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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-28976
IDS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0823832
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IDS TOWER 10, MINNEAPOLIS, MINNESOTA 55440-0010
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (612) 671-1257
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No ___
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING
THIS FORM WITH THE PERMITTED ABBREVIATED NARRATIVE DISCLOSURE.
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IDS LIFE INSURANCE COMPANY
FORM 10-Q
For the Quarter Ended September 30, 1996
Table of Contents
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1996 (unaudited) and
December 31, 1995 3-4
Consolidated Statements of Income for the
three months ended September 30, 1996 and 1995
(unaudited) 5
Consolidated Statements of Income for the
nine months ended September 30, 1996 and 1995
(unaudited) 6
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1996 and 1995
(unaudited) 7-8
Notes to Consolidated Financial Statements
(unaudited) 9-10
Item 2. Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations 11-13
PART II - OTHER INFORMATION 14
SIGNATURES 15
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
(unaudited)
<S> <C> <C>
Investments:
Fixed Maturities:
Held to maturity, at amortized cost (Fair value:
1996, $10,788,460; 1995, $11,878,377) $10,635,653 $11,257,591
Available for sale, at fair value (Amortized cost:
1996, $10,376,822; 1995, $10,146,136) 10,410,197 10,516,212
21,045,850 21,773,803
Mortgage loans on real estate
(Fair value: 1996, $3,497,236; 1995, $3,184,666) 3,457,028 2,945,495
Policy loans 452,686 424,019
Other investments 227,727 146,894
Total investments 25,183,291 25,290,211
Cash and cash equivalents 120,134 72,147
Receivables:
Reinsurance 144,541 114,387
Amounts due from brokers 19,313 -
Other accounts receivable 36,457 33,667
Premiums due 4,970 5,441
Total receivables 205,281 153,495
Accrued investment income 340,123 348,008
Deferred policy acquisition costs 2,228,125 2,025,725
Deferred income taxes 60,730 -
Other assets 34,922 36,410
Separate account assets 17,484,994 14,974,082
Total assets $45,657,600 $42,900,078
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
(continued)
September 30, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1996 1995
(unaudited)
Liabilities:
Future policy benefits:
Fixed annuities $21,625,025 $21,404,836
Universal life-type insurance 3,151,145 3,076,847
Traditional life insurance 209,959 209,249
Disability income, health and
long-term care insurance 398,623 327,157
Policy claims and other
policyholders' funds 93,230 56,323
Amounts due to brokers 137,630 121,618
Deferred income taxes - 112,904
Other liabilities 245,843 285,354
Separate account liabilities 17,484,994 14,974,082
Total liabilities 43,346,449 40,568,370
Stockholder's equity:
Capital stock, $30 par value per share;
100,000 shares authorized, issued and outstanding 3,000 3,000
Additional paid-in capital 278,814 278,814
Net unrealized gain on investments 21,097 230,129
Retained earnings 2,008,240 1,819,765
Total stockholder's equity 2,311,151 2,331,708
Total liabilities and stockholder's equity $45,657,600 $42,900,078
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Three months ended
September 30,
1996 1995
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 12,692 $ 12,213
Disability income, health and
long-term care insurance 33,342 28,343
Total premiums 46,034 40,556
Policyholder and contractholder charges 77,047 63,768
Management and other fees 68,539 55,634
Net investment income 486,051 477,997
Net realized gain (loss) on investments (1,687) 145
Total revenues 675,984 638,100
Benefits and expenses:
Death and other benefits:
Traditional life insurance 6,460 6,769
Universal life-type insurance
and investment contracts 19,864 17,532
Disability income, health and
long-term care insurance 5,599 4,578
Increase in liabilities for
future policy benefits:
Traditional life insurance 436 7
Disability income, health and
long-term care insurance 12,923 12,956
Interest credited on universal life-type
insurance and investment contracts 343,875 333,159
Amortization of deferred policy
acquisition costs 69,066 86,622
Other insurance and operating expenses 62,397 46,478
Total benefits and expenses 520,620 508,101
Income before income taxes 155,364 129,999
Income taxes 49,118 45,180
Net income $ 106,246 $ 84,819
See accompanying notes.
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Nine months ended
September 30,
1996 1995
Revenues:
Premiums:
Traditional life insurance $ 38,074 $ 37,668
Disability income, health and
long-term care insurance 96,717 81,655
Total premiums 134,791 119,323
Policyholder and contractholder charges 223,388 188,939
Management and other fees 195,701 153,064
Net investment income 1,467,482 1,414,616
Net realized gain (loss) on investments 1,117 (2,605)
Total revenues 2,022,479 1,873,337
Benefits and expenses:
Death and other benefits:
Traditional life insurance 21,289 22,124
Universal life-type insurance
and investment contracts 63,281 51,555
Disability income, health and
long-term care insurance 13,356 13,091
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance 545 (1,714)
Disability income, health and
long-term care insurance 42,351 38,228
Interest credited on universal life-type
insurance and investment contracts 1,019,826 975,033
Amortization of deferred policy
acquisition costs 205,780 211,239
Other insurance and operating expenses 187,619 156,771
Total benefits and expenses 1,554,047 1,466,327
Income before income taxes 468,432 407,010
Income taxes 156,976 141,560
Net income $ 311,456 $ 265,450
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
Nine months ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 311,456 $ 265,450
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (37,373) (35,332)
Repayment 30,482 26,993
Change in reinsurance receivable (30,154) (25,305)
Change in other accounts receivable (2,790) 23,653
Change in accrued investment income 7,885 (11,926)
Change in deferred policy
acquisition costs, net (187,144) (124,744)
Change in liabilities for future policy
benefits for traditional life,
disability income, health and
long-term care insurance 72,176 64,584
Change in policy claims and other
policyholders' funds 36,907 27,075
Change in deferred income taxes (57,411) (32,318)
Change in other liabilities (39,511) (49,153)
Accretion of discount, net (7,046) (19,620)
Net realized (gain) loss on investments (1,117) 2,605
Activity related to universal
life-type insurance:
Premiums 363,562 339,747
Surrenders and death benefits (298,824) (228,266)
Interest credited to account balances 123,716 121,324
Policyholder and contractholder charges,
non-cash (114,156) (103,768)
Other, net 4,217 3,300
Net cash provided by operating activities $ 174,875 $ 244,299
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IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
Nine months ended
September 30,
1996 1995
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases ($41,724) ($443,661)
Maturities, sinking fund payments and calls 548,298 485,070
Sales 115,832 175,616
Fixed maturities available for sale:
Purchases (1,396,732) (1,831,133)
Maturities, sinking fund payments and calls 995,666 553,582
Sales 177,253 50,031
Other investments, excluding policy loans:
Purchases (753,578) (505,182)
Sales 157,985 124,229
Change in amounts due from broker (19,313) (2,672)
Change in amounts due to broker 16,012 (59,805)
Net cash used in investing activities (200,301) (1,453,925)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 2,329,493 2,338,090
Surrenders and death benefits (3,005,414) (2,080,869)
Interest credited to account balances 896,110 853,709
Universal life-type insurance policy loans:
Issuance (65,179) (63,768)
Repayment 43,403 39,880
Cash dividends to parent (125,000) (140,000)
Net cash provided by financing activities 73,413 947,042
Net increase (decrease) in cash and cash equivalents 47,987 (262,584)
Cash and cash equivalents at beginning of period 72,147 267,774
Cash and cash equivalents at end of period $ 120,134 $ 5,190
See accompanying notes.
</TABLE>
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
($ thousands)
(unaudited)
1. General
In the opinion of the management of IDS Life Insurance
Company (the Company), the accompanying unaudited
consolidated financial statements contain all
adjustments (consisting of normal recurring
adjustments) necessary to present fairly its balance
sheet as of September 30, 1996, statements of income
for the three and nine months ended September 30, 1996
and 1995 and statements of cash flows for the nine
months ended September 30, 1996 and 1995.
The Company is a wholly owned subsidiary of American
Express Financial Corporation which is a wholly owned
subsidiary of American Express Company. The
accompanying consolidated financial statements include
the accounts of the Company and its wholly owned
subsidiaries, IDS Life Insurance Company of New York,
American Enterprise Life Insurance Company, American
Centurion Life Assurance Company and American Partners
Life Insurance Company. All material intercompany
accounts and transactions have been eliminated in
consolidation.
2. Nature of business
The Company is engaged in the life insurance and
annuity business. The Company sells various forms of
fixed and variable individual life insurance, group
life insurance, individual and group disability income
insurance, long-term care insurance, and single and
installment premium fixed and variable annuities.
3. Statements of cash flows
The Company considers investments with a maturity at
the date of their acquisition of three months or less
to be cash equivalents. These securities are carried
principally at amortized cost which approximates market
value.
Cash paid for interest on borrowings totaled $3,610 and
$4,568 for the nine months ended September 30, 1996 and
1995, respectively. Cash paid for income taxes totaled
$274,418 and $157,199 for the nine months ended
September 30, 1996 and 1995, respectively.
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ thousands)
(unaudited)
(continued)
4. Commitments and contingencies
Commitments for purchases of investments in the
ordinary course of business at September 30, 1996
aggregated $170,101.
The maximum amount of risk retained by the Company on
any one life is $750 of life and waiver of premium
benefits plus $50 of accidental death benefits. The
excesses are reinsured with other life insurance
companies on a yearly renewable term basis.
The Company is a defendant in various lawsuits, none of
which, in the opinion of the Company counsel, will
result in a material liability.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Nine Months Ended September 30, 1996 Compared to Nine Months
Ended September 30, 1995:
Consolidated net income increased 17 percent to $311
million for the nine months ended September 30, 1996,
compared to $265 million in 1995. Earnings growth resulted
primarily from increases in net investment income,
management fees and policyholder and contractholder charges,
partially offset by the impact of somewhat lower spread
rates. It is expected that spread rates will continue to
decrease throughout the year.
Premiums received totaled $4.6 billion for the nine
months ended September 30, 1996, compared to $3.8 billion a year
ago. Increased sales of variable annuities and life insurance
were partially offset by decreased sales of fixed annuities,
reflecting lower interest rates in 1996 compared to 1995.
Net investment income was $1.5 billion for the nine
months ended September 30, 1996, a slight increase from a year ago.
The increase reflects higher total investments which increased
4.2 percent from a year ago to $25 billion at September 30,
1996, partially offset by lower yields.
Policyholder and contractholder charges increased to
$223 million for the nine months ended September 30, 1996,
compared with $189 million a year ago. This increase is
primarily due to higher life insurance in force.
Management and other fees increased to $196 million for
the nine months ended September 30, 1996, compared with $153
million a year ago. This is primarily due to an increase in
separate account assets, which grew 24 percent to $17 billion at
September 30, 1996 due to market appreciation and sales. The
Company provides investment management services for the mutual
funds which are used as investment options for variable annuities
and variable life insurance. The Company also receives a
mortality and expense risk fee from the separate accounts.
Total benefits and expenses were $1.6 billion for the
nine months ended September 30, 1996, a slight increase from
a year ago. The largest component of expenses, interest
credited on universal life-type insurance and investment
contracts, increased to $1,020 million, compared with $975
million for the corresponding period in 1995. This is due
to both higher aggregate amounts in force and an decrease in
interest credited rates.
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Liquidity and Capital Resources
The liquidity requirements of the Company are met by
funds provided from operations and investment activity. The
primary components of the funds provided are premiums,
investment income, proceeds from sales of investments as
well as maturities and periodic repayments of investment
principal.
The primary uses of funds are policy benefits,
commissions and operating expenses, policy loans, new
investment purchases and dividends to parent.
The Company has available lines of credit with three
banks aggregating $100 million, which are used strictly
as short-term sources of funds. At September 30, 1996,
outstanding borrowings under these agreements were $nil.
The Company also uses reverse repurchase agreements for
short-term liquidity needs. Outstanding reverse repurchase
agreements totaled $35 million at September 30, 1996.
At September 30, 1996, approximately 8.7 percent of the
Company's invested assets were below-investment-grade bonds,
compared to 9.2 percent at December 31, 1995. These
investments may be subject to a higher degree of risk than
higher-rated issues because of the borrowers' generally
greater sensitivity to adverse economic conditions, such as
recession or increasing interest rates, and in certain
instances the lack of an active secondary market. Expected
returns on below-investment-grade bonds reflect
consideration of such factors. The Company has identified
those fixed maturities for which a decline in fair value is
determined to be other than temporary, and has written them
down to fair value with a charge to earnings.
At September 30, 1996, net unrealized appreciation on
investments in fixed maturities decreased due to an increase
in market rates during the third quarter of 1996. For the
nine months ended September 30, 1996, sales of fixed
maturities held to maturity were due to significant
deterioration in the issuers' creditworthiness.
At September 30, 1996, the Company had an allowance for
losses on mortgage loans of $34 million.
The Company paid $125 million in dividends to its
parent during the nine months ended September 30, 1996.
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PAGE 13
The economy and other factors have caused an increase
in the number of insurance companies that are under
regulatory supervision. This circumstance has resulted in
an increase in assessments by state guaranty associations to
cover losses to policyholders of insolvent or rehabilitated
companies. Some assessments can be partially recovered
through a reduction in future premium taxes in certain
states. The Company has established an asset for guaranty
association assessments paid to those states allowing a
reduction in future premium taxes over a reasonable period
of time. The asset will be amortized as future premium
taxes are reduced. The Company has also estimated the
effect of future assessments on the Company's financial
position and results of operations and has established a
reserve for such assessments.
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PAGE 14
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Reference is made to Note 4 of the Notes to
Consolidated Financial Statements (unaudited)
contained in the Report filed on Form 10-Q for the
quarterly period ended September 30, 1996.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
No reports on Form 8-K were required to be filed by the
Company for the nine months ended September 30, 1996.
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PAGE 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
REGISTRANT IDS LIFE INSURANCE COMPANY
BY /s/ Melinda S. Urion
NAME AND TITLE Melinda S. Urion
Executive Vice President and Controller
DATE November 12, 1996
<TABLE> <S> <C>
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Company
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<PERIOD-START> JAN-01-1996
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