<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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.
<PAGE>
IDS LIFE INSURANCE COMPANY
FORM 10-Q
For the Quarter Ended June 30, 1997
Table of Contents
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1997 (unaudited) and
December 31, 1996 3 - 4
Consolidated Statements of Income for the
three months ended June 30, 1997 and 1996
(unaudited) 5
Consolidated Statements of Income for the
six months ended June 30, 1997 and 1996
(unaudited) 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996
(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 - 12
PART II - OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
June 30, December 31,
ASSETS 1997 1996
-------- -------
(unaudited)
<S> <C> <C>
Investments:
Fixed Maturities:
Held to maturity, at amortized cost (Fair value:
1997, $10,031,249; 1996, $10,521,650) $ 9,800,420 $10,236,379
Available for sale, at fair value (Amortized cost:
1997, $11,839,284; 1996, $11,008,622) 11,977,679 11,146,845
----------- -----------
21,778,099 21,383,224
Mortgage loans on real estate 3,561,032 3,493,364
Policy loans 476,141 459,902
Other investments 295,759 251,465
----------- -----------
Total investments 26,111,031 25,587,955
Cash and cash equivalents 55,032 224,603
Amounts recoverable from reinsurers 181,652 157,722
Amounts due from brokers 26,816 11,047
Other accounts receivable 42,611 44,089
Accrued investment income 351,579 343,313
Deferred policy acquisition costs 2,405,876 2,330,805
Deferred income taxes 42,910 33,923
Other assets 34,649 37,364
Separate account assets 21,060,949 18,535,160
----------- -----------
Total assets $50,313,105 $47,305,981
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
(continued)
June 30, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996
---------- -------------
(unaudited)
Liabilities:
Future policy benefits:
<S> <C> <C>
Fixed annuities $22,078,822 $21,838,008
Universal life-type insurance 3,234,017 3,177,149
Traditional life insurance 211,244 209,685
Disability income and
long-term care insurance 473,022 424,200
Policy claims and other
policyholders' funds 68,018 83,634
Amounts due to brokers 249,202 261,987
Other liabilities 343,753 332,078
Separate account liabilities 21,060,949 18,535,160
----------- -----------
Total liabilities 47,719,027 44,861,901
----------- -----------
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 283,646 283,615
Net unrealized gain on investments 88,363 86,102
Retained earnings 2,219,069 2,071,363
----------- -----------
Total stockholder's equity 2,594,078 2,444,080
----------- -----------
Total liabilities and stockholder's equity $50,313,105 $47,305,981
=========== ===========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Three months ended
June 30,
1997 1996
------- ------
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 12,716 $ 12,942
Disability income and
long-term care insurance 36,669 31,736
-------- --------
Total premiums 49,385 44,678
Policyholder and contractholder charges 84,062 74,888
Management and other fees 80,913 64,560
Net investment income 510,032 487,601
Net realized gain on investments 2,583 312
-------- --------
Total revenues 726,975 672,039
-------- --------
Benefits and expenses:
Death and other benefits:
Traditional life insurance 8,925 7,606
Universal life-type insurance
and investment contracts 24,973 19,792
Disability income and
long-term care insurance 5,808 3,456
Increase in liabilities for
future policy benefits:
Traditional life insurance 771 355
Disability income and
long-term care insurance 14,652 14,812
Interest credited on universal life-type
insurance and investment contracts 345,571 337,876
Amortization of deferred policy
acquisition costs 77,582 68,469
Other insurance and operating expenses 89,314 55,955
-------- --------
Total benefits and expenses 567,596 508,321
-------- --------
Income before income taxes 159,379 163,718
Income taxes 42,874 56,350
-------- --------
Net income $116,505 $107,368
======== ========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Six months ended
June 30,
1997 1996
----------- --------
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 26,424 $ 25,382
Disability income and
long-term care insurance 74,018 63,375
----------- -----------
Total premiums 100,442 88,757
Policyholder and contractholder charges 166,955 146,341
Management and other fees 157,453 127,162
Net investment income 1,004,656 981,431
Net realized gain (loss) on investments (2,675) 2,804
----------- -----------
Total revenues 1,426,831 1,346,495
----------- -----------
Benefits and expenses:
Death and other benefits:
Traditional life insurance 14,648 14,829
Universal life-type insurance
and investment contracts 46,302 43,417
Disability income and
long-term care insurance 10,824 7,757
Increase in liabilities for
future policy benefits:
Traditional life insurance 1,345 109
Disability income and
long-term care insurance 28,005 29,428
Interest credited on universal life-type
insurance and investment contracts 692,475 675,951
Amortization of deferred policy
acquisition costs 154,312 136,714
Other insurance and operating expenses 137,011 125,222
----------- -----------
Total benefits and expenses 1,084,922 1,033,427
----------- -----------
Income before income taxes 341,909 313,068
Income taxes 104,204 107,858
----------- -----------
Net income $ 237,705 $ 205,210
=========== ===========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($thousands)
(unaudited)
Six months ended
June 30,
1997 1996
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 237,705 $ 205,210
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (26,635) (23,261)
Repayment 21,886 19,844
Change in reinsurance receivable (23,930) (18,661)
Change in other accounts receivable 1,478 (7,504)
Change in accrued investment income (8,266) (1,762)
Change in deferred policy
acquisition costs, net (74,722) (127,788)
Change in liabilities for future policy
benefits for traditional life,
disability income and
long-term care insurance 50,381 48,626
Change in policy claims and other
policyholders' funds (15,616) 21,079
Change in deferred income taxes (10,201) (119,935)
Change in other liabilities 11,675 (4,483)
Accretion of discount, net (6,441) (5,149)
Net realized (gain) loss on investments 2,675 (2,804)
Policyholder and contractholder charges,
non-cash (79,005) (74,518)
Other, net 7,283 (734)
--------- ---------
Net cash provided by (used in) operating activities $ 88,267 ($ 91,840)
--------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
Six months ended
June 30,
1997 1996
------------ ----------
<S> <C> <C>
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases ($ 1,011) ($ 32,846)
Maturities, sinking fund payments and calls 370,421 422,554
Sales 64,386 102,355
Fixed maturities available for sale:
Purchases (1,480,783) (925,631)
Maturities, sinking fund payments and calls 480,051 633,287
Sales 187,632 157,080
Other investments, excluding policy loans:
Purchases (261,187) (548,874)
Sales 136,009 99,550
Change in amounts due from broker (15,769) --
Change in amounts due to broker (12,785) 194,433
----------- -----------
Net cash provided by (used in) investing activities (533,036) 101,908
----------- -----------
Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received 1,473,080 1,854,045
Surrenders and death benefits (1,788,867) (2,409,827)
Interest credited to account balances 692,475 675,951
Universal life-type insurance policy loans:
Issuance (47,653) (42,836)
Repayment 36,163 29,587
Cash dividends to parent (90,000) (85,000)
----------- -----------
Net cash provided by financing activities 275,198 21,920
----------- -----------
Net increase (decrease) in cash and cash equivalents (169,571) 31,988
Cash and cash equivalents at beginning of period 224,603 72,147
----------- -----------
Cash and cash equivalents at end of period $ 55,032 $ 104,135
=========== ===========
See accompanying notes.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
($ thousands)
(unaudited)
1. General
In the opinion of the management of IDS Life Insurance Company (the
Company), the accompanying unaudited consolidated financial statements
contain all adjustments (consisting of normal recurring adjustments)
necessary to present fairly its balance sheet as of June 30, 1997,
statements of income for the three and six months ended June 30, 1997
and 1996 and statements of cash flows for the six months ended June 30,
1997 and 1996.
The Company is a wholly owned subsidiary of American Express Financial
Corporation (AEFC), 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, American
Partners Life Insurance Company and American Express Corporation. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Purchased and written index options are carried at market value and
included in other investments. Gains or losses on index options are
recognized currently and included in insurance and other operating
expenses.
2. Nature of business
The Company is engaged in the life insurance and annuity business. The
Company sells various forms of fixed and variable individual life
insurance, group life insurance, individual and group disability income
insurance, long-term care insurance, and single and installment premium
fixed and variable annuities.
3. Statements of cash flows
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These
securities are carried principally at amortized cost which approximates
market value.
Cash paid for interest on borrowings totaled $2,285 and $2,471 for the
six months ended June 30, 1997 and 1996, respectively. Cash paid for
income taxes totaled $90,688 and $111,800 for the six months ended June
30, 1997 and 1996, respectively.
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ thousands)
(unaudited)
(continued)
4. Commitments and contingencies
At June 30, 1997, the Company had commitments to purchase affordable
housing limited partnership investments of $25,154, which are included
in other liabilities. Commitments for purchases of investments in the
ordinary course of business at June 30, 1997 aggregated $151,145.
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.
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company and AEFC do business involving
insurers' sales practices, alleged agent misconduct, failure to properly
supervise agents, and other matters. The Company and AEFC, like other
life and health insurers, from time to time are involved in such
litigation. On December 13, 1996, an action entitled Lesa Benacquisto
and Daniel Benacquisto vs. IDS Life Insurance Company and American
Express Financial Corporation was commenced in Minnesota state court.
The action is brought by individuals who replaced an existing Company
insurance policy with a new Company policy. The plaintiffs purport to
represent a class consisting of all persons who replaced existing
Company policies with new policies from and after January 1, 1985. The
complaint puts at issue various alleged sales practices and
misrepresentations, alleged breaches of fiduciary duties and alleged
violations of consumer fraud statutes. Plaintiffs seek damages in an
unspecified amount and also seek to establish a claims resolution
facility for the determination of individual issues. The Company and
AEFC filed an answer to the Complaint on February 18, 1997. A similar
action entitled Mork and Melchert, et ux. vs. IDS Life Insurance Company
involving the replacement of existing IDS Life insurance policies and
annuity contracts was filed in the same court on March 21, 1997.
The Company is a defendant in various other lawsuits, none of which, in
the opinion of the Company counsel, will result in a material liability.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Six Months Ended June 30, 1997 Compared to Six Months Ended
June 30, 1996:
Consolidated net income increased 16 percent to $238 million for the six
months ended June 30, 1997, compared to $205 million in 1996. Earnings
growth resulted primarily from increases in management fees and policyholder
and contractholder charges.
Premiums received totaled $2.7 billion for the six months ended
June 30, 1997, compared to $3.1 billion a year ago. Increased sales of
variable annuities and life insurance were offset by decreased sales of fixed
annuities, reflecting current market conditions.
Net investment income was $1.0 billion for the six months ended
June 30, 1997, compared to $981 million a year ago. The increase reflects
slightly higher total investments of $26 billion at June 30, 1997.
Policyholder and contractholder charges increased to $167 million for
the six months ended June 30, 1997, compared with $146 million a year
ago. This increase is primarily due to higher life insurance in force.
Management and other fees increased to $157 million for the six months
ended June 30, 1997, compared with $127 million a year ago. This is primarily
due to an increase in separate account assets, which grew 26 percent over the
past 12 months to $21 billion at June 30, 1997, 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 $1.1 billion for the six months ended
June 30, 1997, a slight increase over a year ago. The largest component of
expenses, interest credited on universal life-type insurance and investment
contracts, increased to $692 million, compared with $676 million for the
corresponding period in 1996. This is due to higher aggregate amounts in
force partially offset by slightly lower interest credited rates. Increases
in amortization of deferred policy acquisition costs and other insurance and
operating expenses are primarily due to an increase in business in force.
<PAGE>
Liquidity and Capital Resources
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 one bank and its parent
aggregating $125 million, of which $100 million is with its parent. These
lines of credit are used strictly as short-term sources of funds. At June
30, 1997, outstanding borrowings under these agreements were $nil. The
Company also uses reverse repurchase agreements for short-term liquidity
needs. Outstanding reverse repurchase agreements totaled $182 million at
June 30, 1997.
At June 30, 1997, approximately 8.5 percent of the Company's invested
assets were below-investment-grade bonds, compared to 8.1 percent at December
31, 1996. 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.
For the six months ended June 30, 1997, sales of fixed maturities held
to maturity were due to significant deterioration in the issuers'
creditworthiness.
At June 30, 1997, the Company had an allowance for losses on mortgage
loans of $42 million, compared to $37 million at December 31, 1996.
The Company paid $90 million in dividends to its parent during the six
months ended June 30, 1997.
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 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.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Reference is made to Note 4 of the Notes to Consolidated Financial
Statements (unaudited) contained in the Report filed on Form 10-Q
for the quarterly period ended June 30, 1997.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
No reports on Form 8-K were required to be filed by the Company for the six
months ended June 30, 1997.
<PAGE>
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
NAME AND TITLE Melinda S. Urion
Executive Vice President and Controller
DATE August 12, 1997
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000727892
<NAME> IDS Life Insurance Company
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 11977679
<DEBT-CARRYING-VALUE> 9800420
<DEBT-MARKET-VALUE> 10031249
<EQUITIES> 13256
<MORTGAGE> 3561032
<REAL-ESTATE> 104755
<TOTAL-INVEST> 26111031
<CASH> 55032
<RECOVER-REINSURE> 1280
<DEFERRED-ACQUISITION> 2405876
<TOTAL-ASSETS> 50313105
<POLICY-LOSSES> 25997105
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 68018
<NOTES-PAYABLE> 0
<COMMON> 3000
0
0
<OTHER-SE> 2591078
<TOTAL-LIABILITY-AND-EQUITY> 50313105
100422
<INVESTMENT-INCOME> 1004656
<INVESTMENT-GAINS> (2675)
<OTHER-INCOME> 324408
<BENEFITS> 793599
<UNDERWRITING-AMORTIZATION> 154312
<UNDERWRITING-OTHER> 137011
<INCOME-PRETAX> 341909
<INCOME-TAX> 104204
<INCOME-CONTINUING> 237705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237705
<EPS-PRIMARY> 0
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<RESERVE-OPEN> 26387
<PROVISION-CURRENT> 71774
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<PAYMENTS-CURRENT> 95831
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</TABLE>
