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 June 30, 2003
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 (State or other jurisdiction of incorporation or organization) |
54-1829180 (I.R.S. Employer Identification No.) | |
| 6604 West Broad Street, Richmond, Virginia (Address of principal executive offices) |
23230 (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 x No ¨
Indicate by check mark whether the registrant is an accelerated filed (as defined in Rule 12b-2 of the Act). Yes ¨ No x
At August 1, 2003, 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.
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| Management’s Discussion and Analysis of Results of Operations and Financial Condition |
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PART 1 – FINANCIAL INFORMATION
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed, Consolidated Statements of Current and Retained Earnings
(Dollar amounts in millions)
(Unaudited)
| Three Months Ended |
Six Months Ended |
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June 30, 2003 |
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June 30, 2002 |
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June 30, 2003 |
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June 30, 2002 |
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| Revenues: |
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| Premiums |
$ | 1,768 | $ | 1,618 | $ | 3,512 | $ | 3,174 | ||||||||
| Net investment income |
1,180 | 1,088 | 2,266 | 2,140 | ||||||||||||
| Net realized investment gains (losses) |
(45 | ) | (211 | ) | 1 | (57 | ) | |||||||||
| Other income |
218 | 234 | 449 | 498 | ||||||||||||
| Total revenues |
3,121 | 2,729 | 6,228 | 5,755 | ||||||||||||
| Benefits and expenses: |
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| Benefits and other changes in policy reserves |
1,528 | 1,383 | 3,144 | 2,761 | ||||||||||||
| General expenses |
701 | 731 | 1,411 | 1,473 | ||||||||||||
| Interest credited |
429 | 429 | 859 | 850 | ||||||||||||
| Amortization of intangibles |
78 | 64 | 162 | 133 | ||||||||||||
| Change in deferred acquisition costs, net |
(168 | ) | (208 | ) | (359 | ) | (388 | ) | ||||||||
| Interest expense |
31 | 37 | 63 | 67 | ||||||||||||
| Total benefits and expenses |
2,599 | 2,436 | 5,280 | 4,896 | ||||||||||||
| Earnings before income taxes, minority interest and cumulative effect of change in accounting principle |
522 | 293 | 948 | 859 | ||||||||||||
| Provision for income taxes |
(192 | ) | (63 | ) | (322 | ) | (253 | ) | ||||||||
| Earnings before minority interest and cumulative effect of change in accounting principle |
330 | 230 | 626 | 606 | ||||||||||||
| Minority interest |
(1 | ) | (1 | ) | (2 | ) | (3 | ) | ||||||||
| Earnings before cumulative effect of change in accounting principle |
329 | 229 | 624 | 603 | ||||||||||||
| Cumulative effect of change in accounting principle, net of tax |
— | — | — | (380 | ) | |||||||||||
| Net earnings |
329 | 229 | 624 | 223 | ||||||||||||
| Retained earnings at beginning of period |
7,667 | 6,289 | 7,372 | 6,295 | ||||||||||||
| Retained earnings at end of period |
$ | 7,996 | $ | 6,518 | $ | 7,996 | $ | 6,518 | ||||||||
See Notes to Condensed, Consolidated Financial Statements.
1
Item 1. Financial Statements (continued)
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed, Consolidated Statements of Financial Position
(Dollar amounts in millions)
| June 30, 2003 |
December 31, 2002 |
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| (Unaudited) | ||||||||
| Assets |
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| Investments: |
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| Fixed maturities available-for-sale, at fair value |
$ | 61,824 | $ | 72,777 | ||||
| Equity securities available-for-sale, at fair value |
763 | 1,203 | ||||||
| Mortgage and other loans, net of valuation allowance |
6,026 | 7,232 | ||||||
| Policy loans |
997 | 1,405 | ||||||
| Other invested assets |
3,206 | 958 | ||||||
| Short-term investments |
1,190 | 831 | ||||||
| Total investments |
74,006 | 84,406 | ||||||
| Cash and cash equivalents |
644 | 2,101 | ||||||
| Accrued investment income |
1,208 | 1,540 | ||||||
| Deferred acquisition costs |
4,222 | 5,024 | ||||||
| Goodwill |
1,600 | 2,336 | ||||||
| Intangible assets |
1,356 | 2,245 | ||||||
| Reinsurance recoverable |
2,261 | 2,289 | ||||||
| Other assets |
1,458 | 2,029 | ||||||
| Separate account assets |
7,636 | 7,369 | ||||||
| Assets held for sale |
22,708 | — | ||||||
| Total assets |
$ | 117,099 | $ | 109,339 | ||||
| Liabilities and Shareholder’s Interest |
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| Liabilities: |
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| Future annuity and contract benefits |
$ | 58,318 | $ | 72,953 | ||||
| Liability for policy and contract claims |
2,775 | 3,491 | ||||||
| Other policyholder liabilities |
316 | 1,372 | ||||||
| Other liabilities |
6,931 | 5,700 | ||||||
| Short-term debt |
1,884 | 1,850 | ||||||
| Long-term debt |
478 | 1,002 | ||||||
| Separate account liabilities |
7,636 | 7,369 | ||||||
| Liabilities associated with assets held for sale |
20,264 | — | ||||||
| Total liabilities |
98,602 | 93,737 | ||||||
| Minority interest in and equity of consolidated subsidiaries |
266 | 341 | ||||||
| Shareholder’s interest: |
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| Net unrealized investment gains |
3,746 | 1,204 | ||||||
| Derivatives qualifying as hedges |
(459 | ) | (98 | ) | ||||
| Foreign currency translation adjustments |
(5 | ) | (170 | ) | ||||
| Accumulated non-owner changes in equity |
3,282 | 936 | ||||||
| Common stock |
— | — | ||||||
| Additional paid-in capital |
6,953 | 6,953 | ||||||
| Retained earnings |
7,996 | 7,372 | ||||||
| Total shareholder’s interest |
18,231 | 15,261 | ||||||
| Total liabilities and shareholder’s interest |
$ | 117,099 | $ | 109,339 | ||||
See Notes to Condensed, Consolidated Financial Statements.
2
Item 1. Financial Statements (continued).
GE FINANCIAL ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Condensed, Consolidated Statements of Cash Flows
(Dollar amounts in millions)
(Unaudited)
| Six Months Ended June 30, |
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| 2003 |
2002 |
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| Cash Flows From Operating Activities |
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| Net earnings |
$ | 624 | $ | 223 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: |
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| Change in reserves |
(385 | ) | 1,619 | |||||
| Cumulative effect of change in accounting principle, net of tax |
— | 380 | ||||||
| Other, net |
(658 | ) | (238 | ) | ||||
| Net cash provided by operating activities |
(419 | ) | 1,984 | |||||
| Cash Flows From Investing Activities |
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| Short term investment activity, net |
(361 | ) | 248 | |||||
| Proceeds from sales, securitizations and maturities of investment securities and other invested assets |
9,763 | 9,518 | ||||||
| Principal collected on and sale and securitizations of mortgage and policy loans |
598 | 498 | ||||||
| Purchases of investment securities and other invested assets |
(10,869 | ) | (13,704 | ) | ||||
| Mortgage and policy loan originations |
(1,040 | ) | (576 | ) | ||||
| Net cash used in investing activities |
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