-----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, FPJATB8Z5iov0fWKnWZRBJDZL3yKOuUexEW3yHbVbGHH0hVtFwJIqrI+CN+H4/Tg pa5tKBMNEIoD+wb3W/c3kQ== 0000086317-00-000138.txt : 20000515 0000086317-00-000138.hdr.sgml : 20000515 ACCESSION NUMBER: 0000086317-00-000138 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FORTIS LIFE INSURANCE CO CENTRAL INDEX KEY: 0000914804 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132699219 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-71690 FILM NUMBER: 629341 BUSINESS ADDRESS: STREET 1: 220 SALINA MEADOWS PARKWAY STREET 2: SUITE 225 CITY: SYRACUSE STATE: NY ZIP: 13220 BUSINESS PHONE: 3154510066 MAIL ADDRESS: STREET 1: 220 SALINA MEADOWS PARKWAY STREET 2: SUITE 225 CITY: SYRACUSE STATE: NY ZIP: 13220 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 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 333-14761 FIRST FORTIS LIFE INSURANCE COMPANY (Exact name of registrant as specified in its charter) NEW YORK (State or other jurisdiction of incorporation or organization) 13-2699219 (IRS Identification No.) 308 MALTBIE STREET, SUITE 200, SYRACUSE, NY 13204 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: 315- 451-0066 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 FIRST FORTIS LIFE INSURANCE COMPANY BALANCE SHEETS (In thousands, except share data) March 31, December 31, 2000 1999 (Unaudited) Assets Investments: Fixed maturities, at fair value (amortized cost 2000-- $126,540; 1999--$126,432;) $121,611 $121,212 Policy Loans 1 1 Short-term investments 6,900 5,800 128,512 127,013 Cash and cash equivalents 1,494 4,562 Receivables: Uncollected premiums, less allowance (2000 and 1999 $100) 2,869 3,097 Reinsurance recoverable on unpaid and paidlosses 32,475 31,634 Other 681 1,495 36,025 36,226 Accrued investment income 2,312 2,095 Deferred policy acquisition costs 3,916 4,353 Property and equipment at cost, less accumulated depreciation (2000-- $ 2,298; 1999--$2,287) 112 124 Deferred federal income taxes 4,416 3,535 Goodwill, less accumulated amortization (2000--$425; 1999--$414) 405 416 Assets held in separate accounts 75,612 69,928 Total assets $252,804 $248,252 FIRST FORTIS LIFE INSURANCE COMPANY RESERVES, LIABILITIES AND SHAREHOLDER'S EQUITY (In thousands, except per share data) March 31, December 31, 2000 1999 (Unaudited) Policy reserves, liabilities and shareholder's equity Policy reserves and liabilities: Future policy benefit reserves: Life insurance $ 34,895 $ 34,165 Interest sensitive and investment products 4,100 3,487 Accident and health 71,582 70,852 110,577 108,504 Unearned revenues 9,644 9,834 Other policy claims and benefits payable 13,361 12,247 Income taxes payable 1,738 1,213 Other liabilities 6,423 10,590 Liabilities related to separate accounts 75,612 69,928 Total policy reserves and liabilities 217,355 212,316 Shareholder's equity: Common stock, $20 par value: Authorized, issued and outstanding shares 2,000 2,000 - - 100,000 Additional paid-in capital 37,440 37,440 Retained deficit (6,955) (124) Accumulated other comprehensive income 2,964 (3,380) Total shareholder's equity 35,449 35,936 Total policy reserves, liabilities and $252,804 $248,252 shareholder's equity See accompanying notes. FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (In thousands) (Unaudited) Three months ended March 31, 2000 1999 Revenues Insurance operations: Life insurance premiums $6,426 $5,885 Interest sensitive and investment products 45 5 policy charges Accident and health insurance premiums 9,174 8,502 Total 15,645 14,392 Net investment income 2,292 2,135 Realized (losses) gains on investments (727) 421 Other income 321 337 Total revenues 17,531 17,285 Benefits and Expenses Benefits to policyholders: Life insurance 6,142 4,504 Interest sensitive and investment products 58 136 Accident and health 7,798 6,859 Total 13,998 11,499 Amortization of deferred policy 85 43 acquisition costs Insurance commissions 1,233 942 General and administrative expenses 3,256 3,866 Total benefits and expenses 18,572 16,350 (Loss) income before federal income taxes (1,041) 935 Income taxes expense(benefits) Current 619 292 Deferred (983) 35 (364) 327 Net (loss) income (677) 608 Other comprehensive income (loss): Unrealized gain (loss) on investments 6,344 (1,929) Comprehensive income $5,667 $1,321 See accompanying notes. FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three months ended March 31, 2000 1999 Operating Activities Net income $ (677) $ 608 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Loss on disposal of property and equipment - (2) Increase in future policy benefit reserves and other policy claims and benefits 2,329 2,893 Increase in federal income taxes (457) (636) Decrease in other liabilities (4,167) (612) Depreciation, amortization and accretion 460 24 Amortization of investment premiums, net 9 9 Decrease (increase) in uncollected premiums, accrued investment income and other 825 (1,799) Increase in reinsurance recoverable (841) (75) Net realized (gains) loss on investments 727 (421) Cash Used By Operating Activities (1,792) (11) Investing Activities Purchases of fixed maturity investments (20,042) (25,876) Sales or maturities of fixed maturity 19,198 30,780 investments Increase in equity securities and short-term (1,100) (3,720) investments Purchase of property and equipment - 2 Net Cash (Used) Provided By Investing (1,944) 1,186 Activities Financing Activities Activities related to investment products: Considerations received 1,384 564 Surrenders and death benefits (783) (2,903) Interest credited to policyholders 67 91 Net Cash Provided (Used) By Financing 668 (2,248) Activities Decrease In Cash (3,068) (1,073) Cash and cash equivalents at beginning of 4,562 1,160 period Cash and cash equivalents at end of period $1,494 $ 87 See accompanying notes FIRST FORTIS LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS March 31, 2000 (unaudited) General: The accompanying unaudited financial statements of First Fortis Life Insurance Company contain all adjustments necessary to present fairly the balance sheet as of March 31, 2000 and the related statement of income for the three months ended March 31, 2000 and 1999, and cash flow for the three months ended March 31, 2000 and 1999. Income tax payments for the three months ended March 31, 2000 and March 31, 1999 were $94,000 and $897,000, respectively. The classification of fixed maturity investments is to be made at the time of purchase and, prospectively, that classification is expected to be reevaluated as of each balance sheet date. At March 31, 2000, all fixed maturity and equity securities are classified as available-for-sale and carried at fair value. The amortized cost and fair values of investments available-for sale were as follows at March 31, 2000 (in thousands): Gross Gross Amortized UnrealizedUnrealized Fair Cost Gain Loss Value Fixed Income Securities: Governments $ 15,239 $ 150 $ 445 $ 14,944 Public utilities 16,511 4 922 15,593 Industrial and 94,790 185 3,901 91,074 miscellaneous Total $126,540 $ 339 $5,268 $121,611 . FIRST FORTIS LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS March 31, 2000 (unaudited) The amortized cost and fair value of available-for- sale investments in fixed maturities at March 31, 2000, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Fair Cost Value Due in one year or less $ 2,503 $ 2,503 Due after one year through five years 31,326 30,393 Due after five years through ten years 42,318 40,259 Due after ten years 50,393 48,456 Total $ 126,540 $ 121,611 Proceeds from sales and maturities of investments in fixed maturities in the three-month period ended March 31, 2000 were $19,198,000 and $30,780,000 respectively. Gross gains of $18,000 and $518,000 and gross losses of $745,000 and $97,000 were realized on sales during the three- month period ended March 31, 2000 and 1999, respectively. Net Investment Income and Realized Gains (Losses) on Investments: Major categories of net investment income and realized gains and losses on investments for the first three months of each year were as follows (in thousands): Realized Investment Income Gain (Loss) 2000 1999 2000 1999 Fixed maturities $2,222 $2,058 $(727) $421 Short-term investments 100 111 - - 2,322 2,169 $(727) $421 Expenses (30) (34) Net investment income $2,292 $2,135 First Fortis Life Insurance Company Management's Discussion and Analysis of Financial Condition and Results of Operations March Year-to-Date 2000 Compared to March Year-to-Date 1999 Revenues First Fortis (the Company) life insurance premiums increased during the first three months of 2000, as compared to the same period in 1999 due to strong group life sales. Group disability and dental sales account for the increase in accident and health premiums. Accident and health premiums are principally composed of group accident and health coverages. Dental, disability income, and medical premium represented 51%, 47%, and 2%, respectively, of total first quarter group accident and health premium in 2000 compared to 45%, 44%, and 11%, respectively, in 1999. The decrease in the group medical premium as a percent of the total group accident and health premium is due to the run-out of a block of business that discontinued sales in 1996. The Company continues to match investment portfolio composition to liquidity needs and capital requirements. Changes in interest rates during 2000 and 1999 resulted in recognition of realized gains and losses upon sales of securities. Benefits First quarter year-to-date 2000 life benefits as compared to premium were higher than 1999 and is attributed to higher paid claim activity and reserve increases. First quarter year-to-date 2000 accident and health benefits as compared to premium were higher than the same period in 1999 due primarily to losses paid and additional reserves established for the discontinued group medical business. Expenses The Company continues to monitor its commission rate structures, and, as indicated by market conditions, periodically adjusts rates paid. Rates paid vary by product type, group size and duration. The Company's general and administrative expenses as a percent of premium have decreased to 21% in 2000 from 27% in 1999. The Company is incurring lower costs due to the relocation of their administrative offices, service and supply vendor changes, and permanent staff alignment. The Company continues to strive for improvements in the expense to gross revenue ratio while maintaining quality and timely services to the policyholders. Market Risk and Risk Management Interest rate risk is the Company's primary market risk exposure. Substantial and sustained increases and decreases in market interest rates can affect the profitability of insurance products and market value of investments. The yield realized on new investments generally increases or decreases in direct relationship with interest rate changes. The market value of the Company's fixed maturity and mortgage loan portfolios generally increases when interest rates decrease, and decreases when interest rates increase. Interest rate risk is monitored and controlled through asset/liability management. As part of the risk management process, different economic scenarios are modeled, including cash flow testing required for insurance regulatory purposes, to determine that existing assets are adequate to meet projected liability cash flows. A major component of the Company's asset/liability management program is structuring the investment portfolio with cash flow characteristics consistent with the cash flow characteristics of the Company's insurance liabilities. The Company uses computer models to perform simulations of the cash flow generated from existing insurance policies under various interest rate scenarios. Information from these models is used in the determination of interest crediting strategies and investment strategies. The asset/liability management discipline includes strategies to minimize exposure to loss as market interest rates change. On the basis of these analyses, management believes there is no material solvency risk to the Company with respect to interest rate movements up or down of 100 basis points from year end levels. Equity market risk exposure is not significant. Equity investments in the general account are not material enough to threaten solvency and contract owners bear the investment risk related to the variable products. Therefore, the risks associated with the investments supporting the variable separate accounts are assumed by contract owners, not by the Company. The Company provides certain minimum death benefits that depend on the performance of the variable separate accounts. Currently the majority of these death benefit risks are reinsured which then protects the Company from adverse mortality experience and prolonged capital market decline. Liquidity and Capital Resources The liquidity requirements of the Company have been met by funds provided from operations, including investment income. Funds are principally used to provide for policy benefits, operating expenses, commissions and investment purchases. The impact of the declining inforce medical business has been considered in evaluating the Company's future liquidity needs. The Company expects its operating activities to continue to generate sufficient funds. The National Association of Insurance Commissioners has implemented risk-based capital standards to determine the capital requirements of a life insurance company based upon the risks inherent in its operations. These standards require the computation of a risk-based capital amount which is then compared to a company's actual total adjusted capital. Based upon current calculation using these risk- based capital standards, the Company's percentage of total adjusted capital is in excess of ratios which would require regulatory attention. The Company has no long or short term debt. As of March 30, 2000, 99% of the Company's fixed maturity investments consisted of investment grade bonds. The Company does not expect this percentage to change significantly in the future. Regulation The Company is subject to the laws and regulations established by the New York State Insurance Department governing insurance business conducted in New York State. Periodic audits are conducted by the New York Insurance Department related to the Company's compliance with these laws and regulations. To date, there have been no adverse findings regarding the Company's operations. Year 2000 The Company utilizes computer systems to process Company businesses. Fortis Inc., the Company's parent ("Fortis"), created a Year 2000 Project Office which was dedicated to ensuring that all of the systems for Fortis and its subsidiaries and affiliates were ready for Year 2000. The estimated total cost of the Fortis Year 2000 Project was approximately $85 million. The Company is not incurring any cost for the Year 2000 project since it is being paid for by affiliates of the Company. As of December 20, 1999, 100% of the computer system lines of code that had been identified were renovated and tested and were ready for year 2000. Although there have been several minor matters, as of March 31, 2000, no significant disruptions resulting from the century date change have been detected. The Company will continue to monitor the status of and exposure to any potential Year 2000 issues. PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders a.None b.None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a.None b.No Forms 8-K have been filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this repot to be signed on its behalf by the undersigned thereunto duly authorized. First Fortis Life Insurance Company (Registrant) /s/ Larry M. Cains _____________________________________________ Larry M. Cains Treasurer Date: May 12, 2000 EX-27 2
7 0000914804 FIRST FORTIS LIFE INSURANCE COMPANY 1000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 128,512 0 0 0 0 0 128,512 1,494 32,475 3,916 252,804 110,577 9,644 13,361 0 0 2,000 0 0 33,449 252,804 15,645 2,292 (727) 321 13,998 85 4,489 (1,041) (364) (677) 0 0 0 (677) 0 0 63,788 0 0 0 0 0 0
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