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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, 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 June 30, 1996
Table of Contents
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1996 (unaudited) and
December 31, 1995 3 - 4
Consolidated Statements of Income for the
six months ended June 30, 1996 and 1995
(unaudited) 5
Consolidated Statements of Income for the
three months ended June 30, 1996 and 1995
(unaudited) 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1995
(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>
June 30, December 31,
ASSETS 1996 1995
(unaudited)
<S> <C> <C>
Investments:
Fixed Maturities:
Held to maturity, at amortized cost (Fair value:
1996, $10,877,425; 1995, $11,878,377) $10,768,970 $11,257,591
Available for sale, at fair value (Amortized cost:
1996, $10,283,339; 1995, $10,146,136) 10,277,208 10,516,212
21,046,178 21,773,803
Mortgage loans on real estate
(Fair value: 1996, $3,338,721; 1995, $3,184,666) 3,317,820 2,945,495
Policy loans 440,685 424,019
Other investments 216,753 146,894
Total investments 25,021,436 25,290,211
Cash and cash equivalents 104,136 72,147
Receivables:
Reinsurance 133,048 114,387
Other accounts receivable 41,171 33,667
Premiums due 4,897 5,441
Total receivables 179,116 153,495
Accrued investment income 349,770 348,008
Deferred policy acquisition costs 2,170,324 2,025,725
Deferred income taxes 136,527 -
Other assets 36,925 36,410
Separate account assets 16,713,279 14,974,082
Total assets $44,711,513 $42,900,078
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
(continued)
June 30, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1996 1995
(unaudited)
Liabilities:
Future policy benefits:
Fixed annuities $21,399,929 $21,404,836
Universal life-type insurance 3,127,406 3,076,847
Traditional life insurance 209,524 209,249
Disability income, health and
long-term care insurance 375,508 327,157
Policy claims and other
policyholders' funds 77,402 56,323
Amounts due to brokers 307,337 112,904
Deferred income taxes - 121,618
Other liabilities 280,871 285,354
Separate account liabilities 16,713,279 14,974,082
Total liabilities 42,491,256 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 gain (loss) on investments (3,555) 230,129
Retained earnings 1,941,998 1,819,765
Total stockholder's equity 2,220,257 2,331,708
Total liabilities and stockholder's equity $44,711,513 $42,900,078
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30,
1996 1995
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 12,942 $ 13,251
Disability income, health and
long-term care insurance 31,736 26,828
Total premiums 44,678 40,079
Policyholder and contractholder charges 74,888 63,145
Management and other fees 64,560 50,840
Net investment income 487,601 476,106
Net realized gain (loss) on investments 312 (1,512)
Total revenues 672,039 628,658
Benefits and expenses:
Death and other benefits:
Traditional life insurance 7,606 8,505
Universal life-type insurance
and investment contracts 19,792 17,481
Disability income, health and
long-term care insurance 3,456 4,761
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance 355 (758)
Disability income, health and
long-term care insurance 14,812 14,640
Interest credited on universal life-type
insurance and investment contracts 337,876 329,834
Amortization of deferred policy
acquisition costs 68,469 59,844
Other insurance and operating expenses 55,955 49,375
Total benefits and expenses 508,321 483,682
Income before income taxes 163,718 144,976
Income taxes 56,350 50,038
Net income $ 107,368 $ 94,938
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Six months ended
June 30,
1996 1995
Revenues:
Premiums:
Traditional life insurance $ 25,382 $ 25,455
Disability income, health and
long-term care insurance 63,375 53,312
Total premiums 88,757 78,767
Policyholder and contractholder charges 146,341 125,171
Management and other fees 127,162 97,430
Net investment income 981,431 936,720
Net realized gain (loss) on investments 2,804 (2,750)
Total revenues 1,346,495 1,235,338
Benefits and expenses:
Death and other benefits:
Traditional life insurance 14,829 15,355
Universal life-type insurance
and investment contracts 43,417 34,023
Disability income, health and
long-term care insurance 7,757 8,513
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance 109 (1,721)
Disability income, health and
long-term care insurance 29,428 25,272
Interest credited on universal life-type
insurance and investment contracts 675,951 641,874
Amortization of deferred policy
acquisition costs 136,714 124,617
Other insurance and operating expenses 125,222 110,293
Total benefits and expenses 1,033,427 958,226
Income before income taxes 313,068 277,112
Income taxes 107,858 96,380
Net income $ 205,210 $ 180,732
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 205,210 $ 180,732
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (23,261) (22,684)
Repayment 19,844 18,321
Change in reinsurance receivable (18,661) (16,338)
Change in other accounts receivable (7,504) 15,343
Change in accrued investment income (1,762) (12,745)
Change in deferred policy
acquisition costs, net (127,788) (100,483)
Change in liabilities for future policy
benefits for traditional life,
disability income, health and
long-term care insurance 48,626 43,643
Change in policy claims and other
policyholders' funds 21,079 36,420
Change in deferred income taxes (119,935) (22,928)
Change in other liabilities (4,483) (32,026)
Accretion of discount, net (5,149) (12,184)
Net realized (gain) loss on investments (2,804) 2,750
Activity related to universal
life-type insurance:
Premiums 242,049 227,118
Surrenders and death benefits (199,311) (148,131)
Interest credited to account balances 82,339 80,075
Policyholder and contractholder charges,
non-cash (74,518) (68,498)
Other, net (734) 9,723
Net cash provided by operating activities $ 33,237 $ 178,108
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
Six months ended
June 30,
1996 1995
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases ($ 32,846) ($ 391,215)
Maturities, sinking fund payments and calls 422,554 307,164
Sales 102,355 125,282
Fixed maturities available for sale:
Purchases (925,631) (1,567,022)
Maturities, sinking fund payments and calls 633,287 323,689
Sales 157,080 14,820
Other investments, excluding policy loans:
Purchases (548,874) (294,900)
Sales 99,550 93,620
Change in amounts due from broker - 4,674
Change in amounts due to broker 194,433 147,695
Net cash provided by (used in) investing activities 101,908 (1,236,193)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 1,611,996 1,829,091
Surrenders and death benefits (2,210,516) (1,422,092)
Interest credited to account balances 593,613 561,798
Universal life-type insurance policy loans:
Issuance (42,836) (43,467)
Repayment 29,587 26,297
Cash dividends to parent (85,000) (105,000)
Net cash provided by (used in) financing activities (103,156) 846,627
Net increase (decrease) in cash and cash equivalents 31,989 (211,458)
Cash and cash equivalents at beginning of period 72,147 267,774
Cash and cash equivalents at end of period $ 104,136 $ 56,316
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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
June 30, 1996, statements of income for the three and six months
ended June 30, 1996 and 1995 and statements of cash flows for the
six months ended June 30, 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 $2,471 and $1,879 for
the six months ended June 30, 1996 and 1995, respectively. Cash
paid for income taxes totaled $249,383 and $111,800 for the six
months ended June 30, 1996 and 1995, respectively.
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
(unaudited)
(continued)
4. Commitments and contingencies
Commitments for purchases of investments in the ordinary course of
business at June 30, 1996 aggregated $274,434.
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, 1996 Compared to Six Months Ended June
30, 1995:
Consolidated net income increased 14 percent to $205 million
for the six months ended June 30, 1996, compared to $181 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 spread rates. It is expected that spread rates will continue
to decrease throughout the year.
Premiums received totaled $3.1 billion for the six months
ended June 30, 1996, compared to $2.8 billion a year ago.
Increased sales of variable annuities and life insurance were
partially offset by decreased sales of fixed annuities, reflecting
lower interest rates in 1996 compared to 1995.
Net investment income increased to $981 million for the six
months ended June 30, 1996, compared with $937 million a year ago.
The increase reflects higher total investments which increased 3.6
percent from a year ago to $25 billion at June 30, 1996, partially
offset by lower yields.
Policyholder and contractholder charges increased to $146
million for the six months ended June 30, 1996, compared with $125
million a year ago. This increase is primarily due to higher life
insurance in force.
Management and other fees increased to $127 million for the
six months ended June 30, 1996, compared with $97 million a year
ago. This is primarily due to an increase in separate account
assets, which grew 29 percent to $17 billion at June 30, 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 were $1.0 billion for the six
months ended June 30, 1996, a slight increase from a year ago. The
largest component of expenses, interest credited on universal
life-type insurance and investment contracts, increased to $676
million, compared with $642 million for the corresponding period in
1995. This is due to both higher aggregate amounts in force and an
decrease 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. At June 30, 1996, outstanding borrowings under
these agreements were $nil. The Company also uses reverse
repurchase agreements for short-term liquidity needs. Outstanding
reverse repurchase agreements totaled $184 million at June 30,
1996.
At June 30, 1996, approximately 8.5 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 higher-rated 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, 1996, net unrealized appreciation on investments
in fixed maturities decreased due to an increase in market rates
during the second quarter of 1996. For the six months ended June
30, 1996, sales of fixed maturities held to maturity were due to
significant deterioration in the issuers' creditworthiness.
At June 30, 1996, the Company had an allowance for losses on
mortgage loans of $34 million.
The Company paid $85 million in dividends to its parent during
the six months ended June 30, 1996.
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PAGE 13
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 paid to
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 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 June
30, 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 six months ended June 30, 1996.
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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 August 12, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> IDS Life Insurance Company
<MULTIPLIER> 1000
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
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<DEBT-HELD-FOR-SALE> 10277208
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<EQUITIES> 3241
<MORTGAGE> 3317820
<REAL-ESTATE> 32347
<TOTAL-INVEST> 25021436
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