The prospectus containing information for the American Express Retirement
Advisor Variable Annuity(SM)-Band 3 filed electronically in Registrant's
Post-Effective Amendment No. 2 to Registration Statement No. 333-79311 on Form
N-4, filed on or about April 28, 2000, is incorporated by reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
AMERICAN EXPRESS RETIREMENT ADVISOR VARIABLE ANNUITYSM - BAND 3
IDS Life Variable Account 10
May 1, 2000
Revised as of July 21, 2000
IDS Life Variable Account 10 is a separate account established and maintained by
IDS Life Insurance Company (IDS Life).
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained by writing or calling us at the address and telephone number below. The
prospectus is incorporated in this SAI by reference.
IDS Life Insurance Company
200 AXP Financial Center
Minneapolis, MN 55474
800-437-0602
<PAGE>
TABLE OF CONTENTS
Performance Information...................................................p.3
Calculating Annuity Payouts...............................................p.7
Rating Agencies...........................................................p.8
Principal Underwriter.....................................................p.9
Independent Auditors......................................................p.9
Financial Statements
<PAGE>
Performance Information
-------------------------------------------------------------------------------
The subaccounts may quote various performance figures to illustrate past
performance. We base total return and current yield quotations (if applicable)
on standardized methods of computing performance as required by the Securities
and Exchange Commission (SEC). An explanation of the methods used to compute
performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the subaccounts in
terms of the average annual compounded rate of return of a hypothetical
investment in the contract over a period of one, five and ten years (or, if
less, up to the life of the subaccounts), calculated according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period, at the end of the
period (or fractional portion thereof)
We calculated the following performance figures on the basis of historical
performance of each fund. We show actual performance from the date the
subaccounts begin investing in the funds. For some subaccounts, we do not
provide any performance information because they are new and have not had any
activity to date. We also show performance from the commencement date of the
funds as if the contract existed at that time, which it did not. Although we
base performance figures on historical earnings, past performance does not
guarantee future results.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return For Periods Ending Dec. 31, 1999
Performance Since Performance Since
Commencement of the Commencement of the Fund**
Subaccount
Since Since
Subaccount Investing In: 1 year Commencement 1 Year 5 Years 10 Years Commencement
<S> <C> <C> <C> <C> <C> <C> <C>
AXPSM VARIABLE PORTFOLIO
BC3 Blue Chip Advantage Fund (9/99;9/99)* --% 13.13% --% --% --% 10.74%
BD3 Bond Fund (9/99;10/81) -- 1.50 1.08 7.36 7.53 10.06
CR3 Capital Resource Fund (9/99;10/81) -- 17.26 23.01 20.63 14.82 15.30
CM3 Cash Management Fund (9/99;10/81) -- 1.17 4.10 4.48 4.27 5.95
DE3 Diversified Equity Income Fund -- 5.76 -- -- -- 2.04
(9/99;9/99)
EM3 Emerging Markets Fund (5/00;5/00)+ -- -- -- -- -- --
EI3 Extra Income Fund (9/99;5/96) -- 1.77 5.60 -- -- 4.88
FI3 Federal Income Fund (9/99;9/99) -- 0.69 -- -- -- 0.60
GB3 Global Bond Fund (9/99;5/96) -- -0.36 -4.98 -- -- 3.45
GR3 Growth Fund (9/99;9/99) -- 19.63 -- -- -- 16.62
IE3 International Fund (9/99;1/92) -- 30.51 44.77 15.45 -- 12.70
MF3 Managed Fund (9/99;4/86) -- 10.28 14.16 17.51 12.86 12.21
ND3 New Dimensions Fund(R)(9/99;5/96) -- 21.59 31.22 -- -- 25.60
IV3 S&P 500 Index Fund (5/00;5/00)+ -- -- -- -- -- --
SC3 Small Cap Advantage Fund (9/99;9/99) -- 14.27 -- -- -- 11.97
SA3 Strategy Aggressive Fund (9/99;1/92) -- 54.28 70.03 24.06 -- 16.32
AIM V.I.
3CA Capital Appreciation Fund (9/99;5/93) -- 33.82 43.78 24.84 -- 21.59
3CD Capital Development Fund (9/99;5/98) -- 29.69 28.33 -- -- 10.53
American Century VARIABLE PORTFOLIOS, INC.
3IF VP International (9/99;5/94) -- 45.58 63.09 21.45 -- 17.54
3VA VP Value (9/99;5/96) -- -4.08 -1.45 -- -- 10.43
CALVERT CVS
3SR Social Balanced Portfolio (5/00;9/86) -- -- 11.55 17.32 11.38 10.98
FIDELITY VIP
3GI III Growth & Income Portfolio (Service -- 7.26 7.05 -- -- 20.11
Class) (9/99;12/96)
3MP III Mid Cap Portfolio (Service Class) -- 28.84 47.87 -- -- 51.93
(9/99;2/98)
3OS Overseas Portfolio (Service Class) -- 24.32 41.55 16.62 10.74 10.12
(9/99;12/87)
FRANKLIN TEMPLETON VIP TRUST
3RE Franklin Real Estate Fund - Class 2 -- -0.47 -6.93 7.33 8.34 8.01
(9/99;1/89)***
3SI Franklin Value Securities Fund - Class -- 5.52 0.78 -- -- -13.72
2
(9/99;5/98)***
3IS Templeton International Smaller -- 4.72 23.18 -- -- 4.61
Companies Fund - Class 2 (9/99;5/96)***
GOLDMAN SACHS Variable Insurance Trust (VIT)
3SE CORESM Small Cap Equity Fund -- 17.04 16.84 -- -- 2.78
(9/99;2/98)****
3UE CORESM U.S. Equity Fund (9/99;2/98) -- 12.79 23.56 -- -- 20.00
3MC Mid Cap Value Fund (9/99;4/94) -- -3.31 -1.55 -- -- -9.43
</TABLE>
* (Commencement date of the subaccount; Commencement date of the Fund)
** Current applicable charges deducted from fund performance include a $30
contract administrative charge and a 0.55% mortality and expense risk fee.
Premium taxes are not reflected in these total returns.
+ Fund had not commenced operations as of Dec. 31, 1999.
***Class 2 shares were issued Jan. 6, 1999. Prior to Jan. 6, 1999, Class 2
performance represents the historical results of Class 1 Shares.
Performance of Class 2 Shares for periods after its Jan. 6, 1999 inception
will reflect Class 2's additional 12b-1 fee expense which also affects all
future performance. Figures assume reinvestment of dividends and capital
gains.
****CoreSM is a service mark of Goldman, Sachs & Co.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return For Periods Ending Dec. 31, 1999
Performance Since Performance Since
Commencement of the Commencement of the Fund**
Subaccount
Since Since
Subaccount Investing In: 1 year Commencement 1 Year 5 Years 10 Years Commencement
<S> <C> <C> <C> <C> <C> <C> <C>
JANUS ASPEN SERIES
3AG Aggressive Growth Portfolio - Service -- -- 121.96 35.05 -- 33.20
Shares (5/00;9/93)*
3GT Global Technology Portfolio - Service -- -- -- -- -- --
Shares (5/00;1/00) +
3IG International Growth Portfolio - -- -- 78.52 32.51 -- 27.78
Service Shares (5/00;4/94)
LAZARD RETIREMENT SERIES
3IP International Equity Portfolio -- 8.94 20.69 -- -- 25.47
(9/99;9/98)
MFS(R) VARIABLE INSURANCE TRUST (VIT)
3MG Growth Series - Service Class -- -- -- -- -- 39.43
(5/00;5/99)
3MD New Discovery Series - Service Class -- -- 69.36 -- -- 38.44
(5/00;5/98)
PUTNAM VARIABLE TRUST
3IN Putnam VT International New -- 57.48 101.65 -- -- 50.84
Opportunities Fund - Class IB Shares
(9/99;4/98)*****
3VS Putnam VT Vista Fund - Class IB Shares -- 37.99 51.83 -- -- 30.30
(9/99;1/97)*****
ROYCE CAPITAL FUND
3MI Micro-Cap Portfolio (9/99;12/96) -- 15.92 27.40 -- -- 16.64
THIRD AVENUE
3SV Value Portfolio (9/99;9/99) -- 8.18 -- -- -- 8.18
WANGER
3IT International Small Cap (9/99;5/95) -- 54.72 125.15 -- -- 37.94
3SP U.S. Small Cap (9/99;5/95) -- 15.59 24.15 -- -- 25.69
WARBURG PINCUS TRUST
3EG Emerging Growth Portfolio (9/99;9/99) -- 34.66 -- -- -- 31.68
</TABLE>
* (Commencement date of the subaccount; Commencement date of the Fund)
** Current applicable charges deducted from fund performance include a $30
contract administrative charge and a 0.55% mortality and expense risk fee.
Premium taxes are not reflected in these total returns.
+ Fund had not commenced operations as of Dec. 31, 1999.
***** Each of the above Funds' Class IB Shares commenced operations on
April 30, 1998. For periods prior to inception of Class IB Shares,
performance information for Class IB Shares is based upon performance of
the Fund's Class IA Shares adjusted to reflect the fees paid by Class IB
Shares, including the 12b-1 fee of 0.15%.
Cumulative Total Return
Cumulative total return represents the cumulative change in the value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value). We compute cumulative total return by using the following formula:
ERV - P
-------
P
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period, at the end of
the period (or fractional portion thereof).
All total return figures reflect the deduction of all applicable charges
including the contract administrative charge and mortality and expense risk fee.
<PAGE>
Annualized Calculation of Yield for Subaccounts Investing in Money Market Funds
Annualized Simple Yield
For the subaccounts investing in money market funds, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical subaccount (exclusive of
capital changes and income other than investment income) at the
beginning of a particular seven-day period;
(b) less a pro rata share of the subaccount expenses accrued over the
period;
(c) dividing this difference by the value of the subaccount at the
beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The subaccount's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the
period and
o any dividends declared for such shares.
It does not include any realized or unrealized gains or losses.
Annualized Compound Yield
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] -1
<TABLE>
<CAPTION>
Annualized Yields Based on the Seven-Day Period Ending Dec. 31, 1999
Subaccount Investing In Simple Yield Compound Yield
<S> <C> <C> <C>
CM3 AXPSM Variable Portfolio - Cash Management Fund 5.51% 5.66%
</TABLE>
You must consider (when comparing an investment in subaccounts investing in
money market funds with fixed annuities) that fixed annuities often provide an
agreed-to or guaranteed yield for a stated period of time, whereas the
subaccount's yield fluctuates. In comparing the yield of the subaccount to a
money market fund, you should consider the different services that the contract
provides.
Annualized Yield for Subaccounts Investing in Income Funds
For the subaccounts investing in income funds, we base quotations of yield on
all investment income earned during a particular 30-day period, less expenses
accrued during the period (net investment income) and compute it by dividing net
investment income per accumulation unit by the value of an accumulation unit on
the last day of the period, according to the following formula:
YIELD = 2[( a-b + 1)6 - 1]
---
cd
where: a = dividends and investment income earned during the period
b = expenses accrued for the period (net of reimbursement
c = the average daily number of accumulation units
outstanding during the period that were entitled to
receive dividends
d = the maximum offering price per accumulation unit on
the last day of the period
<PAGE>
The subaccount earns yield from the increase in the net asset value of shares of
the fund in which it invests and from dividends declared and paid by the fund,
which are automatically invested in shares of the fund.
The yield on the subaccount's accumulation unit may fluctuate daily and does not
provide a basis for determining future yields.
Annualized Yield Based on 30-Day Period Ended Dec. 31, 1999
Subaccount Investing In Simple Yield
BD3 AXPSM Variable Portfolio - Bond Fund 7.42%
EI3 AXPSM Variable Portfolio - Extra Income Fund 10.23
FI3 AXPSM Variable Portfolio - Federal Income Fund 5.47
GB3 AXPSM Variable Portfolio - Global Bond Fund 5.26
Independent rating or statistical services or publishers or publications such as
those listed below may quote subaccount performance, compare it to rankings,
yields or returns, or use it in variable annuity accumulation or settlement
illustrations they publish or prepare.
The Bank Rate Monitor National Index, Barron's, Business Week, CDA
Technologies, Donoghue's Money Market Fund Report, Financial Services
Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's Business Daily,
Kiplinger's Personal Finance, Lipper Analytical Services, Money,
Morningstar, Mutual Fund Forecaster, Newsweek, The New York Times,
Personal Investor, Stanger Report, Sylvia Porter's Personal Finance,
USA Today, U.S. News & World Report, The Wall Street Journal and
Wiesenberger Investment Companies Service.
CALCULATING ANNUITY PAYOUTS
The Variable Account
We do the following calculations separately for each of the subaccounts of the
variable account. The separate monthly payouts, added together, make up your
total variable annuity payout.
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your contract on the valuation date and then
deduct any applicable premium tax; then
o apply the result to the annuity table contained in the contract or another
table at least as favorable.
The annuity table shows the amount of the first monthly payment for each $1,000
of value which depends on factors built into the table, as described below.
Annuity Units: We then convert the value of your subaccount to annuity units. To
compute the number of units credited to you, we divide the first monthly payment
by the annuity unit value (see below) on the valuation date. The number of units
in your subaccount is fixed. The value of the units fluctuates with the
performance of the underlying fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date; by o the fixed number of annuity
units credited to you.
<PAGE>
Annuity Unit Values: We originally set this value at $1 for each subaccount. To
calculate later values we multiply the last annuity value by the product of:
o the net investment factor; and
o the neutralizing factor.
The purpose of the neutralizing factor is to offset the effect of the assumed
rate built into the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor:
We determine the net investment factor by:
o adding the fund's current net asset value per share plus the per share
amount of any accrued income or capital gain dividends to obtain a current
adjusted net asset value per share; then
o dividing that sum by the previous adjusted net asset value per share; and o
subtracting the percentage factor representing the mortality and expense
risk fee from the result.
Because the net asset value of the fund may fluctuate, the net investment factor
may be greater or less than one, and the annuity unit value may increase or
decrease. You bear this investment risk in a variable subaccount.
The Fixed Account
We guarantee your fixed annuity payout amounts. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the value of your fixed account at the settlement date or the date you
selected to begin receiving your annuity payouts; then
o using an annuity table, we apply the value according to the annuity payout
plan you select.
The annuity payout table we use will be the one in effect at the time you choose
to begin your annuity payouts. The values in the table will be equal to or
greater than the table in your contract.
RATING AGENCIES
The following chart reflects the ratings given to us by independent rating
agencies. These agencies evaluate the financial soundness and claims-paying
ability of insurance companies based on a number of different factors. This
information does not relate to the management or performance of the subaccounts
of the contract. This information relates only to the fixed account and reflects
our ability to make annuity payouts and to pay death benefits and other
distributions from the contract.
Rating Agency Rating
--------------- ---------
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
<PAGE>
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is IDS Life which offers the contract
on a continuous basis.
The contract is new and, therefore, we have not received any surrender charges
or paid any commissions.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI have been audited by Ernst &
Young LLP (1400 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN
55402), independent auditors, as stated in their report appearing herein.
FINANCIAL STATEMENTS
IDS Life Variable Account 10 - American Express Retirement Advisor Variable
AnnuitySM - Band 3
Annual Financial Information
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying individual and combined statements of net
assets of the segregated asset subaccounts of IDS Life Variable Account 10
(comprised of subaccounts BC3, BD3, CR3, CM3, DE3, EI3, FI3, GB3, GR3, IE3, MF3,
ND3, SC3, SA3, 3CA, 3CD, 3IF, 3VA, 3GI, 3MP, 3OS, 3RE, 3SI, 3IS, 3SE, 3UE, 3MC,
3IP, 3IN, 3VS, 3MI, 3SV, 3IT, 3SP and 3EG) as of December 31, 1999, and the
related statements of operations and changes in nets assets for the periods
indicated therein. These financial statements are the responsibility of the
management of IDS Life Insurance Company. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1999 with
the affiliated and unaffiliated mutual fund managers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
segregated asset subaccounts of IDS Life Variable Account 10 (as described
above) at December 31, 1999, and the individual and combined results of their
operations and changes in their net assets for the periods indicated therein, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Minneapolis, Minnesota
March 17, 2000
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Net Assets
December 31, 1999
Segregated Asset Subaccounts
Assets BC3 BD3 CR3
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C>
at cost $ 212,470 $ 47,995 $ 938,790
--------- -------- ---------
at market value $ 234,104 $ 47,900 $ 996,131
Dividends receivable -- 291 --
Accounts receivable from IDS Life for
contract purchase payments -- -- --
Receivable from mutual funds and portfolios
for share redemptions -- -- --
-------- ------- -------
Total assets 234,104 48,191 996,131
======= ====== =======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 593 22 464
Contract terminations 3 -- --
Payable to mutual funds and portfolios
for investments purchased -- -- --
------- ------- -------
Total liabilities 596 22 464
--- -- ---
Net assets applicable to contracts
in accumulation period $ 233,508 $ 48,169 $ 995,667
========= ======== =========
Accumulation units outstanding 210,746 47,444 871,976
======= ====== =======
Net asset value per accumulation unit $ 1.11 $ 1.02 $ 1.14
====== ====== ======
Assets CM3 DE3 EI3
Investments in shares of mutual funds and portfolios:
at cost $ 2,285,594 $ 22,840 $ 47,337
----------- -------- --------
at market value $ 2,285,593 $ 23,318 $ 47,709
Dividends receivable 9,214 -- 398
Accounts receivable from IDS Life for
contract purchase payments 114 -- 700
Receivable from mutual funds and portfolios
for share redemptions -- -- --
------- ------ -------
Total assets 2,294,921 23,318 48,807
========= ====== ======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 945 230 21
Contract terminations -- -- --
Payable to mutual funds and portfolios
for investments purchased -- -- --
--- ---- ---
Total liabilities 945 230 21
--- --- --
Net assets applicable to contracts
in accumulation period $ 2,293,976 $ 23,088 $ 48,786
----------- -------- --------
Accumulation units outstanding 2,266,486 22,622 48,194
========= ====== ======
Net asset value per accumulation unit $ 1.01 $ 1.02 $ 1.01
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Net Assets
December 31, 1999
Segregated Asset Subaccounts
Assets FI3 GB3 GR3
Investments in shares of mutual funds
and portfolios:
<S> <C> <C> <C>
at cost $ 10,946 $ 2,832 $ 405,149
-------- ------- ---------
at market value $ 10,943 $ 2,809 $ 467,888
Dividends receivable 11,133 9 --
Accounts receivable from IDS Life for
contract purchase payments 1,285 -- 22
Receivable from mutual funds and portfolios
for share redemptions -- -- --
----- ----- -----
Total assets 23,361 2,818 467,910
====== ===== =======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 2,497 1 216
Contract terminations -- -- --
Payable to mutual funds and portfolios
for investments purchased -- -- --
----- ----- -----
Total liabilities 2,497 1 216
----- - ---
Net assets applicable to contracts in
accumulation period $ 20,864 $ 2,817 $ 467,694
======== ======= =========
Accumulation units outstanding 9,663 2,813 400,647
----- ----- -------
Net asset value per accumulation unit $ 1.01 $ 1.00 $ 1.17
====== ====== ======
Assets IE3 MF3 ND3
Investments in shares of mutual funds
and portfolios:
at cost $ 151,783 $ 10,089 $ 459,229
--------- -------- ---------
at market value $ 169,572 $ 10,472 $ 500,044
Dividends receivable -- -- --
Accounts receivable from IDS Life for
contract purchase payments -- -- 7,640
Receivable from mutual funds and portfolios
for share redemptions -- -- --
----- ----- -----
Total assets 169,572 10,472 507,684
======= ====== =======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 73 4 201
Contract terminations -- -- --
Payable to mutual funds and portfolios
for investments purchased -- -- --
----- ----- -----
Total liabilities 73 4 201
-- - ---
Net assets applicable to contracts in
accumulation period $ 169,499 $ 10,468 $ 507,483
--------- -------- ---------
Accumulation units outstanding 133,025 9,618 426,131
======= ===== =======
Net asset value per accumulation unit $ 1.27 $ 1.09 $ 1.19
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Net Assets
December 31, 1999
Segregated Asset Subaccounts
Assets SC3 SA3 3CA
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C>
at cost $ 595,837 $ 40,705 $ 218,472
--------- -------- ---------
at market value $ 662,774 $ 49,917 $ 243,363
Dividends receivable -- -- --
Accounts receivable from IDS Life for contract purchase payments -- -- --
Receivable from mutual funds and portfolios for share redemptions -- -- 95
---- ------- -------
Total assets 662,774 49,917 243,458
======= ====== =======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 1,022 20 95
Contract terminations 200,000 -- --
Payable to mutual funds and portfolios for investments purchased -- -- --
---- ---- ----
Total liabilities 201,022 20 95
------- -- --
Net assets applicable to contracts in accumulation period $ 461,752 $ 49,897 $ 243,363
--------- -------- ---------
Accumulation units outstanding 27,894 32,918 185,081
====== ====== =======
Net asset value per accumulation unit $ 1.12 $ 1.52 $ 1.31
====== ====== ======
Assets 3CD 3IF 3VA
Investments in shares of mutual funds and portfolios:
at cost $ 4,002 $ 11,894 $ 53,884
------- -------- --------
at market value $ 4,882 $ 13,570 $ 54,561
Dividends receivable -- -- --
Accounts receivable from IDS Life for contract purchase payments -- -- --
Receivable from mutual funds and portfolios for share redemptions 2 5 18
- - --
Total assets 4,884 13,575 54,579
===== ====== ======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 2 5 18
Contract terminations -- -- --
Payable to mutual funds and portfolios for investments purchased -- -- --
----- ---- ----
Total liabilities 2 5 18
- - --
Net assets applicable to contracts in accumulation period $ 4,882 $ 13,570 $ 54,561
------- -------- --------
Accumulation units outstanding 3,858 9,427 59,244
===== ===== ======
Net asset value per accumulation unit $ 1.27 $ 1.44 $ 0.92
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Net Assets
December 31, 1999
Segregated Asset Subaccounts
Assets 3GI 3MP 3OS
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C>
at cost $ 456,359 $ 111,787 $ 26,387
--------- --------- --------
at market value $ 465,000 $ 126,214 $ 30,534
Dividends receivable -- 790 --
Accounts receivable from IDS Life for contract purchase payments 131 24 --
Receivable from mutual funds and portfolios for share redemptions 158 50 14
--- -- --
Total assets 465,289 127,078 30,548
======= ======= ======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 158 50 14
Contract terminations -- -- --
Payable to mutual funds and portfolios for investments purchased 131 24 --
--- --
Total liabilities 289 74 14
--- -- --
Net assets applicable to contracts in accumulation period $ 465,000 $ 127,004 $ 30,534
--------- --------- --------
Accumulation units outstanding 444,754 102,185 24,865
======= ======= ======
Net asset value per accumulation unit $ 1.05 $ 1.24 $ 1.23
====== ====== ======
Assets 3RE 3SI 3IS
Investments in shares of mutual funds and portfolios:
at cost $ 3,941 $ 1,504 $ 8,872
------- ------- -------
at market value $ 3,989 $ 1,563 $ 9,405
Dividends receivable -- -- --
Accounts receivable from IDS Life for contract purchase payments -- -- --
Receivable from mutual funds and portfolios for share redemptions 3 16 16
- -- --
Total assets 3,992 1,579 9,421
===== ===== =====
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 2 -- 4
Contract terminations -- -- --
Payable to mutual funds and portfolios for investments purchased 1 16 12
- -- --
Total liabilities 3 16 16
- -- --
Net assets applicable to contracts in accumulation period $ 3,989 $ 1,563 $ 9,405
------- ------- -------
Accumulation units outstanding 4,160 1,623 9,250
===== ===== =====
Net asset value per accumulation unit $ 0.96 $ 0.96 $ 1.02
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Net Assets
December 31, 1999
Segregated Asset Subaccounts
Assets 3SE 3UE 3MC
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C>
at cost $ 42,261 $ 182,216 $ 7,429
-------- --------- -------
at market value $ 46,356 $ 187,710 $ 7,530
Dividends receivable -- -- --
Accounts receivable from IDS Life for contract purchase payments -- -- 10
Receivable from mutual funds and portfolios for share redemptions 20 92 2
-- -- -
Total assets 46,376 187,802 7,542
====== ======= =====
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 20 32 2
Contract terminations -- -- --
Payable to mutual funds and portfolios for investments purchased -- 60 10
-- --
Total liabilities 20 92 12
-- -- --
Net assets applicable to contracts in accumulation period $ 46,356 $ 187,710 $ 7,530
-------- --------- -------
Accumulation units outstanding 40,902 170,333 7,935
====== ======= =====
Net asset value per accumulation unit $ 1.13 $ 1.10 $ 0.95
====== ====== ======
Assets 3IP 3IN 3VS
Investments in shares of mutual funds and portfolios:
at cost $ 8,398 $ 105,475 $ 230,602
------- --------- ---------
at market value $ 8,964 $ 131,637 $ 247,884
Dividends receivable -- -- --
Accounts receivable from IDS Life for contract purchase payments -- 11 3,382
Receivable from mutual funds and portfolios for share redemptions 4 50 102
- -- ---
Total assets 8,968 131,698 251,368
===== ======= =======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 4 50 102
Contract terminations -- -- --
Payable to mutual funds and portfolios for investments purchased -- 11 3,382
-- -----
Total liabilities 4 61 3,484
- -- -----
Net assets applicable to contracts in accumulation period $ 8,964 $ 131,637 $ 247,884
------- --------- ---------
Accumulation units outstanding 8,363 86,882 182,717
===== ====== =======
Net asset value per accumulation unit $ 1.07 $ 1.52 $ 1.36
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Net Assets
December 31, 1999
Segregated Asset Subaccounts
Assets 3MI 3SV 3IT
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C>
at cost $ 21,022 $ 124,441 $ 138,891
-------- --------- ---------
at market value $ 21,970 $ 130,357 $ 169,351
Dividends receivable -- -- --
Accounts receivable from IDS Life for contract purchase payments 5 -- 3,385
Receivable from mutual funds and portfolios for share redemptions 9 866 60
- --- --
Total assets 21,984 131,223 172,796
====== ======= =======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 9 58 60
Contract terminations -- -- --
Payable to mutual funds and portfolios for investments purchased 5 808 3,385
- --- -----
Total liabilities 14 866 3,445
-- --- -----
Net assets applicable to contracts in accumulation period $ 21,970 $ 130,357 $ 169,351
-------- --------- ---------
Accumulation units outstanding 19,042 120,448 111,791
====== ======= =======
Net asset value per accumulation unit $ 1.15 $ 1.08 $ 1.51
====== ====== ======
Combined
Variable
Assets 3SP 3EG Account
Investments in shares of mutual funds and portfolios:
at cost $ 135,620 $ 18,725 $ 7,143,778
--------- -------- -----------
at market value $ 143,413 $ 22,322 $ 7,579,749
Dividends receivable -- -- 21,835
Accounts receivable from IDS Life for contract purchase payments -- -- 16,709
Receivable from mutual funds and portfolios for share redemptions 174 11 1,767
--- -- -----
Total assets 143,587 22,333 7,620,060
======= ====== =========
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 51 11 7,056
Contract terminations -- -- 200,003
Payable to mutual funds and portfolios for investments purchased 123 -- 7,968
--- -----
Total liabilities 174 11 215,027
--- -- -------
Net assets applicable to contracts in accumulation period $ 143,413 $ 22,322 $ 7,405,033
--------- -------- -----------
Accumulation units outstanding 124,538 16,945
======= ======
Net asset value per accumulation unit $ 1.15 $ 1.32
====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Operations
Period ended December 31, 1999
Segregated Asset Subaccounts1
<S> <C> <C> <C>
Investment income BC3 BD3 CR3
Dividend income from mutual funds and portfolios $ 2,835 $ 449 $ 89,254
Mortality and expense risk fee 3,101 32 1,193
----- -- -----
Investment income (loss) - net (266) 417 88,061
==== === ======
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 2,132,738 41,908 1,590
Cost of investments sold 2,015,349 42,117 1,558
--------- ------ -----
Net realized gain (loss) on investments 117,389 (209) 32
Net change in unrealized appreciation or depreciation of investments 21,634 (95) 57,341
------ --- ------
Net gain (loss) on investments 139,023 (304) 57,373
------- ---- ------
Net increase (decrease) in net assets resulting from operations $ 138,757 $ 113 $ 145,434
========= ===== =========
Investment income CM3 DE3 EI3
Dividend income from mutual funds and portfolios $ 12,609 $ 6,759 $ 445
Mortality and expense risk fee 1,286 2,691 24
----- ----- --
Investment income (loss) - net 11,323 4,068 421
====== ===== ===
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 410,561 2,018,274 994
Cost of investments sold 410,561 2,006,620 987
------- --------- ---
Net realized gain (loss) on investments -- 11,654 7
Net change in unrealized appreciation or depreciation of investments (1) 478 372
-- --- ---
Net gain (loss) on investments (1) 12,132 379
-- ------ ---
Net increase (decrease) in net assets resulting from operations $ 11,322 $ 16,200 $ 800
======== ======== =====
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Operations
Period ended December 31, 1999
Segregated Asset Subaccounts1
Investment income FI3 GB3 GR3
<S> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 129,829 $ 18 $ 465
Mortality and expense risk fee 14,908 2 2,851
------ - -----
Investment income (loss) - net 114,921 16 (2,386)
======= == ======
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 10,084,511 691 2,208,747
Cost of investments sold 10,120,144 699 2,020,091
---------- --- ---------
Net realized gain (loss) on investments (35,633) (8) 188,656
Net change in unrealized appreciation or depreciation of investments (3) (23) 62,739
-- --- ------
Net gain (loss) on investments (35,636) (31) 251,395
------- --- -------
Net increase (decrease) in net assets resulting from operations $ 79,285 $ (15) $ 249,009
======== ===== =========
Investment income IE3 MF3 ND3
Dividend income from mutual funds and portfolios $ 1,762 $ 206 $ 1,060
Mortality and expense risk fee 79 5 238
-- - ---
Investment income (loss) - net 1,683 201 822
===== === ===
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 1,647 702 19,277
Cost of investments sold 1,531 681 18,631
----- --- ------
Net realized gain (loss) on investments 116 21 646
Net change in unrealized appreciation or depreciation of investments 17,789 383 40,815
------ --- ------
Net gain (loss) on investments 17,905 404 41,461
------ --- ------
Net increase (decrease) in net assets resulting from operations $ 19,588 $ 605 $ 42,283
======== ===== ========
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Operations
Period ended December 31, 1999
Segregated Asset Subaccounts1
Investment income SC3 SA3 3CA
<S> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 25,198 $ 1,311 $ 4,208
Mortality and expense risk fee 4,801 28 115
----- -- ---
Investment income (loss) - net 20,397 1,283 4,093
====== ===== =====
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments in
mutual funds and portfolios:
Proceeds from sales 2,597,025 1,583 2,099
Cost of investments sold 2,460,592 1,435 1,942
--------- ----- -----
Net realized gain (loss) on investments 136,433 148 157
Net change in unrealized appreciation or
depreciation of investments 66,937 9,212 24,891
------ ----- ------
Net gain (loss) on investments 203,370 9,360 25,048
------- ----- ------
Net increase (decrease) in net assets resulting
from operations $ 223,767 $ 10,643 $ 29,141
========= ======== ========
Investment income 3CD 3IF 3VA
Dividend income from mutual funds and portfolios $-- $-- $--
Mortality and expense risk fee 5 6 35
- - --
Investment income (loss) - net (5) (6) (35)
== == ===
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments in
mutual funds and portfolios:
Proceeds from sales 989 5,299 1,060
Cost of investments sold 842 4,796 1,075
--- ----- -----
Net realized gain (loss) on investments 147 503 (15)
Net change in unrealized appreciation or
depreciation of investments 880 1,676 677
--- ----- ---
Net gain (loss) on investments 1,027 2,179 662
----- ----- ---
Net increase (decrease) in net assets resulting
from operations $ 1,022 $ 2,173 $ 627
======= ======= =====
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Operations
Period ended December 31, 1999
Segregated Asset Subaccounts1
Investment income 3GI 3MP 3OS
<S> <C> <C> <C>
Dividend income from mutual funds and portfolios $-- $ 790 $--
Mortality and expense risk fee 207 65 21
--- -- --
Investment income (loss) - net (207) 725 (21)
==== === ===
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 19,674 1,937 926
Cost of investments sold 19,571 1,855 827
------ ----- ---
Net realized gain (loss) on investments 103 82 99
Net change in unrealized appreciation or depreciation of investments 8,641 14,427 4,147
----- ------ -----
Net gain (loss) on investments 8,744 14,509 4,246
----- ------ -----
Net increase (decrease) in net assets resulting from operations $ 8,537 $ 15,234 $ 4,225
======= ======== =======
Investment income 3RE 3SI 3IS
Dividend income from mutual funds and portfolios $-- $-- $--
Mortality and expense risk fee 4 2 10
- - --
Investment income (loss) - net (4) (2) (10)
== == ===
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 706 1,528 722
Cost of investments sold 712 1,493 684
--- ----- ---
Net realized gain (loss) on investments (6) 35 38
Net change in unrealized appreciation or depreciation of investments 48 59 533
-- -- ---
Net gain (loss) on investments 42 94 571
-- -- ---
Net increase (decrease) in net assets resulting from operations $ 38 $ 92 $ 561
==== ==== =====
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Operations
Period ended December 31, 1999
Segregated Asset Subaccounts1
Investment income 3SE 3UE 3MC
<S> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 99 $ 781 $ 43
Mortality and expense risk fee 25 56 4
-- -- -
Investment income (loss) - net 74 725 39
== === ==
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 767 2,857 814
Cost of investments sold 726 2,715 826
--- ----- ---
Net realized gain (loss) on investments 41 142 (12)
Net change in unrealized appreciation or depreciation of investments 4,095 5,494 101
----- ----- ---
Net gain (loss) on investments 4,136 5,636 89
----- ----- --
Net increase (decrease) in net assets resulting from operations $ 4,210 $ 6,361 $ 128
======= ======= =====
Investment income 3IP 3IN 3VS
Dividend income from mutual funds and portfolios $ 84 $ -- $16,708
Mortality and expense risk fee 10 72 117
-- -- ------
Investment income (loss) - net 74 (72) 16,591
== === ======
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 1,772 12,231 6,053
Cost of investments sold 1,695 10,485 6.170
--- ----- -----
Net realized gain (loss) on investments 77 1,746 (117)
Net change in unrealized appreciation or depreciation of investments 566 26,162 17,282
----- ----- ------
Net gain (loss) on investments 643 27,908 17,165
----- ----- ------
Net increase (decrease) in net assets resulting from operations $ 717 $27,836 $33,756
======= ======= =======
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Operations
Period ended December 31, 1999
Segregated Asset Subaccounts
Investment income 3MI1 3SV2 3IT1
<S> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 1,671 $-- $--
Mortality and expense risk fee 19 69 66
-- -- --
Investment income (loss) - net 1,652 (69) (66)
===== === ===
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 1,218 2,975 875
Cost of investments sold 1,188 2,919 736
----- ----- ---
Net realized gain (loss) on investments 30 56 139
Net change in unrealized appreciation or depreciation of investments 948 5,916 30,460
--- ----- ------
Net gain (loss) on investments 978 5,972 30,599
--- ----- ------
Net increase (decrease) in net assets resulting from operations $ 2,630 $ 5,903 $ 30,533
======= ======= ========
Combined
Variable
Investment income 3SP1 3EG2 Account
Dividend income from mutual funds and portfolios $-- $ 176 $ 296,760
Mortality and expense risk fee 60 17 32,224
-- -- ------
Investment income (loss) - net (60) 159 264,536
=== === =======
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds and portfolios:
Proceeds from sales 3,399 7,867 19,596,016
Cost of investments sold 3,337 6,877 19,172,467
----- ----- ----------
Net realized gain (loss) on investments 62 990 423,549
Net change in unrealized appreciation or depreciation of investments 7,793 3,597 435,971
----- ----- -------
Net gain (loss) on investments 7,855 4,587 859,520
----- ----- -------
Net increase (decrease) in net assets resulting from operations $ 7,795 $ 4,746 $ 1,124,056
======= ======= ===========
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
2For the period Sept. 21, 1999 (commencement of operations) to Dec. 31, 1999.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Changes in Net Assets
Period ended December 31, 1999
Segregated Asset Subaccounts1
Operations BC3 BD3 CR3
<S> <C> <C> <C>
Investment income (loss) - net $ (266) $ 417 $ 88,061
Net realized gain (loss) on investments 117,389 (209) 32
Net change in unrealized appreciation or depreciation of investments 21,634 (95) 57,341
------ --- ------
Net increase (decrease) in net assets resulting from operations 138,757 113 145,434
======= === =======
Contract transactions
Contract purchase payments 2,223,661 56,502 850,083
Net transfers2 (428) (8,446) 150
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits (2,128,482) -- --
---------- ---- -----
Increase (decrease) from contract transactions 94,751 48,056 850,233
------ ------ -------
Net assets at beginning of year -- -- --
----- --- -----
Net assets at end of year $ 233,508 $ 48,169 $ 995,667
========= ======== =========
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 211,504 56,266 871,965
Net transfers2 598 (8,822) 11
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits (1,356) -- --
------ ----- -----
Units outstanding at end of year 210,746 47,444 871,976
======= ====== =======
Operations CM3 DE3 EI3
Investment income (loss) - net $ 11,323 $ 4,068 $ 421
Net realized gain (loss) on investments -- 11,654 7
Net change in unrealized appreciation or depreciation of investments (1) 478 372
-- --- ---
Net increase (decrease) in net assets resulting from operations 11,322 16,200 800
====== ====== ===
Contract transactions
Contract purchase payments 2,447,471 2,017,652 40,753
Net transfers2 (151,562) 4,251 7,563
Transfers for policy loans (7,921) -- --
Contract terminations:
Surrender benefits (5,334) (2,015,015) (330)
------ ---------- ----
Increase (decrease) from contract transactions 2,282,654 6,888 47,986
--------- ----- ------
Net assets at beginning of year -- -- --
------ ----- ----
Net assets at end of year $ 2,293,976 $ 23,088 $ 48,786
=========== ======== ========
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 2,427,761 18,486 40,956
Net transfers2 (148,076) 4,136 7,565
Transfers for policy loans (7,903) -- --
Contract terminations:
Surrender benefits (5,296) -- (327)
------ ----
Units outstanding at end of year 2,266,486 22,622 48,194
========= ====== ======
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
2Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Changes in Net Assets
Period ended December 31, 1999
Segregated Asset Subaccounts1
Operations FI3 GB3 GR3
<S> <C> <C> <C>
Investment income (loss) - net $ 114,921 $ 16 $ (2,386)
Net realized gain (loss) on investments (35,633) (8) 188,656
Net change in unrealized appreciation or depreciation of investments (3) (23) 62,739
-- --- ------
Net increase (decrease) in net assets resulting from operations 79,285 (15) 249,009
====== === =======
Contract transactions
Contract purchase payments 10,011,795 1,366 2,385,249
Net transfers2 (875) 1,466 12,026
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits (10,069,341) -- (2,178,590)
----------- ----------
Increase (decrease) from contract transactions (58,421) 2,832 218,685
------- ----- -------
Net assets at beginning of year -- -- --
----- ------ -----
Net assets at end of year $ 20,864 $ 2,817 $ 467,694
-------- ------- ---------
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 11,748 1,356 390,177
Net transfers2 (2,085) 1,457 10,470
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits -- -- --
----- ------ -----
Units outstanding at end of year 9,663 2,813 400,647
===== ===== =======
Operations IE3 MF3 ND3
Investment income (loss) - net $ 1,683 $ 201 $ 822
Net realized gain (loss) on investments 116 21 646
Net change in unrealized appreciation or depreciation of investments 17,789 383 40,815
------ --- ------
Net increase (decrease) in net assets resulting from operations 19,588 605 42,283
====== === ======
Contract transactions
Contract purchase payments 122,687 3,163 419,823
Net transfers2 28,149 6,700 47,188
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits (925) -- (1,811)
---- ------
Increase (decrease) from contract transactions 149,911 9,863 465,200
------- ----- -------
Net assets at beginning of year -- -- --
----- ------- ---------
Net assets at end of year $ 169,499 $ 10,468 $ 507,483
========= ======== =========
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 109,540 3,128 384,980
Net transfers2 24,246 6,490 42,731
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits (761) -- (1,580)
---- ------
Units outstanding at end of year 133,025 9,618 426,131
======= ===== =======
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
2Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Changes in Net Assets
Period ended December 31, 1999
Segregated Asset Subaccounts1
Operations SC3 SA3 3CA
<S> <C> <C> <C>
Investment income (loss) - net $ 20,397 $ 1,283 $ 4,093
Net realized gain (loss) on investments 136,433 148 157
Net change in unrealized appreciation or depreciation of investments 66,937 9,212 24,891
------ ----- ------
Net increase (decrease) in net assets resulting from operations 223,767 10,643 29,141
======= ====== ======
Contract transactions
Contract purchase payments 3,025,558 27,399 193,854
Net transfers2 2,427 12,050 21,404
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits (2,790,000) (195) (1,036)
---------- ---- ------
Increase (decrease) from contract transactions 237,985 39,254 214,222
------- ------ -------
Net assets at beginning of year -- -- --
----- ------ ------
Net assets at end of year $ 461,752 $ 49,897 $ 243,363
========= ======== =========
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 25,607 23,484 167,912
Net transfers2 2,287 9,588 17,993
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits -- (154) (824)
---- ----
Units outstanding at end of year 27,894 32,918 185,081
====== ====== =======
Operations 3CD 3IF 3VA
Investment income (loss) - net $ (5) $ (6) $ (35)
Net realized gain (loss) on investments 147 503 (15)
Net change in unrealized appreciation or depreciation of investments 880 1,676 677
--- ----- ---
Net increase (decrease) in net assets resulting from operations 1,022 2,173 627
===== ===== ===
Contract transactions
Contract purchase payments 3,153 9,015 53,734
Net transfers2 707 2,382 200
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits -- -- --
----- ----- ----
Increase (decrease) from contract transactions 3,860 11,397 53,934
----- ------ ------
Net assets at beginning of year -- -- --
----- ----- ----
Net assets at end of year $ 4,882 $ 13,570 $ 54,561
======= ======== ========
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 3,331 7,633 59,036
Net transfers2 527 1,794 208
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits -- -- --
----- ----- ----
Units outstanding at end of year 3,858 9,427 59,244
===== ===== ======
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
2Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Changes in Net Assets
Period ended December 31, 1999
Segregated Asset Subaccounts1
Operations 3GI 3MP 3OS
<S> <C> <C> <C>
Investment income (loss) - net $ (207) $ 725 $ (21)
Net realized gain (loss) on investments 103 82 99
Net change in unrealized appreciation or depreciation of investments 8,641 14,427 4,147
----- ------ -----
Net increase (decrease) in net assets resulting from operations 8,537 15,234 4,225
===== ====== =====
Contract transactions
Contract purchase payments 448,377 87,463 22,997
Net transfers2 9,516 24,417 3,312
Transfers for policy loans -- (16) --
Contract terminations:
Surrender benefits (1,430) (94) --
------ ---
Increase (decrease) from contract transactions 456,463 111,770 26,309
------- ------- ------
Net assets at beginning of year -- -- --
----- ----- -----
Net assets at end of year $ 465,000 $ 127,004 $ 30,534
========= ========= ========
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 436,983 80,126 22,044
Net transfers2 9,167 22,159 2,821
Transfers for policy loans -- (16) --
Contract terminations:
Surrender benefits (1,396) (84) --
------ ---
Units outstanding at end of year 444,754 102,185 24,865
======= ======= ======
Operations 3RE 3SI 3IS
Investment income (loss) - net $ (4) $ (2) $ (10)
Net realized gain (loss) on investments (6) 35 38
Net change in unrealized appreciation or depreciation of investments 48 59 533
-- -- ---
Net increase (decrease) in net assets resulting from operations 38 92 561
== == ===
Contract transactions
Contract purchase payments 4,253 1,303 7,650
Net transfers2 (302) 168 1,194
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits -- -- --
---- ---- ----
Increase (decrease) from contract transactions 3,951 1,471 8,844
----- ----- -----
Net assets at beginning of year -- -- --
----- ----- -----
Net assets at end of year $ 3,989 $ 1,563 $ 9,405
======= ======= =======
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 4,478 1,436 8,027
Net transfers2 (318) 187 1,223
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits -- -- --
---- ---- ----
Units outstanding at end of year 4,160 1,623 9,250
===== ===== =====
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
2Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Changes in Net Assets
Period ended December 31, 1999
Segregated Asset Subaccounts1
Operations 3SE 3UE 3MC
<S> <C> <C> <C>
Investment income (loss) - net $ 74 $ 725 $ 39
Net realized gain (loss) on investments 41 142 (12)
Net change in unrealized appreciation or depreciation of investments 4,095 5,494 101
----- ----- ---
Net increase (decrease) in net assets resulting from operations 4,210 6,361 128
===== ===== ===
Contract transactions
Contract purchase payments 17,711 176,140 2,268
Net transfers2 24,582 5,209 5,150
Transfers for policy loans -- -- (16)
Contract terminations:
Surrender benefits (147) -- --
----
Increase (decrease) from contract transactions 42,146 181,349 7,402
------ ------- -----
Net assets at beginning of year -- -- --
----- ------ -----
Net assets at end of year $ 46,356 $ 187,710 $ 7,530
======== ========= =======
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 17,410 165,502 2,440
Net transfers2 23,632 4,831 5,512
Transfers for policy loans -- -- (17)
Contract terminations:
Surrender benefits (140) -- --
----
Units outstanding at end of year 40,902 170,333 7,935
====== ======= =====
Operations 3IP 3IN 3VS
Investment income (loss) - net $ 74 $ (72) $ 16,591
Net realized gain (loss) on investments 77 1,746 (117)
Net change in unrealized appreciation or depreciation of investments 566 26,162 17,282
--- ------ ------
Net increase (decrease) in net assets resulting from operations 717 27,836 33,756
=== ====== ======
Contract transactions
Contract purchase payments 8,054 61,050 214,071
Net transfers2 193 42,951 1,301
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits -- (200) (1,244)
---- ------
Increase (decrease) from contract transactions 8,247 103,801 214,128
----- ------- -------
Net assets at beginning of year -- -- --
----- ------- ------
Net assets at end of year $ 8,964 $ 131,637 $ 247,884
======= ========= =========
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 8,327 52,793 182,784
Net transfers2 36 34,238 899
Transfers for policy loans -- -- --
Contract terminations:
Surrender benefits -- (149) (966)
---- ----
Units outstanding at end of year 8,363 86,882 182,717
===== ====== =======
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
2Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 -- AXP Retirement Advisor Variable AnnuitySM Band 3
Statements of Changes in Net Assets
Period ended December 31, 1999
Segregated Asset Subaccounts
Operations 3MI1 3SV2 3IT1
<S> <C> <C> <C>
Investment income (loss) - net $ 1,652 $ (69) $ (66)
Net realized gain (loss) on investments 30 56 139
Net change in unrealized appreciation or depreciation of investments 948 5,916 30,460
--- ----- ------
Net increase (decrease) in net assets resulting from operations 2,630 5,903 30,533
===== ===== ======
Contract transactions
Contract purchase payments 16,525 124,554 132,267
Net transfers3 2,831 779 7,240
Transfers for policy loans (16) (16) (16)
Contract terminations:
Surrender benefits -- (863) (673)
---- ----
Increase (decrease) from contract transactions 19,340 124,454 138,818
------ ------- -------
Net assets at beginning of year -- -- --
----- ------- ------
Net assets at end of year $ 21,970 $ 130,357 $ 169,351
======== ========= =========
Accumulation unit activity
Units outstanding at beginning of year -- -- --
Contract purchase payments 16,569 120,290 106,977
Net transfers3 2,489 1,000 5,308
Transfers for policy loans (16) (16) (16)
Contract terminations:
Surrender benefits -- (826) (478)
---- ----
Units outstanding at end of year 19,042 120,448 111,791
====== ======= =======
Combined
Variable
Operations 3SP1 3EG2 Account
Investment income (loss) - net $ (60) $ 159 $ 264,536
Net realized gain (loss) on investments 62 990 423,549
Net change in unrealized appreciation or depreciation of investments 7,793 3,597 435,971
----- ----- -------
Net increase (decrease) in net assets resulting from operations 7,795 4,746 1,124,056
===== ===== =========
Contract transactions
Contract purchase payments 128,180 17,525 25,363,306
Net transfers3 8,005 51 121,949
Transfers for policy loans -- -- (8,001)
Contract terminations:
Surrender benefits (567) -- (19,196,277)
---- -----------
Increase (decrease) from contract transactions 135,618 17,576 6,280,977
------- ------ ---------
Net assets at beginning of year -- -- --
----- --- ------
Net assets at end of year $ 143,413 $ 22,322 $ 7,405,033
========= ======== ===========
Accumulation unit activity
Units outstanding at beginning of year -- --
Contract purchase payments 117,633 17,008
Net transfers3 7,426 (63)
Transfers for policy loans -- --
Contract terminations:
Surrender benefits (521) --
----
Units outstanding at end of year 124,538 16,945
======= ======
1For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999.
2For the period Sept. 21, 1999 (commencement of operations) to Dec. 31, 1999.
3Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Account 10 - American Express Retirement Advisor Variable
Annuity - Band 3
Notes to Financial Statements
1. ORGANIZATION
IDS Life Variable Account 10 (the Account) was established under Minnesota law
on Aug. 23, 1995 as a segregated asset account of IDS Life Insurance Company
(IDS Life). The Account is registered as a unit investment trust under the
Investment Company Act of 1940, as amended (the 1940 Act). Operations of the
Account commenced on March 5, 1996.
The Account is comprised of various subaccounts. Each subaccount invests
exclusively in shares of the following funds or portfolios (collectively, the
Funds), which are registered under the 1940 Act as diversified (non-diversified
for Global Bond and Warburg Pincus Trust/Emerging Growth Portfolio), open-end
management investment companies and have the following investment managers.
Subaccount Invests exclusively in shares of Investment Manager
<S> <C> <C>
BC3 AXPSM Variable Portfolio-- Blue Chip Advantage Fund IDS Life Insurance Company 1
BD3 AXPSM Variable Portfolio-- Bond Fund IDS Life Insurance Company 1
CR3 AXPSM Variable Portfolio-- Capital Resource Fund IDS Life Insurance Company 1
CM3 AXPSM Variable Portfolio-- Cash Management Fund IDS Life Insurance Company 1
DE3 AXPSM Variable Portfolio-- Diversified Equity IDS Life Insurance Company 1
Income Fund
EI3 AXPSM Variable Portfolio-- Extra Income Fund IDS Life Insurance Company 1
FI3 AXPSM Variable Portfolio-- Federal Income Fund IDS Life Insurance Company 1
GB3 AXPSM Variable Portfolio-- Global Bond Fund IDS Life Insurance Company 1
GR3 AXPSM Variable Portfolio-- Growth Fund IDS Life Insurance Company 1
IE3 AXPSM Variable Portfolio-- International Fund IDS Life Insurance Company 2
MF3 AXPSM Variable Portfolio-- Managed Fund IDS Life Insurance Company 1
ND3 AXPSM Variable Portfolio-- New Dimensions Fund(R) IDS Life Insurance Company 1
SC3 AXPSM Variable Portfolio-- Small Cap Advantage Fund IDS Life Insurance Company 3
SA3 AXPSM Variable Portfolio-- Strategy Aggressive Fund IDS Life Insurance Company 1
3CA AIM V.I. Capital Appreciation Fund A I M Advisors, Inc.
3CD AIM V.I. Capital Development Fund A I M Advisors, Inc.
3IF American Century VP International American Century Investment Management, Inc.
3VA American Century VP Value American Century Investment Management, Inc.
3GI Fidelity VIP III Growth & Income Portfolio - Fidelity Management & Research Company (FMR) 4
Service Class
3MP Fidelity VIP III Mid Cap Portfolio - Service Class FMR 4
3OS Fidelity VIP Overseas Portfolio - Service Class FMR 5
3RE FTVIPT Franklin Real Estate Securities Fund - Class 2 Franklin Advisers, Inc.
3SI FTVIPT Franklin Value Securities Fund - Class 2 Franklin Advisory Services, LLC
3IS FTVIPT Templeton International Smaller Companies Templeton Investment Counsel, Inc.
Fund - Class 2
3SE Goldman Sachs VIT CORESM Small Cap Equity Fund Goldman Sachs Asset Management
3UE Goldman Sachs VIT CORESM U.S. Equity Fund Goldman Sachs Asset Management
3MC Goldman Sachs VIT Mid Cap Value Fund Goldman Sachs Asset Management
3IP Lazard Retirement International Equity Portfolio Lazard Asset Management
3IN Putnam VT International New Opportunities Fund - Putnam Investment Management, Inc.
Class IB Shares
3VS Putnam VT Vista Fund - Class IB Shares Putnam Investment Management, Inc.
3MI Royce Micro-Cap Portfolio Royce & Associates, Inc.
3SV Third Avenue Value Portfolio The Investment Adviser EQSF Advisers, Inc.
3IT Wanger International Small Cap Wanger Asset Management, L.P.
3SP Wanger U.S. Small Cap Wanger Asset Management, L.P.
3EG Warburg Pincus Trust - Emerging Growth Portfolio Warburg Pincus Asset Management, Inc.
1 American Express Financial Corporation (AEFC) is the investment advisor.
2 AEFC is the investment advisor. American Express Asset Management
International Inc. is the sub-investment advisor.
3 AEFC is the investment advisor. Kenwood Capital Management LLC is the
sub-investment advisor.
4 FMR U.K. and FMR Far East are the sub-investment advisors.
5 FMR U.K., FMR Far East, Fidelity International Investment Advisors (FIIA) and
FIIA U.K. are the sub-investment advisors.
The assets of each subaccount of the Account are not chargeable with liabilities
arising out of the business conducted by any other segregated asset account or
by IDS Life.
IDS Life serves as issuer of the contract.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments in the Funds
Investments in shares of the Funds are stated at market value which is the net
asset value per share as determined by the respective Funds. Investment
transactions are accounted for on the date the shares are purchased and sold.
The cost of investments sold and redeemed is determined on the average cost
method. Dividend distributions received from the Funds are reinvested in
additional shares of the Funds and are recorded as income by the subaccounts on
the ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the subaccounts' share of the Funds'
undistributed net investment income, undistributed realized gain or loss and the
unrealized appreciation or depreciation on their investment securities.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from those estimates.
Federal Income Taxes
IDS Life is taxed as a life insurance company. The Account is treated as part of
IDS Life for federal income tax purposes. Under existing federal income tax law,
no income taxes are payable with respect to any investment income of the
Account.
3. MORTALITY AND EXPENSE RISK FEE
IDS Life makes contractual assurances to the Account that possible future
adverse changes in administrative expenses and mortality experience of the
contract owners and annuitants will not affect the Account. The mortality and
expense risk fee paid to IDS Life is computed daily and is equal, on an annual
basis, to 0.55% of the average daily net assets.
4. CONTRACT ADMINISTRATIVE CHARGES
IDS Life deducts a contract administrative charge of $30 per year on each
contract anniversary. This charge cannot be increased and does not apply after
annuity payouts begin. IDS Life does not expect to profit from this charge. This
charge reimburses IDS Life for expenses incurred in establishing and maintaining
the annuity records. This charge is waived when the contract value, or total
purchase payments less any payments surrendered, is $50,000 or more on the
current contract anniversary. The $30 annual charge is deducted at the time of
any full surrender.
5. INVESTMENT IN SHARES
The subaccounts' investment in shares of the Funds as of Dec. 31, 1999 were as follows:
Subaccount Investment Shares NAV
<S> <C> <C> <C>
BC3 AXPSM Variable Portfolio-- Blue Chip Advantage Fund 21,121 $11.08
BD3 AXPSM Variable Portfolio-- Bond Fund 4,543 10.54
CR3 AXPSM Variable Portfolio-- Capital Resource Fund 27,369 36.40
CM3 AXPSM Variable Portfolio-- Cash Management Fund 2,285,814 1.00
DE3 AXPSM Variable Portfolio-- Diversified Equity Income Fund 2,289 10.19
EI3 AXPSM Variable Portfolio-- Extra Income Fund 5,563 8.58
FI3 AXPSM Variable Portfolio-- Federal Income Fund 1,103 9.92
GB3 AXPSM Variable Portfolio-- Global Bond Fund 290 9.69
GR3 AXPSM Variable Portfolio-- Growth Fund 40,063 11.68
IE3 AXPSM Variable Portfolio-- International Fund 8,749 19.38
MF3 AXPSM Variable Portfolio-- Managed Fund 528 19.82
ND3 AXPSM Variable Portfolio-- New Dimensions Fund(R) 21,877 22.86
SC3 AXPSM Variable Portfolio-- Small Cap Advantage Fund 59,561 11.13
SA3 AXPSM Variable Portfolio-- Strategy Aggressive Fund 2,087 23.92
3CA AIM V.I. Capital Appreciation Fund 6,840 35.58
3CD AIM V.I. Capital Development Fund 411 11.89
3IF American Century VP International 1,086 12.50
3VA American Century VP Value 9,170 5.95
3GI Fidelity VIP III Growth & Income Portfolio - Service Class 26,972 17.24
3MP Fidelity VIP III Mid Cap Portfolio - Service Class 8,282 15.24
3OS Fidelity VIP Overseas Portfolio - Service Class 1,115 27.38
3RE FTVIPT Franklin Real Estate Securities Fund - Class 2 268 14.88
3SI FTVIPT Franklin Value Securities Fund - Class 2 198 7.88
3IS FTVIPT Templeton International Smaller Companies Fund - Class 850 11.07
2
3SE Goldman Sachs VIT CORESM Small Cap Equity Fund 4,373 10.60
3UE Goldman Sachs VIT CORESM U.S. Equity Fund 13,427 13.98
3MC Goldman Sachs VIT Mid Cap Value Fund 894 8.42
3IP Lazard Retirement International Equity Portfolio 665 13.49
3IN Putnam VT International New Opportunities Fund - Class IB 5,655 23.28
Shares
3VS Putnam VT Vista Fund - Class IB Shares 12,004 20.65
3MI Royce Micro-Cap Portfolio 3,584 6.13
3SV Third Avenue Value Portfolio 12,026 10.84
3IT Wanger International Small Cap 3,878 43.67
3SP Wanger U.S. Small Cap 5,764 24.88
3EG Warburg Pincus Trust - Emerging Growth Portfolio 1,708 13.07
6. INVESTMENT TRANSACTIONS
The subaccounts' purchases of the Funds' shares, including reinvestment of
dividend distributions, were as follows:
Period ended Dec. 31,
Subaccount Investment 1999
<S> <C> <C>
BC3 AXPSM Variable Portfolio-- Blue Chip Advantage Fund $ 2,227,8191
BD3 AXPSM Variable Portfolio-- Bond Fund 90,1121
CR3 AXPSM Variable Portfolio-- Capital Resource Fund 940,3481
CM3 AXPSM Variable Portfolio-- Cash Management Fund 2,696,1551
DE3 AXPSM Variable Portfolio-- Diversified Equity Income Fund 2,029,4601
EI3 AXPSM Variable Portfolio-- Extra Income Fund 48,3241
FI3 AXPSM Variable Portfolio-- Federal Income Fund 10,131,0901
GB3 AXPSM Variable Portfolio-- Global Bond Fund 3,5311
GR3 AXPSM Variable Portfolio-- Growth Fund 2,425,2401
IE3 AXPSM Variable Portfolio-- International Fund 153,3141
MF3 AXPSM Variable Portfolio-- Managed Fund 10,7701
ND3 AXPSM Variable Portfolio-- New Dimensions Fund(R) 477,8601
SC3 AXPSM Variable Portfolio-- Small Cap Advantage Fund 3,056,4291
SA3 AXPSM Variable Portfolio-- Strategy Aggressive Fund 42,1401
3CA AIM V.I. Capital Appreciation Fund 220,4141
3CD AIM V.I. Capital Development Fund 4,8441
3IF American Century VP International 16,6901
3VA American Century VP Value 54,9591
3GI Fidelity VIP III Growth & Income Portfolio - Service Class 475,9301
3MP Fidelity VIP III Mid Cap Portfolio - Service Class 113,6421
3OS Fidelity VIP Overseas Portfolio - Service Class 27,2141
3RE FTVIPT Franklin Real Estate Securities Fund - Class 2 4,6531
3SI FTVIPT Franklin Value Securities Fund - Class 2 2,9971
3IS FTVIPT Templeton International Smaller Companies Fund - Class 2 9,5561
3SE Goldman Sachs VIT CORESM Small Cap Equity Fund 42,9871
3UE Goldman Sachs VIT CORESM U.S. Equity Fund 184,9311
3MC Goldman Sachs VIT Mid Cap Value Fund 8,2551
3IP Lazard Retirement International Equity Portfolio 10,0931
3IN Putnam VT International New Opportunities Fund - Class IB 115,9601
Shares
3VS Putnam VT Vista Fund - Class IB Shares 236,7721
3MI Royce Micro-Cap Portfolio 22,2101
3SV Third Avenue Value Portfolio 127,3602
3IT Wanger International Small Cap 139,6271
3SP Wanger U.S. Small Cap 138,9571
3EG Warburg Pincus Trust - Emerging Growth Portfolio 25,6022
Combined Variable Account $26,316,246
1 Operations commenced on Sept. 15, 1999.
2 Operations commenced on Sept. 21, 1999.
7. YEAR 2000 ISSUE (unaudited)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of IDS Life and the
Account. All of the major systems used by the IDS Life and by the Account are
maintained by AEFC and are utilized by multiple subsidiaries and affiliates of
AEFC. IDS Life and the Account's businesses are heavily dependent upon AEFC's
computer systems and have significant interactions with systems of third
parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to IDS Life and the Account, was conducted to identify
the major systems that could be affected by the Year 2000 issue. Steps were
taken to resolve potential problems including modification to existing software
and the purchase of new software. As of Dec. 31, 1999, AEFC completed its
program of corrective measures on its internal systems and applications,
including Year 2000 compliance testing. As of Dec. 31, 1999, AEFC had also
completed an evaluation of the Year 2000 readiness of other third parties whose
system failures could have an impact on IDS Life's and the Account's operations.
AEFC's Year 2000 project also included establishing Year 2000 contingency plans
for all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. As of Dec. 31, 1999, these plans had been amended to include
specific Year 2000 considerations.
In assessing its Year 2000 initiatives and the results of actual production
since Jan. 1, 2000, management believes no material adverse consequences were
experienced, and there was no material effect on IDS Life's and the Account's
business, results of operations, or financial condition as a result of the Year
2000 issue.
</TABLE>
<PAGE>
<PAGE>
IDS LIFE INSURANCE COMPANY
FINANCIAL INFORMATION
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
IDS LIFE INSURANCE COMPANY
We have audited the accompanying consolidated balance sheets of IDS Life
Insurance Company (a wholly-owned subsidiary of American Express Financial
Corporation) as of December 31, 1999 and 1998, and the related consolidated
statements of income, stockholder's equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of IDS Life Insurance
Company at December 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
February 3, 2000
Minneapolis, Minnesota
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-1
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, ($ THOUSANDS) 1999 1998
<S> <C> <C>
ASSETS
------------------------------------------------------------------
Investments:
Fixed maturities:
Held to maturity, at amortized cost
(fair value:
1999, $7,105,743; 1998, $8,420,035) $ 7,156,292 $ 7,964,114
Available for sale, at fair value
(amortized cost:
1999, $13,703,137; 1998,
$13,344,949) 13,049,549 13,613,139
------------------------------------------------------------------
20,205,841 21,577,253
Mortgage loans on real estate 3,606,377 3,505,458
Policy loans 561,834 525,431
Other investments 506,797 366,604
------------------------------------------------------------------
Total investments 24,880,849 25,974,746
Cash and cash equivalents 32,333 22,453
Amounts recoverable from reinsurers 327,168 262,260
Amounts due from brokers 145 327
Other accounts receivable 48,578 47,963
Accrued investment income 343,449 366,574
Deferred policy acquisition costs 2,665,175 2,496,352
Deferred income taxes, net 216,020 --
Other assets 33,089 30,487
Separate account assets 35,894,732 27,349,401
------------------------------------------------------------------
Total assets $64,441,538 $56,550,563
------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------------------------------------
Liabilities:
Future policy benefits:
Fixed annuities $20,552,159 $21,172,303
Universal life-type insurance 3,391,203 3,343,671
Traditional life insurance 226,842 225,306
Disability income and long-term care
insurance 811,941 660,320
Policy claims and other policyholders'
funds 24,600 70,309
Deferred income taxes, net -- 16,930
Amounts due to brokers 148,112 195,406
Other liabilities 579,678 410,285
Separate account liabilities 35,894,732 27,349,401
------------------------------------------------------------------
Total liabilities 61,629,267 53,443,931
------------------------------------------------------------------
Commitments and contingencies
Stockholder's equity:
Capital stock, $30 par value per
share;
100,000 shares authorized, issued and
outstanding 3,000 3,000
Additional paid-in capital 288,327 288,327
Accumulated other comprehensive (loss)
income, net of tax:
Net unrealized securities (losses) gains (411,230) 169,584
------------------------------------------------------------------
Retained earnings 2,932,174 2,645,721
------------------------------------------------------------------
Total stockholder's equity 2,812,271 3,106,632
------------------------------------------------------------------
Total liabilities and stockholder's
equity $64,441,538 $56,550,563
==================================================================
</TABLE>
See accompanying notes.
--------------------------------------------------------------------------------
F-2 IDS LIFE INSURANCE COMPANY
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, ($ THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
REVENUES:
-----------------------------------------------------------------------------
Premiums:
Traditional life insurance $ 53,790 $ 53,132 $ 52,473
Disability income and long-term care
insurance 201,637 176,298 154,021
-----------------------------------------------------------------------------
Total premiums 255,427 229,430 206,494
Policyholder and contractholder charges 411,994 383,965 341,726
Management and other fees 473,108 401,057 340,892
Net investment income 1,919,573 1,986,485 1,988,389
Net realized gain on investments 26,608 6,902 860
-----------------------------------------------------------------------------
Total revenues 3,086,710 3,007,839 2,878,361
-----------------------------------------------------------------------------
BENEFITS AND EXPENSES:
-----------------------------------------------------------------------------
Death and other benefits:
Traditional life insurance 29,819 29,835 28,951
Universal life-type insurance and
investment contracts 118,561 108,349 92,814
Disability income and long-term care
insurance 30,622 27,414 22,333
Increase in liabilities for future
policy benefits:
Traditional life insurance 7,311 6,052 3,946
Disability income and long-term care
insurance 87,620 73,305 63,631
Interest credited on universal life-type
insurance and investment contracts 1,240,575 1,317,124 1,386,448
Amortization of deferred policy
acquisition costs 332,705 382,642 322,731
Other insurance and operating expenses 335,180 287,326 276,596
-----------------------------------------------------------------------------
Total benefits and expenses 2,182,393 2,232,047 2,197,450
-----------------------------------------------------------------------------
Income before income taxes 904,317 775,792 680,911
Income taxes 267,864 235,681 206,664
-----------------------------------------------------------------------------
Net income $ 636,453 $ 540,111 $ 474,247
=============================================================================
</TABLE>
See accompanying notes.
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-3
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
TOTAL ADDITIONAL COMPREHENSIVE
STOCKHOLDER'S CAPITAL PAID-IN (LOSS) INCOME, RETAINED
THREE YEARS ENDED DECEMBER 31, 1999 ($ THOUSANDS) EQUITY STOCK CAPITAL NET OF TAX EARNINGS
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $2,444,080 $3,000 $283,615 $ 86,102 $2,071,363
Comprehensive income:
Net income 474,247 -- -- -- 474,247
Unrealized holding gains arising during the year,
net of deferred policy acquisition costs of
($7,714) and taxes of ($75,215) 139,686 -- -- 139,686 --
Reclassification adjustment for losses included in
net income, net of tax of ($308) 571 -- -- 571 --
Other comprehensive income 140,257 -- -- 140,257 --
---------------------------------------------------------------------------------------------------------------------
Comprehensive income 614,504 -- -- -- --
Capital contribution from parent 7,232 -- 7,232 -- --
Cash dividends to parent (200,000) -- -- -- (200,000)
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 2,865,816 3,000 290,847 226,359 2,345,610
Comprehensive income:
Net income 540,111 -- -- -- 540,111
Unrealized holding losses arising during the year,
net of deferred policy acquisition costs of
$6,333 and taxes of $32,826 (60,964) -- -- (60,964) --
Reclassification adjustment for losses included in
net income, net of tax of ($2,254) 4,189 -- -- 4,189 --
Other comprehensive loss (56,775) -- -- (56,775) --
Comprehensive income 483,336 -- -- -- --
Other changes (2,520) -- (2,520) -- --
---------------------------------------------------------------------------------------------------------------------
Cash dividends to parent (240,000) -- -- -- (240,000)
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 3,106,632 3,000 288,327 169,584 2,645,721
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 $3,106,632 $3,000 $288,327 $ 169,584 $2,645,721
Comprehensive income:
Net income 636,453 -- -- -- 636,453
Unrealized holding losses arising during the year,
net of deferred policy acquisition costs of
$28,444 and taxes of $304,936 (566,311) -- -- (566,311) --
Reclassification adjustment for gains included in
net income, net of tax of $7,810 (14,503) -- -- (14,503) --
---------------------------------------------------------------------------------------------------------------------
Other comprehensive loss (580,814) -- -- (580,814) --
Comprehensive income 55,639 -- -- -- --
---------------------------------------------------------------------------------------------------------------------
Cash dividends to parent (350,000) -- -- -- (350,000)
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $2,812,271 $3,000 $288,327 $(411,230) $2,932,174
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
--------------------------------------------------------------------------------
F-4 IDS LIFE INSURANCE COMPANY
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, ($ THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------------------------------------------------
Net income $ 636,453 $ 540,111 $ 474,247
Adjustments to reconcile net income to
net cash provided by operating
activities: Policy loans, excluding
universal life-type insurance:
Issuance (56,153) (53,883) (54,665)
Repayment 54,105 57,902 46,015
Change in amounts recoverable from
reinsurers (64,908) (56,544) (47,994)
Change in other accounts receivable (615) (10,068) 6,194
Change in accrued investment income 23,125 (9,184) (14,077)
Change in deferred policy acquisition
costs, net (140,379) (10,443) (156,486)
Change in liabilities for future policy
benefits for traditional life,
disability income and long-term care
insurance 153,157 138,826 112,915
Change in policy claims and other
policyholders' funds (45,709) 1,964 (15,289)
Deferred income tax provision (benefit) 79,796 (19,122) 19,982
Change in other liabilities 169,395 64,902 13,305
(Accretion of discount), amortization of
premium, net (17,907) 9,170 (5,649)
Net realized gain on investments (26,608) (6,902) (860)
Policyholder and contractholder charges,
non-cash (175,059) (172,396) (160,885)
Other, net (5,324) 10,786 7,161
-------------------------------------------------------------------------------
Net cash provided by operating
activities $ 583,369 $ 485,119 $ 223,914
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------------------------------------------------
Fixed maturities held to maturity:
Purchases $ (3,030) $ (1,020) $ (1,996)
Maturities, sinking fund payments and
calls 741,949 1,162,731 686,503
Sales 66,547 236,963 236,761
Fixed maturities available for sale:
Purchases (3,433,128) (4,100,238) (3,160,133)
Maturities, sinking fund payments and
calls 1,442,507 2,967,311 1,206,213
Sales 1,691,389 278,955 457,585
Other investments, excluding policy
loans:
Purchases (657,383) (555,647) (524,521)
Sales 406,684 579,038 335,765
Change in amounts due from brokers 182 8,073 2,647
Change in amounts due to brokers (47,294) (186,052) 119,471
-------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 208,423 390,114 (641,705)
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------------------------------------------------
Activity related to universal life-type
insurance and investment contracts:
Considerations received 2,031,630 1,873,624 2,785,758
Surrenders and other benefits (3,669,759) (3,792,612) (3,736,242)
Interest credited to account balances 1,240,575 1,317,124 1,386,448
Universal life-type insurance policy
loans:
Issuance (102,239) (97,602) (84,835)
Repayment 67,881 67,000 54,513
Capital transaction with parent -- -- 7,232
Dividends paid (350,000) (240,000) (200,000)
-------------------------------------------------------------------------------
Net cash (used in) provided by financing
activities (781,912) (872,466) 212,874
-------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 9,880 2,767 (204,917)
Cash and cash equivalents at beginning
of year 22,453 19,686 224,603
-------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 32,333 $ 22,453 $ 19,686
-------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
IDS Life Insurance Company (the Company) is a stock life insurance company
organized under the laws of the State of Minnesota. The Company is a
wholly-owned subsidiary of American Express Financial Corporation (AEFC), which
is a wholly owned subsidiary of American Express Company. The Company serves
residents of all states except New York. IDS Life Insurance Company of New York
is a wholly owned subsidiary of the Company and serves New York State residents.
The Company also wholly owns American Enterprise Life Insurance Company,
American Centurion Life Assurance Company, American Partners Life Insurance
Company and American Express Corporation.
The Company's principal products are deferred annuities and universal life
insurance, which are issued primarily to individuals. It offers single premium
and flexible premium deferred annuities on both a fixed and variable dollar
basis. Immediate annuities are offered as well. The Company's insurance products
include universal life (fixed and variable), whole life, single premium life and
term products (including waiver of premium and accidental death benefits). The
Company also markets disability income and long-term care insurance.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
which vary in certain respects from reporting practices prescribed or permitted
by state insurance regulatory authorities (see Note 4).
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVESTMENTS
Fixed maturities that the Company has both the positive intent and the ability
to hold to maturity are classified as held to maturity and carried at amortized
cost. All other fixed maturities and all marketable equity securities are
classified as available for sale and carried at fair value. Unrealized gains and
losses on securities classified as available for sale are reported as a separate
component of accumulated other comprehensive (loss) income, net of the related
deferred policy acquisition costs effect and deferred taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed securities
in determining the constant effective yield used to recognize interest income.
Prepayment estimates are based on information received from brokers who deal in
mortgage-backed securities.
--------------------------------------------------------------------------------
F-6 IDS LIFE INSURANCE COMPANY
<PAGE>
Mortgage loans on real estate are carried at amortized cost less reserves for
mortgage loan losses. The estimated fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage interest rates
currently offered for mortgages of similar maturities.
Impairment of mortgage loans is measured as the excess of a loan's recorded
investment over its present value of expected principal and interest payments
discounted at the loan's effective interest rate, or the fair value of
collateral. The amount of the impairment is recorded in a reserve for mortgage
loan losses. The reserve for mortgage loan losses is maintained at a level that
management believes is adequate to absorb estimated losses in the portfolio. The
level of the reserve account is determined based on several factors, including
historical experience, expected future principal and interest payments,
estimated collateral values, and current economic and political conditions.
Management regularly evaluates the adequacy of the reserve for mortgage
loan losses.
The Company generally stops accruing interest on mortgage loans for which
interest payments are delinquent more than three months. Based on management's
judgment as to the ultimate collectibility of principal, interest payments
received are either recognized as income or applied to the recorded investment
in the loan.
The cost of interest rate caps and floors is amortized to investment income over
the life of the contracts and payments received as a result of these agreements
are recorded as investment income when realized. The amortized cost of interest
rate caps and floors is included in other investments. Amounts paid or received
under interest rate swap agreements are recognized as an adjustment to
investment income.
The Company may purchase and write index options to hedge the fee income earned
on the management of equity securities in separate accounts and the underlying
mutual funds. These index options are carried at market value and are included
in other investments or other liabilities, as appropriate. Gains or losses on
index options that qualify as hedges are deferred and recognized in management
and other fees in the same period as the hedged fee income.
The Company also uses index options to manage the risks related to a certain
annuity product that pay interest based upon the relative change in a major
stock market index between the beginning and end of the product's term.
Purchased options used in conjunction with this product are reported in other
investments and written options are included in other liabilities. The
amortization of the cost of purchased options, the proceeds of written options
and the changes in intrinsic value of the contracts are included in net
investment income.
Policy loans are carried at the aggregate of the unpaid loan balances which do
not exceed the cash surrender values of the related policies.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such investments
are written down to the fair value by a charge to income.
STATEMENTS OF CASH FLOWS
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These securities are
carried principally at amortized cost, which approximates fair value.
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-7
<PAGE>
Supplementary information to the consolidated statements of cash flows for the
years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $214,940 $215,003 $174,472
Interest on borrowings 4,521 14,529 8,213
</TABLE>
RECOGNITION OF PROFITS ON ANNUITY CONTRACTS AND INSURANCE POLICIES
Profits on fixed deferred annuities are recognized by the Company over the lives
of the contracts, using primarily the interest method. Profits represent the
excess of investment income earned from investment of contract considerations
over interest credited to contract owners and other expenses.
The retrospective deposit method is used in accounting for universal life-type
insurance. Under this method, profits are recognized over the lives of the
policies in proportion to the estimated gross profits expected to be realized.
Premiums on traditional life, disability income and long-term care insurance
policies are recognized as revenue when due, and related benefits and expenses
are associated with premium revenue in a manner that results in recognition of
profits over the lives of the insurance policies. This association is
accomplished by means of the provision for future policy benefits and the
deferral and subsequent amortization of policy acquisition costs.
Policyholder and contractholder charges include the monthly cost of insurance
charges, issue and administrative fees and surrender charges. These charges also
include the minimum death benefit guarantee fees received from the variable life
insurance separate accounts. Management and other fees include investment
management fees from underlying proprietary mutual funds and mortality and
expense risk fees received from the variable annuity and variable life insurance
separate accounts.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally sales compensation, policy
issue costs, underwriting and certain sales expenses, have been deferred on
insurance and annuity contracts. The deferred acquisition costs for most single
premium deferred annuities and installment annuities are amortized using
primarily the interest method. The costs for universal life-type insurance and
certain installment annuities are amortized as a percentage of the estimated
gross profits expected to be realized on the policies. For traditional life,
disability income and long-term care insurance policies, the costs are amortized
over an appropriate period in proportion to premium revenue.
Amortization of deferred policy acquisition costs requires the use of
assumptions including interest margins, mortality margins, persistency rates,
maintenance expense levels and, for variable products, separate account
performance. For universal life-type insurance and deferred annuities, actual
experience is reflected in the Company's amortization models monthly. As actual
experience differs from the current assumptions, management considers the need
to change key assumptions underlying the amortization models prospectively. The
impact of changing prospective assumptions is reflected in the period that such
changes are made and is generally referred to as an unlocking adjustment. During
1999, unlocking adjustments resulted in a net decrease in amortization of $56.8
million. Net unlocking adjustments in 1998 and 1997 were not significant.
LIABILITIES FOR FUTURE POLICY BENEFITS
Liabilities for universal-life type insurance and fixed and variable deferred
annuities are accumulation values.
--------------------------------------------------------------------------------
F-8 IDS LIFE INSURANCE COMPANY
<PAGE>
Liabilities for equity indexed deferred annuities are determined as the present
value of guaranteed benefits and the intrinsic value of index-based benefits.
Liabilities for fixed annuities in a benefit status are based on established
industry mortality tables and interest rates ranging from 5% to 9.5%, depending
on year of issue.
Liabilities for future benefits on traditional life insurance are based on the
net level premium method, using anticipated mortality, policy persistency and
interest earning rates. Anticipated mortality rates are based on established
industry mortality tables. Anticipated policy persistency rates vary by policy
form, issue age and policy duration with persistency on cash value plans
generally anticipated to be better than persistency on term insurance plans.
Anticipated interest rates range from 4% to 10%, depending on policy form, issue
year and policy duration.
Liabilities for future disability income and long-term care policy benefits
include both policy reserves and claim reserves. Policy reserves are based on
the net level premium method, using anticipated morbidity, mortality, policy
persistency and interest earning rates. Anticipated morbidity and mortality
rates are based on established industry morbidity and mortality tables.
Anticipated policy persistency rates vary by policy form, issue age, policy
duration and, for disability income policies, occupation class. Anticipated
interest rates for disability income and long-term care policy reserves are 3%
to 9.5% at policy issue and grade to ultimate rates of 5% to 7% over 5 to 10
years.
Claim reserves are calculated based on claim continuance tables and anticipated
interest earnings. Anticipated claim continuance rates are based on established
industry tables. Anticipated interest rates for claim reserves for both
disability income and long-term care range from 5% to 8%.
REINSURANCE
The maximum amount of life insurance risk retained by the Company is $750 on any
policy insuring a single life and $1,500 on any policy insuring a joint-life
combination. Beginning in 1999, the Company retains only 20% of the mortality
risk on new variable universal life insurance policies. Risk not retained is
reinsured with other life insurance companies, primarily on a yearly renewable
term basis. Long-term care policies are primarily reinsured on a coinsurance
basis. The Company retains all disability income and waiver of premium risk.
Beginning in 2000, the Company will retain all accidental death benefit risk.
FEDERAL INCOME TAXES
The Company's taxable income is included in the consolidated federal income tax
return of American Express Company. The Company provides for income taxes on a
separate return basis, except that, under an agreement between AEFC and American
Express Company, tax benefit is recognized for losses to the extent they can be
used on the consolidated tax return. It is the policy of AEFC and its
subsidiaries that AEFC will reimburse subsidiaries for all tax benefits.
Included in other liabilities at December 31, 1999 and 1998 are $852 receivable
from and $26,291 payable to, respectively, AEFC for federal income taxes.
SEPARATE ACCOUNT BUSINESS
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity and variable life insurance contract
owners. The Company receives investment management fees from the proprietary
mutual funds used as investment options for variable annuities and variable life
insurance. The Company receives mortality and expense risk fees from the
separate accounts.
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-9
<PAGE>
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the separate accounts will not be
affected by future variations in the actual life expectancy experience of the
annuitants and beneficiaries from the mortality assumptions implicit in the
annuity contracts. The Company makes periodic fund transfers to, or withdrawals
from, the separate account assets for such actuarial adjustments for variable
annuities that are in the benefit payment period. The Company also guarantees
that the rates at which administrative fees are deducted from contract funds
will not exceed contractual maximums.
For variable life insurance, the Company guarantees that the rates at which
insurance charges and administrative fees are deducted from contract funds will
not exceed contractual maximums. The Company also guarantees that the death
benefit will continue payable at the initial level regardless of investment
performance so long as minimum premium payments are made.
ACCOUNTING CHANGES
American Institute of Certified Public Accountants (AICPA) Statement of Position
(SOP) 98-1, "Accounting for Costs of Computer Software Developed or Obtained for
Internal Use" became effective January 1, 1999. The SOP requires the
capitalization of certain costs incurred after the date of adoption to develop
or obtain software for internal use. Software utilized by the Company is owned
by AEFC and capitalized by AEFC. As a result, the new rule did not have a
material impact on the Company's results of operations or financial condition.
Effective January 1, 1999, the Company adopted AICPA SOP 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments," providing
guidance for the timing of recognition of liabilities related to guaranty fund
assessments. The Company had historically carried a liability for estimated
guaranty fund assessment exposure. Adoption of the SOP did not have a material
impact on the Company's results of operations or financial condition.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective January 1, 2001. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires the recognition of all derivatives as either
assets or liabilities on the balance sheet and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and the resulting designation. The ultimate
financial effect of adoption of the new rule will depend on the derivatives in
place at adoption and cannot be estimated at this time.
2. INVESTMENTS
Fair values of investments in fixed maturities represent quoted market prices
and estimated values when quoted prices are not available. Estimated values are
determined by established procedures involving, among other things, review of
market indices, price levels of current offerings of comparable issues, price
estimates and market data from independent brokers and financial files.
--------------------------------------------------------------------------------
F-10 IDS LIFE INSURANCE COMPANY
<PAGE>
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 37,613 $ 236 $ 2,158 $ 35,691
State and municipal
obligations 9,681 150 -- 9,831
Corporate bonds and
obligations 5,713,475 91,571 113,350 5,691,696
Mortgage-backed securities 1,395,523 4,953 31,951 1,368,525
------------------------------------------------------------------------------
$7,156,292 $96,910 $147,459 $7,105,743
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 46,325 $ 612 $ 2,231 $ 44,706
State and municipal
obligations 13,226 519 191 13,554
Corporate bonds and
obligations 7,960,352 60,120 560,450 7,460,022
Mortgage-backed securities 5,683,234 9,692 161,659 5,531,267
--------------------------------------------------------------------------------
Total fixed maturities 13,703,137 70,943 724,531 13,049,549
Equity securities 3,000 16 -- 3,016
--------------------------------------------------------------------------------
$13,706,137 $70,959 $724,531 $13,052,565
--------------------------------------------------------------------------------
</TABLE>
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at December 31, 1998 are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 39,888 $ 4,460 $ -- $ 44,348
State and municipal
obligations 9,683 490 -- 10,173
Corporate bonds and
obligations 6,305,476 447,752 27,087 6,726,141
Mortgage-backed securities 1,609,067 30,458 152 1,639,373
-------------------------------------------------------------------------------
$7,964,114 $483,160 $27,239 $8,420,035
-------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-11
<PAGE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 52,043 $ 3,324 $ -- $ 55,367
State and municipal
obligations 11,060 1,231 -- 12,291
Corporate bonds and
obligations 7,332,344 271,174 155,181 7,448,337
Mortgage-backed securities 5,949,502 151,511 3,869 6,097,144
--------------------------------------------------------------------------------
Total fixed maturities 13,344,949 427,240 159,050 13,613,139
Equity securities 3,000 158 -- 3,158
--------------------------------------------------------------------------------
$13,347,949 $427,398 $159,050 $13,616,297
--------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of investments in fixed maturities at
December 31, 1999 by contractual maturity are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
HELD TO MATURITY COST VALUE
----------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 238,740 $ 239,747
Due from one to five years 2,996,713 3,012,721
Due from five to ten years 1,922,199 1,893,918
Due in more than ten years 603,117 590,832
Mortgage-backed securities 1,395,523 1,368,525
----------------------------------------------------------------
$7,156,292 $7,105,743
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
AVAILABLE FOR SALE COST VALUE
------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 271,381 $ 274,415
Due from one to five years 595,747 592,533
Due from five to ten years 4,936,041 4,669,573
Due in more than ten years 2,216,734 1,981,761
Mortgage-backed securities 5,683,234 5,531,267
------------------------------------------------------------------
$13,703,137 $13,049,549
------------------------------------------------------------------
</TABLE>
During the years ended December 31, 1999, 1998 and 1997, fixed maturities
classified as held to maturity were sold with amortized cost of $68,470,
$230,036 and $229,848, respectively. Net gains and losses on these sales were
not significant. The sale of these fixed maturities was due to significant
deterioration in the issuers' credit worthiness.
Fixed maturities available for sale were sold during 1999 with proceeds of
$1,691,389 and gross realized gains and losses of $36,568 and $14,255,
respectively. Fixed maturities available for sale were sold during 1998 with
proceeds of $278,955 and gross realized gains and losses of $15,658 and $22,102,
respectively. Fixed maturities available for sale were sold during 1997 with
proceeds of $457,585 and gross realized gains and losses of $6,639 and $7,518,
respectively.
At December 31, 1999, bonds carried at $14,559 were on deposit with various
states as required by law.
--------------------------------------------------------------------------------
F-12 IDS LIFE INSURANCE COMPANY
<PAGE>
At December 31, 1999, investments in fixed maturities comprised 81 percent of
the Company's total invested assets. These securities are rated by Moody's and
Standard & Poor's (S&P), except for securities carried at approximately $3.7
billion which are rated by AEFC's internal analysts using criteria similar to
Moody's and S&P. A summary of investments in fixed maturities, at amortized
cost, by rating on December 31 is as follows:
<TABLE>
<CAPTION>
RATING 1999 1998
------------------------------------------------------------------
<S> <C> <C>
Aaa/AAA $ 7,144,280 $ 7,629,628
Aaa/AA 1,920 2,277
Aa/AA 301,728 308,053
Aa/A 314,168 301,325
A/A 2,598,300 2,525,283
A/BBB 1,014,566 1,148,736
Baa/BBB 6,319,549 6,237,014
Baa/BB 348,849 492,696
Below investment grade 2,816,069 2,664,051
------------------------------------------------------------------
$20,859,429 $21,309,063
------------------------------------------------------------------
</TABLE>
At December 31, 1999, 90 percent of the securities rated Aaa/AAA are GNMA, FNMA
and FHLMC mortgage-backed securities. No holdings of any other issuer are
greater than one percent of the Company's total investments in fixed maturities.
At December 31, 1999, approximately 14 percent of the Company's invested assets
were mortgage loans on real estate. Summaries of mortgage loans by region of the
United States and by type of real estate are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
REGION SHEET TO PURCHASE SHEET TO PURCHASE
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
East North Central $ 715,998 $ 10,380 $ 750,705 $ 16,393
West North Central 555,635 42,961 491,006 81,648
South Atlantic 867,838 23,317 839,233 21,020
Middle Atlantic 428,051 1,806 476,448 6,169
New England 259,243 4,415 263,761 2,824
Pacific 238,299 3,466 195,851 16,946
West South Central 144,607 4,516 136,841 1,412
East South Central 43,841 -- 46,029 --
Mountain 381,148 9,380 345,379 8,473
----------------------------------------------------------------------------------
3,634,660 100,241 3,545,253 154,885
Less allowance for losses 28,283 -- 39,795 --
----------------------------------------------------------------------------------
$3,606,377 $100,241 $3,505,458 $154,885
----------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-13
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
PROPERTY TYPE SHEET TO PURCHASE SHEET TO PURCHASE
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Department/retail stores $1,158,712 $ 33,829 $1,139,349 $ 59,305
Apartments 887,538 11,343 960,808 9,272
Office buildings 931,234 26,062 783,576 50,450
Industrial buildings 309,845 5,525 298,549 13,263
Hotels/motels 103,625 -- 109,185 14,122
Medical buildings 114,045 -- 124,369 --
Nursing/retirement homes 45,935 -- 46,696 --
Mixed use 66,893 -- 65,151 --
Other 16,833 23,482 17,570 8,473
----------------------------------------------------------------------------------
3,634,660 100,241 3,545,253 154,885
Less allowance for losses 28,283 -- 39,795 --
----------------------------------------------------------------------------------
$3,606,377 $100,241 $3,505,458 $154,885
----------------------------------------------------------------------------------
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory authorities
to 80 percent or less of the market value of the real estate at the time of
origination of the loan. The Company holds the mortgage document, which gives it
the right to take possession of the property if the borrower fails to perform
according to the terms of the agreement. Commitments to purchase mortgages are
made in the ordinary course of business. The fair value of the mortgage
commitments is $nil.
At December 31, 1999 and 1998, the Company's recorded investment in impaired
loans was $21,375 and $24,941, respectively, with allowances of $5,750 and
$6,662, respectively. During 1999 and 1998, the average recorded investment in
impaired loans was $23,815 and $37,873, respectively.
The Company recognized $1,190, $1,809 and $2,981 of interest income related to
impaired loans for the years ended December 31, 1999, 1998 and 1997
respectively.
The following table presents changes in the allowance for losses related to all
loans:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $39,795 $38,645 $37,495
Provision (reduction) for
investment losses (9,512) 7,582 8,801
Loan payoffs (500) (800) (3,851)
Foreclosures and writeoffs (1,500) (5,632) (3,800)
--------------------------------------------------------------
Balance, December 31 $28,283 $39,795 $38,645
--------------------------------------------------------------
</TABLE>
At December 31, 1999, the Company had no commitments to purchase investments
other than mortgage loans.
--------------------------------------------------------------------------------
F-14 IDS LIFE INSURANCE COMPANY
<PAGE>
Net investment income for the years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------------------------------
<S> <C> <C> <C>
Interest on fixed maturities $1,598,059 $1,676,984 $1,692,481
Interest on mortgage loans 285,921 301,253 305,742
Other investment income 70,892 43,518 25,089
Interest on cash equivalents 5,871 5,486 5,914
-----------------------------------------------------------------------
1,960,743 2,027,241 2,029,226
Less investment expenses 41,170 40,756 40,837
-----------------------------------------------------------------------
$1,919,573 $1,986,485 $1,988,389
-----------------------------------------------------------------------
</TABLE>
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $22,387 $12,084 $16,115
Mortgage loans 10,211 (5,933) (6,424)
Other investments (5,990) 751 (8,831)
--------------------------------------------------------------
$26,608 $ 6,902 $ 860
--------------------------------------------------------------
</TABLE>
Changes in net unrealized appreciation (depreciation) of investments for the
years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities available for sale $(921,778) $(93,474) $223,441
Equity securities (142) (203) 53
</TABLE>
3. INCOME TAXES
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
The income tax expense (benefit) for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes:
Current $178,444 $244,946 $176,879
Deferred 79,796 (16,602) 19,982
-----------------------------------------------------------------
258,240 228,344 196,861
State income taxes-current 9,624 7,337 9,803
-----------------------------------------------------------------
Income tax expense $267,864 $235,681 $206,664
-----------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-15
<PAGE>
Increases (decreases) to the income tax provision applicable to pretax income
based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1999 1998 1997
PROVISION RATE PROVISION RATE PROVISION RATE
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
based on the statutory
rate $316,511 35.0% $271,527 35.0% $238,319 35.0%
Tax-excluded interest and
dividend income (9,626) (1.1) (12,289) (1.6) (10,294) (1.5)
State taxes, net of
federal benefit 6,256 0.7 4,769 0.6 6,372 0.9
Affordable housing
credits (31,000) (3.4) (19,688) (2.5) (20,705) (3.0)
Other, net (14,277) (1.6) (8,638) (1.1) (7,028) (1.0)
-------------------------------------------------------------------------------
Total income taxes $267,864 29.6% $235,681 30.4% $206,664 30.4%
-------------------------------------------------------------------------------
</TABLE>
A portion of life insurance company income earned prior to 1984 was not subject
to current taxation but was accumulated, for tax purposes, in a policyholders'
surplus account. At December 31, 1999, the Company had a policyholders' surplus
account balance of $20,114. The policyholders' surplus account is only taxable
if dividends to the stockholder exceed the stockholder's surplus account or if
the Company is liquidated. Deferred income taxes of $7,040 have not been
established because no distributions of such amounts are contemplated.
Significant components of the Company's deferred tax assets and liabilities as
of December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policy reserves $733,647 $756,769
Unrealized loss on available for sale
investments 221,431 --
Investments, other 1,873 --
Life insurance guaranty fund assessment
reserve 4,789 15,289
Other -- 4,253
------------------------------------------------------------
Total deferred tax assets 961,740 776,311
------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs 740,837 698,471
Unrealized gain on available for sale
investments -- 91,315
Investments, other -- 3,455
Other 4,883 --
------------------------------------------------------------
Total deferred tax liabilities 745,720 793,241
------------------------------------------------------------
Net deferred tax assets (liabilities) $216,020 $(16,930)
------------------------------------------------------------
</TABLE>
The Company is required to establish a valuation allowance for any portion of
the deferred tax assets that management believes will not be realized. In the
opinion of management, it is more likely than not that the Company will realize
the benefit of the deferred tax assets and, therefore, no such valuation
allowance has been established.
4. STOCKHOLDER'S EQUITY
Retained earnings available for distribution as dividends to the parent are
limited to the Company's surplus as determined in accordance with accounting
practices prescribed by state insurance regulatory authorities. Statutory
unassigned surplus
--------------------------------------------------------------------------------
F-16 IDS LIFE INSURANCE COMPANY
<PAGE>
aggregated $1,693,356 as of December 31, 1999 and $1,598,203 as of December 31,
1998 (see Note 3 with respect to the income tax effect of certain
distributions). In addition, any dividend distributions in 2000 in excess of
approximately $418,845 would require approval of the Department of Commerce of
the State of Minnesota.
Statutory net income for the years ended December 31 and capital and surplus as
of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------------------------------
<S> <C> <C> <C>
Statutory net income $ 478,173 $ 429,903 $ 379,615
Statutory capital and surplus 1,978,406 1,883,405 1,765,290
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company loans funds to AEFC under a collateral loan agreement. The balance
of the loan was $nil at December 31, 1999 and 1998. This loan can be increased
to a maximum of $75,000 and pays interest at a rate equal to the preceding
month's effective new money rate for the Company's permanent investments.
Interest income on related party loans totaled $nil, $nil and $103 in 1999, 1998
and 1997, respectively.
The Company participates in the American Express Company Retirement Plan which
covers all permanent employees age 21 and over who have met certain employment
requirements. Employer contributions to the plan are based on participants' age,
years of service and total compensation for the year. Funding of retirement
costs for this plan complies with the applicable minimum funding requirements
specified by ERISA. The Company's share of the total net periodic pension cost
was $223, $211 and $201 in 1999, 1998 and 1997, respectively.
The Company also participates in defined contribution pension plans of American
Express Company which cover all employees who have met certain employment
requirements. Company contributions to the plans are a percent of either each
employee's eligible compensation or basic contributions. Costs of these plans
charged to operations in 1999, 1998 and 1997 were $1,906, $1,503 and $1,245,
respectively.
The Company participates in defined benefit health care plans of AEFC that
provide health care and life insurance benefits to retired employees and retired
financial advisors. The plans include participant contributions and service
related eligibility requirements. Upon retirement, such employees are considered
to have been employees of AEFC. AEFC expenses these benefits and allocates the
expenses to its subsidiaries. The Company's share of postretirement benefits in
1999, 1998 and 1997 was $1,147, $1,352 and $1,330, respectively.
Charges by AEFC for use of joint facilities, technology support, marketing
services and other services aggregated $485,177, $411,337 and $414,155 for 1999,
1998 and 1997, respectively. Certain of these costs are included in deferred
policy acquisition costs.
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1999, 1998 and 1997, traditional life insurance and universal
life-type insurance in force aggregated $89,271,957, $81,074,928 and $74,730,720
respectively, of which $8,281,576, $4,912,313 and $4,351,904 were reinsured at
the respective year ends. The Company also reinsures a portion of the risks
assumed under disability income and long-term care policies. Under all
reinsurance agreements, premiums ceded to reinsurers amounted to $76,970,
$66,378 and $60,495 and reinsurance recovered from reinsurers amounted to
$27,816, $20,982, and $19,042 for the years ended December 31, 1999, 1998 and
1997, respectively. Reinsurance contracts do not relieve the Company from its
primary obligation to policyholders.
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-17
<PAGE>
In January 2000, AEFC reached an agreement in principle to settle three
class-action lawsuits. The Company had been named as a co-defendant in all three
lawsuits. It is expected the settlement will provide $215 million of benefits to
more than 2 million class participants. The agreement in principle to settle
also provides for release by class members of all insurance and annuity market
conduct claims dating back to 1985 and is subject to a number of contingencies
including a definitive agreement and court approval. The settlement costs
allocated to the Company are included in the accompanying 1999 statement of
income and did not have a material impact on the Company's consolidated
financial position or results from operations.
The Company is named as a defendant in various other lawsuits. The outcome of
any litigation cannot be predicted with certainty. In the opinion of management,
however, the ultimate resolution of these lawsuits, taken in aggregate should
not have a material adverse effect on the Company's consolidated financial
position.
The IRS routinely examines the Company's federal income tax returns and is
currently completing the audit for the 1990 through 1992 tax years. Management
does not believe there will be a material adverse effect on the Company's
consolidated financial position as a result of this audit.
7. LINES OF CREDIT
The Company has available lines of credit with its parent aggregating $200,000
($100,000 committed and $100,000 uncommitted). The interest rate for any
borrowings is established by reference to various indices plus 20 to 45 basis
points, depending on the term. Borrowings outstanding under this agreement were
$50,000 uncommitted at December 31, 1999 and $nil at December 31, 1998.
8. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into transactions involving derivative financial instruments
to manage its exposure to interest rate risk and equity market risk, including
hedging specific transactions. The Company does not hold derivative instruments
for trading purposes. The Company manages risks associated with these
instruments as described below.
Market risk is the possibility that the value of the derivative financial
instruments will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate or equity market index.
The Company is not impacted by market risk related to derivatives held for
non-trading purposes beyond that inherent in cash market transactions.
Derivatives held for purposes other than trading are largely used to manage risk
and, therefore, the cash flow and income effects of the derivatives are inverse
to the effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not fulfill the terms
of the contract. The Company monitors credit risk related to derivative
financial instruments through established approval procedures, including setting
concentration limits by counterparty, and requiring collateral, where
appropriate. A vast majority of the Company's counterparties are rated A or
better by Moody's and Standard & Poor's.
Credit risk related to interest rate caps and floors and index options is
measured by the replacement cost of the contracts. The replacement cost
represents the fair value of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over the
life of the agreement. Notional amounts are not recorded on the balance sheet.
Notional amounts far exceed the related credit risk.
--------------------------------------------------------------------------------
F-18 IDS LIFE INSURANCE COMPANY
<PAGE>
The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>
NOTIONAL CARRYING FAIR TOTAL CREDIT
DECEMBER 31, 1999 AMOUNT AMOUNT VALUE EXPOSURE
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $2,500,000 $ 9,685 $ 12,773 $12,773
Interest rate floors 1,000,000 602 319 319
Options purchased 180,897 49,789 61,745 61,745
Liabilities:
Options written 43,262 (1,677) (2,402) --
Off balance sheet:
Interest rate swaps 1,267,000 -- (17,582) --
------- -------- -------
$58,399 $ 54,853 $74,837
======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL CARRYING FAIR TOTAL CREDIT
DECEMBER 31, 1998 AMOUNT AMOUNT VALUE EXPOSURE
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $3,400,000 $ 15,985 $ 4,256 $ 4,256
Interest rate floors 1,000,000 1,082 13,971 13,971
Options purchased 110,912 24,094 29,453 29,453
Liabilities:
Options purchased/written 265,454 (10,526) (11,062) --
Off balance sheet:
Interest rate swaps 1,667,000 -- (73,477) --
-------- -------- -------
$ 30,635 $(36,859) $47,680
======== ======== =======
</TABLE>
The fair values of derivative financial instruments are based on market values,
dealer quotes or pricing models. The interest rate caps, floors and swaps expire
on various dates from 2000 to 2003. The purchased and written options expire on
various dates from 2000 to 2006.
Interest rate caps, swaps and floors are used principally to manage the
Company's interest rate risk. These instruments are used to protect the margin
between interest rates earned on investments and the interest rates credited to
related annuity contract holders.
The Company also uses interest rate swaps to manage interest rate risk related
to the level of fee income earned on the management of fixed income securities
in separate accounts and the underlying mutual funds. The amount of fee income
received is based upon the daily market value of the separate account and mutual
fund assets. As a result, changing interest rate conditions could impact the
Company's fee income significantly. The Company entered into interest rate swaps
to hedge anticipated fee income for 1999 related to separate accounts and mutual
funds which invest in fixed income securities. Interest was reported in
management and other fees.
The Company offers an annuity product that pays interest based upon the relative
change in a major stock market index between the beginning and end of the
product's term. As a means of hedging its obligation under the provisions of
this product, the Company purchases and writes options on the major stock market
index.
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-19
<PAGE>
Index options are used to manage the equity market risk related to the fee
income that the Company receives from its separate accounts and the underlying
mutual funds. The amount of the fee income received is based upon the daily
market value of the separate account and mutual fund assets. As a result, the
Company's fee income could be impacted significantly by fluctuations in the
equity market. The Company entered into index option collars (combination of
puts and calls) to hedge anticipated fee income for 1999 and 1998 related to
separate accounts and mutual funds which invest in equity securities. Testing
demonstrated the impact of these instruments on the income statement closely
correlates with the amount of fee income the Company realizes. At December 31,
1999 deferred losses on purchased put and written call index options were $nil.
At December 31, 1998 deferred losses on purchased put and written call index
options were $2,933 and deferred gains on written call index options were
$7,435, respectively.
9. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company discloses fair value information for most on- and off-balance sheet
financial instruments for which it is practicable to estimate that value. Fair
values of life insurance obligations and all non-financial instruments, such as
deferred acquisition costs are excluded.
Off-balance sheet intangible assets, such as the value of the field force, are
also excluded. Management believes the value of excluded assets and liabilities
is significant. The fair value of the Company, therefore, cannot be estimated by
aggregating the amounts presented.
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
FINANCIAL ASSETS VALUE VALUE VALUE VALUE
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $ 7,156,292 $ 7,105,743 $ 7,964,114 $ 8,420,035
Available for sale 13,049,549 13,049,549 13,613,139 13,613,139
Mortgage loans on real
estate (Note 2) 3,606,377 3,541,958 3,505,458 3,745,617
Other:
Equity securities (Note 2) 3,016 3,016 3,158 3,158
Derivative financial
Instruments (Note 8) 60,076 74,837 41,161 47,680
Other 2,258 2,258 28,872 28,872
Cash and cash equivalents
(Note 1) 32,333 32,333 22,453 22,453
Separate account assets (Note
1) 35,894,732 35,894,732 27,349,401 27,349,401
</TABLE>
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
FINANCIAL LIABILITIES VALUE VALUE VALUE VALUE
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Future policy benefits for
fixed annuities $19,189,170 $18,591,859 $19,855,203 $19,144,838
Derivative financial
instruments (Note 8) 1,677 19,984 10,526 84,539
Separate account liabilities 31,869,184 31,016,081 25,005,732 24,179,115
</TABLE>
At December 31, 1999 and 1998, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related contracts
carried at $1,270,094 and $1,226,985, respectively, and policy loans of $92,895
and $90,115, respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1999 and 1998. The fair value of
deferred
--------------------------------------------------------------------------------
F-20 IDS LIFE INSURANCE COMPANY
<PAGE>
annuities is estimated as the carrying amount less any applicable surrender
charges and related loans. The fair value for annuities in non-life contingent
payout status is estimated as the present value of projected benefit payments at
rates appropriate for contracts issued in 1999 and 1998.
At December 31, 1999 and 1998, the fair value of liabilities related to separate
accounts is estimated as the carrying amount less any applicable surrender
charges and less variable insurance contracts carried at $4,025,548 and
$2,343,669, respectively.
10. YEAR 2000 (UNAUDITED)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the Company. All of the
major systems used by the Company are maintained by AEFC and are utilized by
multiple subsidiaries and affiliates of AEFC. The Company's businesses are
heavily dependent upon AEFC's computer systems and have significant interaction
with systems of third parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to the Company, was conducted to identify the major
systems that could be affected by the Year 2000 issue. Steps were taken to
resolve potential problems including modification to existing software and the
purchase of new software. As of December 31, 1999, AEFC had completed its
program of corrective measures on its internal systems and applications,
including Year 2000 compliance testing. As of December 31, 1999, AEFC had also
completed an evaluation of the Year 2000 readiness of other third parties whose
system failures could have an impact on the Company's operations.
AEFC's Year 2000 project also included establishing Year 2000 contingency plans
for all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. At December 31, 1999, these plans had been amended to include
specific Year 2000 considerations.
In assessing its Year 2000 initiatives and the results of actual production
since January 1, 2000, management believes no material adverse consequences were
experienced, and there was no material effect on the Company's business, results
of operations, or financial condition as a result of the Year 2000 issue.
--------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-21
