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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-28976
IDS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0823832
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IDS TOWER 10, MINNEAPOLIS, MINNESOTA 55440-0010
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (612) 671-1257
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No ___
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING
THIS FORM WITH THE PERMITTED ABBREVIATED NARRATIVE DISCLOSURE.
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IDS LIFE INSURANCE COMPANY
FORM 10-Q
For the Quarter Ended September 30, 1995
Table of Contents
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1995 (unaudited) and
December 31, 1994 3 - 4
Consolidated Statements of Income for the
three months ended September 30, 1995 and 1994
(unaudited) 5
Consolidated Statements of Income for the
nine months ended September 30, 1995 and 1994
(unaudited) 6
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1995 and 1994
(unaudited) 7 - 8
Notes to Consolidated Financial Statements
(unaudited) 9 - 10
Item 2. Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations 11 - 13
PART II - OTHER INFORMATION 14
SIGNATURES 15
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
(unaudited)
<S> <C> <C>
Investments:
Fixed Maturities:
Held to maturity, at amortized cost (Fair value:
1995, $11,393,021; 1994, $10,694,800) $11,036,382 $11,269,861
Available for sale, at fair value (Amortized cost:
1995, $9,723,978; 1994, $8,459,128) 9,907,299 8,017,555
20,943,681 19,287,416
Mortgage loans on real estate
(Fair value: 1995, $2,847,560; 1994, $2,342,520) 2,694,957 2,400,514
Policy loans 414,139 381,912
Other investments 116,849 51,795
Total investments 24,169,626 22,121,637
Cash and cash equivalents 5,190 267,774
Receivables:
Reinsurance 105,409 80,304
Amounts due from brokers 10,605 7,933
Other accounts receivable 26,092 49,745
Premiums due 4,779 1,594
Total receivables 146,885 139,576
Accrued investment income 329,436 317,510
Deferred policy acquisition costs 1,961,532 1,865,324
Deferred income taxes - 124,061
Other assets 61,662 30,426
Assets held in segregated asset accounts,
primarily common stocks at market 14,120,026 10,881,235
Total assets $40,794,357 $35,747,543
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
(continued)
September 30, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
(unaudited)
Liabilities:
Future policy benefits:
Fixed annuities $20,472,909 $19,361,979
Universal life-type insurance 3,025,137 2,896,100
Traditional life insurance 208,667 206,754
Disability income, health and
long-term care insurance 306,748 244,077
Policy claims and other
policyholders' funds 77,143 50,068
Amounts due to brokers 166,933 226,737
Deferred income taxes 53,331 -
Other liabilities 242,749 291,902
Liabilities related to segregated
asset accounts 14,120,026 10,881,235
Total liabilities 38,673,643 34,158,852
Stockholder's equity:
Capital Stock, $30 par value per share; 3,000 3,000
100,000 shares authorized, issued and outstanding
Additional paid-in capital 237,384 222,000
Net unrealized gain (loss) on investments 113,751 (275,708)
Retained earnings 1,766,579 1,639,399
Total stockholder's equity 2,120,714 1,588,691
Total liabilities and stockholder's equity $40,794,357 $35,747,543
See accompanying notes.
</TABLE>
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PAGE 5
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
1995 1994
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 12,213 $ 11,881
Disability income, health and
long-term care insurance 28,343 23,678
Total premiums 40,556 35,559
Policyholder and contractholder charges 63,768 55,499
Management and other fees 55,634 43,492
Net Investment Income 477,997 437,689
Net realized gain (loss) on investments 145 (1,023)
Total revenues 638,100 571,216
Benefits and expenses:
Death and other benefits:
Traditional life insurance 6,769 5,770
Universal life-type insurance
and investment contracts 17,532 13,258
Disability income, health and
long-term care insurance 4,578 3,819
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance 7 (436)
Disability income, health and
long-term care insurance 12,956 12,745
Interest credited on universal life-type
insurance and investment contracts 333,159 292,978
Amortization of deferred policy
acquisition costs 86,622 64,935
Other insurance and operating expenses 46,478 42,414
Total benefits and expenses 508,101 435,483
Income before income taxes 129,999 135,733
Income taxes 45,180 45,665
Net income $ 84,819 $ 90,068
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Nine months ended
September 30,
1995 1994
Revenues:
Premiums:
Traditional life insurance $ 37,668 $ 35,770
Disability income, health and
long-term care insurance 81,655 68,248
Total premiums 119,323 104,018
Policyholder and contractholder charges 188,939 162,189
Management and other fees 153,064 120,598
Net Investment Income 1,414,616 1,330,950
Net realized loss on investments (2,605) (1,837)
Total revenues 1,873,337 1,715,918
Benefits and expenses:
Death and other benefits:
Traditional life insurance 22,124 21,534
Universal life-type insurance
and investment contracts 51,555 50,554
Disability income, health and
long-term care insurance 13,091 9,756
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance (1,714) (1,734)
Disability income, health and
long-term care insurance 38,228 30,667
Interest credited on universal life-type
insurance and investment contracts 975,033 871,081
Amortization of deferred policy
acquisition costs 211,239 207,927
Other insurance and operating expenses 156,771 142,466
Total benefits and expenses 1,466,327 1,332,251
Income before income taxes 407,010 383,667
Income taxes 141,560 131,403
Net income $ 265,450 $ 252,264
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 265,450 $ 252,264
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (35,332) (28,037)
Repayment 26,993 24,913
Change in reinsurance receivable (25,305) (16,538)
Change in other accounts receivable 23,653 (5,723)
Change in accrued investment income (11,926) (1,857)
Change in deferred policy
acquisition costs, net (124,744) (127,804)
Change in liabilities for future policy
benefits for traditional life,
disability income, health and
long-term care insurance 64,584 44,007
Change in policy claims and other
policyholders' funds 27,075 53,260
Change in deferred income taxes (32,318) (29,718)
Change in other liabilities (49,153) 4,222
Amortization of premium
(accretion of discount), net (19,620) 8,280
Net loss on investments 2,605 1,837
Activity related to universal
life-type insurance:
Premiums 339,747 299,172
Surrenders and death benefits (228,266) (218,766)
Interest credited to account balances 121,324 112,289
Policyholder and contractholder charges,
non-cash (103,768) (93,979)
Other, net 3,300 (3,541)
Net cash provided by operating activities $ 244,299 $ 274,281
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
Nine months ended
September 30,
1995 1994
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases ($ 443,661) ($ 809,541)
Maturities, sinking fund payments and calls 485,070 1,385,948
Sales 175,616 42,762
Fixed maturities available for sale:
Purchases (1,831,133) (1,827,901)
Maturities, sinking fund payments and calls 553,582 968,698
Sales 50,031 179,117
Other investments, excluding policy loans:
Purchases (505,182) (440,592)
Sales 124,229 222,664
Change in amounts due from broker (2,672) 4,119
Change in amounts due to broker (59,805) (156,621)
Net cash used in investing activities (1,453,925) (431,347)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 2,338,090 2,250,745
Surrenders and death benefits (2,080,869) (2,702,747)
Interest credited to account balances 853,709 758,793
Universal life-type insurance policy loans:
Issuance (63,768) (56,182)
Repayment 39,880 38,047
Cash dividends to parent (140,000) (105,000)
Net cash provided by financing activities 947,042 183,656
Net increase (decrease) in cash and cash equivalents (262,584) 26,590
Cash and cash equivalents at beginning of period 267,774 146,281
Cash and cash equivalents at end of period $ 5,190 $ 172,871
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
($ in thousands)
(unaudited)
1. General
In the opinion of the management of IDS Life Insurance Company (the
Company), the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly its balance sheet as of
September 30, 1995, statements of income for the three and nine
months ended September 30, 1995 and 1994 and statements of cash
flows for the nine months ended September 30, 1995 and 1994.
The Company is a wholly owned subsidiary of American Express
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, American Centurion Life
Assurance Company and American Partners Life Insurance Company.
All material intercompany accounts and transactions have been
eliminated in consolidation.
2. Nature of business
The Company is engaged in the life 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.
3. Statements of cash flows
The Company considers investments with a maturity at the date of
their acquisition of three months or less to be cash equivalents.
These securities are carried principally at amortized cost which
approximates market value.
Cash paid for interest on borrowings totaled $4,568 and $1,382 for
the nine months ended September 30, 1995 and 1994, respectively.
Cash paid for income taxes totaled $157,199 and $168,352 for the
nine months ended September 30, 1995 and 1994, respectively.
4. Commitments and contingencies
Commitments for purchases of investments in the ordinary course of
business at September 30, 1995 aggregated $423,938.
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
(unaudited)
(continued)
The maximum amount of 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 excesses are reinsured with other
life insurance companies on a yearly renewable term basis.
The Company is a defendant in various lawsuits, none of which, in
the opinion of the Company counsel, will result in a material
liability.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Nine Months Ended September 30, 1995 Compared to Nine Months
Ended September 30, 1994:
Consolidated net income increased 5.2 percent to $265 million for
the nine months ended September 30, 1995, compared to $252 million
in 1994. Earnings growth resulted primarily from increases in
management fees and policyholder and contractholder charges,
partially offset by a decrease in investment margins. The
increases reflect higher average insurance and annuities in force.
Investment margins were below prior year levels primarily due to
the increase in interest rates credited.
Total premiums received decreased to $3.8 billion for the nine
months ended September 30, 1995, compared with $4.2 billion a year
ago. This decrease is primarily due to decreased sales of variable
annuities.
Total revenues increased 10 percent to $1.9 billion for the nine
months ended September 30, 1995, compared with the corresponding
period in 1994. The increase is primarily due to increases in net
investment income, policyholder and contractholder charges and
management fees.
Net investment income increased to $1.4 billion for the nine months
ended September 30, 1995, compared with $1.3 billion a year ago.
The increase reflects higher total investments which increased 11
percent from a year ago to $24 billion at September 30, 1995,
partially offset by lower yields.
Policyholder and contractholder charges increased to $189 million
for the nine months ended September 30, 1995, compared with $162
million a year ago. This increase is primarily due to higher life
insurance in force.
Management and other fees increased to $153 million for the nine
months ended September 30, 1995, compared with $121 million a year
ago. This is primarily due to an increase in assets held in
segregated asset accounts, which grew 32 percent to $14 billion at
September 30, 1995 due to market appreciation and sales. The
Company provides investment management services for the mutual
funds which are used as investment options for variable annuities
and variable life insurance. The Company also receives a mortality
and expense risk fee from the segregated asset accounts.
Total benefits and expenses increased to $1.5 billion for the nine
months ended September 30, 1995, compared to $1.3 billion a year
ago. The largest component of expenses, interest credited on
universal life-type insurance and investment contracts, increased
to $975 million, compared with $871 million for the corresponding
period in 1994. This is due to higher aggregate amounts in force
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PAGE 12
and an increase in interest credited rates. Amortization of
deferred policy acquisition costs increased to $211 million for the
nine months ended September 30, 1995, compared to $208 million a
year ago. This increase reflects a higher deferred cost asset
base.
Risk Management
The Company primarily invests in fixed income securities, over a
broad range of maturities for the purpose of providing fixed
annuity clients with a competitive rate of return on their
investments while minimizing risk, and to provide a dependable and
consistent margin between the interest rate earned on investments
and the interest rate credited to clients' accounts. The Company
does not invest in securities to generate trading profits.
The Company has an investment committee that holds regularly
scheduled meetings and, when necessary, special meetings. At these
meetings, the committee reviews models projecting different
interest rate scenarios and their impact on profitability. The
objective of the committee is to structure the investment security
portfolio based upon the type and behavior of products in the
liability portfolio so as to achieve targeted levels of
profitability.
Rates credited to clients' accounts are generally reset at shorter
intervals than the maturity of underlying investments. Therefore,
margins may be negatively impacted by increases in the general
level of interest rates. Part of the committee's strategy includes
the purchase of some types of derivatives, such as interest rate
caps, 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 the Company 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, new investment purchases and
dividends to parent.
The Company has available lines of credit with three banks
aggregating $100 million, which are used strictly as short-term
sources of funds. There were no outstanding borrowings under these
agreements at September 30, 1995. The Company also uses reverse
repurchase agreements for short-term liquidity needs. Outstanding
reverse repurchase agreements totaled $115 million at September 30,
1995.
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PAGE 13
At September 30, 1995, approximately 8.3 percent of the Company's
invested assets were below-investment-grade bonds, compared to 8.9
percent at December 31, 1994. These investments may be subject to
a higher degree of risk than the more "traditional" issues because
of the borrowers' generally greater sensitivity to adverse economic
conditions, such as recession or increasing interest rates, and in
certain instances the lack of an active secondary market. Expected
returns on below-investment-grade bonds reflect consideration of
such factors. The Company has identified those fixed maturities
for which a decline in fair value is determined to be other than
temporary, and has written them down to fair value with a charge to
earnings.
At September 30, 1995, net unrealized appreciation on investments
in fixed maturities held to maturity totaled $357 million. For the
nine months ended September 30, 1995, sales of fixed maturities
held for investment were due to either credit deterioration or
early extinguishment by the issuer.
At September 30, 1995, the Company had an allowance for losses on
mortgage loans of $34 million.
The Company paid $140 million in dividends to its parent during the
nine months ended September 30, 1995.
The economy and other factors have caused an increase in the number
of insurance companies that are under regulatory supervision. This
circumstance has resulted in an increase in assessments by state
guaranty associations to cover losses to policyholders of insolvent
or rehabilitated companies. Some assessments can be partially
recovered through a reduction in future premium taxes in certain
states. The Company established an asset for guaranty association
assessments 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. The Company has
also estimated the potential effect of future assessments on the
Company's financial position and results of operations and has
established a reserve for such potential assessments.
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PAGE 14
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Reference is made to Note 4 of the Notes to
Consolidated Financial Statements (unaudited)
contained in the Report filed on Form 10-Q for the
quarterly period ended September 30, 1995.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
No reports on Form 8-K were required to be filed by the Company for
the nine months ended September 30, 1995.
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PAGE 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
REGISTRANT IDS LIFE INSURANCE COMPANY
BY _______________________________
NAME AND TITLE Melinda S. Urion
Executive Vice President and Controller
DATE November 9, 1995
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000727892
<NAME> IDS Life Insurance Company
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEPT-30-1995
<PERIOD-TYPE> 9-MOS
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 9907299
<DEBT-CARRYING-VALUE> 11036382
<DEBT-MARKET-VALUE> 11393021
<EQUITIES> 26573
<MORTGAGE> 2694957
<REAL-ESTATE> 59922
<TOTAL-INVEST> 24169626
<CASH> 5190
<RECOVER-REINSURE> 1589
<DEFERRED-ACQUISITION> 1961532
<TOTAL-ASSETS> 40794357
<POLICY-LOSSES> 24013461
<UNEARNED-PREMIUMS> 0
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<POLICY-HOLDER-FUNDS> 77143
<NOTES-PAYABLE> 0
<COMMON> 3000
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<INVESTMENT-INCOME> 1414616
<INVESTMENT-GAINS> (2605)
<OTHER-INCOME> 342003
<BENEFITS> 1098317
<UNDERWRITING-AMORTIZATION> 211239
<UNDERWRITING-OTHER> 156771
<INCOME-PRETAX> 407010
<INCOME-TAX> 141560
<INCOME-CONTINUING> 265450
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 265450
<EPS-PRIMARY> 0
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<RESERVE-OPEN> 20636
<PROVISION-CURRENT> 86770
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<PAGE>
</TABLE>
