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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 March 31, 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 March 31, 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 March 31, 1995
Table of Contents
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1995 (unaudited) and
December 31, 1994 3 - 4
Consolidated Statements of Income for the
three months ended March 31, 1995 and 1994
(unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1995 and 1994
(unaudited) 6 - 7
Notes to Consolidated Financial Statements
(unaudited) 8 - 9
Item 2. Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations 10 - 12
PART II - OTHER INFORMATION 13
SIGNATURES 14
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
<TABLE>
<CAPTION>
March 31 December 31,
ASSETS 1995 1994
(unaudited)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1995, $11,014,165; 1994, $10,694,800) $11,216,376 $11,269,861
Available for sale, at fair value (Amortized cost:
1995, $9,241,648; 1994, $8,459,128) 9,094,474 8,017,555
20,310,850 19,287,416
Mortgage loans on real estate
(Fair value: 1995, $2,515,556; 1994, $2,342,520) 2,479,800 2,400,514
Policy loans 391,770 381,912
Other investments 64,180 51,795
Total investments 23,246,600 22,121,637
Cash and cash equivalents 3,173 267,774
Receivables:
Reinsurance 87,964 80,304
Amounts due from brokers 3,700 7,933
Other accounts receivable 26,538 49,745
Premiums due 1,469 1,594
Total receivables 119,671 139,576
Accrued investment income 310,137 317,510
Deferred policy acquisition costs 1,903,736 1,865,324
Deferred income taxes 41,932 124,061
Other assets 38,149 30,426
Assets held in segregated asset accounts,
primarily common stocks at market 11,821,035 10,881,235
Total assets $37,484,433 $35,747,543
========== ==========
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
(continued)
March 31, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
(unaudited)
Liabilities:
Future policy benefits:
Fixed annuities $19,970,071 $19,361,979
Universal life-type insurance 2,943,084 2,896,100
Traditional life insurance 205,765 206,754
Disability income, health and
long-term care insurance 260,444 244,077
Policy claims and other
policyholders' funds 75,675 50,068
Amounts due to brokers 95,041 226,737
Other liabilities 309,950 291,902
Liabilities related to segregated
asset accounts 11,821,035 10,881,235
Total liabilities 35,681,065 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 loss
on investments (93,938) (275,708)
Retained earnings 1,656,922 1,639,399
Total stockholder's equity 1,803,368 1,588,691
Total liabilities and stockholder's equity $37,484,433 $35,747,543
========== ==========
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 12,204 $ 11,726
Disability income, health and
long-term care insurance 26,484 22,181
Total premiums 38,688 33,907
Policyholder and contractholder charges 62,026 53,097
Management and other fees 46,590 37,559
Net investment income 460,614 452,111
Net realized gain (loss) on investments (1,238) 2,813
Total revenues 606,680 579,487
Benefits and expenses:
Death and other benefits:
Traditional life insurance 6,850 6,307
Universal life-type insurance
and investment contracts 16,542 23,363
Disability income, health and
long-term care insurance 3,752 2,991
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance (963) (673)
Disability income, health and
long-term care insurance 10,632 9,653
Interest credited on universal life-type
insurance and investment contracts 312,040 290,219
Amortization of deferred policy
acquisition costs 64,773 80,917
Other insurance and operating expenses 60,918 47,804
Total benefits and expenses 474,544 460,581
Income before income taxes 132,136 118,906
Income taxes 46,342 41,147
Net income $ 85,794 $ 77,758
====== ======
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 85,794 $ 77,759
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (10,204) (7,177)
Repayment 8,746 7,948
Change in reinsurance receivable (7,660) (4,283)
Change in other accounts receivable 23,207 477
Change in accrued investment income 7,373 (1,879)
Change in deferred policy
acquisition costs, net (52,164) (26,053)
Change in liabilities for future policy
benefits for traditional life,
disability income, health and
long-term care insurance 15,378 13,422
Change in policy claims and other
policyholders' funds 25,607 30,960
Change in deferred income taxes (15,971) (14,834)
Change in other liabilities 19,502 30,089
Amortization of premium
(accretion of discount), net 75,421 (9,914)
Net (gain) loss on investments 1,238 (2,813)
Activity related to universal
life-type insurance:
Premiums 113,073 101,581
Surrenders and death benefits (71,379) (78,637)
Interest credited to account balances 39,473 37,326
Policyholder and contractholder charges,
non-cash (34,183) (31,166)
Other, net 3,027 (135)
Net cash provided by operating activities $226,278 $122,671
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
Three months ended
March 31,
1995 1994
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases ($120,997) ($775,221)
Maturities, sinking fund payments and calls 145,157 702,184
Sales 61,991 25,558
Fixed maturities available for sale:
Purchases (871,475) (861,073)
Maturities, sinking fund payments and calls 78,755 439,702
Sales - 2,941
Other investments, excluding policy loans:
Purchases (151,337) (143,277)
Sales 50,902 145,116
Change in amounts due from broker 4,233 (1,222)
Change in amounts due to broker (131,696) 214,475
Net cash used in investing activities (934,467) (250,817)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 951,274 555,872
Surrenders and death benefits (701,853) (747,160)
Interest credited to account balances 272,567 253,000
Universal life-type insurance policy loans:
Issuance (22,434) (16,433)
Repayment 14,034 13,695
Cash dividends to parent (70,000) (40,000)
Net cash provided by financing activities 443,588 18,974
Net decrease in cash and cash equivalents (264,601) (109,172)
Cash and cash equivalents at beginning of period 267,774 146,281
Cash and cash equivalents at end of period $ 3,173 $ 37,109
===== ======
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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
March 31, 1995, statements of income for the three months ended
March 31, 1995 and 1994 and statements of cash flows for the three
months ended March 31, 1995 and 1994.
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, 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 $20 and $897 for the
three months ended March 31, 1995 and 1994, respectively. Cash
paid (refunded) for income taxes totaled $(3,367) and $14,226 for
the three months ended March 31, 1995 and 1994, respectively.
4. Commitments and contingencies
Commitments for purchases of investments in the ordinary course of
business at March 31, 1995 aggregated $196,112.
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
(unaudited)
(continued)
4. Commitments and contingencies (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
Three Months Ended March 31, 1995 Compared to Three Months Ended
March 31, 1994:
Consolidated net income increased 10 percent to $86 million
for the three months ended March 31, 1995, compared to $78 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 increased to $1.5 billion for the
three months ended March 31, 1995, compared with $1.4 billion a
year ago. This increase is primarily due to sales of fixed rate
annuities.
Total revenues increased 4.7 percent to $607 million for the
three months ended March 31, 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 $461 million for the three
months ended March 31, 1995, compared with $452 million a year ago.
The increase is a result of higher asset levels which increased 10
percent from a year ago to $37 billion at March 31, 1995.
Policyholder and contractholder charges increased to $62
million for the three months ended March 31, 1995, compared with
$53 million a year ago. This increase is primarily due to higher
life insurance in force.
Management and other fees increased to $47 million for the
three months ended March 31, 1995, compared with $38 million a year
ago. This is primarily due to an increase in assets held in
segregated assets accounts, which grew 25 percent to $11.8 billion
at March 31, 1995 due to market appreciation and positive net
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 slightly to $475 million
for the three months ended March 31, 1995, compared to $461 million
a year ago. The largest component of expenses, interest credited
on universal life-type insurance and investment contracts,
increased to $312 million, compared with $290 million for the
corresponding period in 1994. This is primarily due to an increase
in interest credited rates and higher aggregate amounts in force.
Amortization of deferred policy acquisition costs decreased to $65
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million for the three months ended March 31, 1995, compared to $81
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.
As of January 1, 1995, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan", as amended by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures". The adoption of SFAS No. 114 did not
have a material impact on the Company's results of operations or
financial condition.
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. At March 31, 1995, there were no outstanding
borrowings under these agreements. The Company also uses reverse
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PAGE 12
repurchase agreements for short-term liquidity needs. Outstanding
reverse repurchase agreements totalled $19 million at March 31,
1995.
At March 31, 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 March 31, 1995, net unrealized depreciation on investments
in fixed maturities held for investment totaled $202 million. For
the three months ended March 31, 1995, sales of fixed maturities
held for investment were due to either credit deterioration or
early extinguishment by the issuer.
At March 31, 1995, the Company had an allowance for losses on
mortgage loans of $35 million.
The Company paid $70 million in dividends to its parent during
the three months ended March 31, 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 March
31, 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 three months ended March 31, 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 Melinda S. Urion
NAME AND TITLE Melinda S. Urion
Executive Vice President and
Controller
DATE May 10, 1995
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<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> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 9094474
<DEBT-CARRYING-VALUE> 11216376
<DEBT-MARKET-VALUE> 11014165
<EQUITIES> 13209
<MORTGAGE> 2479800
<REAL-ESTATE> 22079
<TOTAL-INVEST> 23246600
<CASH> (16538)
<RECOVER-REINSURE> 991
<DEFERRED-ACQUISITION> 1903736
<TOTAL-ASSETS> 37484433
<POLICY-LOSSES> 23379364
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 75675
<NOTES-PAYABLE> 0
<COMMON> 3000
0
0
<OTHER-SE> 1803368
<TOTAL-LIABILITY-AND-EQUITY> 37484433
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<INVESTMENT-INCOME> 460614
<INVESTMENT-GAINS> (1238)
<OTHER-INCOME> 108616
<BENEFITS> 348853
<UNDERWRITING-AMORTIZATION> 64773
<UNDERWRITING-OTHER> 60918
<INCOME-PRETAX> 132136
<INCOME-TAX> 46342
<INCOME-CONTINUING> 85794
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 85794
<EPS-PRIMARY> 0
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<PAGE>
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