<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 30, 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 0-27394
GE GLOBAL INSURANCE HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 95-3435367
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5200 Metcalf, Overland Park, Kansas 66201
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (913) 676-5200
--------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
AT APRIL 30, 1996, 1,000 SHARES OF COMMON STOCK WITH A PAR VALUE OF $5,000 WERE
OUTSTANDING.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b)
OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE
FORMAT.
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TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements....................................... 1
Item 2. Management's Discussion and Analysis of Results of Operations 5
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 7
Signatures............................................................. 8
Index to Exhibits..................................................... 9
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GE Global Insurance Holding Corporation
and Subsidiaries
Condensed Consolidated Statements of Income and Retained Earnings
(Unaudited)
Three months ended
March 30,1996 April 1, 1995
-------------------------
(In Millions)
REVENUES
Net premiums written $2,089 $1,018
=========================
Net premiums earned $1,236 $ 679
Net investment income 203 139
Net realized gains on investments 86 41
Other revenues 12 7
-------------------------
Total revenues 1,537 866
EXPENSES
Claims, claim expenses and policy benefits 952 502
Acquisition costs 254 141
Other operating costs and expenses 103 54
-------------------------
Total expenses 1,309 697
-------------------------
Income before income taxes, dividends on
subsidiary's preferred stock and minority interest 228 169
Income tax expense 70 34
Dividends on subsidiary's preferred stock 20 23
Minority interest 2 -
-------------------------
Net income 136 112
Dividends on preferred stock (2) -
Retained earnings at beginning of period 2,743 2,337
-------------------------
Retained earnings at end of period $2,877 $2,449
=========================
See notes to condensed, consolidated financial statements.
1
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GE Global Insurance Holding Corporation
and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
March 30, 1996 December 31, 1995
--------------------------------
(In Millions)
ASSETS
Investments:
Fixed maturities available-for-sale, at
fair value $12,770 $12,991
Equity securities available-for-sale, at
fair value 1,903 1,822
Other invested assets 571 581
-------------------------------
Total investments 15,244 15,394
Cash 482 455
Premiums receivable 3,906 3,298
Other receivables 1,394 1,507
Reinsurance recoverables 2,392 2,936
Deferred acquisition costs 704 474
Other assets 1,756 1,549
-------------------------------
Total assets $25,878 $25,613
===============================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Claims and claim expenses $11,175 $11,842
Accumulated contract values 1,798 1,809
Future policy benefits for life and
health contracts 722 719
Unearned premiums 2,515 1,328
Other reinsurance balances 1,745 1,901
Other liabilities 1,990 2,012
Short-term debt - 600
Long-term debt 555 -
-------------------------------
Total liabilities 20,500 20,211
Preferred stock of subsidiary 1,167 1,167
Minority interest 41 44
Stockholder's equity:
Common stock, $5,000 par value; authorized,
issued and outstanding - 1,000 shares 5 5
Preferred stock, $100,000 par value; authorized,
issued and outstanding - 1,500 shares 150 150
Paid-in capital 845 845
Unrealized appreciation of investments 288 436
Currency translation adjustments 5 12
Retained earnings 2,877 2,743
-------------------------------
Total stockholder's equity 4,170 4,191
-------------------------------
Total liabilities and stockholder's equity $25,878 $25,613
===============================
See notes to condensed, consolidated financial statements.
2
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GE Global Insurance Holding Corporation
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
March 30,1996 April 1, 1995
-------------------------
(In Millions)
Net cash provided from operating activities $178 $409
Cash flows from investing activities:
Fixed maturities available-for-sale:
Purchases (1,579) (1,173)
Sales 1,340 939
Maturities 129 143
Equity securities available-for-sale:
Purchases (330) (184)
Sales 334 134
Net (purchases) sales of short-term investments 5 (220)
Other investing activities (8) (17)
----------------------------
Net cash used in investing activities (109) (378)
Cash flows from financing activities:
Dividends paid (2) -
Change in contract deposits (31) 11
Net contract accumulation receipts/(payments) 9 (120)
Principal payments on short-term debt (600) -
Proceeds from long-term debt 555 -
----------------------------
Net cash used in financing activities (69) (109)
Effect of exchange rate changes on cash 27 101
----------------------------
Change in cash 27 23
Cash, beginning of period 455 341
----------------------------
Cash, end of period $482 $364
============================
See notes to condensed, consolidated financial statements.
3
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GE Global Insurance Holding Corporation
and Subsidiaries
Notes to Condensed, Consolidated Financial Statements
(Unaudited)
1. The condensed, consolidated financial statements represent a consolidation
of GE Global Insurance Holding Corporation ("GE Global") and its wholly
owned subsidiary, Employers Reinsurance Corporation and its consolidated
subsidiaries. All significant intercompany transactions have been
eliminated. In the opinion of management, all adjustments of a normal
recurring nature necessary to present a fair statement of financial
position as of March 30, 1996, and the results of operations and cash flows
for the three-month interim periods ended March 30, 1996, and April 1,
1995, have been included. The condensed, consolidated financial statements
have been prepared in accordance with the instructions for Form 10-Q and
therefore do not include some information and notes necessary to constitute
a complete and detailed presentation in conformity with annual reporting
requirements.
2. The results of operations for the three months ended March 30, 1996, should
not be regarded as necessarily indicative of the results that may be
expected for the entire year.
3. A newly issued accounting standard was adopted in the first quarter of 1996
with no significant effect on the financial position or results of
operations of the Corporation.
Statement of Financial Accounting Standards (SFAS) No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF, requires that certain long-lived assets be reviewed for
impairment when events or circumstances indicate that the carrying amounts
of the assets may not be recoverable. If such review indicates that the
carrying amount of an asset exceeds the sum of its expected future cash
flows, the asset's carrying value is written down to fair value. Long-lived
assets to be disposed of are reported at the lower of carrying amount or
fair value less cost to sell.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first quarter of 1996 were $136 million, a $24 million
increase from the first quarter of 1995. The increase was primarily driven by
increased premium and investment income resulting from the 1995 acquisitions of
over 93% of Frankona Ruckversicherungs-Aktien-Gesellschaft and certain assets
representing a majority of the reinsurance business of Aachener
Ruckversicherungs-Gesellschaft Aktiengesellschaft (the "Acquired Businesses").
Other factors affecting net earnings were increased net realized gains
(excluding the Acquired Businesses), which were principally offset by an
increase in claims, claim expenses and policy benefits associated with the
strengthening of loss reserves.
The significant increase in 1996 first quarter net premiums written is not
proportional to the increase in net premiums earned because a large proportion
of the direct policies reinsured by the Acquired Businesses renew on January 1
of each year and will be earned ratably over the calendar year. This causes a
significant increase in net written premiums for the first quarter of 1996 and
this trend will continue in the future.
OPERATING RESULTS
NET PREMIUMS WRITTEN increased $1,071 million for the first quarter of
1996, including $1,113 million from the Acquired Businesses. The offsetting $42
million decrease is due primarily to a decrease in domestic net premiums written
associated with a general decrease in reinsurance rates.
NET PREMIUMS EARNED increased $557 million over the first quarter of the
prior year, primarily due to $529 million from the Acquired Businesses. The
remaining $28 million increase in net premiums earned is principally attributed
to growth in the other international operations.
NET INVESTMENT INCOME increased $64 million for the first quarter of 1996,
principally due to $59 million from the Acquired Businesses. The remaining $5
million increase in net investment income is primarily caused by the growth in
the investment portfolio which has been partially offset by transferring assets
from fixed income portfolios to equity portfolios.
NET REALIZED GAINS ON INVESTMENTS increased $45 million over the first
quarter of the prior year, which includes $13 million from the Acquired
Businesses. The remaining $32 million increase in net realized investment gains
is principally attributed to capitalizing on favorable global market conditions
that existed in the first quarter of 1996 and utilization of realized gains to
achieve a total return on the equity portfolios.
CLAIMS, CLAIM EXPENSES AND POLICY BENEFITS increased $450 million for the
first quarter of 1996, including $391 million from the Acquired Businesses. The
remaining $59 million increase in claims, claim expenses and policy benefits is
consistent with the increase in net premiums earned and is also due to
strengthening loss reserves principally associated with long-term disability
business.
ACQUISITION COSTS increased $113 million over the first quarter of the
prior year, primarily due to $108 million related to the Acquired Businesses.
The remaining $5 million increase is consistent with the increase in net
premiums earned associated with international operations.
OTHER OPERATING COSTS AND EXPENSES increased $49 million for the first
quarter of 1996, including $41 million related to the Acquired Businesses. The
remaining $8 million increase in such costs and expenses reflects an increase in
underwriting and marketing sales force staffing, and related marketing expenses.
INCOME TAX EXPENSE increased $36 million over the first quarter of the
prior year, including $28 million related to the Acquired Businesses. The
remaining $8 million increase in income tax expense is principally due to the
increase in net realized investment gains.
5
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Listing of Exhibits.
12 Computation of ratio of earnings to fixed charges
27 Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K.
None.
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GE GLOBAL INSURANCE HOLDING CORPORATION
Date: May 14, 1996 By: /s/ JAMES DORE
--------------------
James Dore
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
8
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Exhibit 12
GE Global Insurance Holding Corporation
and Subsidiaries
Ratio of Earnings to Fixed Charges
Three months ended
March 30, 1996
----------------
(In Millions)
Earnings:
Income before income taxes $228
Add: Fixed charges (1) 10
----------------
$238
================
Fixed charges:
Dividends on subsidiary's preferred stock (2) $29
Interest expense 10
----------------
$39
================
Ratio of earnings to fixed charges 6.12
================
(1) The fixed charges adjustment to income before income taxes excludes the
dividends on subsidiary's preferred stock as this amount was not deducted
in the determination of income before income taxes.
(2) The fixed charges amount for dividends on subsidiary's preferred stock
represents the pretax earnings amount which would be required to cover such
fixed charges as calculated below:
Subsidiary's Preferred Stock Dividend Requirement
-------------------------------------------------
100% - Income Tax Rate
The income tax rate is based on the relationship of the provision for income tax
expense to income before income taxes for the respective period.
6
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-30-1996
<DEBT-HELD-FOR-SALE> 12,770
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1,903
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 15,244
<CASH> 482
<RECOVER-REINSURE> 2,392
<DEFERRED-ACQUISITION> 704
<TOTAL-ASSETS> 25,878
<POLICY-LOSSES> 13,695
<UNEARNED-PREMIUMS> 2,515
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 1,745
<NOTES-PAYABLE> 555
0
150
<COMMON> 5
<OTHER-SE> 4,015
<TOTAL-LIABILITY-AND-EQUITY> 25,878
1,236
<INVESTMENT-INCOME> 203
<INVESTMENT-GAINS> 86
<OTHER-INCOME> 12
<BENEFITS> 952
<UNDERWRITING-AMORTIZATION> 254
<UNDERWRITING-OTHER> 103
<INCOME-PRETAX> 228
<INCOME-TAX> 70
<INCOME-CONTINUING> 136
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