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.
[ X ] For the quarterly period ended: March 31, 1996
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>
March, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Investments:
Fixed maturities, at fair value (amortized cost
1996--$117,690,182; 1995--$106,648,745) $118,374,746
$112,183,452
Preferred stock at fair value (cost--$92,029) -- 89,345
Short-term investments 3,350,000
6,850,000
121,724,746 119,122,797
Cash 2,543,124 1,145,131
Receivables:
Uncollected premiums, less allowance of $100,000 4,875,593
4,440,446
Reinsurance recoverable on unpaid and paid losses 9,537,704
9,335,947
Prepaid federal income taxes and other 2,822,379
2,255,199
17,235,676 16,031,592
Accrued investment income 2,115,882
1,814,291
Property and equipment at cost, less accumulated
depreciation (1996-$1,371,295; 1995-$1,249,280) 1,121,649
1,199,482
Goodwill 588,500
600,000
Total Assets $145,329,577
$139,913,293
Reserves, liabilities, and shareholder's equity
Policy reserves and liabilities:
Future policy benefit reserves:
Life insurance $ 23,281,262 $
22,529,817
Accident and health 60,823,562
59,442,638
84,104,824 81,972,455
Other policy claims and benefits payable 14,712,987
13,561,740
Other liabilities 11,920,451
5,988,794
Total policy reserves and liabilities 110,738,262
101,522,989
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 37,440,000
37,440,000
Retained deficit (5,300,497)
(4,700,825)
Unrealized appreciation of
investment securities, net 451,812
3,651,129
Total shareholder's equity 34,591,315
38,390,304
Total reserves, liabilities, and shareholder's equity $145,329,577
$139,913,293
See notes to financial statements.
<PAGE>
First Fortis Life Insurance Company
Statements of Operations
(Unaudited)
Three months ended
March 31,
1996 1995
<S> <C> <C>
Revenues
Insurance operations:
Life insurance premiums $ 6,276,948 $ 4,457,889
Accident and health premiums 14,099,190 18,415,634
Net investment income 1,951,022 1,795,068
Realized gains (losses) on investments 148,104
(218,492)
Other income 105,751 26,720
Total revenues 22,581,015 24,476,819
Benefits and expenses
Benefits to policyholders:
Life insurance 6,019,779 2,256,537
Accident and health 12,576,075 17,167,591
Amortization of deferred policy acquisition
costs --
462,000
Insurance commissions 1,379,939 1,394,776
General and administrative expenses 3,499,546 3,526,285
Total benefits and expenses 23,475,339 24,807,189
Loss before federal income taxes (benefit) (894,324)
(330,370)
Federal income taxes (benefit) (294,652) (110,051)
Net loss $ (599,672) $ (220,319)
See notes to financial statements.<PAGE>
First Fortis Life Insurance Company
Statements of Cash Flows
(Unaudited)
Three months ended
March 31,
1996 1995
<S> <C> <C>
Operating activities
Net loss $ (599,672) $ (220,319)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Increase in future policy
benefit reserves and other policy
claims and benefits 3,283,616 206,938
(Increase) decrease in income taxes 1,336,032 (110,031)
Amortization of policy acquisition
costs --
462,000
Increase in other liabilities 5,931,657 3,118,816
Depreciation, amortization and accretion 209,950 165,585
(Increase) decrease in uncollected premiums,
accrued investment income and other (991,817)
1,355,793
(Increase) decrease in reinsurance recoverable (201,757) 134,309
Net realized (gains) losses on
investments (148,104) 218,492
Net cash provided by operating activities 8,819,905 5,331,583
Investing activities
Purchases of fixed maturity investments (41,227,677) (15,647,767)
Sales and maturities of fixed maturity
investments 30,257,918 11,950,767
(Increase) decrease in equity securities and
short-term investments 3,592,029 (400,000)
Purchase of property and equipment (44,182) (375,430)
Net cash used in investing activities (7,421,912)
(4,472,430)
Increase in cash 1,397,993 859,153
Cash at beginning of period 1,145,131 483,075
Cash at end of period $ 2,543,124 $ 1,342,228
See notes to financial statements.
</TABLE> <PAGE>
First Fortis Life Insurance Company
Notes to Financial Statements
March 31, 1996 and 1995
(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 March 31, 1996
and the related statements of operations for the three
months ended March 31, 1996 and 1995, and cash flows
for the three months ended March 31, 1996 and 1995.
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
March 31, 1996
Governments $ 27,367,034 $ 23,989 $ (342,184) $ 27,048,839
Public utilities 6,073,723 85,908 (47,982)
6,111,649
Industrial and
miscellaneous 84,249,425 1,521,882 (557,049)
85,214,258
Total $117,690,182 $1,631,779 $ (947,215) $118,374,746
</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 March 31, 1996, 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 $ 2,597,164 $ 2,610,710
Due after one year through five years 28,317,724 28,500,157
Due after five years through ten years 58,985,427 59,401,378
Due after ten years 27,789,867 27,862,501
$117,690,182 $118,374,746
</TABLE>
First Fortis Life Insurance Company
Notes to Financial Statements (Continued)
Investments (Continued)
Proceeds from sales and maturities of fixed maturity
securities were $30,257,918 and $11,950,767 for the
three month period ended March 31, 1996 and 1995,
respectively. Gross gains of $583,959 and $89,092 and
gross losses of $435,855 and $307,584 were realized on
the sales during the three month period ended March 31,
1996 and 1995.
Net Investment Income and Net Realized Gains (Losses)
on Investments
Major categories of net investment income and realized
gains (losses) on investments for the three months
ended March 31 were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Net Net Realized
Investment Gains (Losses)
Income on Investments
1996 1995 1996 1995
Fixed maturities $1,951,201 $1,856,398 $ 148,104$
(218,492)
Short-term
investments 71,905 702 -
-
2,023,106 1,857,100 $ 148,104 $
(218,492)
Expenses (72,084) (62,032)
Net investment
income $1,951,022 $1,795,068
</TABLE>
Federal Income Taxes
As of March 31, 1996 and December 31, 1995,
respectively, the Company had a deferred tax asset
valuation allowance of $1,337,823.
Subsequent Event
On May 2, 1996, the Company received verbal approval
from the New York State Insurance Department of a
reinsurance agreement with Fortis Benefits Insurance
Company, an affiliate. The agreement, which will be
effective as of January 1, 1996, will decrease the
Company's long term disability reinsurance retention
from a $10,000 net monthly benefit to a $2,000 net
monthly benefit. The agreement is expected to reduce
the variability of financial results for this product
line. The effect on the Company's first quarter 1996
financial statements is being computed and will be
disclosed in the second quarter 1996.<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
As of and for the Three Months Ended March 31, 1996 and
1995.
REVENUES
Total premium decreased in 1996 as compared to 1995.
On-going marketing efforts have continued to increase
the Company's group life, group disability income, and
group dental premiums, whereas the decision announced
in 1995 to cease writing new medical business and
premium rate action on the Company's small-group
medical business have contributed to a decline of
approximately 63% of inforce small group medical fully
insured medical lives and a $28 million decrease in
annualized inforce small group medical premium since
January 1, 1995.
The Company continues to match investment portfolio
composition to liquidity needs and capital
requirements. Changes in interest rates during 1996 and
1995 resulted in recognition of realized gains and
losses.
BENEFITS
During the first quarter 1996, the Company's group life
claims ratio was higher than expected as a result of
increased mortality and larger average claim amounts.
During 1995, the corresponding mortality rate was lower
than expected. Improved recovery rates on existing
group disability income claimants and the actions taken
by the Company on its medical business which resulted
in the reduction of inforce fully insured medical lives
have improved accident and health benefit results from
1995 to 1996.
EXPENSES
The Company continues to monitor its 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 on medical products have been offset by
changes in the mix of inforce business thus resulting
in the increase in the commissions to premium ratio
from 1995 to 1996.
The decrease in medical premium from 1995 to 1996 has
resulted in an increase in the Company's ratio of
general and administrative expenses to premium. During
the first quarter 1996, the Company paid $108,000 of
medical business related employee termination benefits,
which had been accrued for in 1995.<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations As of and for the
Three Months Ended March 31, 1996 and 1995 (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 funds which will be
sufficient for these needs.
The National Association of Insurance Commissioners'
risk-based capital formula helps to establish
guidelines for capital levels. At March 31, 1996, the
Company's capital exceeded the minimum recommended
risk-based capital level.
As of March 31, 1996, 98.3% of the Company's fixed
maturity securities consisted of investment grade
bonds.
Regulation
The Company 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 the
Company's 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: May 13, 1996
/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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 118,374,746
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 121,724,746
<CASH> 2,543,124
<RECOVER-REINSURE> 9,537,704
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 145,329,577
<POLICY-LOSSES> 84,104,824
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 14,712,987
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 2,000,000
0
0
<OTHER-SE> 32,591,315
<TOTAL-LIABILITY-AND-EQUITY> 145,329,577
20,376,138
<INVESTMENT-INCOME> 1,951,022
<INVESTMENT-GAINS> 148,104
<OTHER-INCOME> 105,751
<BENEFITS> 18,595,854
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> (894,324)
<INCOME-TAX> (294,652)
<INCOME-CONTINUING> (599,672)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (599,672)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 65,764,070
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
