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, 2000
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, 2000
Table of Contents
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2000 (unaudited) and
December 31, 1999 3 - 4
Consolidated Statements of Income for the
three months ended March 31, 2000 and 1999
(unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999
(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 - 16
SIGNATURES 17
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
ASSETS 2000 1999
---------------- ------------------
(unaudited)
Investments:
Fixed Maturities:
Held to maturity, at amortized cost (Fair value:
2000, $6,947,896; 1999,$7,105,743) $7,016,434 $7,156,292
Available for sale, at fair value (Amortized cost:
2000, $13,632,816; 1999, $13,703,137) 12,934,920 13,049,549
---------------- ------------------
19,951,354 20,205,841
Mortgage loans on real estate 3,596,389 3,606,377
Policy loans 575,421 561,834
Other investments 530,904 506,797
---------------- ------------------
Total investments 24,654,068 24,880,849
Cash and cash equivalents 43,421 32,333
Amounts recoverable from reinsurers 343,503 327,168
Amounts due from brokers 507 145
Other accounts receivable 71,793 48,578
Accrued investment income 340,709 343,449
Deferred policy acquisition costs 2,708,346 2,665,175
Deferred income taxes 252,867 216,020
Other assets 37,411 33,089
Separate account assets 38,430,646 35,894,732
---------------- ------------------
Total assets $66,883,271 $64,441,538
================ ==================
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
($ thousands, except share amounts)
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 2000 1999
---------------- ------------------
(unaudited)
Liabilities:
Future policy benefits:
Fixed annuities $20,211,549 $20,552,159
Universal life-type insurance 3,400,958 3,391,203
Traditional life insurance 228,849 226,842
Disability income and
long-term care insurance 858,813 811,941
Policy claims and other
policyholders' funds 46,182 24,600
Amounts due to brokers 141,662 148,112
Other 722,132 579,678
liabilities
Separate account liabilities 38,430,646 35,894,732
---------------- ------------------
Total liabilities 64,040,791 61,629,267
---------------- ------------------
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 loss, net of tax:
Net unrealized securities (losses) gains (463,368) (411,230)
Retained earnings 3,014,521 2,932,174
---------------- ------------------
Total stockholder's equity 2,842,480 2,812,271
---------------- ------------------
Total liabilities and stockholder's equity $66,883,271 $64,441,538
================ ==================
</TABLE>
See accompanying notes.
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
($ thousands)
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended
March 31,
2000 1999
---------------- ------------------
Revenues:
Premiums:
Traditional life insurance $13,719 $13,377
Disability income and
long-term care insurance 54,277 47,435
---------------- ------------------
Total premiums 67,996 60,812
Policyholder and contractholder charges 120,027 101,174
Management and other fees 144,192 109,997
Net investment income 463,263 481,132
Net realized (loss) gain on investments (20,895) 3,703
----------------- -----------------
Total revenues 774,583 756,818
----------------- -----------------
Benefits and expenses:
Death and other benefits:
Traditional life insurance 8,499 7,773
Universal life-type insurance
and investment contracts 31,747 27,663
Disability income and
long-term care insurance 9,448 7,129
Increase in liabilities for
future policy benefits:
Traditional life insurance 1,838 1,591
Disability income and
long-term care insurance 24,732 19,965
Interest credited on universal life-type
insurance and investment contracts 299,293 310,785
Amortization of deferred policy
acquisition costs 95,187 93,569
Other insurance and operating expenses 89,339 69,780
---------------- ------------------
Total benefits and expenses 560,083 538,255
---------------- ------------------
Income before income taxes 214,500 218,563
Income taxes 62,154 77,697
---------------- ------------------
Net income $152,346 $140,866
================ ==================
</TABLE>
See accompanying notes.
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($thousands)
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended
March 31,
2000 1999
---------------- -------------------
Cash flows from operating activities:
Net income $152,346 $140,866
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (14,519) (12,239)
Repayment 13,482 12,627
Change in amounts recoverable from reinsurers (16,335) (12,512)
Change in other accounts receivable (23,215) (3,849)
Change in accrued investment income 2,740 402
Change in deferred policy
acquisition costs, net (41,037) (3,011)
Change in liabilities for future policy
benefits for traditional life,
disability income and
long-term care insurance 48,878 35,147
Change in policy claims and other
policyholders' funds 21,582 41,431
Change in deferred income taxes (8,772) 12,878
Change in other liabilities 142,452 34,731
Accretion of discount, net (6,266) 1,625
Net realized gain (loss) on investments 20,895 (3,703)
Policyholder and contractholder charges,
non-cash (39,074) (43,906)
Other, net 2,668 (6,289)
---------------- --------------------
Net cash provided by operating activities $255,825 $194,198
---------------- --------------------
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ thousands)
(unaudited)
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended
March 31,
2000 1999
---------------- ------------------
Cash flows from investing activities: Fixed maturities held to maturity:
Maturities, sinking fund payments and calls $127,344 $215,088
Sales 8,193 37,183
Fixed maturities available for sale:
Purchases (418,496) (534,626)
Maturities, sinking fund payments and calls 284,047 505,204
Sales 161,170 5,783
Other investments, excluding policy loans:
Purchases (136,419) (119,594)
Sales 110,564 84,085
Change in amounts due from broker (362) 327
Change in amounts due to broker (6,450) (111,598)
----------------- -----------------
Net cash provided by investing activities
129,591 81,852
----------------- -----------------
Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received 432,063 436,630
Surrenders and death benefits (1,023,136) (822,899)
Interest credited to account balances 299,293 310,784
Universal life-type insurance policy loans:
Issuance (31,885) (24,238)
Repayment 19,337 18,390
Cash dividends to parent (70,000) (70,000)
----------------- -----------------
Net cash used in financing activities (374,328) (151,333)
----------------- -----------------
Net increase in cash and cash equivalents 11,088 124,717
Cash and cash equivalents at beginning of period 32,333 22,453
----------------- -----------------
Cash and cash equivalents at end of period $43,421 $147,170
================= =================
</TABLE>
See accompanying notes.
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
($ 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, 2000,
statements of income for the three months ended March 31, 2000 and 1999 and
statements of cash flows for the three months ended March 31, 2000 and
1999.
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 unaudited 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.
2. Comprehensive Income
Total comprehensive income was $100,211 and $30,706 for the three months
ended March 31, 2000 and 1999 respectively.
3. Statements of cash flows
Cash paid for interest on borrowings totaled $1,208 and $528 for the three
months ended March 31, 2000, and 1999, respectively. Cash paid for income
taxes totaled $(915) and $(26,711)for the three months ended March 31, 2000
and 1999, respectively.
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ thousands)
(unaudited)
(continued)
4. Commitments and contingencies
Commitments for purchases of investments in the ordinary course of business
at March 31, 2000 aggregated $111,166.
The maximum amount of life insurance risk retained by the Company is $750 on
any policy insuring a single life and $1,500 on any policy insuring a
joint-life combination. Beginning in 1999, the Company retains only 20% of
the mortality risk on new variable universal life insurance policies. Risk
not retained is reinsured with other life insurance companies, primarily on
a yearly renewable term basis. Long-term care policies are primarily
reinsured on a coinsurance basis. The Company retains all disability income
and waiver of premium risk. Beginning in 2000, the Company will retain all
accidental death benefit risk.
In January 2000, AEFC reached an agreement in principle to settle three
class-action lawsuits. The Company had been named as a co-defendant in all
three lawsuits. It is expected the settlement will provide $215 million of
benefits to more than 2 million class participants. The agreement in
principle to settle also provides for release by class members of all
insurance and annuity market conduct claims dating back to 1985 and is
subject to a number of contingencies including a definitive agreement and
court approval. The settlement costs allocated to the Company are included
in the accompanying 1999 statement of income and did not have a material
impact on the Company's consolidated financial position or results of
operations.
The Company is named as a defendant in various other lawsuits. The outcome
of any litigation cannot be predicted with certainty. In the opinion of
management, however, the ultimate resolution of these lawsuits, taken in
aggregate 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
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999:
Consolidated net income increased 8 percent to $152 million for the three
months ended March 31, 2000, compared to $141 million in 1999. Earnings growth
resulted primarily from increases in management fees and policyholder and
contractholder charges partially offset by a decrease in spread rates and by a
realized loss on investments.
Premiums received totaled $1.7 billion for the three months ended March 31,
2000, compared to $1.0 billion a year ago. The premium growth is primarily due
to increased sales of variable and fixed annuities and variable universal life
insurance.
Policyholder and contractholder charges increased to $120 million for the
three months ended March 31, 2000, compared with $101 million a year ago. This
increase was primarily due to an increase in life insurance in force.
Management and other fees increased to $144 million for the three months
ended March 31, 2000 compared with $110 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 $473 million for the three months ended
March 31, 2000 compared to $481 million one year ago. This is primarily due to
lower investments in fixed maturities at March 31, 2000 compared to March 31,
1999.
Total benefits and expenses were $569 million for the three months ended
March 31, 2000, an increase of 6 percent from a year ago. The largest component
of expenses, interest credited on universal life-type insurance and investment
contracts, decreased 4 percent to $299 million. This was due to lower aggregate
amounts of fixed annuities in force. Other insurance and operating expenses
increased 28 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 of $200 million
($100 million committed and $100 million uncommitted). This line of credit is
used strictly as a short-term source of funds. At March 31, 2000, outstanding
borrowings under this agreement were $110 million. The Company also uses reverse
repurchase agreements for short-term liquidity needs. Outstanding reverse
repurchase agreements totaled $34 million at March 31, 2000.
At March 31, 2000, approximately 12 percent of the Company's invested
assets were below-investment-grade bonds, compared to 11 percent at December 31,
1999. 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. In recent months, the industry-wide default rate on
below-investment-grade bonds has increased significantly and this trend is
expected to continue over the next several months and possibly beyond.*
Additional investment security losses throughout the remainder of 2000 are
likely but the amount of these losses is dependent on a number of factors and
cannot be estimated at this time.* Management believes that there will not be a
significant adverse impact on the Company's consolidated financial position.*
For the three months ended March 31, 2000, sales of fixed maturities held
to maturity were due to significant deterioration in the issuers'
creditworthiness.
* Statements in this discussion of the Company's liquidity and capital
resources 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, changes in the ability of issuers of investment securities held by the
Company to meet their debt obligations.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)
At March 31, 2000, the Company had an allowance for losses on mortgage
loans of $27 million.
The Company paid $70 million in dividends to its parent during the three
months ended March 31, 2000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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, 2000.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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 4.5 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 33116,
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 three months ended March 31, 2000.
<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 May 11, 2000
