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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 SEPTEMBER 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 Offices) (Zip Code)
(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
October 29, 2004, was 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 SEPTEMBER 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 September 30, 2004 and December 31, 2003............................................ 2-3
Unaudited interim statements of operations of First Fortis Life
Insurance Company for the three and nine months ended September 30, 2004 and 2003...... 4
Unaudited interim statements of changes in stockholder's equity of
First Fortis Life Insurance Company for the nine months ended September 30, 2004....... 5
Unaudited interim statements of cash flows of First Fortis Life Insurance
Company for the nine months ended September 30, 2004 and 2003.......................... 6
Notes to the unaudited 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
2. Unregistered Sale of Equity Securities and Use of Proceeds *........................... 13
3. Defaults Upon Senior Securities *...................................................... 13
4. Submission of Matters to a Vote of Security Holders *.................................. 13
5. Other Information...................................................................... 13
6. Exhibits .............................................................................. 14
Signatures................................................................................... 15
* Not required under reduced disclosure pursuant to General Instruction H(1) (a)
and (b) of Form 10Q
FIRST FORTIS LIFE INSURANCE COMPANY
BALANCE SHEETS
AT SEPTEMBER 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003
SEPTEMBER 30, DECEMBER 31,
------------- -----------
2004 2003
------------- -----------
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
ASSETS
Investments:
Fixed maturities available for sale, at fair value
(amortized cost- $116,249 in 2004 and $157,032 in 2003) $ 125,074 $ 167,712
Equity securities available for sale, at fair value
(cost- $11,520 in 2004 and $9,574 in 2003) 11,520 9,784
Commercial mortgage loans on real estate
at amortized cost 7,121 3,800
Policy loans 75 37
Short-term investments 1,280 8,091
Other investments - 275
----------- -----------
Total investments 145,070 189,699
Cash and cash equivalents 1,547 1,060
Premiums and accounts receivable 4,884 2,777
Reinsurance recoverables 99,292 100,451
Accrued investment income 1,914 2,185
Deferred acquisition costs 1,122 942
Deferred income taxes, net 2,738 3,040
Goodwill 2,038 2,038
Other assets 92 82
Assets held in separate accounts 31,251 39,678
----------- -----------
Total assets $ 289,948 $ 341,952
=========== ===========
See the accompanying notes to the financial statements
2
FIRST FORTIS LIFE INSURANCE COMPANY
BALANCE SHEETS
AT SEPTEMBER 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003
SEPTEMBER 30, DECEMBER 31,
------------- -----------
2004 2003
------------- -----------
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
LIABILITIES
Future policy benefits and expenses $ 27,748 $ 24,143
Unearned premiums 27,460 35,798
Claims and benefits payable 136,694 137,233
Commissions payable 4,475 3,811
Reinsurance balances payable 2,074 1,935
Funds held under reinsurance 88 94
Deferred gain on disposal of businesses 6,885 8,067
Due to affiliates 772 2,407
Accounts payable and other liabilities 3,930 6,264
Tax payable 293 1,771
Liabilities related to separate accounts 31,251 39,678
----------- -----------
Total liabilities 241,670 261,201
Commitment & Contingencies (Note 5) -- --
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 (deficit) earnings (2,563) 28,663
Accumulated other comprehensive income 5,835 7,082
----------- -----------
Total stockholder's equity 48,278 80,751
----------- -----------
Total liabilities and stockholder's equity $ 289,948 $ 341,952
=========== ===========
See the accompanying notes to the financial statements
3
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
(IN THOUSANDS)
REVENUES
Net earned premiums and other considerations $ 14,906 $ 15,625 $ 47,007 $ 50,479
Net investment income 2,280 2,563 7,569 7,742
Net realized gain (loss) on investments 500 (89) 702 652
Amortization of deferred gain on disposal
of businesses 395 471 1,182 1,423
Fees and other income 62 11 180 189
---------- ---------- ---------- ----------
Total revenues 18,143 18,581 56,640 60,485
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits 9,761 11,297 29,582 32,757
Amortization of deferred acquisition costs 88 184 225 270
Underwriting, general and administrative
expenses 4,501 6,984 14,193 19,140
---------- ---------- ---------- ----------
Total benefits, losses and expenses 14,350 18,465 44,000 52,167
---------- ---------- ---------- ----------
Income before income taxes 3,793 116 12,640 8,318
Income taxes 771 40 3,869 2,911
---------- ---------- ---------- ----------
Net income $ 3,022 $ 76 $ 8,771 $ 5,407
========== ========== ========== ==========
See the accompanying notes to the financial statements
4
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FROM DECEMBER 31, 2003 THROUGH SEPTEMBER 30, 2004 (UNAUDITED)
ACCUMULATED
ADDITIONAL RETAINED OTHER
COMMON PAID-IN (DEFICIT) 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 - - 8,771 - 8,771
Net change in unrealized
gains (losses) on securities - - - (1,244) (1,244)
--------
Total comprehensive income - - - - 7,527
Dividends - - (40,000) - (40,000)
Other - - 3 (3) -
------ ------- -------- ------- --------
Balance, September 30, 2004 $2,000 $43,006 $ (2,563) $ 5,835 $ 48,278
====== ======= ======== ======= ========
See the accompanying notes to the financial statements
5
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)
NINE MONTHS ENDED
------------------------
SEPTEMBER 30,
------------------------
2004 2003
-------- --------
(IN THOUSANDS)
NET CASH (USED IN) OPERATING ACTIVITIES $ (2,897) $ (5,638)
INVESTING ACTIVITIES
Sales of:
Fixed maturities available for sale 52,062 26,634
Equity securities available for sale 1,088 2,193
Other invested assets 275 44
Maturities, prepayments and scheduled redemption of:
Fixed maturities available for sale 8,017 18,658
Purchase of:
Fixed maturities available for sale (18,441) (31,150)
Equity securities available for sale (3,069) (8,322)
Change in commercial mortgage loans on real estate (3,321) -
Change in short term investments 6,811 (4,450)
Change in policy loans (38) (10)
-------- --------
Net cash provided by investing activities 43,384 3,597
FINANCING ACTIVITIES
Dividends paid (40,000) -
-------- --------
Net cash (used in) financing activities (40,000) -
Change in cash and cash equivalents 487 (2,041)
Cash and cash equivalents at beginning of period 1,060 2,041
-------- --------
Cash and cash equivalents at end of period $ 1,547 $ -
======== ========
See the accompanying notes to the financial statements
6
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 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 of the
financial statements have been included. Certain prior period amounts have been
reclassified to conform to the 2004 presentation.
Dollar amounts are in thousands except for number of shares.
The financial statements include the accounts of the Company and all of
its wholly owned subsidiaries. All significant inter-company transactions and
balances are eliminated in consolidation.
Operating results for the three and nine months ended September 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 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
7
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)
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 Financial Accounting
Standard 115 ("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 financial statements for fiscal
years ending after December 15, 2003. The Company adopted the disclosure
requirements of EITF 03-1 at December 31, 2003. The guidance for evaluating
whether an investment is other than temporarily impaired is effective for
reporting periods beginning after June 15, 2004; however, the Financial
Accounting Standards Board ("FASB") has issued two new proposed Staff Positions.
EITF 03-1a, which would defer the June 15, 2004 effective date of the
requirement to record impairment losses caused by the effect of increases in
interest rates or sector spreads on debt securities subject to paragraph 16 of
EITF 03-1 until further guidance is provided and EITF 03-1b, which would exclude
minor impairments from the requirement. Both Staff Positions are still in the
comment period phase. The Company is continuing to evaluate the impact of
adoption of this issue given the fact that portions of the issue are still in
the comment period. The Company currently follows the guidance on other than
temporary impairments provided by staff accounting bulletin ("SAB") 59,
Accounting for Noncurrent Marketing Equity Securities.
In May 2004, the 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. The Company's
Retirement and Other Employees Benefits plan's Accumulated Pension Benefit
Obligation and net periodic postretirement benefit cost do not reflect any
amounts associated with the subsidy due to the fact that the Company is unable
to determine whether the benefits provided by its' Retirement and Other Employee
Benefits plans are actuarially equivalent to Medicare Part D under the Act. The
adoption of this statement did not 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 September 30, 2004 and 2003, respectively, and $85 and $46
for the nine months ended September 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 $6 and $14 for three months ended September 30, 2004 and 2003,
respectively, and $4 and $37 for the nine months ended September 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
NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)
There were no net postretirement benefit costs allocated to the Company
for the three and nine months ended September 30, 2004 and 2003. The Company
made contributions to the postretirement benefit plans of approximately $8 and
$8 for three months ended September 30, 2004 and 2003, respectively, and $24 and
$17 for the nine months ended September 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 addresses the financial condition of First Fortis Life Insurance
Company (which we refer to as FFLIC) as of September 30, 2004, compared with
December 31, 2003, and our results of operations for the three and nine months
ended September 30, 2004, and 2003. This discussion should be read in
conjunction with our MD&A and annual audited financial statements as of December
31, 2003 included in our Form 10-K for the year ended December 31, 2003 filed
with the U.S. Securities and Exchange Commission and the September 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 MONTHS FOR THE NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
2004 2003 2004 2003
-------- -------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
------------------------ ------------------------
REVENUES:
Net earned premiums and other considerations $ 14,906 $ 15,625 $ 47,007 $ 50,479
Net investment income 2,280 2,563 7,569 7,742
Net realized gain (loss) on investments 500 (89) 702 652
Amortization of deferred gain on disposal of
businesses 395 471 1,182 1,423
Fees and other income 62 11 180 189
-------- -------- -------- --------
Total revenues 18,143 18,581 56,640 60,485
-------- -------- -------- --------
BENEFITS, LOSSES AND EXPENSES:
Policyholder benefits (9,761) (11,297) (29,582) (32,757)
Selling, underwriting and general expenses(1) (4,589) (7,168) (14,418) (19,410)
-------- -------- -------- --------
Total benefits, losses and expenses (14,350) (18,465) (44,000) (52,167)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 3,793 116 12,640 8,318
Income taxes (771) (40) (3,869) (2,911)
-------- -------- -------- --------
NET INCOME $ 3,022 $ 76 $ 8,771 $ 5,407
======== ======== ======== ========
- ---------------
(1) Includes amortization of DAC.
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2003
Total Revenues
Total revenues decreased by $438, or 2%, from $18,581 for the three
months ended September 30, 2003, to $18,143 for the three months ended September
30, 2004. Total revenues decreased by $3,845, or 6%, from $60,485 for the nine
months ended September 30, 2003, to $56,640 for the nine months ended September
30, 2004.
Net earned premiums and other considerations decreased by $719, or 5%,
from $15,625 for the three months ended September 30, 2003, to $14,906 for the
three months ended September 30, 2004. Net earned premiums and other
considerations decreased by $3,472, or 7%, from $50,479 for the nine months
ended September 30, 2003, to $47,007 for the nine months ended September 30,
2004. The decreases in net earned premiums and other considerations for the
three and nine months ended September 30, 2004, were primarily due to decreases
of $801 and $5,004, respectively, in group life and dental premiums and $1,414
and $4,546, respectively, in credit life premiums. These decreases were offset
by increases of $1,499 and $6,087 for the three and nine months ended September
30, 2004, respectively, in disability insurance premiums. The decline in
renewals for the life and dental business resulted primarily from our continued
pricing discipline in an increasingly competitive market which has resulted in
lower sales and renewals. The decline in renewals for the credit life business
is primarily due to 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. Our total
net
11
earned premiums were derived 87% and 79% from the life, dental and disability
business in 2004 and 2003, respectively, and 13% and 21% from the credit line
business in 2004 and 2003, respectively.
Net investment income decreased by $283, or 11%, from $2,563 for the
three months ended September 30, 2003, to $2,280 for the three months ended
September 30, 2004. Net investment income decreased by $173, or 2%, from $7,742
for the nine months ended September 30, 2003, to $7,569 for the nine months
ended September 30, 2004. The three and nine month decline is attributable to
the decrease in invested assets.
Net realized gains on investments increased by $589 from net realized
losses of $89 for the three months ended September 30, 2003, to net realized
gains of $500 for the three months ended September 30, 2004. Net realized gains
on investments increased by $50, or 8%, from net realized gains of $652 for the
nine months ended September 30, 2003, to net realized gains of $702 for the nine
months ended September 30, 2004. Net realized gains on investments are comprised
of both other-than-temporary impairments and realized gains/(losses) on sales of
securities. For the three and nine months ended September 30, 2004 and 2003, we
had no other-than-temporary impairments.
Amortization of deferred gain on disposal of businesses decreased by
$76, or 16%, from $471 for the three months ended September 30, 2003, to $395
for the three months ended September 30, 2004. Amortization of deferred gain on
disposal of businesses decreased by $241, or 17%, from $1,423 for the nine
months ended September 30, 2003, to $1,182 for the nine months ended September
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 increased by $51 from $11 for the three months
ended September 30, 2003, to $62 for the three months ended September 30, 2004.
Fees and other income decreased by $9, from $189 for the nine months ended
September 30, 2003, to $180 for the nine months ended September 30, 2004. The
nine month decrease is predominantly related to the run-off of credit line
business.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses decreased by $4,115, or 22%, from
$18,465 for the three months ended September 30, 2003, to $14,350 for the three
months ended September 30, 2004. Total benefits, losses and expenses decreased
by $8,167 or 16%, from $52,167 for the nine months ended September 30, 2003, to
$44,000 for the nine months ended September 30, 2004.
Policyholder benefits decreased by $1,536, or 14%, from $11,297 for the
three months ended September 30, 2003, to $9,761 for the three months ended
September 30, 2004. Policyholder benefits decreased by $3,175, or 10%, from
$32,757 for the nine months ended September 30, 2003, to $29,582 for the nine
months ended September 30, 2004. The decrease in policyholder benefits for the
three months ended September 30, 2004, was primarily due to a decrease of $891
in disability insurance benefits and $603 in credit life benefits. These
decreases were offset by an increase of $346 in group life and dental benefits.
The decrease in policyholder benefits for the nine months ended September 30,
2004, was primarily due to decreases of $5,084 in group life and dental benefits
and $1,608 in credit life benefits. The decrease in group life and dental
benefits is predominantly attributable to favorable mortality experience in
group life. These decreases were offset by an increase of $3,896 in disability
insurance benefits resulting from alternate distribution sources, as well as
unfavorable experience on a large case.
Selling, underwriting and general expenses decreased by $2,579, or 36%,
from $7,168 for the three months ended September 30, 2003, to $4,589 for the
three months ended September 30, 2004. Selling, underwriting and general
expenses decreased by $4,992, or 26%, from $19,410 for the nine months ended
September 30, 2003, to $14,418 for the nine months ended September 30, 2004.
Decreased expense levels are driven by the runoff of credit life business.
12
Net Income
Net income increased by $2,946, from $76 for the three months ended
September 30, 2003, to $3,022 for the three months ended September 30, 2004. Net
income increased by $3,364, from $5,407 for the nine months ended September 30,
2003, to $8,771 for the nine months ended September 30, 2004.
Income taxes increased by $731, from $40 for the three months ended
September 30, 2003, to $771 for the three months ended September 30, 2004.
Income taxes increased by $958, from $2,911 for the nine months ended September
30, 2003, to $3,869 for the nine months ended September 30, 2004. During the
three months ended September 30, 2004, we recognized the release of
approximately $400 of previously provided tax accruals which were no longer
necessary.
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 September 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 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS.
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) Because all of the Company's outstanding common stock is held
directly by Assurant, Inc., the Company does not file a
Schedule 14A and has not adopted any procedures by which
security holders may recommend nominees to the registrant's
board of directors.
13
ITEM 6 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).
10.1 Amendment Number One to the Assurant, Inc. Amended and
Restated 2004 Employee Stock Repurchase Plan.
10.2 Amendment Number One to the Fortis Executive Pension and 401K
Plan.
10.3 Amendment Number Two to the Fortis, Inc. Supplemental
Executive Retirement Plan.
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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST FORTIS LIFE INSURANCE COMPANY
Date: November 12, 2004 By: /s/ Lance Wilson
-------------------------------------
Name: Lance Wilson
Title: President and Chief Executive
Officer(Principal Executive Officer)
Date: November 12, 2004 By: /s/ Ranell Jacobson
---------------------------------------
Name: Ranell Jacobson
Title: Treasurer (Chief Financial Officer)
15