<PAGE>
PAGE 1
FINANCIAL PLANNING
Single Premium Variable Life Insurance Policy
1994 ANNUAL REPORT
Offers an opportunity for growth with life insurance protection.
IDS
An American Express company
AMERICAN
EXPRESS
Issued by IDS Life Insurance Company
<PAGE>
PAGE 2
IDS Life Variable Life Seperate Account
Single Premium Variable Life Subaccounts
Message from the President
(Photo of) Richard Kling, President, IDS Life Insurance Company
Lessening one's tax burden is always important, especially if
you're among the highest income earners. But no matter what
bracket you're in, you can help meet both your life insurance and
investment needs on a tax-favored basis with just one product --
Single Premium Variable Life.
Taxes may change, but one thing hasn't changed at all. That's the
need for insurance protection and sound investment choices. At IDS
Life Insurance Company (IDS Life), we've been providing that for
more than three decades. Our strength and stability are enhanced
by being part of the IDS family of companies, which has been
helping people reach their financial objectives for 100 years.
Diversification and balance continue to be critical elements in a
financial strategy. IDS Life's Single Premium Variable Life
Insurance Policy provides those elements by combining a variety of
investment options with life insurance protection.
You can allocate your policy value among the five investment
portfolios of IDS Life Series Fund, or you may choose to invest in
units of the Zero Coupon U.S. Treasury Securities Trust. Investing
in any of these options allows you to accumulate money on a tax-
deferred baisi while also meeting your protection objectives.
IDS Life among the largest life insurance companies in the country
and provides a wide range of insurance and annuity products that
help meet the needs of a changing society. We do not view our
products as seperate investments but as integral parts of the total
financial planning service offered by your IDS personal financial
planner. All of us have a mtutal goal - to turn your financial
objectives into reality through a prudent, sound investment
program.
Sincerely,
Richard W. Kling
President
IDS Life Insurance Company
<PAGE>
PAGE 3
Annual Financial Information
Report of Independent Auditors
The Board of Directors IDS Life Insurance Company
We have audited the accompanying individual and combined statements
of net assets of the segregated asset subaccounts of IDS Life
Variable Life Separate Account for Single Premium Variable Life
Insurance as of December 31, 1993, and the related statements of
operations and changes in net assets for each of the three years in
the period then ended. These financial statements are the
responsibility of the management of IDS Life Insurance Company.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation by the underlying affiliated
mutual fund and unit investment trust of securities owned at
December 31, 1993. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the individual and combined
financial position of the segregated asset subaccounts of IDS Life
Variable Life Separate Account for Single Premium Variable Life
Insurance at December 31, 1993 and the individual and combined
results of their operations and the changes in their net assets for
each of the three years in the period then ended, in conformity
with generally accepted accounting principles.
ERNST & YOUNG
Minneapolis, Minnesota
March 18, 1994
<PAGE>
PAGE 4
<TABLE><CAPTION>
Statements of Net Assets Dec. 31, 1993
Combined
Segregated Asset Subaccounts Retirement
Assets P Q R S T 1995 2004 Annuity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investments in shares of mutual fund portfolios and units of the trusts,
at market value:
IDS Life Series Fund
Equity Portfolio -- 301,638
shares at net asset value
of $20.73 per share
(cost $3,990,966)..... $6,252,050 $ -- $ -- $ -- $ -- $ -- $ -- $ 6,252,050
IDS Life Series Fund
Income Portfolio -- 386,979
shares at net asset value
of $10.43 per share
(cost $3,659,564)..... -- 4,034,577 -- -- -- -- -- 4,034,577
IDS Life Series Fund
Money Market Portfolio --
2,229,317 shares at net
asset value of $1.00 per share
(cost $2,229,277)..... -- -- 2,229,255 -- -- -- -- 2,229,255
IDS Life Series Fund
Managed Portfolio -- 1,559,989
shares at net asset value of
$15.94 per share
(cost $18,764,472).... -- -- -- 24,873,345 -- -- -- 24,873,345
IDS Life Series Fund
Government Securities Portfolio
- -- 267,949 shares at net asset
value of $10.71 per share
(cost $2,551,177)..... -- -- -- -- 2,870,604 -- -- 2,870,604
Smith Barney Shearson
Stripped ("Zero Coupon")
U.S. Treasury Securities Fund,
Series A 1995 Trust -- 1,916,327
units at net asset value of
$0.93 per unit
(cost $1,107,458)..... -- -- -- -- -- 1,777,715 -- 1,777,715
Smith Barney Shearson
Stripped ("Zero Coupon")
U.S. Treasury Securities Fund,
Series A 2004 Trust -- 3,113,138
units at net asset value of
$0.52 per unit
(cost $804,138)....... -- -- -- -- -- -- 1,607,917 1,607,917
6,252,050 4,034,577 2,229,255 24,873,345 2,870,604 1,777,715 1,607,917 43,645,463
Dividends receivable.. -- 23,204 4,912 -- 13,752 -- -- 41,868
Accounts receivable from
IDS Life for contract
purchase payments..... 4,504 52 -- -- -- -- -- 4,556
Receivable from mutual
fund portfolios and
trusts for share
redemptions.......... -- -- 9,100 4,588 48 823 785 15,344
Total assets......... 6,256,554 4,057,833 2,243,267 24,877,933 2,884,404 1,778,538 1,608,702 43,707,231
/TABLE
<PAGE>
PAGE 5
<TABLE><CAPTION>
Combined
Segregated Asset Subaccounts Variable
Liabilities P Q R S T 1995 2004 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Payable to IDS Life for:
Mortality and expense
risk fee............. 5,353 1,724 952 21,529 1,222 757 683 32,220
Minimum death benefit
guarantee risk
charge............... 1,606 517 286 6,459 367 227 205 9,667
Transaction charge... -- -- -- -- -- 378 342 720
Contract
terminations......... -- -- 9,100 4,588 47 823 784 15,342
Payable to mutual fund
portfolios for investments
purchased............ 4,504 21,015 3,674 -- 12,164 -- -- 41,357
Total liabilities.... 11,463 23,256 14,012 32,576 13,800 2,185 2,014 99,306
Net assets applicable to
Variable Life contracts in
accumulation period.. $6,245,091 $4,034,577 $2,229,255 $24,845,357 $2,870,604 $1,776,353 $1,606,688 $43,607,925
Accumulation units
outstanding.......... 2,374,388 2,178,301 1,504,967 8,702,667 1,603,034 1,004,986 732,324
Net asset value per
accumulation unit.... $ 2.63 $ 1.85 $ 1.48 $ 2.85 $ 1.79 $ 1.77 $ 2.19
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 6
<TABLE><CAPTION>
Statements of Operations Year ended Dec. 31, 1993
Combined
Segregated Asset Subaccounts Variable
P Q R S T 1995 2004 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from mutual
fund portfolios....... $ 184,109 $ 287,644 $ 65,316 $2,357,742 $ 187,739 $ -- $ -- $ 3,082,550
Expenses:
Mortality and expense
risk fee (Note 3)..... 29,316 20,311 12,451 116,717 14,405 8,994 8,033 210,227
Minimum death benefit
guarantee risk charge
(Note 4)............. 8,795 6,093 3,735 35,015 4,322 2,698 2,410 63,068
Transaction charge
(Note 7)............. -- -- -- -- -- 4,497 4,016 8,513
Total expenses....... 38,111 26,404 16,186 151,732 18,727 16,189 14,459 281,808
Investment income
(loss) -- net........ 145,998 261,240 49,130 2,206,010 169,012 (16,189) (14,459) 2,800,742
Realized and Unrealized Gain (Loss) on Investments -- net
Realized gain (loss) on sales of investments in mutual fund portfolios
and in the trusts:
Proceeds from sales... 658,531 619,248 954,333 1,619,205 230,463 160,637 134,228 4,376,645
Cost of investments
sold.................. 460,929 564,410 954,340 1,297,453 203,328 103,233 70,427 3,654,120
Net realized gain (loss)
on investments........ 197,602 54,838 (7) 321,752 27,135 57,404 63,801 722,525
Net change in unrealized
appreciation or depreciation
of investments........ 350,924 215,515 (2) 1,525,183 111,623 64,947 244,202 2,512,392
Net gain (loss) on
investments........... 548,526 270,353 (9) 1,846,935 138,758 122,351 308,003 3,234,917
Net increase in net assets
resulting from
operations............ $ 694,524 $ 531,593 $ 49,121 $4,052,945 $ 307,770 $ 106,162 $ 293,544 $ 6,035,659
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 7
<TABLE><CAPTION>
Statements of Operations Year ended Dec. 31, 1992
Combined
Segregated Asset Subaccounts Variable
P Q R S T 1995 2004 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from mutual
fund portfolios....... $ 250,518 $ 306,473 $ 111,801 $2,818,545 $ 179,033 $ -- $ -- $ 3,666,370
Expenses:
Mortality and expense
risk fee (Note 3)..... 26,269 19,463 16,766 105,006 13,440 8,870 6,945 196,759
Minimum death benefit
guarantee risk charge
(Note 4).............. 7,885 5,841 5,032 31,517 4,033 2,662 2,085 59,055
Transaction charge
(Note 7).............. -- -- -- -- -- 4,435 3,473 7,908
Total expenses........ 34,154 25,304 21,798 136,523 17,473 15,967 12,503 263,722
Investment income
(loss) -- net......... 216,364 281,169 90,003 2,682,022 161,560 (15,967) (12,503) 3,402,648
Realized and Unrealized Gain (Loss) on Investments -- net
Net realized gain (loss) on sales of investments in mutual fund
portfolios and in the trusts:
Proceeds from sales... 736,186 566,225 1,172,364 1,763,665 443,708 64,221 114,662 4,861,031
Cost of investments
sold.................. 529,706 545,598 1,172,394 1,418,713 416,532 44,698 73,856 4,201,497
Net realized gain (loss)
on investments........ 206,480 20,627 (30) 344,952 27,176 19,523 40,806 659,534
Net change in unrealized
appreciation or depreciation
of investments........ (210,702) 32,468 33 (1,097,021) (33,542) 111,473 91,222 (1,106,069)
Net gain (loss) on
investments........... (4,222) 53,095 3 (752,069) (6,366) 130,996 132,028 (446,535)
Net increase in net assets
resulting from
operations............ $ 212,142 $ 334,264 $ 90,006 $ 1,929,953 $ 155,194 $ 115,029 $ 119,525 $ 2,956,113
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 8
<TABLE><CAPTION>
Statements of Operations Year ended Dec. 31, 1991
Combined
Segregated Asset Subaccounts Variable
P Q R S T 1991* 1995 2004 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income from mutual
fund portfolios..... $ 21,802 $ 308,849 $ 217,008 $1,260,881 $181,796 $ -- $ -- $ -- $ 1,990,336
Expenses:
Mortality and expense risk
fee (Note 3)....... 24,775 19,363 19,874 98,244 13,199 4,680 7,202 5,352 192,689
Minimum death benefit
guarantee risk charge
(Note 4)........... 7,432 5,809 5,962 29,473 3,960 1,404 2,161 1,605 57,806
Transaction charge
(Note 7)........... -- -- -- -- -- 2,340 3,601 2,676 8,617
Total expenses..... 32,207 25,172 25,836 127,717 17,159 8,424 12,964 9,633 259,112
Investment income
(loss) -- net...... (10,405) 283,677 191,172 1,133,164 164,637 (8,424) (12,964) (9,633) 1,731,224
Realized and Unrealized Gain (Loss) on Investments -- net
Net realized gain (loss) on sales of investments in mutual fund
portfolios and in the trusts:
Proceeds from sales. 1,295,095 1,068,059 1,380,890 1,879,440 354,654 1,250,399 120,369 114,399 7,463,305
Cost of investments
sold................ 1,066,062 1,087,148 1,380,913 1,541,220 342,494 959,746 88,738 80,828 6,547,149
Net realized gain (loss)
on investments...... 229,033 (19,089) (23) 338,220 12,160 290,653 31,631 33,571 916,156
Net change in unrealized
appreciation or depreciation
of investments...... 2,098,819 264,199 (25) 3,693,552 208,150 (226,895) 189,031 181,278 6,408,109
Net gain (loss) on
investments......... 2,327,852 245,110 (48) 4,031,772 220,310 63,758 220,662 214,849 7,324,265
Net increase in net assets
resulting from
operations.......... $2,317,447 $ 528,787 $ 191,124 $5,164,936 $384,947 $ 55,334 $207,698 $205,216 $9,055,489
* For the period from Jan. 1, 1991 to Nov. 15, 1991, date of maturity of securities in 1991 Trust.
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 9
<TABLE><CAPTION>
Statements of Changes in Net Assets Year ended Dec. 31, 1993
Combined
Segregated Asset Subaccounts Variable
Operations P Q R S T 1995 2004 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income
(loss) -- net......... $ 145,998 $ 261,240 $ 49,130 $ 2,206,010 $ 169,012 $ (16,189) $ (14,459) $ 2,800,742
Net realized gain (loss)
on investments........ 197,602 54,838 (7) 321,752 27,135 57,404 63,801 722,525
Net change in unrealized
appreciation or depreciation
of investments........ 350,924 215,515 (2) 1,525,183 111,623 64,947 244,202 2,512,392
Net increase in net assets
resulting from
operations............ 694,524 531,593 49,121 4,052,945 307,770 106,162 293,544 6,035,659
Contract Transactions
Variable life contract
purchase payments..... 3 1,902 11,800 10 1,352 -- -- 15,067
Net transfers*........ 99,561 1,196 (469,568) 361,404 (4,975) 12,824 (863) (421)
Transfers for policy
loans................. (54,614) (64,694) 6,040 (260,955) (4,139) (31,593) (24,019) (433,974)
Policy charges
(Note 3).............. (95,900) (82,218) (46,544) (371,233) (54,356) (36,149) (31,257) (717,657)
Contract terminations:
Surrender benefits
(Note 8).............. (170,049) (184,117) (292,594) (525,999) (56,884) (69,621) (71,208) (1,370,472)
Death benefits........ (50,317) (27,502) -- (279,131) (2,502) (21,562) -- (381,014)
Increase (decrease) from
contract transactions. (271,316) (355,433) (790,866) (1,075,904) (121,504) (146,101) (127,347) (2,888,471)
Net assets at beginning
of year............... 5,821,883 3,858,417 2,971,000 21,868,316 2,684,338 1,816,292 1,440,491 40,460,737
Net assets at end of
year.................. $6,245,091 $4,034,577 $2,229,255 $24,845,357 $2,870,604 $1,776,353 $1,606,688 $43,607,925
Accumulation Unit Activity
Units outstanding at beginning
of year............... 2,493,139 2,378,468 2,045,594 9,122,529 1,670,434 1,089,681 792,476
Purchase payments..... 2 1,056 8,046 5 772 -- --
Net transfers*........ 38,828 1,997 (321,072) 143,791 (1,081) 7,258 (396)
Transfers for policy
loans................. (23,342) (39,523) 4,246 (101,017) (1,922) (18,196) (11,511)
Deductions for policy
charges............... (40,866) (46,400) (31,745) (144,619) (31,216) (20,754) (14,976)
Contract terminations:
Surrender benefits.... (71,481) (101,638) (200,102) (205,542) (32,820) (40,585) (33,269)
Death benefits........ (21,892) (15,659) -- (112,480) (1,433) (12,418) --
Units outstanding at
end of year........... 2,374,388 2,178,301 1,504,967 8,702,667 1,603,034 1,004,986 732,324
* Includes transfer activity from (to) other subaccounts.
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 10
<TABLE><CAPTION>
Statements of Changes in Net Assets Year ended Dec. 31, 1992
Combined
Segregated Asset Subaccounts Variable
Operations P Q R S T 1995 2004 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income
(loss) -- net........ $ 216,364 $ 281,169 $ 90,003 $2,682,022 $ 161,560 $ (15,967) $ (12,503) $ 3,402,648
Net realized gain (loss)
on investments....... 206,480 20,627 (30) 344,952 27,176 19,523 40,806 659,534
Net change in unrealized
appreciation or depreciation
of investments....... (210,702) 32,468 33 (1,097,021) (33,542) 111,473 91,222 (1,106,069)
Net increase in net assets
resulting from
operations........... 212,142 334,264 90,006 1,929,953 155,194 115,029 119,525 2,956,113
Contract Transactions
Net transfers*....... 417,287 (103,183) (598,039) 127,645 (64,337) 146,721 73,565 (341)
Transfers for policy
loans................ (176,400) (119,068) (86,143) (270,930) (102,668) (15,887) (27,297) (798,393)
Policy charges
(Note 3)............. (86,571) (76,855) (58,562) (328,954) (47,578) (33,812) (26,538) (658,870)
Contract terminations:
Surrender benefits
(Note 8)............. (251,531) (107,256) (262,648) (792,653) (23,854) (12,303) (39,048) (1,489,293)
Death benefits....... (46,457) (11,897) (3,811) (84,013) -- -- -- (146,178)
Increase (decrease)
from contract
transactions......... (143,672) (418,259) (1,009,203) (1,348,905) (238,437) 84,719 (19,318) (3,093,075)
Net assets at beginning
of year.............. 5,753,413 3,942,412 3,890,197 21,287,268 2,767,581 1,616,544 1,340,284 40,597,699
Net assets at end
of year.............. $5,821,883 $3,858,417 $2,971,000 $21,868,316 $2,684,338 $1,816,292 $1,440,491 $40,460,737
Accumulation Unit Activity
Units outstanding at
beginning of year.... 2,574,820 2,646,974 2,750,951 9,735,040 1,825,795 1,033,212 799,918
Net transfers*....... 182,879 (66,157) (418,012) 56,220 (39,648) 95,034 47,140
Transfers for policy
loans................ (79,895) (77,437) (60,245) (123,830) (68,951) (9,742) (16,430)
Deductions for policy
charges.............. (41,940) (49,701) (40,797) (148,990) (30,977) (21,026) (15,677)
Contract terminations:
Surrender benefits... (121,636) (67,330) (183,679) (358,227) (15,485) (7,797) (22,475)
Death benefits....... (21,089) (7,881) (2,624) (37,684) -- -- --
Units outstanding at
end of year.......... 2,493,139 2,378,468 2,045,594 9,122,529 1,670,734 1,089,681 792,476
* Includes transfer activity from (to) other subaccounts.
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 11
<TABLE><CAPTION>
Statements of Changes in Net Assets Year ended Dec. 31, 1991
Combined
Segregated Asset Subaccounts Variable
Operations P Q R S T 1991* 1995 2004 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income
(loss) -- net....... $ (10,405) $283,677 $ 191,172 $1,133,164 $ 164,637 $ (8,424) $(12,964) $(9,633) $ 1,731,224
Net realized gain (loss)
on investments...... 229,033 (19,089) (23) 338,220 12,160 290,653 31,631 33,571 916,156
Net change in unrealized
appreciation or depreciation
of investments...... 2,098,819 264,199 (25) 3,693,552 208,150 (226,895) 189,031 181,278 6,408,109
Net increase in net
assets resulting
from operations..... 2,317,447 528,787 191,124 5,164,936 384,947 55,334 207,698 205,216 9,055,489
Contract Transactions
Net transfers**..... 314,763 (150,157) (192,060) 814,787 56,726 (1,144,360) 126,073 173,360 (868)
Transfers for policy
loans............... (179,324) (140,480) (99,239) (393,550) (41,987) (23,409) (12,736) (11,111) (901,836)
Policy charges
(Note 3)............ (70,572) (69,293) (68,870) (293,559) (44,518) (15,430) (26,329) (19,019) (607,590)
Contract terminations:
Surrender benefits
(Note 8)............ (483,710) (443,919) (136,794) (935,419) (86,554) (49,001) (51,253) (32,239) (2,218,889)
Death benefits...... (57,684) (54,262) (79,973) (214,266) (40,655) -- -- -- (446,840)
Increase (decrease)
from contract
transactions........ (476,527) (858,111) (576,936) (1,022,007) (156,988)(1,232,200) 35,755 110,991 (4,176,023)
Net assets at beginning
of year............. 3,912,493 4,271,736 4,276,009 17,144,339 2,539,622 1,176,866 1,373,091 1,024,077 35,718,233
Net assets at end
of year............. $5,753,413 $3,942,412 $3,890,197 $21,287,268 $2,767,581 $ -- $1,616,544 $1,340,284 $40,597,699
Accumulation Unit Activity
Units outstanding at
beginning of year... 2,892,890 3,289,395 3,172,428 10,289,399 1,937,180 890,779 1,011,907 730,623
Net transfers**..... 176,612 (117,639) (144,237) 427,715 42,817 (826,259) 84,162 112,736
Transfers for
policy loans........ (95,785) (102,379) (71,736) (205,882) (30,707) (17,244) (8,741) (7,497)
Deductions for policy
charges............. (40,308) (50,547) (49,783) (154,429) (32,499) (11,342) (18,427) (12,978)
Contract terminations:
Surrender benefits.. (326,216) (332,561) (99,068) (516,857) (61,600) (35,934) (35,689) (22,966)
Death benefits...... (32,373) (39,295) (56,653) (104,906) (29,396) -- -- --
Units outstanding at
end of year......... 2,574,820 2,646,974 2,750,951 9,735,040 1,825,795 -- 1,033,212 799,918
* For the period from Jan. 1, 1991 to Nov. 15, 1991, date of maturity of securities in 1991 Trust.
** Includes transfer activity from (to) other subaccounts.
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 12
Notes to Financial Statements
1. Organization
IDS Life Variable Life Separate Account (the Variable Account) was
established on Oct. 16, 1985 as a segregated asset account of IDS
Life Insurance Company (IDS Life) under Minnesota law and is
registered as a single unit investment trust under the Investment
Company Act of 1940. Operations of the Variable Account commenced
on Jan. 20, 1986.
The Variable Account is comprised of various subaccounts. The
assets of each subaccount of the Variable Account are not
chargeable with liabilities arising out of the business conducted
by any other Subaccount, Account or by IDS Life. The assets of the
Variable Account shall be available, however, to cover the
liabilities of IDS Life to the extent the assets of the Variable
Account exceed its liabilities arising under the policies supported
by it. Single Premium Variable Life policy owners allocate their
premium payment to one or more of the seven subaccounts which are
currently used in connection with these policies. Such funds are
then invested in shares of five portfolios of IDS Life Series Fund,
Inc. (the mutual fund) or in units of two Trusts of Smith Barney
Shearson, formerly Shearson Lehman Brothers Stripped ("Zero
Coupon") U.S. Treasury Securities Fund, Series A (individually, a
Trust or collectively, the Trusts). The mutual fund, which
commenced operations Jan. 20, 1986, is registered under the
Investment Company Act of 1940 as a diversified, open-end
management investment company. Funds are allocated to the
subaccounts which are used in connection with the Single Premium
Variable Life policies: Subaccount P invests in the shares of the
Equity Portfolio; Subaccount Q invests in the shares of the Income
Portfolio; Subaccount R invests in the shares of the Money Market
Portfolio; Subaccount S invests in the shares of the Managed
Portfolio; and Subaccount T invests in the shares of the Government
Securities Portfolio. The Trusts, which commenced operations Aug.
4, 1986, are registered under the Investment Company Act of 1940 as
a unit investment trust. Funds allocated to Subaccount 1991 were
invested in units of the 1991 Trust; Subaccount 1995 invests in
units of the 1995 Trust and Subaccount 2004 invests in units of the
2004 Trust. The 1991 Trust matured on Nov. 15, 1991, and is no
longer available for investment.
IDS Life serves as manager, investment adviser and distributor for
the Variable Account and the underlying series mutual fund. Smith
Barney Shearson Inc. serves as sponsor for the Trusts.
2. Summary of Significant Accounting Policies
Investments in Mutual Fund Investments in shares of the mutual fund
portfolios are stated at market value which is the net asset value
per share as determined by the respective portfolios. Investment
transactions are accounted for on the date the shares are purchased
and sold. The cost of investments sold and redeemed is determined
on the average cost method. Dividend distributions received from
the portfolios are reinvested, net of any expenses payable to IDS
Life, in additional shares of the portfolios and are recorded as <PAGE>
PAGE 13
income by the subaccounts on the ex-dividend date.
Unrealized appreciation or depreciation of investments in the
accompanying financial statements represents the subaccounts' share
of the portfolios' undistributed net investment income,
undistributed realized gain or loss and the unrealized appreciation
or depreciation on their investment securities.
Investments in Trusts Investments in units of the Trusts are stated
at market value which is the net asset value per unit as determined
by the respective trust. Investment transactions are accounted for
on the date the units are purchased and sold. The cost of
investments sold and redeemed is determined on the average cost
method.
Unrealized appreciation or depreciation of investments in the
accompanying financial statements represents the subaccounts' share
of the Trusts' undistributed net investment income, undistributed
realized gain or loss and the unrealized appreciation or
depreciation on their investment securities. Federal Income Taxes
IDS Life is taxed as a life insurance company. The Variable
Account is treated as part of IDS Life for federal income tax
purposes.
Under existing federal income tax law, no income taxes are payable
with respect to any investment income of the Variable Account.
3. Mortality and Expense Risk Fee and Policy Charges
IDS Life makes contractual assurances to the Variable Account that
possible future adverse changes in administrative expenses and
mortality experience of the policy owners and beneficiaries will
not affect the Variable Account. The mortality and expense risk
fee paid to IDS Life is computed daily and is equal, on an annual
basis, to 0.5 percent of the daily net asset value of the Variable
Account. A monthly deduction is made for the cost of insurance for
the Policy month. The cost of insurance for the Policy month is
determined on the monthly date by determining the net amount at
risk, as of that day, and by then applying the cost of insurance
rates to the net amount at risk which IDS Life is assuming for the
succeeding month. The monthly deduction will be taken from the
subaccounts as specified in the application for the policy.
4. Minimum Death Benefit Guarantee Risk Charge
IDS Life deducts a minimum death benefit guarantee risk charge
equal, on an annual basis, to 0.15 percent of the daily net asset
value of the Variable Account. This deduction is made to
compensate IDS Life for the risk it assumes by providing a
guaranteed minimum death benefit. The deduction will be made from
the Variable Account and computed on a daily basis. This charge is
guaranteed for the life of the contract and may not be increased.
5. Issue and Administrative Expense Charge<PAGE>
PAGE 14
The Policy provides for a one-time $150 issue and administrative
expense charge which will be deducted directly from the premium
paid by the owner. This charge is to reimburse IDS Life for
expenses incurred in processing the premium payment and
establishing and maintaining the records relating to the owner and
participation in the subaccounts for the duration of the Policy.
6. State Premium Tax Charge
The Policy provides that a charge of 2.5 percent of the single
premium will be deducted from the single premium to cover the
premium taxes assessed by the various states. Premium taxes vary
from state to state. This charge is the average rate which IDS
Life expects to pay on premiums from all states.
7. Transaction Charge
IDS Life makes a daily charge against the assets of each subaccount
investing in the Trusts. This charge is intended to reimburse IDS
Life for the transaction charge paid directly by IDS Life to Smith
Barney Shearson Inc. on the sale of the Trust units to the Variable
Account. IDS Life pays these amounts from its general account
assets. The amount of the asset charge is equivalent to an
effective annual rate of 0.25 percent of the account value invested
in the Trusts. This amount may be increased in the future but in
no event will it exceed an effective annual rate of 0.5 percent of
the account value. The charge will be cost-based (taking into
account a loss of interest) with no anticipated element of profit
for IDS Life.
8. Surrender Charges
IDS Life will use a surrender charge to help it recover certain
expenses relating to the sale of the Policy. The surrender charge
will be deducted during the first eight policy years. IDS Life
will never deduct more than 9 percent of the single premium as a
surrender charge. Charges by IDS Life for surrenders are not
available on an individual segregated asset account basis. Charges
for all segregated asset accounts amounted to $4,408,562 in 1993,
$3,649,836 in 1992 and $3,264,084 in 1991. Such charges are not an
expense of the subaccounts or Variable Account. They are deducted
from contract surrender benefits paid by IDS Life.
9. Investment Transactions
The subaccounts' purchases of portfolio shares or trust units (net
of charges), including reinvestment of dividend distributions, were
as follows:
<TABLE><CAPTION>
Year ended Dec. 31,
Subaccount Investment 1993 1992 1991
<S> <C> <C> <C> <C>
P Equity Portfolio................. $ 533,814 $ 808,899 $ 819,700
Q Income Portfolio................. 525,055 429,135 493,625
R Money Market Portfolio........... 212,597 253,164 995,126
S Managed Portfolio................ 2,753,024 3,097,683 2,130,662
T Government Securities Portfolio.. 277,971 366,831 362,303
1991 1991 Trust....................... -- -- 8,875
1995 1995 Trust....................... (1,681) 133,082 143,394
2004 2004 Trust....................... (7,456) 82,891 216,023
$4,293,324 $5,171,685 $5,169,708
/TABLE
<PAGE>
PAGE 15
<TABLE><CAPTION>
Condensed Financial Information (unaudited)
The tables below give per-unit information about the Period from
financial history of each Subaccount. Jan. 20, 1986
(Commencement
of operations)
Year Ended Dec. 31, to Dec. 31,
1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subaccount P (invests in Equity Portfolio)
Accumulation unit value at beginning of
period.................................... $2.34 $2.23 $1.35 $1.43 $1.17 $1.07 $0.99 $1.00
Accumulation unit value at end of period.. $2.63 $2.34 $2.23 $1.35 $1.43 $1.17 $1.07 $0.99
Number of accumulation units outstanding
at end of period (000 omitted)............ 2,374 2,493 2,575 2,893 3,286 3,887 3,887 968
Subaccount Q (invests in Income Portfolio)
Accumulation unit value at beginning of
period.................................... $1.62 $1.49 $1.30 $1.23 $1.11 $1.04 $1.10 $1.00
Accumulation unit value at end of period.. $1.85 $1.62 $1.49 $1.30 $1.23 $1.11 $1.04 $1.10
Number of accumulation units outstanding
at end of period (000 omitted)............ 2,178 2,378 2,647 3,289 3,778 3,478 3,252 1,292
Subaccount R (invests in Money Market Portfolio)
Accumulation unit value at beginning of
period.................................... $1.45 $1.41 $1.35 $1.26 $1.16 $1.10 $1.05 $1.00
Accumulation unit value at end of period.. $1.48 $1.45 $1.41 $1.35 $1.26 $1.16 $1.10 $1.05
Number of accumulation units outstanding
at end of period (000 omitted)............ 1,505 2,046 2,751 3,172 3,146 3,210 1,629 903
Subaccount S (invests in Managed Portfolio)
Accumulation unit value at beginning of
period.................................... $2.40 $2.19 $1.67 $1.56 $1.20 $1.11 $1.07 $1.00
Accumulation unit value at end of period.. $2.85 $2.40 $2.19 $1.67 $1.56 $1.20 $1.11 $1.07
Number of accumulation units outstanding
at end of period (000 omitted)............ 8,703 9,123 9,735 10,289 11,099 12,793 14,419 5,573
Subaccount T (invests in Government Securities Portfolio)
Accumulation unit value at beginning of
period.................................... $1.61 $1.52 $1.31 $1.24 $1.09 $1.03 $1.08 $1.00
Accumulation unit value at end of period.. $1.79 $1.61 $1.52 $1.31 $1.24 $1.09 $1.03 $1.08
Number of accumulation units outstanding
at end of period (000 omitted)............ 1,603 1,671 1,826 1,937 2,168 2,234 1,666 876
Subaccount 1991* (invests in 1991 Trust)
Accumulation unit value at beginning of
period.................................... $ -- $ -- $1.32 $1.22 $1.10 $1.05 $1.04 $1.00
Accumulation unit value at end of period.. $ -- $ -- $ -- $1.32 $1.22 $1.10 $1.05 $1.04
Number of accumulation units outstanding
at end of period (000 omitted)............ -- -- -- 891 1,046 847 353 116
Subaccount 1995 (invests in 1995 Trust)
Accumulation unit value at beginning of
period.................................... $1.67 $1.56 $1.36 $1.24 $1.08 $1.02 $1.06 $1.00
Accumulation unit value at end of period.. $1.77 $1.67 $1.56 $1.36 $1.24 $1.08 $1.02 $1.06
Number of accumulation units outstanding
at end of period (000 omitted)............ 1,005 1,090 1,033 1,012 1,075 979 219 140
Subaccount 2004 (invests in 2004 Trust)
Accumulation unit value at beginning of
period.................................... $1.82 $1.68 $1.40 $1.36 $1.11 $0.98 $1.09 $1.00
Accumulation unit value at end of period.. $2.19 $1.82 $1.68 $1.40 $1.36 $1.11 $0.98 $1.09
Number of accumulation units outstanding
at end of period (000 omitted)............ 732 792 800 731 930 901 654 200
*The 1991 Trust matured on Nov. 15, 1991.
</TABLE>
<PAGE>
PAGE 16
IDS Life Financial Information
The Financial statements shown below are those of the insurance
company and not those of the Fund, the Account or the Trust. They
are included in the prospectus for the purpose of informing
investors as to the financial condition of the insurance company
and its ability to carry out its obligations under the annuity
contracts.
IDS Life Insurance Company
<TABLE>
<CAPTION>
Consolidated Balance Sheets Dec. 31, 1993 Dec. 31,1992
Assets (Thousands)
______________________________________________________________________________________________________________________________
<S> <C> <C>
Investments:
Fixed maturities (Fair value: 1993, $20,425,979; 1992, $17,896,374) $19,392,424 $17,185,879
Mortgage loans on real estate (Fair value: 1993, $2,125,686; 1992, $1,785,970) 2,055,450 1,688,490
Policy loans 350,501 320,016
Other investments 56,307 51,955
______________________________________________________________________________________________________________________________
Total investments 21,854,682 19,246,340
______________________________________________________________________________________________________________________________
Cash and cash equivalents 146,281 73,563
Receivables:
Reinsurance 55,298 -
Amounts due from brokers 5,719 20,202
Other accounts receivable 21,459 20,095
Premiums due 1,329 1,361
______________________________________________________________________________________________________________________________
Total receivables 83,805 41,658
______________________________________________________________________________________________________________________________
Accrued investment income 307,177 285,120
Deferred policy acquisition costs 1,652,384 1,440,875
Other assets 21,730 18,672
Assets held in segregated asset accounts, primarily common stocks at market 8,991,694 6,189,545
______________________________________________________________________________________________________________________________
Total assets $33,057,753 $27,295,773
______________________________________________________________________________________________________________________________
Liabilities and Stockholder's Equity
______________________________________________________________________________________________________________________________
Liabilities:
Fixed annuities - future policy benefits $18,492,135 $16,342,419
Universal life-type insurance - future policy benefits 2,753,455 2,567,687
Traditional life-type insurance - future policy benefits 210,205 210,886
Disability income, health and long-term care insurance - future policy benefits 185,272 104,896
Policy claims and other policyholders' funds 44,516 49,899
Deferred federal income taxes 43,620 87,913
Amounts due to brokers 351,486 258,654
Other liabilities 292,024 235,509
Liabilities related to segregated asset accounts 8,991,694 6,189,545
______________________________________________________________________________________________________________________________
Total liabilities 31,364,407 26,047,408
______________________________________________________________________________________________________________________________
Stockholder's equity:
Capital stock, $30 per value per share; 100,000 shares authorized, issued and outstanding 3,000 3,000
Additional paid-in capital 222,000 22,000
Net unrealized appreciation on equity securities 114 214
Retained earnings 1,468,232 1,223,151
______________________________________________________________________________________________________________________________
Total stockholder's equity 1,693,346 1,248,365
______________________________________________________________________________________________________________________________
Total liabilities and stockholder's equity $33,057,753 $27,295,773
Commitments and contingencies (Note 6)
______________________________________________________________________________________________________________________________
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
PAGE 17
<TABLE>
<CAPTION>
Consolidated Statement of Income Years ended Dec. 31,
1993 1992 1991
(Thousands)
__________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 48,137 $ 49,719 $ 49,706
Disability income and long-term care insurance 79,108 64,660 52,632
__________________________________________________________________________________________________________________________________
127,245 114,379 102,338
Policyholder and contractholder charges 184,205 156,368 137,202
Management and other fees 120,139 84,591 61,142
Net investment income 1,783,219 1,616,821 1,422,866
Net loss on investments (6,737) (3,710) (5,837)
__________________________________________________________________________________________________________________________________
Total revenues 2,208,071 1,968,449 1,717,711
__________________________________________________________________________________________________________________________________
Benefits and expenses:
Death and other benefits - traditional life insurance 32,136 34,139 30,170
Death and other benefits - universal life-type insurance
and investment contracts 49,692 42,174 38,529
Death and other benefits - disability income, health and
long-term care insurance 13,148 10,701 8,242
Increase (decrease) in liabilities for future policy benefits -
traditional life insurance (4,513) (5,788) (6,425)
Increase (decrease) in liabilities for future policy benefits -
disability income, health and long-term care insurance 32,528 27,172 19,700
Interest credited on universal life-type insurance and investment contracts 1,218,647 1,188,379 1,098,281
Amortization of deferred policy acquisition costs 211,733 140,159 116,078
Other insurance and operating expenses 241,974 215,692 153,669
__________________________________________________________________________________________________________________________________
Total benefits and expenses 1,795,345 1,652,628 1,458,244
__________________________________________________________________________________________________________________________________
Income before income taxes 412,726 315,821 259,467
Income taxes 142,647 104,651 77,430
__________________________________________________________________________________________________________________________________
Net income $ 270,079 $ 211,170 $ 182,037
__________________________________________________________________________________________________________________________________
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
PAGE 18
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows Years ended Dec. 31,
1993 1992 1991
(Thousands)
__________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 270,079 $ 211,170 $ 182,037
Adjustments to reconcile net income to net cash provided by operating activities:
Issuance - policy loans, excluding universal life-type insurance (35,886) (32,881) (29,309)
Repayment - policy loans, excluding universal life-type insurance 29,557 26,750 19,928
Change in reinsurance receivable (55,298) - -
Change in other accounts receivable (1,364) (4,772) (1,558)
Change in accrued investment income (22,057) (15,853) (26,022)
Change in deferred policy acquisition costs, net (211,509) (229,252) (175,442)
Change in liabilities for future policy benefits for traditional life, disability
income, health and long-term care insurance 79,695 21,384 13,275
Change in policy claims and other policyholders' funds (5,383) (1,347) 11,801
Change in deferred federal income taxes (44,237) (30,385) (29,207)
Change in other liabilities 56,515 88,997 45,323
Amortization of premium (accretion of discount), net (27,438) (4,289) 19,726
Net loss on investments 6,737 3,710 5,837
Premiums related to universal life-type insurance 397,883 312,621 264,504
Surrenders and death benefits related to universal life-type insurance (255,133) (166,162) (109,307)
Interest credited to account balances related to universal life-type insurance 156,885 161,873 160,585
Policyholder and contractholder charges, non-cash (115,140) (100,975) (96,211)
Other, net (1,907) (10,647) 2,258
__________________________________________________________________________________________________________________________________
Net cash provided by operating activities $ 221,999 $ 229,942 $ 258,218
__________________________________________________________________________________________________________________________________
Cash flows from investing activities:
Acquisition of investments, excluding policy loans $(7,102,546) $(7,001,348) $(5,518,481)
Maturities, sinking fund payments and calls of investments, excluding policy loans 3,931,819 2,700,479 838,589
Sale of investments, excluding policy loans 613,571 1,073,950 2,274,401
Change in amounts due from brokers 14,483 289,335 (134,312)
Change in amounts due to brokers 92,832 42,182 72,382
__________________________________________________________________________________________________________________________________
Net cash used in investing activities (2,449,841) (2,895,402) (2,467,421)
__________________________________________________________________________________________________________________________________
Cash flows from financing activities:
Considerations received related to investment contracts 2,843,668 2,821,069 2,316,333
Surrenders and death benefits related to investment contracts (1,765,869) (1,168,633) (871,808)
Interest credited to account balances related to investment contracts 1,071,917 1,026,506 937,696
Issuance - universal life-type insurance policy loans (70,304) (72,007) (76,010)
Repayment - universal life-type insurance policy loans 46,148 40,351 31,860
Capital contribution from parent 200,000 - -
Cash dividend to parent (25,000) (20,000) (20,000)
__________________________________________________________________________________________________________________________________
Net cash provided by financing activities 2,300,560 2,627,286 2,318,071
__________________________________________________________________________________________________________________________________
Net increase (decrease) in cash and cash equivalents 72,718 (38,174) 108,868
Cash and cash equivalents at beginning of year 73,563 111,737 2,869
__________________________________________________________________________________________________________________________________
Cash and cash equivalents at end of year $ 146,281 $ 73,563 $ 111,737
__________________________________________________________________________________________________________________________________
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
PAGE 19
Notes to Consolidated Financial Statements ($ Thousands)
Dec. 31, 1993, 1992, 1991
1. Summary of significant accounting policies
Nature of business
IDS Life Insurance Company (the Company) is engaged in the
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.
Basis of presentation
The Company is a wholly owned subsidiary of IDS Financial
Corporation (IDS), 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 and American
Enterprise Life Insurance Company. All material intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles which vary in certain respects from reporting practices
prescribed or permitted by state insurance regulatory authorities.
Also, the consolidated financial statements are presented on a
historical cost basis without adjustment of the net assets
attributable to the 1984 acquisition of IDS by American Express
Company.
Investments
Investments in fixed maturities are carried at cost, adjusted where
appropriate for amortization of premiums and accretion of
discounts. Mortgage loans on real estate are carried principally
at the unpaid principal balances of the related loans. Policy
loans are carried at the aggregate of the unpaid loan balances
which do not exceed the cash surrender values of the related
policies. Other investments include interest rate caps, real
estate and equity securities. When evidence indicates a decline,
which is other than temporary, in the underlying value or earning
power of individual investments, such investments are written down
to the estimated realizable value by a charge to income. Equity
securities are carried at market value and the related net
unrealized appreciation or depreciation is reported as a credit or
charge to stockholder's equity.
The Company has the ability and the intent to recover the costs of
these investments by holding them for the forseeable future. The
ability to hold investments to scheduled maturity dates is
dependent on, among other things, annuity contract owners
maintaining their annuity contracts in force.
The Company will implement, effective January 1, 1994, Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under the new rules,
debt securities that the Company has both the positive intent and
ability to hold to maturity will be carried at amortized cost.
Debt securities that the Company does not have the positive intent <PAGE>
PAGE 20
1. Summary of significant accounting policies (continued)
and ability to hold to maturity and all marketable equity
securities will be classified as available-for-sale and carried at
fair value. Unrealized gains and losses on securites classified as
available-for-sale will be carried as a separate component of
stockholder's equity. The effect of the new rules will be to
increase stockholder's equity by approximately $181 million, net of
taxes, as of January 1, 1994, but the new rules will have no
material impact on the Company's results of operations.
Realized investment gain or loss is determined on an identified
cost basis.
Interest rate cap contracts are purchased to reduce the Company's
exposure to rising interest rates which would increase the cost of
future policy benefits for interest sensitive products. Costs
are amortized over the lives of the agreements and benefits are
recognized when realized.
Prepayments are anticipated on certain investments in
mortgage-backed securities in determining the constant effective
yield used to recognize interest income. Prepayment estimates
are based on information received from brokers who deal in
mortgage-backed securities.
Statement 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 fair value.
Supplementary information to the consolidated statement of cash
flows for the years ended Dec. 31 is summarized as follows:
1993 1992 1991
___________________________________________________________________
Cash paid during the year for:
Income taxes $188,204 $140,445 $111,809
Interest on borrowings 2,661 1,265 108
___________________________________________________________________
Recognition of profits on annuity contracts and insurance policies
The Company issues single premium deferred annuity contracts that
provide for a service fee (surrender charge) at annually decreasing
rates upon withdrawal of the annuity accumulation value by the
contract owner. No sales fee is deducted from the contract
considerations received on these contracts ("no load" annuities).
Single premium deferred annuities issued prior to 1980 had a sales
fee and no surrender charge. All of the Company's single premium
deferred annuity contracts provide for crediting the contract
owners' accumulations at specified rates of interest. Such rates
are revised by the Company from time to time based on changes in
the market investment yield rates for fixed-income securities.
<PAGE>
PAGE 21
1. Summary of significant accounting policies (continued)
Profits on single premium deferred annuities and installment
annuities are recognized by the Company over the lives of the
contracts and represent the excess of investment income earned
from investment of contract considerations over interest credited
to contract owners and other expenses.
The retrospective deposit method is used in accounting for
universal life-type insurance. This method recognizes profits over
the lives of the policies in proportion to the estimated gross
profits expected to be realized.
Premiums on traditional life, disability income, health and
long-term care insurance policies are recognized as revenue when
collected or due, and related benefits and expenses are associated
with premium revenue in a manner that results in recognition of
profits over the lives of the insurance policies. This association
is accomplished by means of the provision for future policy
benefits and the deferral and subsequent amortization of policy
acquisition costs.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales
compensation, policy issue costs, underwriting and certain sales
expenses, have been deferred on insurance and annuity contracts.
The deferred acquisition costs for single premium deferred
annuities and installment annuities are amortized based upon
surrender charge revenue and a portion of the excess of investment
income earned from investment of the contract considerations over
the interest credited to contract owners. The costs for universal
life-type insurance are amortized over the lives of the policies as
a percentage of the estimated gross profits expected to be
realized on the policies. For traditional life, disability income,
health and long-term care insurance policies, the costs are
amortized over an appropriate period in proportion to premium
revenue.
Liabilities for future policy benefits
Liabilities for universal life-type insurance, single premium
deferred annuities and installment annuities are accumulation
values.
Liabilities for fixed annuities in a benefit status are based on
the Progressive Annuity Table with interest at 5 percent, the 1971
Individual Annuity Table with interest at 7 percent or 8.25
percent, or the 1983a Table with various interest rates ranging
from 5.5 percent to 9.5 percent, depending on year of issue.
Liabilities for future benefits on traditional life insurance have
been computed principally by the net level premium method, based on
anticipated rates of mortality (approximating the 1965-1970 Select
and Ultimate Basic Table for policies issued after 1980 and the
1955-1960 Select and Ultimate Basic Table for policies issued prior
to 1981), policy persistency derived from Company experience data
(first year rates ranging from approximately 70 percent to 90
percent and increasing rates thereafter), and estimated future
investment yields of 4 percent for policies issued before 1974 and
<PAGE>
PAGE 22
1. Summary of significant accounting policies (continued)
5.25 percent for policies issued from 1974 to 1980. Cash value
plans issued in 1980 and later assume future investment rates that
grade from 9.5 percent to 5 percent over 20 years. Term insurance
issued from 1981 to 1984 assumes an 8 percent level investment rate
and term insurance issued after 1984 assumes investment rates that
grade from 10 percent to 6 percent over 20 years.
Liabilities for future disability income policy benefits have been
computed principally by the net level premium method, based on the
1964 Commissioners Disability Table with the 1958 Commissioners
Standard Ordinary Mortality Table at 3 percent interest for 1980
and prior, 8 percent interest for persons disabled from 1981 to
1991 and 6 percent interest for persons disabled after 1991.
Liabilities for future benefits on long-term care insurance have
been computed principally by the net level premium method, using
morbidity rates based on the 1985 National Nursing Home Survey and
mortality rates based on the 1983a Table. The interest rate basis
is 9.5 percent grading to 7 percent over ten years for policies
issued from 1989 to 1992, 7.75 percent grading to 7 percent over
four years for policies issued after 1992, 8 percent for claims
incurred in 1989 to 1991 and 6 percent for claims incurred after
1991.
At Dec. 31, 1993 and 1992, the carrying amount and fair value of
fixed annuities future policy benefits, after excluding life
insurance-related contracts carried at $913,127 and $834,909, were
$17,579,008 and $15,507,510, and $16,881,747 and $14,867,066,
respectively. The fair value is net of policy loans of $59,132 and
$51,394 at Dec. 31, 1993 and 1992, respectively. The fair value of
these benefits is based on the status of the annuities at Dec. 31,
1993 and 1992. The fair value of deferred annuities is estimated
as the carrying amount less any surrender charges and related
loans. The fair value for annuities in non-life contingent payout
status is estimated as the present value of projected benefit
payments at the rate appropriate for contracts issued in 1993 and
1992.
Reinsurance
The maximum amount of life insurance 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 maximum amount of disability
income risk retained by the Company on any one life is $6 of
monthly benefit for benefit periods longer than three years. The
excesses are reinsured with other life insurance companies on a
yearly renewable term basis. Graded premium whole life policies
and long term care are primarily reinsured on a coinsurance basis.
In 1993 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 113, "Accounting and Reporting for Reinsurance
of Short-Duration and Long-Duration Contracts." Under SFAS No.
113, amounts paid or deemed to have been paid for reinsurance
contracts are recorded as reinsurance receivables. Prior to 1993,
these amounts were recorded as a reduction of the liability for
future insurance policy benefits. The cost of reinsurance is
accounted for over the period covered by the reinsurance contract.
<PAGE>
PAGE 23
1. Summary of significant accounting policies (continued)
Federal income taxes
The Company's taxable income is included in the consolidated
federal income tax return of American Express Company. The Company
provides for income taxes on a separate return basis, except that,
under an agreement between IDS and American Express Company, tax
benefit is recognized for losses to the extent they can be used on
the consolidated tax return. It is the policy of IDS and its
subsidiaries that IDS will reimburse a subsidiary for any tax
benefit.
Included in other liabilities at Dec. 31, 1993 and 1992 are $14,709
and $18,181, respectively, payable to IDS for federal income taxes.
Segregated asset account business
The segregated asset account assets and liabilities represent funds
held for the exclusive benefit of the variable annuity and variable
life insurance contract owners. The Company receives investment
management and mortality and expense assurance fees from the
variable annuity and variable life insurance mutual funds and
segregated asset accounts. The Company also deducts a monthly cost
of insurance charge and receives a minimum death benefit guarantee
fee and issue and administrative fee from the variable life
insurance segregated asset accounts.
The Company makes contractual mortality assurances to the variable
annuity contract owners that the net assets of the segregated asset
accounts will not be affected by future variations in the actual
life expectancy experience of the annuitants and the beneficiaries
from the mortality assumptions implicit in the annuity contracts.
The Company makes periodic fund transfers to, or withdrawals from,
the segregated asset accounts for such actuarial adjustments for
variable annuities that are in the benefit payment period. The
Company guarantees, for the variable life insurance policyholders,
the cost of the contractual insurance rate and that the death
benefit will never be less than the death benefit at the date of
issuance.
At Dec. 31, 1993 and 1992 the fair value of liabilities related to
segregated asset accounts was $8,305,209 and $5,727,402,
respectively. The fair value of these liabilities at Dec. 31, 1993
and 1992 is estimated as the carrying amount less variable
insurance contracts carried at $346,276 and $226,946, respectively,
and surrender charges, if applicable.
Reclassification
Certain 1992 and 1991 amounts have been reclassified to conform to
the 1993 presentation.
2. Investments
Market values of investments in fixed maturities represent quoted
market prices and estimated fair values when quoted prices are not
available. Estimated fair values are determined by established
procedures involving, among other things, review of market indices,
price levels of current offerings of comparable issues, price
estimates and market data from independent brokers and financial
files. <PAGE>
PAGE 24
2. Investments (continued)
Net gain (loss) on investments for the years ended Dec. 31 is
summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
________________________________________________________________________________________________
<S> <C> <C> <C>
Fixed maturities $ 5,460 $ 14,474 $ 22,750
Mortgage loans (11,422) (5,004) (1,064)
Other investments (6,606) (8,265) (5,695)
(12,568) 1,205 15,991
Net (increase) decrease in allowance for losses 5,831 (4,915) (21,828)
$ (6,737) $ (3,710) $ (5,837)
________________________________________________________________________________________________
Changes in net unrealized appreciation
(depreciation) of investments for the years
ended Dec. 31 are summarized as follows:
1993 1992 1991
________________________________________________________________________________________________
Fixed maturities $323,060 $(128,683) $861,355
Equity securities (156) 300 418
________________________________________________________________________________________________
Fair values of and gross unrealized gains
and losses on investments in fixed maturities
carried at amortized cost at Dec. 31 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
1993 Cost Gains Losses Value
________________________________________________________________________________________________
U.S. Government agency obligations $ 63,532 $ 3,546 $ 1,377 $ 65,701
State and municipal obligations 11,072 2,380 - 13,452
Corporate bonds and obligations 9,362,074 768,747 45,706 10,085,115
Mortgage-backed securities 9,978,523 341,067 57,879 10,261,711
19,415,201 1,115,740 104,962 20,425,979
Less allowance for losses 22,777 - 22,777 -
$19,392,424 $1,115,740 $ 82,185 $20,425,979
________________________________________________________________________________________________
Gross Gross
Amortized Unrealized Unrealized Fair
1992 Cost Gains Losses Value
________________________________________________________________________________________________
U.S. Government agency obligations $ 36,753 $ 3,658 $ 4 $ 40,407
State and municipal obligations 11,234 1,542 - 12,776
Corporate bonds and obligations 7,688,190 431,781 104,707 8,015,264
Mortgage-backed securities 9,487,601 377,539 37,213 9,827,927
17,223,778 814,520 141,924 17,896,374
Less allowance for losses 37,899 - 37,899 -
$17,185,879 $ 814,520 $104,025 $17,896,374
________________________________________________________________________________________________
The amortized cost and fair value of investments in fixed maturities at Dec. 31, 1993 by
contractual maturity are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Amortized Fair
Cost Value
________________________________________________________________________________________________
Due in one year or less $ 89,160 $ 90,928
Due from one to five years 1,430,756 1,532,298
Due from five to ten years 5,488,955 5,924,580
Due in more than ten years 2,427,807 2,616,462
Mortgage-backed securities 9,978,523 10,261,711
$19,415,201 $20,425,979
________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 25
2. Investments (continued)
Proceeds from sales of investments in fixed maturities during 1993
and 1992 were $482,523 and $996,619, respectively. During 1993 and
1992, gross gains of $48,499 and $94,915, respectively, and gross
losses of $43,039 and $80,441, respectively, were realized on those
sales.
At Dec. 31, 1993, the amount of net unrealized appreciation on
equity securities included $160 of gross unrealized appreciation,
$nil of gross unrealized depreciation and deferred tax credits of
$46. At Dec. 31, 1992, the amount of net unrealized appreciation
on equity securities included $328 of gross unrealized
appreciation, $12 of gross unrealized depreciation and deferred tax
credits of $102. The fair value of equity securities was $1,900
and $2,005 at Dec. 31, 1993 and 1992, respectively.
Included in other investments at Dec. 31, 1993 are interest rate
caps at amortized cost of $26,923 with a fair value of $14,201.
These interest rate caps carry a notional amount of $4,400,000 and
expire on various dates from 1994 to 1998.
At Dec. 31, 1993, bonds carried at $4,184 were on deposit with
various states as required by law.
Net investment income for the years ended Dec. 31 is summarized as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
______________________________________________________________________________________
<S> <C> <C> <C>
Interest on fixed maturities $1,589,802 $1,449,234 $1,279,317
Interest on mortgage loans 175,063 148,693 122,723
Other investment income 29,345 24,281 20,005
Interest on cash equivalents 2,137 5,363 8,729
1,796,347 1,627,571 1,430,774
Less investment expenses 13,128 10,750 7,908
______________________________________________________________________________________
$1,783,219 $1,616,821 $1,422,866
______________________________________________________________________________________
</TABLE>
At Dec. 31, 1993, investments in fixed maturities comprised 89
percent of the Company's total invested assets. These securities
are rated by Moody's and Standard & Poor's (S&P), except for
approximately $2.1 billion which is rated by IDS internal analysts
using criteria similar to Moody's and S&P. A summary of
investments in fixed maturities by rating on Dec. 31 is as follows:
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
Rating 1993 1992
________________________________________________________________________
<S> <C> <C>
Aaa/AAA $ 9,959,884 $ 9,480,345
Aa/AA 258,659 219,370
Aa/A 160,638 109,806
A/A 2,021,177 1,735,750
A/BBB 654,949 447,592
Baa/BBB 3,936,366 3,352,192
Baa/BB 717,606 392,361
Below investment grade 1,705,922 1,486,362
________________________________________________________________________
$19,415,201 $17,223,778
________________________________________________________________________
</TABLE>
<PAGE>
PAGE 26
2. Investments (continued)
At Dec. 31, 1993, 99 percent of the securities rated Aaa/AAA are
GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of
any other issuer are greater than 1 percent of the Company's total
investments in fixed maturities.
At Dec. 31, 1993, approximately 9.4 percent of the Company's
invested assets were mortgage loans on real estate. Summaries of
mortgage loans by region of the United States and by type of real
estate at Dec. 31, 1993 and 1992 are as follows:
<TABLE><CAPTION>
Dec. 31, 1993 Dec. 31, 1992
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
______________________________________________________________________________________
<S> <C> <C> <C> <C>
East North Central $ 552,150 $ 20,933 $ 484,808 $ 21,728
West North Central 361,704 16,746 357,388 14,327
South Atlantic 452,679 52,440 320,593 32,022
Middle Atlantic 260,239 41,090 188,294 56,816
New England 155,214 17,620 114,170 24,677
Pacific 120,378 15,492 89,636 5,148
West South Central 43,948 525 46,296 716
East South Central 73,748 - 83,994 10,085
Mountain 70,410 14,594 26,906 8,882
______________________________________________________________________________________
2,090,470 179,440 1,712,085 174,401
Less allowance for losses 35,020 - 23,595 -
______________________________________________________________________________________
$2,055,450 $179,440 $1,688,490 $174,401
______________________________________________________________________________________
Dec. 31, 1993 Dec. 31, 1992
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
______________________________________________________________________________________
Apartments $ 744,788 $ 79,153 $ 541,855 $ 70,198
Department/retail stores 624,651 65,402 504,331 74,671
Office buildings 234,042 15,583 327,216 12,950
Industrial buildings 217,648 9,279 203,361 15,150
Nursing/retirement homes 83,768 917 56,431 716
Hotels/motels 33,138 - 34,631 716
Medical buildings 30,429 5,954 23,006 -
Residential 78 - 6,618 -
Other 121,928 3,152 14,636 -
______________________________________________________________________________________
2,090,470 179,440 1,712,085 174,401
Less allowance for losses 35,020 - 23,595 -
______________________________________________________________________________________
$2,055,450 $179,440 $1,688,490 $174,401
______________________________________________________________________________________
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real
estate at the time of origination of the loan. The Company holds
the mortgage document, which gives the right to take possession of
the property if the borrower fails to perform according to the
terms of the agreement. The fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage
interest rates currently offered for mortgages of similar
maturities. Commitments to purchase mortgages are made in the
ordinary course of business. The fair value of the mortgage
commitments is $nil.
<PAGE>
PAGE 27
3. Income taxes
The Company qualifies as a life insurance company for federal
income tax purposes. As such, the Company is subject to the
Internal Revenue Code provisions applicable to life insurance
companies.
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
_______________________________________________________________________________
<S> <C> <C> <C>
Federal income taxes:
Current $180,558 $130,998 $104,292
Deferred (44,237) (30,385) (29,207)
_______________________________________________________________________________
136,321 100,613 75,085
State income taxes-Current 6,326 4,038 2,345
_______________________________________________________________________________
Income tax expense $142,647 $104,651 $ 77,430
_______________________________________________________________________________
</TABLE>
Increases (decreases) to the federal tax provision applicable to
pretax income based on the statutory rate are attributable to:
<TABLE><CAPTION>
1993 1992 1991
_________________________________________________________________________________________________________
Provision Rate Provision Rate Provision Rate
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based on
the statutory rate $144,454 35.0% $107,379 34.0% $88,219 34.0%
Increases (decreases) are attributable to:
Tax-excluded interest and dividend income (11,002) (2.7) (8,209) (2.6) (9,496) (3.7)
Other, net 2,869 0.7 1,443 0.4 (3,638) (1.4)
_________________________________________________________________________________________________________
Federal income taxes $136,321 33.0% $100,613 31.8% $75,085 28.9%
_________________________________________________________________________________________________________
</TABLE>
A portion of life insurance company income earned prior to 1984 was
not subject to current taxation but was accumulated, for tax
purposes, in a "policyholders' surplus account." At Dec. 31, 1993,
the Company had a policyholders' surplus account balance of
$19,032. The policyholders' surplus account is only taxable if
dividends to the stockholder exceed the stockholder's surplus
account or if the Company is liquidated. Deferred income taxes of
$6,661 have not been established because no distributions of such
amounts are contemplated.
Significant components of the Company's deferred tax assets and
liabilities as of Dec. 31 are as follows:
<TABLE><CAPTION>
Deferred tax assets: 1993 1992
______________________________________________________________________________________
<S> <C> <C>
Policy reserves $453,436 $356,712
Life insurance guarantee fund assessment reserve 35,000 21,794
______________________________________________________________________________________
Total deferred tax assets 488,436 378,506
______________________________________________________________________________________
Deferred tax liabilities:
______________________________________________________________________________________
Deferred policy acquisition costs 509,868 446,579
Investments 10,105 2,435
Other 12,083 17,405
______________________________________________________________________________________
Total deferred tax liabilities 532,056 466,419
______________________________________________________________________________________
Net deferred tax liabilities $ 43,620 $ 87,913
______________________________________________________________________________________
/TABLE
<PAGE>
PAGE 28
4. Stockholder's equity
Retained earnings available for distribution as dividends to parent
are limited to the Company's surplus as determined in accordance
with accounting practices prescribed by state insurance regulatory
authorities. Statutory unassigned surplus aggregated $922,246 as
of Dec. 31, 1993 and $685,103 as of Dec. 31, 1992 (see Note 3 with
respect to the income tax effect of certain distributions). In
addition, any dividend distributions in 1994 in excess of
approximately $259,063 would require approval of the Department of
Commerce of the State of Minnesota.
Statutory net income for 1993, 1992 and 1991 and stockholder's
equity as of Dec. 31, 1993, 1992 and 1991 are summarized as
follows:
<TABLE><CAPTION>
1993 1992 1991
___________________________________________________________________________________
<S> <C> <C> <C>
Statutory net income $ 275,015 $180,296 $200,704
Statutory stockholder's equity 1,157,022 714,942 551,939
___________________________________________________________________________________
</TABLE>
Dividends paid to IDS were $25,000 in 1993, $20,000 in 1992 and
$20,000 in 1991.
5. Related party transactions
The Company has loaned funds or agreed to loan funds to IDS under
two separate loan agreements. The balance of the first loan was
$75,000 and $nil at Dec. 31, 1993 and 1992, respectively. This
loan can be increased to a maximum of $100,000 and pays interest at
a rate equal to the preceding month's effective new money rate for
the Company's permanent investments. It is collateralized by
equities valued at $96,790 at Dec. 31, 1993. The second loan was
used to fund the construction of the IDS Operations Center. This
loan had an outstanding balance of $84,588 and $85,278 at Dec. 31,
1993 and 1992, respectively. The loan is secured by a first lien
on the IDS Operations Center property and has an interest rate of
9.89 percent. The Company also has a loan to an affiliate which
was used to fund construction of the IDS Learning Center. At Dec.
31, 1993 and 1992, the balance outstanding was $22,573 and $22,755,
respectively. The loan is secured by a first lien on the IDS
Learning Center property and has an interest rate of 9.82 percent.
Interest income on the above loans totaled $11,116, $10,711 and
$14,783 in 1993, 1992 and 1991, respectively.
The Company purchased a five year secured note from an affiliated
company which had an outstanding balance of $27,222 and $31,111 at
Dec. 31, 1993 and 1992, respectively. The note bears a market
interest rate, revised semi-annually, which at Dec. 31, 1993 was
8.42 percent.
The Company has a reinsurance agreement whereby it assumed 100
percent of a block of single premium life insurance business from
an affiliated company. The accompanying consolidated balance sheet
at Dec. 31, 1993 and 1992 includes $759,714 and $746,060,
respectively, of future policy benefits related to this agreement.
<PAGE>
PAGE 29
5. Related party transactions (continued)
The accompanying consolidated statement of income includes revenue
from policyholder charges of $21, $109 and $243, and expenses of
$4,931, $5,897 and $6,445 related to this agreement for 1993, 1992
and 1991, respectively.
The Company has a reinsurance agreement to cede 50 percent of its
long-term care insurance business to an affiliated company. The
accompanying consolidated balance sheet at Dec. 31, 1993 includes
$44,086 of reinsurance receivables related to this agreement.
Liabilities for future policy benefits were reduced by $27,028 at
Dec. 31, 1992 for the effect of this agreement. Premiums ceded
amounted to $16,230, $12,499 and $6,365 and reinsurance recovered
from reinsurers amounted to $404, $250 and $187 for the years ended
Dec. 31, 1993, 1992 and 1991, respectively.
The Company participates in the retirement plan of IDS which covers
all permanent employees age 21 and over who have met certain
employment requirements. The benefits are based on the number of
years the employee participates in the plan, their final average
monthly salary, the level of social security benefits the employee
is eligible for and the level of vesting the employee has earned in
the plan. IDS' policy is to fund retirement plan costs accrued
subject to ERISA and federal income tax considerations. The
Company's share of the total net periodic pension cost was $nil in
1993, 1992 and 1991.
The Company also participates in defined contribution pension plans
of IDS which cover all employees who have met certain employment
requirements. Company contributions to the plans are a percent of
either each employee's eligible compensation or basic
contributions. Costs of these plans charged to operations in 1993,
1992 and 1991 were $2,008, $1,826 and $1,682, respectively.
The Company participates in defined benefit health care plans of
IDS that provide health care and life insurance benefits to retired
employees and retired financial planners. The plans include
participant contributions and service-related eligibility
requirements. Upon retirement, such employees are considered to
have been employees of IDS. IDS expenses these benefits and
allocates the expenses to its subsidiaries. Accordingly, costs of
such benefits to the Company are included in employee compensation
and benefits and cannot be identified on a separate company basis.
Charges by IDS for use of joint facilities and other services
aggregated $243,346, $204,675 and $174,500 for 1993, 1992 and 1991,
respectively. Certain of these costs are included in deferred
policy acquisition costs. In addition, the Company rents its home
office space from IDS on an annual renewable basis. Such rentals
aggregated $4,513, $4,074 and $3,469 for 1993, 1992 and 1991,
respectively.
Certain commission and marketing services expenses are allocated to
the Company by its affiliates. The expenses for 1993, 1992 and
1991 were $127,000, $110,064 and $95,367, respectively. Certain of
the costs assessed to the Company are included in deferred policy
acquisition costs.
<PAGE>
PAGE 30
6. Commitments and contingencies
At Dec. 31, 1993 and 1992, traditional life insurance and universal
life-type insurance in force aggregated $46,125,515 and
$40,904,345, respectively, of which $3,038,426 and $2,937,590 were
reinsured at the respective year ends. The Company also reinsures
a portion of the risks assumed under disability income policies.
Under the agreements, premiums ceded to reinsurers amounted to
$28,276, $24,222 and $16,908 and reinsurance recovered from
reinsurers amounted to $3,345, $6,766 and $6,447 for the years
ended Dec. 31, 1993, 1992 and 1991.
Reinsurance contracts do not relieve the Company from its primary
obligation to policyholders.
The Company is a defendant in various lawsuits, none of which, in
the opinion of the Company counsel, will result in a material
liability.
The Company received the revenue agent's report for the tax years
1984 through 1986 in February 1992, and has settled on all agreed
audit issues. The Company will protest the remaining open issues
and, while the outcome of the appeal is not known at this time,
management does not believe there will be any material impact as a
result of this audit.
7. Lines of credit
The Company has available lines of credit with two banks
aggregating $75,000 at 45 to 80 basis points over the banks' cost
of funds or equal to the prime rate, depending on which line of
credit agreement is used. Borrowings outstanding under these
agreements were $1,519 and $nil at Dec. 31, 1993 and 1992,
respectively.
8. Segment information
The Company's operations consist of two business segments; first,
individual and group life insurance, disability income, health and
long-term care insurance, and second, annuity products designed for
individuals, pension plans, small businesses and employer-sponsored
groups. The consolidated statement of income for the years ended
Dec. 31, 1993, 1992 and 1991 and total assets at Dec. 31, 1993,
1992 and 1991 by segment are summarized as follows:
<PAGE>
PAGE 31
8. Segment information (continued)
<TABLE>
<CAPTION>
1993 1992 1991
___________________________________________________________________________________________________________
<S> <C> <C> <C>
Net investment income:
Life, disability income, health and long-term care insurance $ 250,224 $ 246,676 $ 233,828
Annuities 1,532,995 1,370,145 1,189,038
___________________________________________________________________________________________________________
$ 1,783,219 $ 1,616,821 $ 1,422,866
___________________________________________________________________________________________________________
Premiums and other considerations:
Life, disability income and long-term care insurance $ 281,284 $ 250,386 $ 220,754
Annuities 143,876 104,952 79,928
___________________________________________________________________________________________________________
$ 425,160 $ 355,338 $ 300,682
___________________________________________________________________________________________________________
Income before income taxes:
Life, disability income, health and long-term care insurance $ 104,127 $ 96,215 $ 90,050
Annuities 315,336 223,316 175,254
Net loss on investments (6,737) (3,710) (5,837)
___________________________________________________________________________________________________________
$ 412,726 $ 315,821 $ 259,467
___________________________________________________________________________________________________________
Total assets:
Life, disability income, health and long-term care insurance $ 4,810,145 $ 4,093,778 $ 3,670,197
Annuities 28,247,608 23,201,995 18,888,612
___________________________________________________________________________________________________________
$33,057,753 $27,295,773 $22,558,809
___________________________________________________________________________________________________________
</TABLE>
Allocations of net investment income and certain general expenses
are based on various assumptions and estimates.
Assets are not individually identifiable by segment and have been
allocated principally based on the amount of future policy benefits
by segment.
Capital expenditures and depreciation expense are not material, and
consequently, are not reported.
<PAGE>
PAGE 32
Annual Financial Information
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying consolidated balance sheets of IDS
Life Insurance Company (a wholly owned subsidiary of IDS Financial
Corporation) as of December 31, 1993 and 1992, and the related
consolidated statement of income and cash flows for each of the
three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of IDS Life Insurance Company at December 31, 1993 and
1992, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31,
1993, in conformity with generally accepted accounting principles.
Ernst & Young
Minneapolis, Minnesota
February 3, 1994
<PAGE>
PAGE 33
1994 ANNUAL REPORT
Single Premium Variable Life Insurance Policy
IDS Life Insurance Company
IDS Tower 10
Minneapolis, Minnesota 55440-0010
