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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
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 33-46620
FORTIS BENEFITS INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 81-0170040
(State or other jurisdiction of (IRS Identification No.)
incorporation or organization)
576 BIELENBERG DRIVE, WOODBURY, MN 55125
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 651-361-4000
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
---
FORTIS BENEFITS INSURANCE COMPANY
BALANCE SHEETS
(In thousands, except share data)
- --------------------------------------------------------------------------------
ASSETS SEPTEMBER 30, DECEMBER 31,
2002 2001
----------------------------------
(UNAUDITED)
Investments:
Fixed maturities, at fair value (amortized cost 2002 - $2,963,495;
2001 - $2,744,158 $ 3,092,247 $ 2,785,442
Equity securities, at fair value (cost 2002 - $128,908;
2001 - $114,049) 125,882 115,348
Mortgage loans on real estate, less allowance for possible losses
(2002--$13,228, 2001--$13,118) 595,822 655,211
Policy loans 10,199 9,935
Short-term investments 154,343 258,790
Real estate and other investments 61,619 64,424
------------- --------------
4,040,112 3,889,150
Cash and cash equivalents 10,283 11,704
Receivables:
Uncollected premiums 66,875 63,080
Reinsurance recoverable on unpaid and paid losses 1,117,542 1,104,617
Other 11,664 34,027
------------- --------------
1,196,081 1,201,724
Accrued investment income 51,695 50,999
Deferred policy acquisition costs 122,591 108,406
Property and equipment at cost, less accumulated depreciation 4,116 4,972
Deferred federal income taxes 159,375 193,022
Other assets 7,442 12,780
Due from affiliates 21,639 12,044
Goodwill, less accumulated amortization (2002 - $5,720
2001 - $5,720) 171,788 167,992
Assets held in separate accounts 3,023,242 4,372,559
------------- --------------
Total assets $ 8,808,364 $ 10,025,352
============= ==============
The accompanying notes are an integral part of the financial statements.
2
FORTIS BENEFITS INSURANCE COMPANY
BALANCE SHEETS
(In thousands, except share data)
- --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
POLICY RESERVES AND LIABILITIES AND SHAREHOLDER'S EQUITY 2002 2001
----------------------------------
(UNAUDITED)
Policy reserves and liabilities:
Future policy benefit reserves:
Traditional and pre-need life insurance $ 1,860,905 $ 1,796,952
Interest sensitive and investment products 1,019,915 1,052,932
Accident and health 1,217,404 1,110,436
------------- --------------
4,098,224 3,960,320
Unearned revenues 48,795 54,811
Other policy claims and benefits payable 254,390 265,702
Policyholder dividends payable 2,023 2,023
------------- --------------
4,403,432 4,282,856
Accrued expenses 92,264 92,783
Current income taxes payable 4,904 80,306
Other liabilities 120,255 106,220
Deferred gain on reinsurance ceded 323,551 369,833
Liabilities related to separate accounts 3,023,242 4,372,559
------------- --------------
Total policy reserves and liabilities 7,967,648 9,304,557
------------- --------------
Shareholder's equity:
Common stock, $5 par value: authorized, issued and outstanding
shares - 1,000,000 5,000 5,000
Additional paid-in capital 516,570 516,570
Retained earnings 235,664 170,811
Unrealized gain on available-for-sale securities (net
of deferred taxes 2002 - $45,643; 2001 - $16,099) 84,766 29,899
Unrealized loss due to foreign currency exchange (1,284) (1,485)
------------- --------------
Total shareholder's equity 840,716 720,795
------------- --------------
Total policy reserves and liabilities and shareholder's equity $ 8,808,364 $ 10,025,352
============= ==============
The accompanying notes are an integral part of the financial statements.
3
FORTIS BENEFITS INSURANCE COMPANY
STATEMENTS OF INCOME
(In thousands)
- --------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
2002 2001
---------------------------------
(UNAUDITED) (unaudited)
Revenues:
Insurance operations:
Traditional and pre-need life insurance premiums $ 383,287 $ 376,069
Interest sensitive and investment product
policy charges 1,953 46,371
Accident and health insurance premiums 883,529 750,082
------------- ---------------
1,268,769 1,172,522
Net investment income 196,031 228,140
Net realized gains (losses) on investments (41,736) 8,483
Amortization of gain on reinsured business 46,282 33,883
Other income 7,502 12,492
------------- ---------------
Total revenues 1,476,848 1,455,520
Benefits and expenses:
Benefits to policyholders:
Traditional and pre-need life insurance 332,246 317,292
Interest sensitive investment products 4,470 35,385
Accident and health claims 656,086 574,773
------------- ---------------
992,802 927,450
Policyholder dividends 167 875
Amortization of deferred policy acquisition costs 35,120 44,096
Insurance commissions 119,461 109,180
General and administrative expenses 233,658 220,711
------------- ---------------
Total benefits and expenses 1,381,208 1,302,312
------------- ---------------
Income before income taxes 95,640 153,208
Income tax expense
Current 23,383 168,215
Deferred 7,408 (115,736)
------------- ---------------
30,791 52,479
------------- ---------------
Net income $ 64,849 $ 100,729
============= ===============
Other comprehensive loss:
Unrealized (loss) gain on investments 55,072 49,695
------------- ---------------
Comprehensive income $ 119,921 $ 150,424
============= ===============
The accompanying notes are an integral part of the financial statements.
4
FORTIS BENEFITS INSURANCE COMPANY
STATEMENTS OF INCOME
(In thousands)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30,
2002 2001
---------------------------------
(UNAUDITED) (unaudited)
Revenues:
Insurance operations:
Traditional and pre-need life insurance premiums $ 125,469 $ 121,758
Interest sensitive and investment product
policy charges 541 3,290
Accident and health insurance premiums 296,208 255,065
-------------- --------------
422,218 380,113
Net investment income 66,449 73,500
Net realized gains (losses) on investments (19,426) 10,132
Amortization of gain on reinsured business 15,402 16,362
Other income 2,119 3,934
-------------- --------------
Total revenues 486,762 484,041
Benefits and expenses:
Benefits to policyholders:
Traditional and pre-need life insurance 108,435 100,581
Interest sensitive investment products 1,159 4,451
Accident and health claims 218,995 191,279
-------------- --------------
328,589 296,311
Policyholder dividends 572 116
Amortization of deferred policy acquisition costs 13,295 11,872
Insurance commissions 33,741 40,047
General and administrative expenses 76,205 70,152
-------------- --------------
Total benefits and expenses 452,402 418,498
---------------- --------------
Income before income taxes 34,360 65,543
Income tax expense
Current 24,184 18,034
Deferred (12,816) 4,112
-------------- --------------
11,368 22,146
-------------- --------------
Net income $ 22,992 $ 43,397
============== ==============
Other comprehensive loss:
Unrealized gain (loss) on investments 77,488 33,456
--------------- --------------
Comprehensive income $ 100,480 $ 76,853
=============== ==============
The accompanying notes are an integral part of the financial statements.
5
FORTIS BENEFITS INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(In thousands)
- --------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
2002 2001
-----------------------------------
(UNAUDITED) (unaudited)
Cash flows from operating activities:
Net income $ 64,849 $ 100,729
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for depreciation and amortization of goodwill 1,003 2,349
Amortization of gain on reinsured business (46,282) (33,883)
Amortization of investment (discounts) premiums, net (1,688) (534)
Net realized losses (gains) on sold investments 41,736 (8,483)
Policy acquisition costs deferred (49,220) (61,395)
Amortization of deferred policy acquisition costs 35,120 44,096
Provision for deferred federal income taxes 7,408 (115,736)
(Decrease) increase in income taxes payable (73,358) 166,935
Change in receivables, accrued investment income, unearned
premiums, accrued expenses, other assets, due to and
from affiliates and other liabilities 7,260 66,199
Increase in future policy benefit reserves for traditional,
interest sensitive and accident and health policies 137,696 65,798
Decrease in other policy claims and benefits and
policyholder dividends payable (11,312) (797)
Gain on sale of property and equipment -- (2,782)
------------ -------------
Net cash provided by operating activities 113,212 222,496
------------ -------------
Cash flows from investing activities:
Purchases of fixed maturity investments (1,572,410) (1,120,226)
Sales and repayments of fixed maturity investments 1,309,567 1,363,064
Increase (decrease) in short-term investments 104,447 (362,904)
Purchases of other investments (69,225) (280,301)
Sales of other investments 120,614 333,399
(Purchases) sales of property and equipment (147) 20,670
Cash disbursed pursuant to reinsurance agreement (6,697) (1,605)
------------ -------------
Net cash used in investing activities (113,851) (47,903)
------------ -------------
Cash flows from financing activities:
Activities related to investment products:
Considerations received -- 43,713
Surrenders and death benefits -- (79,329)
Dividends paid (75,000)
Interest credited to policyholders -- 7,174
Change in foreign exchange rate (782) 4,035
------------ -------------
Net cash used in financing activities (782) (99,407)
------------ -------------
(Decrease) increase in cash and cash equivalents (1,421) 75,186
Cash and cash equivalents at beginning of year 11,704 17,084
------------ -------------
Cash and cash equivalents at end of year $ 10,283 $ 92,270
============ =============
The accompanying notes are an integral part of the financial statements.
6
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (unaudited)
(In thousands)
- --------------------------------------------------------------------------------
General: The accompanying unaudited financial statements of Fortis
Benefits Insurance 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 flows for the nine months ended September 30, 2002 and
2001.
Income tax payments were $98,763 and $1,323 for the nine months ended
September 30, 2002 and 2001, 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 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:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
Fixed maturities:
Governments $ 164,696 $ 12,771 $ 60 $ 177,407
Public utilities 251,017 18,468 10,318 259,167
Industrial and miscellaneous 2,009,424 153,778 70,103 2,093,099
Other 538,358 24,233 17 562,574
------------ ---------- ---------- ------------
Total fixed maturities 2,963,495 209,250 80,498 3,092,247
Equity securities 128,908 6,604 9,630 125,882
------------ ---------- ---------- ------------
Total $ 3,092,403 $ 215,854 $ 90,128 $ 3,218,129
============ ========== ========== ============
The amortized cost and fair value 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 $ 61,569 $ 62,106
Due after one year through five years 326,016 343,270
Due after five years through ten years 931,356 964,955
Due after ten years 1,644,554 1,721,916
------------ ------------
Total $ 2,963,495 $ 3,092,247
============ ============
7
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (unaudited)
(In thousands)
- --------------------------------------------------------------------------------
Proceeds from sales of investments in fixed maturities in the nine-month
period ended September 30, 2002 and September 30, 2001 were $1,309,567
and $1,363,064 respectively. Gross gains of $23,260 and $33,882 and gross
losses of $68,180 and $37,092 were realized during the nine month periods
ended September 30, 2002 and 2001, respectively.
Mortgage Loans
The Company has issued commercial mortgage loans on properties located
throughout the United States. Approximately 37.0% of outstanding
principal is concentrated in the states of New York, California and
Florida, at September 30, 2002. The Company has a diversified loan
portfolio with a small average size, which greatly reduces any loss
exposure. The Company has established a reserve for mortgage loans.
Effective as of July 1, 2001, Fortis Benefits Insurance Company, a
Minnesota insurance company ("FBIC"), completed a merger in which Pierce
National Life Insurance Company, a California insurance company ("PNL"),
merged with and into FBIC (the "Merger"). Immediately prior to the
Merger, both FBIC and PNL were indirect wholly owned subsidiaries of
Fortis, Inc., a Nevada corporation and a holding company for certain
insurance companies in the United States. The Merger was completed as
part of an internal reorganization being effected by Fortis, Inc. with
respect to certain of its life and health insurance companies. The PNL
business is primarily pre-need life insurance designed to pre-fund
funeral expenses and is sold as individual life and annuity products. The
transaction will be accounted for as a statutory merger.
Disposal of Fortis Financial Group (the "Division"): On April 1, 2001,
Fortis, Inc. completed the sale (the "Sale") of its Division to The
Hartford Financial Services Group ("Hartford") for $1.12 billion. The
Division includes, among other blocks of business, certain individual
life insurance policies (including variable universal life insurance
policies) and all annuity contracts (collectively, the "Insurance
Contracts") written by the Company and some of its affiliates.
To effect the Sale as it relates to the Company, Hartford reinsured the
Insurance Contracts on a 100% coinsurance basis, with the variable
products on a modified coinsurance basis, and agreed to administer the
Insurance Contracts prospectively. The Company received $500 million as
part of the reinsurance agreement. The Sale also included Hartford's
purchase of certain real and personal property owned by the Company and
used in connection with the Division's business for which the Company
received $21 million.
The $1.12 billion purchase price was reallocated amongst the Company and
other affiliates involved in the sale. The Sale resulted in a pre-tax
deferred gain of approximately $395 million for the Company. The deferred
gain will be amortized at the rate that earnings from the business sold
would have been expected to emerge. Amortization of $43,670 has been
included in income during the nine months ended September 30, 2002. The
Company ceded $236,009 of premiums and $908,753 of reserves to Hartford
through September 30, 2002.
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 assumed approximately $75,000 of reserves, $244,000 of assets
including $147,000 of goodwill, and paid net cash of approximately
$169,000 as of December 31, 2001.
8
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (unaudited)
(In thousands)
- --------------------------------------------------------------------------------
Net Investment Income and Net Realized (Losses) Gains on Investments:
Major categories of net investment income and realized (losses) gains on
investments for the first nine months of each year were as follows:
REALIZED GAIN (LOSS)
INVESTMENT INCOME ON INVESTMENTS
2002 2001 2002 2001
Fixed maturities $ 152,072 $ 166,833 $ (44,920) $ (3,210)
Preferred stocks 4,687 1,784 (66) 61
Common stocks 3,490 9,658 2,400 815
Mortgage loans on real estate 39,142 50,595 919 7,810
Policy loans 422 2,010 -- --
Short-term investements 178 846 (69) (110)
Real estate and other investments 1,945 1,219 -- 3,117
--------- --------- --------- ---------
201,936 232,945 (41,736) 8,483
--------- ---------
Expenses (5,905) (4,805)
--------- ----------
$ 196,031 $ 228,140
========= ==========
9
FORTIS BENEFITS INSURANCE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SEPTEMBER 30, 2002 COMPARED TO SEPTEMBER 30, 2001
REVENUES
Fortis Benefits Insurance Company (the "Company") distributes its products
through a network of independent agents, brokers and financial institutions. The
Company's major products offered are group dental, group disability, group
medical, group life, pre-need annuity and life and accidental death coverages.
On December 31, 2001, the Company purchased (the "Purchase") the Dental Benefits
Division of Protective Life Corporation ("Protective"). The Purchase includes
primarily group dental products. The Company reinsured this business on a 100%
coinsurance basis and will perform all administration activities. The Company
assumed approximately $75 million of reserves, $244 million of assets including
$147 million of goodwill, and paid net cash of approximately $169 million.
The purchase of the Protective business accounts for a $153 million increase in
accident and health premiums from September 30, 2001 to September 30, 2002.
During 2001, the Company began offering a new accidental death product through
financial institutions. This business represents 6.6% and 3.6% of total accident
and health premium as of September 30, 2002 and 2001 respectively. Rate
increases in the group medical line resulted in a 19% decrease of group medical
premium due to non-renewal of existing business and lower new sales.
Strong sales in the pre-need annuity and life line resulted in an increase of
pre-need premium from nine months ended September 30, 2001 to nine months ended
September 30, 2002 of 5%. 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 business to the
Hartford. Premium on this business represented 0% and 3.7% of total Company
premium income for nine months ended September 30, 2002 and 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.
The Company had net capital losses from fixed maturity investments of $44.9
million and $3.2 million for the first nine months of 2002 and 2001,
respectively.
BENEFITS
The total year-to-date policyholder benefit to premium ratio decreased from
79.1% to 78.2% from September 30, 2001 to September 30, 2002. The group dental,
group disability, group medical, group life and pre-need benefit to premium
ratios for the nine months ended September 30, were 73%, 88%, 65%, 75% and 102%
10
respectively in 2002 and 75%, 86%, 75%, 73% and 100% respectively in 2001. Group
disability claim incidence is higher and terminations lower during the nine
months ended September 30, 2002 as compared to the same period ended September
30, 2001. The 10% decrease in the group medical benefit to premium ratio during
the nine months of 2002 compared to the same period in 2001 is a result of
pricing increases and improved administration on this business.
EXPENSES
Commission rates have increased slightly from levels in 2001. This is primarily
due to changes in the mix of business by product lines as well as the change in
first year versus renewal premiums.
The Company's general and administrative expense to premium ratio has decreased
slightly from 18.8% at September 30, 2001 to 18.4% at September 30, 2002. 2001
expenses associated with the business reinsured by the Hartford had
proportionally higher expenses on premium revenue than the remaining business'
expense to premium levels. Offsetting this 2001 to 2002 decrease in expense to
premium ratio are expense increases related to systems project costs. The
Company continues to monitor expenses, striving to improve the expense to
premium ratio, while maintaining quality and timely services to 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
11
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 market value of cash, short-term investments and publicly traded bonds and
stocks is at least equal to all policyholder reserves and liabilities. The
Company's portfolio is readily marketable and convertible to cash to a degree
sufficient to provide for short-term needs. The Company consistently monitors
its liability durations and invests assets accordingly. The Company has no
material commitments or off-balance sheet financing arrangements, which would
reduce sources of funds in the upcoming year.
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 calculations 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's fixed maturity investments consisted of 96.5% investment grade
bonds as of September 30, 2002 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 Minnesota
State Insurance Department governing insurance business conducted in Minnesota.
Periodic audits are conducted by the Minnesota 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.
12
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 Executive 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 it's behalf by the
undersigned thereunto duly authorized.
Fortis Benefits 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)
13
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned Chief Executive Officer of Fortis Benefits 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
14
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned Chief Financial Officer of Fortis Benefits 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
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Larry M. Cains
Chief Financial Officer
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