-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OErga2zEMf8W98XK7NF0/0ESACMJXOpGo4+xecfbOU3YMX8uGzJmwrfjA+4QXjiK 0WabeCcY39UL8hOiOSA7YQ== 0001036213-02-000004.txt : 20060215 0001036213-02-000004.hdr.sgml : 20060215 20020515165750 ACCESSION NUMBER: 0001036213-02-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 DATE AS OF CHANGE: 20030331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST GREAT WEST LIFE & ANNUITY INSURANCE CO CENTRAL INDEX KEY: 0001036213 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 931225432 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-25269 FILM NUMBER: 02653428 BUSINESS ADDRESS: STREET 1: 50 MAIN STREET STREET 2: 9TH FLOOR CITY: WHITE PLAINS STATE: NY ZIP: 10606 BUSINESS PHONE: 303-737-3000 MAIL ADDRESS: STREET 1: 50 MAIN STREET STREET 2: 9TH FLOOR CITY: WHITE PALINS STATE: NY ZIP: 10606 10-Q 1 firstgwla10q.txt FIRST GWLA 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 --------------------------------------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transaction period from to ----------------- -------------------- Commission file number 333-25269 ------------------- FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) - -------------------------------------------------------------------------------- New York 93-1225432 - --------------------------------------------------- -------------------------- (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification Number) 125 Wolf Road, Albany, New York 12205 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) [518] 437-1816 ---------------------------------------------------- (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 -------------- -------------- As of May 10, 2002, 2,500 shares of the registrant's common stock were outstanding, all of which were owned by the registrant's parent company. NOTE:This Form 10-Q is filed by the registrant only as a consequence of the sale by the registrant of a market value adjusted annuity product. 16 TABLE OF CONTENTS
Part I FINANCIAL INFORMATION Page --------- Item 1 Financial Statements Statements of Income 3 Balance Sheets 4 Statements of Cash Flows 6 Statements of Stockholder's Equity 7 Notes to Financial Statements 8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3 Quantitative and Qualitative Disclosures About Market Risk 15 Part II OTHER INFORMATION 16 Item 1 Legal Proceedings 16 Item 6 Exhibits and Reports on Form 8-K 16 Signature 16
PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY STATEMENTS OF INCOME [Dollars in Thousands]
============================================================================================== [Unaudited] Three Months Ended March 31, ---------------------------- 2002 2001 ------------ ------------ REVENUES: Premium income $ 2,524 $ 4,567 Fee income 1,070 1,819 Net investment income 3,240 2,858 Realized gains on investments 2 492 ------------ ------------ 6,836 9,736 BENEFITS AND EXPENSES: Life and other policy benefits (net of reinsurance recoveries totaling $0 and $77) 1,676 5,793 Change in reserves 83 (368) Interest paid or credited to contractholders 2,038 2,032 General and administrative expenses 1,620 1,795 ------------ ------------ 5,417 9,252 INCOME BEFORE INCOME TAXES 1,419 484 PROVISION FOR INCOME TAXES: Current 665 190 Deferred (95) 15 ------------ ------------ 570 205 ------------ ------------ NET INCOME $ 849 $ 279 ============ ============
See notes to financial statements. FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
BALANCE SHEETS [Dollars in Thousands Except for Share Information] ============================================================================================== March 31, December 31, ASSETS 2002 2001 - ------ ----------------- ---------------- [unaudited] INVESTMENTS: Fixed maturities available-for-sale, at fair value (amortized cost $181,511 and $176,687) $ 183,278 $ 178,591 Short-term investments, available-for-sale (cost approximates fair value) 1,924 3,854 ----------------- ---------------- Total investments 185,202 182,445 Cash 8,723 7,860 Reinsurance receivable 2,287 2,346 Deferred policy acquisition costs 1,269 1,257 Investment income due and accrued 1,820 1,713 Uninsured claims receivable 967 1,884 Due from parent corporation 803 107 Other assets 2,355 3,371 Premiums in course of collection 592 792 Deferred income taxes 1,501 1,377 Separate account assets 45,714 45,576 ----------------- ---------------- TOTAL ASSETS $ 251,233 $ 248,728 ================= ================ (continued) FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY BALANCE SHEETS [Dollars in Thousands] ============================================================================================== [unaudited] March 31, December 31, LIABILITIES AND STOCKHOLDER'S EQUITY 2002 2001 - ------------------------------------ ----------------- ---------------- [unaudited] POLICY BENEFIT LIABILITIES: Policy reserves $ 155,261 $ 152,874 Policy and contract claims 1,998 1,175 Policyholders' funds 2,751 2,801 GENERAL LIABILITIES: Bank overdrafts 1,540 3,104 Other liabilities 1,948 1,986 Separate account liabilities 45,714 45,576 ----------------- ---------------- Total liabilities 209,212 207,516 ----------------- ---------------- STOCKHOLDER'S EQUITY: Common stock, $1,000 par value; 10,000 shares authorized; 2,500 shares issued and outstanding 2,500 2,500 Additional paid-in capital 28,600 28,600 Accumulated other comprehensive income 687 727 Retained earnings 10,234 9,385 ----------------- ---------------- Total stockholder's equity 42,021 41,212 ----------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 251,233 $ 248,728 ================= ================ See notes to financial statements. (Concluded)
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY STATEMENTS OF CASH FLOWS [Dollars in Thousands]
============================================================================================== [Unaudited] Three Months Ended March 31, ------------------------------------- 2002 2001 ----------------- ---------------- OPERATING ACTIVITIES: Net income $ 849 $ 279 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of investments (441) (325) Realized gains on disposal of investments (2) (492) Depreciation and amortization 42 110 Deferred income taxes (95) 15 Changes in assets and liabilities: Policy benefit liabilities 3,271 1,737 Reinsurance recoverable 59 (1) Accrued interest and other receivables 93 (436) Other, net 331 (11,183) ----------------- ---------------- Net cash (used in) provided by operating 4,107 (10,296) activities ----------------- ---------------- INVESTING ACTIVITIES: Proceeds from maturities and redemptions of investments: Fixed maturities available-for-sale 6,144 29,448 Purchases of investments: Fixed maturities available-for-sale (8,595) (21,590) ----------------- ---------------- Net cash provided by (used in) investing activities (2,451) 7,858 ----------------- ---------------- FINANCING ACTIVITIES: Contract deposits, net of withdrawals (97) 4,902 Due to Parent Corporation (696) 635 ----------------- ---------------- Net cash provided by (used in) financing (793) 5,537 activities NET INCREASE IN CASH 863 3,099 CASH, BEGINNING OF YEAR 7,860 8,462 ----------------- ---------------- CASH, END OF PERIOD $ 8,723 $ 11,561 ================= ================ See notes to financial statements.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2002
============================================================================================== [Dollars in Thousands] [Unaudited] Accumulated Additional Other Common Stock Paid-in Comprehensive Retained ---------------------- Shares Amount Capital Income Earnings Total --------- --------- ------------- ---------------- -------------- -------------- BALANCES, JANUARY 1, 2002 2,500 $ 2,500 $ 28,600 $ 727 $ 9,385 $ 41,212 Net income 849 849 Other comprehensive income (40) (40) -------------- Comprehensive income 809 --------- --------- ------------- ---------------- -------------- -------------- BALANCES, MARCH 31, 2002 2,500 $ 2,500 $ 28,600 $ 687 $ 10,234 $ 42,021 ========= ========= ============= ================ ============== ============== See notes to financial statements.
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [Amounts in Thousands] ================================================================================ [Unaudited] 1. BASIS OF PRESENTATION First Great-West Life & Annuity Insurance Company (the Company) is a wholly-owned subsidiary of Great-West Life & Annuity Insurance Company (the Parent Corporation or GWL&A). The Company was incorporated as a stock life insurance company in the State of New York and was capitalized on April 4, 1997. The Company was licensed as an insurance company in the State of New York on May 28, 1997. The financial statements and related notes of the Company have been prepared in accordance with generally accepted accounting principles applicable to interim financial reporting and do not include all of the information and footnotes required for complete financial statements. However, in the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the results. These financial statements should be read in conjunction with the audited financial statements and the accompanying notes included in the Company's latest annual report on Form 10-K for the year ended December 31, 2001. Operating results for the three months ended March 31, 2002 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2002. Certain reclassifications have been made to the 2001 financial statements to conform to the 2002 presentation. 2. NEW ACCOUNTING PRONOUNCEMENTS On June 29, 2001, Statement No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142) was approved by the FASB. SFAS No. 142 changes the accounting for goodwill and certain other intangibles from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this statement. The Company implemented SFAS No. 142 on January 1, 2002 and the Company does not expect this statement to have a material impact on the Company's financial position or results of operations. In August 2001, the FASB issued Statement No.144 "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No.144). SFAS No.144 supercedes current accounting guidance relating to impairment of long-lived assets and provides a single accounting methodology for long-lived assets to be disposed of, and also supercedes existing guidance with respect to reporting the effects of the disposal of a business. SFAS No.144 was adopted January 1, 2002 without a material impact on the Company's financial position or results of operations. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended Operating Summary March 31, -------------------------- [Thousands] 2002 2001 ---------------------------------------- ---------- ------------ Premium income $ 2,524 $ 4,567 Fee income 1,070 1,819 Net investment income 3,240 2,858 Realized gains on investments 2 492 ---------- ------------ Total revenues 6,836 9,736 Total benefits and expenses 5,417 9,252 Income tax expenses 570 205 ---------- ------------ Net income $ 849 $ 279 ========== ============ Three Months Ended Operating Summary March 31, ---------------------------- [Thousands] 2002 2001 ---------------------------------------- ---------- -------------- Deposits for investment-type contracts $ 131 $ 5,202 Deposits to separate accounts 1,337 2,875 Self-funded premium equivalents 6,396 6,400 Balance Sheet March 31, December 31, [Thousands] 2002 2001 ---------------------------------------- ---------- -------------- Investment assets $ 185,202 $ 182,445 Separate account assets 45,714 45,576 Total assets 251,233 248,728 Total policy benefit liabilities 160,010 156,850 Total stockholder's equity 42,021 41,212 GENERAL This Form 10-Q contains forward-looking statements. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. In particular, statements using verbs such as "expect," "anticipate," "believe" or words of similar import generally involve forward-looking statements. Without limiting the foregoing, forward-looking statements include statements which represent the Company's beliefs concerning future or projected levels of sales of the Company's products, investment spreads or yields, or the earnings or profitability of the Company's activities. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments, some of which may be national in scope, such as general economic conditions and interest rates, some of which may be related to the insurance industry generally, such as pricing competition, regulatory developments and industry consolidation, and others of which may relate to the Company specifically, such as credit, volatility and other risks associated with the Company's investment portfolio, and other factors. Readers are also directed to consider other matters, including any risks and uncertainties discussed in documents filed by the Company and certain of its subsidiaries with the Securities and Exchange Commission. The following discussion addresses the financial condition of the Company as of March 31, 2002, compared with December 31, 2001, and its results of operations for the three months ended March 31, 2002, compared with the same periods last year. The discussion should be read in conjunction with the Management's Discussion and Analysis section included in the Company's report on Form 10-K for the year-ended December 31, 2001 to which the reader is directed for additional information. RESULTS OF OPERATIONS The Company's net income increased $570 thousand for the first quarter 2002 when compared to the first quarter of 2001 due to a $707 thousand increase in the Employee Benefits segment offset by a $137 thousand decrease in the Financial Services segment. Premium and fee income decreased for the first quarter of 2002 when compared to the first quarter of 2001. The decreases are due to membership decline in the Employee Benefits segment. Net investment income increased $382 thousand for the first quarter of 2002 when compared to the first quarter of 2001. The increase is due to an increase in invested assets primarily related to Business Owned Life Insurance (BOLI). In addition to a $5.0 million BOLI sale in 2001, invested assets increased due to interest accumulations. The Company had a realized investment gain of $2 thousand for the first three months of 2002. The $490 thousand decrease from the same period last year is the result of investment yield enhancement activity on the sale of available-for-sale securities in the first quarter of 2001. The $3.8 million decrease in benefits and expenses during the first quarter compared to the prior year is due to lower group life and health claims. There were no significant changes in total assets and liabilities for the first three months of 2002 when compared to year ended December 31, 2001. Historically, the 401(k) business unit had been included with the Employee Benefits segment. In order to capitalize on administrative system efficiencies and group pension expertise, 401(k) is now administered by the Financial Services segment. As a result, prior period segment results have been reclassified to conform with this change. SEGMENT RESULTS Employee Benefits The results below reflect the operations for the Employee Benefits segment for the first quarter: Operating Summary Three Months Ended March 31, -------------------------- [Thousands] 2002 2001 ----------------------------- ------------ ---------- Premium Income $ 2,526 $ 4,569 Fee Income 981 1,724 Net investment Income 496 299 Realized losses on investments 0 0 ------------ ---------- Total revenues 4,003 6,592 Total benefits and expenses 2,707 6,491 Income tax expenses 521 33 ------------ ---------- Net income $ 775 $ 68 ============ ========== Self-funded premium $ 6,396 $ 6,400 equivalents Employee Benefits net income increased $707 thousand for the first quarter of 2002 when compared to the first quarter of 2001. The increase was primarily due to favorable mortality and morbidity results. Premium and fee income decreased $2.8 million for the first quarter of 2002 when compared to the first quarter of 2001. The decrease is due primarily to membership decline. Net investment income increased $197 thousand for the first quarter of 2002 when compared to the first quarter of 2001. The increase was primarily the result of better cash flow in 2002. Total benefits and expenses decreased $3.8 million for the first quarter of 2002 when compared to the first quarter of 2001. The decrease was due to a combination of lower group life and health claims and an administrative expense reduction related to reduced membership. Financial Services The following is a summary of certain financial data of the Financial Services segment: Three Months Ended Operating Summary March 31, ----------------------------- [Thousands] 2002 2001 --------------------------------------- ------------ ------------- Premium income $ (2) $ (2) Fee income 89 95 Net investment income 2,744 2,559 Realized gains on investments 2 492 ------------ ------------- Total revenues 2,833 3,144 Total benefits and expenses 2,710 2,761 Income tax expenses 49 172 ------------ ------------- Net income $ 74 $ 211 ============ ============= Deposits for investment-type contracts $ 131 $ 5,202 Deposits to separate $ 1,337 $ 2,875 Net Income for Financial Services decreased $137 thousand for the first quarter of 2002 when compared to the first quarter of 2001. The decrease was primarily due to a decrease in realized gains on investments of $490 thousand, somewhat offset by an increase in net investment income of $185 thousand. Net Investment income increased $185 thousand or 7% for the first three months of 2002 when compared to the first three months of 2001 due to a BOLI sale of $5.0 million in 2001 and an increase in assets due to the interest accumulations. Premium income for Financial Services remained unchanged for the first three months of 2002 when compared to the first three months of 2001. The Company had a realized investment gain of $2 thousand for the first three months of 2002. The $490 thousand decrease from the same period last year is the result of investment yield enhancement activity on the sale of available-for-sale securities in the first quarter of 2001. Deposits for investment-type contracts decreased for the first quarter of 2002 when compared to the first quarter of 2001. The decrease was due to lower sales of BOLI products. BOLI sales generally represent large single-deposit contracts, the timing of which can significantly impact individual quarters. GENERAL ACCOUNT INVESTMENTS The Company's primary investment objective is to acquire assets with duration and cash flow characteristics reflective of the Company's liabilities, while meeting industry, size, issuer, and geographic diversification standards. Formal liquidity and credit quality parameters have also been established. Fixed maturity investments include public and privately placed corporate bonds, government bonds and mortgage-backed and asset-backed securities. Private placement investments that are primarily in the held-to-maturity category are generally less marketable than publicly traded assets, yet they typically offer covenant protection that allows the Company, if necessary, to take appropriate action to protect its investment. The Company believes that the cost of the additional monitoring and analysis required by private placements is more than offset by their enhanced yield. One of the Company's primary objectives is to ensure that its fixed maturity portfolio is maintained at a high average quality, so as to limit credit risk. If not externally rated, the securities are rated by the Company on a basis intended to be similar to that of the rating agencies. The distribution of the fixed maturity portfolio by credit rating is summarized as follows: March 31, December 31, 2002 2001 ------------------ ------------------- AAA 63.3 % 65.0 % AA 9.7 % 6.8 % A 11.2 % 11.9 % BBB 13.4 % 13.9 % BB and Lower 2.4 % 2.4 % -------------- --- --------------- --- TOTAL 100.0 % 100.0 % ============== === =============== === The Company follows rigorous procedures to control interest rate risk and observes strict asset and liability matching guidelines. These guidelines are designed to ensure that even under changing market conditions, the Company's assets will always be able to meet the cash flow and income requirements of its liabilities. Using dynamic modeling to analyze the effects of a wide range of possible market changes upon investments and policyholder benefits, the Company ensures that its investment portfolio is appropriately structured to fulfill financial obligations to its policyholders. During the three months ended March 31, 2002, net unrealized losses on fixed maturities included in stockholders' equity, which is net of policyholder-related amounts and deferred income taxes, decreased surplus by $40 thousand. CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with generally accepted accounting principles requires the Company's management to make a variety of estimates and assumptions. These estimates and assumptions affect, among other things, the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenues and expenses. Actual results can differ from the amounts previously estimated, which were based on the information available at the time the estimates were made. The critical accounting policies described below are those that the Company believes are important to the portrayal of the Company's financial condition and results, and which require management to make difficult, subjective and/or complex judgments. Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown. The Company believes that critical accounting policies include policy reserves, allowances for credit losses, deferred policy acquisition costs, and valuation of privately placed fixed maturities. Policy Reserves Life Insurance and Annuity Reserves - Life insurance and annuity policy reserves with life contingencies are computed on the basis of estimated mortality, investment yield, withdrawals, future maintenance and settlement expenses, and retrospective experience rating premium refunds. Annuity contract reserves without life contingencies are established at the contractholder's account value. Reinsurance - Policy reserves ceded to other insurance companies are carried as a reinsurance receivable on the balance sheet. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding risks to other insurance enterprises under excess coverage and co-insurance contracts. The Company retains 100% of the first $50 thousand of coverage per individual life and has a maximum of $250 thousand of coverage per individual life. Life insurance policies are first reinsured to the Parent Corporation up to a maximum of $1.25 million of coverage per individual life. Any excess amount is reinsured to a third party. Policy and Contract Claims - Policy and contract claims include provisions for reported life and health claims in process of settlement, valued in accordance with the terms of the related policies and contracts, as well as provisions for claims incurred and unreported based primarily on prior experience of the Company. Allowance For Credit Losses The Company maintains an allowance for credit losses at a level that, in management's opinion, is sufficient to absorb credit losses on its amounts receivable related to uninsured accident and health plan claims and premiums in course of collection. Management's judgement is based on past loss experience and current and projected economic conditions. Deferred Policy Acquisition Costs Policy acquisition costs, which primarily consist of sales commissions and costs associated with the Company's group sales representatives related to the production of new business, have been deferred to the extent recoverable. These costs are variable in nature and are dependent upon sales volume. Deferred costs associated with the annuity products are being amortized over the life of the contracts in proportion to the emergence of gross profits. Retrospective adjustments of these amounts are made when the Company revises its estimates of current or future gross profits. Deferred costs associated with traditional life insurance are amortized over the premium paying period of the related policies in proportion to premium revenues recognized. Valuation Of Privately Placed Fixed Maturities The estimated fair values of financial instruments have been determined using available information and appropriate valuation methodologies. However, considerable judgement is required to interpret market data to develop estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. To determine fair value for fixed maturities not actively traded, the Company utilizes discounted cash flows calculated at current market rates on investments of similar quality and term. LIQUIDITY AND CAPITAL RESOURCES The Company's operations have liquidity requirements that are dependent upon the principal product lines. Life insurance and pension plan reserves are primarily long-term liabilities. Life insurance and pension plan reserve requirements are usually stable and predictable, and are supported primarily by long-term, fixed income investments. Generally, the Company has met its operating requirements by maintaining appropriate levels of liquidity in its investment portfolio. Liquidity for the Company has remained strong, as evidenced by significant amounts of short-term investments and cash that totaled $10.6 million and $11.7 million as of March 31, 2002 and December 31, 2001, respectively. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's assets are purchased to fund future benefit payments to its policyholders and contractholders. The primary risk of these assets is exposure to rising interest rates. To manage interest rate risk, the Company invests in assets that are suited to the products that it sells. For products with uncertain timing of benefit payments such as life insurance, the Company invests in fixed income assets with expected cash flows that are earlier than the expected timing of the benefit payments. The Company can then react to changing interest rates as these assets mature for reinvestment. There are no significant changes to the Company's risk from December 31, 2001. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Index to Exhibits None (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY BY: /s/ Glen R. Derback DATE: May 14, 2002 ------------------------------------------- ---------------------- Glen R. Derback, Vice President and Treasurer (Duly authorized officer and chief accounting officer) -----END PRIVACY-ENHANCED MESSAGE-----