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, 1999
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 33-87272, 333-51353, 333-28765, 333-28681,
333-28743, 333-51949, 333-65009, 333-66745,
333-76941, 333-76945
GOLDEN AMERICAN LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 41-0991508
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
1475 Dunwoody Drive, West Chester, Pennsylvania 19380-1478
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (610) 425-3400
__________________________________________________________________________
Former name, former address and formal fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
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: 250,000 shares of Common
Stock as of May 12, 1999.
NOTE: WHEREAS GOLDEN AMERICAN LIFE INSURANCE COMPANY 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).
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Person for whom the Financial Information is given: Golden American Life
Insurance Company
Condensed Consolidated Statements of Operations (Unaudited):
<TABLE>
<CAPTION>
For the Three For the Three
Months ended Months ended
March 31, 1999 March 31, 1998
_____________________________________
(Dollars in thousands)
<S> <C> <C>
Revenues:
Annuity and interest sensitive life
product charges $14,821 $6,940
Management fee revenue 1,815 909
Net investment income 13,883 8,842
Realized gains on investments 47 87
Other income 3,504 45
_____________________________________
34,070 16,823
Insurance benefits and expenses:
Annuity and interest sensitive life
benefits:
Interest credited to account balances 36,393 16,706
Benefit claims incurred in excess of
account balances 666 88
Underwriting, acquisition and
insurance expenses:
Commissions 35,767 20,909
General expenses 13,007 6,311
Insurance taxes 1,171 801
Policy acquisition costs deferred (62,400) (33,554)
Amortization:
Deferred policy acquisition costs 4,722 935
Value of purchased insurance in force 1,507 1,588
Goodwill 945 945
_____________________________________
31,778 14,729
Interest expense 1,614 913
_____________________________________
33,392 15,642
_____________________________________
Income before income taxes 678 1,181
Income taxes 622 764
_____________________________________
Net income $56 $417
=====================================
</TABLE>
See accompanying notes.
Condensed Consolidated Balance Sheets (Unaudited):
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
_____________________________________
(Dollars in thousands,
except per share data)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, available for sale,
at fair value (cost: 1999 - $765,936;
1998 - $739,772) $763,771 $741,985
Equity securities, at fair value
(cost: 1999 - $14,437; 1998 - $14,437) 12,007 11,514
Mortgage loans on real estate 94,254 97,322
Policy loans 12,187 11,772
Short-term investments 59,064 41,152
_____________________________________
Total investments 941,283 903,745
Cash and cash equivalents 10,684 6,679
Due from affiliates -- 2,983
Accrued investment income 11,578 9,645
Deferred policy acquisition costs 264,096 204,979
Value of purchased insurance in force 34,901 35,977
Current income taxes recoverable 356 628
Deferred income tax asset 31,566 31,477
Property and equipment, less allowances for
depreciation of $1,229 in 1999 and $801
in 1998 10,266 7,348
Goodwill, less accumulated amortization of
$5,352 in 1999 and $4,408 in 1998 145,775 146,719
Other assets 6,970 6,239
Separate account assets 3,939,445 3,396,114
_____________________________________
Total assets $5,396,920 $4,752,533
=====================================
</TABLE>
See accompanying notes.
Condensed Consolidated Balance Sheets (Unaudited) (Continued):
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
_____________________________________
(Dollars in thousands,
except per share data)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Policy liabilities and accruals:
Future policy benefits:
Annuity and interest sensitive life
products $948,959 $881,112
Unearned revenue reserve 4,529 3,840
Other policy claims and benefits 8 --
_____________________________________
953,496 884,952
Surplus notes 85,000 85,000
Due to affiliates 4,010 --
Other liabilities 42,323 32,573
Separate account liabilities 3,939,445 3,396,114
_____________________________________
5,024,274 4,398,639
Commitments and contingencies
Stockholder's equity:
Common stock, par value $10 per share,
authorized, issued and outstanding
250,000 shares 2,500 2,500
Additional paid-in capital 367,640 347,640
Accumulated comprehensive loss (2,199) (895)
Retained earnings 4,705 4,649
_____________________________________
Total stockholder's equity 372,646 353,894
_____________________________________
Total liabilities and stockholder's
equity $5,396,920 $4,752,533
=====================================
</TABLE>
See accompanying notes.
Condensed Consolidated Statements of Cash Flows (Unaudited):
<TABLE>
<CAPTION>
For the Three For the Three
Months ended Months ended
March 31, 1999 March 31, 1998
_____________________________________
(Dollars in thousands)
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES ($2,081) ($2,974)
INVESTING ACTIVITIES
Sale, maturity or repayment of
investments:
Fixed maturities - available for sale 34,870 31,250
Mortgage loans on real estate 2,992 447
_____________________________________
37,862 31,697
Acquisition of investments:
Fixed maturities - available for sale (61,852) (73,944)
Equity securities -- (10,000)
Mortgage loans on real estate -- (1,825)
Policy loans - net (415) (118)
Short term investments - net (17,912) (20,934)
_____________________________________
(80,179) (106,821)
Net purchase of property and equipment (3,368) (618)
_____________________________________
Net cash used in investing activities (45,685) (75,742)
FINANCING ACTIVITIES
Proceeds from reciprocal loan agreement
borrowings 13,400 103,843
Repayment of reciprocal loan agreement
borrowings (13,400) (64,406)
Proceeds from revolving note payable 18,150 --
Repayment of revolving note payable (18,150) --
Repayment of line of credit borrowings -- (5,309)
Receipts from annuity and interest
sensitive life policies credited to
account balances 168,327 94,722
Return of account balances on annuity
and interest sensitive life policies (23,912) (13,534)
Net reallocations to Separate Accounts (112,644) (42,204)
Contribution from parent 20,000 --
_____________________________________
Net cash provided by financing activities 51,771 73,112
_____________________________________
</TABLE>
See accompanying notes.
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued):
<TABLE>
<CAPTION>
For the Three For the Three
Months ended Months ended
March 31, 1999 March 31, 1998
_____________________________________
(Dollars in thousands)
<S> <C> <C>
Increase (decrease) in cash and cash
equivalents $4,005 ($5,604)
Cash and cash equivalents at beginning
of period 6,679 21,039
_____________________________________
Cash and cash equivalents at end of period $10,684 $15,435
=====================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for interest $1,127 $346
Non-cash financing activities:
Non-cash adjustment to additional paid in
capital for adjusted merger costs -- 143
Non-cash contribution of capital from
parent to repay line of credit borrowings -- 18,750
</TABLE>
See accompanying notes.
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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. This form is being filed with the reduced disclosure
format specified in General Instruction H (1)(a) and (b) of Form 10-Q.
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, 1999 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the financial
statements and footnotes thereto included in the Golden American Life
Insurance Company Annual Report on Form 10-K for the year ended December 31,
1998.
CONSOLIDATION
The condensed consolidated financial statements include Golden American Life
Insurance Company ("Golden American") and its wholly owned subsidiary, First
Golden American Life Insurance Company of New York ("First Golden," and with
Golden American, collectively, the "Companies"). All significant
intercompany accounts and transactions have been eliminated.
ORGANIZATION
Golden American is a wholly owned subsidiary of Equitable of Iowa Companies,
Inc. ("EIC" or the "Parent"). On October 24, 1997, PFHI Holdings, Inc.
("PFHI"), a Delaware corporation, acquired all of the outstanding capital
stock of Equitable of Iowa Companies ("Equitable") according to the terms of
an Agreement and Plan of Merger dated July 7, 1997 among Equitable, PFHI, and
ING Groep N.V. ("ING"). PFHI is a wholly owned subsidiary of ING, a global
financial services holding company based in The Netherlands. As a result of
this transaction, Equitable was merged into PFHI, which was simultaneously
renamed Equitable of Iowa Companies, Inc., a Delaware corporation.
FAIR VALUES
Estimated fair values of publicly traded fixed maturities for 1999 are as
reported by an independent pricing service.
STATUTORY
The net loss for Golden American as determined in accordance with statutory
accounting practices was $17,489,000 and $4,885,000 for the three months
ended March 31, 1999 and 1998, respectively. Total statutory capital and
surplus was $180,811,000 at March 31, 1999 and $183,045,000 at December 31,
1998.
RECLASSIFICATIONS
Certain amounts in the March 31, 1998 and December 31, 1998 financial
statements have been reclassified to conform to the March 31, 1999 financial
statement presentation.
NOTE 2 -- COMPREHENSIVE INCOME
As of January 1, 1998, the Companies adopted the Statement of Financial
Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of this statement had no
impact on the Companies' net income or stockholder's equity. SFAS No. 130
requires unrealized gains or losses on the Companies' available for sale
securities (net of adjustments for value of purchased insurance in force
("VPIF"), deferred policy acquisition costs ("DPAC") and deferred income
taxes) to be included in other comprehensive income.
During the first quarters of 1999 and 1998, total comprehensive income (loss)
for the Companies amounted to $(1,249,000) and $446,000, respectively.
Included in these amounts are total comprehensive income (loss) for First
Golden of $(18,000) and $194,000 for the first quarters of 1999 and 1998,
respectively. Other comprehensive income excludes net investment gains
(losses) included in net income which merely represent transfers from
unrealized to realized gains and losses. These amounts totaled $296,000 and
$75,000 during the first quarters of 1999 and 1998, respectively. Such
amounts, which have been measured through the date of sale, are net of income
taxes and adjustments for VPIF and DPAC totaling $(249,000) and $12,000 for
the first quarters of 1999 and 1988, respectively.
NOTE 3 -- RELATED PARTY TRANSACTIONS
OPERATING AGREEMENTS: 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 Companies. DSI is authorized to enter into
agreements with broker/dealers to distribute the Companies' variable
insurance products and appoint representatives of the broker/dealers as
agents. The Companies paid commissions and expenses to DSI totaling
$34,785,000 and $21,037,000 for the quarters ended March 31, 1999 and 1998,
respectively.
Golden American provides certain managerial and supervisory services to DSI.
The fee paid by DSI for these services is calculated as a percentage of
average assets in the variable separate accounts. For the quarters ended
March 31, 1999 and 1998, the fee was $1,815,000 and $909,000, respectively.
The Companies have an asset management agreement with ING Investment
Management LLC ("ING IM"), an affiliate, in which ING IM provides asset
management services. Under the agreement, the Companies record a fee based
on the value of the assets under management. The fee is payable quarterly.
For the first quarters of 1999 and 1998, the Companies incurred fees of
$538,000 and $318,000, respectively, under this agreement.
Golden American has a guaranty agreement with Equitable Life Insurance
Company of Iowa ("Equitable Life"), an affiliate. In consideration of an
annual fee, payable June 30, Equitable Life guarantees to Golden American
that it will make funds available, if needed, to Golden American to pay the
contractual claims made under the provisions of Golden American's life
insurance and annuity contracts. The agreement is not, and nothing contained
therein or done pursuant thereto by Equitable Life shall be deemed to
constitute, a direct or indirect guaranty by Equitable Life of the payment of
any debt or other obligation, indebtedness or liability, of any kind or
character whatsoever, of Golden American. The agreement does not guarantee
the value of the underlying assets held in separate accounts in which funds
of variable life insurance and variable annuity policies have been invested.
The calculation of the annual fee is based on risk based capital. As Golden
American's risk based capital level was above required amounts, no annual fee
was payable in 1998.
Golden American provides certain advisory, computer and other resources and
services to Equitable Life. Revenues for these services, which reduce
general expenses incurred by Golden American, totaled $399,000 and $2,333,000
for the quarters ended March 31, 1999 and 1998, respectively.
The Companies have a service agreement with Equitable Life in which Equitable
Life provides administrative and financial related services. Under this
agreement, the Companies incurred expenses of $317,000 and $149,000 for the
quarters ended March 31, 1999 and 1998, respectively.
First Golden provides resources and services to DSI. Revenues for these
services, which reduce general expenses incurred by the Companies, totaled
$32,000 and $19,000 for the quarters ended March 31, 1999 and 1998,
respectively.
For the quarter ended March 31, 1999, the Companies received premiums, net of
reinsurance, for variable products sold through four affiliates, Locust
Street Securities, Inc., Vestax Securities Corporation, DSI and Multi-
Financial Securities Corporation, of $29,700,000, $26,500,000, $5,400,000 and
$5,500,000, respectively ($25,800,000, $7,000,000, $7,100,000 and $1,400,000,
respectively, for the same period of 1998).
RECIPROCAL LOAN AGREEMENT: Golden American maintains a reciprocal loan
agreement with ING America Insurance Holdings, Inc. ("ING AIH"), a Delaware
corporation and affiliate, to facilitate the handling of unusual and/or
unanticipated short-term cash requirements. Under this agreement, which
became effective January 1, 1998 and expires December 31, 2007, Golden
American and ING AIH can borrow up to $65,000,000 from one another. Prior to
lending funds to ING AIH, Golden American must obtain the approval of the
State of Delaware Department of Insurance. Interest on any Golden American
borrowings is charged at the rate of ING AIH's cost of funds for the interest
period plus 0.15%. Interest on any ING AIH borrowings is charged at a rate
based on the prevailing interest rate of U.S. commercial paper available for
purchase with a similar duration. Under this agreement, Golden American
incurred interest expense of $7,000 and $187,000 for the quarters ended March
31, 1999 and 1998, respectively. At March 31, 1999, Golden American did not
have any borrowings or receivables from ING AIH under this agreement.
LINE OF CREDIT: Golden American maintained a line of credit agreement with
Equitable to facilitate the handling of unusual and/or unanticipated short-
term cash requirements. Under this agreement, which became effective
December 1, 1996 and expired December 31, 1997, Golden American could borrow
up to $25,000,000. Interest on any borrowings was charged at the rate of
Equitable's monthly average aggregate cost of short-term funds plus 1.00%.
Under this agreement, Golden American incurred interest expense of $211,000
for the first three months of 1998. The outstanding balance was paid by a
capital contribution and with funds borrowed from ING AIH.
SURPLUS NOTES: On December 30, 1998, Golden American issued a 7.25% surplus
note in the amount of $60,000,000 to Equitable Life. The note matures on
December 29, 2028. The note and related accrued interest is subordinate to
payments due to policyholders, claimant and beneficiary claims, as well as
debt owed to all other classes of debtors, other than surplus note holders,
of Golden American. Any payment of principal and/or interest made is subject
to the prior approval of the Delaware Insurance Commissioner. Under this
agreement, Golden American incurred interest expense of $1,087,000 in the
first quarter of 1999.
On December 17, 1996, Golden American issued an 8.25% surplus note in the
amount of $25,000,000 to Equitable. The note matures on December 17, 2026.
The note and related accrued interest is subordinate to payments due to
policyholders, claimant and beneficiary claims, as well as debts owed to all
other classes of debtors of Golden American. Any payment of principal made
is subject to the prior approval of the Delaware Insurance Commissioner.
Golden American incurred interest totaling $516,000 in the first quarter of
1999, unchanged from the same period of 1998. As a result of the merger,
the surplus note is now payable to EIC.
STOCKHOLDER'S EQUITY: During the first quarters of 1999 and 1998, Golden
American received capital contributions from its Parent of $20,000,000 and
$18,750,000, respectively.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
REINSURANCE: At March 31, 1999, Golden American had reinsurance treaties
with four unaffiliated reinsurers and one affiliated reinsurer covering a
significant portion of the mortality risks under its variable contracts.
Golden American remains liable to the extent its reinsurers do not meet their
obligations under the reinsurance agreements. At March 31, 1999, the
Companies had a net receivable of $8,484,000 for reserve credits, reinsurance
claims or other receivables from these reinsurers comprised of $905,000 for
claims recoverable from reinsurers, $1,815,000 for a payable for reinsurance
premiums and $9,394,000 for a receivable from an unaffiliated reinsurer.
Included in the accompanying financial statements are net considerations to
reinsurers of $1,815,000 in the first quarter of 1999 compared to $938,000
for the same period in 1998. Also included in the accompanying financial
statements are net policy benefits of $721,000 in the first quarter of 1999
compared to $534,000 for the same period in 1998.
Effective June 1, 1994, Golden American entered into a modified coinsurance
agreement with an unaffiliated reinsurer. The accompanying financial
statements are presented net of the effects of the treaty.
INVESTMENT COMMITMENTS: At March 31, 1999, an outstanding commitment on a
fixed maturity totaled $5,000,000.
GUARANTY FUND ASSESSMENTS: Assessments are levied on the Companies by life
and health guaranty associations in most states in which the Companies are
licensed to cover losses of policyholders of insolvent or rehabilitated
insurers. In some states, these assessments can be partially recovered
through a reduction in future premium taxes. The Companies cannot predict
whether and to what extent legislative initiatives may affect the right to
offset. The associated cost for a particular insurance company can vary
significantly based upon its fixed account premium volume by line of business
and state premiums as well as its potential for premium tax offset. The
Companies have established an undiscounted reserve to cover such assessments,
regularly review information regarding known failures and revise estimates of
future guaranty fund assessments. Accordingly, the Companies accrued and
charged to expense an additional $173,000 in the first quarter of 1998. At
March 31, 1999, the Companies have an undiscounted reserve of $2,446,000 to
cover estimated future assessments (net of related anticipated premium tax
credits) and have established an asset totaling $574,000 for assessments paid
which may be recoverable through future premium tax offsets. The Companies
believe this reserve is sufficient to cover expected future guaranty fund
assessments, based upon previous premiums, and known insolvencies at this
time.
LITIGATION: The Companies, like other insurance companies, may be named or
otherwise involved in lawsuits, including class action lawsuits. In some
class action and other lawsuits involving insurers, substantial damages have
been sought and/or material settlement payments have been made. The
Companies currently believe no pending or threatened lawsuits exist that are
reasonably likely to have a material adverse impact on the Companies.
VULNERABILITY FROM CONCENTRATIONS: The Companies have various concentrations
in the investment portfolio. The Companies' asset growth, net investment
income and cash flow are primarily generated from the sale of variable
products and associated future policy benefits and separate account
liabilities. 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 cause a severe impact on the Companies' financial condition.
Two broker/dealers generated 33% of the Companies' sales during the first
quarter of 1999 (26% by two broker/dealers in the same period of 1998). The
Premium Plus product generated 73% of the Companies' sales during the first
quarter of 1999 (53% in the same period of 1998).
REVOLVING NOTE PAYABLE: To enhance short-term liquidity, the Companies have
established a revolving note payable effective July 27, 1998 and expiring
July 31, 1999 with SunTrust Bank, Atlanta (the "Bank"). The note was
approved by the Boards of Directors of Golden American and First Golden on
August 5, 1998 and September 29, 1998, respectively. The total amount the
Companies may have outstanding is $85,000,000, of which Golden American and
First Golden have individual credit sublimits of $75,000,000 and $10,000,000,
respectively. 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 Companies for the advance. The
terms of the agreement require the Companies to maintain the minimum level of
Company Action Level Risk Based Capital as established by applicable state
law or regulation. During the quarter ended March 31, 1999, the Companies
paid interest expense of $4,000. At March 31, 1999, the Companies did not
have any borrowings under this agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
The purpose of this section is to discuss and analyze the Golden American
Life Insurance Company's ("Golden American") condensed consolidated results
of operations. In addition, some analysis and information regarding
financial condition and liquidity and capital resources has also been
provided. This analysis should be read jointly with the condensed
consolidated financial statements, related notes and the Cautionary Statement
Regarding Forward-Looking Statements, which appear elsewhere in this report.
Golden American reports financial results on a consolidated basis. The
condensed consolidated financial statements include the accounts of Golden
American and its subsidiary, First Golden American Life Insurance Company of
New York ("First Golden," and collectively with Golden American, the
"Companies").
Golden American is a wholly owned subsidiary of Equitable of Iowa Companies,
Inc. ("EIC" or the "Parent"). On October 24, 1997, PFHI Holdings, Inc.
("PFHI"), a Delaware corporation, acquired all of the outstanding capital
stock of Equitable of Iowa Companies ("Equitable") according to the terms of
an Agreement and Plan of Merger dated July 7, 1997 among Equitable, PFHI, and
ING Groep N.V. ("ING"). PFHI is a wholly owned subsidiary of ING, a global
financial services holding company based in The Netherlands. As a result of
this transaction, Equitable was merged into PFHI, which was simultaneously
renamed Equitable of Iowa Companies, Inc., a Delaware corporation.
RESULTS OF OPERATIONS
_____________________
PREMIUMS
<TABLE>
<CAPTION>
Percentage Dollar
Three Months ended March 31 1999 Change Change 1998
________________________________________________________________________________
(Dollars in millions)
<S> <C> <C> <C> <C>
Variable annuity
premiums:
Separate account $460.2 66.0% $183.1 $277.1
Fixed account 168.4 79.4 74.5 93.9
____________________________________________________
Total variable annuity
premiums 628.6 69.4 257.6 371.0
Variable life
premiums 1.5 (47.4) (1.4) 2.9
____________________________________________________
Total premiums $630.1 68.5% $256.2 $373.9
====================================================
</TABLE>
For the Companies' 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.
Variable annuity separate account premiums increased 66.0% during the first
three months of 1999 and increased 18.6% compared to fourth quarter 1998
premiums. These increases resulted from increased sales of the Premium Plus
product. The fixed account portion of the Companies' variable annuity
premiums increased 79.4% during the first three months of 1999 and decreased
30.4% compared to the fourth quarter of 1998.
Premiums, net of reinsurance, for variable products from two significant
broker/dealers having at least ten percent of total sales for the quarter
ended March 31, 1999 totaled $207.6 million, or 33% of total premiums ($97.5
million, or 26% from two significant broker/dealers for the quarter ended
March 31, 1998).
REVENUES
<TABLE>
<CAPTION>
Percentage Dollar
Three Months ended March 31 1999 Change Change 1998
________________________________________________________________________________
(Dollars in millions)
<S> <C> <C> <C> <C>
Annuity and interest
sensitive life
product charges $14.8 113.6% $7.9 $6.9
Management fee revenue 1.8 99.7 0.9 0.9
Net investment income 13.9 57.0 5.1 8.8
Realized gains (losses)
on investments 0.1 (45.7) -- 0.1
Other income 3.5 7,674.9 3.4 0.1
____________________________________________________
$34.1 102.5% $17.3 $16.8
====================================================
</TABLE>
Total revenues increased 102.5% in the first quarter of 1999 from the same
period in 1998. Annuity and interest sensitive life product charges increased
113.6% in the first quarter of 1999 due to additional fees earned from the
increasing block of business under management in the separate accounts and an
increase in surrender charges.
Golden American provides certain managerial and supervisory services to
Directed Services, Inc. ("DSI"). The fee paid to Golden American for these
services, which is calculated as a percentage of average assets in the
variable separate accounts, was $1.8 million and $0.9 million for the first
three months of 1999 and 1998, respectively.
Net investment income increased 57.0% in the first quarter of 1999 due to
growth in invested assets. The Companies had $47,000 of realized gains on
the sale of investments in the first three months of 1999, compared to gains
of $87,000 in the same period of 1998. Other income increased $3.4 million
to $3.5 million in the first three months of 1999 due primarily to income
received from a modified coinsurance agreement with an unaffiliated
reinsurer, which was largely offset by a reduction in the Companies'
deferred policy acquisition costs.
EXPENSES
Total insurance benefits and expenses increased $17.1 million, or 115.7%, to
$31.8 million in the first three months of 1999. Interest credited to account
balances increased $19.7 million, or 117.8%, to $36.4 million in the first
three months of 1999. The extra credit bonus on the Premium Plus product
increased $11.6 million to $19.9 million at March 31, 1999 resulting in an
increase in interest credited during the first three months of 1999 compared
to the same period in 1998. The bonus interest on the fixed account
increased $2.2 million to $3.5 million at March 31, 1999 resulting in an
increase in interest credited during the first three months of 1999 compared
to the same period in 1998. The remaining increase in interest credited
relates to higher account balances associated with the Companies' fixed
account option within the variable products.
Commissions increased $14.9 million, or 71.1%, to $35.8 million in the first
three months of 1999. Insurance taxes increased $0.4 million, or 46.1%, to
$1.2 million in the first three months of 1999. Changes in commissions and
insurance taxes are generally related to changes in the level and mix or
composition of variable product sales. Insurance taxes are impacted by
several other factors, which include an increase in FICA taxes primarily due
to bonuses. Most costs incurred as the result of new sales have been
deferred, thus having very little impact on current earnings.
General expenses increased $6.7 million, or 106.1%, to $13.0 million in the
first three months of 1999. Management expects general expenses to continue
to increase in 1999 as a result of the emphasis on expanding the salaried
wholesaler distribution network. The Companies use a network of wholesalers
to distribute products and the salaries of these wholesalers are included in
general expenses. The portion of these salaries and related expenses that
varies with production levels is deferred thus having little impact on
current earnings. The increase in general expenses was partially offset by
reimbursements received from Equitable Life Insurance Company of Iowa
("Equitable Life"), an affiliate, for certain advisory, computer and other
resources and services provided by Golden American.
The Companies' deferred policy acquisition costs ("DPAC"), previous balance
of value of purchased insurance in force ("VPIF") and unearned revenue
reserve were eliminated and an asset of $44.3 million representing VPIF was
established for all policies in force at the merger date. During the first
quarter of 1999, VPIF was adjusted to increase amortization by $0.2 million
to reflect changes in the assumptions related to the timing of estimated
gross profits. VPIF increased $0.2 million in the first quarter of 1998 as a
result of an adjustment to the merger costs. The amortization of VPIF and
DPAC increased $3.7 million, or 146.9%, in the first three months of 1999 due
primarily to an increase in the amortization of DPAC in the first quarter of
1999 compared to the same period in 1998. This increase resulted from growth
in DPAC from $45.4 million at March 31, 1998 to $264.1 million at March 31,
1999, which was generated by expenses associated with the large sales volume
experienced since March 31, 1998. 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,
1999 is $3.2 million for the remainder of 1999, $4.1 million in 2000, $3.9
million in 2001, $3.7 million in 2002, $3.2 million in 2003 and $2.5 million
in 2004. Actual amortization may vary based upon changes in assumptions and
experience.
Amortization of goodwill during the first three months of 1999 totaled $0.9
million unchanged from the first quarter of 1998. Goodwill resulting from
the merger is being amortized on a straight-line basis over 40 years.
Interest expense on the $25 million surplus note issued in December 1996 and
expiring December 2026 was $0.5 million in the first three months of 1999,
unchanged from the same period of 1998. Interest expense on the $60 million
surplus note issued in December 1998 and expiring December 2028 was $1.1
million in the first three months of 1999. Golden American also paid $7,000
in the first three months of 1999 to ING America Insurance Holdings, Inc.
("ING AIH") for interest on the reciprocal loan agreement. Interest expense
on the revolving note payable with SunTrust Bank, Atlanta was $4,000 for the
first three months of 1999. In addition, Golden American paid interest of
$0.2 million during the first three months of 1998 on the line of credit with
Equitable, which was repaid with a capital contribution from the Parent and
with funds borrowed from ING AIH.
INCOME
Net income for the first three months of 1999 was $0.1 million, a decrease of
$0.3 million from net income of $0.4 million in the same period of 1998.
Comprehensive income (loss) for the first three months of 1999 was $(1.3)
million, a decrease of $1.7 million from $0.4 million in the same period of
1998.
FINANCIAL CONDITION
___________________
INVESTMENTS
The financial statement carrying value and amortized cost basis of the
Companies' total investment portfolio grew 1.9% and 2.4%, respectively,
during the first quarter of 1999. All of the Companies' investments, other
than mortgage loans on real estate, are carried at fair value in the
Companies' financial statements. As such, growth in the carrying value of the
Companies' investment portfolio included changes in unrealized appreciation
and depreciation of fixed maturities as well as growth in the cost basis of
these securities. Growth in the cost basis of the Companies' investment
portfolio resulted from the investment of premiums from the sale of the
Companies' fixed account options. The Companies manage the growth of
insurance operations in order to maintain adequate capital ratios. To
support the fixed account options of the Companies' variable insurance
products, cash flow was invested primarily in fixed maturities, short-term
investments and mortgage loans on real estate.
At March 31, 1999, the Companies had no investments in default. At March 31,
1999, the Companies' investment portfolio had a yield of 6.4%. The Companies
estimate the total investment portfolio, excluding policy loans, had a fair
value approximately equal to 99.6% of amortized cost value for accounting
purposes at March 31, 1999.
FIXED MATURITIES: At March 31, 1999, the Companies had fixed maturities with
an amortized cost of $765.9 million and an estimated fair value of $763.8
million. The individual securities in the Companies' 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") ($490.6 million or 64.0%), that are rated BBB+ to BBB-
by Standard & Poor's ($124.0 million or 16.2%) and below investment grade
securities, which are securities issued by corporations that are rated BB+ to
B- by Standard & Poor's ($70.1 million or 9.2%). Securities not rated by
Standard & Poor's had a National Association of Insurance Commissioners
rating of 1, 2 or 3 ($81.2 million or 10.6%). The Companies' fixed maturity
investment portfolio had a combined yield at amortized cost of 6.5% at March
31, 1999.
The Companies classify 100% of securities as available for sale. Net
unrealized depreciation of fixed maturities of $2.2 million was comprised of
gross appreciation of $3.8 million and gross depreciation of $6.0 million.
Net unrealized holding losses on these securities, net of adjustments for
VPIF, DPAC and deferred income taxes of $0.6 million, was included in
stockholder's equity at March 31, 1999.
At March 31, 1999, the amortized cost value of the Companies' total
investments in below investment grade securities, excluding mortgage-backed
securities, was $65.9 million, or 7.2%, of the Companies' investment
portfolio. The Companies intend to purchase additional below investment
grade securities but do not expect the percentage of the portfolio invested
in such securities to exceed 10% of the investment portfolio. At March 31,
1999, the yield at amortized cost on the Companies' below investment grade
portfolio was 7.8% compared to 6.4% for the Companies' investment grade
corporate bond portfolio. The Companies estimate the fair value of the below
investment grade portfolio was $64.5 million, or 97.9% of amortized cost
value, at March 31, 1999.
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
investment grade issuers. The Companies attempt to reduce the overall risk in
the below investment grade portfolio, as in all investments, through careful
credit analysis, strict investment policy guidelines, and diversification by
company and by industry.
The Companies analyze the investment portfolio, including below investment
grade securities, at least quarterly in order to determine if the Companies'
ability to realize the carrying value on any investment has been impaired.
For debt and equity securities, if impairment in value is determined to be
other than temporary (i.e. if it is probable the Companies 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 Companies' portfolio. Significant write-downs in the
carrying value of investments could materially adversely affect the
Companies' net income in future periods.
During the first three months of 1999, fixed maturities designated as
available for sale with a combined amortized cost of $34.9 million were
called or repaid by their issuers. In total, net pre-tax gains from sales,
calls and repayments of fixed maturity investments amounted to $47,000 in the
first three months of 1999.
At March 31, 1999, no fixed maturities were deemed to have impairments in
value that are other than temporary.
EQUITY SECURITIES: Equity securities represent 1.6% of the Companies'
investment portfolio. At March 31, 1999, the Companies owned equity
securities with a cost of $14.4 million and an estimated fair value of $12.0
million. Net unrealized depreciation of equity securities of $2.4 million was
comprised of gross appreciation of $2,000 and gross depreciation of $2.4
million. Equity securities are primarily comprised of the Companies'
investments in shares of the mutual funds underlying the Companies'
registered separate accounts.
MORTGAGE LOANS ON REAL ESTATE: Mortgage loans on real estate represent 10.3%
of the Companies' investment portfolio. Mortgages outstanding were $94.3
million at March 31, 1999 with an estimated fair value of $94.9 million. The
Companies' mortgage loan portfolio includes 56 loans with an average size of
$1.7 million and average seasoning of 0.9 years if weighted by the number of
loans. The Companies' mortgage loans on real estate are typically secured by
occupied buildings in major metropolitan locations and not speculative
developments and are diversified by type of property and geographic location.
At March 31, 1999, the yield on the Companies' mortgage loan portfolio was
7.3%.
At March 31, 1999, no mortgage loan on real estate was delinquent by 90 days
or more. The Companies' loan investment strategy is consistent with other
life insurance subsidiaries of EIC. The insurance subsidiaries have
experienced a historically low default rate in their mortgage loan
portfolios.
OTHER ASSETS
Accrued investment income increased $1.9 million during the first three
months of 1999 due to an increase in the overall size of the portfolio
resulting from the investment of premiums allocated to the fixed account
options of the Companies' variable products.
DPAC represents certain deferred costs of acquiring new insurance business,
principally first year commissions and interest bonuses, extra credit bonuses
and other expenses related to the production of new business after the
merger. The Companies' DPAC and previous balance of VPIF were eliminated as
of the merger date, and an asset representing VPIF was established for all
policies in force at the merger date. VPIF is amortized into income in
proportion to the expected gross profits of in force acquired business in a
manner similar to DPAC amortization. Any expenses which vary with the sales
of the Companies' products are deferred and amortized. At March 31, 1999,
the Companies had DPAC and VPIF balances of $264.1 million and $34.9 million,
respectively. During the first quarter of 1999, VPIF was adjusted to
increase amortization by $0.2 million to reflect changes in the assumptions
related to the timing of estimated gross profits.
Property and equipment increased $2.9 million, or 39.7%, during the first
quarter of 1999, due to the purchase of furniture and other equipment for
Golden American's new building.
Goodwill totaling $151.1 million, representing the excess of the acquisition
cost over the fair value of net assets acquired, was established at the
merger date. Accumulated amortization of goodwill through March 31, 1999 was
$5.4 million.
At March 31, 1999, the Companies had $3.9 billion of separate account assets
compared to $3.4 billion at December 31, 1998. The increase in separate
account assets resulted from market appreciation and sales of the Companies'
variable annuity products, net of redemptions.
At March 31, 1999, the Companies had total assets of $5.4 billion, a 13.6%
increase from December 31, 1998.
LIABILITIES
In conjunction with the volume of variable annuity sales, the Companies'
total liabilities increased $0.6 billion, or 14.2%, during the first three
months of 1999 and totaled $5.0 billion at March 31, 1999. Future policy
benefits for annuity and interest sensitive life products increased $67.8
million, or 7.7%, to $949.0 million reflecting premium growth in the
Companies' fixed account options of the variable products, net of transfers
to the separate accounts. Market appreciation and premiums, net of
redemptions, accounted for the $0.5 billion, or 16.0%, increase in separate
account liabilities to $3.9 billion at March 31, 1999.
On December 30, 1998, Golden American issued a $60 million, 7.25% surplus
note to Equitable Life, which matures on December 29, 2028.
On December 17, 1996, Golden American issued a $25 million, 8.25% surplus
note to Equitable, which matures on December 17, 2026. As a result of the
merger, the surplus note is now payable to EIC.
Other liabilities increased $9.7 million from $32.6 million at December 31,
1998, due to increases in assured draft proceeds and outstanding checks,
which were partially offset by a decrease in accounts payable.
The effects of inflation and changing prices on the Companies' 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.
STOCKHOLDER'S EQUITY
Additional paid-in capital increased $20.0 million, or 5.8%, from December
31, 1998 to $367.6 million at March 31, 1999 due to a capital contribution
from the Parent.
LIQUIDITY AND CAPITAL RESOURCES
_______________________________
Liquidity is the ability of the Companies to generate sufficient cash flows
to meet the cash requirements of operating, investing and financing
activities. The Companies' principal sources of cash are variable annuity
premiums and product charges, investment income, maturing investments,
proceeds from debt issuance and capital contributions made by the Parent.
Primary uses of these funds are payments of commissions and operating
expenses, interest and extra premium credits, investment purchases, repayment
of debt, as well as withdrawals and surrenders.
Net cash used in operating activities was $2.1 million in the first quarter
of 1999 compared to $3.0 million in the same period of 1998. The Companies
have predominantly had negative cash flows from operating activities since
Golden American started issuing variable insurance products in 1989. These
negative operating cash flows result primarily from the funding of
commissions and other deferrable expenses related to the continued growth in
the variable annuity products.
Net cash used in investing activities was $45.7 million during the first
quarter of 1999 compared to $75.7 million in the same period of 1998. This
decrease is primarily due to greater net purchases of fixed maturities and
equity securities during the first quarter of 1998 than in the same period of
1999. Net purchases of fixed maturities reached $27.0 million during the
first quarter of 1999 versus $42.7 million in the same period of 1998. Net
sales of mortgage loans on real estate were $3.0 million during the first
quarter of 1999 compared to net purchases of $1.4 million during the first
quarter of 1998.
Net cash provided by financing activities was $51.8 million during the first
quarter of 1999 compared to $73.1 million during the same period in 1998. In
the first quarter of 1999, net cash provided by financing activities was
positively impacted by net fixed account deposits of $144.4 million compared
to $81.2 million in the same period of 1998. This increase was offset by net
reallocations to the Companies' separate accounts, which increased to $112.6
million from $42.2 million during the prior year, and by net borrowings of $0
in the first quarter of 1999 compared to $34.1 million in the first quarter
of 1998. In the first quarter of 1999, another important source of cash
provided by financing activities was a $20.0 million capital contribution
from the Parent.
The Companies' 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. Golden American maintains a $65.0 million
reciprocal loan agreement with ING AIH and the Companies' have established an
$85.0 million revolving note facility with SunTrust Bank, Atlanta. Management
believes that these sources of liquidity are adequate to meet the Companies'
short-term cash obligations.
Based on current trends, the Companies expect to continue to use net cash in
operating activities, given the continued growth of the variable annuity
products. It is anticipated that a continuation of capital contributions
from the Parent and the issuance of additional surplus notes will cover these
net cash outflows. ING is committed to the sustained growth of Golden
American. During 1999, ING will maintain Golden American's statutory capital
and surplus at the end of each quarter at a level such that: 1) the ratio of
Total Adjusted Capital divided by Company Action Level Risk Based Capital
exceeds 300%; and 2) the ratio of Total Adjusted Capital (excluding surplus
notes) divided by Company Action Level Risk Based Capital exceeds 200%; and
3) Golden American's statutory capital and surplus exceeds the "Amounts
Accrued for Expense Allowances Recognized in Reserves" as disclosed on page 3,
Line 13A of Golden American's Statutory Statement.
During the first quarter of 1999, Golden American's operations were moved to
a new site in West Chester, Pennsylvania. Golden American currently occupies
65,000 square feet of leased space and has made commitments for an additional
60,000 square feet to be added during 1999 to be occupied by itself and its
affiliates. Golden American's New York subsidiary is housed in leased space
in New York, New York. The Companies intend to spend approximately $3.6
million on capital needs during the remainder of 1999.
The ability of Golden American to pay dividends to its Parent is restricted.
Prior approval of insurance regulatory authorities is required for payment of
dividends to the stockholder which exceed an annual limit. During 1999,
Golden American cannot pay dividends to its Parent without prior approval of
statutory authorities.
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 First Golden within thirty days
after the filing. The management of First Golden does not anticipate paying
any dividends to Golden American during 1999.
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
Companies have complied with the NAIC's risk-based capital reporting
requirements. Amounts reported indicate the Companies have total adjusted
capital well above all required capital levels.
REINSURANCE: At March 31, 1999, Golden American had reinsurance treaties
with four unaffiliated reinsurers and one affiliated reinsurer covering a
significant portion of the mortality risks under its variable contracts.
Golden American remains liable to the extent its reinsurers do not meet their
obligations under the reinsurance agreements.
YEAR 2000 READINESS DISCLOSURE: Based on and in conjunction with a 1997
study and an ongoing analysis of computer software and hardware, the
Companies have assessed their exposure to the Year 2000 change of the century
date issue. Some of the Companies' computer programs were originally written
using two digits rather than four to define a particular year. As a result,
these computer programs contain "time sensitive" software that may recognize
"00" as the year 1900 rather than the year 2000, which could cause system
failure or miscalculations resulting in disruptions to operations. These
disruptions could include, but are not limited to, a temporary inability to
process transactions. To a lesser extent, the Companies depend on various
non-information technology systems, which could also fail or malfunction as a
result of the Year 2000.
The Companies have developed a plan to address the Year 2000 issue in a
timely manner. The following schedule details the plan's phases, progress
towards completion and actual or estimated completions dates as of April 30,
1999:
<TABLE>
<CAPTION>
% Complete as of Actual/Estimated
Phases April 30, 1999 Completion Dates
_____________________________________________________________________________
<S> <C> <C>
ASSESSMENT AND DEVELOPMENT of the steps to
be taken to address Year 2000 systems
issues 100% 12/31/1997
REMEDIATION of business critical systems
to address Year 2000 issues 100% 2/28/1999
REMEDIATION of non-critical systems
to address Year 2000 issues 76-99% 6/01/1999
TESTING of business critical systems 100% 3/05/1999
TESTING of non-critical systems and
integrated testing of hardware and
infrastructure 51-75% 6/15/1999
POINT-TO-POINT TESTING of external
interfaces with third party computer
systems that communicate with the
Companies'systems 51-75% 5/31/1999
IMPLEMENTATION of tested business
critical software addressing Year 2000
systems issues 100% 3/05/1999
IMPLEMENTATION of tested non-critical
software addressing Year 2000
systems issues 51-75% 6/30/1999
CONTINGENCY PLAN 76-99% 6/30/1999
</TABLE>
The Companies' operations could be adversely affected if significant
customers, suppliers and other third parties, including underlying mutual
funds available through the Companies' variable products, would be unable to
transact business in the Year 2000 and thereafter as a result of the Year
2000 issue. To mitigate the effect of outside influences and other
dependencies relative to the Year 2000, the Companies have identified and
contacted these third parties to obtain assurances that necessary steps are
being taken to prepare for the Year 2000. The Companies will continue these
communications and establish compliance checkpoints through the Year 2000
transition.
Management believes the Companies' systems are or will be substantially
compliant by Year 2000. Through March 31, 1999, Golden American has spent
approximately $400,000 in connection with the Year 2000 project, which
includes $54,000 of expenses charged during the first three months of 1999.
These costs are incremental expenses that Golden American does not anticipate
recurring in the Year 2000 and thereafter. The Companies anticipate charging
to expense an additional $146,000 to $246,000 during the remainder of 1999,
which includes upgrade and internal resources costs.
Despite the Companies' efforts to modify or replace "time sensitive" computer
and information systems, the Companies could experience a disruption to their
operations as a result of the Year 2000. The Companies are currently
developing a contingency plan to address the content of third party
compliance statements and any systems that may malfunction despite the
testing being performed. The contingency plan is anticipated to be completed
by June 30, 1999.
The Year 2000 project costs and completion dates are based on management's
best estimates. These estimates were derived using numerous assumptions of
future events, including the continued availability of resources, third party
Year 2000 compliance and other factors. There is no guarantee these
estimates will be achieved and actual results could materially differ from
those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
trained personnel, the ability to locate and correct all relevant computer
codes and other uncertainties.
It is the Companies' intention to make every reasonable effort to achieve
business continuity through appropriate planning, testing and establishing
contingency scenarios; however, the Companies do not make any representations
because of many unknown factors beyond the control of the Companies.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
_________________________________________________________
Any forward-looking statement contained herein or in any other oral or
written statement by the Companies or any of their officers, directors or
employees is qualified by the fact that actual results of the Companies may
differ materially from such statement, among other risks and uncertainties
inherent in the Companies' business, due to the following important factors:
1. Prevailing interest rate levels and stock market performance, which may
affect the ability of the Companies to sell their products, the market value
and liquidity of the Companies' investments and the lapse rate of the
Companies' policies, notwithstanding product design features intended to
enhance persistency of the Companies' products.
2. Changes in the federal income tax laws and regulations which may affect
the tax status of the Companies' 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 Companies' products.
4. Increasing competition in the sale of the Companies' products.
5. Other factors that could affect the performance of the Companies,
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 vari-
able products, variable product design and sales volume by significant
sellers of the Companies' variable products.
6. To the extent third parties are unable to transact business in the Year
2000 and thereafter, the Companies' operations could be adversely affected.
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
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 14, 1999 GOLDEN AMERICAN LIFE INSURANCE COMPANY
By/s/E. Robert Koster
___________________________________
E. Robert Koster
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
By/s/Michellen A. Wildin
___________________________________
Michellen A. Wildin
Assistant Vice President and Chief
Accounting Officer
(Principal Accounting Officer)
INDEX
Exhibits to Form 10-Q
Three Months ended March 31, 1999
GOLDEN AMERICAN LIFE INSURANCE COMPANY
2 PLAN OF ACQUISITION
(a) Stock Purchase Agreement dated as of May 3, 1996, between Equitable
of Iowa Companies ("Equitable") and Whitewood Properties Corp.
(incorporated by reference from Exhibit 2 in Equitable's Form 8-K
filed August 28, 1996)
(b) Agreement and Plan of Merger dated as of July 7, 1997, among ING
Groep N.V., PFHI Holdings, Inc., and Equitable (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 Golden American Life Insurance Company
("Registrant" or "Golden American") (incorporated by reference from
Exhibit 3(a) to Amendment No. 9 to Registrant's Registration
Statement on Form S-1 filed with the Securities and Exchange
Commission (the "SEC") on February 17, 1998 (File No. 33-87272))
(b)(i) By-laws of Golden American (incorporated by reference from Exhibit
3(b)(i) to Amendment No. 9 to Registrant's Registration Statement
on Form S-1 filed with the SEC on February 17, 1998
(File No. 33-87272))
(ii) By-laws of Golden American, as amended (incorporated by reference
from Exhibit 3(b)(ii) to Amendment No. 9 to Registrant's
Registration Statement on Form S-1 filed with the SEC on February
17, 1998 (File No. 33-87272))
(iii) Certificate of Amendment of the By-laws of MB Variable Life
Insurance Company, as amended (incorporated by reference from
Exhibit 3(b)(iii) to Amendment No. 9 to Registrant's Registration
Statement on Form S-1 filed with the SEC on February 17, 1998
(File No. 33-87272))
(iv) By-laws of Golden American, as amended (12/21/93) (incorporated by
reference from Exhibit 3(b)(iv) to Amendment No. 9 to Registrant's
Registration Statement on Form S-1 filed with the SEC on February
17, 1998 (File No. 33-87272))
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 Amendment No. 3 of
Registrant's Registration Statement on Form S-1 filed with the SEC
on or about April 23, 1999 (File No. 333-51353))
(b) Discretionary Group Deferred Combination Variable Annuity Contract
(incorporated by reference from Exhibit 4(b) to Amendment No. 3 of
Registrant's Registration Statement on Form S-1 filed with the SEC
on or about April 23, 1999 (File No. 333-51353))
INDEX
Exhibits to Form 10-Q
Three Months ended March 31, 1999
GOLDEN AMERICAN LIFE INSURANCE COMPANY
(c) Individual Deferred Variable Annuity Contract (incorporated by
reference from Exhibit 4(c) to Amendment No. 4 of Registrant's
Registration Statement on Form S-1 filed with the SEC on or about
April 23, 1999 (File No. 333-51353))
(d) Individual Deferred Combination Variable and Fixed Annuity
Application (incorporated by reference from Exhibit 4(g) to
Amendment No.3 of Registrant's Registration Statement on Form S-1
filed with the SEC on or about April 23, 1999 (File No. 333-51353))
(e) Group Deferred Combination Variable and Fixed Annuity Enrollment
Form (incorporated by reference from Exhibit 4(h) to Amendment No.3
of Registrant's Registration Statement on Form S-1 filed with the
SEC on or about April 23, 1999 (File No. 333-51353))
(f) Individual Deferred Variable Annuity Application (incorporated by
reference from Exhibit 4(i) to Amendment No. 3 of Registrant's
Registration Statement on Form S-1 filed with the SEC on or about
April 23, 1999 (File No. 333-51353))
(g) Individual Deferred Variable and Fixed Annuity Contract
(incorporated by reference from Exhibit 4(a) to Amendment No. 5 to
Registrant's Registration Statement filed with the SEC on or about
April 23, 1999 (File No. 333-28765))
(h) Group Deferred Variable and Fixed Annuity Contract Individual
Deferred Variable and Fixed Annuity Contract (incorporated by
reference from Exhibit 4(b) to Amendment No. 5 to Registrant's
Registration Statement filed with the SEC on or about April 23,
1999 (File No. 333-28765))
(i) Individual Deferred Variable Annuity Contract (incorporated by
reference from Exhibit 4(c) to Amendment No. 5 to Registrant's
Registration Statement filed with the SEC on or about April 23,
1999 (File No. 333-28765))
(j) Individual Deferred Variable and Fixed Annuity Contract
(incorporated by reference from Exhibit 4(a) to a Registration
Statement for Golden American filed with the SEC on or about
April 23, 1999 (File No. 333-76941)
(k) Group Deferred Variable and Fixed Annuity Contract Individual
Deferred Variable and Fixed Annuity Contract (incorporated by
reference from Exhibit 4(b) to a Registration Statement
for Golden American filed with the SEC on or about April 23, 1999
(File No. 333-76941))
(l) Individual Deferred Variable Annuity Contract (incorporated by
reference from Exhibit 4(c) to a Registration Statement for
Golden American filed with the SEC on or about April 23, 1999
(File No. 333-76941))
INDEX
Exhibits to Form 10-Q
Three Months ended March 31, 1999
GOLDEN AMERICAN LIFE INSURANCE COMPANY
(m) Individual Deferred Variable and Fixed Annuity Contract
(incorporated by reference from Exhibit 4(a) to a Registration
Statement for Golden American filed with the SEC on or about
April 23, 1999 (File No. 333-76945))
(n) Group Deferred Variable and Fixed Annuity Contract Individual
Deferred Variable and Fixed Annuity Contract (incorporated by
reference from Exhibit 4(b) to a Registration Statement for
Golden American filed with the SEC on or about April 23, 1999
(File No. 333-76945))
(o) Individual Deferred Variable Annuity Contract (incorporated by
reference from Exhibit 4(c) to a Registration Statement for
Golden American filed with the SEC on or about April 23, 1999
(File No. 333-76945))
(p) Individual Deferred Variable and Fixed Annuity Contract
(incorporated by reference from Exhibit 4(a) to Amendment No.3 to
Registrant's Registration Statement filed with the SEC on or about
April 23, 1999 (File No. 333-66745))
(q) Group Deferred Variable and Fixed Annuity Contract Individual
Deferred Variable and Fixed Annuity Contract (incorporated by
reference from Exhibit 4(b) to Amendment No. 3 to Registrant's
Registration Statement filed with the SEC on or about April 23,
1999 (File No. 333-66745))
(r) Individual Deferred Variable Annuity Contract (incorporated by
reference from Exhibit 4(c) to Amendment No. 3 to Registrant's
Registration Statement filed with the SEC on or about
April 23, 1999 (File No. 333-66745))
10 MATERIAL CONTRACTS
(a) Administrative Services Agreement, dated as of January 1, 1997,
between Golden American and Equitable Life Insurance Company of
Iowa (incorporated by reference from Exhibit 10(a) to a
Registration Statement for Golden American on Form S-1 filed with
the SEC on April 29, 1998 (File No. 333-51353))
(b) Service Agreement, dated as of January 1, 1994, between Golden
American and Directed Services, Inc. (incorporated by reference
from Exhibit 10(b) to a Registration Statement for Golden American
on Form S-1 filed with the SEC on April 29, 1998
(File No. 333-51353))
(c) Service Agreement, dated as of January 1, 1997, between Golden
American and Equitable Investment Services, Inc. (incorporated by
reference from Exhibit 10(c) to a Registration Statement for Golden
American on Form S-1 filed with the SEC on April 29, 1998
(File No. 333-51353))
INDEX
Exhibits to Form 10-Q
Three Months ended March 31, 1999
GOLDEN AMERICAN LIFE INSURANCE COMPANY
(d) Participation Agreement between Golden American and Warburg Pincus
Trust (incorporated by reference from Exhibit 8(a) to Amendment
No. 54 to Separate Account B of Golden American's Registration
Statement on Form N-4 filed with the SEC on or about April 30, 1998
(File Nos. 333-28679 and 811-5626))
(e) Participation Agreement between Golden American and PIMCO Variable
Trust (incorporated by reference from Exhibit 8(b) to Amendment
No. 54 to Separate Account B of Golden American's Registration
Statement on Form N-4 filed with the SEC on or about April 30, 1998
(File Nos. 333-28679 and 811-5626))
(f) Asset Management Agreement, dated January 20, 1998, between Golden
American and ING Investment Management LLC (incorporated by
reference from Exhibit 10(f) to Golden American's Form 10-Q filed
with the SEC on August 14, 1998 (File No. 33-87272))
(g) Reciprocal Loan Agreement, dated January 1, 1998, as amended March
20, 1998, between Golden American and ING America Insurance Holdings,
Inc. (incorporated by reference from Exhibit 10(g) to Golden
American's Form 10-Q filed with the SEC on August 14, 1998
(File No. 33-87272))
(h) Underwriting Agreement between Golden American and Directed
Services, Inc. (incorporated by reference from Exhibit 1 to
Amendment No. 9 to Registrant's Registration Statement on Form S-1
filed with the SEC on or about February 17, 1998
(File No. 33-87272))
(i) Revolving Note Payable, dated July 27, 1998, between Golden American
and SunTrust Bank, Atlanta (incorporated by reference from Exhibit
10(i) to Golden American's Form 10-Q filed with the SEC on
November 13, 1998 (File No. 33-87272))
27 FINANCIAL DATA SCHEDULE (ELECTRONIC FILING ONLY)
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