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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
POST-EFFECTIVE AMENDMENT NO. 7
TO REGISTRATION STATEMENT NO. 33-28976
Under
The Securities Act of 1933
IDS Life Insurance Company
(Exact name of registrant as specified in charter)
Minnesota
(State or other jurisdiction of incorporation or organization)
63
___________________________________________________________________
(Primary Standard Industrial Classification Code Number)
41-0823832
___________________________________________________________________
(I.R.S. Employer Identification No.)
IDS Tower 10, Minneapolis, MN 55440-0010
(612) 671-3131
___________________________________________________________________
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Mary Ellyn Minenko, Counsel
IDS Life Insurance Company
IDS Tower 10, Minneapolis, Minnesota 55440-0010
(612) 671-3678
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
It is proposed that this filing become effective on May 1, 1995.
If any of the Securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. [X]
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<TABLE><CAPTION>
Calculation of Registration Fee
Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate offering Amount of
registered registered price per unit price registration fee
<S> <C> <C> <C> <C>
N/A
</TABLE>
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<TABLE><CAPTION>
IDS LIFE ACCOUNT MGA
GROUP AND INDIVIDUAL MARKET VALUE ANNUITY CONTRACTS ISSUED BY
IDS LIFE INSURANCE COMPANY
Cross-Reference Sheet
Pursuant to Regulation S-K
Item 501(b)
Form S-1 Item Number and Caption Location in Prospectus
<S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus......................Outside Front Cover
2. Inside Front and Outside Back
Cover Pages of Prospectus.....................Table of Contents
(inside front cover)
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges.......................................Summary or, as to ratio
of earnings to fixed
charges, Not Applicable
4. Use of Proceeds...............................Investments by IDS Life
5. Determination of Offering Price...............Not Applicable
6. Dilution......................................Not Applicable
7. Selling Security Holders......................Not Applicable
8. Plan of Distribution..........................Distribution of Contracts
9. Description of Securities to Be
Registered....................................Description of Contracts
10. Interests of Named Experts and
Counsel.......................................Not Applicable
11. Information with Respect to the
Registrant....................................The Company;
Directors and Executive
Officers of the Registrant;
Executive Compensation;
Security Ownership of
Management;
Legal Proceedings and
Opinion; and
Financial Statements
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities...............................See Item 14 in Part II
/TABLE
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PART I.
INFORMATION REQUIRED IN PROSPECTUS
Attached hereto and made a part hereof is the Prospectus.
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IDS Life Market Value Annuity
Prospectus, May 1, 1995
This prospectus describes interests in a group market value annuity
contract and individual market value annuity contracts (Preferred
Choice Annuities) offered by IDS Life Insurance Company (IDS Life)
to the general public for non-tax benefited purchases. With
respect to the group contract, eligible individuals include members
of the general public.
Participation in a group contract will be accounted for separately
by the issuance of a certificate showing your interest under the
group contract. Participation in an individual contract is shown
by the issuance of an individual annuity contract. The certificate
and the individual contract are both referred to as the "Contract."
In addition, IDS Life may offer these Contracts in the following
tax benefited programs: (1) plans qualified under Section 401(a),
401(k) or 403(a) of the Internal Revenue Code of 1986, as amended
(the Code); (2) annuity purchase plans adopted by public school
systems and certain tax-exempt organizations pursuant to Section
403(b) of the Code; (3) individual retirement annuities established
by persons, eligible under Section 408 of the Code (IRA); (4)
contracts purchased by the U.S. Government, the government of any
state or political subdivision thereof, or by any agency or
instrumentality (within the meaning of Section 414(d) of the Code),
for use in satisfying its obligation to provide a benefit under a
governmental plan; and (5) deferred compensation plans under
Section 457 of the Code.
A minimum purchase payment of at least $5,000 must accompany the
application for a Contract. No additional payment is permitted
under a Contract. The Accumulation Value will be guaranteed by the
general assets of IDS Life. IDS Life generally intends to invest
funds received in relation to Contracts in a variety of debt
instruments having price durations which tend to match the
applicable Contract.
IDS Life Account MGA
Group and Individual Market
Value Annuity Contracts
Sold by:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Telephone: 800-422-3542
THESE SECURITIES MAY BE SUBJECT TO A SUBSTANTIAL SURRENDER CHARGE
AND/OR MARKET VALUE ADJUSTMENT IF NOT HELD TO THE RENEWAL DATE
WHICH COULD RESULT IN YOUR RECEIPT OF LESS THAN YOUR ORIGINAL
PURCHASE PAYMENT.
FOR RENEWAL GUARANTEE PERIODS, THE RENEWAL INTEREST RATE WILL BE
DECLARED BY IDS LIFE BASED ON VARIOUS FACTORS. IT MAY BE HIGHER OR
LOWER THAN THE PREVIOUS GUARANTEED INTEREST RATE.
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THE MINIMUM GUARANTEED RENEWAL INTEREST RATE IS 3 PERCENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
IDS LIFE INSURANCE COMPANY IS NOT A BANK AND THE SECURITIES IT
OFFERS ARE NOT BACKED OR GUARANTEED BY ANY BANK, NOR ARE THEY
INSURED BY THE FDIC.
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Table of Contents Page
Summary...................................................
Glossary of Special Terms.................................
Description of Contracts..................................
General...................................................
Application and Purchase Payment..........................
Right to Cancel...........................................
Guarantee Periods.........................................
Surrenders................................................
Surrender Charge..........................................
Market Value Adjustment...................................
Premium Taxes.............................................
Death Benefit Prior to Settlement.........................
Statement.................................................
Electing the Settlement Date and Form of Annuity..........
Investments by IDS Life...................................
Amendment of Contracts....................................
Distribution of Contracts.................................
Assignment of Contracts...................................
Federal Tax Considerations................................
The Company...............................................
Business..................................................
Selected Financial Data...................................
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations.............
Reserves..................................................
Investments...............................................
Competition...............................................
Employees.................................................
Properties................................................
State Regulation..........................................
Directors and Executive Officers..........................
Executive Compensation....................................
Security Ownership of Management..........................
Legal Proceedings and Opinion.............................
Experts...................................................
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Appendix A (Partial Surrender Illustration)...............
Appendix B (Market Value Adjustment Illustration).........
IDS Life Financial Information............................
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Summary
IDS Life is offering group and individual market value annuities to
the general public for non-tax benefited and tax benefited
purchases. IDS Life is a wholly owned subsidiary of American
Express Financial Corporation, which itself is a wholly owned
subsidiary of American Express Company. As described in this
prospectus, market value annuity Contracts have a guaranteed
interest rate that is credited to the purchase payment when it is
held to the end of the Guarantee Period (the Renewal Date).
Surrenders before the Renewal Date are subject to a Market Value
Adjustment and a surrender charge (if applicable).
When a payment is made under an application, the applicant selects
a Guarantee Period from among those then offered by IDS Life.
During this Guarantee Period, the purchase payment earns interest
at the applicable guaranteed interest rate as established by IDS
Life. Interest is credited on a daily basis and the interest
credited earns interest at the applicable guaranteed interest rate
as established by IDS Life. (See Guarantee Periods page ).
At the end of each Guarantee Period, a renewal Guarantee Period of
one year will begin, unless the Owner elects a different duration.
The Owner must elect the length of a renewal Guarantee Period
during the 30 days before the end of the previous Guarantee Period.
Failure to make an election will result in an automatic renewal for
a period of one year. As of the first day of each renewal
Guarantee Period the renewal value will earn interest at the then
applicable renewal guaranteed interest rate and the interest
credited will earn interest at the then applicable renewal
guaranteed interest rate. (See Guarantee Periods page ).
Subject to certain restrictions, partial or total surrenders are
permitted. We may defer payment of any surrender for a period up
to six months from the date we receive notice of surrender or the
period permitted by state law, if less. A deferral of payment will
not be for a period greater than seven days except under
extraordinary circumstances. We will pay annual interest of at
least 3 percent of any amounts deferred for more than thirty days
during such period if we choose to exercise this deferral right.
(See Surrenders page ).
Surrenders may be subject to a surrender charge and/or a Market
Value Adjustment. Before the eighth Contract anniversary, a
surrender charge beginning at a maximum of 8 percent will be
assessed if you surrender. No surrender charge will be applied for
any surrenders after the eighth Contract anniversary or if the
surrender occurs on the last day of a Guarantee Period. We will
waive the surrender charge in certain instances. (See Surrender
Charge page ).
A Market Value Adjustment will be applied when the surrender occurs
before the Renewal Date. No Market Value Adjustment will be
applied to any surrender effective as of the end of a Guarantee
Period. The Market Adjusted Value will reflect the relationship, <PAGE>
PAGE 10
at the time of surrender, between the rate we then are crediting on
purchase payments to new Contracts with the same durations as the
time remaining in the Guarantee Period, and the guaranteed interest
rate applicable to that Contract. Generally, significant factors
affecting the amount of the Market Value Adjustment are the level
of interest rates on investments that are similar to those
supporting current Contract purchase payments and the time
remaining to the end of the Guarantee Period. The Market Adjusted
Value is sensitive, therefore, to changes in Current Interest
Rates. The level of the Market Value Adjustment is dependent on
the Current Interest Rate at the time of surrender. The Market
Value Adjustment may increase or decrease the value of this
investment before the Renewal Date. It is possible that the amount
you receive on surrender would be less than your original purchase
payment if interest rates increase. Also, if interest rates
decrease, the amount you receive on surrender may be more than your
original purchase payment and accrued interest. The Market
Adjusted Value also affects settlements under an annuity payment
plan. (See Market Value Adjustment page ).
We reserve the right to deduct applicable premium taxes from the
Accumulation Value of the Contract. State premium taxes range from
0 to 3.5 percent of the gross purchase payments. (See Premium
Taxes page __).
The Contract provides for a guaranteed death benefit. In the event
of the death of the Annuitant or Owner prior to the Settlement
Date, IDS Life will pay to the Owner or beneficiary the death
benefit in lieu of any other payment under the Contract. The
amount of the death benefit will equal the Accumulation Value. (See
Death Benefit Prior to Settlement page ).
On the Settlement Date specified by the Owner, IDS Life will pay
the Owner a lump sum payment or start to pay a series of payments.
A series of payments may be elected under certain Annuity Plans.
(See Electing the Settlement Date and Form of Annuity page ).
Glossary of Special Terms
In this prospectus "we" "us" and "IDS Life" refer to IDS Life
Insurance Company and "you" and "yours" refer to an Owner who has
been issued a Contract.
In addition, as used in this prospectus, the following terms have
the indicated meanings:
Accumulation Value - The value of the purchase payment plus
interest credited, adjusted for any surrenders.
Annuitant - The person on whose life monthly annuity payments
depend.
Cash Surrender Value - The Market Adjusted Value less any
applicable surrender charge.
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Contract Anniversary - The same day and month as the Contract Date
each year that the Contract remains in force.
Contract Date - The effective date of the Contract as designated in
the Contract.
Current Interest Rate - The applicable interest rate contained in a
schedule of rates established by us from time to time for various
Guarantee Periods.
Initial Guarantee Period - The period during which the Initial
Guarantee Rate will be credited.
Initial Guarantee Rate - The rate of interest credited to the
purchase payment during the Initial Guarantee Period.
Market Adjusted Value - The Accumulation Value adjusted by the
Market Adjusted Value formula, on any date before the end of the
Guarantee Period.
Market Value Adjustment - The Market Adjusted Value minus the
Accumulation Value.
Owner - The person or entity to whom the annuity Contract is
issued.
Renewal Date - The first day of a Renewal Guarantee Period. It
will always be on a Contract Anniversary.
Renewal Guarantee Period - A Renewal Guarantee Period will begin at
the end of each Guarantee Period.
Renewal Guarantee Rate - The rate of interest credited to the
Renewal Value during the Renewal Guarantee Period.
Renewal Value - The accumulation value at the end of the current
Guarantee Period.
Settlement - The application of the Market Adjusted Value of the
Contract to provide annuity payments.
Settlement Date - The date on which annuity payments are to begin.
Written Request - A request in writing signed by you and delivered
to us at our Home Office.
Description of Contracts
General
This prospectus describes interests in market value annuities
offered by IDS Life for non-tax benefited purchases. In addition,
IDS Life may offer the Contracts in the following tax benefited
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programs: (1) Section 401(a), 401(k) and 403(a) Plans; (2) Section
403(b) Plans; (3) IRAs; (4) certain governmental plans; and (5)
deferred compensation plans.
As described in this prospectus, the Contracts have a guaranteed
interest rate that is credited to a purchase payment in the
Contract when the purchase payment is held to its Renewal Date.
Surrenders prior to the Renewal Date are subject to a Market Value
Adjustment and a surrender charge (if applicable).
Application and Purchase Payment
To apply for a Contract, you must complete an application and make
a minimum purchase payment of $5,000. For individuals age 75 and
younger, the maximum purchase payment is $1,000,000 without prior
approval. For individuals age 76 to 85, it is $500,000. If you
purchase the Contract to fund a tax benefited plan, that plan's
limit on contributions also will apply.
We will return an improperly completed application, along with the
corresponding purchase payment, five days after we receive it if
the application has not, by that time, been properly completed.
A payment is credited to a Contract on the date we receive a
properly completed application along with the purchase payment.
Interest is earned the next day. IDS Life then issues a Contract
and confirms the purchase payment in writing.
Right to Cancel
State or Federal law may give you the right to cancel the Contract
within a specific period of time after receipt of the Contract and
receive a refund of the entire purchase payment. For revocation to
be effective, mailing or delivery of notice of cancellation must be
made in writing to our Home Office at IDS Tower 10, Minneapolis,
Minnesota 55440-0010.
Guarantee Periods
The Owner selects the duration of the Guarantee Period from among
those durations we offer. As of the date of this prospectus, we
are offering Guarantee Periods with annual durations from one to 10
years; however, the Guarantee Periods we offer in the future could
be different. The duration selected will determine the guaranteed
interest rate and the purchase payment (less surrenders made and
less applicable premium taxes, if any) will earn interest at this
guaranteed interest rate during the entire Guarantee Period. All
interest earned will be credited daily; this compounding effect is
reflected in the guaranteed interest rate.
Below is an illustration of how we will credit interest during the
Guarantee Period. For the purpose of this example, we have made
the assumptions as indicated.
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Example of Guaranteed Rate of Accumulation
Beginning Account Value: $50,000
Guaranteed Period: 10 years
Guaranteed Rate: 5 percent Annual Effective Rate
Interest Credited
to the Account Cumulative Interest
Year During Year Credited to the Account
1 $2,500.00 $ 2,500.00
2 2,625.00 5,125.00
3 2,756.25 7,881.25
4 2,894.06 10,775.31
5 3,038.77 13,814.08
6 3,190.70 17,004.78
7 3,350.24 20,355.02
8 3,517.75 23,872.77
9 3,693.64 27,566.41
10 3,878.32 31,444.73
Guaranteed Accumulation Value at the end of 10 years is:
$50,000 + $31,444.73 = $81,444.73
Note: This example assumes no surrenders of any amount during the
entire ten-year period. A Market Value Adjustment applies and a
surrender charge may apply to any interim surrender. (See
Surrenders). The hypothetical interest rates are illustrative only
and are not intended to predict future interest rates to be
declared under the Contract. Actual interest rates declared for
any given time may be more or less than those shown.
Renewal Guarantee Periods - At the end of any Guarantee Period, a
Renewal Guarantee Period will begin. We will notify you in writing
about the Renewal Guarantee Periods available before the Renewal
Date. This written notification will not specify the interest rate
for the Renewal Value. You may elect in writing, during the 30-day
period before the end of the Guarantee Period, a Renewal Guarantee
Period of a different duration from among those we offer at that
time. If no election is made, we will automatically apply the
Renewal Value to a Guarantee Period of one year. In no event may
Renewal Guarantee Periods extend beyond the Settlement Date then in
effect for the Contract. For example, if the Annuitant is age 62
at the end of a Guarantee Period and the Settlement Date for the
Annuitant is age 65, a three-year Guarantee Period is the maximum
Guarantee Period that may be selected under the Contract. The
Renewal Value will then earn interest at a guaranteed interest rate
that we have declared for such duration. We may declare new
schedules of guaranteed interest rates as frequently as daily.
At the beginning of any Renewal Guarantee Period, the Renewal Value
will be the Accumulation Value at the end of the Guarantee Period
just ending. The Renewal Value is guaranteed by our general
assets. This amount will earn interest for the Renewal Guarantee
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PAGE 14
Period at the then applicable guaranteed interest rate for the
period selected, that may be higher or lower than the previous
guaranteed interest rate.
At your Written Request, we will notify you of the Renewal
Guarantee Rates for the periods then available. You also may call
us to inquire about Renewal Guarantee Rates.
Establishment of Guaranteed Interest Rates - The guaranteed
interest rate for a chosen Guarantee Period will be known at the
time a purchase payment is received or an Accumulation Value is
renewed. We will send a confirmation that will show the amount and
the applicable guaranteed interest rate. The minimum guaranteed
interest rate for Renewal Values is 3 percent per year. The rate
on Renewal Values will be equal to or greater than the rate
credited on new comparable purchase payments at that time.
IDS Life has no specific formula for determining the rate of
interest that it will declare as guaranteed interest rates in the
future. We will declare the guaranteed interest rates from time to
time based on our analysis of current market conditions. (See
Investments by IDS Life). In addition, IDS Life also may consider
various other factors in determining guaranteed interest rates for
a given period, including, regulatory and tax requirements; sales
commission and administrative expenses we bear; general economic
trends; and competitive factors. IDS Life management will make the
final determination as to the guaranteed interest rates to be
declared. We cannot predict nor can we guarantee future guaranteed
interest rates above the 3 percent rate.
Surrenders
General - Subject to certain tax law and retirement plan
restrictions noted below, total and partial surrenders may be made
under a Contract at any time.
In the case of all surrenders, the Accumulation Value will be
reduced by the amount surrendered on the surrender date and that
amount will be payable to the Owner. The Accumulation Value also
will be reduced by any applicable surrender charge and either
reduced or increased by any Market Value Adjustment applicable to
the surrender. IDS Life will, on request, inform you of the amount
payable in a total or partial surrender. Any total or partial
surrender may be subject to tax and tax penalties. Surrenders from
certain tax benefited Contracts also may be subject to 20 percent
income tax withholding. (See Federal Tax Considerations).
Tax-Sheltered Annuities - The Code imposes certain restrictions on
an Owner's right to receive early distributions attributable to
salary reduction contributions from a Contract purchased for a
retirement plan qualified under Section 403(b) of the Code as a
Tax-Sheltered Annuity (TSA).
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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 contract only if the Owner has attained age 59-1/2, has become
disabled as defined in the Code, has separated from the service of
the employer that purchased the Contract or has died.
Additionally, if the Owner should encounter a financial hardship
(within the meaning of the Code), he or she may receive a
distribution of all Contract values attributable to salary
reduction contributions made after Dec. 31, 1988, but not of the
earnings on them.
Even though a distribution may be permitted under these rules
(e.g., for hardship or after separation from service), it may
nonetheless be subject to a 10 percent IRS penalty tax (in addition
to income tax) as a premature distribution and to 20 percent income
tax withholding. (See Federal Tax Considerations).
These restrictions do not apply to transfers of Contract value to
another TSA investment vehicle available through the employer.
Partial Surrenders - The minimum amount you may surrender is $250.
You cannot make a partial surrender if it would reduce the
Accumulation Value of your annuity to less than $2,000.
You may request the net check amount you wish to receive. We will
determine how much Accumulation Value needs to be surrendered to
yield the net check amount after any applicable Market Value
Adjustments and surrender charge deductions.
A partial surrender request not exceeding $40,000 may be made by
telephone. We have the authority to honor any telephone partial
surrender request believed to be authentic and will use reasonable
procedures to confirm that they are. This includes asking
identifying questions and tape recording calls. As long as
reasonable procedures are followed, neither IDS Life nor its
affiliates will be liable for any loss resulting from fraudulent
requests. At times when the volume of telephone requests is
unusually high, we will take special measures to ensure that your
call is answered as promptly as possible. A telephone surrender
request will not be allowed within 30 days of a phoned-in address
change.
Total Surrenders - We will compute the value of your Contract at
the close of business after we receive your request for a complete
surrender. We may ask you to return the Contract.
Payment on Surrender - We may defer payment of any partial or total
surrender for a period not exceeding 6 months from the date we
receive your notice of surrender or the period permitted by state
insurance law, if less. Only under extraordinary circumstances
will we defer a surrender payment more than 7 days, and if we defer
payment for more than 30 days, we will pay annual interest of at
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least 3 percent on the amount deferred. While all circumstances
under which we could defer payment upon surrender may not be
foreseeable at this time, such circumstances could include, for
example, our inability to liquidate assets due to a general
financial crisis. If we intend to withhold payment more than 30
days, we will notify you in writing.
Surrender Charge
A surrender charge may be assessed on any total or partial
surrender taken prior to the eighth Contract anniversary unless the
surrender occurs on the last day of a Guarantee Period. The amount
of the surrender charge will be based on the length of the
Guarantee Period. The table below shows the maximum amount of the
surrender charge.
Surrender Charge Percentage
Guarantee Period Contract Years as measured from the beginning
of a Guarantee Period
1 2 3 4 5 6 7 8
1 Year 1%
2 Years 2 1%
3 Years 3 2 1%
4 Years 4 3 2 1%
5 Years 5 4 3 2 1%
6 Years 6 5 4 3 2 1%
7 Years 7 6 5 4 3 2 1%
8 Years 8 7 6 5 4 3 2 1%
9 Years 8 7 6 5 4 3 2 1
10 Years 8 7 6 5 4 3 2 1
For Renewal Guarantee Periods, the surrender charge will be based
on the lesser of:
o the length of the new Guarantee Period, or
o the number of years remaining until the eighth Contract
anniversary.
For example, if a Contract Owner chose an Initial Guarantee Period
of 5 years and later a Renewal Guarantee Period of 4 years, the
surrender charge percentages would be:
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Contract Year Surrender Charge
1 5%
2 4
3 3
4 2
5 1*
6 3
7 2
8 1
9+ 0
*0% on last day of 5th Contract year.
There will never be any surrender charges after the eighth Contract
anniversary.
Also, after the first Contract anniversary, surrender charges will
not apply to surrenders of amounts totalling up to 10 percent of
the Accumulation Value as of the last Contract anniversary.
Surrender Charge Calculation - If there is a surrender charge, it
is calculated as:
(A minus B) multiplied by P
where: A = Market Adjusted Value surrendered
B = 10 percent of Accumulation Value on last Contract
anniversary not already taken as a partial surrender
this Contract year.
P = applicable surrender charge percentage
For an illustration of a partial surrender and applicable surrender
charges, see Appendix A.
Waiver of Surrender Charge - There will be no surrender charge:
o on the last day of a Guarantee Period;
o after the eighth Contract anniversary;
o after the first Contract anniversary for surrenders of amounts
totalling up to 10 percent of the Contract Accumulation Value
as of the last Contract anniversary;
o upon the death of the Annuitant or Owner; or
o upon the application of the Market Adjusted Value to provide
annuity payments under an annuity payment plan (if such
application occurs on a Renewal Date, there will be no
surrender charge or Market Value Adjustment, and the full
Accumulation Value will be applied under an annuity payment
plan).
In some cases, such as when an employer makes this annuity
available to employees, we may expect to incur lower sales and
administrative expenses or perform fewer services due to the size
of the group, the average contribution and the use of group
enrollment procedures. Then we may be able to reduce or eliminate
surrender charges. However, we expect this to occur infrequently.
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Market Value Adjustment
The Accumulation Value, including the interest credited, is
guaranteed if the Contract is held until the end of the Guarantee
Period. However, a Market Value Adjustment will be applied if a
surrender occurs prior to the end of the Guarantee Period. The
Market Adjusted Value also affects Settlements under an annuity
payment plan.
The Market Adjusted Value is your Accumulation Value (purchase
payment plus interest credited minus surrenders and surrender
charges) adjusted by a formula. The Market Adjusted Value reflects
the relationship between the guaranteed interest rate on your
Contract and the interest rate we are crediting on new contracts
with Guarantee Periods that are the same as the time remaining in
your Guarantee Period.
The Market Adjusted Value is sensitive to changes in Current
Interest Rates. The difference between your Accumulation Value and
Market Adjusted Value on any day will depend on our current
schedule of guaranteed interest rates on that day, the time
remaining in your Guarantee Period and your guaranteed interest
rate.
Your Market Adjusted Value may be more or less than your
Accumulation Value. If your guaranteed interest rate is lower than
the Current Interest Rate, your Market Adjusted Value probably will
be lower than your Accumulation Value. If your guaranteed interest
rate is higher than the Current Interest Rate, your Market Adjusted
Value probably will be higher than your Accumulation Value.
For example, assume you bought a Contract with a Guarantee Period
of 10 years and a guaranteed interest rate of 4.5 percent annually.
Assume that after 3 years you decide to surrender your Contract
(you have 7 years left in your Guarantee Period). If the Current
Interest Rate we are offering on new Contracts with 7-year
Guarantee Periods is 5 percent, your Market Adjusted Value will be
lower than your Accumulation Value. On the other hand, if the
Current Interest Rate we are then offering on new Contracts with
7-year Guarantee Periods is 4 percent, your Market Adjusted Value
will be higher than your Accumulation Value.
Market Adjusted Value Formula:
Market Adjusted Value = (Renewal Value)
(1 + ic + .0025)(N + t)
Renewal Value -- The Accumulation Value at the end of the current
Guarantee Period
ic -- The Current Interest Rate offered for new Contract
sales and renewals for the number of years
remaining in the Guarantee Period
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N -- The number of complete Contract years to the end
of the current Guarantee Period
t -- The fraction of the Contract year remaining to the
end of the Contract year (for example, if 180 days
remain in a 365 day year, t would be .493)
The current guaranteed interest rate (ic) is declared by us
periodically. It is the rate which we are then paying on purchase
payments and renewals paid under this class of Contracts for
Guarantee Period durations equaling the remaining Guarantee Period
duration of the Contract to which the formula is being applied. If
the remaining Guarantee Period is a number of complete years, the
specific complete year guarantee rate will be used. If the
remaining Guarantee Period is less than 1 year, the one year
guarantee rate will be used. If the remaining Guarantee Period is
a number of complete years plus fractional years, the rate will be
determined by straight line interpolation between the two years'
rates. For example, if the remaining Guarantee Period duration is
8.5 years, and the current guaranteed interest rate for 8 years is
4 percent and for 9 years is 5 percent, IDS Life will use a
guaranteed interest rate of 4.5 percent.
Market Value Adjustment Formula:
Market Value Adjustment = Market Adjusted Value less
Accumulation Value
For an illustration showing an upward and downward adjustment, see
Appendix B.
Premium Taxes
We reserve the right to deduct an amount from the Accumulation
Value of the Contract at the time that any applicable premium taxes
not previously deducted are payable. If a tax is payable at the
time of the purchase payment and we choose to not deduct it at that
time, we further reserve the right to deduct it at a later date.
Current premium taxes range in an amount up to 3.5 percent
depending on jurisdiction.
Death Benefit Prior to Settlement
If the Annuitant or Owner dies before the Settlement Date, the
death benefit payable to the beneficiary will equal the
Accumulation Value.
If your Spouse is Sole Beneficiary or Co-Owner - If you, as Owner
or Co-Owner, die before the Settlement Date and your spouse is the
only beneficiary or Co-Owner, 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.
<PAGE>
PAGE 20
Section 401(k) Plans, Section 403(b) Plans (TSAs), Section 457
Plans, Custodial and Trusteed Plans, and IRAs - If the Contract is
purchased under a Section 401(k) plan, Section 403(b) plan, Section
457 plan, custodial or trusteed plan or for an IRA and we receive
proof of the annuitant's death before the Settlement Date, we will
pay the beneficiary the death benefit described above. If the
annuitant dies before reaching age 70-1/2 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 70-1/2. To do
this, the spouse must, within 60 days after we receive proof of
death, give us written instructions to keep the Contract in force.
Paying the Beneficiary - Unless you have given us other written
instructions, we will pay the beneficiary in a single payment. The
beneficiary may elect to receive this payment at any time within 5
years after the date of death. Payment from a tax benefited
Contract (except an IRA) made to a surviving spouse instead of
being directly rolled over to an IRA may be subject to 20 percent
income tax withholding. We may make payments under any payment
plan available under this Contract if:
o the beneficiary asks us in writing within 60 days after we
receive proof of death;
o payments begin no later than one year after death; and
o the payment period does not extend beyond the beneficiary's life
or life expectancy.
We will determine the Market Adjusted Value at the next close of
business after our death claim requirements are fulfilled. We will
mail payment to the beneficiary within seven days after our death
claim requirements are fulfilled.
Statement
Prior to the Settlement Date, at least annually, we will send a
statement showing a summary of the Contract.
Electing the Settlement Date and Form of Annuity
A Settlement Date is established when you apply for the Contract.
The Settlement Date may be changed, but any such change must be
made in writing and received by us at least 30 days prior to the
scheduled Settlement Date.
The Settlement Date cannot be later than the later of:
o the Contract anniversary nearest the Annuitant's 85th birthday;
or
o the 10th Contract anniversary.
<PAGE>
PAGE 21
Annuity Payments - The first payment will be made as of the
Settlement Date. Once annuity payments have started for an
Annuitant, no surrender of the annuity benefit can be made for the
purpose of receiving a lump sum in lieu of payments.
Death After Settlement Date - If you or the Annuitant dies after
the Settlement Date, the amount payable to the beneficiary, if any,
will continue as provided in the annuity payment plan then in
effect.
Annuity Plans - There are different ways to receive annuity
payments. We call these plans. You may select one of these plans,
or another payment arrangement to which we agree, by giving us
written notice at least 30 days before the Settlement Date.
The Market Adjusted Value (less applicable premium taxes, if any)
may be applied on the Settlement Date under any of the annuity
plans described below, but in the absence of an election, the
Market Adjusted Value will be applied on the Settlement Date under
Plan B to provide a life annuity with 120 monthly payments certain.
If the amount to be applied to an annuity plan is not at least
$2,000 or if payments are to be made to other than a natural
person, we have the right to make a lump sum payment of the Cash
Surrender Value. If a lump sum payment is made from a tax
benefited Contract (except an IRA), 20 percent income tax
withholding may apply.
o Plan A - This provides monthly annuity payments for the
lifetime of the Annuitant. No payments will be made after the
Annuitant dies.
o Plan B - This provides monthly annuity payments for the
lifetime of the Annuitant with a guarantee by us that payments
will be made for a period of at least 5, 10 or 15 years. You
must select the period.
o Plan C - This provides monthly annuity payments for the
lifetime of the Annuitant with a guarantee by us that payments
will be made for a certain number of months. We determine the
number of months by dividing the Market Adjusted Value applied
under this plan by the amount of the monthly annuity payment.
o Plan D - We call this a Joint and Survivor life annuity.
Monthly payments will be paid for the lifetime of the
Annuitant and a joint annuitant. When either the Annuitant or
joint annuitant dies we will continue to make monthly payments
for the lifetime of the survivor. No payments will be paid
after the death of both the Annuitant and joint annuitant.
o Plan E - This provides monthly fixed dollar annuity payments
for a period of years. The period of years may be no less
than 10 nor more than 30.
<PAGE>
PAGE 22
The Contract provides for annuity payment plans on a fixed basis
only. The amount of each annuity payment will not change during
the annuity payment period. The amount of the annuity payment will
depend on:
- -- the Market Adjusted Value (less any applicable premium tax
not previously deducted) on the date;
- -- the annuity table we are then using for annuity settlements
(never less than the table guaranteed in the Contract);
- -- the Annuitant's age; and
- -- the annuity payment plan selected.
The tables for Plans A, B, C and D are based on the "1983
Individual Annuitant Mortality Table A" and an assumed rate of 4
percent per year. The table for Plan E is based on an interest
rate of 4 percent. IDS Life may, at our discretion, if mortality
appears more favorable and interest rates justify, apply other
tables that will result in higher monthly payments.
Restrictions for Some Tax Benefited Plans - If your annuity was
purchased under a Section 401(k) plan, custodial or trusteed plan,
Section 457 plan, Section 403(b) plan (TSA), or as an IRA, you must
select a payment plan that provides for payments:
o during the life of the Annuitant;
o during the joint lives of the Annuitant and 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 beneficiary.
Reference also must be made to the terms of the tax benefited plan
and applicable law for any limitations or restrictions on the
Settlement Date or annuity payment plan that may be selected.
Investments by IDS Life
Assets of IDS Life must be invested in accordance with requirements
established by applicable state laws regarding the nature and
quality of investments that may be made by life insurance companies
and the percentage of their assets that may be committed to any
particular type of investment. In general, these laws permit
investments, within specified limits and subject to certain
qualifications, in federal, state, and municipal obligations,
corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments. All claims
by purchasers of the Contracts, and other general account products,
will be funded by the general account.
<PAGE>
PAGE 23
IDS Life intends to construct and manage the investment portfolio
using a strategy known as "immunization." Immunization seeks to
lock in a defined return on the pool of assets versus the pool of
liabilities over a specified time horizon. Since the return on the
assets versus the liabilities is locked in, it is "immune" to any
potential fluctuations in interest rates during the given time.
Immunization is achieved by constructing a portfolio of assets with
a price sensitivity to interest rate changes (i.e., price duration)
that is essentially equal to the price duration of the
corresponding portfolio of liabilities. Portfolio immunization
provides flexibility and efficiency to IDS Life in creating and
managing the asset portfolio, while still assuring safety and
soundness for funding liability obligations.
IDS Life's investment strategy will incorporate the use of a
variety of debt instruments having price durations tending to match
the applicable guaranteed interest periods. These instruments
include, but are not necessarily limited to, the following:
o Securities issued by the U.S. government or its agencies
or instrumentalities, which issues may or may not be
guaranteed by the U.S. government;
o Debt securities that have an investment grade, at the
time of purchase, within the four highest grades assigned
by the nationally recognized rating agencies;
o Debt instruments that are unrated, but which are deemed
by IDS Life to have an investment quality within the four
highest grades;
o Other debt instruments, which are rated below investment
grade, limited to 10 percent of assets at the time of
purchase; and
o Real estate mortgages, limited to 30 percent of portfolio
assets at the time of acquisition.
In addition, options and futures contracts on fixed income
securities will be used from time to time to achieve and maintain
appropriate investment and liquidity characteristics on the overall
asset portfolio.
While this information generally describes our investment strategy,
we are not obligated to follow any particular strategy except as
may be required by Federal law and Minnesota and other state
insurance laws.
Amendment of Contracts
We reserve the right to amend the Contracts to meet the
requirements of applicable federal or state laws or regulations.
We will notify you in writing of any such amendments.
<PAGE>
PAGE 24
Distribution of Contracts
IDS Life is the principal underwriter for the Contracts. IDS Life
is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 (1934 Act) as a broker-dealer and
is a member of the National Association of Securities Dealers,
Inc. IDS Life may enter into Distribution Agreements with certain
broker-dealers registered under the 1934 Act. IDS Life will pay a
maximum commission of 5 percent for the sale of a Contract. In the
future, we may pay a commission on an election of a subsequent
Guarantee Period by an Owner.
Assignment of Contracts
You may change ownership of your annuity at any time by filing a
change of ownership with us at our home office. No change of
ownership will be binding upon us until we receive and record it.
We take no responsibility for the validity of the change. If you
have a tax-benefited plan, the Contract may not be sold, assigned,
transferred, discounted or pledged as collateral for a loan or as
security for the performance of an obligation or for any other
purpose to any person other than IDS Life; provided, however, that
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.
The value of any part of a non-tax benefited annuity contract
assigned or pledged is taxed like a cash withdrawal to the extent
allocable to investment in annuity contracts after Aug. 13, 1982.
Transfer of a non-tax benefited annuity Contract to another person
without adequate consideration is considered a gift and the
transfer will be considered a surrender of the Contract for federal
income tax purposes. The income in the Contract will be taxed to
the transferor who may be subject to the 10 percent IRS penalty tax
for early withdrawal. The transferee's investment in the annuity
will be the value of the annuity at the time of the transfer.
Consult with your tax advisor before taking any action.
Federal Tax Considerations
Under current law, there is no liability for federal income tax on
any increase in the annuity's value until payments are made (except
for change of ownership discussed above in "Assignment of
Contracts"). However, since federal tax consequences cannot always
be anticipated, you should consult a tax advisor if you have any
questions about the taxation of your annuity Contract.
You are not taxed on your investment in the Contract. Your
investment in the Contract generally includes purchase payments
made into the Contract with after-tax dollars. If the investment
in the Contract was made by you or on your behalf with pre-tax
dollars as part of a tax benefited retirement plan, such amounts
are not considered to be part of your investment in the Contract
and will be taxed when paid to you.
<PAGE>
PAGE 25
If you surrender part or all of your Contract before the date on
which you have decided to begin to receive annuity payments, you
will be taxed on the payments which you receive, to the extent that
the value of your Contract exceeds your investment in the Contract,
and you may have to pay an IRS penalty tax for early withdrawal.
If you begin receiving annuity payments under a non-tax benefited
annuity Contract, a portion of each payment will be subject to tax
and a portion of each payment will be considered to be part of your
investment in the Contract and will not be taxed. All amounts
received after your investment in the annuity is recovered will be
subject to tax. If you begin receiving payments from a tax
benefited annuity, for example an IRA, Section 403(b) plan, or
Section 457 plan, all of the payments generally will be subject to
taxation except to the extent that the contributions were made with
after-tax dollars.
Unlike life insurance proceeds, the death benefit under an annuity
contract is not tax exempt. The gain, if any, is taxable as
ordinary income to the beneficiary in the year(s) he or she
receives the payments.
Tax law requires that all non-qualified deferred annuity contracts
issued by the same company to the same contract owner during a
calendar year are to be treated as a single, unified contract. The
amount of income included and taxed in a distribution (or a
transaction deemed a distribution under tax law) taken from any one
of such contracts is determined by summing all such contracts.
The income earned on an annuity contract held by such entities as
corporations, partnerships or trusts generally will be treated as
ordinary income received during that year.
You may have to pay a 10 percent IRS penalty tax on any amount
includible in your ordinary income. This penalty will not apply to
any amount received:
o after you reach age 59-1/2;
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 over your life or life expectancy (or joint
lives or life expectancies of you and your designated
beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except
for Contracts in tax benefited plans).
These are the major exceptions to the 10 percent IRS penalty tax.
Additional exceptions may apply depending upon whether or not the
annuity is tax benefited.
<PAGE>
PAGE 26
For tax benefited Contracts, other penalties apply if you surrender
an annuity bought under your plan before the plan specifies that
payments can be made under the plan.
If you receive all or part of the Contract value from a tax
benefited annuity (except an IRA), mandatory 20 percent income tax
withholding generally will be imposed at the time the payment is
made. In addition, federal income tax and the 10 percent IRS
penalty tax for early withdrawals may apply to amounts properly
includible in income. This mandatory 20 percent income tax
withholding will not be imposed if:
o instead of receiving the payment, you elect to have the payment
rolled over directly to an IRA or another eligible plan;
o the payment is one 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
designated beneficiary) or made over a period of 10 years or
more; or
o the payment is a minimum distribution required under the Code.
These are the major exceptions to the mandatory 20 percent income
tax withholding. Payments made to a surviving spouse instead of
being directly rolled over to an IRA may be subject to 20 percent
income tax withholding. For taxable distributions that are not
subject to the mandatory 20 percent withholding, federal income tax
will be withheld from the taxable part of your distribution unless
you elect otherwise. State withholding also may be imposed on
taxable distributions.
You will receive a tax statement for any year that you receive a
taxable distribution from your annuity Contract.
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 changes in the tax
qualification requirements. We will send you a copy of any such
amendments.
Our discussion of federal tax laws is based upon our understanding
of these laws as they are currently interpreted. Either federal
tax laws or current interpretations of them may change. You are
urged to consult your tax advisor concerning your specific
circumstances.
<PAGE>
PAGE 27
The Company
Business
IDS Life is a stock insurance company organized in 1957 under the
laws of the State of Minnesota. IDS Life is a wholly owned
subsidiary of American Express Financial Corporation, which is a
wholly owned subsidiary of American Express Company. IDS Life acts
as a direct writer of insurance policies and annuities and as the
investment manager of various investment companies. IDS Life is
licensed to write life insurance and annuity contracts in 49 states
and the District of Columbia. The headquarters of IDS Life is IDS
Tower 10, Minneapolis, MN 55440-0010.
Selected Financial Data
The following selected financial data for IDS Life and its
subsidiaries should be read in conjunction with the consolidated
financial statements and notes included in the prospectus beginning
on page __.
<TABLE><CAPTION>
Years ended Dec. 31, (Thousands)
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Premiums $ 144,640 $ 127,245 $ 114,379 $ 102,338 $ 89,749
Net investment income 1,781,873 1,783,219 1,616,821 1,422,866 1,204,934
Net gain (loss) on investments (4,282) (6,737) (3,710) (5,837) 1,022
Other 384,105 304,344 240,959 198,344 165,742
Total revenues 2,306,336 2,208,071 1,968,449 1,717,711 1,461,447
Income before income taxes 512,512 412,726 315,821 259,467 227,742
Net income $ 336,169 $ 270,079 $ 211,170 $ 182,037 $ 157,748
Total assets $33,747,543 $33,057,753 $27,295,773 $22,558,809 $18,088,351
</TABLE>
Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations
Results of Operations
1994 Compared to 1993: Consolidated net income increased 24
percent to $336 million in 1994, compared to $270 million in 1993.
Earnings growth resulted primarily from increases in spread income,
policyholder and contractholder charges, and management fees.
These increases reflect higher average insurance and annuities in
force during 1994. For the full year, investment margins were
comparable to 1993 levels, although investment margins for the
fourth quarter of 1994 were below prior year levels. It is
expected that this trend will continue through the first half of
1995. As a result, the growth in 1995 earnings is expected to be
less than that experienced in 1994.
Consolidated income before income taxes totaled $513 million in
1994, compared with $413 million in 1993. In 1994, $123 million
was from the life, disability income, health and long-term care
insurance segment, compared with $104 million in 1993. In 1994,
$394 million was from the annuity segment, compared with $315
million in 1993. There was a $4.3 million net loss on investments
in 1994, compared with a net loss on investments of $6.7 million in
1993. <PAGE>
PAGE 28
Total premiums received increased to $5.7 billion in 1994, compared
with $5.3 billion in 1993. This increase is primarily due to
continued strong sales of variable annuities. In addition, IDS
Life reported small increases in its fixed single premium deferred
annuity line. Universal life-type insurance and variable universal
life insurance premiums received also increased from the prior
year.
Total revenues increased to $2.3 billion in 1994, compared with
$2.2 billion in 1993. The increase is primarily due to increases
in policyholder and contractholder charges, and management fees.
Net investment income, the largest component of revenues, was
basically unchanged from the prior year, reflecting a slight
increase in total investments offset by a decrease in the rate
earned on those investments.
Policyholder and contractholder charges, which consist primarily of
cost of insurance charges on universal life-type policies,
increased 19 percent to $220 million in 1994, compared with $184
million in 1993. This increase reflects higher total life
insurance in force which grew 14 percent to $52.7 billion at
Dec. 31, 1994.
Management and other fees increased 37 percent to $164 million in
1994, compared with $120 million in 1993. This is primarily due to
an increase in assets held in segregated asset accounts, which grew
21 percent to $10.9 billion at Dec. 31, 1994, resulting from strong
sales of variable products. IDS Life provides investment
management services for the mutual funds used as investment options
for variable annuities and variable life insurance. IDS Life also
receives a mortality and expense risk fee from the segregated asset
accounts.
Total benefits and expenses decreased slightly to $1.8 billion in
1994. The largest component of expenses, interest credited to
policyholder accounts for universal life-type insurance and
investment contracts, decreased to $1.2 billion. This is primarily
due to a decrease in interest credited rates, partially offset by
higher aggregate amounts in force.
Amortization of deferred policy acquisition costs increased to $280
million in 1994, compared with $212 million in 1993. This increase
is a result of a higher level of amortizable deferred costs and a
high level of surrenders as a result of an exchange plan announced
during the first quarter of 1994 and completed prior to the end of
1994.
Other insurance and operating expenses, which include non-
capitalized commissions and indirect selling expenses, direct and
indirect operating expenses, premium taxes and guaranty association
expenses decreased to $210 million in 1994, compared with $242
million in 1993. This decrease primarily reflects a decrease in
amounts accrued for future guaranty association assessments.
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan,"
and SFAS No. 118, "Accounting by Creditors for Impairment of a<PAGE>
PAGE 29
Loan-Income Recognition and Disclosures," are effective Jan. 1,
1995. The new rules are not expected to have a material impact on
IDS Life's results of operations or financial condition.
1993 Compared to 1992: Consolidated income before income taxes
totaled $413 million in 1993, compared with $316 million in 1992.
In 1993, $104 million was from the life, disability income, health
and long-term care insurance segment, compared with $96 million in
1992. In 1993, $315 million was from the annuity segment, compared
with $223 million in 1992. The remaining $6.7 million loss in 1993
was a net loss on investments, compared with a net loss on
investments of $3.7 million in 1992.
Total premiums received increased to $5.3 billion in 1993, compared
with $4.4 billion in 1992. This increase is primarily due to
strong sales of variable annuities due to the low interest rate
environment. In addition, IDS Life reported small increases in its
fixed single premium deferred annuity line. Universal life-type
insurance and variable universal life insurance premiums received
also increased from the prior year.
Total revenues increased to $2.2 billion in 1993, compared with
$2.0 billion in 1992. Of this, net investment income was $1.8
billion in 1993, compared with $1.6 billion in 1992, reflecting an
increase in invested assets. Total investments grew 14 percent to
$21.9 billion at Dec. 31, 1993, from $19.2 billion at Dec. 31,
1992.
Policyholder and contractholder charges, which consist primarily of
cost of insurance charges on universal life-type policies,
increased 18 percent to $184 million in 1993, compared with $156
million in 1992. This increase reflects higher total life
insurance in force which grew 13 percent to $46.1 billion at
Dec. 31, 1993.
Management and other fees increased 41 percent to $120 million in
1993, compared with $85 million in 1992. This is primarily due to
an increase in assets held in segregated asset accounts, which grew
45 percent to $9.0 billion at Dec. 31, 1993, resulting from strong
sales of variable products. IDS Life provides investment
management services for the mutual funds used as investment options
for variable annuities and variable life insurance. IDS Life also
receives a mortality and expense risk fee from the segregated asset
accounts.
Total benefits and expenses increased to $1.8 billion in 1993,
compared with $1.7 billion in 1992. The largest component of
expenses, interest credited to policyholder accounts for universal
life-type insurance and investment contracts, aggregated $1.2
billion and was essentially unchanged from the prior year. This
reflected interest credited to higher accumulation values offset by
lower interest credited rates.
Amortization of deferred policy acquisition costs increased to $212
million in 1993, compared with $140 million in 1992, reflecting
prior years' growth of life insurance and annuity business and a<PAGE>
PAGE 30
cumulative adjustment driven by the long-term decrease in accrual
rates on fixed annuities.
Other insurance and operating expenses, which include non-
capitalized commissions and indirect selling expenses, direct and
indirect operating expenses, premium taxes and guaranty association
expenses increased to $242 million in 1993, compared with $216
million in 1992.
Risk Management
IDS Life primarily invests in fixed income securities, over a broad
range of maturities for the purpose of providing fixed annuity
clients with a competitive rate of return on their investments
while minimizing risk, and to provide a dependable and consistent
margin between the interest rate earned on investments and the
interest rate credited to clients' accounts. IDS Life does not
invest in securities to generate trading profits.
IDS Life has an investment committee that holds regularly scheduled
meetings and, when necessary, special meetings. At these meetings,
the committee reviews models projecting different interest rate
scenarios and their impact on profitability. The objective of the
committee is to structure the investment security portfolio based
upon the type and behavior of products in the liability portfolio
so as to achieve targeted levels of profitability.
Rates credited to clients' accounts are generally reset at shorter
intervals than the maturity of underlying investments. Therefore,
margins may be negatively impacted by increases in the general
level of interest rates. Part of the committee's strategy includes
the purchase of some types of derivatives, such as interest rate
caps, for hedging purposes. These derivatives protect margins by
increasing investment returns if there is a sudden and severe rise
in interest rates, thereby mitigating the impact of an increase in
rates credited to clients' accounts.
Liquidity and Capital Resources
The liquidity requirements of IDS Life are met by funds provided
from operations and investment activity. The primary components of
the funds provided are premiums, investment income, proceeds from
sales of investments as well as maturities and periodic repayments
of investment principal.
The primary uses of funds are policy benefits, commissions and
operating expenses, policy loans and new investment purchases.
IDS Life has available lines of credit with three banks aggregating
$100 million, which are used strictly as short-term sources of
funds. Borrowings outstanding under the agreements were $nil at
Dec. 31, 1994. IDS Life also uses reverse repurchase agreements
for short-term liquidity needs. There were no reverse repurchase
agreements outstanding at Dec. 31, 1994.
At Dec. 31, 1994, investments in fixed maturities comprised 87
percent of IDS Life's total invested assets. Of the fixed maturity
portfolio, approximately 47 percent is invested in GNMA, FNMA and<PAGE>
PAGE 31
FHLMC mortgage-backed securities which are considered AAA/Aaa
quality.
At Dec. 31, 1994, approximately 8.9 percent of IDS Life's
investments in fixed maturities were below investment grade bonds.
These investments may be subject to a higher degree of risk than
the more "traditional" issues because of the borrower's generally
greater sensitivity to adverse economic conditions, such as
recession or increasing interest rates, and in certain instances,
the lack of an active secondary market. Expected returns on below
investment grade bonds reflect consideration of such factors. IDS
Life has identified those fixed maturities for which a decline in
fair value is determined to be other than temporary, and has
written them down to fair value with a charge to earnings.
At Dec. 31, 1994, net unrealized depreciation on fixed maturities
held to maturity included $111 million of gross unrealized
appreciation and $686 million of gross unrealized depreciation.
Net unrealized depreciation on fixed maturities available for sale
included $35 million of gross unrealized appreciation and $479
million of gross unrealized depreciation.
At Dec. 31, 1994, IDS Life had an allowance for losses for mortgage
loans totaling $35 million and for real estate totaling $8 million.
The economy and other factors have caused an increase in the number
of insurance companies that are under regulatory supervision. This
circumstance has resulted in an increase in assessments by state
guaranty associations to cover losses to policyholders of insolvent
or rehabilitated companies. Some assessments can be partially
recovered through a reduction in future premium taxes in certain
states. IDS Life established an asset for guaranty association
assessments from those states allowing a reduction in future
premium taxes over a reasonable period of time. The asset will be
amortized as future premium taxes are reduced. IDS Life has also
estimated the potential effect of future assessments on IDS Life's
financial position and results of operations and has established a
reserve for such potential assessments.
In the first quarter of 1995, IDS Life paid a $70 million dividend
to its parent. In 1994, dividends paid to its parent were $165
million.
The National Association of Insurance Commissioners has established
risk-based capital standards to determine the capital requirements
of a life insurance company based upon the risks inherent in its
operations. These standards require the computation of a risk-
based capital amount which is then compared to a company's actual
total adjusted capital. The computation involves applying factors
to various statutory financial data to address four primary risks:
asset default, adverse insurance experience, interest rate risk and
external events. These standards provide for regulatory attention
when the percentage of total adjusted capital to authorized control
level risk-based capital is below certain levels. As of Dec. 31,
1994, IDS Life's total adjusted capital was well in excess of the
levels requiring regulatory attention.
<PAGE>
PAGE 32
Segment Information
IDS Life's operations consist of two business segments: Individual
and group life, disability income, long-term care and health
insurance; and fixed and variable annuity products designed for
individuals, pension plans, small businesses and employer-sponsored
groups. IDS Life is not dependent upon any single customer and no
single customer accounted for more than 10 percent of revenue in
1994, 1993 or 1992. (See Note 10, Segment information, in the
"Notes to Consolidated Financial Statements".)
Reinsurance
Reinsurance arrangements are used to reduce exposure to large
losses. The maximum amount of risk retained by IDS Life on any one
life is $750,000 of life and waiver of premium benefits plus
$50,000 of accidental death benefits. The excesses are reinsured
with other life insurance companies. At Dec. 31, 1994, traditional
life and universal life-type insurance in force aggregated $52.7
billion, of which $3.2 billion was reinsured.
Reserves
In accordance with the insurance laws and regulations under which
IDS Life operates, it is obligated to carry on its books, as
liabilities, actuarially determined reserves to meet its
obligations on its outstanding life and health insurance policies
and annuity contracts. Reserves for policies and contracts are
based on mortality and morbidity tables in general use in the
United States. These reserves are computed amounts that, with
additions from premiums to be received, and with interest on such
reserves compounded annually at assumed rates, will be sufficient
to meet IDS Life's policy obligations at their maturities or in the
event of an insured's death. In the accompanying financial
statements these reserves are determined in accordance with
generally accepted accounting principles. (See Note 1, Liabilities
for future policy benefits, in the "Notes to Consolidated Financial
Statements.")
Investments
Of IDS Life's consolidated total investments of $22.1 billion at
Dec. 31, 1994, 41 percent was invested in mortgage-backed
securities, 45 percent in corporate and other bonds, 11 percent in
primary mortgage loans on real estate, 1.8 percent in policy loans
and the remaining 1.2 percent in other investments.
Competition
IDS Life is engaged in a business that is highly competitive due to
the large number of stock and mutual life insurance companies and
other entities marketing insurance products. There are over 2,600
stock, mutual and other types of insurers in the life insurance
business. In Fortune magazine's May 1994 listing of the 50 largest
life insurance companies as ranked by assets, IDS Life ranked
fifteenth. Best's Insurance Reports, Life-Health edition, 1994,
assigned IDS Life one of its highest classifications, A+
(Superior).
<PAGE>
PAGE 33
Employees
As of Dec. 31, 1994, IDS Life and its subsidiaries had 231
employees; including 177 employed at the home office in
Minneapolis, MN, and 54 employed at IDS Life Insurance Company of
New York located in Albany, NY. The number of employees of these
companies decreased significantly in 1994 from previous years due
to a reorganization and reassignment of many employees to the
parent company, American Express Financial Corporation.
Properties
IDS Life occupies office space in Minneapolis, MN, which is rented
by its parent, American Express Financial Corporation. IDS Life
reimburses American Express Financial Corporation for rent based on
direct and indirect allocation methods. Facilities occupied by IDS
Life and its subsidiaries are believed to be adequate for the
purposes for which they are used and are well maintained.
State Regulation
IDS Life is subject to the laws of the State of Minnesota governing
insurance companies and to the regulations of the Minnesota
Department of Commerce. An annual statement in the prescribed form
is filed with the Minnesota Department of Commerce each year
covering IDS Life's operation for the preceding year and its
financial condition at the end of such year. Regulation by the
Minnesota Department of Commerce includes periodic examination to
determine IDS Life's contract liabilities and reserves so that the
Minnesota Department of Commerce may certify that these items are
correct. IDS Life's books and accounts are subject to review by
the Minnesota Department of Commerce at all times. Such regulation
does not, however, involve any supervision of the account's
management or IDS Life's investment practices or policies. In
addition, IDS Life is subject to regulation under the insurance
laws of other jurisdictions in which it operates. A full
examination of IDS Life's operations is conducted periodically by
the National Association of Insurance Commissioners.
Under insurance guaranty fund laws, in most states, insurers doing
business therein can be assessed up to prescribed limits for
policyholder losses incurred by insolvent companies. Most of these
laws do provide, however, that an assessment may be excused or
deferred if it would threaten an insurer's own financial strength.
Directors and Executive Officers*
The members of the Board of Directors and the principal executive
officers of IDS Life, together with the principal occupation of
each during the last five years, are as follows:
Directors
Louis C. Fornetti, 45
Director since March 1994; senior vice president and director,
American Express Financial Corporation (AEFC), since February 1985.
<PAGE>
PAGE 34
David R. Hubers, 52
Director since September 1989; president and chief executive
officer, AEFC, since August 1993, and director since January 1984.
Senior vice president, Finance and chief financial officer, AEFC,
from January 1984 to August 1993.
Richard W. Kling, 54
Director since February 1984; president since March 1994.
Executive vice president, Marketing and Products from January 1988
to March 1994. Senior vice president, AEFC, since May 1994.
Director of IDS Life Series Fund, Inc. and member of the board of
managers of IDS Life Variable Annuity Funds A and B.
Paul F. Kolkman, 48
Director since May 1984; executive vice president since March 1994;
vice president, Finance from May 1984 to March 1994; vice
president, AEFC, since January 1987.
Peter A. Lefferts, 53
Director and executive vice president, Marketing since March 1994;
senior vice president and director, AEFC, since February 1986.
Janis E. Miller, 43
Director and executive vice president, Variable Assets since March
1994; vice president, AEFC, since June 1990. Director, Mutual
Funds Product Development and Marketing, AEFC, from May 1987 to May
1990. Director of IDS Life Series Fund, Inc. and member of the
board of managers of IDS Life Variable Annuity Funds A and B.
James A. Mitchell, 53
Chairman of the board since March 1994; director since July 1984;
chief executive officer since November 1986; president from July
1984 to March 1994; executive vice president, AEFC, since March
1994; director, AEFC, since July 1984; senior vice president, AEFC,
from July 1984 to March 1994.
Barry J. Murphy, 44
Director and executive vice president, Client Service, since March
1994; senior vice president, Operations, Travel Related Services
(TRS), a subsidiary of American Express Company, since July 1992;
vice president, TRS, from November 1989 to July 1992; chief
operating officer, TRS, from March 1988 to November 1989.
Stuart A. Sedlacek, 37
Director and executive vice president, Assured Assets since March
1994; vice president, AEFC, since September 1988.
Melinda S. Urion, 41
Director and controller since September 1991; executive vice
president since March 1994; vice president and treasurer from
September 1991 to March 1994; corporate controller, AEFC, since
April 1994; vice president, AEFC, since September 1991; chief
accounting officer, AEFC, from July 1988 to September 1991.
<PAGE>
PAGE 35
Officers Other Than Directors
Timothy V. Bechtold, 41
Vice president, Insurance Product Development, since May 1989.
David J. Berry, 51
Vice president since October 1989.
Alan R. Dakay, 42
Vice president, Institutional Insurance Marketing, since
September 1991. Vice President, Institutional Insurance Marketing,
AEFC, since May 1990.
Robert M. Elconin, 37
Vice president since March 1994.
Morris Goodwin Jr., 43
Vice president and treasurer since March 1994; vice president and
corporate treasurer, AEFC, since July 1989; chief financial officer
and treasurer, American Express Trust Company, from January 1988 to
July 1989.
Lorraine R. Hart, 43
Vice president, Investments, since March 1992; member of the
investment committee. Vice president, Investments, AEFC, since
October 1989. Vice president-Investments, IDS Certificate Company,
IDS Property Casualty Insurance Company, American Enterprise Life
Insurance Company and American Partners Life Insurance Company.
Ryan R. Larson, 44
Vice president, Annuity Product Development, since September 1983.
Vice president, IPG Product Development, AEFC, since July 1989;
qualified actuary, American Enterprise Life Insurance Company.
Mary O. Neal, 41
Vice president, Sales Support, since September 1990.
James R. Palmer, 49
Vice president, Taxes, since May 1989. Vice president, Insurance
Operations, AEFC, since February 1987.
F. Dale Simmons, 57
Vice president, Real Estate Loan Management, since November 1993.
Vice president, senior portfolio manager, Insurance Investments,
AEFC, since August 1990. Vice president and assistant treasurer,
IDS Life of New York.
William A. Stoltzmann, 46
Vice president, general counsel and secretary since 1985; vice
president and assistant general counsel, AEFC, since November 1985.
*The address for all of the directors and principal officers is:
IDS Tower 10, Minneapolis, MN 55440-0010.
<PAGE>
PAGE 36
Executive Compensation
Executive officers of IDS Life also may serve one or more
affiliated companies. The following table reflects cash
compensation paid to the five most highly compensated executive
officers as a group for services rendered in 1994 to IDS Life and
its affiliates. The table also shows the total cash compensation
paid to all executive officers of IDS Life, as a group, who were
executive officers at any time during 1994.
<TABLE><CAPTION>
Name of individual Cash
or number in group Position held compensation
<S> <C> <C>
Five most highly compensated
executive officers as a group: $ 2,231,979
James A. Mitchell Chairman of the Board and
Chief Executive Officer
Alan R. Dakay Vice President,
Institutional Insurance Marketing
Lorraine R. Hart Vice President,
Investments
Stuart A. Sedlacek Exec. Vice President,
Assured Assets
Peter A. Lefferts Exec. Vice President,
Marketing
All executive officers
as a group (19) $ 4,840,713
</TABLE>
Security Ownership of Management
IDS Life's directors and officers do not beneficially own any
outstanding shares of stock of IDS Life. All of the outstanding
shares of stock of IDS Life are beneficially owned by its parent,
American Express Financial Corporation. The percentage of shares
of American Express Financial Corporation owned by any director,
and by all directors and officers of IDS Life as a group, does not
exceed one percent of the class outstanding.
Legal Proceedings and Opinion
Legal matters in connection with federal laws and regulations
affecting the issue and sale of the Contracts described in this
prospectus and the organization of IDS Life, its authority to issue
Contracts under Minnesota law and the validity of the forms of the
Contracts under Minnesota law have been passed on by the General
Counsel of IDS Life.
Experts
The consolidated financial statements of IDS Life Insurance Company
at Dec. 31, 1994, and 1993, and for each of the three years in the
period ended Dec. 31, 1994, appearing in this Prospectus and<PAGE>
PAGE 37
Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon
appearing elsewhere herein and in the Registration Statement, and
are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
<PAGE>
PAGE 38
Appendix A
Partial Surrender Illustration
Involving a Surrender Charge and a Market Value Adjustment
Annuity Assumptions:
Single Payment $10,000
Guarantee Period 10 Years
Guarantee Rate (ig) 4.5 percent effective
annual yield
End of Contract year
Contract Surrender Accumulation Values
year Charge % if no surrenders
1 8% $10,450.00
2 7 $10,920.25
3 6 $11,411.66
4 5 $11,925.19
5 4 $12,461.82
6 3 $13,022.60
7 2 $13,608.62
8 1 $14,221.01
9 0 $14,860.95
10 0 $15,529.69
Partial Surrender Assumptions:
On the first day of your 4th Contract year you request a partial
surrender of:
Example I - $2,000 of your Accumulation Value
Example II - A $2,000 net surrender check
You may surrender 10 percent of $11,411.66 (end of 3rd Contract
year Accumulation Value) without surrender charge but subject to a
Market Value Adjustment -- this is $1,141.17
The excess Market Adjusted Value surrendered is subject to both a 5
percent (4th Contract year) surrender charge and a Market Value
Adjustment.
The current rate (ic) for applicable new sales and renewals = 4
percent
The number of full years left in your Guarantee Period (N) = 7
The number of fractional years left in your Guarantee Period (t) =
0
<PAGE>
PAGE 39
Example I - $2,000 of Accumulation Value Surrendered
What Will Be Your Market Value Adjustment Amount?
The Market Adjusted Value of your $2,000 partial surrender will be:
Renewal Value of Accumulation Value Surrendered
(1 + ic + .0025)(N+t)
= $2,000 (1 + ig)7
(1 + ic + .0025)7
= $2,000 (1.045)7
(1.0425)7
= $2,033.82
The Market Value Adjustment = the Market Adjusted Value surrendered
less the Accumulation Value surrendered
$2,033.82 - $2,000 = $33.82
(NOTE: This Market Value Adjustment is Positive. In Other Cases
The Market Value Adjustment May Be Negative.)
What Will Be Your Surrender Charge Amount?
The surrender charge will be 5 percent multiplied by the excess of
the Market Adjusted Value over the Accumulation Value that may be
surrendered without surrender charge:
($2,033.82 - $1,141.17) x .05 = $44.63
What Net Amount Will You Receive?
Your Contract's Accumulation Value will decrease by $2,000 and we
will send you a check for:
Accumulation Value surrendered $2,000.00
Plus Market Value Adjustment 33.82
Less surrender charge (44.63)
Net surrender amount $1,989.19
Example II - $2,000 Net Surrender Check Requested
What Will Be The Accumulation Value Surrendered?
Tell us if you want a specific net surrender check amount. We will
work backwards using an involved formula to determine how much
Accumulation Value must be surrendered to result in a net check to
you for a specific amount. For a $2,000 net check to you, the
formula results in $2,011.20 of Accumulation Value to be
surrendered.
<PAGE>
PAGE 40
What Will Be Your Market Value Adjustment Amount?
The Market Adjusted Value is:
Renewal Value of Accumulation Value Surrendered
(1 + ic + .0025)(N+t)
= $2,011.20 (1 + ig)7
(1 + ic + .0025)7
= $2,011.20 (1.045)7
(1.0425)7
= $2,045.21
The Market Value Adjustment = the Market Adjusted Value surrendered
less the Accumulation Value surrendered
$2,045.21 - $2,011.20 = $34.00
(NOTE: This Market Value Adjustment is Positive. In Other Cases
The Market Value Adjustment May Be Negative.)
What Will Be Your Surrender Charge Amount?
The surrender charge will be 5 percent multiplied by the excess of
the Market Adjusted Value over the Accumulation Value that may be
surrendered without surrender charge:
($2,045.21 - $1,141.17) x .05 = $45.20
What Net Amount Will You Receive?
Your Contract's Accumulation Value will decrease by $2,011.20 and
we will send you a check for:
Accumulation Value surrendered $2,011.20
Plus Market Value Adjustment 34.00
Less surrender charge (45.20)
Net surrender amount $2,000.00
Appendix B
Market Value Adjustment Illustration
Annuity Assumptions:
Single Payment $50,000
Guarantee Period 10 Years
Guarantee Rate 4.5 percent effective annual yield
Market Adjustment Assumptions: These examples show how the Market
Value Adjustment may affect your Contract values. The surrenders
in these examples occur one year after the Contract date. There
are no previous surrenders.
<PAGE>
PAGE 41
The Accumulation Value at the end of one year is $52,250. If there
aren't any surrenders, the Renewal Value at the end of the 10 year
Guarantee Period will be $77,648.47.
The Market Value Adjustment is based on the rate we are crediting
(at the time of your surrender) on new Contracts with the same
length Guarantee Period as the time remaining in your Guarantee
Period. After one year, you have 9 years left of your 10 year
Guarantee Period.
Example I shows a downward Market Value Adjustment. Example II
shows an upward Market Value Adjustment. These examples do not
show the surrender charge (if any) which would be calculated
separately after the Market Value Adjustment. Surrender charge
calculations are shown in Appendix A.
Market Adjusted Value Formula:
Market Adjusted = (Renewal Value)
Value (1 + ic + .0025)(N+t)
Renewal Value -- The Accumulation Value at the end of the
current Guarantee Period
ic -- The Current Interest Rate offered for new
Contract sales and renewals for the number of
years remaining in the Guarantee Period
N -- The number of complete Contract years to the
end of the current Guarantee Period
t -- The fraction of the Contract year remaining to
the end of the Contract year
Example I - Downward Market Value Adjustment
A surrender results in a downward Market Value Adjustment when
interest rates have increased. Assume after 1 year, we are now
crediting 5 percent for a new Contract with a 9 year Guarantee
Period. If you fully surrender, the Market Adjusted Value would
be:
Renewal Value
(1 + ic + .0025)(N+t)
= $77,648.47
(1 + .05 + .0025)9
= $48,993
The Market Value Adjustment is a $3,257 reduction of the
Accumulation Value:
($3,257) = $48,993 - $52,250
<PAGE>
PAGE 42
If you surrendered half of your Contract instead of all, the Market
Adjusted Value of the surrendered portion would be one-half that of
the full surrender:
$38,824.24
$24,496.50 = (1 + .05 + .0025)9
Example II - Upward Market Value Adjustment
A surrender results in an upward Market Value Adjustment when
interest rates have decreased. Assume after 1 year, we are now
crediting 4 percent for a new Contract with a 9 year guarantee
period. If you fully surrender, the Market Adjusted Value would
be:
Renewal Value
(1 + ic + .0025)(N+t)
= $77,648.47
(1 + .04 + .0025)9
= $53,388.58
The Market Value Adjustment is a $1,138.58 increase of the
Accumulation Value:
$1,138.58 = $53,388.50 - $52,250
If you surrendered half of your Contract instead of all, the Market
Adjusted Value of the surrendered portion would be one-half that of
the full surrender:
$38,824.24
$26,694.29 = (1 + .04 + .0025)9
<PAGE>
PAGE 43
IDS Life Financial Information
The financial statements shown below are those of the insurance
company and not those of the IDS Life Account MGA. They are
included in the prospectus for the purpose of informing investors
as to the financial condition of the insurance company and its
ability to carry out its obligations under the contracts.
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
<TABLE><CAPTION>
ASSETS 1994 1993
(thousands)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1994, $10,694,800) $11,269,861 $ -
Available for sale, at fair value (Amortized cost:
1994, $8,459,128) 8,017,555 -
Investment securities, at amortized cost (Fair value:
1993, $20,425,979) - 19,392,424
Mortgage loans on real estate
(Fair value: 1994, $2,342,520; 1993, $2,125,686) 2,400,514 2,055,450
Policy loans 381,912 350,501
Other investments 51,795 56,307
Total investments 22,121,637 21,854,682
Cash and cash equivalents 267,774 146,281
Receivables:
Reinsurance 80,304 55,298
Amounts due from brokers 7,933 5,719
Other accounts receivable 49,745 21,459
Premiums due 1,594 1,329
Total receivables 139,576 83,805
Accrued investment income 317,510 307,177
Deferred policy acquisition costs 1,865,324 1,652,384
Deferred income taxes 124,061 -
Other assets 30,426 21,730
Assets held in segregated asset
accounts, primarily common stocks
at market 10,881,235 8,991,694
Total assets $35,747,543 $33,057,753
======== ========
See accompanying notes to consolidated financial statements.<PAGE>
PAGE 44
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1994 1993
(thousands)
Liabilities:
Future policy benefits:
Fixed annuities $19,361,979 $18,492,135
Universal life-type insurance 2,896,100 2,753,455
Traditional life insurance 206,754 210,205
Disability income, health and
long-term care insurance 244,077 185,272
Policy claims and other
policyholders' funds 50,068 44,516
Deferred income taxes - 43,620
Amounts due to brokers 226,737 351,486
Other liabilities 291,902 292,024
Liabilities related to segregated
asset accounts 10,881,235 8,991,694
Total liabilities 34,158,852 31,364,407
Stockholder's equity:
Capital stock, $30 par value per share;
100,000 shares authorized, issued and outstanding 3,000 3,000
Additional paid-in capital 222,000 222,000
Net unrealized gain (loss) on investments (275,708) 114
Retained earnings 1,639,399 1,468,232
Total stockholder's equity 1,588,691 1,693,346
Total liabilities and stockholder's equity $35,747,543 $33,057,753
======== ========
Commitments and contingencies (Note 6)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 45
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
1994 1993 1992
(thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 48,184 $ 48,137 $ 49,719
Disability income and
long-term care insurance 96,456 79,108 64,660
Total premiums 144,640 127,245 114,379
Policyholder and contractholder
charges 219,936 184,205 156,368
Management and other fees 164,169 120,139 84,591
Net investment income 1,781,873 1,783,219 1,616,821
Net loss on investments (4,282) (6,737) (3,710)
Total revenues 2,306,336 2,208,071 1,968,449
Benefits and expenses:
Death and other benefits:
Traditional life insurance 28,263 32,136 34,139
Universal life-type insurance
and investment contracts 52,027 49,692 42,174
Disability income, health and
long-term care insurance 13,393 13,148 10,701
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance (3,229) (4,513) (5,788)
Disability income, health and
long-term care insurance 37,912 32,528 27,172
Interest credited on universal life-type
insurance and investment contracts 1,174,985 1,218,647 1,188,379
Amortization of deferred policy
acquisition costs 280,372 211,733 140,159
Other insurance and operating expenses 210,101 241,974 215,692
Total benefits and expenses 1,793,824 1,795,345 1,652,628
Income before income taxes 512,512 412,726 315,821
Income taxes 176,343 142,647 104,651
Net income $ 336,169 $ 270,079 $ 211,170
======= ======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 46
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
1994 1993 1992
(thousands)
Cash flows from operating activities:
Net income $ 336,169 $ 270,079 $ 211,170
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (37,110) (35,886) (32,881)
Repayment 33,384 29,557 26,750
Change in reinsurance receivable (25,006) (55,298) -
Change in other accounts receivable (28,286) (1,364) (4,772)
Change in accrued investment income (10,333) (22,057) (15,853)
Change in deferred policy acquisition
costs, net (192,768) (211,509) (229,252)
Change in liabilities for future policy
benefits for traditional life,
disability income, health and
long-term care insurance 55,354 79,695 21,384
Change in policy claims and other
policyholders' funds 5,552 (5,383) (1,347)
Change in deferred income taxes (19,176) (44,237) (30,385)
Change in other liabilities (122) 56,515 88,997
Amortization of premium
(accretion of discount), net 30,921 (27,438) (4,289)
Net loss on investments 4,282 6,737 3,710
Activity related to universal
life-type insurance:
Premiums 409,035 397,883 312,621
Surrenders and death benefits (290,427) (255,133) (166,162)
Interest credited to account
balances 150,955 156,885 161,873
Policyholder and contractholder
charges, non-cash (126,918) (115,140) (100,975)
Other, net (8,974) (1,907) (10,647)
Net cash provided by operating
activities $ 286,532 $ 221,999 $ 229,942
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 47
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years ended December 31,
1994 1993 1992
(thousands)
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ (879,740) $ - $ -
Maturities, sinking fund payments and calls 1,651,762 - -
Sales 58,001 - -
Fixed maturities available for sale:
Purchases (2,763,278) - -
Maturities, sinking fund payments and calls 1,234,401 - -
Sales 374,564 - -
Fixed maturities:
Purchases - (6,548,852) (6,590,279)
Maturities, sinking fund payments and calls - 3,934,055 2,696,239
Sales - 487,983 1,011,093
Other investments, excluding policy loans:
Purchases (634,807) (553,694) (411,069)
Sales 243,862 123,352 67,097
Change in amounts due from brokers (2,214) 14,483 289,335
Change in amounts due to brokers (124,749) 92,832 42,182
Net cash used in investing activities (842,198) (2,449,841) (2,895,402)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 3,157,778 2,843,668 2,821,069
Surrenders and death benefits (3,311,965) (1,765,869) (1,168,633)
Interest credited to account balances 1,024,031 1,071,917 1,026,506
Universal life-type insurance policy loans:
Issuance (78,239) (70,304) (72,007)
Repayment 50,554 46,148 40,351
Capital contribution from parent - 200,000 -
Cash dividend to parent (165,000) (25,000) (20,000)
Net cash provided by financing activities 677,159 2,300,560 2,627,286
Net increase (decrease) in cash and
cash equivalents 121,493 72,718 (38,174)
Cash and cash equivalents at
beginning of year 146,281 73,563 111,737
Cash and cash equivalents at
end of year $ 267,774 $ 146,281 $ 73,563
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 48
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dec. 31, 1994, 1993 and 1992
($ thousands)
1. Summary of significant accounting policies
Nature of business
IDS Life Insurance Company (the Company) is engaged in the
insurance and annuity business. The Company sells various forms of
fixed and variable individual life insurance, group life insurance,
individual and group disability income insurance, long-term care
insurance, and single and installment premium fixed and variable
annuities.
Basis of presentation
The Company is a wholly owned subsidiary of American Express
Financial Corporation (formerly IDS Financial Corporation), which
is a wholly owned subsidiary of American Express Company. The
accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, IDS Life
Insurance Company of New York, American Enterprise Life Insurance
Company and American Partners Life Insurance Company. All material
intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles which vary in certain respects from reporting practices
prescribed or permitted by state insurance regulatory authorities.
Investments
As of January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under SFAS No. 115,
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. The effect of adopting
SFAS No. 115 was to increase stockholder's equity by approximately
$181 million, net of tax, as of January 1, 1994, but the adoption
had no impact on the Company's net income.
Management determines the appropriate classification of fixed
maturities at the time of purchase and reevaluates the
classification at each balance sheet date.
<PAGE>
PAGE 49
1. Summary of significant accounting policies (continued)
Mortgage loans on real estate are carried principally at the unpaid
principal balances of the related loans. Policy loans are carried
at the aggregate of the unpaid loan balances which do not exceed
the cash surrender values of the related policies. Other
investments include interest rate caps and equity securities. 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. Equity securities are carried at market value and the
related net unrealized appreciation or depreciation is reported as
a credit or charge to stockholder's equity.
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.
Statement of cash flows
The Company considers investments with a maturity at the date of
their acquisition of three months or less to be cash equivalents.
These securities are carried principally at amortized cost which
approximates fair value.
Supplementary information to the consolidated statement of cash
flows for the years ended Dec. 31 is summarized as follows:
1994 1993 1992
Cash paid during the year for:
Income taxes $226,365 $188,204 $140,445
Interest on borrowings 1,553 2,661 1,265
Recognition of profits on annuity contracts and insurance policies
The Company issues single premium deferred annuity contracts that
provide for a service fee (surrender charge) at annually decreasing
rates upon withdrawal of the annuity accumulation value by the
contract owner. No sales fee is deducted from the contract
considerations received on these contracts ("no load" annuities).
All of the Company's single premium deferred annuity contracts
provide for crediting the contract owners' accumulations at
specified rates of interest. Such rates are revised by the Company
from time to time based on changes in the market investment yield
rates for fixed-income securities.
Profits on single premium deferred annuities and installment
annuities are recognized by the Company over the lives of the
contracts and represent the excess of investment income earned from
investment of contract considerations over interest credited to
contract owners and other expenses.
<PAGE>
PAGE 50
1. Summary of significant accounting policies (continued)
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, health and
long-term care insurance policies are recognized as revenue when
collected or 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.
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 single premium deferred
annuities and installment annuities are amortized based upon
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 are amortized over the lives of the policies as
a percentage of the estimated gross profits expected to be realized
on the policies. For traditional life, disability income, health
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 have
been computed principally by the net level premium method, based on
anticipated rates of mortality (approximating the 1965-1970 Select
and Ultimate Basic Table for policies issued after 1980 and the
1955-1960 Select and Ultimate Basic Table for policies issued prior
to 1981) and the 1975-1980 Select and Ultimate Basic Table for term
insurance policies issued after 1984, policy persistency derived
from Company experience data (first year rates ranging from
approximately 70 percent to 90 percent and increasing rates
thereafter), and estimated future investment yields of 4 percent
for policies issued before 1974 and 5.25 percent for policies
issued from 1974 to 1980. Cash value plans issued in 1980 and
later assume future investment rates that grade from 9.5 percent to
<PAGE>
PAGE 51
1. Summary of significant accounting policies (continued)
5 percent over 20 years. Term insurance issued from 1981 to 1984
assumes an 8 percent level investment rate, term insurance issued
from 1985-1993 assumes investment rates that grade from 10 percent
to 6 percent over 20 years and term insurance issued after 1993
assumes investment rates that grade from 8.7 percent to 6.57
percent over 7 years.
Liabilities for future disability income policy benefits have been
computed principally by the net level premium method, based on the
1964 Commissioners Disability Table with the 1958 Commissioners
Standard Ordinary Mortality Table at 3 percent interest for 1980
and prior, 8 percent interest for persons disabled from 1981 to
1991, 7.7 percent interest for persons disabled in 1992 and 6
percent interest for persons disabled after 1992.
Liabilities for future benefits on long-term care insurance have
been computed principally by the net level premium method, using
morbidity rates based on the 1985 National Nursing Home Survey and
mortality rates based on the 1983a Table. The interest rate basis
is 9.5 percent grading to 7 percent over ten years for policies
issued from 1989 to 1992, 7.75 percent grading to 7 percent over
four years for policies issued after 1992, 8 percent for claims
incurred in 1989 to 1991, 7.7 percent for claims incurred in 1992
and 6.7 percent 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. Graded premium whole life policies
and long term care 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 and its
subsidiaries that American Express Financial Corporation will
reimburse a subsidiary for any tax benefit.
Included in other receivables at Dec. 31, 1994 is $22,034
receivable from American Express Financial Corporation for federal
income taxes. Included in other liabilities at December 31, 1993
is $14,709 payable to American Express Financial Corporation for
federal income taxes.
<PAGE>
PAGE 52
1. Summary of significant accounting policies (continued)
Segregated asset account business
The segregated asset account assets and liabilities represent funds
held for the exclusive benefit of the variable annuity and variable
life insurance contract owners. The Company receives investment
management and mortality and expense assurance fees from the
variable annuity and variable life insurance mutual funds and
segregated asset accounts. The Company also deducts a monthly cost
of insurance charge and receives a minimum death benefit guarantee
fee and issue and administrative fee from the variable life
insurance segregated asset accounts.
The Company makes contractual mortality assurances to the variable
annuity contract owners that the net assets of the segregated asset
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 segregated asset accounts for such actuarial adjustments for
variable annuities that are in the benefit payment period. The
Company guarantees, for the variable life insurance policyholders,
the contractual insurance rate and that the death benefit will
never be less than the death benefit at the date of issuance.
Reclassification
Certain 1993 and 1992 amounts have been reclassified to conform to
the 1994 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 gain (loss) on investments for the years ended Dec. 31 is
summarized as follows:
1994 1993 1992
Fixed maturities $(1,575) $ 20,583 $ 22,075
Mortgage loans (3,013) (25,056) (13,444)
Other investments 306 (2,264) (12,341)
$(4,282) $ (6,737) $ (3,710)
===== ===== =====
Changes in net unrealized appreciation (depreciation) of
investments for the years ended Dec. 31 are summarized as follows:
<PAGE>
PAGE 53
2. Investments (continued)
1994 1993 1992
Fixed maturities:
Held to maturity $(1,329,740) $ -- $ --
Available for sale (720,449) -- --
Investment securities -- 323,060 (128,683)
Equity securities (2,917) (156) 300
The amortized cost, gross unrealized gains and losses and fair
values of investments in fixed maturities and equity securities at
Dec. 31, 1994 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 $ 21,500 $ 43 $ 4,372 $ 17,171
State and municipal
obligations 9,687 132 -- 9,819
Corporate bonds
and obligations 8,806,707 100,468 459,568 8,447,607
Mortgage-backed
securities 2,431,967 10,630 222,394 2,220,203
$11,269,861 $111,273 $686,334 $10,694,800
======== ======= ======= ========
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government
agency obligations $ 128,093 $ 756 $ 1,517 $ 127,332
State and municipal
obligations 11,008 702 -- 11,710
Corporate bonds
and obligations 1,142,321 24,166 7,478 1,159,009
Mortgage-backed
securities 7,177,706 9,514 467,716 6,719,504
Total fixed maturities 8,459,128 35,138 476,711 8,017,555
Equity securities 4,663 -- 2,757 1,906
$8,463,791 $35,138 $479,468 $8,019,461
======= ======= ======= =======
</TABLE>
The change in net unrealized gain (loss) on available for sale
securities included as a separate component of stockholder's equity
was $(275,822) in 1994.
The amortized cost, gross unrealized gains and losses and fair
values of investments in fixed maturities carried at amortized cost
at Dec. 31, 1993 are as follows:
<TABLE><CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government
agency obligations $ 63,532 $ 3,546 $ 1,377 $ 65,701
State and municipal
obligations 11,072 2,380 -- 13,452
Corporate bonds
and obligations 9,339,297 768,747 22,929 10,085,115
Mortgage-backed
securities 9,978,523 341,067 57,879 10,261,711
$19,392,424 $1,115,740 $ 82,185 $20,425,979
======== ======== ======== ========
/TABLE
<PAGE>
PAGE 54
2. Investments (continued)
At Dec. 31, 1993, net unrealized appreciation on equity securities
included $160 of gross unrealized appreciation, $nil of gross
unrealized depreciation and deferred tax credits of $46. The fair
value of equity securities was $1,900 at December 31, 1993.
The amortized cost and fair value of investments in fixed
maturities at Dec. 31, 1994 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 $ 108,056 $ 109,228
Due from one to five years 1,412,335 1,423,394
Due from five to ten years 5,467,826 5,245,742
Due in more than ten years 1,849,677 1,696,233
Mortgage-backed securities 2,431,967 2,220,203
$11,269,861 $10,694,800
======== ========
Amortized Fair
Available for sale Cost Value
Due from one to five years $ 757,160 $ 756,842
Due from five to ten years 433,717 449,057
Due in more than ten years 90,545 92,152
Mortgage-backed securities 7,177,706 6,719,504
$8,459,128 $8,017,555
======= =======
During the year ended Dec. 31, 1994, fixed maturities classified as
held to maturity were sold with proceeds of $58,001 and gross
realized gains and losses on such sales were $226 and $3,515,
respectively. The sale of these fixed maturities was due to credit
deterioration.
In addition, fixed maturities available for sale were sold during
1994 with proceeds of $374,564 and gross realized gains and losses
on such sales were $1,861 and $7,602, respectively.
Proceeds from sales of investments in fixed maturities during 1993
were $487,983. During 1993, gross gains of $48,499 and gross
losses of $43,039, respectively, were realized on those sales.
At Dec. 31, 1994, bonds carried at $6,536 were on deposit with
various states as required by law.
Net investment income for the years ended Dec. 31 is summarized as
follows:
<PAGE>
PAGE 55
2. Investments (continued)
1994 1993 1992
Interest on fixed maturities $1,556,756 $1,589,802 $1,449,234
Interest on mortgage loans 196,521 175,063 148,693
Other investment income 38,366 29,345 24,281
Interest on cash equivalents 6,872 2,137 5,363
1,798,515 1,796,347 1,627,571
Less investment expenses 16,642 13,128 10,750
$1,781,873 $1,783,219 $1,616,821
======= ======= =======
At Dec. 31, 1994, investments in fixed maturities comprised 87
percent of the Company's total invested assets. These securities
are rated by Moody's and Standard & Poor's (S&P), except for
securities carried at cost approximately $1.7 billion which are
rated by American Express Financial Corporation internal analysts
using criteria similar to Moody's and S&P. A summary of
investments in fixed maturities, at amortized cost, by rating on
Dec. 31 is as follows:
Rating 1994 1993
Aaa/AAA $ 9,708,047 $ 9,959,884
Aa/AA 242,914 258,659
Aa/A 119,952 160,638
A/A 2,567,947 2,021,177
A/BBB 725,755 654,949
Baa/BBB 3,849,188 3,936,366
Baa/BB 796,063 717,606
Below investment grade 1,719,123 1,683,145
$19,728,989 $19,392,424
======== ========
At Dec. 31, 1994, 97 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, 1994, approximately 10.9 percent of the Company's
invested assets were mortgage loans on real estate. Summaries of
mortgage loans by region of the United States and by type of real
estate at Dec. 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
Dec. 31, 1994 Dec. 31, 1993
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
East North Central $ 581,142 $ 62,291 $ 552,150 $ 20,933
West North Central 257,996 7,590 361,704 16,746
South Atlantic 597,896 63,010 452,679 52,440
Middle Atlantic 408,940 34,478 260,239 41,090
New England 209,867 23,087 155,214 17,620
Pacific 138,900 -- 120,378 15,492
West South Central 50,854 -- 43,948 525
East South Central 67,503 -- 73,748 --
Mountain 122,668 18,750 70,410 14,594
2,435,766 209,206 2,090,470 179,440
Less allowance for losses 35,252 -- 35,020 --
$2,400,514 $209,206 $2,055,450 $179,440
======= ======= ======= =======
<PAGE>
PAGE 56
2. Investments (continued)
Dec. 31, 1994 Dec. 31, 1993
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
Apartments $ 904,012 $ 56,964 $ 744,788 $ 79,153
Department/retail stores 802,522 88,325 624,651 65,402
Office buildings 321,761 21,691 234,042 15,583
Industrial buildings 232,962 18,827 217,648 9,279
Nursing/retirement homes 89,304 4,649 83,768 917
Hotels/motels 32,666 -- 33,138 --
Medical buildings 36,490 15,651 30,429 5,954
Residential 20 -- 78 --
Other 16,029 3,099 121,928 3,152
2,435,766 209,206 2,090,470 179,440
Less allowance for losses 35,252 -- 35,020 --
$2,400,514 $209,206 $2,055,450 $179,440
======= ======= ======= =======
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real
estate at the time of origination of the loan. The Company holds
the mortgage document, which gives 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.
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:
1994 1993 1992
Federal income taxes:
Current $186,508 $180,558 $130,998
Deferred (19,175) (44,237) (30,385)
167,333 136,321 100,613
State income taxes-current 9,010 6,326 4,038
Income tax expense $176,343 $142,647 $104,651
====== ====== ======
Increases (decreases) to the federal tax provision applicable to
pretax income based on the statutory rate are attributable to:
<PAGE>
PAGE 57
3. Income taxes (continued)
<TABLE>
<CAPTION>
1994 1993 1992
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income
taxes based on
the statutory rate $179,379 35.0% $144,454 35.0% $107,379 34.0%
Increases (decreases)
are attributable to:
Tax-excluded interest
and dividend income (9,939) (2.0) (11,002) (2.7) (8,209) (2.6)
Other, net (2,107) (0.4) 2,869 0.7 1,443 0.4
Federal income taxes $167,333 32.6% $136,321 33.0% $100,613 31.8%
====== === ====== === ====== ===
</TABLE>
A portion of life insurance company income earned prior to 1984 was
not subject to current taxation but was accumulated, for tax
purposes, in a "policyholders' surplus account." At December 31,
1994, the Company had a policyholders' surplus account balance of
$19,032. 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
$6,661 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:
1994 1993
Deferred tax assets:
Policy reserves $533,433 $453,436
Investments 116,736 --
Life insurance guarantee
fund assessment reserve 32,235 35,000
Total deferred tax assets 682,404 488,436
Deferred tax liabilities:
Deferred policy acquisition costs 553,722 509,868
Investments -- 10,151
Other 4,621 12,037
Total deferred tax
liabilities 558,343 532,056
Net deferred tax assets (liabilities) $124,061 $(43,620)
====== ======
The Company is required to establish a "valuation allowance" for
any portion of the deferred tax assets that management believes
will not be realized. In the opinion of management, it is more
likely than not that the Company will realize the benefit of the
deferred tax assets, and, therefore, no such valuation allowance
has been established.
<PAGE>
PAGE 58
4. Stockholder's equity
Retained earnings available for distribution as dividends to the
parent are limited to the Company's surplus as determined in
accordance with accounting practices prescribed by state insurance
regulatory authorities. Statutory unassigned surplus aggregated
$1,020,981 as of December 31, 1994 and $922,246 as of December 31,
1993 (see Note 3 with respect to the income tax effect of certain
distributions). In addition, any dividend distributions in 1995 in
excess of approximately $288,601 would require approval of the
Department of Commerce of the State of Minnesota.
Statutory net income for 1994, 1993 and 1992 and capital and
surplus as of Dec. 31, 1994, 1993 and 1992 are summarized as
follows:
1994 1993 1992
Statutory net income $ 294,699 $ 275,015 $180,296
Statutory capital and surplus 1,261,958 1,157,022 714,942
Dividends paid to American Express Financial Corporation were
$165,000 in 1994, $25,000 in 1993 and $20,000 in 1992.
5. Related party transactions
The Company has loaned funds to American Express Financial
Corporation under three loan agreements. The balance of the first
loan was $40,000 and $75,000 at December 31, 1994 and 1993,
respectively. This loan can be increased to a maximum of $75,000
and pays interest at a rate equal to the preceding month's
effective new money rate for the Company's permanent investments.
It is collateralized by equities valued at $110,034 at December 31,
1994. The second loan was used to fund the construction of the IDS
Operations Center. This loan was paid off during 1994 and had an
outstanding balance of $84,588 at December 31, 1993. The loan was
secured by a first lien on the IDS Operations Center property and
had an interest rate of 9.89 percent. The Company also had a loan
to an affiliate which was used to fund construction of the IDS
Learning Center. This loan was sold to the parent during 1994 and
the balance outstanding was $22,573 at December 31, 1993. The loan
was secured by a first lien on the IDS Learning Center property and
had an interest rate of 9.82 percent. Interest income on the above
loans totaled $2,894, $11,116 and $10,711 in 1994, 1993 and 1992,
respectively.
The Company purchased a five year secured note from an affiliated
company which had an outstanding balance of $23,333 and $27,222 at
December 31, 1994 and 1993, respectively. The note bears a fixed
rate of 8.42 percent. Interest income on the above note totaled
$2,278, $2,605 and $2,278 in 1994, 1993 and 1992, respectively.
The Company has a reinsurance agreement whereby it assumed 100
percent of a block of single premium life insurance business from
an affiliated company. The accompanying consolidated balance sheet
at Dec. 31, 1994 and 1993 includes $765,366 and $759,714,
respectively, of future policy benefits related to this agreement.
<PAGE>
PAGE 59
5. Related party transactions (continued)
The accompanying consolidated statement of income includes revenue
from policyholder charges of $8, $21 and $109, and expenses of
$6,912, $4,931 and $5,897 related to this agreement for 1994, 1993
and 1992, respectively.
The Company has a reinsurance agreement to cede 50 percent of its
long-term care insurance business to an affiliated company. The
accompanying consolidated balance sheet at December 31, 1994 and
1993 includes $65,123 and $44,086, respectively, of reinsurance
receivables related to this agreement. Premiums ceded amounted to
$20,360, $16,230 and $12,499 and reinsurance recovered from
reinsurers amounted to $62, $404 and $250 for the years ended Dec.
31, 1994, 1993 and 1992, respectively.
The Company participates in the retirement plan of American Express
Financial Corporation which covers all permanent employees age 21
and over who have met certain employment requirements. The
benefits are based on years of service and the employee's monthly
average of basic annual salary rates in effect on January 1, or
such other date as determined by American Express Financial
Corporation of the highest five consecutive annual salaries of the
last 10 years. American Express Financial Corporation's policy is
to fund retirement plan costs accrued subject to ERISA and federal
income tax considerations. The Company's share of the total net
periodic pension cost was $nil in 1994, 1993 and 1992.
The Company also participates in defined contribution pension plans
of American Express Financial Corporation 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 1994, 1993 and 1992 were $957, $2,008 and
$1,826, 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. At Dec. 31, 1994, the total accumulated
post retirement benefit obligation, determined in accordance with
SFAS 106 and based on an assumed interest rate of 8.75 percent and
a health care cost trend rate of 7 percent, has been recorded as a
liability by American Express Financial Corporation.
Charges by American Express Financial Corporation for use of joint
facilities, marketing services and other services aggregated
$335,183, $243,346 and $204,675 for 1994, 1993 and 1992,
respectively. Certain of these costs are included in deferred
<PAGE>
PAGE 60
5. Related party transactions (continued)
policy acquisition costs. In addition, the Company rents its home
office space from American Express Financial Corporation on an
annual renewable basis. Such rentals aggregated $965, $4,513 and
$4,074 for 1994, 1993 and 1992, respectively.
6. Commitments and contingencies
At December 31, 1994 and 1993, traditional life insurance and
universal life-type insurance in force aggregated $52,666,567 and
$46,125,515, respectively, of which $3,246,608 and $3,038,426 were
reinsured at the respective year ends. The Company also reinsures
a portion of the risks assumed under disability income policies.
Under the agreements, premiums ceded to reinsurers amounted to
$29,489, $28,276 and $24,222 and reinsurance recovered from
reinsurers amounted to $5,505, $3,345 and $6,766 for the years
ended Dec. 31, 1994, 1993 and 1992.
Reinsurance contracts do not relieve the Company from its primary
obligation to policyholders.
The Company is a defendant in various lawsuits, none of which, in
the opinion of the Company counsel, will result in a material
liability.
The Company settled all remaining IRS audit issues for the tax
years 1984 through 1986 in September of 1994. There was no
material impact as a result of this audit. Also, the IRS is
currently auditing the Company's 1987 through 1989 tax years.
Management does not believe there will be a material impact as a
result of this audit.
7. Lines of credit
The Company has available lines of credit with three banks
aggregating $100,000 at 40 to 80 basis points over the banks' cost
of funds or equal to the prime rate, depending on which line of
credit agreement is used. Borrowings outstanding under these
agreements were $nil and $1,519 at December 31, 1994 and 1993,
respectively.
8. 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 manages risks
associated with these instruments as described below. The Company
does not hold derivative instruments for trading purposes.
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<PAGE>
PAGE 61
8. Derivative financial instruments (continued)
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.
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.
Credit exposure related to interest rate caps is measured by the
replacement cost of the contracts. The replacement cost
represents the fair value of the instruments. Financial futures
contracts are settled in cash daily.
<TABLE>
<CAPTION>
Notional Carrying Total Credit
Assets Amount Value Fair Value Exposure
<S> <C> <C> <C> <C>
Financial futures contracts $ 159,800 $ 2,072 $ 2,072 $ -
Interest rate caps 4,400,000 29,054 42,365 42,365
$4,559,800 $31,126 $44,437 $42,365
======= ===== ===== =====
</TABLE>
The fair values of derivative financial instruments are based on
market values, dealer quotes or pricing models. The financial
futures contracts expire in 1995. The interest rate caps expire on
various dates from 1995 to 1999.
Financial futures contracts and interest rate caps are used
principally to manage the Company's exposure to rising interest
rates. These instruments are used primarily to protect the margin
between interest rate earned on investments and the interest rate
credited to related annuity contract holders.
Changes in the fair value of financial futures contracts are
accounted for as adjustments to the carrying amount of the hedged
investments and amortized over the remaining lives of such
investments. The cost of interest rate caps is amortized to
interest expense over the life of the contracts and payments
received as a result of these agreements are recorded as a
reduction of interest expense when realized. The amortized cost of
interest rate cap contracts is included in other investments.
9. Fair values of financial instruments
The Company is required to disclose fair value information for most
on- and off-balance sheet financial instruments for which it is<PAGE>
PAGE 62
9. Fair values of financial instruments (continued)
practical to estimate that value. Certain financial instruments
such as life insurance obligations, receivables and all
non-financial instruments, such as deferred acquisition costs are
excluded from required disclosure. Off-balance sheet intangible
assets, such as the value of 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>
1994 1993
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $11,269,861 $10,694,800 $ -- $ --
Available for sale 8,017,555 8,017,555 -- --
Investment securities -- -- 19,392,424 20,425,979
Mortgage loans on
real estate (Note 2) 2,400,514 2,342,520 2,055,450 2,125,686
Other:
Equity securities (Note 2) 1,906 1,906 1,900 1,900
Derivative financial
instruments (Note 8) 31,126 44,437 26,923 14,201
Cash and
cash equivalents (Note 1) 267,774 267,774 146,281 146,281
Assets held in segregated
asset accounts (Note 1) 10,881,235 10,881,235 8,991,694 8,991,694
Financial Liabilities
Future policy benefits
for fixed annuities 18,325,870 17,651,897 17,519,876 16,881,747
Liabilities related to
segregated asset accounts 10,398,861 9,943,672 8,645,418 8,305,209
</TABLE>
At December 31, 1994 and 1993, the carrying amount and fair value
of future policy benefits for fixed annuities exclude life
insurance-related contracts carried at $971,897 and $913,127,
respectively, and policy loans of $64,212 and $59,132,
respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1994 and 1993. The fair
value of deferred annuities is estimated as the carrying amount
less any applicable surrender charges and related loans. The fair
value for annuities in non-life contingent payout status is
estimated as the present value of projected benefit payments at the
rate appropriate for contracts issued in 1994 and 1993.
At December 31, 1994 and 1993 the fair value of liabilities related
to segregated asset accounts is estimated as the carrying amount
less variable insurance contracts carried at $482,374 and $346,276,
respectively, and surrender charges, if applicable.
10. Segment information
The Company's operations consist of two business segments; first,
individual and group life insurance, disability income, health and
long-term care insurance, and second, annuity products designed for<PAGE>
PAGE 63
individuals, pension plans, small businesses and employer-sponsored
groups. The consolidated statement of income for the years ended
Dec. 31, 1994, 1993 and 1992 and total assets at Dec. 31, 1994,
1993 and 1992 by segment are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net investment income:
Life, disability income,
health and long-term
care insurance $ 247,047 $ 250,224 $ 246,676
Annuities 1,534,826 1,532,995 1,370,145
$1,781,873 $1,783,219 $1,616,821
======= ======= =======
Premiums, charges
and fees:
Life, disability income,
health and long-term
care insurance $335,375 $281,284 $250,386
Annuities 193,370 143,876 104,952
$528,745 $425,160 $355,338
====== ====== ======
Income before income taxes:
Life, disability income,
health and long-term
care insurance $122,677 $104,127 $ 96,215
Annuities 394,117 315,336 223,316
Net loss
on investments (4,282) (6,737) (3,710)
$512,512 $412,726 $315,821
====== ====== ======
Total assets:
Life, disability income,
health and long-term
care insurance $ 5,269,188 $ 4,810,145 $ 4,093,778
Annuities 30,478,355 28,247,608 23,201,995
$35,747,543 $33,057,753 $27,295,773
========= ======== ========
</TABLE>
Allocations of net investment income and certain general expenses
are based on various assumptions and estimates.
Assets are not individually identifiable by segment and have been
allocated principally based on the amount of future policy benefits
by segment.
Capital expenditures and depreciation expense are not material, and
consequently, are not reported.
<PAGE>
PAGE 64
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying consolidated balance sheets of IDS
Life Insurance Company (a wholly owned subsidiary of American
Express Financial Corporation) as of December 31, 1994 and 1993,
and the related consolidated statements of income and cash flows
for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of IDS Life Insurance Company at December 31, 1994 and
1993, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, the Company changed its method of accounting for
certain investments in debt and equity securities in 1994.
Ernst & Young LLP
Minneapolis, Minnesota
February 3, 1995
<PAGE>
PAGE 65
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses of the issuance and distribution of the interests
in the IDS Life Account MGA of IDS Life Insurance Company to be
registered, other than commissions on sales of the Contracts, are
to be borne by the registrant.
Item 14. Indemnification of Directors and Officers
Section 300.083 of Minnesota Law provides in part that a
corporation organized under such law shall have power to indemnify
anyone made, or threatened to be made, a party to a threatened,
pending or completed proceeding, whether civil or criminal,
administrative or investigative, because he is or was a director or
officer of the corporation, or served as a director or officer of
another corporation at the request of the corporation.
Indemnification in such a proceeding may extend to judgments,
penalties, fines and amounts paid in settlement, as well as to
reasonable expenses, including attorneys' fees and disbursements.
In a civil proceeding, there can be no indemnification under the
statute, unless it appears that the person seeking indemnification
has acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the corporation and
its shareholders and unless such person has received no improper
personal benefit; in a criminal proceeding, the person seeking
indemnification must also have no reasonable cause to believe his
conduct was unlawful.
Article IX of the By-laws of the IDS Life Insurance Company
requires the IDS Life Insurance Company to indemnify directors and
officers to the extent indemnification is permitted as stated by
the preceding paragraph, and contains substantially the same
language as the above-mentioned Section 300.083.
Article IX, paragraph (2), of the By-laws of the IDS Life
Insurance Company provides as follows:
"Section 2. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party, by reason of
the fact that he is or was a director, officer, employee or agent
of this Corporation, or is or was serving at the direction of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
to any threatened, pending or completed action, suit or proceeding,
wherever brought, to the fullest extent permitted by the laws of
the State of Minnesota, as now existing or hereafter amended,
provided that this Article shall not indemnify or protect any such
director, officer, employee or agent against any liability to the
Corporation or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence, in the performance of his duties or by reason of his
reckless disregard of his obligations and duties."
<PAGE>
PAGE 66
The parent company of IDS Life Insurance Company maintains an
insurance policy which affords liability coverage to directors and
officers of the IDS Life Insurance Company while acting in that
capacity. IDS Life Insurance Company pays its proportionate share
of the premiums for the policy.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 15. Recent Sales of Unregistered Securities
None
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
3.1 Copy of Certificate of Incorporation of IDS Life
Insurance Company filed electronically as Exhibit 3.1 to
Post-Effective Amendment No. 5 to Registration Statement
No. 33-28976 is incorporated herein by reference.
3.2 Copy of the Amended By-laws of IDS Life Insurance Company
filed electronically as Exhibit 3.2 to Post-Effective
Amendment No. 5 to Registration Statement No. 33-28976 is
incorporated herein by reference.
3.3 Copy of Resolution of the Board of Directors of IDS Life
Insurance Company, dated May 5, 1989, establishing IDS
Life Account MGA filed electronically as Exhibit 3.3 to
Post-Effective Amendment No. 5 to Registration Statement
No. 33-28976 is incorporated herein by reference.
4.1 Copy of Group Annuity Contract, Form 30363C, filed
electronically as Exhibit 4.1 to Post-Effective Amendment
No. 5 to Registration Statement No. 33-28976 is
incorporated herein by reference.
<PAGE>
PAGE 67
4.2 Copy of Group Annuity Certificate, Form 30360C, filed
electronically as Exhibit 4.2 to Post-Effective Amendment
No. 5 to Registration Statement No. 33-28976 is
incorporated herein by reference.
4.3 Copy of Endorsement No. 30340C-GP to the Group Annuity
Contract filed electronically as Exhibit 4.3 to Post-
Effective Amendment No. 5 to Registration Statement No.
33-28976 is incorporated herein by reference.
4.4 Copy of Endorsement No. 30340C to the Group Annuity
Certificate filed electronically as Exhibit 4.4 to Post-
Effective Amendment No. 5 to Registration Statement No.
33-28976 is incorporated herein by reference.
5. Copy of Opinion of Counsel regarding legality of
Contracts, dated Oct. 3, 1990, filed electronically as
Exhibit 5 to Post-Effective Amendment No. 5 to
Registration Statement No. 33-28976 is incorporated
herein by reference.
22. Copy of List of Subsidiaries is filed electronically
herewith.
24. Consent of Independent Auditors is filed electronically
herewith.
25. Powers of Attorney, dated March 31, 1994, filed
electronically as Exhibit 25 to Post-Effective Amendment
No. 5 to Registration Statement No. 33-28976 is
incorporated herein by reference.
(b) Financial Statement Schedules
27. Schedule I - Consolidated Summary of Investments Other
than Investments in Related Parties
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
Schedule V - Valuation and Qualifying Accounts
Report of Independent Auditors dated February 3, 1995.
All other schedules to the consolidated financial statements
required by Article 7 of Regulation S-X are not required under
the related instructions or are inapplicable and, therefore,
have been omitted.
Item 17. Undertakings
A. The Registrant undertakes: (a) to file, during any period in
which offers or sales are being made, a post-effective amendment to
this registration statement: (i) to include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, (ii) to reflect
in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement, (iii) to include any material<PAGE>
PAGE 68
information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to
such information in the Registration Statement, (b) that, for the
purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment may be deemed to be a new
Registration Statement relating to the securities offered therein
and the offering of such securities at that time may be deemed to
be the initial bona fide offering thereof, (c) that all
post-effective amendments will comply with the applicable forms,
rules and regulations of the Commission in effect at the time such
post-effective amendments are filed, and (d) to remove from
registration by means of a post-effective amendment any of the
securities being registered which will remain at the termination of
the offering.
B. The Registrant represents that it is relying upon the no-action
assurance given to the American Council of Life Insurance (pub.
avail. Nov. 28, 1988). Further, the Registrant represents that it
has complied with the provisions of paragraphs (1) - (4) of the no-
action letter.
<PAGE>
PAGE 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, IDS
Life Insurance Company has duly caused this Registration Statement
to be signed on behalf of the Registrant by the undersigned,
thereunto duly authorized in this City of Minneapolis, and State of
Minnesota on the 26th day of April, 1995.
IDS Life Insurance Company
(Registrant)
By IDS Life Insurance Company
By /s/ James A. Mitchell*
James A. Mitchell
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities indicated on the 26th day of April, 1995.
Signature Title
/s/ James A. Mitchell* Chairman of the Board
James A. Mitchell and Chief Executive
Officer
/s/ Richard W. Kling* Director and President
Richard W. Kling
/s/ Louis C. Fornetti* Director
Louis C. Fornetti
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ Peter A. Lefferts* Director and Executive Vice
Peter A. Lefferts President, Marketing
/s/ Janis E. Miller* Director and Executive Vice
Janis E. Miller President, Variable Assets
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
<PAGE>
PAGE 70
Signature Title
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President, Assured Assets
/s/ Melinda S. Urion* Director, Exective Vice
Melinda S. Urion President and Controller
*Signed pursuant to Power of Attorney dated March 31, 1994, filed
as Exhibit 25 to Registration Statement No. 33-28976 for IDS Life
Insurance Company (IDS Life Account MGA).
By:
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
PAGE 1
IDS Life Account MGA
Registration No. 33-28976
EXHIBIT INDEX
22. Copy of List of Subsidiaries
24. Consent of Independent Auditors
27.1. Financial Statement Schedules and Report of Independent
Auditors
27.2 Financial Data Schedule
<PAGE>
PAGE 1
LIST OF SUBSIDIARIES
o American Centurion Life Insurance Company
o American Enterprise Life Insurance Company
o American Partners Life Insurance Company
o IDS Life Insurance Company of New York
<PAGE>
PAGE 1
Consent of Independent Auditors
We consent to the use of our reports dated February 3, 1995 on the
consolidated financial statements and financial statement schedules
of IDS Life Insurance Company in Post-Effective Amendment No. 7 to
the Registration Statement (Form S-1 No. 33-28976) being filed
under the Securities Act of 1933 for the registration of interests
in group and individual market value annuity contracts to be
offered by IDS Life Insurance Company.
Minneapolis, Minnesota
April 24, 1995
<PAGE>
PAGE 1
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1994
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 1,301,547 $ 1,177,730 $ 1,301,547
States, municipalities and
polictical subdivisions 9,687 9,819 9,687
All other corporate bonds 9,958,627 9,507,251 9,958,627
Total held to maturity 11,269,861 10,694,800 11,269,861
Available for sale:
United States Government and
government agencies and
authorities (b) 3,783,176 3,514,514 3,514,514
States, municipalities and
polictical subdivisions 11,008 11,710 11,710
All other corporate bonds 4,664,944 4,491,331 4,491,331
Total available for sale 8,459,128 8,017,555 8,017,555
Mortgage loans on real estate 2,400,514 XXXXXXXXX 2,400,514
Policy loans 381,912 XXXXXXXXX 381,912
Other investments 51,795 XXXXXXXXX 51,795
Total investments $22,563,210 $ XXXXXXXXX $22,121,637
(a) - Includes mortgage-backed securities with a cost and market value of $1,280,047 and $1,160,559, respectively.
(b) - Includes mortgage-backed securities with a cost and market value of $3,655,083 and $3,387,182, respectively.
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1994
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Annuities $1,150,585 $19,361,979 $ - $23,888 $ - $1,534,826
Life, DI,
Long-term Care and
Health Insurance 714,739 3,346,931 - 26,180 144,640 247,047
_____________________________________________________________________________________________________________________________
Total $1,865,324 $22,708,910 $ - $50,068 $144,640 $1,781,873
_____________________________________________________________________________________________________________________________
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
_____________________________________________________________________________________________________________________________
Annuities $ (5,762) $ 194,060 $131,515 N/A
Life, DI,
Long-term Care and
Health Insurance 134,128 86,312 78,586 N/A
_____________________________________________________________________________________________________________________________
Total $ 128,366 $ 280,372 $210,101 N/A
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1993
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Annuities $1,008,378 $18,492,135 $ - $21,508 $ - $1,532,995
Life, DI,
Long-term Care and
Health Insurance 644,006 3,148,932 - 23,008 127,245 250,22
_____________________________________________________________________________________________________________________________
Total $1,652,384 $21,641,067 $ - $44,516 $127,245 $1,783,219
_____________________________________________________________________________________________________________________________
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
_____________________________________________________________________________________________________________________________
Annuities $ 3,656 $ 139,602 $122,999 N/A
Life, DI,
Long-term Care and
Health Insurance 119,335 72,131 118,975 N/A
_____________________________________________________________________________________________________________________________
Total $ 122,991 $ 211,733 $241,974 N/A
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1992
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Annuities $ 860,027 $16,342,419 $ - $28,705 $ - $1,370,145
Life, DI,
Long-term Care and
Health Insurance 580,848 2,883,469 - 21,194 114,379 246,676
_____________________________________________________________________________________________________________________________
Total $1,440,875 $19,225,888 $ - $49,899 $114,379 $1,616,821
_____________________________________________________________________________________________________________________________
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
_____________________________________________________________________________________________________________________________
Annuities $ 1,870 $ 81,706 $100,928 N/A
Life, DI,
Long-term Care and
Health Insurance 106,528 58,453 114,764 N/A
_____________________________________________________________________________________________________________________________
Total $ 108,398 $ 140,159 $215,692 N/A
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Column A Column B Column C Column D Column E Column F
Gross amount Ceded to other Assumed from Net % of amount
companies other companies Amount assumed to net
______________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1994
Life insurance in force $50,814,651 $3,246,608 $1,851,916 $49,419,959 3.75%
______________________________________________________________________________________________________________
Premiums:
Life insurance $ 51,219 $ 3,354 $ 319 $ 48,184 0.66%
DI & health insurance 114,049 17,593 -- 96,456 0.00%
Total premiums $ 165,268 $ 20,947 $ 319 $ 144,640 0.22%
______________________________________________________________________________________________________________
For the year ended
December 31, 1993
Life insurance in force $44,188,493 $3,038,426 $1,937,022 $43,087,089 4.50%
______________________________________________________________________________________________________________
Premiums:
Life insurance $ 51,764 $ 3,627 $ -- $ 48,137 0.00%
DI & health insurance 96,250 17,142 -- 79,108 0.00%
Total premiums $ 148,014 $ 20,769 $ -- $ 127,245 0.00%
______________________________________________________________________________________________________________
For the year ended
December 31, 1992
Life insurance in force $38,888,963 $2,937,590 $2,015,382 $37,966,755 5.31%
______________________________________________________________________________________________________________
Premiums:
Life insurance $ 53,238 $ 3,849 $ 330 $ 49,719 0.66%
DI & health insurance 78,347 13,687 -- 64,660 0.00%
Total premiums $ 131,585 $ 17,536 $ 330 $ 114,379 0.29%
______________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Column A Column B Column C Column D Column E
Additions
---------
Balance at Charged to
Description Beginning Charged to Other Accounts- Deductions- Balance at End
of Period Costs & Expenses Describe * Describe ** of Period
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1994
- -----------------------------
Reserve for Mortgage Loans $35,020 $232 $ 0 $ 0 $35,252
Reserve for Fixed Maturities $22,777 ($16,777) $ 0 $6,000 $ 0
Reserve for Other Investments $10,700 ($3,185) $ 0 $ 0 $ 7,515
For the year ended
December 31, 1993
- -----------------------------
Reserve for Mortgage Loans $23,595 $13,635 $ 0 $2,210 $35,020
Reserve for Fixed Maturities $37,899 ($15,122) $ 0 $22,777
Reserve for Other Investments $12,834 ($4,344) $ 0 ($2,210) $10,700
For the year ended
December 31, 1992
- ------------------------------
Reserve for Mortgage Loans $16,131 $8,440 $ 0 $976 $23,595
Reserve for Fixed Maturities $45,100 ($7,601) $400 $ 0 $37,899
Reserve for Other Investments $ 7,782 $4,076 $ 0 ($976) $12,834
* Cash received on bond previously written down.
** 1994 amount represents a direct writedown of the related investments in fixed maturities. 1993 and 1992 amounts represent
transfers between reserve accounts.
</TABLE>
<PAGE>
PAGE 7
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the consolidated financial statements of IDS Life
Insurance Company as of December 31, 1994 and 1993, and for each of
the three years in the period ended December 31, 1994, and have
issued our report thereon dated February 3, 1995 (included
elsewhere in this Registration Statement).
Our audits also included the financial statements schedules I, III,
IV and V included elsewhere in this Registration Statement. These
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
Ernst & Young LLP
Minneapolis, Minnesota
February 3, 1995
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
<CIK> 0000727892
<NAME> IDS Life Insurance Company
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1994
<PERIOD-START> JAN-01-1993 JAN-01-1994
<PERIOD-END> DEC-31-1993 DEC-31-1994
<PERIOD-TYPE> YEAR YEAR
<EXCHANGE-RATE> 1 1
<DEBT-HELD-FOR-SALE> 0 8017555
<DEBT-CARRYING-VALUE> 19392424 11269861
<DEBT-MARKET-VALUE> 20425979 10694800
<EQUITIES> 1900 1906
<MORTGAGE> 2055450 2400514
<REAL-ESTATE> 27484 20835
<TOTAL-INVEST> 21854682 22121637
<CASH> 146281 267774
<RECOVER-REINSURE> 1293 1110
<DEFERRED-ACQUISITION> 1652384 1865324
<TOTAL-ASSETS> 33057753 35747543
<POLICY-LOSSES> 21641067 22708910
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0 0
0 0
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127245 144640
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