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IDS Life of New York Flexible Annuity
Prospectus
May 1, 1997
The Flexible Annuity is an individual deferred fixed/variable annuity contract
offered by IDS Life Insurance Company of New York (IDS Life of New York), a
subsidiary of IDS Life Insurance Company (IDS Life), which is a subsidiary of
American Express Financial Corporation (AEFC). Purchase payments may be
allocated among different accounts, providing variable and/or fixed returns and
payouts. The annuity is available for qualified and nonqualified retirement
plans.
IDS Life of New York Accounts 4, 5, 6, 9, 10, 11, 12, 13 and 14
Sold by: IDS Life Insurance Company of New York
20 Madison Ave. Extension
Albany, NY 12203
Telephone: 800-541-2251
This prospectus contains the information about the variable
accounts that you should know before investing. Refer to "The
variable accounts" in this prospectus.
The prospectus is accompanied or preceded by the Retirement Annuity Mutual Fund
prospectus for IDS Life Aggressive Growth Fund, IDS Life International Equity
Fund, IDS Life Capital Resource Fund, IDS Life Managed Fund, IDS Life Special
Income Fund, IDS Life Moneyshare Fund, IDS Life Growth Dimensions Fund, IDS Life
Global Yield Fund and IDS Life Income Advantage Fund. Please read these
documents carefully and keep them for future reference.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, or any state securities commission, nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
IDS Life of New York is not a financial institution and the securities it offers
are not deposits or obligations of, or guaranteed or endorsed by any financial
institution nor are they insured by the Federal Deposit Insurance Corporation,
the Federal
Reserve Board or any other agency.
A Statement of Additional Information (SAI) (incorporated by reference into this
prospectus) has been filed with the Securities and Exchange Commission (SEC),
and is available without charge by contacting IDS Life of New York at the
telephone number above or by completing and sending the order form on the last
page of this prospectus. The table of contents of the SAI is on the last page of
this prospectus.
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Table of contents
Key terms
The Flexible Annuity in brief
Expense summary
Condensed financial information
Financial statements
Performance information
The variable accounts
The funds
IDS Life Aggressive Growth Fund
IDS Life International Equity Fund
IDS Life Capital Resource Fund
IDS Life Managed Fund
IDS Life Special Income Fund
IDS Life Moneyshare Fund
IDS Life Growth Dimensions Fund
IDS Life Global Yield Fund
IDS Life Income Advantage Fund
The fixed account
Buying your annuity
The retirement date
Beneficiary
How to make purchase payments
Charges
Contract administrative charge
Mortality and expense risk fee
Surrender charge
Valuing your investment
Number of units
Accumulation unit value
Net investment factor
Factors that affect variable account
accumulation units
Making the most of your annuity
Automated dollar-cost averaging
Transferring money between accounts
Transfer policies
How to request a transfer or a surrender
Surrendering your contract
Surrender policies
Receiving payment when you request a surrender
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TSA special surrender provisions
Changing ownership
Benefits in case of death
The annuity payout period
Annuity payout plans
Death after annuity payouts begin
Taxes
Voting rights
Distribution of the contracts
About IDS Life of New York
Regular and special reports
Services
Table of contents of the Statement of
Additional Information
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Key terms
These terms can help you understand details about your annuity.
Annuity - A contract purchased from an insurance company that offers
tax-deferred growth of the investment until earnings are withdrawn and that can
be tailored to meet the specific needs of the individual during retirement.
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
available to the owner and/or any other payee. This amount may be on a variable
or fixed basis or a combination of both.
Annuity unit - A measure of the value of each variable account used to calculate
the annuity payouts.
Beneficiary - The person designated to receive annuity benefits in case of the
owner's or annuitant's death.
Close of business - When the New York Stock Exchange (NYSE) closes, normally 4
p.m. Eastern time.
Code - Internal Revenue Code of 1986, as amended.
Contract value - The total value of your annuity before any applicable surrender
charge and any contract administrative charge have been deducted.
Contract year - A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
Fixed account - An account to which you may allocate purchase payments. Amounts
allocated to this account earn interest at rates that are declared periodically
by IDS Life of New York.
IDS Life of New York - In this prospectus, "we," "us," "our" and "IDS Life of
New York" refer to IDS Life Insurance Company of New York.
Mutual funds (funds) - Nine IDS Life Retirement Annuity mutual funds, each with
a different investment objective. (See "The funds.") You may allocate your
purchase payments into variable accounts investing in shares of any or all of
these funds.
Owner (you, your) - The person who controls the annuity (decides on investment
allocations, transfers, payout options, etc.). Usually, but not always, the
owner is also the annuitant. The owner is responsible for taxes, regardless of
whether he or she receives the annuity's benefits.
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Purchase payments - Payments made to IDS Life of New York for an annuity.
Qualified annuity - An annuity purchased for a retirement plan that is subject
to applicable federal law and any rules of the plan itself. These plans include:
o Individual Retirement Annuities (IRAs)
o Simplified Employee pension (SEP) plans
o Section 401(k) plans
o Custodial and trusteed pension and profit-sharing plans
o Tax-Sheltered Annuities (TSAs)
All other annuities are considered nonqualified annuities.
Retirement date - The date when annuity payouts are scheduled to begin. This
date is first established when you start your contract. You can change it in the
future.
Surrender charge - A deferred sales charge that may be applied if you surrender
your annuity before the retirement date.
Surrender value - The amount you are entitled to receive if you surrender your
annuity. It is the contract value minus any applicable surrender charge and
contract administrative charge.
Valuation date - Any normal business day, Monday through Friday, that the NYSE
is open. The value of each variable account is calculated 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 mutual fund. (See "The variable
accounts.") The value of your investment in each variable account changes with
the performance of the particular fund.
The Flexible Annuity in brief
Purpose: The Flexible Annuity is designed to allow you to build up funds for
retirement. You do this by making one or more investments (purchase payments)
that may earn returns that increase the value of the annuity. Beginning at a
specified future date (the retirement date), the annuity provides lifetime or
other forms of payouts to you or to anyone you designate.
Ten-day free look: You may return your annuity to your financial advisor or our
Albany office within 10 days after it is delivered to you and receive a full
refund of the contract value. No charges will be deducted.
Accounts: You may allocate your purchase payments among any or all
of:
o nine variable accounts, each of which invests in mutual funds
with a particular investment objective. The value of each
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variable account varies with the performance of the particular fund. We
cannot guarantee that the value at the retirement date will equal or exceed
the total of purchase payments allocated to the variable accounts. (p.)
o one fixed account, which earns interest at rates that are
adjusted periodically by IDS Life of New York. (p.)
Buying your annuity: Your financial advisor will help you complete and submit an
application. Applications are subject to acceptance at our Albany office. You
may buy a nonqualified annuity or a qualified annuity including an IRA. Payment
may be made either in a lump sum or installments:
o Minimum purchase payment - $2,000 ($1,000 for qualified annuities) unless you
pay in installments by means of a bank authorization or under a group billing
arrangement such as a payroll deduction.
o Minimum installment payment - $50 monthly; $23.08 biweekly
payroll deductions.
o Maximum first-year payment(s) - $50,000 to $1,000,000 depending
on your age.
o Maximum payment for each subsequent year - $50,000. (p.)
Transfers: Subject to certain restrictions, you may redistribute your money
among accounts without charge at any time until annuity payouts begin and once
per contract year among the variable accounts thereafter. You may establish
automated transfers among the fixed and variable account(s). (p.)
Surrenders: You may surrender all or part of your contract value at
any time before the retirement date. You also may establish
automated partial surrenders. Surrenders may be subject to charges
and tax penalties and may have other tax consequences; also,
certain restrictions apply. (p.)
Changing ownership: You may change ownership of a nonqualified annuity by
written instruction, however, such changes of nonqualified annuities may have
federal income tax consequences. Certain restrictions apply concerning change of
ownership of a qualified annuity. (p.)
Benefits in case of death: If you or the annuitant dies before annuity payouts
begin, we will pay the beneficiary an amount at least equal to the contract
value. (p.)
Annuity payouts: The contract value of the investment can be applied 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 they are needed.
If you purchased a qualified annuity, the payout schedule must meet requirements
of the qualified plan. Payouts may be made 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.)
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Taxes: Generally, your annuity 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 income if
you are the owner. (p.)
Charges: Your Flexible Annuity is subject to a $6 quarterly ($24
annual) contract administrative charge, a 1% mortality and expense
risk charge and a surrender charge. (p.)
Expense summary
The purpose of this table is to help you understand the various costs and
expenses associated with your annuity.
You pay no sales charge when you purchase the annuity. All costs that you bear
directly or indirectly for the variable accounts and underlying mutual funds are
shown below. Some expenses may vary as explained under "Contract charges."
Owner Expenses
Surrender Charge
(as a percentage of new purchase payments)
Purchase payments less than six years old 7%
Earnings and purchase payments more than
six years old 0%
Annual Contract
Administrative Charge $24
Separate Account Annual Expenses
(as a percentage of average account value)
Total Separate Account Annual Expenses* 1%
Mortality and Expense Risk Fee
Annual Operating Expenses of Underlying Mutual Funds (management fees and other
expenses deducted as a percentage of average net assets as follows.)
<TABLE>
<CAPTION>
IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life Growth Global Income
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .60% .82% .60% .59% .59% .50% .63 % .84% .63%
Other expenses .09 .16 .08 .07 .10 .06 .22 .62 .54
Total* .69% .98% .68% .66% .69% .56% .85% 1.46% 1.17%
</TABLE>
* Annualized operating expenses of underlying mutual funds at Dec. 31, 1996.
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Example:* You would pay the following expenses on a $1,000 investment, assuming
5% annual return and surrender at the end of each time period:
<TABLE>
<CAPTION>
IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life Growth Global Income
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 88.16 $ 91.14 $ 88.06 $ 87.86 $ 88.16 $ 86.83 $ 89.80 $ 96.06 $ 93.08
3 years 126.74 135.25 125.93 125.31 126.24 122.18 131.22 150.05 141.13
5 years 166.78 181.96 166.26 165.20 166.78 159.82 175.18 206.67 191.80
10 years 209.99 241.03 208.90 206.73 209.99 195.78 227.23 290.50 260.89
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:
IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life Growth Global Income
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage
1 year $ 18.16 $ 21.14 $ 18.06 $ 17.86 $ 18.16 $ 16.83 $ 19.80 $ 26.06 $ 23.08
3 years 56.24 65.25 55.93 55.31 56.24 52.18 61.22 80.05 71.13
5 years 96.78 111.96 96.26 95.20 96.78 89.92 105.18 136.67 121.80
10 years 209.99 241.03 208.90 206.73 209.99 195.78 227.23 290.50 260.89
</TABLE>
This example should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
* In this example, the $24 annual contract administrative charge is approximated
as a .082% charge based on our average contract size.
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Condensed financial information
(unaudited)
The following tables give per-unit information about the financial history of
each variable account.
<TABLE>
<CAPTION>
Years Ended Dec. 31, 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Account 4 (investing in shares of Capital Resource Fund)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit $4.35 $3.43 $3.43 $3.35 $3.35 $2.24 $2.25 $1.78 $1.61 $1.44
value at beginning
of period
Accumulation unit value $4.64 $4.35 $3.43 $3.43 $3.35 $3.25 $2.24 $2.25 $1.78 $1.61
at end of period
Number of accumulation 47,283 44,849 38,283 30,089 21,677 13,591 10,058 8,345 7,347 7,342
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
expense to average
net assets
Account 101 (investing in shares of International Equity Fund)
Accumulation unit $1.38 $1.25 $1.29 $0.98 $1.00 --- --- --- --- ---
value at beginning
of period
Accumulation unit value $1.50 $1.38 $1.25 $1.29 $0.98 --- --- --- --- ---
at end of period
Number of accumulation 77,830 63,576 51,480 21,650 3,421 --- --- --- --- ---
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% --- --- --- --- ---
expense to average
net assets
Account 112 (investing in shares of Aggressive Growth Fund)
Accumulation unit $1.47 $1.12 $1.21 $1.08 $1.00 --- --- --- --- ---
value at beginning
of period
Accumulation unit value $1.69 $1.47 $1.12 $1.21 $1.08 --- --- --- --- ---
at end of period
Number of accumulation 77,673 62,233 45,347 19,430 5,961 --- --- --- --- ---
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% --- --- --- --- ---
expense to average
net assets
</TABLE>
1 Account 10 commenced operations on Jan. 13, 1992.
2 Account 11 commenced operations on Jan. 13, 1992.
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<TABLE>
<CAPTION>
Account 5 (investing in shares of Special Income Fund)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit $3.53 $2.91 $3.06 $2.67 $2.46 $2.12 $2.05 $1.90 $1.74 $1.74
value at beginning
of period
Accumulation unit value $3.73 $3.53 $2.91 $3.06 $2.67 $2.46 $2.12 $2.05 $1.90 $1.74
at end of period
Number of accumulation 24,424 23,903 21,936 23,259 16,710 12,228 10,315 9,301 7,891 8,093
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
expense to average
net assets
Account 6 (investing in shares of Moneyshare Fund)
Accumulation unit $1.99 $1.91 $1.86 $1.83 $1.80 $1.71 $1.61 $1.49 $1.40 $1.33
value at beginning
of period
Accumulation unit value $2.07 $1.99 $1.91 $1.86 $1.83 $1.80 $1.71 $1.61 $1.49 $1.40
at end of period
Number of accumulation 5,927 5,445 3,794 4,113 5,378 7,253 6,487 5,493 2,836 2,125
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
expense to average
net assets
Simple yield3 3.85% 4.11% 4.41% 1.90% 1.77% 3.24% 6.20% 6.80% 7.30% 5.73%
Compound yield3 3.93% 4.20% 4.51% 1.92% 1.79% 3.29% 6.39% 7.03% 7.57% 5.90%
Account 9 (investing in shares of Managed Fund)
Accumulation unit $2.57 $2.09 $2.21 $1.98 $1.86 $1.45 $1.42 $1.14 $1.06 $1.01
value at beginning
of period
Accumulation unit value $2.96 $2.57 $2.09 $2.21 $1.98 $1.86 $1.45 $1.42 $1.14 $1.06
at end of period
Number of accumulation 75,219 72,999 66,800 50,761 31,828 20,105 15,292 12,248 11,920 12,219
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
expense to average
net assets
Account 124 (investing in shares of Global Yield Fund)
Accumulation unit $1.00 --- --- --- --- --- --- --- --- ---
value at beginning
of period
Accumulation unit value $1.07 --- --- --- --- --- --- --- --- ---
at end of period
Number of accumulation 2,311 --- --- --- --- --- --- --- --- ---
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% --- --- --- --- --- --- --- --- ---
expense to average
net assets
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Account 134 (investing in shares of Income Advantage Fund)
Accumulation unit $1.00 --- --- --- --- --- --- --- --- ---
value at beginning
of period
Accumulation unit value $1.05 --- --- --- --- --- --- --- --- ---
at end of period
Number of accumulation 4,671 --- --- --- --- --- --- --- --- ---
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% --- --- --- --- --- --- --- --- ---
expense to average
net assets
Account 144 (investing in shares of Growth Dimensions Fund)
Accumulation unit $1.00 --- --- --- --- --- --- --- --- ---
value at beginning
of period
Accumulation unit value $1.11 --- --- --- --- --- --- --- --- ---
at end of period
Number of accumulation 27,817 --- --- --- --- --- --- --- --- ---
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% --- --- --- --- --- --- --- --- ---
expense to average
net assets
</TABLE>
3 Net of annual contract administrative charge and mortality and expense risk
fee. 4 Accounts KZ, LZ and MZ commenced operations on April 30, 1996.
Financial statements
The SAI dated May 1, 1997, contains:
o complete audited financial statements of the variable accounts
including:
- statements of net assets as of Dec. 31, 1996;
- statements of operations for the year ended Dec. 31, 1996,
except for IDS Life of New York Accounts 12, 13, and 14 which
are for the period April 30, 1996 (commencement of operations)
to Dec. 31, 1996;
and
- statements of changes in net assets for the years ended Dec.
31, 1996 and Dec. 31, 1995, except for IDS Life of New York
Accounts 12, 13 and 14 which are for the period April 30, 1996
(commencement of operations) to Dec. 31, 1996.
o complete audited financial statements for IDS Life of New York
including:
- balance sheets as of Dec. 31, 1996 and Dec. 31, 1995; and
- related statements of income and cash flows for each of the
three years in the period ended Dec. 31, 1996.
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Performance information
Performance information for the variable accounts may appear from time to time
in advertisements or sales literature. In all cases, such information reflects
the performance of a hypothetical investment in a particular account during a
particular time period.
Calculations are performed as follows:
Simple yield - Account 6 (investing in Moneyshare Fund): Income over a given
seven-day period (not counting any change in the capital value of the
investment) is annualized (multiplied by 52) by assuming that the same income is
received for 52 weeks. This annual income is then stated as an annual percentage
return on the investment.
Compound yield - Account 6: Calculated like simple yield, except that, when
annualized, the income is assumed to be reinvested. Compounding of reinvested
returns increases the yield as compared to a simple yield.
Yield - For accounts investing in income funds: Net investment income (income
less expenses) per accumulation unit during a given 30-day period is divided by
the value of the unit on the last day of the period. The result is converted to
an annual percentage.
Average annual total return: Expressed as an average annual compounded rate of
return of a hypothetical investment over a period of one, five and 10 years (or
up to the life of the account if it is less than 10 years old). This figure
reflects deduction of all applicable charges, including the contract
administrative charge, mortality and expense risk fee and surrender charge,
assuming a surrender at the end of the illustrated period. Optional average
annual total return quotations may be made that do not reflect a surrender
charge deduction (assuming no surrender).
Aggregate total return: Represents the cumulative change in the value of an
investment over a specified period of time (reflecting change in an account's
accumulation unit value). The calculation assumes reinvestment of investment
earnings and reflects the deduction of all applicable charges, including the
contract administrative charge, mortality and expense risk fee and surrender
charge, assuming a surrender at the end of the illustrated period. Optional
aggregate total return quotations may be made that do not reflect a surrender
charge deduction (assuming no surrender). Aggregate total return may be shown by
means of schedules, charts or graphs.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the fund in which the
account invests and the market conditions during the given time period. Such
information is not intended to indicate future performance. Because advertised
yields and total return figures include all charges attributable to the annuity,
which has the effect of decreasing advertised performance, account performance
should not be compared to that of mutual funds that sell their shares directly
to the public. (See the SAI for a
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PAGE 13
further description of methods used to determine yield and total return for the
accounts.) If you would like additional information about actual performance,
contact your financial advisor.
The variable accounts
Purchase payments can be allocated to any or all of the variable accounts that
invest in shares of the following funds:
IDS Life of
New York Account Established
IDS Life Aggressive Growth Fund 11 Oct. 8, 1991
IDS Life International Equity Fund 10 Oct. 8, 1991
IDS Life Capital Resource Fund 4 Nov. 12, 1981
IDS Life Managed Fund 9 Feb. 12, 1986
IDS Life Special Income Fund 5 Nov. 12, 1981
IDS Life Moneyshare Fund 6 Nov. 12, 1981
IDS Life Growth Dimensions Fund 14 April 17, 1996
IDS Life Global Yield Fund 12 April 17, 1996
IDS Life Income Advantage Fund 13 April 17, 1996
Each variable account meets the definition of a separate account under federal
securities laws. Income, capital gains and capital losses of each account are
credited or charged to that account alone. No variable account will be charged
with liabilities of any other account or of our general business. Each variable
account's net assets are held in relation to the contracts described in this
prospectus as well as other variable annuity contracts that we issue that are
not described in this prospectus. All obligations arising under the contracts
are general obligations of IDS Life of New York.
All variable accounts were established under New York law and are registered
together as a single unit investment trust under the Investment Company Act of
1940 (the 1940 Act). This registration does not involve any supervision of our
management or investment practices and policies by the SEC.
The funds
IDS Life Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock
of small- and medium-size companies. The fund also may invest in
warrants or debt securities or in large well-established companies
when the portfolio manager believes such investments offer the best
opportunity for capital appreciation.
IDS Life International Equity Fund
Objective: capital appreciation. Invests primarily in common stock of foreign
issuers and foreign securities convertible into common stock. The fund also may
invest in certain international bonds if the portfolio manager believes they
have a greater potential for capital appreciation than equities.
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IDS Life Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common
stocks and other securities convertible into common stock,
diversified over many different companies in a variety of
industries.
IDS Life Managed Fund
Objective: maximum total investment return. Invests primarily in
U.S. common stocks, securities convertible into common stock,
warrants, fixed income securities (primarily high-quality corporate
bonds) and money-market instruments. The fund invests in many
different companies in a variety of industries.
IDS Life Special Income Fund
Objective: to provide a high level of current income while
conserving the value of the investment for the longest time period.
Invests primarily in high-quality, lower-risk corporate bonds
issued by many different companies in a variety of industries and
in government bonds.
IDS Life Moneyshare Fund
Objective: maximum current income consistent with liquidity and conservation of
capital. Invests in high-quality money market securities with remaining
maturities of 13 months or less. The fund also will maintain a dollar-weighted
average portfolio maturity not exceeding 90 days. The fund attempts to maintain
a constant net asset value of $1 per share.
IDS Life Growth Dimensions Fund
Objective: long-term growth of capital. Invests primarily in
common stocks of U.S. and foreign companies showing potential for
significant growth.
IDS Life Global Yield Fund
Objective: high total return through income and growth of capital.
Invests primarily in a non-diversified portfolio of debt securities
of U.S. and foreign issuers.
IDS Life Income Advantage Fund
Objective: high current income, with capital growth as a secondary
objective. Invests in long-term, high-yielding, high-risk debt
securities below investment grade issued by U.S. and foreign
corporations.
The Internal Revenue Service (IRS) has issued final regulations relating to the
diversification requirements under Section 817(h) of the Code. Each mutual fund
intends to comply with these requirements.
More comprehensive information regarding each fund is contained in the fund
prospectus. You should read the fund prospectus and consider carefully, and on a
continuing basis, which fund or combination of funds is best suited to your
long-term investment needs. There is no assurance that the investment objectives
of the funds will be attained nor is there any guarantee that the contract value
will equal or exceed the total purchase payments made. Some funds may involve
more risk than others--please monitor your investments accordingly.
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The U.S. Treasury and the IRS have indicated that they may provide additional
guidance concerning how many variable accounts may be offered and how many
exchanges among variable accounts may be allowed before the owner is considered
to have investment control and thus is currently taxed on income earned within
variable account assets. We do not know at this time what the additional
guidance will be or when action will be taken. We reserve the right to modify
the contract, as necessary, to ensure that the owner will not be subject to
current taxation as the owner of the variable account assets.
We intend to comply with all federal tax laws to ensure that the contract
continues to qualify as an annuity for federal income tax purposes. We reserve
the right to modify the contract as necessary to comply with any new tax laws.
IDS Life is the investment manager and AEFC is the investment advisor for each
of the funds. IDS International, Inc., a wholly-owned subsidiary of AEFC, is the
sub-investment advisor for International Equity Fund. The investment manager and
advisors cannot guarantee that the funds will meet their investment objectives.
Please read the Retirement Annuity Mutual Fund prospectus for complete
information on investment risks, deductions, expenses and other facts you should
know before investing. It is available by contacting IDS Life of New York at the
address or telephone number on the front of this prospectus, or from your
financial advisor.
The fixed account
Purchase payments may also be allocated to the fixed account. The cash value of
the fixed account increases as interest is credited to the account. Purchase
payments and transfers to the fixed account become part of the general account
of IDS Life of New York, the company's main portfolio of investments. Interest
is credited daily and compounded annually. We may change the interest rates from
time to time.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 (1933 Act), nor is the
fixed account registered as an investment company under the 1940 Act.
Accordingly, neither the fixed account nor any interests in it are generally
subject to the provisions of the 1933 or 1940 Acts, and we have been advised
that the staff of the SEC has not reviewed the disclosures in this prospectus
that relate to 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.
Buying your annuity
Your financial advisor will help you prepare and submit your application and
send it along with your initial purchase payment to our Albany office. As the
owner, you have all rights and may receive all benefits under the contract. The
annuity can be owned in joint tenancy only in spousal situations. You cannot buy
an
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annuity or be an annuitant if you are 91 or older. Please remember that
investment performance, expenses and deduction of certain changes affect
accumulation unit value.
When you apply, you can select:
o the account(s) in which you want to invest;
o how you want to make purchase payments; and
o a beneficiary.
If your application is complete, we will process it and apply your purchase
payment to your account(s) within two business days after we receive it at our
Albany office. If your application is accepted, we will send you a contract. If
we cannot accept your application within five business days, we will decline it
and return your payment. We will credit additional purchase payments to your
account(s) at the next close of business after we receive your payments at our
Albany office.
The retirement date
Upon processing your application, we will establish the retirement date to the
maximum age or date as specified below. You can also select a date within the
maximum limits. This date can be aligned 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 can also change the date, provided you send us written
instructions at least 30 days before annuity payouts begin.
For nonqualified annuities, the retirement date must be:
o no earlier than the 60th day after the contract's effective
date; and
o no later than the annuitant's 85th birthday (or before the
10th contract anniversary, if purchased after age 75).
For qualified annuities, to avoid IRS penalty taxes, the retirement date
generally must be:
o on or after the date the annuitant reaches age 59 1/2; and
o for IRAs, SIMPLE IRAs, and SEPs, by April 1 of the year
following the calendar year when the annuitant reaches age 70
1/2; or
o for all other qualified annuities, by April 1 of the year following the
later of the calendar year when the annuitant reaches age 70 1/2 or, if
later, retires; except that 5% business owners may not 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 are taking the minimum IRA or TSA distributions as required by the Code
from another tax-qualified investment or in the form of partial surrenders from
this annuity, annuity payouts can start as late as the annuitant's 85th birthday
or the 10th contract anniversary.
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Beneficiary
If death benefits become payable before the retirement date, your named
beneficiary will receive all or part of the contract value. If there is no named
beneficiary, then you or your estate will be the beneficiary. (See "Benefits in
case of death" for more about beneficiaries).
Minimum purchase payment
If single payment:
Nonqualified: $2,000
Qualified: $1,000
If installment payments
$50 monthly; $23.08 biweekly
Installments must total at least $600 in the first year.*
*If you make no purchase payments for 36 months and your previous payments total
$600 or less, we have the right to give you 30 days' written notice and pay you
the total value of your annuity in a lump sum.
Minimum additional purchase payment(s): $50
Maximum first-year payment(s):
This maximum is based on your age or age of the annuitant (whoever is older) on
the effective date of the contract.
Up to age 75 $1 million
76 to 85 $500,000
86 to 90 $50,000
Maximum payment for each subsequent year: $50,000**
**These limits apply in total to all IDS Life of New York annuities you own. We
reserve the right to increase maximum limits or reduce age limits. For qualified
annuities the qualified plan's limits on annual contributions also apply.
How to make purchase payments
1 By letter
Send your check along with your name and account number to:
Regular mail:
IDS Life Insurance Company of New York
Box 5144
Albany, NY 12205
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Express mail:
IDS Life Insurance Company of New York
20 Madison Ave. Extension
Albany, NY 12203
2 By scheduled payment plan
Your financial advisor can help you set up:
o an automatic payroll deduction, salary reduction or other group
billing arrangement;
o a bank authorization.
Charges
Contract administrative charge
This fee is for establishing and maintaining your records. We deduct $6 from the
contract value at the end of each contract quarter (each three-month period
measured from the effective date of your contract). This equates to an annual
charge of $24. If you surrender your contract, the quarterly charge will be
deducted at the time of surrender. The quarterly charge cannot be increased and
does not apply after annuity payouts begin.
Mortality and expense risk fee
This fee is to cover the mortality risk and expense risk and is applied daily to
the variable accounts and reflected in the unit values of the accounts. The
variable accounts pay this fee at the time that dividends are distributed from
the funds in which they invest. Annually, the fee totals 1% of the variable
accounts' average daily net assets. Approximately two-thirds of this amount is
for our assumption of mortality risk and one-third is for our assumption of
expense risk. This fee does not apply to the fixed account.
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 the entire
group of IDS Life of New York annuitants live. If, as a group, IDS Life of New
York annuitants outlive the life expectancy we have assumed in our actuarial
tables, then we must take money from our general assets to meet our obligations.
If, as a group, IDS Life of New York annuitants do not live as long as expected,
we could profit from the mortality risk fee.
Expense risk arises because the contract administrative charge cannot be
increased and may not cover our expenses. Any deficit would have to be made up
from our general assets.
We may use any profits realized from the mortality and expense risk fee for any
proper corporate purpose, including, among others, payment of distribution
(selling) expenses. We do not expect that the surrender charge, discussed in the
following paragraphs, will cover sales and distribution expenses.
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Surrender charge
A surrender charge of 7% applies on each purchase payment you make. We may
deduct this surrender charge if you request a surrender within six years of
making that purchase payment. The surrender amount you request is determined by
drawing from your total contract value in the following order:
1) First we surrender any contract earnings (contract value minus
all purchase payments received and not previously surrendered).
There is no surrender charge on contract earnings. Note: Contract
earnings are determined by looking at the entire contract value,
not the earnings of any particular variable or the fixed account.
2) Next, if necessary, we surrender amounts representing purchase payments six
contract years old or more and not previously surrendered. There is no surrender
charge on these old purchase payments.
3) Finally, if necessary, we surrender amounts representing purchase payments up
to six contract years old and not previously surrendered. A surrender charge of
7% applies to any amount surrendered from these new purchase payments.
The surrender charge is calculated so that the total amount surrendered, minus
any surrender charge, equals the amount you request:
o for a total surrender, the surrender charge equals the amount withdrawn from
amounts representing new purchase payments times 7%; and
o for a partial surrender, the surrender charge equals the amount withdrawn
from amounts representing new purchase payments divided by 0.93 times 7%.
Example of surrender charge on new purchase payments
you request..............$1,000 partial surrender = $1,075.27
.93
Total amount surrendered.........$1,075.27
X 0.07
Total surrender charge...........$ 75.27
There are no surrender charges for:
o amounts surrendered after the later of the annuitant attaining
age 65 or the 10th contract anniversary;
o contracts settled using an annuity payout plan; and
o death benefits.
Other information on charges: AEFC makes certain custodial services available to
some custodial and trusteed pension and profit sharing plans and 401(k) plans
funded by IDS Life of New York annuities. Fees for these services start at $30
per calendar year per participant. A termination fee for owners under 59 1/2
will be charged (fee waived in case of death or disability).
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Possible group reductions: In some cases (for example an employer making the
annuity available to employees) lower sales and administrative expenses may be
incurred 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 contract administrative and surrender charges. However, we expect
this to occur infrequently.
Valuing your investment
Here is how your accounts are valued:
Fixed account: The amounts allocated to the fixed account are valued directly in
dollars and equal the sum of your purchase payments, plus interest earned, less
any amounts surrendered or transferred (including the contract administrative
charge).
Variable accounts: Amounts allocated to the variable accounts are converted into
accumulation units. Each time you make a purchase payment or transfer amounts
into one of the variable accounts, a certain number of accumulation units are
credited to your contract for that account. Conversely, each time you take a
partial surrender, transfer amounts out of a variable account or are assessed a
contract administrative charge, a certain number of accumulation units are
subtracted from your contract.
The accumulation units are the true measure of investment value in each account
during the accumulation period. They are related to, but not the same as, the
net asset value of the underlying fund. The dollar value of each accumulation
unit can rise or fall daily depending on the performance of the underlying
mutual fund and on certain fund expenses. Here is how unit values are
calculated:
Number of units
To calculate the number of accumulation units for a particular account, we
divide your investment by the current accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable account equals the last
value times the account's current net investment factor.
Net investment factor
o Determined each business day by adding the underlying mutual fund's current
net asset value per share, plus per share amount of any current dividend or
capital gain distribution; then
o dividing that sum by the previous net asset value per share; and
o subtracting the percentage factor representing the mortality and
expense risk fee from the result.
Because the net asset value of the underlying mutual fund may fluctuate, the
accumulation unit value may increase or decrease. You bear this investment risk
in a variable account.
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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:
o additional purchase payments allocated to the variable
account(s);
o transfers into or out of the variable account(s);
o partial surrenders;
o surrender charges; and/or
o contract administrative charges.
Accumulation unit values may fluctuate due to:
o changes in underlying mutual fund(s) net asset value;
o dividends distributed to the variable account(s);
o capital gains or losses of underlying mutual funds;
o mutual fund operating expenses; and/or
o mortality and expense risk fees.
Making the most of your annuity
Automated dollar-cost averaging
You can use automated transfers to take advantage of dollar-cost averaging
(investing a fixed amount at regular intervals). For example, you might have a
set amount transferred monthly from a relatively conservative variable account
to a more aggressive one or to several others.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market value(s) of the underlying
mutual fund(s). Since you invest the same amount each period, you automatically
acquire more units when the market value falls, fewer units when it rises. The
potential effect is to lower the average cost per unit. For specific features
contact your financial advisor.
How dollar-cost averaging works
Amount Accumulation Number of units
Month invested unit value purchased
Jan $100 $20 5.00
Feb 100 18 5.56
March 100 17 5.88
April 100 15 6.67
May 100 16 6.25
June 100 18 5.56
July 100 17 5.88
Aug 100 19 5.26
Sept 100 21 4.76
Oct 100 20 5.00
(footnotes to table) By investing an equal number of dollars each
month...
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(arrow in table pointing to April) you automatically buy more units when the per
unit market price is low...
(arrow in table pointing to September) and fewer units when the per unit market
price is high.
You have 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 subaccount will gain
in value, nor will it protect against a decline in value if market prices fall.
Because this strategy involves continuous investing, your success with
dollar-cost averaging 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.
Transferring money between accounts
You may transfer money from any one account, including the fixed account, to
another before the annuity payouts begin. If we receive your request before the
close of business, we will process it that day. Requests received after the
close of business will be processed the next business day. 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. Certain restrictions
apply to transfers involving the fixed account.
Transfer policies
o You may transfer contract values between the variable accounts, or from the
variable account(s) to the fixed account at any time. However, if you have
made a transfer from the fixed account to the variable account(s), you may
not make a transfer (including automated transfers) from any variable account
back to the fixed account until the next contract anniversary.
o You may transfer contract values from the fixed account to the variable
account(s) once a year during a 31-day transfer period starting on each
contract anniversary (except for automated transfers, which can be set up for
transfer periods of your choosing subject to certain minimums).
o If we receive your transfer request within 30 days before the contract
anniversary date, the transfer from the fixed account to the variable
account(s) will be effective on the anniversary.
o If we receive your request on or within 30 days after the contract
anniversary date, the transfer from the fixed account to the variable
account(s) will be effective on the day we receive it.
o We will not accept requests for transfers from the fixed account at any other
time.
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o Once annuity payouts begin, no transfers may be made to or from the fixed
account, but transfers may be made once per contract year among the variable
accounts. During the annuity payout period, you cannot be invested in more
than five variable accounts at any one time unless we agree otherwise.
How to request a transfer or a surrender
1 By letter
Send your name, account number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or surrender to:
Regular mail:
IDS Life Insurance Company of New York
Box 5144
Albany, NY 12205
Express mail:
IDS Life Insurance Company of New York
20 Madison Ave. Extension
Albany, NY 12203
Minimum amount
Mail transfers: $250 or entire account balance
Mail surrenders: $250 or entire account balance
Maximum amount
Mail transfers: None (up to contract value)
Mail surrenders: None (up to contract value)
2 By automated transfers and automated partial surrenders
Your financial advisor can help you set up automated transfers among your
accounts or partial surrenders from the accounts.
Start or stop this service by written request or other method acceptable to IDS
Life of New York. You must allow 30 days for IDS Life of New York to change any
instructions that are currently in place.
o Automated transfers from the fixed to variable account(s) may not exceed an
amount that, if continued, would deplete the fixed account within 12 months.
o Automated transfers and automated partial surrenders are subject to all of
the contract provisions and terms, including transfer of contract values
between accounts. Automated surrenders may be restricted by applicable law
under some contracts.
o You may not make additional purchase payments if automated
partial surrenders are in effect.
o Automated partial surrenders may result in IRS taxes and penalties on all or
part of the amount surrendered.
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Minimum amount
Automated transfers or surrenders: $50
Maximum amount
Automated transfers or surrenders: None (except for automated
transfers from the fixed
account)
Surrendering your contract
As owner, you may surrender all or part of your contract at any time before
annuity payouts begin by sending a written request to IDS Life of New York. For
total surrenders we will compute the value of your contract at the close of
business after we receive your request. We may ask you to return the contract.
You may have to pay surrender charges (see "Surrender charge") and IRS taxes and
penalties (see "Taxes"). No surrenders may be made after annuity payouts begin.
Surrender policies
If you have a balance in more than one account and request a partial surrender,
we will withdraw money from all your accounts in the same proportion as your
value in each account correlates to your total contract value, unless you
request otherwise. The minimum contract value after partial surrender is $600.
Receiving payment when you request a surrender
By regular or express mail:
o payable to owner;
o mailed to address of record.
o special payee and/or addressee.
NOTE: You will be charged a fee if you request express mail
delivery.
By wire:
o request that payment be wired to your bank;
o bank account must be in the same ownership as your contract;
o pre-authorization required. For instructions, contact your
financial advisor.
Payment normally will be sent within seven days after receiving your request.
However, we may postpone the payment if:
o the surrender amount includes a purchase payment check that
has not cleared;
o the NYSE is closed, except for normal holiday and weekend
closings;
o trading on the NYSE is restricted, according to SEC rules;
o an emergency, as defined by SEC rules, makes it impractical
to sell securities or value the net assets of the
accounts; or
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o the SEC permits us to delay payment for the protection of
security holders.
TSA special surrender provisions
Participants in Tax-Sheltered Annuities: The Code imposes certain restrictions
on your right as owner to receive early distributions from a TSA:
o Distributions attributable to salary reduction contributions made after Dec.
31, 1988, plus the earnings on them, or to transfers or rollovers of such
amounts from other contracts, may be made from the TSA only if:
-you have attained age 59 1/2;
-you have become disabled as defined in
the Code;
-you have separated from the service of the employer who
purchased the annuity; or
-the distribution is made to your beneficiary
because of your death.
o If you encounter a financial hardship (within the meaning of the Code), you
may receive a distribution of all contract values attributable to salary
reduction contributions made after Dec.
31, 1988, but not the earnings on them.
o Even though a distribution may be permitted under the above
rules, it still may be subject to IRS taxes and penalties. (See
"Taxes.")
o The above restrictions on the right to receive a distribution do not affect
the availability of the amount credited to the contract as of Dec. 31, 1988.
The restrictions do not apply to transfers or exchanges of contract value
within the annuity, or to another registered variable annuity contract or
investment vehicle available through the employer.
o If the contract has a loan provision, the right to receive a loan from your
fixed account is described in detail in your contract. You may borrow from
the contract value allocated to the fixed account.
o For certain types of contributions under a TSA contract to be excluded from
taxable income, the employer must comply with certain nondiscrimination
requirements. You should consult your employer to determine whether the
nondiscrimination rules apply to you.
Changing ownership
You may change ownership of your nonqualified annuity at any time by filing a
change of ownership with us at our Albany office. The change will become binding
upon us when we receive and record it. We take no responsibility for the
validity of the change.
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If you have a nonqualified annuity, you may lose your tax advantages by
transferring, assigning or pledging any part of it.
(See "Taxes.")
If you have a qualified annuity, you may not sell, assign, transfer, discount or
pledge your contract as collateral for a loan, or as security for the
performance of an obligation or for any other purpose to any person except IDS
Life of New York. However, if the owner is a trust or custodian, or an employer
acting in a similar capacity, ownership of a contract may be transferred to the
annuitant.
Benefits in case of death
If you or the annuitant dies (or, for qualified annuities, if the annuitant
dies) before annuity payouts begin, we will pay the beneficiary as follows:
If death occurs before the annuitant's 75th birthday, the beneficiary receives
the greatest of:
o the contract value; or
o the contract value as of the most recent sixth contract anniversary, minus
any surrenders since that anniversary; or
o purchase payments, minus any surrenders.
If death occurs on or after the annuitant's 75th birthday, the beneficiary
receives the greater of:
o the contract value; or
o the contract value as of the most recent sixth contract anniversary, minus
any surrenders since that anniversary.
If your spouse is sole beneficiary under a nonqualified annuity and you die
before the retirement date, your spouse may keep the annuity as owner. To do
this your spouse must, within 60 days after we receive proof of death, give us
written instructions to keep the contract in force.
Under a qualified annuity, if the annuitant dies before the retirement date, and
the spouse is the only beneficiary, the spouse may keep the annuity in force
until the date on which the annuitant would have reached age 70 1/2 or any other
date permitted by the Code. To do this, the spouse must give us written
instructions within 60 days after we receive proof of death.
Payments: We will pay the beneficiary in a single sum unless you
have given us other written instructions, or the beneficiary may
receive payouts under any annuity payout plan available under this
contract if:
o the beneficiary asks us in writing within 60 days after we
receive proof of death;
o payouts begin no later than one year after death, or other date
as permitted by the Code; and
o the payout period does not extend beyond the beneficiary's life
or life expectancy.
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When paying the beneficiary, we will determine the contract's value
at the next close of business after our death claim requirements
are fulfilled. Interest, if any, will be paid 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.")
The annuity payout period
As owner of the contract, 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 will mutually agree on other payout
arrangements. The amount available for payouts under the plan you select is the
contract value on your retirement date. No surrender charges are deducted under
the payout plans listed below.
You also decide whether annuity payouts are to be made on a fixed
or variable basis, or a combination of fixed and variable. Amounts
of fixed and variable payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract; and
o the amounts you allocated to the account(s) at settlement.
In addition, for variable payouts only, amounts depend on the investment
performance of the account(s) you select. These payouts will vary from month to
month because the performance of the underlying mutual 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 "Transfer policies."
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 to be used to purchase
the payout plan.
o Plan A - Life annuity - no refund: Monthly payouts are made until the
annuitant's death. Payouts end with the last payout before the annuitant's
death; no further payouts will be made. This means that if the annuitant dies
after only one monthly payout has been made, no more payouts will be made.
o Plan B - Life annuity with five, 10 or 15 years certain: Monthly payouts are
made for a guaranteed payout period of five, 10 or 15 years that you elect. This
election will determine the length of the payout period to the beneficiary if
the annuitant should die before the elected period has expired. The guaranteed
payout period is calculated from the retirement date. If the annuitant outlives
the elected guaranteed payout period, payouts will continue until the
annuitant's death.
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o Plan C - Life annuity - installment refund: Monthly payouts are made until the
annuitant's death, with our guarantee that payouts will continue for some period
of time. Payouts will be made for at least the number of months determined by
dividing the amount applied under this option by the first monthly payout,
whether or not the annuitant is living.
o Plan D - Joint and last survivor life annuity - no refund: Monthly payouts are
made while both the annuitant and a joint annuitant are living. If either
annuitant dies, monthly payouts continue at the full amount until the death of
the surviving annuitant. Payouts end with the death of the second annuitant.
o Plan E - Payouts for a specified period: Monthly payouts are
made for a specific payout period of 10 to 30 years that you elect.
Payouts will be made only for the number of years specified whether
the annuitant is living or not. Depending on the time period
selected, it is foreseeable that an annuitant can outlive the
payout period selected. In addition, a 10% IRS penalty tax could
apply under this payout plan. (See "Taxes.")
Restrictions for some qualified plans: If you purchased a qualified annuity, you
must select a payout plan that provides for payouts:
o over the life of the annuitant;
o over the joint lives of the annuitant and a designated
beneficiary;
o for a period not exceeding the life expectancy of the
annuitant; or
o for a period not exceeding the joint life expectancies
of the annuitant and a designated beneficiary.
If we do not receive instructions: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's retirement date. If you
do not, we will make payouts under Plan B, with 120 monthly payouts guaranteed.
If monthly payouts would be less than $20: We will calculate the amount of
monthly payouts at the time the contract 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 contract value to the owner in a lump sum.
Death after annuity payouts begin
If you or the annuitant dies after annuity payouts begin, any amount payable to
the beneficiary will be provided in the annuity payout plan in effect.
Taxes
Generally, under current law, any increase in your contract value is taxable to
you only when you receive a payout or surrender. (See detailed discussion
below.) Any portion of the annuity payouts and any surrenders you request that
represent ordinary
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income are normally taxable. You will receive a 1099 tax information form for
any year in which a taxable distribution was made according to our records.
Annuity payouts under nonqualified annuities: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts received after your investment in the annuity is fully recovered will be
subject to tax.
Tax law requires that all nonqualified deferred annuity contracts issued by the
same company to the same owner during a calendar year are to be taxed as a
single, unified contract when distributions are taken from any one of such
contracts.
Annuity payouts under qualified annuities: Under a qualified annuity, the entire
payout generally will be includable as ordinary income and subject to tax except
to the extent that contributions were made with after-tax dollars. If you or
your employer invested in your contract with pre-tax dollars as part of a
qualified retirement plan, such amounts are not considered to be part of your
investment in the contract and will be taxed when paid to you.
Surrenders: If you surrender part or all of your contract before your annuity
payouts begin, your surrender payment will be taxed to the extent that the value
of your contract immediately before the surrender exceeds your investment. You
also may have to pay a 10% IRS penalty for surrenders before reaching age 59
1/2. For qualified annuities, other penalties may apply if you surrender your
annuity before your plan specifies that you can receive payouts.
Death benefits to beneficiaries: The death benefit under an annuity is not
tax-exempt. Any amount received by the beneficiary that represents previously
deferred income earnings within the contract, is taxable as ordinary income to
the beneficiary in the year(s) he or she receives the payment(s).
Annuities owned by corporations, partnerships or trusts: For nonqualified
annuities any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. This
provision is effective for purchase payments made after Feb. 28, 1986. However,
if the trust was set up for the benefit of a natural person only, the income
will continue to be tax-deferred.
Penalties: If you receive amounts from your contract 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:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal
periodic payments, made at least annually, over your life or life expectancy
(or joint lives or life expectancies of you and your beneficiary); or
<PAGE>
PAGE 30
o if it is allocable to an investment before Aug. 14, 1982 (except
for qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if you
surrender your annuity before your plan specifies that payouts can be made.
Withholding, generally: If you receive all or part of the contract value from an
annuity, withholding may be imposed against the taxable income portion of the
payout. Any withholding that is done represents a prepayment of your tax due for
the year. You take credit for such amounts on the annual tax return that you
file.
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. As long as you've
provided us with a valid Social Security Number or Taxpayer Identification
Number, you
can elect not to have any withholding occur.
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. Similar to
above, as long as you've provided us with a valid Social Security Number or
Taxpayer Identification Number, you can elect not to have this withholding
occur.
The state also imposes withholding requirements similar to the federal
withholding described above. If this should be the case, any payment from which
federal withholding is deducted may also have state withholding deducted.
The withholding requirements may differ if payment is being made to a non-U.S.
citizen or if the payment is being delivered outside the United States.
Withholding from qualified annuities: If you receive directly all or part of the
contract value from a qualified annuity (except an IRA or SEP) mandatory 20%
income tax withholding generally will be imposed at the time the payout is made.
This mandatory withholding is in place of the elective withholding discussed
above. This mandatory withholding will not be imposed if:
o instead of receiving the distribution check, you elect to have the
distribution rolled over directly to an IRA or another eligible plan;
o the payout is one in a series of substantially equal periodic payouts, made
at least annually, over 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
o 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.
State withholding also may be imposed on taxable distributions.
<PAGE>
PAGE 31
Transfer of ownership of a nonqualified annuity: If you make such a transfer
without receiving adequate consideration, the transfer is considered a gift and
also may be considered a surrender for federal income tax purposes. If the gift
is a currently taxable event for income tax purposes, the amount of deferred
earnings at the time of the transfer will be taxed to the original owner, who
also may be subject to a 10% IRS penalty as discussed earlier. In this case, the
new owner's investment in the annuity will be the value of the annuity at the
time of the transfer.
Collateral assignment of a nonqualified annuity: If you collaterally assign or
pledge your contract, earnings on purchase payments you made after Aug. 13, 1982
will be taxed to you like a surrender.
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 advisor if you have any questions about taxation of your contract.
Tax qualifications: The contract is intended to qualify as an annuity for
federal income tax purposes. To that end, the provisions of the contract are to
be interpreted to ensure or maintain such tax qualification, notwithstanding any
other provisions of the contract. We reserve the right to amend the contract to
reflect any clarifications that may be needed or are appropriate to maintain
such qualification or to conform the contract to any applicable charges in the
tax qualification requirements. We will send you a copy of any such amendment.
Voting rights
As a contract owner with investments in the variable account(s) you may vote on
important mutual 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:
o the reserve held in each account for your contract, divided by;
o the net asset value of one share of the applicable underlying
mutual fund.
As we make annuity payouts, the reserve for the annuity decreases; therefore,
the number of votes also will decrease.
<PAGE>
PAGE 32
We calculate votes separately for each account not more than 60 days before a
shareholders' meeting. Notice of these meetings, proxy materials and a statement
of the number of votes to which the voter is entitled, will be sent.
We will vote shares for which we have not received instructions in the same
proportion as the votes for which we have received instructions. We also will
vote the shares for which we have voting rights in the same proportion as the
votes for which we have received instructions.
Distribution of the contracts
American Express Financial Advisors Inc., a registered broker/dealer and an
affiliate of IDS Life of New York is the sole distributor of the contract. IDS
Life of New York pays total commissions of up to 7.0% of the total purchase
payments received on the contracts. A portion of this total commission is paid
to district managers and field vice presidents of the selling representative.
About IDS Life of New York
The Flexible Annuity is issued by IDS Life of New York. IDS Life of New York is
a wholly-owned subsidiary of IDS Life, which is a wholly-owned subsidiary of
AEFC. AEFC is a wholly-owned subsidiary of American Express Company. American
Express Company is a financial services company principally engaged through
subsidiaries (in addition to AEFC) in travel related services, investment
services and international banking services.
IDS Life of New York is a stock life insurance company organized in 1972 under
the laws of the State of New York and is located at 20 Madison Ave. Ext.,
Albany, New York. IDS Life of New York is licensed in New York and North Dakota
and conducts a conventional life insurance business in the State of New York.
American Express Financial Advisors Inc. is the principal
underwriter for the Accounts. Its corporate office is IDS Tower
10, Minneapolis, MN 55440-0010. American Express Financial
Advisors Inc. is a wholly owned subsidiary of AEFC.
American Express Financial Advisors Inc. offers mutual funds,
investment certificates and a broad range of financial management
services. IDS Life of New York offers insurance and annuities.
American Express Financial Advisors Inc. serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,800 financial advisors.
Other subsidiaries provide investment management and related services for
pension, profit-sharing, employee savings and endowment funds of businesses and
institutions.
<PAGE>
PAGE 33
Regular and special reports
Services
To help you track and evaluate the performance of your annuity, we provide:
Quarterly statements showing the value of your investment.
Annual reports containing required information on the annuity and its underlying
investments.
A personalized annuity progress report detailing the cumulative return since the
contract was purchased and the average annual rate of return on your
investments. This report, which is unique in the industry, is available upon
request from your financial advisor.
Table of contents of the Statement of Additional Information
IDS Life of New York Preferred Retirement
Account.......................................3
Performance information.......................4
Calculating annuity payouts...................7
Rating agencies...............................8
Principal underwriter.........................8
Independent auditors..........................9
Prospectus....................................9
Financial statements - IDS Life of New York Accounts 4, 5, 6, 9, 10, 11, 12, 13
and 14 IDS Life Insurance Company of New York
- -------------------------------------------------------------------
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
_____ IDS Life of New York Flexible Annuity
_____ IDS Life Retirement Annuity Mutual Funds
Please return this request to:
IDS Life of New York Annuity Service
IDS Life Insurance Company of New York
Box 5144
Albany, NY 12205
Your name _______________________________________________________
Address _________________________________________________________
City ______________________ State ______________ Zip ___________
<PAGE>
PAGE 34
STATEMENT OF ADDITIONAL INFORMATION
for
FLEXIBLE ANNUITY
IDS LIFE OF NEW YORK ACCOUNTS 4, 5, 6, 9, 10, 11, 12, 13 and 14
May 1, 1997
IDS Life of New York Accounts 4, 5, 6, 9, 10, 11, 12, 13 and 14 are separate
accounts established and maintained by IDS Life Insurance Company of New York
(IDS Life of New York).
This Statement of Additional Information, dated May 1, 1997, is not a
prospectus. It should be read together with the accounts' prospectus, dated May
1, 1997, which may be obtained from your financial advisor, or by writing or
calling IDS Life of New York Annuity Service at the address or telephone number
below.
IDS Life of New York Annuity Service
20 Madison Avenue Extension
Albany, NY 12203
(518) 869-8613
<PAGE>
PAGE 35
TABLE OF CONTENTS
IDS Life of New York Preferred Retirement Account.............p. 3
Performance Information.......................................p. 4
Calculating Annuity Payouts...................................p. 7
Rating Agencies...............................................p. 8
Principal Underwriter.........................................p. 8
Independent Auditors..........................................p. 9
Prospectus....................................................p. 9
Financial Statements
- IDS Life of New York Accounts 4, 5, 6, 9, 10, 11, 12, 13 and 14
- IDS Life Insurance Company of New York
<PAGE>
PAGE 36
IDS LIFE OF NEW YORK PREFERRED RETIREMENT ACCOUNT
The Flexible Annuity may be used to fund the IDS Life of New York Preferred
Retirement Account (PRA) as a way to build tax-deferred retirement income. The
PRA can be used to supplement, or as an alternative to, a non-deductible IRA or
other retirement plan.
The advantages of the IDS Life of New York Preferred Retirement Account over a
non-deductible IRA are shown below:
IDS Life of New York Non-deductible
Preferred Retirement IRA
Account
- -------------------------------------------------------------
Maximum $1 million initially, $2,000 per year
amount you then $50,000 per ($4,000 per year
can year (spouse can for married individuals
contribute have own plan and filing jointly)
also contribute
$50,000, whether
or not employed)
- --------------------------------------------------------------
Highest age The later of age 85 70 1/2 years old
you can or the 10th contract
contribute anniversary
- --------------------------------------------------------------
Types of Any type: wages, Generally limited
income you investment income, to income from
can gifts, inheritance, employment
contribute etc.
- --------------------------------------------------------------
Records None required, but You must keep all
you must IDS Life of New York records yourself
keep furnishes you regular
reports for your files
- --------------------------------------------------------------
Reports you None You must report all
must file contributions and
with the withdrawals each
IRS year
- --------------------------------------------------------------
Age at which The later of age 85 70 1/2 years old
you must or the 10th contract
begin anniversary
withdrawals
- --------------------------------------------------------------
<PAGE>
PAGE 37
PERFORMANCE INFORMATION
Calculation of yield for Account 6
IDS Life of New York Account 6, which invests in IDS Life Moneyshare Fund,
calculates an annualized simple yield and compound yield based on a seven-day
period.
The simple yield is calculated by determining the net change in the value of a
hypothetical account having the balance of one accumulation unit at the
beginning of the seven-day period. (The net change does not include capital
change, but does include a pro rata share of the annual charges, including the
annual contract administrative charge and the mortality and expense risk fee.)
The net change in the account value is divided by the value of the account at
the beginning of the period to obtain the return for the period. That return is
then multiplied by 365/7 to obtain an annualized figure. The value of the
hypothetical account includes the amount of any declared dividends, the value of
any shares purchased with any dividend paid during the period and any dividends
declared for such shares. The variable account's (account) yield does not
include any realized or unrealized gains or losses, nor does it include the
effect of any applicable surrender charge.
The account calculates its compound yield according to the following formula:
Compound Yield = [(return for seven-day period +1)365/7 ] - 1
On Dec. 31, 1996, the account's annualized simple yield was 3.85%
and its compound yield was 3.93%.
The rate of return, or yield, on the account's accumulation unit may fluctuate
daily and does not provide a basis for determining future yields. Investors must
consider, when comparing an investment in Account 6 with fixed annuities, that
fixed annuities often provide an agreed-to or guaranteed fixed yield for a
stated period of time, whereas the variable account's yield fluctuates. In
comparing the yield of Account 6 to a money market fund, you should consider the
different services that the annuity provides.
Calculation of yield for accounts investing in income funds
Quotations of yield will be based on all investment income earned during a
particular 30-day period, less expenses accrued during the period (net
investment income) and will be computed by dividing net investment income per
accumulation unit by the value of an accumulation unit on the last day of the
period, according to the following formula:
<PAGE>
PAGE 38
YIELD = 2[(a-b + 1) - 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.
Yield on the account is earned from the increase in the net asset value of
shares of the fund in which the account invests and from dividends declared and
paid by the fund, which are automatically invested in shares of the fund.
On Dec. 31, 1996, the annualized yield for Account 5 was 7.68% for
Account 12 2.79% and for Account 13 9.32%.
Calculation of average annual total return
Quotations of average annual total return for an account will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the annuity contract over a period of one, five and ten years (or,
if less, up to the life of the Account), calculated according to the following
formula:
P(1+T) n = ERV
where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000 payment made
at the beginning of the one, five, or ten year (or other)
period at the end of the one, five, or ten year (or other)
period (or fractional portion thereof).
The following performance figures are calculated on the basis of historical
performance of the funds.
Average Annual Total Return For Period Ended: Dec. 31, 1996
Average Annual Total Return with Surrender
<TABLE>
<CAPTION>
Since
Account investing in: 1 Year 5 Year 10 Year Inception
- --------------------
IDS Life
<S> <C> <C> <C> <C>
Aggressive Growth Fund (1/92)* 7.96% -% -% 10.09%
Capital Resource Fund (10/81) -0.21 6.21 12.27 -
International Equity Fund (1/92) 1.38 - - 7.33
Managed Fund (4/86) 8.72 8.67 11.28 -
Moneyshare Fund (10/81) -3.09 1.61 4.44 -
Special Income Fund (10/81) -1.20 7.45 7.76 -
<PAGE>
PAGE 39
Growth Dimensions Fund (4/96) - - - 3.83
Global Yield Fund (4/96) - - - 0.14
Income Advantage Fund (4/96) - - - -2.05
Average Annual Total Return without Surrender
Since
Account Investing in: 1 Year 5 Year 10 Year Inception
- --------------------
IDS Life
Aggressive Growth Fund (1/92) 14.96% -% -% 11.03%
Capital Resource Fund (10/81) 6.79 7.29 12.27 -
International Equity Fund (1/92) 8.38 - - 8.37
Managed Fund (4/86) 15.72 9.66 11.28 -
Moneyshare Fund (10/81) 3.91 2.89 4.44 -
Special Income Fund (10/81) 5.80 8.48 7.76 -
Growth Dimensions Fund (4/96) - - - 10.83
Global Yield Fund (4/96) - - - 7.14
Income Advantage Fund (4/96) - - - 4.95
</TABLE>
* inception dates of the funds are shown in parentheses
Aggregate total return
Aggregate total return represents the cumulative change in the value of an
investment over a specified period of time (reflecting change in an account's
accumulation unit value) and is computed by the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one, five, or ten year (or
other) period at the end of the one, five, or ten year (or
other) period (or fractional portion thereof).
The Securities and Exchange Commission requires that an assumption be made that
the contract owner surrenders the entire contract at the end of the one, five
and ten year periods (or, if less, up to the life of the account) for which
performance is required to be calculated. In addition, performance figures may
be shown without the deduction of a surrender charge.
Total return figures reflect the deduction of all applicable charges including
administrative charge and mortality and expense risk fee.
Performance of the accounts may be quoted or compared to rankings, yields, or
returns as published or prepared by independent rating or statistical services
or publishers or publications such as The Bank Rate Monitor National Index,
Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund Report,
Financial Services Week, Financial Times, Financial World, Forbes, Fortune,
Global Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster,
Newsweek, The New York Times,
<PAGE>
PAGE 40
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 Account
The following calculations are done separately for each of the variable
accounts. The separate monthly payouts, added together, make up your total
variable annuity payout.
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your annuity as of the valuation
date seven days before the retirement date.
o apply the result to the annuity table contained in the contract or another
table at least as favorable. The annuity table shows the amount of the first
monthly payment for each $1,000 of value which depends on factors built into the
table, as described below.
Annuity Units: The value of your account is then converted to annuity units. To
compute the number credited to you, we divide the first monthly payment by the
annuity unit value (see below) on the valuation date on (or next day preceding)
the seventh calendar day before the retirement date. The number of units in your
account is fixed. The value of the units fluctuate with the performance of the
underlying mutual fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date on or immediately
preceding the seventh calendar day before the payout is due; by
o the fixed number of annuity units credited to you.
Annuity Table: The table shows the amount of the first monthly payment for each
$1,000 of contract 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 contract value is invested at the beginning
of the annuity payout period and earns a 3.5% rate of return, which is
reinvested and helps to support future payouts.
Annuity Unit Values: This value was originally set 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
investment rate built into the annuity table. With an assumed investment rate of
3.5%, the neutralizing factor is 0.999906 for a one day valuation period.
Net Investment Factor:
o Determined each business day by adding the underlying mutual fund's current
net asset value per share plus per share amount of
<PAGE>
PAGE 41
any current dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share; and
o subtracting the percentage factor representing the mortality and expense risk
fee from the result.
Because the net asset value of the underlying mutual fund may fluctuate, the net
investment factor may be greater or less than one, and the accumulation unit
value may increase or decrease. You bear this investment risk in a variable
account.
The Fixed Account
Your fixed annuity payout amounts are guaranteed. 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; and
o the annuity payout table we use will be the one in effect at the time you
choose to begin your annuity payouts. The table will be equal to or greater than
the table in your contract.
RATING AGENCIES
The following chart reflects the ratings given to IDS Life of New York by
independent rating agencies. These agencies evaluate the financial soundness and
claims-paying ability of insurance companies based on a number of different
factors. This information does not relate to the management or performance of
the variable accounts of the annuity. This information relates only to the fixed
account and reflects IDS Life of New York's ability to make annuity payouts and
to pay death benefits and other distributions from the annuity.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the accounts is American Express Financial
Advisors Inc. which offers the variable annuities on a continuous basis.
Surrender charges received by IDS Life of New York for 1996, 1995 and 1994,
aggregated $551,374, $464,724, and $269,275,
<PAGE>
PAGE 42
respectively. Commissions paid by IDS Life of New York for 1996, 1995 and 1994,
aggregated $1,036,511, $681,615, and $1,130,352, respectively. The surrender
charges were applied toward payment of commissions.
INDEPENDENT AUDITORS
The financial statements of IDS Life of New York Accounts 4, 5, 6, 9, 10, 11,
12, 13 and 14, including the statements of net assets as of December 31, 1996,
and the related statements of operations for the year then ended, except for IDS
Life of New York Accounts 12,13 and 14 which are for the period April 30, 1996
(commencement of operations) to Dec. 31, 1996 and the related statements of
changes in net assets for each of the two years in the period then ended, except
for IDS life of New York Accounts 12, 13 and 14 which are for the period April
30, 1996 (commencement of operations) to Dec. 31, 1996 and the financial
statements of IDS Life Insurance Company of New York as of December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996,
appearing in this SAI, have been audited by Ernst & Young LLP, independent
auditors, as stated in their reports appearing herein.
PROSPECTUS
The prospectus dated May 1, 1997, is hereby incorporated in this Statement of
Additional Information by reference.
<PAGE>
IDS Life of New York 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 OF NEW YORK
BALANCE SHEETS
Dec. 31, Dec. 31,
ASSETS 1996 1995
- ------ ----------- ------
(thousands)
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1996, $604,635; 1995, $683,147) $ 585,812 $ 642,580
Available for sale, at fair value (Fair value:
1996, $590,608; 1995, $577,068) 601,623 601,298
Mortgage loans on real estate 160,017 158,730
Policy loans 20,077 18,035
Other investments 1,374 1,915
----------- ------
Total investments 1,368,903 1,422,558
Accrued investment income 21,068 22,572
Deferred policy acquisition costs 119,183 109,800
Other assets 3,950 2,108
Separate account assets 950,018 724,212
-------- ---------
Total assets $2,463,122 $2,281,250
======== ========
<PAGE>
IDS LIFE INSURANCE COMPANY OF NEW YORK
BALANCE SHEETS (continued)
Dec. 31, Dec. 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1996 1995
- ------------------------------------ ---------- ---------
(thousands)
Liabilities:
Future policy benefits:
Fixed annuities $1,054,954 $1,109,167
Universal life-type insurance 142,278 136,475
Traditional life, disability income
and long-term care insurance 45,338 42,477
Policy claims and other policyholders' funds 3,155 3,644
Deferred income taxes 9,046 15,663
Amounts due to brokers 3,007 10,000
Other liabilities 25,463 21,029
Separate account liabilities 950,018 724,212
--------- ---------
Total liabilities 2,233,259 2,062,667
Stockholder's equity:
Capital stock, $10 par value per share;
200,000 shares authorized, issued and outstanding 2,000 2,000
Additional paid-in capital 49,000 49,000
Net unrealized gain on investments 6,943 15,341
Retained earnings 171,920 152,242
--------- -----------
Total stockholder's equity 229,863 218,583
-------- -----------
Total liabilities and stockholder's equity $2,463,122 $2,281,250
======== ========
Commitments and contingencies (Note 7)
See accompanying notes.
<PAGE>
IDS LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF INCOME
Years ended Dec.31,
1996 1995 1994
--------- ------- -------
(thousands)
Revenues:
Traditional life, disability income
and long-term care insurance
premiums $ 10,931 $ 9,280 $ 7,846
Policyholder and contractholder charges 15,832 13,216 11,607
Mortality and expense risk fees 8,574 6,213 4,562
Net investment income 109,468 110,924 108,143
Net realized gain (loss) on investments (1,424) 1,548 957
------ ------ -------
Total revenues 143,381 141,181 133,115
-------- -------- -------
Benefits and expenses:
Death and other benefits:
Traditional life, disability income
and long-term care insurance 4,182 3,354 6,016
Universal life-type insurance
and investment contracts 4,409 4,548 3,773
Increase in liabilities for future
policy benefits for traditional life,
disability income and
long-term care insurance 2,324 1,958 506
Interest credited on universal life-type
insurance and investment contracts 65,099 68,630 65,018
Amortization of deferred policy
acquisition costs 16,071 13,085 12,994
Other insurance and operating expenses 8,972 7,474 8,359
-------- ------- ------
Total benefits and expenses 101,057 99,049 96,666
------- ------- -------
Income before income taxes 42,324 42,132 36,449
Income taxes 14,640 14,745 12,794
------- ------- -------
Net income $ 27,684 $ 27,387 $ 23,655
====== ====== ======
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
Years ended Dec. 31,
1996 1995 1994
--------- --------- ------
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $27,684 $27,387 $23,655
Adjustments to reconcile net income to net
cash provided by operating activities:
Policy loan issuance, excluding universal
life-type insurance (2,473) (2,093) (1,365)
Policy loan repayment, excluding universal
life-type insurance 1,571 881 849
Change in accrued investment income 1,504 (1,055) (175)
Change in deferred policy acquisition
costs, net (9,087) (11,017) (11,522)
Change in liabilities for future policy
benefits for traditional life, disability income
and long-term care insurance 2,861 1,931 501
Change in policy claims and other
policyholders' funds (489) 427 870
Change in deferred income taxes (2,095) (1,301) (4,321)
Change in other liabilities 4,434 2,429 (1,711)
(Accretion of discount)
amortization of premium, net (652) (480) 2,464
Net realized (gain) loss on investments 1,424 (1,548) (957)
Policyholder and contractholder
charges, non-cash (7,831) (6,962) (6,000)
Other, net (1,781) (508) 689
--------- ----- ------
Net cash provided by operating
activities $15,070 $ 8,091 $2,977
------- ------- ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS (continued)
Years ended Dec. 31,
1996 1995 1994
------- ------- -----
(thousands)
<S> <C> <C> <C>
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ -- $ (37,540) $ (36,560)
Maturities, sinking fund payments and calls 39,082 34,216 78,757
Sales 14,465 28,905 2,649
Fixed maturities available for sale:
Purchases (97,370) (133,503) (117,965)
Maturities, sinking fund payments and calls 71,939 44,234 70,316
Sales 15,669 8,839 14,533
Other investments, excluding policy loans:
Purchases (14,802) (1,939) (47,353)
Sales 12,659 5,993 2,975
Change in amounts due to brokers (6,993) 10,000 (4,952)
------- ------- -------
Net cash provided by (used in)
investing activities 34,649 (40,795) (37,600)
--------- -------- ---------
Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received 131,011 159,431 188,469
Surrenders and death benefits (236,689) (190,695) (212,171)
Interest credited to account balances 65,099 68,630 65,018
Universal life-type insurance policy loans:
Issuance (4,490) (4,870) (3,907)
Repayment 3,350 2,946 2,476
Cash dividend to parent (8,000) (8,000) --
------ ------- ---
Net cash (used in) provided by financing
activities (49,719) 27,442 39,885
-------- ------- -------
Net (decrease) increase in cash and cash
equivalents -- (5,262) 5,262
Cash and cash equivalents at
beginning of year -- 5,262 --
-------- ------ -------
Cash and cash equivalents at
end of year $ -- $ -- $ 5,262
========= ======= =======
See accompanying notes.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ thousands)
1. Summary of significant accounting policies
Nature of business
IDS Life Insurance Company of New York (the Company) is engaged in the
insurance and annuity business in the state of New York. 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 Company is a wholly owned subsidiary of IDS Life Insurance Company
(IDS Life), which is a wholly owned subsidiary of American Express
Financial Corporation, which is a wholly owned subsidiary of American
Express Company. The accompanying financial statements have been
prepared in conformity with generally accepted accounting principles
which vary in certain respects from reporting practices prescribed or
permitted by the New York Department of Insurance as reconciled in Note
11.
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 carried as a separate component of
stockholder's equity, net of 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 the loan's
recorded investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate, or
the fair value of collateral. The amount of the impairment is recorded
in a reserve for mortgage loan losses. The reserve for mortgage loans
losses is maintained at a level that management believes is adequate to
absorb estimated losses in the portfolio. The level of the reserve
account is determined based on several factors, including historical
experience, expected future principal and interest payments, estimated
collateral values, and current and anticipated economic and political
conditions. Management regularly evaluates the adequacy of the reserve
for mortgage loan losses.
The Company generally stops accruing interest on mortgage loans for
which interest payments are delinquent more than three months. Based on
management's judgement 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 is amortized to investment income over
the life of the contracts and payments received as a result of these
agreements are recorded as a reduction of investment income when
realized. The amortized cost of interest rate caps is included in other
investments.
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 statements of cash flows is summarized
as follows:
1996 1995 1994
-------- -------- ------
Cash paid during the year for:
Income taxes $15,247 $15,026 $17,386
Interest on borrowings 777 742 147
Recognition of profits on annuity contracts and insurance policies
Profits on fixed deferred annuities are recognized by the Company over
the lives of the contracts, using primarily the interest method.
Profits represent the excess of investment income earned from
investment of contract considerations over interest credited to
contract owners and other expenses.
The retrospective deposit method is used in accounting for universal
life-type insurance. This method recognizes profits over the lives of
the policies in proportion to the estimated gross profits expected to
be realized.
Premiums on traditional life, disability income and long-term care
insurance policies are recognized as revenue when due, and related
benefits and expenses are associated with premium revenue in a manner
that results in recognition of profits over the lives of the insurance
policies. This association is accomplished by means of the provision
for future policy benefits and the deferral and subsequent amortization
of policy acquisition costs.
Policyholder and contractholder charges include the monthly cost of
insurance charges and issue and administrative fees. These charges also
include the minimum death benefit guarantee fees received from the
variable life insurance separate accounts. Management and other fees
include investment management fees and mortality and expense risk fees
from the variable annuity and variable life insurance separate accounts
and underlying funds.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales compensation,
policy issue costs, underwriting and certain sales expenses, have been
deferred on insurance and annuity contracts. The deferred acquisition
costs for most single premium deferred annuities and installment
annuities are amortized in relation to surrender charge revenue and a
portion of the excess of investment income earned from investment of
the contract considerations over the interest credited to contract
owners. 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, single premium deferred
annuities and installment annuities are accumulation values.
Liabilities for fixed annuities in a benefit status are based on the
Progressive Annuity Table with interest at 5 percent, the 1971
Individual Annuity Table with interest at 7 percent or 8.25 percent, or
the 1983a Table with various interest rates ranging from 5.5 percent to
9.5 percent, depending on year of issue.
Liabilities for future benefits on traditional life insurance are based
on the net level premium method and anticipated rates of mortality,
policy persistency and interest earnings. Anticipated mortality rates
generally approximate the 1955-1960 Select and Ultimate Basic Table for
policies issued prior to 1980, the 1965-1970 Select and Ultimate Basic
Table for policies issued from 1981-1984 and the 1975-1980 Select and
Ultimate Basic Table for policies issued after 1984. 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
are 4% for policies issued before 1974, 5.25% for policies issued from
1974-1980, and range from 10% to 6% depending on policy form, issue
year and policy duration for policies issued after 1980.
Liabilities for future disability income policy benefits include both
policy reserves and claim reserves. Policy reserves are based on the
net level premium method and anticipated rates of morbidity, mortality,
policy persistency and interest earnings. Anticipated morbidity rates
are based on the 1964 Commissioners Disability Table for policies
issued before 1996 and the 1985 CIDA table for policies issued in 1996.
Anticipated mortality rates are based on the 1958 Commissioners
Standard Ordinary Table for policies issued before 1996 and the
1975-1980 Basic Table for policies issued in 1996. Anticipated policy
persistency rates vary by policy form, occupation class, issue age and
policy duration. Anticipated interest rates are 3% for policies issued
before 1996 and grade from 7.5% to 5% over five years for policies
issued in 1996. Claim reserves are calculated on the basis of
anticipated rates of claim continuance and interest earnings.
Anticipated claim continuance rates are based on the 1964 Commissioners
Disability Table for claims incurred before 1993 and the 1985 CIDA
Table for claims incurred after 1992. Anticipated interest rates are 8%
for claims incurred prior to 1992, 7% for claims incurred in 1992 and
6% for claims incurred after 1992.
Liabilities for future long-term care policy benefits include both
policy reserves and claim reserves. Policy reserves are based on the
net level premium method and anticipated rates of morbidity, mortality,
policy persistency and interest earnings. Anticipated morbidity rates
are based on the 1985 National Nursing Home Survey. Anticipated
mortality rates are based on the 1983a Table. Anticipated policy
persistency rates vary by policy form, issue age and policy duration.
Anticipated interest rates are 9.5% grading to 7% over 10 years for
policies issued from 1989-1992 and 7.75% grading to 7% over 4 years for
policies issued after 1992. Claim reserves are calculated on the basis
of anticipated rates of claim continuance and interest earnings.
Anticipated claim continuance rates are based on the 1985 National
Nursing Home Survey. Anticipated interest rates are 8% for claims
incurred prior to 1992, 7% claims incurred in 1992 and 6% for claims
incurred after 1992.
Reinsurance
The maximum amount of life insurance risk retained by the Company on
any one life is $750 of life and waiver of premium benefits plus $50 of
accidental death benefits. The maximum amount of disability income risk
retained by the Company on any one life is $6 of monthly benefit for
benefit periods longer than three years. The excesses are reinsured
with other life insurance companies on a yearly renewable term basis.
Long-term care policies are primarily reinsured on a coinsurance basis.
Federal income taxes
The Company's taxable income is included in the consolidated federal
income tax return of American Express Company. The Company provides for
income taxes on a separate return basis, except that, under an
agreement between American Express Financial Corporation 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
American Express Financial Corporation to reimburse subsidiaries for
all tax benefits.
Included in other liabilities at Dec. 31, 1996 and 1995 are $5,161 and
$3,971, respectively, payable to IDS Life 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 makes contractual mortality assurances to the variable
annuity contract owners that the net assets of the separate accounts
will not be affected by future variations in the actual life expectancy
experience of the annuitants and the beneficiaries from the mortality
assumptions implicit in the annuity contracts. The Company makes
periodic fund transfers to, or withdrawals from, the separate accounts
for such actuarial adjustments for variable annuities that are in the
benefit payment period. For variable life insurance, the Company
guarantees that the rates at which insurance charges and administrative
fees are deducted from contract funds will not exceed contractual
maximums. The Company also guarantees that the death benefit will
continue payable at the initial level regardless of investment
performance so long as minimum premium payments are made.
Accounting changes
The Financial Accounting Standards Board's (FASB) Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," was
effective Jan. 1, 1996. The new rule did not have a material impact on
the Company's results of operations or financial condition.
Reclassification
Certain 1995 and 1994 amounts have been reclassified to conform to the
1996 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.
Net realized gain (loss) on investments for the years ended Dec. 31 is
summarized as follows:
1996 1995 1994
------ ------ -----
Fixed maturities $ (572) $1,997 $948
Mortgage loans (855) (487) -
Other investments 3 38 9
---------- ----- --
$(1,424) $1,548 $957
======== ====== ====
Changes in net unrealized appreciation (depreciation) of investments
for the years ended Dec. 31 are summarized as follows:
1996 1995 1994
---------- --------- --------
Fixed maturities:
Held to maturity $(21,744) $73,970 $(84,244)
Available for sale (13,215) 43,726 (38,226)
<PAGE>
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities and equity securities at Dec. 31, 1996
are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 4,498 $ 144 $ -- $ 4,642
Corporate bonds and obligations 523,807 23,060 2,964 543,903
Mortgage-backed securities 57,507 409 1,826 56,090
--------- --------- ------ ---------
$585,812 $23,613 $4,790 $604,635
======== ======= ====== ========
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
State and municipal obligations $ 105 $ 10 $ -- $ 115
Corporate bonds and obligations 260,966 8,857 1,181 268,642
Mortgage-backed securities 329,537 5,788 2,459 332,866
-------- -------- ------ --------
$590,608 $14,655 $3,640 $601,623
======== ======= ====== ========
</TABLE>
The change in net unrealized loss on available for sale securities
included as a separate component of stockholder's equity was $8,398 in
1996.
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities and equity securities at Dec. 31, 1995
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 $ 5,003 $ 199 $ -- $ 5,202
State and municipal obligations 150 -- 2 148
Corporate bonds and obligations 578,253 41,939 2,027 618,165
Mortgage-backed securities 59,174 846 388 59,632
--------- --------- ------- ---------
$642,580 $42,984 $2,417 $683,147
======== ======= ====== ========
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
State and municipal obligations $ 105 $ 10 $ -- $ 115
Corporate bonds and obligations 248,973 17,470 497 265,946
Mortgage-backed securities 327,990 9,157 1,910 335,237
-------- -------- ------ --------
Total fixed maturities 577,068 26,637 2,407 601,298
Equity securities 10 -- -- 10
----------- ------- --------- -----------
$577,078 $26,637 $2,407 $601,308
======== ======= ====== ========
</TABLE>
The change in net unrealized gain on available for sale securities
included as a separate component of stockholder's equity was $27,710 in
1995.
<PAGE>
The amortized cost and fair value of investments in fixed maturities at
Dec. 31, 1996 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.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 11,777 $ 11,912
Due from one to five years 125,637 132,169
Due from five to ten years 321,472 333,245
Due in more than ten years 69,419 71,219
Mortgage-backed securities 57,507 56,090
--------- ---------
$585,812 $604,635
======== ========
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 39,155 $ 39,695
Due from one to five years 55,313 58,288
Due from five to ten years 127,642 130,246
Due in more than ten years 38,961 40,528
Mortgage-backed securities 329,537 332,866
-------- --------
$590,608 $601,623
======== ========
During the years ended Dec. 31, 1996, 1995 and 1994, fixed maturities
classified as held to maturity were sold with amortized cost of
$14,507, $27,971 and $2,735, 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' creditworthiness.
As a result of adopting the FASB Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments
in Debt and Equity Securities," the Company reclassified securities
with a book value of $15,607 and net unrealized gains of $144 from held
to maturity to available for sale in December 1995.
In addition, fixed maturities available for sale were sold during 1996
with proceeds of $15,669 and gross realized gains and losses of $28 and
$1,541, respectively. Fixed maturities available for sale were sold
during 1995 with proceeds of $8,839 and gross realized gains and losses
of $nil and $74, respectively. Fixed maturities available for sale were
sold during 1994 with proceeds of $14,533 and gross realized gains and
losses of $181 and $308, respectively.
At Dec. 31, 1996, bonds carried at $261 were on deposit with the state
of New York as required by law.
Net investment income for the years ended Dec. 31 is summarized as
follows:
1996 1995 1994
---------- --------- -------
Interest on fixed maturities $ 95,574 $ 97,092 $ 93,800
Interest on mortgage loans 14,171 13,888 13,226
Other investment income 1,293 1,291 1,219
Interest on cash equivalents 67 186 363
----------- ---- ------
111,105 112,457 108,608
Less investment expenses 1,637 1,533 465
---------- ------ -------
$109,468 $110,924 $108,143
======== ======== ========
<PAGE>
At Dec. 31, 1996, investments in fixed maturities comprised 87 percent
of the Company's total invested assets. Securities are rated by Moody's
and Standard & Poor's (S&P), except for securities carried at
approximately $130 million which are rated by American Express
Financial Corporation internal analysts using criteria similar to
Moody's and S&P. A summary of investments in fixed maturities, at
amortized cost, by rating on Dec. 31 is as follows:
Rating 1996 1995
---------------------- ------- --------
Aaa/AAA $ 396,097 $ 391,321
Aa/AA 13,996 17,572
Aa/A 10,197 9,950
A/A 196,542 209,483
A/BBB 62,488 61,912
Baa/BBB 336,706 357,445
Baa/BB 51,639 46,029
Below investment grade 108,755 125,936
----------- --------
$1,176,420 $1,219,648
========== ==========
At Dec. 31, 1996, 94 percent of the securities rated Aaa/AAA are GNMA,
FNMA and FHLMC mortgage-backed securities. No holdings of any other
issuer are greater than 1 percent of the Company's total investments
in fixed maturities.
At Dec. 31, 1996, approximately 11.6 percent of the Company's invested
assets were mortgage loans on real estate. Summaries of mortgage loans
by region and by type of real estate are as follows:
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
------------------------ ----------------------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
-------------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C>
West North Central $ 23,191 $1,342 $ 23,705 $ --
East North Central 33,430 1,708 34,207 --
South Atlantic 35,501 -- 38,802 2,033
Middle Atlantic 22,889 -- 23,502 --
Pacific 12,986 -- 13,150 --
Mountain 15,425 -- 14,937 5,084
New England 8,805 -- 8,982 --
East South Central 8,825 -- 1,613 7,407
West South Central 265 -- 277 --
--------- ---------- ---- -------
161,317 3,050 159,175 14,524
Less allowance for losses 1,300 -- 445 --
------ --- ---- -------
$160,017 $3,050 $158,730 $14,524
======== ====== ======== =======
Dec. 31, 1996 Dec. 31, 1995
--------------------- --------------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
------------------------- -------- ----------- ------- -----------
Apartments $ 70,292 $ 1,708 $ 64,136 $7,988
Department/retail stores 48,476 1,342 55,308 --
Office buildings 18,684 -- 12,367 6,536
Industrial buildings 11,956 -- 13,255 --
Nursing/retirement 6,477 -- 6,565 --
Medical buildings 5,167 -- 5,255 --
Other -- -- 2,012 --
Hotels/motels 265 -- 277 --
------ ---- --- -------
161,317 3,050 159,175 14,524
Less allowance for losses 1,300 -- 445 --
----- ----- ---- -------
$160,017 $ 3,050 $158,730 $14,524
======== ======= ======== =======
</TABLE>
<PAGE>
Mortgage loan fundings are restricted by state insurance regulatory
authority 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 the right to take possession of the property if
the borrower fails to perform according to the terms of the agreement.
The fair value of the mortgage loans is determined by a discounted cash
flow analysis using mortgage interest rates currently offered for
mortgages of similar maturities. Commitments to purchase mortgages are
made in the ordinary course of business. The fair value of the mortgage
commitments is $nil.
At Dec. 31, 1996 and 1995, the Company's recorded investment in
impaired loans was $1,327 and $2,052 with a reserve of $1,300 and $445,
respectively. During 1996 and 1995, the average recorded investment in
impaired loans was $1,628 and $3,003, respectively.
The Company recognized $152 and $204 of interest income related to
impaired loans for the year ended Dec. 31, 1996 and 1995, respectively.
The following table presents changes in the reserve for investment
losses related to all loans:
1996 1995
------ -----
Balance, Jan. 1 $ 445 $445
Provision for investment losses 855 --
------ ----
Balance, Dec. 31 $1,300 $445
====== ====
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.
Income tax expense consists of the following:
1996 1995 1994
------ ------ ------
Federal income taxes:
Current $15,735 $15,146 $16,419
Deferred (2,095) (1,301) (4,320)
------- ------ -------
13,640 13,845 12,099
State income taxes-current 1,000 900 695
----- ------ -----
Income tax expense $14,640 $14,745 $12,794
======= ======= =======
Increases (decreases) to the federal tax provision applicable to pretax
income based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- --------------------- --------------------
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based
on the statutory rate $14,813 35.0% $14,746 35.0% $12,757 35.0%
Increases (decreases) are
attributable to:
Tax-excluded interest
and dividend income (458) (1.1) (464) (1.1) (554) (1.5)
Other, net (716) (1.7) (437) (1.0) (104) (0.3)
---- ---- ---- ---- ----- ----
Federal income taxes $13,639 32.2% $13,845 32.9% $12,099 33.2%
======= ==== ======= ==== ======= ====
</TABLE>
<PAGE>
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 Dec. 31, 1996, the Company had a
policyholders' surplus account balance of $798. The policyholders'
surplus account is only taxable if dividends to the stockholder exceed
the stockholder's surplus account or if the Company is liquidated.
Deferred income taxes of $279 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 Dec. 31 are as follows:
1996 1995
-------- ------
Deferred tax assets:
Policy reserves $28,809 $26,237
Other 4,018 2,791
------- -----
Total deferred tax assets 32,827 29,028
------ ------
Deferred tax liabilities:
Deferred policy acquisition costs 35,302 33,001
Investments 6,571 11,690
------ ------
Total deferred tax
liabilities 41,873 44,691
------ -------
Net deferred tax liabilities $(9,046) $(15,663)
======= ========
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 the New York Department of
Insurance. Statutory unassigned surplus aggregated $94,007 as of Dec.
31, 1996 and $85,964 as of Dec. 31, 1995 (see Note 3 with respect to
the income tax effect of certain distributions).
Dividends paid to parent were $8,000 in 1996, $8,000 in 1995 and $nil
in 1994.
5. Retirement plan and services
Until July 1, 1995, the Company participated in the IDS Retirement Plan
of American Express Financial Corporation which covered all permanent
employees age 21 and over who had met certain employment requirements.
Effective July 1, 1995, the IDS Retirement Plan was merged with
American Express Company's American Express Retirement Plan, which
simultaneously was amended to include a cash balance formula and a lump
sum distribution option. 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 $34, $33 and
$33 in 1996, 1995 and 1994, respectively.
The Company has a "Sales Benefit Plan" which is an unfunded,
noncontributory retirement plan for all eligible financial advisors.
Total plan costs for 1996, 1995 and 1994, which are calculated on the
basis of commission earnings of the individual financial advisors, were
$1,474, $1,392 and $1,372, respectively. Such costs are included in
deferred policy acquisition costs.
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 1996, 1995
and 1994 were $248, $231 and $251, respectively.
The Company participates in defined benefit health care plans of
American Express Financial Corporation 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 American Express
Financial Corporation. American Express Financial Corporation expenses
these benefits and allocates the expenses to its subsidiaries.
Accordingly, costs of such benefits to the Company are included in
employee compensation and benefits and cannot be identified on a
separate company basis.
6. Incentive plan and operating expenses
The Company maintains a "Persistency Payment Plan." Under the terms of
this plan, financial advisors earn additional compensation based on the
volume and persistency of insurance sales. The total costs for the plan
for 1996, 1995 and 1994 were $1,424, $1,720 and $1,287, respectively.
Such costs are included in deferred policy acquisition costs.
Charges by IDS Life and American Express Financial Corporation for the
use of joint facilities, marketing services and other services
aggregated $12,389, $12,122 and $9,314 for 1996, 1995 and 1994,
respectively. Certain of the costs assessed to the Company are included
in deferred policy acquisition costs.
7. Commitments and contingencies
At Dec. 31, 1996 and 1995, traditional life insurance and universal
life-type insurance in force aggregated $4,053,561 and $3,502,851,
respectively, of which $203,963 and $163,462 were reinsured at the
respective year ends.
In addition, the Company has a stop loss reinsurance agreement with IDS
Life covering ordinary life benefits. IDS Life agrees to pay all death
benefits incurred each year which exceed 125 percent of normal claims,
where normal claims are defined in the agreement as .095 percent of the
mean retained life insurance in force. Premiums ceded to IDS Life
amounted to $98, $85 and $76 for the years ended Dec. 31, 1996, 1995
and 1994, respectively. Claim recoveries under the terms of this
reinsurance agreement were $861, $1,426 and $nil in 1996, 1995 and
1994, respectively.
Premiums ceded to reinsurers other than IDS Life amounted to $747, $667
and $735 for the years ended Dec. 31, 1996, 1995 and 1994,
respectively. Reinsurance recovered from reinsurers other than IDS Life
amounted to $66, $576 and ($107) for the years ended Dec. 31, 1996,
1995 and 1994.
Reinsurance contracts do not relieve the Company from its primary
obligations to policyholders.
The Company has an agreement to assume a block of extended term life
insurance business. The amount of insurance in force related to this
agreement was $345,943 and $392,106 at Dec. 31, 1996 and 1995,
respectively. The accompanying statement of income includes premiums of
$nil for the years ended Dec. 31, 1996, 1995 and 1994, and decrease in
liabilities for future policy benefits of $2,010, 2,039 and $2,538
related to this agreement for the years ended Dec. 31, 1996, 1995 and
1994, respectively.
8. Lines of credit
The Company has available lines of credit with two banks and American
Express Financial Corporation (AEFC) aggregating $55,000 of which
$25,000 is with AEFC. The lines of credit are at 40 to 80 basis points
over each lender's cost of funds. The $10,000 line of credit with one
bank expired on Dec. 31, 1996 and the Company did not seek renewal. The
$20,000 line of credit with the other bank expires on June 30, 1997 and
the Company expects to seek renewal. Outstanding borrowings under these
agreements were $nil at Dec. 31, 1996 and 1995.
<PAGE>
9. Derivative financial instruments
The Company enters into transactions involving derivative financial
instruments to manage its exposure to interest rate 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. 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 exposure related
to derivative financial instruments through established approval
procedures, including setting concentration limits by counterparty and
industry, 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 exposure related to interest rate caps is measured by
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
exposure.
The Company's holdings of derivative financial instruments are as
follows:
Notional Carrying Fair Total Credit
Dec. 31, 1996 Amount Value Value Exposure
------------- ------ ------- ----- ---------
Assets:
Interest rate caps $250,000 $1,374 $832 $832
======== ====== ==== ====
Dec. 31, 1995
Assets:
Interest rate caps $300,000 $1,905 $745 $745
======== ====== ==== ====
The fair values of derivative financial instruments are based on market
values, dealer quotes or pricing models. The interest rate caps expire
on various dates from 1997 to 2000.
Interest rate caps are used to manage the Company's exposure to
interest rate risk. These instruments are used primarily to protect the
margin between interest rates earned on investments and the interest
rates credited to related annuity contract holders.
<PAGE>
10. 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,
receivables and all non-financial instruments, such as deferred
acquisition costs are excluded. Off-balance sheet intangible assets,
such as the value the field force, are also excluded. Management
believes the value of excluded assets is significant. The fair value of
the Company, therefore, cannot be estimated by aggregating the amounts
presented.
<TABLE>
<CAPTION>
1996 1995
------- ------
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $ 585,812 $ 604,635 $ 642,580 $ 683,147
Available for sale 601,623 601,623 601,298 601,298
Mortgage loans on real estate (Note 2) 160,017 164,444 158,730 168,194
Other:
Equity securities (Note 2) -- -- 10 10
Derivative financial instruments (Note 9) 1,374 832 1,905 745
Separate accounts assets (Note 1) 950,019 950,019 724,212 724,212
Financial Liabilities
Future policy benefits for
fixed annuities 979,030 946,359 1,038,431 1,005,004
Separate account liabilities 880,160 838,492 678,263 645,389
</TABLE>
At Dec. 31, 1996 and 1995, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related
contracts carried at $72,252 and $67,843, respectively, and policy
loans of $3,672 and $2,893, respectively. The fair value of these
benefits is based on the status of the annuities at Dec. 31, 1996 and
1995. The fair value of deferred annuities is estimated as the carrying
amount less any 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 1996 and 1995.
At Dec. 31, 1996 and 1995, the fair value of liabilities related to
separate accounts is estimated as the carrying amount less applicable
surrender charges and less variable insurance contracts carried at
$69,859 and $45,949, respectively.
<PAGE>
11. Statutory insurance accounting practices
Reconciliations of net income for 1996, 1995 and 1994 and stockholder's
equity at Dec. 31, 1996 and 1995, as shown in the accompanying
financial statements, to that determined using statutory accounting
practices are as follows:
1996 1995 1994
-------- -------- -------
Net income, per accompanying
financial statements $27,684 $27,387 $23,655
Deferred policy acquisition costs (9,087) (11,017) (11,522)
Adjustments of future policy
benefit liabilities (9,683) (10,655) 13,741
Deferred federal income taxes (2,095) (1,301) (4,321)
Provision for losses on investments 877 -- (1,652)
IMR gain/loss transfer and amortization 1,010 (331) (54)
Adjustment to separate account reserves 8,863 20,769 142
Other, net 116 948 144
------- -------- --------
Net income, on basis of
statutory accounting practices $17,685 $25,800 $20,133
======= ======= =======
1996 1995
-------- -------
Stockholder's equity, per accompanying
financial statements $229,863 $218,583
Deferred policy acquisition costs (119,183) (109,800)
Adjustments of future policy benefit liabilities 13,458 23,172
Deferred federal income taxes 9,046 15,663
Securities valuation reserve (19,446) (18,029)
Adjustments of separate account liabilities 43,189 34,326
Net unrealized loss on investments (11,016) (24,231)
Premiums due, deferred and advance 1,149 925
Deferred revenue liability 1,342 794
Allowance for losses 1,349 445
Non-admitted assets (634) (578)
Interest maintenance reserve (1,432) (2,442)
Other, net (281) 347
-------- ------
Stockholder's equity, on basis of statutory
accounting practices $147,404 $139,175
======== ========
<PAGE>
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company of New York
We have audited the accompanying balance sheets of IDS Life Insurance Company of
New York (a wholly owned subsidiary of IDS Life Insurance Company) as of
December 31, 1996 and 1995, and the related statements of income and cash flows
for each of the three years in the period ended December 31, 1996. 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 financial position of IDS Life Insurance Company of
New York at December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
Ernst & Young LLP
February 7, 1997
Minneapolis, Minnesota
<PAGE>
PAGE 43
STATEMENT OF DIFFERENCES
Difference Description
1) Headings. 1) The headings in the
prospectus are placed
in blue strip at the top
of the page.
2) The page numbers in the 2) The prospectus begins on
electronic document do not page 1 in both documents,
correspond to the printed ends on page 33 in the
prospectus. electronic document, and
page 61 in the printed
prospectus.
3) Financial language. 3) A paragraph was addded on
the first page of the IDS Life Insurance
Company of New York Balance Sheets.
