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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 [ x ]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005OR[    ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission file number 033-37576
 FORTIS BENEFITS INSURANCE COMPANY
 (Exact name of registrant as specified in its charter)
 IOWA
    
    81-0170040(State or Other Jurisdiction
of Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 729 INSURANCE EXCHANGE BUILDING
DES MOINES, IOWA
    
    50309(Address of Principal Executive Offices)
    
    (Zip Code)
 (651) 361-4000
 NOT APPLICABLE
  X
  X




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FORTIS BENEFITS INSURANCE COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
 TABLE OF CONTENTS
 Item
    
    
    
    
    PageNumber
    
    
    
    
    NumberPART I
FINANCIAL INFORMATION1.
    
    FINANCIAL STATEMENTS
    
    
    2Fortis Benefits Insurance Company Consolidated Balance Sheets at June 30, 2005 (Unaudited) and December 31, 2004
    
    
    2Fortis Benefits Insurance Company Consolidated Statement of Operations for the three and six months ended June 30, 2005 and 2004 (Unaudited)
    
    
    4Fortis Benefits Insurance Company Consolidated Statement of Changes in Stockholders Equity from December 31, 2004 to June 30, 2005 (Unaudited)
    
    
    5Fortis Benefits Insurance Company Consolidated Statement of Cash Flows (Unaudited) for the six months ended June 30, 2005 and 2004
    
    
    6Fortis Benefits Insurance Company Notes to the Consolidated Financial Statements For the six months ended June 30, 2005 and 2004 (Unaudited)
    
    
    72.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    103.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK *
    
    
    124.
    
    CONTROLS AND PROCEDURES
    
    
    12PART II
OTHER INFORMATION2.
    
    UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS*
    
    
    133.
    
    DEFAULTS UPON SENIOR SECURITIES *
    
    
    134.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS *
    
    
    135.
    
    OTHER INFORMATION
    
    
    136.
    
    EXHIBITS
    
    
    13SIGNATURES
    
    
    14EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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Fortis Benefits Insurance Company
 
 Consolidated Balance Sheets
At June 30, 2005 (Unaudited) and December 31, 2004
 June 30,
    
    December 31,2005
    
    2004(in thousands except number of shares)AssetsInvestments:Fixed maturities available for sale, at fair value (amortized
cost  $3,419,286 in 2005 and $3,352,819 in 2004)
    
    $
    3,711,953
    
    
    $
    3,600,516Equity securities available for sale, at fair value
(cost  $253,336 in 2005 and $241,101 in 2004)
    
    
    257,474
    
    
    
    248,722Commercial mortgage loans on real estate at amortized cost
    
    
    703,332
    
    
    
    695,921Policy loans
    
    
    9,876
    
    
    
    9,956Short-term investments
    
    
    28,570
    
    
    
    47,989Collateral held under securities lending
    
    
    352,877
    
    
    
    332,276Other investments
    
    
    62,607
    
    
    
    49,020Total investments
    
    
    5,126,689
    
    
    
    4,984,400Cash and cash equivalents
    
    
    20,612
    
    
    
    43,362Premiums and accounts receivable, net
    
    
    87,185
    
    
    
    78,669Reinsurance recoverables
    
    
    1,254,966
    
    
    
    1,238,111Due from affiliates
    
    
    3,305
    
    
    
    5,967Accrued investment income
    
    
    51,365
    
    
    
    51,933Deferred acquisition costs
    
    
    121,631
    
    
    
    116,060Property and equipment, at cost less accumulated depreciation
    
    
    1,282
    
    
    
    1,507Deferred income taxes, net
    
    
    
    
    
    
    20,515Goodwill
    
    
    155,950
    
    
    
    156,104Value of business acquired
    
    
    36,553
    
    
    
    39,413Other assets
    
    
    34,395
    
    
    
    38,708Assets held in separate accounts
    
    
    3,191,724
    
    
    
    3,435,089Total assets
    
    $
    10,085,657
    
    
    $
    10,209,838
 See the accompanying notes to the consolidated financial statements.
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Fortis Benefits Insurance Company
 Consolidated Balance Sheets
At June 30, 2005 (Unaudited) and December 31, 2004
 June 30,
    
    December 31,2005
    
    2004(in thousands except number of shares)LiabilitiesFuture policy benefits and expenses
    
    $
    3,072,517
    
    
    $
    3,028,030Unearned premiums
    
    
    41,862
    
    
    
    46,228Claims and benefits payable
    
    
    1,946,298
    
    
    
    1,884,608Commissions payable
    
    
    18,383
    
    
    
    19,721Reinsurance balances payable
    
    
    3,518
    
    
    
    6,727Funds held under reinsurance
    
    
    99
    
    
    
    93Deferred gain on disposal of businesses
    
    
    188,738
    
    
    
    206,182Obligation under securities lending
    
    
    352,877
    
    
    
    332,276Accounts payable and other liabilities
    
    
    127,296
    
    
    
    159,798Deferred income taxes, net
    
    
    4,329
    
    
    
    Tax payable
    
    
    13,353
    
    
    
    7,987Liabilities related to separate accounts
    
    
    3,191,724
    
    
    
    3,435,089Total liabilities
    
    
    8,960,994
    
    
    
    9,126,739Stockholders equityCommon stock, par value $5 per share, 1,000,000
shares authorized, issued, and outstanding
    
    
    5,000
    
    
    
    5,000Additional paid-in capital
    
    
    516,570
    
    
    
    516,570Retained earnings
    
    
    405,923
    
    
    
    388,854Accumulated other comprehensive income
    
    
    197,170
    
    
    
    172,675Total stockholders equity
    
    
    1,124,663
    
    
    
    1,083,099Total liabilities and stockholders equity
    
    $
    10,085,657
    
    
    $
    10,209,838
 See the accompanying notes to the consolidated financial statements.
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Fortis Benefits Insurance Company
 
 Consolidated Statements of Operations (Unaudited)
Three and Six Months Ended June 30, 2005 and 2004
 Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004(in thousands)RevenuesNet earned premiums and other considerations
    
    $
    428,656
    
    
    $
    432,467
    
    
    $
    884,721
    
    
    $
    871,025Net investment income
    
    
    79,063
    
    
    
    70,080
    
    
    
    148,177
    
    
    
    137,176Net realized
(losses) gains on investments
    
    
    (611
    )
    
    
    (12
    )
    
    
    (210
    )
    
    
    3,580Amortization of deferred gain on disposal of businesses
    
    
    8,702
    
    
    
    10,752
    
    
    
    17,444
    
    
    
    21,610Fees and other income
    
    
    1,458
    
    
    
    2,853
    
    
    
    4,404
    
    
    
    6,743Total revenues
    
    
    517,268
    
    
    
    516,140
    
    
    
    1,054,536
    
    
    
    1,040,134Benefits, losses and expensesPolicyholder benefits
    
    
    332,619
    
    
    
    330,217
    
    
    
    692,460
    
    
    
    685,495Amortization of deferred acquisition costs and
value of business acquired
    
    
    21,156
    
    
    
    20,279
    
    
    
    39,122
    
    
    
    35,229Underwriting, general and administrative expenses
    
    
    121,671
    
    
    
    119,721
    
    
    
    238,214
    
    
    
    238,736Total benefits, losses and expenses
    
    
    475,446
    
    
    
    470,217
    
    
    
    969,796
    
    
    
    959,460Income before income taxes
    
    
    41,822
    
    
    
    45,923
    
    
    
    84,740
    
    
    
    80,674Income taxes
    
    
    12,388
    
    
    
    15,506
    
    
    
    27,671
    
    
    
    27,544Net income
    
    $
    29,434
    
    
    $
    30,417
    
    
    $
    57,069
    
    
    $
    53,130
 See the accompanying notes to the consolidated financial statements.
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Fortis Benefits Insurance Company
 
 Consolidated Statements of Changes in Stockholders Equity
From December 31, 2004 to June 30, 2005 (Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    OtherCommon
    
    Paid-in
    
    Retained
    
    ComprehensiveStock
    
    Capital
    
    Earnings
    
    Income (Loss)
    
    Total(in thousands)Balance, December 31, 2004
    
    $
    5,000
    
    
    $
    516,570
    
    
    $
    388,854
    
    
    $
    172,675
    
    
    $
    1,083,099Dividends
    
    
    
    
    
    
    
    
    
    
    (40,000
    )
    
    
    
    
    
    
    (40,000
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    57,069
    
    
    
    
    
    
    
    57,069Other comprehensive income:Net change in unrealized gains on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,964
    
    
    
    26,964Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,469
    )
    
    
    (2,469
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,495Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,564Balance, June 30, 2005
    
    $
    5,000
    
    
    $
    516,570
    
    
    $
    405,923
    
    
    $
    197,170
    
    
    $
    1,124,663
 See the accompanying notes to the consolidated financial statements.
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Fortis Benefits Insurance Company
 
 Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended June 30, 2005 and 2004
 Six Months Ended June 30,2005
    
    2004(in thousands)Net cash provided by operating activities
    
    $
    107,830
    
    
    $
    84,126Investing activitiesSales of:Fixed maturities available for sale
    
    
    188,926
    
    
    
    355,766Equity securities available for sale
    
    
    15,784
    
    
    
    18,629Other invested assets
    
    
    5,165
    
    
    
    4,581Maturities, prepayments, and scheduled redemption of:Fixed maturities available for sale
    
    
    118,993
    
    
    
    88,413Purchase of:Fixed maturities available for sale
    
    
    (383,771
    )
    
    
    (445,440
    )Equity securities available for sale
    
    
    (28,428
    )
    
    
    (55,769
    )Other invested assets
    
    
    (18,752
    )
    
    
    (10,946
    )Change in commercial mortgage loans on real estate
    
    
    (7,969
    )
    
    
    (60,716
    )Change in short term investments
    
    
    19,418
    
    
    
    33,521Change in collateral held under securities lending
    
    
    (20,601
    )
    
    
    39,631Change in policy loans
    
    
    54
    
    
    
    Net cash (used in) investing activities
    
    $
    (111,181
    )
    
    $
    (32,330
    )Financing activitiesDividends paid
    
    
    (40,000
    )
    
    
    (25,000
    )Change in obligation under securities lending
    
    
    20,601
    
    
    
    (39,631
    )Net cash (used in) provided by financing activities
    
    
    (19,399
    )
    
    
    (64,631
    )Change in cash and cash equivalents
    
    
    (22,750
    )
    
    
    (12,835
    )Cash and cash equivalents at beginning of period
    
    
    43,362
    
    
    
    29,176Cash and cash equivalents at end of period
    
    $
    20,612
    
    
    $
    16,341
 See the accompanying notes to the consolidated financial statements.
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Fortis Benefits Insurance CompanyNotes to the Consolidated Financial StatementsSix Months Ended June 30, 2005 and 2004 (Unaudited)
 1.
    
    Nature of Operations
   2.
    
    Basis of Presentation
  7




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3.
    
    Recently Adopted Accounting Pronouncements
 Accounting
Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements
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4.
    
    Retirement and Other Employee Benefits
    5.
    
    Commitments and Contingencies
   9




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PART I
FINANCIAL INFORMATION
 
 Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations.
    10




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For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(in thousands)
    
    (in thousands)Revenues:Net earned premiums and other considerations
    
    
    $
    428,656
    
    
    
    $
    432,467
    
    
    
    $
    884,721
    
    
    
    $
    871,025Net investment income
    
    
    
    79,063
    
    
    
    
    70,080
    
    
    
    
    148,177
    
    
    
    
    137,176Net realized
(losses) gains on investments
    
    
    
    (611
    )
    
    
    
    (12
    )
    
    
    
    (210
    )
    
    
    
    3,580Amortization of deferred gains on disposal of businesses
    
    
    
    8,702
    
    
    
    
    10,752
    
    
    
    
    17,444
    
    
    
    
    21,610Fees and other income
    
    
    
    1,458
    
    
    
    
    2,853
    
    
    
    
    4,404
    
    
    
    
    6,743Total revenues
    
    
    
    517,268
    
    
    
    
    516,140
    
    
    
    
    1,054,536
    
    
    
    
    1,040,134Benefits, losses and expenses:Policyholder benefits
    
    
    
    332,619
    
    
    
    
    330,217
    
    
    
    
    692,460
    
    
    
    
    685,495Selling, underwriting and general expenses(1)
    
    
    
    142,827
    
    
    
    
    140,000
    
    
    
    
    277,336
    
    
    
    
    273,965Total benefits, losses and expenses
    
    
    
    475,446
    
    
    
    
    470,217
    
    
    
    
    969,796
    
    
    
    
    959,460Income before income taxes
    
    
    
    41,822
    
    
    
    
    45,923
    
    
    
    
    84,740
    
    
    
    
    80,674Income taxes
    
    
    
    12,388
    
    
    
    
    15,506
    
    
    
    
    27,671
    
    
    
    
    27,544Net income
    
    
    $
    29,434
    
    
    
    $
    30,417
    
    
    
    $
    57,069
    
    
    
    $
    53,130
 
  For The Three Months Ended June 30, 2005 Compared to The Three Months Ended June 30, 2004.
 Net Income
  Total Revenues
  11




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Total Expenses
  For The Six Months Ended June 30, 2005 Compared to The Six Months Ended June 30, 2004.
 Net Income
  Total Revenues
  Total Expenses
  
 Item 3. Quantitative And Qualitative Disclosures About Market Risk.
  
 Item 4. Controls And Procedures.
  12




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PART II
OTHER INFORMATION
 
 Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
 (a)
    
    None.(b)
    
    Because all of the Companys outstanding common stock is held indirectly by
Assurant, Inc., the Company does not file a Schedule 14A and has not adopted any
procedures by which security holders may recommend nominees to the registrants board of
directors.
 
 Item 6. Exhibits
  31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.32.1
    
    Certification of Chief Executive Officer of Fortis Benefits Insurance Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer of Fortis Benefits Insurance Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
   FORTIS BENEFITS INSURANCE COMPANYBy:  /s/ P. Bruce CamachoName:  P. Bruce CamachoTitle:  President and ChiefExecutive OfficerBy:  /s/ Ranell M. JacobsonName:  Ranell M. JacobsonTitle:  Treasurer 14