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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
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 033-71690
FIRST FORTIS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
NEW YORK 13-2699219
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
308 MALTBIE STREET, SUITE 200
SYRACUSE, NEW YORK 13204
(Address of Principal Executive (Zip Code)
Offices)
(315) 451-0066
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No X
--- ----
The number of shares of the registrant's common stock outstanding at
July 31, 2004, were 100,000, all of which are owned directly by Assurant, Inc.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH REDUCED
DISCLOSURE FORMAT.
FIRST FORTIS LIFE INSURANCE COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
TABLE OF CONTENTS
ITEM PAGE
NUMBER NUMBER
- ------ ------
PART I
FINANCIAL INFORMATION
1. Financial Statements................................................................. 2
Unaudited interim balance sheets of First Fortis Life Insurance Company
at June 30, 2004 and December 31, 2003.............................................. 2
Unaudited interim statements of operations of First Fortis Life Insurance
Company for the three and six months ended June 30, 2004 and 2003.................... 4
Unaudited interim statements of changes in stockholder's equity of
First Fortis Life Insurance Company for the six months ended June 30, 2004........... 5
Unaudited interim statement of cash flows of First Fortis Life Insurance
Company for the six months ended June 30, 2004 and 2003.............................. 6
Notes to the unaudited interim financial statements of First Fortis Life Insurance
Company ............................................................................. 7
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 10
3. Quantitative and Qualitative Disclosures About Market Risk *......................... 13
4. Controls and Procedures.............................................................. 13
PART II
OTHER INFORMATION
1. Legal Proceedings.................................................................... 13
2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities * .. 13
3. Defaults Upon Senior Securities *.................................................... 13
4. Submission of Matters to a Vote of Security Holders *................................ 13
5. Other Information.................................................................... 13
6. Exhibits and Reports on Form 8-K..................................................... 14
Signatures................................................................................. 16
* Not required under reduced disclosure pursuant to General Instruction H(1) (a)
and (b) of Form 10Q
i
FIRST FORTIS LIFE INSURANCE COMPANY
BALANCE SHEETS
AT JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003
- --------------------------------------------------------------------------------
June 30, December 31,
-------- ------------
2004 2003
---- ----
(in thousands except per
share amount)
ASSETS
Investments:
Fixed maturities available for sale, at fair value
(amortized cost- $150,404 in 2004 and $157,032 in 2003) $156,625 $167,712
Equity securities available for sale, at fair value
(cost- $11,449 in 2004 and $9,574 in 2003) 10,904 9,784
Commercial mortgage loans on real estate,
at amortized cost 5,659 3,800
Policy loans 65 37
Short-term investments 4,791 8,091
Other investments -- 275
-------- --------
Total investments 178,044 189,699
Cash and cash equivalents 372 1,060
Premiums and accounts receivable 6,065 2,777
Reinsurance recoverables 97,637 100,451
Accrued investment income 2,128 2,185
Deferred acquisition costs 1,027 942
Income tax receivable 129 --
Deferred income taxes 3,842 3,040
Goodwill 2,038 2,038
Other assets 92 82
Assets held in separate accounts 30,154 39,678
-------- --------
Total assets $321,528 $341,952
======== ========
See the accompanying notes to the financial statements
2
FIRST FORTIS LIFE INSURANCE COMPANY
BALANCE SHEETS
AT JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003
- --------------------------------------------------------------------------------
June 30, December 31,
-------- ------------
2004 2003
---- ----
(in thousands except per
share amount)
LIABILITIES
Future policy benefits and expenses $ 26,773 $ 24,143
Unearned premiums 28,832 35,798
Claims and benefits payable 135,723 137,233
Commissions payable 4,203 3,811
Reinsurance balances payable 1,593 1,935
Funds held under reinsurance 79 94
Deferred gain on disposal of businesses 7,280 8,067
Due to affiliates 260 2,407
Accounts payable and other liabilities 3,518 6,264
Income tax payable -- 1,771
Liabilities related to separate accounts 30,154 39,678
-------- --------
Total liabilities 238,415 261,201
STOCKHOLDER'S EQUITY
Common stock, $20 par value: authorized,
issued and outstanding shares - 100,000 2,000 2,000
Additional paid-in capital 43,006 43,006
Retained earnings 34,416 28,663
Accumulated other comprehensive income 3,691 7,082
-------- --------
Total stockholder's equity 83,113 80,751
-------- --------
Total liabilities and stockholder's equity $321,528 $341,952
======== ========
See the accompanying notes to the financial statements
3
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2004 2003 2004 2003
---- ---- ---- ----
(in thousands)
REVENUES
Net earned premiums and other
considerations $ 16,409 $17,424 $32,101 $34,855
Net investment income 2,612 2,599 5,289 5,179
Net realized (loss) gain on
investments (13) 796 202 741
Amortization of deferred gain on
disposal of businesses 388 470 787 952
Fees and other income 52 90 119 177
-------- ------- ------- -------
Total revenues 19,448 21,379 38,498 41,904
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits 11,752 11,347 19,821 21,460
Amortization of deferred
acquisition costs 63 55 137 86
Underwriting, general and
administrative expenses 5,068 5,814 9,692 12,156
-------- ------- ------- -------
Total benefits, losses and expenses 16,883 17,216 29,650 33,702
-------- ------- ------- -------
Income before income taxes 2,565 4,163 8,848 8,202
Income taxes 891 1,457 3,098 2,871
-------- ------- ------- -------
Net income $ 1,674 $ 2,706 $ 5,750 $ 5,331
======== ======= ======= =======
See the accompanying notes to the financial statements
4
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FROM DECEMBER 31, 2003 THROUGH JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
Accumulated
Additional Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Income (Loss) Total
----- ------- -------- ------------- -----
(in thousands)
Balance, December 31, 2003 $ 2,000 $ 43,006 $28,663 $ 7,082 $80,751
Comprehensive income:
Net income -- -- 5,750 -- 5,750
Net change in unrealized
gains on securities (3,388) (3,388)
-------
Total comprehensive income 2,362
Other -- -- 3 (3) --
------- -------- ------- ------- -------
Balance, June 30, 2004 $ 2,000 $ 43,006 $34,416 $ 3,691 $83,113
======= ======== ======= ======= =======
See the accompanying notes to the financial statements
5
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
Six Months Ended June 30,
-------------------------
2004 2003
---- ----
(in thousands)
NET CASH (USED IN)/PROVIDED BY OPERATING
ACTIVITIES $ (7,298) $ 2,190
INVESTING ACTIVITIES
Sales of:
Fixed maturities available for sale 12,566 18,975
Equity securities available for sale 562 1,379
Other invested assets 275 --
Maturities, prepayments and scheduled redemption of:
Fixed maturities available for sale 6,643 13,662
Purchase of:
Fixed maturities available for sale (12,412) (20,724)
Equity securities available for sale (2,437) (7,493)
Change in commercial mortgage loans on real
estate (1,859) --
Change in short term investments 3,300 (2,596)
Change in policy loans (28) (6)
-------- --------
Net cash provided by investing activities 6,610 3,197
Change in cash and cash equivalents (688) 5,387
Cash and cash equivalents at beginning of period 1,060 2,041
-------- --------
Cash and cash equivalents at end of period $ 372 $ 7,428
======== ========
See the accompanying notes to the financial statements
6
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
First Fortis Life Insurance Company (the "Company") is a provider of life
and health insurance products. At January 1, 2004, the Company was a wholly
owned subsidiary of Assurant, Inc. (formerly Fortis, Inc.), which itself was an
indirect, wholly owned subsidiary of Fortis N.V of the Netherlands and Fortis
SA/NV of Belgium (collectively, "Fortis") through their affiliates, including
their wholly owned subsidiary, Fortis Insurance N.V.
On February 5, 2004, Fortis sold approximately 65% of its ownership
interest in Assurant, Inc. via an Initial Public Offering ("IPO"). In connection
with the IPO, Fortis, Inc. was merged into Assurant, Inc., a Delaware
corporation, which was formed solely for the purpose of the redomestication of
Fortis, Inc. After the merger, Assurant, Inc. became the successor to the
business, operations and obligations of Fortis, Inc. Assurant, Inc. is traded on
the New York Stock Exchange under the symbol AIZ.
The Company is incorporated in New York and is qualified to sell life,
health and annuity insurance in the state of New York. The Company's revenues
are derived principally from group employee benefits, credit, and health
products. The Company offers insurance products, including life insurance
policies, annuity contracts, group life, credit, and accident and health
insurance policies.
2. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles in the United States
of America ("GAAP") for interim financial information. Accordingly, these
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Certain prior period amounts have been reclassified to conform to the
2004 presentation.
Dollar amounts are presented in U.S. dollars and all amounts are in
thousands except for number of shares.
Operating results for the three and six months ended June 30, 2004 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2004. The accompanying interim financial statements should be read
in conjunction with the audited financial statements and related notes included
in the Company's annual report on form 10K for the fiscal year ended December
31, 2003.
3. RECENT ACCOUNTING PRONOUNCEMENTS
On July 7, 2003, the Accounting Standards Executive Committee (AcSEC) of
the American Institute of Certified Public Accountants (AICPA) issued Statement
of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long Duration Contracts and for Separate Accounts ("SOP 03-1").
SOP 03-1 provides guidance on a number of topics unique to insurance
7
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
enterprises, including separate account presentation, interest in separate
accounts, gains and losses on the transfer of assets from the general account to
a separate account, liability valuation, returns based on a contractually
referenced pool of assets or index, accounting for contracts that contain death
or other insurance benefit features, accounting for reinsurance and other
similar contracts, accounting for annuitization benefits and sales inducements
to contract holders. SOP 03-1 was adopted by the Company on January 1, 2004. The
adoption of this statement did not have a material impact on the Company's
financial position or the results of operations.
In March 2004, the Emerging Issues Task Force ("EITF") reached a final
consensus on Issue 03-1, "The Meaning of Other Than Temporary Impairment and Its
Application to Certain Investments" ("EITF 03-1"). EITF 03-1 provides guidance
on the disclosure requirements for other than temporary impairments of debt and
marketable equity investments that are accounted for under FAS 115. EITF 03-1
also provides guidance for evaluating whether an investment is other than
temporarily impaired. The adoption of EITF 03-1 required the Company to include
certain quantitative and qualitative disclosures for debt and marketable equity
securities classified as available-for-sale or held-to-maturity under FAS 115
that are impaired at the balance sheet date but for which an other than
temporary impairment has not been recognized. The disclosures were effective for
annual financial statements for fiscal years ending after December 15, 2003. The
Company adopted the disclosure requirements of EITF 03-1 at December 31, 2003,
for determining whether an investment is other than temporary impaired.
In May 2004, the Financial Accounting Standard Board ("FASB") issued FASB
Staff Position ("FSP") FAS 106-2, Accounting and Disclosure Requirements Related
to the Medicare Prescription Drug, Improvement and Modernization Act of 2003
("FAS 106-2"). This statement provides guidance on the accounting for the
effects of the Medicare Prescription Drug, Improvement and Modernization Act of
2003 ("The Act") for employers that sponsor postretirement health care plans
that provide prescription drug benefits. FAS 106-2 also requires employers to
provide certain disclosures regarding the effect of the federal subsidy provided
by the Act. FAS 106-2 is effective for the first interim or annual period
beginning after June 15, 2004. The Company is assessing whether the adoption of
this statement will have a material impact on the Company's financial position
or the results of operations.
4. RETIREMENT AND OTHER EMPLOYEE BENEFITS
The Company is an indirect wholly-owned subsidiary of Assurant, Inc.,
which sponsors a defined benefit pension plan covering employees and certain
agents who meet eligibility requirements as to age and length of service.
Pension cost allocated to the Company amounted to approximately $28 and $15 for
three months ended June 30, 2004 and 2003, respectively, and $57 and $31 for the
six months ended June 30, 2004 and 2003, respectively.
The Company participates in a contributory profit sharing plan, sponsored
by Assurant, Inc. covering employees and certain agents who meet eligibility
requirements as to age and length of service. The amount expensed was
approximately $(11) and $9 for three months ended June 30, 2004 and 2003,
respectively, and $(2) and $24 for the six months ended June 30, 2004 and 2003,
respectively.
In addition to retirement benefits, the Company participates in other
health care and life insurance benefit plans (postretirement benefits) for
retired employees, sponsored by Assurant, Inc.
8
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
There were no net postretirement benefit costs allocated to the Company for the
three and six months ended June 30, 2004 and 2003. The Company made
contributions to the postretirement benefit plans of approximately $8 and $5 for
three months ended June 30, 2004 and 2003, respectively, and $6 and $9 for the
six months ended June 30, 2004 and 2003, respectively, as claims were incurred.
5. COMMITMENTS AND CONTINGENCIES
The Company is regularly involved in litigation in the ordinary course of
business, both as a defendant and as a plaintiff. The Company may from time to
time be subject to a variety of legal and regulatory actions relating to the
Company's current and past business operations. While the Company cannot predict
the outcome of any pending or future litigation, examination or investigation,
the Company does not believe that any pending matter will have a material
adverse effect on the Company's financial condition or results of operations.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(Dollar amounts in thousands except share data)
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of First Fortis Life
Insurance Company (FFLIC or the Company) as of June 30, 2004, compared with
December 31, 2003, and its results of operations for the three and six months
ended June 30, 2004, and 2003. This discussion should be read in conjunction
with FFLIC's MD&A and annual audited financial statements as of December 31,
2003 included in the Company's Form 10-K for the year ended December 31, 2003
filed with the U.S. Securities and Exchange Commission (hereafter referred to as
the Company's 2003 Form 10-K) and June 30, 2004 unaudited financial statements
and related notes included elsewhere in this Form 10-Q.
Some of the statements in this MD&A and elsewhere in this report may
contain forward-looking statements that reflect our current views with respect
to, among other things, future events and financial performance. You can
identify these forward-looking statements by the use of forward-looking words
such as "outlook", "believes", "expects", "potential", "continues", "may",
"will", "should", "seeks", "approximately", "predicts", "intends", "plans",
"estimates", "anticipates" or the negative version of those words or other
comparable words. Any forward-looking statements contained in this report are
based upon our historical performance and on current plans, estimates and
expectations. The inclusion of this forward-looking information should not be
regarded as a representation by us or any other person that the future plans,
estimates or expectations contemplated by us will be achieved. Such
forward-looking statements are subject to various risks and uncertainties.
Accordingly, there are or will be important factors that could cause our actual
results to differ materially from those indicated in this report. If one or more
of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from what
we projected. Any forward-looking statements you read in this report reflect our
current views with respect to future events and are subject to these and other
risks, uncertainties and assumptions relating to our operations, results of
operations, financial condition, growth strategy and liquidity.
10
RESULTS OF OPERATIONS
CONSOLIDATED OVERVIEW
The tables below present information regarding our consolidated results of
operations:
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
2004 2003 2004 2003
---- ---- ---- ----
(IN THOUSANDS) (IN THOUSANDS)
-------------- --------------
REVENUES:
Net earned premiums and other
considerations........................ $ 16,409 $ 17,424 $ 32,101 $ 34,855
Net investment income.................. 2,612 2,599 5,289 5,179
Net realized (losses) gains on
investments........................... (13) 796 202 741
Amortization of deferred gain on
disposal of businesses................ 388 470 787 952
Fees and other income.................. 52 90 119 177
-------- -------- -------- --------
Total revenues........................ 19,448 21,379 38,498 41,904
-------- -------- -------- --------
BENEFITS, LOSSES AND EXPENSES:
Policyholder benefits.................. (11,752) (11,347) (19,821) (21,460)
Selling, underwriting and general
expenses(1)........................... (5,131) (5,869) (9,829) (12,242)
-------- -------- -------- --------
Total benefits, losses and
expenses............................ (16,883) (17,216) (29,650) (33,702)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES............... 2,565 4,163 8,848 8,202
Income taxes........................... (891) (1,457) (3,098) (2,871)
-------- -------- -------- --------
NET INCOME............................... $ 1,674 $ 2,706 $ 5,750 $ 5,331
======== ======== ======== ========
- ---------------
(1) Includes amortization of DAC.
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO THE THREE AND SIX
MONTHS ENDED JUNE 30, 2003
Total Revenues
Total revenues decreased by $1,931, or 9%, from $21,379 for the three
months ended June 30, 2003, to $19,448 for the three months ended June 30, 2004.
Total revenues decreased by $3,406, or 8%, from $41,904 for the six months ended
June 30, 2003, to $38,498 for the six months ended June 30, 2004.
Net earned premiums and other considerations decreased by $1,015, or 6%,
from $17,424 for the three months ended June 30, 2003, to $16,409 for the three
months ended June 30, 2004. Net earned premiums and other considerations
decreased by $2,754, or 8%, from $34,855 for the six months ended June 30, 2003,
to $32,101 for the six months ended June 30, 2004. The decreases in net earned
premiums and other considerations for the three and six months ended June 30,
2004, were primarily due to decreases of $2,798 and $4,204, respectively, in
group life and dental premiums and $1,938 and $3,134, respectively, in credit
life premiums. These decreases were offset by increases of $3,721 and $4,584 for
the three and six months ended June 30, 2004, respectively, in disability
premiums. The decline in renewals for the life and dental business resulted
primarily from our continued pricing discipline. The decline in renewals for the
credit life business resulted primarily from an adverse regulatory climate that
has affected this line of business. The increases in disability premiums are
primarily driven by an increase in business written through alternative
distribution sources, as well as the transition of a block of business from
administrative fee only business to fully insured business. Our total net earned
premiums were derived 88% and 80%
11
from the life, dental and disability business in 2004 and 2003, respectively,
and 12% and 20% from the credit life business in 2004 and 2003, respectively.
Net investment income increased by $13, or 1%, from $2,599 for the three
months ended June 30, 2003, to $2,612 for the three months ended June 30, 2004.
Net investment income increased by $110, or 2%, from $5,179 for the six months
ended June 30, 2003, to $5,289 for the six months ended June 30, 2004.
Net realized gains (losses) on investments declined by $809 from net
realized gains of $796 for the three months ended June 30, 2003, to net realized
losses of $13 for the three months ended June 30, 2004. Net realized gains on
investments declined by $539 from net realized gain of $741 for the six months
ended June 30, 2003, to net realized gains of $202 for the six months ended June
30, 2004.
Amortization of deferred gain on disposal of businesses decreased by $82,
or 18%, from $470 for the three months ended June 30, 2003, to $388 for the
three months ended June 30, 2004. Amortization of deferred gain on disposal of
businesses decreased by $165, or 17%, from $952 for the six months ended June
30, 2003, to $787 for the six months ended June 30, 2004. The decreases are
consistent with the run-off of the businesses ceded to The Hartford in 2001 and
John Hancock in 2000.
Fees and other income decreased by $38, or 42%, from $90 for the three
months ended June 30, 2003, to $52 for the three months ended June 30, 2004.
Fees and other income decreased by $58, or 33%, from $177 for the six months
ended June 30, 2003, to $119 for the six months ended June 30, 2004. The
decreases are directly related to the run-off of credit life business.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses decreased by $332, or 2%, from $17,215
for the three months ended June 30, 2003, to $16,883 for the three months ended
June 30, 2004. Total benefits, losses and expenses decreased by $4,052 or 12%,
from $33,702 for the six months ended June 30, 2003, to $29,650 for the six
months ended June 30, 2004.
Policyholder benefits increased by $405, or 4%, from $11,347 for the three
months ended June 30, 2003, to $11,752 for the three months ended June 30, 2004.
Policyholder benefits decreased by $1,639, or 8%, from $21,460 for the six
months ended June 30, 2003, to $19,821 for the six months ended June 30, 2004.
The increase in policyholder benefits for the three months ended June 30, 2004,
was primarily due to an increase of $2,925 in disability benefits. This increase
was offset by decreases of $2,090 in group life and dental benefits and $430 in
credit life benefits. The decrease in policyholder benefits for the six months
ended June 30, 2004, was primarily due to decreases of $5,428 in group life and
dental benefits and $1,004 in credit life benefits due to non-renewals. These
decreases were offset by an increase of $4,786 in disability insurance benefits
resulting from additional assumed business along with unfavorable experience on
a large disability case.
Selling, underwriting and general expenses decreased by $738, or 13%, from
$5,869 for the three months ended June 30, 2003, to $5,131 for the three months
ended June 30, 2004. Selling, underwriting and general expenses decreased by
$2,413, or 20%, from $12,242 for the six months ended June 30, 2003, to $9,829
for the six months ended June 30, 2004. Decreased expense levels are driven by
the reduction in the amortization of deferred acquisition costs.
Net Income
Net income decreased by $1,032, or 38%, from $2,706 for the three months
ended June 30, 2003, to $1,674 for the three months ended June 30, 2004. Net
income increased by $419, or 8%, from $5,331 for the six months ended June 30,
2003, to $5,750 for the six months ended June 30, 2004.
12
Income taxes decreased by $566, or 39%, from $1,457 for the three months
ended June 30, 2003, to $891 for the three months ended June 30, 2004. Income
taxes increased by $227, or 8%, from $2,871 for the six months ended June 30,
2003, to $3,098 for the six months ended June 30, 2004. Income tax changes are
consistent with changes in pre-tax income.
Subsequent Event
First Fortis is a wholly owned subsidiary of Assurant, Inc., and is
licensed to issue insurance products only in New York. Assurant, Inc. currently
has four decentralized operating business segments. First Fortis issues certain
of the insurance products that are marketed in New York by the Assurant Employee
Benefits and Assurant Solutions business segments. Those products are, in part,
administered by Assurant, Inc. employees located in a policy service center
located in Syracuse, New York on behalf of First Fortis pursuant to an
Administrative Services Agreement.
Assurant, Inc. announced on August 2, 2004 that it has decided to close
the Syracuse policy service center and transfer these policy administration
functions to the principal offices of the business segments marketing the
various products, primarily Assurant Employee Benefits. First Fortis will
continue to maintain a corporate legal entity function in the state of New York
to comply with regulatory requirements.
The closure of the Syracuse service center will result in the gradual
elimination of approximately 15 positions in 2004 and 2005. We have not yet been
able to form an estimate of the range of costs expected to be incurred in
connection with this action. The cost associated with this closure will be
recorded in the third quarter of 2004. We believe that over the longer term this
action will result in reduced on-going costs to First Fortis in connection with
the administration of this business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required under reduced disclosure format.
ITEM 4. CONTROLS AND PROCEDURES.
Under the supervision and with the participation of our Chief Executive
Officer and our Chief Financial Officer, we have evaluated the effectiveness of
our disclosure controls and procedures as of June 30, 2004. Based on this
evaluation, our Chief Executive Officer and our Chief Financial Officer have
concluded that our disclosure controls and procedures were effective as of that
date in providing a reasonable level of assurance that information we are
required to disclose in reports we file or furnish under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods in SEC rules and forms. Further, our disclosure controls and procedures
were effective in providing a reasonable level of assurance that information
required to be disclosed by us in such reports is accumulated and communicated
to our management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There has been no new material legal proceedings, other than ordinary
routine litigation incidental to the business of First Fortis Life Insurance
Company or its subsidiaries, for the three months ended June 30, 2004. There
have been no material developments in previously reported legal proceedings in
the three months ended June 30, 2004.
13
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
Not required under reduced disclosure format.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not required under reduced disclosure format.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not required under reduced disclosure format.
ITEM 5. OTHER INFORMATION.
(a) None.
(b) None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
The following exhibits either (a) are filed with this report or (b) have
previously been filed with the SEC and are incorporated herein by reference to
those prior filings. Exhibits are available upon request at the investor
relations section of our website, located at www.assurant.com.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
3.1 Articles of Incorporation of First Fortis Life Insurance
Company (incorporated by reference from the Registrant's Form 10-K
filed, File No. 33-71690, filed on March 29, 1996).
3.2 By-laws of First Fortis Life Insurance Company
(incorporated by reference from the Registrant's
Registration Statement on Form N-4, File No. 33-71686, and
Separate Account A filed on November 15, 1993).
4.1 Form of Combination Fixed and Variable Group Annuity
Contract; (incorporated by reference from the Registrant's
Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4, File No. 33-71686, and Separate
Account A filed on April 27, 1995).
4.2 Form of Application to be used in connection with Form of
Combination Fixed and Variable Group Annuity Contract filed as
Exhibit 4.1 to this report (incorporated by reference from the
Registrant's Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4, File No. 33-71686, and Separate Account A
filed on April 27, 1995).
4.3 Form of IRA Endorsement (incorporated by reference from the
Registrant's Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4, File No. 33-71686, and
Separate Account A filed on April 27, 1995).
4.4 Form of Section 403(b) Annuity Endorsement (incorporated by
reference from Registrant's Post-Effective Amendment No. 2
to the Registration Statement on Form N-4, File No.
33-71686, and Separate Account A filed on April 27, 1995).
31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal
Executive Officer.
31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal
Financial Officer.
32.1 Certification of Chief Executive Officer of First Fortis
Life Insurance Company pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
14
32.2 Certification of Chief Financial Officer of First Fortis
Life Insurance Company pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(B) REPORTS ON FORM 8-K
None.
15
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
Date: August 11, 2004 By: /s/ Lance Wilson
---------------------------------------
Name: Lance Wilson
Title:President and Chief Executive
Officer (Principal Executive Officer)
Date: August 11, 2004 By: /s/ Ranell Jacobson
---------------------------------------
Name: Ranell Jacobson
Title:Treasurer (Chief Financial Officer)
16
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
3.1 Articles of Incorporation of First Fortis Life Insurance
Company (incorporated by reference from the Registrant's Form 10-K
filed, File No. 33-71690, filed on March 29, 1996).
3.2 By-laws of First Fortis Life Insurance Company
(incorporated by reference from the Registrant's
Registration Statement on Form N-4, File No. 33-71686, and
Separate Account A filed on November 15, 1993).
4.1 Form of Combination Fixed and Variable Group Annuity
Contract; (incorporated by reference from the Registrant's
Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4, File No. 33-71686, and Separate
Account A filed on April 27, 1995).
4.2 Form of Application to be used in connection with Form of
Combination Fixed and Variable Group Annuity Contract filed as
Exhibit 4.1 to this report (incorporated by reference from the
Registrant's Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4, File No. 33-71686, and Separate Account A
filed on April 27, 1995).
4.3 Form of IRA Endorsement (incorporated by reference from the
Registrant's Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4, File No. 33-71686, and
Separate Account A filed on April 27, 1995).
4.4 Form of Section 403(b) Annuity Endorsement (incorporated by
reference from Registrant's Post-Effective Amendment No. 2
to the Registration Statement on Form N-4, File No.
33-71686, and Separate Account A filed on April 27, 1995).
31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal
Executive Officer.
31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal
Financial Officer.
32.1 Certification of Chief Executive Officer of First Fortis
Life Insurance Company pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
32.2 Certification of Chief Financial Officer of First Fortis
Life Insurance Company pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.