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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 10-Q
 
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    
 
SECURITIES EXCHANGE ACT OF 1934
 
    
 
For the quarterly period ended September 28, 2002
 
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 0-23375
 
 
GE Financial Assurance Holdings, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
  
54-1829180
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
6604 West Broad Street, Richmond, Virginia
  
23230
(Address of principal executive offices)
  
(Zip Code)
 
(804) 281-6000
(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  þ  No  ¨
 
At October 29, 2002 1,000 shares of common stock with a par value of $1.00 were outstanding. The common stock of GE Financial Assurance Holdings, Inc. is not publicly traded.
 
 
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.
 
 

Table of Contents
 
TABLE OF CONTENTS
 
         
Page
PART I—FINANCIAL INFORMATION.
     
Item 1.
      
1
Item 2.
      
8
Item 4.
      
12
PART II—OTHER INFORMATION.
     
Item 1.
      
13
Item 6.
      
13
  
14
  
15

Table of Contents
 
PART I—FINANCIAL INFORMATION
 
Item 1.     Financial Statements.
 
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
 
CONDENSED, CONSOLIDATED STATEMENTS OF CURRENT AND RETAINED EARNINGS
(Dollar amounts in millions)
(Unaudited)
 
    
Three Months Ended
     
Nine Months Ended
  
    
Sept 28, 2002
     
Sept 29, 2001
     
Sept 28, 2002
     
Sept 29, 2001
  
Revenues:
                                    
Premiums
   
$
1,733
 
   
$
1,587
 
   
$
4,907
 
   
$
4,817
 
Net investment income
   
 
1,053
 
   
 
1,049
 
   
 
3,201
 
   
 
3,101
 
Surrender fee income
   
 
43
 
   
 
88
 
   
 
145
 
   
 
286
 
Net realized investment gains
   
 
143
 
   
 
70
 
   
 
123
 
   
 
323
 
Policy fees and other income
   
 
184
 
   
 
203
 
   
 
580
 
   
 
644
 
    
  
  
  
Total revenues
   
 
3,156
 
   
 
2,997
 
   
 
8,956
 
   
 
9,171
 
    
  
  
  
Benefits and expenses:
                                    
Benefits and other changes in policy reserves
   
 
1,521
 
   
 
1,396
 
   
 
4,327
 
   
 
4,251
 
General expenses
   
 
778
 
   
 
745
 
   
 
2,202
 
   
 
2,278
 
Interest credited
   
 
436
 
   
 
433
 
   
 
1,286
 
   
 
1,244
 
Amortization of intangibles
   
 
81
 
   
 
144
 
   
 
263
 
   
 
398
 
Change in deferred acquisition costs, net
   
 
(204
)
   
 
(241
)
   
 
(592
)
   
 
(642
)
Interest expense
   
 
37
 
   
 
41
 
   
 
104
 
   
 
119
 
    
  
  
  
Total benefits and expenses
   
 
2,649
 
   
 
2,518
 
   
 
7,590
 
   
 
7,648
 
    
  
  
  
Earnings before income taxes, minority interest and cumulative effect of change in accounting principle
   
 
507
 
   
 
479
 
   
 
1,366
 
   
 
1,523
 
Provision for income taxes
   
 
47
 
   
 
161
 
   
 
300
 
   
 
515
 
    
  
  
  
Earnings before minority interest and cumulative effect of change in accounting principle
   
 
460
 
   
 
318
 
   
 
1,066
 
   
 
1,008
 
Minority interest
   
 
—  
 
   
 
1
 
   
 
3
 
   
 
4
 
    
  
  
  
Earnings before cumulative effect of change in accounting principle
   
 
460
 
   
 
317
 
   
 
1,063
 
   
 
1,004
 
Cumulative effect of change in accounting principle, net of tax
   
 
—  
 
   
 
—  
 
   
 
(380
)
   
 
(15
)
    
  
  
  
Net earnings
   
 
460
 
   
 
317
 
   
 
683
 
   
 
989
 
Retained earnings at beginning of period
   
 
6,518
 
   
 
5,692
 
   
 
6,295
 
   
 
5,020
 
    
  
  
  
Retained earnings at end of period
   
$
6,978
 
   
$
6,009
 
   
$
6,978
 
   
$
6,009
 
    
  
  
  
 
See Notes to Condensed, Consolidated Financial Statements.

1

Table of Contents
 
Item 1.    Financial Statements (Continued).
 
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
 
CONDENSED, CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollar amounts in millions)
 
    
September 28,
2002
     
December 31,
2001
  
    
(Unaudited)
         
ASSETS
                  
Investments:
                  
Fixed maturities available-for-sale, at fair value
   
$
72,889
 
   
$
60,968
 
Equity securities available-for-sale, at fair value
   
 
955
 
   
 
1,078
 
Mortgage and other loans, net of valuation allowance
   
 
6,962
 
   
 
6,055
 
Policy loans
   
 
1,402
 
   
 
1,151
 
Short-term investments
   
 
181
 
   
 
389
 
Other invested assets
   
 
1,466
 
   
 
1,345
 
    
  
Total investments
   
 
83,855
 
   
 
70,986
 
Cash and cash equivalents
   
 
3,052
 
   
 
1,741
 
Accrued investment income
   
 
1,502
 
   
 
1,384
 
Deferred acquisition costs
   
 
4,616
 
   
 
4,265
 
Goodwill
   
 
2,326
 
   
 
2,421
 
Intangible assets
   
 
2,304
 
   
 
2,410
 
Reinsurance recoverable
   
 
2,226
 
   
 
1,950
 
Other assets
   
 
2,309
 
   
 
2,609
 
Separate account assets
   
 
7,277
 
   
 
9,172
 
    
  
Total assets
   
$
109,467
 
   
$
96,938
 
    
  
LIABILITIES AND SHAREHOLDER’S INTEREST
                  
Liabilities:
                  
Future annuity and contract benefits
   
$
72,273
 
   
$
62,247
 
Liability for policy and contract claims
   
 
2,955
 
   
 
2,887
 
Other policyholder liabilities
   
 
1,526
 
   
 
1,144
 
Other liabilities
   
 
6,760
 
   
 
5,539
 
Short-term borrowings
   
 
2,050
 
   
 
1,798
 
Separate account liabilities
   
 
7,277
 
   
 
9,172
 
Long-term debt
   
 
1,171
 
   
 
1,143
 
    
  
Total liabilities
   
 
94,012
 
   
 
83,930
 
    
  
Minority interest in and equity of consolidated subsidiaries
   
 
340
 
   
 
253
 
Shareholder’s interest:
                  
Net unrealized investment gains (losses)
   
 
1,296
 
   
 
(297
)
Derivatives qualifying as hedges
   
 
(91
)
   
 
(168
)
Foreign currency translation adjustments
   
 
(21
)
   
 
(28
)
    
  
Accumulated non-owner changes in equity
   
 
1,184
 
   
 
(493
)
Common stock
   
 
—  
 
   
 
—  
 
Additional paid-in capital
   
 
6,953
 
   
 
6,953
 
Retained earnings
   
 
6,978
 
   
 
6,295
 
    
  
Total shareholder’s interest
   
 
15,115
 
   
 
12,755
 
    
  
Total liabilities and shareholder’s interest
   
$
109,467
 
   
$
96,938
 
    
  
 
See Notes to Condensed, Consolidated Financial Statements.

2

Table of Contents
 
Item 1.    Financial Statements (Continued).
 
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
 
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in millions)
(Unaudited)
 
    
Nine Months Ended
  
    
September 28,
2002
     
September 29,
2001
  
Cash Flows From Operating Activities
                  
Net earnings
   
$
683
 
   
$
989
 
Adjustments to reconcile net earnings to net cash provided by operating activities:
                  
Change in reserves
   
 
1,927
 
   
 
2,755
 
Cumulative effect of change in accounting principle, net of tax