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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 June 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
For Quarter ended June 30, 1995 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) 671-2581
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 June 30, 1995
Table of Contents
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1995 (unaudited) and
December 31, 1994 3 - 4
Consolidated Statements of Income for the
three months ended June 30, 1995 and 1994
(unaudited) 5
Consolidated Statements of Income for the
six months ended June 30, 1995 and 1994
(unaudited) 6
Consolidated Statements of Cash Flows for the
six months ended June 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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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
June 30, December 31,
ASSETS 1995 1994
(unaudited)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1995, $11,553,681; 1994, $10,694,800) $11,217,462 $11,269,861
Available for sale, at fair value (Amortized cost:
1995, $9,687,942; 1994, $8,459,128) 9,867,064 8,017,555
21,084,526 19,287,416
Mortgage loans on real estate
(Fair value: 1995, $2,741,110 ; 1994, $2,342,520) 2,564,568 2,400,514
Policy loans 403,445 381,912
Other investments 98,115 51,795
Total investments 24,150,654 22,121,637
Cash and cash equivalents 56,316 267,774
Receivables:
Reinsurance 96,642 80,304
Amounts due from brokers 3,259 7,933
Other accounts receivable 34,402 49,745
Premiums due 4,614 1,594
Total receivables 138,917 139,576
Accrued investment income 330,255 317,510
Deferred policy acquisition costs 1,937,273 1,865,324
Deferred income taxes - 124,061
Other assets 46,332 30,426
Assets held in segregated asset accounts,
primarily common stocks at market 12,968,713 10,881,235
Total assets $39,628,460 $35,747,543
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
(continued)
June 30, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
(unaudited)
Liabilities:
Future policy benefits:
Fixed annuities $20,330,776 $19,361,979
Universal life-type insurance 2,986,664 2,896,100
Traditional life insurance 208,703 206,754
Disability income, health and long-term care 285,771 244,077
insurance
Policy claims and other policyholders' funds 86,488 50,068
Amounts due to brokers 374,432 226,737
Deferred income taxes 60,382 -
Other liabilities 259,876 291,902
Liabilities related to segregated asset accounts 12,968,713 10,881,235
Total liabilities 37,561,805 34,158,852
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 237,384 222,000
Net unrealized gain (loss) on investments 109,410 (275,708)
Retained earnings 1,716,861 1,639,399
Total stockholder's equity 2,066,655 1,588,691
Total liabilities and stockholder's equity $39,628,460 $35,747,543
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Three months ended
June 30,
1995 1994
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 13,251 $ 12,163
Disability income, health and long-term care insurance 26,828 22,389
Total premiums 40,079 34,552
Policyholder and contractholder charges 63,145 53,593
Management and other fees 50,840 39,547
Net investment income 476,106 441,150
Net realized loss on investments (1,512) (3,627)
Total revenues 628,658 565,215
Benefits and expenses:
Death and other benefits:
Traditional life insurance 8,505 9,457
Universal life-type insurance and investment contracts 17,481 13,933
Disability income, health and long-term care insurance 4,761 2,946
Increase (decrease) in liabilities for future policy benefits:
Traditional life insurance (758) (625)
Disability income, health and long-term care insurance 14,640 8,269
Interest credited on universal life-type insurance and
investment contracts 329,834 287,884
Amortization of deferred policy acquisition costs 59,844 62,075
Other insurance and operating expenses 49,375 52,248
Total benefits and expenses 483,682 436,187
Income before income taxes 144,976 129,028
Income taxes 50,038 44,591
Net income $ 94,938 $ 84,437
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Six months ended
June 30,
1995 1994
Revenues:
Premiums:
Traditional life insurance $ 25,455 $ 23,889
Disability income, health and long-term care insurance 53,312 44,570
Total premiums 78,767 68,459
Policyholder and contractholder charges 125,171 106,690
Management and other fees 97,430 77,106
Net investment income 936,720 893,261
Net realized loss on investments (2,750) (814)
Total revenues 1,235,338 1,144,702
Benefits and expenses:
Death and other benefits:
Traditional life insurance 15,355 15,764
Universal life-type insurance and investment contracts 34,023 37,296
Disability income, health and long-term care insurance 8,513 5,937
Increase (decrease) in liabilities for future policy benefits:
Traditional life insurance (1,721) (1,298)
Disability income, health and long-term care insurance 25,272 17,922
Interest credited on universal life-type insurance and
investment contracts 641,874 578,103
Amortization of deferred policy acquisition costs 124,617 142,992
Other insurance and operating expenses 110,293 100,052
Total benefits and expenses 958,226 896,768
Income before income taxes 277,112 247,934
Income taxes 96,380 85,738
Net income $ 180,732 $ 162,196
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
Six months ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 180,732 $ 162,196
Adjustments to reconcile net income to net cash
provided by operating activities:
Policy loans, excluding universal life-type insurance:
Issuance (22,684) (17,108)
Repayment 18,321 16,318
Change in reinsurance receivable (16,338) (9,098)
Change in other accounts receivable 15,343 (12,746)
Change in accrued investment income (12,745) (8,831)
Change in deferred policy acquisition costs, net (100,483) (80,190)
Change in liabilities for future policy benefits for
traditional life, disability income, health and
long-term care insurance 43,643 26,017
Change in policy claims and other policyholders' funds 36,420 33,890
Change in deferred income taxes (22,928) (17,101)
Change in other liabilities (32,026) (6,460)
Amortization of premium (accretion of discount), net (12,184) 5,133
Net loss on investments 2,750 814
Activity related to universal life-type insurance:
Premiums 227,118 197,855
Surrenders and death benefits (148,131) (150,004)
Interest credited to account balances 80,075 74,456
Policyholder and contractholder charges, non-cash (68,498) (62,014)
Other, net 9,723 (448)
Net cash provided by operating activities $ 178,108 $ 152,679
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
Six months ended
June 30,
1995 1994
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ (391,215) $ (796,443)
Maturities, sinking fund payments and calls 307,164 1,180,937
Sales 125,282 40,575
Fixed maturities available for sale:
Purchases (1,567,022) (910,158)
Maturities, sinking fund payments and calls 323,689 756,602
Sales 14,820 86,996
Other investments, excluding policy loans:
Purchases (294,900) (299,329)
Sales 93,620 176,710
Change in amounts due from broker 4,674 5,605
Change in amounts due to broker 147,695 (323,532)
Net cash used in investing activities (1,236,193) (82,037)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 1,829,091 1,372,806
Surrenders and death benefits (1,422,092) (1,834,997)
Interest credited to account balances 561,798 503,647
Universal life-type insurance policy loans:
Issuance (43,467) (36,419)
Repayment 26,297 25,472
Cash dividends to parent (105,000) (75,000)
Net cash provided by (used in) financing activities 846,627 (44,491)
Net increase (decrease) in cash and cash equivalents (211,458) 26,151
Cash and cash equivalents at beginning of period 267,774 146,281
Cash and cash equivalents at end of period $ 56,316 $ 172,432
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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
June 30, 1995, statements of income for the three and six months
ended June 30, 1995 and 1994 and statements of cash flows for the
six months ended June 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 $1,879 and $1,377 for
the six months ended June 30, 1995 and 1994, respectively. Cash
paid for income taxes totaled $111,800 and $110,658 for the six
months ended June 30, 1995 and 1994, respectively.
4. Commitments and contingencies
Commitments for purchases of investments in the ordinary course of
business at June 30, 1995 aggregated $266,503.
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ 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
Six Months Ended June 30, 1995 Compared to Six Months Ended June
30, 1994:
Consolidated net income increased 12 percent to $181 million for
the six months ended June 30, 1995, compared to $162 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 $2.8 billion for the six
months ended June 30, 1995, compared with $3.1 billion a year ago.
This decrease is primarily due to decreased sales of variable
annuities.
Total revenues increased 7.9 percent to $1.2 billion for the six
months ended June 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 $937 million for the six months
ended June 30, 1995, compared with $893 million a year ago. The
increase reflects higher total investments which increased 13
percent from a year ago to $24 billion at June 30, 1995.
Policyholder and contractholder charges increased to $125 million
for the six months ended June 30, 1995, compared with $107 million
a year ago. This increase is primarily due to higher life
insurance in force.
Management and other fees increased to $97 million for the six
months ended June 30, 1995, compared with $77 million a year ago.
This is primarily due to an increase in assets held in segregated
asset accounts, which grew 32 percent to $13 billion at June 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 $958 million for the six
months ended June 30, 1995, compared to $897 million a year ago.
The largest component of expenses, interest credited on universal
life-type insurance and investment contracts, increased to $642
million, compared with $578 million for the corresponding period in
1994. This is due to higher aggregate amounts in force and an
increase in interest credited rates.
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Amortization of deferred policy acquisition costs decreased to $125
million for the six months ended June 30, 1995, compared to $143
million a year ago. This decrease is a result of a high level of
surrenders in 1994 as a result of an exchange plan announced during
the first quarter of 1994.
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, and new investment purchases.
The Company has available lines of credit with three banks
aggregating $100 million, which are used strictly as short-term
sources of funds. Outstanding borrowings under these agreements
totalled $10 million at June 30, 1995. The Company also uses
reverse repurchase agreements for short-term liquidity needs.
Outstanding reverse repurchase agreements totalled $332 million at
June 30, 1995.
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At June 30, 1995, approximately 7.7 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 June 30, 1995, net unrealized appreciation on investments in
fixed maturities held to maturity totalled $336 million. For the
six months ended June 30, 1995, sales of fixed maturities held for
investment were due to either credit deterioration or early
extinguishment by the issuer.
At June 30, 1995, the Company had an allowance for losses on
mortgage loans of $38 million.
The Company paid $105 million in dividends to its parent during the
six months ended June 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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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 June 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 six months ended June 30, 1995.
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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 /s/ Melinda S. Urion
NAME AND TITLE Melinda S. Urion
Executive Vice President and
Controller
DATE Aug 14, 1995
