UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended: September 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 13220
(Address of principal executive offices)
(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.
Yes X No
<PAGE>
First Fortis Life Insurance Company
Balance Sheets
<TABLE>
September 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Assets
Investments:
Fixed maturities, at fair value (amortized cost
1995--$107,006,473; 1994 -- $102,195,927) $109,404,757$
97,337,464
Short-term investments 700,000
1,900,000
110,104,757 99,237,464
1,825,136 483,075
Cash
Receivables:
Uncollected premiums, less allowance of $100,000 5,323,067
4,595,706
Reinsurance recoverable on unpaid and paid losses 9,438,474
8,875,349
Prepaid federal income taxes and other 1,930,093
2,215,328
16,691,634 15,686,383
Accrued investment income 1,882,464
1,945,610
Deferred policy acquisition costs 3,209,000
4,595,000
Property and equipment at cost, less accumulated
depreciation (1995-$1,134,124; 1994-$766,831 1,308,975
1,360,471
Goodwill 611,000
646,000
Total Assets $135,632,966
$123,954,003
Reserves, liabilities, and shareholder's equity
Policy reserves and liabilities:
Future policy benefit reserves:
Life insurance $ 22,772,001 $
21,233,643
Accident and health 56,951,440
52,844,913
79,723,441 74,078,566
Other policy claims and benefits payable 12,715,198
17,974,419
Other liabilities 10,849,472
5,860,473
Total policy reserves and liabilities 103,288,111
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 (1,678,012)
(1,540,982)
Unrealized appreciation (depreciation) of
investment securities, net 1,582,867
(4,858,463)
Total shareholder's equity 32,344,855
26,040,555
Total reserves, liabilities, and shareholder's equity $135,632,966
$123,954,003
See notes to financial statements.
<PAGE>
First Fortis Life Insurance Company
Statements of Operations
(Unaudited)
Three months ended
September 30,
1995 1994
<S> <C> <C>
Revenues
Insurance operations:
Life insurance premiums $ 5,092,793 $ 4,336,162
Accident and health premiums 14,318,558 18,072,844
Net investment income 1,765,857 1,605,976
Realized gains (losses) on investments 1,620,033
(338,876)
Other income 136,818 32,100
Total revenues 22,934,059 23,708,206
Benefits and expenses
Benefits to policyholders:
Life insurance 5,857,045 2,617,948
Accident and health 11,026,159 18,435,957
Amortization of deferred policy acquisition
costs 462,000 454,000
Insurance commissions 1,385,461 1,349,533
General and administrative expenses 3,231,214 3,283,757
Total benefits and expenses 21,961,879 26,141,195
Income (loss) before federal income taxes 972,180 (2,432,989)
Federal income taxes (benefit) 288,209 (1,038,308)
Net income (loss) $ 683,971 $ (1,394,681)
See notes to financial statements.<PAGE>
First Fortis Life Insurance Company
Statements of Operations
(Unaudited)
Nine months ended
September 30,
1995 1994
<S> <C> <C>
Revenues
Insurance operations:
Life insurance premiums $ 14,026,054 $ 15,103,530
Accident and health premiums 48,588,034 54,021,265
Net investment income 5,370,296 4,579,214
Realized gains (losses) on investments 2,000,296
(507,830)
Other income 180,615 253,160
Total revenues 70,165,295 73,449,339
Benefits and expenses
Benefits to policyholders:
Life insurance 11,890,619 12,517,182
Accident and health 42,919,160 50,686,103
Amortization of deferred policy acquisition
costs 1,386,000 1,362,000
Insurance commissions 4,085,807 4,109,489
General and administrative expenses 10,245,712 9,452,037
Total benefits and expenses 70,527,298 78,126,811
Loss before federal income taxes (362,003)
(4,677,472)
Federal income taxes (benefit) (224,973) (1,944,308)
Net loss $ (137,030) $ (2,733,164)
See notes to financial statements.<PAGE>
First Fortis Life Insurance Company
Statements of Cash Flows
(Unaudited)
Nine months ended
September 30,
1995 1994
<S> <C> <C>
Operating activities
Net loss $ (137,030) $ (2,733,164)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Increase in future policy
benefit reserves and other policy
claims and benefits 385,664 4,746,534
Decrease in income taxes (224,953) (3,387,126)
Amortization of policy acquisition
costs 1,386,000 1,362,000
Increase (decrease) in other liabilities 4,988,999 (3,118,889)
Depreciation and amortization 402,293 293,698
(Increase) decrease in uncollected premiums and
accrued investment income (664,215) 1,864,126
(Increase) decrease in reinsurance recoverable (563,125) 571,811
Net realized (gains) losses on
investments (2,000,296) 507,830
Other (305,229) (1,544,115)
Net cash provided by (used in) operating
activities 3,268,108 (1,437,295)
Investing activities
Purchases of fixed maturity investments (104,461,152) (64,889,262)
Sales and maturities of fixed maturity
investments 101,650,902 60,790,653
Decrease in equity securities and
short-term investments 1,200,000 5,635,906
Purchase of property and equipment (315,797) (269,746)
Net cash provided by (used in) investing
activities (1,926,047) 1,267,551
Increase (decrease) in cash 1,342,061 (169,744)
Cash at beginning of period 483,075 1,803,384
Cash at end of period $ 1,825,136 $ 1,633,640
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 September 30, 1995 and the
related statements of operations for the three and nine
months ended September 30, 1995 and 1994, and cash flows
for the nine months ended September 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 $ 22,293,774 $ 531,265 $ (12,797) $ 22,812,242
States and
municipal 1,115,478 71,502 - 1,186,980
Public utilities 4,949,630 134,191 (16,971)
5,066,850
Industrial and
miscellaneous 78,647,591 1,912,843 (221,749)
80,338,685
Total $107,006,473 $2,649,801 $ (251,517) $109,404,757
</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 September 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 $ 2,987,193 $ 2,997,026
Due after one year through five years 26,477,228 26,819,163
Due after five years through ten years 53,263,046 54,207,479
Due after ten years 24,279,006 25,381,089
$107,006,473 $109,404,757
</TABLE>
First Fortis Life Insurance Company
Notes to Financial Statements (Continued)
Investments (Continued)
Proceeds from sales and maturities of fixed maturity
securities were $101,650,902 and $60,790,653 for the nine
month period ended September 30, 1995 and 1994,
respectively. Gross gains of $2,688,576 and $514,368 and
gross losses of $688,280 and $1,022,198 were realized on
the sales during the nine month period ended September
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 nine months ended
September 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 $5,569,236 $4,692,009 $2,000,296$
(512,313)
Short-term
investments 785 36,455 -
4,483
5,570,021 4,728,464 $2,000,296
(507,830)
Expenses (199,725) (149,250)
Net investment
income $5,370,296 $4,579,214
</TABLE>
Federal Income Taxes
As of September 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.
Subsequent Event
On October 24, 1995, the Company announced that it will
cease selling its group medical products effective
January 1, 1996. The Company will continue to renew and
service existing medical business. Management is in the
process of estimating costs related to this decision.<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
As of and for the Three and the Nine Months Ended
September 30, 1995 and 1994
REVENUES
The decrease in 1995 year to date life insurance premiums
as compared to 1994 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 decreased in 1995 as
compared to 1994. On-going marketing efforts have
continued to increase First Fortis' disability income and
dental premiums, whereas premium rate action on the
Company's small-group medical business has contributed to
a decline of approximately 50% of inforce fully insured
medical lives and an $18 million decrease in annualized
inforce premium since December 31, 1994.
The Company continues to match investment portfolio
composition to liquidity needs and capital requirements.
Changes in interest rates resulted in recognition of
realized gains in 1995.
BENEFITS
During the third quarter 1995, the Company's group life
claims ratio was higher than expected as a result of
increased mortality and larger average claim amounts.
Improved recovery rates on existing group disability
income claimants and premium rate increases resulting in
the reduction of inforce fully insured medical lives have
improved accident and health benefit results from 1994 to
1995.
EXPENSES
First Fortis continues to monitor its insurance
commission rate structures, and, as indicated by market
conditions, periodically adjusts rates paid. Rates paid
vary by product type, group size and duration.
Commission rate decreases were offset by changes in the
mix of inforce business thus increasing the commissions
to premium ratio from 1994 to 1995.
Higher medical claims volume in the first six months of
1995 increased the Company's general and administrative
expense to premium ratio as compared to 1994. Improved
medical and disability income benefit experience in the
third quarter 1995 reduced the associated claims handling
expenses, thus reducing third quarter 1995 general and
administrative expenses as compared to third quarter
1994, first quarter 1995 and second quarter 1995.
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
As of and for the Three and the Nine Months Ended
September 30, 1995 and 1994 (Continued)
Liquidity and Capital Resources
The liquidity requirements of the Company have been met
by funds provided from operations, including investment
income. Funds are principally used to provide for policy
benefits, 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 September 30, 1995, First Fortis'
capital exceeded the minimum recommended risk-based
capital level.
As of September 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.
<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
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: November 13, 1995
/s/ Larry M. Cains
Larry M. Cains, Treasurer
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000914804
<NAME> FIRST FORTIS LIFE INSURANCE COMPANY
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 109,404,757
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 110,104,757
<CASH> 1,825,136
<RECOVER-REINSURE> 9,438,474
<DEFERRED-ACQUISITION> 3,209,000
<TOTAL-ASSETS> 135,632,966
<POLICY-LOSSES> 79,723,441
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 12,715,198
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 2,000,000
0
0
<OTHER-SE> 30,344,855
<TOTAL-LIABILITY-AND-EQUITY> 135,632,966
62,614,088
<INVESTMENT-INCOME> 5,370,296
<INVESTMENT-GAINS> 2,000,296
<OTHER-INCOME> 180,615
<BENEFITS> 54,809,779
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 1,386,000
<INCOME-PRETAX> (362,003)
<INCOME-TAX> (224,973)
<INCOME-CONTINUING> (137,030)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (137,030)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 66,136,369
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
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</TABLE>
