-----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, TaQPdlyiEVBPVihcajnhFfHaZHVpEN6c6TSUD8h0fSHczezE9AG9/qdSTV+TTXvi goc+NQ2uqeaKvDt7RegngQ== 0000086317-98-000079.txt : 19980515 0000086317-98-000079.hdr.sgml : 19980515 ACCESSION NUMBER: 0000086317-98-000079 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD 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: 98619316 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, 1998 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 33-71690 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.) 220 SALINA MEADOWS PARKWAY,SUITE 255,SYRACUSE, NY 13212 (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 per share data) March 31, December 31, 1998 1997 (unaudited) ASSETS Investments: Fixed maturities, at fair value (amortized cost 1998--$118,064; 1997--$102,284) $121,097 $105,776 Short-term investments 1,950 11,697 123,047 117,473 Cash and cash equivalents 4,174 7,453 Receivables: Uncollected premium, less allowance of $100 3,072 2,358 Reinsurance recoverable on paid and unpaid losses 22,727 19,764 Other 1,296 1,402 27,095 23,524 Accrued investment income 1,922 1,700 Deferred policy acquisition costs 1,810 1,413 Property and equipment at cost, less accumulated depreciation (1998--$1,920; 1997--$1,853) 577 676 Deferred federal income tax 2,065 2,079 Goodwill, less accumulated amortization (1998--$333; 1997--$322) 497 508 Assets held in separate accounts 21,279 16,072 Total assets $182,466 $170,898 See accompanying notes. FIRST FORTIS LIFE INSURANCE COMPANY RESERVES, LIABILITIES AND SHAREHOLDER'S EQUITY (In thousands, except per share data) March 31, December 31, 1998 1997 (unaudited) POLICY RESERVES AND LIABILITIES Future policy benefit reserves: Life insurance $ 28,585 $ 27,671 Interest sensitive and investment products 8,221 6,878 Accident and health 64,432 61,175 101,238 95,724 Unearned revenues 5,865 5,223 Other policy claims and benefits payable 10,967 10,304 Income taxes payable 856 911 Other liabilities 6,041 5,583 Liabilities related to separate accounts 21,279 16,072 Total policy reserves and liabilities 146,246 133,817 SHAREHOLDER'S EQUITY: Common stock, $20 par value, 100,000 shares authorized and outstanding 2,000 2,000 Additional paid-in capital 37,440 37,440 Retained deficit (5,204) (4,642) Unrealized gain on investments, net 1,984 2,283 Total shareholder's equity 36,220 37,081 Total policy reserves, liabilities, and shareholder's equity $182,466 $170,898 See accompanying notes. FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS (In thousands) (Unaudited) Three months ended March 31, 1998 1997 REVENUES Insurance operations: Life insurance premiums $5,198 $4,630 Interest sensitive and investment products policy charges 11 - Accident and health premiums 7,644 8,783 Net investment income 1,992 1,956 Realized gains (losses) on investments 369 (81) Other income 239 134 TOTAL REVENUES 15,453 15,422 BENEFITS AND EXPENSES Benefits to policyholders: Life insurance 4,514 3,194 Interest sensitive and investment products 156 - Accident and health 7,546 10,002 Amortization of deferred policy acquisition costs (47) - Insurance commissions 1,147 1,019 General and administrative expenses 3,001 3,023 TOTAL BENEFITS AND EXPENSES 16,318 17,238 LOSS BEFORE FEDERAL INCOME TAXES (865) (1,816) Federal income taxes benefit (303) (617) NET LOSS $(562) $(1,199) See accompanying notes. FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three months ended March 31, 1998 1997 OPERATING ACTIVITIES Net loss $ (562) $(1,199) Adjustments to reconcile net loss to net cash provided by operating activities: Loss on disposal of property and equipment 11 - Increase in future policy benefit reserves and other policy claims and benefits 5,474 2,283 (Increase) decrease in federal income taxes 121 (617) Increase in other liabilities 458 1,172 Depreciation, amortization and accretion (300) 193 Increase in uncollected premiums, accrued investment income and other (831) (691) Increase in reinsurance recoverable (2,963) (852) Net realized (gains) losses on investments (369) 80 NET CASH PROVIDED BY OPERATING ACTIVITIES 1,039 369 INVESTING ACTIVITIES Purchases of fixed maturity investments (72,054) (36,380) Sales or maturities of fixed maturity investments 56,644 35,781 Increase (decrease)in equity securities and short-term investments 9,747 (600) Purchase of property and equipment - (21) NET CASH USED BY INVESTING ACTIVITIES (5,663) (1,220) FINANCING ACTIVITIES Activities related to investment products: Considerations received 3,731 257 Surrenders and death benefits (2,542) (33) Interest credited to policyholders 156 4 NET CASH PROVIDED BY FINANCING ACTIVITIES 1,345 228 INCREASE (DECREASE) IN CASH (3,279) (623) Cash and cash equivalents at beginning of period 7,453 1,545 CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,174 $ 922 See accompanying notes. /TABLE FIRST FORTIS LIFE INSURANCE COMPANY Notes to Financial Statements March 31, 1998 (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, 1998 and the related statements of operations for the three months ended March 31, 1998 and 1997, and cash flows for the three months ended March 31, 1998 and 1997. 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, 1998, 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, 1998 (in thousands):
Gross Gross Amortized Unrealized Unrealized Fair Cost Gain Loss Value Fixed Income Securities: Governments $ 22,186 $ 132 $123 $ 22,195 Public Utilities 8,205 228 5 8,428 Industrial and miscellaneous 87,673 2,917 116 90,474 Total $118,064 $3,277 $244 $121,097
The amortized cost and fair value of fixed maturities at March 31, 1998, 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. FIRST FORTIS LIFE INSURANCE COMPANY Notes to Financial Statements March 31, 1998 (unaudited) Amortized Fair Cost Value Due in one year or less $ 1,255 $ 1,261 Due after one year through five years 53,101 53,867 Due after five years through ten years 25,130 25,636 Due after ten years 38,578 40,333 $118,064 $121,097
Proceeds from sales and maturities of fixed maturity securities were $24,037,000 and $32,607,000 for the three month period ended March 31, 1998 and 1997, respectively. Gross gains of $478,000 and $188,000 and gross losses of $109,000 and $269,000 were realized on the sales during the three month period ended March 31, 1998 and 1997. 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 Gain (Loss) Investment Income on Investments 1998 1997 1998 1997 Fixed maturities $1,880 $2,011 $369 $(81) Short-term investments 134 (10) - - 2,014 2,001 $369 $(81) Expenses (22) (45) Net investment income $1,992 $1,956 /TABLE Management's Discussion and Analysis of Financial Condition and Results of Operations March Year-to-Date 1998 Compared to March Year-to-Date 1997 Revenues First Fortis' (the 'Company') insurance premiums decreased during the first quarter of 1998 as compared to the first quarter of 1997. This decrease was substantially attributable to the Company's decision, effective January 1, 1996, to cease new sales of group medical policies. The Company continues to service the existing group medical business. The decision to effectively exit the group medical business has reduced annualized premiums associated with this line from $11.4 million inforce at January 1, 1997 to a current inforce of $5.5 million in premium. Accident and health premiums are principally composed of group accident and health coverages. The discontinuance of group medical sales and strong dental sales have caused the group accident and health premium mix to shift. First quarter disability income, dental, and medical premium represented 39%, 43%, and 18%, respectively, of total group accident and health premium in 1998 compared to 39%, 32%, and 29%, respectively, in 1997. The Company continues to match investment portfolio composition to liquidity needs and capital requirements. Changes in interest rates during 1998 and 1997 resulted in recognition of realized gains and losses upon sales of securities. Benefits The decrease in accident and health benefits in the first three months of 1998 as compared to the same period in 1997 is primarily due to improved experience in the group medical products. Slightly offsetting this is a larger volume of new group long term disability claims. 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 are relatively flat in the first quarter of 1998 from the same period in 1997. The Company continues to strive for improvements in the expense to gross revenue ratio, while maintaining quality and timely services to the policyholders. Year 2000 The Year 2000 issue is the result of computer programs having been written using two digits rather than four to define a year. Any programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than 2000. This could result in the failure of major systems or miscalculations, which could have a material impact on the operations of the Company and any of its businesses or subsidiaries. All of the Company's major businesses are heavily dependent upon internal computer systems, and many have significant interaction with systems of third parties. A comprehensive review of the Company's computer systems and business processes has been conducted to identify the major systems that could be affected by the Year 2000 issue. Steps are being taken to resolve any potential problems including modification to existing software and the purchase of new software. These measures are scheduled to be completed and tested on a timely basis. The Company's goal is to complete internal remediation and testing of each system by early 1999. The costs related to the Year 2000 issue are not expected to have a material impact on the Company's results of financial condition. This expectation is subject to uncertainties that could cause actual results to differ materially. Factors that could influence the total costs to be incurred by the Company in connection with the Year 2000 issue include the ability of the Company to successfully identify systems containing two-digit year codes, the nature and amount of programming required to fix the affected programs, the related labor and consulting costs for such remediation, and the ability of third parties that interface with the Company to successfully address their Year 2000 issues. The Company is evaluating the Year 2000 readiness of advisors and other third parties whose system failures could have an impact on the Company's operations. The potential materiality of any such impact is not entirely known at this time. The Company is closely monitoring these entities to avoid any unforeseen circumstances. 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 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 31, 1998, 97% of the Company's fixed maturity investments consisted of investment grade bonds, and 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. 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 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 report to be signed on its behalf by the undersigned thereunto duly authorized. First Fortis Life Insurance Company (Registrant) Date: May 13, 1998 /s/ Larry M. Cains Treasurer EX-27 2
7 0000914804 FIRST FORTIS LIFE INSURANCE COMPANY 1000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 123,047 0 0 0 0 0 123,047 4,174 22,727 0 182,466 101,238 0 10,967 0 0 2,000 0 0 34,220 182,466 12,853 1,992 369 239 12,216 (47) 4,148 (865) (303) (562) 0 0 0 (562) 0 0 60,498 0 0 0 0 0 0
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