<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
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Commission file number 0-27394
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GE Global Insurance Holding Corporation
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(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 No.)
5200 Metcalf, Overland Park, Kansas 66201
(Address of principal executive offices) (Zip Code)
(913) 676-5200
(Registrant's telephone number, including area code)
--------------------------
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, 1997, 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...............................7
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K................................................8
Signatures. ................................................................................9
Index to Exhibits. ................................................................................10
</TABLE>
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<TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
GE GLOBAL INSURANCE HOLDING CORPORATION
AND SUBSIDIARIES
Condensed, Consolidated Statement of Current and Retained Earnings
(Unaudited)
Three months ended
-------------------------------------------
(In millions) March 29, 1997 March 30, 1996
------------------ -----------------
<S> <C> <C>
Revenues
Net premiums earned $1,344 $1,236
Net investment income 224 203
Net realized gains on investments 88 86
Other revenues 13 12
------ ------
Total revenues 1,669 1,537
------ ------
Costs and Expenses
Claims, claim expenses and policy benefits 1,055 952
Insurance acquisition costs 248 254
Other operating costs and expenses 119 103
Minority interest in net earnings of consolidated subsidiaries 21 22
------ ------
Total costs and expenses 1,443 1,331
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Earnings before income taxes 226 206
Provision for income taxes 68 70
------ ------
Net earnings 158 136
Dividends on preferred stock (2) (2)
Retained earnings at beginning of period 3,245 2,743
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Retained earnings at end of period $3,401 $2,877
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</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
1
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<TABLE>
<CAPTION>
Item 1. Financial Statements (Continued).
GE GLOBAL INSURANCE HOLDING CORPORATION
AND SUBSIDIARIES
Condensed, Consolidated Statement of Financial Position
(In millions) March 29, 1997 December 31, 1996
-------------- -----------------
(Unaudited)
<S> <C> <C>
Assets
Investments:
Fixed maturity securities available-for-sale, at fair value $13,466 $13,572
Equity securities, at fair value 2,299 2,303
Other invested assets 965 604
------- -------
Total investments 16,730 16,479
Cash 123 377
Premiums receivable 2,314 2,645
Other receivables 1,232 1,220
Reinsurance recoverables 2,432 2,358
Deferred insurance acquisition costs 617 495
Other assets 1,902 1,814
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Total assets $25,350 $25,388
======= =======
Liabilities and equity
Claims and claim expenses $11,132 $10,869
Accumulated contract values 1,565 1,643
Future policy benefits for life and health contracts 1,327 831
Unearned premiums 1,229 1,170
Other reinsurance balances 1,142 1,836
Other liabilities 2,503 2,517
Long-term borrowings 557 556
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Total liabilities 19,455 19,422
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Minority interest in equity of consolidated subsidiaries 1,185 1,206
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Common stock 5 5
Preferred stock 150 150
Paid-in capital 845 845
Unrealized gains on investment securities 357 500
Foreign currency translation adjustments (48) 15
Retained earnings 3,401 3,245
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Total stockholder's equity 4,710 4,760
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Total liabilities and equity $25,350 $25,388
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</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
2
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<TABLE>
<CAPTION>
Item 1. Financial Statements (Continued).
GE GLOBAL INSURANCE HOLDING CORPORATION
AND SUBSIDIARIES
Condensed, Consolidated Statement of Cash Flows
(Unaudited)
Three months ended
--------------------------------------------
(In millions) March 29, 1997 March 30, 1996
------------------ ------------------
<S> <C> <C>
Cash from operating activities $ 203 $ 178
------ ------
Cash Flows From Investing Activities
Fixed maturity securities available-for-sale:
Purchases (1,361) (1,579)
Sales 1,135 1,340
Maturities 182 129
Equity securities:
Purchases (298) (330)
Sales 286 334
Net (purchases) sales of short-term investments (345) 5
Other investing activities (21) (8)
------ -------
Cash used for investing activities (422) (109)
------ -------
Cash Flows From Financing Activities
Change in contract deposits 41 (31)
Net contract accumulation receipts (payments) (9) 9
Principal payments on short-term borrowings - (600)
Proceeds from long-term borrowings - 555
Dividends paid (2) (2)
------ -------
Cash from (used for) financing activities 30 (69)
------ -------
Effect of exchange rate changes on cash (65) 27
------ ------
Increase (decrease) in cash (254) 27
Cash at beginning of period 377 455
------ ------
Cash at end of period $ 123 $ 482
====== ======
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
3
<PAGE>
Item 1. Financial Statements (Continued).
GE GLOBAL INSURANCE HOLDING CORPORATION
AND SUBSIDIARIES
Notes to Condensed, Consolidated Financial Statements
(Unaudited)
1. The accompanying condensed, consolidated quarterly financial statements
represent the adding together of GE Global Insurance Holding
Corporation and its wholly-owned subsidiary, Employers Reinsurance
Corporation and its consolidated subsidiaries (collectively called "the
Corporation"). All significant intercompany transactions have been
eliminated. Certain prior period data have been reclassified to conform
to the current presentation.
2. The condensed, consolidated quarterly financial statements are
unaudited. These statements include all adjustments (consisting of
normal recurring accruals) considered necessary by management to
present a fair statement of the results of operations, financial
position and cash flows. The results reported in these condensed,
consolidated quarterly financial statements should not be regarded as
necessarily indicative of results that may be expected for the entire
year.
3. The Corporation has adopted Statement of Financial Accounting Standards
(SFAS) No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. Among other things, the new
statement distinguishes transfers of financial assets that are sales
from transfers that are secured borrowings, based on the control of the
transferred assets. SFAS No. 125 is effective for all transfers of
financial assets occurring after December 31, 1996. The adoption of
this statement did not have an effect on the financial position or
results of operations of the Corporation.
4
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Item 2. Management's Discussion and Analysis of Results of Operations.
Overview
Net earnings for the first three months of 1997 were $158 million, a $22 million
increase over the first three months of 1996. The increase was primarily the
result of increased investment income related to the continued growth of the
investment portfolios.
The Company's two primary business segments are property and casualty
insurance/reinsurance and life reinsurance. Business is conducted throughout the
world utilizing the Company's network of local offices.
Property and casualty insurance/reinsurance (P&C) is the largest of the two
business segments. Typically, the underwriting performance of P&C business is
measured in terms of a combined ratio and earnings before income taxes. The
combined ratio (calculated in accordance with generally accepted accounting
principles) is the sum of the loss ratio and the underwriting expense ratio. For
the first three months of 1997, the P&C combined ratio was 102.9% compared to
103.3% for the same period in 1996. The primary reason for the improvement in
the 1997 combined ratio was a general decrease in domestic incurred losses,
caused by a decline in both frequency and severity of claims. Earnings before
income taxes from P&C operations increased $29 million in the first three months
of 1997, primarily due to an increase in net investment income caused by
continued growth in the P&C investment portfolios, an increase in net realized
gains on investments and the improvement in the combined ratio.
The life reinsurance segment typically measures performance based on revenues
and earnings before income taxes. Revenues include life insurance premiums, net
investment income, net realized gains on investments and income from certain
investment-related products. For the first three months of 1997, the life
operations generated revenues and earnings before income taxes of $429 million
and $24 million, respectively, compared to $211 million and $33 million,
respectively, for the same period in 1996. The $218 million increase in revenues
primarily reflects two significant quota share reinsurance contracts obtained in
1997. The primary reasons for the $9 million decrease in earnings before income
taxes are a decrease in net realized gains on investments and an increase in
other operating costs and expenses, partially offset by an increase in net
investment income. The increase in net investment income was principally caused
by the continued growth in the life reinsurance investment portfolios.
Operating Results
Net premiums earned increased $108 million or 9% over the first three months of
1996, primarily attributable to a significant increase in domestic life net
premiums earned offset partially by a decrease in domestic and international
property and casualty net premiums earned. The significant increase in domestic
life net premiums earned principally reflects two significant quota share
reinsurance contracts obtained in 1997.
Net investment income increased $21 million or 10% over the first three months
of 1996, with most of the increase attributable to the continued growth in the
investment portfolios.
Claims, claim expenses and policy benefits increased $103 million or 11% over
the first three months of 1996, primarily related to the corresponding increase
in net premiums earned.
5
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Item 2. Management's Discussion and Analysis of Results of Operations (Cont'd).
Insurance acquisition costs decreased $6 million or 2% over the first three
months of 1996, compared to a 9% increase in net premiums earned. The decrease
in insurance acquisition costs compared to the increase in net premiums earned
was primarily due to the growth in longer duration life reinsurance business and
the resulting amortization of insurance acquisition costs over a longer average
time period.
Other operating costs and expenses increased $16 million or 16% over the first
three months of 1996. The increase primarily reflected costs associated with the
integration and financing of businesses acquired in recent years.
Provision for income taxes was $68 million for the first three months of 1997
(an effective tax rate of 30.1%), compared to $70 million for the first three
months of 1996 (an effective tax rate of 34.0%). The decrease in the 1997
effective tax rate as compared to 1996 resulted primarily from a change in the
relative levels of life reinsurance business recorded in such periods.
6
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 12. Computation of ratio of earnings to fixed charges
Exhibit 27. Financial Data Schedule (filed electronically only)
b. Reports on Form 8-K.
None.
8
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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
---------------------------------------
(Registrant)
Date: May 13, 1997 By: /s/ JAMES DORE
-----------------------------------------
James Dore,
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
9
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GE GLOBAL INSURANCE HOLDING CORPORATION
AND SUBSIDIARIES
Index to Exhibits
Exhibit No. Page
----------- ----
12 Computation of ratio of earnings to fixed charges..........7
27 Financial Data Schedule (filed electronically only)
10
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EXHIBIT 12
GE GLOBAL INSURANCE HOLDING CORPORATION
AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
Three months ended March 29, 1997
(Unaudited)
(In millions)
Earnings:
Earnings before income taxes $226
Fixed charges:
Minority interest in net earnings of
consolidated subsidiaries (1) 21
Interest expense 12
----
$259
====
Fixed charges:
Minority interest in net earnings of
consolidated subsidiaries (2) $ 30
Interest expense 12
----
$ 42
====
Ratio of earnings to fixed charges 6.17
====
(1) Minority interest in net earnings of consolidated subsidiaries includes
dividends on subsidiary's preferred stock.
(2) The fixed charges amount for minority interest in net earnings of
consolidated subsidiaries 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 taxes to earnings before income taxes for the respective period.
7
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-29-1997
<DEBT-HELD-FOR-SALE> 13,466
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 2,299
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 16,730
<CASH> 123
<RECOVER-REINSURE> 2,432
<DEFERRED-ACQUISITION> 617
<TOTAL-ASSETS> 25,350
<POLICY-LOSSES> 14,024
<UNEARNED-PREMIUMS> 1,229
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 1,142
<NOTES-PAYABLE> 557
0
150
<COMMON> 5
<OTHER-SE> 4,555
<TOTAL-LIABILITY-AND-EQUITY> 25,350
1,344
<INVESTMENT-INCOME> 224
<INVESTMENT-GAINS> 88
<OTHER-INCOME> 13
<BENEFITS> 1,055
<UNDERWRITING-AMORTIZATION> 248
<UNDERWRITING-OTHER> 119
<INCOME-PRETAX> 226
<INCOME-TAX> 68
<INCOME-CONTINUING> 158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
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