<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 March 31, 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 March 31, 1997
Table of Contents
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1997 (unaudited) and
December 31, 1996 3 - 4
Consolidated Statements of Income for the
three months ended March 31, 1997 and 1996
(unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996
(unaudited) 6 - 7
Notes to Consolidated Financial Statements
(unaudited) 8 - 9
Item 2. Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations 10 - 12
PART II - OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
------------------ ---------------------
(unaudited)
<S> <C> <C>
Investments:
Fixed Maturities:
Held to maturity, at amortized cost (Fair value:
1997, $10,089,364; 1996,$10,521,650) $10,002,346 $10,236,379
Available for sale, at fair value (Amortized cost:
1997, $11,553,065; 1996, $11,008,622) 11,479,554 11,146,845
------------------ ---------------------
21,481,900 21,383,224
Mortgage loans on real estate 3,517,454 3,493,364
Policy loans 465,953 459,902
Other investments 292,645 251,465
------------------ ---------------------
Total investments 25,757,952 25,587,955
Cash and cash equivalents 204,971 224,603
Amounts recoverable from reinsurers 168,297 157,722
Amounts due from brokers 2,847 11,047
Other accounts receivable 43,036 44,089
Accrued investment income 339,983 343,313
Deferred policy acquisition costs 2,376,726 2,330,805
Deferred income taxes 104,823 33,923
Other assets 36,175 37,364
Separate account assets 18,412,971 18,535,160
------------------ ---------------------
Total assets $47,447,781 $47,305,981
================== =====================
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
(continued)
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996
------------------ ---------------------
(unaudited)
<S> <C> <C>
Liabilities:
Future policy benefits:
Fixed annuities $21,926,135 $21,838,008
Universal life-type insurance 3,208,625 3,177,149
Traditional life insurance 210,489 209,685
Disability income and
long-term care insurance 447,859 424,200
Policy claims and other
policyholders' funds 90,603 83,634
Amounts due to brokers 378,955 261,987
Other liabilities 384,215 332,078
Separate account liabilities 18,412,971 18,535,160
------------------ ---------------------
Total liabilities 45,059,852 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 283,615 283,615
Net unrealized gain (loss) on investments (45,619) 86,102
Retained earnings 2,146,933 2,071,363
------------------ ---------------------
Total stockholder's equity 2,387,929 2,444,080
------------------ ---------------------
Total liabilities and stockholder's equity $47,447,781 $47,305,981
================== =====================
</TABLE>
See accompanying notes.
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
------------------ ---------------------
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 13,078 $ 12,440
Disability income and
long-term care insurance 37,349 31,639
------------------ ---------------------
Total premiums 50,427 44,079
Policyholder and contractholder charges 82,893 71,453
Management and other fees 76,540 62,602
Net investment income 494,604 493,830
Net realized gain (loss) on investments (5,258) 2,492
------------------ ---------------------
Total revenues 699,206 674,456
------------------ ---------------------
Benefits and expenses:
Death and other benefits:
Traditional life insurance 5,723 7,223
Universal life-type insurance
and investment contracts 21,329 23,625
Disability income and
long-term care insurance 5,016 4,301
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance 574 (246)
Disability income and
long-term care insurance 13,353 14,616
Interest credited on universal life-type
insurance and investment contracts 346,904 338,075
Amortization of deferred policy
acquisition costs 76,730 68,245
Other insurance and operating expenses 47,677 69,267
------------------ ---------------------
Total benefits and expenses 517,306 525,106
------------------ ---------------------
Income before income taxes 181,900 149,350
Income taxes 61,330 51,508
------------------ ---------------------
Net income $ 120,570 $ 97,842
================== =====================
</TABLE>
See accompanying notes.
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
------------------ ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $120,570 $97,842
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (12,205) (10,345)
Repayment 10,800 9,888
Change in reinsurance receivable (10,575) (11,011)
Change in other accounts receivable 1,053 (8,315)
Change in accrued investment income 3,330 6,682
Change in deferred policy
acquisition costs, net (36,725) (58,647)
Change in liabilities for future policy
benefits for traditional life,
disability income and
long-term care insurance 24,463 23,826
Change in policy claims and other
policyholders' funds 6,969 20,123
Change in deferred income taxes 28 (17,150)
Change in other liabilities 52,137 96,613
Accretion of discount, net (2,701) (4,340)
Net realized (gain) loss on investments 5,258 (2,492)
Policyholder and contractholder charges,
non-cash (39,487) (37,500)
Other, net 218 (6,463)
------------------ ---------------------
Net cash provided by operating activities $123,133 $98,711
------------------ ---------------------
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
------------------ ---------------------
<S> <C> <C>
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ 0 $ (5,481)
Maturities, sinking fund payments and calls 205,803 241,436
Sales 29,789 60,564
Fixed maturities available for sale:
Purchases (946,213) (444,871)
Maturities, sinking fund payments and calls 247,601 269,315
Sales 155,972 140,507
Other investments, excluding policy loans:
Purchases (133,886) (264,621)
Sales 63,557 30,720
Change in amounts due from broker 8,200 (49,219)
Change in amounts due to broker 116,968 (4,467)
------------------ ---------------------
Net cash used in investing activities (252,209) (26,117)
------------------ ---------------------
Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received 709,723 992,081
Surrenders and death benefits (897,537) (1,386,055)
Interest credited to account balances 346,904 338,075
Universal life-type insurance policy loans:
Issuance (23,572) (21,218)
Repayment 18,926 15,244
Cash dividends to parent (45,000) (40,000)
------------------ ---------------------
Net cash provided by (used in) financing activities 109,444 (101,873)
------------------ ---------------------
Net increase (decrease) in cash and cash equivalents (19,632) (29,279)
Cash and cash equivalents at beginning of period 224,603 72,147
------------------ ---------------------
Cash and cash equivalents at end of period $204,971 $42,868
================== =====================
</TABLE>
See accompanying notes.
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
($ 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 March 31, 1997,
statements of income for the three months ended March 31, 1997 and 1996
and statements of cash flows for the three months ended March 31, 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 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 $319 and $1,172 for the
three months ended March 31, 1997 and 1996, respectively. Cash paid
(refunded) for income taxes totaled ($32,369) and $20,222 for the three
months ended March 31, 1997 and 1996, respectively.
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ thousands)
(unaudited)
(continued)
4. Commitments and contingencies
-----------------------------
At March 31, 1997, the Company had commitments to purchase affordable
housing limited partnership investments of $28,476, which is recorded
as a liability in the accompanying balance sheets. Commitments for
purchases of investments in the ordinary course of business at March
31, 1997 aggregated $192,830.
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
- ---------------------
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996:
Consolidated net income increased 23 percent to $121 million for the
three months ended March 31, 1997, compared to $98 million in 1996. Earnings
growth resulted primarily from increases in 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 $1.3 billion for the three months ended March
31, 1997, compared to $1.5 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 $495 million for the three months ended March
31, 1997, a small increase from a year ago. The increase reflects slightly
higher total investments of $26 billion at March 31, 1997, partially offset by
lower yields.
Policyholder and contractholder charges increased to $83 million for
the three months ended March 31, 1997, compared with $71 million a year ago.
This increase is primarily due to higher life insurance in force.
Management and other fees increased to $77 million for the three months
ended March 31, 1997, compared with $63 million a year ago. This is primarily
due to an increase in separate account assets, which grew 17 percent over the
past 12 months to $18 billion at March 31, 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 $517 billion for the three months
ended March 31, 1997, a decrease from a year ago. The largest component of
expenses, interest credited on universal life-type insurance and investment
contracts, increased to $347 million, compared with $338 million for the
corresponding period in 1996. This is due to higher aggregate amounts in force.
Other insurance and operating expenses decreased to $48 million, compared with
$69 million for the corresponding period in 1996. This is due to a reduction in
accrued expenses related to future guarantee fund assessments.
<PAGE>
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 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 March 31, 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 $6 million at March 31, 1997.
At March 31, 1997, approximately 8.2 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.
At March 31, 1997, net unrealized depreciation on investments in fixed
maturities increased due to an increase in interest rates during the first
quarter of 1997. For the three months ended March 31, 1997, sales of fixed
maturities held to maturity were due to significant deterioration in the
issuers' creditworthiness.
At March 31, 1997, the Company had an allowance for losses on mortgage
loans of $42 million.
The Company paid $45 million in dividends to its parent during the
three months ended March 31, 1997.
<PAGE>
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 March 31, 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 three
months ended March 31, 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 /s/ Melinda S. Urion
------------------------------------
NAME AND TITLE Melinda S. Urion
Executive Vice President and Controller
DATE May 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> MAR-31-1997
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 11479554
<DEBT-CARRYING-VALUE> 10002346
<DEBT-MARKET-VALUE> 10089364
<EQUITIES> 3196
<MORTGAGE> 3517454
<REAL-ESTATE> 108306
<TOTAL-INVEST> 25757952
<CASH> 204971
<RECOVER-REINSURE> 1367
<DEFERRED-ACQUISITION> 2376726
<TOTAL-ASSETS> 47447781
<POLICY-LOSSES> 25793108
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 90603
<NOTES-PAYABLE> 0
<COMMON> 3000
0
0
<OTHER-SE> 2384929
<TOTAL-LIABILITY-AND-EQUITY> 47447781
50427
<INVESTMENT-INCOME> 494604
<INVESTMENT-GAINS> (5258)
<OTHER-INCOME> 159433
<BENEFITS> 392899
<UNDERWRITING-AMORTIZATION> 76730
<UNDERWRITING-OTHER> 47677
<INCOME-PRETAX> 181900
<INCOME-TAX> 61330
<INCOME-CONTINUING> 120570
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120570
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 26387
<PROVISION-CURRENT> 32068
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 31689
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 26766
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
