<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 9 (File No. 33-52518) [x]
---------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10 (File No. 811-3217) [x]
---------
(Check appropriate box or boxes)
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) 671-4085
- -------------------------------------------------------------------------------
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:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1999, 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.
<PAGE>
<PAGE>
PROSPECTUS
April 30, 1999
EMPLOYEE BENEFIT ANNUITY
Group flexible premium deferred combination fixed/variable annuity.
IDS LIFE ACCOUNTS F, IZ, JZ, G, H, N, KZ, LZ AND MZ
Issued by: IDS Life Insurance Company (IDS Life)
IDS Tower 10
Minneapolis, MN 55440-0010
Telephone: 800-437-0602
This prospectus contains information that you should know before investing. You
also will receive the IDS Life Retirement Annuity Mutual Funds prospectus.
Please read the prospectuses carefully and keep them for future reference. This
contract is available for salary-reduction plans that meet the requirements of a
section 403(b) of the Internal Revenue Code ("Code").
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THIS CONTRACT IS NOT A DEPOSIT OF A BANK OR FINANCIAL
INSTITUTION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THIS CONTRACT
INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the Securities and Exchange Commission (SEC), and is available without charge by
contacting IDS Life at the telephone number above or by completing and sending
the order form on page 50 of this prospectus. The table of contents of the SAI
is on page 49 of this prospectus.
<PAGE>
TABLE OF CONTENTS
KEY TERMS 3
THE CERTIFICATE IN BRIEF 5
EXPENSE SUMMARY 8
CONDENSED FINANCIAL INFORMATION (UNAUDITED) 10
FINANCIAL STATEMENTS 13
PERFORMANCE INFORMATION 13
THE VARIABLE ACCOUNTS 15
THE FUNDS 17
THE FIXED ACCOUNT 19
BUYING THE CONTRACT AND CERTIFICATE 20
CHARGES 23
VALUING YOUR INVESTMENT 26
MAKING THE MOST OF YOUR CERTIFICATE 28
SURRENDERS 32
TSA-SPECIAL SURRENDER PROVISIONS 34
CHANGING OWNERSHIP 36
BENEFITS IN CASE OF DEATH 37
THE ANNUITY PAYOUT PERIOD 38
TAXES 42
VOTING RIGHTS 45
ABOUT THE SERVICE PROVIDERS 46
YEAR 2000 48
TABLE OF CONTENTS OF THE STATEMENT
OF ADDITIONAL INFORMATION 49
2
<PAGE>
- ----------------------------------
KEY TERMS
THESE TERMS CAN HELP YOU UNDERSTAND DETAILS ABOUT THE
CONTRACT AND CERTIFICATE.
ACCUMULATION UNIT -- A measure of the value of each variable account before
annuity payouts begin.
ANNUITANT -- The person on whose life or life expectancy the annuity payouts are
based.
ANNUITY PAYOUTS -- An amount paid at regular intervals under one of several
plans.
BENEFICIARY -- The person you designate to receive annuity benefits in case of a
participant's death while the contract is in force and before annuity payouts
begin.
CERTIFICATE -- The document we deliver to you that represents your participation
in the contract.
CERTIFICATE VALUE -- The total value of your certificate before we deduct any
applicable charges.
CERTIFICATE YEAR -- A period of 12 months, starting on the effective date of
your certificate and on each anniversary of the effective date.
CLOSE OF BUSINESS -- When the New York Stock Exchange (NYSE) closes, normally 4
p.m.Eastern time.
CONTRACT OWNER (OWNER) -- The person or party entitled to ownership rights
stated in the contract and in whose name the contract is issued.
FIXED ACCOUNT -- An account to which you may allocate purchase payments. Amounts
you allocate to this account earn interest at rates that we declare
periodically.
FUNDS -- Mutual funds and/or portfolios that are investment options under your
certificate, each with a different investment objective. You may allocate
purchase payments into variable accounts investing in shares of any or all of
these funds.
PARTICIPANT (YOU, YOUR) -- The person named in the certificate who has all
rights under the certificate, except as reserved by the owner.
RETIREMENT DATE -- The date when annuity payouts are scheduled to begin.
SURRENDER VALUE -- The amount you are entitled to receive if you make a full
surrender from your certificate. It is the certificate value minus any
applicable charges.
3
<PAGE>
KEY TERMS
VALUATION DATE -- Any normal business day, Monday through Friday, that the NYSE
is open. Each valuation date ends at the close of business. We calculate the
value of each variable account at the close of business on each valuation date.
VARIABLE ACCOUNTS -- Separate accounts to which you may allocate purchase
payments; each invests in shares of one fund. The value of your investment in
each variable account changes with the performance of the particular fund.
4
<PAGE>
- ----------------------------------
THE CERTIFICATE IN BRIEF
PURPOSE: The purpose of the certificate is to allow you to
accumulate money for retirement. You do this by making
one or more investments (purchase payments) that may
earn returns that increase the value of your
certificate. The contract and related certificate
provide lifetime or other forms of annuity payouts
beginning at a specified date (the retirement date). As
in the case of other annuities, it may not be
advantageous for you to purchase this certificate as a
replacement for, or in addition to an existing annuity.
FREE LOOK PERIOD: You may return a certificate to the financial advisor
or to our office within 10 days after it is delivered
and receive a full refund of the certificate value. No
charges will be deducted. However, you bear the
investment risk from the time of purchase until you
return the certificate; the refund amount may be more
or less than the payment made. (Exception: If the law
requires, we will refund all of the purchase payments.)
ACCOUNTS: Currently, you may allocate your purchase payments
among any or all of:
- the variable accounts, each of which invests in a
fund with a particular investment objective. The value
of each variable account varies with the performance
of the particular fund in which it invests. We cannot
guarantee that the value at the retirement date will
equal or exceed the total purchase payments you
allocate to the variable accounts. (p. 15)
- the fixed account, which earns interest at a rate
that we adjust periodically. (p. 19)
5
<PAGE>
THE CERTIFICATE IN BRIEF
BUYING THE CONTRACT AND CERTIFICATE:
A financial advisor will help the owner complete and
submit an application for a contract and help you
complete and submit an enrollment form for the
certificate. Applications and enrollment forms are
subject to acceptance at our office. You must make an
initial lump-sum purchase payment. You have the option
of making additional purchase payments in the future.
The maximum amount of purchase payments is determined
by any restrictions imposed by the Internal Revenue
Code of 1986, as amended (the Code).
- Minimum purchase payment -- ($1,000) unless you pay
in installments under a group billing arrangement such
as a payroll deduction.
- Minimum installment purchase payment -- $25 monthly
or $300 annually.
- Maximum first-year purchase payment(s) -- $50,000 to
$1,000,000 depending on your age.
- Maximum purchase payment for each subsequent year --
$50,000. (p. 21)
TRANSFERS: Subject to certain restrictions, you currently may
redistribute money among accounts without charge at any
time until annuity payouts begin, and once per year
among the variable accounts after annuity payouts
begin. You may establish automated transfers among the
fixed and variable accounts. Fixed account transfers
are subject to special restrictions. (p. 29)
SURRENDERS: You may surrender all or part of your certificate
value at any time before the retirement date subject to
certain restrictions imposed by the Code. Surrenders
may be subject to charges and tax penalties (including
a 10% IRS penalty if you surrender prior to your
reaching age 59 1/2) and may have other tax
consequences. (p. 32)
CHANGING OWNERSHIP: Restrictions apply concerning change of ownership of
rights under a contract or certificate. (p. 36)
BENEFITS IN CASE OF DEATH:
If the participant dies before annuity payouts begin,
we will pay the beneficiary an amount at least equal to
the certificate value. (p. 37)
6
<PAGE>
ANNUITY PAYOUTS: You can apply your certificate value to an annuity
payout plan that begins on the retirement date. You may
choose from a variety of plans to make sure that
payouts continue as long as you like. We can make
payouts on a fixed or variable basis, or both. Total
monthly payouts include amounts from each variable
account and the fixed account. During the annuity
payout period, you cannot be invested in more than five
variable accounts at any one time unless we agree
otherwise. (p. 38)
TAXES: Generally, your certificate value grows tax deferred
until you surrender it or begin to receive payouts.
(Under certain circumstances, IRS penalty taxes may
apply). Even if you direct payouts to someone else, you
will still be taxed on the distribution. (p. 42)
CHARGES:
- $30 annual administrative charge;
- 1.00% mortality and expense risk fee;
- surrender charge;
- any premium taxes that may be imposed on us by state
or local governments (currently, we deduct any
applicable premium tax when you make a total
withdrawal or when annuity payouts begin); and
- the operating expense of the funds.
7
<PAGE>
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EXPENSE SUMMARY
The purpose of this table is to help the owner and participant understand the
various costs and expenses associated with the contract and related
certificates.
There is no sales charge when purchasing the contract or certificate. We show
all direct and indirect costs for the variable accounts and funds below. Some
expenses may vary as we explain under "Charges."
ANNUAL CONTRACT OWNERS EXPENSES:
<TABLE>
<CAPTION>
SURRENDER CHARGE*
(contingent deferred sales charge as a percentage
of amount surrendered)
Certificate years
from
purchase payment Surrender charge
receipt percentage
----------------- ------------------
<S> <C> <C> <C>
1 8%
2 8
3 8
4 8
5 7
6 6
7 5
8 4
9 3
10 2
11 1
12 and later 0
ADMINISTRATIVE CHARGE $30
</TABLE>
ANNUAL VARIABLE ACCOUNT EXPENSES
(as a percentage of average daily net assets of the variable
accounts):
MORTALITY AND EXPENSE RISK FEE 1%
* The surrender charge is further limited so that it will never
exceed 8.5% of aggregate purchase payments made to the
certificate.
8
<PAGE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES OF THE FUNDS
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS):
IDS LIFE IDS LIFE IDS LIFE IDS LIFE IDS LIFE IDS LIFE IDS
AGGRESSIVE CAPITAL GLOBAL GROWTH INCOME INTERNATIONAL LIFE IDS LIFE
GROWTH RESOURCE YIELD DIMENSIONS ADVANTAGE EQUITY MANAGED MONEYSHARE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .59% .59% .83% .61% .62% .83% .59% .50%
Other expenses .09 .07 .13 .06 .09 .15 .04 .06
Total(1) .68% .66% .96% .67% .71% .98% .63% .56%
<CAPTION>
IDS LIFE
SPECIAL
INCOME
<S> <C>
Management fees .60%
Other expenses .07
Total(1) .67%
</TABLE>
(1) Annualized operating expenses of underlying funds at Dec. 31, 1998
<TABLE>
<CAPTION>
EXAMPLE:* IDS LIFE IDS LIFE IDS LIFE IDS LIFE IDS LIFE IDS LIFE IDS LIFE
AGGRESSIVE CAPITAL GLOBAL GROWTH INCOME INTERNATIONAL IDS LIFE IDS LIFE SPECIAL
GROWTH RESOURCE YIELD DIMENSIONS ADVANTAGE EQUITY MANAGED MONEYSHARE INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and full surrender at the end of each
time period:
1 Year $101.15 $100.96 $103.79 $101.06 $101.44 $103.98 $100.68 $100.02 $101.06
3 Years 145.47 144.90 153.43 145.18 146.33 154.00 144.04 142.04 145.18
5 Years 180.94 179.97 194.43 180.46 182.39 195.39 178.51 175.11 180.46
10 Years 242.31 240.20 271.41 241.26 245.47 273.46 237.03 229.59 241.26
You would pay the following expenses on the same investment assuming no surrender or selection of an annuity payout plan at the
end of each time period:
1 Year $ 18.64 $ 18.44 $ 21.51 $ 18.54 $ 18.95 $ 21.72 $ 18.13 $ 17.41 $ 18.54
3 Years 57.71 57.08 66.40 57.39 58.64 67.02 56.15 53.97 57.39
5 Years 99.26 98.20 113.88 98.73 100.83 114.92 96.63 92.94 98.73
10 Years 215.08 212.92 244.93 214.00 218.32 247.03 209.66 202.03 214.00
</TABLE>
* In this example, the $30 contract administrative charge is approximated as a
0.139% charge based on our average certificate size. Premium taxes imposed by
some state and local governments are not reflected in this table.
YOU SHOULD NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
9
<PAGE>
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CONDENSED FINANCIAL INFORMATION (UNAUDITED)
The following tables give per-unit information about the financial history of
each account.
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACCOUNT JZ(1) (INVESTING IN SHARES OF IDS LIFE AGGRESSIVE GROWTH FUND)
Accumulation $1.88 $1.68 $1.46 $1.12 $1.21 $1.08 $1.00 -- -- --
unit
value at
beginning
of period
Accumulation $1.91 $1.88 $1.68 $1.46 $1.12 $1.21 $1.08 -- -- --
unit value
at end of
period
Number of 1,087,314 1,168,829 1,172,793 1,007,976 780,423 347,336 115,574 -- -- --
accumulation
units
outstanding at
end of period
(000 omitted)
Ratio of 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% -- -- --
operating
expense to
average net
assets
ACCOUNT F (INVESTING IN SHARES OF IDS LIFE CAPITAL RESOURCE FUND)
Accumulation $8.21 $6.67 $6.25 $4.94 $4.93 $4.82 $4.67 $3.22 $3.23 $2.57
unit
value at
beginning
of period
Accumulation $10.09 $8.21 $6.67 $6.25 $4.94 $4.93 $4.82 $4.67 $3.22 $3.23
unit value
at end of
period
Number of 507,310 556,866 628,555 641,903 576,724 488,632 402,977 309,984 242,767 204,645
accumulation
units
outstanding at
end
of period (000
omitted)
Ratio of 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
operating
expense to
average
net assets
ACCOUNT KZ(2) (INVESTING IN SHARES OF IDS LIFE GLOBAL YIELD FUND)
Accumulation $1.10 $1.07 $1.00 -- -- -- -- -- -- --
unit
value at
beginning
of period
Accumulation $1.18 $1.10 $1.07 -- -- -- -- -- -- --
unit value
at end of
period
Number of 78,150 65,609 24,878 -- -- -- -- -- -- --
accumulation
units
outstanding at
end
of period (000
omitted)
Ratio of 1.00% 1.00% 1.00% -- -- -- -- -- -- --
operating
expense to
average
net assets
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACCOUNT MZ(2) (INVESTING IN SHARES OF IDS LIFE GROWTH DIMENSIONS FUND)
Accumulation $1.37 $1.11 $1.00 -- -- -- -- -- -- --
unit
value at
beginning
of period
Accumulation $1.74 $1.37 $1.11 -- -- -- -- -- -- --
unit value
at end of
period
Number of 1,001,826 831,259 350,598 -- -- -- -- -- -- --
accumulation
units
outstanding at
end
of period (000
omitted)
Ratio of 1.00% 1.00% 1.00% -- -- -- -- -- -- --
operating
expense to
average
net assets
ACCOUNT LZ(2) (INVESTING IN SHARES OF IDS LIFE INCOME ADVANTAGE FUND)
Accumulation $1.18 $1.05 $1.00 -- -- -- -- -- -- --
unit
value at
beginning
of period
Accumulation $1.12 $1.18 $1.05 -- -- -- -- -- -- --
unit value
at end of
period
Number of 228,165 175,024 59,939 -- -- -- -- -- -- --
accumulation
units
outstanding at
end
of period (000
omitted)
Ratio of 1.00% 1.00% 1.00% -- -- -- -- -- -- --
operating
expense to
average
net assets
ACCOUNT IZ(1) (INVESTING IN SHARES OF IDS LIFE INTERNATIONAL EQUITY FUND)
Accumulation $1.52 $1.49 $1.38 $1.25 $1.29 $0.98 $1.00 -- -- --
unit
value at
beginning
of period
Accumulation $1.74 $1.52 $1.49 $1.38 $1.25 $1.29 $0.98 -- -- --
unit value
at end of
period
Number of 1,042,405 1,168,353 1,220,486 1,088,874 913,364 405,536 69,874 -- -- --
accumulation
units
outstanding at
end
of period (000
omitted)
Ratio of 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% -- -- --
operating
expense to
average
net assets
</TABLE>
11
<PAGE>
CONDENSED FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ACCOUNT N (INVESTING IN SHARES OF IDS LIFE MANAGED FUND)
Accumulation $3.51 $2.97 $2.56 $2.09 $2.21 $1.98 $1.86 $1.45 $1.42 $1.14
unit
value at
beginning
of period
Accumulation $4.03 $3.51 $2.97 $2.56 $2.09 $2.21 $1.98 $1.86 $1.45 $1.42
unit value
at end of
period
Number of 1,100,357 1,178,735 1,197,162 1,212,021 1,127,834 910,254 650,797 496,554 400,961 331,315
accumulation
units
outstanding at
end
of period (000
omitted)
Ratio of 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
operating
expense to
average
net assets
ACCOUNT H (INVESTING IN SHARES OF IDS LIFE MONEYSHARE FUND)
Accumulation $2.46 $2.36 $2.27 $2.18 $2.12 $2.09 $2.04 $1.95 $1.82 $1.69
unit
value at
beginning
of period
Accumulation $2.56 $2.46 $2.36 $2.27 $2.18 $2.12 $2.09 $2.04 $1.95 $1.82
unit value
at end of
period
Number of 98,897 87,255 89,644 102,568 84,475 74,935 102,277 126,489 139,005 108,690
accumulation
units
outstanding at
end
of period (000
omitted)
Ratio of 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
operating
expense to
average
net assets
Simple 3.70% 4.06% 3.73% 3.97% 4.12% (1.56)% 1.67% 3.26% 6.25% 6.81%
yield(3)
Compound 3.77% 4.14% 3.80% 4.04% 4.21% (1.55)% 1.69% 3.31% 6.44% 7.04%
yield(3)
ACCOUNT G (INVESTING IN SHARES OF IDS LIFE SPECIAL INCOME FUND)
Accumulation $5.25 $4.86 $4.59 $3.80 $3.99 $3.48 $3.21 $2.76 $2.67 $2.48
unit
value at
beginning
of period
Accumulation $5.27 $5.25 $4.86 $4.59 $3.80 $3.99 $3.48 $3.21 $2.76 $2.67
unit value
at end of
period
Number of 287,881 316,789 362,167 393,697 361,640 405,429 330,000 270,858 236,926 222,248
accumulation
units
outstanding at
end
of period (000
omitted)
Ratio of 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
operating
expense to
average
net assets
</TABLE>
(1) Accounts IZ and JZ commenced operations on Jan. 13, 1992.
(2) Accounts KZ, LZ and MZ commenced operations on April 30, 1996.
(3) Net of annual contract administrative charge and mortality and expense risk
fee.
12
<PAGE>
- ----------------------------------
FINANCIAL STATEMENTS
You can find our audited financial statements and the audited financial
statements of the variable accounts in the SAI.
PERFORMANCE INFORMATION
- --------------------------------------------------------
Performance information for the variable accounts may appear from time to time
in advertisements or sales literature. This information reflects the performance
of a hypothetical investment in a particular variable account during a specified
time period. Although we base performance figures on historical earnings, past
performance does not guarantee future results.
We include non-recurring charges (such as surrender charges) in total return
figures, but not in yield quotations. Excluding non-recurring charges in yield
calculations increases the reported value.
Total return figures reflect deduction of all applicable charges, including:
- -the administrative charge,
- -mortality and expense risk fee, and
- -surrender charge (assuming a surrender at the end of the illustrated period).
We also may make optional total return quotations that do not reflect a
surrender charge deduction (assuming no surrender). Total return quotations may
be shown by means of schedules, charts or graphs.
AVERAGE ANNUAL TOTAL RETURN is the average annual compounded rate of return of
the investment over a period of one, five and 10 years (or up to the life of the
variable account if it is less than ten years old).
CUMULATIVE TOTAL RETURN is the cumulative change in the value of an investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return will be higher than average annual total
return because it is not averaged.
13
<PAGE>
- ----------------------------------
PERFORMANCE INFORMATION
ANNUALIZED SIMPLE YIELD (FOR VARIABLE ACCOUNTS INVESTING IN MONEY MARKET FUNDS)
"annualizes" the income generated by the investment over a given seven-day
period. That is, we assume the amount of income generated by the investment
during the period will be generated each seven-day period for a year. We show
this as a percentage of the investment.
ANNUALIZED COMPOUND YIELD (FOR VARIABLE ACCOUNTS INVESTING IN MONEY MARKET
FUNDS) is calculated like simple yield except that we assume the income is
reinvested when we annualize it. Compound yield will be higher than the simple
yield because of the compounding effect of the assumed reinvestment.
ANNUALIZED YIELD (FOR VARIABLE ACCOUNTS INVESTING IN INCOME FUNDS) divides the
net investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage.
You should consider performance information in light of the investment
objectives, policies, characteristics and quality of the fund in which the
variable account invests and the market conditions during the specified time
period. Advertised yields and total return figures include charges that reduce
advertised performance. Therefore, you should not compare variable account
performance 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
total return and yield.)
If you would like additional information about actual performance, please
contact your financial advisor.
14
<PAGE>
- ----------------------------------
THE VARIABLE ACCOUNTS
You may allocate payments to any or all the variable accounts that invest in
shares of the following funds:
<TABLE>
<CAPTION>
IDS LIFE ACCOUNT ESTABLISHED
<S> <C> <C>
IDS Life Aggressive Growth Fund JZ Sept. 20, 1991
IDS Life Capital Resource Fund F May 13, 1981
IDS Life Global Yield Fund KZ April 2, 1996
IDS Life Growth Dimensions Fund MZ April 2, 1996
IDS Life Income Advantage Fund LZ April 2, 1996
IDS Life International Equity Fund IZ Sept. 20, 1991
IDS Life Managed Fund N April 17, 1985
IDS Life Moneyshare Fund H May 13, 1981
IDS Life Special Income Fund G May 13, 1981
</TABLE>
Each variable account meets the definition of a separate account under federal
securities laws. We credit or charge income, capital gains and capital losses of
each variable account only to that variable account. State insurance law
prohibits us from charging a variable account with liabilities of any other
variable 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 contracts that we issue that are not described in this prospectus.
The U.S. Treasury and the Internal Revenue Service (IRS) indicated that they may
provide additional guidance on investment control. This concerns how many
variable accounts an insurance company may offer and how many exchanges among
variable accounts it may allow before the participant would be currently taxed
on income earned within variable account assets. At this time, we do not know
what the additional guidance will be or when action will be taken. We reserve
the right to modify the contract/certificate, as necessary, to ensure that the
participant 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/
certificate continues to qualify as an annuity for federal income tax purposes.
We reserve the right to modify the contract/certificate as necessary to comply
with any new tax laws.
15
<PAGE>
THE VARIABLE ACCOUNTS
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. All obligations
arising under the contracts are general obligations of IDS Life.
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<PAGE>
- ----------------------------------
THE FUNDS
IDS LIFE AGGRESSIVE GROWTH FUND
Objective: capital appreciation. Invests primarily in common stocks of small-and
medium-size companies.
IDS LIFE CAPITAL RESOURCE FUND
Objective: capital appreciation. Invests primarily in U.S. common stocks.
IDS LIFE GLOBAL YIELD FUND
Objective: high total return through income and growth of capital. Invests
primarily in debt securities of U.S. and foreign issuers.
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 INCOME ADVANTAGE FUND
Objective: high current income, with capital growth as a secondary objective.
Invests primarily in long-term, high-yielding, high-risk debt securities below
investment grade issued by U.S. and foreign corporations.
IDS LIFE INTERNATIONAL EQUITY FUND
Objective: capital appreciation. Invests primarily in common stock of foreign
issuers.
IDS LIFE MANAGED FUND
Objective: maximum total investment return through a combination of capital
growth and current income. Invests primarily in stocks, convertible securities,
bonds and money market instruments.
IDS LIFE MONEYSHARE FUND
Objective: maximum current income consistent with liquidity and conservation of
capital. Invests in money market securities.
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
investment-grade bonds.
The investment objectives and policies of some of the funds are similar to the
investment objectives
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<PAGE>
THE FUNDS
and policies of other mutual funds that the investment advisor or its affiliates
manage. Although the objectives and policies may be similar, each fund will have
its own portfolio holdings and its own fees and expenses. Accordingly, each fund
will have its own investment results.
The IRS issued final regulations relating to the diversification requirements
under Section 817(h) of the Internal Revenue Code of 1986, as amended (the
Code). Each fund intends to comply with these requirements.
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 advisor cannot guarantee
that the funds will meet their investment objectives. Please read the funds'
prospectus for facts you should know before investing. This prospectus is
available by contacting us at the address or telephone number on page 1 of this
prospectus, or from your financial advisor.
18
<PAGE>
- ----------------------------------
THE FIXED ACCOUNT
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest to the account. Purchase
payments and transfers to the fixed account become part of our general account.
We credit interest daily and compound it annually. We will change the interest
rates from time to time at our discretion.
Interests in the fixed account are not required to be registered with the SEC.
The SEC staff does not review the disclosures in this prospectus on the fixed
account. Disclosures regarding the fixed account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. (See
"Making the Most of Your Certificate -- Transfer policies" for restrictions on
transfers involving the fixed account.)
19
<PAGE>
- ----------------------------------
BUYING THE CONTRACT AND CERTIFICATE
A financial advisor will help the owner prepare and submit an application. The
financial advisor will also help each participant prepare and submit an
enrollment form. These forms will be sent to our office. Unless otherwise
provided in the contract, the owner has all rights under the contract. Your
interest under the contract, as evidenced by your certificate, is subject to the
terms of the owner's contract.
When you enroll in the certificate, you may select:
- -the accounts in which you want to invest;
- -the date you want to start receiving annuity payouts (the retirement date); and
- -a beneficiary.
The owner selects the frequency with which to make purchase payments.
If the application and enrollment forms are complete, we will process them
within two business days after we receive them at our office. If we accept the
application, we will send the owner a contract. If we accept your enrollment
form, we will send you a certificate. If we cannot accept an application or
enrollment form within five business days, we will decline it and return any
payment. We will credit additional purchase payments to the accounts on the
valuation date we receive them. We will value additional payments at the next
accumulation unit value calculated after we receive payment at our office.
THE RETIREMENT DATE
Annuity payouts are scheduled to begin on the retirement date. When we process
your application, we will establish the retirement date to the maximum age or
date described below. You can also select a date within the maximum limits. You
can align this date with your actual retirement from a job, or it can be a
different future date, depending on your needs and goals and on certain
restrictions. You also can change the date, provided you send us written
instructions at least 30 days before annuity payouts begin.
TO AVOID IRS PENALTY TAXES, the retirement date generally must be:
- -on or after the date you reach age 59 1/2; and
- -by April 1 of the year following the calendar year when the annuitant reaches
age 70 1/2 or, if later, retires (except that 5% business owners may not
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<PAGE>
select a retirement date that is later than April 1 of the year following the
calendar year when they reach age 70 1/2).
If you take the minimum 403(b) plan distributions as required by the Code from
another tax-qualified investment, or in the form of partial surrenders under the
certificate, retirement payments can start as late as your 85th birthday or the
10th contract anniversary, if later.
Certain restrictions on retirement dates apply to participants in the Texas
Optional Retirement Program, should the Employee Benefit Annuity be available in
the program. (See "Special surrender provisions.")
BENEFICIARY
If death benefits become payable before the retirement date (while the
certificate is in force and before annuity payouts begin), we will pay your
named beneficiary all or part of the certificate value. If there is no named
beneficiary, then your estate will be the beneficiary. (See "Benefits in case of
death" for more about beneficiaries.)
PURCHASE PAYMENT AMOUNTS
MINIMUM PURCHASE PAYMENTS: $25 monthly
Installments must total at least $300 per year.*
* If no purchase payments have been made on a participant's behalf for 24 months
and previous payments total $600 or less, we have the right to pay the
participant the total value of the certificate in a lump sum. This right does
not apply to contracts sold to New Jersey residents.
MINIMUM LUMP SUM PURCHASE PAYMENT
Initial purchase payment: $1,000
- -Minimum additional purchase payments: $50
MAXIMUM FIRST-YEAR PURCHASE PAYMENTS:
This maximum is based on the participant's age on the effective date of the
certificate.
<TABLE>
<S> <C> <C> <C>
Up to age $1
75 million
76 to 85 $500,000
86 to 90 $50,000
</TABLE>
- -Maximum purchase payment for each subsequent year**: $50,000
**These limits apply in total to all IDS Life annuities and certificates you
own. We reserve the right to increase maximum limits or reduce age limits.
The Code's limits on annual contribution also apply.
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<PAGE>
BUYING THE CONTRACT AND CERTIFICATE
HOW TO MAKE PURCHASE PAYMENTS
BY SCHEDULED PAYMENT PLAN:
A financial advisor can help the owner set up an automatic salary reduction
arrangement.
22
<PAGE>
- ----------------------------------
CHARGES
ADMINISTRATIVE CHARGE
We charge this fee for establishing and maintaining records for each certificate
under the contract. We deduct $30 from the certificate value at the end of each
certificate year. We prorate this charge among the variable accounts and the
fixed account in the same proportion your interest in each account bears to your
total certificate value. If you surrender a certificate, we will deduct the
annual charge at the time of surrender. We cannot increase the annual
administrative charge and it does not apply after annuity payouts begin or when
we pay death benefits.
MORTALITY AND EXPENSE RISK FEE
This fee is to cover the mortality risk and expense risk. We charge this fee
daily to your variable accounts. The unit values of your variable accounts
reflect this fee and it totals 1% of the variable accounts' average daily net
assets on an annual basis. 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.
Mortality risk arises because of our guarantee to pay a death benefit and our
guarantee to make annuity payouts according to the terms of the contract, no
matter how long a specific annuitant lives and no matter how long our entire
group of annuitants live. If, as a group, annuitants outlive the life expectancy
we assumed in our actuarial tables, then we must take money from our general
assets to meet our obligations. If, as a group, annuitants do not live as long
as expected, we could profit from the mortality risk fee.
Expense risk arises because we cannot increase the administrative charge and
this charge may not cover our expenses. We would have to make up any deficit
from our general assets.
The variable accounts pay us the mortality and expense risk fee they accrued as
follows:
- -first, to the extent possible, the variable accounts pay this fee from any
dividends distributed from the funds in which they invest;
- -then, if necessary, the funds redeem shares to cover any remaining fees
payable.
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CHARGES
We may use any profits we realize from the variable accounts' payment to us of
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 surrender charge, discussed in the following paragraphs, will cover sales
and distribution expenses.
SURRENDER CHARGE
If part or all of a certificate is surrendered within the first 11 certificate
years, the following surrender charge applies:
<TABLE>
<CAPTION>
Surrender charge as
Certificate percentage of
year amount surrendered
- ------------- ------------------------
<S> <C>
1 8%
2 8
3 8
4 8
5 7
6 6
7 5
8 4
9 3
10 2
11 1
12 and later 0
</TABLE>
The surrender charge is further limited so that it will never exceed 8.5% of
aggregate purchase payments made to the certificate. We reserve the right to
reduce or eliminate the surrender charge.
For a partial surrender that is subject to a surrender charge, the amount we
actually surrender from your certificate will be the amount you request plus any
applicable surrender charge. We apply the surrender charge to this total amount.
We pay you the amount you requested. We reserve the right to reduce or eliminate
the surrender charge. If you make a full surrender of your certificate, we also
will deduct the $30 administrative charge.
EXAMPLE OF SURRENDER CHARGE:
Owner requests a $1,000 partial surrender and the surrender charge is 5%:
<TABLE>
<S> <C>
$1000/(1.00-.05) = $1,052.63
Total amount surrendered......... $1,052.63
X 0.05
---------
Total surrender charge........... $ 52.63
</TABLE>
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<PAGE>
NO SURRENDER CHARGE: There is no surrender charge on amounts surrendered:
- -after the 11th certificate year;
- -due to a participant's retirement under the plan on or after age 55;
- -due to the death of the participant; or
- -upon settlement of the certificate under an annuity payout plan
POSSIBLE GROUP REDUCTIONS: In some cases we may incur lower sales and
administrative expenses due to the size of the group, the average contribution
and the use of group enrollment procedures. In such cases, we may be able to
reduce or eliminate the administrative and surrender charges. However, we expect
this to occur infrequently.
PREMIUM TAXES
Certain state and local governments may impose premium taxes (up to 3.5%). We
may make a charge against the certificate value for any state premium taxes to
the extent the taxes are payable.
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<PAGE>
- ----------------------------------
VALUING YOUR INVESTMENT
We value your accounts as follows:
FIXED ACCOUNT: We value the amounts you allocated to the fixed account directly
in dollars. The fixed account value equals:
- -the sum of your purchase payments and transfer amounts allocated to the fixed
account;
- -plus interest credited;
- -minus the sum of amounts surrendered (including and applicable surrender
charges) and amounts transferred out; and
- -minus any prorated administrative charge
VARIABLE ACCOUNTS: We convert amounts you allocated to the variable accounts
into accumulation units. Each time you make a purchase payment or transfer
amounts into one of the variable accounts, we credit a certain number of
accumulation units to your certificate for that account. Conversely, each time
you take a partial surrender, transfer amounts out of a variable account or we
assess an administrative charge, we subtract a certain number of accumulation
units from your certificate.
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 fund in which the account invests.
The dollar value of each accumulation unit can rise or fall daily depending on
the variable account expenses, performance of the fund and on certain fund
expenses. Here is how we calculate accumulation unit values:
NUMBER OF UNITS
To calculate the number of accumulation units for a particular account, we
divide your investment, after deduction of any premium taxes, 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.
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<PAGE>
NET INVESTMENT FACTOR
We determine the net investment factor by:
- -adding the fund's current net asset value per share, plus the per share amount
of any accrued income or capital gain dividends to obtain a current adjusted
net asset value per share; then
- -dividing that sum by the previous adjusted net asset value per share; and
- -subtracting the percentage factor representing the mortality and expense risk
fee from the result.
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a variable
account.
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 you own may fluctuate due to:
- -additional purchase payments you allocate to the variable accounts;
- -transfers into or out of the variable accounts;
- -partial surrenders;
- -surrender charges; and/or
- -prorated portions of the administrative charge.
Accumulation unit values will fluctuate due to:
- -changes in funds' net asset value;
- -dividends distributed to the variable accounts;
- -capital gains or losses of funds;
- -fund operating expenses; and/or
- -mortality and expense risk fees.
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<PAGE>
- ----------------------------------
MAKING THE MOST OF YOUR CERTIFICATE
AUTOMATED DOLLAR-COST AVERAGING
Currently, you can use automated transfers to take advantage of dollar-cost
averaging (investing a fixed amount at regular intervals). For example, you
might transfer a set amount monthly from a relatively conservative variable
account to a more aggressive one, or to several others, or from the fixed
account to one or more variable accounts. There is no charge for dollar-cost
averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market values of the funds. Since you
invest the same amount each period, you automatically acquire more units when
the market value falls and fewer units when it rises. The potential effect is to
lower your average cost per unit.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOW DOLLAR-COST AVERAGING WORKS
<CAPTION>
AMOUNT ACCUMULATION NUMBER OF
MONTH INVESTED UNIT VALUE UNITS PURCHASED
<S> <C> <C> <C>
Jan $100 $20 5.00
Feb 100 18 5.56
Mar 100 17 5.88
Apr 100 15 6.67
May 100 16 6.25
Jun 100 18 5.56
Jul 100 17 5.88
Aug 100 19 5.26
Sept 100 21 4.76
Oct 100 20 5.00
</TABLE>
You paid an average price of only $17.91 per unit over the 10 months, while the
average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any variable account will gain in
value nor will it protect against a decline in value if market prices fall.
Because dollar-cost averaging involves continuous investing, your success with
this strategy will depend upon your willingness to continue to invest regularly
through periods of low price levels. Dollar-cost averaging can be an effective
way to help meet your long-term goals. For specific features contact your
financial advisor.
By investing an
equal number of
dollars each month...
you automatically -->
buy more units when
the per unit market
price is low...
and fewer units -->
when the per unit
market price is high.
28
<PAGE>
TRANSFERRING MONEY BETWEEN ACCOUNTS
You may transfer money from any one variable account, or the fixed account, to
another account before annuity payouts begin. (Certain restrictions apply to
transfers involving the fixed account.) We will process your transfer on the
valuation date we receive your request. We will value your transfer at the next
accumulation unit value calculated after we receive your request. There is no
charge for transfers. Before making a transfer, you should consider the risks
involved in switching investments.
We may suspend or modify transfer privileges at any time.
TRANSFER POLICIES
- -You may transfer certificate values between the variable accounts, or from the
variable accounts to the fixed account at any time. However, if you made a
transfer from the fixed account to the variable accounts, you may not make a
transfer from any variable account back to the fixed account until the next
eligible transfer period (if any) as defined in the plan, or until the next
certificate anniversary.
- -You may transfer certificate values from the fixed account to the variable
accounts once per certificate year (except for automated transfers, which can
be set up for certain transfer periods subject to certain minimums).
- -Once annuity payouts begin, you may not make transfers to or from the fixed
account, but you may make transfers once per certificate year among the
variable accounts.
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<PAGE>
MAKING THE MOST OF YOUR CERTIFICATE
HOW TO REQUEST A TRANSFER OR SURRENDER
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------
Send your name, certificate number, Social
1 Security number or Taxpayer Identification
BY LETTER number and signed request for a transfer or
surrender to:
REGULAR MAIL:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
EXPRESS MAIL:
IDS Life Insurance Company
733 Marquette Avenue
Minneapolis, MN 55402
MINIMUM AMOUNT
Transfers or $250 or entire account
surrenders: balance
MAXIMUM AMOUNT
Transfers or Certificate value
surrenders:
- -------------------------------------------------------------
Your financial advisor can help you set up
2 automated transfers among your variable
BY AUTOMATED accounts or fixed account.
TRANSFERS
</TABLE>
You can start or stop this service by written request or other method acceptable
to us. You must allow 30 days for us to change any instructions that are
currently in place.
- -Automated transfers from the fixed account to the variable accounts may not
exceed an amount that, if continued, would deplete the fixed account within 12
months.
- -Automated transfers are subject to all of the contract provisions and terms,
including transfer of certificate values between accounts.
<TABLE>
<S> <C> <C>
MINIMUM AMOUNT
Transfers: $50
</TABLE>
30
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------
For salary reduction plans only.
3
BY PHONE
Call between 7 a.m. and 6 p.m. Central
time:
1-800-437-0602 (toll free)
TTY service for the hearing impaired:
1-800-285-8846 (toll free)
MINIMUM AMOUNT
Transfers or $250 or entire account
surrenders: balance
MAXIMUM AMOUNT
Transfers: Certificate value
Surrenders: $50,000
</TABLE>
We answer telephone requests promptly, but you may experience delays when the
call volume is unusually high. If you are unable to get through, use the mail
procedure as an alternative.
We will honor any telephone transfer or surrender requests that we believe are
authentic and we will use reasonable procedures to confirm that they are. This
includes asking identifying questions and tape recording calls. We will not
allow a telephone surrender within 30 days of a phoned-in address change. As
long as we follow the procedures, we (and our affiliates) will not be liable for
any loss resulting from fraudulent requests.
Telephone transfers or surrenders are automatically available. You may request
that telephone transfers or surrenders NOT be authorized from your account by
writing to us.
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<PAGE>
- ----------------------------------
SURRENDERS
Subject to certain restrictions imposed by the Code, you may surrender all or
part of your certificate at any time before annuity payouts begin by sending us
a written request or calling us. We will process your surrender request on the
valuation date we receive it. For total surrenders we will compute the value of
the certificate at the next accumulation unit value calculated after we receive
your request. We may ask you to return the certificate. You may have to pay
surrender charges (see "Charges") and IRS taxes and penalties (see "Taxes"). You
cannot make surrenders after annuity payouts begin.
SURRENDER POLICIES
If you have a balance in more than one account and you request a partial
surrender, we will withdraw money from all of your variable accounts and/or the
fixed account in the same proportion as your value in each account correlates to
the total certificate value, unless requested otherwise.
RECEIVING PAYMENT
By regular or express mail:
- -payable to you;
- -mailed to address of record.
NOTE: We will charge you a fee if you request express mail delivery.
By wire:
- -request that payment be wired to your bank;
- -bank account must be in the same ownership as your contract; and
- -pre-authorization required.
For instructions, contact your financial advisor.
Normally, we will send the payment within seven days after receiving your
request. However, we may postpone the payment if:
- -- the surrender 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;
32
<PAGE>
- -- an emergency, as defined by SEC rules, makes it impractical to sell
securities or value the net assets of the accounts; or
- -- the SEC permits us to delay payment for the protection of security holders.
33
<PAGE>
- ----------------------------------
TSA SPECIAL SURRENDER PROVISIONS
PARTICIPANTS IN TAX-SHELTERED ANNUITIES: The Code imposes certain restrictions
on your right to receive early distributions from a TSA:
- -Distributions attributable to salary reduction contributions (plus earnings)
made after Dec. 31, 1988, or to transfers or rollovers from other contracts,
may be made from the TSA only if:
- -- you are at least age 59 1/2;
- -- you are disabled as defined in the Code;
- -- you separated from the service of the employer who purchased the contract; or
- -- the distribution is because of your death.
- -If you encounter a financial hardship (as defined by the Code), you may receive
a distribution of all certificate values attributable to salary reduction
contributions made after Dec. 31, 1988, but not the earnings on them.
- -Even though a distribution may be permitted under the above rules, it may be
subject to IRS taxes and penalties (see "Taxes").
- -The employer must comply with certain nondiscrimination requirements for
certain types of contributions under a TSA contract to be excluded from taxable
income. You should consult your employer to determine whether the
nondiscrimination rules apply to you.
- -The above restrictions on distributions do not affect the availability of the
amount transferred or rolled over to the certificate as of Dec. 31, 1988. The
restrictions also do not apply to transfers or exchanges of certificate values
within the certificate, or to another registered variable annuity contract or
investment vehicle available through the employer.
- -If the contract/certificate has a loan provision, the right to receive a loan
from your fixed account is described in detail in your contract/certificate.
You may borrow from the certificate value allocated to the fixed account.
34
<PAGE>
PARTICIPANTS IN THE TEXAS OPTIONAL RETIREMENT PROGRAM: You cannot receive
distributions before retirement unless you become totally disabled or end your
employment at a Texas college or university. This restriction affects your right
to:
- -surrender all or part of your certificate at any time; and
- -move up your retirement date.
If you are in the program for only one year, the portion of the purchase
payments made by the state of Texas will be refunded to the state with no
surrender charge. These restrictions are based on an opinion of the Texas
Attorney General interpreting Texas law.
35
<PAGE>
- ----------------------------------
CHANGING OWNERSHIP
The contract and related certificates cannot 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 other than
us. Your vested rights under the certificate are nonforfeitable.
36
<PAGE>
- ----------------------------------
BENEFITS IN CASE OF DEATH
If you die before annuity payouts begin while this contract is in force, we will
pay your beneficiary as follows:
If death occurs before the annuitant's 75th birthday, the beneficiary receives
the greater of:
- -the certificate value; or
- -purchase payments made to the certificate, minus any surrenders.
If death occurs on or after the annuitant's 75th birthday, the beneficiary
receives the certificate value.
IF YOUR SPOUSE IS SOLE BENEFICIARY and you die before the retirement date, your
spouse may keep the certificate in force. To do this your spouse must, within 60
days after we receive proof of death, give us written instructions to keep the
certificate in force. If you die before the retirement date, your spouse may
keep the certificate in force until the date on which you would have reached age
70 1/2 or any other date permitted by the Code.
PAYMENTS: Under a nonqualified annuity we will pay the beneficiary in a single
sum unless you give us other written instructions. We must fully distribute the
death benefit within five years of your death. However, the beneficiary may
receive payouts under any annuity payout plan available under this contract if:
- -the beneficiary asks us in writing within 60 days after we receive proof of
death; and
- -payouts begin no later than one year after your death, or other date as
permitted by the Code; and
- -the payout period does not extend beyond the beneficiary's life or life
expectancy.
When paying the beneficiary, we will process the death claim on the valuation
date that our death claim requirements are fulfilled. We will determine the
contract's value at the next accumulation unit value calculated after our claim
requirements are fulfilled. We will pay interest, if any, from the date of death
at a rate no less than required by law. We will mail payment to the beneficiary
within seven days after our death claim requirements are fulfilled. (see
"Taxes").
37
<PAGE>
- ----------------------------------
THE ANNUITY PAYOUT PERIOD
As the participant, you have the right to decide how and to whom annuity payouts
will be made starting at the retirement date. You may select one of the annuity
payout plans outlined below, or we may mutually agree on other payout
arrangements.
The amount available to purchase payouts under the plan you select is the
certificate value on the retirement date (less any applicable premium tax). We
do not deduct any surrender charges under the payout plans listed below.
The contract and related certificates allow you to determine whether we will
make payouts on a fixed or variable basis, or a combination of fixed and
variable. You may reallocate this certificate value to the fixed account to
provide fixed dollar payouts and/or among the variable accounts to provide
variable annuity payouts. During the annuity payout period, you cannot invest in
more than five accounts at any one time unless we agree otherwise. Amounts of
fixed and variable payouts depend on:
- -the annuity payout plan you select;
- -your age;
- -the annuity table in the contract and related certificates; and
- -the amounts allocated to the accounts at settlement on the retirement date.
In addition, for variable payouts only, amounts depend on the investment
performance of the accounts selected.
These payouts will vary from month to month because the performance of the funds
will fluctuate. (In the case of fixed annuities, payouts remain the same from
month to month.) For information with respect to transfers between accounts
after annuity payouts begin, see "Making the Most of Your Certificate --
Transfer policies."
ANNUITY TABLE
The annuity table in your certificate shows the amount of the first monthly
payment for each $1,000 of certificate value according to the age and, when
applicable, the sex of the annuitant. (Where required by law, we will use a
unisex table of settlement rates.) The table assumes that the certificate value
is invested at the beginning of the annuity payout period and earns a 5% rate of
return, which is reinvested and helps to support future payouts.
38
<PAGE>
SUBSTITUTION OF 3.5% TABLE
If you ask us at least 30 days before the retirement date, we will substitute an
annuity table based on an assumed 3.5% investment rate for the 5% table in the
certificate. The assumed investment rate affects both the amount of the first
payout and the extent to which subsequent payouts increase or decrease. Using
the 5% table results in a higher initial payment, but later payouts will
increase more slowly when annuity unit values rise and decrease more rapidly
when they decline.
39
<PAGE>
THE ANNUITY PAYOUT PERIOD
ANNUITY PAYOUT PLANS
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before contract values are used to purchase the
payout plan:
- -PLAN A -- LIFE ANNUITY - NO REFUND: We make monthly payouts until the
annuitant's death. Payouts end with the last payout before the annuitant's
death. We will not make any further payouts. This means that if the annuitant
dies after we have made only one monthly payout, we will not make any more
payouts.
- -PLAN B -- LIFE ANNUITY WITH FIVE, 10 OR 15 YEARS CERTAIN: We make monthly
payouts 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 expires. We calculate the
guaranteed payout period from the retirement date. If the annuitant outlives
the elected guaranteed payout period, we will continue to make payouts until
the annuitant's death.
- -PLAN C -- LIFE ANNUITY - INSTALLMENT REFUND: We make monthly payouts until the
annuitant's death, with our guarantee that payouts will continue for some
period of time. We will make payouts 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.
- -PLAN D -- JOINT AND LAST SURVIVOR LIFE ANNUITY - NO REFUND: We make monthly
payouts while both the annuitant and a joint annuitant are living. If either
annuitant dies, we will continue to make monthly payouts at the full amount
until the death of the surviving annuitant. Payouts end with the death of the
second annuitant.
- -PLAN E -- PAYOUTS FOR A SPECIFIED PERIOD: We make monthly payouts for a
specific payout period of 10 to 30 years that you elect. We will make payouts
only for the number of years specified whether the annuitant is living or not.
Depending on the selected time period, 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.")
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<PAGE>
RESTRICTIONS ON PAYOUT OPTIONS: You may be required to select a payout plan that
provides for payouts:
- -over the life of the annuitant;
- -over the joint lives of the annuitant and a designated beneficiary;
- -for a period not exceeding the life expectancy of the annuitant; or
- -for a period not exceeding the joint life expectancies of the annuitant and a
designated beneficiary.
You have the responsibility for electing a payout option that complies with your
certificate and with applicable law.
IF WE DO NOT RECEIVE INSTRUCTIONS: You must give us written instructions for the
annuity payouts at least 30 days before your retirement date. If you do not, we
will make payouts under Plan B, with 120 monthly payouts guaranteed, unless this
option is contrary to applicable provisions of the Code. Certificate values that
you allocated to the fixed account will provide fixed dollar payouts and
certificate values that you allocated among variable accounts will provide
variable annuity payouts.
IF MONTHLY PAYOUTS WOULD BE LESS THAN $20: We will calculate the amount of
monthly payouts at the time the certificate value is used to purchase a payout
plan. If the calculations show that monthly payouts would be less than $20, we
have the right to pay the certificate value to the participant in a lump sum.
DEATH AFTER ANNUITY PAYOUTS BEGIN
If the annuitant dies after annuity payouts begin, we will pay any amount
payable to the beneficiary as provided in the annuity payout plan in effect.
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<PAGE>
- ----------------------------------
TAXES
Generally, under current law, any increase in your certificate value is taxable
to you only when you receive a payout or surrender except to the extent that
contributions were made with after-tax dollars. (However, see detailed
discussion below.) Any portion of the annuity payouts and any surrenders
requested that represent ordinary income are normally taxable. We will send you
a tax information reporting form for any year in which we made a taxable
distribution according to our records.
QUALIFIED ANNUITIES: We designed this contract for use with qualified retirement
plans. Special rules apply to these retirement plans. Your rights to benefits
may be subject to the terms and conditions of these retirement plans regardless
of the terms of the contract.
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions under the contract comply with the law.
Qualified annuities have minimum distribution rules that govern the timing and
amount of distributions during your life (except for Roth IRAs) and after your
death. You should refer to your retirement plan or adoption agreement, or
consult a tax advisor for more information about these distribution rules.
ANNUITY PAYOUTS: The entire payout generally is includable as ordinary income
and subject to tax to the extent that contributions were made with after-tax
dollars. If you or your employer invested in the certificate with deductible or
pre-tax dollars, such amounts are not considered to be part of your investment
in the certificate and will be taxed when paid to you.
SURRENDERS/WITHDRAWALS: If you surrender or withdraw part or all of the
certificate before your annuity payouts begin, your surrender payment will be
taxed. You also may have to pay a 10% IRS penalty for surrenders before reaching
age 59 1/2, unless certain exceptions apply. Other penalties may apply.
DEATH BENEFITS TO BENEFICIARIES: The death benefit under a certificate is not
tax-exempt. Any amount your beneficiary receives that represents previously
deferred earnings within the certificate is taxable as ordinary income to the
beneficiary in the years he or she receives the payments.
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<PAGE>
PENALTIES: If you receive amounts from the certificate before reaching age
59 1/2, you may have to pay a 10% IRS penalty on the amount includable in your
ordinary income. However, this penalty will not apply to any amount received by
you or your beneficiary:
- -because of your death;
- -because you become disabled (as defined in the Code);
- -if the distribution is part of a series of substantially equal periodic
payments, after separation from service, made at least annually, over your life
or life expectancy (or joint lives or life expectancies of you and your
designated beneficiary); or
- -after you separate from service during or after the year you attain age 55.
Other penalties or exceptions may apply if you surrender your certificate before
your plan specifies that payments can be made.
MANDATORY WITHHOLDING: If you receive directly all or part of the certificate
value, mandatory 20% Federal income tax withholding generally (and possibly
state income tax withholding) will be imposed at the time the payment is made.
Any withholding that is done represents a prepayment of your tax due for the
year and you would take credit for such amounts on the annual tax return you
file. This mandatory withholding will not be imposed if:
- -instead of receiving the distribution check, you elect to have the distribution
rolled over directly to an IRA or another eligible plan;
- -the payment is one in a series of substantially equal periodic payments, made
at least annually, over your life or life expectancy (or the joint lives or
life expectancies of you and your designated beneficiary) or over a specified
period of 10 years or more; or
- -the payment is a minimum distribution required under the Code.
Payments made to a surviving spouse instead of being directly rolled over to an
IRA may also be subject to mandatory 20% income tax withholding.
ELECTIVE WITHHOLDING: If the distribution is not subject to mandatory
withholding as described above, you can elect not to have any withholding occur.
To do this you must provide us with a valid Social Security Number or Taxpayer
Identification Number.
43
<PAGE>
TAXES
If you do not make this election and if the payout is part of an annuity payout
plan, the amount of withholding generally is computed using payroll tables. You
can provide us with 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 surrender), 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, we may deduct state
withholding from any payment from which we deduct federal withholding. The
withholding requirements may differ if we are making payment to a non-U.S.
citizen or if we deliver the payment 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, you should
consult a tax adviser if you have any questions about taxation of the contract
and/ or related certificates.
TAX QUALIFICATION: We intend that the contract (and your certificate of
participation thereunder) qualify as an annuity for Federal income tax purposes.
To that end, the provisions of the contract and your certificate are to be
interpreted to ensure or maintain such tax qualification, in spite of any other
provisions to the contrary. We reserve the right to amend the contract and/or
related certificates to reflect any clarifications that may be needed or are
appropriate to maintain such qualification or to conform the contract and/or
certificates to any applicable changes in the tax qualification requirements. We
will send you a copy of any such amendment.
44
<PAGE>
- ----------------------------------
VOTING RIGHTS
As a contract owner with investments in the variable accounts you may vote on
important fund policies until annuity payouts begin. Once they begin, the person
receiving them has voting rights. We will vote fund shares according to the
instructions of the person with voting rights.
Before annuity payouts begin, 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.
After annuity payouts begin, the number of votes is equal to:
- -the reserve held in each account for your contract, divided by
- -the net asset value of one share of the applicable fund.
As we make annuity payouts, the reserve for the annuity decreases; therefore,
the number of votes also will decrease.
We calculate votes separately for each account. We will send notice of these
meetings, proxy materials and a statement of the number of votes to which the
voter is entitled.
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.
45
<PAGE>
- ----------------------------------
ABOUT THE SERVICE PROVIDERS
PRINCIPAL UNDERWRITER
IDS Life issues the contracts and is the principal underwriter for the
certificates. IDS Life is a stock life insurance company organized in 1957,
under the laws of the State of Minnesota and is located at IDS Tower 10,
Minneapolis, MN 55440-0010. IDS Life conducts a conventional life insurance
business.
The AEFC family of companies offers not only insurance and annuities, but also
mutual funds, investment certificates and a broad range of financial management
services. AEFA serves individuals and businesses through its nationwide network
of more than 180 offices and 9,200 advisors.
IDS Life pays total commissions of up to 7.0% of
the total purchase payments it receives on the certificates. We pay a portion of
this total commission to district managers and field vice presidents of the
selling representative.
ISSUER
IDS Life issues the contracts. IDS Life is a wholly-owned subsidiary of AEFC,
which itself is a wholly-owned subsidiary of 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 is located at IDS Tower 10, Minneapolis, MN
55440-0010. IDS Life conducts a conventional life insurance business.
LEGAL PROCEEDINGS
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which IDS Life and AEFC do business involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents and
other matters. IDS Life and AEFC, like other life and health insurers, from time
to time are involved in such litigation. On December 13, 1996, an action
entitled Lesa Benacquisto and Daniel Benacquisto vs. IDS Life Insurance Company
and American Express Financial Corporation was commenced in Minnesota state
court. The action was brought by individuals who replaced an existing IDS Life
insurance policy with a new IDS Life policy. The plaintiffs purport to represent
a class consisting of all persons who replaced existing IDS Life policies with
new policies
46
<PAGE>
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. IDS Life and AEFC filed an answer
to the complaint on February 18, 1997, denying the allegations. A second action,
entitled Arnold Mork, Isabella Mork, Ronald Melchart and Susan Melchart vs. IDS
Life Insurance Company and American Express Financial Corporation was commenced
in the same court on March 21, 1997. In addition to claims that are included in
the Benacquisto lawsuit, the second action includes an allegation of improper
replacement of an existing IDS Life annuity contract. A subsequent class action,
Richard Thoresen and Elizabeth Thoresen vs. AEFC, American Partners Life
Insurance Company, American Enterprise Life Insurance Company, American
Centurion Life Assurance Company, IDS Life Insurance Company and IDS Life
Insurance Company of New York, was filed in the same court on October 13, 1998
alleging that the sale of annuities in tax-deferred contributory retirement
investment plans (e.g. IRAs) was done through deceptive marketing practices,
which IDS Life denies. Plaintiffs in each of the above actions seek damages in
an unspecified amount and also seek to establish a claims resolution facility
for the determination of individual issues.
IDS Life and AEFC and its parent believe they have meritorious defenses to the
claims raised in the lawsuits. The outcome of any litigation cannot be predicted
with certainty. In the opinion of management, however, the ultimate resolution
of the above lawsuits and others filed against IDS Life should not have a
material adverse effect on IDS Life's consolidated financial position.
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<PAGE>
- ----------------------------------
YEAR 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of IDS Life and the
variable accounts. IDS Life and the variable accounts have no computer systems
of their own but are dependent upon the systems of 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
target date for substantially completing corrective measures on business
critical systems was Dec. 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC currently is on track with this
schedule and also is on track to finish the work on non-critical systems by June
30, 1999. The Year 2000 readiness of other third parties whose system failures
could have an impact on IDS Life and the variable accounts' operations continues
to be evaluated. The potential materiality of any such impact is not known at
this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
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<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Performance information...................... 3
Calculating annuity payouts.................. 5
Rating agencies.............................. 7
Principal underwriter........................ 7
Independent auditors......................... 7
Financial statements
49
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------------------
Please check the box to receive a copy of the Statement of
Additional Information:
/ / IDS Life Employee Benefit Annuity
/ / IDS Life Retirement Annuity Mutual Funds
Please return this request to:
IDS LIFE INSURANCE COMPANY
IDS TOWER 10
MINNEAPOLIS, MN 55440-0010
Your name ______________________________________________________________________
Address ________________________________________________________________________
City ______________________________________________ State _________ Zip ________
50
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
EMPLOYEE BENEFIT ANNUITY
IDS LIFE ACCOUNTS F, IZ, JZ, G, H, N, KZ, LZ and MZ
April 30, 1999
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 (SAI) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained from your financial advisor, or by writing or calling us at the address
and telephone number below. The prospectus is incorporated in this SAI by
reference.
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
800-437-0602
<PAGE>
Employee Benefit Annuity
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ & MZ
TABLE OF CONTENTS
Performance Information............................................p.3
Calculating Annuity Payouts........................................p.5
Rating Agencies....................................................p.7
Principal Underwriter..............................................p.7
Independent Auditors...............................................p.7
Financial Statements
<PAGE>
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
The variable accounts may quote various performance figures to illustrate past
performance. We base total return and current yield quotations (if applicable)
on standardized methods of computing performance as required by the Securities
and Exchange Commission (SEC). An explanation of the methods used to compute
performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the variable
accounts in terms of the average annual compounded rate of return of a
hypothetical investment in the contract and certificate over a period of one,
five and 10 years (or, if less, up to the life of the variable accounts),
calculated according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period, at the end of the
period (or fractional portion thereof)
We calculated the following performance figures on the basis of historical
performance of each fund. Past performance does not guarantee future results.
Average Annual Total Return With Surrender For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Variable Account Investing in: 1 Year 5 Years 10 Years Since
------------------------------- Inception
IDS Life
- ------------------
JZ Aggressive Growth Fund -6.58% 8.39% -- 9.16%
(1/92)*
- ------------------
F Capital Resource Fund (10/81) 14.67 14.47 14.56 --
- ------------------
KZ Global Yield Fund (4/96) -1.21 -- -- 3.40
- ------------------
MZ Growth Dimensions Fund (4/96) 19.14 -- -- 20.70
- ------------------
LZ Income Advantage Fund (4/96) -13.53 -- -- 1.12
- ------------------
IZ International Equity Fund 6.47 5.01 -- 7.69
(1/92)
- ------------------
N Managed Fund (4/86) 6.44 11.77 13.27 --
- ------------------
H Moneyshare Fund (10/81) -4.09 2.50 4.13 --
- ------------------
G Special Income Fund (10/81) -7.68 4.34 7.69 --
* (Commencement dates of the Funds)
</TABLE>
Average Annual Total Return Without Surrender For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Variable Account Investing in: 1 Year 5 Years 10 Years Since Inception
-------------------------------
IDS Life
- ------------------
JZ Aggressive Growth Fund 1.42% 9.38% -- 9.66%
(1/92)*
- ------------------
F Capital Resource Fund (10/81) 22.67 15.27 14.56 --
- ------------------
KZ Global Yield Fund (4/96) 6.79 -- -- 6.18
- ------------------
MZ Growth Dimensions Fund (4/96) 27.14 -- -- 22.86
- ------------------
LZ Income Advantage Fund (4/96) -5.53 -- -- 3.99
- ------------------
IZ International Equity Fund 14.47 6.13 -- 8.24
(1/92)
- ------------------
N Managed Fund (4/86) 14.44 12.65 13.34 --
- ------------------
H Moneyshare Fund (10/81) 3.91 3.73 4.13 --
- ------------------
G Special Income Fund (10/81) 0.32 5.50 7.69 --
* (Commencement dates of the Funds)
</TABLE>
<PAGE>
Cumulative Total Return
Cumulative total return represents the cumulative change in the value of an
investment for a given period (reflecting change in a variable account's
accumulation unit value). We compute aggregate total return by using the
following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period, at the
end of the period (or fractional portion thereof).
The SEC requires that we assume that the contract owner surrender the entire
contract at the end of the one, five and 10 year periods (or, if less, up to the
life of the variable account). In addition, we may show performance figures
without the deduction of a surrender charge. All total return figures reflect
the deduction of all applicable charges including the administrative charge and
mortality and expense risk fee.
Calculation of Yield for Variable Accounts Investing in Money Market Fund
Annualized Simple Yield:
For the variable account investing in the money market fund, we base quotations
of simple yield on:
(a) the change in the value of a hypothetical variable account
(exclusive of capital changes and income other than investment
income) at the beginning of a particular seven-day period;
(b) less a pro rata share of the variable account expenses accrued
over the period;
(c) dividing this difference by the value of the variable account at
the beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The variable account's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the period, and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable surrender charge, or
o any realized or unrealized gains or losses.
Annualized Compound Yield:
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] -1
Annualized Yield Based on the Seven-Day Period Ending Dec. 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Variable Account Investing In: Simple Yield Compound Yield
H IDS Life Moneyshare Fund 3.70% 3.77%
</TABLE>
<PAGE>
You must consider (when comparing an investment in variable accounts investing
in money market funds with fixed annuities) that fixed annuities often provide
an agreed-to or guaranteed yield for a stated period of time, whereas the
variable account's yield fluctuates. In comparing the yield of the variable
account to a money market fund, you should consider the different services that
the contract provides.
Annualized Yield for Variable Accounts Investing in Income Funds
For the variable accounts investing in income funds, we base quotations of yield
on all investment income earned during a particular 30-day period, less expenses
accrued during the period (net investment income) and compute it by dividing net
investment income per accumulation unit by the value of an accumulation unit on
the last day of the period, according to the following formula:
YIELD = 2[( a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the period
b = expenses accrued for the period (net of 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
The variable account earns yield from the increase in the net asset value of
shares of the fund in which it invests and from dividends declared and paid by
the fund, which are automatically invested in shares of the fund.
Annualized Yield Based on the 30-Day Period Ended Dec. 31, 1998
Variable Account Investing in: Yield
KZ IDS Life Global Yield Fund 5.38%
LZ IDS Life Income Advantage Fund 9.54
G IDS Life Special Income Fund 7.24
The yield on the variable account's accumulation unit may fluctuate daily and
does not provide a basis for determining future yields.
Independent rating or statistical services or publishers or publications such as
those listed below may quote variable account performance, compare it to
rankings, yields or returns, or use it in variable annuity accumulation or
settlement illustrations they publish or prepare.
The Bank Rate Monitor National Index, Barron's, Business Week, CDA
Technologies, Donoghue's Money Market Fund Report, Financial Services
Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's 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.
CALCULATING ANNUITY PAYOUTS
The Variable Accounts
We do the following calculations separately for each of the variable accounts.
The separate monthly payouts, added together, make up your total variable
annuity payout.
<PAGE>
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your certificate as of the valuation date
that falls on (or closest to the valuation date that falls before) the
seventh calendar day before the retirement date and then deduct any
applicable premium tax; then
o apply the result to the annuity table contained in the certificate or another
table at least as favorable.
The annuity table shows the amount of the first monthly payment for each $1,000
of value which depends on factors built into the table, as described below.
Annuity Units: We then convert the value of your variable account to annuity
units. To compute the number of units credited to you, we divide the first
monthly payment by the annuity unit value (see below) on the valuation date that
falls on (or closest to the valuation date that falls before) the seventh
calendar day before the retirement date. The number of units in your variable
account is fixed. The value of the units fluctuates with the performance of the
underlying fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date that falls on (or closest to
the valuation date that falls before) the seventh calendar day before the
payout is due; by
o the fixed number of annuity units credited to you.
Annuity Unit Values: We originally set this value at $1 for each variable
account. To calculate later values we multiply the last annuity value by the
product of:
o the net investment factor; and
o the neutralizing factor.
The purpose of the neutralizing factor is to offset the effect of the assumed
rate built into the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor: We determine the net investment factor by:
o adding the fund's current net asset value per share plus the per share
amount of any accrued income or capital gain dividends to obtain a current
adjusted net asset value per share; then
o dividing that sum by the previous adjusted net asset value per share; and
o subtracting the percentage factor representing the mortality and expense risk
fee from the result.
Because the net asset value of the fund may fluctuate, the net investment factor
my be greater or less than one, and the annuity unit value may increase or
decrease. You bear this investment risk in a variable account.
The Fixed Account
We guarantee your fixed annuity payout amounts. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the value of your fixed account at the retirement date or the date you
have selected to begin receiving your annuity payouts; then
o using an annuity table, we apply the value according to the annuity payout
plan you select.
The annuity payout table we use will be the one in effect at the time you choose
to begin your annuity payouts. The values in the table will be equal to or
greater than the table in your certificate.
<PAGE>
RATING AGENCIES
The following chart reflects the ratings given to us by independent rating
agencies. These agencies evaluate the financial soundness and claims-paying
ability of insurance companies based on a number of different factors. This
information does not relate to the management or performance of the variable
accounts of the contract. This information relates only to the fixed account and
reflects our ability to make annuity payouts and to pay death benefits and other
distributions from the contract.
Rating Agency Rating
A.M. Best A+
(Superior)
- -----------------------
Duff & Phelps AAA
- -----------------------
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is IDS Life which offers the contract
on a continuous basis.
Surrender charges we received for the last three years aggregated total
$17,936,810, $14,502,145 and $11,956,753, respectively.
Commissions we paid for the last three years aggregated total $17,634,855,
$17,883,488, and $17,247,007, respectively.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI have been audited by Ernst &
Young LLP (1400 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN 55402)
independent auditors, as stated in their report appearing herein.
FINANCIAL STATEMENTS
<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 JZ, F, KZ, MZ, LZ, IZ, N, H and G as of December 31,
1998, 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. 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, 1998 with the affiliated mutual
fund managers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of IDS
Life Accounts JZ, F, KZ, MZ, LZ, IZ, N, H and G at December 31, 1998, 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.
/s/Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
March 12, 1999
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts JZ, F, KZ, MZ, LZ, IZ, N, H and G
Statements of Net Assets Dec. 31,1998
Segregated Asset Account
Assets JZ F KZ MZ LZ
Investments in shares of mutual funds:
<S> <C> <C> <C> <C> <C>
at cost $1,788,197,221 $3,684,935,824 $89,724,605 $1,216,218,017 $291,192,101
-------------- -------------- ----------- -------------- ------------
at market value $2,082,781,066 $5,131,361,606 $92,406,970 $1,749,002,038 $255,849,036
Dividends receivable - - 421,690 - 2,042,371
Accounts receivable from IDS Life
for contract purchase payments 2,245,222 323,481 48,064 767,173 8,521
Receivable from mutual funds
for share redemptions 5,982 6,927,810 468 719,242 77,256
----- --------- --- ------- ------
Total assets 2,085,032,270 5,138,612,897 92,877,192 1,750,488,453 257,977,184
============= ============= ========== ============= ===========
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 1,776,939 4,382,459 78,332 1,477,882 216,846
Contract terminations 5,982 2,868,832 468 8,534 77,256
Payable to mutual funds
for investments purchased 460,659 - 391,422 - 1,834,046
------- --------- ------- --------- ---------
Total liabilities 2,243,580 7,251,291 470,222 1,486,416 2,128,148
--------- --------- ------- --------- ---------
Net assets applicable to
contracts in
accumulation period 2,077,993,544 5,116,939,216 92,156,974 1,742,693,302 254,604,759
Net assets applicable
to contracts in
payment period 4,795,146 14,422,390 249,996 6,308,735 1,244,277
--------- ---------- ------- --------- ---------
Total net assets $2,082,788,690 $5,131,361,606 $92,406,970 $1,749,002,037 $255,849,036
============== ============== =========== ============== ============
Accumulation units outstanding 1,087,313,726 507,310,351 78,149,847 1,001,825,924 228,164,851
============= =========== ========== ============= ===========
Net asset value per accumulation unit $ 1.91 $ 10.09 $ 1.18 $ 1.74 $ 1.12
====== ======= ====== ====== ======
Combined
Variable
Assets IZ N H G Accounts
Investments in shares of mutual funds:
at cost $1,458,478,934 $3,425,224,387 $252,973,354 $1,565,710,281 $13,772,654,724
-------------- -------------- ------------ -------------- ---------------
at market value $1,821,953,414 $4,446,937,115 $252,973,751 $1,523,631,898 $17,356,896,894
Dividends receivable - - 1,014,866 9,368,649 12,847,576
Accounts receivable from IDS Life
for contract purchase payments 124,319 254,451 45,301 74,156 3,890,688
Receivable from mutual funds
for share redemptions 2,401,429 6,179,886 3,002,032 673,389 19,987,494
--------- --------- --------- ------- ----------
Total assets 1,824,479,162 4,453,371,452 257,035,950 1,533,748,092 17,393,622,652
============= ============= =========== ============= ==============
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 1,557,290 3,793,373 213,187 1,299,951 14,796,259
Contract terminations 968,459 2,640,964 3,002,032 673,389 10,245,916
Payable to mutual funds
for investments purchased - - 33,728 8,142,881 10,862,736
--------- --------- ------ --------- ----------
Total liabilities 2,525,749 6,434,337 3,248,947 10,116,221 35,904,911
--------- --------- --------- ---------- ----------
Net assets applicable
to contracts in
accumulation period 1,818,239,593 4,430,951,683 253,582,292 1,518,130,705 17,305,292,068
Net assets applicable
to contracts in
payment period 3,713,820 15,985,432 204,711 5,501,166 52,425,673
--------- ---------- ------- --------- ----------
Total net assets $1,821,953,413 $4,446,937,115 $253,787,003 $1,523,631,871 $17,357,717,741
============== ============== ============ ============== ===============
Accumulation units outstanding 1,042,405,301 1,100,356,781 98,897,110 287,880,919
============= ============= ========== ===========
Net asset value per accumulation unit $ 1.74 $ 4.03 $ 2.56 $ 5.27
====== ====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts JZ, F, KZ, MZ, LZ, IZ, N, H and G
Statements of Operations Year ended Dec. 31, 1998
Segregated Asset Account
Investment income JZ F KZ MZ LZ
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $134,146,265 $377,044,679 $4,596,451 $8,812,237 $26,973,910
Mortality and expense risk fee 20,533,567 47,281,244 840,691 14,090,021 2,498,615
---------- ---------- ------- ---------- ---------
Investment income (loss) - net 113,612,698 329,763,435 3,755,760 (5,277,784) 24,475,295
----------- ----------- --------- ---------- ----------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds:
Proceeds from sales 199,174,546 473,839,958 2,488,079 13,841,654 5,279,074
Cost of investments sold 165,668,256 355,015,396 2,461,107 11,756,388 5,772,621
----------- ----------- --------- ---------- ---------
Net realized gain (loss) on investment 33,506,290 118,824,562 26,972 2,085,266 (493,547)
Net change in unrealized appreciation or
depreciation of investments (116,897,748) 540,393,789 1,835,832 356,854,753 (40,099,627)
------------ ----------- --------- ----------- -----------
Net gain (loss) on investments (83,391,458) 659,218,351 1,862,804 358,940,019 (40,593,174)
----------- ----------- --------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $30,221,240 $988,981,786 $5,618,564 $353,662,235 ($16,117,879)
=========== ============ ========== ============ ============
Combined
Variable
Investment income IZ N H G Accounts
Dividend income from mutual funds $24,644,854 $492,538,113 $11,015,698 $119,862,975 $1,199,635,182
Mortality and expense risk fee 18,854,430 42,828,816 2,206,125 16,034,502 165,168,011
---------- ---------- --------- ---------- -----------
Investment income (loss) - net 5,790,424 449,709,297 8,809,573 103,828,473 1,034,467,171
--------- ----------- --------- ----------- -------------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds:
Proceeds from sales 294,157,633 290,145,944 272,231,869 145,538,861 1,696,697,618
Cost of investments sold 244,674,617 215,303,335 272,232,501 143,468,656 1,416,352,877
----------- ----------- ----------- ----------- -------------
Net realized gain (loss) on investment 49,483,016 74,842,609 (632) 2,070,205 280,344,741
Net change in unrealized appreciation or
depreciation of investments 195,486,480 60,772,481 191 (96,451,963) 901,894,188
----------- ---------- --- ----------- -----------
Net gain (loss) on investments 244,969,496 135,615,090 (441) (94,381,758) 1,182,238,929
----------- ----------- ---- ----------- -------------
Net increase (decrease) in net assets
resulting from operations $250,759,920 $585,324,387 $8,809,132 $9,446,715 $2,216,706,100
============ ============ ========== ========== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts JZ, F, KZ, MZ, LZ, IZ, N, H and G
Statements of Changes in Net Assets Year ended Dec. 31, 1998
Segregated Asset Account
Operations JZ F KZ MZ LZ
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $113,612,698 $329,763,435 $3,755,760 $(5,277,784) $24,475,295
Net realized gain (loss) on investmets 33,506,290 118,824,562 26,972 2,085,266 (493,547)
Net change in unrealized appreciation or
depreciation of investments (116,897,748) 540,393,789 1,835,832 356,854,753 (40,099,627)
------------ ----------- --------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations 30,221,240 988,981,786 5,618,564 353,662,235 (16,117,879)
========== =========== ========= =========== ===========
Contract transactions
Contract purchase payments 65,985,738 105,479,671 2,038,404 64,342,063 8,136,532
Net transfers* (35,763,509) (108,133,439) 19,960,605 314,642,480 79,088,999
Transfers for policy loans 3,183,399 7,449,789 51,676 2,358,750 131,965
Annuity payments (400,799) (1,252,612) (17,032) (436,312) (92,089)
Contract charges (1,742,005) (3,987,171) (39,574) (1,046,612) (119,647)
Contract terminations:
Surrender benefits (172,177,805) (412,678,091) (7,210,042) (116,815,110) (20,503,088)
Death benefits (8,726,997) (25,027,040) (410,791) (5,413,424) (1,466,072)
---------- ----------- -------- ---------- ----------
Increase (decrease) from
contract transactions (149,641,978) (438,148,893) 14,373,246 257,631,835 65,176,600
------------ ------------ ---------- ----------- ----------
Net assets at beginning of year 2,202,209,428 4,580,528,713 72,415,160 1,137,707,967 206,790,315
------------- ------------- ---------- ------------- -----------
Net assets at end of year $2,082,788,690 $5,131,361,606 $92,406,970 $1,749,002,037 $255,849,036
============== ============== =========== ============== ============
Accumulation unit activity
Units outstanding at beginning of year 1,168,829,188 556,866,324 65,608,959 831,259,213 175,023,644
Contracts purchase payments 35,152,612 11,916,818 1,792,193 42,906,289 6,839,352
Net transfers* (20,661,784) (12,362,984) 17,576,406 209,719,850 65,787,681
Transfers for policy loans 1,704,172 843,187 45,365 1,565,644 111,933
Contract charges (937,617) (453,322) (33,633) (701,700) (99,946)
Contract terminations:
Surrender benefits (91,770,066) (46,477,597) (6,465,380) (79,116,097) (18,148,390)
Death benefits (5,002,779) (3,022,075) (374,063) (3,807,275) (1,349,423)
---------- ---------- -------- ---------- ----------
Units outstanding at end of year 1,087,313,726 507,310,351 78,149,847 1,001,825,924 228,164,851
============= =========== ========== ============= ===========
Combined
Variable
Operations IZ N H G Accounts
Investment income (loss) - net $5,790,424 $449,709,297 $8,809,573 $103,828,473 $1,034,467,171
Net realized gain (loss) on investmets 49,483,016 74,842,609 (632) 2,070,205 280,344,741
Net change in unrealized appreciation or
depreciation of investments 195,486,480 60,772,481 191 (96,451,963) 901,894,188
----------- ---------- --- ----------- -----------
Net increase (decrease) in net assets
resulting from operations 250,759,920 585,324,387 8,809,132 9,446,715 2,216,706,100
=========== =========== ========= ========= =============
Contract transactions
Contract purchase payments 53,287,596 102,722,742 17,799,064 38,193,749 457,985,559
Net transfers* (94,797,288) (8,531,530) 65,210,894 (27,040,242) 204,636,970
Transfers for policy loans 2,850,813 5,797,400 385,793 1,985,036 24,194,621
Annuity payments (322,447) (1,407,902) (22,173) (514,367) (4,465,733)
Contract charges (1,544,330) (3,325,118) (149,937) (1,195,650) (13,150,044)
Contract terminations:
Surrender benefits (158,297,324) (355,471,928) (51,592,016) (148,764,277) (1,443,509,681)
Death benefits (9,473,917) (28,459,626) (1,774,081) (14,915,925) (95,667,873)
---------- ----------- ---------- ----------- -----------
Increase (decrease) from
contract transactions (208,296,897) (288,675,962) 29,857,544 (152,251,676) (869,976,181)
------------ ------------ ---------- ------------ ------------
Net assets at beginning of year 1,779,490,390 4,150,288,690 215,120,327 1,666,436,832 16,010,987,822
------------- ------------- ----------- ------------- --------------
Net assets at end of year $1,821,953,413 $4,446,937,115 $253,787,003 $1,523,631,871 $17,357,717,741
============== ============== ============ ============== ===============
Accumulation unit activity
Units outstanding at beginning of year 1,168,353,202 1,178,734,680 87,255,005 316,788,701
Contracts purchase payments 31,638,503 27,547,912 7,095,301 7,194,454
Net transfers* (58,491,047) (2,527,414) 25,681,176 (4,997,642)
Transfers for policy loans 1,695,063 1,525,609 153,649 375,028
Contract charges (924,518) (898,151) (60,456) (226,888)
Contract terminations:
Surrender benefits (93,910,984) (95,728,467) (20,439,462) (28,247,658)
Death benefits (5,954,918) (8,297,388) (788,103) (3,005,076)
---------- ---------- -------- ----------
Units outstanding at end of year 1,042,405,301 1,100,356,781 98,897,110 287,880,919
============= ============= ========== ===========
*Includes transfer activity from (to) other accounts and transfers from (to) IDS
Life's fixed account. See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Accounts JZ, F, KZ, MZ, LZ, IZ, N, H, and G
Statements of Changes in Net Assets Year ended Dec. 31, 1997
Segregated Asset Account
Operations JZ F KZ MZ LZ
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 172,766,819 $ 81,933,825 $ 2,162,354 $ (1,098,484) $11,346,551
Net realized gain (loss) on investments 25,391,697 69,777,113 26,603 105,557 23,200
Net change in unrealized appreciation or
depreciation of investments 31,135,686 748,884,487 88,527 157,444,749 3,906,529
---------- ----------- ------ ----------- ---------
Net increase (decrease) in net
assets resulting
from operations 229,294,202 900,595,425 2,277,484 156,451,822 15,276,280
=========== =========== ========= =========== ==========
Contract transactions
Contract purchase payments 87,605,673 134,271,812 3,443,369 58,794,952 10,032,844
Net transfers* 30,217,819 (330,558,730) 42,846,230 572,710,885 125,588,307
Transfers for policy loans 2,700,859 6,741,393 43,334 1,398,475 80,094
Annuity payments (325,569) (839,990) (7,873) (147,303) (31,168)
Contract charges (1,879,204) (4,189,959) (26,651) (632,210) (70,043)
Contract terminations:
Surrender benefits (118,237,119) (306,180,259) (2,695,820) (37,984,244) (6,707,680)
Death benefits (8,138,343) (20,091,752) (163,126) (2,163,641) (464,874)
---------- ----------- -------- ---------- --------
Increase (decrease) from
contract transactions (8,055,884) (520,847,485) 43,439,463 591,976,914 128,427,480
---------- ------------ ---------- ----------- -----------
Net assets at beginning of year 1,980,971,110 4,200,780,773 26,698,213 389,279,231 63,086,555
------------- ------------- ---------- ----------- ----------
Net assets at end of year $2,202,209,428 $4,580,528,713 $72,415,160 $1,137,707,967 $206,790,315
============== ============== =========== ============== ============
Accumulation unit activity
Units outstanding at beginning
of year 1,172,792,754 628,555,221 24,878,248 350,597,571 59,938,791
Contract purchase payments 50,910,206 18,318,230 3,250,861 47,250,516 9,009,695
Net transfers* 17,204,464 (46,459,818) 40,199,836 465,445,880 112,669,161
Transfers for policy loans 1,552,061 911,718 40,853 1,099,049 70,990
Contract charges (1,087,659) (572,335) (24,882) (502,902) (62,522)
Contract terminations:
Surrender benefits (67,429,599) (40,932,101) (2,560,115) (30,794,587) (6,187,383)
Death benefits (5,113,039) (2,954,591) (175,842) (1,836,314) (415,088)
---------- ---------- -------- ---------- --------
Units outstanding at end of year 1,168,829,188 556,866,324 65,608,959 831,259,213 175,023,644
============= =========== ========== =========== ===========
Combined
Variable
Operations IZ N H G Accounts
Investment income (loss) - net $ 48,707,495 $ 376,571,167 $ 9,208,281 $140,409,440 $ 842,007,448
Net realized gain (loss) on investments 19,817,409 28,722,923 (212) 10,087,389 153,951,679
Net change in unrealized appreciation or
depreciation of investments (34,561,365) 246,854,996 (586) (23,859,115) 1,129,893,908
----------- ----------- ---- ----------- -------------
Net increase (decrease) in net
assets resulting
from operations 33,963,539 652,149,086 9,207,483 126,637,714 2,125,853,035
========== =========== ========= =========== =============
Contract transactions
Contract purchase payments 78,292,637 125,778,517 26,471,423 49,361,355 574,052,582
Net transfers* (40,464,119) 72,184,459 2,490,728 (141,589,262) 333,426,317
Transfers for policy loans 2,538,097 4,673,820 415,203 1,893,361 20,484,636
Annuity payments (218,797) (818,698) (21,359) (404,625) (2,815,382)
Contract charges (1,744,401) (3,418,455) (170,801) (1,396,704) (13,528,428)
Contract terminations:
Surrender benefits (110,545,864) (236,462,530) (33,151,710) (119,861,011) (971,826,237)
Death benefits (9,311,925) (25,132,076) (2,393,157) (15,519,877) (83,378,771)
---------- ----------- ---------- ----------- -----------
Increase (decrease) from
contract transactions (81,454,372) (63,194,963) (6,359,673) (227,516,763) (143,585,283)
----------- ----------- ---------- ------------ ------------
Net assets at beginning of year 1,826,981,223 3,561,334,567 212,272,517 1,767,315,881 14,028,720,070
------------- ------------- ----------- ------------- --------------
Net assets at end of year $1,779,490,390 $4,150,288,690 $215,120,327 $1,666,436,832 $16,010,987,822
============== ============== ============ ============== ===============
Accumulation unit activity
Units outstanding at beginning
of year 1,220,479,990 1,197,162,300 89,644,495 362,167,237
Contract purchase payments 51,062,806 38,914,736 10,978,965 9,842,757
Net transfers* (25,974,782) 23,088,309 1,243,189 (28,290,096)
Transfers for policy loans 1,642,862 1,423,911 172,138 376,163
Contract charges (1,139,369) (1,055,013) (71,845) (279,982)
Contract terminations:
Surrender benefits (71,076,097) (72,296,420) (13,512,157) (23,650,436)
Death benefits (6,642,208) (8,503,143) (1,199,780) (3,376,942)
---------- ---------- ---------- ----------
Units outstanding at end of year 1,168,353,202 1,178,734,680 87,255,005 316,788,701
============= ============= ========== ===========
*Includes transfer activity from (to) other accounts and transfers from (to) IDS
Life's fixed account. See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS Life Accounts JZ, F, KZ, MZ, LZ, IZ, N, H and G
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, as amended (the 1940 Act). 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 JZ, F, KZ, MZ, LZ, IZ, N, H and G are collectively
referred to as "the Accounts."
Each Account invests exclusively in shares of the following funds (collectively,
the Funds), which are registered under the 1940 Act as diversified,
(non-diversified for Global Yield) open-end management investment companies and
have the following investment managers.
Account Invests exclusively in shares of Investment Manager
JZ IDS Life Aggressive Growth Fund IDS Life Insurance Company 1
F IDS Life Capital Resource Fund IDS Life Insurance Company 1
KZ IDS Life Global Yield Fund IDS Life Insurance Company 1
MZ IDS Life Growth Dimensions Fund IDS Life Insurance Company 1
LZ IDS Life Income Advantage Fund IDS Life Insurance Company 1
IZ IDS Life International Equity Fund IDS Life Insurance Company 2
N IDS Life Managed Fund IDS Life Insurance Company 1
H IDS Life Moneyshare Fund IDS Life Insurance Company 1
G IDS Life Special Income Fund IDS Life Insurance Company 1
1 American Express Financial Corporation (AEFC) is the investment advisor.
2 AEFC is the investment advisor. American Express Asset Management
International, Inc. is the sub-investment advisor.
The assets of each Account are not chargeable with liabilities arising out of
the business conducted by any other segregated asset account or by IDS Life.
IDS Life serves as issuer of the contracts.
2. Summary of Significant Accounting Policies
Investments in the Funds
Investments in shares of the Funds are stated at market value which is the net
asset value per share as determined by the respective Funds. Investment
transactions are accounted for on the date the shares are purchased and sold.
The cost of investments sold and redeemed is determined on the average cost
method. Dividend distributions received from the Funds are reinvested in
additional shares of the Funds and are recorded as income by the subaccounts on
the ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the Accounts' share of the Funds' undistributed
net investment income, undistributed realized gain or loss and the unrealized
appreciation or depreciation on their investment securities.
Use of Estimates
The preparation of financial statements in conformity with 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
IDS Life makes contractual assurances to the Accounts that possible future
adverse changes in administrative expenses and mortality experience of the
contract owners and annuitants 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% of the average daily net assets of the Accounts.
4. Contract Administrative Charges
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 $17,936,810 in 1998 and $14,502,145 in 1997. Such charges are not
treated as a separate expense of the Accounts. They are ultimately deducted from
contract surrender benefits paid by IDS Life.
5. Investment in Shares
The Accounts' investment in shares of the Funds as of Dec. 31,1998 were
as follows:
Account Investment Shares NAV
JZ IDS Life Aggressive Growth Fund 135,831,984 $15.33
F IDS Life Capital Resource Fund 157,143,811 32.65
KZ IDS Life Global Yield Fund 8,698,435 10.62
MZ IDS Life Growth Dimensions Fund 99,857,192 17.52
LZ IDS Life Income Advantage Fund 28,712,357 8.91
IZ IDS Life International Equity Fund 116,962,935 15.58
N IDS Life Managed Fund 240,114,195 18.52
H IDS Life Moneyshare Fund 252,995,233 1.00
G IDS Life Special Income Fund 137,181,418 11.11
6. Investment Transactions
The Accounts' purchases of Funds' shares, including reinvestment of dividend
distributions, were as follows:
Year ended Dec. 31,
Account Investment 1998 1997
JZ IDS Life Aggressive Growth Fund $ 161,144,482 $ 281,608,415
F IDS Life Capital Resource Fund 361,299,794 111,547,849
KZ IDS Life Global Yield Fund 20,617,085 47,045,559
MZ IDS Life Growth Dimensions Fund 265,183,065 592,288,967
LZ IDS Life Income Advantage Fund 94,930,969 140,453,856
IZ IDS Life International Equity Fund 90,031,710 122,035,293
N IDS Life Managed Fund 447,421,778 417,692,561
H IDS Life Moneyshare Fund 310,085,733 230,838,115
G IDS Life Special Income Fund 97,115,658 140,887,599
Combined Variable Accounts $1,847,830,274 $2,084,398,214
7. Year 2000 Issue (unaudited)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of IDS Life and the
Account. IDS Life and the Account have no computer systems of their own but are
dependent upon the systems of 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
target date for substantially completing corrective measures on business
critical systems was Dec. 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC is currently on track with this
schedule and is also on track to finish the work on non-critical systems by June
30, 1999. The Year 2000 readiness of unaffiliated investment managers and other
third parties whose system failures could have an impact on IDS Life's and the
Account's operations continues to be evaluated. The potential materiality of any
such impact is not known at this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
<PAGE>
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
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 for the purpose of informing the
investor as to the financial condition of the insurance company and its ability
to carry out its obligations under its variable contracts.
IDS LIFE INSURANCE COMPANY
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS DEC. 31, 1998 DEC. 31, 1997
ASSETS ($ thousands, except share amounts)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value: 1998,
$8,420,035; 1997, $9,743,410).................................... $ 7,964,114 $ 9,315,450
Available for sale, at fair value (amortized cost: 1998,
$13,344,949; 1997, $12,515,030).................................. 13,613,139 12,876,694
Mortgage loans on real estate.................................... 3,505,458 3,618,647
Policy loans..................................................... 525,431 498,874
Other investments................................................ 366,604 318,591
- -------------------------------------------------------------------------------------------------
Total investments................................................ 25,974,746 26,628,256
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents........................................ 22,453 19,686
Amounts recoverable from reinsurers.............................. 262,260 205,716
Amounts due from brokers......................................... 327 8,400
Other accounts receivable........................................ 47,963 37,895
Accrued investment income........................................ 366,574 357,390
Deferred policy acquisition costs................................ 2,496,352 2,479,577
Other assets..................................................... 30,487 22,700
Separate account assets.......................................... 27,349,401 23,214,504
- -------------------------------------------------------------------------------------------------
Total assets..................................................... $ 56,550,563 $ 52,974,124
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Liabilities:
Future policy benefits:
Fixed annuities.................................................. $ 21,172,303 $ 22,009,747
Universal life-type insurance.................................... 3,343,671 3,280,489
Traditional life insurance....................................... 225,306 213,676
Disability income and long-term care insurance................... 660,320 533,124
Policy claims and other policyholders' funds..................... 70,309 68,345
Deferred income taxes, net....................................... 16,930 61,582
Amounts due to brokers........................................... 195,406 381,458
Other liabilities................................................ 410,285 345,383
Separate account liabilities..................................... 27,349,401 23,214,504
- -------------------------------------------------------------------------------------------------
Total liabilities................................................ 53,443,931 50,108,308
- -------------------------------------------------------------------------------------------------
Stockholder's equity:
Capital stock, $30 par value per share; 100,000 shares
authorized, issued and outstanding............................... 3,000 3,000
Additional paid-in capital....................................... 288,327 290,847
Accumulated other comprehensive income, net of tax:
Net unrealized securities gains.................................. 169,584 226,359
Retained earnings................................................ 2,645,721 2,345,610
- -------------------------------------------------------------------------------------------------
Total stockholder's equity....................................... 3,106,632 2,865,816
- -------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity....................... $ 56,550,563 $ 52,974,124
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-1
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DEC. 31,
1998 1997 1996
CONSOLIDATED STATEMENTS OF INCOME ($ thousands)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Revenues:
Premiums:
Traditional life insurance....................................... $ 53,132 $ 52,473 $ 51,403
Disability income and long-term care insurance................... 176,298 154,021 131,518
- ------------------------------------------------------------------------------------------------------------
Total premiums................................................... 229,430 206,494 182,921
- ------------------------------------------------------------------------------------------------------------
Policyholder and contractholder charges.......................... 383,965 341,726 302,999
Management and other fees........................................ 401,057 340,892 271,342
Net investment income............................................ 1,986,485 1,988,389 1,965,362
Net realized gain (loss) on investments.......................... 6,902 860 (159)
- ------------------------------------------------------------------------------------------------------------
Total revenues................................................... 3,007,839 2,878,361 2,722,465
- ------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Death and other benefits:
Traditional life insurance....................................... 29,835 28,951 26,919
Universal life-type insurance and investment contracts........... 108,349 92,814 85,017
Disability income and long-term care insurance................... 27,414 22,333 19,185
Increase in liabilities for future policy benefits:
Traditional life insurance....................................... 6,052 3,946 1,859
Disability income and long-term care insurance................... 73,305 63,631 57,230
Interest credited on universal life-type insurance and investment
contracts........................................................ 1,317,124 1,386,448 1,370,468
Amortization of deferred policy acquisition costs................ 382,642 322,731 278,605
Other insurance and operating expenses........................... 287,326 276,596 261,468
- ------------------------------------------------------------------------------------------------------------
Total benefits and expenses...................................... 2,232,047 2,197,450 2,100,751
- ------------------------------------------------------------------------------------------------------------
Income before income taxes....................................... 775,792 680,911 621,714
Income taxes..................................................... 235,681 206,664 207,138
- ------------------------------------------------------------------------------------------------------------
Net income....................................................... $ 540,111 $ 474,247 $ 414,576
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-2
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY OTHER
TOTAL ADDITIONAL COMPREHENSIVE
STOCKHOLDER'S CAPITAL PAID-IN INCOME, RETAINED
THREE YEARS ENDED DEC. 31, 1998 ($ thousands) EQUITY STOCK CAPITAL NET OF TAX EARNINGS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995................................ $2,331,708 $3,000 $278,814 $ 230,129 $1,819,765
Comprehensive income:
Net income................................................ 414,576 -- -- -- 414,576
Unrealized holding losses arising during the year, net of
deferred policy acquisition costs of $10,325 and taxes of
$82,982................................................... (154,111) -- -- (154,111) --
Reclassification adjustment for losses included in net
income, net of tax of $(5,429)............................ 10,084 -- -- 10,084 --
----------- ----------
Other comprehensive loss.................................. (144,027) -- -- (144,027) --
-----------
Comprehensive income...................................... 270,549 -- -- -- --
Capital contribution from parent.......................... 4,801 -- 4,801 -- --
Other changes............................................. 2,022 -- -- -- 2,022
Cash dividends to parent.................................. (165,000) -- -- -- (165,000)
---------------------------------------------------------------
Balance, December 31, 1996................................ 2,444,080 3,000 283,615 86,102 2,071,363
Comprehensive income:
Net income................................................ 474,247 -- -- -- 474,247
Unrealized holding gains arising during the year, net of
effect on deferred policy acquisition costs of $(7,714)
and taxes of $(75,215).................................... 139,686 -- -- 139,686 --
Reclassification adjustment for losses included in net
income, net of tax of $(308).............................. 571 -- -- 571 --
----------- ----------
Other comprehensive income................................ 140,257 -- -- 140,257 --
-----------
Comprehensive income...................................... 614,504 -- -- -- --
Capital contribution from parent.......................... 7,232 -- 7,232 -- --
Cash dividends to parent.................................. (200,000) -- -- -- (200,000)
---------------------------------------------------------------
Balance, December 31, 1997................................ 2,865,816 3,000 290,847 226,359 2,345,610
Comprehensive income:
Net income................................................ 540,111 -- -- -- 540,111
Unrealized holding losses arising during the year, net of
effect on deferred policy acquisition costs of $6,333 and
taxes of $32,826.......................................... (60,964) -- -- (60,964) --
Reclassification adjustment for losses included in net
income, net of tax of $(2,254)............................ 4,189 -- -- 4,189 --
----------- ----------
Other comprehensive loss.................................. (56,775) -- -- (56,775) --
-----------
Comprehensive income...................................... 483,336 -- -- -- --
Other changes............................................. (2,520) -- (2,520) -- --
Cash dividends to parent.................................. (240,000) -- -- -- (240,000)
---------------------------------------------------------------
Balance, December 31, 1998................................ $3,106,632 $3,000 $288,327 $ 169,584 $2,645,721
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DEC. 31,
1998 1997 1996
CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 540,111 $ 474,247 $ 414,576
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Policy loan issuance, excluding universal life-type insurance.... (53,883) (54,665) (49,314)
Policy loan repayment, excluding universal life-type insurance... 57,902 46,015 41,179
Change in amounts recoverable from reinsurers.................... (56,544) (47,994) (43,335)
Change in other accounts receivable.............................. (10,068) 6,194 (4,981)
Change in accrued investment income.............................. (9,184) (14,077) 4,695
Change in deferred policy acquisition costs, net................. (10,443) (156,486) (294,755)
Change in liabilities for future policy benefits for traditional
life, disability income and long-term care insurance............. 138,826 112,915 97,479
Change in policy claims and other policyholders' funds........... 1,964 (15,289) 27,311
Change in deferred income tax provision (benefit)................ (19,122) 19,982 (65,609)
Change in other liabilities...................................... 64,902 13,305 46,724
Amortization of premium (accretion of discount), net............. 9,170 (5,649) (23,032)
Net realized (gain) loss on investments.......................... (6,902) (860) 159
Policyholder and contractholder charges, non-cash................ (172,396) (160,885) (154,286)
Other, net....................................................... 10,786 7,161 (10,816)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities.............. $ 485,119 $ 223,914 $ (14,005)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed maturities held to maturity:
Purchases........................................................ $ (1,020) $ (1,996) $ (43,751)
Maturities, sinking fund payments and calls...................... 1,162,731 686,503 759,248
Sales............................................................ 236,963 236,761 279,506
Fixed maturities available for sale:
Purchases........................................................ (4,100,238) (3,160,133) (2,299,198)
Maturities, sinking fund payments and calls...................... 2,967,311 1,206,213 1,270,240
Sales............................................................ 278,955 457,585 238,905
Other investments, excluding policy loans:
Purchases........................................................ (555,647) (524,521) (904,536)
Sales............................................................ 579,038 335,765 236,912
Change in amounts due from brokers............................... 8,073 2,647 (11,047)
Change in amounts due to brokers................................. (186,052) 119,471 140,369
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities.............. 390,114 (641,705) (333,352)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Activity related to universal life-type insurance and
investment contracts:
Considerations received.......................................... 1,873,624 2,785,758 3,567,586
Surrenders and death benefits.................................... (3,792,612) (3,736,242) (4,250,294)
Interest credited to account balances............................ 1,317,124 1,386,448 1,370,468
Universal life-type insurance policy loans:
Issuance......................................................... (97,602) (84,835) (86,501)
Repayment........................................................ 67,000 54,513 58,753
Capital transaction with parent.................................. -- 7,232 4,801
Dividends paid................................................... (240,000) (200,000) (165,000)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities........................ (872,466) 212,874 499,813
- ------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents............. 2,767 (204,917) 152,456
Cash and cash equivalents at beginning of year................... 19,686 224,603 72,147
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year......................... $ 22,453 $ 19,686 $ 224,603
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS)
- -----------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
IDS Life Insurance Company (the Company) is a stock life insurance company
organized under the laws of the State of Minnesota. The Company is a wholly
owned subsidiary of American Express Financial Corporation (AEFC), which is a
wholly owned subsidiary of American Express Company. The Company serves
residents of all states except New York. IDS Life Insurance Company of New York
is a wholly owned subsidiary of the Company and serves New York State residents.
The Company also wholly owns American Enterprise Life Insurance Company,
American Centurion Life Assurance Company, American Partners Life Insurance
Company and American Express Corporation.
The Company's principal products are deferred annuities and universal life
insurance, which are issued primarily to individuals. It offers single premium
and flexible premium deferred annuities on both a fixed and variable dollar
basis. Immediate annuities are offered as well. The Company's insurance products
include universal life (fixed and variable), whole life, single premium life and
term products (including waiver of premium and accidental death benefits). The
Company also markets disability income and long-term care insurance.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All 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 other comprehensive income, net of deferred policy acquisition
costs and deferred taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed securities
in determining the constant effective yield used to recognize interest income.
Prepayment estimates are based on information received from brokers who deal in
mortgage-backed securities.
Mortgage loans on real estate are carried at amortized cost less reserves for
mortgage loan losses. The estimated fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage interest rates
currently offered for mortgages of similar maturities.
Impairment of mortgage loans is measured as the excess of a loan's recorded
investment over its present value of expected principal and interest payments
discounted at the loan's effective interest rate, or the fair value of
collateral. The amount of the impairment is recorded in a reserve for mortgage
loan losses. The reserve for mortgage loan losses is maintained at a level that
management believes is adequate to absorb estimated losses in the portfolio. The
level of the reserve account is determined based on several factors, including
historical
F-5
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
The Company purchases and writes index options to hedge the fee income earned on
the management of equity securities in separate accounts and the underlying
mutual funds. These index options are carried at market value and are included
in other investments or other liabilities, as appropriate. Gains or losses on
index options that qualify as hedges are deferred and recognized in management
and other fees in the same period as the hedged fee income. Gains or losses on
index options that do not qualify as hedges are marked to market through the
income statement.
The Company also uses index options to manage the risks related to a certain
annuity product that pays interest based upon the relative change in a major
stock market index between the beginning and end of the product's term.
Purchased options used in conjunction with this product are reported in other
investments and written options are included in other liabilities. The
amortization of the cost of purchased options, the proceeds of written options
and the changes in intrinsic value of the contracts are included in net
investment income.
Policy loans are carried at the aggregate of the unpaid loan balances which do
not exceed the cash surrender values of the related policies.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such investments
are written down to the fair value by a charge to income.
STATEMENTS OF CASH FLOWS
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These securities are
carried principally at amortized cost, which approximates fair value.
Supplementary information to the consolidated statements of cash flows for the
years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------
CASH PAID DURING THE YEAR FOR:
Income taxes....................... $215,003 $174,472 $317,283
Interest on borrowings............. 14,529 8,213 4,119
- -----------------------------------------------------------------
</TABLE>
RECOGNITION OF PROFITS ON ANNUITY CONTRACTS AND INSURANCE POLICIES
Profits on fixed deferred annuities are recognized by the Company over the lives
of the contracts, using primarily the interest method. Profits represent the
excess of investment income earned from investment of contract considerations
over interest credited to contract owners and other expenses.
F-6
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The retrospective deposit method is used in accounting for universal life-type
insurance. Under this method, profits are recognized over the lives of the
policies in proportion to the estimated gross profits expected to be realized.
Premiums on traditional life, disability income and long-term care insurance
policies are recognized as revenue when due, and related benefits and expenses
are associated with premium revenue in a manner that results in recognition of
profits over the lives of the insurance policies. This association is
accomplished by means of the provision for future policy benefits and the
deferral and subsequent amortization of policy acquisition costs.
Policyholder and contractholder charges include the monthly cost of insurance
charges, issue and administrative fees and surrender charges. These charges also
include the minimum death benefit guarantee fees received from the variable life
insurance separate accounts. Management and other fees include investment
management fees from underlying proprietary mutual funds and mortality and
expense risk fees received from the variable annuity and variable life insurance
separate accounts.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally sales compensation, policy
issue costs, underwriting and certain sales expenses, have been deferred on
insurance and annuity contracts. The deferred acquisition costs for most single
premium deferred annuities and installment annuities are amortized using
primarily the interest method. The costs for universal life-type insurance and
certain installment annuities are amortized as a percentage of the estimated
gross profits expected to be realized on the policies. For traditional life,
disability income and long-term care insurance policies, the costs are amortized
over an appropriate period in proportion to premium revenue.
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.
Liabilities for future benefits on traditional life insurance are based on the
net level premium method, using anticipated mortality, policy persistency and
interest earning rates. Anticipated mortality rates are based on established
industry mortality tables. Anticipated policy persistency rates vary by policy
form, issue age and policy duration with persistency on cash value plans
generally anticipated to be better than persistency on term insurance plans.
Anticipated interest rates range from 4% to 10%, depending on policy form, issue
year and policy duration.
Liabilities for future disability income and long-term care policy benefits
include both policy reserves and claim reserves. Policy reserves are based on
the net level premium method, using anticipated morbidity, mortality, policy
persistency and interest earning rates. Anticipated morbidity and mortality
rates are based on established industry morbidity and mortality tables.
Anticipated policy persistency rates vary by policy form, issue age, policy
duration and, for disability income policies, occupation class. Anticipated
interest rates for disability income and long-term care policy reserves are 3%
to 9.5% at policy issue and grade to ultimate rates of 5% to 7% over 5 to 10
years.
Claim reserves are calculated based on claim continuance tables and anticipated
interest earnings. Anticipated claim continuance rates are based on established
industry tables. Anticipated interest rates for claim reserves for both
disability income and long-term care range from 6% to 8%.
REINSURANCE
The maximum amount of life insurance risk retained by the Company on any one
life is $750 of life benefit plus $50 of accidental death benefits. The maximum
amount of life insurance risk retained on any joint-life
F-7
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
combination is $1,500. The excesses are reinsured with other life insurance
companies, primarily on a yearly renewable term basis. Long-term care policies
are primarily reinsured on a coinsurance basis. Beginning in 1998, the Company
retains all disability income and waiver of premium risk.
FEDERAL INCOME TAXES
The Company's taxable income is included in the consolidated federal income tax
return of American Express Company. The Company provides for income taxes on a
separate return basis, except that, under an agreement between AEFC and American
Express Company, tax benefit is recognized for losses to the extent they can be
used on the consolidated tax return. It is the policy of AEFC and its
subsidiaries that AEFC will reimburse subsidiaries for all tax benefits.
Included in other liabilities at December 31, 1998 and 1997 are $26,291 payable
to and $12,061, receivable from, respectively, AEFC for federal income taxes.
SEPARATE ACCOUNT BUSINESS
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity and variable life insurance contract
owners. The Company receives investment management fees from the proprietary
mutual funds used as investment options for variable annuities and variable life
insurance. The Company receives mortality and expense risk fees from the
separate accounts.
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the separate accounts will not be
affected by future variations in the actual life expectancy experience of the
annuitants and beneficiaries from the mortality assumptions implicit in the
annuity contracts. The Company makes periodic fund transfers to, or withdrawals
from, the separate account assets for such actuarial adjustments for variable
annuities that are in the benefit payment period. The Company also guarantees
that the rates at which administrative fees are deducted from contract funds
will not exceed contractual maximums.
For variable life insurance, the Company guarantees that the rates at which
insurance charges and administrative fees are deducted from contract funds will
not exceed contractual maximums. The Company also guarantees that the death
benefit will continue payable at the initial level regardless of investment
performance so long as minimum premium payments are made.
ACCOUNTING CHANGES
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires the reporting and display of
comprehensive income and its components. Comprehensive income is defined as the
aggregate change in stockholder's equity excluding changes in ownership
interests. For the Company, it is net income and the unrealized gains or losses
on available-for-sale securities, net of the effect on deferred policy
acquisition costs, taxes and reclassification adjustment.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for Costs of Computer
Software Developed or Obtained for Internal Use." The SOP, which is effective
January 1, 1999, requires the capitalization of certain costs incurred after the
date of adoption to develop or obtain software for internal use. Software
utilized by the Company is owned by AEFC and will be capitalized by AEFC. As a
result, the new rule will not have a material impact on the Company's results of
operations or financial condition.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments," providing guidance for the
timing of recognition of liabilities related to guaranty fund assessments. The
Company will adopt the SOP on January 1, 1999. The Company has historically
carried a balance
F-8
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
in other liabilities on the balance sheet for potential guaranty fund assessment
exposure. Adoption of the SOP will not have a material impact on the Company's
results of operations or financial condition.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective January 1, 2000. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation.
Earlier application of all of the provisions of this Statement is encouraged,
but it is permitted only as of the beginning of any fiscal quarter that begins
after issuance of the Statement. This Statement cannot be applied retroactively.
The ultimate financial impact of the new rule will be measured based on the
derivatives in place at adoption and cannot be estimated at this time.
RECLASSIFICATION
Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
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, 1998 are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 39,888 $ 4,460 $ -- $ 44,348
State and municipal obligations.............. 9,683 491 -- 10,173
Corporate bonds and obligations.............. 6,305,476 447,752 27,087 6,726,141
Mortgage-backed securities................... 1,609,067 30,458 152 1,639,373
- ----------------------------------------------------------------------------------------------------
$7,964,114 $483,161 $ 27,239 $ 8,420,035
- ----------------------------------------------------------------------------------------------------
</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........... $ 52,043 $ 3,324 $ -- $ 55,367
State and municipal obligations.............. 11,060 1,231 -- 12,291
Corporate bonds and obligations.............. 7,332,344 271,174 155,181 7,448,337
Mortgage-backed securities................... 5,949,502 151,511 3,869 6,097,144
- ----------------------------------------------------------------------------------------------------
Total fixed maturities....................... 13,344,949 427,240 159,050 13,613,139
Equity securities............................ 3,000 158 -- 3,158
- ----------------------------------------------------------------------------------------------------
$13,347,949 $427,398 $159,050 $ 13,616,297
- ----------------------------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
The amortized cost, gross unrealized gains and losses and fair values of
investmentsin fixed maturities and equity securities at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
HELD TO MATURITY COST GAINS LOSSES FAIR VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 41,932 $ 2,949 $ -- $ 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 $445,193 $17,233 $ 9,743,410
- -----------------------------------------------------------------------------------------------------
</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........... $ 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>
The amortized cost and fair value of investments in fixed maturities at December
31, 1998 by contractual maturity are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
HELD TO MATURITY COST VALUE
<S> <C> <C>
- ------------------------------------------------------------------
Due in one year or less................. $ 354,296 $ 359,020
Due from one to five years.............. 2,111,369 2,249,847
Due from five to ten years.............. 3,012,227 3,189,789
Due in more than ten years.............. 877,155 982,006
Mortgage-backed securities.............. 1,609,067 1,639,373
- ------------------------------------------------------------------
$7,964,114 $ 8,420,035
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
AVAILABLE FOR SALE COST VALUE
<S> <C> <C>
- ------------------------------------------------------------------
Due in one year or less................. $ 102,463 $ 104,475
Due from one to five years.............. 682,336 725,859
Due from five to ten years.............. 3,904,326 4,044,378
Due in more than ten years.............. 2,718,659 2,654,382
Mortgage-backed securities.............. 5,937,165 6,084,045
- ------------------------------------------------------------------
$13,344,949 $13,613,139
- ------------------------------------------------------------------
</TABLE>
During the years ended December 31, 1998, 1997 and 1996, fixed maturities
classified as held to maturity were sold with amortized cost of $230,036,
$229,848 and $277,527, 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 1998 with proceeds of
$278,955 and gross realized gains and losses of $15,658 and $22,102,
respectively. Fixed maturities
F-10
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
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.
At December 31, 1998, bonds carried at $14,302 were on deposit with various
states as required by law.
At December 31, 1998, 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 $3.6
billion which are rated by AEFC's internal analysts using criteria similar to
Moody's and S&P. A summary of investments in fixed maturities, at amortized
cost, by rating on December 31 is as follows:
<TABLE>
<CAPTION>
RATING 1998 1997
<S> <C> <C>
- ------------------------------------------------------------------
Aaa/AAA................................. $ 7,629,628 $ 9,195,619
Aaa/AA.................................. 2,277 --
Aa/AA................................... 308,053 232,451
Aa/A.................................... 301,325 246,792
A/A..................................... 2,525,283 2,787,936
A/BBB................................... 1,148,736 1,200,345
Baa/BBB................................. 6,237,014 5,226,616
Baa/BB.................................. 492,696 475,084
Below investment grade.................. 2,664,051 2,465,637
- ------------------------------------------------------------------
$21,309,063 $21,830,480
- ------------------------------------------------------------------
</TABLE>
At December 31, 1998, 93 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, 1998, approximately 13 percent of the Company's invested assets
were mortgage loans on real estate. Summaries of mortgage loans by region of the
United States and by type of real estate are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
REGION SHEET TO PURCHASE SHEET TO PURCHASE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
East North Central............ $ 750,705 $ 16,393 $ 748,372 $ 32,462
West North Central............ 491,006 81,648 456,934 14,340
South Atlantic................ 839,233 21,020 922,172 14,619
Middle Atlantic............... 476,448 6,169 545,601 15,507
New England................... 263,761 2,824 316,250 2,136
Pacific....................... 195,851 16,946 184,917 3,204
West South Central............ 136,841 1,412 125,227 --
East South Central............ 46,029 -- 60,274 --
Mountain...................... 345,379 8,473 297,545 28,717
- --------------------------------------------------------------------------------------
3,545,253 154,885 3,657,292 110,985
Less allowance for losses..... 39,795 -- 38,645 --
- --------------------------------------------------------------------------------------
$3,505,458 $154,885 $3,618,647 $110,985
- --------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
PROPERTY TYPE SHEET TO PURCHASE SHEET TO PURCHASE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Department/retail stores...... $ 1,139,349 $ 59,305 $ 1,189,203 $ 27,314
Apartments.................... 960,808 9,272 1,089,127 16,576
Office buildings.............. 783,576 50,450 716,729 34,546
Industrial buildings.......... 298,549 13,263 295,889 21,200
Hotels/motels................. 109,185 14,122 101,052 --
Medical buildings............. 124,369 -- 99,979 9,748
Nursing/retirement homes...... 46,696 -- 72,359 --
Mixed Use..................... 65,151 -- 71,007 --
Other......................... 17,570 8,473 21,947 1,601
- -----------------------------------------------------------------------------------------
3,545,253 154,885 3,657,292 110,985
Less allowance for losses..... 39,795 -- 38,645 --
- -----------------------------------------------------------------------------------------
$ 3,505,458 $ 154,885 $ 3,618,647 $ 110,985
- -----------------------------------------------------------------------------------------
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory authorities
to 80 percent or less of the market value of the real estate at the time of
origination of the loan. The Company holds the mortgage document, which gives it
the right to take possession of the property if the borrower fails to perform
according to the terms of the agreement. Commitments to purchase mortgages are
made in the ordinary course of business. The fair value of the mortgage
commitments is $nil.
At December 31, 1998 and 1997, the Company's recorded investment in impaired
loans was $24,941 and $45,714, respectively, with allowances of $6,662 and
$9,812, respectively. During 1998 and 1997, the average recorded investment in
impaired loans was $37,873 and $61,870, respectively.
The Company recognized $1,809, $2,981and $4,889 of interest income related to
impaired loans for the years ended December 31, 1998, 1997 and 1996
respectively.
The following table presents changes in the allowance for investment losses
related to all loans:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------
Balance, January 1................. $38,645 $37,495 $37,340
Provision for investment losses.... 7,582 8,801 10,005
Loan payoffs....................... (800) (3,851) (4,700)
Foreclosures and writeoffs......... (5,632) (3,800) (5,150)
- --------------------------------------------------------------
Balance, December 31............... $39,795 $38,645 $37,495
- --------------------------------------------------------------
</TABLE>
At December 31, 1998, the Company had commitments to purchase investments other
than mortgage loans for $223,011. Commitments to purchase investments are
made in the ordinary course of business. The fair value of these commitments is
$nil.
Net investment income for the years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Interest on fixed maturities....... $1,676,984 $1,692,481 $1,666,929
Interest on mortgage loans......... 301,253 305,742 283,830
Other investment income............ 43,518 25,089 43,283
Interest on cash equivalents....... 5,486 5,914 5,754
- -----------------------------------------------------------------------
2,027,241 2,029,226 1,999,796
Less investment expenses........... 40,756 40,837 34,434
- -----------------------------------------------------------------------
$1,986,485 $1,988,389 $1,965,362
- -----------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------
Fixed maturities................... $12,084 $16,115 $ 8,736
Mortgage loans..................... (5,933) (6,424) (8,745)
Other investments.................. 751 (8,831) (150)
- --------------------------------------------------------------
$ 6,902 $ 860 $ (159)
- --------------------------------------------------------------
</TABLE>
Changes in net unrealized appreciation (depreciation) of investments for the
years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------
Fixed maturities available for sale..... $(93,474) $ 223,441 $(231,853)
Equity securities....................... (203) 53 (52)
- ------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
3. INCOME TAXES
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the
Internal Revenue Code provisions applicable to life insurance companies.
The income tax expense (benefit) for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------
Federal income taxes:
Current............................ $244,946 $176,879 $260,357
Deferred........................... (16,602) 19,982 (65,609)
- -----------------------------------------------------------------
228,344 196,861 194,748
State income taxes-current......... 7,337 9,803 12,390
- -----------------------------------------------------------------
Income tax expense................. $235,681 $206,664 $207,138
- -----------------------------------------------------------------
</TABLE>
Increases (decreases) to the federal tax provision applicable to pretax income
based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
PROVISION RATE PROVISION RATE PROVISION RATE
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Federal income taxes based
on the statutory rate....................................... $271,527 35.0% $238,319 35.0% $217,600 35.0%
(Decreases) increases are attributable to:
Tax-excluded interest and dividend income................... (12,289) (1.6) (10,294) (1.5) (9,636) (1.5)
State taxes, net of federal benefit......................... 4,769 .6 6,372 .9 8,053 1.3
Affordable housing credits.................................. (19,688) (2.5) (20,705) (3.0) (5,090) (.8)
Other, net.................................................. (8,638) (1.1) (7,028) (1.0) (3,789) (.7)
- --------------------------------------------------------------------------------------------------------------------------
Federal income taxes........................................ $235,681 30.4% $206,664 30.4% $207,138 33.3%
- --------------------------------------------------------------------------------------------------------------------------
</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, 1998, the Company had a policyholders' surplus
account balance of $20,114. The policyholders' surplus account is only
F-13
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
3. INCOME TAXES (CONTINUED)
taxable if dividends to the stockholder exceed the stockholder's surplus account
or if the Company is liquidated. Deferred income taxes of $7,040 have not been
established because no distributions of such amounts are contemplated.
Significant components of the Company's deferred tax assets and liabilities as
of December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------
Deferred tax assets:
Policy reserves........................................ $756,769 $748,204
Life insurance guaranty fund assessment reserve........ 15,289 20,101
Other.................................................. 4,253 9,589
- ---------------------------------------------------------------------------
Total deferred tax assets.............................. 776,311 777,894
- ---------------------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs...................... 698,471 700,032
Unrealized gain on investments......................... 91,315 121,885
Investments, other..................................... 3,455 17,559
- ---------------------------------------------------------------------------
Total deferred tax liabilities......................... 793,241 839,476
- ---------------------------------------------------------------------------
Net deferred tax liabilities........................... $ 16,930 $ 61,582
- ---------------------------------------------------------------------------
</TABLE>
The Company is required to establish a valuation allowance for any portion of
the deferred tax assets that management believes will not be realized. In the
opinion of management, it is more likely than not that the Company will realize
the benefit of the deferred tax assets and, therefore, no such valuation
allowance has been established.
- --------------------------------------------------------------------------------
4. STOCKHOLDER'S EQUITY
Retained earnings available for distribution as dividends to the parent are
limited to the Company's surplus as determined in accordance with accounting
practices prescribed by state insurance regulatory authorities. Statutory
unassigned surplus aggregated $1,598,203 as of December 31, 1998 and $1,468,677
as of December 31, 1997 (see Note 3 with respect to the income tax effect of
certain distributions). In addition, any dividend distributions in 1999 in
excess of approximately $353,933 would require approval of the Department of
Commerce of the State of Minnesota.
Statutory net income for the years ended December 31 and capital and surplus as
of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Statutory net income............... $ 429,903 $ 379,615 $ 365,585
Statutory capital and surplus...... 1,883,405 1,765,290 1,565,082
- -----------------------------------------------------------------------
</TABLE>
F-14
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
5. RELATED PARTY TRANSACTIONS
The Company loans funds to AEFC under a collateral loan agreement. The balance
of the loan was $nil at December 31, 1998 and 1997. This loan can be increased
to a maximum of $75,000 and pays interest at a rate equal to the preceding
month's effective new money rate for the Company's permanent investments.
Interest income on related party loans totaled $nil, $103 and $780 in 1998, 1997
and 1996, 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 $211, $201 and $174 in 1998, 1997 and 1996, 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 1998, 1997 and 1996 were $1,503, $1,245 and $990,
respectively.
The Company participates in defined benefit health care plans of AEFC that
provide health care and life insurance benefits to retired employees and retired
financial advisors. The plans include participant contributions and service
related eligibility requirements. Upon retirement, such employees are considered
to have been employees of AEFC. AEFC expenses these benefits and allocates the
expenses to its subsidiaries. The Company's share of postretirement benefits in
1998, 1997 and 1996 was $1,352, $1,330 and $1,449, respectively.
Charges by AEFC for use of joint facilities, technology support, marketing
services and other services aggregated $411,337, $414,155 and $397,362 for 1998,
1997 and 1996, respectively. Certain of these costs are included in deferred
policy acquisition costs.
- --------------------------------------------------------------------------------
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1998, 1997 and 1996, traditional life insurance and universal
life-type insurance in force aggregated $81,074,928, $74,730,720 and
$67,274,354, respectively, of which $4,912,313, $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 $66,378,
$60,495 and $48,250 and reinsurance recovered from reinsurers amounted to
$20,982, $19,042, and $15,612 for the years ended December 31, 1998, 1997 and
1996, respectively. Reinsurance contracts do not relieve the Company from its
primary obligation to policyholders.
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company, its parent and its subsidiaries conduct
business involving insurers' sales practices, alleged agent misconduct, failure
to properly supervise agents, and other matters. The Company has been named as a
defendant in three of these types of actions.
The plaintiffs purport to represent a class consisting of all persons who
purchased policies or contracts from the Company and its subsidiaries. The
complaints put at issue various alleged sales practices and misrepresentations,
alleged breaches of fiduciary duties and alleged violations of consumer fraud
statutes. The Company and its subsidiaries believe they have meritorious
defenses to the claims raised in these lawsuits.
The outcome of any litigation cannot be predicted with certainty. In the opinion
of
F-15
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
management, however, the ultimate resolution of these lawsuits, taken in the
aggregate, should not have a material adverse effect on the Company's
consolidated financial position.
The IRS routinely examines the Company's federal income tax returns, and is
currently 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 available lines of credit with its parent aggregating $100,000.
The interest rate for any borrowings is established by reference to various
indices plus 20 to 45 basis points, depending on the term. Borrowings
outstanding under this agreement were $nil at December 31, 1998 and 1997.
- --------------------------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into transactions involving derivative financial instruments
to manage its exposure to interest rate risk and equity market risk, including
hedging specific transactions. The Company does not hold derivative instruments
for trading purposes. The Company manages risks associated with these
instruments as described below.
Market risk is the possibility that the value of the derivative financial
instruments will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate or equity market index.
The Company is not impacted by market risk related to derivatives held for
non-trading purposes beyond that inherent in cash market transactions.
Derivatives held for purposes other than trading are largely used to manage risk
and, therefore, the cash flow and income effects of the derivatives are inverse
to the effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not fulfill the terms
of the contract. The Company monitors credit risk related to derivative
financial instruments through established approval procedures, including setting
concentration limits by counterparty, and requiring collateral, where
appropriate. A vast majority of the Company's counterparties are rated A or
better by Moody's and Standard & Poor's.
Credit risk related to interest rate caps and floors and index options is
measured by the replacement cost of the contracts. The replacement cost
represents the fair value of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over the
life of the agreement. Notional amounts are not recorded on the balance sheet.
Notional amounts far exceed the related credit risk.
F-16
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 NOTIONAL CARRYING FAIR TOTAL CREDIT
ASSETS: AMOUNT AMOUNT VALUE EXPOSURE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
Assets:
Interest rate caps............ $3,400,000 $15,985 $ 4,256 $ 4,256
Interest rate floors.......... 1,000,000 1,082 13,971 13,971
Options purchased............. 110,912 24,094 29,453 29,453
Liabilities:
Options purchased/written..... 265,454 (10,526 ) (11,062) --
Off balance sheet:
Interest rate swaps........... 1,667,000 -- (73,477) --
- ----------------------------------------------------------------------------
$30,635 $(36,859) $47,680
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997 NOTIONAL CARRYING FAIR TOTAL CREDIT
ASSETS: AMOUNT AMOUNT VALUE EXPOSURE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
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
Options purchased/written..... 279,737 9,808 10,449 10,449
Liabilities:
Options written............... 7,373 (89) 114 --
Off balance sheet:
Interest rate swaps........... 1,267,000 -- (45,799) --
- ---------------------------------------------------------------------------------
$36,243 $ (15,020) $30,655
- ---------------------------------------------------------------------------------
</TABLE>
The fair values of derivative financial instruments are based on market values,
dealer quotes or pricing models. The interest rate caps, floors and swaps expire
on various dates from 1999 to 2003. The put and call options expire on various
dates from 1999 to 2005.
Interest rate caps, swaps and floors are used principally to manage the
Company's interest rate risk. These instruments are used to protect the margin
between interest rates earned on investments and the interest rates credited to
related annuity contract holders.
The Company is also using interest rate swaps to manage interest rate risk
related to the level of fee income earned on the management of fixed income
securities in separate accounts and the underlying mutual funds. The amount of
fee income received is based upon the daily market value of the separate account
and mutual fund assets. As a result, changing interest rate conditions could
impact the Company's fee income significantly. The Company entered into interest
rate swaps to hedge anticipated fee income for 1999 related to separate accounts
and mutual funds which invest in fixed income securities. Interest will be
accrued and reported in accrued investment income and other liabilities, as
appropriate, and management and other fees.
The Company offers a certain annuity product that pays interest based upon the
relative change in a major stock market index between the beginning and end of
the product's term. As a means of hedging its obligation under the provisions of
this product, the Company purchases and writes options on the major stock market
index.
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
F-17
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
collars (combination of puts and calls) to hedge anticipated fee income for 1998
and 1999 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, 1998 deferred losses on purchased put and written call index options were
$2,933 and $7,435, respectively. At December 31, 1997 deferred losses on
purchased put index options were $2,428 and deferred gains on written call index
options were $5,275.
- --------------------------------------------------------------------------------
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>
1998 1997
- ----------------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
FINANCIAL ASSETS
Investments:
Fixed maturities (Note 2):
Held to maturity.............. $ 7,964,114 $ 8,420,035 $ 9,315,450 $ 9,743,410
Available for sale............ 13,613,139 13,613,139 12,876,694 12,876,694
Mortgage loans on real estate
(Note 2)...................... 3,505,458 3,745,617 3,618,647 3,808,570
Other:
Equity securities (Note 2).... 3,158 3,158 3,361 3,361
Derivative financial
instruments (Note 8).......... 41,161 47,680 36,332 30,665
Other......................... 28,872 28,872 82,347 85,383
Cash and cash equivalents
(Note 1)...................... 22,453 22,453 19,686 19,686
Separate account assets
(Note 1)...................... 27,349,401 27,349,401 23,214,504 23,214,504
FINANCIAL LIABILITIES
Future policy benefits for
fixed annuities............... $19,855,203 $19,144,838 $20,731,052 $19,882,302
Derivative financial
instruments (Note 8).......... 10,526 84,539 89 45,685
Separate account
liabilities................... 25,005,732 24,179,115 21,488,282 20,707,620
- ----------------------------------------------------------------------------------
</TABLE>
At December 31, 1998 and 1997, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related contracts
carried at $1,226,985 and $1,185,155, respectively, and policy loans of $90,115
and $93,540, respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1998 and 1997. 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 1998 and 1997.
At December 31, 1998 and 1997, 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 $2,343,669 and
$1,726,222, respectively.
F-18
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
10. 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 target date for substantially
completing corrective measures on business critical systems was December 31,
1998. Substantial testing of these systems was targeted for completion early in
1999. AEFC is currently on track with this schedule and is also on track to
finish the work on non-critical systems by June 30, 1999.
AEFC continues to evaluate 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.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential 2000 exposure is gathered.
F-19
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- -----------------------------------------------------------------
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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
February 4, 1999
F-20
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ & MZ:
Statements of Net Assets at Dec. 31, 1998.
Statements of Operations for the year ended Dec. 31, 1998.
Statements of Changes in Net Assets for the years ended Dec. 31, 1998
and Dec. 31, 1997.
Notes to Financial Statements.
Report of Independent Auditors dated March 12, 1999.
IDS Life Insurance Company:
Consolidated Balance Sheets at Dec. 31, 1998 and 1997;
Consolidated Statements of Income for the years ended Dec. 31, 1998,
1997, and 1996; Consolidated Statements of Stockholder's Equity for the
years ended Dec. 31, 1998, 1997, and 1996; Consolidated Statements of
Cash Flows for the years ended Dec. 31, 1998, 1997, and 1996; and Notes
to Consolidated Financial Statements. Report of Independent Auditors
dated February 4, 1999.
(b) Exhibits:
1.1 Copy of Resolution of the Executive Committee of the Board of Directors of
IDS Life establishing Accounts C, D, E, F, G, and H adopted May 13, 1981,
filed electronically as Exhibit 1.1 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
1.2 Copy of Resolution 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 Statement No. 33-52518 is
incorporated herein by reference.
1.3 Copy of 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 Statement No.
33-52518 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 Statement No.
33-52518 is incorporated herein by reference.
2. Not applicable.
3. Not applicable.
4.1 Copy of Group Deferred Fixed/Variable Contract (form 34607) filed
electronically as Exhibit 4 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
<PAGE>
4.2 Copy of Group Deferred Fixed/Variable Certificate (form 34610-MN) filed
electronically as Exhibit 5 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
5.1 Form of Master Application for Group Deferred Annuity Contract (form
34608C) filed electronically as Exhibit 5.1 to Post-Effective Amendment No.
4 to Registration Statement No. 33-52518 is incorporated herein by
reference.
5.2 Form of Participant Enrollment Form (form 34609A) filed electronically as
Exhibit 5.2 to Post-Effective Amendment No. 4 to Registration Statement No.
33-52518 is incorporated herein by reference.
6.1 Copy of Articles of Incorporation of IDS Life dated July 24, 1957, filed
electronically as Exhibit 6.1 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
6.2 Copy of Amendment to By-Laws of IDS Life filed electronically as Exhibit
6.2 to Post-Effective Amendment No. 2 to Registration Statement No 33-52518
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, dated April 28, 1999 filed electronically herewith.
10. Consent of Independent Auditors, filed electronically herewith.
11. None.
12. Not applicable.
13. Copy of Schedule for computation of each performance quotation filed
electronically as Exhibit 13 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-52518 is incorporated herein by reference.
14.1 Power of Attorney to sign Amendments to this Registration Statement dated
August 19, 1997 is filed electronically as Exhibit 15.1 to Post-Effective
Amendment No. 8 to Registration Statement No. 33-52518 is incorporated
herein by reference.
14.2.Power of Attorney to sign Amendments to this Registration Statement dated
April 9, 1998 is filed electronically as Exhibit 15.2 to Post-Effective
Amendment No. 8 to Registration Statement No. 33-52518 is incorporated
herein by reference.
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company)
<TABLE>
<CAPTION>
<S> <C> <C>
Name Principal Business Address Positions and Offices with Depositor
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
<PAGE>
Jeffrey S. Horton IDS Tower 10 Vice President, Treasurer and
Minneapolis, MN 55440 Assistant Secretary
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
Paula R. Meyer IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President, Assured Assets
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 President
Minneapolis, MN 55440
F. Dale Simmons IDS Tower 10 Vice President, Real Estate Loan
Minneapolis, MN 55440 Management
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>
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
IDS Life Insurance Company 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 Partners LLC Delaware
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 Advisors Japan Inc. Delaware
American Express Financial Corporation 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 Mississippi Inc. Mississippi
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 Brokerage Group Minnesota
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 Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
<PAGE>
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
Investors Syndicate Development Corp. Nevada
Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contractowners
On March 31, 1999, there were 17,457 contract owners of the
Employee Benefit Annuity.
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 directors, 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.
(c)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
IDS Life $17,634,855 $17,936,810 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 caused this Registration Statement to be signed
on its behalf in the City of Minneapolis, and State of Minnesota, on the 28th
day of April, 1999.
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 the 28th day of
April, 1999.
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, Treasurer
Jeffrey S. Horton and Assistant Secretary
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
<PAGE>
Signature Title
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President, Assured Assets
/s/ Philip C. Wentzel** Vice President and
Philip C. Wentzel Controller
*Signed pursuant to Power of Attorney dated August 19, 1997 is filed
electronically as Exhibit 15.1 to Post-Effective Amendment No. 8 to Registration
Statement No. 33-52518 is incorporated herein by reference.
**Signed pursuant to Power of Attorney dated April 9, 1998 is filed
electronically as Exhibit 15.2 to Post-Effective Amendment No. 8 to Registration
Statement No. 33-52518 is incorporated herein by reference.
/s/Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 9
This Post-Effective Amendment is comprised of the following papers and
documents:
The Cover Page.
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 and MZ
Registration No. 33-52518/811-3217
EXHIBIT INDEX
Exhibit 9 Opinion of Counsel
Exhibit 10 Consent of Independent Auditors
<PAGE>
April 28, 1999
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
RE: Registration Statement on Form N-4
File No.:33-52518
Ladies and Gentlemen:
I am familiar with the establishment of the IDS Life Account F, IZ, JZ, G, H, N,
KZ, LZ, 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 examinations 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, when offered and sold in accordance
with the prospectus contained in the Registration Statement and in
compliance with applicable law, will be 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,
/s/Mary Ellyn Minenko
Mary Ellyn Minenko
Group Counsel
(612-671-3678
<PAGE>
Consent of Independent Auditors
We consent to the use of our report dated February 4, 1999 on the financial
statements IDS Life Insurance Company and our report dated March 12, 1999 on the
financial statements of IDS Life Accounts JZ, F, KZ, MZ, LZ, IZ, N, H and G in
Post-Effective Amendment No. 9 to the Registration Statement (Form N-4, No.
33-52518) and related Prospectus for the registration of the Variable Retirement
and Employee Benefit Annuity Contracts to be offered by IDS Life Insurance
Company.
/s/Ernst & Young LLP
Minneapolis, Minnesota
April 27, 1999
