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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): APRIL 1, 2001
FORTIS BENEFITS INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 33-63799 81-0170040
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2323 GRAND BOULEVARD KANSAS CITY, MO 64108-2670
(Address of Principal Executive Offices)
(816) 474-2345
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 1, 2001, Fortis, Inc. completed the sale (the "Sale") of its
Fortis Financial Group division (the "Division") to The Hartford Financial
Services Group ("The Hartford"). The Division includes, among other blocks of
business, certain individual life insurance policies (including variable
universal life insurance policies) and all annuity contracts (collectively, the
"Insurance Contracts") written by Fortis Benefits Insurance Company (the
"Company"). Certain of the Insurance Contracts permit investment in, among other
investment options, various series of the Fortis Series Fund (the "Fund").
To effect the Sale as it relates to the Company, Hartford Life and
Annuity Insurance Company ("Hartford Annuity"), an indirect wholly owned
subsidiary of The Hartford, reinsured the Insurance Contracts on a 100%
coinsurance basis and agreed to administer the Insurance Contracts going
forward. The Sale also included Hartford Annuity's purchase of certain real and
personal property owned by the Company and used in connection with the
Division's business. Also as part of the Sale, Hartford Life and Accident
Insurance Company purchased 100% of the outstanding stock of Fortis Advisers,
Inc. ("Fortis Advisers"), which is the investment adviser for the Fund. The Sale
also included 100% of the outstanding stock of Fortis Investors, Inc., which is
a wholly owned subsidiary of Fortis Advisers and acts as principal distributor
for the Fund. Fortis and the Company received in connection with the Sale
aggregate cash consideration of approximately $1.15 billion from The Hartford
and its affiliates.
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ITEM 7. FINANCIAL STATEMENTS
(a) Financial Statements of Business Acquired
Not applicable.
(b) Pro Forma Financial Information
The following unaudited pro forma financial information of Fortis
Benefits Insurance Company is being presented in connection with the Company's
Sale of the Division to The Hartford on April 1, 2001.
The accompanying unaudited pro forma financial statements of the
Company for the period ended December 31, 2000 present the financial position
and results for the Company as if the Sale and certain transactions and
adjustments related to the Sale had occurred as of January 1, 2000. The
unaudited pro forma financial information does not purport to represent what the
Company's financial position or results of operations actually would have been
had the Sale in fact occurred as of the date indicated, or to project the
Company's financial position or results of operations for any future date or
period. The pro forma adjustments are based on available information and certain
assumptions that the Company currently believes are reasonable under the
circumstances. The unaudited pro forma financial information should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 2000.
The unaudited pro forma financial information is provided for
informational purposes only. The Company's financial statements will reflect the
actual effects of the Sale in the 10-Q filing for the period ending June 30,
2001. Although the actual Sale results will differ, the unaudited pro forma
financial information reflects management's best estimate based on currently
available information.
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FORTIS BENEFITS INSURANCE COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 2000 (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
HISTORICAL ADJUSTMENTS(a)(b) PRO FORMA
------------ ---------------- ------------
ASSETS
Investments:
Fixed maturities, at fair value
(amortized historical cost 2000 - $2,543,040) $ 2,530,480 $ (158,752) $ 2,371,728
Equity securities, at fair value
(historical cost 2000 - $91,164) 87,912 -- 87,912
Mortgage loans on real estate, less
allowance for possible losses
of $11,085 810,616 (93,115) 717,501
Policy loans 102,308 (102,192) 116
Short-term investments 152,736 -- 152,736
Real estate and other investments 41,712 -- 41,712
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3,725,764 (354,059) 3,371,705
Cash and cash equivalents 13,209 19,299 32,508
--
--
--
Receivables:
Uncollected premiums 66,505 (260) 66,245
Reinsurance recoverable on unpaid and paid
losses 64,182 1,077,253 1,141,435
Other 48,083 (5,934) 42,149
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178,770 1,071,059 1,249,829
Accrued investment income (e) 52,556 (4,839) 47,717
Deferred policy acquisition costs 473,761 (433,192) 40,569
Property and equipment at cost, less
accumulated depreciation 20,891 (18,138) 2,753
Federal income tax recoverable (c) 7,248 (528) 6,720
Deferred federal income taxes (c) 33,825 154,050 187,875
Other assets 1,677 -- 1,677
Assets held in separate accounts (f) 5,184,083 -- 5,184,083
------------ ------------ ------------
Total assets $ 9,691,784 $ 433,652 $ 10,125,436
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POLICY RESERVES AND LIABILITIES AND SHAREHOLDER'S EQUITY
Policy reserves and liabilities:
Future policy benefit reserves:
Traditional and pre-need life insurance $ 1,170,612 $ -- $ 1,170,612
Interest sensitive and investment products 970,591 -- 970,591
Accident and health 1,007,328 -- 1,007,328
------------ ------------ ------------
3,148,531 -- 3,148,531
Unearned revenues 33,614 (243) 33,371
Other policy claims and benefits payable 240,677 (7,941) 232,736
Policyholder dividends payable 7,438 (7,438) --
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3,430,260 (15,622) 3,414,638
Accrued expenses 69,476 (1,061) 68,415
Current income taxes payable (c) -- 161,290 161,290
Other liabilities 181,633 (787) 180,846
Due to affiliates 4,497 -- 4,497
Deferred gain on LTC & FFG sale(d) 15,919 256,308 272,227
Liabilities related to separate accounts (f) 5,159,275 24,808 5,184,083
------------ ------------ ------------
Total policy reserves and liabilities 8,861,060 424,936 9,285,996
Shareholder's equity:
Common stock, $5 par value:
authorized, issued and outstanding
shares - 1,000,000 5,000 -- 5,000
Additional paid-in capital 468,000 -- 468,000
Retained earnings 366,644 8,716 375,360
Accumulated other comprehensive loss (8,920) -- (8,920)
Total shareholder's equity 830,724 8,716 839,440
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Total policy reserves and liabilities and
shareholder's equity $ 9,691,784 $ 433,652 $ 10,125,436
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See notes to unaudited pro forma combined financial statements.
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FORTIS BENEFITS INSURANCE COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2000 (IN THOUSANDS)
HISTORICAL ADJUSTMENTS PRO FORMA
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Insurance operations:
Traditional life insurance premiums $ 428,641 (10,267) $ 418,374
Interest sensitive and investment product
policy charges 159,728 (157,408) 2,320
Accident and health insurance premiums 952,015 -- 952,015
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1,540,384 (167,675) 1,372,709
Net investment income (e) 279,572 (54,622) 224,950
Net realized (losses) gains on investments (17,039) 3,662 (13,377)
Other income(d) 12,687 17,733 30,420
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Total revenues 1,815,604 (200,902) 1,614,702
Benefits to policyholders:
Traditional life insurance 335,022 (10,621) 324,401
Interest sensitive investment products 89,062 (83,105) 5,957
Accident and health claims 749,945 0 749,945
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1,174,029 (93,726) 1,080,303
Policyholder dividends 2,685 (2,685) 0
Amortization of deferred policy acquisition costs 47,215 (36,055) 11,160
Insurance commissions 128,267 (6,566) 121,701
General and administrative expenses 333,734 (68,697) 265,037
----------- ----------- -----------
Total benefits and expenses 1,685,930 (207,729) 1,478,201
----------- ----------- -----------
Income before federal income taxes 129,674 6,827 136,501
Federal income taxes (c) 41,555 (1,889) 39,666
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Net income $ 88,119 $ 8,716 $ 96,835
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See notes to unaudited pro forma combined financial statements.
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FORTIS BENEFITS INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Adjustments to the balance sheet, including invested assets,
receivables, accrued investment income, deferred acquisition costs, reserves,
unearned revenues, policy claims and dividends payable and accrued expenses,
along with adjustments to the income statement, are related to the Division sold
to The Hartford.
(b) Adjustments to cash and cash equivalents and property and equipment
represent the sale of certain personal and real property to The Hartford.
(c) Adjustments to deferred federal income taxes and current income
taxes payable represent the accrual of federal income tax associated with the
Sale.
(d) Deferred gain on the Sale will be amortized to income as the
business runs off. For 2000, the pro forma income statement includes pre-tax
amortization of $18,000. An effective tax rate of 35% has been applied and is
reflected in the provision for federal income tax.
(e) Pro forma investment income includes estimated earnings from
approximately $500 million of cash proceeds from the Sale (after applicable tax
payment).
(f) Separate accounts business is reinsured under a modified
coinsurance agreement with The Hartford.
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(c) Exhibits
2.1 Asset Purchase Agreement, dated January 25, 2001, by and among
Fortis, Inc., Fortis Benefits Insurance Company, Fortis
Insurance Company, First Fortis Life Insurance Company,
Houston National Life Insurance Company, John Alden Life
Insurance Company and Hartford Life, Inc., Hartford Life and
Annuity Insurance Company, and Hartford Life Insurance
Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FORTIS BENEFITS INSURANCE COMPANY
(Registrant)
Date: April 16, 2001 By: /s/ Larry Cains
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Treasurer
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(Principal Financial Officer and
Chief Accounting Officer)