<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 8 (File No. 33-47302) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10 (File No. 811-3217) X
IDS LIFE ACCOUNT F
IDS LIFE ACCOUNT IZ
IDS LIFE ACCOUNT JZ
IDS LIFE ACCOUNT G
IDS LIFE ACCOUNT H
IDS LIFE ACCOUNT N
IDS LIFE ACCOUNT KZ
IDS LIFE ACCOUNT LZ
IDS LIFE ACCOUNT MZ
(Exact Name of Registrant)
IDS Life Insurance Company
(Name of Depositor)
IDS Tower 10, Minneapolis, MN 55440-0010
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1998, pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(i) of Rule 485
on (date) pursuant to paragraph (a)(i) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for
previously filed post-effective amendment.
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CROSS REFERENCE SHEET
Cross reference sheet showing location in the prospectus of the information
called for by the items enumerated in Part A and B of Form N-4.
Negative answers omitted from the prospectus and Statement of Additional
Information are so indicated.
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PART A
Item No. Section in Prospectus
1 Cover page
2 Key terms
3 (a) Expense Summary
(b) The Group Variable Annuity in brief
4 (a) Condensed financial information
(b) Performance information
(c) Financial statements
5 (a) Cover page; About IDS Life
(b) The variable accounts
(c) The funds
(d) Cover page; The funds
(e) Voting rights
(f) NA
(g) NA
6 (a) Charges
(b) Expense Summary; Charges
(c) Charges
(d) Distribution of contracts
(e) The funds
(f) NA
7 (a) Buying your annuity; The annuity payout period
(b) The variable accounts; Making the most of your annuity
(c) The funds; charges
(d) Cover page
8 (a) The annuity payout period
(b) NA
(c) The annuity payout period
(d) The annuity payout period
(e) The annuity payout period
(f) NA
9 (a) NA
(b) NA
10 (a) Buying your annuity; Valuing the investment
(b) Valuing the investment
(c) Buying your annuity; Valuing the investment
(d) NA
11 (a) Cash withdrawals, loans and conversions
(b) NA
(c) Cash withdrawals, loans and conversions
(d) Buying your annuity
(e) NA
12 (a) Taxes
(b) Cover page; Key terms
(c) NA
13 About IDS Life
14 Table of contents of the Statement of Additional Information
PART B
Section in
Item No. Statement of Additional Information
15 (a) Cover page
(b) NA
16 Table of contents
17 (a) NA
(b) NA
(c) About IDS Life*
18 (a) NA
(b) NA
(c) Independent Auditors
(d) NA
(e) NA
(f) Principal underwriter
19 (a) Other contractual provisions *
(b) Contract transfer, termination and market value adjustment
20 (a) Principal underwriter
(b) Principal underwriter
(c) Principal underwriter
(d) NA
21 (a) Performance information
(b) Performance information
22 NA
23 (a) Financial statements
(b) IDS Life financial information*
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*Designates section in the prospectus, which is hereby incorporated by reference
in this Statement of Additional Information.
<PAGE>
IDS Life Group Variable Annuity Contract
Prospectus
May 1, 1998
The Group Variable Annuity Contract is a group, unallocated deferred
fixed/variable annuity contract (the contract) offered by IDS Life Insurance
Company (IDS Life) a subsidiary of American Express Financial Corporation
(AEFC). This contract is designed to fund employer group retirement plans (the
plans) that qualify as retirement programs under Sections 401 (including 401(k))
and 457 of the Internal Revenue Code of 1986, as amended (the Code). The
contracts provide for the accumulation of values on a fixed and/or variable
basis. Retirement payments are made on a fixed basis.
New Group Variable Annuity Contracts are not currently being offered.
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
Sold by: IDS Life Insurance Company, IDS Tower 10, Minneapolis, MN 55440-0010
Telephone: 800-437-0602.
This prospectus contains the information about the variable accounts that you
should know before investing. Refer to "The variable accounts" in this
prospectus.
The prospectus is accompanied or preceded by the Retirement Annuity Mutual Fund
prospectus for IDS Life Aggressive Growth Fund, IDS Life International Equity
Fund, IDS Life Capital Resource Fund, IDS Life Managed Fund, IDS Life Special
Income Fund, IDS Life Moneyshare Fund, IDS Life Growth Dimensions Fund, IDS Life
Global Yield Fund and IDS Life Income Advantage Fund. Please read these
documents carefully and
keep them for future reference.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, or any state securities commission, nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
IDS Life is not a bank or financial institution and the securities it offers are
not deposits or obligations of, backed or guaranteed or endorsed by any bank or
financial institution nor are they insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
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A Statement of Additional Information (SAI) (incorporated by reference into this
prospectus) filed with the Securities and Exchange Commission (SEC) is available
without charge by contacting IDS Life at the telephone number above or by
completing and sending the order form on the last page of this prospectus.
The table of contents of the SAI is on the last page of this prospectus.
<PAGE>
Table of contents
Key terms
The Group Variable Annuity Contract in brief
Expense summary
Condensed financial information
Financial statements
Performance information
The variable accounts
The funds
IDS Life Aggressive Growth Fund IDS Life International Equity Fund IDS Life
Capital Resource Fund IDS Life Managed Fund IDS Life Special Income Fund IDS
Life Moneyshare Fund IDS Life Growth Dimensions Fund IDS Life Global Yield Fund
IDS Life Income Advantage Fund
The fixed account
Buying the annuity
How to make purchase payments
Charges
Contract administrative charge
Mortality and expense risk fee
Withdrawal charge
Premium taxes
Valuing the investment
Number of units
Accumulation unit value
Net investment factor
Factors that affect variable account accumulation units
<PAGE>
Making the most of your annuity Transferring money between accounts How to
request a transfer or a withdrawal
Cash withdrawals, loans and conversions
Withdrawal policies
Loans
Receiving payout when the owner requests a withdrawal
Special withdrawal provisions
Conversion
Changing ownership
Contract transfer, termination and
market value adjustment
The annuity payout period
Annuity payout plans
Taxes
Voting rights
Other contractual provisions
Distribution of contracts
Recordkeeper
Additional information about IDS Life
Directors and executive officers
Executive compensation
Security ownership of management
Legal proceedings and opinion
Experts
Appendix
<PAGE>
IDS Life financial information
About IDS Life
Periodic reports
Table of contents of the Statement of Additional Information
<PAGE>
Key terms
These terms can help you understand details about your annuity.
Annuity - A contract purchased from an insurance company that offers
tax-deferred growth of the investment until earnings are withdrawn.
Accumulation unit - A measure of the value of each variable account before
annuity payouts begin.
Annuity payouts - A fixed amount paid at regular intervals to a payee.
Close of business - When the New York Stock Exchange (NYSE) closes, normally
3:00 p.m. Central Time.
Code - Internal Revenue Code of 1986, as amended.
Contract anniversary - An anniversary of the effective date of this Contract.
Contract value - The total value of your annuity before any applicable
withdrawal charge, market value adjustment, contract administrative charge or
any other applicable charge has been deducted.
Contract year - A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
Fixed account - An account to which you may allocate purchase payments. Amounts
allocated to this account earn interest at rates that are declared periodically
by IDS Life.
IDS Life - In this prospectus, "we," "us," "our" and "IDS Life" refer to IDS
Life Insurance Company.
Mutual funds (funds) - Nine IDS Life Retirement Annuity mutual funds, each with
a different investment objective. (See "The funds.") You may allocate your
purchase payments into variable accounts investing in shares of any or all of
these funds.
Owner (you, your) - The plan sponsor or trustee of the Plan.
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Participant - An eligible employee or other person who is entitled to benefits
under the Plan.
Plan - The retirement Plan under which the Contract is issued and which meets
the requirements of Code Sections 401 (including 401(k)) or 457.
Purchase payments - Payments made to IDS Life for an annuity.
Retirement date - The date when a participant's annuity payouts are scheduled to
begin.
Valuation date - Any normal business day, Monday through Friday, that the New
York Stock Exchange is open. The value of each variable account is calculated at
the close of business on each valuation date.
Valuation period - The interval of time commencing at the close of business on
each valuation date and ending at the close of business on the next valuation
date. Close of business is normally 3 p.m.
(Central time).
Variable accounts - Separate accounts to which you may allocate purchase
payments; each invests in shares of one mutual fund. (See "The variable
accounts.") The value of your investment in each variable account changes with
the performance of the particular fund.
Withdrawal charge - A deferred sales charge that may be applied if the owner
takes a total or partial withdrawal or the contract is transferred or
terminated.
The Group Variable Annuity Contract in brief
Purpose: The Group Variable Annuity Contract is used for plans that meet the
requirements of Code sections 401 (including 401(k)) and 457.
Accounts: The owner can elect to have contract values accumulate in any or all
of:
o nine variable accounts, each of which invests in mutual funds with a
particular investment objective. The value of each variable account
varies with the performance of the particular fund. We cannot guarantee
that the value at the retirement date will equal or exceed the total of
purchase payments allocated to the variable accounts. (p.)
o one fixed account, which earns interest at rates that are adjusted
periodically by IDS Life. (p.)
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Buying the annuity: A financial advisor will help the owner complete and submit
an application. Applications are subject to acceptance at our Minneapolis
office. Generally, payments may be made annually, semiannually, quarterly or
monthly or any other frequency we accept.
Transfers: Subject to certain restrictions, you may redistribute investments
among accounts without charge at any time while the contract is in force. (p.)
Cash Withdrawals, Loans and Conversions: The owner may withdraw all or part of
the contract's value at any time. Withdrawals may be subject to charges and tax
penalties and may have tax consequences. Total withdrawals may be subject to a
market value adjustment. (p.)
The owner also may request a withdrawal for the purpose of funding loans for
participants. A withdrawal for a loan is not subject to withdrawal charges.
However, we reserve the right to deduct withdrawal charges from the remaining
contract value to the extent of any unpaid loans at the time of a total
withdrawal of contract value or at contract transfer or termination. (p.)
If a participant terminates employment, the owner may direct us to withdraw a
part of the contract value so that the participant can purchase an individual
deferred annuity contract from us. No withdrawal charges will apply at the time
of withdrawal for this conversion. (p.)
Contract Transfer, Termination and Market Value Adjustment: The owner may direct
us to withdraw the total contract value and transfer that value to another
funding agent. (p.)
Under certain circumstances, we may terminate the contract. (p.)
If the value of the fixed account is canceled due to total withdrawal, contract
transfer or contract termination, a market value adjustment may be imposed in
addition to applicable contract charges. The amount of the market value
adjustment approximates the gain or loss resulting from our sale of assets
purchased by the purchase payments. (p.)
Annuity payouts: The owner can direct us to begin retirement payouts to a payee
under an annuity payout plan that begins on the participant's retirement date.
The owner may choose from a variety of plans, or the owner and IDS Life can
mutually agree on other payout arrangements. The annuity payout plan selected
must meet the requirements of the plan. Payouts will be made on a fixed basis.
(p.)
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Taxes: Generally there is no federal income tax to participants on contributions
to the contract made by the owner or on increases in the contract's value until
distributions are made (under certain circumstances, tax penalties and other tax
consequences may apply.) IDS Life is taxed as a life insurance company under the
Code. The income and capital gains of the variable accounts, to the extent
applied to increase reserves under the contract, are not taxable to IDS Life.
(p.)
Charges: The Group Variable Annuity Contract is subject to a $125 per quarter
($500 annual) contract administrative charge. We reserve the right to increase
this charge, but it will never exceed $1,000 per year. We also deduct a 1%
mortality and expense risk charge and a withdrawal charge. Currently there are
no premium taxes under this contract, but certain state and local governments
may impose premium taxes when the owner selects an annuity payout plan. (p.)
Changing ownership: In general, ownership of the contract may not be
transferred. (p.)
Prohibited investments: The owner will not offer under the plan as a funding
vehicle to which future contributions may be made: (1) guaranteed investment
contracts; (2) bank investment contracts; (3) annuity contracts; or (4) funding
vehicles providing a guarantee of principal. (p.)
Recordkeeper - Any person or entity authorized by the owner to administer
recordkeeping services for the plan and participants must be approved by IDS
Life. (p.)
Expense summary
The purpose of this table is to help the owner understand the various costs and
expenses associated with the Group Variable Annuity Contract.
Owner Expenses
Withdrawal Charge:
(as a percentage of amount withdrawn)
Contract Year Percentage
- ------------- ----------
1 6%
2 6%
3 5%
4 4
5 3
6 2
7 1
8 and later 0
Annual contract administrative charge $500
($125 per quarter)
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Separate account annual expense
(as a percentage of average daily net assets of the underlying fund)
Mortality and expense risk fee 1%
<TABLE>
<CAPTION>
Annual operating expenses of underlying mutual funds (Management fees and other
expenses deducted as a percentage of average net assets)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life Growth Global Income
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage
Management fees .60% .83% .60% .59% .60% .51% .63% .84% .62%
Other expenses .07 .11 .07 .05 .07 .06 .08 .07 .03
Total * .67% .94% .67% .64% .67% .57% .71% .91% .65%
*Annualized operating expenses of underlying mutual funds at Dec. 31, 1997.
Example:* The owner would pay the following expenses on a $1,000 investment,
assuming 5% annual return and withdrawal at the end of each time period:
IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life Growth Global Income
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage
1 year $ 80.41 $ 83.01 $ 80.41 $ 80.12 $ 80.41 $ 79.45 $ 80.80 $ 82.72 $ 80.22
3 years $112.20 $120.15 $112.20 $111.32 $112.20 $109.25 $113.38 $119.27 $111.61
5 years $133.65 $147.30 $133.65 $132.13 $133.65 $128.56 $135.69 $145.79 $132.64
10 years $213.78 $242.61 $213.78 $210.53 $213.78 $202.91 $218.10 $239.45 $211.62
The owner would pay the following expenses on the same investment assuming no
withdrawal or selection of an annuity payout plan at the end of each time
period:
IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life Growth Global Income
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage
1 year $ 18.55 $ 21.32 $ 18.55 $ 18.25 $ 18.55 $ 16.91 $ 18.96 $ 21.01 $ 18.35
3 years $ 57.43 $ 65.81 $ 57.43 $ 56.49 $ 57.43 $ 52.43 $ 58.67 $ 64.88 $ 56.80
5 years $ 98.78 $112.89 $ 98.78 $ 97.21 $ 98.78 $ 90.35 $100.88 $111.33 $ 97.73
10 years $213.78 $242.61 $213.78 $210.53 $213.78 $202.91 $218.10 $239.45 $211.62
This example should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
* In this example, the $500 annual contract administrative charge is
approximated as a 0.137% charge based on our average contract size.
</TABLE>
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<TABLE>
<CAPTION>
Condensed Financial Information (Unaudited)
The following tables give per-unit information about the financial history of
each variable account.
Year Ended Dec. 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Account F (investing in shares of Capital Resource Fund)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit $6.67 $6.25 $4.94 $4.93 $4.82 $4.67 $3.22 $3.23 $2.57 $2.31
value at beginning
of period
Accumulation unit value $8.21 $6.67 $6.25 $4.94 $4.93 $4.82 $4.67 $3.22 $3.23 $2.57
at end of period
Number of accumulation 556,866 628,555 641,903 576,724 488,632 402,977 309,984 242,767 204,645 186,639
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
expense to average
Account IZ1 (investing in shares of International Equity Fund)
Accumulation unit $1.49 $1.38 $1.25 $1.29 $0.98 $1.00 -- -- -- --
value at beginning
of period
Accumulation unit value $1.52 $1.49 $1.38 $1.25 $1.29 $0.98 -- -- -- --
at end of period
Number of accumulation 1,168,353 1,220,486 1,088,874 913,364 405,536 69,874 -- -- -- --
units outstanding at end
of period (000 omitted)
Ration of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% -- -- -- --
expense to average
net assets
Account JZ1 (investing in shares of Aggressive Growth Fund)
Accumulation unit $1.68 $1.46 $1.12 $1.21 $1.08 $1.00 -- -- -- --
value at beginning
of period
Accumulation unit value $1.88 $1.68 $1.46 $1.12 $1.21 $1.08 -- -- -- --
at end of period
Number of accumulation 1,168,829 1,172,793 1,007,976 780,423 347,336 115,574 -- -- -- --
units outstanding at end
of period (000 omitted)
Ration of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% -- -- -- --
expense to average
net assets
Account G (investing in shares of Special Income Fund)
Accumulation unit $4.86 $4.59 $3.80 $3.99 $3.48 $3.21 $2.76 $2.67 $2.48 $2.27
value at beginning
of period
Accumulation unit value $5.25 $4.86 $4.59 $3.80 $3.99 $3.48 $3.21 $2.76 $2.67 $2.48
at end of period
Number of accumulation 316,789 362,167 393,697 361,640 405,429 330,000 270,858 236,926 222,248 175,878
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
expense to average
net assets
Account H (investing in shares of Moneyshare Fund)
Accumulation unit $2.36 $2.27 $2.18 $2.12 $2.09 $2.04 $1.95 $1.82 $1.69 $1.59
value at beginning
of period
Accumulation unit value $2.46 $2.36 $2.27 $2.18 $2.12 $2.09 $2.04 $1.95 $1.82 $1.69
at end of period
Number of accumulation 87,255 89,644 102,568 84,475 74,935 102,277 126,489 139,005 108,690 63,005
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
expense to average
net assets
Simple yield 4.10% 3.77% 3.97% 4.16% 1.89% 1.76% 3.26% 6.25% 6.81% 7.30%
Compound yield 4.18% 3.84% 4.05% 4.24% 1.90% 1.77% 3.31% 6.44% 7.04% 7.57%
Account N (investing in shares of Managed Fund)
Accumulation unit $2.97 $2.56 $2.09 $2.21 $1.98 $1.86 $1.45 $1.42 $1.14 $1.06
value at beginning
of period
Accumulation unit value $3.51 $2.97 $2.56 $2.09 $2.21 $1.98 $1.86 $1.45 $1.42 $1.14
at end of period
Number of accumulation 1,178,735 1,197,162 1,212,021 1,127,834 910,254 650,797 496,554 400,961 331,315 325,918
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
expense to average
net assets
Account KZ3 (investing in shares of Global Yield Fund)
Accumulation unit $1.07 $1.00 -- -- -- -- -- -- -- --
value at beginning
of period
Accumulation unit value $1.10 $1.07 -- -- -- -- -- -- -- --
at end of period
Number of accumulation 65,609 24,878 -- -- -- -- -- -- -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% -- -- -- -- -- -- -- --
expense to average
net assets
Account LZ3 (investing in shares of Income Advantage Fund)
Accumulation unit $1.05 $1.00 -- -- -- -- -- -- --
value at beginning
of period
Accumulation unit value $1.18 $1.05 -- -- -- -- -- -- --
at end of period
Number of accumulation 175,024 59,939 -- -- -- -- -- -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% -- -- -- -- -- -- --
expense to average
net assets
Account MZ3 (investing in shares of Growth Dimensions Fund)
Accumulation unit $1.11 $1.00 -- -- -- -- -- --
value at beginning
of period
Accumulation unit value $1.37 $1.11 -- -- -- -- -- --
at end of period
Number of accumulation 831,259 350,598 -- -- -- -- -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% -- -- -- -- -- --
expense to average
net assets
1 Accounts IZ and JZ commenced operations on Jan. 13, 1992.
2 Net of annual contract administrative charge and mortality and expense
risk fee.
3 Accounts KZ, LZ and MZ commenced operations on April 30, 1996.
</TABLE>
<PAGE>
Financial statements
The SAI dated May 1, 1998, contains:
o complete audited financial statements of the variable accounts including:
- statements of net assets as of Dec. 31, 1997;
- statements of operations for the year ended Dec. 31, 1997, and
- statements of changes in net assets for the years ended Dec. 31, 1997
and Dec. 31, 1996, except for IDS Life Accounts KZ, LZ and MZ which
are for the year ended Dec. 31, 1997 and the period April 30, 1996
(commencement of operations) to Dec. 31, 1996.
This prospectus contains:
o complete audited financial statements for IDS Life including:
- consolidated balance sheets as of Dec. 31, 1997 and Dec. 31, 1996; and
- related consolidated statements of income, stockholder's equity and
cash flows for each of the three years in the period ended Dec. 31,
1997.
Performance information
Performance information for the variable accounts may appear from time to time
in advertisements or sales literature. In all cases, such information reflects
the performance of a hypothetical investment in a particular account during a
particular time period. Calculations are performed as follows:
Simple yield - Account H (investing in IDS Life Moneyshare Fund): Income over a
given seven-day period (not counting any change in the capital value of the
investment) is annualized (multiplied by 52) by assuming that the same income is
received for 52 weeks. This annual income is then stated as an annual percentage
return on the investment.
Compound yield - Account H : Calculated like simple yield, except that, when
annualized, the income is assumed to be reinvested. Compounding of reinvested
returns increases the yield as compared to a simple yield.
Yield - For accounts investing in income funds: Net investment income (income
less expenses) per accumulation unit during a given 30-day period is divided by
the value of the unit on the last day of the period. The result is converted to
an annual percentage.
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Average annual total return: Expressed as an average annual compounded rate of
return of a hypothetical investment over a period of one, five and 10 years (or
up to the life of the account if it is less than 10 years old). This figure
reflects deduction of all applicable charges, including the contract
administrative charge, mortality and expense risk fee and withdrawal charge,
assuming a withdrawal at the end of the illustrated period. Optional average
annual total return quotations may be made that do not reflect a withdrawal
charge deduction (assuming no withdrawal).
Aggregate total return: Represents the cumulative change in the value of an
investment over a specified period of time (reflecting change in an account's
accumulation unit value). The calculation assumes reinvestment of investment
earnings and reflects the deduction of all applicable charges, including the
contract administrative charge, mortality and expense risk fee and withdrawal
charge, assuming a withdrawal at the end of the illustrated period. Optional
aggregate total return quotations may be made that do not reflect a withdrawal
charge deduction (assuming no withdrawal). Aggregate total return may be shown
by means of schedules, charts or graphs.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the fund in which the
account invests and the market conditions during the given time period. Such
information is not intended to indicate future performance. Because advertised
yields and total return figures include all charges attributable to the annuity,
which has the effect of decreasing advertised performance, account performance
should not be compared to that of mutual funds that sell their shares directly
to the public. (See the SAI for a further description of methods used to
determine yield and total return for the accounts.)
If you would like additional information about actual performance, contact your
financial advisor.
The variable accounts
Purchase payments can be allocated to any or all of the variable accounts that
invest in shares of the following funds:
IDS Life Account Established
IDS Life Aggressive Growth Fund JZ Sept. 20, 1991
IDS Life International Equity Fund IZ Sept. 20, 1991
IDS Life Capital Resource Fund F May 13, 1981
IDS Life Managed Fund N April 17, 1985
IDS Life Special Income Fund G May 13, 1981
IDS Life Moneyshare Fund H May 13, 1981
IDS Life Growth Dimensions Fund MZ April 2, 1996
IDS Life Global Yield Fund KZ April 2, 1996
IDS Life Income Advantage Fund LZ April 2, 1996
<PAGE>
Each variable account meets the definition of a separate account under federal
securities laws. Income, capital gains and capital losses of each account are
credited or charged to that account alone. No variable account will be charged
with liabilities of any other account or of our general business. Each variable
account's net assets are held in relation to the contracts described in this
prospectus as well as other variable annuity contracts that we issue that are
not described in this prospectus. All obligations arising under the contracts
are general obligations of IDS Life.
All variable accounts were established under Minnesota law and are registered
together as a single unit investment trust under the Investment Company Act of
1940 (the 1940 Act). This registration does not involve any supervision of our
management or investment practices and policies by the SEC.
The funds
IDS Life Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock of small- and
medium-size companies. The fund also may invest in warrants or debt securities
or in large well-established companies when the portfolio manager believes such
investments offer the best opportunity for capital appreciation.
IDS Life International Equity Fund
Objective: capital appreciation. Invests primarily in common stock of foreign
issuers and foreign securities convertible into common stock. The fund also may
invest in certain international bonds if the portfolio manager believes they
have a greater potential for capital appreciation than equities.
IDS Life Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common stocks and
other securities convertible into common stock, diversified over many different
companies in a variety of industries.
IDS Life Managed Fund
Objective: maximum total investment return. Invests primarily in U.S. common
stocks, securities convertible into common stock, warrants, fixed income
securities (primarily high-quality corporate bonds) and money-market
instruments. The fund invests in many different companies in a variety of
industries.
IDS Life Special Income Fund
Objective: to provide a high level of current income while conserving the value
of the investment for the longest time period. Invests primarily in
high-quality, lower-risk corporate bonds issued by many different companies in a
variety of industries and in government bonds.
<PAGE>
IDS Life Moneyshare Fund
Objective: maximum current income consistent with liquidity and conservation of
capital. Invests in high-quality money market securities with remaining
maturities of 13 months or less. The fund also will maintain a dollar-weighted
average portfolio maturity not exceeding 90 days. The fund attempts to maintain
a constant net asset value of $1 per share.
IDS Life Growth Dimensions Fund
Objective: long-term growth of capital. Invests primarily in common stocks of
U.S. and foreign companies showing potential for significant growth.
IDS Life Global Yield Fund
Objective: high total return through income and growth of capital. Invests
primarily in a non-diversified portfolio of debt securities of U.S. and foreig
issuers.
IDS Life Income Advantage Fund
Objective: high current income, with capital growth as a secondary objective.
Invests in long-term, high-yielding, high-risk debt securities below investment
grade issued by U.S. and foreign corporations.
More comprehensive information regarding each fund is contained in the fund
prospectus. You should read the fund prospectus and consider carefully, and on a
continuing basis, which fund or combination of funds is best suited to your
long-term investment needs. There is no assurance that the investment objectives
of the funds will be attained nor is there any guarantee that the contract value
will equal or exceed the total purchase payments made. Some funds may involve
more risk than others--please monitor your investments accordingly.
The Internal Revenue Service (IRS) has issued final regulations relating to the
diversification requirements under Section 817(h) of the Code. Each mutual fund
intends to comply with these requirements.
The U.S. Treasury and the IRS have indicated that they may provide additional
guidance concerning how many variable accounts may be offered and how many
exchanges among variable accounts may be allowed before the owner is considered
to have investment control and thus is currently taxed on income earned within
variable account assets. We do not know at this time what the additional
guidance will be or when action will be taken. We reserve the right to modify
the contract, as necessary, to ensure that the owner will not be subject to
current taxation as the owner of the variable account assets.
We intend to comply with all federal tax laws to ensure that the contract
continues to qualify as an annuity for federal income tax purposes. We reserve
the right to modify the contract as necessary to comply with any new tax laws.
<PAGE>
IDS Life is the investment manager and AEFC is the investment advisor for each
of the funds. American Express Asset Management International Inc., a wholly
owned subsidiary of AEFC, is the sub-investment advisor for IDS Life
International Equity Fund. The investment manager and advisors cannot guarantee
that the funds will meet their investment objectives. Please read the Retirement
Annuity Mutual Fund prospectus for complete information on investment risks,
deductions, expenses and other facts you should know before investing. It is
available by contacting IDS Life at the address or telephone number on the front
of this prospectus, or from your financial advisor.
The fixed account
Purchase payments may also be allocated to the fixed account. The cash value of
the fixed account increases as interest is credited to the account. Purchase
payments and transfers to the fixed account become part of the general account
of IDS Life, the company's main portfolio of investments. Interest is credited
daily and compounded annually. We may change the interest rates from time to
time.
In addition, a market value adjustment is imposed on the fixed account if the
owner cancels the value of the fixed account due to total withdrawal, contract
transfer or contract termination. The amount of the market value adjustment
approximates the gain or loss resulting from sale by IDS Life of assets
purchased with purchase payments. (See "Market value adjustment.")
Buying the annuity
A financial advisor will help the owner prepare and submit an application and
send it along with the initial purchase payment to our Minneapolis office.
Please remember that investment performance, expenses and deduction of certain
charges affect accumulation unit value.
When applying, you can select
o the account(s) in which to invest
o how to make purchase payments
If the application is complete, we will process it and apply the purchase
payments to your account(s) within two business days after we receive it at our
Minneapolis office. If the application is accepted, we will send the owner a
contract. If we cannot accept the application within five business days, we will
decline it and return the payment unless the parties agree otherwise. We will
credit additional purchase payments to the contract's account(s) at the next
close of business after we receive and accept your payments at our Minneapolis
office.
<PAGE>
How to make purchase payments
1 By letter
Send your check along with your name and account number to:
Regular mail:
IDS Life Insurance Company
P.O. Box 74
Minneapolis, MN 55440-0074
Express mail:
IDS Life Insurance Company
733 Marquette Avenue
Minneapolis, MN 55402
2 By scheduled payment plan
A financial advisor can help set up:
o participant salary reduction
Charges
Contract administrative charge
This fee is for establishing and maintaining your records. We deduct $125 from
the contract value at the end of each contract quarter (each three-month period
measured from the effective date of your contract). We deduct this charge on a
pro-rata basis from the fixed and variable accounts. Annual charge: $500. We
reserve the right to increase the contract administrative charge in the future,
but we guarantee that it will never exceed $250 per quarter ($1,000 per year).
Mortality and expense risk fee
This fee is to cover the mortality risk and expense risk and is applied daily to
the variable accounts and reflected in the unit values of the accounts. The
variable accounts pay this fee at the time that dividends are distributed from
the funds in which they invest. Annually, the fee totals 1% of the variable
accounts' average daily net assets. Approximately two-thirds of this amount is
for our assumption of mortality risk and one-third is for our assumption of
expense risk. This fee does not apply to the fixed account.
<PAGE>
Mortality risk arises because of our guarantee to make annuity payouts according
to the terms of the contract, no matter how long a specific participant lives
and no matter how long the entire group of IDS Life annuitants live. If, as a
group, IDS Life annuitants outlive the life expectancy we have assumed in our
actuarial tables, then we must take money from our general assets to meet our
obligations. If, as a group, IDS Life annuitants do not live as long as
expected, we could profit from the mortality risk fee.
Expense risk arises because the contract administrative charge cannot be
increased above $1,000 per year and may not cover our expenses. Any deficit
would have to be made up from our general assets.
We may use any profits realized from the mortality and expense risk fee for any
proper corporate purpose, including, among others, payment of distribution
(selling) expenses. We do not expect that the withdrawal charge, discussed in
the following paragraphs, will cover sales and distribution expenses.
Withdrawal charge
If the owner withdraws part or all of the contract, a withdrawal charge may
apply. This withdrawal charge represents a percentage of the amount withdrawn as
follows:
ithdrawal Charge as
Percent of
Contract Year Amount Withdrawn
------------- ----------------
1 6%
2 6
3 5
4 4
5 3
6 2
7 1
8 and later 0
In the case of partial withdrawal, the withdrawal charge is deducted from the
contract value remaining after the owner is paid the amount requested.
<PAGE>
Example of withdrawal charge:
Owner requests $1,000 partial withdrawal, and the withdrawal charge is 5%:
1,000 partial withdrawal = $1,052.63
.95
Total amount withdrawn...............................$ 1,052.63
x 0.05
Total withdrawal charge..............................$ 52.63
There are no withdrawal charges for withdrawals on behalf of a participant if
the participant:
o attains age 59 1/2;
o purchases an immediate annuity under the annuity payout plans of this contract
after separation from service;
o retires under the plan after age 55;
o becomes disabled (as defined by the Code);
o dies;
o encounters financial hardship as permitted under the plan and the Code;
o receives a loan as requested by the owner;
o converts contract value to an individual retirement annuity or other
qualified annuity offered by IDS life as requested by the owner.
Under no circumstance will withdrawal charges exceed 8.5% of aggregate purchase
payments made.
Possible group reductions: In some cases lower sales and administrative expenses
may be incurred or we may perform fewer services. In such cases, we may be able
to reduce or eliminate certain contract charges. However, we expect this to
occur infrequently.
Premium taxes
Currently, there are no premium taxes under this contract. However, a charge
will be made by IDS Life against the contract value for any state and local
premium taxes to the extent the taxes are payable in connection with the
purchase of an annuity contract under the annuity payout plans.
<PAGE>
Valuing the investment
Here is how the accounts are valued:
Fixed account: The amounts allocated to the fixed account are valued directly in
dollars and equal the sum of your purchase payments, plus interest earned, less
any amounts withdrawn or transferred (including the contract administrative
charge).
Variable accounts: Amounts allocated to the variable accounts are converted into
accumulation units. Each time the owner makes a purchase payment or transfers
amounts into one of the variable accounts, a certain number of accumulation
units are credited to the contract for that account. Conversely, each time the
owner takes a partial withdrawal, transfers amounts out of a variable account or
is assessed a contract administrative charge, a certain number of accumulation
units are subtracted from the contract.
The accumulation units are the true measure of investment value in each account
during the accumulation period. They are related to, but not the same as, the
net asset value of the underlying fund. The dollar value of each accumulation
unit can rise or fall daily depending on the performance of the underlying
mutual fund and on certain fund expenses. Here is how unit values are
calculated:
Number of units
To calculate the number of accumulation units for a particular account, we
divide the investment by the current accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable account equals the last
value times the account's current net investment factor.
Net investment factor
o Determined by adding the underlying mutual fund's current net asset
value per share, plus per share amount of any current dividend or
capital gain distribution; then
o dividing that sum by the previous 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 underlying mutual fund may fluctuate, the
accumulation unit value may increase or decrease. The owner bears this
investment risk in a variable account.
<PAGE>
Factors that affect variable account accumulation units
Accumulation units may change in two ways; in number and in value. Here are the
factors that influence those changes:
The number of accumulation units owned may fluctuate due to:
o additional purchase payments allocated to the variable account(s);
o transfers into or out of the variable account(s);
o partial withdrawals;
o withdrawal charges; and/or
o contract administrative charges.
Accumulation unit values may fluctuate due to:
o changes in underlying mutual fund(s) net asset value;
o dividends distributed to the variable account(s);
o capital gains or losses of underlying mutual funds;
o mutual fund operating expenses; and/or
o mortality and expense risk
fees.
Making the most of the annuity
Transferring money between accounts
The owner may transfer money from one account, including the fixed account, to
another before the annuity payouts begin. We will process your transfer request
at the next close of business after we receive it. There is no charge for
transfers. Before making a transfer, the owner should consider the risks
involved in switching investments.
We may suspend or modify transfer privileges at any time. Any restriction
imposed by the plan will apply.
How to request a transfer or a withdrawal
A transfer or withdrawal request can be made by letter or we can agree to
another method. Send the plan name, account number, Social Security Number or
Taxpayer Identification Number and signed request for a transfer or withdrawal
to:
Regular mail:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
Express mail:
IDS Life Insurance Company
733 Marquette Avenue
Minneapolis, MN 55402
As owner, you may withdraw all or part of the annuity contract value at any time
by sending a written request or by any other method we accept. For total
withdrawals, we will compute the value of the contract at the next close of
business after we receive the request. We may ask the owner to return the
contract. The owner may have to pay withdrawal charges (see "Charges") and IRS
taxes and penalties (see "Taxes").
Cash Withdrawals, loans and conversions
Withdrawal policies
o If the owner requests a total withdrawal, payment will equal the total
contract value less the contract administrative charge, any applicable
premium tax and withdrawal charge.
o The owner or the recordkeeper must state the reason for a partial
withdrawal.
o If the contract has a balance in more than one account and request for
a partial withdrawal is made, we will withdraw money from all the
accounts in the same proportion as the value in each account correlates
to the total contract value, unless requested otherwise.
o For total withdrawals from the fixed account, a market value adjustment
may apply. (See "Contract transfer, termination and market value
adjustment" below.)
Loans
The owner may request withdrawals for the purpose of funding loans for
participants. At the time of the loan request, the owner must specify from which
accounts the withdrawal for the loan should be made. The amount and terms of the
loan must be in accordance with the applicable requirements of the plan and the
Code. IDS Life assumes no responsibility for the validity of the loan or whether
the loan complies with such applicable requirements.
Withdrawals for the purpose of funding a loan under the plan will not be subject
to withdrawal charges when the loan is made. However, we reserve the right to
deduct any such withdrawal charges from the remaining contract value to the
extent of any unpaid loans at the time of a total withdrawal of the contract
value or at contract transfer or termination. (See "Charges.")
<PAGE>
Receiving payout when the owner requests a withdrawal
By regular or express mail
o Payable to owner
o Normally mailed to address of record within seven days after receiving the
request. However, we may postpone the payout if:
- the withdrawal amount includes a purchase payment check that
has not cleared
- the NYSE is closed, except for normal holiday and weekend
closings
- trading on the NYSE is restricted, according to SEC rules
- an emergency, as defined by SEC rules, makes it impractical to
sell securities or value the net assets of the accounts
- the SEC permits us to delay payment for the protection of
security holders.
Special withdrawal provisions
o The rights of any person to any benefits under the plans under which
these contracts are issued will be subject to the terms and conditions
of the plans themselves, regardless of the terms and conditions of the
contract issued in connection with the plans.
o IDS Life reserves the right to defer the payment of amounts withdrawn
from the fixed account for a period not to exceed six months from the
date we receive the request for withdrawal.
o Since contracts offered will be issued in connection with plans that
meet the requirements of Code Sections 401 (including 401(k)) and 457,
reference should be made to the terms of the particular plan for any
further limitations or restrictions on cash withdrawals.
o A withdrawal charge will be deducted from the amount withdrawn subject
to certain limitations and exceptions. (See "Charges.") A cash
withdrawal is also subject to federal income taxes and may incur
federal tax penalties. The tax consequences of a cash withdrawal
payment should be carefully considered. (See "Taxes.")
<PAGE>
Conversion
In the event of a participant's termination of employment or for other reasons
that meet the requirements of the plan and the Code and which are acceptable to
us, the owner may elect to transfer, on the participant's behalf, part of the
contract value to an individual deferred annuity contract then offered by IDS
Life. This individual contract will be qualified as an individual retirement
annuity under Section 408 or will qualify under other applicable sections of the
Code. Such contract will be in a form then customarily issued by us for business
under such qualified plans. No withdrawal charges will apply at the time of such
conversion.
Changing ownership
Ownership of the contract may not be transferred except to:
o a trustee or successor trustee of a pension or profit sharing trust
that is qualified under the Code; or
o as otherwise permitted by laws and regulations governing the plans under
which the contract is issued.
Subject to the provisions above, the contract may not be sold, assigned,
transferred, discounted or pledged as collateral for a loan or as security for
the performance of an obligation or for any other purpose to any person except
IDS Life.
Contract transfer, termination and market value adjustment
Withdrawals by owner for transfer of funds
The owner may direct IDS Life to withdraw the total contract value and transfer
that value to another funding agent. All applicable contract charges including
withdrawal charges will be payable by the owner and will be deducted from the
first payout unless the total contract value is transferred to a plan offered by
IDS Life or its affiliates. (See "Charges.")
The owner must provide IDS Life with a written request to make such a
withdrawal. This written request must be sent to our Minneapolis office and must
specify the initial withdrawal date and payee to whom the payouts are to be
made.
<PAGE>
At the owner's option, we will pay the contract value less any applicable
charges in annual installments or in a lump sum as follows:
1. The contract value may be paid in five annual installments beginning on the
initial withdrawal date and then on each of the next four anniversaries of such
date as follows:
% of Then Remaining
Installment Payment Contract Value Balance
------------------- ----------------------
1 20%
2 25
3 33
4 50
5 100
No additional withdrawals for benefits or other transfers of contract values
will be allowed and no additional purchase payments will be accepted after the
first withdrawal payment is made. We will continue to credit interest to any
contract value balance remaining after an installment payment at the interest
crediting rate then in effect for the fixed account.
2. The contract value may be paid in a lump sum. Any amount attributable to the
fixed account value will be based on the market value of such balance. The
market value will be determined by us by applying the formula described below
under "Market value adjustment." We will make lump sum payments according to the
provisions of the above section titled "Receiving a payment when you request a
withdrawal."
Market value adjustment - A market value adjustment (MVA) applies only when we
pay out the fixed account value in a lump sum when:
o the owner withdraws the total contract value to transfer that value to
another funding vehicle;
o the owner makes a total withdrawal of the fixed account contract value; or
o we terminate the contract as described below. (See "Contract termination.")
The MVA will be applied to the amount being withdrawn from the fixed account
after deduction of any applicable contract administrative charge and withdrawal
charge. (See "Charges.")
<PAGE>
The MVA will reflect the relationship between the current interest rate being
credited to new purchase payments allocated to the fixed account and the rate
being credited to all prior purchase payments. The MVA is calculated as follows:
MVA = fixed account value x (A - B) x C
Where:
A = the weighted average interest rate (in decimal form) being credited
to all fixed account purchase payments made by the owner at the time of
termination, rounded to 4 decimal places;
B = the interest rate (in decimal form) being credited to new purchase
payments to the contract at the time of termination or total
withdrawal, rounded to 4 decimal places; and
C = the annuity factor, which represents the relationship between the
contract year and the average duration of underlying investments from
the following table:
Contract Year Annuity Factor
1-3 6.0
4-6 5.0
7+ 4.0
For an example showing an upward and downward MVA, please see Appendix A.
No MVA applies if:
o the owner makes a partial withdrawal of the fixed account contract value;
o installment payments are made when the owner withdraws the total
contract value to transfer that value to another funding vehicle or we
terminate the contract; or
o the owner transfers contract values from the fixed account to the
variable accounts as described above under "Transfer money between
accounts."
<PAGE>
Contract termination
We reserve the right upon 30 days' written notice to the owner to declare a
contract termination date that will be any date on or after the expiration of
the 30-day notification period.
A contract termination date may be declared if:
o The owner adopts an amendment to the plan that causes the plan to be
materially different from the plan originally in existence when the
contract was purchased. To be "materially different," the amendment
must cause a substantial change in the level of the dollar amounts of
purchase payments or contract benefits to be paid by us;
o The plan fails to qualify or becomes disqualified under the appropriate
sections of the Code;
o The owner offers under the plan as a funding vehicle to which future
contributions may be made a guaranteed investment contract, bank
investment contract, annuity contract or funding vehicle providing a
guarantee of principal. See "Prohibited Investments;" or
o The owner changes to a recordkeeper that is not approved by us.
If we waive our rights to terminate the contract under any provision of this
section at any time, such waiver will not be considered a precedent and will not
prohibit us from exercising the right to terminate this contract, for the
reasons noted above, at any future time.
Procedures at contract termination
On the contract termination date, we will withdraw any outstanding charges,
including any contract administrative charges, from the contract value. A
withdrawal charge may apply and be payable by the owner on account of any
termination under this provision and will be deducted from the first termination
payment. (See "Charges.")
At the owner's option, we will pay the contract value in a lump sum or in annual
installment payouts according to the table under "Withdrawals by owner for
transfer of funds" above. A lump sum payout will be subject to an applicable MVA
to the fixed account value. If the owner does not select an option, we will pay
the contract value to you under the installment option.
<PAGE>
The annuity payout period
When a plan participant reaches his or her retirement date, the owner of the
contract may select one of the annuity payout plans outlined below or the owner
and IDS Life will mutually agree on other payout arrangements. No withdrawal
charges are deducted under the payout plans listed below.
Retirement payouts will be made on a fixed basis. We will make these retirement
payouts under a supplemental fixed immediate annuity in the form customarily
offered by us at the time of purchase.
Annuity payout plans
The owner may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before contract values are to be used to purchase
the payout plan.
o Plan A - Life annuity - no refund: Monthly payouts are made until the
annuitant's death. Payouts end with the last payout before the annuitant's
death; no further payouts will be made. This means that if the annuitant dies
after only one monthly payout has been made, no more payouts will be made.
o Plan B - Life annuity with five, 10 or 15 years certain: Monthly payouts are
made for a guaranteed payout period of five, 10 or 15 years that you elect. This
election will determine the length of the payout period to the beneficiary if
the annuitant should die before the elected period has expired. The guaranteed
payout period is calculated from the retirement date. If the annuitant outlives
the elected guaranteed payout period, payouts will continue until the
annuitant's death.
o Plan C - Life annuity - installment refund: Monthly payouts are made until the
annuitant's death, with our guarantee that payouts will continue for some period
of time. Payouts will be made for at least the number of months determined by
dividing the amount applied under this option by the first monthly payout,
whether or not the annuitant is living.
o Plan D - Joint and last survivor life annuity - no refund: Monthly payouts are
made while both the annuitant and a joint annuitant are living. If either
annuitant dies, monthly payouts continue at the full amount until the death of
the surviving annuitant. Payouts end with the death of the second annuitant.
o Plan E - Payouts for a specified period: Monthly payouts are made for a
specific payout period of 10 to 30 years that you elect. Payouts will be made
only for the number of years specified whether the annuitant is living or not.
Depending on the time period selected, it is foreseeable that an annuitant can
outlive the payout period selected. In addition, a 10% IRS penalty tax could
apply under this payout plan. (See "Taxes.")
<PAGE>
Restrictions on payout options:
Since the contract is issued in connection with plans that meet the requirements
of code section 401 (including 401(k)) and 457, the payout schedule must meet
the applicable requirements of the particular plan and of the code, including
the distribution and incidental death benefit requirements. In general, the plan
must provide for retirement payouts:
o over the life of the participant;
o over the joint lives of the participant and a designated beneficiary;
o for a period not exceeding the life expectancy of the participant; or
o for a period not exceeding the joint life expectancies of the
participant and a designated beneficiary.
If monthly payouts would be less than $20: We will calculate the amount of
monthly payouts at the time the immediate annuity is purchased to provide
retirement payouts. If the calculations show that monthly payouts would be less
than $20, we have the right to pay the contract value to the owner in a lump
sum.
Taxes
Tax treatment of IDS Life and the variable accounts: IDS Life is taxed as a life
insurance company under the Code. Although the operations of the variable
accounts are accounted for separately from other operations of IDS Life for
purposes of federal income taxation, the variable accounts are not taxable as
entities separate from IDS Life. Under existing federal income tax laws, the
income and capital gains of the variable accounts, to the extent applied to
increase reserves under the contracts, are not taxable to IDS Life.
Taxation of annuities in general: Generally, there is no tax to a participant on
contributions made by the owner to the contract or on any increases in the value
of the contract. However, when distribution to a participant occurs, the
distribution will be subject to taxation (except contributions that were made
with after-tax dollars).
<PAGE>
Penalties: If participants receive amounts from the contract before reaching age
59-1/2, they may have to pay a 10% IRS penalty on the amount includable in their
ordinary income. However, this penalty will not apply to any amount received by
the participant or designated beneficiary:
o because of the participant's death;
o because the participant becomes disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments after separation from service, made at least annually, over the
participant's life or life expectancy (or joint lives or life expectancies of
the participant and designated beneficiary);
o if the participant retires under the plan during or after the year he or she
attains age 55; or o if the payout is a 457 plan distribution.
Other penalties or exceptions may apply if distributions are made from the
annuity before your plan specifies that payouts can be made.
Withholding: If the participant receives a distribution, mandatory 20% income
tax withholding generally will be imposed at the time the payout is made. Any
withholding that is done represents a prepayment of the participant's tax due
for the year and the participant will take credit for such amounts when filing
an annual tax return. This mandatory withholding will not be imposed if: o
instead of receiving the distribution check, the participant elects to have the
distribution rolled over directly to an IRA or
another eligible plan;
o the payout is one in a series of substantially equal periodic payouts,
made at least annually, over the participant's life or life expectancy
(or the joint lives or life expectancies of the participant and
designated beneficiary) or over a specified period of 10 years or more;
o the payout is a minimum distribution required under the Code; or
o the payout is a 457 plan distribution.
Payouts made to a surviving spouse instead of being directly rolled over to an
IRA may also be subject to 20% income tax withholding.
If a distribution is made to the participant from a contract offered under a
Section 457 plan (deferred compensation plan of state and local governments and
tax-exempt organizations), withholding is computed using payroll methods,
depending upon the type of payment.
<PAGE>
Elective withholding: If the distribution is not subject to mandatory
withholding as described above, the participant can elect not to have any
withholding occur. To do this we must be provided with a valid Social Security
Number or Taxpayer Identification Number.
If this election is not made and if the payout is part of an annuity payout
plan, the amount of withholding generally is computed using payroll tables.
Please send us a statement of how many exemptions to use in calculating the
withholding. If the distribution is any other type of payment (such as a partial
or full withdrawal), withholding is computed using 10% of the taxable portion.
Some states also impose withholding requirements similar to the federal
withholding described above. If this should be the case, any payments from which
federal withholding is deducted may also have state withholding deducted.
The withholding requirements may differ if payment is being made to a non-U.S.
citizen or if the payment is being delivered outside the United States.
Important: Our discussion of federal tax laws is based upon our understanding of
these laws as they are currently interpreted. Federal tax laws or current
interpretations of them may change. For this reason and because tax consequences
are complex and highly individual and cannot always be anticipated, please
consult a tax advisor regarding any questions about taxation of the annuity
contract.
Tax qualification
The contract is intended to qualify as an annuity contract for federal income
tax purposes. To that end, the provisions of this contract are to be interpreted
to ensure or maintain such tax qualification, notwithstanding any other
provisions to the contrary. We reserve the right to amend this contract to
reflect any clarifications that may be needed or are appropriate to maintain
such qualification or to conform this contract to any applicable changes in the
tax qualification requirements. We will send the owner a copy of any such
amendment.
Voting rights
The contract owner or other authorized party with investments in the variable
account(s) may vote on important mutual fund policies. We will vote fund shares
according to the instructions we receive.
The number of votes is determined by applying the percentage interest in each
variable account to the total number of votes allowed to the account.
<PAGE>
We calculate votes separately for each account not more than 60 days before a
shareholders' meeting. Notice of these meetings, proxy materials and a statement
of the number of votes to which the voter is entitled, will be sent.
We will vote shares for which we have not received instructions in the same
proportion as the votes for which we have received instructions. We also will
vote the shares for which we have voting rights in the same proportion as the
votes for which we have received instructions.
Other contractual provisions
Modification
Upon notice to the owner, the contract may be modified by IDS Life if such
modification:
o is necessary to make the contract or the variable accounts comply with
any law or regulation issued by a governmental agency to which we or
the variable accounts are subject;
o is necessary to assure continued qualification of the contract under
the Code or other federal or state laws relating to retirement
annuities or annuity contracts;
o is necessary to reflect a change in the variable accounts; or
o provides additional accumulation options for the variable accounts.
In the event of any such modification, we may make appropriate endorsement to
the contract to reflect such modification.
Prohibited investments
While the contract is in force, and prior to any withdrawal or contract
termination, the owner will not offer under the plan as a funding vehicle to
which future contributions may be made any of the following:
o guaranteed investment contracts;
o bank investment contracts;
o annuity contracts with fixed and/or variable accounts; or
o funding vehicles providing a guarantee of principal.
IDS Life reserves the right to terminate the contract if one or more of these
prohibited investments is offered.
Proof of condition or event
Where any payments under the contract depend on the recipient being alive and/or
being a certain age on a given date, or depend on the occurrence of a specific
event, IDS Life may require proof satisfactory to it that such a condition has
been met prior to making the payment.
<PAGE>
Distribution of contracts
IDS Life is the principal underwriter for the contracts. We are registered with
the SEC under the Securities Exchange Act of 1934 (1934 Act) as a broker-dealer
and are a member of the National Association of Securities Dealers, Inc.
We may enter into distribution agreements with certain broker-dealers registered
under the 1934 Act. We will pay a maximum commission of 7% for the sale of a
contract. In addition, we may pay a service commission when the owner maintains
the contract in force.
Recordkeeper
We provide a contract to fund plans that meet the requirements of Code Sections
401 (including 401(k)) and 457. We do not provide any administrative or
recordkeeping services in connection with the Plan. We will rely on information
and/or instructions provided by the Plan administrator and/or recordkeeper in
order to properly administer the contract. For this reason, any person or entity
authorized by the owner to administer recordkeeping services for the Plan and
participants must be approved by IDS Life.
Additional information about IDS Life
Selected financial data
The following selected financial data for IDS Life and its subsidiaries should
be read in conjunction with the consolidated financial statements and notes.
<TABLE>
<CAPTION>
Years ended Dec. 31, (thousands)
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Premiums $ 206,494 $ 182,921 $ 161,530 $ 144,640 $ 127,245
Net investment income 1,988,389 1,965,362 1,907,309 1,781,873 1,783,219
Net gain (loss) on investments 860 (159) (4,898) (4,282) (6,737)
Other 682,618 574,341 472,035 384,105 304,344
Total revenues $ 2,878,361 $ 2,722,465 $ 2,535,976 $ 2,306,336 $ 2,208,071
Income before income taxes $ 680,911 $ 621,714 $ 560,782 $ 512,512 $ 412,726
Net income $ 474,247 $ 414,576 $ 364,940 $ 336,169 $ 270,079
Total assets $52,974,124 $47,305,981 $42,900,078 $35,747,543 $33,057,753
</TABLE>
<PAGE>
Management's discussion and analysis of consolidated financial condition and
results of operations
Results of operations
1997 compared to 1996:
Consolidated net income increased 14% to $474 million in 1997, compared to $415
million in 1996. Earnings growth resulted primarily from increases in management
fees and policyholder and contractholder charges. These increases reflect higher
average insurance and annuities in force during 1997.
Consolidated income before income taxes totaled $681 million in 1997, compared
with $622 million in 1996. In 1997, $179 million was from the life, disability
income and long-term care insurance segment, compared with $161 million in 1996
and $502 million was from the annuity segment, compared with $461 million in
1996.
Total premiums received decreased to $5.2 billion in 1997, compared with $6.1
billion in 1996. This decrease is primarily due to a decrease in sales of fixed
annuities in 1997.
Total revenues increased to $2.9 billion in 1997, compared with $2.7 billion in
1996. The increase is primarily due to increases in net investment income,
policyholder and contractholder charges, and management fees. Net investment
income, the largest component of revenues, increased slightly from the prior
year, reflecting slight increases in investments owned and investment yields.
Policyholder and contractholder charges, which consist primarily of cost of
insurance charges on universal life-type policies, increased 13% to $342 million
in 1997, compared with $303 million in 1996. This increase reflects increased
total life insurance in force which grew 12% to $75 billion at Dec. 31, 1997.
Management and other fees increased 26% to $341 million in 1997, compared with
$271 million in 1996. This is primarily due to an increase in separate account
assets, which grew 25% to $23 billion at Dec. 31, 1997, due to market
appreciation and sales. The Company provides investment management services for
the mutual funds used as investment options for variable annuities and variable
life insurance. The Company also receives a mortality and expense risk fee from
the separate accounts.
Total benefits and expenses increased slightly to $2.2 billion in 1997. The
largest component of expenses, interest credited to policyholder accounts for
universal life-type insurance and investment contracts, remained steady at $1.4
billion. DAC increased to $323 million compared to $279 million in 1996. These
increases were due primarily to increased aggregate amounts in force.
<PAGE>
1996 compared to 1995:
Consolidated net income increased 14% to $415 million in 1996, compared to $365
million in 1995. Earnings growth resulted primarily from increases in management
fees and policyholder and contractholder charges partially offset by a slight
decrease in investment margins. These increases reflect increased average
insurance and annuities in force during 1996. Investment margins were below
prior year levels primarily due to increasing interest credited rates throughout
1996.
Consolidated income before income taxes totaled $622 million in 1996, compared
with $561 million in 1995. In 1996, $161 million was from the life, disability
income and long-term care insurance segment, compared with $125 million in 1995.
In 1996, $461 million was from the annuity segment, compared with $440 million
in 1995.
Total premiums received increased to $6.1 billion in 1996, compared with $5.0
billion in 1995. This increase is primarily due to an increase in sales of
variable annuities in 1996.
Total revenues increased to $2.7 billion in 1996, compared with $2.5 billion in
1995. The increase is primarily due to increases in net investment income,
policyholder and contractholder charges, and management fees. Net investment
income, the largest component of revenues, increased from the prior year,
reflecting a slight increase in investments owned.
Policyholder and contractholder charges, which consist primarily of cost of
insurance charges on universal life-type policies, increased 18% to $303 million
in 1996, compared with $256 million in 1995. This increase reflects increased
total life insurance in force which grew 13% to $67 billion at Dec. 31, 1996.
Management and other fees increased 26% to $271 million in 1996, compared with
$216 million in 1995. This is primarily due to an increase in separate account
assets, which grew 24% to $19 billion at Dec. 31, 1996, due to market
appreciation and sales. The Company provides investment management services for
the mutual funds used as investment options for variable annuities and variable
life insurance. The Company also receives a mortality and expense risk fee from
the separate accounts.
Total benefits and expenses increased slightly to $2.1 billion in 1996. The
largest component of expenses, interest credited to policyholder accounts for
universal life-type insurance and investment contracts, increased to $1.4
billion. This was due to increased aggregate amounts in force and an increase in
average interest credited rates.
<PAGE>
Risk management
The Company primarily invests in fixed income securities over a broad range of
maturities for the purpose of providing fixed annuity clients with a competitive
rate of return on their investments while minimizing risk, and to provide a
dependable and targeted spread between the interest rate earned on investments
and the interest rate credited to clients' accounts. The Company does not invest
in securities to generate trading profits.
The Company has an investment committee that holds regularly scheduled meetings
and, when necessary, special meetings. At these meetings, the committee reviews
models projecting different interest rate scenarios and their impact on
profitability. The objective of the committee is to structure the investment
security portfolio based upon the type and behavior of products in the liability
portfolio so as to achieve targeted levels of profitability.
Rates credited to clients' accounts are generally reset at shorter intervals
than the maturity of underlying investments. Therefore, margins may be
negatively impacted by increases in the general level of interest rates. Part of
the committee's strategy includes the purchase of some types of derivatives,
such as interest rate caps and swaps, for hedging purposes. These derivatives
protect margins by increasing investment returns if there is a sudden and severe
rise in interest rates, thereby mitigating the impact of an increase in rates
credited to clients' accounts.
The amount of the fee income the Company receives 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 a decline in the equity markets.
Another part of the committee's strategy is to enter into index option collars
(combinations of puts and calls) for hedging purposes. These derivatives protect
fee income by providing option income when there is a significant decline in the
equity markets, which mitigates the impact of the corresponding decline in
separate account and mutual fund assets. The Company finances the cost of this
protection through selling a portion of the upside potential from an increasing
market through written options.
Liquidity and capital resources
The liquidity requirements of the Company are met by funds provided by premiums,
investment income, proceeds from sales of investments as well as maturities and
periodic repayments of investment principal.
The primary uses of funds are policy benefits, commissions and operating
expenses, policy loans, dividends and investment purchases.
<PAGE>
The Company has an available line of credit with its parent aggregating $100
million. The line of credit is used strictly as short-term sources of funds. No
borrowings were outstanding under the agreement at Dec. 31, 1997. At Dec. 31,
1997, outstanding reverse repurchase agreements totaled $163 million.
At Dec. 31, 1997, investments in fixed maturities comprised 83% of the Company's
total invested assets. Of the fixed maturity portfolio, approximately 40% is
invested in GNMA, FNMA and FHLMC mortgage-backed securities which are considered
AAA/Aaa quality.
At Dec. 31, 1997, approximately 11% of the Company's investments in fixed
maturities were below investment grade bonds. These investments may be subject
to a higher degree of risk than the investment grade issues because of the
borrower's generally greater sensitivity to adverse economic conditions, such as
recession or increasing interest rates, and in certain instances, the lack of an
active secondary market. Expected returns on below investment grade bonds
reflect consideration of such factors. The Company has identified those fixed
maturities for which a decline in fair value is determined to be other than
temporary, and has written them down to fair value with a charge to earnings.
At Dec. 31, 1997, net unrealized appreciation on fixed maturities held to
maturity included $445 million of gross unrealized appreciation and $17 million
of gross unrealized depreciation. Net unrealized appreciation on fixed
maturities available for sale included $399 million of gross unrealized
appreciation and $37 million of gross unrealized depreciation.
At Dec. 31, 1997, the Company had an allowance for losses for mortgage loans
totaling $39 million and for real estate investments totaling $6 million.
The economy and other factors have caused an increase in the number of insurance
companies that are under regulatory supervision. This circumstance has resulted
in an increase in assessments by state guaranty associations to cover losses to
policyholders of insolvent or rehabilitated companies. Some assessments can be
partially recovered through a reduction in future premium taxes in certain
states. The Company established an asset for guaranty association assessments
paid to those states allowing a reduction in future premium taxes over a
reasonable period of time. The asset is being amortized as premium taxes are
reduced. The Company has also estimated the potential effect of future
assessments on the Company's financial position and results of operations and
has established a reserve for such potential assessments. The Company has not
adopted Statement of Position 97-3 providing guidance when an insurer should
recognize a liability for guaranty fund assessments. The SOP is effective for
fiscal years beginning after Dec. 15, 1998. Adoption will not have a material
impact on the Company's results of operations or financial condition.
<PAGE>
In the first quarter of 1998, the Company paid a $60 million dividend to its
parent. In 1997, dividends paid to its parent were $200 million.
The National Association of Insurance Commissioners has established risk-based
capital standards to determine the capital requirements of a life insurance
company based upon the risks inherent in its operations. These standards require
the computation of a risk-based capital amount which is then compared to a
company's actual total adjusted capital. The computation involves applying
factors to various statutory financial data to address four primary risks: asset
default, adverse insurance experience, interest rate risk and external events.
These standards provide for regulatory attention when the percentage of total
adjusted capital to authorized control level risk-based capital is below certain
levels. As of Dec. 31, 1997, the Company's total adjusted capital was well in
excess of the levels requiring regulatory attention.
Year 2000 issue
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
systems used by the Company are maintained by AEFC and are utilized by multiple
subsidiaries and affiliates of AEFC. The Company's business is heavily dependent
upon AEFC's computer systems and has significant interactions with systems of
third parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to the Company, has been conducted to identify the
major systems that could be affected by the Year 2000 issue. Steps are being
taken to resolve any potential problems including modification to existing
software and the purchase of new software. These measures are scheduled to be
completed and tested on a timely basis. AEFC's goal is to complete internal
remediation and testing of each system by the end of 1998 and to continue
compliance efforts through 1999.
AEFC is evaluating the Year 2000 readiness of advisors and other third parties
whose system failures could have an impact on the Company's operations. The
potential materiality of any such impact is not known at this time.
<PAGE>
Segment information
The Company's operations consist of two business segments: Individual and group
life, disability income and long-term care insurance; and fixed and variable
annuity products designed for individuals, pension plans, small businesses and
employer-sponsored groups. The Company is not dependent upon any single customer
and no single customer accounted for more than 10% of revenue in 1997, 1996 or
1995. Additionally, no single distributor accounted for more than 10% of
premiums received in 1997, 1996 or 1995. (See Note 10, Segment information, in
the "Notes to Consolidated Financial Statements".)
Reinsurance
Reinsurance arrangements are used to reduce exposure to large losses. The
maximum amount of risk retained by IDS Life on any one life is $750,000 of life
and waiver of premium benefits plus $50,000 of accidental death benefits. The
excesses are reinsured with other life insurance companies. At Dec. 31, 1997,
traditional life and universal life-type insurance in force aggregated $75
billion, of which $4 billion was reinsured.
Reserves
In accordance with the insurance laws and regulations under which IDS Life
operates, it is obligated to carry on its books, as liabilities, actuarially
determined reserves to meet its obligations on its outstanding life and health
insurance policies and annuity contracts. Reserves for policies and contracts
are based on mortality and morbidity tables in general use in the United States.
These reserves are computed amounts that, with additions from premiums to be
received, and with interest on such reserves compounded annually at assumed
rates, will be sufficient to meet IDS Life's policy obligations at their
maturities or in the event of an insured's death. In the accompanying financial
statements, these reserves are determined in accordance with generally accepted
accounting principles. (See Note 1, "Liabilities for future policy benefits," in
the "Notes to Consolidated Financial Statements.")
Investments
Of IDS Life's consolidated total investments of $27 billion at Dec. 31, 1997,
34% was invested in mortgage-backed securities, 48% in corporate and other
bonds, 14% in primary mortgage loans on real estate, 2% in policy loans and the
remaining 2% in other investments.
<PAGE>
Competition
IDS Life is engaged in a business that is highly competitive due to the large
number of stock and mutual life insurance companies and other entities marketing
insurance products. There are over 1,700 stock, mutual and other types of
insurers in the life insurance business. Best's Insurance Reports, Life-Health
edition, 1997, assigned IDS Life one of its highest classifications, A+
(Superior).
Employees
As of Dec. 31, 1997, IDS Life and its subsidiaries had 303 employees; including
245 employed at the corporate office in Minneapolis, MN, 8 employed at the
American Centurion Life Assurance Company, located in Albany, NY and 50 employed
at IDS Life Insurance Company of New York, located in Albany, NY.
Properties
IDS Life occupies office space in Minneapolis, MN, which is rented by its
parent, AEFC. IDS Life reimburses AEFC for rent based on direct and indirect
allocation methods. Facilities occupied by IDS Life and our subsidiaries are
believed to be adequate for the purposes for which they are used and are well
maintained.
State Regulation
IDS Life is subject to the laws of the State of Minnesota governing insurance
companies and to the regulations of the Minnesota Department of Commerce. An
annual statement in the prescribed form is filed with the Minnesota Department
of Commerce each year covering our operation for the preceding year and its
financial condition at the end of such year. Regulation by the Minnesota
Department of Commerce includes periodic examination to determine IDS Life's
contract liabilities and reserves so that the Minnesota Department of Commerce
may certify that these items are correct. The Company's books and accounts are
subject to review by the Minnesota Department of Commerce at all times. Such
regulation does not, however, involve any supervision of the account's
management or the company's investment practices or policies. In addition, IDS
Life is subject to regulation under the insurance laws of other jurisdictions in
which it operates. A full examination of IDS Life's operations is conducted
periodically by the National Association of Insurance Commissioners.
Under insurance guaranty fund laws, in most states, insurers doing business
therein can be assessed up to prescribed limits for policyholder losses incurred
by insolvent companies. Most of these laws do provide however, that an
assessment may be excused or deferred if it would threaten an insurer's own
financial strength.
<PAGE>
Directors and executive officers*
The directors and principal executive officers of IDS Life and the principal
occupation of each during the last five years is as follows:
Directors
David R. Hubers
Born in 1943
Director since September 1989; president and chief executive officer, AEFC,
since August 1993, and director since January 1984. Senior vice president,
Finance and chief financial officer, AEFC, from January 1984 to August 1993.
Richard W. Kling
Born in 1940
Director since February 1984; president since March 1994. Executive vice
president, Marketing and Products, from January 1988 to March 1994. Senior vice
president, AEFC, since May 1994. Director of IDS Life Series Fund, Inc. and
chairman of the board of managers and president of IDS Life Variable Annuity
Funds A and B.
Paul F. Kolkman
Born in 1946
Director since May 1984; executive vice president since March 1994; vice
president, Finance, from May 1984 to March 1994; vice president, AEFC, since
January 1987. Vice president and chief actuary of IDS Life Series Fund, Inc.
James A. Mitchell
Born in 1941
Chairman of the board since March 1994; director since July 1984; chief
executive officer since November 1986; president from July 1984 to March 1994;
executive vice president, AEFC, since March 1994; director, AEFC, since July
1984; senior vice president, AEFC, from July 1984 to March 1994.
Barry J. Murphy
Born in 1951
Director and executive vice president, Client Service, since March 1994; senior
vice president, AEFC, since May 1994; senior vice president, Travel Related
Services (TRS), a subsidiary of American Express Company, from July 1992 to
April 1994; vice president, TRS, from November 1989 to July 1992.
<PAGE>
Stuart A. Sedlacek
Born in 1957
Director and executive vice president, Assured Assets, since March 1994; vice
president, AEFC, since September 1988.
Officers other than directors
Jeffrey S. Horton
Born in 1961
Vice president and treasurer since December 1997; vice president and corporate
treasurer, AEFC, since December 1997; controller, American Express Technologies
- - Financial Services, AEFC, from July 1997 to December 1997; controller, Risk
Management Products, AEFC from May 1994 to July 1997; director of finance and
analysis, Corporate Treasury, AEFC, from June 1990 to May 1994.
William A. Stoltzmann
Born in 1948
Vice president, general counsel and secretary since 1989; vice president and
assistant general counsel, AEFC, since November 1985. Vice president, general
counsel and secretary, American Enterprise Life Insurance Company, American
Partners Life Insurance Company.
*The address for all of the directors and principal officers is:
IDS Tower 10, Minneapolis, MN 55440-0010.
<PAGE>
Executive compensation
Executive officers of IDS Life also may serve one or more affiliated companies.
The following table reflects cash compensation paid to the five most highly
compensated executive officers as a group for services rendered in 1997 to IDS
Life and its affiliates. The table also shows the total cash compensation paid
to all executive officers of IDS Life, as a group, who were executive officers
at any time during 1997.
Name of individual or number in Cash
group Position held compensation
Five most highly compensated executive officers as a group: $8,616,958
James A. Mitchell Chairman of the Board and Chief
Exec. Officer
Richard W. Kling President
Stuart A. Sedlacek Exec. Vice President,
Assured Assets
Pamela J. Moret Exec. Vice President,
Variable Assets
Barry J. Murphy Executive Vice President,
Client Service
All executive officers as a group $12,523,043
(10)
Security ownership of management
IDS Life's directors and officers do not beneficially own any outstanding shares
of stock of the company. All of the outstanding shares of stock of IDS Life are
beneficially owned by its parent, AEFC. The percentage of shares of AEFC owned
by any director, and by all directors and officers of IDS Life as a group, does
not exceed 1% of the class outstanding.
<PAGE>
Legal proceedings and opinion
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which IDS Life and its subsidiaries do business involving
insurers' sales practices, alleged agent misconduct, failure to properly
supervise agents, and other matters. In December 1996, an action of this type
was brought against IDS Life and its parent, AEFC. A second action was filed in
March 1997. The plaintiffs purport to represent a class consisting of all
persons who replaced existing IDS Life policies with new IDS Life policies from
and after January 1, 1985. The complaint puts at issue various alleged sales
practices and misrepresentations, alleged breaches of fiduciary duties and
alleged violations of consumer fraud statutes. Plaintiffs seek damages in an
unspecified amount and seek to establish a claims resolution facility for the
determination of individual issues.
IDS Life believes it has meritorious defenses to these and other actions arising
in connection with the conduct of its business activities and intends to defend
them vigorously. IDS Life believes that it is not party to, nor are any of its
properties the subject of, any pending legal proceedings which would have a
material adverse effect on its consolidated financial condition.
Legal matters in connection with federal laws and regulations affecting the
issue and sale of the contracts described in this prospectus and the
organization of IDS Life, its authority to issue contracts under Minnesota law
and the validity of the forms of the contracts under Minnesota law have been
passed on by counsel to IDS Life.
Experts
The consolidated financial statements of IDS Life Insurance Company at Dec. 31,
1997 and 1996, and for each of the three years in the period ended Dec. 31,
1997, appearing in this prospectus and registration statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the registration statement, and is included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
<PAGE>
Appendix
1. Assume: contract effective date of October 1, 1993
contract termination date of July 1, 1998
contract year at termination is 5
Purchase Payments Initial Current Accumulation
Year Rate Rate Account Value
1 $10,000 6.50% 6.25% $12,560
2 8,000 6.00 6.25 9,870
3 12,000 6.25 6.25 13,960
4 15,000 7.50 6.75 16,660
5 20,000 6.50 6.50 20,640
Total Accumulation Account Value = $ 73,690
Withdrawal Charge = .03 x 73,690 = 2,211
Fixed Account Value = 73,690 - 2,211 = 71,479
Weighted Average Interest Rate = 6.433%
Interest Rate on New Purchase Payments = 6.750
MVA = $71,479 x (.06433 - .06750) x 5.0 = $ (1,132.94)
Market Value = 71,479 - 1,132.94 = 70,346.06
2. Assume: contract effective date of January 15, 1994 contract
termination date of September 20, 1996 contract year at termination is
3
Purchase Payments Initial Current Accumulation
Year Rate Rate Account Value
1 $15,000 7.00% 6.25% $17,710
2 20,000 6.50 6.00 22,140
3 25,000 5.50 5.50 25,910
Total Accumulation Account Value = $ 65,760
Withdrawal Charge = .05 x 65,760 = 3,288
Fixed Account Value = 65,760 - 3,288 = 62,472
Weighted Average Interest Rate = 5.870%
Interest Rate on New Purchase Payments = 5.250
MVA = $62,472 x (.05870 - .05250) x 6 = $ 2,323.96
Market Value = 62,472 + 2,323.96 = 64,795.96
<PAGE>
IDS Life financial information
The financial statements shown below are those of the insurance company and not
those of any other entity. They are included in the prospectus for the purpose
of informing investors as to the financial condition of the insurance company
and its ability to carry out its obligations under its variable contracts.
<PAGE>
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, 1997 and 1996 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, 1997. 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 generally accepted auditing
standards. 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, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
February 5, 1998
<PAGE>
IDS Life Financial Information
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
Dec. 31, Dec. 31,
ASSETS 1997 1996
(thousands)
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1997, $9,743,410; 1996, $10,521,650) $9,315,450 $10,236,379
Available for sale, at fair value (Amortized cost:
1997, $12,515,030; 199, $11,008,622) 12,876,694 11,146,845
Mortgage loans on real estate 3,618,647 3,493,364
Policy loans 498,874 459,902
Other investments 318,591 251,465
Total investments 26,628,256 25,587,955
Cash and cash equivalents 19,686 224,603
Amounts recoverable from reinsurers 205,716 157,722
Amounts due from brokers 8,400 11,047
Other accounts receivable 37,895 44,089
Accrued investment income 357,390 343,313
Deferred policy acquisition costs 2,479,577 2,330,805
Deferred income taxes, net -- 33,923
Other assets 22,700 37,364
Separate account assets 23,214,504 18,535,160
Total assets $52,974,124 $47,305,981
========= =========
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
Dec. 31, Dec. 31
LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996
(thousands)
Liabilities:
Future policy benefits:
Fixed annuities $22,009,747 $21,838,008
Universal life-type insurance 3,280,489 3,177,149
Traditional life insurance 213,676 209,685
Disability income and long-term care insurance 533,124 424,200
Policy claims and other policyholders' funds 68,345 83,634
Deferred income taxes, net 61,582 --
Amounts due to brokers 381,458 261,987
Other liabilities 345,383 332,078
Separate account liabilities 23,214,504 18,535,160
Total liabilities 50,108,308 44,861,901
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 290,847 283,615
Net unrealized gain on investments 226,359 86,102
Retained earnings 2,345,610 2,071,363
Total stockholder's equity 2,865,816 2,444,080
Total liabilities and stockholder's equity $52,974,124 $47,305,981
========= =========
See accompanying notes.
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended Dec. 31,
1997 1996 1995
(thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 52,473 $ 51,403 $ 50,193
Disability income and long-term care insurance 154,021 131,518 111,337
Total premiums 206,494 182,921 161,530
Policyholder and contractholder charges 341,726 302,999 256,454
Management and other fees 340,892 271,342 215,581
Net investment income 1,988,389 1,965,362 1,907,309
Net realized gain (loss) on investments 860 (159) (4,898)
Total revenues 2,878,361 2,722,465 2,535,976
Benefits and expenses:
Death and other benefits:
Traditional life insurance 28,951 26,919 29,528
Universal life-type insurance
and investment contracts 92,814 85,017 71,691
Disability income and
long-term care insurance 22,333 19,185 16,259
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance 3,946 1,859 (1,315)
Disability income and
long-term care insurance 63,631 57,230 51,279
Interest credited on universal life-type
insurance and investment contracts 1,386,448 1,370,468 1,315,989
Amortization of deferred policy acquisition costs 322,731 278,605 280,121
Other insurance and operating expenses 276,596 261,468 211,642
Total benefits and expenses 2,197,450 2,100,751 1,975,194
Income before income taxes 680,911 621,714 560,782
Income taxes 206,664 207,138 195,842
Net income $ 474,247 $ 414,576 $ 364,940
======== ======== =======
See accompanying notes.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended Dec. 31, 1997
(thousands)
<TABLE>
<CAPTION>
Additional Net Unrealized
Capital Paid-In Gain (Loss) on Retained
Stock Capital on Investments Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, Dec. 31, 1994 3,000 222,000 (275,708) 1,639,399 1,588,691
Net income -- -- -- 364,940 364,940
Change in net unrealized
gain (loss) on investments -- -- 505,837 -- 505,837
Capital contribution from parent -- 56,814 -- -- 56,814
Loss on reinsurance transaction
with affiliate -- -- -- (4,574) (4,574)
Cash dividends -- -- -- (180,000) (180,000)
Balance, Dec. 31, 1995 3,000 278,814 230,129 1,819,765 2,331,708
Net income -- -- -- 414,576 414,576
Change in net unrealized
gain (loss) on investments -- -- (144,027) -- (144,027)
Capital contribution from parent -- 4,801 -- -- 4,801
Other changes -- -- -- 2,022 2,022
Cash dividends -- -- -- (165,000) (165,000)
Balance, Dec. 31, 1996 $3,000 $283,615 $ 86,102 $2,071,363 $2,444,080
Net income -- -- -- 474,247 474,247
Change in net unrealized
gain (loss) on investments -- -- 140,257 -- 140,257
Capital contribution from parent -- 7,232 -- -- 7,232
Cash dividends -- -- -- (200,000) (200,000)
Balance, Dec. 31, 1997 $3,000 $290,847 $226,359 $2,345,610 $2,865,816
===== ======= ======= ========= ========
See accompanying notes.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended Dec. 31,
1997 1996 1995
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 474,247 $ 414,576 $ 364,940
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Policy loan issuance, excluding universal
life-type insurance (54,665) (49,314) (46,011)
Policy loan repayment, excluding universal
life-type insurance 46,015 41,179 36,416
Change in amounts recoverable from reinsurers (47,994) (43,335) (34,083)
Change in other accounts receivable 6,194 (4,981) 12,231
Change in accrued investment income (14,077) 4,695 (30,498)
Change in deferred policy acquisition
costs, net (156,486) (294,755) (196,963)
Change in liabilities for future policy
benefits for traditional life,
disability income and
long-term care insurance 112,915 97,479 85,575
Change in policy claims and other
policyholders' funds (15,289) 27,311 6,255
Change in deferred income tax provision (benefit) 19,982 (65,609) (33,810)
Change in other liabilities 13,305 46,724 (6,548)
(Accretion of discount)
amortization of premium, net (5,649) (23,032) (22,528)
Net realized (gain) loss on investments (860) 159 4,898
Policyholder and contractholder
charges, non-cash (160,885) (154,286) (140,506)
Other, net 7,161 (10,816) 3,849
Net cash provided by (used in) operating
activities $ 223,914 $ (14,005) $ 3,217
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Years ended Dec. 31,
1997 1996 1995
(thousands)
<S> <C> <C> <C>
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ (1,996) $ (43,751) $ (1,007,208)
Maturities, sinking fund payments and calls 686,503 759,248 538,219
Sales 236,761 279,506 332,154
Fixed maturities available for sale:
Purchases (3,160,133) (2,299,198) (2,452,181)
Maturities, sinking fund payments and calls 1,206,213 1,270,240 861,545
Sales 457,585 238,905 136,825
Other investments, excluding policy loans:
Purchases (524,521) (904,536) (823,131)
Sales 335,765 236,912 160,521
Change in amounts due from brokers 2,647 (11,047) 7,933
Change in amounts due to brokers 119,471 140,369 (105,119)
Net cash used in investing activities (641,705) (333,352) (2,350,442)
Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received 2,785,758 3,567,586 4,189,525
Surrenders and death benefits (3,736,242) (4,250,294) (3,141,404)
Interest credited to account balances 1,386,448 1,370,468 1,315,989
Universal life-type insurance policy loans:
Issuance (84,835) (86,501) (84,700)
Repayment 54,513 58,753 52,188
Capital contribution from parent 7,232 4,801 --
Dividends paid (200,000) (165,000) (180,000)
Net cash provided by financing activities 212,874 499,813 2,151,598
Net (decrease) increase in cash and
cash equivalents (204,917) 152,456 (195,627)
Cash and cash equivalents at
beginning of year 224,603 72,147 267,774
Cash and cash equivalents at
end of year $ 19,686 $ 224,603 $ 72,147
======= ======== ========
See accompanying notes.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
($ 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 (ACLAC), 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 material
intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles 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 generally
accepted accounting principles 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 stockholder's equity, net of deferred taxes.
<PAGE>
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.
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.
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------
Impairment of mortgage loans is measured as the excess of the 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 loans
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 and anticipated 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.
During 1997, 1996 and 1995, the Company purchased and wrote index
options to protect against significant declines in fee income as a
result of a decrease in the market value of its managed assets. These
options were marked-to-market through the income statement.
During 1997, the Company purchased and wrote index options to hedge
1998 management fee and other income from separate accounts and the
underlying mutual funds. These index options are carried at market
value and are included in other investments. Gains or losses on these
instruments are deferred and recognized in management and other fees in
the same period as the hedged fee 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.
<PAGE>
Supplementary information to the consolidated statements of cash flows
for the years ended December 31 is summarized as
follows:
1997 1996 1995
---- ---- ----
Cash paid during the year for:
Income taxes $174,472 $317,283 $191,011
Interest on borrowings 8,213 4,119 5,524
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------
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 and issue and administrative fees. 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 and mortality and expense risk fees
received from the variable annuity and variable life insurance separate
accounts and underlying mutual funds.
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 in relation to accumulation values and surrender charge revenue.
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.
Liabilities for future policy benefits
Liabilities for universal life-type insurance and deferred annuities
are accumulation values.
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.
<PAGE>
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.
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------
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 10% 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 a national survey. Anticipated interest rates for claim
reserves for both disability income and long-term care range from 6% to
8%.
Reinsurance
The maximum amount of life insurance risk retained by the Company on
any one life is $750 of life and waiver of premium benefits plus $50 of
accidental death benefits. The maximum amount of disability income
risk retained by the Company on any one life is $6 of monthly benefit
for benefit periods longer than three years. The excesses are
reinsured with other life insurance companies on a yearly renewable
term basis. Graded premium whole life and long-term care policies are
primarily reinsured on a coinsurance basis.
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, 1997 and 1996 are $12,061
and $33,358, respectively, receivable from American Express Financial
Corporation 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.
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------
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 the beneficiaries from the mortality
assumptions implicit in the annuity contracts. The Company makes
periodic fund transfers to, or withdrawals from, the separate accounts
for such actuarial adjustments for variable annuities that are in the
benefit payment period. 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.
Reclassification
Certain 1996 and 1995 amounts have been reclassified to conform to the
1997 presentation.
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.
The amortized cost, gross unrealized gains and losses and fair values
of investments in fixed maturities and equity securities at December
31, 1997 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 $41,932 $ 2,950 $ -- $ 44,881
State and municipal obligations 9,684 568 -- 10,252
Corporate bonds and obligations 7,280,646 415,700 9,322 7,687,024
Mortgage-backed securities 1,983,188 25,976 7,911 2,001,253
--------- ------ ----- ---------
$9,315,450 $445,194 $17,233 $9,743,410
========= ======= ====== =========
</TABLE>
<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 $ 65,291 $ 4,154 $ -- $69,445
State and municipal obligations 11,045 1,348 -- 12,393
Corporate bonds and obligations 5,308,129 232,761 30,198 5,510,692
Mortgage-backed securities 7,130,565 160,478 6,879 7,284,164
--------- ------- ----- ---------
Total fixed maturities 12,515,030 398,741 37,077 12,876,694
Equity securities 3,000 361 -- 3,361
---------- ------- ------ ----------
$12,518,030 $399,102 $37,077 $12,880,055
========== ======= ====== ==========
</TABLE>
<PAGE>
2. Investments (continued)
-----------
The amortized cost, gross unrealized gains and losses and fair values
of investments in fixed maturities and equity securities at December
31, 1996 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 $ 44,002 $ 933 $ 1,276 $ 43,659
State and municipal obligations 9,685 412 -- 10,097
Corporate bonds and obligations 8,057,997 356,687 47,639 8,367,045
Mortgage-backed securities 2,124,695 21,577 45,423 2,100,849
---------- ------- ------ ----------
$10,236,379 $379,609 $94,338 $10,521,650
========== ======= ====== ==========
</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 $ 77,944 $ 2,607 $ 96 $ 80,455
State and municipal obligations 11,032 1,336 -- 12,368
Corporate bonds and obligations 3,701,604 122,559 24,788 3,799,375
Mortgage-backed securities 7,218,042 104,808 68,203 7,254,647
--------- ------- ------ ---------
Total fixed maturities 11,008,622 231,310 93,087 11,146,845
Equity securities 3,000 308 -- 3,308
---------- ------- ------ ----------
$11,011,622 $231,618 $93,087 $11,150,153
========== ======= ====== ==========
</TABLE>
The amortized cost and fair value of investments in fixed maturities at
December 31, 1997 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.
<PAGE>
Amortized Fair
Held to maturity Cost Value
---------------- --------- --------
Due in one year or less $ 356,597 $360,956
Due from one to five years 1,536,239 1,619,875
Due from five to ten years 4,337,547 4,577,552
Due in more than ten years 1,101,879 1,183,774
Mortgage-backed securities 1,983,188 2,001,253
--------- ---------
$9,315,450 $9,743,410
========= =========
Amortized Fair
Available for sale Cost Value
--------- -----
Due in one year or less $ 162,663 $ 164,012
Due from one to five years 633,339 679,561
Due from five to ten years 2,418,162 2,517,098
Due in more than ten years 2,170,301 2,231,859
Mortgage-backed securities 7,130,565 7,284,164
---------- ----------
$12,515,030 $12,876,694
========== ==========
<PAGE>
2. Investments (continued)
-----------
During the years ended December 31, 1997, 1996 and 1995, fixed
maturities classified as held to maturity were sold with amortized cost
of $229,848, $277,527 and $333,508, 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 1997 with proceeds
of $457,585 and gross realized gains and losses of $6,639 and $7,518,
respectively. Fixed maturities available for sale were sold during
1996 with proceeds of $238,905 and gross realized gains and losses of
$571 and $16,084, respectively. Fixed maturities available for sale
were sold during 1995 with proceeds of $136,825 and gross realized
gains and losses of $nil and $5,781, respectively.
At December 31, 1997, bonds carried at $14,351 were on deposit with
various states as required by law.
At December 31, 1997, investments in fixed maturities comprised 83
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 $2.7 billion which are rated by American
Express Financial Corporation 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:
Rating 1997 1996
--------- --------- ---------
Aaa/AAA $ 9,195,619 $ 9,460,134
Aaa/AA -- 2,870
Aa/AA 232,451 241,914
Aa/A 246,792 192,631
A/A 2,787,936 2,949,895
A/BBB 1,200,345 1,034,661
Baa/BBB 5,226,616 4,531,515
Baa/BB 475,084 768,285
Below investment grade 2,465,637 2,063,096
--------- ---------
$21,830,480 $21,245,001
========== ==========
At December 31, 1997, 95 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, 1997, 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:
<PAGE>
December 31, 1997 December 31, 1996
------------------------ -----------------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
------------- ---------- ------------ ---------- -----------
East North Central $ 748,372 $ 32,462 $ 777,960 $ 19,358
West North Central 456,934 14,340 389,285 29,620
South Atlantic 922,172 14,619 891,852 35,007
Middle Atlantic 545,601 15,507 553,869 17,959
New England 316,250 2,136 310,177 14,042
Pacific 184,917 3,204 190,770 4,997
West South Central 125,227 -- 105,173 11,246
East South Central 60,274 -- 75,176 --
Mountain 297,545 28,717 236,597 11,401
--------- ------- --------- -------
3,657,292 110,985 3,530,859 143,630
Less allowance for
losses 38,645 -- 37,495 --
--------- ------- --------- -------
$3,618,647 $110,985 $3,493,364 $143,630
========= ======= ========= =======
<PAGE>
2. Investments (continued)
-----------
December 31, 1997 December 31, 1996
------------------------ -------------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
--------------- ---------- ----------- ---------- -----------
Department/retail
stores $1,189,203 $ 27,314 $1,154,179 $ 68,032
Apartments 1,089,127 16,576 1,119,352 23,246
Office buildings 716,729 34,546 611,395 27,653
Industrial buildings 295,889 21,200 296,944 6,716
Hotels/motels 101,052 -- 97,870 6,257
Medical buildings 99,979 9,748 67,178 8,289
Nursing/retirement
homes 72,359 -- 88,226 1,877
Mixed Use 71,007 -- 73,120 --
Other 21,947 1,601 22,595 1,560
--------- ------- --------- ------
3,657,292 110,985 3,530,859 143,630
Less allowance for
losses 38,645 -- 37,495 --
--------- ------- --------- -------
$3,618,647 $110,985 $3,493,364 $143,630
========= ======= ========= =======
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. The 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. Commitments to purchase
mortgages are made in the ordinary course of business. The fair value
of the mortgage commitments is $nil.
At December 31, 1997 and 1996, the Company's recorded investment in
impaired loans was $45,714 and $79,441, respectively, with allowances
of $9,812 and $16,162, respectively. During 1997 and 1996, the average
recorded investment in impaired loans was $61,870 and $74,338,
respectively.
The Company recognized $2,981, $4,889 and $5,014 of interest income
related to impaired loans for the years ended December 31, 1997, 1996
and 1995 respectively.
<PAGE>
The following table presents changes in the allowance for investment
losses related to all loans:
1997 1996 1995
------ ------ ------
Balance, January 1 $37,495 $37,340 $35,252
Provision for investment losses 8,801 10,005 15,900
Loan payoffs (3,851) (4,700) (11,900)
Foreclosures (3,800) (5,150) (1,350)
Other -- -- (562)
------ ------ -------
Balance, December 31 $38,645 $37,495 $37,340
====== ====== ======
At December 31, 1997, the Company had commitments to purchase
investments other than mortgage loans for $234,485. Commitments to
purchase investments are made in the ordinary course of business. The
fair value of these commitments is $nil.
<PAGE>
2. Investments (continued)
-----------
Net investment income for the years ended December 31 is summarized as
follows:
1997 1996 1995
--------- --------- ---------
Interest on fixed maturities $1,692,481 $1,666,929 $1,656,136
Interest on mortgage loans 305,742 283,830 232,827
Other investment income 25,089 43,283 35,936
Interest on cash equivalents 5,914 5,754 5,363
--------- --------- ---------
2,029,226 1,999,796 1,930,262
Less investment expenses 40,837 34,434 22,953
--------- --------- ---------
$1,988,389 $1,965,362 $1,907,309
========= ========= =========
Net realized gain (loss) on investments for the years ended December 31
is summarized as follows:
1997 1996 1995
------ ----- -----
Fixed maturities $ 16,115 $ 8,736 $ 9,973
Mortgage loans (6,424) (8,745) (13,259)
Other investments (8,831) (150) (1,612)
------- ----- -------
$ 860 $ (159) $ (4,898)
======= ====== ======
Changes in net unrealized appreciation (depreciation) of investments
for the years ended December 31 are summarized as follows:
1997 1996 1995
------- ------- -------
Fixed maturities available
for sale $223,441 $(231,853) $811,649
Equity securities 53 (52) 3,118
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 consists of the following:
1997 1996 1995
Federal income taxes:
Current $176,879 $260,357 $218,040
Deferred 19,982 (65,609) (33,810)
------- -------- -------
196,861 194,748 184,230
State income taxes-current 9,803 12,390 11,612
------- ------- -------
Income tax expense $206,664 $207,138 $195,842
======= ======= =======
<PAGE>
3. Income taxes (continued)
------------
Increases (decreases) to the federal tax provision applicable to pretax
income based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------------- ---------------
Provision Rate Provision Rate Provision Rate
--------- ---- --------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Federal income
taxes based on
the statutory rate $238,319 35.0% $217,600 35.0% $196,274 35.0%
Increases (decreases)
are attributable to:
Tax-excluded interest
and dividend income (10,294) (1.5) (9,636) (1.5) (8,524) (1.5)
State Taxes, net of federal
benefit 6,372 0.9 8,053 1.3 7,548 1.3
Low income housing
credits (20,705) (3.0) (5,090) (0.8) (861) (0.2)
Other, net (7,028) (1.0) (3,789) (0.7) 1,405 0.3
------- ----- ------- ---- ------- ----
Federal income taxes $206,664 30.4% $207,138 33.3% $195,842 34.9%
======= ==== ======= ==== ======= ====
</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, 1997, 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:
1997 1996
---- ----
Deferred tax assets:
Policy reserves $748,204 $724,412
Life insurance guarantee
fund assessment reserve 20,101 29,854
Other 9,589 2,763
------- -------
Total deferred tax assets 777,894 757,029
------- -------
<PAGE>
Deferred tax
liabilities:
Deferred policy acquisition costs 700,032 665,685
Unrealized gain on investments 121,885 48,486
Investments, other 17,559 8,935
------- -------
Total deferred tax liabilities 839,476 723,106
------- -------
Net deferred tax (liabilities) assets $(61,582) $ 33,923
====== ======
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.
<PAGE>
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 aggregated $1,468,677 as of
December 31, 1997 and $1,261,592 as of December 31, 1996 (see Note 3
with respect to the income tax effect of certain distributions). In
addition, any dividend distributions in 1998 in excess of approximately
$331,480 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:
1997 1996 1995
---------- ---------- ----------
Statutory net income $ 379,615 $ 365,585 $ 326,799
Statutory capital and surplus 1,765,290 1,565,082 1,398,649
surplus
5. Related party transactions
--------------------------
The Company loans funds to American Express Financial Corporation under
a collateral loan agreement. The balance of the loan was $nil and
$11,800 at December 31, 1997 and 1996, respectively. 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
$103, $780 and $1,371 in 1997, 1996 and 1995, respectively.
The Company purchased a five year secured note from an affiliated
company which was redeemed in 1996. The interest rate on the note was
8.42 percent. Interest income on the above note totaled $1,637 and
$1,937 in 1996 and 1995, 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 $201, $174
and $155 in 1997, 1996 and 1995, 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 1997,
1996 and 1995 were $1,245, $990 and $815, respectively.
<PAGE>
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. Accordingly, costs of such benefits to
the Company are included in employee compensation and benefits and
cannot be identified on a separate company basis.
<PAGE>
5. Related party transactions (continued)
--------------------------
Charges by AEFC for use of joint facilities, marketing services and
other services aggregated $414,155, $397,362 and $377,139 for 1997,
1996 and 1995, respectively. Certain of these costs are included in
deferred policy acquisition costs. In addition, the Company rents its
home office space from AEFC on an annual renewable basis.
6. Commitments and contingencies
-----------------------------
At December 31, 1997 and 1996, traditional life insurance and universal
life-type insurance in force aggregated $74,730,720 and $67,274,354,
respectively, of which $4,351,904 and $3,875,921 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 $60,495, $48,250 and $39,399 and reinsurance recovered from
reinsurers amounted to $19,042, $15,612, and $14,088 for the years
ended December 31, 1997, 1996 and 1995, respectively. Reinsurance
contracts do not relieve the Company from its primary obligation to
policyholders.
A number of lawsuits have been filed against life and health insurers
in jurisdictions in which the Company and its subsidiaries do business
involving insurers' sales practices, alleged agent misconduct, failure
to properly supervise agents, and other matters. In December 1996, an
action of this type was brought against the Company and its parent,
AEFC. A second action was filed in March, 1997. The plaintiffs
purport to represent a class consisting of all persons who replaced
existing Company policies with new Company policies from and after
January 1, 1985. The complaint puts at issue various alleged sales
practices and misrepresentations, alleged breaches of fiduciary duties
and alleged violations of consumer fraud statutes. Plaintiffs seek
damages in an unspecified amount and seek to establish a claims
resolution facility for the determination of individual issues. The
Company and its parent believe they have meritorious defenses to the
claims raised in the lawsuit. The outcome of any litigation cannot be
predicted with certainty. In the opinion of management, however, the
ultimate resolution of the above lawsuit and others filed against the
Company 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 auditing the Company's returns 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 an available line of credit with its parent aggregating
$100,000. The rate for the line of credit is the parent's cost of
funds, ranging from 20 to 45 basis points over the established index.
Borrowings outstanding under this agreement were $nil at
December 31, 1997 and 1996.
<PAGE>
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.
<PAGE>
8. Derivative financial instruments (continued)
--------------------------------
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.
The Company's holdings of derivative financial instruments are as
follows:
Notional Carrying Fair Total Credit
December 31, 1997 Amount Amount Value Exposure
----------------- -------- -------- ----- ------------
Assets:
Interest rate caps $ 4,600,000 $ 24,963 $ 15,665 $ 15,665
Interest rate floors 1,000,000 1,561 4,551 4,551
Put index options 221,984 11,120 11,120 11,120
Liabilities:
Call index options 221,984 (8,273) (8,273) --
Off balance sheet:
Interest rate swaps 1,267,000 -- (45,799) --
--------- ------ ------ ------
$29,371 $(22,736) $31,336
====== ====== ======
Notional Carrying Fair Total Credit
December 31, 1996 Amount Amount Value Exposure
Assets:
Interest rate caps $4,000,000 $ 16,227 $ 7,439 $ 7,439
Interest rate floors 1,000,000 2,041 4,341 4,341
Off balance sheet:
Interest rate swaps 1,000,000 -- (24,715) --
--------- ------ -------- ------
$18,268 $(12,935) $11,780
====== ====== ======
<PAGE>
The fair values of derivative financial instruments are based on market
values, dealer quotes or pricing models. The interest rate caps and
floors expire on various dates from 1998 to 2003. The interest rate
swaps expire on various dates from 2000 to 2003. All put and call
options expire in 1998.
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.
<PAGE>
8. Derivative financial instruments (continued)
--------------------------------
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 changing economic conditions in the equity market.
The Company entered into index option collars (combination of puts and
calls) to hedge anticipated fee income for 1998 related to separate
accounts and mutual funds which invest in equity securities. Testing
has demonstrated the impact of these instruments on the income
statement closely correlates with the amount of fee income the Company
realizes. In the event that testing demonstrates that this correlation
no longer exists, or in the event the Company disposes of the index
options collars, the instruments will be marked-to-market through the
income statement. At December 31, 1997, deferred gains on purchased
put index options were $11,120 and deferred losses on written call
index options were $8,273.
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>
1997 1996
------------------ ---------------------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
---------------- -------- ------ ------- -----
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $9,315,450 $9,743,410 $10,236,379 $10,521,650
Available for sale 12,876,694 12,876,694 11,146,845 11,146,845
Mortgage loans on
real estate (Note 2) 3,618,647 3,808,570 3,493,364 3,606,077
Other:
Equity securities (Note 2) 3,361 3,361 3,308 3,308
Derivative financial
instruments (Note 8) 37,644 31,336 18,268 11,780
Other 82,347 85,383 63,993 66,242
Cash and
cash equivalents (Note 1) 19,686 19,686 224,603 224,603
Separate account assets
(Note 1) 23,214,504 23,214,504 18,535,160 18,535,160
<PAGE>
Financial Liabilities
Future policy benefits
for fixed annuities 20,731,052 19,882,302 20,641,986 19,721,968
Derivative financial
instruments (Note 8) (8,273) (54,072) -- (24,715)
Separate account liabilities 21,488,282 20,707,620 17,358,087 16,688,519
</TABLE>
<PAGE>
9. Fair values of financial instruments (continued)
------------------------------------
At December 31, 1997 and 1996, the carrying amount and fair value of
future policy benefits for fixed annuities exclude life
insurance-related contracts carried at $1,185,155 and $1,112,155,
respectively, and policy loans of $93,540 and $83,867, respectively.
The fair value of these benefits is based on the status of the
annuities at December 31, 1997 and 1996. The fair value of deferred
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
1997 and 1996.
At December 31, 1997 and 1996, 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 $1,726,222 and $1,177,073, respectively.
10. Segment information
-------------------
The Company's operations consist of two business segments; first,
individual and group life insurance, disability income and long-term
care insurance, and second, annuity products designed for individuals,
pension plans, small businesses and employer-sponsored groups. The
consolidated condensed statements of income for the years ended
December 31, 1997, 1996 and 1995 and total assets at December 31, 1997,
1996 and 1995 by segment are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net investment income:
Life, disability income
and long-term care insurance $ 269,874 $ 262,998 $ 256,242
Annuities 1,718,515 1,702,364 1,651,067
--------- --------- ---------
$ 1,988,389 $ 1,965,362 $ 1,907,309
========= ========= =========
Premiums, charges and fees:
Life, disability income
and long-term care insurance $ 514,838 $ 448,389 $ 384,008
Annuities 374,274 308,873 249,557
------- ------- -------
$ 889,112 $ 757,262 $ 633,565
======= ======= =======
Income before income taxes:
Life, disability income
and long-term care insurance $ 178,717 $ 161,115 $ 125,402
Annuities 501,334 460,758 440,278
Net gain (loss) on investments 860 (159) (4,898)
------- ------- -------
$ 680,911 $ 621,714 $ 560,782
======= ======= =======
<PAGE>
Total assets:
Life, disability income
and long-term care insurance $ 8,193,796 $ 7,028,906 $ 6,195,870
Annuities 44,780,328 40,277,075 36,704,208
---------- ---------- ----------
$52,974,124 $47,305,981 $42,900,078
========== ========== ==========
</TABLE>
<PAGE>
Allocations of net investment income and certain general expenses are
based on various assumptions and estimates.
Assets are not individually identifiable by segment and have been
allocated principally based on the amount of future policy benefits by
segment.
Capital expenditures and depreciation expense are not material, and
consequently, are not reported.
11. 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 the Company. All of the systems used by the Company are
maintained by AEFC and are utilized by multiple subsidiaries and
affiliates of AEFC. The Company's business is heavily dependent
upon AEFC's computer systems and has significant interactions with
systems of third parties.
A comprehensive review of AEFC's computer systems and business
processes, including those specific to the Company, has been conducted to
identify the major systems that could be affected by the Year 2000
issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis.
AEFC's goal is to complete internal remediation and testing of each
system by the end of 1998 and to continue compliance efforts through
1999.
AEFC is evaluating the Year 2000 readiness of advisors and other third
parties whose system failures could have an impact on the Company's
operations. The potential materiality of any such impact is not known at
this time.
About IDS Life
The Group Variable Annuity Contract is issued by IDS Life, a wholly-owned
subsidiary of AEFC, which itself is a wholly owned subsidiary of the American
Express Company, a financial services company headquartered in New York City.
IDS Life is a stock life insurance company organized in 1957 under the laws of
the State of Minnesota and located at IDS Tower 10, Minneapolis, MN 55440-0010.
We conduct a conventional life insurance business in the District of Columbia
and all states except New York.
American Express Financial Advisors Inc. offers mutual funds, investment
certificates and a broad range of financial management services.
IDS Life offers insurance and annuities.
American Express Financial Advisors Inc. serves individuals and businesses
through its nationwide network of more than 175 offices and
more than 8600 financial advisors.
Other subsidiaries provide investment management and related services for
pension, profit-sharing, employee savings and endowment funds of businesses and
institutions.
Periodic reports
We will send the owner quarterly, or more frequently as the Code may require, a
statement showing the number, type and value of accumulation units credited to
the contract. This statement will be accurate as of a date not more than two
months prior to the date of mailing. In addition, every person having voting
rights will receive any required reports or prospectuses. We also will send any
statements that may be required by applicable laws, rules and regulations
showing contract restrictions.
<PAGE>
Table of contents of the Statement of Additional Information
Performance information..................................................
Rating agencies..........................................................
Principal underwriter....................................................
Independent auditors.....................................................
Prospectus...............................................................
Financial statements -
.........IDS Life Accounts F, IZ, JZ, G, H, N,
.........KZ, LZ and MZ
- ------------------------------------------------------------------------------
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
_____ IDS Life Group Variable Annuity Contract
_____ IDS Life Retirement Annuity Mutual Funds
Please return this request to:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55420
Your name _______________________________________________________
Address _________________________________________________________
City ______________________ State ______________ Zip ___________
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
GROUP, UNALLOCATED FIXED/VARIABLE ANNUITY CONTRACTS
IDS LIFE ACCOUNTS F, IZ, JZ, G, H, N, KZ, LZ and MZ
May 1, 1998
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ are separate accounts
established and maintained by IDS Life Insurance Company (IDS Life).
This Statement of Additional Information, dated May 1, 1998, is not a
prospectus. It should be read together with the accounts' prospectus, dated May
1, 1998, which may be obtained from your financial advisor, or by writing or
calling IDS Life at the address or telephone number below.
IDS Life Insurance Company
P10/199
P.O. Box 74
Minneapolis, MN 55440-0074
800-437-0602
<PAGE>
Group, Unallocated Fixed/Variable Annuity Contracts
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
TABLE OF CONTENTS
Performance Information................................................p. 3
Rating Agencies........................................................p. 6
Principal Underwriter..................................................p. 6
Independent Auditors...................................................p. 7
Prospectus.............................................................p. 7
Financial Statements
- - IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
<PAGE>
PERFORMANCE INFORMATION
Calculation of yield for Account H
IDS Life Account H, which invests in IDS Life Moneyshare Fund, calculates an
annualized simple yield and compound yield based on a seven-day period.
The simple yield is calculated by determining the net change in the value of a
hypothetical account having the balance of one accumulation unit at the
beginning of the seven-day period. (The net change does not include capital
change, but does include a pro rata share of the annual charges, including the
annual contract administrative charge and the mortality and expense risk fee.)
The net change in the account value is divided by the value of the account at
the beginning of the period to obtain the return for the period. That return is
then multiplied by 365/7 to obtain an annualized figure. The value of the
hypothetical account includes the amount of any declared dividends, the value of
any shares purchased with any dividend paid during the period and any dividends
declared for such shares. The variable account's (account) yield does not
include any realized or unrealized gains or losses, nor does it include the
effect of any applicable withdrawal charge.
The account calculates its compound yield according to the following formula:
Compound Yield = [(return for seven-day period +1) x (365/7)] - 1
On Dec. 31, 1997, the account's annualized simple yield was 4.10% and its
compound yield was 4.18%.
The rate of return, or yield, on the account's accumulation unit may fluctuate
daily and does not provide a basis for determining future yields. Investors must
consider, when comparing an investment in Account H with fixed annuities, that
fixed annuities often provide an agreed-to or guaranteed fixed yield for a
stated period of time, whereas the variable account's yield fluctuates. In
comparing the yield of Account H to a money market fund, you should consider the
different services that the annuity provides.
Calculation of yield for accounts investing in income funds
Quotations of yield will be based on all investment income earned during a
particular 30-day period, less expenses accrued during the period (net
investment income) and will be computed 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
<PAGE>
where: a = dividends and investment income earned during the period.
b = expenses accrued for the period (net of reimbursements).
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.
Yield on the account is earned from the increase in the net asset value of
shares of the fund in which the account invests and from dividends declared and
paid by the fund, which are automatically invested in shares of the fund.
On Dec. 31, 1997, the annualized yield for Account G was 6.85%, for Account KZ
was 5.88% and for Account LZ was 8.24%.
Calculation of average annual total return
Quotations of average annual total return for an account will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the annuity contract over a period of one, five and ten years (or,
if less, up to the life of the Account), 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 one, five, or
ten year (or other) period at the end of the one,
five, or ten year (or other) period (or fractional
portion thereof).
<PAGE>
The following performance figures are calculated on the basis of historical
performance of the funds.
<TABLE>
<CAPTION>
Average Annual Total Return For Period Ended: Dec. 31, 1997
Average Annual Total Return with Withdrawal
<S> <C> <C> <C> <C>
Since
Account investing in: 1 Year 5 Year 10 Year Inception
- --------------------
IDS Life
Aggressive Growth Fund (1/92)* 4.65% 11.09% -- 10.89%
Capital Resource Fund (10/81) 15.34% 10.71% 13.38% --
International Equity Fund (1/92) -4.57% 8.63% -- 7.01%
Managed Fund (4/86) 11.03% 11.52% 12.64% --
Moneyshare Fund (10/81) -2.30% 2.85% 4.35% --
Special Income Fund (10/81) 1.11% 7.94% 8.60% --
Growth Dimensions Fund (4/96) 15.54% -- -- 16.68%
Global Yield Fund (4/96) -3.53% -- -- 2.60%
Income Advantage Fund (4/96) 5.33% -- -- 6.83%
Average Annual Total Return without Withdrawal
Since
Account investing in: 1 Year 5 Year 10 Year Inception
- --------------------
IDS Life
Aggressive Growth Fund (1/92)* 11.33% 11.54% -- 11.08%
Capital Resource Fund (10/81) 22.70% 11.16% 13.38% --
International Equity Fund (1/92) 1.52% 9.07% -- 7.19%
Managed Fund (4/86) 18.12% 11.97% 12.64% --
Moneyshare Fund (10/81) 3.94% 3.27% 4.35% --
Special Income Fund (10/81) 7.56% 8.37% 8.60% --
Growth Dimensions Fund (4/96) 22.91% -- -- 20.32%
Global Yield Fund (4/96) 2.62% -- -- 5.80%
Income Advantage Fund (4/96) 12.05% -- -- 10.17%
* inception dates of the funds are shown in parentheses.
</TABLE>
Aggregate total return
Aggregate total return represents the cumulative change in the value of an
investment over a specified period of time (reflecting change in an account's
accumulation unit value) and is computed by 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 one, five, or ten year
(or other) period at the end of the one, five, or
ten year (or other) period (or fractional portion
thereof).
<PAGE>
The Securities and Exchange Commission requires that an assumption be made that
the contract owner withdraws the entire contract at the end of the one, five and
ten year periods (or, if less, up to the life of the account) for which
performance is required to be calculated. In addition, performance figures may
be shown without the deduction of a withdrawal charge.
Total return figures reflect the deduction of all applicable charges including
the contract administrative charge and mortality and expense risk fee.
Performance figures will be shown with the deduction of the applicable
withdrawal charge.
Performance of the accounts may be quoted or compared to rankings, yields, or
returns or used in variable annuity accumulation or settlement illustrations as
published or prepared by independent rating or statistical services or
publishers or publications such as 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 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 and World Report, The Wall Street Journal
and Wiesenberger Investment Companies Service.
RATING AGENCIES
The following chart reflects the ratings given to IDS Life 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 variable
accounts of the annuity. This information relates only to the fixed account and
reflects IDS Life's ability to make annuity payouts and to pay death benefits
and other distributions from the annuity.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the accounts is IDS Life which offers the variable
annuities on a continuous basis.
<PAGE>
Withdrawal charges received by IDS Life for 1997, 1996 and 1995, aggregated
$14,502,145, $11,956,753 and $10,125,762, respectively. Commissions paid by IDS
Life for 1997, 1996 and 1995, aggregated $17,883,488, $17,247,007 and
$9,019,184, respectively. The withdrawal charges were applied toward payment of
commissions.
INDEPENDENT AUDITORS
The financial statements of IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
including the statements of net assets as of December 31, 1997, and the related
statements of operations for the year then ended, and the related statements of
changes in net assets for each of the two years in the period then ended, except
for IDS Life Accounts KZ, LZ and MZ which are for the period April 30, 1996
(commencement of operations) to December 31, 1996 appearing in this SAI, have
been audited by Ernst & Young LLP, independent auditors, as stated in their
reports appearing herein.
PROSPECTUS
The prospectus dated May 1, 1998, is hereby incorporated in this Statement of
Additional Information by reference.
<PAGE>
<PAGE>
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 IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ as of December
31, 1997, and the related statements of operations for the year then ended, and
the statements of changes in net assets for each of the two years in the period
then ended, except for IDS Life Accounts KZ, LZ and MZ, which are for the year
ended December 31, 1997 and for the period from April 30, 1996 (commencement of
operations) to December 31, 1996. 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 generally accepted auditing
standards. 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, 1997 with the affiliated mutual
fund manager. 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 IDS
Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ at December 31, 1997, and the
individual and combined results of their operations and changes in their net
assets for the periods described above, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
March 13, 1998
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Net Assets Dec. 31, 1997
Segregated Asset Account
-----------------------------------------------------------------------------------------
Assets F IZ JZ G H
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
160,437,800 shares at net asset value
<S> <C> <C> <C> <C> <C>
of $28.58 per share (cost $3,678,651,426) $ 4,584,683,419 $ - $ - $ - $ -
IDS Life International Equity Fund -
130,686,066 shares at net asset value
of $13.63 per share (cost $1,613,121,841) - 1,781,109,841 - - -
IDS Life Aggressive Growth Fund -
137,156,967 shares at net asset value
of $16.07 per share (cost $1,792,720,995) - - 2,204,202,588 - -
IDS Life Special Income Fund -
141,282,453 shares at net asset value
of $11.80 per share (cost $1,612,063,279) - - - 1,666,436,859 -
IDS Life Moneyshare Fund, Inc. -
215,138,258 shares at net asset value
of $1.00 per share (cost $215,120,122) - - - - 215,120,328
IDS Life Managed Fund, Inc. -
230,299,831 shares at net asset value
of $18.04 per share (cost $3,193,105,944) - - - - -
IDS Life Global Yield Fund -
6,971,024 shares at net asset value
of $10.39 per share (cost $71,568,627) - - - - -
IDS Life Income Advantage Fund -
19,912,683 shares at net asset value
of $10.38 per share (cost $202,033,753) - - - - -
IDS Life Growth Dimensions Fund -
83,118,305 shares at net asset value
of $13.70 per share (cost $962,791,340) - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
4,584,683,419 1,781,109,841 2,204,202,588 1,666,436,859 215,120,328
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - 10,348,791 1,022,824
Accounts receivable from
IDS Life for contract
purchase payments 349,345 188,022 225,771 108,828 5,559,283
Receivable from mutual funds for
share redemptions 4,644,465 1,457,983 2,801,461 304,372 327
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 4,589,677,229 1,782,755,846 2,207,229,820 1,677,198,850 221,702,762
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable to IDS Life for:
Mortality and expense risk fee 4,154,706 1,619,451 1,993,160 1,513,283 196,340
Contract terminations 4,644,465 1,457,983 2,801,461 304,372 327
Payable to mutual funds for investments
purchased 349,345 188,022 225,771 8,944,363 6,385,768
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,148,516 3,265,456 5,020,392 10,762,018 6,582,435
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period 4,570,911,413 1,777,169,898 2,198,611,830 1,662,313,715 214,938,668
Net assets applicable to contracts in
payment period 9,617,300 2,320,492 3,597,598 4,123,117 181,659
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $ 4,580,528,713 $ 1,779,490,390 $ 2,202,209,428 $ 1,666,436,832 $ 215,120,327
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 556,866,324 1,168,353,202 1,168,829,188 316,788,701 87,255,005
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $8.21 $1.52 $1.88 $5.25 $2.46
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1997
Segregrated Asset Account
------------------------------------------------------------------------- Combined
Assets N KZ LZ MZ Variable
Accounts
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
160,437,800 shares at net asset value
<S> <C> <C> <C> <C> <C>
of $28.58 per share (cost $3,678,651,426) $ - $ - $ - $ - $ 4,584,683,419
IDS Life International Equity Fund -
130,686,066 shares at net asset value
of $13.63 per share (cost $1,613,121,841) - - - - 1,781,109,841
IDS Life Aggressive Growth Fund -
137,156,967 shares at net asset value
of $16.07 per share (cost $1,792,720,995) - - - - 2,204,202,588
IDS Life Special Income Fund -
141,282,453 shares at net asset value
of $11.80 per share (cost $1,612,063,279) - - - - 1,666,436,859
IDS Life Moneyshare Fund, Inc. -
215,138,258 shares at net asset value
of $1.00 per share (cost $215,120,122) - - - - 215,120,328
IDS Life Managed Fund, Inc. -
230,299,831 shares at net asset value
of $18.04 per share (cost $3,193,105,944) 4,154,046,191 - - - 4,154,046,191
IDS Life Global Yield Fund -
6,971,024 shares at net asset value
of $10.39 per share (cost $71,568,627) - 72,415,160 - - 72,415,160
IDS Life Income Advantage Fund -
19,912,683 shares at net asset value
of $10.38 per share (cost $202,033,753) - - 206,790,315 - 206,790,315
IDS Life Growth Dimensions Fund -
83,118,305 shares at net asset value
of $13.70 per share (cost $962,791,340) - - - 1,138,720,608 1,138,720,608
- ------------------------------------------------------------------------------------------------------------------------------------
4,154,046,191 72,415,160 206,790,315 1,138,720,608 16,023,525,309
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends receivable - 383,982 1,514,846 - 13,270,443
Accounts receivable from
IDS Life for contract
purchase payments 337,735 4,853 305,852 1,029,184 8,108,873
Receivable from mutual funds for
share redemptions 931,768 49,818 321 1,502 10,192,017
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 4,155,315,694 72,853,813 208,611,334 1,139,751,294 16,055,096,642
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable to IDS Life for:
Mortality and expense risk fee 3,757,501 64,967 183,116 1,012,641 14,495,165
Contract terminations 931,768 49,818 321 1,502 10,192,017
Payable to mutual funds for investments
purchased 337,735 323,868 1,637,582 1,029,184 19,421,638
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,027,004 438,653 1,821,019 2,043,327 44,108,820
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period 4,140,286,625 72,324,955 206,374,719 1,135,319,470 15,978,251,293
Net assets applicable to contracts in
payment period 10,002,065 90,205 415,596 2,388,497 32,736,529
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $ 4,150,288,690 $ 72,415,160 $ 206,790,315 $ 1,137,707,967 $ 16,010,987,822
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 1,178,734,680 65,608,959 175,023,644 831,259,213
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $3.51 $1.10 $1.18 $1.37
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Operations Year ended Dec. 31, 1997
Segregated Asset Account
----------------------------------------------------------------------------------------
Investment income F IZ JZ G H
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 126,502,302 $ 67,130,767 $ 193,435,313 $ 157,493,878 $ 11,494,327
Mortality and expense risk fee 44,568,477 18,423,272 20,668,494 17,084,438 2,286,046
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 81,933,825 48,707,495 172,766,819 140,409,440 9,208,281
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales
of investments in mutual funds:
Proceeds from sales 550,019,453 154,762,560 116,634,433 227,994,923 227,989,506
Cost of investments sold 480,242,340 134,945,151 91,242,736 217,907,534 227,989,718
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 69,777,113 19,817,409 25,391,697 10,087,389 (212)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 748,884,487 (34,561,365) 31,135,686 (23,859,115) (586)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 818,661,600 (14,743,956) 56,527,383 (13,771,726) (798)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 900,595,425 $ 33,963,539 $ 229,294,202 $ 126,637,714 $ 9,207,483
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ
Statements of Operations - continued Year ended Dec. 31, 1997
Segregated Asset Account
-------------------------------------------------------------------------------- Combined
Investment income N KZ LZ MZ Variable
Accounts
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 416,352,602 $ 2,693,029 $ 12,724,423 $ 7,014,788 $ 994,841,429
Mortality and expense risk fee 39,781,435 530,675 1,377,872 8,113,272 152,833,981
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 376,571,167 2,162,354 11,346,551 (1,098,484) 842,007,448
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales
of investments in mutual funds:
Proceeds from sales 103,684,853 1,443,742 679,825 717,699 1,383,926,994
Cost of investments sold 74,961,930 1,417,139 656,625 612,142 1,229,975,315
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 28,722,923 26,603 23,200 105,557 153,951,679
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 246,854,996 88,527 3,906,529 157,444,749 1,129,893,908
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 275,577,919 115,130 3,929,729 157,550,306 1,283,845,587
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 652,149,086 $ 2,277,484 $ 15,276,280 $ 156,451,822 $ 2,125,853,035
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets Year ended Dec. 31, 1997
Segregated Asset Account
----------------------------------------------------------------------------------------
Operations F IZ JZ G H
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 81,933,825 $ 48,707,495 $ 172,766,819 $ 140,409,440 $ 9,208,281
Net realized gain (loss) on investments 69,777,113 19,817,409 25,391,697 10,087,389 (212)
Net change in unrealized appreciation or
depreciation of investments 748,884,487 (34,561,365) 31,135,686 (23,859,115) (586)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 900,595,425 33,963,539 229,294,202 126,637,714 9,207,483
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 134,271,812 78,292,637 87,605,673 49,361,355 26,471,423
Net transfers* (330,558,730) (40,464,119) 30,217,819 (141,589,262) 2,490,728
Transfers for policy loans 6,741,393 2,538,097 2,700,859 1,893,361 415,203
Annuity payments (839,990) (218,797) (325,569) (404,625) (21,359)
Contract charges (4,189,959) (1,744,401) (1,879,204) (1,396,704) (170,801)
Contract terminations:
Surrender benefits (306,180,259) (110,545,864) (118,237,119) (119,861,011) (33,151,710)
Death benefits (20,091,752) (9,311,925) (8,138,343) (15,519,877) (2,393,157)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions (520,847,485) (81,454,372) (8,055,884) (227,516,763) (6,359,673)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 4,200,780,773 1,826,981,223 1,980,971,110 1,767,315,881 212,272,517
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 4,580,528,713 $ 1,779,490,390 $ 2,202,209,428 $ 1,666,436,832 $ 215,120,327
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 628,555,221 1,220,479,990 1,172,792,754 362,167,237 89,644,495
Contract purchase payments 18,318,230 51,062,806 50,910,206 9,842,757 10,978,965
Net transfers* (46,459,818) (25,974,782) 17,204,464 (28,290,096) 1,243,189
Transfers for policy loans 911,718 1,642,862 1,552,061 376,163 172,138
Contract charges (572,335) (1,139,369) (1,087,659) (279,982) (71,845)
Contract terminations:
Surrender benefits (40,932,101) (71,076,097) (67,429,599) (23,650,436) (13,512,157)
Death benefits (2,954,591) (6,642,208) (5,113,039) (3,376,942) (1,199,780)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 556,866,324 1,168,353,202 1,168,829,188 316,788,701 87,255,005
- ------------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other accounts and transfers (from) to IDS
Life for conversion from (to) fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets - continued Year ended Dec. 31, 1997
Segregated Asset Account
---------------------------------------------------------------------------- Combined
Operations N KZ LZ MZ Variable
Accounts
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 376,571,167 $ 2,162,354 $ 11,346,551 $ (1,098,484) $ 842,007,448
Net realized gain (loss) on investments 28,722,923 26,603 23,200 105,557 153,951,679
Net change in unrealized appreciation or
depreciation of investments 246,854,996 88,527 3,906,529 157,444,749 1,129,893,908
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 652,149,086 2,277,484 15,276,280 156,451,822 2,125,853,035
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 125,778,517 3,443,369 10,032,844 58,794,952 574,052,582
Net transfers* 72,184,459 42,846,230 125,588,307 572,710,885 333,426,317
Transfers for policy loans 4,673,820 43,334 80,094 1,398,475 20,484,636
Annuity payments (818,698) (7,873) (31,168) (147,303) (2,815,382)
Contract charges (3,418,455) (26,651) (70,043) (632,210) (13,528,428)
Contract terminations:
Surrender benefits (236,462,530) (2,695,820) (6,707,680) (37,984,244) (971,826,237)
Death benefits (25,132,076) (163,126) (464,874) (2,163,641) (83,378,771)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions (63,194,963) 43,439,463 128,427,480 591,976,914 (143,585,283)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 3,561,334,567 26,698,213 63,086,555 389,279,231 14,028,720,070
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 4,150,288,690 $ 72,415,160 $ 206,790,315 $ 1,137,707,967 $ 16,010,987,822
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 1,197,162,300 24,878,248 59,938,791 350,597,571
Contract purchase payments 38,914,736 3,250,861 9,009,695 47,250,516
Net transfers* 23,088,309 40,199,836 112,669,161 465,445,880
Transfers for policy loans 1,423,911 40,853 70,990 1,099,049
Contract charges (1,055,013) (24,882) (62,522) (502,902)
Contract terminations:
Surrender benefits (72,296,420) (2,560,115) (6,187,383) (30,794,587)
Death benefits (8,503,143) (175,842) (415,088) (1,836,314)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 1,178,734,680 65,608,959 175,023,644 831,259,213
- ------------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other accounts and transfers (from) to IDS
Life for conversion from (to) fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets Year ended Dec. 31, 1996
Segregated Asset Account
------------------------------------------------------------------------------------------------------------
Operations F IZ JZ G H
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 626,663,819 $ 48,620,781 $ 188,771,679 $ 121,009,234 $ 8,463,581
Net realized gain (loss)
on investments 39,842,450 5,627,173 9,280,782 6,148,079 (748)
Net change in unrealized appreciation or
depreciation of investments (394,337,953) 81,683,280 42,813,163 (25,950,503) 825
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 272,168,316 135,931,234 240,865,624 101,206,810 8,463,658
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 247,034,837 136,590,270 137,497,822 136,598,453 71,251,781
Net transfers** 7,353,251 158,214,068 227,344,754 (130,631,868) (73,493,878)
Transfers for policy loans 6,524,720 2,185,648 2,289,136 1,948,047 542,980
Annuity payments (618,433) (145,076) (211,338) (302,440) (16,311)
Contract charges (4,665,100) (1,844,449) (1,844,915) (1,651,986) (186,455)
Contract terminations:
Surrender benefits (323,487,903) (99,067,158) (97,711,535) (138,993,547) (26,610,434)
Death benefits (19,407,560) (6,956,648) (6,698,818) (13,852,642) (1,119,093)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions (87,266,188) 188,976,655 260,665,106 (146,885,983) (29,631,410)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 4,015,878,645 1,502,073,334 1,479,440,380 1,812,995,054 233,440,269
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 4,200,780,773 $ 1,826,981,223 $ 1,980,971,110 $ 1,767,315,881 $ 212,272,517
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 641,902,761 1,088,873,599 1,007,975,519 393,696,727 102,567,540
Contract purchase payments 38,493,929 95,677,544 87,429,534 29,931,965 31,461,578
Net transfers** 1,526,639 110,170,298 143,201,245 (28,111,632) (32,033,370)
Transfers for policy loans 1,013,895 1,512,631 1,436,806 419,834 233,492
Contract charges (729,091) (1,286,561) (1,166,154) (358,645) (81,536)
Contract terminations:
Surrender benefits (50,461,665) (69,287,451) (61,605,600) (30,226,184) (11,981,080)
Death benefits (3,191,247) (5,180,070) (4,478,596) (3,184,828) (522,129)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 628,555,221 1,220,479,990 1,172,792,754 362,167,237 89,644,495
- ------------------------------------------------------------------------------------------------------------------------------------
**Includes transfer activity from (to) other accounts and transfers (from) to
IDS Life for conversion from (to) fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets - continued Year ended Dec. 31, 1996
Segregated Asset Account
------------------------------------------------------------------------------- Combined
Operations N KZ * LZ * MZ * Variable
Accounts
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 274,337,654 $ 248,565 $ 1,417,383 $ (217,794) $ 1,269,314,902
Net realized gain (loss) on investments 28,800,977 1,196 - 1,551 89,701,460
Net change in unrealized appreciation or
depreciation of investments 191,117,363 758,006 850,033 18,484,519 (84,581,267)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 494,255,994 1,007,767 2,267,416 18,268,276 1,274,435,095
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 178,726,120 2,213,183 4,646,202 18,844,441 933,403,109
Net transfers** 11,968,781 23,859,394 57,148,839 358,733,822 640,497,163
Transfers for policy loans 4,253,041 4,127 18,815 208,070 17,974,584
Annuity payments (458,457) (1,456) (4,943) (17,149) (1,775,603)
Contract charges (3,435,971) (4,484) (10,289) (88,337) (13,731,986)
Contract terminations:
Surrender benefits (219,622,814) (377,077) (950,606) (6,499,453) (913,320,527)
Death benefits (15,758,360) (3,241) (28,879) (170,439) (63,995,680)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions (44,327,660) 25,690,446 60,819,139 371,010,955 599,051,060
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 3,111,406,233 - - - 12,155,233,915
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 3,561,334,567 $ 26,698,213 $ 63,086,555 $ 389,279,231 $ 14,028,720,070
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 1,212,021,386 - - -
Contract purchase payments 67,036,198 2,150,213 4,593,557 17,880,563
Net transfers** 5,024,835 23,110,914 56,411,486 339,165,647
Transfers for policy loans 1,578,243 3,961 18,315 194,231
Contract charges (1,282,363) (4,320) (10,113) (82,302)
Contract terminations:
Surrender benefits (80,844,746) (379,430) (1,045,166) (6,403,548)
Death benefits (6,371,253) (3,090) (29,288) (157,020)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 1,197,162,300 24,878,248 59,938,791 350,597,571
- ------------------------------------------------------------------------------------------------------------------------------------
*For the period April 30, 1996 (commencement of operations) to Dec. 31, 1996.
**Includes transfer activity from (to) other accounts and transfers (from) to
IDS Life for conversion from (to) fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
Notes to Financial Statements
1. Organization
IDS Life Accounts F, G, H and N were established as segregated asset accounts of
IDS Life Insurance Company (IDS Life) under Minnesota law and are registered
collectively as a single unit investment trust under the Investment Company Act
of 1940. Accounts F, G and H were established on May 13, 1981 and commenced
operations on Oct. 13, 1981. Account N was established on April 17, 1985 and
commenced operations on April 30, 1986. Accounts IZ and JZ were established as
segregated asset accounts on Sept. 20, 1991 and commenced operations on Jan. 13,
1992. Accounts KZ, LZ and MZ were established as segregated asset accounts on
April 2, 1996 and commenced operations on April 30, 1996. IDS Life Accounts F,
IZ, JZ, G, H, N, KZ, LZ and MZ are collectively referred to as "the Accounts."
The assets of the Accounts are held for the exclusive benefit of the variable
annuity contract owners and are not chargeable with liabilities arising out of
the business conducted by any other segregated asset accounts or by IDS Life.
Contract owners allocate their variable purchase payments to one or more of the
nine segregated asset accounts. Such funds are then invested in shares of nine
mutual funds organized by IDS Life as the investment vehicles for variable
annuity contracts issued by IDS Life and its subsidiaries.
Each Fund is registered under the Investment Company Act of 1940 as a
diversified, (non-diversified for Global Yield) open-end management investment
company or series of an open-end management company. IDS Life Capital Resource
Fund, IDS Life Special Income Fund and IDS Life Moneyshare Fund, Inc. commenced
operations Oct. 13, 1981. IDS Life Managed Fund, Inc. commenced operations April
30, 1986. IDS Life Aggressive Growth Fund and IDS Life International Equity Fund
commenced operations on Jan. 13, 1992. IDS Life Global Yield Fund, IDS Life
Income Advantage Fund and IDS Life Growth Dimensions Fund commenced operations
on April 30, 1996. Funds allocated to IDS Life Account F are invested in the
shares of IDS Life Capital Resource Fund; IDS Life Account IZ invests in the
shares of IDS Life International Equity Fund; IDS Life Account JZ invests in the
shares of IDS Life Aggressive Growth Fund; IDS Life Account G invests in the
shares of IDS Life Special Income Fund; IDS Life Account H invests in the shares
of IDS Life Moneyshare Fund, Inc.; IDS Life Account N invests in the shares of
IDS Life Managed Fund, Inc.; IDS Life Account KZ invests in the shares of IDS
Life Global Yield Fund; IDS Life Account LZ invests in the shares of IDS Life
Income Advantage Fund and IDS Life Account MZ invests in the shares of IDS Life
Growth Dimensions Fund.
IDS Life serves as investment manager and principal underwriter for the Accounts
and the underlying nine mutual funds. American Express Financial Corporation
(AEFC), an affiliated company, is the investment advisor for each of the funds.
American Express Asset Management International, Inc., an affiliated company, is
the sub-investment advisor for IDS Life International Equity Fund.
2. Summary of Significant Accounting Policies
Investments in Mutual Funds
Investments in shares of the mutual 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 mutual funds are reinvested in
additional shares of the mutual funds and are recorded as income by the Accounts
on the ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the Accounts' share of the mutual 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 generally accepted
accounting principles 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 Accounts are 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
Accounts.
3. Mortality and Expense Risk Fee and Contract Charges
IDS Life makes contractual assurances to the Accounts that possible future
adverse changes in administrative expenses and mortality experience of the
annuitants and beneficiaries will not affect the Accounts. The mortality and
expense risk fee paid to IDS Life is computed daily and is equal, on an annual
basis, to 1 percent of the average daily net assets of the Accounts.
An annual charge of $20 is deducted from the contract value of each Variable
Retirement Annuity contract. An annual charge of $30 is deducted from the
contract value of each Combination Retirement Annuity contract. A quarterly
charge of $125 is deducted from the contract value of each Group Variable
Annuity contract. An annual charge of $30 is deducted from the certificate value
of each Employee Benefit Annuity certificate. A quarterly charge of $6 is
deducted from the contract value of each Flexible Annuity contract. The annual
charges are deducted at contract or certificate year end and the quarterly
charges are deducted at contract quarter end, during the accumulation period,
for administrative services provided to the Accounts by IDS Life.
A contingent deferred sales charge (surrender charge or withdrawal charge) will
be imposed upon:
a) certain Variable Retirement Annuity contract surrenders during
the first seven years,
b) Combination Retirement Annuity contract surrenders during the first seven,
eight or eleven years, depending on type of contract,
c) Group Variable Annuity contract withdrawals during the first seven years,
d) Employee Benefit Annuity certificate surrenders during the first eleven
years, and
e) Flexible Annuity contract surrenders of amounts other than those
representing earnings or those representing purchase payments six contract
years old or more.
Charges by IDS Life for surrenders are not identified on an individual
segregated asset account basis. Charges for all segregated asset accounts
amounted to $14,502,145 in 1997 and $11,956,753 in 1996. Such charges are not
treated as a separate expense of the Accounts. They are ultimately deducted from
contract surrender benefits paid by IDS Life.
4. Investment Transactions
The Accounts' purchases of mutual fund shares, including reinvestment of
dividend distributions, were as follows:
Year ended Dec. 31,
Account Investment 1997 1996
- --------------------------------------------------------------------------------
F IDS Life Capital Resource Fund..... $ 111,547,849 $ 842,940,565
IZ IDS Life International Equity Fund. 122,035,293 295,290,858
JZ IDS Life Aggressive Growth Fund.... 281,608,415 488,497,853
G IDS Life Special Income Fund ...... 140,887,599 175,575,133
H IDS Life Moneyshare Fund, Inc...... 230,838,115 198,361,500
N IDS Life Managed Fund, Inc......... 417,692,561 372,910,559
KZ IDS Life Global Yield Fund ........ 47,045,559 26,031,598*
LZ IDS Life Income Advantage Fund .... 140,453,856 62,236,522*
MZ IDS Life Growth Dimensions Fund ... 592,288,967 371,131,317*
- --------------------------------------------------------------------------------
Combined Variable Account.......... $2,084,398,214 $2,832,975,905
- --------------------------------------------------------------------------------
*For the period April 30, 1996 (commencement of operations)to Dec. 31, 1996.
5. 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 the Variable Accounts.
The Variable Accounts have no computer systems of their own but are dependent
upon the systems maintained by AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each system by the end of
1998 and to continue compliance efforts through 1999.
The Year 2000 readiness of other third parties whose system failures could have
an impact on the Variable Accounts' operations is currently being evaluated. The
potential materiality of any such impact is not known at this time.
PART C
Item 24. Financial Statements and Exhibits
(a) IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ:
Statements of Net Assets at Dec. 31, 1997.
Statements of Operations for the year ended Dec. 31, 1997.
Statements of Changes in Net Assets for the years ended Dec.
31, 1997 and Dec. 31, 1996.
Notes to Financial Statements.
Report of Independent Auditors dated March 13, 1998.
IDS Life Insurance Company:
Consolidated Balance Sheets at Dec. 31, 1997 and 1996;
Consolidated Statements of Income for the years ended Dec.
31, 1997, 1996, and 1995;
Consolidated Statements of Stockholder's Equity for the year
ended Dec. 31, 1997, 1996 and 1995;
Consolidated Statements of Cash Flows for the years ended
Dec. 31, 1997, 1996, and 1995;
Notes to Consolidated Financial Statements.
Report of Independent Auditors dated Feb. 5, 1998.
Exhibits to Financial Statements included in Part C:
Financial Statement Schedules I, III, IV, and V as required by
Regulation S-X:
Schedule I - Consolidated Summary of Investments Other than
Investmentsn in Related Parties
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
Schedule V - Valuation and Qualifying Accounts
Report of Independent Auditors dated Feb. 5, 1998.
All other schedules to the consolidated financial statements required by
Article 7 of Regulation S-X are not required under the related instructions
or are inapplicable and, therefore have been omitted.
(b) Exhibits:
1.1 Resolution of the Executive Committee of the Board of Directors of IDS
Life adopted May 13, 1981, filed electronically as Exhibit 1.1 to
Post-Effective Amendment No. 2 to Registration No. 33-47302, is
incorporated herein by reference.
1.2 Resolution of the Executive Committee of the Board of Directors of IDS
Life establishing Account N on April 17, 1985, filed electronically as
Exhibit 1.2 to Post-Effective Amendment No. 2 to Registration No.
33-47302, is incorporated herein by reference.
<PAGE>
1.3 Resolution of the Board of Directors of IDS Life establishing Accounts
IZ and JZ on September 20, 1991, filed electronically as Exhibit 1.3 to
Post-Effective Amendment No. 2 to Registration No. 33-47302, is
incorporated herein by reference.
1.4 Consent in Writing in Lieu of Meeting of Board of Directors
establishing Accounts MZ, KZ and LZ on April 2, 1996, filed
electronically as Exhibit 1.4 to Post-Effective Amendment No. 6 to
Registration No.
33-47302, is incorporated herein by reference.
2. Not applicable.
3. Not applicable.
4. Form of Group Deferred Variable Annuity Contract (form 34660) date
April, 1992, filed electronically as Exhibit 4 to Post-Effective
Amendment No. 2 to Registration No. 33-47302, is incorporated herein by
reference.
5. Copy of Variable Group Deferred Annuity Contract Application (form
34661) dated May, 1992, filed electronically as Exhibit 5 to
Post-Effective Amendment No. 2 to Registration No. 33-47302, is
incorporated herein by reference.
6.1 Copy of Certificate of Incorporation of IDS Life, filed electronicall
as Exhibit 6.1 to Post-Effective Amendment No. 2 to Registration
No. 33-47302, is incorporated herein by reference.
6.2 Copy of Amended By-Laws of IDS Life, filed electronically as
Exhibit 6.2 to Post-Effective Amendment No. 2 to Registration
No. 33-47302, is incorporated herein by reference.
7. Not applicable.
8. Not applicable.
9. Opinion of counsel and consent to its use as to the legality of the
securities registered, filed electronically herewith.
10 Consent of Independent Auditors, filed electronically herewith.
11. Financial Statement Schedules and Report of Independent Auditors, filed
electronically herewith.
12. Not applicable.
13. Copy of Schedule for computation of each performance quotation filed in
Registration Statement in response to item 24, filed electronically as
Exhibit 13 to Post-Effective Amendment No. 2 to Registration No.
33-47302, is incorporated herein by reference.
<PAGE>
14. Financial Data Schedules, filed electronically herewith.
15. Power of Attorney dated August 19, 1997, filed electronically herewith.
15.1 Power of Attorney dated April 9, 1998, filed electronically herewith.
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company)
<S> <C> <C>
Positions and Offices with Depositor
Name Principal Business Address
- -------------------------------- ----------------------------------- ---------------------------------------
Timothy V. Bechtold IDS Tower 10 Executive Vice President-Risk
Minneapolis, MN 55440 Management Products
David J. Berry IDS Tower 10 Vice President
Minneapolis, MN 55440
Mark W. Carter IDS Tower 10 Executive Vice President-Marketing
Minneapolis, MN 55440
Robert M. Elconin IDS Tower 10 Vice President
Minneapolis, MN 55440
Lorraine R. Hart IDS Tower 10 Vice President-Investments
Minneapolis, MN 55440
David R. Hubers IDS Tower 10 Director
Minneapolis, MN 55440
James M. Jensen IDS Tower 10 Vice President-Insurance Product
Minneapolis, MN 55440 Development
Richard W. Kling IDS Tower 10 Director and President
Minneapolis, MN 55440
Paul F. Kolkman IDS Tower 10 Director and Executive Vice President
Minneapolis, MN 55440
Ryan R. Larson IDS Tower 10 Vice President
Minneapolis, MN 55440
James A. Mitchell IDS Tower 10 Director, Chairman of the Board and
Minneapolis, MN 55440 Chief Executive Officer
Pamela J. Moret IDS Tower 10 Executive Vice President-Variable
Minneapolis, MN 55440 Assets
Barry J. Murphy IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President-Client Service
James R. Palmer IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
Stuart A. Sedlacek IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President-Assured Assets
F. Dale Simmons IDS Tower 10 Vice President-Real Estate Loan
Minneapolis, MN 55440 Management and Assistant Treasurer
William A. Stoltzmann IDS Tower 10 Vice President, General Counsel and
Minneapolis, MN 55440 Secretary
Philip C. Wentzel IDS Tower 10 Vice President and Controller
Minneapolis, MN 55440
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
IDS Life Insurance Company which is a wholly-owned subsidiary
of American Express Financial Corporation. American Express
Financial Corporation is a wholly-owned subsidiary of American
Express Company (American Express).
The following list includes the names of major subsidiaries of
American Express.
<TABLE>
<CAPTION>
<S> <C>
Jurisdiction of
Name of Subsidiary Incorporation
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
American Express Asset Management Ltd. England
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Minnesota
Delaware
American Express Insurance Agency of Arizona Inc. Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express Insurance Agency of Oregon Inc. Oregon
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance Agency of Maryland Inc. Maryland
American Express Property Casualty Insurance Agency of Pennsylvania Inc. Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of New Mexico Inc. New Mexico
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
North Dakota Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contractowners
As of February, 1998, 194 (qualified) contracts have been issued.
<PAGE>
Item 28. Indemnification
The By-Laws of the depositor provide that it shall indemnify any
person who was or is a party or is threatened to be made a party,
by reason of the fact that he is or was a director, officer,
employee or agent of this Corporation, or is or was serving at
the direction of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise, to any threatened, pending or
completed action, suit or proceeding, wherever brought, to the
fullest extent permitted by the laws of the State of Minnesota,
as now existing or hereafter amended, provided that this Article
shall not indemnify or protect any such director, officer,
employee or agent against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence, in the
performance of his duties or by reason of his reckless disregard
of his obligations and duties.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to director, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 29. Principal Underwriters
(a) IDS Life is the principal underwriter for IDS Life Accounts F,
IZ, JZ, G, H, N, KZ, LZ and MZ IDS Life Variable Annuity Fund
A, IDS Life Variable Annuity Fund B, IDS Life Account RE, IDS
Life Account MGA and IDS Life Account SBS, IDS Life Variable
Account 10, IDS Life Variable Life Separate Account and IDS
Life Variable Account for Smith Barney.
(b) This table is the same as our response to Item 25 of this
Registration Statement.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(c) Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
IDS Life $17,883,488 $14,502,145 None None
</TABLE>
<PAGE>
Item 30. Location of Accounts and Records
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as
is necessary to ensure that the audited financial
statements in the registration statement are never more
than 16 months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as
part of any application to purchase a contract offered by
the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or
included in the prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of
Additional Information and any financial statements
required to be made available under this Form promptly
upon written or oral request to IDS Life Contract Owner
Service at the address or phone number listed in the
prospectus.
(d) The sponsoring insurance company represents that the fees
and charges deducted under the contract, in the aggregate,
are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by
the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, IDS Life Insurance Company, on behalf of the Registrant, certifies that it
meets the requirements of Securities Act Rule 485(b) for effectiveness of this
Registration Statement and has duly caused this Registration Statement to be
signed on its behalf in the City of Minneapolis, and State of Minnesota, on this
22nd day of April, 1998.
IDS LIFE ACCOUNT F
IDS LIFE ACCOUNT IZ
IDS LIFE ACCOUNT JZ
IDS LIFE ACCOUNT G
IDS LIFE ACCOUNT H
IDS LIFE ACCOUNT N
IDS LIFE ACCOUNT KZ
IDS LIFE ACCOUNT LZ
IDS LIFE ACCOUNT MZ
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
Richard W. Kling
President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on this 22nd day of
April, 1998.
Signature Title
/s/ James A. Mitchell* Director, Chairman of the
James A. Mitchell Board and Chief Executive
Officer
/s/ Richard W. Kling* Director and President
Richard W. Kling
/s/ Jeffrey S. Horton** Vice President and Treasurer
Jeffrey S. Horton
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
<PAGE>
Signature Title
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President, Assured Assets
/s/ Philip C. Wentzel** Vice President and Controller
Philip C. Wentzel
*Signed pursuant to Power of Attorney dated August 19, 1997, filed
electronically herewith.
**Signed pursuant to Power of Attorney dated April 9, 1998, filed electronically
herewith.
- -----------------------------
Mary Ellyn Minenko
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 8
This Amendment is comprised of the following papers and documents:
The Cover Page.
Cross-reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
IDS Life Accounts F,IZ,JZ,G,H,N,KZ,LZ&MZ (GVAC)
Registration No. 33-47302/811-3217
EXHIBIT INDEX
9. Opinion of Counsel and Consent
10. Consent of Independent Auditors.
11. Financial Statement Schedules and Report of Independent
Auditors.
14. Financial Data Schedules.
15. Power of Attorney dated August 19, 1997.
15.1 Power of Attorney dated April 9, 1998.
April 20, 1998
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
RE: Registration Statement on Form N-4
File No.: 33-47302
Ladies and Gentlemen:
I am familiar with the establishment of the IDS Life Accounts F, IZ, JZ, G, H,
N, KZ, LZ and MZ ("Account"), which is a separate account of IDS Life Insurance
Company ("Company") established by the Company's Board of Directors according to
applicable insurance law. I also am familiar with the above-referenced
Registration Statement filed by the Company on behalf of the Account with the
Securities and Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to give the following
opinion:
1. The Company is duly incorporated, validly existing and in good standing
under applicable state law and is duly licensed or qualified to do business
in each jurisdiction where it transacts business. The Company has all
corporate powers required to carry on its business and to issue the
contracts.
2. The Account is a validly created and existing separate account of the
Company and is duly authorized to issue the securities registered.
3. The contracts issued by the Company during the past fiscal year, when
offered and sold in accordance with the prospectus contained in the
Registration Statement and in compliance with applicable law, were legally
issued and represent binding obligations of the Company in accordance with
their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
Mary Ellyn Minenko
Counsel
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts" and
"Independent Auditors" and to the use of our reports dated February 5, 1998 on
the consolidated financial statements and schedules of IDS Life Insurance
Company and our report dated March 13, 1998 on the financial statements of IDS
Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, and MZ in Post-Effective Amendment No.
8 to the Registration Statement (Form N-4 No. 33-47302) and related Prospectus
for the registration of Group Variable Annuity Contracts to be offered by IDS
Life Insurance Company.
Ernst & Young LLP
Minneapolis, Minnesota
April 20, 1998
<PAGE>
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the consolidated financial statements of IDS Life Insurance
Company as of December 31, 1997 and 1996, and for each of the three years in the
period ended December 31, 1997, and have issued our report thereon dated
February 5, 1998 (included elsewhere in this Registration Statement). Our audits
also included the financial statement schedules listed in the index to financial
statement schedules of this Registration Statement. These schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
Ernst & Young LLP
Minneapolis, Minnesota
February 5, 1998
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 1,829,112 $ 1,846,833 $ 1,829,112
States, municipalities and
political subdivisions 9,684 10,252 9,684
All other corporate bonds (b) 7,476,654 7,886,325 7,476,654
------------ ---------- ----------
Total held to maturity 9,315,450 9,743,410 9,315,450
Available for sale:
United States Government and
government agencies and
authorities (c) 6,798,425 6,944,942 6,944,942
States, municipalities and
political subdivisions 11,045 12,393 12,393
All other corporate bonds (d) 5,705,560 5,919,359 5,919,359
------------ ---------- ----------
Total available for sale 12,515,030 12,876,694 12,876,694
Mortgage loans on real estate 3,618,647 XXXXXXXXX 3,618,647
Policy loans 498,874 XXXXXXXXX 498,874
Other investments 318,591 XXXXXXXXX 318,591
------------ ----------
Total investments $ 26,266,592 $ XXXXXXXXX $ 26,628,256
============ ========== ==========
(a) - Includes mortgage-backed securities with a cost and market value of $1,787,180 and $1,801,952,
respectively.
(b) - Includes mortgage-backed securities with a cost and market value of $196,008 and $199,301,
respectively.
(c) - Includes mortgage-backed securities with a cost and market value of $6,733,134 and $6,875,498,
respectively.
(d) - Includes mortgage-backed securities with a cost and market value of $397,431 and $408,667,
respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($
thousands)
FOR THE YEAR ENDED DECEMBER 31, 1997
Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K
Segment Deferred Future Unearned Other policy Premium Net Benefits, Amortization Other Premiums
policy policy premiums claims and revenue investment claims, of deferred operating written
acquisition benefits, benefits income losses and policy expenses*
cost losses, payable settlement acquisition
claims and expenses costs
loss
expenses
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annuities $ 1,453,441 $ 22,009,747 $ - $ 35,007 $ - $1,718,515 $ 1,720 $229,729 $262,680 N/A
Life, DI, and
Long-term Care
Insurance 1,026,136 4,027,289 - 33,338 206,494 269,874 209,955 93,002 13,916 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 2,479,577 $ 26,037,036 $ - $ 68,345 $ 206,494 $ 1,988,389 $ 211,675 $322,731 $276,596 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
*Allocations of net investment income and other operating expenses are based on various assumptions and estimates.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1996
Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K
Segment Deferred Future Unearned Other policy Premium Net Benefits, Amortization Other Premiums
policy policy premiums claims and revenue investment claims, of deferred operating written
acquisition benefits, benefits income losses and policy expenses*
cost losses, payable settlement acquisition
claims and expenses costs
loss
expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annuities $ 1,398,025 $ 21,838,008 $ - $ 50,137 $ - $1,702,364 $ 2,724 $ 189,645 $ 180,942 N/A
Life, DI, and
Long-term
Care Insurance 932,780 3,811,034 - 33,497 182,921 262,998 187,486 88,960 80,526 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,330,805 $ 25,649,042 $ - $ 83,634 $ 182,921 $1,965,362 $ 190,210 $ 278,605 $ 261,468 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
*Allocations of net investment income and other operating expenses are based on various assumptions and estimates.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1995
Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K
Segment Deferred Future Unearned Other policy Premium Net Benefits, Amortization Other Premiums
policy policy premiums claims and revenue investment claims, of deferred operating written
acquisition benefits, benefits income losses and policy expenses*
cost losses, payable settlement acquisition
claims and expenses costs
loss
expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annuities $ 1,227,169 $ 21,404,836 $ - $ 28,191 $ - $1,651,067 $ 2,693 $ 189,626 $ 166,191 N/A
Life, DI,
and Long-term
Care Insurance 798,556 3,613,253 - 28,132 161,530 256,242 164,749 90,495 45,451 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,025,725 $ 25,018,089 $ - $ 56,323 $ 161,530 $1,907,309 $ 167,442 $ 280,121 $ 211,642 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
*Allocations of net investment income and other operating expenses are based on various assumptions and estimates.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
Gross amount Ceded to other Assumed from Net % of amount
companies other companies Amount assumed to net
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1997
Life insurance in force $ 73,119,122 $ 4,351,904 $ 1,611,596 $ 70,378,814 2.29%
- -------------------------------------------------------------------------------------------
Premiums:
Life insurance $ 55,094 $ 3,124 $ 503 $ 52,473 0.96%
DI & LTC insurance 196,799 42,778 -- 154,021 0.00%
- -------------------------------------------------------------------------------------------
Total premiums $ 251,893 $ 45,902 $ 503 $ 206,494 0.24%
- -------------------------------------------------------------------------------------------
For the year ended
December 31, 1996
Life insurance in force $ 65,571,173 $ 3,875,921 $ 1,703,181 $ 63,398,433 2.69%
- -------------------------------------------------------------------------------------------
Premiums:
Life insurance $ 54,111 $ 3,253 $ 545 $ 51,403 1.06%
DI & LTC insurance 164,561 33,043 -- 131,518 0.00%
- -------------------------------------------------------------------------------------------
Total premiums $ 218,672 $ 36,296 $ 545 $ 182,921 0.30%
- -------------------------------------------------------------------------------------------
For the year ended
December 31, 1995
Life insurance in force $ 57,895,180 $ 3,771,204 $ 1,788,352 $ 55,912,328 3.20%
- -------------------------------------------------------------------------------------------
Premiums:
Life insurance $ 53,089 $ 2,648 $ (248) $ 50,193 -0.49%
DI & LTC insurance 137,016 25,679 -- 111,337 0.00%
- -------------------------------------------------------------------------------------------
Total premiums $ 190,105 $ 28,327 $ (248) $ 161,530 -0.15%
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- ------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
---------
Balance at Charged to
Description Beginning Charged to Other Accounts- Deductions- Balance at End
of Period Costs & Expenses Describe Describe * of Period
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1997
- ----------------------------
Reserve for Mortgage Loans $37,495 $8,801 $0 $7,651 $38,645
Reserve for Other Investments $3,963 $2,100 $0 $0 $6,063
For the year ended
December 31, 1996
- ----------------------------
Reserve for Mortgage Loans $37,340 $10,005 $0 $9,850 $37,495
Reserve for Other Investments $4,713 ($750) $0 $0 $3,963
For the year ended
December 31, 1995
- ----------------------------
Reserve for Mortgage Loans $35,252 $15,900 $0 $13,812 $37,340
Reserve for Other Investments $7,515 ($2,802) $0 $0 $4,713
* 1997, 1996 and 1995 amounts represent $7,651, $9,850, and $13,812, respectively, for loan
payoffs and foreclosures.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 13341177327
<INVESTMENTS-AT-VALUE> 16023525309
<RECEIVABLES> 31571333
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16055096642
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (44108820)
<TOTAL-LIABILITIES> (44108820)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 5548718916
<SHARES-COMMON-PRIOR> 5106216607
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 16010987822
<DIVIDEND-INCOME> 994841429
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (152833981)
<NET-INVESTMENT-INCOME> 842007448
<REALIZED-GAINS-CURRENT> 153951679
<APPREC-INCREASE-CURRENT> 1129893908
<NET-CHANGE-FROM-OPS> 2125853035
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 906679356
<NUMBER-OF-SHARES-REDEEMED> (464177047)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1982267752
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (152833981)
<AVERAGE-NET-ASSETS> 15019853946
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 12876694
<DEBT-CARRYING-VALUE> 9315450
<DEBT-MARKET-VALUE> 9743410
<EQUITIES> 3361
<MORTGAGE> 3618647
<REAL-ESTATE> 102433
<TOTAL-INVEST> 26628256
<CASH> 19686
<RECOVER-REINSURE> 989
<DEFERRED-ACQUISITION> 2479577
<TOTAL-ASSETS> 52974124
<POLICY-LOSSES> 26037036
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 68345
<NOTES-PAYABLE> 0
<COMMON> 3000
0
0
<OTHER-SE> 2862816
<TOTAL-LIABILITY-AND-EQUITY> 52974124
206494
<INVESTMENT-INCOME> 1988389
<INVESTMENT-GAINS> 860
<OTHER-INCOME> 682618
<BENEFITS> 1598123
<UNDERWRITING-AMORTIZATION> 322731
<UNDERWRITING-OTHER> 276596
<INCOME-PRETAX> 680911
<INCOME-TAX> 206664
<INCOME-CONTINUING> 474247
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 474247
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 26387
<PROVISION-CURRENT> 144098
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 143237
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 27248
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
IDS LIFE INSURANCE COMPANY
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors of IDS Life Insurance Company on
behalf of the below listed registrants that previously have filed registration
statements and amendments thereto pursuant to the requirements of the Securities
Act of 1933 and the Investment Company Act of 1940 with the Securities and
Exchange Commission:
<TABLE>
<CAPTION>
<S> <C> <C>
1933 Act 1940 Act
Reg. Number Reg. Number
IDS Life Variable Account 10
IDS Life Flexible Portfolio Annuity 33-62407 811-07355
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Flexible Annuity 33-4173 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Variable Retirement and Combination
Retirement Annuities 2-73114 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Employee Benefit Annuity 33-52518 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Group Variable Annuity Contract 33-47302 811-3217
IDS Life Insurance Company
IDS Life Group Variable Annuity Contract (Fixed Account) 33-48701 N/A
IDS Life Insurance Company
IDS Life Guaranteed Term Annuity 33-28976 N/A
IDS Life Insurance Company
IDS Life Flexible Payment Market Value Annuity 33-50968 N/A
IDS Life Variable Life Separate Account
Flexible Premium Variable Life Insurance Policy 33-11165 811-4298
IDS Life Variable Life Separate Account
Flexible Premium Survivorship Variable Life
Insurance Policy 33-62457 811-4298
IDS Life Variable Life Separate Account
Single Premium Variable Life Insurance Policy 2-97637 811-4298
IDS Life Variable Account for Smith Barney
Single Premium Variable Life Insurance Policy 33-5210 811-4652
IDS Life Account SBS
Symphony Annuity 33-40779 812-7731
IDS Life Account RE
Real Estate Variable Annuity 33-13375 N/A
IDS Life Variable Annuity Fund A 2-29081 811-1653
IDS Life Variable Annuity Fund B 2-47430 811-1674
</TABLE>
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko,
Eileen J. Newhouse, Sherilyn K. Beck, Colin Lancaster, Bruce Kohn and Timothy S.
Meehan or any one of them, as her or his attorney-in-fact and agent, to sign for
her or him in her or his name, place and stead any and all filings, applications
(including applications for exemptive relief), periodic reports, registration
statements for existing or future products of existing separate accounts (with
all exhibits and other documents required or desirable in connection therewith),
other documents, and amendments thereto and to file such filings, applications,
periodic reports, registration statements, other documents, and amendments
thereto with the Securities and Exchange Commission, and any necessary states,
and grants to any or all of them the full power and authority to do and perform
each and every act required or necessary in connection therewith.
Dated the 19th day of August, 1997.
/s/ David R. Hubers August 15, 1997
- ------------------------------------
David R. Hubers
Director
/s/ Richard W. Kling August 18, 1997
-----------------------------------
Richard W. Kling
Director and President
/s/ Paul F. Kolkman August 19, 1997
- ------------------------------------
Paul F. Kolkman
Director and Executive Vice
President
/s/ James A. Mitchell August 15, 1997
- ------------------------------------
James A. Mitchell
Director, Chairman of the
Board and Chief Executive Officer
/s/ Barry J. Murphy August 14, 1997
- ------------------------------------
Barry J. Murphy
Director and Executive Vice
President, Client Service
/s/ Stuart A. Sedlacek August 19, 1997
- ------------------------------------
Stuart A. Sedlacek
Director and Executive Vice
President, Assured Assets
/s/ Melinda S. Urion August 14, 1997
- ------------------------------------
Melinda S. Urion
Director, Executive Vice
President and Controller
IDS LIFE INSURANCE COMPANY
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as principal financial officer and controller,
respectively, of IDS Life Insurance Company on behalf of the below listed
registrants that previously have filed registration statements and amendments
thereto pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 with the Securities and Exchange Commission:
<TABLE>
<CAPTION>
<S> <C> <C>
1933 Act 1940 Act
Reg. Number Reg. Number
IDS Life Variable Account 10
IDS Life Flexible Portfolio Annuity 33-62407 811-07355
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Flexible Annuity 33-4173 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Variable Retirement and Combination
Retirement Annuities 2-73114 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Employee Benefit Annuity 33-52518 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Group Variable Annuity Contract 33-47302 811-3217
IDS Life Insurance Company
IDS Life Group Variable Annuity Contract (Fixed Account) 33-48701 N/A
IDS Life Insurance Company
IDS Life Guaranteed Term Annuity 33-28976 N/A
IDS Life Insurance Company
IDS Life Flexible Payment Market Value Annuity 33-50968 N/A
IDS Life Insurance Company
Portfolio Guaranteed Term Annuity 333-42793 N/A
IDS Life Variable Life Separate Account
Flexible Premium Variable Life Insurance Policy 33-11165 811-4298
IDS Life Variable Life Separate Account
Flexible Premium Survivorship Variable Life
Insurance Policy 33-62457 811-4298
IDS Life Variable Life Separate Account
Single Premium Variable Life Insurance Policy 2-97637 811-4298
IDS Life Variable Account for Smith Barney
Single Premium Variable Life Insurance Policy 33-5210 811-4652
IDS Life Account SBS
Symphony Annuity 33-40779 812-7731
IDS Life Account RE
Real Estate Variable Annuity 33-13375 N/A
IDS Life Variable Annuity Fund A 2-29081 811-1653
IDS Life Variable Annuity Fund B 2-47430 811-1674
</TABLE>
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko,
Eileen J. Newhouse, Sherilyn K. Beck, Colin Lancaster, Bruce Kohn and Timothy S.
Meehan or any one of them, as his attorney-in-fact and agent, to sign for him in
his name, place and stead any and all filings, applications (including
applications for exemptive relief), periodic reports, registration statements
for existing or future products of existing separate accounts (with all exhibits
and other documents required or desirable in connection therewith), other
documents, and amendments thereto and to file such filings, applications,
periodic reports, registration statements, other documents, and amendments
thereto with the Securities and Exchange Commission, and any necessary states,
and grants to any or all of them the full power and authority to do and perform
each and every act required or necessary in connection therewith.
Dated the 9th day of April, 1998.
/s/ Jeffrey S. Horton April 8, 1998
- ------------------------------------
Jeffrey S. Horton
Vice President, Treasurer
and Assistant Secretary
/s/ Philip C. Wentzel April 9, 1998
- ------------------------------------
Philip C. Wentzel
Vice President and Controller