<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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-28976
IDS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0823832
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IDS TOWER 10, MINNEAPOLIS, MINNESOTA 55440-0010
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (612) 671-1257
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE PERMITTED
ABBREVIATED NARRATIVE DISCLOSURE.
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IDS LIFE INSURANCE COMPANY
FORM 10-Q
For the Quarter Ended June 30, 1999
Table of Contents
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
June 30, 1999 (unaudited) and
December 31, 1998 3 - 4
Consolidated Statements of Income for the
three months ended June 30, 1999 and 1998
(unaudited) 5
Consolidated Statements of Income for the
six months ended June 30, 1999 and 1998
(unaudited) 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 1999 and 1998
(unaudited) 7 - 8
Notes to Consolidated Financial Statements
(unaudited) 9 - 11
Item 2. Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations 12 - 17
PART II - OTHER INFORMATION 18 - 21
SIGNATURES 22
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
June 30, December 31,
ASSETS 1999 1998
----------------- -------------
(unaudited)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1999, $7,692,650; 1998, $8,420,035) ......... $ 7,560,309 $7,964,114
Available for sale, at fair value (Amortized cost:
1999, $13,969,069; 1998, $13,344,949) ........ 13,538,079 13,613,139
----------- -----------
21,098,388 21,577,253
Mortgage loans on real estate ........................ 3,555,273 3,505,458
Policy loans ......................................... 543,370 525,431
Other investments .................................... 428,518 366,604
----------- -----------
Total investments ................... 25,625,549 25,974,746
Cash and cash equivalents ................................ 226,251 22,453
Amounts recoverable from reinsurers ...................... 292,200 262,260
Amounts due from brokers ................................. -- 327
Other accounts receivable ................................ 57,263 47,963
Accrued investment income ................................ 375,897 366,574
Deferred policy acquisition costs ........................ 2,526,412 2,496,352
Deferred income taxes .................................... 125,050 --
Other assets ............................................. 24,791 30,487
Separate account assets .................................. 30,060,735 27,349,401
----------- -----------
Total assets ........................ $59,314,148 $56,550,563
=========== ===========
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except per share amount)
(continued)
June 30, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1999 1998
------------------ ------------
(unaudited)
<S> <C> <C>
Liabilities:
Future policy benefits:
Fixed annuities ................................. $20,943,750 $21,172,303
Universal life-type insurance ................... 3,373,013 3,343,671
Traditional life insurance ...................... 222,546 225,306
Disability income and
long-term care insurance .................... 731,227 660,320
Policy claims and other
policyholders' funds ............................ 96,607 70,309
Amounts due to brokers .............................. 529,282 195,406
Deferred income taxes ............................... -- 16,930
Other liabilities ................................... 477,253 410,285
Separate account liabilities ........................ 30,060,735 27,349,401
----------- -----------
Total liabilities .................. 56,434,412 53,443,931
----------- -----------
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 .......................... 288,327 288,327
Accumulated other comprehensive income, net of tax:
Net unrealized securities (losses) gains .......... (136,328) 169,584
Retained earnings ................................... 2,724,737 2,645,721
----------- -----------
Total stockholder's equity ......... 2,879,736 3,106,632
----------- -----------
Total liabilities and stockholder's equity .............. $59,314,148 $56,550,563
=========== ===========
See accompanying notes .
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Three months ended
June 30,
1999 1998
------------- ---------
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance .................................... $ 13,670 $ 13,578
Disability income and
long-term care insurance .................................... 47,826 42,693
--------- ---------
Total premiums ................................... 61,496 56,271
Policyholder and contractholder charges ........................... 103,945 94,918
Management and other fees ......................................... 115,445 103,781
Net investment income ............................................. 486,238 495,473
Net realized gain (loss) on investments ........................... 5,758 2,214
--------- ---------
Total revenues ................................... 772,882 752,657
--------- ---------
Benefits and expenses:
Death and other benefits:
Traditional life insurance .................................... 7,328 8,376
Universal life-type insurance
and investment contracts .................................. 29,985 27,773
Disability income and
long-term care insurance .................................. 7,611 6,851
Increase in liabilities for
future policy benefits:
Traditional life insurance ................................ 1,635 1,617
Disability income and
long-term care insurance ............................. 21,560 18,690
Interest credited on universal life-type
insurance and investment contracts ............................ 313,602 333,428
Amortization of deferred policy
acquisition costs ............................................. 96,785 93,026
Other insurance and operating expenses ............................ 72,275 66,722
--------- ---------
Total benefits and expenses ...................... 550,781 556,483
--------- ---------
Income before income taxes ............................................ 222,101 196,174
Income taxes .......................................................... 53,952 57,015
--------- ---------
Net income ............................................................ $ 168,149 $ 139,159
========= =========
See accompanying notes
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
Six months ended
June 30,
1999 1998
------------- ---------
<S> <C> <C>
Revenues:
Premiums:
Traditional life insurance .................................... $ 27,047 $ 26,893
Disability income and
long-term care insurance .................................... 95,261 83,484
--------- ---------
Total premiums ................................... 122,308 110,377
Policyholder and contractholder charges ........................... 205,119 188,542
Management and other fees ......................................... 225,442 202,877
Net investment income ............................................. 967,370 997,358
Net realized gain (loss) on investments ........................... 9,461 (609)
--------- ---------
Total revenues ................................... 1,529,701 1,498,545
--------- ---------
Benefits and expenses:
Death and other benefits:
Traditional life insurance .................................... 15,101 16,059
Universal life-type insurance
and investment contracts .................................. 57,648 51,764
Disability income and
long-term care insurance .................................. 14,740 14,070
Increase in liabilities for
future policy benefits:
Traditional life insurance ................................ 3,226 3,172
Disability income and
long-term care insurance ............................. 41,525 35,420
Interest credited on universal life-type
insurance and investment contracts ............................ 624,387 672,242
Amortization of deferred policy
acquisition costs ............................................. 190,354 190,272
Other insurance and operating expenses ............................ 142,055 122,122
--------- ---------
Total benefits and expenses ...................... 1,089,036 1,105,121
--------- ---------
Income before income taxes ............................................ 440,665 393,424
Income taxes .......................................................... 131,649 122,307
--------- ---------
Net income ............................................................ $ 309,016 $ 271,117
========= =========
See accompanying notes
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
Six months ended
June 30 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................... $ 309,016 $ 271,117
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance ....................................... (27,212) (27,951)
Repayment ...................................... 25,876 31,481
Change in reinsurance recoverable .................... (29,940) (25,191)
Change in other accounts receivable .................. (9,300) (19,803)
Change in accrued investment income .................. (9,323) (3,162)
Change in deferred policy
acquisition costs, net ............................ (15,245) (3,365)
Change in liabilities for future policy
benefits for traditional life,
disability income and
long-term care insurance .......................... 68,147 65,115
Change in policy claims and other
policyholders' funds .............................. 26,298 2,929
Change in deferred income taxes ...................... 22,743 (11,211)
Change in other liabilities .......................... 66,968 (19,707)
Amortization of premium
(accretion of discount), net ............ 2,445 1,808
Net realized (gain) loss on investments .................. (9,461) 609
Policyholder and contractholder charges,
non-cash .......................................... (87,597) (83,617)
Other, net ........................................... (6,181) (2,048)
--------- ---------
Net cash provided by operating activities $ 327,234 $177,004
--------- ---------
</TABLE>
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<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
Six months ended
June 30,
1999 1998
--------------- ---------
<S> <C> <C>
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $(859) $ 0
Maturities, sinking fund payments and calls ..................... 356,447 630,758
Sales ........................................................... 42,965 214,384
Fixed maturities available for sale:
Purchases ....................................................... (1,662,373) (1,703,554)
Maturities, sinking fund payments and calls ..................... 896,855 1,037,675
Sales ........................................................... 389,920 182,317
Other investments, excluding policy loans:
Purchases ....................................................... (301,977) (306,099)
Sales ........................................................... 179,616 237,222
Change in amounts due from broker ................................... 327 7,620
Change in amounts due to broker ..................................... 333,876 129,639
----------- -----------
Net cash provided by investing activities ................ 234,797 429,962
----------- -----------
Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received ......................................... 954,742 953,403
Surrenders and other benefits ................................... (1,690,731) (1,973,540)
Interest credited to account balances ........................... 624,375 672,062
Universal life-type insurance policy loans:
Issuance ........................................................ (50,525) (50,511)
Repayment ....................................................... 33,906 37,164
Dividends paid ............................................ (230,000) (120,000)
----------- -----------
Net cash used in financing activities ................ (358,233) (481,422)
----------- -----------
Net increase in cash and cash equivalents .............................. 203,798 125,544
Cash and cash equivalents at beginning of period ........................ 22,453 19,686
----------- -----------
Cash and cash equivalents at end of period .............................. $226,251 $145,230
=========== ===========
See accompanying notes
</TABLE>
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IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
($ 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, 1999,
statements of income for the three and six months ended June 30, 1999
and 1998 and statements of cash flows for the six months ended June 30,
1999 and 1998.
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 or other liabilities as appropriate.
Gains or losses on index options that qualify as hedges are deferred
and recognized in management and other fees in the same period as the
hedged fee income. Gains or losses on index options that do not qualify
as hedges are marked to market through the income statement.
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.
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ thousands)
(unaudited)
(continued)
3. Statements of cash flows (continued)
Cash paid for interest on borrowings totaled $1,535 and $6,318 for the
six months ended June 30, 1999, and 1998, respectively. Cash paid for
income taxes totaled $135,986 and $125,545 for the six months ended
June 30, 1999 and 1998, respectively.
4. Commitments and contingencies
Commitments for purchases of investments in the ordinary course of
business at June 30, 1999 aggregated $149,465.
The maximum amount of risk retained by the Company on any one life is
$750 of life and waiver of premium benefits plus $50 of accidental
death benefits. The excesses are reinsured with other life insurance
companies on a yearly renewable term basis.
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
($ thousands)
(unaudited)
(continued)
4. Commitments and contingencies (continued)
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. The Company and AEFC filed an
answer to the Complaint on February 18, 1997, denying the allegations.
A second action, entitled Arnold Mork, Isabella Mork, Ronald Melchert
and Susan Melchert vs. IDS Life Insurance Company and American Express
Financial Corporation was commenced in the same court on March 21,
1997. In addition to claims that are included in the Benacquisto
lawsuit, the second action includes an allegation of improper
replacement of an existing IDS Life annuity contract. A subsequent
class action, Richard Thoresen and Elizabeth Thoresen vs. AEFC,
American Partners Life Insurance Company, American Enterprise Life
Insurance Company, American Centurion Life Assurance Company, IDS Life
Insurance Company and IDS Life Insurance Company of New York, was filed
in the same court on October 13, 1998 alleging that the sale of
annuities in tax-deferred contributory retirement investment plans
(e.g. IRA's) was done through deceptive marketing practices, which the
company denies. Plaintiffs in each of the aforementioned actions seek
damages in an unspecified amount and also seek to establish a claims
resolution facility for the determination of individual issues.
The Company and its parent believe they have meritorious defenses to
the claims raised in the lawsuits. The outcome of any litigation cannot
be predicted with certainty. In the opinion of management, however, the
ultimate resolution of the above lawsuits and others filed against the
Company should not have a material adverse effect on the Company's
consolidated financial position.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998:
Consolidated net income increased 14 percent to $309 million for the
six months ended June 30, 1999, compared to $271 million in 1998. Earnings
growth resulted primarily from increases in management fees and policyholder and
contractholder charges and an increase in spread rates.
Premiums received totaled $2.2 billion for the six months ended June
30, 1999, the same amount as one year ago.
Policyholder and contractholder charges increased to $205 million for
the six months ended June 30, 1999, compared with $189 million a year ago. This
increase was primarily due to an increase in life insurance in force.
Management and other fees increased to $225 million for the six months
ended June 30, 1999 compared with $203 million a year ago. This was primarily
due to an increase in average separate account assets outstanding, resulting
primarily from market appreciation. The Company provides investment management
services for many of 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. Net investment income
decreased to $967 million for the six months ended June 30, 1999 compared to
$997 million one year ago. This is primarily due to lower outstanding bond
balances at June 30, 1999 compared to June 30, 1998.
Total benefits and expenses were $1.1 billion for the six months ended
June 30, 1999, a decrease of 1 percent from a year ago. The largest component of
expenses, interest credited on universal life-type insurance and investment
contracts, decreased 7 percent to $624 million. This was due to lower aggregate
amounts of fixed annuities in force and lower crediting rates, reflecting market
conditions. Other insurance and operating expenses increased 16 percent as a
result of business growth and technology costs related to growth initiatives.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 an available line of credit with its parent totaling
$100 million. This line of credit is used strictly as a short-term source of
funds. At June 30, 1999, outstanding borrowings under this agreement were $90
million. The Company also uses reverse repurchase agreements for short-term
liquidity needs. Outstanding reverse repurchase agreements totaled $20 million
at June 30, 1999.
At June 30, 1999, approximately 11 percent of the Company's invested
assets were below-investment-grade bonds, compared to 13 percent at December 31,
1998. 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, 1999, sales of fixed maturities held
to maturity were due to significant deterioration in the issuers'
creditworthiness.
At June 30, 1999, the Company had an allowance for losses on mortgage
loans of $40 million.
The Company paid $230 million in dividends to its parent during the six
months ended June 30, 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Year 2000
The Company is a wholly owned subsidiary of American Express Financial
Corporation (AEFC), which is a wholly owned subsidiary of American Express
Company (American Express). All of the major systems used by the Company are
maintained by AEFC and are utilized by multiple subsidiaries and affiliates of
AEFC. American Express is coordinating Year 2000 (Y2K) efforts on behalf of all
of its businesses and subsidiaries. Representatives of AEFC are participating in
these efforts.
American Express and AEFA began addressing the Y2K issue in 1995 and have
established a plan for resolution, which involves the remediation,
decommissioning and replacement of relevant systems, including mainframe,
mid-range and desktop computers, application software, operating systems,
systems software, data back-up archival and retrieval services, telephone and
other communications systems, and hardware peripherals and facilities dependent
on embedded technology. American Express' and AEFC's Y2K compliance effort is
divided into two initiatives. The first, known as "Millenniax," relates to
mainframe and other technological systems maintained by the American Express
Technologies organization (AET). The second, known as "Business T," relates to
the technological assets that are owned, managed or maintained by American
Express' individual business and staff units, including AEFC. American Express'
and AEFC's plans for remediation of the Y2K issue include the following program
phases: (i) employee awareness and mobilization, (ii) inventory collection and
assessment, (iii) impact analysis, (iv) remediation/decommission, (v) testing
and (vi) implementation. With respect to the Millenniax systems and Business T
assets for both American Express and AEFC, all of the program phases referred to
above are at least 99 percent complete.
American Express' cumulative costs since inception of the Y2K initiatives were
$471 million through June 30, 1999 and are estimated to be in the range of $46 -
$72 million for the remainder through 2000.* AEFC's cumulative costs since
inception of the Y2K initiatives were $63 million through June 30, 1999 and are
estimated to be in the range of $6.5 - $8 million for the remainder through
2000.* These costs, which are expensed as incurred, relate to both Millenniax
and Business T, and have not had, nor are they expected to have, a material
adverse impact on American Express', AEFC's or the Company's results of
operations or financial condition.* Y2K costs related to Millenniax represent 6
percent and 1 percent of the AET budget for the years 1999 and 2000,
respectively.*
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Year 2000 (continued)
American Express' and AEFC's major businesses are heavily dependent upon
internal computer systems, and all have significant interaction with systems of
third parties, both domestically and internationally. American Express and AEFC
are working with key external parties, including merchants, clients,
counterparties, vendors, exchanges, utilities, suppliers, agents and regulatory
agencies to mitigate the potential risks to American Express and AEFC of Y2K. As
part of their overall compliance program, American Express and AEFC are actively
communicating with third parties through face-to-face meetings and
correspondence, on an ongoing basis, to ascertain their state of readiness.
Although numerous third parties have indicated to American Express and AEFC in
writing that they are addressing their Y2K issues on a timely basis, the
readiness of third parties overall varies across the spectrum. The failure of
external parties to resolve their own Y2K issues in a timely manner could result
in a material financial risk to American Express, AEFC or the Company.*
At this point, with remediation and testing of individual internal systems
substantially complete, American Express' and AEFC's primary focus is on
performing additional targeted integration testing of systems that support their
most critical business functions, independent validation of such testing and
completing Y2K contingency plans for all critical systems and, to a lesser
extent, certain non-critical systems. A substantial portion of the integrated
testing and related validation has been completed, with the remainder scheduled
to be completed during the third quarter of 1999.*
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Year 2000 (continued)
The contingency planning effort is a full-scale initiative that includes both
internal and external experts under the guidance of an American Express-wide
steering committee. The contingency plans, which are based in part on an
assessment of the magnitude and probability of potential risks, primarily focus
on proactive steps to prevent Y2K-related failures from occurring, or if they
should occur, detecting them quickly, minimizing their impact and expediting
their repair. The Y2K contingency plans supplement disaster recovery and
business continuity plans already in place, and include measures such as
selecting alternative suppliers and channels of distribution, setting-up manual
back-up processes, creating command centers, establishing additional roll-over
management procedures and scheduling the availability of key personnel.
The Y2K contingency plans have been developed generally in accordance with
guidelines established by the Federal Financial Institutions Examination
Council. This effort is divided into four phases: (i) establishing
organizational planning guidelines, (ii) completing a business impact analysis,
(iii) developing the contingency plans and (iv) validating and verifying the
contingency plans. The first three of these phases have essentially been
completed, and have identified and assessed the need for, and developed, Y2K
contingency plans for American Express' and AEFC's most critical core business
functions. Such functions include, but are not limited to, credit authorization,
Cardmember billing, merchant payment, client investments, funds transfer,
securities settlement and travel reservations. These contingency plans also
address third party systems that American Express' and AEFC's businesses
interface with and rely upon, such as international telecommunications networks
and utilities, global financial payment and clearing systems, and airline and
other travel systems. The final phase of American Express' and AEFC's
contingency planning, which will include validation and verification of the
contingency plans, will take place during the third quarter of 1999.* American
Express and AEFC will continue to refine their contingency planning activities
throughout 1999 as additional information related to their exposures is
gathered.* To the extent that there are Y2K failures that affect major internal
processes or third party systems that American Express or AEFC relies upon,
including but not limited to those described above, such failures could have a
material impact on American Express and its businesses or subsidiaries,
including the Company, through business interruption or shutdown, financial
loss, reputational damage and legal liability to third parties.* At this point
it appears that some of the major industries in certain countries outside the
United States, such as telecommunications and utilities, have made less progress
in the Y2K compliance effort and, as a result, may present a somewhat greater
exposure to American Express, AEFC and the Company.*
For additional information relating to the Y2K issue, see pages eleven through
thirteen of the Company's 1998 10-K report.
* Statements in this Y2K discussion marked with an asterisk are forward-looking
statements which are subject to risks and uncertainties. Important factors that
could cause results to differ materially from these forward-looking statements
include, among other things, the ability of American Express or AEFC to
successfully identify all systems containing two-digit codes, the nature and
amount of programming and other resources required to fix and test the affected
systems, the costs of labor and consultants related to such efforts as well as
those involving the development and implementation of contingency plans, the
continued availability of such personnel, the ability of third parties that
interface with American Express or AEFC to successfully address their Y2K
issues, and the ability of American Express and AEFC to assess potential
internal and external Y2K exposures and develop effective contingency plans in
connection therewith.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
New Accounting Pronouncements
On January 1, 1999, the Company adopted, Statement of Position (SOP)
98-1,"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", which was issued by the American Institute of Certified Public
Accountants (AICPA). The SOP requires the capitalization of certain costs
incurred subsequent to December 31, 1998, in connection with developing or
obtaining software for internal use. Adoption of the SOP did not have a material
impact on the Company's earnings or financial position.
On January 1, 1999 the Company also adopted SOP 97-3, "Accounting by
Insurance and Other Enterprises for Insurance Related Assessments". The SOP
requires recognition of liabilities for insurance-related assessments when
information indicates it is probable an assessment will be imposed and the
amount of the assessment can be reasonably estimated. The Company had previously
been recognizing a liability for potential insurance-related assessments.
Therefore, adoption of the SOP did not have a material impact on the Company's
earnings or financial position.
<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, 1999.
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
(a) 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.
<PAGE>
PART II - OTHER INFORMATION (continued)
4.1 Copy of Non-tax qualified 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 Non-tax qualified Group Annuity
Certificate, Form 30360C, filed
electronically as Exhibit 4.2 to
Post-Effective Amendment 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.
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.
4.5 Copy of Tax qualified Group Annuity
Contract, Form 30369C, filed electronically
as Exhibit 4.6 to Post-Effective Amendment
No. 10 to Registration Statement
No. 33-28976 is incorporated herein by
reference.
4.6 Copy of Tax qualified Group Annuity
Certificate, Form 30368C, filed
electronically as Exhibit 4.6 to
Post-Effective Amendment No. 10 to
Registration Statement No. 33-28976 is
incorporated herein by reference.
4.7 Copy of Group IRA Annuity Contract, Form
30372C, filed electronically as Exhibit 4.7
to Post-Effective Amendment No. 10 to
Registration Statement No. 33-28976 is
incorporated herein by reference.
4.8 Copy of Group IRA Annuity Certificate, Form
30371C, filed electronically as Exhibit 4.8
to Post-Effective Amendment No. 10 to
Registration Statement No. 33-28976 is
incorporated herein by reference.
4.9 Copy of Non-tax qualified Individual
Annuity Contract, Form 30365D, filed
electronically as Exhibit 4.9 to
Post-Effective Amendment No. 10 to
Registration Statement No. 33-28976 is
incorporated herein by reference.
<PAGE>
PART II - OTHER INFORMATION (continued)
4.10 Copy of Endorsement No. 30379 to the
Individual Annuity Contract, filed
electronically as Exhibit 4.10 to
Post-Effective Amendment No. 10 to
Registration Statement No. 33-28976 is
incorporated herein by reference.
4.11 Copy of Tax qualified Individual Annuity
Contract, Form 30370C, filed electronically
as Exhibit 4.11 to Post-Effective
Amendment No. 10 to Registration Statement
No. 33-28976 is incorporated herein by
reference.
4.12 Copy of Individual IRA Annuity Contract,
Form 30373C, filed electronically as
Exhibit 4.12 to Post-Effective Amendment
No. 10 to Registration Statement No.
33-28976 is incorporated herein by
reference.
4.13 Copy of Endorsement No. 33007 filed
electronically as Exhibit 4.13 to
Post-Effective Amendment No. 12 to
Registration Statement No. 33-28976 is
incorporated herein by reference.
4.14 Copy of Group Annuity Contract, Form
30363D, filed electronically as Exhibit
4.1 to Post-Effective Amendment No. 2 to
Registration Statement No. 33-50968 is
incorporated herein by reference.
4.15 Copy of Group Annuity Certificate, Form
30360D, filed electronically as Exhibit 4.2
to Post-Effective Amendment No.2 to
Registration Statement No. 33-50968 is
incorporated herein by reference.
4.16 Form of Deferred Annuity Contract,
Form 30365E, filed electronically as
Exhibit 4.3 to Post-Effective Amendment
No. 2 to Registration Statement
No. 33-50968 is incorporated herein by
reference.
4.17 Form of Group Deferred Variable Annuity
Contract, Form 34660, filed electronically
as Exhibit 4.1 to Post-Effective Amendment
No. 2 to Registration Statement
No. 33-48701 is incorporated herein by
reference.
4.18 Copy of Non-tax qualified Group Annuity
Contract, Form 33111, filed electronically
as Exhibit 4.1 to Registration Statement
No. 333-42793 is incorporated herein by
reference.
<PAGE>
PART II - OTHER INFORMATION (continued)
4.19 Copy of Non-tax qualified Group Annuity
Certificate, Form 33114, filed
electronically as Exhibit 4.2 to
Registration Statement No. 333-42793 is
incorporated herein by reference.
4.20 Copy of Tax qualified Group Annuity
Contract, Form 33112, filed electronically
as Exhibit 4.3 to Registration Statement
No. 333-42793 is incorporated herein by
reference.
4.21 Copy of Tax qualified Group Annuity
Certificate, Form 33115, filed
electronically as Exhibit 4.4 to
Registration Statement No. 333-42793 is
incorporated herein by reference.
4.22 Copy of Group IRA Annuity Contract, Form
33113, filed electronically as Exhibit 4.5
to Registration Statement No. 333-42793 is
incorporated herein by reference.
4.23 Copy of Group IRA Annuity Certificate, Form
3116, filed electronically as Exhibit 4.6 to
Registration Statement No.333-42793 is
incorporated herein by reference.
4.24 Copy of Non-tax qualified Individual
Annuity Contract, Form 30484, filed
electronically as Exhibit 4.7 to
Post-Effective Amendment No. 1 to
Registration Statement No. 333-42793 is
incorporated herein by reference.
4.25 Copy of Tax qualified Individual Annuity
Contract, Form 30485, filed electronically
as Exhibit 4.8 to Post-Effective Amendment
No. 1 to Registration Statement No.
333-42793 is incorporated herein by
reference.
4.26 Copy of Individual IRA Contract, Form
30486, filed electronically as Exhibit 4.9
to Post-Effective Amendment No. 1 to
Registration Statement No. 333-42793 is
incorporated herein by reference.
27. Financial data schedule is filed
electronically herewith.
(b) No reports on Form 8-K were required to be filed
by the Company for the six months ended June 30,
1999.
<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/Philip C. Wentzel
NAME AND TITLE Philip C. Wentzel
Vice President and Controller
DATE August 11, 1999
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