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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2003

OR

For the transition period                      from to                     

Commission file number 333-69620

GE Life and Annuity Assurance Company

(Exact name of registrant as specified in its charter)

(804) 281-6000

(Registrant’s telephone number, including area code)

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  þ    No  ¨

At May 2, 2003, 25,651 shares of common stock with a par value of $1,000.00 were outstanding. The common stock of GE Life and Annuity Assurance Company is not publicly traded.

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PART I—FINANCIAL INFORMATION

Item 1.    Condensed, Consolidated Financial Statements

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Statements of Current and Retained Earnings

(Dollar amounts in millions)

(Unaudited)

See Notes to Condensed, Consolidated Financial Statements.

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GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Balance Sheets

(Dollar amounts in millions except per share amounts)

(Unaudited)

See Notes to Condensed, Consolidated Financial Statements.

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GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Statements of Cash Flows

(Dollar amounts in millions)

(Unaudited)

See Notes to Condensed, Consolidated Financial Statements.

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GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Notes to Condensed, Consolidated Financial Statements

(Dollar amounts in millions)

(Unaudited)

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The following is a summary of assets by operating segment:

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The result of testing goodwill of the Company for impairment in accordance with SFAS 142, as of January 1, 2002, was no goodwill impairment charge. Goodwill is tested for impairment at least annually using a fair value approach, which requires the use of estimates and judgements. To the extent the carrying amount of a reporting unit’s goodwill exceeds its fair value, an impairment charge would be recorded.

Intangibles Subject to Amortization

Amortization expense related to intangible assets, excluding goodwill, for the first quarter of 2003 and 2002 was $7.2 million and $7.8 million, respectively. The estimated percentage of the December 31, 2002 net PVFP balance before the effect of unrealized investment gains or losses, to be amortized over each of the next five years is as follows:

Amortization expense for PVFP in future periods will be affected by acquisitions, realized capital gains/losses or other factors affecting the ultimate amount of gross profits realized from certain lines of business. Similarly, future amortization expense for other intangibles will depend on future acquisitions, dispositions and other business transactions.

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Goodwill

Item 2.     Management’s Discussion and Analysis of Results of Operations and Financial Condition

Overview

Earnings before income taxes for the first three months of 2003 were $36.3 million, a $12.8 million, or 26.1%, decrease from the first three months of 2002. The decline in the equity markets has adversely impacted our product fee revenues and resulted in an increased amortization expense of deferred acquisition costs on certain variable annuities products. Declining interest rates during the quarter have resulted in lower investment yields on our fixed maturity portfolio, partially offset by reduced interest crediting rates on certain of our contracts.

Operating Results

Net investment income decreased $16.8 million, or 10.9%, to $137.9 million for the first three months of 2003 from $154.7 million for the first three months of 2002. The decrease was primarily a result of a decrease in weighted average investment yields to 4.69% for the first three months of 2003 from 5.25% for the first three months of 2002 due to the overall declining interest rate environment in addition to a block of floating rate securities included in the portfolio. Average invested assets were relatively unchanged ($11,819 million in the first three months of 2003 as compared to $11,800 million in the first three months of 2002).

Net realized investment gains increased $5.6 million to $19.0 million, or 41.8%, for the first three months of 2003 from $13.4 million for the first three months of 2002. For 2003, gross gains and (losses) were $28.8 million and $(9.8) million, respectively. Impairment losses recognized for 2003 were $2.8 million ($1.8 million after tax). There were no securitizations in the first three months of 2003. For 2002, gross gains and (losses) were $30.4 million and $(17.0) million, respectively. Included in the first three months of 2002 gross realized investment gains were $5.8 million resulting from the securitization of certain financial assets. We seek to offset investment losses realized from other than temporary impairments and portfolio repositioning with investments gains.

Cost of insurance increased $5.7 million, or 18.0%, to $37.3 million for the first three months of 2003 from $31.6 million for the first three months of 2002. The increase was primarily a result of premium refunds received in the first three months of 2003 from a terminated reinsurance treaty.

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Variable product fees decreased $7.7 million, or 24.4%, to $23.9 million for the first three months of 2003 from $31.6 million for the first three months of 2002. The decrease in variable product fees primarily resulted from a decline in the daily average separate account values as a result of the unfavorable conditions in the equity markets.

Interest credited decreased $15.0 million, or 12.7%, to $103.5 million in the first three months of 2003 from $118.5 million in the first three months of 2002. This decrease was primarily attributable to the decline in the institutional stable value product liabilities and crediting rates.

Benefits and other changes in policy reserves include both activity related to future policy benefits on long-duration life and health products as well as claim costs incurred during the year under these contracts. In addition, the bonus feature of our bonus variable annuity product is initially accounted for as a benefit. Benefits and other changes in policy reserves increased $2.5 million, or 5.0%, to $52.4 million in the first three months of 2003 from $49.9 million in the first three months of 2002. The increase primarily relates to higher renewal premiums of Medicare supplemental products and slightly higher sales of our bonus variable annuity product, coupled with an increase in the bonus rate from 4.0% to 5.0%.

Commissions increased $3.2 million, or 11.3%, to $31.4 million in the first three months of 2003 from $28.2 million in the first three months of 2002. In the second quarter of 2002, we launched a new variable annuity, GE Retirement Answer (“GERA”). The increase in commission expense was primarily attributable to the new sales of GERA.

General expenses were $25.8 million for the first three months of 2003, an increase of $3.9 million or 17.8% over the first three months of 2002 expense of $21.9 million. The increase is primarily the result of higher legal expenses.

Change in deferred acquisition costs, net changed $2.5 million, or 30.5%, to ($5.7) million for the first three months of 2003 from ($8.2) million for the first three months of 2002. Deferred acquisition costs include costs and expenses which vary with and are primarily related to the acquisition of insurance and investment contracts. These costs and expenses include commissions, printing, underwriting, policy issuance costs and the bonus feature of a certain variable annuity product. Under U.S. GAAP, these costs are deferred and recognized, over time, in relation to either premiums or gross profits underlying the contracts. The change is primarily a result of an additional $4.4 million of amortization expense resulting from adverse equity market performance offset by an increase in commission expense and other sales related expenses deferred for the new sales of GERA.

Provision for income taxes decreased $5 million, or 30.5%, to $11.4 million for the first three months of 2003 from $16.4 million for the comparable period in 2002. The effective tax rate of 31.4% for the first three months of 2003 was 2 percentage points lower than the effective tax rate of 33.4% for the comparable period in 2002. This decrease is attributable primarily to the impact of recurring permanent tax benefits on lower pre-tax income.

Financial Condition

Total investments. Total investments increased $639.1 million, or 5.5%, at March 31, 2003 from December 31, 2002. This increase was primarily a result of net purchases of securities and other invested assets.

Investment securities comprise mainly investment grade debt securities. Investment securities were $10,581.5 million, including gross unrealized gains and (losses) of $351.7 million and ($205.2) million, respectively at March 31, 2003 and $10,073.9 million, including gross unrealized gains and (losses) of $258.6 million and ($235.8) million, respectively, at December 31, 2002. Market value for these purposes is defined by relevant accounting standards and should not be viewed as a forecast of future gains or losses. We estimate that available gains, net of hedging position and estimated impairment of intangibles and other insurance related assets, could be as much as $130 million.

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We regularly review investment securities for impairment based on criteria that includes the extent to which cost exceeds market value, the duration of that market decline, and the financial health and specific prospects for the issuer. Of securities where carrying value exceeds fair value at March 31, 2003, approximately $45 million is at risk of being charged to earnings in the succeeding twelve months. Impairment losses recognized for the first three months of 2003 and 2002, were $2.8 million ($1.8 million after tax) and $0, respectively.

Separate account assets and liabilities. Separate account assets and liabilities represent funds held for the exclusive benefit of variable annuity and variable life contract holders. As of March 31, 2003, we held $6,650.4 million of separate account assets. The decrease of $532.4, or 7.4%, from $7,182.8 million at December 31, 2002 was related primarily to the overall decreased market value of the underlying investment funds and higher lapses from our no surrender charge product.

Future annuity and contract benefits. Future annuity and contract benefits increased $66.8 million to $10,838.3 million at March 31, 2003 from $10,771.5 million at December 31, 2002. The increase is primarily attributable to an increase in liabilities for the variable annuity fixed account investment option resulting from changes in customer investment choices. This increase was partially offset by the institutional stable value liability decline, which resulted from maturities exceeding new sales.

Liability for policy and contract claims. Liability for policy and contract claims decreased $113.0 million, to $127.4 million at March 31, 2003 from $240.4 million at December 31, 2002. The decrease was primarily attributable to the institutional stable value maturities and interest payments.

Accounts payable and accrued expenses. Accounts payable and accrued expenses increased $520.5 million, to $656.7 million at March 31, 2003 from $136.2 million at December 31, 2002. The increase is primarily attributable to the timing of settlement of trades related to investments resulting in increased balances payable to brokers.

Liquidity

For the three months ended March 31, 2003 and 2002 cash flows provided by (used in) operating and certain financing activities were $167.6 million and ($262.5) million, respectively. These amounts include net cash used in financing activities relating to investment contract issuances accounted for as deposit liabilities under U.S. GAAP and redemptions of $25.8 million and $259.9 million, respectively. We maintain a committed credit line with an indirect parent, GNA, of $500 million to provide liquidity to meet normal variation in cash. The amount outstanding as of March 31, 2003 was $21.3 million and is included in accounts payable and accrued expenses in the Condensed, Consolidated Balance Sheets.

Forward-Looking Statements

This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements which represent our belief regarding potential investments gains and losses. These statements are based on our current expectation and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global economic, business, competitive market, and regulatory factors. We undertake no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future developments or otherwise.

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Item 3.     Quantitative and Qualitative Disclosures about Market Risk

There were no material changes during the three months ended March 31, 2003 to our exposure to market risk for changes in interest rates and foreign currency exchange rates.

Item 4.     Controls and Procedures

Within the 90-day period prior to filing this report, we, including the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in the Exchange Act Rule 13a-14(c). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the date of evaluation. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and the Chief Financial Officer completed their evaluation.

PART II—OTHER INFORMATION

Item 1.     Legal Proceedings

We, like other insurance companies, are involved in lawsuits, including class action lawsuits. In some class action and other lawsuits involving insurance companies, substantial damages have been sought and/or material settlement payments have been made. Except for the McBride case described below, the ultimate outcome of which, and any effect on us, cannot be determined at this time, management believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse impact on our Consolidated Financial Statements.

On November 1, 2000, GE Life and Annuity Assurance Company (“GE Life”) was named as a defendant in a lawsuit filed in Georgia state court related to the sale of universal life insurance policies (McBride v. Life Insurance Co. of Virginia dba GE Life and Annuity Assurance Co.). On December 1, 2000, we successfully removed the case to the United States District Court for the Middle District of Georgia. The complaint is brought as a class action on behalf of all persons who purchased certain universal life insurance policies from GE Life and alleges improper sales practices in connection with the sale of universal life policies. No class has been certified. On February 27, 2002, the Court denied our motion for summary judgment. We have vigorously denied liability with respect to the plaintiff’s allegations and the ultimate outcome, and any effect on us, of the McBride litigation cannot be determined at this time.

Item 6.     Exhibits and Reports on Form 8-K

a.  Exhibits

b.  Reports on Form 8-K during the quarter ended March 31, 2003.

     None

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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.

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CERTIFICATIONS

I, Pamela S. Schutz, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of GE Life and Annuity Assurance Company.

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.  The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 2, 2003

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I, Kelly L. Groh, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of GE Life and Annuity Assurance Company.

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.  The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 2, 2003

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