SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
-------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ---------------
COMMISSION FILE NUMBER 333-16279, 333-77385
-------------------------
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-3919096
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
230 Park Avenue, Suite 966, New York, New York 10169-0999
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 973-9647
------------------------------
- --------------------------------------------------------------------------------
Former name, former address and formal fiscal year,
if changed since last report
Indicate by check 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 200,000 shares of Common Stock
as of May 10, 2000.
NOTE: WHEREAS FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK MEETS THE
CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1)(a) AND (b) OF FORM 10Q, THIS
FORM IS BEING FILED WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION H(2).
Exhibit index - Page 15 Page 1 of 17
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Person for whom the Financial Information is given: First Golden American Life Insurance Company of New York
Condensed Statements of Operations (Unaudited):
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
-------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues:
Annuity product charges $380 $112
Net investment income 462 535
Realized losses on investments (234) --
Other income 8 15
-------------------------------------------------
616 662
Insurance benefits and expenses:
Annuity benefits:
Interest credited to account balances 277 167
Underwriting, acquisition, and insurance expenses:
Commissions 321 199
General expenses 164 168
Insurance taxes, state licenses, and fees 53 23
Policy acquisition costs deferred (468) (321)
Amortization:
Deferred policy acquisition costs 97 60
Value of purchased insurance in force 1 1
Goodwill 1 1
-------------------------------------------------
446 298
-------------------------------------------------
Income before income taxes 170 364
Income taxes 60 132
-------------------------------------------------
Net income $110 $232
=================================================
See accompanying notes.
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Condensed Balance Sheets (Unaudited):
March 31, 2000 December 31, 1999
---------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, available for sale, at fair value
(cost: 2000-$28,429; 1999-$29,178) $27,343 $28,095
Short-term investments 4,117 2,309
---------------------------------------------
Total investments 31,460 30,404
Cash and cash equivalents 1,435 1,026
Due from affiliates 164 539
Accrued investment income 572 443
Deferred policy acquisition costs 3,534 3,198
Value of purchased insurance in force 98 102
Property and equipment, less allowances for
depreciation of $30 in 2000 and $31 in 1999 36 41
Goodwill, less accumulated amortization of $6 in 2000
and $5 in 1999 90 91
Other assets 584 19
Separate account assets 54,862 47,215
---------------------------------------------
Total assets $92,835 $83,078
=============================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Policy liabilities and accruals:
Future policy benefits:
Annuity products $7,074 $7,583
Current income tax liability 602 557
Deferred income tax liability 652 610
Revolving note payable -- 100
Due to affiliates 119 32
Other liabilities 686 323
Separate account liabilities 54,862 47,215
-----------------------------------------------
63,995 56,420
Commitments and contingencies
Stockholder's equity:
Preferred stock, par value $5,000 per share,
authorized 6,000 shares -- --
Common stock, par value $10 per share, authorized,
issued, and outstanding 200,000 shares 2,000 2,000
Additional paid-in capital 26,049 23,936
Accumulated other comprehensive loss (968) (927)
Retained earnings 1,759 1,649
-----------------------------------------------
Total stockholder's equity 28,840 26,658
-----------------------------------------------
Total liabilities and stockholder's equity $92,835 $83,078
===============================================
See accompanying notes.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows (Unaudited):
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
----------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $296 $(7)
INVESTING ACTIVITIES
Sale, maturity, or repayment of fixed maturities - available for sale 1,455 626
Acquisition of fixed maturities - available for sale (956) --
Short-term investments - net (1,808) (45)
Purchase of property and equipment -- (8)
Sale of property and equipment 6 --
----------------------------------------------
Net cash provided by (used in) investing activities (1,303) 573
FINANCING ACTIVITIES
Proceeds from revolving note payable 100 --
Repayment of revolving note payable (200) --
Receipts from investment contracts credited to account balances 276 26
Return of account balances on investment contracts (79) (52)
Net reallocations to Separate Account (794) (821)
Contribution from parent 2,113 --
----------------------------------------------
Net cash provided by (used in) financing activities 1,416 (847)
----------------------------------------------
Increase (decrease) in cash and cash equivalents 409 (281)
Cash and cash equivalents at beginning of period 1,026 1,932
----------------------------------------------
Cash and cash equivalents at end of period $1,435 $1,651
==============================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $11 --
Income taxes 28 --
See accompanying notes.
4
</TABLE>
<PAGE>
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, the financial 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 considered
necessary for a fair presentation have been included. All adjustments were of a
normal recurring nature, unless otherwise noted in Management's Discussion and
Analysis and the Notes to Financial Statements. Operating results for the three
months ended March 31, 2000 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2000. These financial
statements should be read in conjunction with the financial statements and the
related notes included in First Golden American Life Insurance Company of New
York's ("First Golden" or the "Company") annual report on Form 10-K for the year
ended December 31, 1999.
ORGANIZATION
First Golden is a stock life insurance company organized under the laws of the
State of New York and is a wholly owned subsidiary of Golden American Life
Insurance Company ("Golden American"). Golden American is a wholly owned
subsidiary of Equitable of Iowa Companies, Inc. ("EIC"). EIC is an indirect
wholly owned subsidiary of ING Groep N.V., a global financial services holding
company based in The Netherlands.
STATUTORY
Net income for First Golden as determined in accordance with statutory
accounting practices was $36,000 and $206,000 for the three months ended March
31, 2000 and 1999, respectively. Total statutory capital and surplus was
$27,184,000 at March 31, 2000 and $25,082,000 at December 31, 1999.
NOTE 2 -- COMPREHENSIVE INCOME
Comprehensive income includes all changes in stockholder's equity during a
period except those resulting from investments by and distributions to the
stockholder. Other comprehensive income (loss) for the first quarter of 2000 and
1999 amounted to $69,000 and $(18,000), respectively. Other comprehensive income
(loss) excludes net investment gains (losses) included in net income which
merely represent transfers from unrealized to realized gains and losses. These
amounts totaled $(130,000) during the first three months of 2000. Such amounts,
which have been measured through the date of sale, are net of income taxes and
adjustments for value of purchased insurance in force and deferred policy
acquisition costs totaling $(104,000) for the first three months of 2000. There
were no such amounts excluded for the first quarter of 1999.
NOTE 3 -- RELATED PARTY TRANSACTIONS
Directed Services, Inc. ("DSI"), an affiliate, acts as the principal underwriter
(as defined in the Securities Act of 1933 and the Investment Company Act of
1940, as amended) and distributor of the variable insurance products issued by
the Company. DSI is authorized to enter into agreements with broker/dealers to
distribute the Company's variable insurance products and appoint representatives
of the broker/dealers as agents. The Company paid commissions to DSI totaling
$321,000 in the first quarter of 2000. For the first quarter of 1999, the
commissions and expenses were $199,000.
The Company has an asset management agreement with ING Investment Management LLC
("ING IM"), an affiliate, in which ING IM provides asset management and
accounting services. Under the agreement, the Company records a fee based on the
value of the assets managed by ING IM. The fee is payable quarterly. For the
first quarters of 2000 and 1999, the Company incurred fees of $20,000 and
$17,000, respectively, under this agreement.
5
<PAGE>
The Company has service agreements with Golden American and Equitable Life
Insurance Company of Iowa ("Equitable Life"), an affiliate, in which Golden
American and Equitable Life provide administrative and financial related
services. Under the agreement with Golden American, the Company incurred
expenses of $121,000 and $4,000 for the first quarters of 2000 and 1999,
respectively. Under the agreement with Equitable Life, the Company incurred
expenses of $91,000 and $40,000 for the first quarters of 2000 and 1999,
respectively.
The Company provides resources and services to DSI. Revenues for these services,
which reduce general expenses incurred by the Company, totaled $52,000 and
$32,000 for the first quarters of 2000 and 1999, respectively.
The Company provides resources and services to Golden American. Revenues for
these services, which reduce general expenses incurred by the Company, totaled
$148,000 for the first quarter of 2000.
The Company had premiums, net of reinsurance, for variable products for the
three months ended March 31, 2000 and 1999 that totaled $2,000 from Locust
Street Securities, Inc., an affiliate.
During the first quarter of 2000, the Company received a $2,113,000 capital
contribution from Golden American.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
REINSURANCE: At March 31, 2000, First Golden had a reinsurance treaty with an
unaffiliated reinsurer covering a significant portion of the mortality risks
under its variable contracts as of December 31, 1999. First Golden remains
liable to the extent its reinsurer does not meet its obligations under the
reinsurance agreement. At March 31, 2000 and December 31, 1999, the Company had
a payable of $5,000 and $4,000, respectively, for reinsurance premiums. Included
in the accompanying financial statements are net considerations to the reinsurer
of $9,000 in the first quarter of 2000. Also included are net considerations to
the reinsurer of $2,000 in the first quarter of 1999.
The reinsurance treaty that covered the nonstandard minimum guaranteed death
benefits for new business was terminated for business issued after December 31,
1999. The Company is currently pursuing alternative reinsurance arrangements for
new business after December 31, 1999. There can be no assurance that such
alternative arrangements will be available. Any reinsurance covering business in
force at December 31, 1999 will continue to apply in the future.
LITIGATION: The Company, like other insurance companies, may be named or
otherwise involved in lawsuits, including class action lawsuits and
arbitrations. In some class action and other actions involving insurers,
substantial damages have been sought and/or material settlement or award
payments have been made. The Company currently believes no pending or threatened
lawsuits or actions exist that are reasonably likely to have a material adverse
impact on the Company.
VULNERABILITY FROM CONCENTRATIONS: The Company has various concentrations in its
investment portfolio. As of March 31, 2000, the Company had two investments
(other than bonds issued by agencies of the United States government) each
exceeding ten percent of stockholder's equity. The Company's asset growth, net
investment income, and cash flow are primarily generated from the sale of
variable annuities and associated future policy benefits. Substantial changes in
tax laws that would make these products less attractive to consumers and extreme
fluctuations in interest rates or stock market returns, which may result in
higher lapse experience than assumed, could have a severe impact to the
Company's financial condition. Two broker/dealers, each having at least ten
percent of total sales, generated 94% of the Company's sales in the three months
ended March 31, 2000 (83% by two broker/dealers during the same period in 1999).
6
<PAGE>
REVOLVING NOTE PAYABLE: To enhance short-term liquidity, the Company established
a revolving note payable effective July 31, 1999 and expiring July 31, 2000 with
SunTrust Bank, Atlanta (the "Bank"). The total amount the Company may have
outstanding is $10,000,000. The note accrues interest at an annual rate equal
to: (1) the cost of funds for the Bank for the period applicable for the advance
plus 0.25% or (2) a rate quoted by the Bank to the Company for the advance. The
terms of the agreement require the Company to maintain the minimum level of
Company Action Level Risk Based Capital as established by applicable state law
or regulation. At March 31, 2000, the Company did not have any borrowings under
this agreement. At December 31, 1999, the company had borrowings of $100,000
under the agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
The purpose of this section is to discuss and analyze First Golden American Life
Insurance Company of New York's ("First Golden" or the "Company") condensed
results of operations. In addition, some analysis and information regarding
financial condition and liquidity and capital resources is also provided. This
analysis should be read jointly with the condensed financial statements, the
related notes, and the Cautionary Statement Regarding Forward-Looking
Statements, which appear elsewhere in this report.
First Golden is a wholly owned subsidiary of Golden American Life Insurance
Company ("Golden American" or the "Parent"). Golden American is a wholly owned
subsidiary of Equitable of Iowa Companies, Inc. ("EIC"). EIC is an indirect
wholly owned subsidiary of ING Groep N.V. ("ING"), a global financial services
holding company based in The Netherlands. First Golden's primary purpose is to
offer variable insurance products in the states of New York and Delaware.
RESULTS OF OPERATIONS
- ---------------------
PREMIUMS
The Company reported $5.3 million in variable annuity premiums during the first
three months of 2000 compared to $3.3 million for the first three months of
1999. For the Company's variable contracts, premiums collected are not reported
as revenues, but as deposits to insurance liabilities. Revenues for these
products are recognized over time in the form of investment income and product
charges.
Premiums, net of reinsurance, for variable products from two significant
broker/dealers, each having at least ten percent of total sales, for the three
months ended March 31, 2000 totaled $5.0 million, or 94% of total premiums ($2.7
million, or 83%, from two significant broker/dealers for the three months ended
March 31, 1999).
REVENUES
During the first three months of 2000 and 1999, product charges totaled $380,000
and $112,000, respectively. This increase is due to higher account balances
associated with the Company's variable account option. Net investment income was
$462,000 for the first three months of 2000. This is a decrease of 13.7%
compared to net investment income of $535,000 for the first three months of
1999, due to a decrease in invested assets from March 31, 1999. The Company
recognized realized losses of $234,000 during the first three months of 2000.
EXPENSES
The Company reported total insurance benefits and expenses of $446,000 during
the first three months of 2000 compared to $298,000 for first three months of
1999. Interest credited to account balances totaled $277,000 during the first
three months of 2000 and $167,000 for the same period in 1999. The increase in
interest credited relates to higher credited rates associated with the Company's
fixed account option within the variable product.
Commissions increased $122,000 in the first three months of 2000 from $199,000
during the first three months of 1999. Changes in commissions are generally
related to changes in the level of variable product sales. General expenses were
$164,000 and $168,000 for the first three months of 2000 and 1999, respectively.
Most costs incurred as the result of new sales have been deferred, thus having
very little impact on current earnings.
7
<PAGE>
First Golden deferred $468,000 of expenses associated with the sale of variable
annuity contracts for the three months ended March 31, 2000. Expenses of
$321,000 were deferred for the three months ended March 31, 1999. These
acquisition costs are amortized in proportion to the expected gross profits.
Amortization of deferred policy acquisition costs ("DPAC") was $97,000 for the
three months ended March 31, 2000 and $60,000 for the three months ended March
31, 1999. The amortization of value of purchased insurance in force ("VPIF") was
$1,000 and $1,000 for the three months ended March 31, 2000 and 1999,
respectively. During the first three months of 2000, VPIF was adjusted by $2,000
to reflect changes in the assumptions related to the timing of future gross
profits. During the first three months of 1999, VPIF was adjusted to reduce
amortization by $1,000 to reflect changes in the assumptions related to the
timing of future gross profits. Based on current conditions and assumptions as
to the impact of future events on acquired policies in force, the expected
approximate net amortization relating to VPIF as of March 31, 2000 is $8,000 for
the remainder of 2000, $10,000 in 2001, $10,000 in 2002, $8,000 in 2003, $6,000
in 2004, and $5,000 in 2005. Actual amortization may vary based upon changes in
assumptions and experience.
INCOME
Net income was $110,000 for the first three months of 2000, a decrease of
$122,000, or 52.6%, from the same period in 1999.
Comprehensive income for the first three months of 2000 was $69,000, an increase
of $87,000 from comprehensive loss of $18,000 during the first three months of
1999.
FINANCIAL CONDITION
- -------------------
INVESTMENTS
All of the Company's investments are carried at fair value in the Company's
financial statements. The change in the carrying value of the Company's
investment portfolio includes changes in unrealized appreciation and
depreciation of fixed maturities as well as a decline in the cost basis of these
securities due to scheduled principal payments.
FIXED MATURITIES: At March 31, 2000, the Company had fixed maturities with an
amortized cost of $28.4 million and an estimated fair value of $27.3 million.
The Company classifies 100% of its securities as available for sale. Net
unrealized depreciation on fixed maturities of $1,086,000 was comprised of gross
appreciation of $10,000 and gross depreciation of $1,096,000. Net unrealized
holding losses on these securities, net of adjustments for VPIF, DPAC, and
deferred income taxes of $629,000, were included in stockholder's equity at
March 31, 2000.
The individual securities in the Company's fixed maturities portfolio (at
amortized cost) include investment grade securities, which include securities
issued by the U.S. government, its agencies, and corporations that are rated at
least A- by Standard & Poor's Rating Services ("Standard & Poor's") ($18.3
million or 64.4%), that are rated BBB+ to BBB- by Standard & Poor's ($9.1
million or 31.9%), and below investment grade securities, which are securities
issued by corporations that are rated BB+ to BB- by Standard & Poor's ($1.0
million or 3.7%).
Fixed maturities rated BBB+ to BBB- may have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity of the issuer to make principal and interest payments than
is the case with higher rated fixed maturities. The Company intends to purchase
additional below investment grade securities, but it does not expect the
percentage of its portfolio invested in such securities to exceed 10% of its
investment portfolio. At March 31, 2000, the yield at amortized cost on the
Company's below investment grade portfolio was 8.1% compared to 6.7% for the
Company's investment grade corporate bond portfolio. The Company estimates the
fair value of its below investment grade portfolio was $975,000, or 93.8% of
amortized cost value, at March 31, 2000.
8
<PAGE>
Below investment grade securities have different characteristics than investment
grade corporate debt securities. Risk of loss upon default by the borrower is
significantly greater with respect to below investment grade securities than
with other corporate debt securities. Below investment grade securities are
generally unsecured and are often subordinated to other creditors of the issuer.
Also, issuers of below investment grade securities usually have higher levels of
debt and are more sensitive to adverse economic conditions, such as recession or
increasing interest rates, than are issuers of investment grade securities. The
Company attempts to reduce the overall risk in its below investment grade
portfolio, as in all of its investments, through careful credit analysis, strict
investment policy guidelines, and diversification by company and by industry.
The Company analyzes its investment portfolio, including below investment grade
securities, at least quarterly in order to determine if its ability to realize
its carrying value on any investment has been impaired. For debt securities, if
impairment in value is determined to be other than temporary (i.e., if it is
probable the Company will be unable to collect all amounts due according to the
contractual terms of the security), the cost basis of the impaired security is
written down to fair value, which becomes the new cost basis. The amount of the
write-down is included in earnings as a realized loss. Future events may occur,
or additional or updated information may be received, which may necessitate
future write-downs of securities in the Company's portfolio. Significant
write-downs in the carrying value of investments could materially adversely
affect the Company's net income in future periods.
During the three months ended March 31, 2000, the amortized cost basis of the
Company's fixed maturities portfolio was reduced by $1.7 million as a result of
sales, maturities, and scheduled principal repayments. In total, net pre-tax
losses from sales, calls, and repayments of fixed maturity investments amounted
to $234,000 in the first three months of 2000.
At March 31, 2000, no fixed maturities were deemed to have impairments in value
that are other than temporary. At March 31, 2000, the Company had no investment
in default. The Company's fixed maturities portfolio had a combined yield at
amortized cost of 6.6% at March 31, 2000.
OTHER ASSETS
DPAC represents certain deferred costs of acquiring new insurance business,
principally first year commissions and interest bonuses and other expenses
related to production after October 24, 1997. The Company's DPAC was eliminated
as of the ING merger date and an asset of $132,000 representing VPIF was
established for all policies in force at the ING merger date. VPIF is amortized
into income in proportion to the expected gross profits of in force acquired in
a manner similar to DPAC amortization. Any expenses which vary directly with the
sales of the Company's products are deferred and amortized. At March 31, 2000,
the Company had VPIF and DPAC balances of $98,000 and $3.5 million,
respectively.
Goodwill totaling $96,000, representing the excess of the acquisition cost over
the fair value of net assets acquired, was established as a result of the merger
with ING. Accumulated amortization of goodwill as of March 31, 2000 was
approximately $6,000.
Other assets increased $565,000 during the first quarter of 2000 primarily due
to accounts receivable at March 31, 2000.
At March 31, 2000, the Company had $54.9 million of separate account assets
compared to $47.2 million at December 31, 1999. The increase in separate account
assets resulted from market appreciation and sales of the Company's variable
products, net of redemptions.
At March 31, 2000, the Company had total assets of $92.8 million, an increase of
11.8% from December 31, 1999.
9
<PAGE>
LIABILITIES
Future policy benefits decreased $509,000 in the first three months of 2000 to
$7.1 million due mainly to net reallocations to the Company's separate account.
Policy reserves represent the premiums received plus accumulated interest less
mortality and administration charges. At March 31, 2000, the Company had $54.9
million of separate account liabilities. This is an increase of 16.2% over
separate account liabilities as of December 31, 1999, and is primarily related
to market appreciation and sales of the Company's variable products, net of
redemptions.
Other liabilities increased $363,000 from December 31, 1999. The increase
results primarily from a payable to the separate account at March 31, 2000.
The Company's total liabilities increased $7.6 million, or 13.4%, during the
first three months of 2000 and totaled $64.0 million at March 31, 2000. The
increase is primarily the result of an increase in separate account liabilities.
The effects of inflation and changing prices on the Company's financial position
are not material since insurance assets and liabilities are both primarily
monetary and remain in balance. An effect of inflation, which has been low in
recent years, is a decline in stockholder's equity when monetary assets exceed
monetary liabilities.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Liquidity is the ability of the Company to generate sufficient cash flows to
meet the cash requirements of its operating, investing, and financing
activities. The Company's principal sources of cash are variable annuity
premiums and product charges, investment income, maturing investments, and
capital contributions. Primary uses of these funds are payments of commissions
and operating expenses, investment purchases, repayment of debt, as well as
withdrawals and surrenders.
Net cash provided by operating activities was $296,000 in the first three months
of 2000 compared to net cash used in operations of $7,000 in the same period of
1999. The increase in operating cash flows results primarily from an increase in
annuity product charges.
Net cash used in investing activities was $1.3 million during the first three
months of 2000 compared to net cash provided in investing activities of $573,000
in the same period of 1999. The decrease results primarily due to increased net
purchases of short-term investments of $1.8 million in the first three months of
2000 versus $45,000 in the first three months of 1999.
Net cash provided in financing activities was $1.4 million during the first
three months of 2000 compared to cash used in financing activities of $847,000
during the same period in the prior year, an increase of $2.3 million. The
increase is primarily due to the $2.1 million capital contribution from Golden
American.
The Company's liquidity position is managed by maintaining adequate levels of
liquid assets, such as cash or cash equivalents and short-term investments.
Additional sources of liquidity include borrowing facilities to meet short-term
cash requirements. The Company has a $10.0 million revolving note facility with
SunTrust Bank, Atlanta, which expires on July 31, 2000. Management believes
these sources of liquidity are adequate to meet the Company's short-term cash
obligations.
First Golden's principal office is located in New York, New York, where certain
of the Company's records are maintained. The 2,568 square feet of office space
is leased through 2001.
First Golden believes it will be able to fund the capital required for projected
new business primarily with existing capital and future capital contributions
from its Parent. First Golden expects to continue to receive capital
contributions from Golden American if necessary. It is ING's policy to ensure
adequate capital and surplus is provided for the Company and, if necessary,
additional funds will be contributed.
10
<PAGE>
The Golden American Board of Directors has agreed by resolution to provide funds
as needed for the Company to maintain policyholders' surplus that meets or
exceeds the greater of: (1) the minimum capital adequacy standards to maintain a
level of capitalization necessary to meet A.M. Best Company's guidelines for a
rating one level less than the one originally given to First Golden or (2) the
New York State Insurance Department risk-based capital minimum requirements as
determined in accordance with New York statutory accounting principles. No funds
were transferred from Golden American during the first three months of 1999.
First Golden is required to maintain a minimum capital and surplus of not less
than $6 million under the provisions of the insurance laws of the State of New
York.
Under the provisions of the insurance laws of the State of New York, First
Golden cannot distribute any dividends to its stockholder, Golden American,
unless a notice of its intent to declare a dividend and the amount of the
dividend has been filed with the New York Insurance Department at least thirty
days in advance of the proposed declaration. If the Superintendent of the New
York Insurance Department finds the financial condition of First Golden does not
warrant the distribution, the Superintendent may disapprove the distribution by
giving written notice to the Company within thirty days after the filing. The
management of First Golden does not anticipate paying any dividends to its
Parent during 2000.
The NAIC's risk-based capital requirements require insurance companies to
calculate and report information under a risk-based capital formula. These
requirements are intended to allow insurance regulators to monitor the
capitalization of insurance companies based upon the type and mixture of risks
inherent in a company's operations. The formula includes components for asset
risk, liability risk, interest rate exposure, and other factors. The Company has
complied with the NAIC's risk-based capital reporting requirements. Amounts
reported indicate the Company has total adjusted capital well above all required
capital levels.
VULNERABILITY FROM CONCENTRATIONS: First Golden's operations consist of one
business segment, the sale of insurance products. First Golden is not dependent
upon any single customer, however, two broker/dealers accounted for a
significant portion of its sales volume in the first three months of 2000. All
premiums are generated from consumers and corporations in the states of New York
and Delaware.
REINSURANCE: The reinsurance treaty that covered the nonstandard minimum
guaranteed death benefits for new business was terminated for business issued
after December 31, 1999. The Company is currently pursuing alternative
reinsurance arrangements for new business after December 31, 1999. There can be
no assurance that such alternative arrangements will be available. Any
reinsurance covering business in force at December 31, 1999 will continue to
apply in the future.
IMPACT OF YEAR 2000: In prior years, the Company discussed the nature and
progress of Golden American's plans for the Company to become Year 2000 ready.
In late 1999, Golden American completed remediation and testing of the Company's
systems. As a result of those planning and implementation efforts, the Company
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company is not aware of
any material problems resulting from Year 2000 issues, either with its products,
its internal systems, or the products and services of third parties. Golden
American will continue to monitor the Company's mission critical computer
applications and those of suppliers and vendors throughout the Year 2000 to
ensure that any latent Year 2000 matters that may arise are addressed promptly.
11
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
- ---------------------------------------------------------
Any forward-looking statements contained herein or in any other oral or written
statement by the Company or any of its officers, directors, or employees is
qualified by the fact that actual results of the Company may differ materially
from such statement, among other risks and uncertainties inherent in the
Company's business, due to the following important factors:
1. Prevailing interest rate levels and stock market performance, which may
affect the ability of the Company to sell its products, the market value
and liquidity of the Company's investments, fee revenue, and the lapse rate
of the Company's policies, notwithstanding product design features intended
to enhance persistency of the Company's products.
2. Changes in the federal income tax laws and regulations, which may affect
the tax status of the Company's products.
3. Changes in the regulation of financial services, including bank sales and
underwriting of insurance products, which may affect the competitive
environment for the Company's products.
4. Increasing competition in the sale of the Company's products.
5. Other factors that could affect the performance of the Company, including,
but not limited to, market conduct claims, litigation, insurance industry
insolvencies, availability of competitive reinsurance on new business,
investment performance of the underlying portfolios of the variable
products, variable product design, and sales volume by significant sellers
of the Company's variable products.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
A list of exhibits included as part of this report is set forth in the Exhibit
Index which immediately precedes such exhibits and is hereby incorporated by
reference herein.
(b) Reports on Form 8-K
None
13
<PAGE>
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.
DATE: May 12, 2000 FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
By/S/ Barnett Chernow
----------------------------------------
Barnett Chernow
President and Director
(Principal Executive Officer)
By/S/ Mary Bea Wilkinson
----------------------------------------
Mary Bea Wilkinson
Senior Vice President and Treasurer
(Principal Financial Officer)
14
<PAGE>
<TABLE>
<CAPTION>
INDEX
Exhibits to Form 10-Q
Three Months ended March 31 2000
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
Page Number
-----------
<S> <C>
2 PLAN OF ACQUISITION
(a) Agreement and Plan of Merger dated July 7, 1997, among Equitable of Iowa Companies ("Equitable"),
ING Groep N.V. and PFHI Holdings, Inc. (incorporated by reference from Exhibit 2 in Equitable's
Form 8-K filed July 11, 1997)......................................................................
------
3 ARTICLES OF INCORPORATION AND BY-LAWS
(a) Articles of Incorporation of First Golden American Life Insurance Company of New York
("Registrant" or "First Golden") (incorporated by reference from Exhibit 3(i) to Amendment No. 1
to Registrant's Registration Statement on Form S-1 filed with the Securities and Exchange
Commission (the "SEC") on or about March 18, 1997 (File No. 333-16279))............................
------
(b) By-laws of First Golden (incorporated by reference from Exhibit 3(ii) to Amendment No. 1 to
Registrant's Registration Statement on Form S-1 filed with the SEC on or about March 18, 1997
(File No. 333-16279))..............................................................................
------
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
(a) Individual Deferred Combination Variable and Fixed Annuity Contract (incorporated by reference
from Exhibit 4(a) to a Registration Statement for First Golden on Form S-1 filed with the SEC on
or about April 23, 1999 (File No. 333-77385))......................................................
------
(b) Individual Deferred Combination Variable and Fixed Annuity Contract Application (incorporated by
reference from Exhibit 4(b) to a Registration Statement for First Golden on Form S-1 filed with
the SEC on or about April 23, 1999 (File No. 333-77385))...........................................
------
(c) Schedule Page to the DVA Plus-NY Contract featuring the Galaxy VIP Fund (incorporated by reference
from Exhibit 4(f) to Amendment No. 1 to a Registration Statement for First Golden on Form S-1
filed with the SEC on or about November 1, 1999 (File No. 333-77385))...........................
------
10 MATERIAL CONTRACTS
(a) Services Agreement, dated November 8, 1996, between Directed Services, Inc. and First Golden
(incorporated by reference from Exhibit 10(a) to Amendment No. 1 to Registrant's Registration
Statement on Form S-1 filed with the SEC on or about March 18, 1997 (File No. 333-16279))..........
------
(b) Administrative Services Agreement, dated November 8, 1996, between First Golden and Golden
American Life Insurance Company (incorporated by reference from Exhibit 10(b) to Amendment No. 1
to Registrant's Registration Statement on Form S-1 filed with the SEC on or about March 18, 1997
(File No. 333-16279))..............................................................................
------
(c) Form of Administrative Services Agreement between First Golden and Equitable Life Insurance
Company of Iowa (incorporated by reference from Exhibit 10(c) to Amendment No. 1 to Registrant's
Registration Statement on Form S-1 filed with the SEC on or about March 18, 1997 (File No.
333-16279))........................................................................................
------
15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX
Exhibits to Form 10-Q
Three Months ended March 31, 2000
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
Page Number
-----------
<S> <C>
(d) Form of Custodial Agreement between Registrant and The Bank of New York (incorporated by reference
from Exhibit 10(d) to Amendment No. 1 to Registrant's Registration Statement on Form S-1 filed
with the SEC on or about March 18, 1997 (File No. 333-16279))......................................
------
(e) Form of Participation Agreement between First Golden and the Travelers Series Fund Inc.
(incorporated by reference from Exhibit 10(e) to a Registration Statement for First Golden on Form
S-1 filed with the SEC on or about April 23, 1999 (File No. 333-77385))............................
------
(f) Participation Agreement between First Golden and the Greenwich Street Series Fund Inc.
(incorporated by reference from Exhibit 10(f) to a Registration Statement for First Golden on Form
S-1 filed with the SEC on or about April 23, 1999 (File No. 333-77385))............................
------
(g) Participation Agreement between First Golden and the Smith Barney Concert Allocation Series Inc.
(incorporated by reference from Exhibit 10(g) to a Registration Statement for First Golden on Form
S-1 filed with the SEC on or about April 23, 1999 (File No. 333-77385))............................
------
(h) Form of Participation Agreement between First Golden and PIMCO Variable Insurance Trust
(incorporated by reference from Exhibit 10(h) to a Registration Statement for First Golden on Form
S-1 filed with the SEC on or about April 23, 1999 (File No. 333-77385))............................
------
(i) Form of Participation Agreement between First Golden and The Galaxy VIP Fund (incorporated by
reference from Exhibit 10(1) to Amendment No. 1 to a Registration Statement for First Golden on
Form S-1 filed with the SEC on or about September 24, 1999 (File No. 333-76945))...................
------
(j) Asset Management Agreement, dated March 30, 1998, between First Golden and ING Investment
Management LLC (incorporated by reference from Exhibit 10(g) to First Golden's Form 10-Q filed with
the SEC on August 14, 1998 (File No. 333-16279))...................................................
------
(k) Underwriting Agreement between First Golden and Directed Services, Inc. (incorporated by reference
from Exhibit 1 to Amendment No. 1 to Registrant's Registration Statement on Form S-1 filed with
the SEC on or about March 18, 1997 (File No. 333-16279))...........................................
------
(l) Revolving Note Payable, dated July 27, 1998, between First Golden and SunTrust Bank, Atlanta
(incorporated by reference from Exhibit 10(i) to First Golden's Form 10-Q filed with the SEC on
November 12, 1998 (File No. 333-16279))............................................................
------
(m) Revolving Note Payable, dated July 31, 1999, between First Golden and SunTrust Bank, Atlanta
(incorporated by reference from Exhibit 10(i) to First Golden's Form 10-Q filed with the SEC on
August 13, 1999 (File No. 333-16279))..............................................................
------
16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX
Exhibits to Form 10-Q
Three Months ended March 31, 2000
FIRST GOLDEN AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
Page Number
-----------
<S> <C>
(n) Participation Agreement between First Golden and ING Variable Insurance Trust (incorporated by
reference from Exhibit 10(m) to Amendment No. 2 to a Registration Statement for First Golden on
Form S-1 filed with the SEC on or about April 26, 2000 (File No. 333-77385)).......................
------
(o) Participation Agreement between First Golden and Prudential Series Fund, Inc. (incorporated by
reference from Exhibit 10(n) to Amendment No. 2 to a Registration Statement for First Golden on
Form S-1 filed with the SEC on or about April 26, 2000 (File No. 333-77385)).......................
------
27 FINANCIAL DATA SCHEDULE (ELECTRONIC FILING ONLY)..........................................................
------
17
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONDENSED
STATEMENTS OF OPERATIONS AND CONDENSED BALANCE SHEETS (UNAUDITED) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 27,343
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 31,460
<CASH> 1,435
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 3,534
<TOTAL-ASSETS> 92,835
<POLICY-LOSSES> 7,074
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,000
<OTHER-SE> 26,840
<TOTAL-LIABILITY-AND-EQUITY> 92,835
0
<INVESTMENT-INCOME> 462
<INVESTMENT-GAINS> (234)
<OTHER-INCOME> 388
<BENEFITS> 277
<UNDERWRITING-AMORTIZATION> 97
<UNDERWRITING-OTHER> 72
<INCOME-PRETAX> 170
<INCOME-TAX> 60
<INCOME-CONTINUING> 110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110
<EPS-BASIC> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
