executive Officer of First Fortis Life Insurance Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer of First Fortis Life Insurance Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 14 SIGNATURES Pursuant to the requirements 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. FIRST FORTIS LIFE INSURANCE COMPANY Date: November 12, 2004 By: /s/ Lance Wilson ------------------------------------- Name: Lance Wilson Title: President and Chief Executive Officer(Principal Executive Officer) Date: November 12, 2004 By: /s/ Ranell Jacobson --------------------------------------- Name: Ranell Jacobson Title: Treasurer (Chief Financial Officer) 15