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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, 1996
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 March 31, 1996
Table of Contents
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1996 (unaudited) and
December 31, 1995 3 - 4
Consolidated Statements of Income for the
three months ended March 31, 1996 and 1995
(unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1995
(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 1996 1995
(unaudited)
<S> <C> <C>
Investments:
Fixed Maturities:
Held to maturity, at amortized cost (Fair value:
1996, $11,241,735; 1995, $11,878,377) $10,974,448 $11,257,591
Available for sale, at fair value (Amortized cost:
1996, $10,180,147; 1995, $10,146,136) 10,292,958 10,516,212
21,267,406 21,773,803
Mortgage loans on real estate
(Fair value: 1996, $3,284,067; 1995, $3,184,666) 3,172,025 2,945,495
Policy loans 430,450 424,019
Other investments 154,459 146,894
Total investments 25,024,340 25,290,211
Cash and cash equivalents 42,868 72,147
Receivables:
Reinsurance 125,398 114,387
Amounts due from brokers 49,219 -
Other accounts receivable 41,982 33,667
Premiums due 4,778 5,441
Total receivables 221,377 153,495
Accrued investment income 341,326 348,008
Deferred policy acquisition costs 2,095,963 2,025,725
Other assets 37,590 36,410
Separate account assets 15,760,152 14,974,082
Total assets $43,523,616 $42,900,078
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
(continued)
March 31, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1996 1995
(unaudited)
Liabilities:
Future policy benefits:
Fixed annuities $21,278,855 $21,404,836
Universal life-type insurance 3,109,429 3,076,847
Traditional life insurance 209,107 209,249
Disability income, health and
long-term care insurance 351,125 327,157
Policy claims and other
policyholders' funds 76,446 56,323
Amounts due to brokers 117,151 112,904
Deferred income taxes 9,681 121,618
Other liabilities 381,967 285,354
Separate account liabilities 15,760,152 14,974,082
Total liabilities 41,293,913 40,568,370
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 278,814 278,814
Net unrealized loss on investments 70,282 230,129
Retained earnings 1,877,607 1,819,765
Total stockholder's equity 2,229,703 2,331,708
Total liabilities and stockholder's equity $43,523,616 $42,900,078
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1996 1995
<S> <C> <C>
Revenues
Premiums:
Traditional life insurance $ 12,440 $ 12,204
Disability income, health and
long-term care insurance 31,639 26,484
Total premiums 44,079 38,688
Policyholder and contractholder charges 71,453 62,026
Management and other fees 62,602 46,590
Net investment Income 493,830 460,614
Net realized gain (loss) on investments 2,492 (1,238)
Total revenues 674,456 606,680
Benefits and expenses:
Death and other benefits:
Traditional life insurance 7,223 6,850
Universal life-type insurance
and investment contracts 23,625 16,542
Disability income, health and
long-term care insurance 4,301 3,752
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance (246) (963)
Disability income, health and
long-term care insurance 14,616 10,632
Interest credited on universal life-type
insurance and investment contracts 338,075 312,040
Amortization of deferred policy
acquisition costs 68,245 64,773
Other insurance and operating expenses 69,267 60,918
Total benefits and expenses 525,106 474,544
Income before income taxes 149,350 132,136
Income taxes 51,508 46,342
Net income $ 97,842 $ 85,794
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
Three months ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 97,842 $ 85,794
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (10,345) (10,204)
Repayment 9,888 8,746
Change in reinsurance receivable (11,011) (7,660)
Change in other accounts receivable (8,315) 23,207
Change in accrued investment income 6,682 7,373
Change in deferred policy
acquisition costs, net (58,647) (52,164)
Change in liabilities for future policy
benefits for traditional life,
disability income, health and
long-term care insurance 23,826 15,378
Change in policy claims and other
policyholders' funds 20,123 25,607
Change in deferred income taxes (17,150) (15,971)
Change in other liabilities 96,613 19,502
Amortization of premium
(accretion of discount), net (4,340) 75,421
Net (gain) loss on investments (2,492) 1,238
Activity related to universal
life-type insurance:
Premiums 121,713 113,073
Surrenders and death benefits (93,275) (71,379)
Interest credited to account balances 41,644 39,473
Policyholder and contractholder charges,
non-cash (37,500) (34,183)
Other, net (6,463) 3,027
Net cash provided by operating activities $168,793 $226,278
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
Three months ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases ($5,481) ($120,997)
Maturities, sinking fund payments and calls 241,436 145,157
Sales 60,564 61,991
Fixed maturities available for sale:
Purchases (444,871) (871,475)
Maturities, sinking fund payments and calls 269,315 78,755
Sales 140,507 -
Other investments, excluding policy loans:
Purchases (264,621) (151,337)
Sales 30,720 50,902
Change in amounts due from broker (49,219) 4,233
Change in amounts due to broker (4,467) (131,696)
Net cash used in investing activities (26,117) (934,467)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 870,368 951,274
Surrenders and death benefits (1,292,780) (701,853)
Interest credited to account balances 296,431 272,567
Universal life-type insurance policy loans:
Issuance (21,218) (22,434)
Repayment 15,244 14,034
Cash dividends to parent (40,000) (70,000)
Net cash (used in) provided by financing activities (171,955) 443,588
Net decrease in cash and cash equivalents (29,279) (264,601)
Cash and cash equivalents at beginning of period 72,147 267,774
Cash and cash equivalents at end of period $ 42,868 $ 3,173
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
($ 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, 1996, statements of income for
the three months ended March 31, 1996 and 1995 and
statements of cash flows for the three months ended
March 31, 1996 and 1995.
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 $1,172 and
$20 for the three months ended March 31, 1996 and 1995,
respectively. Cash paid (refunded) for income taxes
totaled $20,222 and $(3,367) for the three months ended
March 31, 1996 and 1995, respectively.
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
(unaudited)
(continued)
4. Commitments and contingencies
Commitments for purchases of investments in the
ordinary course of business at March 31, 1996
aggregated $310,810.
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, 1996 Compared to Three Months
Ended March 31, 1995:
Consolidated net income increased 14 percent to $98
million for the three months ended March 31, 1996, compared
to $86 million in 1995. Earnings growth resulted primarily
from increases in net investment income, management fees and
policyholder and contractholder charges, partially offset by
the impact of somewhat lower investment margins.
Premiums received totaled $1.4 billion for the three
months ended March 31, 1996, a slight increase from a year ago.
Increased sales of variable annuities and life insurance
were mostly offset by decreased sales of fixed annuities.
Net investment income increased to $494 million for the
three months ended March 31, 1996, compared with $461 million a
year ago. The increase reflects higher total investments which
increased 7.6 percent from a year ago to $25 billion at March 31,
1996.
Policyholder and contractholder charges increased to
$71 million for the three months ended March 31, 1996,
compared with $62 million a year ago. This increase is
primarily due to higher life insurance in force.
Management and other fees increased to $63 million for
the three months ended March 31, 1996, compared with $47 million a
year ago. This is primarily due to an increase in separate account
assets, which grew 33 percent to $16 billion at March 31, 1996 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 separate accounts.
Total benefits and expenses increased to $525 million
for the three months ended March 31, 1996, compared to $475
million a year ago. The largest component of expenses,
interest credited on universal life-type insurance and
investment contracts, increased to $338 million, compared
with $312 million for the corresponding period in 1995.
This is due to higher aggregate amounts in force and an
increase in interest credited rates.
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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 March 31, 1996. The
Company also uses reverse repurchase agreements for short-
term liquidity needs. Outstanding reverse repurchase
agreements totaled $78 million at March 31, 1996.
At March 31, 1996, approximately 8.4 percent of the
Company's invested assets were below-investment-grade bonds,
compared to 9.2 percent at December 31, 1995. 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, 1996, net unrealized appreciation on
investments in fixed maturities decreased due to an increase
in market rates during the first quarter of 1996. For the
three months ended March 31, 1996, sales of fixed maturities
held to maturity were primarily due to significant
deterioration in the issuers' creditworthiness.
At March 31, 1996, the Company had an allowance for
losses on mortgage loans of $35 million.
The Company paid $40 million in dividends to its parent
during the three months ended March 31, 1996.
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PAGE 12
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 has 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
effect of future assessments on the Company's financial
position and results of operations and has established a
reserve for such assessments.
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PAGE 13
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, 1996.
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, 1996.
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PAGE 14
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 May 13, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> IDS Life Insurance Company
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<FISCAL-YEAR-END> DEC-31-1995
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<PERIOD-END> SEPT-30-1995
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