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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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
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 55440-0534
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (612) 671-3131
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [Not
Applicable]
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTIONS J(1) (a) and (b) OF FORM 10-K AND IS THEREFORE FILING
THIS FORM WITH THE PERMITTED ABBREVIATED NARRATIVE DISCLOSURE.
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PART I
ITEM 1. BUSINESS
IDS Life Insurance Company (the Company) is a stock life insurance
company organized under the laws of the State of Minnesota. The
Company is a wholly owned subsidiary of American Express Financial
Corporation, which is a wholly owned subsidiary of American Express
Company. The Company serves residents of all states except New
York. IDS Life Insurance Company of New York and American
Centurion Life Assurance Company are wholly owned subsidiaries of
the Company and serve New York State residents. The Company also
wholly owns American Enterprise Life Insurance Company and American
Partners Life Insurance Company.
The Company's principal products are deferred annuities and
universal life insurance, which are issued primarily to
individuals. It offers single premium and annual premium deferred
annuities on both a fixed and variable dollar basis. Immediate
annuities are offered as well. The Company's insurance products
include universal life (fixed and variable), whole life, single
premium life and term products (including waiver of premium and
accidental death benefits). The Company also markets disability
income and long-term care insurance.
The Company's principal annuity product in terms of amount in force
is the fixed deferred annuity. The annuity contract guarantees a
minimum interest rate during the accumulation period (the time
before annuity payments begin), although the Company normally pays
a higher rate reflective of current market rates. The Company has
also adopted a practice whereby the higher current rate is
guaranteed for a specified period. The Company also offers a
variable annuity product under the name Flexible Annuity. This is
a fixed/variable annuity offering the purchaser a choice among
mutual funds with portfolios of equities, bonds, managed assets
and/or short-term securities, and the Company's general account, as
the underlying investment vehicle. With respect to funds applied
to the variable portion of the annuity, the purchaser, rather than
the Company, assumes the investment risks and receives the rewards
inherent in the ownership of the underlying investment. The
Flexible Annuity provides for a surrender charge during the first
six years after a purchase payment is made. At December 31, 1995,
the Company had $32.9 billion of deferred annuities in force, an
increase of 17 percent from the prior year end.
The Company's principal insurance product is the flexible-premium,
adjustable-benefit universal life insurance policy. In this type
of insurance policy, each premium payment accumulates interest in a
cash value account. The policyholder has access to the cash
surrender value in whole or in part after the first year. The size
of the cash value of the fund can also be controlled by the
policyholder by increasing or decreasing premiums, subject only to
maintaining a required minimum to keep the policy in force.
Monthly deductions from the cash value of the policy are made for
the cost of insurance, expense charges and any policy riders. At
December 31, 1995, the Company had $43.1 billion of universal
life-type insurance in force, up 14 percent from December 31, 1994.
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Assets held in segregated accounts which fund the variable annuity
and variable life insurance products totaled $15.0 billion at
December 31, 1995, a 38 percent increase from December 31, 1994.
IDS Life Insurance Company, American Enterprise Life Insurance
Company and American Partners Life Insurance Company are subject to
comprehensive regulation by the Minnesota Department of Commerce
(Insurance Division), the Indiana Department of Insurance and the
Arizona Department of Insurance, respectively. IDS Life Insurance
Company of New York and American Centurion Life Assurance Company
are both subject to comprehensive regulation by the New York
Department of Insurance. The laws of the other states in which the
Company does business regulate such matters as the licensing of
sales personnel and, in some cases, the contents of insurance
policies. The purpose of such regulation and supervision is
primarily to protect the interests of policyholders. In the United
States, the McCarran-Ferguson Act provides that the primary
regulation of the insurance industry is left to the individual
states. Typically, states regulate such matters as company
licensing, agent licensing, cancellation or nonrenewal of policies,
minimum health insurance policy benefits, life insurance cost
disclosure, solicitation and replacement practices, unfair trade
and claims practices, rates, forms, advertising, investment type
and quality, minimum capital and surplus levels and changes in
control. Virtually all states mandate participation in insurance
guaranty associations, which assess insurance companies in order to
fund claims of policyholders of insolvent insurance companies. In
addition to state laws, the Company is affected by a variety of
federal laws, and there is periodic federal interest in various
aspects of the insurance industry including taxation, solvency and
accounting procedures, as well as the treatment of persons
differently because of sex, with respect to terms, conditions,
rates or benefits of an insurance contract. If any of these issues
were resolved unsatisfactorily, there could be an adverse effect
upon the Company.
As a distributor of variable contracts, the Company is registered
as a broker-dealer. As the investment manager for various
investment companies, the Company is registered as an investment
advisor under applicable federal laws and is a member of the
National Association of Securities Dealers, Inc.
The insurance and annuity business is highly competitive and the
Company's competitors consist of insurance companies and other
financial institutions. Competitive factors applicable to the
business of the Company include the interest rates credited to its
products, the financial strength of the organization and the
services provided to policyholders.
For additional information, see Note 10, Segment information, in
the "Notes to Consolidated Financial Statements".
ITEM 2. PROPERTIES
The Company occupies office space in Minneapolis, Minnesota, which
is leased by its parent, American Express Financial Corporation.
The Company reimburses American Express Financial Corporation for
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rent based on direct and indirect allocation methods. IDS Life
Insurance Company of New York and American Centurion Life Assurance
Company rent office space in Albany, New York. Facilities occupied
by the Company and its subsidiaries are believed to be adequate for
the purposes for which they are used and are well maintained.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits, none of which, in
the opinion of the Company counsel, will result in a material
liability.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
Item omitted pursuant to General Instructions J(2) (a) of Form
10-K.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
1995 Compared to 1994:
Consolidated net income increased 8.6 percent to $365 million in
1995, compared to $336 million in 1994. Earnings growth resulted
primarily from increases in management fees and policyholder and
contractholder charges partially offset by a slight decrease in
investment margins. These increases reflect higher average
insurance and annuities in force during 1995. Investment margins
were below prior year levels primarily due to higher interest
credited rates during the first two quarters of 1995.
Consolidated income before income taxes totaled $561 million in
1995, compared with $513 million in 1994. In 1995, $125 million
was from the life, disability income, health and long-term care
insurance segment, compared with $123 million in 1994. In 1995,
$440 million was from the annuity segment, compared with $394
million in 1994. There was a $4.9 million net realized loss on
investments in 1995, compared with a net realized loss on
investments of $4.3 million in 1994.
Total premiums received decreased to $5.0 billion in 1995, compared
with $5.7 billion in 1994. This decrease is primarily due to a
decrease in sales of variable annuities, reflecting very strong
sales of variable products during 1994.
Total revenues increased to $2.5 billion in 1995, compared with
$2.3 billion in 1994. The increase is primarily due to increases
in net investment income, policyholder and contractholder charges,
and management fees. Net investment income, the largest component
of revenues, increased from the prior year, reflecting an increase
in investments owned.
Policyholder and contractholder charges, which consist primarily of
cost of insurance charges on universal life-type policies,
increased 16 percent to $256 million in 1995, compared with $220
million in 1994. This increase reflects higher total life
insurance in force which grew 13 percent to $59.4 billion at
December 31, 1995.
Management and other fees increased 32 percent to $216 million in
1995, compared with $164 million in 1994. This is primarily due to
an increase in separate account assets, which grew 38 percent to
$15 billion at December 31, 1995, due to market appreciation and
sales. The Company provides investment management services for the
mutual funds 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 $2.0 billion in 1995. The
largest component of expenses, interest credited to policyholder
accounts for universal life-type insurance and investment
contracts, increased to $1.3 billion. This was due to higher
aggregate amounts in force and an increase in average interest
credited rates.
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1994 Compared to 1993:
Consolidated net income increased 24 percent to $336 million in
1994, compared to $270 million in 1993. Earnings growth resulted
primarily from increases in spread income, policyholder and
contractholder charges, and management fees. These increases
reflect higher average insurance and annuities in force during
1994. For the full year, investment margins were comparable to
1993 levels, although investment margins for the fourth quarter of
1994 were below prior year levels.
Consolidated income before income taxes totaled $513 million in
1994, compared with $413 million in 1993. In 1994, $123 million
was from the life, disability income, health and long-term care
insurance segment, compared with $104 million in 1993. In 1994,
$394 million was from the annuity segment, compared with $315
million in 1993. There was a $4.3 million net realized loss on
investments in 1994, compared with a net realized loss on
investments of $6.7 million in 1993.
Total premiums received increased to $5.7 billion in 1994, compared
with $5.3 billion in 1993. This increase is primarily due to
continued strong sales of variable annuities. In addition, the
Company reported small increases in its fixed single premium
deferred annuity line. Universal life-type insurance and variable
universal life insurance premiums received also increased from the
prior year.
Total revenues increased to $2.3 billion in 1994, compared with
$2.2 billion in 1993. The increase is primarily due to increases
in policyholder and contractholder charges, and management fees.
Net investment income, the largest component of revenues, was
basically unchanged from the prior year, reflecting a slight
increase in investments owned offset by a decrease in the rate
earned on those investments.
Policyholder and contractholder charges, which consist primarily of
cost of insurance charges on universal life-type policies,
increased 19 percent to $220 million in 1994, compared with $184
million in 1993. This increase reflects higher total life
insurance in force which grew 14 percent to $52.7 billion at
December 31, 1994.
Management and other fees increased 37 percent to $164 million in
1994, compared with $120 million in 1993. This is primarily due to
an increase in separate account assets, which grew 21 percent to
$11 billion at December 31, 1994, resulting from strong sales of
variable products. The Company provides investment management
services for the mutual funds 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 decreased slightly to $1.8 billion in
1994. The largest component of expenses, interest credited to
policyholder accounts for universal life-type insurance and
investment contracts, decreased to $1.2 billion. This is primarily
due to a decrease in interest credited rates, partially offset by
higher aggregate amounts in force.<PAGE>
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Amortization of deferred policy acquisition costs increased to $280
million in 1994, compared with $212 million in 1993. This increase
is a result of a higher level of amortizable deferred costs and a
high level of surrenders as a result of an exchange plan announced
during the first quarter of 1994 and completed prior to the end of
1994.
Other insurance and operating expenses, which include non-
capitalized commissions and indirect selling expenses, direct and
indirect operating expenses, premium taxes and guaranty association
expenses, decreased to $210 million in 1994, compared with $242
million in 1993. This decrease primarily reflects a decrease in
amounts accrued for future guaranty association assessments.
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 targeted spread 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, dividends and investment
purchases.
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The Company has available lines of credit with three banks
aggregating $100 million, which are used strictly as short-term
sources of funds. Borrowings outstanding under the agreements were
$nil at December 31, 1995. At December 31, 1995, outstanding
reverse repurchase agreements totalled $103 million.
At December 31, 1995, investments in fixed maturities comprised 86
percent of the Company's total invested assets. Of the fixed
maturity portfolio, approximately 43 percent is invested in GNMA,
FNMA and FHLMC mortgage-backed securities which are considered
AAA/Aaa quality.
At December 31, 1995, approximately 9.2 percent of the Company's
investments in fixed maturities were below investment grade bonds.
These investments may be subject to a higher degree of risk than
the high-rated issues because of the borrower's 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 December 31, 1995, net unrealized appreciation on fixed
maturities held to maturity included $667 million of gross
unrealized appreciation and $47 million of gross unrealized
depreciation. Net unrealized appreciation on fixed maturities
available for sale included $398 million of gross unrealized
appreciation and $28 million of gross unrealized depreciation.
At December 31, 1995, the Company had an allowance for losses for
mortgage loans totaling $37 million and for real estate investments
totaling $4.7 million.
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 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 potential effect of future assessments on the
Company's financial position and results of operations and has
established a reserve for such potential assessments.
In the first quarter of 1996, the Company paid a $40 million
dividend to its parent. In 1995, dividends paid to its parent were
$180 million.
The National Association of Insurance Commissioners has established
risk-based capital standards to determine the capital requirements
of a life insurance company based upon the risks inherent in its
operations. These standards require the computation of a
risk-based capital amount which is then compared to a company's
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actual total adjusted capital. The computation involves applying
factors to various statutory financial data to address four primary
risks: asset default, adverse insurance experience, interest rate
risk and external events. These standards provide for regulatory
attention when the percentage of total adjusted capital to
authorized control level risk-based capital is below certain
levels. As of December 31, 1995, the Company's total adjusted
capital was well in excess of the levels requiring regulatory
attention.
Segment Information
The Company's operations consist of two business segments:
Individual and group life, disability income, long-term care and
health insurance; and fixed and variable annuity products designed
for individuals, pension plans, small businesses and
employer-sponsored groups. The Company is not dependent upon any
single customer and no single customer accounted for more than 10
percent of revenue in 1995, 1994 or 1993. Additionally, no single
distributor accounted for more than 10 percent of premiums received
in 1995, 1994 or 1993.(See Note 10, Segment information, in the
"Notes to Consolidated Financial Statements".)
Reinsurance
Reinsurance arrangements are used to reduce exposure to large
losses. The maximum amount of risk retained by the Company on any
one life is $750,000 of life and waiver of premium benefits plus
$50,000 of accidental death benefits. The excesses are reinsured
with other life insurance companies. At December 31, 1995,
traditional life and universal life-type insurance in force
aggregated $59.7 billion, of which $3.8 billion was reinsured.
Investments
Of the Company's consolidated total investments of $25.3 billion at
December 31, 1995, 39 percent was invested in mortgage-backed
securities, 46 percent in corporate and other bonds, 12 percent in
primary mortgage loans on real estate, 1.7 percent in policy loans
and the remaining 1.3 percent in other investments.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of
this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item omitted pursuant to General Instructions J(2) (c) of Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
Item omitted pursuant to General Instructions J(2) (c) of Form
10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Item omitted pursuant to General Instructions J(2) (c) of Form
10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item omitted pursuant to General Instructions J(2) (c) of Form
10-K.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) Financial Statements
See Index to Financial Statements and Financial
Statement Schedules.
(2) Financial Statement Schedules
See Index to Financial Statements and Financial
Statement Schedules.
(3) Exhibits
3.1 Copy of Certificate of Incorporation of IDS Life
Insurance Company filed electronically as Exhibit
3.1 to Post Effective Amendment No. 5 to
Registration Statement No. 33-28976 is
incorporated herein by reference.
3.2 Copy of the Amended By-laws of IDS Life Insurance
Company filed electronically as Exhibit 3.2 to
Post-Effective Amendment No. 5 to Registration
Statement No. 33-28976 is incorporated herein by
reference.
3.3 Copy of Resolution of the Board of Directors of
IDS Life Insurance Company, dated May 5, 1989,
establishing IDS Life Account MGA filed
electronically as Exhibit 3.3 to Post-Effective
Amendment No. 5 to Registration Statement No.
33-28976 is incorporated herein by reference.
4.1 Copy of Group Annuity Contract, Form 30363C,
filed electronically as Exhibit 4.1 to
Post-Effective Amendment No. 5 to Registration
Statement No. 33-28976 is incorporated herein by
reference.
4.2 Copy of Group Annuity Certificate, Form 30360C,
filed electronically as Exhibit 4.2 to
Post-Effective Amendmnet No. 5 to Registration
Statement No. 33-28976 is incorporated herein by
reference.
4.3 Copy of Endorsement No. 30340C-GP to the Group
Annuity Contract filed electronically as Exhibit
4.3 to Post-Effective Amendment No. 5 to
Registration Statement No. 33-28976 is
incorporated herein by reference.
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4.4 Copy of Endorsement No. 30340C to the Group
Annuity Certificate filed electronically as
Exhibit 4.4 to Post-Effective Amendment No. 5 to
Registration Statement No. 33-28976 is
incorporated herein by reference.
21. Copy of List of Subsidiaries filed electronically
as Exhibit 21 to Post-Effective Amendment No. 7
to Registration Statement No. 33-28976 is herein
incorporated by reference.
23. Consent of Independent Auditors is filed
electronically herewith.
27. Financial data shedule is filed electronically
herewith.
(b) Reports on Form 8-K filed in the fourth quarter of 1995
No reports on Form 8-K were required to be filed by the
Company for the quarter ended December 31, 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
IDS LIFE INSURANCE COMPANY
Registrant
3/27/96 By /s/ James A. Mitchell
Date James A. Mitchell, Chairman of the
Board and Chief Executive Officer
3/27/96 By /s/ Melinda S. Urion
Date Melinda S. Urion, Executive Vice
President and Controller
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been duly signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
3/27/96 By /s/ David R. Hubers
Date David R. Hubers, Director
3/27/96 By /s/ Richard W. Kling
Date Richard W. Kling, President
3/27/96 By /s/ Paul F. Kolkman
Date Paul F. Kolkman, Executive Vice
President
3/27/96 By /s/ James A. Mitchell
Date James A. Mitchell, Chairman of the
Board and Chief Executive Officer
3/27/96 By /s/ Stuart A. Sedlacek
Date Stuart A. Sedlacek, Executive Vice
President, Assured Assets
3/27/96 By /s/ Melinda S. Urion
Date Melinda S. Urion, Executive Vice
President and Controller
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ANNUAL REPORT ON FORM 10-K
ITEM 8 and ITEM 14(a) (1) and (2) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1995
IDS LIFE INSURANCE COMPANY
MINNEAPOLIS, MINNESOTA
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IDS LIFE INSURANCE COMPANY
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of IDS Life
Insurance Company are included in Item 8:
Report of Independent Auditors
Responsibility for Preparation of Financial Statements
Consolidated Balance Sheets at December 31, 1995 and 1994
Consolidated Statements of Income for the years ended December
31, 1995, 1994 and 1993
Consolidated Statements of Stockholder's Equity for the years
ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
The following consolidated financial statement schedules of IDS
Life Insurance Company are included in Item 14(d):
I. Summary of Investments - Other than Investments in
Related Parties
III. Supplementary Insurance Information
IV. Reinsurance
V. Valuation and Qualifying Accounts
All other schedules to the consolidated financial statements
required by Article 7 of Regulation S-X are not required under the
related instructions or are inapplicable and therefore have been
omitted.
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Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying consolidated balance sheets of IDS
Life Insurance Company (a wholly owned subsidiary of American
Express Financial Corporation) as of December 31, 1995 and 1994 and
the related consolidated statements of income, stockholder's equity
and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the financial
statement schedules listed in the index at Item 14(a). These
financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of IDS Life Insurance Company at December 31,
1995 and 1994, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Note 1 to the consolidated financial statements,
the Company changed its method of accounting for certain
investments in debt and equity securities in 1994.
Ernst & Young LLP
Minneapolis, Minnesota
February 2, 1996
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IDS Life Insurance Company
Responsibility for Preparation of Financial Statements
The management of IDS Life Insurance Company is responsible for
the preparation of the financial statements and related notes
included in this Form 10-K. The statements have been prepared in
conformity with generally accepted accounting principles
appropriate in the circumstances, and include amounts based on
the best judgment of management. Financial information included
elsewhere in this Form 10-K is consistent with these financial
statements.
In recognition of its responsibility for the integrity and
objectivity of data in the financial statements, management
maintains a system of internal accounting controls. This system
includes an organizational structure with clearly defined lines
of responsibility and delegation of authority. To ensure the
effective administration of internal control, employees are
carefully selected and trained, written policies and procedures
are developed and disseminated, and appropriate communication
channels are provided to foster an environment conducive to the
effective functioning of controls.
The system is supported by an internal auditing function that
reports its findings to management throughout the year. IDS Life
Insurance Company's independent auditors are engaged to express
an opinion on the year-end financial statements. They
objectively and independently review the performance of
management in carrying out its responsibility for reporting
operating results and financial condition. With the coordinated
support of the internal auditors, they review and test the system
of internal accounting controls and the data contained in the
financial statements.
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1995 1994
(thousands)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1995, $11,878,377; 1994, $10,694,800) $11,257,591 $11,269,861
Available for sale, at fair value (Amortized cost:
1995, $10,146,136; 1994, $8,459,128)
10,516,212 8,017,555
21,773,803 19,287,416
Mortgage loans on real estate
(Fair value: 1995, $3,184,666; 1994, $2,342,520) 2,945,495 2,400,514
Policy loans 424,019 381,912
Other investments 146,894 51,795
Total investments 25,290,211 22,121,637
Cash and cash equivalents 72,147 267,774
Receivables:
Reinsurance 114,387 80,304
Amounts due from brokers - 7,933
Other accounts receivable 33,667 49,745
Premiums due 5,441 1,594
Total receivables 153,495 139,576
Accrued investment income 348,008 317,510
Deferred policy acquisition costs 2,025,725 1,865,324
Deferred income taxes - 124,061
Other assets 36,410 30,426
Separate account assets 14,974,082 10,881,235
Total assets $42,900,078 $35,747,543
========== ==========
<PAGE>
PAGE 20
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
(thousands)
Liabilities:
Future policy benefits:
Fixed annuities $21,404,836 $19,361,979
Universal life-type insurance 3,076,847 2,896,100
Traditional life insurance 209,249 206,754
Disability income, health and
long-term care insurance 327,157 244,077
Policy claims and other
policyholders' funds 56,323 50,068
Deferred income taxes 112,904 -
Amounts due to brokers 121,618 226,737
Other liabilities 285,354 291,902
Separate account liabilities 14,974,082 10,881,235
Total liabilities 40,568,370 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 278,814 222,000
Net unrealized gain (loss) on investments 230,129 (275,708)
Retained earnings 1,819,765 1,639,399
Total stockholder's equity 2,331,708 1,588,691
Total liabilities and stockholder's equity $42,900,078 $35,747,543
========== ==========
Commitments and contingencies (Note 6)
See accompanying notes.
</TABLE>
<PAGE>
PAGE 21
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
1995 1994 1993
(thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 50,193 $ 48,184 $ 48,137
Disability income and
long-term care insurance 111,337 96,456 79,108
Total premiums 161,530 144,640 127,245
Policyholder and contractholder
charges 256,454 219,936 184,205
Management and other fees 215,581 164,169 120,139
Net investment income 1,907,309 1,781,873 1,783,219
Net realized loss on investments (4,898) (4,282) (6,737)
Total revenues 2,535,976 2,306,336 2,208,071
Benefits and expenses:
Death and other benefits:
Traditional life insurance 29,528 28,263 32,136
Universal life-type insurance
and investment contracts 71,691 52,027 49,692
Disability income, health and
long-term care insurance 16,259 13,393 13,148
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance (1,315) (3,229) (4,513)
Disability income, health and
long-term care insurance 51,279 37,912 32,528
Interest credited on universal life-type
insurance and investment contracts 1,315,989 1,174,985 1,218,647
Amortization of deferred policy
acquisition costs 280,121 280,372 211,733
Other insurance and operating expenses 211,642 210,101 241,974
Total benefits and expenses 1,975,194 1,793,824 1,795,345
Income before income taxes 560,782 512,512 412,726
Income taxes 195,842 176,343 142,647
Net income $ 364,940 $ 336,169 $ 270,079
======= ======= =======
See accompanying notes.
</TABLE>
<PAGE>
PAGE 22
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1995
(thousands)
Additional Net Unrealized
Capital Paid-In Gain (Loss) on Retained
Stock Capital Investments Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $3,000 $ 22,000 $ 214 $1,223,151 $1,248,365
Net income 270,079 270,079
Change in net unrealized
gain (loss) on investments - - (100) - (100)
Capital contribution from parent - 200,000 - - 200,000
Cash dividends - - - (25,000) (25,000)
Balance, December 31, 1993 3,000 222,000 114 1,468,230 1,693,344
Net income - - - 336,169 336,169
Change in net unrealized
gain (loss) on investments - - (275,822) - (275,822)
Cash dividends - - - (165,000) (165,000)
Balance, December 31, 1994 3,000 222,000 (275,708) 1,639,399 1,588,691
Net income - - - 364,940 364,940
Change in net unrealized
gain (loss) on investments - - 505,837 - 505,837
Capital contribution from parent - 56,814 - - 56,814
Loss on reinsurance transaction
with affiliate - - - (4,574) (4,574)
Cash dividends - - - (180,000) (180,000)
Balance, December 31, 1995 $3,000 $278,814 $ 230,129 $1,819,765 $2,331,708
===== ======= ======= ========= =========
See accompanying notes.
</TABLE>
<PAGE>
PAGE 23
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
1995 1994 1993
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 364,940 $ 336,169 $ 270,079
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (46,011) (37,110) (35,886)
Repayment 36,416 33,384 29,557
Change in reinsurance receivable (34,083) (25,006) (55,298)
Change in other accounts receivable 16,078 (28,286) (1,364)
Change in accrued investment income (30,498) (10,333) (22,057)
Change in deferred policy acquisition
costs, net (196,963) (192,768) (211,509)
Change in liabilities for future policy
benefits for traditional life,
disability income, health and
long-term care insurance 85,575 55,354 79,695
Change in policy claims and other
policyholders' funds 6,255 5,552 (5,383)
Change in deferred income taxes (33,810) (19,176) (44,237)
Change in other liabilities (6,548) (122) 56,515
Amortization of premium
(accretion of discount), net (22,528) 30,921 (27,438)
Net realized loss on investments 4,898 4,282 6,737
Activity related to universal
life-type insurance:
Premiums 465,631 409,035 397,883
Surrenders and death benefits (306,600) (290,427) (255,133)
Interest credited to account
balances 162,222 150,955 156,885
Policyholder and contractholder
charges, non-cash (140,506) (126,918) (115,140)
Other, net 2 (8,974) (1,907)
Net cash provided by operating
activities $ 324,470 $ 286,532 $ 221,999
<PAGE>
PAGE 24
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years ended December 31,
1995 1994 1993
(thousands)
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $(1,007,208) $ (879,740) $ -
Maturities, sinking fund payments and calls 538,219 1,651,762 -
Sales 332,154 58,001 -
Fixed maturities available for sale:
Purchases (2,452,181) (2,763,278) -
Maturities, sinking fund payments and calls 861,545 1,234,401 -
Sales 136,825 374,564 -
Fixed maturities:
Purchases - - (6,548,852)
Maturities, sinking fund payments and calls - - 3,934,055
Sales - - 487,983
Other investments, excluding policy loans:
Purchases (823,131) (634,807) (553,694)
Sales 160,521 243,862 123,352
Change in amounts due from brokers 7,933 (2,214) 14,483
Change in amounts due to brokers (105,119) (124,749) 92,832
Net cash used in investing activities (2,350,442) (842,198) (2,449,841)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 3,723,894 3,157,778 2,843,668
Surrenders and death benefits (2,834,804) (3,311,965) (1,765,869)
Interest credited to account balances 1,153,767 1,024,031 1,071,917
Universal life-type insurance policy loans:
Issuance (84,700) (78,239) (70,304)
Repayment 52,188 50,554 46,148
Capital contribution from parent - - 200,000
Dividend paid (180,000) (165,000) (25,000)
Net cash provided by financing activities 1,830,345 677,159 2,300,560
Net (decrease) increase in cash and
cash equivalents (195,627) 121,493 72,718
Cash and cash equivalents at
beginning of year 267,774 146,281 73,563
Cash and cash equivalents at
end of year $ 72,147 $ 267,774 $ 146,281
====== ======= =======
See accompanying notes.
</TABLE>
<PAGE>
PAGE 25
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ thousands)
1. Summary of significant accounting policies
Nature of business
IDS Life Insurance Company (the Company) is a stock life
insurance company organized under the laws of the State of
Minnesota. The Company is a wholly owned subsidiary of
American Express Financial Corporation, which is a wholly
owned subsidiary of American Express Company. The Company
serves residents of all states except New York. IDS Life
Insurance Company of New York is a wholly owned subsidiary
of the Company and serves New York State residents. The
Company also wholly owns American Enterprise Life Insurance
Company, American Centurion Life Assurance Company (ACLAC),
and American Partners Life Insurance Company.
The Company's principal products are deferred annuities and
universal life insurance, which are issued primarily to
individuals. It offers single premium and annual premium
deferred annuities on both a fixed and variable dollar
basis. Immediate annuities are offered as well. The
Company's insurance products include universal life (fixed
and variable), whole life, single premium life and term
products (including waiver of premium and accidental death
benefits). The Company also markets disability income and
long-term care insurance.
The Company's principal annuity product in terms of amount
in force is the fixed deferred annuity. The annuity
contract guarantees a minimum interest rate during the
accumulation period (the time before annuity payments
begin), although the Company normally pays a higher rate
reflective of current market rates. The fixed annuity
provides for a surrender charge during the first seven to
ten years after a purchase payment is made. The Company has
also adopted a practice whereby the higher current rate is
guaranteed for a specified period. The Company also offers
a variable annuity product under the name Flexible Annuity.
This is a fixed/variable annuity offering the purchasers a
choice among mutual funds with portfolios of equities,
bonds, managed assets and/or short-term securities, and the
Company's general account, as the underlying investment
vehicles. With respect to funds applied to the variable
portion of the annuity, the purchaser, rather than the
Company, assumes the investment risks and receives the
rewards inherent in the ownership of the underlying
investment. The Flexible Annuity provides for a surrender
charge during the first six years after a purchase payment
is made.
<PAGE>
PAGE 26
1. Summary of significant accounting policies (continued)
The Company's principal insurance product is the flexible-
premium, adjustable-benefit universal life insurance policy.
In this type of insurance policy, each premium payment
accumulates interest in a cash value account. The
policyholder has access to the cash surrender value in whole
or in part after the first year. The size of the cash value
of the fund can also be controlled by the policyholder by
increasing or decreasing premiums, subject only to
maintaining a required minimum to keep the policy in force.
Monthly deductions from the cash value of the policy are
made for the cost of insurance, expense charges and any
policy riders.
Basis of presentation
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.
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles which vary in certain respects from reporting
practices prescribed or permitted by state insurance
regulatory authorities.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Investments
Fixed maturities that the Company has both the positive
intent and the ability to hold to maturity are classified as
held to maturity and carried at amortized cost. All other
fixed maturities and all marketable equity securities are
classified as available for sale and carried at fair value.
Unrealized gains and losses on securities classified as
available for sale are carried as a separate component of
stockholder's equity.
Management determines the appropriate classification of
fixed maturities at the time of purchase and reevaluates the
classification at each balance sheet date.
<PAGE>
PAGE 27
1. Summary of significant accounting policies (continued)
Mortgage loans on real estate are carried principally at the
unpaid principal balances of the related loans. Policy
loans are carried at the aggregate of the unpaid loan
balances which do not exceed the cash surrender values of
the related policies. Other investments include interest
rate caps, equity securities and real estate investments.
When evidence indicates a decline, which is other than
temporary, in the underlying value or earning power of
individual investments, such investments are written down to
the fair value by a charge to income. Equity securities are
carried at market value and the related net unrealized
appreciation or depreciation is reported as a credit or
charge to stockholder's equity.
Realized investment gain or loss is determined on an
identified cost basis.
Prepayments are anticipated on certain investments in
mortgage-backed securities in determining the constant
effective yield used to recognize interest income.
Prepayment estimates are based on information received from
brokers who deal in mortgage-backed securities.
Statement 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 fair value.
Supplementary information to the consolidated statement of
cash flows for the years ended December 31 is summarized as
follows:
1995 1994 1993
Cash paid during the year for:
Income taxes $191,011 $226,365 $188,204
Interest on borrowings 5,524 1,553 2,661
Recognition of profits on fixed annuity contracts and
insurance policies
The Company issues single premium deferred annuity contracts
that provide for a service fee (surrender charge) at
annually decreasing rates upon withdrawal of the annuity
accumulation value by the contract owner. No sales fee is
deducted from the contract considerations received on these
contracts ("no load" annuities). All of the Company's
single premium deferred annuity contracts provide for
crediting the contract owners' accumulations at specified
rates of interest. Such rates are revised by the Company
from time to time based on changes in the market investment
yield rates for fixed-income securities.
<PAGE>
PAGE 28
1. Summary of significant accounting policies (continued)
Profits on single premium deferred annuities and installment
annuities are recognized by the Company over the lives of
the contracts and represent the excess of investment income
earned from investment of contract considerations over
interest credited to contract owners and other expenses.
The retrospective deposit method is used in accounting for
universal life-type insurance. This method recognizes
profits over the lives of the policies in proportion to the
estimated gross profits expected to be realized.
Premiums on traditional life, disability income, health and
long-term care insurance policies are recognized as revenue
when collected or due, and related benefits and expenses are
associated with premium revenue in a manner that results in
recognition of profits over the lives of the insurance
policies. This association is accomplished by means of the
provision for future policy benefits and the deferral and
subsequent amortization of policy acquisition costs.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales
compensation, policy issue costs, underwriting and certain
sales expenses, have been deferred on insurance and annuity
contracts. The deferred acquisition costs for single premium
deferred annuities and installment annuities are amortized
based upon surrender charge revenue and a portion of the
excess of investment income earned from investment of the
contract considerations over the interest credited to contract
owners. The costs for universal life-type insurance are
amortized over the lives of the policies as a percentage of
the estimated gross profits expected to be realized on the
policies. For traditional life, disability income, health
and long-term care insurance policies, the costs are
amortized over an appropriate period in proportion to
premium revenue.
Liabilities for future policy benefits
Liabilities for universal life-type insurance, single
premium deferred annuities and installment annuities are
accumulation values.
Liabilities for fixed annuities in a benefit status are
based on the Progressive Annuity Table with interest at 5
percent, the 1971 Individual Annuity Table with interest at
7 percent or 8.25 percent, or the 1983a Table with various
interest rates ranging from 5.5 percent to 9.5 percent,
depending on year of issue.
<PAGE>
PAGE 29
1. Summary of significant accounting policies (continued)
Liabilities for future benefits on traditional life
insurance have been computed principally by the net level
premium method, based on anticipated rates of mortality
(approximating the 1965-1970 Select and Ultimate Basic Table
for policies issued after 1980 and the 1955-1960 Select and
Ultimate Basic Table for policies issued prior to 1981 and
the 1975-1980 Select and Ultimate Basic Table for term
insurance policies issued after 1984), policy persistency
derived from Company experience data (first year rates
ranging from approximately 70 percent to 90 percent and
increasing rates thereafter), and estimated future
investment yields of 4 percent for policies issued before
1974 and 5.25 percent for policies issued from 1974 to 1980.
Cash value plans issued in 1980 and later assume future
investment rates that grade from 9.5 percent to 5 percent
over 20 years. Term insurance issued from 1981 to 1984
assumes an 8 percent level investment rate, term insurance
issued from 1985-1993 assumes investment rates that grade
from 10 percent to 6 percent over 20 years and term
insurance issued after 1993 assumes investment rates that
grade from 8 percent to 6.5 percent over 7 years.
Liabilities for future disability income policy benefits
have been computed principally by the net level premium
method, based on the 1964 Commissioners Disability Table
with the 1958 Commissioners Standard Ordinary Mortality
Table at 3 percent interest for persons disabled in 1980 and
prior, 8 percent interest for persons disabled from 1981 to
1991, 7 percent interest for persons disabled in 1992 and 6
percent interest for persons disabled after 1992.
Liabilities for future benefits on long-term care insurance
have been computed principally by the net level premium
method, using morbidity rates based on the 1985 National
Nursing Home Survey and mortality rates based on the 1983a
Table. The interest rate basis is 9.5 percent grading to 7
percent over ten years for policies issued from 1989 to
1992, 7.75 percent grading to 7 percent over four years for
policies issued after 1992, 8 percent for claims incurred in
1989 to 1991, 7 percent for claims incurred in 1992 and 6
percent for claims incurred after 1992.
Reinsurance
The maximum amount of life insurance 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
maximum amount of disability income risk retained by the
Company on any one life is $6 of monthly benefit for benefit
periods longer than three years. The excesses are reinsured
with other life insurance companies on a yearly renewable
term basis. Graded premium whole life and long-term care
policies are primarily reinsured on a coinsurance basis.
<PAGE>
PAGE 30
1. Summary of significant accounting policies (continued)
Federal income taxes
The Company's taxable income is included in the consolidated
federal income tax return of American Express Company. The
Company provides for income taxes on a separate return
basis, except that, under an agreement between American
Express Financial Corporation and American Express Company,
tax benefit is recognized for losses to the extent they can
be used on the consolidated tax return. It is the policy of
American Express Financial Corporation to reimburse a
subsidiary for any tax benefit.
Included in other liabilities at December 31, 1995 is
$13,415 payable to American Express Financial Corporation
for federal income taxes. Included in other receivables at
December 31, 1994 is $22,034 receivable from American
Express Financial Corporation for federal income taxes.
Separate account business
The separate account assets and liabilities represent funds
held for the exclusive benefit of the variable annuity and
variable life insurance contract owners. The Company
receives investment management and mortality and expense
assurance fees from the variable annuity and variable life
insurance mutual funds and separate accounts. The Company
also deducts a monthly cost of insurance charge and receives
a minimum death benefit guarantee fee and issue and
administrative fee from the variable life insurance separate
accounts.
The Company makes contractual mortality assurances to the
variable annuity contract owners that the net assets of the
separate accounts will not be affected by future variations
in the actual life expectancy experience of the annuitants
and the beneficiaries from the mortality assumptions
implicit in the annuity contracts. The Company makes
periodic fund transfers to, or withdrawals from, the
separate accounts for such actuarial adjustments for
variable annuities that are in the benefit payment period.
The Company guarantees, for the variable life insurance
policyholders, the contractual insurance rate and that the
death benefit will never be less than the death benefit at
the date of issuance.
Accounting changes
The Financial Accounting Standards Board's (FASB) SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," is effective
January 1, 1996. The new rule is not expected to have a
material impact on the Company's results of operations or
financial condition.
The Company's adoption of SFAS No. 114 as of January 1, 1995
is discussed in Note 2.
<PAGE>
PAGE 31
1. Summary of significant accounting policies (continued)
The Company adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The effect of
adopting the new rule was to increase stockholder's equity
by approximately $181 million, net of tax, as of January 1,
1994, but the adoption had no impact on the Company's net
income.
Reclassification
Certain 1994 and 1993 amounts have been reclassified to
conform to the 1995 presentation.
2. Investments
Fair values of investments in fixed maturities represent
quoted market prices and estimated values when quoted prices
are not available. Estimated values are determined by
established procedures involving, among other things, review
of market indices, price levels of current offerings of
comparable issues, price estimates and market data from
independent brokers and financial files.
Net realized gain (loss) on investments for the years ended
December 31 is summarized as follows:
1995 1994 1993
Fixed maturities $ 9,973 $(1,575) $ 20,583
Mortgage loans (13,259) (3,013) (25,056)
Other investments (1,612) 306 (2,264)
$ (4,898) $(4,282) $ (6,737)
Changes in net unrealized appreciation (depreciation) of
investments for the years ended December 31 are summarized
as follows:
1995 1994 1993
Fixed maturities:
Held to maturity $1,195,847 $(1,329,740) $ --
Available for sale 811,649 (720,449) --
Investment securities -- -- 323,060
Equity securities 3,118 (2,917) (156)
The amortized cost, gross unrealized gains and losses and
fair values of investments in fixed maturities and equity
securities at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 64,523 $ 3,919 $ -- $ 68,442
State and municipal obligations 11,936 362 32 12,266
Corporate bonds and obligations 8,921,431 620,327 36,786 9,504,972
Mortgage-backed securities 2,259,701 42,684 9,688 2,292,697
$11,257,591 $667,292 $46,506 $11,878,377
<PAGE>
PAGE 32
2. Investments (continued)
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government agency obligations $ 84,082 $ 3,248 $ 50 $ 87,280
State and municipal obligations 11,020 1,476 -- 12,496
Corporate bonds and obligations 2,514,308 186,596 3,451 2,697,453
Mortgage-backed securities 7,536,726 206,288 24,031 7,718,983
Total fixed maturities 10,146,136 397,608 27,532 10,516,212
Equity securities 3,156 361 -- 3,517
$10,149,292 $397,969 $27,532 $10,519,729
</TABLE>
The amortized cost, gross unrealized gains and losses and
fair values of investments in fixed maturities and equity
securities at December 31, 1994 are as follows:
<TABLE><CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 21,500 $ 43 $ 4,372 $ 17,171
State and municipal obligations 9,687 132 -- 9,819
Corporate bonds and obligations 8,806,707 100,468 459,568 8,447,607
Mortgage-backed securities 2,431,967 10,630 222,394 2,220,203
$11,269,861 $111,273 $686,334 $10,694,800
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government agency obligations $ 128,093 $ 756 $ 1,517 $ 127,332
State and municipal obligations 11,008 702 -- 11,710
Corporate bonds and obligations 1,142,321 24,166 7,478 1,159,009
Mortgage-backed securities 7,177,706 9,514 467,716 6,719,504
Total fixed maturities 8,459,128 35,138 476,711 8,017,555
Equity securities 4,663 -- 2,757 1,906
$ 8,463,791 $ 35,138 $479,468 $ 8,019,461
</TABLE>
The amortized cost and fair value of investments in fixed
maturities at December 31, 1995 by contractual maturity are
shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or
prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 268,363 $ 272,808
Due from one to five years 1,692,030 1,783,047
Due from five to ten years 5,467,302 5,833,309
Due in more than ten years 1,570,195 1,696,516
Mortgage-backed securities 2,259,701 2,292,697
$11,257,591 $11,878,377
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 118,996 $ 120,019
Due from one to five years 849,800 913,175
Due from five to ten years 1,301,191 1,397,237
Due in more than ten years 339,423 366,798
Mortgage-backed securities 7,536,726 7,718,983
$10,146,136 $10,516,212
<PAGE>
PAGE 33
2. Investments (continued)
During the year ended December 31, 1995, fixed maturities
classified as held to maturity were sold with proceeds of
$332,154 and gross realized gains and losses on such sales
were $14,366 and $15,720, respectively. The sale of these
fixed maturities was due to significant deterioration in the
issuers' creditworthiness. As a result of adopting the FASB
Special Report, "A Guide to Implementation of Statement 115
on Accounting for Certain Investments in Debt and Equity
Securities," the Company reclassified securities with a book
value of $91,760 and net unrealized gains of $881 from held
to maturity to available for sale in December 1995.
In addition, fixed maturities available for sale were sold
during 1995 with proceeds of $136,825 and gross realized
gains and losses on such sales were $nil and $5,781,
respectively.
During the year ended December 31, 1994, fixed maturities
classified as held to maturity were sold with proceeds of
$58,001 and gross realized gains and losses on such sales
were $226 and $3,515, respectively. The sale of these fixed
maturities was due to significant deterioration in the
issuers' creditworthiness.
In addition, fixed maturities available for sale were sold
during 1994 with proceeds of $374,564 and gross realized
gains and losses on such sales were $1,861 and $7,602,
respectively.
At December 31, 1995, bonds carried at $12,761 were on
deposit with various states as required by law.
Net investment income for the years ended December 31 is
summarized as follows:
1995 1994 1993
Interest on fixed maturities $1,656,136 $1,556,756 $1,589,802
Interest on mortgage loans 232,827 196,521 175,063
Other investment income 35,936 38,366 29,345
Interest on cash equivalents 5,363 6,872 2,137
1,930,262 1,798,515 1,796,347
Less investment expenses 22,953 16,642 13,128
$1,907,309 $1,781,873 $1,783,219
At December 31, 1995, investments in fixed maturities
comprised 86 percent of the Company's total invested assets.
These securities are rated by Moody's and Standard & Poor's
(S&P), except for securities carried at approximately
$2.3 billion which are rated by American Express Financial
Corporation internal analysts using criteria similar to
Moody's and S&P. A summary of investments in fixed
maturities, at amortized cost, by rating on December 31 is
as follows:
<PAGE>
PAGE 34
2. Investments (continued)
Rating 1995 1994
Aaa/AAA $ 9,907,664 $ 9,708,047
Aaa/AA 3,112 --
Aa/AA 279,403 242,914
Aa/A 154,846 119,952
A/A 3,104,122 2,567,947
A/BBB 871,782 725,755
Baa/BBB 4,417,654 3,849,188
Baa/BB 657,633 796,063
Below investment grade 2,007,511 1,719,123
$21,403,727 $19,728,989
At December 31, 1995, 95 percent of the securities rated
Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities.
No holdings of any other issuer are greater than 1 percent
of the Company's total investments in fixed maturities.
At December 31, 1995, approximately 11.6 percent of the
Company's invested assets were mortgage loans on real
estate. Summaries of mortgage loans by region of the United
States and by type of real estate at December 31, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
East North Central $ 720,185 $ 67,206 $ 581,142 $ 62,291
West North Central 303,113 34,411 257,996 7,590
South Atlantic 732,529 111,967 597,896 63,010
Middle Atlantic 508,634 37,079 408,940 34,478
New England 244,816 40,452 209,867 23,087
Pacific 168,272 23,161 138,900 --
West South Central 61,860 27,978 50,854 --
East South Central 58,462 10,122 67,503 --
Mountain 184,964 16,774 122,668 18,750
2,982,835 369,150 2,435,766 209,206
Less allowance for losses 37,340 -- 35,252 --
$2,945,495 $369,150 $2,400,514 $209,206
December 31, 1995 December 31, 1994
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
Apartments $1,038,446 $ 84,978 $ 904,012 $ 56,964
Department/retail stores 985,660 134,538 802,522 88,325
Office buildings 464,381 62,664 321,761 21,691
Industrial buildings 255,469 22,721 232,962 18,827
Nursing/retirement homes 80,864 4,378 89,304 4,649
Mixed Use 53,169 -- -- --
Hotels/motels 31,335 48,816 32,666 --
Medical buildings 57,772 2,495 36,490 15,651
Other 15,739 8,560 16,049 3,099
2,982,835 369,150 2,435,766 209,206
Less allowance for losses 37,340 -- 35,252 --
$2,945,495 $369,150 $2,400,514 $209,206
</TABLE>
Mortgage loan fundings are restricted by state insurance
regulatory authorities to 80 percent or less of the market
value of the real estate at the time of origination of the
loan. The Company holds the mortgage document, which gives
the right to take possession of the property if the borrower
<PAGE>
PAGE 35
2. Investments (continued)
fails to perform according to the terms of the agreement.
The fair value of the mortgage loans is determined by a
discounted cash flow analysis using mortgage interest rates
currently offered for mortgages of similar maturities.
Commitments to purchase mortgages are made in the ordinary
course of business. The fair value of the mortgage
commitments is $nil.
As of January 1, 1995, the Company adopted Statement of
Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" (SFAS No. 114), as
amended by Statement of Financial Accounting Standards No.
118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures". The adoption of the
new rules did not have a material impact on the Company's
results of operations or financial condition.
SFAS No. 114 applies to all loans except for smaller-balance
homogeneous loans, that are collectively evaluated for
impairment. Impairment is measured as the excess of the
loan's recorded investment over its present value of
expected principal and interest payments discounted at the
loan's effective interest rate, or the fair value of
collateral. The amount of the impairment is recorded as a
reserve for investment losses.
Based on management's judgment as to the ultimate
collectibility of principal, interest payments received are
either recognized as income or applied to the recorded
investment in the loan until it has been recovered. Once
the recorded investment has been recovered, any additional
payments are recognized as interest income.
The reserve for investment losses is maintained at a level
that management believes is adequate to absorb estimated
credit losses in the portfolio. The level of the reserve
account is determined based on several factors, including
historical experience, expected future principal and
interest payments, estimated collateral values, and current
and anticipated economic and political conditions.
Management regularly evaluates the adequacy of the reserve
for investment losses.
At December 31, 1995, the Company's recorded investment in
impaired loans was $83,874 with a reserve of $19,307.
During the year, the average recorded investment in impaired
loans was $74,567.
The Company recognized $5,014 of interest income related to
impaired loans for the year ended December 31, 1995.
The following table presents changes in the reserve for
investment losses related to all loans:
<PAGE>
PAGE 36
2. Investments (continued)
1995
Balance, January 1 $35,252
Provision for investment losses 15,900
Sales of related loans (6,600)
Loan payoffs (5,300)
Other (1,912)
Balance, December 31 $37,340
At December 31, 1995, the Company had commitments to
purchase real estate investments for $54,897. Commitments
to purchase real estate investments are made in the ordinary
course of business. The fair value of these commitments is
$nil.
3. Income taxes
The Company qualifies as a life insurance company for
federal income tax purposes. As such, the Company is
subject to the Internal Revenue Code provisions applicable
to life insurance companies.
Income tax expense consists of the following:
1995 1994 1993
Federal income taxes:
Current $218,040 $186,508 $180,558
Deferred (33,810) (19,175) (44,237)
184,230 167,333 136,321
State income taxes-current 11,612 9,010 6,326
Income tax expense $195,842 $176,343 $142,647
Increases (decreases) to the federal tax provision
applicable to pretax income based on the statutory rate are
attributable to:
<TABLE>
<CAPTION>
1995 1994 1993
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income
taxes based on
the statutory rate $196,274 35.0% $179,379 35.0% $144,454 35.0%
Increases (decreases)
are attributable to:
Tax-excluded interest
and dividend income (8,524) (1.5) (9,939) (2.0) (11,002) (2.7)
Other, net (3,520) (0.6) (2,107) (0.4) 2,869 0.7
Federal income taxes $184,230 32.9% $167,333 32.6% $136,321 33.0%
</TABLE>
A portion of life insurance company income earned prior to
1984 was not subject to current taxation but was
accumulated, for tax purposes, in a policyholders' surplus
account. At December 31, 1995, the Company had a
policyholders' surplus account balance of $20,114. The
policyholder's surplus account balance increased in 1995 due
<PAGE>
PAGE 37
3. Income taxes (continued)
to the acquisition of ACLAC. The policyholders' surplus
account is only taxable if dividends to the stockholder
exceed the stockholder's surplus account or if the Company
is liquidated. Deferred income taxes of $7,040 have not
been established because no distributions of such amounts
are contemplated.
Significant components of the Company's deferred tax assets
and liabilities as of December 31 are as follows:
1995 1994
Deferred tax assets:
Policy reserves $ 600,176 $533,433
Investments -- 116,736
Life insurance guarantee
fund assessment reserve 26,785 32,235
Total deferred tax assets 626,961 682,404
Deferred tax liabilities:
Deferred policy acquisition costs 590,762 553,722
Investments 146,805 --
Other 2,298 4,621
Total deferred tax
liabilities 739,865 558,343
Net deferred tax assets (liabilities) $(112,904) $124,061
The Company is required to establish a valuation allowance
for any portion of the deferred tax assets that management
believes will not be realized. In the opinion of management,
it is more likely than not that the Company will realize the
benefit of the deferred tax assets, and, therefore, no such
valuation allowance has been established.
4. Stockholder's equity
During 1995, the Company received a $39,700 capital
contribution from its parent, American Express Financial
Corporation, in the form of investments in fixed maturities
and mortgage loans. In addition, effective January 1, 1995,
the Company began consolidating the financial results of
ACLAC. This change reflected the transfer of ownership of
ACLAC from Amex Life Assurance Company (Amex Life), a former
affiliate, to the Company prior to the sale of Amex Life to
an unaffiliated third party on October 2, 1995. This
transfer of ownership to the Company has been reflected as a
capital contribution of $17,114 in the accompanying
financial statements. The effect of this change in
reporting entity was not significant and prior periods have
not been restated.
As discussed in Note 5, the Company entered into a
reinsurance agreement with Amex Life during 1995. As a
result of this transaction, a loss of $4,574 was realized
and reported as a direct charge to retained earnings.
<PAGE>
PAGE 38
4. Stockholder's equity (continued)
Retained earnings available for distribution as dividends to
the parent are limited to the Company's surplus as
determined in accordance with accounting practices
prescribed by state insurance regulatory authorities.
Statutory unassigned surplus aggregated $1,103,993 as of
December 31, 1995 and $1,020,981 as of December 31, 1994
(see Note 3 with respect to the income tax effect of certain
distributions). In addition, any dividend distributions in
1996 in excess of approximately $290,988 would require
approval of the Department of Commerce of the State of
Minnesota.
Statutory net income for the years ended December 31 and
capital and surplus as of December 31 are summarized as
follows:
1995 1994 1993
Statutory net income $ 326,799 $ 294,699 $ 275,015
Statutory capital and surplus 1,398,649 1,261,958 1,157,022
Dividends paid to American Express Financial Corporation
were $180,000 in 1995, $165,000 in 1994, and $25,000 in
1993.
5. Related party transactions
The Company has loaned funds to American Express Financial
Corporation under two loan agreements. The balance of the
first loan was $25,800 and $40,000 at December 31, 1995 and
1994, respectively. This loan can be increased to a maximum
of $75,000 and pays interest at a rate equal to the
preceding month's effective new money rate for the Company's
permanent investments. It is collateralized by equities
valued at $122,978 at December 31, 1995. The second loan
was used to fund the construction of the IDS Operations
Center. This loan was paid off during 1994. The loan was
secured by a first lien on the IDS Operations Center
property and had an interest rate of 9.89 percent. The
Company also had a loan to an affiliate which was used to
fund construction of the IDS Learning Center. This loan was
sold to the American Express Financial Corporation during
1994. The loan was secured by a first lien on the IDS
Learning Center property and had an interest rate of 9.82
percent. Interest income on the above loans totaled $1,371,
$2,894 and $11,116 in 1995, 1994 and 1993, respectively.
The Company purchased a five year secured note from an
affiliated company which had an outstanding balance of
$19,444 and $23,333 at December 31, 1995 and 1994,
respectively. The note bears a fixed rate of 8.42 percent.
Interest income on the above note totaled $1,937, $2,278 and
$2,605 in 1995, 1994 and 1993, respectively.
<PAGE>
PAGE 39
5. Related party transactions (continued)
The Company has a reinsurance agreement whereby it assumed
100 percent of a block of single premium life insurance
business from Amex Life. The accompanying consolidated
balance sheets at December 31, 1995 and 1994 include
$764,663 and $765,366, respectively, of future policy
benefits related to this agreement.
The Company has a reinsurance agreement to cede 50 percent
of its long-term care insurance business to Amex Life. The
accompanying consolidated balance sheets at December 31,
1995 and 1994 include $95,484 and $65,123, respectively, of
reinsurance receivables related to this agreement. Premiums
ceded amounted to $25,553, $20,360 and $16,230 and
reinsurance recovered from reinsurers amounted to $760, $62
and $404 for the years ended December 31, 1995, 1994 and
1993, respectively.
The Company has a reinsurance agreement to assume deferred
annuity contracts from Amex Life. At October 1, 1995 a
$803,618 block of deferred annuities and $28,327 of deferred
policy acquisition costs were transferred to the Company.
The accompanying consolidated balance sheet at December 31,
1995 includes $828,298 of future policy benefits related to
this agreement.
Until July 1, 1995 the Company participated in the IDS
Retirement Plan of American Express Financial Corporation
which covered all permanent employees age 21 and over who
had met certain employment requirements. Effective July 1,
1995, the IDS Retirement Plan was merged with American
Express Company's American Express Retirement Plan, which
simultaneously was amended to include a cash balance formula
and a lump sum distribution option. Employer contributions
to the plan are based on participants' age, years of service
and total compensation for the year. Funding of retirement
costs for this plan complies with the applicable minimum
funding requirements specified by ERISA. The Company's
share of the total net periodic pension cost was $nil in
1995, 1994 and 1993.
The Company also participates in defined contribution
pension plans of American Express Company which cover all
employees who have met certain employment requirements.
Company contributions to the plans are a percent of either
each employee's eligible compensation or basic
contributions. Costs of these plans charged to operations
in 1995, 1994 and 1993 were $815, $957 and $2,008,
respectively.
The Company participates in defined benefit health care
plans of American Express Financial Corporation that provide
health care and life insurance benefits to retired employees
and retired financial advisors. The plans include
participant contributions and service related eligibility
requirements. Upon retirement, such employees are
<PAGE>
PAGE 40
5. Related party transactions (continued)
considered to have been employees of American Express
Financial Corporation. American Express Financial
Corporation expenses these benefits and allocates the
expenses to its subsidiaries. Accordingly, costs of such
benefits to the Company are included in employee
compensation and benefits and cannot be identified on a
separate company basis. At December 31, 1995 and 1994, the
total accumulated post retirement benefit obligation has
been recorded as a liability by American Express Financial
Corporation.
Charges by American Express Financial Corporation for use of
joint facilities, marketing services and other services
aggregated $377,139, $335,183, and $243,346 for 1995, 1994
and 1993, respectively. Certain of these costs are included
in deferred policy acquisition costs. In addition, the
Company rents its home office space from American Express
Financial Corporation on an annual renewable basis.
6. Commitments and contingencies
At December 31, 1995 and 1994, traditional life insurance
and universal life-type insurance in force aggregated
$59,683,532 and $52,666,567, respectively, of which
$3,771,204 and $3,246,608 were reinsured at the respective
year ends. The Company also reinsures a portion of the
risks assumed under disability income policies. Under the
agreements, premiums ceded to reinsurers amounted to
$29,146, $29,489 and $28,276 and reinsurance recovered from
reinsurers amounted to $5,756, $5,505, and $3,345 for the
years ended December 31, 1995, 1994 and 1993.
Reinsurance contracts do not relieve the Company from its
primary obligation to policyholders.
The Company is a defendant in various lawsuits, none of
which, in the opinion of Company counsel, will result in a
material liability.
The IRS has completed its audit of the Company's 1987
through 1989 tax years. The Company is currently contesting
one issue at the IRS Appeals Level. Management does not
believe there will be a material impact as a result of this
audit.
7. Lines of credit
The Company has available lines of credit with three banks
aggregating $100,000 at 40 to 80 basis points over the
banks' cost of funds or equal to the prime rate, depending
on which line of credit agreement is used. Borrowings
outstanding under these agreements were $nil at December 31,
1995 and 1994, respectively.
<PAGE>
PAGE 41
8. Derivative financial instruments
The Company enters into transactions involving derivative
financial instruments to manage its exposure to interest
rate risk, including hedging specific transactions. The
Company manages risks associated with these instruments as
described below. The Company does not hold derivative
instruments for trading purposes.
Market risk is the possibility that the value of the
derivative financial instruments will change due to
fluctuations in a factor from which the instrument derives
its value, primarily an interest rate. The Company is not
impacted by market risk related to derivatives held for non-
trading purposes beyond that inherent in cash market
transactions. Derivatives held for purposes other than
trading are largely used to manage risk and, therefore, the
cash flow and income effects of the derivatives are inverse
to the effects of the underlying transactions.
Credit risk is the possibility that the counterparty will
not fulfill the terms of the contract. The Company monitors
credit exposure related to derivative financial instruments
through established approval procedures, including setting
concentration limits by counterparty and industry, and
requiring collateral, where appropriate. A vast majority of
the Company's counterparties are rated A or better by
Moody's and Standard & Poor's.
The notional or contract amount of a derivative financial
instrument is generally used to calculate the cash flows
that are received or paid over the life of the agreement.
Notional amounts are not recorded on the balance sheet.
Notional amounts far exceed the related credit exposure.
Credit exposure related to interest rate caps is measured by
the replacement cost of the contracts. The replacement
cost represents the fair value of the instruments.
Financial futures contracts are settled in cash daily.
<TABLE>
<CAPTION>
Notional Carrying Fair Total Credit
December 31, 1995 Amount Value Value Exposure
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $5,100,000 $26,680 $ 8,366 $ 8,366
December 31, 1994
Assets:
Financial futures contracts $ 159,800 $ 2,072 $ 2,072 $ --
Interest rate caps 4,400,000 29,054 42,365 42,365
$4,559,800 $31,126 $44,437 $42,365
</TABLE>
The fair values of derivative financial instruments are
based on market values, dealer quotes or pricing models.
The financial futures contracts expired in 1995. The
interest rate caps expire on various dates from 1996 to
2000.
<PAGE>
PAGE 42
8. Derivative financial instruments (continued)
Financial futures contracts and interest rate caps are used
principally to manage the Company's exposure to rising
interest rates. These instruments are used primarily to
protect the margin between interest rates earned on
investments and the interest rates credited to related
annuity contract holders.
Changes in the fair value of financial futures contracts are
accounted for as adjustments to the carrying amount of the
hedged investments and amortized over the remaining lives of
such investments. The cost of interest rate caps is
amortized to interest expense over the life of the contracts
and payments received as a result of these agreements are
recorded as a reduction of interest expense when realized.
The amortized cost of interest rate cap contracts is
included in other investments.
9. Fair values of financial instruments
The Company discloses fair value information for most on-
and off-balance sheet financial instruments for which it is
practical to estimate that value. Fair values of life
insurance obligations and all non-financial instruments,
such as deferred acquisition costs are excluded. Off-
balance sheet intangible assets, such as the value of the
field force, are also excluded. Management believes the
value of excluded assets is significant. The fair value of
the Company, therefore, cannot be estimated by aggregating
the amounts presented.
<TABLE>
<CAPTION>
1995 1994
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $11,257,591 $11,878,377 $11,269,861 $10,694,800
Available for sale 10,516,212 10,516,212 8,017,555 8,017,555
Mortgage loans on
real estate (Note 2) 2,945,495 3,184,666 2,400,514 2,342,520
Other:
Equity securities (Note 2) 3,517 3,517 1,906 1,906
Derivative financial
instruments (Note 8) 26,680 8,366 31,126 44,437
Other 52,182 52,182 -- --
Cash and
cash equivalents (Note 1) 72,147 72,147 267,774 267,774
Separate account assets
(Note 1) 14,974,082 14,974,082 10,881,235 10,881,235
Financial Liabilities
Future policy benefits
for fixed annuities 20,259,265 19,603,114 18,325,870 17,651,897
Separate account liabilities 14,208,619 13,665,636 10,398,861 9,943,672
</TABLE>
At December 31, 1995 and 1994, the carrying amount and fair
value of future policy benefits for fixed annuities exclude
life insurance-related contracts carried at $1,070,598 and
$971,897, respectively, and policy loans of $74,973 and
$64,212, respectively. The fair value of these benefits is
<PAGE>
PAGE 43
9. Fair values of financial instruments (continued)
based on the status of the annuities at December 31, 1995
and 1994. The fair value of deferred annuities is estimated
as the carrying amount less any applicable surrender charges
and related loans. The fair value for annuities in non-life
contingent payout status is estimated as the present value
of projected benefit payments at rates appropriate for
contracts issued in 1995 and 1994.
At December 31, 1995 and 1994, the fair value of liabilities
related to separate accounts is estimated as the carrying
amount less any applicable surrender charges and less
variable insurance contracts carried at $765,463 and
$482,374, respectively.
10. Segment information
The Company's operations consist of two business segments;
first, individual and group life insurance, disability
income, health and long-term care insurance, and second,
annuity products designed for individuals, pension plans,
small businesses and employer-sponsored groups. The
consolidated condensed statements of income for the years
ended December 31, 1995, 1994 and 1993 and total assets at
December 31, 1995, 1994 and 1993 by segment are summarized
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net investment income:
Life, disability income, health
and long-term care insurance $ 256,242 $ 247,047 $ 250,224
Annuities 1,651,067 1,534,826 1,532,995
$ 1,907,309 $ 1,781,873 $ 1,783,219
Premiums, charges and fees:
Life, disability income, health
and long-term care insurance $ 384,008 $ 335,375 $ 287,713
Annuities 249,557 193,370 143,876
$ 633,565 $ 528,745 $ 431,589
Income before income taxes:
Life, disability income, health
and long-term care insurance $ 125,402 $ 122,677 $ 104,127
Annuities 440,278 394,117 315,336
Net loss on investments (4,898) (4,282) (6,737)
$ 560,782 $ 512,512 $ 412,726
Total assets:
Life, disability income, health
and long-term care insurance $ 6,195,870 $ 5,269,188 $ 4,810,145
Annuities 36,704,208 30,478,355 28,247,608
$42,900,078 $35,747,543 $33,057,753
</TABLE>
Allocations of net investment income and certain general
expenses are based on various assumptions and estimates.
Assets are not individually identifiable by segment and have
been allocated principally based on the amount of future
policy benefits by segment.
Capital expenditures and depreciation expense are not
material, and consequently, are not reported.
<PAGE>
PAGE 44
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1995
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 1,237,093 $ 1,253,115 $ 1,237,093
States, municipalities and
political subdivisions 11,936 12,266 11,936
All other corporate bonds 10,008,562 10,612,996 10,008,562
Total held to maturity 11,257,591 11,878,377 11,257,591
Available for sale:
United States Government and
government agencies and
authorities (b) 4,092,563 4,176,080 4,176,080
States, municipalities and
political subdivisions 11,020 12,496 12,496
All other corporate bonds 6,042,553 6,327,636 6,327,636
Total available for sale 10,146,136 10,516,212 10,516,212
Mortgage loans on real estate 2,945,495 XXXXXXXXX 2,945,495
Policy loans 424,019 XXXXXXXXX 424,019
Other investments 146,894 XXXXXXXXX 146,894
Total investments $24,920,135 $ XXXXXXXXX $25,290,211
(a) - Includes mortgage-backed securities with a cost and market value of $1,172,570 and
$1,184,673, respectively.
(b) - Includes mortgage-backed securities with a cost and market value of $4,008,481 and
$4,088,800, respectively.
</TABLE>
<PAGE>
PAGE 45
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1995
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
<S> <C> <C> <C> <C> <C> <C>
Annuities $1,227,169 $21,404,836 $ - $28,191 $ - $1,651,067
Life, DI,
Long-term Care and
Health Insurance 798,556 3,613,253 - 28,132 161,530 256,242
Total $2,025,725 $25,018,089 $ - $56,323 $161,530 $1,907,309
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
Annuities $ 2,693 $ 189,626 $166,191 N/A
Life, DI,
Long-term Care and
Health Insurance 164,749 90,495 45,451 N/A
Total $ 167,442 $ 280,121 $211,642 N/A
</TABLE>
<PAGE>
PAGE 46
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1994
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
<S> <C> <C> <C> <C> <C> <C>
Annuities $1,150,585 $19,361,979 $ - $23,888 $ - $1,534,826
Life, DI,
Long-term Care and
Health Insurance 714,739 3,346,931 - 26,180 144,640 247,047
Total $1,865,324 $22,708,910 $ - $50,068 $144,640 $1,781,873
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
Annuities $ (5,762) $ 194,060 $131,515 N/A
Life, DI,
Long-term Care and
Health Insurance 134,128 86,312 78,586 N/A
Total $ 128,366 $ 280,372 $210,101 N/A
</TABLE>
<PAGE>
PAGE 47
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1993
Column A Column B Column C Column D Column E Column F
Segment Deferred Future Unearned Other policy Premium
policy policy premiums claims and revenue
acquisition benefits, benefits
cost losses, payable
claims and
loss
expenses
<S> <C> <C> <C> <C> <C>
Annuities $1,008,378 $18,492,135 $ - $ 21,508 $ -
Life, DI,
Long-term Care and
Health Insurance 644,006 3,148,932 - 23,008 127,245
Total $1,652,384 $21,641,067 $ - $ 44,516 $127,245
Column G Column H Column I Column J Column K
Net Benefits, Amortization Other Premiums
investment claims, of deferred operating written
income losses and policy expenses
settlement acquisition
expenses costs
Annuities $1,532,995 $ 3,656 $139,602 $122,999 N/A
Life, DI,
Long-term Care and
Health Insurance 250,224 119,335 72,131 118,975 N/A
Total $1,783,219 $ 122,991 $211,733 $241,974 N/A
</TABLE>
<PAGE>
PAGE 48
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Column A Column B Column C Column D Column E Column F
Gross amount Ceded to other Assumed from Net % of amount
companies other companies Amount assumed to net
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1995
Life insurance in force $57,895,180 $3,771,204 $1,788,352 $55,912,328 3.20%
Premiums:
Life insurance $ 53,089 $ 2,648 $ (248) $ 50,193 -0.49%
DI & health insurance 137,016 25,679 -- 111,337 0.00%
Total premiums $ 190,105 $ 28,327 $ (248) $ 161,530 -0.15%
For the year ended
December 31, 1994
Life insurance in force $50,814,651 $3,246,608 $1,851,916 $49,419,959 3.75%
Premiums:
Life insurance $ 51,219 $ 3,354 $ 319 $ 48,184 0.66%
DI & health insurance 114,049 17,593 -- 96,456 0.00%
Total premiums $ 165,268 $ 20,947 $ 319 $ 144,640 0.22%
For the year ended
December 31, 1993
Life insurance in force $44,188,493 $3,038,426 $1,937,022 $43,087,089 4.50%
Premiums:
Life insurance $ 51,764 $ 3,627 $ -- $ 48,137 0.00%
DI & health insurance 96,250 17,142 -- 79,108 0.00%
Total premiums $ 148,014 $ 20,769 $ -- $ 127,245 0.00%
</TABLE>
<PAGE>
PAGE 49
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Column A Column B Column C Column D Column E
Additions
---------
Balance at Charged to
Description Beginning Charged to Other Accounts- Deductions- Balance at End
of Period Costs & Expenses Describe Describe * of Period
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1995
- -------------------------
Reserve for Mortgage Loans $35,252 $ 1,088 $0 ($1,000) $37,340
Reserve for Other Investments $ 7,515 ($ 2,802) $0 $ 0 $ 4,713
For the year ended
December 31, 1994
- -------------------------
Reserve for Mortgage Loans $35,020 $ 232 $0 $ 0 $35,252
Reserve for Fixed Maturities $22,777 ($16,777) $0 $6,000 $ 0
Reserve for Other Investments $10,700 ($ 3,185) $0 $ 0 $ 7,515
For the year ended
December 31, 1993
- -------------------------
Reserve for Mortgage Loans $23,595 $13,635 $0 $2,210 $35,020
Reserve for Fixed Maturities $37,899 ($15,122) $0 $22,777
Reserve for Other Investments $12,834 ($ 4,344) $0 ($2,210) $10,700
* 1995 amount represents a reserve on mortgage loans which were transferred from an affiliate. 1994 amount represents
a direct writedown of the related investments in fixed maturities. 1993 amounts represent transfers between reserve accounts.
</TABLE>
<PAGE>
<PAGE>
PAGE 1
IDS Life Insurance Company
File No. 33-28976
EXHIBIT INDEX
Exhibit 27: Financial Data Schedule.
<TABLE> <S> <C>
<PAGE>
<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> DEC-31-1995
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 10516212
<DEBT-CARRYING-VALUE> 11257591
<DEBT-MARKET-VALUE> 11878377
<EQUITIES> 3517
<MORTGAGE> 2945495
<REAL-ESTATE> 28796
<TOTAL-INVEST> 25290211
<CASH> 72147
<RECOVER-REINSURE> 1849
<DEFERRED-ACQUISITION> 2025725
<TOTAL-ASSETS> 42900078
<POLICY-LOSSES> 25018089
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 56323
<NOTES-PAYABLE> 0
<COMMON> 3000
0
0
<OTHER-SE> 2328708
<TOTAL-LIABILITY-AND-EQUITY> 42900078
161530
<INVESTMENT-INCOME> 1907309
<INVESTMENT-GAINS> (4898)
<OTHER-INCOME> 472035
<BENEFITS> 1483431
<UNDERWRITING-AMORTIZATION> 280121
<UNDERWRITING-OTHER> 211642
<INCOME-PRETAX> 560782
<INCOME-TAX> 195842
<INCOME-CONTINUING> 364940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 364940
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 23228
<PROVISION-CURRENT> 117478
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 116514
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 24192
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
