UNITED STATES
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:
June 30, 1995
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: 33-71690
FIRST FORTIS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or
organization)
13-2699219(I.R.S. Employer Identification No.)
220 SALINA MEADOWS PARKWAY, SUITE 255, SYRACUSE, NEW YORK
(Address of principal executive offices)
13220 (Zip Code)
(315) 451-0066
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required 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.
X Yes No
<PAGE>
First Fortis Life Insurance Company
Balance Sheets
<TABLE>
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Assets
Investments:
Fixed maturities, at fair value (amortized cost
1995--$105,244,013; 1994 -- $102,195,927) $108,652,175 $ 97,337,464
Short-term investments 600,000 1,900,000
109,252,175 99,237,464
1,816,053 483,075
Cash
Receivables:
Uncollected premiums, less allowance of $100,000 4,758,448 4,595,706
Reinsurance recoverable on unpaid and paid losses 8,488,176 8,875,349
Prepaid federal income taxes and other 1,282,669 2,215,328
14,529,293 15,686,383
Accrued investment income 1,704,213 1,945,610
Deferred policy acquisition costs 3,671,000 4,595,000
Property and equipment at cost, less accumulated
depreciation (19950$1,014,811; 1994-$766,831 1,352,665 1,360,471
Goodwill 623,000 646,000
Total Assets $132,948,399 $123,954,003
Reserves, liabilities, and shareholder's equity
Policy reserves and liabilities:
Future policy benefit reserves:
Life insurance $ 21,402,926 $ 21,233,643
Accident and health 54,853,326 52,844,913
76,256,252 74,078,566
Other policy claims and benefits payable 15,730,488 17,974,419
Other liabilities 8,634,255 5,860,473
Total policy reserves and liabilities 100,620,995 97,913,448
Shareholder's equity:
Common stock, $20 par value 100,000 shares
authorized, issued, and outstanding 2,000,000 2,000,000
Additional paid-in capital 30,440,000 30,440,000
Retained deficit (2,361,983) (1,540,982)
Unrealized appreciation (depreciation) of
investment securities, net 2,249,387 (4,858,463)
Total shareholder's equity 32,327,404 26,040,555
Total reserves, liabilities, and shareholder's equity $132,948,399 $123,954,003
See notes to financial statements.
<PAGE>
First Fortis Life Insurance Company
Statements of Operations
(Unaudited)
Three months ended
June 30,
1995 1994
<S> <C> <C>
Revenues
Insurance operations:
Life insurance premiums $ 4,475,372 $ 5,130,480
Accident and health premiums 15,853,842 19,068,060
Net investment income 1,809,371 1,520,582
Realized gains (losses) on investments 598,755 (300,947)
Other income 17,077 92,811
Total revenues 22,754,417 25,510,986
Benefits and expenses
Benefits to policyholders:
Life insurance 3,777,037 2,831,487
Accident and health 14,725,410 17,186,651
Amortization of deferred policy acquisition
costs 462,000 454,000
Insurance commissions 1,305,570 1,752,542
General and administrative expenses 3,488,213 2,843,660
Total benefits and expenses 23,758,230 25,068,340
Income (loss) before federal income taxes (1,003,813) 442,646
Federal income taxes (benefit) (403,131) 216,103
Net income (loss) $ (600,682) $ 226,543
See notes to financial statements.<PAGE>
First Fortis Life Insurance Company
Statements of Operations
(Unaudited)
Six months ended
June 30,
1995 1994
<S> <C> <C>
Revenues
Insurance operations:
Life insurance premiums $ 8,933,261 $ 10,767,368
Accident and health premiums 34,269,476 35,948,421
Net investment income 3,604,439 2,973,238
Realized gains (losses) on investments 380,263 (168,954)
Other income 43,797 221,060
Total revenues 47,231,236 49,741,133
Benefits and expenses
Benefits to policyholders:
Life insurance 6,033,574 9,899,234
Accident and health 31,893,001 32,250,146
Amortization of deferred policy acquisition
costs 924,000 908,000
Insurance commissions 2,700,346 2,759,956
General and administrative expenses 7,014,498 6,168,280
Total benefits and expenses 48,565,419 51,985,616
Loss before federal income taxes (1,334,183) (2,244,483)
Federal income taxes (benefit) (513,182) (906,000)
Net loss $ (821,001) $ (1,338,483)
See notes to financial statements.<PAGE>
First Fortis Life Insurance Company
Statements of Cash Flows
(Unaudited)
Six months ended
June 30,
1995 1994
<S> <C> <C>
Operating activities
Net loss $ (821,001) $ (1,338,483)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Increase (decrease in future policy
benefit reserves and other policy
claim and benefits (66,235) 1,784,812
Decrease in income taxes (513,162) (2,348,818)
Amortization of policy acquisition
costs 924,000 908,000
Increase (decrease) in other liabilities 2,773,781 (3,399,981)
Depreciation and amortization 270,980 243,682
Decrease in uncollected premiums and
accrued investment income 78,655 1,741,016
Decrease in reinsurance recoverable 387,173 284,207
Net realized (gains) losses on
investments (380,263) 168,954
Other 287,047 (98,394)
Net cash provided by (used in) operating
activities 2,940,975 (2,055,005)
Investing activities
Purchases of fixed maturity investments (43,958,839) (41,145,671)
Sales and maturities of fixed maturity
investments 41,291,016 39,465,444
Decrease in equity securities and
short-term investments 1,300,000 3,385,906
Purchase of property and equipment (240,174) (227,676)
Net cash provided by (used in) investing
activities (1,607,997) 1,478,003
Increase (decrease) in cash 1,332,978 (577,002)
Cash at beginning of period 483,075 1,803,384
Cash at end of period $ 1,816,053 $ 1,226,382
See notes to financial statements.
</TABLE> <PAGE>
First Fortis Life Insurance Company
Notes to Financial Statements
June 30, 1995 and 1994
(Unaudited)
General
The accompanying unaudited financial statements of First
Fortis Life Insurance Company ("First Fortis" or
"Company"), contain all adjustments necessary to present
fairly the balance sheet as of June 30, 1995 and the
related statements of operations for the three and six
months ended June 30, 1995 and 1994, and cash flows
for the six months ended June 30, 1995 and 1994.
Investments
The following is a summary of the amortized cost and fair
value of fixed maturity securities:
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
June 30, 1995:
Governments $ 28,463,138 $1,739,230 $ (42,160) $ 30,160,208
States and
municipal 18,810,821 333,141 (183,569) 18,960,393
Public utilities 3,389,064 116,546 - 3,505,610
Industrial and
miscellaneous 54,580,990 1,711,013 (266,039) 56,025,964
Total $105,244,013 $3,899,903 $ (491,768) $108,652,175
</TABLE>
The fair values for fixed maturity securities are based
on quoted market prices, where available. For fixed
maturity securities not actively traded, fair values are
estimated using values obtained from independent pricing
services or, in the case of private placements, are
estimated by discounting expected future cash flows using
a current market rate applicable to the yield, credit
quality, and maturity of the investments.
The amortized cost and fair value of fixed maturity
securities at June 30, 1995, by contractual maturity,
are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the
right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 4,524,070 $ 4,530,911
Due after one year through five years 32,417,462 33,112,101
Due after five years through ten years 45,481,358 46,737,433
Due after ten years 22,821,123 24,271,730
$105,244,013 $108,652,175
</TABLE>
First Fortis Life Insurance Company
Notes to Financial Statements (Continued)
Investments (Continued)
Proceeds from sales and maturities of fixed maturity
securities were $41,291,016 and $39,465,444 for the six
month period ended June 30, 1995 and 1994, respectively.
Gross gains of $871,709 and $380,209 and gross losses of
$491,446 and $549,163 were realized on the sales during
the six month period ended June 30, 1995 and 1994.
Net Investment Income and Net Realized Gains (Losses) on
Investments
Major categories of net investment income and realized
gains (losses) on investments for the six months ended
June 30 were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Net Net Realized
Investment Gains (Losses)
Income on Investments
1995 1994 1995 1994
Fixed maturities $3,721,598 $3,081,072 $ 380,263 $ (164,471)
Short-term
investments 466 30,935 - (4,483)
3,722,064 3,112,007 380,263 (168,954)
Expenses (177,625) (138,769)
Net investment
income $3,604,439 $2,973,238
</TABLE>
Federal Income Taxes
As of June 30, 1995 and December 31, 1994, respectively,
the Company had a deferred tax asset valuation allowance
of $1,515,531 and $3,167,408, of which $-0- and
$1,651,877 related to unrealized depreciation on
investment securities. The $1,651,877 decrease in the
deferred tax asset valuation allowance was recognized in
the "unrealized appreciation (depreciation) of investment
securities, net" component of shareholder's equity.
Management's Discussion and Analysis of Financial
Condition and Results of Operations As of and for the
Three and the Six Months Ended June 30, 1995 and 1994
REVENUES
On-going marketing efforts increased group fully insured
life premium from 1994 to 1995. In mid-1994, a minimum
premium group life insurance account lapsed. This
account did not have a significant impact on the
Company's operating results.
Effective April 1, 1995, an association group of fully
insured medical business terminated. This group, which
had contributed to a medical loss ratio that exceeded
product pricing assumptions, represented approximately
22% of the Company's fully insured medical premium in
1994. Premium rate actions have resulted in lapses of
another 15% of this business. This trend may continue
during the remainder of 1995. During 1994, medical
premium grew primarily from the impact of New York State
Regulation 145 "Open Enrollment and Community Rating of
Individual and Small Group Health Insurance" ("Community
Rating"). On-going marketing efforts have continued to
increase First Fortis' other accident and health
insurance product premiums (disability income and dental
coverages).
The Company continues to match investment portfolio
composition to liquidity needs and capital requirements.
Changes in interest rates during 1995 and 1994 resulted
in recognition of realized gains and losses.
BENEFITS
The year to date June 30, 1995 group life mortality
experience is consistent with product pricing
assumptions. Year to date June 30, 1994 life insurance
benefits were impacted by higher than expected first
quarter 1994 death claims and lower than expected
second quarter 1994 death claims.
Improved recovery rates on existing group disability
income claimants were offset by a Community Rating
medical loss ratio that exceeded product pricing
assumptions. Premium rate actions and the association
termination are expected to improve medical and
disability income results later in 1995.
COMMISSIONS
First Fortis continues to monitor its commission and
third party administrator rate structures, and, as
indicated by market conditions, periodically adjusts
rates paid. Rates paid are dependent upon product type,
group size and duration. The changes in the commissions
to premiums ratio reflect changes in the mix of inforce
business and adjustments to rates paid. Management's
Discussion and Analysis of Financial Condition and
Results of Operations As of and for the Three and the Six
Months Ended June 30, 1995 and 1994 (Continued)
Liquidity and Capital Resources
The liquidity requirements of the Company have been met
by funds provided from operations. Funds are principally
used to provide for policy benefits and reserves,
operating expenses, commissions and investment
purchases. The Company expects its operating activities
to continue to generate sufficient funds.
The National Association of Insurance Commissioners'
risk-based capital formula helps to establish guidelines
for capital levels. At June 30, 1995, First Fortis'
capital exceeded the minimum recommended risk-based
capital level.
As of June 30, 1995, 99.5% of the Company's fixed
maturity securities consisted of investment grade bonds.
Regulation
First Fortis is subject to the laws and regulations
established by the New York State Insurance Department
governing insurance business conducted in New York
State. Periodic audits are conducted by the New York
Insurance Department related to the Company's compliance
with these laws and regulations. To date there have
been no adverse findings regarding First Fortis
operations.
First Fortis closely monitors state and national medical
insurance legislative activity, and its potential effect
on the Company's marketing approach.
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations As of and for the
Three and the Six Months Ended June 30, 1995 and 1994
REVENUES
The decrease in total life insurance premiums from 1994
to 1995 resulted from the lapse of a minimum premium
group life insurance account in mid-1994. This account
did not have a significant impact on the Company's
operating results.
Total accident and health premium has decreased from 1994
to 1995. During 1994, medical premium grew primarily
from the impact of New York State Regulation 145 "Open
Enrollment and Community Rating of Individual and Small
Group Health Insurance" ("Community Rating"). Premium
rate actions through June 30, 1995 have contributed to a
40% decrease of inforce fully insured medical lives and
a $14 million decrease in inforce premium from December
31, 1994. The decrease includes the April 1, 1995 lapse
of an association case. This group, which had
contributed to a medical loss ratio that exceeded Company
expectations, represented 26% of inforce lives at
December 31, 1994 and 22% of the Company's fully insured
medical premium in 1994. On-going marketing efforts have
continued to increase First Fortis' disability income and
dental premiums.
The Company continues to match investment portfolio
composition to liquidity needs and capital requirements.
Changes in interest rates during 1995 and 1994 resulted
in recognition of realized gains and losses.
BENEFITS
The group life claims ratio was higher than expected in
the first six months of 1994 as a result of higher death
claims during the first quarter of 1994. In 1995,
mortality experience returned to a level consistent with
Company expectations.
Improved recovery rates on existing group disability
income claimants were offset by a Community Rating
medical loss ratio that exceeded Company assumptions.
Premium rate actions and the above-mentioned association
case lapse are expected to improve medical and disability
income benefits results later in 1995.
EXPENSES
First Fortis continues to monitor its insurance
commissions rate structures, and, as indicated by market
conditions, periodically adjusts rates paid. Rates paid
are dependent upon product type, group size and duration.
The changes in the insurance commissions to premiums
ratio reflect changes in the mix of inforce business, and
changes in the insurance commissions rate structures.
Increased general and administrative expenses from 1994
to 1995 principally resulted from costs associated with
a higher medical claims volume in 1995 compared to 1994.
Liquidity and Capital Resources
The liquidity requirements of the Company have been met
by funds provided from operations. Funds are principally
used to provide for policy benefits and reserves,
operating expenses, commissions and investment purchases.
The Company expects its operating activities to continue
to generate sufficient funds.
The National Association of Insurance Commissioners'
risk-based capital formula helps to establish guidelines
for capital levels. At June 30, 1995, First Fortis'
capital exceeded the minimum recommended risk-based
capital level.
As of June 30, 1995, 99.5% of the Company's fixed
maturity securities consisted to investment grade bonds.
Regulation
First Fortis is subject to the laws and regulations
established by the New York State Insurance Department
governing insurance business conducted in New York State.
Periodic audits are conducted by the New York Insurance
Department related to the Company's compliance with these
laws and regulations. To date there have been no adverse
findings regarding First Fortis operations.
First Fortis closely monitors state and national medical
insurance legislative activity, and its potential effect
on the Company's marketing approach.
<PAGE>
Part II. Other Information
Item 1: Legal Proceedings
None
Item 2: Changes in Securities
None
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security
Holders
(a) On April 19, 1995, the Annual First Fortis
Life Insurance Company Shareholder Meeting was held.
(b), (c) All 100,000 outstanding shares of the
Company's common stock were cast for the election of each
director (Larry M. Cains, Allen R. Freedman, Thomas M.
Keller, Dean C. Kopperud, Terry J. Kryshak, Susie Gharib,
Guy Gerard Rutherfurd, Jr., Dale Edward Gardner, Kenneth
W. Nelson, Clarence Elkus Galston, and Robert B.
Pollock).
(d) None
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
a) None
b) No Forms 8-K have been filed during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
First Fortis Life Insurance Company
(Registrant)
Date August 11, 1995 /s/ Larry M. Cains,
Treasurer
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000914804
<NAME> FIRST FORTIS LIFE INSURANCE COMPANY
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 108,652,175
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 109,252,175
<CASH> 1,816,053
<RECOVER-REINSURE> 8,488,176
<DEFERRED-ACQUISITION> 3,671,000
<TOTAL-ASSETS> 132,948,399
<POLICY-LOSSES> 76,256,252
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 15,730,488
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 2,000,000
0
0
<OTHER-SE> 30,327,404
<TOTAL-LIABILITY-AND-EQUITY> 132,948,399
43,202,737
<INVESTMENT-INCOME> 3,604,439
<INVESTMENT-GAINS> 380,263
<OTHER-INCOME> 43,797
<BENEFITS> 37,926,575
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 924,000
<INCOME-PRETAX> (1,334,183)
<INCOME-TAX> (513,182)
<INCOME-CONTINUING> (821,001)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (821,001)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 66,136,369
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
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</TABLE>
