Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

  For the quarterly period ended March 31, 2004

OR

  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)

(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 May 4, 2004, 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

TABLE OF CONTENTS

Table of Contents

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)

See Notes to Condensed, Consolidated Financial Statements.

1

Table of Contents

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Balance Sheets

(Dollar amounts in millions except share amounts)

(Unaudited)

See Notes to Condensed, Consolidated Financial Statements.

2

Table of Contents

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Statements of Cash Flows

(Dollar amounts in millions)

(Unaudited)

See Notes to Condensed, Consolidated Financial Statements.

3

Table of Contents

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Notes to Condensed, Consolidated Financial Statements

(Dollar amounts in millions)

(Unaudited)

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 Annual Report on Form 10-K, as of December 31, 2003.

4

Table of Contents

Our variable annuity contracts include both fixed account and separate account liabilities. Investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder for assets allocated to the separate account option. As discussed in Note 6, this business was impacted by a reinsurance transaction effective January 1, 2004. Variable annuity contracts provide for a guaranteed minimum death benefit (“GMDB” or “GMDBs”), which provides a minimum account value to be paid on the annuitant’s death. Our contractholders have the option to purchase, at an additional charge, a GMDB rider that provides for enhanced death benefits. This minimum death benefit that we contractually guarantee to be paid on the annuitant’s death is either one of the following specified amounts or (in some cases) the greater of one or more of these amounts (a) current account value, (b) return of premium, which is no less than net deposits made to the contract, (c) the highest contract value on a specified anniversary date (“ratchet”), (d) premium accumulated at a stated interest rate (“roll-up”), or (e) higher of the ratchet or roll-up.

On January 1, 2004, the total account value of our variable annuities with GMDBs was approximately $10.3 billion, with related death benefit exposure before reinsurance, or net amount at risk, of approximately $1.8 billion. As of January 1, 2004, contracts with GMDB features not covered by reinsurance had an account value of $3.8 billion, and a related death benefit exposure, or net amount at risk, of $256 million. Prior to adopting SOP 03-1, we held GMDB reserves on the business not reinsured. On January 1, 2004, the cumulative effect of change in accounting principle related to adopting SOP 03-1 was a $0.7 million benefit, net of taxes, for the change in reserves, less additional amortization of deferred acquisition costs, on variable annuity contracts with GMDBs.

The following table presents our exposure, net of reinsurance, by GMDB type at March 31, 2004:

The average attained age, of our contractholders with GMDBs weighted by net amount at risk, is 65.3 years of age as of March 31, 2004.

The assets supporting the separate accounts of the variable contracts are primarily mutual fund equity securities and are reflected in our Condensed, Consolidated Balance Sheet at fair value and reported as summary total separate account assets with an equivalent summary total reported for liabilities. Amounts assessed against the contractholders for mortality, administrative, and other services are included in revenues. Changes in liabilities for minimum guarantees are included in benefits and other changes in policy reserves. Separate account net investment income, net investment gains and losses, and the related liability changes are offset within the same line item in the Condensed, Consolidated Statements of Earnings.

The liability for our GMDBs on variable annuity contracts net of reinsurance was $2.5 million at January 1 and March 31, 2004. Paid GMDBs, net of reinsurance, was $0.6 million for the three months ended March 31, 2004. Incurred GMDBs, net of reinsurance, was $0.6 million for the three months ended March 31, 2004.

5

Table of Contents

The GMDB liability is determined by estimating the expected value of death benefits in excess of the projected account value and recognizing the excess ratably over the accumulation period based on total expected assessments. We regularly evaluate estimates used and adjust the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised.

The following assumptions were used to determine the GMDB liability at January 1 and March 31, 2004: data used was 100 stochastically generated investment performance scenarios; geometric mean equity growth assumed to be 9.5% and volatility assumed to be 20% for the portion of account value invested in equity securities; mortality assumed to be 95% of the 1983 Basic Table mortality; lapse rates, which vary by contract type and duration, assumed to range from 1% to 25% and correspond closely to lapse rates used for deferred acquisition cost amortization; and discount rate assumed to be 8%.

We defer sales inducements for features on variable annuities that entitle the contractholder to an incremental amount to be credited to the account value upon making a deposit, and for fixed annuities with crediting rates higher than the contract’s expected ongoing crediting rates for periods after the inducement. Upon adoption of SOP 03-1, we reclassified previously deferred sales inducements of $138.0 million at January 1, 2004 from unamortized deferred acquisition costs to a separate intangible asset. For the three months ended March 31, 2004 we deferred new sales inducements of $2.8 million. At March 31, 2004 the unamortized sales inducements balance was $137.8 million. Deferred sales inducements are amortized in benefits and other changes in policy reserves using the same methodology and assumptions used to amortize deferred acquisition costs. For the three months ended March 31, 2004 we amortized sales inducements of $3.0 million.

6

Table of Contents

The following is a summary of operating segment activity: