FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
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Commission file number 333-25269
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FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
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(Exact name of registrant as specified in its charter)
New York 93-1225432
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
8515 East Orchard Road, Englewood, CO 80111
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(Address of principal executive offices)
(Zip Code)
[303] 689-4128
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(Registrant's telephone number, including area code)
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 No X
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As of September 30, 1997, 2,000 shares of the registrant's common stock were
outstanding, all of which were owned by the registrant's parent company.
NOTE:This Form 10-Q is filed by the registrant only as a consequence of
the sale by the registrant of a market value adjusted annuity product.
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TABLE OF CONTENTS
Page
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Part I FINANCIAL INFORMATION
Item 1 Financial Statements
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Statements of Income 3
Balance Sheet 4
Statement of Cash Flows 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
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Part II OTHER INFORMATION
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Item 1 Legal Proceeding 10
Item 6 Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit 27 Financial Data Schedule 12
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PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
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STATEMENTS OF INCOME
FOR THE PERIOD APRIL 4, 1997 [INCEPTION] TO SEPTEMBER 30, 1997
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[Unaudited]
[Dollars in thousands except for share amounts.]
For the Period
Three Months April 4, 1997
Ended [Inception] to
September 30, September 30,
1997 1997
--------------- ---------------
REVENUES:
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Annuity contract charges and premiums $ 5 $ 5
Net investment income 84 161
---- ----
89 166
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EXPENSES:
Commissions 1 1
Operating expenses 45 58
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46 59
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INCOME BEFORE INCOME TAXES 43 107
CURRENT PROVISION FOR INCOME TAXES 15 37
---- ----
NET INCOME $ 28 $ 70
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See notes to financial statements.
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FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
BALANCE SHEET
SEPTEMBER 30, 1997
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[Unaudited]
[Dollars in thousands except for share amounts.]
ASSETS
Fixed maturities-available-for-sale,
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at fair value (amortized cost $4,979) $ 4,994
Cash 1,086
Investment income due and accrued 90
Other assets 44
Separate account assets 6,265
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TOTAL ASSETS $12,479
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LIABILITIES AND STOCKHOLDER'S EQUITY
POLICY BENEFIT LIABILITIES -
Policy reserves $ 76
GENERAL LIABILITIES:
Due to Parent Corporation 16
Other liabilities 43
Separate account liabilities 6,265
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TOTAL LIABILITIES 6,400
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STOCKHOLDER'S EQUITY:
Common stock, $1,000 par value,
2,000 shares authorized,
issued and outstanding 2,000
Additional paid-in capital 4,000
Net unrealized gain on
securities available-for-sale 9
Retained earnings 70
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TOTAL STOCKHOLDER'S EQUITY 6,079
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $12,479
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See notes to financial statements.
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FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
STATEMENT OF CASH FLOWS
FOR THE PERIOD APRIL 4, 1997 [INCEPTION] TO SEPTEMBER 30, 1997
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[Unaudited]
[Dollars in Thousands]
OPERATING ACTIVITIES:
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Net income $ 70
Adjustments to reconcile net income to
net cash provided by operating activities -
Amortization of investments (12)
Changes in assets and liabilities:
Investment income due and accrued (90)
Other, net (6)
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Net cash used in operating activities (38)
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INVESTING ACTIVITIES:
Purchases of fixed maturity investments -
Available-for-sale (4,968)
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Net cash used in investing activities (4,968)
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FINANCING ACTIVITIES:
Contract deposits 76
Due to Parent Corporation 16
Capital contributions 6,000
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Net cash provided by financing activities 6,092
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NET INCREASE IN CASH 1,086
CASH, BEGINNING OF PERIOD 0
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CASH, END OF PERIOD $ 1,086
=======
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See notes to financial statements.
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<PAGE>
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD APRIL 4, 1997 [INCEPTION] TO SEPTEMBER 30,1997
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[Unaudited]
[Dollars in thousands except for share amounts.]
1. ORGANIZATION
Organization - First Great-West Life & Annuity Insurance Company (the
Company) is a wholly-owned subsidiary of Great-West Life & Annuity
Insurance Company (the Parent Corporation). The Company was incorporated
as a stock life insurance company in the State of New York and was
capitalized on April 4, 1997, through a $6,000 cash investment from the
Parent Corporation for 2,000 shares of common stock. The Company was
licensed as an insurance company in the State of New York on May 28,
1997.
Basis of Presentation - The financial statements and related notes of
the Company have been prepared in accordance with generally accepted
accounting principles applicable to interim reporting and do not include
all of the information and footnotes required 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. These financial statements should be read in
conjunction with the audited balance sheet and notes thereto for the
period ended April 4, 1997. The results of operations for the period
April 4, 1997, (inception) to September 30, 1997, are not necessarily
indicative of the results that may be expected for the period ended
December 31, 1997.
2. SIGNIFICANT ACCOUNTING PRINCIPLES
Cash - Cash includes only amounts in demand deposit accounts.
Investments - Fixed maturity investments available-for-sale are carried
at fair value, with the net unrealized gain or loss included as a
component of stockholder's equity. If a decline in fair value is
determined to be other than temporary, the investment will be written
down and a realized loss recognized. The fair values of publicly traded
fixed maturities are obtained from an independent pricing service.
The amortized cost of fixed maturities available-for-sale is adjusted
for the amortization of premium and accretion of discounts using the
effective interest and method over the estimated life of the related
bonds. Such amortization is included in net investment income.
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Separate Account - Separate Account assets and related liabilities are
carried at fair value. The Company's Separate Accounts invest in shares
of various external mutual funds.
Due to Parent Corporation - Due to Parent Corporation includes amounts
due on demand.
Policy Reserves - Annuity contract reserves without life contingencies
of $76 are carried at contractholders' account value.
Recognition of Premium Income and Expenses - Revenues for annuity and
other contracts without significant life contingencies consist of
contract charges for the cost of insurance, contract administration, and
surrender fees that have been assessed against the contract account
balance during the period.
Income Taxes - Income taxes are recorded using an asset and liability
approach which requires, among other provisions, the recognition of
deferred tax assets and liabilities for expected future tax consequences
of events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax consequences, all
expected future events (other than the enactments or changes in the tax
laws or rules) are considered.
The Company and its Parent have entered into an income tax allocation
agreement whereby the Parent will file a consolidated federal income tax
return. Under the agreement, the Company is responsible for and will
receive the benefits of any income tax liability or benefit computed on
a separate basis.
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the Period
Three Months April 4, 1997
Ended (Inception)
September 30, September 30,
1997 1997
---------------- ----------------
Operating Summary(Thousands)
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Premiums $ 5 $ 5
Net investment income 84 161
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Total revenues 89 166
Total benefits and expenses 46 59
Income tax expenses 15 37
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Net income $28 $ 70
=== ====
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Introduction - The following discussion addresses the financial
condition of the Company as of September 30, 1997, and its results of
operations for the period April 4, 1997, (inception) to September 30,
1997.
The Company's operations during the period indicated have been focused
on obtaining licensure as an insurance company domiciled in the State of
New York (which occurred May 28, 1997) and preliminary marketing
activities. Sales have been limited to individual annuity products -
both fixed income annuities with a market value adjustment and variable
annuities sold through a marketing agreement with Charles Schwab & Co.
Although sales of the fixed income annuities without significant life
contingencies have been minimal ($76 thousand), the contributions
received for the variable annuities included in the Separate Account are
over $6 million for the four-month time frame in which the Company has
been licensed. The net income of $70 thousand reflects investment income
on surplus less the operating expenses associated with the new
operations.
In the months ahead, the Company will continue to focus its efforts on
variable sales while continuing to develop other products for submission
to the New York Department of Insurance for approval.
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General Account Investments - The Company's investment strategies and
portfolios are intended to match the duration of the related liabilities
and provide sufficient cash flow to meet obligations while maintaining a
competitive rate of return. The duration of these investments is
monitored, and investment purchases and sales are executed with the
objective of having adequate funds available to satisfy the Company's
maturing liabilities.
It is management's philosophy that the portfolio of fixed maturities be
of high quality. The fixed maturities in the Company's portfolio are
generally rated by external rating agencies, and if not externally
rated, are rated by the Company on a basis believed to be similar to
that used by rating agencies. The credit rating on the fixed maturity
portfolio at September 30, 1997, is AAA.
During the period from inception to September 30, 1997, net unrealized
gains (losses) on fixed maturities included in stockholders' equity,
which is net of policyholder-related amounts and deferred income taxes,
increased surplus by $9 thousand.
Liquidity and Capital Resouces - Liquidity for the Company has remained
strong as evidence by significant amounts of cash. Generally, the
Company has met its operating requirements by maintaining appropriate
levels of liquidity in its investment portfolio.
The Company's capital resources represent funds available for long-term
business commitments and primarily consist of stockholder's equity.
Capital resources provide protection for policyholders and the financial
strength to support the underwriting of insurance risks, and allow for
continued business growth. The amount of capital resources that may be
needed is determined by the Company's senior management and Board of
Directors, as well as by regulatory requirements. The allocation of
resources to new long-term business commitments is designed to achieve
an attractive return, tempered by considerations of risk and the need to
support the Company's existing business.
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<PAGE>
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the Company is a party or of which any of their property
is the subject.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits
Exhibit Number Title Page
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27 Financial Data Schedule 12
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the
third quarter of 1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
DATE: _November 12, 1997____ BY: /s/_Glen R. Derback_____________________
Glen R. Derback, Vice President and Treasurer
(Duly authorized officer and chief accounting
officer)
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<ARTICLE> 7
<LEGEND>
First Great-West Life & Annuity Insurance Company as of and for the Period
Ending September 30, 1997 (000s)
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</LEGEND>
<CIK> 0001036213
<NAME> FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUN-30-1997
<PERIOD-END> SEP-30-1997
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<DEBT-HELD-FOR-SALE> 4,994
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<COMMON> 2,000
<OTHER-SE> 4,079
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<INVESTMENT-INCOME> 161
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</TABLE>
