GE LIFE & ANNUITY ASSURANCE CO - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

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 333-69620

GE Life and Annuity Assurance Company

(Exact name of registrant as specified in its charter)

Virginia

54-0283385

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

6610 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 ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

At August 1, 2003, 25,651 shares of common stock with a par value of $1,000.00 were outstanding. The common stock of GE Life and Annuity Assurance Company is not publicly traded.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1. Condensed, Consolidated Financial Statements		1

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		8

Item 3. Quantitative and Qualitative Disclosures about Market Risk		12

Item 4. Controls and Procedures		12

PART II – OTHER INFORMATION

Item 1. Legal Proceedings		12

Item 6. Exhibits and Reports on Form 8-K		12

Signatures		14

Certifications		16

PART I—FINANCIAL INFORMATION

Item 1. Condensed, Consolidated Financial Statements

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Statements of Current and Retained Earnings

(Dollar amounts in millions)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2003			June 30, 2002			June 30, 2003			June 30, 2002
Revenues:
Net investment income	$	137.1		$	150.4		$	275.0		$	305.1
Net realized investment gains (losses)		(3.5	)		(38.4	)		15.5			(25.0	)
Premiums		24.4			26.1			47.9			51.3
Cost of insurance		33.5			31.2			70.8			62.8
Variable product fees		25.8			30.6			49.7			62.2
Other income		10.4			11.0			19.7			21.7

Total revenues		227.7			210.9			478.6			478.1


Benefits and expenses:
Interest credited		103.1			116.4			206.6			234.9
Benefits and other changes in policy reserves		52.5			50.8			104.9			100.7
Commissions		45.1			29.3			76.5			57.5
General expenses		28.5			19.8			54.3			41.7
Amortization of intangibles, net		9.0			6.5			16.2			14.3
Change in deferred acquisition costs, net		(23.2	)		(6.5	)		(28.9	)		(14.7	)

Total benefits and expenses		215.0			216.3			429.6			434.4

Earnings (loss) before income taxes		12.7			(5.4	)		49.0			43.7
Provision (benefit) for income taxes		3.0			(5.0	)		14.4			11.4

Net earnings (loss)		9.7			(0.4	)		34.6			32.3
Retained earnings at beginning of period		542.5			444.1			517.6			411.4

Retained earnings at end of period	$	552.2		$	443.7		$	552.2		$	443.7

See Notes to Condensed, Consolidated Financial Statements.

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Balance Sheets

(Dollar amounts in millions except per share amounts)

	June 30, 2003		December 31, 2002
	(Unaudited)
Assets
Investments:
Fixed maturities available-for-sale, at fair value	$	10,625.3	$	10,049.0
Equity securities available-for-sale, at fair value		22.6		24.9
Mortgage loans, net of valuation allowance		1,137.5		1,034.7
Policy loans		130.5		123.9
Short-term investments		—		278.0
Other invested assets		356.7		80.5

Total investments		12,272.6		11,591.0

Cash and cash equivalents		—		—
Accrued investment income		157.2		160.4
Deferred acquisition costs		806.6		827.2
Goodwill		107.4		107.4
Intangible assets		183.7		207.7
Reinsurance recoverable		161.7		174.4
Other assets		118.3		97.2
Separate account assets		7,504.8		7,182.8

Total assets	$	21,312.3	$	20,348.1

Liabilities and Shareholders’ Interest
Liabilities:
Future annuity and contract benefits	$	10,851.9	$	10,771.5
Liability for policy and contract claims		214.3		240.4
Other policyholder liabilities		134.0		208.1
Other liabilities		492.8		136.2
Deferred income tax liability		239.4		104.9
Separate account liabilities		7,504.8		7,182.8

Total liabilities		19,436.6		18,643.9

Shareholders’ interest:
Net unrealized investment gains (losses)		121.2		(12.0	)
Derivatives qualifying as hedges		6.0		2.3

Accumulated non-owner changes in equity		127.2		(9.7	)
Preferred stock, Series A ($1,000 par value, $1,000 redemption and liquidation value, 200,000 shares authorized, 120,000 shares issued and outstanding)		120.0		120.0
Common stock ($1,000 par value, 50,000 shares authorized, 25,651 shares issued and outstanding)		25.6		25.6
Additional paid-in capital		1,050.7		1,050.7
Retained earnings		552.2		517.6

Total shareholders’ interest		1,875.7		1,704.2

Total liabilities and shareholders’ interest	$	21,312.3	$	20,348.1

See Notes to Condensed, Consolidated Financial Statements.

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Statements of Cash Flows

(Dollar amounts in millions)

(Unaudited)

	Six Months Ended
	June 30, 2003			June 30, 2002
Cash Flows From Operating Activities
Net earnings	$	34.6		$	32.3
Adjustments to reconcile net earnings to net cash provided by operating activities:
Change in reserves		232.4			287.9
Other, net		(10.8	)		(223.6	)

Net cash provided by operating activities		256.2			96.6

Cash Flows From Investing Activities
Short-term investment activity, net		278.0			23.2
Proceeds from sales, securitizations and maturities of investment securities and other invested assets		2,069.9			2,339.0
Principal collected on mortgage and policy loans		110.1			63.8
Purchases of investment securities and other invested assets		(2,398.9	)		(2,050.5	)
Mortgage and policy loan originations		(219.7	)		(67.6	)

Net cash provided by (used in) investing activities		(160.6	)		307.9

Cash Flows From Financing Activities
Proceeds from issuance of investment contracts		1,589.9			1,895.3
Redemption and benefit payments on investment contracts		(1,681.5	)		(2,247.1	)
Payments on short term borrowings		(4.0	)		—

Net cash used in financing activities		(95.6	)		(351.8	)

Increase in Cash and Cash Equivalents		—			52.7
Cash and Cash Equivalents at Beginning of Period		—			—

Cash and Cash Equivalents at End of Period	$	—		$	52.7

See Notes to Condensed, Consolidated Financial Statements.

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Notes to Condensed, Consolidated Financial Statements

(Dollar amounts in millions)

(Unaudited)

The accompanying condensed, consolidated quarterly financial statements represent GE Life and Annuity Assurance Company and its consolidated subsidiary, Assigned Settlement, Inc. (the “Company”, “we”, “us”, or “our” unless context otherwise requires). All significant intercompany transactions have been eliminated.

These condensed, consolidated quarterly financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP “). The preparation of condensed, consolidated quarterly financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation. We label our quarterly information using a calendar convention, that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish actual interim closing dates using a “fiscal” calendar, which requires our businesses to close their books on a Saturday in order to normalize the potentially disruptive effects of quarterly closings on business processes. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on the GE web site, [www.ge.com/en/company/investor/secreports.htm].

The condensed, consolidated quarterly financial statements are unaudited. These statements include all adjustments (consisting of normal recurring accruals) we considered necessary 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. The condensed, consolidated, quarterly financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in our Current Report on Form 10-K, as of December 31, 2002.

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