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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, 2002
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
1
FIRST FORTIS LIFE INSURANCE COMPANY
BALANCE SHEET
(In thousands, except share data)
SEPTEMBER 30, DECEMBER 31,
2002 2001
-------------------------------------------
ASSETS (UNAUDITED)
Investments:
Fixed maturities, at fair value (amortized cost 2002 - $166,838; $ 174,231 $ 161,583
2001 - $158,417)
Preferred stock 2,962 2,640
Policy loans 17 6
Short-term investments 8,721 6,601
Real estate and other investment 426 474
-------------------------------------------
186,357 171,304
Cash and cash equivalents 4,291 5,598
Receivables:
Uncollected premiums, less allowance (2002 and 2001 - $100) 2,319 3,830
Reinsurance recoverable on unpaid and paid losses 107,283 107,443
Other 1,774 3,274
Intercompany receivables 39 1,974
-------------------------------------------
111,415 116,521
Accrued investment income 2,572 2,488
Deferred policy acquisition costs 1,712 3,760
Property and equipment at cost, less accumulated depreciation (2002 -
$1,738; 2001 - $1,729) 18 60
Deferred federal income taxes 5,082 5,953
Goodwill, less accumulated amortization (2002 and 2001 - $506) 1,949 1,949
Assets held in separate accounts 44,761 66,341
-------------------------------------------
Total assets $ 358,157 $ 373,974
===========================================
See accompanying notes
2
FIRST FORTIS LIFE INSURANCE COMPANY
BALANCE SHEET
(In thousands, except share data)
SEPTEMBER 30, DECEMBER 31,
2002 2001
-----------------------------------------
(UNAUDITED)
POLICY RESERVES, LIABILITIES AND SHAREHOLDER'S EQUITY
Policy reserves and liabilities:
Future policy benefit reserves:
Life insurance $ 63,006 $ 65,123
Interest sensitive and investment products 6,205 5,010
Accident and health 86,497 81,578
-----------------------------------------
155,708 151,711
Unearned revenues 26,093 27,048
Other policy claims and benefits payable 31,361 31,877
Income taxes payable 2,617 6,537
Other liabilities 32,429 31,160
Liabilities related to separate accounts 44,761 66,341
-----------------------------------------
Total policy reserves and liabilities 292,969 314,674
-----------------------------------------
Shareholder's equity:
Common stock, $20 par value: authorized, issued and outstanding 2,000 2,000
shares --100,000
Additional paid-in capital 43,006 43,006
Retained earnings 15,575 12,047
Unrealized gain on investments 4,607 2,247
-----------------------------------------
Total shareholder's equity 65,188 59,300
-----------------------------------------
Total policy reserves, liabilities and shareholder's equity $ 358,157 $ 373,974
=========================================
See accompanying notes
3
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENT OF INCOME
(In thousands, except share data)
NINE MONTHS ENDED
SEPTEMBER 30,
2002 2001
--------------------------------------
(UNAUDITED) (UNAUDITED)
REVENUES:
Insurance operations:
Life insurance premiums $ 18,389 $ 15,419
Interest sensitive and investment product policy charges - 378
Accident and health insurance premiums 37,188 29,852
--------------------------------------
55,577 45,649
Net investment income 8,363 7,154
Net realized losses on investments (1,922) (355)
Other income 1,902 1,776
--------------------------------------
Total revenues 63,920 54,224
BENEFITS AND EXPENSES:
Benefits to policyholders:
Life insurance 14,603 10,529
Interest sensitive investment products 5 479
Accident and health claims 24,725 21,953
--------------------------------------
39,333 32,961
Amortization of deferred policy acquisition costs 1,986 180
Insurance commissions 6,401 4,654
General and administrative expenses 10,130 9,195
--------------------------------------
Total benefits and expenses 57,850 46,990
--------------------------------------
Income before federal income taxes 6,070 7,234
Income taxes expense
Current 2,942 6,760
Deferred (400) (4,228)
--------------------------------------
2,542 2,532
--------------------------------------
Net income $ 3,528 $ 4,702
======================================
Other comprehensive income:
Unrealized gain on investments 2,360 2,769
--------------------------------------
Comprehensive income $ 5,888 $ 7,471
======================================
See accompanying notes.
4
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENT OF INCOME
(In thousands, except share data)
THREE MONTHS ENDED
SEPTEMBER 30,
2002 2001
-------------------------------------
(UNAUDITED) (UNAUDITED)
REVENUES:
Insurance operations:
Life insurance premiums $ 5,564 $ 5,013
Interest sensitive and investment product policy charges - -
Accident and health insurance premiums 12,844 9,708
-------------------------------------
18,408 14,721
Net investment income 2,848 2,332
Net realized losses on investments (839) 57
Other income 583 717
-------------------------------------
Total revenues 21,000 17,827
BENEFITS AND EXPENSES:
Benefits to policyholders:
Life insurance 4,512 3,756
Interest sensitive investment products 1 1
Accident and health claims 8,957 6,089
-------------------------------------
13,470 9,846
Amortization of deferred policy acquisition costs (86) 15
Insurance commissions 491 1,680
General and administrative expenses 2,952 2,843
-------------------------------------
Total benefits and expenses 16,827 14,384
-------------------------------------
Income before federal income taxes 4,173 3,443
Income taxes expense
Current 2,082 1,578
Deferred (204) (373)
-------------------------------------
1,878 1,205
-------------------------------------
Net income $ 2,295 $ 2,238
=====================================
Other comprehensive income:
Unrealized gain on investments 3,747 2,073
-------------------------------------
Comprehensive income $ 6,042 $ 4,311
=====================================
See accompanying notes.
5
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOW
(In thousands, except share data)
NINE MONTHS ENDED
SEPTEMBER 30,
2002 2001
--------------------------------------
(UNAUDITED) (UNAUDITED)
OPERATING ACTIVITIES
Net income $ 3,528 $ 4,702
Adjustments to reconcile net income to net cash used in
operating activities:
Increase (decrease) in future policy benefit reserves and
other policy claims and benefits 2,526 5,609
Provision for deferred federal income taxes (400) (4,228)
(Increase) decrease in federal income taxes (3,919) 5,869
Decrease (increase) in other liabilities 2,954 209
Depreciation, amortization and accretion 2,090 63
Amortization of investment premiums, net (175) (146)
Amortization of gain on reinsurance transaction (1,686) (1,363)
Decrease in uncollected premiums, accrued investment
income and other 4,862 (705)
Decrease (increase) in reinsurance recoverable 160 (11,026)
Net realized loss (gain) on investments 1,922 355
--------------------------------------
Cash Used in Operating Activities 11,862 (661)
INVESTING ACTIVITIES
Purchases of fixed maturity investments (89,230) (35,145)
Sales or maturities of fixed maturity investments 77,118 49,073
Increase in equity securities and short-term investments (1,057) (25,194)
Cash received pursuant to reinsurance agreement - 10,789
--------------------------------------
Net Cash Provided By Investing Activities (13,169) (477)
FINANCING ACTIVITIES
Activities related to investment products:
Considerations received - 1,863
Surrenders and death benefits - (316)
Interest credited to policyholders - 84
--------------------------------------
Net Cash Provided By Financing Activities - 1,631
(Decrease) increase in cash (1,307) 493
Cash and cash equivalents at beginning of period 5,598 1,659
--------------------------------------
Cash and cash equivalents at end of period $ 4,291 $ 2,152
======================================
See accompanying notes.
6
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOW
(In thousands, except share data)
NINE MONTHS ENDED
SEPTEMBER 30,
2002 2001
-------------------------------
(Unaudited) (Unaudited)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
Assets and liabilities transferred in reinsurance transactions:
Non-cash Assets ceded:
Other Assets $ - $ (1,623)
Deferred acquisition costs - (3,957)
--------------- --------------
Total value of assets ceded $ - $ (5,580)
=============== ==============
Non-cash liabilities ceded:
Future policy benefits reserves $ - $ 7,125
Unearned premium reserves - (182)
Other liabilities - -
--------------- --------------
Total liabilities ceded $ - $ 6,943
=============== ==============
See accompanying notes
7
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
(In thousands, unaudited)
1. 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, 2002 and the related
statement of income for the nine months ended September 30, 2002 and
2001, and cash flow for the nine months ended September 30, 2002 and
2001.
Income tax payments for the nine months ended September 30, 2002 and
September 30, 2001 were $6,862 and $891 respectively.
2. INVESTMENTS
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, 2002 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, 2002 (in thousands):
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSS VALUE
----------------------------------------------------------------
Fixed Income Securities:
Governments $ 8,744 $ 780 $ - $ 9,524
Public utilities 14,820 1,090 402 15,508
Industrial and miscellaneous 143,274 9,471 3,546 149,199
--------------- --------------- ----------- --------------
Total $ 166,838 $ 11,341 $ 3,948 $ 174,231
=============== =============== =========== ==============
The amortized cost and fair value of available-for-sale investments in
fixed maturities at September 30, 2002 by contractual maturity are shown
below. 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 $ 6,203 $ 6,382
Due after one year through five years 28,056 29,389
Due after five years through ten years 53,423 55,587
Due after ten years 79,156 82,873
-------------- ---------------
Total $ 166,838 $ 174,231
============== ===============
8
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
(In thousands, unaudited)
Proceeds from sales and maturities of investments in fixed maturities in
the nine-month period ended September 30, 2002 and 2001 were $74,195 and
$49,073, respectively. Gross gains of $1,226 and $1,096 and gross losses
of $3,148 and $1,451 were realized on sales during the nine-month period
ended September 30, 2002 and 2001, respectively.
Net Investment Income and Net Realized 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 INCOME REALIZED GAIN (LOSS)
-----------------------------------------------------------
2002 2001 2002 2001
-----------------------------------------------------------
Fixed maturities $ 8,544 $6,622 $(1,922) $ (355)
Short-term investments 50 656
-----------------------------------------------------------
8,594 7,278 $(1,922) $ (355)
============================
Expenses (231) (124)
----------------------------
Net investment income $ 8,363 $7,154
============================
3. BANKERS AMERICAN LIFE ASSURANCE COMPANY
Effective as of November 30, 2001, the Company completed a statutory
merger in which Bankers American Life Assurance Company, a New York
insurance company (BALAC), merged with and into the Company (the Merger).
The Merger was completed as part of an internal reorganization effected
by Fortis, Inc. with respect to certain of its life and health insurance
companies.
4. DISPOSAL OF FORTIS FINANCIAL GROUP (THE DIVISION)
On April 1, 2001, Fortis, Inc. completed the sale (the Sale) of its
Division to The Hartford Life Insurance Company (Hartford). The Division
includes among other blocks of business, certain individual life
insurance policies and annuity contracts written by the Company.
To effect the Sale as it relates to the Company, Hartford reinsured the
Insurance contracts on a 100% co-insurance basis (or 100% modified
co-insurance basis for some of the blocks) and agreed to administer the
Insurance Contracts going forward. The Company
9
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
(In thousands, unaudited)
received, in connection with the Sale, aggregate cash consideration of
approximately $15,000 from the Hartford. The reinsurance transaction
resulted in a gain of $9,465, which was deferred and will be amortized
into income at the rate that earnings from the business sold would have
been expected to emerge. The amount of gain amortized during the nine
months ended September 30, 2002 was $1,489.
5. ASSUMPTION OF PROTECTIVE LIFE'S DENTAL BENEFITS DIVISION
In the fourth quarter of 2001, the Company entered into a reinsurance
agreement with Protective Life Corporation (Protective). The agreement,
which became effective December 31, 2001, provided for the assumption of
Protective's Dental Benefits Division on a 100% co-insurance basis. The
Company paid $2,500 for the business and recorded goodwill of $1,625 in
the transactions.
10
FIRST FORTIS LIFE INSURANCE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SEPTEMBER 30, 2002 COMPARED TO SEPTEMBER 30, 2001
On November 30, 2001, First Fortis Life Insurance Company ("FFLIC") acquired
100% of the issued and outstanding common stock of Bankers American Life
Assurance Company ("BALAC") from American Bankers Insurance Group, Inc. ("ABIG")
for a total purchase price of $32 million. FFLIC paid the purchase price in cash
using internally generated working capital.
Also on November 30, 2001, and immediately following the stock purchase
described above, BALAC merged with and into FFLIC, with FFLIC as the surviving
corporation (the "Merger").
Both ABIG and FFLIC are wholly owned subsidiaries of Fortis, Inc., a Nevada
corporation that serves as a holding company for insurance and related business
in the U.S. FFLIC is, and BALAC was immediately prior to the Merger, a New York
life insurance company engaged in life and other lines of insurance business in
the State of New York. Fortis, Inc. determined that it was advisable to combine
the assets and operations of FFLIC and BALAC, so that it would have only one New
York-domiciled life insurance company. BALAC's assets, liabilities and
obligations, which have been transferred to FFLIC by operation of law as a
result of the Merger, consist primarily of outstanding insurance policies
written in the State of New York, and the related reserve assets, liabilities
and obligations.
REVENUES
The Company's life insurance premium increased from September 30, 2001 to
September 30, 2002 principally due to additional premium levels associated with
the merger. Life premiums are composed of group life and credit life business
representing 73% and 27%, respectively of premium for the nine months ended
September 30, 2002; and 91% and 9% respectively of premium for the nine months
ended September 30, 2001. Accident and health premiums increased during the
first half of 2002 as compared to the same period in 2001 primarily due to the
merger as well as a 9% increase in dental premium. Offsetting this is a decrease
in disability premium due to slower sales and decreases in persistency.
On December 31, 2001, the Company purchased (the "Purchase") the Dental Benefits
Division of Protective Life Corporation ("Protective"). The Purchase includes
group dental, group life and group disability insurance products ("Insurance
Products"). The Company will reinsure these Insurance Products on a 100%
co-insurance basis and perform administration of such Insurance Products. The
Company paid $2.5 million for the business and recorded goodwill of $1.6 million
in the transaction.
On April 1, 2001 the Company entered into a coinsurance agreement with Hartford
Financial Services Group ("Hartford") whereby the Company ceded the Investment
Product block of
11
business to the Hartford. This business is reflected as interest sensitive and
investment product policy charges of $0 and $0.4 million at September 30, 2002
and September 30, 2001, respectively.
The Company continues to match investment portfolio composition to liquidity
needs and capital requirements. Changes in interest rates during 2002 and 2001
resulted in recognition of realized gains and losses upon sales of securities.
BENEFITS
The total Company ratio of benefits to premium decreased slightly in 2002 to 71%
from 72% in 2001 primarily due to lower benefit to premium ratios on the merged
credit business. Group life benefit to premium ratios increased to 95% at
September 30, 2002 from 69% at September 30, 2001 as this line of business
experienced unusually high mortality during the first nine months of 2002.
Higher group disability claim incidence and lower sales, persistency and
terminations during the nine months ended September 30, 2002 as compared to the
same period in 2001 have resulted in an increase in a group disability benefit
to premium ratio to 84% in 2002 from 78% in 2001.
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 expense to premium ratio decreased to
18% in the nine months ended September 30, 2002 from 20% in the nine months
ended September 30, 2001. Shifts in the mix of business are the primary reason
for this decrease as the merged credit business has a relatively low expense to
premium ratio. The Company continues to strive for improvements in the expense
to gross revenue ratio while maintaining quality and timely services to the
policyholders.
The Company's federal income taxes increased to 42% for the nine months ended
September 30, 2002 due to adjustments for the prior year tax return.
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
12
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 September 30, 2002, 97.7% 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
13
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. Written Statement of Chief Executive Officer (Exhibit 99.1)
Written Statement of Chief Financial Officer (Exhibit 99.2)
b. None
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 12, 2002
/s/ Larry M. Cains
- -------------------
Larry M. Cains
Treasurer
(on behalf of the Registrant and as its principal financial and chief accounting
officer)
14
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned Chief Executive Officer of First Fortis Life
Insurance Company (the "Company"), do hereby certify, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1. I have reviewed the Quarterly Report on Form 10-Q of the Company for
the period ended September 30, 2002 (this "Report");
2. Based on my knowledge, this 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 periods covered by this Report;
3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this Report;
4. The Company's other certifying officers 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 Company and have:
a) Designated such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Report is being prepared;
b) Evaluated the effectiveness of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing
date of this Report (the "Evaluation Date"); and
c) Presented in this Report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The Company's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Company's auditors and the audit committee
of Company'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 Company's
ability to record, process, summarize and report financial data
and have identified for the Company'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 Company's
internal controls; and
6. The Company's other certifying officers and I have indicated in this
Report whether there were significant changes in internal controls or in the
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: November 12, 2002
/s/ Robert B. Pollock
--------------------------
Robert B. Pollock
Chief Executive Officer
15
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned Chief Financial Officer of First Fortis Life
Insurance Company (the "Company"), do hereby certify, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1. I have reviewed the Quarterly Report on Form 10-Q of the Company for
the period ended September 30, 2002 (this "Report");
2. Based on my knowledge, this 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 periods covered by this Report;
3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this Report;
4. The Company's other certifying officers 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 Company and have:
a) Designated such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Report is being prepared;
b) Evaluated the effectiveness of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing
date of this Report (the "Evaluation Date"); and
c) Presented in this Report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The Company's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Company's auditors and the audit committee
of Company'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 Company's
ability to record, process, summarize and report financial data
and have identified for the Company'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 Company's
internal controls; and
6. The Company's other certifying officers and I have indicated in this
Report whether there were significant changes in internal controls or in the
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: November 12, 2002
/s/ Larry M. Cains
--------------------------
Larry M. Cains
Chief Financial Officer
16