-----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, JizMe/7E24ngs7HBoSHGOVkr99rxMDsUI3a0/mZJeZQTq/lKeIsjn6rmjTvQfgza UFLdn8fDLg+uWhqJ0mW/bw== 0000086317-97-000116.txt : 19971117 0000086317-97-000116.hdr.sgml : 19971117 ACCESSION NUMBER: 0000086317-97-000116 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: 97718165 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 September 30, 1997 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 13220 (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 September 30, December 31, 1997 1996 (unaudited) ASSETS Investments: Fixed maturities, at fair value (amortized cost: $104,840,679 at September 30, 1997, $111,970,939 at December 31, 1996) $ 107,419,594 $113,136,650 Short-term investments 11,049,625 0 118,469,219 $113,136,650 Cash 4,207,983 1,544,745 Receivables: Uncollected premium, less allowance of $100,000 1,156,660 3,890,111 Reinsurance recoverable on paid and unpaid losses 18,088,686 14,731,285 Prepaid federal income taxes and other 3,768,591 4,311,855 23,013,937 22,933,251 Accrued investment income 1,730,384 1,739,498 Property and equipment, at cost, less accumulated depreciation (1997--$1,738,874; 1996--1,395,517) 790,505 1,027,576 Goodwill 519,500 554,000 Assets held in separate accounts 10,375,869 2,203,109 Total Assets $ 159,107,397 $143,138,829 See accompanying notes. FIRST FORTIS LIFE INSURANCE COMPANY RESERVES, LIABILITIES AND SHAREHOLDER'S EQUITY September 30, December 31, 1997 1996 (unaudited) POLICY RESERVES AND LIABILITIES Future policy benefit reserves: Traditional life insurance $ 31,522,760 $25,225,095 Accident and health 63,402,702 60,774,384 94,925,462 85,999,479 Other policy claims and benefits payable 12,613,677 14,798,802 Other liabilities 6,232,448 4,445,831 Liabilities related to separate accounts 10,375,869 2,203,109 Total policy reserves and liabilities 124,147,456 107,447,221 SHAREHOLDER'S EQUITY Common stock, $20 par value, 100,000 shares authorized and outstanding 2,000,000 2,000,000 Additional paid-in capital 37,440,000 37,440,000 Retained deficit (6,182,142) (4,517,761) Unrealized appreciation of investment securities, net 1,702,083 769,369 Total Shareholder's equity 34,959,941 35,691,608 Total reserves, liabilities, and shareholder's equity $159,107,397 $143,138,829 See accompanying notes. FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS (Unaudited) Nine months ended September 30, 1997 1996 REVENUES Insurance operations: Traditional life insurance premiums $14,663,549 $18,007,966 Accident and health premiums 24,883,107 37,596,779 Net investment income 5,933,778 5,943,158 Realized gains (losses) on investments 153,109 (447,454) Other income 466,574 143,020 TOTAL REVENUES 46,100,117 61,243,469 BENEFITS AND EXPENSES Benefits to policyholders: Traditional life insurance 11,837,725 15,687,372 Accident and health 23,981,875 32,431,262 Insurance commissions 3,370,316 4,089,666 General and administrative expenses 9,470,735 9,481,274 TOTAL BENEFITS AND EXPENSES 48,660,651 61,689,573 LOSS BEFORE INCOME TAXES (BENEFIT) (2,560,533) ( 446,104) Federal Income Taxes (Benefit) (896,153) ( 128,030) NET LOSS $(1,664,381) $( 318,074) See accompanying notes. FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS (Unaudited) Three months ended September 30, 1997 1996 REVENUES Insurance operations: Traditional life insurance premiums $4,978,272 $ 5,761,379 Accident and health premiums 7,660,586 10,283,974 Net investment income 2,016,681 1,977,664 Realized gains (losses) on investments 251,239 136,942 Other income 194,354 37,932 TOTAL REVENUES 15,101,132 18,197,891 BENEFITS AND EXPENSES Benefits to policyholders: Traditional life insurance 4,728,291 3,294,551 Accident and health 6,351,235 6,971,883 Insurance commissions 1,063,915 1,387,660 General and administrative expenses 3,408,207 2,979,372 TOTAL BENEFITS AND EXPENSES 15,551,648 14,633,466 LOSS BEFORE INCOME TAXES (BENEFIT) ( 450,516) 3,564,426 Federal Income Taxes (Benefit) (157,596) 1,275,269 NET LOSS $( 292,920) $ 2,289,157 See accompanying notes. FIRST FORTIS LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended September 30, 1997 1996 OPERATING ACTIVITIES Net loss $(1,664,381) $(318,074) Adjustments to reconcile net loss to net cash provided by operating activities: Loss on sale of property and equipment 0 56,475 Increase in future policy benefit reserves and other policy claims and benefits 2,431,535 4,671,051 (Increase) decrease in federal income taxes (1,288,186) 1,583,053 Increase in other liabilities 2,182,957 72,535 Depreciation, amortization and accretion 563,952 608,845 (Increase)decrease in uncollected premiums, accrued investment income and other 3,688,560 (1,402,500) (Increase)in reinsurance recoverable (3,357,401) (4,248,030) Net realized (gains) losses on investments (153,109) 447,454 Other 8,622 - NET CASH PROVIDED BY OPERATING ACTIVITIES 2,412,549 1,470,809 INVESTING ACTIVITIES Purchases of fixed maturity investments (114,541,122) (102,455,310) Sales or maturities of fixed maturity investments 121,638,397 97,274,337 (Increase)decrease in equity securities and short-term investments (11,049,625) 3,442,029 Proceeds from sale of property and equipment 0 6,006 Purchase of property and equipment (106,285) (239,345) NET CASH USED BY INVESTING ACTIVITIES (4,058,635) (1,972,283) FINANCING ACTIVITIES Activities related to investment products: Considerations received 5,036,202 0 Surrenders and death benefits (794,010) 0 Interest credited to policyholders 67,132 0 NET CASH PROVIDED BY FINANCING ACTIVITIES 4,309,324 0 INCREASE (DECREASE) IN CASH 2,663,238 (501,474) Cash and cash equivalents at beginning of period 1,544 745 1,145,131 CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,207,983 $ 643,657 See accompanying notes. /TABLE FIRST FORTIS LIFE INSURANCE COMPANY Notes to Financial Statements September 30, 1997 (unaudited) General: The accompanying unaudited financial statements of First Fortis Life Insurance Company (the "Company") contain all adjustments necessary to present fairly the balance sheet as of September 30, 1997 and the related statements of operations for the nine months ended September 30, 1997 and 1996, and cash flows for the nine months ended September 30, 1997 and 1996. The Company was purchased by Fortis, Inc. from Fortis Amev, NV on April 30, 1997 for $33,042,000. Federal Income Taxes: As of September 30, 1997 and December 31, 1996, respectively, the Company had a deferred tax asset valuation allowance of $1,338,000. 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 September 30, 1997, 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 September 30, 1997:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gain Loss Value Fixed Income Securities: Governments $ 5,422,486 $ 101,892 $ 0 $ 5,524,378 Public Utilities 8,603,008 253,262 0 8,856,270 Industrial and miscellaneous 90,815,185 2,307,718 ( 83,958) 93,038,946 Total $ 104,840,679 2,662,872 ( 83,958) 107,419,594
The amortized cost and fair value of fixed maturities at September 30, 1997, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call FIRST FORTIS LIFE INSURANCE COMPANY Notes to Financial Statements September 30, 1997 (unaudited) or prepay obligations with or without call or prepayment penalties. Amortized Fair Cost Value Due in one year or less $ 649,895 $ 649,591 Due after one year through five years 44,026,446 44,759,938 Due after five years through ten years 20,637,168 21,156,626 Due after ten years 39 527,170 40,853,439 $104,840,679 $107,419,594
Proceeds from sales and maturities of fixed maturity securities were $121,638,397 and $97,274,337 for the nine month period ended September 30, 1997 and 1996, respectively. Gross gains of $922,217 and $1,040,322 and gross losses of $769,108 and $1,487,776 were realized on the sales during the nine month period ended September 30, 1997 and 1996. 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 nine months of each year were as follows: Investment Realized Gain (Loss) Income on Investments 1997 1996 1997 1996 Fixed maturities $5,891,606 $5,927,316 $153,109 $(447,454) Short-term investments 169,867 228,683 - - 6,061,473 6,155,999 $153,109 $(447,454) Expenses (127,695) (212,841) Net investment income $5,933,778 $5,943,158
REINSURANCE In the second quarter 1996, the Company received approval from the New York State Insurance Department of a reinsurance agreement with Fortis Benefits Insurance Company ("Fortis Benefits"), an affiliate. The agreement, which became effective as of January 1, 1996, decreased the Company's long term disability reinsurance retention from a $10,000 net monthly benefit to a $2,000 net monthly benefit for claims incurred on and after January 1, 1996. For the nine months ended September 30, 1997, the Company has ceded $4,081,000 of premium to Fortis Benefits. At September 30, 1997, Fortis Benefits has assumed $5,797,340 of reserve liabilities from the Company. The agreement is expected to reduce the variability of financial results for this product line. Separate Accounts The Company began selling variable annuity products in 1996. Assets and liabilities associated with separate accounts relate to premium and annuity considerations for which the contractholder, rather than the Company, bears the investment risk. Separate account assets are reported at fair value. Revenues and expenses related to the separate account assets and liabilities, to the extent of benefits paid or provided to the separate account contractholders, are excluded from the amounts reported in the accompanying statements of operations. Management's Discussion and Analysis of Financial Condition and Results of Operations September Year-to-Date 1997 Compared to September Year- to-Date 1996 Revenues First Fortis' (the "Company") insurance premiums decreased during the first nine months of 1997 as compared to the first nine months of 1996. This decrease was substantially attributable to the following: (1) effective January 1, 1996, the Company ceased new sales of group medical policies, however, the Company continues to service the existing group medical business. The decision to effectively exit the group medical business has reduced premiums associated with this line from a peak in 1996 of $26 million inforce to a current inforce of $7 million in revenue; and, (2) during the last six months of 1996, the annualized premium of Group Life ($2.6 M), Group LTD ($1.4 M) and Group Dental ($7.0 M) of business written through one third party administrator was lapsed. Historically, the benefit loss experience related to this business was worse than the experience from the Company's remaining business. The loss of this business should have minimal impact on overall operating results. On-going marketing efforts have continued to generate new group life, variable annuity, group disability income, group dental and credit life and health business. The Company continues to match investment portfolio composition to liquidity needs and capital requirements. Changes in interest rates during 1997 and 1996 resulted in recognition of realized gains and losses. Benefits During the first three quarters of 1996, the Company's group life claims ratio was higher than expected as a result of increased mortality and larger average claim amounts. Consistent with the last six months of 1996, during the first three quarters of 1997, the Company's group life mortality experience and average claim amounts continued to remain low. During the first three quarters of 1997, group disability income had an increase in the average new claim size as compared to 1996. The Company's group dental claims ratio was higher than expected during the first three quarters of 1997 as a result of higher benefit utilization rates and an increase in dental care costs. 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. As the Company's inforce medical lives continue to decrease, the Company continues to experience a reduction in medical insurance related administrative expenses. Some fixed costs related to the medical business remain with the Company. 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 September 30, 1997, 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: November 13, 1997 /s/ Larry M. Cains Treasurer EX-27 2
7 0000914804 FIRST FORTIS LIFE INSURANCE COMPANY 1 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 118,469,219 0 0 0 0 0 118,469,219 4,207,983 18,088,686 0 159,107,397 94,925,462 0 12,613,677 0 0 2,000,000 0 0 32,959,941 159,107,397 39,546,656 5,933,778 153,109 466,574 35,819,600 0 0 (2,560,534) (896,153) (1,664,381) 0 0 0 (1,664,381) 0 0 61,481,436 0 0 0 0 0 0
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