<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
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Commission file number 0-23375
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GE Financial Assurance Holdings, Inc.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 54-1829180
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6604 West Broad Street, Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
(804) 281-6000
(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 |X| No
At October 27, 2000, 1,000 shares of common stock with a par value of $1.00 were
outstanding. The common stock of GE Financial Assurance Holdings, Inc. is not
publicly traded.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b)
OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE
FORMAT.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-------------------
<S> <C>
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements .......................................................... 1
Item 2. Management's Discussion and Analysis of Results of Operations ................. 7
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K .............................................. 10
Signatures .................................................................................. 11
Index to Exhibits ........................................................................... 12
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges.............................
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed, Consolidated Statement of Current and Retained Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- -------------------------------
(In millions) September 30, September 25, September 30, September 25,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C>
Revenues:
Premiums $ 1,430 $ 896 $ 4,096 $ 2,577
Net investment income 924 787 2,716 2,310
Surrender fee income 392 15 1,057 43
Net realized investment gains 48 21 78 78
Policy fees and other income 236 188 689 400
----------- ----------- ----------- -----------
Total revenues 3,030 1,907 8,636 5,408
----------- ----------- ----------- -----------
Benefits and expenses:
Benefits and other changes in policy reserves 1,498 903 4,136 2,562
Interest credited 384 328 1,094 959
Commissions 302 241 945 587
General expenses 464 351 1,481 903
Amortization of intangibles, net 274 94 891 235
Change in deferred acquisition costs, net (269) (236) (896) (542)
Interest expense 35 24 96 70
----------- ----------- ----------- -----------
Total benefits and expenses 2,688 1,705 7,747 4,774
----------- ----------- ----------- -----------
Earnings before income taxes, minority interest and
cumulative effect of accounting change 342 202 889 634
Provision for income taxes 111 20 315 181
----------- ----------- ----------- -----------
Earnings before minority interest and cumulative effect
of accounting change 231 182 574 453
Minority interest 2 2 4 4
----------- ----------- ----------- -----------
Earnings before cumulative effect of accounting change 229 180 570 449
Cumulative effect of accounting change, net of tax -- -- -- 25
----------- ----------- ----------- -----------
Net earnings 229 180 570 474
Retained earnings at beginning of period 2,036 1,528 1,695 1,234
----------- ----------- ----------- -----------
Retained earnings at end of period $ 2,265 $ 1,708 $ 2,265 $ 1,708
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
1
<PAGE>
Item 1. Financial Statements (Continued).
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed, Consolidated Statement of Financial Position
<TABLE>
<CAPTION>
September 30, December 31,
(In millions) 2000 1999
-------------------- --------------------
<S> <C>
Assets (Unaudited)
Investments:
Fixed maturities available-for-sale, at fair value $ 46,064 $ 36,932
Mortgage loans, net of valuation allowance 8,430 3,414
Policy loans 1,475 945
Short-term investments 3,819 267
Other invested assets 1,570 997
-------------------- --------------------
Total investments 61,358 42,555
Cash 136 265
Accrued investment income 986 961
Deferred acquisition costs 3,208 2,307
Intangible assets 5,549 4,345
Reinsurance recoverable 1,383 1,537
Other assets 2,651 3,328
Separate account assets 11,556 9,308
-------------------- --------------------
Total assets $ 86,827 $ 64,606
==================== ====================
Liabilities and Shareholder's Interest
Liabilities:
Future annuity and contract benefits $ 57,622 $ 39,639
Unearned premiums 838 842
Liability for policy and contract claims 2,410 1,886
Other policyholder liabilities 658 626
Accounts payable and accrued expenses 3,163 2,933
Short-term borrowings 2,081 1,036
Separate account liabilities 11,556 9,308
Long-term debt 702 705
-------------------- --------------------
Total liabilities 79,030 56,975
-------------------- --------------------
Minority interest 49 475
Shareholder's interest:
Net unrealized investment losses (937) (1,079)
Foreign currency translation adjustments 100 220
-------------------- --------------------
Accumulated non-owner changes in equity (837) (859)
Common stock --- ---
Additional paid-in capital 6,320 6,320
Retained earnings 2,265 1,695
-------------------- --------------------
Total shareholder's interest 7,748 7,156
-------------------- --------------------
Total liabilities and shareholder's interest $ 86,827 $ 64,606
==================== ====================
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
2
<PAGE>
Item 1. Financial Statements (Continued).
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed, Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------------
September 30, September 25,
(In millions) 2000 1999
-------------------- -------------------
<S> <C>
Cash Flows From Operating Activities
Net earnings $ 570 $ 474
Adjustments to reconcile net earnings to net cash provided by
operating activities:
(Decrease) increase in future policy benefits (5,392) 666
Cumulative effect of accounting change, net of tax -- (25)
Other - net 569 (494)
-------------------- --------------------
Net cash (used in) provided by operating activities (4,253) 621
-------------------- --------------------
Cash Flows From Investing Activities
Proceeds from investment securities and other invested assets 5,787 5,875
Principal collected on mortgage and policy loans 789 342
Purchases of investment securities and other invested assets (13,466) (8,024)
Mortgage and policy loan originations (1,059) (818)
Acquisitions, net of cash acquired (519) ---
-------------------- --------------------
Net cash used in investing activities (8,468) (2,625)
-------------------- --------------------
Cash Flows From Financing Activities
Proceeds from issuance of investment contracts 6,492 5,293
Redemption and benefit payments on investment contracts (4,642) (3,228)
Net commercial paper borrowings (repayments) 883 (9)
Proceeds from other borrowings 2,530 1,243
Payments on other borrowings (2,368) (1,393)
Cash received upon acquisition of The Signature Group -- 129
Cash received from assumption of Toho Mutual Life Insurance
Company insurance liabilities 13,177 --
-------------------- --------------------
Net cash provided by financing activities 16,072 2,035
-------------------- --------------------
Effect of Exchange Rate Changes on Cash 72 14
-------------------- --------------------
Increase in Cash and Equivalents 3,423 45
Cash and Equivalents at Beginning of Period 532 378
-------------------- --------------------
Cash and Equivalents at End of Period $ 3,955 $ 423
==================== ====================
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
3
<PAGE>
Item 1. Financial Statements (Continued).
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed, Consolidated Financial Statements
(Unaudited)
1. The accompanying condensed, consolidated quarterly financial statements
represent GE Financial Assurance Holdings, Inc. and its consolidated
subsidiaries (collectively "the Company"). All significant intercompany
transactions have been eliminated. Certain prior period amounts have been
reclassified to conform to the current year presentation.
2. The accompanying condensed, consolidated quarterly financial statements
are unaudited. These statements include all adjustments (consisting of
normal recurring accruals) considered necessary by management to present a
fair statement of the results of operations, financial position and cash
flows. The results reported in these condensed, consolidated financial
statements should not be regarded as necessarily indicative of results
that may be expected for the entire year.
3. A summary of changes in shareholder's interest that do not result directly
from transactions with the shareholder follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------
(In millions) September 30, 2000 September 25, 1999
--------------------- ---------------------
<S> <C>
Net earnings $ 229 $ 180
Unrealized gains (losses) on investment securities - net 240 (35)
Foreign currency translation adjustments (16) 113
--------------------- ---------------------
Total $ 453 $258
===================== =====================
Nine Months Ended
-------------------------------------------
(In millions) September 30, 2000 September 25, 1999
--------------------- ---------------------
Net earnings $ 570 $ 474
Unrealized gains (losses) on investment securities - net 142 (1,275)
Foreign currency translation adjustments (120) 98
--------------------- ---------------------
Total $ 592 $ (703)
===================== =====================
</TABLE>
4. The Company conducts its operations through two operating segments: (1)
Wealth Accumulation and Transfer, comprised of products intended to
increase the policyholder's wealth, transfer wealth to beneficiaries or
provide a means for replacing the income of the insured in the event of
premature death, and (2) Lifestyle Protection and Enhancement, comprised of
products intended to protect accumulated wealth and income from the
financial drain of unforeseen events and products which provide consumer
club membership opportunities.
4
<PAGE>
The following is a summary of operating segment activity for the three and
nine month periods ended September 30, 2000 and September 25, 1999:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
(In millions) September 30, 2000 September 25, 1999
-------------------- --------------------
<S> <C>
Revenues
Wealth Accumulation and Transfer .......................... $2,103 $ 1,215
Lifestyle Protection and Enhancement....................... 927 692
-------------------- --------------------
Total revenues ...................................... $3,030 $ 1,907
==================== ====================
Earnings before income taxes, minority interest and cumulative
effect of accounting change
Wealth Accumulation and Transfer .......................... $ 335 $ 166
Lifestyle Protection and Enhancement....................... 7 36
-------------------- --------------------
Total earnings before income taxes, minority interest
and cumulative effect of accounting change ..... $ 342 $ 202
==================== ====================
Nine Months Ended
------------------------------------------
(In millions) September 30, 2000 September 25, 1999
-------------------- --------------------
Revenues
Wealth Accumulation and Transfer .......................... $6,100 $ 3,646
Lifestyle Protection and Enhancement....................... 2,536 1,762
-------------------- --------------------
Total revenues ...................................... $8,636 $ 5,408
==================== ====================
Earnings before income taxes, minority interest and cumulative
effect of accounting change
Wealth Accumulation and Transfer .......................... $ 828 $ 527
Lifestyle Protection and Enhancement....................... 61 107
-------------------- --------------------
Total earnings before income taxes, minority interest
and cumulative effect of accounting change ..... $ 889 $ 634
==================== ====================
</TABLE>
The following is a summary of assets by operating segment as of September
30, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
September 30, December 31,
(In millions) 2000 1999
-------------------- --------------------
<S> <C>
Assets
Wealth Accumulation and Transfer .......................... $77,670 $ 57,302
Lifestyle Protection and Enhancement....................... 9,157 7,304
-------------------- --------------------
Total assets ........................................ $86,827 $ 64,606
==================== ====================
</TABLE>
5. Effective March 1, 2000, GE Edison Life Insurance Company (GE Edison), a
subsidiary of the Company, acquired, by means of a comprehensive transfer
(the Transfer) in accordance with the Insurance Business Law of Japan
(IBL), the insurance policies and related assets of Toho Mutual Life
Insurance Company (Toho). GE Edison assumed approximately $21.5 billion of
policyholder liabilities, $0.4 billion of accounts payable and accrued
expenses, and acquired $20.3 billion of cash, investments and other
tangible assets. The $1.6 billion difference between acquired assets and
assumed liabilities represents the present value of future profits (PVFP)
on the transferred insurance policies. Assets acquired by GE Edison
include approximately $0.5 billion of redeemable preferred stock and
5
<PAGE>
warrants issued by another subsidiary of the Company. The redeemable
preferred stock and warrants have been eliminated in the accompanying
Condensed, Consolidated Statement of Financial Position. The corresponding
amount eliminates the minority interest in the Company previously held by
Toho. The Company has recorded the assets acquired and liabilities assumed
based on their estimated fair values according to preliminary valuations.
Such estimated values may change as additional information is obtained and
the valuations are finalized.
As disclosed in Note 2 to the Company's Consolidated Financial Statements
for the year ended December 31, 1999, included in the Company's Annual
Report on Form 10-K, GE Edison had previously acquired Toho's operating
infrastructure in March 1998. In June 1999, the Financial Supervisory
Agency (FSA) of Japan determined that Toho's continued operation was not in
the best interests of its policyholders given its weak financial position.
As a result, the FSA issued a partial business suspension order to Toho on
June 4, 1999. In connection with such suspension order, the FSA appointed
two independent individuals from the Japanese insurance industry and the
Life Insurance Association of Japan as administrators of Toho
(collectively, the Administrator).
Under the IBL, the sole means for rehabilitating an insolvent insurer is
through a comprehensive transfer of the insurer's insurance policies and
assets to a rescuing company. On December 22, 1999, the Administrator
entered into an agreement with GE Edison, acting as the rescuing company,
for the comprehensive transfer of Toho's insurance policies. In conjunction
with the Transfer, the Administrator restructured Toho's in-force insurance
contracts. The restructured insurance contracts have surrender charges,
reduced benefits and lower policy guarantees. As an inducement for GE
Edison to become the rescuing company, Japan's Policyholder Protection
Corporation contributed approximately $3.6 billion as part of the assets
supporting Toho's restructured policies.
The Company accounted for the Transfer under the purchase method of
accounting and, accordingly, the results of operations of the restructured
insurance contracts and related assets have been included in the Company's
Condensed, Consolidated Statement of Current and Retained Earnings since
the date of the Transfer. In connection with the Transfer, the Company
terminated its former reinsurance arrangements with Toho. Certain amounts
in the Condensed, Consolidated Statement of Current and Retained Earnings
for the nine months ended September 30, 2000 reflect the impact of
terminating such reinsurance arrangements. The termination of the
reinsurance arrangements did not have a significant effect on net earnings
for the three or nine month periods ended September 30, 2000.
6. On April 3, 2000, the Company acquired Phoenix American Life Insurance
Company, a subsidiary of Phoenix Home Life Mutual Insurance Company, for
approximately $280 million. Phoenix American Life Insurance Company, based
in Hartford, Connecticut, serves the needs of small business owners by
offering a broad range of products including dental, disability, and life
insurance.
7. Effective July 1, 2000, the Company began underwriting and distributing
long-term care insurance through a strategic alliance with The Travelers
Insurance Company (Travelers) and certain of its Citigroup affiliates for
approximately $411 million. Under the arrangement, the Company acquired
certain assets used by Travelers in the underwriting and distribution of
long-term care insurance, assumed through indemnity reinsurance 90% of
Travelers existing long-term care insurance business and entered into a
continuing marketing agreement with various Citigroup distribution channels
including Travelers (the Travelers Transaction).
Statutory accounting regulations do not allow goodwill to be recognized on
indemnity reinsurance transactions and therefore, the related statutory
ceding commission flows through the summary of operations statement as an
expense resulting in a reduction of earned surplus. As a result of this
acquisition, the assuming companies' statutory earned surplus was reduced.
However, the Company's principal insurance subsidiaries maintain positive
earned surplus and management believes the Company has sufficient liquidity
to meet its debt service obligations.
8. The Financial Accounting Standards Board (FASB) has issued, and
subsequently amended, Statement of Financial Accounting Standards ("SFAS")
No. 133, Accounting for Derivative Instruments and Hedging Activities,
effective for the Company on January 1, 2001. Upon adoption, all derivative
instruments (including certain derivative instruments embedded in other
contracts) will be recognized in the consolidated statements of financial
position at their fair values, and changes in such fair values must be
recognized immediately in earnings unless specific hedging criteria are
met. Effects of qualifying changes in fair value will be recorded in
shareholder's interest pending recognition in earnings as offsets to the
related earnings effects of the hedged items. Management estimates that, at
September 30, 2000, the effects on its financial statements of adopting
SFAS No. 133, as amended, would have been to reduce net earnings and
shareholder's interest by less than $50 million and $200 million,
respectively. However, the transition effect as of January 1, 2001, cannot
be estimated at this time because it is subject to the following unknown
variables as of that date: (1) actual derivatives and related hedge
positions, (2) market values of derivatives and hedged positions, and (3)
further interpretation of SFAS No. 133 by the FASB.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations.
Overview
Net earnings before cumulative effect of accounting change for the first nine
months of 2000 were $570 million, a $121 million, or 26.9% increase over the
first nine months of 1999. This increase was driven largely by increased
investment income, premiums earned and surrender fee income due to the transfer
of insurance policies and related assets of Toho to GE Edison and growth in
sales of certain existing products, partially offset by increased benefits and
other changes in policy reserves, amortization of PVFP primarily as a result of
the transfer of insurance policies of Toho to GE Edison and subsequent
surrenders thereof, as well as increased general expenses principally relating
to recent acquisitions and the Company's core growth initiatives.
Operating Results
Premiums increased $1,519 million, or 58.9%, to $4,096 million for the first
nine months of 2000 from $2,577 million for the first nine months of 1999. The
increase primarily relates to the transfer of the insurance policies of Toho to
GE Edison, the acquisitions of The Signature Group in July 1999 and Phoenix
American Life in April 2000, and growth in the Company's life and long-term care
businesses.
Net investment income increased $406 million, or 17.6% to $2,716 million for the
first nine months of 2000 from $2,310 million for the first nine months of 1999.
The increase was primarily attributable to higher levels of average invested
assets ($53.8 billion in first nine months of 2000 vs. $42.6 billion in first
nine months of 1999) due to investments relating to the acquisition of certain
assets of Toho, the acquisitions of The Signature Group in July 1999 and Phoenix
American Life in April 2000, and growth in core invested assets. This increase
was partially offset by a decrease in weighted average yields to 6.9% for the
first nine months of 2000 from 7.4% for the first nine months of 1999 due to
lower yields on investment activity related to the Company's Japanese
operations.
Surrender fee income increased $1,014 million to $1,057 million in the first
nine months of 2000 from $43 million in the first nine months of 1999. The
increase in surrender fee income relates to amounts retained by the Company from
the surrender of policyholder contracts assumed from Toho as part of the
Transfer, which policies became subject to surrender charges under the terms of
the restructuring of Toho's in-force insurance contracts as discussed in Note 5.
Policy fees and other income increased $289 million, or 72.3%, to $689 million
in the first nine months of 2000 from $400 million in the first nine months of
1999. Other income is principally comprised of insurance charges made against
universal life contracts, club membership revenues, fees assessed against
policyholder account values and commission income. The increase in the first
nine months of 2000 was primarily due to club membership revenues generated
after the acquisition of The Signature Group in July 1999 and fee income on
variable annuity products.
Benefits and other changes in policy reserves includes both activity related to
future policy benefits on long-duration life and health insurance products as
well as claim costs incurred during the year under these contracts and property
and casualty policies. These amounts increased $1,574 million, or 61.4%, to
$4,136 million in the first nine months of 2000 from $2,562 million in the first
nine months of 1999. The increase primarily relates to the transfer of the
insurance policies of Toho to GE Edison, acquisitions of The Signature Group in
July 1999 and Phoenix American Life in April 2000, and growth in certain of the
Company's life, long-term care and accident and health products.
Interest credited increased $135 million, or 14.1%, to $1,094 million in the
first nine months of 2000 from $959 million in the first nine months of 1999.
This increase was a result of the increase in underlying reserves arising
primarily from sales of annuity products. The increased sales resulted from
higher crediting rates that the Company implemented in response to changes in
market conditions and other factors.
Commission expenses increased $358 million, or 61.0%, to $945 million in the
first nine months of 2000 from $587 million in the first nine months of 1999
primarily due to higher production levels on certain of the Company's life,
long-term care and annuity products, the acquisitions of The Signature Group in
1999 and Phoenix American Life in April 2000 and the termination of reinsurance
arrangements with Toho.
7
<PAGE>
General expenses were $1,481 million for the first nine months of 2000, an
increase of $578 million, or 64.0%, over the first nine months of 1999 expense
of $903 million. The increase primarily relates to the acquisition of The
Signature Group in July 1999, the transfer of insurance policies and related
assets of Toho to GE Edison, and increases in compensation and other operating
expenses commensurate with the Company's increase in premium revenue and in
support of the Company's core growth initiatives.
Amortization of intangibles, net increased $656 million, or 279.1%, to $891
million for the first nine months of 2000 from $235 million for the first nine
months of 1999. The Company's intangible assets primarily consist of two
components that both result from acquisition activities. PVFP, representing the
estimated future gross profit in acquired insurance, annuity and club membership
contracts, and goodwill, representing the excess of purchase price over the fair
value of identified net assets of the acquired entities. Amortization of PVFP
increased approximately $598 million as a result of the transfer of the
insurance policies of Toho to GE Edison and subsequent surrenders thereof and
the acquisition of The Signature Group in July 1999.
Change in deferred acquisition costs, net increased $354 million, or 65.3%, to
$896 million for the first nine months of 2000 from $542 million for the first
nine months of 1999. As discussed in Note 5, a portion of the increase in change
in deferred acquisition costs, net was related to the termination of the Toho
reinsurance arrangements. The remaining increase primarily relates to an
increase in deferral of costs due to increased product sales as a result of
acquisitions and growth in existing products, partially offset by amortization
of previously capitalized acquisition costs.
Interest expense increased $26 million, or 37.1%, to $96 million for the first
nine months of 2000 from $70 million for the first nine months of 1999. The
increase relates primarily to an increase in weighted average commercial paper
borrowings outstanding, and an increase in the weighted average interest rate on
commercial paper borrowings, for the first nine months of 2000 compared to the
first nine months of 1999.
Provision for income taxes increased $134 million or 74.0% for the first nine
months of 2000 from $181 million for the first nine months of 1999. The
Company's effective tax rate of 35.4% is 6.9 percentage points higher than the
effective tax rate of 28.5% for the first nine months 1999 due primarily to the
sale of a minority interest in a subsidiary in 1999, giving rise to the
realization of a deferred tax asset not previously allowed to be recorded.
Financial Condition
Total assets increased $22.2 billion, or 34.4%, at September 30, 2000 from
December 31, 1999. As discussed in Note 5 to the Condensed, Consolidated
Financial Statements presented herewith, assets acquired in connection with the
March 1, 2000 comprehensive transfer of the insurance policies and related
assets of Toho to GE Edison, net of amounts eliminated in consolidation,
approximated $21.9 billion.
Excluding the assets acquired on March 1, 2000 from Toho, various other
fluctuations in core operations and changes in assets occurred. Assets invested
in separate accounts increased by approximately $2.2 billion, or 24.2%, at
September 30, 2000 from December 31, 1999 primarily due to continued sales of
variable annuity products and overall increased market value of the underlying
investment funds. Total investments increased approximately $12.8 billion, or
30.1%, at September 30, 2000 from December 31, 1999. This increase was primarily
driven by purchases of short-term investments and other securities by GE Edison
subsequent to the receipt of cash from Toho as part of the Transfer, net of cash
payments related to surrenders of certain contracts by Toho policyholders,
investments received related to the acquisition of Phoenix American Life and the
Travelers Transaction, investment growth in core operations and net investment
income of approximately $2.7 billion. These increases were partially offset by a
$13.2 billion decrease in cash, primarily resulting from purchases of
investments at GE Edison, and various other decreases related to cash flows and
amortization affecting the balance of assets acquired from Toho from the
transfer date through September 30, 2000.
Total liabilities increased $22.1 billion, or 38.7%, at September 30, 2000 from
December 31, 1999. As discussed in Note 5 to the Condensed, Consolidated
Financial Statements presented herewith, liabilities assumed in connection with
the March 1, 2000 transfer of the insurance policies and related assets of Toho
by GE Edison approximated $21.9 billion.
Excluding the liabilities assumed on March 1, 2000 from Toho, various other
fluctuations in core operations and changes in liabilities have occurred. Future
annuity and contract benefits decreased approximately $1.8 billion, or 4.5%, at
September 30, 2000 from December 31, 1999. This decrease resulted primarily from
surrender payments made to former Toho policyholders subsequent to the Transfer,
partially offset by growth in reserves due to the sales of certain of the
8
<PAGE>
Company's life, annuity, and long-term care business. Accounts payable and
accrued other expenses decreased $0.8 billion, or 27.7%, due primarily to the
timing of net payments and receipts related to the investment portfolio and
normal business activity. Borrowings increased approximately $1,042 million, or
59.9%, primarily as a result of the issuance of additional commercial paper by
the Company, the proceeds of which were used to support strong solvency margins
and claims paying ratings at GE Edison, and the Travelers Transaction. Separate
account liabilities increased by approximately $2.2 billion, or 24.2%, at
September 30, 2000 from December 31, 1999 primarily due to continued sales of
variable annuity products and overall increased market value of the underlying
investment funds.
9
<PAGE>
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 12.1 Computation of ratio of earnings to fixed charges.
Exhibit 27.1 Financial Data Schedule (filed electronically herewith).
b. Reports on Form 8-K.
None.
10
<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.
GE FINANCIAL ASSURANCE HOLDINGS, INC.
-------------------------------------
(Registrant)
Date: October 27, 2000 By: /s/ Thomas W. Casey
------------------------------------------------
Thomas W. Casey,
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: October 27, 2000 By: /s/ Richard G. Fucci
------------------------------------------------
Richard G. Fucci,
Vice President and Controller
(Principal Accounting Officer)
11
<PAGE>
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Index to Exhibits
Exhibit No.
----------------
12.1 Computation of ratio of earnings to fixed charges
27.1 Financial Data Schedule (filed electronically only)
12
