SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-6
File No. 333-69777
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
A. Exact name of trust: IDS Life Variable Life Separate Account
B. Name of depositor: IDS LIFE INSURANCE COMPANY
C. Complete address of depositor's principal executive offices:
IDS Tower 10, Minneapolis, Minnesota 55440-0010
D. Name and complete address of agent for service:
Mary Ellyn Minenko, Esq.
IDS Life Insurance Company
IDS Tower 10
Minneapolis, Minnesota 55440-0010
It is proposed that this filing become effective April 23, or as soon as
practicable.
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b) or as soon as practicable
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
E. Title of securities being registered:
Flexible Premium Variable Life Insurance Policy
F. Approximate date of proposed public offering: as soon as practicable
<PAGE>
Prospectus April __, 1999
IDS Life Variable Life Separate Account
Issued and sold by: IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440
Telephone: 800-862-7919
web site address: http://www.americanexpress.com/advisors
This prospectus contains information about the life insurance policy that you
should know before investing. You also will receive prospectuses for the
underlying funds that are investment options under your policy. Please read all
prospectuses carefully and keep them for future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
An investment in this policy is not a deposit of a bank or financial institution
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. An investment in this policy involves investment
risk including possible loss of principal.
<PAGE>
Table of contents
The policy in brief 3
Key terms 6
The variable account 9
The funds 10
IDS Life Series Fund - Equity Portfolio 10
IDS Life Series Fund - Income Portfolio 10
IDS Life Series Fund - Money Market Portfolio 10
IDS Life Series Fund - Managed Portfolio 10
IDS Life Series Fund - Government
Securities Portfolio 10
IDS Life Series Fund - International Equity Portfolio 10
IDS Life Series Fund - Equity Income Portfolio 11
AIM V.I. Growth and Income Fund 11
Putnam VT New Opportunities Fund-
Class IA Shares 11
Putnam VT High Yield Fund - Class IB Shares 11
Warburg Pincus Trust/Small Company
Growth Portfolio 11
American Century VP Value 12
Templeton International Fund - Class 2 12
Fund objectives 12
Relationship between funds and subaccounts 13
Rates of return of the funds and subaccounts 14
The fixed account 16
Purchasing your policy 17
Application 17
Right to examine policy 17
Premiums 18
Keeping the policy in force 19
No lapse guarantee 19
Grace period 19
Reinstatement 20
Loads, fees and charges 21
Premium expense charge 21
Monthly deduction 21
Surrender charge 23
Partial surrender fee 26
Mortality and expense risk charge 26
Fund expenses 27
Policy value 28
Fixed account value 28
Subaccount values 28
Proceeds payable upon death 31
Change in death benefit option 32
Changes in specified amount 33
Misstatement of age or sex 34
Suicide 35
Beneficiary 35
<PAGE>
Transfers between the fixed account and subaccounts 36
Fixed account transfer policies 36
Minimum transfer amounts 36
Maximum transfer amounts 36
Maximum number of transfers per year 36
Two ways to request a transfer, loan or surrender 37
Automated transfers 37
Automated dollar-cost averaging 38
Policy loans 39
Policy surrenders 41
Total surrenders 41
Partial surrenders 41
Allocations of partial surrenders 41
Effects of partial surrenders 41
Taxes 42
Exchange right 42
Optional insurance benefits 43
Waiver of monthly deduction 43
Accidental death benefit 43
Other insured rider 43
Children's insurance rider 43
Automatic increase benefit rider 43
Accelerated benefit rider for terminal illness 43
Payment of policy proceeds 44
Federal taxes 48
IDS Life's tax status 48
Taxation of policy proceeds 48
Modified endowment contracts 49
Other tax considerations 51
IDS Life 52
Ownership 52
State regulation 52
Distribution of the policy 52
Legal proceedings 53
Year 2000 54
Experts 54
Management of IDS Life 55
Other fund managers 56
Other information 57
Substitution of investments 57
Voting rights 57
Reports 58
Policy illustrations 59
<PAGE>
The policy in brief
Purpose:
The purpose of the policy is to provide life insurance protection on the life of
the insured and to build policy value. The policy provides a death benefit that
we pay to the beneficiary upon the insured's death. As in the case of other life
insurance policies, it may not be advantageous to purchase this policy as a
replacement for, or in addition to an existing life insurance policy.
The policy allows you, as the owner, to allocate your net premiums, or transfer
policy value, to:
The variable account, consisting of subaccounts, each of which invests in a
fund with a particular investment objective. You may direct premiums to any
or all of 13 of these subaccounts. Your policy's value may increase or
decrease daily, depending on the investment return. No minimum amount is
guaranteed. (p.)
The fixed account, which earns interest at rates that are adjusted
periodically by IDS Life. This rate will never be lower than 4.0%. (p.)
Loads, fees and charges:
You pay the following charges, either directly (such as deductions from your
premium payments or from your policy value), or indirectly (as deductions from
the underlying funds). These charges primarily compensate IDS Life for
administering and distributing the policy as well as paying policy benefits and
assuming related risks:
o Premium expense charge -- deducted from each premium payment to cover some
distribution expenses, state and local premium taxes, and federal taxes.
o Monthly deduction -- charged against the value of your policy each month
(prior to the insured's attained insurance age 100), covering the cost of
insurance, cost of issuing the policy, certain administrative expenses and
optional insurance benefits.
o Surrender charge -- applies if you surrender your policy for its full cash
surrender value, or the policy lapses, during the first 10 years and for 10
years after requesting an increase in the specified amount. We base it on
the initial specified amount and on any increase in the specified amount.
o Partial surrender fee -- applies if you surrender part of the value of your
policy; equals $25 or 2% of the amount surrendered, whichever is less.
o Mortality and expense risk charge -- applies only to the subaccounts;
equals, on an annual basis, 0.9% of the average daily net asset value of
the subaccounts for the first 10 policy years and 0.45% thereafter. We
reserve the right to charge up to 0.9% for all policy years.
o Fund expenses -- apply only to the underlying funds and consists of
investment management fees, taxes, brokerage commissions and nonadvisory
expenses. (p.)
Purchasing your policy:
To apply, send a completed application and premium payment to IDS Life's home
office. You will need to provide medical and other evidence that the person you
propose to insure (yourself or someone else) is insurable according to our
underwriting rules before we can accept your application. (p.)
Right to examine policy:
You may return your policy for any reason and receive a full refund of your
premiums by mailing us the policy and a written request for cancellation within
a specified period. (p.)
<PAGE>
Premiums:
In applying for your policy, you state how much you intend to pay and whether
you will pay quarterly, semiannually or annually. You may also make additional,
unscheduled premium payments subject to certain limits. You cannot make premium
payments on or after the insured's attained insurance age 100. We may refuse
premiums in order to comply with the Code. (p.)
No lapse guarantee:
A feature of the policy guaranteeing the policy will remain in force until the
insured's attained insurance age 70 (or five policy years, if later) (always
five policy years if the policy is purchased in Massachusetts or Texas). The
feature is in effect if you meet certain premium requirements. (p.)
Grace period:
If the cash surrender value of your policy becomes less than the amount needed
to pay the monthly deduction and the no lapse guarantee is not in effect, you
will have 61 days to pay a premium that raises the cash surrender value to an
amount sufficient to pay the monthly deduction. If you don't, the policy will
lapse. (p.)
Reinstatement:
If your policy lapses, it can be reinstated within five years. The reinstatement
is subject to certain conditions including evidence of insurability satisfactory
to IDS Life and the payment of a sufficient premium. (p.)
Proceeds payable upon death:
Prior to the insured's attained insurance age 100, your policy's death benefit
can never be less than the specified amount, unless you change that amount or
your policy has outstanding indebtedness. The relationship between the policy
value and the death benefit depends on which of two options you choose:
o Option 1 level amount: The death benefit is the greater of the specified
amount or a percentage of policy value.
o Option 2 variable amount: The death benefit is the greater of the specified
amount plus the policy value or a percentage of policy value.
You may change the death benefit option or specified amount within certain
limits; doing so generally will affect policy charges. On or after the insured's
attained insurance age 100, the proceeds payable upon the death of the insured
will be the cash surrender value. (p.)
Transfers between the fixed account and subaccounts:
You may, at no charge, transfer policy value from one subaccount to another or
between subaccounts and the fixed account. (Certain restrictions apply to
transfers involving the fixed account.) You also can arrange for automated
transfers among the fixed account and subaccounts. (p.)
Policy loans:
You may borrow against your policy's cash surrender value. A policy loan, even
if repaid, can have a permanent effect on the death benefit and policy value. A
loan may have tax consequences if your policy lapses or you surrender it. (p.)
Policy surrenders:
You may cancel this policy while it is in force and receive its cash surrender
value. The cash surrender value is the policy value minus indebtedness, minus
any applicable surrender charges. (p.)
<PAGE>
Exchange right:
For two years after the policy is issued, you can exchange it for one that
provides benefits that do not vary with the investment return of the
subaccounts. Because the policy itself offers a fixed return option, all you
need do is transfer all of the policy value in the subaccounts to the fixed
account. In Connecticut, during the first 18 months after the policy is issued,
you have the right to exchange the policy for a policy of permanent fixed
benefit life insurance. (p.)
Payment of policy proceeds:
We will pay policy proceeds when you surrender the policy or the insured dies.
You or the beneficiary may choose whether you want us to make a lump sum payment
or payments under one or more of certain options. (p.)
Federal taxes:
The death benefit is not considered part of the beneficiary's income and
therefore is not subject to federal income taxes. When the proceeds are paid
after the insured's attained insurance age 100, if the amount received plus any
indebtedness exceeds your investment in the policy, the excess may be taxable as
ordinary income. Part or all of any proceeds you receive through full or partial
surrender, lapse, policy loan or assignment of policy value may be subject to
federal income tax as ordinary income. Proceeds other than death benefits from
certain policies, classified as "modified endowments," are taxed differently
from proceeds of conventional life insurance contracts and also may be subject
to an additional 10% IRS penalty tax if you are younger than 591/2. A policy is
considered to be a modified endowment if it was applied for or materially
changed after June 21, 1988, and premiums paid in the early years exceed certain
modified endowment limits. (p.)
<PAGE>
Key terms
These terms can help you understand details about your policy.
Accumulation unit: An accounting unit used to calculate the policy value of the
subaccounts prior to the insured's death.
Attained insurance age: The insured's insurance age plus the number of policy
anniversaries since the policy date. Attained insurance age changes only on a
policy anniversary.
Cash surrender value: Proceeds received if you surrender the policy in full, or
the amount payable if the insured's death occurs on or after the insured has
attained insurance age 100. The cash surrender value equals the policy value
minus indebtedness and any applicable surrender charges.
Close of business: Closing time of the New York Stock Exchange, normally 3 p.m.,
Central time.
Code: The Internal Revenue Code of 1986, as amended.
Fixed account: The general investment account of IDS Life. The fixed account is
made up of all of IDS Life's assets other than those held in any separate
account.
Fixed account value: The portion of the policy value that you allocate to the
fixed account, including indebtedness.
Funds: Mutual funds or portfolios, each with a different investment objective.
(See "The funds"). Each of the subaccounts of the variable account invests in a
specific one of these funds.
IDS Life: In this prospectus, "we", "us", "our" and "IDS Life" refer to IDS Life
Insurance Company.
Indebtedness: All existing loans on the policy plus interest that has either
been accrued or added to the policy loan.
Insurance age: The insured's age, based upon his or her last birthday on the
date of the application.
Insured: The person whose life is insured by the policy.
Minimum monthly premium: The premium required to keep the NLG in effect. We show
minimum monthly premium in your policy.
<PAGE>
Monthly date: The same day each month as the policy date. If there is no monthly
date in a calendar month, the monthly date is the first day of the next calendar
month.
Net amount at risk: A portion of the death benefit, equal to the total current
death benefit minus the policy value. This is the amount to which we apply cost
of insurance rates in determining the monthly cost of insurance.
Net premium: The premium paid minus the premium expense charge.
No lapse guarantee (NLG): A feature of the policy guaranteeing that the policy
will not lapse before the insured has attained insurance age 70 (or five policy
years, if later) (always five policy years if the policy is purchased in
Massachusetts or Texas). The guarantee is in effect if you meet certain premium
payment requirements.
Owner: The entity(ies) to which, or individual(s) to whom, we issue the policy
or to whom you subsequently transfer ownership. In the prospectus "you" and
"your" refer to the owner.
Policy anniversary: The same day and month as the policy date each year the
policy remains in force.
Policy date: The date we issue the policy and from which we determine policy
anniversaries, policy years and policy months.
Policy value: The sum of the fixed account value plus the variable account
value.
Proceeds: The amount payable under the policy as follows:
o Upon death of the insured prior to the date the insured has attained
insurance age 100, proceeds will be the death benefit in effect as of the
date of the insured's death, minus any indebtedness.
o Upon the death of the insured on or after the insured has attained
insurance age 100, proceeds will be the cash surrender value.
o On surrender of the policy, the proceeds will be the cash surrender value.
Risk classification: A group of insureds that IDS Life expects will have similar
mortality experience.
Scheduled premium: A premium you select at the time of application, of a level
amount, at a fixed interval of time.
Specified amount: An amount we use to determine the death benefit and the
proceeds payable upon death of the insured prior to the insured's attained
insurance age 100. We show the initial specified amount in your policy.
Subaccount(s): One or more of the investment divisions of the variable account,
each of which invests in a particular fund.
Surrender charge: A charge we assess against the policy value at the time of
surrender, or if the policy lapses, during the first 10 years of the policy and
for 10 years after an increase in coverage.
<PAGE>
Valuation date: A normal business day, Monday through Friday, on which the New
York Stock Exchange is open. We set the value of each subaccount at the close of
business on each valuation date.
Valuation period: The interval commencing at the close of business on each
valuation date and ending at the close of business on the next valuation date.
Variable account: IDS Life Variable Life Separate Account consisting of
subaccounts, each of which invests in a particular fund. The policy value in
each subaccount depends on the performance of the particular fund.
Variable account value: The sum of the values that you allocate to the
subaccounts of the variable account.
<PAGE>
The variable account
We established the variable account on October 16, 1985 under Minnesota law. It
is registered as a single unit investment trust under the Investment Company Act
of 1940. The variable account consists of a number of subaccounts, each of which
invests in shares of a particular fund. This registration does not involve any
SEC supervision of the account's management or investment practices or policies.
The variable account meets the definition of a separate account under federal
securities laws. Income, capital gains or capital losses of each subaccount are
credited to or charged against the assets of that subaccount alone. State
insurance law provides that we will not charge a variable subaccount with
liabilities of any other subaccount or of any other business conducted by IDS
Life. Other variable life insurance policies that are not described in this
prospectus also invest in subaccounts of the variable account. At all times, IDS
Life will maintain assets in the subaccounts with total market value at least
equal to the reserves and other liabilities required to cover insurance benefits
under all policies participating in the subaccount.
The U.S. Treasury and the IRS indicated they may provide additional guidance on
investment control. This concerns how many subaccounts an insurance company may
offer and how many exchanges among subaccounts it may allow before the owner
would be currently taxed on income earned within subaccount assets. We do not
know what the additional guidance will be or when action will be taken. We
reserve the right to modify the policy, as necessary, so that the owner will not
be subject to current taxation as the owner of the subaccount assets.
<PAGE>
The funds
You can direct your premiums to any or all of the subaccounts of the variable
account that invest in shares of the following funds:
IDS Life Series Fund, Inc.
IDS Life Series Fund, Inc., a Minnesota corporation, is a diversified, open-end
management investment company incorporated on May 8, 1985. The IDS Life Series
Fund International Equity Portfolio was added on October 24, 1994. The IDS Life
Series Fund Equity Income Portfolio was added on April 26, 1999. IDS Life
acts as the investment manager and American Express Financial Corporation acts
as the investment advisor of the IDS Life Series Fund, Inc. American Express
Trust Company acts as custodian of the IDS Life Series Fund, Inc.'s investments.
o IDS Life Series Fund-Equity Portfolio
Objective: capital appreciation. Invests primarily in common stocks
and other securities convertible into common stock.
o IDS Life Series Fund-Income Portfolio
Objective: to maximize current income while attempting to conserve the
value of the investment and to continue the high level of income for
the longest period of time. At least 50% of net assets normally will
be invested in high-quality, lower-risk corporate bonds, unrated
corporate bonds believed to have the same investment qualities and
government bonds. Other investments may include lower-rated corporate
bonds, bonds and common stocks sold together as a unit, preferred
stock and foreign securities.
o IDS Life Series Fund-Money Market Portfolio
Objective: to provide maximum current income consistent with liquidity
and conservation of capital. Invests in relatively short-term money
market securities, such as marketable debt securities issued or
guaranteed as to principal and interest by the U.S. government or its
agencies or instrumentalities, bank certificates of deposit, bankers'
acceptances, letters of credit and high-grade commercial paper.
o IDS Life Series Fund-Managed Portfolio
Objective: to maximize total investment return through a combination
of capital appreciation and current income. If the investment manager
believes the stock market will be moving higher, it can emphasize
stocks that offer potential for appreciation. At other times, the
manager may increase the portfolio's holdings in bonds and
money-market securities providing high current income.
o IDS Life Series Fund-Government Securities Portfolio
Objective: to provide a high current return and safety of principal.
Invests primarily in debt obligations issued or guaranteed as to
principal and interest by the U.S. government, its agencies and
instrumentalities.
o IDS Life Series Fund-International Equity Portfolio
Objective: capital appreciation. Invests primarily in common stocks of
foreign issuers and foreign securities convertible into common stock.
Other investments may include certain international bonds if the
portfolio manager believes they have greater potential for capital
appreciation than equities.
<PAGE>
o IDS Life Series Fund-Equity Income Portfolio
Objective: to provide a high level of current income and, as a
secondary goal, steady growth of capital. Invests primarily in
dividend-paying stocks. Other investments may include: common stocks,
foreign securities, convertible securities, debt securities,
derivative instruments and money market instruments.
AIM Variable Insurance Funds, Inc.
AIM Variable Insurance Funds, Inc., a Maryland corporation, is an open-end,
series, management investment company incorporated on January 22, 1993. A I M
Advisors, Inc. acts as the investment advisor for AIM Variable Insurance Funds,
Inc.
o AIM V.I. Growth and Income Fund
Objective: growth of capital with a secondary objective of current
income.
Putnam Variable Trust
Putnam Variable Trust is a Massachusetts business trust organized on September
24, 1987. Putnam Investment Management, Inc. ("Putnam Management") acts as the
investment manager for the Putnam Variable Trust.
o Putnam VT New Opportunities Fund - Class IA Shares
Objective: long term capital appreciation. Invests principally in
common stocks of companies in sectors of the economy which Putnam
Management believes possess above-average, long-term growth potential.
o Putnam VT High Yield Fund - Class IB Shares
Objective: high current income and, when consistent with this
objective, a secondary objective of capital growth, by investing
primarily in high-yielding, lower-rated fixed income securities
constituting a portfolio which Putnam Management believes does not
involve undue risk to income or principal. See the special
considerations for investments in high yield securities described in
the Putnam Variable Trust prospectus.
Warburg Pincus Trust
Warburg Pincus Trust is a Massachusetts business trust organized on March 15,
1995. Warburg Pincus Asset Management, Inc. acts as investment advisor for
Warburg Pincus Trust.
o Warburg Pincus Trust/Small Company Growth Portfolio
Objective: capital growth. Invests primarily in equity securities of
small-sized domestic companies.
<PAGE>
American Century Variable Portfolios, Inc.
American Century Variable Portfolios, Inc., a Maryland Corporation, is a
diversified, open-end management investment company incorporated on June 4,
1987. American Century Investment Management, Inc. acts as investment manager
for American Century Variable Portfolios, Inc.
o American Century VP Value
Objective: long-term capital growth, with income as a secondary
objective. Invests primarily in securities that management believes to
be undervalued at the time of purchase.
Templeton Variable Products Series Fund
Templeton Variable Products Series Fund, a Massachusetts business trust
organized on Feb. 25, 1988, is an open-end management investment company.
o Templeton International Fund - Class 2
Objective: long-term capital growth through a flexible policy of
investing in stocks and debt obligations of companies and governments
outside the United States. Templeton Investment Counsel, Inc. acts as
investment manager for the Fund.
Fund objectives
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives nor is there any guarantee that your policy value
will equal or exceed the total premiums you paid. You can find detailed
information about the funds, their investment objectives, policies and risks in
the accompanying fund prospectuses. Please read these prospectuses carefully and
consider, on a continuing basis, which funds best suit your long-term investment
needs. Some funds involve more risk than others, so please monitor your
investment.
The investment objectives and policies of some of the funds may be similar to
the investment objectives and policies of other funds that the investment
managers or advisors or their affiliates manage. Although the objectives and
policies may be similar, the investment results of one fund may be higher or
lower than the results of the other fund. The investment manager or advisor
cannot guarantee, and makes no representation, that the investment results of
similar funds will be comparable even if the funds have the same investment
adviser, manager or sponsor.
Shares of all funds except the IDS Life Series Fund Portfolios are available to
serve as the underlying investment for variable life insurance policies,
variable annuities and qualified plans. Currently the shares of the IDS Life
Series Fund Portfolios are available to serve as the underlying investment for
variable life insurance only. However, in the future these shares also may be
available to serve as the underlying investment for variable life insurance
contracts, variable annuities and qualified plans. It is possible that in the
future it may not be an advantage for variable life insurance separate accounts,
variable annuity separate accounts, and/or qualified plans to invest in the
available funds simultaneously. Although IDS Life and the funds do not currently
foresee any such disadvantages, the boards of directors or trustees of the
appropriate funds will monitor events in order to identify any material
conflicts between such policy owners, contract owners and qualified plans to
<PAGE>
determine what action, if any, they should take in response to a conflict. If a
board were to conclude that separate funds should be established for variable
life insurance, variable annuity and qualified plan separate accounts, the
variable life insurance policy holders would not bear any expenses associated
with establishing separate accounts. Please refer to the fund prospectuses for
risk disclosure regarding mixed and shared funding.
Diversification: The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under Section 817(h) of the Code.
Each fund intends to comply with these requirements.
Relationship between funds and subaccounts
Each subaccount buys shares of the appropriate fund at net asset value without a
sales charge. Dividends and capital gain distributions from a fund are
reinvested at net asset value without a sales charge and held by the subaccount
as an asset. Each subaccount redeems fund shares without a charge to the extent
necessary to make death benefit or other payments under the policy.
<PAGE>
Rates of return of the funds and subaccounts
This section presents rates of return first for the funds, and then for the
corresponding subaccounts. Rates of return are different in the two cases
because those of the subaccounts reflect additional charges. All charges and
expenses mentioned in the section are explained fully under "Loads, fees and
charges".
Rates of return of the funds:
In the following table are average annual rates of return based on the actual
investment performance of the funds after deduction of applicable fund charges
(including the investment management fees and nonadvisory expenses) for the
periods indicated assuming reinvestment of dividends and capital gains. These
rates do not reflect charges that apply to the subaccounts or the policy and
therefore do not illustrate how actual investment performance will affect policy
benefits. If these charges were reflected, the illustrated rates of return would
have been lower. Past performance does not guarantee future results.
<TABLE>
<CAPTION>
Period ending 12/31/98
10 years or since
Fund 1 year 3 years 5 years commencement
<S> <C> <C> <C> <C>
IDS Life Series Fund, Inc.
Equity Portfolio (Beta 1.16*) (1/86)** 9.05% 16.57% 17.64% 18.05%
Income Portfolio (1/86)** 5.46 5.63 6.41 8.91
Money Market Portfolio (1/86)** 5.04 4.97 4.74 5.19
Managed Portfolio (Beta 0.72*) (1/86)** 14.43 15.61 13.11 16.44
Government Securities Portfolio (1/86)** 8.32 6.08 6.03 8.60
International Equity Portfolio (10/94)** 21.51 19.09 -- 28.00
Equity Income Portfolio (5/99)** -- -- -- --
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth and Income Fund (5/94)** 27.68 -- -- 22.49
Putnam Variable Trust
Putnam VT New Opportunities Fund-
Class IA Shares (5/94)** 24.38 -- -- 23.19
Putnam VT High Yield Fund -
Class IB Shares + (4/98)** -5.92 -- -- 9.62
Warburg Pincus Trust
Warburg Pincus Trust/
Small Company Growth Portfolio (6/95)** -2.85 -- -- 14.35
American Century Variable Portfolios, Inc.
American Century VP Value (5/96)** 4.81 -- -- 15.94
Templeton Variable Products Series Fund
Templeton International Fund - Class 2 (5/97)** 9.08 -- -- 11.21
</TABLE>
* Beta is a volatility measure based on calculations of the fund's monthly
return compared to the S&P 500 Index. A beta less than 1 indicates performance
that is less volatile than the market; A beta more than 1 indicates performance
that is more volatile than the market.
** (Commencement date of the fund.)
+ Returns for Class IBShares for periods prior to their inception are derived
from the historical performance of Class IAShares, adjusted to reflect the
applicable contingent deferred sales charge (CDSC) and the higher operating
expenses applicable to such shares.
<PAGE>
Rates of return of subaccounts:
Average annual rates of return in the following table reflect all charges
incurred by the funds and charges against the subaccounts (including the
mortality and expense risk charge.) The rates do not reflect the premium expense
charge, surrender charge or monthly deduction. If these charges were reflected,
the illustrated rates of return would have been lower.
We show actual performance from the date the subaccounts began investing in the
funds. For some subaccounts, we do not provide any performance information
because they are new and have not had any activity to date. Although we base
performance figures on historical earnings, past performance does not guarantee
future results.
<TABLE>
<CAPTION>
Period ending 12/31/98
Since commencement of the subaccounts
10 years or since
Subaccount Investing in: 1 year 3 years 5 years commencement
<S> <C> <C> <C> <C> <C>
IDS Life Series Fund, Inc.
U Equity Portfolio (1/86)* 8.08% 15.52% 16.58% 16.94%
V Income Portfolio (1/86)* 4.56 4.71 5.48 7.95
W Money Market Portfolio (1/86)* 4.12 4.09 3.87 4.29
X Managed Portfolio (1/86)* 13.40 14.63 12.09 15.29
Y Government Securitie Portfolio (1/86)* 7.38 5.15 5.10 7.64
IL International Equity Portfolio (10/94)* 20.42 15.94 -- 19.59
FEI Equity Income Portfolio (5/99)* -- -- -- --
AIM Variable Insurance Funds, Inc.
FGI AIMV.I. Growth and Income Fund (11/96)* 26.54 -- -- 24.22
Putnam Variable Trust
FNO Putnam VT New Opportunities Fund -
Class IA Shares (11/96)* 23.27 -- -- 20.12
FPH Putnam VT High Yield Fund - Class IB Shares (5/99)* -- -- -- --
Warburg Pincus Trust
FSC Warburg Pincus Trust/Small
Company Growth Portfolio (5/99)* -- -- -- --
American Century Variable Portfolios, Inc.
FVL American Century VP Value (5/99)* -- -- -- --
Templeton Variable Products Series Fund
FIF Templeton International Fund -
Class 2 (5/99)* -- -- -- --
</TABLE>
*(Commencement date of the subaccount.)
<PAGE>
The fixed account
You can allocate premiums to the fixed account or transfer policy value from the
subaccounts to the fixed account (with certain restrictions, explained in
"Transfers between the fixed account and subaccounts").
The fixed account is the general investment account of IDS Life. It includes all
assets owned by IDS Life other than those in the variable account and other
separate accounts. Subject to applicable law, IDS Life has sole discretion to
decide how assets of the fixed account will be invested.
Placing policy value in the fixed account does not entitle you to share in the
fixed account's investment experience, nor does it expose you to the account's
investment risk. Instead, IDS Life guarantees that the policy value you place in
the fixed account will accrue interest at an effective annual rate of at least
4.0%, independent of the actual investment experience of the account. IDS Life
bears the full investment risk for amounts allocated to the fixed account. IDS
Life is not obligated to credit interest at any rate higher than 4.0%, although
we may do so at our sole discretion.
We will not credit interest in excess of 4.0% on any portion of policy value in
the fixed account against which you have a policy loan outstanding.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 and the fixed account
has not been registered as an investment company under the Investment Company
Act of 1940. Accordingly, neither the fixed account nor any interests in it are
subject to the provisions of these Acts and the staff of the SEC has not
reviewed the disclosures in this prospectus relating to the fixed account.
Disclosures regarding the fixed account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
<PAGE>
Purchasing your policy
Application
To apply for coverage, complete an application and send it with your premium
payment to IDS Life's home office. In your application, you:
o select a specified amount of insurance;
o select a death benefit option;
o designate a beneficiary; and
o state how premiums are to be allocated among the fixed account and/or
the subaccounts.
Insurability: Before issuing your policy, we require satisfactory evidence of
the insurability of the person whose life you propose to insure (yourself or
someone else). Our underwriting department will review your application and any
medical information or other data required to determine whether the proposed
individual is insurable under our underwriting rules. We may decline your
application if we determine the individual is not insurable and we will return
any premium you have paid.
Age limit: IDS Life generally will not issue a policy where the proposed insured
is over the insurance age of 80. We may, however, do so at our sole discretion.
Risk classification: The risk classification is based on the insured's health,
occupation or other relevant underwriting standards. This classification will
affect the monthly deduction and may affect the cost of certain optional
insurance benefits. (See "Loads, fees and charges" and "Optional insurance
benefits").
Other conditions: In addition to proving insurability, you and the insured must
also meet certain conditions, stated in the application form, before coverage
will become effective and your policy will be delivered to you.
Incontestability: IDS Life will have two years from the effective date of your
policy to contest the truth of statements or representations in your
application. After the policy has been in force during the insured's lifetime
for two years from the policy date, we cannot contest the policy.
Right to examine policy
You may return your policy for any reason and receive a full refund of all
premiums paid. To do so, you must mail or deliver the policy to IDS Life home
office or your financial advisor with a written request for cancellation:
o by the 10th day after you receive it (15th day in Colorado, 20th day in
Idaho and North Dakota).
On the date your request is postmarked or received, the policy will immediately
be considered void from the start.
<PAGE>
Premiums
Payment of premiums:
In applying for your policy, you decide how much you intend to pay and how often
you will make payments. During the first several policy years until the policy
value is sufficient to cover the surrender charge, IDS Life requires that you
pay premiums sufficient to keep the NLG in effect in order to keep the policy in
force.
You may schedule payments annually, semiannually or quarterly. (IDSLife must
approve payment at any other interval.) We show this premium schedule in your
policy.
The scheduled premium serves only as an indication of your intent as to the
frequency and amount of future premium payments. You may skip scheduled premium
payments at any time if your cash surrender value is sufficient to pay the
monthly deduction or if you have paid sufficient premiums to keep the no lapse
guarantee in effect.
You may also change the amount and frequency of scheduled premium payments by
written request. IDS Life reserves the right to limit the amount of such
changes. Any change in the premium amount is subject to applicable tax laws and
regulations.
Although you have flexibility in paying premiums, the amount and frequency of
your payments will affect the policy value, cash surrender value and length of
time your policy will remain in force, as well as affect whether the no lapse
guarantee remains in effect.
Premium limitations:
You may make unscheduled premium payments at any time and in any amount of at
least $25. IDS Life reserves the right to limit the number and amount of
unscheduled premium payments. No premium payments, scheduled or unscheduled, are
allowed on or after the insured's attained insurance age 100.
Also, in order to receive favorable tax treatment under the Code, premiums you
pay during the life of the policy must not exceed certain limitations. To comply
with the Code, we can either refuse excess premiums as you pay them or refund
excess premiums with interest no later than 60 days after the end of the policy
year in which they were paid.
Allocation of premiums:
Until the policy date, we hold all premiums in the fixed account and we credit
interest on the net premiums (gross premiums minus premium expense charge) at
the current fixed account rate. As of the policy date, we will allocate the net
premiums plus accrued interest to the account(s) you have selected in your
application. At that time, we will begin to assess the various loads, fees,
charges and expenses.
We convert any amount that you allocate to a subaccount into accumulation units
of that subaccount, as explained under "Policy value." Similarly, when you
transfer value between subaccounts, we convert accumulation units in one
subaccount into a cash value, which we then convert into accumulation units of
the second subaccount.
<PAGE>
Keeping the policy in force
No lapse guarantee
The NLG provides that your policy will remain in force until the insured's
attained age 70
(or five policy years, if later) (always five policy years if the policy is
purchased in Massachusetts or Texas) even if the cash surrender value is
insufficient to pay the monthly deduction. The NLG will stay in effect as long
as:
o the sum of premiums paid; minus
o partial surrenders; minus
o outstanding indebtedness; equals or exceeds
o the minimum monthly premiums due since the policy date.
The minimum monthly premium is shown in the policy.
If, on a monthly date, you have not paid enough premiums to keep the no lapse
guarantee in effect, the NLGwill terminate. In addition, your policy will lapse
(terminate) if the cash surrender value is less than the amount needed to pay
the monthly deduction.
The no lapse guarantee period may be reinstated within 2 years of its
termination if the policy is in force.
Grace period
If on a monthly date the cash surrender value of your policy is less than the
amount needed to pay the next monthly deduction and the NLG is not in effect,
you will have 61 days to pay the required premium amount. If you do not pay the
required premium, the policy will lapse.
IDS Life will mail a notice to your last known address, requesting payment of
the premium needed so that we can make the next three monthly deductions. If we
receive this premium before the end of the 61-day grace period, we will use the
payment to cover all monthly deductions and any other charges then due. We will
add any balance to the policy value and allocate it in the same manner as other
premium payments.
If a policy lapses with outstanding indebtedness, any excess of the outstanding
indebtedness over the premium paid generally will be taxable to the owner. (See
"Federal taxes"). If the insured dies during the grace period, we will deduct
any overdue monthly deductions from the death benefit.
<PAGE>
Reinstatement
Your policy may be reinstated within five years after it lapses, unless you
surrendered it for cash. To reinstate, IDS Life will require:
o a written request;
o evidence satisfactory to IDS Life that the insured remains insurable;
o payment of the required reinstatement premium; and
o payment or reinstatement of any indebtedness.
The reinstatement premium is the required premium to reinstate the policy.
The effective date of a reinstated policy will be the monthly date on or next
following the day we accept your application for reinstatement. The suicide
period (see "Proceeds payable upon death") will apply from the effective date of
reinstatement (except in Georgia, Nebraska, Oklahoma, Pennsylvania, South
Carolina, Tennessee, Utah and Virginia.) Surrender charges will also be
reinstated.
We will have two years from the effective date of reinstatement to contest the
truth of statements or representations in the reinstatement application.
<PAGE>
Loads, fees and charges
Policy charges compensate IDS Life for:
o providing the insurance benefits of the policy;
o issuing the policy;
o administering the policy;
o assuming certain risks in connection with the policy; and
o distributing the policy.
We deduct some of these charges from your premium payments. We deduct others
periodically from your policy value in the fixed account and/or subaccounts. We
may also assess a charge if you surrender your policy or the policy lapses.
Premium expense charge
We deduct this charge from each premium payment. We credit the amount remaining
after the deduction, called the net premium, to the account(s) you have
selected. The premium expense charge is 5% of each premium payment. It partially
compensates IDS Life for expenses of distributing the policy, including agents'
commissions, advertising and printing of prospectuses and sales literature. (The
surrender charge, discussed under "Surrender charge," below also may partially
compensate these expenses.) It also compensates IDS Life for paying taxes
imposed by certain states and governmental subdivisions on premiums received by
insurance companies. All policies in all states are charged the same premium
expense charge even though state premium taxes vary.
Monthly deduction
On each monthly date we deduct from the value of your policy in the fixed
account and/or subaccounts an amount equal to the sum of:
1. the cost of insurance for the policy month;
2. the policy fee shown in your policy; and
3. charges for any optional insurance benefits provided by rider for the policy
month.
We explain each of the three components below.
You specify, in your policy application, what percentage of the monthly
deduction from 0% to 100% you want us to take from the fixed account and from
each of the subaccounts. You may change these percentages for future monthly
deductions by writing to us.
We will take monthly deductions from the fixed account and the subaccounts on a
pro rata basis if:
o you do not specify the accounts from which you want us to take the monthly
deduction, or
o the value in the fixed account or any subaccount is insufficient to pay the
portion of the monthly deduction you have specified.
<PAGE>
If the cash surrender value of your policy is not enough to cover the monthly
deduction on a monthly anniversary, the policy may lapse. However, the policy
will not lapse if the no lapse guarantee is in effect. (See "No lapse
guarantee;" also "Grace period" and "Reinstatement.")
Components of the monthly deduction:
1. Cost of insurance: primarily, the cost of providing the death benefit under
your policy.
It depends on:
o the amount of the death benefit;
o the policy value; and
o the statistical risk that the insured will die in a given period.
The cost of insurance for a policy month is calculated as:
[a x (b - c)] + d
where:
(a) is the monthly cost of insurance rate based on the insured's attained
insurance age, sex (unless unisex rates are required by law) and risk
classification. Generally, the cost of insurance rate will increase as the
insured's attained insurance age increases.
We set the rates based on our expectations as to future mortality experience. We
may change the rates from time to time; any change will apply to all individuals
of the same rate classification. However, rates will not exceed the Guaranteed
Maximum Monthly Cost of Insurance Rates shown in your policy, which are based on
the 1980 Commissioners Standard Ordinary Smoker and Nonsmoker Mortality Tables,
Age Last Birthday.
(b) is the death benefit on the monthly date divided by 1.0032737 (which reduces
IDS Life's net amount at risk, solely for computing the cost of insurance, by
taking into account assumed monthly earnings at an annual rate of 4.0%).
(c) is the policy value on the monthly date. At this point, the policy value has
been reduced by the policy fee, and any charges for optional riders.
(d) is any flat extra insurance charges we assess as a result of special
underwriting considerations.
2. Policy fee: $5 per month for initial specified amounts below $250,000, and $0
per month for initial specified amounts of $250,000 and above. This charge
reimburses IDS Life for expenses of issuing the policy, such as processing the
application (primarily underwriting) and setting up computer records; and of
administering the policy, such as processing claims, maintaining records, making
policy changes and communicating with owners. We reserve the right to change the
charge in the future, but guarantee that it will never exceed $7.50 per month.
3. Optional insurance benefit charges: charges for any optional benefits you add
to the policy by rider. (See "Optional insurance benefits.")
<PAGE>
Surrender charge
If you surrender your policy or the policy lapses during the first 10 policy
years and in the 10 years following an increase in specified amount, we will
assess a surrender charge.
The surrender charge reimburses IDS Life for costs of issuing the policy, such
as processing the application (primarily underwriting) and setting up computer
records. It also partially pays for commissions, advertising and printing the
prospectus and sales literature.
The surrender charge for the initial specified amount is shown in your policy.
It is based on the insured's insurance age, sex, risk classification and initial
specified amount. The surrender charge for the initial specified amount will
remain level during the first five policy years and then decrease monthly until
it is zero at the end of 10 policy years. If you increase the specified amount,
an additional surrender charge will apply. We will show the additional surrender
charge in a revised policy. It will be based on the insured's attained insurance
age, sex, risk classification and the amount of the increase. The additional
surrender charge will remain level during the first five years following the
effective date of the increase and then decrease monthly until it is zero at the
end of the 10th year following the increase.
The following example illustrates how we calculate the surrender charge is
calculated for a male, insurance age 35 qualifying for nonsmoker rates. We
assume the specified amount is assumed to be $100,000.
Lapse or surrender Surrender
at beginning of year Charge
1 $901.00
2 901.00
3 901.00
4 901.00
5 901.00
6 901.00
7 720.80
8 540.60
9 360.40
10 180.20
11 0.00
From the beginning of year 6 to the end of year 10, the amounts shown decrease
on a monthly basis.
<PAGE>
The surrender charge is the rate from the table below multiplied by the number
of thousands of dollars of initial specified amount. For example, a male age 20
with a nonsmoker risk classification and an initial specified amount of $50,000
will have a surrender charge of $6.61 multiplied by 50 or $330.50. As another
example, a female age 75 with a smoker risk classification and an initial
specified amount of $5,000,000 will have a surrender charge of $44.25 multiplied
by 5,000 or $221,250.
<TABLE>
<CAPTION>
Male Male Female Female
Age Standard Nonsmoker Standard Nonsmoker
<S> <C> <C> <C> <C>
0 5.44 N/A 5.13 N/A
1 5.40 N/A 5.11 N/A
2 5.45 N/A 5.14 N/A
3 5.50 N/A 5.18 N/A
4 5.55 N/A 5.22 N/A
5 5.61 N/A 5.27 N/A
6 5.67 N/A 5.31 N/A
7 5.73 N/A 5.36 N/A
8 5.81 N/A 5.42 N/A
9 5.88 N/A 5.47 N/A
10 5.96 N/A 5.53 N/A
11 6.05 N/A 5.60 N/A
12 6.14 N/A 5.66 N/A
13 6.23 N/A 5.73 N/A
14 6.33 N/A 5.81 N/A
15 6.43 N/A 5.88 N/A
16 6.52 N/A 5.96 N/A
17 6.62 N/A 6.04 N/A
18 6.72 N/A 6.13 N/A
19 6.82 N/A 6.22 N/A
20 7.47 6.61 6.61 6.19
21 7.60 6.70 6.72 6.29
22 7.74 6.81 6.84 6.38
23 7.89 6.92 6.97 6.48
24 8.05 7.04 7.10 6.59
25 8.22 7.16 7.24 6.71
26 8.41 7.30 7.39 6.83
27 8.61 7.45 7.54 6.95
28 8.82 7.60 7.70 7.09
29 9.05 7.77 7.88 7.23
30 9.29 7.94 8.06 7.38
31 9.55 8.13 8.25 7.54
32 9.83 8.33 8.46 7.70
33 10.12 8.54 8.67 7.88
34 10.44 8.77 8.90 8.07
35 10.77 9.01 9.14 8.26
36 11.12 9.26 9.39 8.47
37 11.49 9.53 9.66 8.69
38 11.88 9.81 9.94 8.92
39 12.30 10.11 10.23 9.16
40 12.74 10.42 10.54 9.42
41 13.20 10.76 10.86 9.69
<PAGE>
Male Male Female Female
Age Standard Nonsmoker Standard Nonsmoker
42 13.69 11.12 11.19 9.97
43 14.21 11.49 11.54 10.27
44 14.75 11.89 11.91 10.58
45 15.33 12.32 12.30 10.91
46 15.94 12.77 12.70 11.26
47 16.58 13.25 13.13 11.63
48 17.26 13.75 13.58 12.02
49 17.99 14.30 14.05 12.44
50 18.75 14.87 14.55 12.88
51 19.57 15.49 15.08 13.35
52 20.44 16.15 15.64 13.84
53 21.35 16.85 16.23 14.37
54 22.32 17.60 16.85 14.93
55 23.35 18.39 17.51 15.52
56 24.43 19.24 18.20 16.15
57 25.58 20.15 18.94 16.83
58 26.79 21.11 19.73 17.55
59 28.08 22.15 20.58 18.32
60 29.46 23.26 21.49 19.16
61 30.93 24.45 22.48 20.06
62 32.50 25.72 23.54 21.03
63 34.16 27.09 24.68 22.08
64 35.92 28.55 25.90 23.20
65 37.78 30.11 27.19 24.40
66 39.74 31.78 28.57 25.69
67 41.81 33.57 30.04 27.07
68 44.02 35.50 31.63 28.56
69 46.37 37.57 33.35 30.19
70 47.51 39.81 35.23 31.97
71 47.51 42.23 37.29 33.91
72 47.51 44.78 39.54 36.03
73 47.51 45.48 41.98 38.34
74 47.51 45.48 44.10 40.85
75 47.51 45.48 44.25 43.06
76 47.51 45.48 44.25 43.32
77 47.51 45.48 44.25 43.32
78 47.51 45.48 44.25 43.32
79 47.51 45.48 44.25 43.32
80 47.51 45.48 44.25 43.32
81 47.51 45.48 44.25 43.32
82 47.51 45.48 44.25 43.32
83 47.51 45.48 44.25 43.32
84 47.51 45.48 44.25 43.32
85 47.51 45.48 44.25 43.32
</TABLE>
<PAGE>
Partial surrender fee
If you surrender part of the value of your policy, we will charge you $25 (or 2%
of the amount surrendered, if less). We guarantee that this fee will not
increase for the duration of your policy.
Mortality and expense risk charge
This charge applies only to the subaccounts and not to the fixed account. It is
equal, on an annual basis, to 0.9% of the average daily net asset value of the
subaccounts for the first 10 policy years and 0.45% thereafter. We reserve the
right to charge up to 0.9% for all policy years. Computed daily, the charge
compensates IDS Life for:
o Mortality risk -- the risk that the cost of insurance charge will be
insufficient to meet actual claims.
o Expense risk -- the risk that the policy fee and the surrender charge
(described above) may be insufficient to cover the cost of administering
the policy.
Any profit from the mortality and expense risk charge would be available to IDS
Life for any proper corporate purpose including, among others, payment of sales
and distribution expenses, which we do not expect to be covered by the premium
expense charge and surrender charges discussed earlier. IDS Life will make up
any further deficit from its general assets.
<PAGE>
Fund expenses
The investment managers and advisers receive fees for their services to the
funds. The funds also pay taxes, brokerage commissions and nonadvisory expenses,
such as custodian and trustee fees, registration fees for shares, postage,
fidelity and security bond costs, legal fees and other miscellaneous fees and
charges. The table below will help you understand the expenses that the funds
pay.
<TABLE>
<CAPTION>
Annual operating expenses of the funds
(as a percentage of average daily net assets):
IDS Life Series IDS Life Series
Fund -Government IDS Life Series Fund -
IDS Life Series Securities Fund - Equity International
IDS Life Series IDS Life Series Fund - Money IDS Life Series Portfolio Income Portfolio Equity Portfolio
Fund - Equity Fund - Income Market Fund - Managed (after expense (after expense (after expense
Portfolio Portfolio Portfolio Portfolio limitation) limitation) limitation)
<S> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.70% 0.70% 0.50% 0.70% 0.70% 0.70% 0.95%
12b-1 fees -- -- -- -- -- -- --
Other expenses 0.02 0.04 0.10 0.02 0.10* 0.10* 0.10*
Total 0.72%** 0.74%** 0.60%** 0.72%** 0.80%** 0.80%** 1.05%**
</TABLE>
<TABLE>
<CAPTION>
Warburg
AIM V.I. Pincus Trust/ Templeton
Growth and Putnam VT New Putnam VT Small Company American International
Income Opportunities Fund - High Yield Fund - Growth Century VP Fund -
Fund Class IA Class IB+++ Portfolio Value Class 2++
<S> <C> <C> <C> <C> <C> <C>
Management fees 0.61% 0.56% 0.64% 0.90% 1.00% 0.69%
12b-1 fees -- -- 0.15 -- -- 0.25
Other expenses 0.04 0.05 0.07 0.24 -- 0.17
Total 0.65%+ 0.61%+ 0.86%+ 1.14%+ 1.00%+ 1.11%+
</TABLE>
* IDS Life has agreed to a voluntary limit of 0.1%, on an annual basis, of the
average daily net assets of each of the IDS Life Series Fund Portfolios for
other expenses like taxes and brokerage commissions and for nonadvisory
expenses. If the 0.1% limitation had not been in place, these other expenses
would have been 0.19% for IDS Life Series Fund-Government Securities Portfolio
and 0.11% for IDS Life Series Fund-International Equity Portfolio. IDS Life
Series Fund-Equity Income Portfolio is new. IDS Life plans to limit these
expenses to 0.1%. IDS Life reserves the right to discontinue limiting these
other expenses at 0.1%. However, its present intention is to continue the limit
until the time that actual expenses are less than the limit.
** Annual operating expenses at April 30, 1998.
+ Annual operating expenses at Dec. 31, 1998.
++ The Fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the Fund's prospectus. See Fund prospectus for details.
+++ Inception date is 4/30/98. Actual 12b-1 fees were 0.10%. Management fees,
other expenses and total are based on Class IAShares. Actual Management fees,
other expenses and total were 0.43%, 0.05% and 0.58%, respectively.
IDS Life has entered into certain arrangements under which it is compensated by
the funds' advisors and/or distributors for the administrative services it
provides to these funds.
Other information on charges
IDS Life may reduce or eliminate various fees and charges when we incur lower
sales costs and/or perform fewer administrative services than usual.
<PAGE>
Policy value
The value of your policy is the sum of values in the fixed account and each
subaccount of the variable account.
Fixed account value
The value in the fixed account on the policy date (when the policy is issued)
equals:
o the portion of your initial net premium allocated to the fixed account;
plus
o interest accrued before the policy date; minus
o the portion of the monthly deduction for the first policy month allocated
to the fixed account.
On any later date, the value in the fixed account equals:
o the value on the previous monthly date; plus
o net premiums allocated to the fixed account since the last monthly date;
plus
o any transfers to the fixed account from the subaccounts, including loan
transfers, since the last monthly date; plus
o accrued interest on all of the above; minus
o any transfers from the fixed account to the subaccounts, including loan
repayment transfers, since the last monthly date; minus
o any partial surrenders or partial surrender fees allocated to the fixed
account since the last monthly date; minus
o interest on any transfers or partial surrenders, from the date of the
transfer or surrender to the date of calculation; minus
o any portion of the monthly deduction for the coming month allocated to the
fixed account if the date of calculation is a monthly date.
Subaccount values
The value in each subaccount changes daily, depending on the investment
performance of the funds in which that subaccount invests and on other factors
detailed below. There is no guaranteed minimum subaccount value. You as owner
bear the entire investment risk.
Calculation of subaccount value: The value of each subaccount on the policy date
equals:
o the portion of your initial net premium allocated to the subaccount; plus
o interest accrued before the policy date; minus
o the portion of the monthly deduction for the first policy month allocated
to that subaccount.
The value on each subaccount on each valuation date equals:
o the value of the subaccount on the preceding valuation date, multiplied by
the net investment factor for the current valuation period (explained
below); plus
o net premiums received and allocated to the subaccount during the current
valuation period; plus
o any transfers to the subaccount (from the fixed account or other
subaccounts, including loan repayment transfers) during the period; minus
o any transfers from the subaccount including loan transfers during the
current valuation period; minus
o any partial surrenders and partial surrender fees allocated to the
subaccount during the period; minus
o any portion of the monthly deduction allocated to the subaccount during the
period.
<PAGE>
The net investment factor measures the investment performance of a subaccount
from one valuation period to the next. Because performance may fluctuate, the
value of a subaccount may increase or decrease from day to day.
Accumulation units: We convert the policy value allocated to each subaccount
into accumulation units. Each time you direct a premium payment or transfer
policy value into one of the subaccounts, we credit a certain number of
accumulation units to your policy for that subaccount. Conversely, each time you
take a partial surrender or transfer value out of a subaccount, we subtract a
certain number of accumulation units.
Accumulation units are the true measure of investment value in each subaccount.
For subaccounts investing in the funds, they are related to, but not the same
as, the net asset value of the corresponding fund. The dollar value of each
accumulation unit can rise or fall daily, depending on the investment
performance of the underlying funds, and on certain charges. Here is how unit
values are calculated:
Number of units: To calculate the number of units for a particular subaccount,
we divide your investment (net premium or transfer amount) by the current
accumulation unit value.
Accumulation unit value: The current accumulation unit value for each subaccount
equals the last accumulation unit value times the current net investment factor.
Net investment factor: We determine the net investment factor at the end of each
valuation period. This factor equals
(a divided by b) - c,
where:
(a) equals:
o net asset value per share of the fund; plus
o per-share amount of any dividend or capital gain distribution made by the
relevant fund to the subaccount; plus
o any credit or minus any charge for reserves to cover any tax liability
resulting from the investment operations of the subaccount.
(b) equals:
o net asset value per share of the fund at the end of the preceding valuation
period; plus
o any credit or minus any charge for reserves to cover any tax liability in
the preceding valuation period.
(c) is a percentage factor representing the mortality and expense risk
charge, as described in "Loads, fees and charges" above.
<PAGE>
Factors that affect subaccount accumulation units:
Accumulation units of each subaccount may change in two ways; in number and in
value. Here are the factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional premiums allocated to the subaccount;
o transfers into or out of the subaccount;
o partial surrenders and partial surrender fees;
o surrender charges; and/or
o pro rata portions of the monthly deductions.
Accumulation unit values will fluctuate due to:
o changes in underlying fund's net asset value;
o dividends distributed to the subaccount;
o capital gains or losses of underlying fund;
o fund operating expenses; and/or
o mortality and expense risk fees.
<PAGE>
Proceeds payable upon death
We will pay a benefit to the beneficiary of the policy when the insured dies.
If that death is prior to the insured's attained insurance age 100, the amount
payable is based on the specified amount and death benefit option (described
below) that you have selected, less any indebtedness.
If the insured's death is on or after the attained insurance age 100, the amount
payable is the cash surrender value.
Option 1 (level amount): Under this option, the policy's value is part of the
specified amount. The Option 1 death benefit is the greater of:
o the specified amount on the date of the insured's death; or
o the applicable percentage of the policy value on the date of the insured's
death, if that death occurs on a valuation date, or on the next valuation
date following the date of death. (See table below.)
<TABLE>
<CAPTION>
Applicable percentage table
Applicable Applicable
Insured's attained percentage of Insured's attained percentage of
insurance age policy value insurance age policy value
<S> <C> <C> <C>
40 or younger 250% 61 128%
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75-95 105
55 150 96 104
56 146 97 103
57 142 98 102
58 138 99 101
59 134 100 100
60 130
</TABLE>
The percentage is designed to ensure that the policy meets the provisions of
federal tax law which require a minimum death benefit in relation to policy
value for your policy to qualify as life insurance.
<PAGE>
Option 2 (variable amount): Under this option, the policy value is added to the
specified amount. The Option 2 death benefit is the greater of:
o the policy value plus the specified amount; or
o the applicable percentage of policy value (from the preceding table) on the
date of the insured's death, if that death occurs on a valuation date, or
on the next valuation date following the date of death.
Examples: Option 1 Option 2
specified amount $100,000 $100,000
policy value $ 5,000 $ 5,000
death benefit $100,000 $105,000
policy value increases to $ 8,000 $ 8,000
death benefit $100,000 $108,000
policy value decreases to $ 3,000 $ 3,000
death benefit $100,000 $103,000
If you want to have premium payments and favorable investment performance
reflected partly in the form of an increasing death benefit, you should consider
Option 2. If you are satisfied with the specified amount of insurance protection
and prefer to have premium payments and favorable investment performance
reflected to the maximum extent in the policy value, you should consider Option
1. Under Option 1, the cost of insurance is lower because IDS Life's net amount
at risk is generally lower; for this reason the monthly deduction is less and a
larger portion of your premiums and investment returns is retained in the policy
value.
Change in death benefit option
You may make a written request to change the death benefit option once per
policy year. A change in the death benefit option also will change the specified
amount. You do not need to provide additional evidence of insurability.
If you change from Option 1 to Option 2: The specified amount will decrease by
an amount equal to the policy value on the effective date of the change. You
cannot change from Option 1 to Option 2 if the resulting death benefit amount
would fall below the minimum amount shown in the policy.
<PAGE>
If you change from Option 2 to Option 1: The specified amount will increase by
an amount equal to the policy value on the effective date of the change.
An increase or decrease in specified amount resulting from a change in the death
benefit option will affect the following policy costs:
o Monthly deduction because the cost of insurance depends upon the
specified amount.
o Minimum monthly premium.
o Charges for certain optional insurance benefits.
The surrender charge will not be affected.
Changes in specified amount
Subject to certain limitations, you may make a written request to increase or
decrease the specified amount at any time. Changes in specified amount may have
tax implications, discussed in the section "Modified endowment contracts" under
"Federal taxes."
Increases: If you increase the specified amount, we may require additional
evidence of insurability that is satisfactory to us. The effective date of the
increase will be the monthly anniversary on or next following our approval of
the increase. The increase may not be less than $10,000, and we will not permit
an increase after the insured's attained insurance age 85.
An increase in the specified amount will have the following effect on policy
costs:
o Your monthly deduction will increase because the cost of insurance
charge depends upon the specified amount.
o Charges for certain optional insurance benefits may increase.
o The minimum monthly premium will increase if the NLG is in effect.
o The surrender charge will increase.
At the time of the increase in specified amount, the cash surrender value of
your policy must be sufficient to pay the monthly deduction on the next monthly
anniversary. The increased surrender charge will reduce the cash surrender
value. If the remaining cash surrender value is not sufficient to cover the
monthly deduction, we will require you to pay additional premiums within the
61-day grace period. If you do not, the policy will lapse unless the NLG is in
effect. Because the minimum monthly premium will increase, you may also have to
pay additional premiums to keep the NLG in effect.
<PAGE>
Decreases: Any decrease in specified amount will take effect on the monthly
anniversary on or next following our receipt of your written request. The
specified amount remaining after the decrease may not be less than the minimum
amount shown in the policy. If, following a decrease in specified amount, the
policy would no longer qualify as life insurance under federal tax law, the
decrease may be limited to the extent necessary to meet these requirements.
A decrease in specified amount will affect your costs as follows:
o Your monthly deduction will decrease because the cost of insurance
charge depends upon the specified amount.
o Charges for certain optional insurance benefits may decrease.
o The minimum monthly premium will decrease if the NLG is in effect.
o The surrender charge will not change.
No surrender charge is imposed when you request a decrease in the specified
amount.
We will deduct decreases in the specified amount from the current specified
amount in this order:
o First from the portion due to the most recent increase;
o Next from portions due to the next most recent increases successively; and
o Then from the initial specified amount when the policy was issued.
This procedure may affect the cost of insurance if we have applied different
risk classifications to the current specified amount. We will eliminate the risk
classification applicable to the most recent increase in the specified amount
first, then the risk classification applicable to the next most recent increase,
and so on.
Misstatement of age or sex
If the insured's age or sex has been misstated, the proceeds payable upon death
will be:
o the policy value on the date of death; plus
o the amount of insurance that would have been purchased by the cost of
insurance deducted for the policy month during which death occurred, if that
cost had been calculated using rates for the correct age and sex; minus
o the amount of any outstanding indebtedness on the date of death.
<PAGE>
Suicide
Suicide by the insured, whether sane or insane, within two years from the policy
date is not covered by the policy. If suicide occurs, the only amount payable to
the beneficiary will be the premiums paid, minus the amount of any outstanding
indebtedness.
In Colorado and North Dakota, the suicide period is shortened to one year. In
Missouri, IDS Life must prove that the insured intended to commit suicide at the
time he or she applied for coverage.
Beneficiary
Initially, the beneficiary will be the person you designate in your application
for the policy. You may change the beneficiary by giving written notice to IDS
Life, subject to requirements and restrictions stated in the policy. If you do
not designate a beneficiary, or if the designated beneficiary dies before the
insured, the beneficiary will be you or your estate.
<PAGE>
Transfers between the fixed account and subaccounts
You may transfer policy values from one subaccount to another or between
subaccounts and the fixed account. For most transfers, we will process your
transfer request at the end of the valuation period during which we receive your
request. There is no charge for transfers. Before transferring policy value, you
should consider the risks involved in switching investments.
We may suspend or modify the transfer privilege at any time with the necessary
approval of the SEC. Transfers involving the fixed account are subject to the
restrictions below.
Fixed account transfer policies
o You must make transfers from the fixed account during a 30-day period
starting on a policy anniversary, except for automated transfers, which can
be set up at any time for transfer periods of your choosing subject to
certain minimums.
o If we receive your request to transfer amounts from the fixed account
within 30 days before the policy anniversary, the transfer will become
effective on the anniversary.
o If we receive your request on or within 30 days after the policy
anniversary, the transfer will be effective on the day we receive it.
o We will not accept requests for transfers from the fixed account at any
other time.
o If you made a transfer from the fixed account to one or more subaccounts,
you may not make a transfer from any subaccount back to the fixed account
until the next policy anniversary. We will waive this limitation once
during the first two policy years if you exercise the policy's right to
exchange provision. (See "Exchange right").
Minimum transfer amounts
From a subaccount to another subaccount or the fixed account:
o For mail and phone transfers -- $250 or the entire subaccount balance,
whichever is less.
o For automated transfers -- $50.
From the fixed account to a subaccount:
o $250 or the entire fixed account balance, minus any outstanding
indebtedness, whichever is less.
o For automated transfers -- $50.
Maximum transfer amounts
From a subaccount to another subaccount or the fixed account:
o None.
From the fixed account to a subaccount:
o Entire fixed account balance, minus any outstanding indebtedness.
Maximum number of transfers per year
We reserve the right to limit mail and telephone transfers to five per policy
year. Twelve automated transfers per policy are allowed.
<PAGE>
Two ways to request a transfer, loan or surrender
Provide your name, policy number, Social Security Number or Taxpayer
Identification Number when you request a transfer.
1 By letter
Regular mail: Express mail:
IDS Life Insurance Company IDS Life Insurance Company
P.O. Box 499 733 Marquette Ave.
Minneapolis, MN 55440 Minneapolis, MN 55402
2 By phone
Call between 7 a.m. and 6 p.m. Central Time:
1-800-437-0602 (toll free) or
(612) 671-4738 (Minneapolis area)
TTY service for the hearing impaired:
1-800-285-8846 (toll free)
o We answer phone requests promptly, but you may experience delays when call
volume is unusually high. If you are unable to get through, use mail
procedure as an alternative.
o We will honor any telephone transfer or surrender request we believe is
authentic and we will use reasonable procedures to confirm that it is.
These procedures include asking identifying questions and tape recording
calls. As long as we follow these procedures, IDS Life and its affiliates
will not be liable for any loss resulting from fraudulent requests.
o We make telephone transfers available automatically. If you do not want
telephone transfers to be made from your account, please write to IDS Life
and tell us.
Automated transfers
In addition to written and telephone requests, you can arrange to have policy
value transferred from one account to another automatically. Your financial
advisor can help you set up an automated transfer.
Automated transfer policies:
o Minimum automated transfer amount: $50
o Only one automated transfer arrangement can be in effect at any time. You
can transfer policy values to one or more subaccounts and the fixed
account, but you can transfer from only one account.
o You can start or stop this service by written request. You must allow seven
days for us to change any instructions that currently are in place.
o You cannot make automated transfers from the fixed account in an amount
that, if continued, would deplete the fixed account within 12 months.
o If you made a transfer from the fixed account to one or more subaccounts,
you may not make a transfer from any subaccount back to the fixed account
until the next policy anniversary.
<PAGE>
o If you submit your automated transfer request with an application for a
policy, automated transfers will not take effect until the policy is
issued.
o If the value of the account from which you are transferring policy value is
less than the $50 minimum, we will stop the transfer arrangement
automatically.
o Automated transfers are subject to all other policy provisions and terms
including provisions relating to the transfer of money between the fixed
account and the subaccounts.
Automated dollar-cost averaging
You can use automated transfers to take advantage of dollar-cost averaging --
investing a fixed amount at regular intervals. For example, you might have a set
amount transferred monthly from a relatively conservative subaccount to a more
aggressive one, or to several others.
This systematic approach can help you benefit from fluctuations in accumulation
unit value, caused by fluctuations in the market value of the underlying fund.
Since you invest the same amount each period, you automatically acquire more
units when the market value falls, fewer units when it rises. The potential
effect is to lower your average cost per unit. There is no charge for
dollar-cost averaging.
How dollar-cost averaging works
Amount Accumulation Number of units
Month invested unit value purchased
Jan $100 $20 5.00
Feb 100 16 6.25
Mar 100 9 11.11
Apr 100 5 20.00
May 100 7 14.29
June 100 10 10.00
July 100 15 6.67
Aug 100 20 5.00
Sept 100 17 5.88
Oct 100 12 8.33
By investing an equal number of dollars each month ...
you automatically buy more units when the per unit market price is low ...
and fewer units when the per unit market price is high.
You have paid an average price of only $10.81 per unit over the 10 months, while
the average market price actually was $13.10.
Dollar-cost averaging does not guarantee that any variable subaccount will gain
in value, nor will it protect against a decline in value if market prices fall.
Because this strategy involves continuous investing, your success with
dollar-cost averaging will depend upon your willingness to continue to invest
regularly through periods of low price levels. Dollar-cost averaging can be an
effective way to help meet your long-term goals.
<PAGE>
Policy loans
You may borrow against your policy by written or telephone request. (See chart
under "Transfers between the fixed account and subaccounts" for address and
telephone numbers for your requests.) We will process your loan request at the
end of the valuation period during which we receive your request. (Loans by
telephone are limited to $50,000.)
Interest rate: The interest rate for policy loans is 6% per year. After the 10th
anniversary we expect to reduce the loan interest to 4% per year. Interest is
charged daily and due at the end of the policy year.
Minimum loan:
o $500 ($200 for Connecticut residents) or the remaining loan value,
whichever is less.
Maximum loan:
o In Texas, 100% of the policy value in the fixed account, minus a pro rata
portion of surrender charges.
o In Alabama, 100% of the policy value minus surrender charges.
o In all other states, 90% of the policy value minus surrender charges.
We will compute the maximum loan value as of the end of the valuation period
during which we receive your loan request. The amount available at any time for
a new loan is the maximum loan value less any existing indebtedness. When we
compute the amount available, we reserve the right to deduct from the loan value
interest for the period until the next policy anniversary and monthly deductions
that we will take until the next policy anniversary.
Payment of loaned funds: Generally, we will pay loans within seven days after we
receive your request (with certain exceptions - see "Deferral of payments,"
under "Payment of policy proceeds").
Allocation of loans to accounts: If you do not specify whether the loan is to
come from the fixed account or the subaccounts, we will take it from the
subaccounts and the fixed account in proportion to their values, minus
indebtedness. When we make a loan from a subaccount, we redeem accumulation
units and transfer the proceeds into the fixed account. We will credit the
loaned amount with 4.0% annual interest.
Repayments: We will allocate loan repayments to subaccounts and/or the fixed
account using the premium allocation percentages in effect unless you tell us
otherwise. Repayments must be in amounts of at least $25.
Overdue interest: If you do not pay accrued interest when it is due, we will
increase the amount of indebtedness in the fixed account to cover the amount
due. Interest added to a policy loan will be charged the same interest rate as
the loan itself. We will take the interest from the fixed account and/or
subaccounts, using the monthly deduction allocation percentages. If the value in
the fixed account or any subaccount is not enough to pay the allocated interest,
we will take all of the interest from all of the accounts in proportion to their
value, minus indebtedness.
<PAGE>
Effects of policy loans: If you do not repay your loan, it will reduce the death
benefit and cash surrender value. Even if you do repay it, your loan can have a
permanent effect on death benefits and policy values, because money you borrow
against the subaccounts will not share in the investment results of the relevant
fund(s).
A loan may terminate the no lapse guarantee. We deduct the loan amount from the
total premiums you pay, which may reduce the total below the level required to
keep the NLG in effect.
Taxes: If your policy lapses or you surrender it with an outstanding
indebtedness, and the amount of outstanding indebtedness plus the cash surrender
value is more than the sum of premiums you paid, you generally will be liable
for taxes on the excess. (See "Federal taxes.")
<PAGE>
Policy surrenders
You may surrender your policy in full or in part by written or telephone
request. (See chart under "Transfers between the fixed account and
subaccounts.") We will process your surrender request at the end of the
valuation period during which we receive your request. We may require you to
return your policy.
We normally will process your payment within seven days; however, we reserve the
right to defer payment. (See "Deferral of payments," under "Payment of policy
proceeds.")
Total surrenders
If you totally surrender your policy, you receive its cash surrender value--the
policy value minus outstanding indebtedness and applicable surrender charges.
(See "Loads, fees and charges.") We will compute the value of each subaccount as
of the end of the valuation period during which we receive your request.
Partial surrenders
After the first policy year, you may surrender any amount from $500 up to 90% of
the policy's cash surrender value. (Partial surrenders by telephone are limited
to $50,000.) We will charge you a partial surrender fee, described under "Loads,
fees and charges."
Allocation of partial surrenders
Unless you specify otherwise, IDS Life will make partial surrenders from the
fixed account and subaccounts in proportion to their values at the end of the
valuation period during which we receive your request. In determining these
proportions, we first subtract the amount of any outstanding indebtedness from
the fixed account value.
Effect of partial surrenders
o A partial surrender will reduce the policy value by the amount of the
partial surrender and fee.
o A partial surrender will reduce the death benefit by the amount of the
partial surrender and fee, or, if the death benefit is based on the
applicable percentage of policy value, by an amount equal to the applicable
percentage times the amount of the partial surrender.
o A partial surrender may terminate the no lapse guarantee. We deduct the
surrender amount from total premiums you paid, which may reduce the total
below the level required to keep the no lapse guarantee in effect.
o If Option 1 is in effect, a partial surrender will reduce the specified
amount by the amount of the partial surrender and fee. IDS Life will deduct
this decrease from the current specified amount in this order:
1. First from the specified amount provided by the most recent increase;
2. next from the next most recent increases successively;
3. then from the initial specified amount when the policy was issued.
<PAGE>
Because they reduce the specified amount, partial surrenders may affect the cost
of insurance. IDS Life will not allow a partial surrender if it would reduce the
specified amount below the required minimum. (See "Decreases" under "Proceeds
payable upon death.")
o If Option 2 is in effect, a partial surrender does not affect the specified
amount.
Taxes
Upon surrender, you generally will be liable for taxes on any excess of the cash
surrender value plus outstanding indebtedness over the premium paid. (See
"Federal taxes.")
Exchange right
For two years after we issue the policy, you can exchange it for one that
provides benefits that do not vary with the investment return of the
subaccounts. Because the policy itself offers a fixed return option, all you
need to do is transfer all of the policy value in the subaccounts to the fixed
account. We automatically will credit all future premium payments to the fixed
account unless you request a different allocation.
A transfer for this purpose will not count against the five-transfers-per-year
limit. Also, we will waive any restrictions on transfers into the fixed account
for this type of transfer.
There is no effect on the policy's death benefit, specified amount, net amount
at risk, risk classification or issue age. Only the method of funding the policy
value will be affected.
In Connecticut, during the first 18 months after the policy is issued, you have
the right to exchange the policy for a policy of permanent fixed benefit life
insurance we are then offering.
We will not require evidence of insurability. We will require that:
1. this policy is in force; and
2. your request is in writing; and
3. you repay any existing indebtedness.
The new policy will have the same initial death benefit, policy date and issue
age as this policy. The premium for the new policy will be based on our rates in
effect on its policy date for the same class of risk as under this policy.
We will inform you of the premium for the new policy and why extra sum required
or allowance to be made for a cash surrender value adjustment that takes
appropriate account of the values under both this policy exceeds the cash
surrender value of the new policy, the excess will be sent to you. If the cash
surrender value of this policy is less than the cash surrender value of the new
policy, you will be required to send us the shortage amount for this exchange to
be completed.
<PAGE>
Optional insurance benefits
You may choose to add the following benefits to your policy at an additional
cost, in the form of riders (if you meet certain requirements). More detailed
information on these benefits is in your policy.
Waiver of monthly deduction (WMD): Under WMD, we will waive the monthly
deduction if the insured becomes totally disabled.
Accidental death benefit (ADB): ADB provides an additional death benefit if the
insured's death is caused by accidental injury.
Other insured rider (OIR): OIR provides a level, adjustable death benefit on the
life of each other insured covered.
Children's insurance rider (CIR): CIR provides level term coverage on each
eligible child.
Automatic increase benefit rider (AIB): AIB provides an increase in the
specified amount at a designated percentage on each policy anniversary until
insured's attained age 65.
Accelerated benefit rider for terminal illness (ABRTI): If the insured is
terminally ill and death is expected to occur within six months, the rider
provides that you can withdraw a portion of the death benefit prior to death.
This rider is not available in all states.
<PAGE>
Payment of policy proceeds
We will pay policy proceeds when:
o you surrender the policy; or
o the insured dies.
We will pay all proceeds by check. We will compute the amount of the death
proceeds and pay it in a single sum unless you select one of the payment options
below. We will pay interest at a rate of at least 4% per year (8% in Arkansas,
11% in Florida) on single sum death proceeds, from the date of the insured's
death to the settlement date (the date on which we pay the proceeds in a lump
sum or first place them under a payment option).
Payment options:
During the insured's lifetime, you may request in writing that we pay policy
proceeds under one or more of the three payment options below. (The beneficiary
also may select a payment option, unless you say that he or she cannot). You
decide how much of the proceeds to place under each option (minimum: $5,000). We
will transfer any such amount to IDS Life's general account. Unless we agree
otherwise, we must make payments under all options to a natural person.
You also may make a written request to us to change a prior choice of payment
option or, if we agree, to elect a payment option other than the three below.
If you elect a payment option for pre-death proceeds, payments under this option
may be subject to federal income tax as ordinary income. If you elect Option A,
the full pre-death proceeds will be taxed as a full surrender or maturity as
described in "Taxation of policy proceeds" and also may be subject to an
additional 10% penalty tax if the policy is a modified endowment. The interest
paid under Option A will be ordinary income subject to income tax in the year
earned. The interest payments will not be subject to the 10% penalty tax.
If you elect Option B or Option C for payment of pre-death proceeds, any
indebtedness at the time of election will be taxed as a partial surrender as
described in "Taxation of policy proceeds" and also may be subject to an
additional 10% penalty tax if the policy is a modified endowment. We will use
the remainder of the proceeds to make payments under the option elected. A
portion of each payment will be taxed as ordinary income and a portion of each
payment will be considered a return of the investment in the policy and will not
be taxed. We describe an owner's investment in the policy in "Taxation of policy
proceeds." All payments we make after the investment in the policy is fully
recovered will be subject to tax. Amounts we pay under Option B or Option C that
are subject to tax also may be subject to an additional 10% penalty tax. (See
"Penalty tax" under "Federal Taxes.")
Death benefit proceeds applied to any payment option are not considered part of
the beneficiary's income and therefore are not subject to federal income tax.
Payments of interest under Option A will be ordinary income subject to tax.
Under Option B or Option C, a portion of each payment will be ordinary income
subject to tax and a portion of each payment will be considered a return of the
beneficiary's investment in the policy which is not subject to tax. The
beneficiary's investment in the policy is the death benefit proceeds we apply to
the payment option. All payments we make after the investment in the policy is
fully recovered and will be subject to tax.
<PAGE>
Option A -- Interest payments: We will pay interest on any proceeds placed under
this option at a rate of 4% per year compounded annually, at regular intervals
and for a period that is agreeable to both you and us. At the end of any payment
interval, you may withdraw proceeds in amounts of at least $100. At any time,
you may withdraw all of the proceeds that remain or you may place them under a
different payment option approved by us.
Option B -- Payments for a specified period: We will make fixed monthly payments
for any number of years you specify. Here are examples of monthly payments for
each $1,000 placed under this option:
Payment period Monthly payment per $1,000
(years) placed under Option B
10 $ 9.61
15 6.87
20 5.51
25 4.71
30 4.18
We will furnish monthly amounts for other payment periods at your request,
without charge.
<PAGE>
Option C -- Lifetime income: We will make monthly payments for the life of the
person (payee) who is to receive the income. We will guarantee payment for 10,
15 or 20 years.
We will base the amount of each monthly payment per $1,000 placed under this
option on the table of settlement rates in effect at the time of the first
payment. The amount depends on the sex and adjusted age of the payee on that
date. Adjusted age means the age of the payee (on the payee's last birthday)
minus an adjustment as follows:
Calendar year of Adjustment Calendar year of Adjustment
payee's birth payee's birth
Before 1920 0 1945-1949 6
1920-1924 1 1950-1959 7
1925-1929 2 1960-1969 8
1930-1934 3 1970-1979 9
1935-1939 4 1980-1989 10
1940-1944 5 After 1989 11
The amount of each monthly payment per $1,000 placed under this option will be
at least the amounts shown in the next table.
We will furnish monthly amounts for any adjusted age not shown at your request,
without charge.
Adjusted
age Life income per $1,000 with
payee payments guaranteed for
10 years 15 years 20 years
Male Female Male Female Male Female
50 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82
55 4.62 4.22 4.53 4.18 4.39 4.11
60 5.14 4.66 4.96 4.57 5.71 4.44
65 5.81 5.22 5.46 5.05 5.02 4.79
70 6.61 5.96 5.96 5.60 5.27 5.12
75 7.49 6.89 6.38 6.14 5.42 5.35
<PAGE>
Deferral of payments:
We reserve the right to defer payments of cash surrender value, policy loans or
variable death benefits in excess of the specified amount if:
o the payments derive from a premium payment made by a check that has not
cleared the banking system (we have not collected good payment);
o the NYSE is closed (other than customary weekend and holiday closings);
o in accordance with SEC rules, trading on the NYSE is restricted or, because
of an emergency, it is not practical to dispose of securities held in the
subaccount or determine the value of the subaccount's net assets.
We may delay the payment of any loans or surrenders from the fixed account up to
six months from the date we receive the request. If we postpone the payment of
surrender proceeds more than 30 days, we will pay you interest on the amount
surrendered at an annual rate of 3% for the period of postponement.
<PAGE>
Federal taxes
The following is a general discussion of the policy's federal income tax
implications. It is not intended as tax advice. Because the effect of taxes on
the value and benefits of your policy depends on your individual situation as
well as IDS Life's tax status, YOU SHOULD CONSULT A TAX ADVISOR TO FIND OUT HOW
THESE GENERAL CONSIDERATIONS APPLY TO YOU. The discussion is based on our
understanding of federal income tax laws as the Internal Revenue Service (IRS)
currently interprets them; both the laws and their interpretation may change.
We intend the policy to qualify as a life insurance policy for federal income
tax purposes. To that end, the provisions of the policy are to be interpreted to
ensure or maintain this tax qualification. IDS Life reserves the right to change
the policy in order to ensure that it will continue to qualify as life insurance
for tax purposes. We will send you a copy of any changes.
IDS Life's tax status
The IRS taxes IDS Life as a life insurance company under the Code. For federal
income tax purposes, we consider the subaccounts to be a part of IDS Life,
although we treat their operations separately in accounting and financial
statements. We reinvest the investment income from the subaccounts and it
becomes part of the subaccounts' value. The IRS does not tax IDS Life on this
investment income, including realized capital gains. Therefore, IDS Life does
not charge the subaccounts for our federal income taxes. IDS Life reserves the
right to make such a charge in the future if there is a change in the tax
treatment of subaccounts or variable life insurance contracts or in IDS Life's
tax status as we currently understand it.
Taxation of policy proceeds
The IRS does not consider the death benefit to be part of the beneficiary's
income and therefore it is not subject to federal income taxes. When we pay the
proceeds after the insured's attained insurance age 100 and the amount received
plus any indebtedness exceeds your investment in the policy, the IRS may tax the
excess as ordinary income.
The IRS may tax part or all of any pre-death proceeds that you receive through
full surrender or maturity, lapse, partial surrender, policy loan or assignment
of policy value or payment options as ordinary income. (See the following
table.) In some cases, the tax liability depends on whether the policy is a
modified endowment (explained following the table). The taxable amount also may
be subject to an additional 10% penalty tax if the policy is a modified
endowment.
<PAGE>
Source of proceeds Taxable portion of pre-death proceeds
Full surrender: Amount you receive plus any indebtedness,
minus your investment in the policy.*
Lapse: Any outstanding indebtedness minus your
investment in the policy.*
Partial surrenders Lesser of:
(modified endowments): the amount you receive or policy value minus
your investment in the policy.*
Policy loans and assignments Lesser of:
(modified endowments) the amount of the loan/assignment or policy
value minus your investment in the policy.*
Partial surrenders Generally, if the amount you receive is
(other policies): greater than your investment in the policy,*
the amount in excess of your investment is
taxable. However, during the first 15 policy
years, a different amount may be taxable if the
partial surrender results in or is caused by a
reduction in benefits.
Policy loans and assignments None
(other policies):
Payment options: If we pay the proceeds of the policy under
one of the payment options, see the "Payment
option" under "Payment of policy proceeds"
section for tax information.
*The owner's investment is equal to premiums paid, minus the nontaxable
portion of any previous partial surrenders, plus the taxable portion of any
previous policy loans.
Modified endowment contracts
In 1988, Congress created a new class of life insurance policies called
"Modified Endowment Contracts." The IRS taxes these policies differently from
conventional life insurance contracts.
Your policy is a modified endowment contract if:
o you apply for it or materially change it on or after June 21, 1988 and
o the premiums you pay in the first seven years of the policy, or the first
seven years following a material change, exceed certain limits.
Also, any life insurance policy you receive in exchange for a modified endowment
is itself a modified endowment.
We have procedures for monitoring whether your policy may become a modified
endowment contract. We calculate modified endowment limits when we issue the
policy. We base these limits on the benefits we provide under the policy and on
the risk classification of the insured. We recalculate these limits later if
certain increases or reductions in benefits occur.
<PAGE>
Increases in benefits: We recalculate limits when an increase is a "material
change." Almost any increase you request, such as an increase in specified
amount, the addition of a rider benefit or an increase in an existing rider
benefit, is a material change.
An automatic increase under the terms of your policy, such as an increase in
death benefit due to operation of the applicable percentage table described in
the "Proceeds payable upon death" section or an increase in policy value growth
under Option 2, generally is not a material change. A policy becomes a modified
endowment if premiums you pay in the early years following a material change
exceed the recalculated limits.
Reductions in benefits: When you reduce benefits within seven years after we
issue the policy or after the most recent material change, we recalculate the
limits as if the reduced level of benefits had always been in effect. In most
cases, this recalculation will further restrict the amount of premiums that you
can pay without exceeding modified endowment limits. If the premiums you have
already paid exceed the recalculated limits, the policy becomes a modified
endowment even if you do not pay any further premiums.
Distributions affected: Modified endowment rules apply to distributions in the
year the policy becomes a modified endowment and in all subsequent years. In
addition, the rules apply to distributions taken two years before the policy
becomes a modified endowment because the IRS presumes that you took a
distribution in anticipation of that event.
Serial purchase of modified endowments: The IRS treats all modified endowments
issued by the same insurer (or affiliated companies of the insurer) to the same
owner during any calendar year as one policy for purposes of determining the
amount of any loan or distribution that is taxable.
Penalty tax: If a policy is a modified endowment, the taxable portion of
pre-death proceeds from a full surrender, maturity, lapse, partial surrender,
policy loan or assignment of policy value or certain payment options may be
subject to a 10% penalty tax unless:
o the distribution occurs after the owner attains age 591/2;
o the distribution is attributable to the owner becoming disabled (within the
meaning of Code Section 72(m)(7); or
o the distribution is part of a series of substantially equal periodic
payments made at least once a year over the life (or life expectancy) of
the owner or over the joint lives (or life expectancies) of the owner and
the owner's beneficiary.
<PAGE>
Other tax considerations
Interest paid on policy loans: If you use a policy loan for personal purposes,
interest paid on the loan is not tax-deductible. Other rules apply if you use
the loan for trade or business or investment purposes or if a business or
corporation owns the policy from which the loan is taken.
Policy changes: Changing ownership, exchanging or assigning the policy may have
tax consequences, depending on the circumstances.
Other taxes: Federal estate tax, state and local estate tax, inheritance tax,
gift tax and other tax consequences of ownership or receipt of policy proceeds
also will depend on the circumstances.
Qualified retirement plans: The policy may be used in conjunction with certain
qualified plans. Since the rules governing such use are complex, a purchaser
should consult a competent pension consultant.
On July 6, 1983, the Supreme Court held in Arizona Governing Committee v. Norris
that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Since the policy's cost of
insurance rates and purchase rates for certain settlement options distinguish
between men and women, employers and employee organizations should consult with
legal counsel before purchasing the policy for any employment-related insurance
or benefit program.
<PAGE>
IDS Life
IDS Life is a stock life insurance company organized under the laws of the State
of Minnesota in 1957. Our address is IDS Tower 10, Minneapolis, MN 55440.
IDS Life conducts a conventional life insurance business in the District of
Columbia and all states except New York. A wholly owned subsidiary of IDS Life,
IDS Life Insurance Company of New York, conducts a substantially identical
business in New York.
IDS Life has been in the variable annuity business since 1968 and has sold a
number of different variable annuity contracts and variable life insurance
policies, that use other separate accounts, unit investment trusts and mutual
funds.
Ownership
IDS Life is a wholly owned subsidiary of American Express Financial Corporation
(AEFC); AEFC, a Delaware corporation, is a wholly owned subsidiary of American
Express Company.
The AEFC family of companies offers not only insurance and annuities, but also
mutual funds, investment certificates and a broad range of financial management
services.
Besides managing investments for all funds in the IDS MUTUAL FUND GROUP, AEFC
also manages investments for itself and its subsidiaries, IDS Certificate
Company and IDS Life Insurance Company. Total assets under management on March
31, 1999 were more than $219 billion.
State regulation
IDS Life is subject to the laws of Minnesota governing insurance companies and
to regulation by the Minnesota Department of Commerce. In addition, IDS Life is
subject to regulation under the insurance laws of other jurisdictions in which
it operates IDS Life files an annual statement in a prescribed form with
Minnesota's Department of Commerce and in each state in which IDS Life does
business. IDS Life's books and accounts are subject to review by the Minnesota
Department of Commerce at all times and a full examination of its operations is
conducted periodically. Such regulation does not, however, involve any
supervision of management or investment practices or policies.
Distribution of the policy
IDS Life is the sole distributor of the policy. IDS Life is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. (NASD). Representatives of IDS
Life are licensed insurance and annuity agents, and are registered with the NASD
as representatives of IDS Life.
IDS Life pays its representatives a commission of up to 50% of the initial
target premium (annualized) in the first three years when the policy is sold,
plus up to 3% of all premiums in excess of the target premium. Each year, IDS
Life pays a service fee of 0.125% or less of the policy value, net of
indebtedness. IDS Life pays additional commissions if an increase in coverage
occurs. IDS Life also pays approximately 27% of the total representative's
commission to the field vice presidents and district sales managers of the
selling representative.
<PAGE>
Legal proceedings
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which IDS Life and AEFC do business involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents and
other matters. IDS Life and AEFC, like other life and health insurers, from time
to time are involved in such litigation.
On December 13, 1996, an action entitled Lesa Benacquisto and Daniel Benacquisto
vs. IDS Life Insurance Company and American Express Financial Corporation was
commenced in Minnesota state court. The action is brought by individuals who
replaced an existing IDS Life insurance policy with a new IDS Life policy. The
plaintiffs purport to represent a class consisting of all persons who replaced
existing IDS Life policies with new policies from and after January 1, 1985. The
complaint puts at issue various alleged sales practices and misrepresentations,
alleged breaches of fiduciary duties and alleged violations of consumer fraud
statutes. IDS Life and AEFC filed an answer to the complaint on February 18,
1997, denying the allegations. Asecond action, entitled Arnold Mork, Isabella
Mork, Ronald Melchart and Susan Melchart vs. IDS Life Insurance Company and
American Express Financial Corporation was commenced in the same court on March
21, 1997. In addition to claims that are included in the Benacquisto lawsuit,
the second action includes an allegation of improper replacement of an existing
IDS Life annuity contract. A subsequent class action, Richard Thoresen and
Elizabeth Thoresen vs. AEFC, American Partners Life Insurance Company, American
Enterprise Life Insurance Company, American Centurion Life Assurance Company,
IDS Life Insurance Company and IDS Life Insurance Company of New York, was filed
in the same court on October 13, 1998 alleging that the sale of annuities in
tax-deferred contributory retirement investment plans (e.g. IRA's) was done
through deceptive marketing practices, which the company denies. Plaintiffs in
each of the above actions seek damages in an unspecified amount and also seek to
establish a claims resolution facility for the determination of individual
issues.
IDS Life and AEFC believe they have meritorious defenses to the claims raised in
the lawsuits. The outcome of any litigation cannot be predicted with certainty.
In the opinion of management, however, the ultimate resolution of the above
lawsuits and others filed against IDS Life should not have a material adverse
effect on IDS Life's consolidated financial postion.
<PAGE>
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of IDS Life and the
variable account. IDS Life and variable account have no computer systems of
their own but are dependent upon the systems maintained by AEFC and certain
other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's
target date for substantially completing corrective measures on business
critical systems was Dec. 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFCcurrently is on track with this
schedule and also is on track to finish the work on non-critical systems by June
30, 1999. The Year 2000 readinesss of unaffiliated investment managers and other
third parties whose system failures could have an impact on IDS Life's and the
variable account's operations continues to be evaluated. The potential
materiality of any such impact is not known at this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
Experts
Ernst & Young LLP, independent auditors, have audited the consolidated financial
statements of IDS Life Insurance Company at Dec. 31, 1998 and 1997, and for each
of the three years in the period ended Dec. 31, 1998, and the individual and
combined financial statements of the segregated asset subaccounts of the IDS
Life Variable Life Separate Account - Flexible Premium Variable Life Subaccounts
(comprised of subaccounts U, V, W, X, Y, IL, FGI and FNO) at Dec. 31, 1998
except for the FGI and FNO subaccounts which are for the years ended Dec. 31,
1998 and 1997 and the period Nov. 22, 1996 (commencement of operations) to Dec.
31, 1996, as set forth in their reports. We've included our financial statements
in the prospectus in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
Actuarial matters included in the prospectus have been examined by Mark Gorham,
F.S.A., M.A.A.A., Actuarial Director, Insurance Product Development, as stated
in his opinion filed as an exhibit to the Registration Statement.
<PAGE>
Management of IDS Life
Directors
David R. Hubers
Director since September 1989; president and chief executive officer, AEFC,
since August 1993, and director, AEFC, since January 1984; senior vice
president, Finance and chief financial officer, AEFC, from January 1984 to
August 1993.
Richard W. Kling
Director since February 1984; president since March 1994; executive vice
president, Marketing and Products from January 1988 to March 1994; senior vice
president, AEFC, since May 1994; director of IDS Life Series Fund, Inc. and
chairman of the board of managers of IDS Life Variable Annuity Funds A and B.
Paul F. Kolkman
Director since May 1984; executive vice president since March 1994; vice
president, Finance, from May 1984 to March 1994; vice president, AEFC, since
January 1987.
James A. Mitchell
Chairman of the board since March 1994; director since July 1984; chief
executive officer since November 1986; president from July 1984 to March 1994;
executive vice president, AEFC, since March 1994; director, AEFC, since July
1984; senior vice president, AEFC, from July 1984 to March 1994.
Barry J. Murphy
Director and executive vice president, Client Service, since March 1994; senior
vice president, Operations, Travel Related Services (TRS), a subsidiary of
American Express Company, since July 1992; vice president, TRS, from November
1989 to July 1992 chief operating officer, TRS, from March 1988 to November
1989.
Stuart A. Sedlacek
Director, senior vice president and chief financial officer of AEFC since
January 1998; vice president - Assured Assets, AEFC from 1994 to 1997.
Officers other than directors
Jeffrey S. Horton
Vice president and treasurer since December 1997; vice president and corporate
treasurer, AEFC, since December 1997; controller, American Express
Technologies-Financial Services, AEFC, from July 1997 to December 1997;
controller, Risk Management Products, AEFC, from June 1990 to May 1994.
William A. Stoltzmann
Vice president, general counsel and secretary since 1985; vice president and
assistant general counsel, AEFC, since November 1985.
The address for all of the directors and principal officers is: IDS Tower 10,
Minneapolis, MN 55440-0010.
The officers, employees and sales force of IDS Life are bonded, in the amount of
$100 million, by virtue of a blanket fidelity bond issued to American Express
Company by Saint Paul Fire and Marine, the lead underwriter.
<PAGE>
Other fund managers
A I M Advisors, Inc.
A I M Advisors, Inc. ("A I M") serves as the fund's investment advisor. A I Mhas
acted as an advisor since its organization in 1976. Today, A I M, together with
its subsidiaries, advises or manages over 110 investment portfolios encompassing
a broad range of investment objectives.
Putnam Investment Management, Inc.
Putnam Management has been managing mutual funds since 1937. Today, the firm
serves as the investment manager for the funds in the Putnam Family, with nearly
$222 billion in assets under management at Dec. 31, 1998.
Warburg Pincus Asset Management, Inc.
Warburg Pincus Asset Management, Inc. is a professional investment advisory firm
which provides investment services to investment companies, employee benefit
plans, endowment funds, foundations, and other institutions and individuals.
American Century Investment Management, Inc.
American Century Investment Management Inc., has been providing investment
advisory services to investment companies and institutional investors since it
was founded in 1958.
Templeton Investment Counsel, Inc.
Templeton Investment Counsel, Inc. provides investment research and portfolio
management services, and also provides management services to numerous other
investment companies.
<PAGE>
Other information
The variable account has filed a registration statement with the SEC. For
further information concerning the policy, the variable account and IDS Life,
please refer to the registration statement. You can find the registration
statement on the SEC's web site at http://www.sec.gov.
Substitution of investments
We may change the funds from which the subaccounts buy shares if: the existing
funds become unavailable; or in the judgment of IDS Life, the funds are no
longer suitable for the subaccounts. If these situations occur, we have the
right to substitute the funds held in the subaccounts for other registered,
open-end management investment companies as long as we believe it would be in
the best interest of persons having voting rights under the policies.
In the event of any such substitution or change, IDS Life may, without the
consent or approval of owners, amend the policy and take whatever action is
necessary and appropriate. However, we will not make any substitution or change
without any necessary approval of the SEC or state insurance departments. IDS
Life will notify owners within five days of any substitution or change.
Voting rights
As a policy owner with investments in any subaccount, you may vote on important
fund matters. Each share of a fund has one vote. On some issues, such as
election of directors of IDS Life Series Fund, all shares of the IDS Life Series
Fund Portfolios vote together as one series. When electing directors, all shares
of IDS Life Series Fund Portfolios have cumulative voting rights. Cumulative
voting means that shareholders are entitled to a number of votes equal to the
number of shares they hold multiplied by the number of directors to be elected
and they have the right to divide votes among candidates.
On an issue affecting only one fund -- for example, a fundamental investment
restriction pertaining only to that fund -- its shares vote as a separate
series. If shareholders of a particular fund vote approval of an agreement, the
agreement becomes effective with respect to that fund, whether or not it is
approved by shareholders of the other funds.
IDS Life is the owner of all fund shares and therefore holds all voting rights.
However, IDS Life will vote the shares of each fund according to instructions we
receive from owners. If we do not receive timely instructions from you, we will
vote your shares in the same proportion as the shares for which we do receive
instructions. IDS Life also will vote fund shares that are not otherwise
attributable to owners in the same proportion as those shares in that subaccount
for which we receive instructions.
<PAGE>
We determine the number of fund shares in each subaccount for which you may give
instructions by applying your percentage interest in the subaccount to the total
number of votes attributable to the subaccount. We will determine that number as
of a date we choose that is 60 days or less before the meeting of the fund. We
will send you notice of each shareholder meeting, together with any proxy
solicitation materials and a statement of the number of votes for which you are
entitled to give instructions.
Under certain conditions, IDS Life may disregard voting instructions that would
change the goals of one or more of the funds or would result in approval or
disapproval of an investment advisory contract. If IDS Life does disregard
voting instructions, we will advise you of that action and the reasons for in
our next report to owners.
Reports
At least once a year IDS Life will mail to you, at your last known address of
record, a report containing all information required by law or regulation,
including a statement showing the current policy value.
<PAGE>
Policy illustrations
The following tables illustrate how policy values, cash surrender values and
death benefits may change with the investment experience of the subaccount. The
tables show how these amounts might vary, for a 35-year-old male nonsmoker,
under Death Benefit Option 1, if:
o the annual rate of return of the fund is 0%, 6% or 12%.
o the cost of insurance rates and policy fees are current rates or
guaranteed rates and fees.
This type of illustration involves a number of detailed assumptions. (See chart,
"Understanding the illustrations.") To the extent that your own circumstances
differ from those assumed in the illustrations, your expected results also would
differ.
Upon request, we will furnish you with comparable tables illustrating death
benefits, policy values and cash surrender values based on the actual age of the
person you propose to insure and on an initial specified amount and premium
payment schedule. In addition, after you have purchased a policy, you may
request illustrations based on policy values at the time of request.
Understanding the illustrations:
Rates of return: assumes uniform, gross, after-tax, annual rates of 0%, 6% or
12% for the fund. Results would differ depending on allocations among the
subaccounts, if returns averaged 0%, 6% and 12% for the fund as a whole but
differed across portfolios.
Insured: assumes a male insurance age 35, in a standard risk classification,
qualifying for the nonsmoker rate. Results would be lower if the insured were in
a substandard risk classification or did not qualify for the non-smoker rate.
Premiums: assumes a $900 premium is paid in full at the beginning of each policy
year. Results would differ if premiums were paid on a different schedule.
Policy loans and partial withdrawals: assumes that none have been made. (Since
we assume indebtedness is zero, the cash surrender value in all cases equals the
policy value minus the surrender charge.)
<PAGE>
Effect of expenses and charges
The death benefit, policy value and cash surrender value reflect the following
charges:
o Premium expense charge: 5% of each premium payment.
o Cost of insurance charge for the sex, age and rate classification for the
assumed insured.
o Policy fee: $5 per month ($7.50 per month guaranteed maximum).
o The expenses paid by the fund and charges made against the subaccounts as
described below:
The net investment return of the subaccounts, shown in the tables, is lower than
the gross, after-tax return of the fund or trust because we deducted the
expenses paid by the fund and charges made against the subaccounts. These
include:
o the daily investment management fee paid by the funds, assumed to be
equivalent to an annual rate of 0.7% of the fund's average daily net
assets; the assumed investment management fee is approximately equal to a
simple average of the investment management fees of the funds available
under the policy. The actual charges you incur will depend on how you
choose to allocate policy value. See Fund expenses in the Loads, fees and
charges section of this prospectus for additional information; and
o the daily mortality and expense risk charge, equivalent to 0.9% of the
daily net asset value of the subaccounts annually for the first 10 policy
years and 0.45% thereafter, we reserve the right to charge up to 0.9% for
all policy years.
o a nonadvisory expense charge of 0.1% of each fund's average daily net
assets for direct expenses incurred by the fund; currently, this is the
maximum direct expenses the funds will incur after IDS Life limits the
direct expenses of some funds. The actual charges you incur will depend on
how you choose to allocate policy value. See Fund expenses in the Loads,
fees, and charges section of this prospectus for additional information.
After deduction of the expenses and charges described above, the illustrated
gross annual investment rates of return correspond to the following approximate
net annual rates of return:
Net annual rate of Net annual rate of
Net annual rate of return for "Current return for "Current
Gross annual return for costs assumed" costs assumed"
investment rate "Guaranteed costs illustration, years illustration, years
of return assumed" illustration 1-10 11 and after
0% -1.69% -1.69% -1.24%
6 4.21 4.21 4.68
12 10.11 10.11 10.61
Taxes: Results shown in the tables reflect the fact that IDS Life does not
currently charge the subaccounts for federal income tax. If we take such a
charge in the future, the portfolios will have to earn more than they do now in
order to produce the death benefits and policy values illustrated.
<PAGE>
<TABLE>
<CAPTION>
Illustration
Initial specified amount $100,000 Male age 35 Current costs assumed
Death benefit Option 1 nonsmoker Annual premium $900
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $100,000 $100,000 $100,000 614 657 700 0 0 0
2 1,937 $100,000 $100,000 $100,000 1,209 1,333 1,463 308 432 562
3 2,979 $100,000 $100,000 $100,000 1,784 2,027 2,292 883 1,126 1,391
4 4,073 $100,000 $100,000 $100,000 2,335 2,737 3,191 1,434 1,836 2,290
5 5,222 $100,000 $100,000 $100,000 2,868 3,467 4,172 1,967 2,566 3,271
6 6,428 $100,000 $100,000 $100,000 3,375 4,212 5,236 2,654 3,491 4,515
7 7,694 $100,000 $100,000 $100,000 3,857 4,972 6,392 3,317 4,431 5,851
8 9,024 $100,000 $100,000 $100,000 4,316 5,749 7,651 3,956 5,389 7,291
9 10,420 $100,000 $100,000 $100,000 4,749 6,541 9,021 4,568 6,361 8,841
10 11,886 $100,000 $100,000 $100,000 5,153 7,346 10,512 5,153 7,346 10,512
11 13,425 $100,000 $100,000 $100,000 5,552 8,200 12,189 5,552 8,200 12,189
12 15,042 $100,000 $100,000 $100,000 5,922 9,072 14,025 5,922 9,072 14,025
13 16,739 $100,000 $100,000 $100,000 6,264 9,963 16,040 6,264 9,963 16,040
14 18,521 $100,000 $100,000 $100,000 6,576 10,873 18,252 6,576 10,873 18,252
15 20,392 $100,000 $100,000 $100,000 6,854 11,799 20,681 6,854 11,799 20,681
16 22,356 $100,000 $100,000 $100,000 7,095 12,739 23,348 7,095 12,739 23,348
17 24,419 $100,000 $100,000 $100,000 7,295 13,690 26,279 7,295 13,690 26,279
18 26,585 $100,000 $100,000 $100,000 7,447 14,646 29,501 7,447 14,646 29,501
19 28,859 $100,000 $100,000 $100,000 7,552 15,609 33,048 7,552 15,609 33,048
20 31,247 $100,000 $100,000 $100,000 7,598 16,570 36,955 7,598 16,570 36,955
age 60 45,102 $100,000 $100,000 $100,000 6,784 21,209 63,603 6,784 21,209 63,603
age 65 62,785 $100,000 $100,000 $132,317 3,559 25,064 108,456 3,559 25,064 108,456
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a different
frequency.
The above hypothetical investment results are illustrative only and you should
not consider them to be a representation of past or future investment results.
Actual investment results may be more or less than those shown. The death
benefit, policy value and cash surrender value would be different from those
shown if returns averaged 0%, 6% and 12% over a period of years, but fluctuated
above and below those averages for individual policy years. We cannot represent
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration
Initial specified amount $100,000 Male age 35 Guaranteed costs assumed
Death benefit Option 1 nonsmoker Annual premium $900
Premium Death benefit (1)(2) Policy value (1)(2) Cash surrender value (1)(2)
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 945 $100,000 $100,000 $100,000 584 626 668 0 0 0
2 1,937 $100,000 $100,000 $100,000 1,150 1,270 1,396 249 369 495
3 2,979 $100,000 $100,000 $100,000 1,696 1,931 2,187 795 1,030 1,286
4 4,073 $100,000 $100,000 $100,000 2,219 2,606 3,044 1,318 1,705 2,143
5 5,222 $100,000 $100,000 $100,000 2,723 3,299 3,977 1,822 2,398 3,076
6 6,428 $100,000 $100,000 $100,000 3,203 4,006 4,989 2,482 3,285 4,268
7 7,694 $100,000 $100,000 $100,000 3,658 4,726 6,088 3,117 4,185 5,548
8 9,024 $100,000 $100,000 $100,000 4,090 5,461 7,284 3,729 5,101 6,924
9 10,420 $100,000 $100,000 $100,000 4,496 6,209 8,584 4,315 6,029 8,404
10 11,886 $100,000 $100,000 $100,000 4,873 6,969 9,998 4,873 6,969 9,998
11 13,425 $100,000 $100,000 $100,000 5,221 7,737 11,533 5,221 7,737 11,533
12 15,042 $100,000 $100,000 $100,000 5,538 8,515 13,205 5,538 8,515 13,205
13 16,739 $100,000 $100,000 $100,000 5,823 9,302 15,026 5,823 9,302 15,026
14 18,521 $100,000 $100,000 $100,000 6,075 10,094 17,011 6,075 10,094 17,011
15 20,392 $100,000 $100,000 $100,000 6,289 10,891 19,174 6,289 10,891 19,174
16 22,356 $100,000 $100,000 $100,000 6,463 11,688 21,533 6,463 11,688 21,533
17 24,419 $100,000 $100,000 $100,000 6,590 12,479 24,104 6,590 12,479 24,104
18 26,585 $100,000 $100,000 $100,000 6,666 13,260 26,910 6,666 13,260 26,910
19 28,859 $100,000 $100,000 $100,000 6,683 14,024 29,971 6,683 14,024 29,971
20 31,247 $100,000 $100,000 $100,000 6,637 14,766 33,315 6,637 14,766 33,315
age 60 45,102 $100,000 $100,000 $100,000 5,216 17,893 55,543 5,216 17,893 55,543
age 65 62,785 $100,000 $100,000 $112,343 764 18,976 92,085 764 18,976 92,085
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $900 premium is paid at the beginning of each policy year. Values
will be different if premiums are paid in different amounts or with a different
frequency.
The above hypothetical investment results are illustrative only and you should
not consider them to be a representation of past or future investment results.
Actual investment results may be more or less than those shown. The death
benefit, policy value and cash surrender value would be different from those
shown if returns averaged 0%, 6% and 12% over a period of years, but fluctuated
above and below those averages for individual policy years. We cannot represent
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
Flexible Premium Variable
Life Insurance Policy
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 -- Flexible Premium Variable Life Subaccounts (comprised of subaccounts
U, V, W, X, Y, IL, FGI and FNO) as of December 31, 1998, and the related
statements of operations and changes in net assets for each of the three years
in the period then ended, except for the FGI and FNO subaccounts which are for
each of the two years in the period ended December 31, 1998 and the period
November 22, 1996 (commencement of operations) to December 31, 1996. 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 of securities owned at December 31, 1998 with the affiliated and
unaffiliated mutual fund managers. 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 --
Flexible Premium Variable Life Subaccounts at December 31, 1998 and the
individual and combined results of their operations and the changes in their net
assets for the periods described above, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
March 12, 1999
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Life Separate Account -- Flexible Premium Variable Life Subaccounts
Statements of Net Assets Dec. 31, 1998
Segregated Asset Subaccounts Combined
Variable
Assets U V W X Y IL FGI FNO Account
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
at cost $754,516,686 $82,802,098 $34,738,056 $468,110,128 $12,327,341 $205,977,181 $132,651,504 $109,927,003 $1,801,049,997
------------ ----------- ----------- ------------ ----------- ------------ ------------ ------------ --------------
at market
value $890,343,198 $82,794,183 $34,738,024 $561,662,445 $12,591,497 $242,624,735 $161,862,311 $136,226,674 $2,122,843,067
Dividends
receivable -- 453,912 136,251 -- 52,544 -- -- -- 642,707
Accounts
receivable
from
IDS Life
for contract
purchase
payments 29,608 142,868 63,093 104,584 24,281 120,600 144,696 171,285 801,015
Receivable from
mutual funds
and portfolios
for
redemptions 647,792 -- -- 322,897 -- 63,288 -- -- 1,033,977
------- ---------- ---------- ------- ---------- ------ ----------- ----------- ---------
Total assets 891,020,598 83,390,963 34,937,368 562,089,926 12,668,322 242,808,623 162,007,007 136,397,959 2,125,320,766
----------- ---------- ---------- ----------- ---------- ----------- ----------- ----------- -------------
Liabilities
Payable to
IDS Life for
mortality and
expense risk
fee 677,400 62,775 26,167 427,481 9,406 183,888 119,796 101,125 1,608,038
Payable to
mutual funds
and portfolios
for
investments
purchased -- 534,005 173,177 -- 67,419 -- 144,696 171,285 1,090,582
------- ------- ------- ------- ------ ------- ------- ------- ---------
Total
liabilities 677,400 596,780 199,344 427,481 76,825 183,888 264,492 272,410 2,698,620
------- ------- ------- ------- ------ ------- ------- ------- ---------
Net assets applicable to
Variable Life
contracts in
accumulation
period $890,343,198 $82,794,183 $34,738,024 $561,662,445 $12,591,497 $242,624,735 $161,742,515 $136,125,549 $2,122,622,146
============ =========== =========== ============ =========== ============ ============ ============ ==============
Accumulation
units
outstanding 205,971,122 36,389,966 21,082,168 139,808,650 5,728,665 114,891,933 102,425,500 92,520,119
=========== ========== ========== =========== ========= =========== =========== ==========
Net asset
value per
accumulation
unit $ 4.32 $ 2.28 $ 1.65 $ 4.02 $ 2.20 $ 2.11 $ 1.58 $ 1.47
============ =========== =========== ============ =========== ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations Year ended Dec. 31, 1998
Segregated Asset Subaccounts Combined
Variable
Investment income U V W X Y IL FGI FNO Account
Dividend
income
from mutual
funds and
portfolios
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$127,552,190 $5,482,824 $ 1,502,154 $44,064,797 $651,047 $10,109,537 $ 2,141,220 $ 962,047 $192,465,816
------------ ---------- ----------- ----------- -------- ----------- ------------ ----------- ------------
Expenses:
Mortality
and expense
risk fee 7,017,729 673,510 274,445 4,505,632 95,855 1,923,842 894,291 771,763 16,157,067
--------- ------- ------- --------- ------ --------- ------- ------- ----------
Investment
income
(loss)-- net 120,534,461 4,809,314 1,227,709 39,559,165 555,192 8,185,695 1,246,929 190,284 176,308,749
=========== ========= ========= ========== ======= ========= ========= ======= ===========
Realized and unrealized gain (loss) on investments -- net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds
from sales 9,112,329 2,569,475 12,888,386 3,977,679 2,869,520 1,835,092 352,149 285 33,604,915
Cost of
investments
sold 7,404,017 2,534,204 12,888,474 3,476,801 2,821,030 1,688,869 309,487 297 31,123,179
--------- --------- ---------- --------- --------- --------- ------- --- ----------
Net realized
gain (loss)
on investments 1,708,312 35,271 (88) 500,878 48,490 146,223 42,662 (12 2,481,736
Net change in
unrealized
appreciation or
depreciation of
investments (54,778,267)(1,588,877) 50 24,071,107 143,444 27,604,400 26,122,797 21,170,328 42,744,982
----------- ---------- -- ---------- ------- ---------- ---------- ---------- ----------
Net gain (loss)
on investments (53,069,955)(1,553,606) (38) 24,571,985 191,934 27,750,623 26,165,459 21,170,316 45,226,718
----------- ---------- --- ---------- ------- ---------- ---------- ---------- ----------
Net increase
(decrease)
in net assets
resulting from
operations $ 67,464,506 $3,255,708 $ 1,227,671 $64,131,150 $747,126 $35,936,318 $27,412,388 $21,360,600 $221,535,467
============= ========== =========== =========== ======== =========== =========== =========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Life Separate Account - Flexible Premium Variable Life Subaccounts
Statements of Operations Year ended Dec. 31, 1997
Combined
Segregated Asset Subaccounts Variable
Account
Investment income U V W X Y IL FGI FNO
Dividend income
from mutual funds and
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
portfolios $23,181,667 $4,276,019 $1,234,742 $38,138,777 $636,103 $4,413,548 $ 62,316 $ -- $ 71,943,172
----------- ---------- ---------- ----------- -------- ---------- ----------- ----------- -------------
Expenses:
Mortality and
expense risk fee 5,566,619 541,604 223,384 3,575,194 86,117 1,238,582 190,159 206,714 11,628,373
--------- ------- ------- --------- ------ --------- ------- ------- ----------
Investment income
(loss)--net 17,615,048 3,734,415 1,011,358 34,563,583 549,986 3,174,966 (127,843) (206,714) 60,314,799
========== ========= ========= ========== ======= ========= ======== ======== ==========
Realized and unrealized gain (loss) on investments -- net
Realized gain (loss) on sales of investments in
mutual funds and portfolios:
Proceeds from sales 5,074,599 3,857,257 9,523,185 2,995,867 3,337,156 668,935 -- -- 25,456,999
Cost of investments
sold 4,025,924 3,771,946 9,523,329 2,544,758 3,359,081 630,427 -- -- 23,855,465
--------- --------- --------- --------- --------- ------- --------- --------- ----------
Net realized gain
(loss) on investments 1,048,675 85,311 (144) 451,109 (21,925) 38,508 -- -- 1,601,534
Net change in
unrealized
appreciation or
depreciation of
investments 96,070,257 286,967 141 24,614,820 182,848 2,355,317 3,092,969 5,147,244 131,750,563
---------- ------- --- ---------- ------- --------- --------- --------- -----------
Net gain (loss)
on investments 97,118,932 372,278 (3) 25,065,929 160,923 2,393,825 3,092,969 5,147,244 133,352,097
---------- ------- -- ---------- ------- --------- --------- --------- -----------
Net increase (decrease)
in net assets resulting
from operations $114,733,980 $4,106,693 $1,011,355 $59,629,512 $ 710,909 $5,568,791 $2,965,126 $4,940,530 $193,666,896
============ ========== ========== =========== ========= ========== ========== ========== ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Life Separate Account - Flexible Premium Variable Life Subaccounts
Statements of Operations Year ended Dec. 31, 1996
Combined
Segregated Asset Subaccounts Variable
Account
Investment income U V W X Y IL FGI* FNO*
Dividend income
from mutual funds and
portfolios
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$66,883,373 $3,233,159 $ 611,169 $21,120,183 $532,217 $6,174,491 $8,263 $ -- $98,562,855
----------- ---------- ---------- ----------- -------- ---------- ------ ---------- -----------
Expenses:
Mortality and
expense risk fee 3,754,636 437,113 114,838 2,565,481 103,203 553,611 576 1,042 7,530,500
--------- ------- ------- --------- ------- ------- --- ----- ---------
Investment income
(loss)-- net 63,128,737 2,796,046 496,331 18,554,702 429,014 5,620,880 7,687 (1,042) 91,032,355
========== ========= ======= ========== ======= ========= ===== ====== ==========
Realized and unrealized gain (loss) on investments -- net
Realized gain (loss) on sales of investments in
mutual funds and portfolios:
Proceeds from
sales 2,580,239 3,501,950 6,220,752 1,852,115 1,415,835 -- -- -- 15,570,891
Cost of
investments
sold 1,907,065 3,439,003 6,220,842 1,633,941 1,428,871 -- -- -- 14,629,722
--------- --------- --------- --------- --------- --------- ------ ------- ----------
Net realized
gain (loss)
on investments 673,174 62,947 (90) 218,174 (13,036) -- -- -- 941,169
Net change in
unrealized
appreciation or
depreciation of
investments 5,691,003 (1,319,174) (94) 17,604,775 (403,974) 2,374,285 (4,959) (17,901) 23,923,961
--------- ---------- --- ---------- -------- --------- ------ ------- ----------
Net gain (loss)
on investments 6,364,177 (1,256,227) (184) 17,822,949 (417,010) 2,374,285 (4,959) (17,901) 24,865,130
--------- ---------- ---- ---------- -------- --------- ------ ------- ----------
Net increase
(decrease)
in net assets
resulting
from operations $69,492,914 $1,539,819 $ 496,147 $36,377,651 $ 12,004 $7,995,165 $2,728 $(18,943) $115,897,485
=========== ========== =========== =========== ========= ========== ====== ======== ============
*For the period from Nov. 22, 1996 (commencement of operations) to Dec. 31, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Life Separate Account -- Flexible Premium Variable Life Subaccounts
Statements of Changes in Net Assets Year ended Dec. 31, 1998
Combined
Segregated Asset Subaccounts Variable
Account
Operations U V W X Y IL FGI FNO
Investment
income
(loss)--
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
net $120,534,461 $4,809,314 $1,227,709 $39,559,165 $555,192 $8,185,695 $1,246,929 $190,284 $176,308,749
Net
realized
gain
(loss) on
investments 1,708,312 35,271 (88) 500,878 48,490 146,223 42,662 (12) 2,481,736
Net change
in
unrealized
appreciation
or
depreciation
of
investments (54,778,267) (1,588,877) 50 24,071,107 143,444 27,604,400 26,122,797 21,170,328 42,744,982
----------- ---------- -- ---------- ------- ---------- ---------- ---------- ----------
Net increase
(decrease)
in net
assets
resulting
from
operations 67,464,506 3,255,708 1,227,671 64,131,150 747,126 35,936,318 27,412,388 21,360,600 221,535,467
========== ========= ========= ========== ======= ========== ========== ========== ===========
Contract transactions
Contract
purchase
payments 131,410,140 16,568,072 22,533,012 77,494,858 3,068,352 43,374,689 38,889,216 33,203,965 366,542,304
Net
transfers* 34,512,161 4,116,034 (12,918,560) 18,929,696 53,255 14,647,773 51,456,625 38,403,499 149,200,483
Transfers for
policy loans (9,132,065) (674,976) (55,561) (4,854,390) (80,357) (2,119,714) (594,550) (793,889) (18,305,502)
Policy
charges (33,270,686) (4,896,101) (3,021,126) (23,227,333) (899,151) (8,039,269) (5,030,171) (4,074,024) (82,457,861)
Contract
terminations:
Surrender
benefits (23,336,785) (1,937,895) (1,277,678) (15,414,416) (327,256) (5,022,065) (1,558,456) (1,507,870) (50,382,421)
Death
benefits (2,020,055) (233,686) (20,106) (1,378,719) (72,670) (398,029) (120,690) (87,018) (4,330,973)
---------- -------- ------- ---------- ------- -------- -------- ------- ----------
Increase (decrease)
from contract
transactions 98,162,710 12,941,448 5,239,981 51,549,696 1,742,173 42,443,385 83,041,974 65,144,663 360,266,030
---------- ---------- --------- ---------- --------- ---------- ---------- ---------- -----------
Net assets
at beginning
of year 724,715,982 66,597,027 28,270,372 445,981,599 10,102,198 164,245,032 51,288,153 49,620,286 1,540,820,649
----------- ---------- ---------- ----------- ---------- ----------- ---------- ---------- -------------
Net assets
at end
of year $890,343,198 $82,794,183 $34,738,024 $561,662,445 $12,591,497 $242,624,735 $161,742,515 $136,125,549 $2,122,622,146
============ =========== =========== ============ =========== ============ ============ ============ ==============
Accumulation unit activity
Units
outstanding
at
beginning
of year 181,225,095 30,615,038 17,863,880 125,875,176 4,935,518 93,664,100 41,101,142 41,573,554
Contracts
purchase
payments 33,079,510 7,413,809 13,938,851 20,914,302 1,443,628 21,932,881 28,706,679 26,100,519
Net transfers* 8,570,310 1,826,332 (8,013,780) 5,128,103 (294) 7,154,080 37,992,736 29,942,354
Transfers for
policy loans (2,227,458) (301,509) (34,006) (1,313,581) (37,323) (1,072,377) (441,852) (628,537)
Policy charges (8,392,023) (2,191,418) (1,868,460) (6,275,456) (423,666) (4,060,677) (3,704,506) (3,213,466)
Contract terminations:
Surrender
benefits (5,791,106) (867,738) (791,849) (4,147,133) (154,579) (2,527,911) (1,141,804) (1,184,846)
Death benefits (493,206) (104,548) (12,468) (372,761) (34,619) (198,163) (86,895) (69,459)
-------- -------- ------- -------- ------- -------- ------- -------
Units
outstanding
at end
of year 205,971,122 36,389,966 21,082,168 139,808,650 5,728,665 114,891,933 102,425,500 92,520,119
=========== ========== ========== =========== ========= =========== =========== ==========
* Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account. See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Life Separate Account - Flexible Premium Variable Life Subaccounts
Statements of Changes in Net Assets Year ended Dec. 31, 1997
Combined
Segregated Asset Subaccounts Variable
Account
Operations U V W X Y IL FGI FNO
Investment
income
(loss)--
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
net $ 17,615,048 $ 3,734,415 $ 1,011,358 $ 34,563,583 $ 549,986 $ 3,174,966 $ (127,843) $ (206,714) $ 60,314,799
Net
realized
gain
(loss) on
investments 1,048,675 85,311 (144) 451,109 (21,925) 38,508 -- -- 1,601,534
Net change
in
unrealized
appreciation
or
depreciation
of
investments 96,070,257 286,967 141 24,614,820 182,848 2,355,317 3,092,969 5,147,244 131,750,563
---------- ------- --- ---------- ------- --------- --------- --------- -----------
Net
increase
(decrease)
in
net assets
resulting
from
operations 114,733,980 4,106,693 1,011,355 59,629,512 710,909 5,568,791 2,965,126 4,940,530 193,666,896
=========== ========= ========= ========== ======= ========= ========= ========= ===========
Contract transactions
Contract
purchase
payments 123,570,339 15,053,091 17,423,616 72,845,044 2,402,678 42,899,371 13,841,301 13,991,080 302,026,520
Net
transfers* 33,103,308 (239,083) (4,227,737) 21,193,067 (810,517) 27,901,000 34,880,409 30,282,735 142,083,182
Transfers
for policy
loans (8,713,893) (546,324) (290,773) (5,307,297) (111,242) (1,682,789) (200,323) (223,063) (17,075,704)
Policy
charges (29,122,591) (4,215,454) (2,208,148) (20,456,659) (809,036) (6,477,870) (1,233,735) (1,274,804) (65,798,297)
Contract
terminations:
Surrender
benefits (18,607,496) (1,766,331) (792,989) (11,491,981) (418,878) (2,719,919) (246,589) (436,800) (36,480,983)
Death
benefits (1,276,530) (247,537) (55,408) (1,781,799) (63,523) (279,136) (8,789) (9,988) (3,722,710)
---------- -------- ------- ---------- ------- -------- ------ ------ ----------
Increase
(decrease)
from contract
transactions 98,953,137 8,038,362 9,848,561 55,000,375 189,482 59,640,657 47,032,274 42,329,160 321,032,008
---------- --------- --------- ---------- ------- ---------- ---------- ---------- -----------
Net assets
at beginning
of year 511,028,865 54,451,972 17,410,456 331,351,712 9,201,807 99,035,584 1,290,753 2,350,596 1,026,121,745
----------- ---------- ---------- ----------- --------- ---------- --------- --------- -------------
Net assets
at end of
year $724,715,982 $66,597,027 $28,270,372 $445,981,599 $10,102,198 $164,245,032 $51,288,153 $49,620,286 $1,540,820,649
============ =========== =========== ============ =========== ============ =========== =========== ==============
Accumulation unit activity
Units
outstanding
at beginning
of year 153,373,376 26,774,670 11,458,041 109,309,116 4,856,455 59,452,809 1,288,668 2,406,142
Contract
purchase
payments 34,678,477 7,178,911 11,237,391 22,016,619 1,231,725 24,446,022 11,617,761 12,833,138
Net
transfers* 9,264,513 (114,293) (2,674,428) 6,349,838 (435,528) 16,110,287 29,596,543 28,094,106
Transfers
for policy
loans (2,427,763) (259,393) (188,211) (1,607,411) (56,371) (959,477) (167,885) (203,109)
Policy
charges (8,157,111) (2,008,118) (1,421,377) (6,182,237) (415,413) (3,690,168) (1,026,899) (1,156,378)
Contract
terminations:
Surrender
benefits (5,158,329) (837,375) (511,680) (3,467,220) (212,344) (1,538,186) (199,141) (390,852)
Death
benefits (348,068) (119,364) (35,856) (543,529) (33,006) (157,187) (7,905) (9,493)
-------- -------- ------- -------- ------- -------- ------ ------
Units
outstanding
at end of
year 181,225,095 30,615,038 17,863,880 125,875,176 4,935,518 93,664,100 41,101,142 41,573,554
=========== ========== ========== =========== ========= ========== ========== ==========
*Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Variable Life Separate Account - Flexible Premium Variable Life Subaccounts
Statements of Changes in Net Assets Year ended Dec. 31, 1996
Combined
Segregated Asset Subaccounts Variable
Operations U V W X Y IL FGI** FNO** Account
Investment
income
(loss)--
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
net $ 63,128,737 $ 2,796,046 $ 496,331 $ 18,554,702 $ 429,014 $ 5,620,880 $ 7,687 $ (1,042) $ 91,032,355
Net
realized
gain
(loss) on
investments 673,174 62,947 (90) 218,174 (13,036) -- -- -- 941,169
Net change
in
unrealized
appreciation
or
depreciation
of
investments 5,691,003 (1,319,174) (94) 17,604,775 (403,974) 2,374,285 (4,959) (17,901) 23,923,961
Net increase --------- ----------- ---- ---------- --------- --------- ------- -------- ----------
(decrease)
in net
assets
resulting
from
operations 69,492,914 1,539,819 496,147 36,377,651 12,004 7,995,165 2,728 (18,943) 115,897,485
========== ========= ======= ========== ====== ========= ===== ======== ===========
Contract transactions
Contract
purchase
payments 105,961,565 13,310,365 9,046,621 66,518,941 2,145,072 28,312,012 143,703 362,548 225,800,827
Net
transfers* 66,015,408 3,722,805 (1,205,578) 22,431,178 692,739 43,320,118 1,148,866 2,017,177 138,142,713
Transfers
for
policy
loans (6,244,169) (355,098) 27,139 (3,900,647) (80,185) (665,251) (596) (2,348) (11,221,155)
Policy
charges (23,329,445) (3,771,136) (1,130,174) (17,570,432) (802,276) (3,387,753) (3,948) (7,838) (50,003,002)
Contract
terminations:
Surrender
benefits (14,981,757) (1,611,110) (450,677) (10,189,903) (266,418) (1,284,169) -- -- (28,784,034)
Death
benefits (952,889) (205,738) (28,391) (652,571) (45,597) (77,361) -- -- (1,962,547)
-------- -------- ------- -------- ------- ------- ------- ------- ----------
Increase
(decrease)
from
contract
transactions 126,468,713 11,090,088 6,258,940 56,636,566 1,643,335 66,217,596 1,288,025 2,369,539 271,972,802
----------- ---------- --------- ---------- --------- ---------- --------- --------- -----------
Net assets
at
beginning
of year 315,067,238 41,822,065 10,655,369 238,337,495 7,546,468 24,822,823 -- -- 638,251,458
----------- ---------- ---------- ----------- --------- ---------- --------- --------- -----------
Net assets
at end
of year $511,028,865 $54,451,972 $17,410,456 $331,351,712 $9,201,807 $99,035,584 $1,290,753 $2,350,596 $1,026,121,745
============ =========== =========== ============ ========== =========== ========== ========== ==============
Accumulation unit activity
Units
outstanding
at
beginning
of year 112,397,698 21,093,984 7,292,031 89,225,571 3,992,247 18,302,995 -- --
Contract
purchase
payments 34,307,830 6,801,860 6,064,251 23,599,318 1,157,301 17,547,447 143,378 369,756
Net
transfers* 21,380,545 1,912,837 (839,017) 7,943,928 352,919 26,953,612 1,149,856 2,046,787
Transfers
for policy
loans (2,016,634) (182,651) 18,550 (1,382,862) (43,801) (412,513) (611) (2,377)
Policy
charges (7,542,639) (1,925,848) (757,352) (6,225,537) (432,937) (2,093,202) (3,955) (8,024)
Contract
terminations:
Surrender
benefits (4,851,362) (820,422) (301,100) (3,621,740) (144,876) (797,805) -- --
Death
benefits (302,062) (105,090) (19,322) (229,562) (24,398) (47,725) -- --
-------- -------- ------- -------- ------- ------- ------- ------
Units
outstanding
at end of
year 153,373,376 26,774,670 11,458,041 109,309,116 4,856,455 59,452,809 1,288,668 2,406,142
=========== ========== ========== =========== ========= ========== ========= =========
* Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account.
**For the period from Nov. 22, 1996 (commencement of operations) to Dec. 31, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Flexible Premium Variable
Life Subaccounts
Notes to Financial Statements
1. Organization
IDS Life Variable Life Separate Account (the Variable Account) was established
under Minnesota law on Oct. 16, 1985 as a segregated asset account of IDS Life
Insurance Company (IDS Life). The Variable Account is registered as a single
unit investment trust under the Investment Company Act of 1940, as amended (the
1940 Act). Operations of the Variable Account commenced on Jan. 20, 1986.
The Variable Account is comprised of various subaccounts. Each subaccount
invests exclusively in shares of the following portfolios or funds (the Funds),
which are registered under the 1940 Act as diversified, open-end management
investment companies and have the following investment managers.
Subaccount Invests exclusively in shares of Investment Manager
<S> <C> <C>
U IDS Life Series Fund Equity Portfolio IDS Life Insurance Company 1
V IDS Life Series Fund Income Portfolio IDS Life Insurance Company 1
W IDS Life Series Fund Money Market Portfolio IDS Life Insurance Company 1
X IDS Life Series Fund Managed Portfolio IDS Life Insurance Company 1
Y IDS Life Series Fund Government Securities Portfolio IDS Life Insurance Company 1
IL IDS Life Series Fund International Equity Portfolio IDS Life Insurance Company 1
FGI AIM V.I. Growth and Income Fund AIM Management Group Inc.
FNO Putnam VT New Opportunities Fund Putnam Investment Management,Inc.
1 American Express Financial Corporation (AEFC) is the investment advisor.
The assets of each subaccount of the Variable Account are not chargeable with
liabilities arising out of the business conducted by any other segregated asset
account or by IDS Life. IDS Life serves as the distributor of the
Flexible Premium Variable Life Policy.
2. Summary of Significant Accounting Policies
Investments in the Funds Investments in shares of the Funds are stated at market
value which is the net asset value per share as determined by the respective
Fund. 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 Funds are
reinvested in additional shares of the Funds and are recorded as 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 Funds'
undistributed net investment income, undistributed realized gain or loss and the
unrealized appreciation or depreciation on their investment securities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
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 0.9% of the average daily net assets of the subaccount. A
monthly deduction is made for the cost of insurance and the policy fee. 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.
IDS Life deducts a policy fee of $5 per month. The policy fee is waived for
policies with an intitial specified amount of $250,000 or more. This charge
reimburses IDS Life for expenses incurred in administering the policy, such as
processing claims, maintaining records, making policy changes and communicating
with owners of policies. IDS Life does not anticipate that it will make any
profit on this charge. IDS Life reserves the right to change this charge in the
future, but guarantees that it will never exceed $7.50 per month.
4. Optional Insurance Benefit Charge
Each month IDS Life deducts charges for any optional insurance benefits added to
the policy by rider.
5. Premium Expense Charge
IDS Life deducts a premium expense charge of 5% from each premium payment. It
partially compensates IDS Life for expenses in distributing the policy,
including agents' compensation, advertising and printing the prospectus and
sales literature. It also compensates IDS Life for paying taxes imposed
by certain states and governmental subdivisions on premiums received by
insurance companies. All policies in all states are charged the same
premium expense charge even though state premium taxes vary.
6. Surrender Charge
There are surrender charges for surrenders and lapses during the first 10 policy
years and in the 10 years following an increase in specified amount. This charge
is level for the first 5 years and then decreases monthly until it is zero at
the end of 10 years. The surrender charge reimburses IDS Life for costs of
issuing the policy, such as processing the application (primarily underwriting)
and setting up computer records. It also partially compensates IDS Life for
expenses in distributing the policy, including agents' compensation, advertising
and printing the prospectus and sales literature. Charges by IDS Life for
surrenders are not identified on an individual segregated asset account basis.
Charges for all segregated asset accounts amounted to $17,936,810 in 1998,
$14,502,145 in 1997 and $11,956,753 in 1996. Such charges are not treated as a
separate expense of the subaccounts or Variable Account. They are ultimately
deducted from surrender benefits paid by IDS Life.
7. Investment in Shares
The subaccounts' investment in shares of the Funds as of Dec. 31, 1998 were as
follows:
Subaccount Investment Shares NAV
<S> <C> <C> <C>
U IDS Life Series Fund Equity Portfolio 32,330,459 $27.54
V IDS Life Series Fund Income Portfolio 8,256,015 10.03
W IDS Life Series Fund Money Market Portfolio 34,741,315 1.00
X IDS Life Series Fund Managed Portfolio 29,407,407 19.10
Y IDS Life Series Fund Government Securities Portfolio 1,213,762 10.37
IL IDS Life Series Fund International Equity Portfolio 13,438,137 18.05
FGI AIM V.I. Growth and Income Fund 6,815,255 23.75
FNO Putnam VT New Opportunities Fund 5,227,424 26.06
8. Investment Transactions
The subaccounts' purchases of Funds' shares, including reinvestment of dividend
distributions, were as follows:
Year ended Dec. 31,
Subaccount Investment 1998 1997 1996
<S> <C> <C> <C> <C>
U IDS Life Series Fund Equity Portfolio............................$226,733,888 $121,966,988 $192,481,448
V IDS Life Series Fund Income Portfolio............................ 20,320,237 15,630,034 17,388,084
W IDS Life Series Fund Money Market Portfolio..................... 19,356,076 20,383,104 12,976,023
X IDS Life Series Fund Managed Portfolio.......................... 94,424,448 92,732,258 77,193,596
Y IDS Life Series Fund Government Securities Portfolio............ 5,166,525 4,076,984 3,488,184
IL IDS Life Series Fund International Equity Portfolio.............. 52,222,291 63,357,169 72,175,223
FGI AIM V.I. Growth and Income Fund.................................. 84,722,297 46,942,418 1,296,276*
FNO Putnam VT New Opportunities Fund................................. 65,398,582 42,159,212 2,369,506*
Combined Variable Account........................................$568,344,344 $407,248,167 $379,368,340
* Commenced operations on Nov. 22, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Flexible Premium Variable
Life Subaccounts
Condensed Financial Information (Unaudited)
The following tables give per-unit information about the financial history of each subaccount.
Year ended Dec. 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Subaccount U (Investing in shares of IDS Life Series Fund Equity Portfolio)
Accumulation unit value at
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $4.00 $3.33 $2.80 $2.04 $2.01 $1.79 $1.71 $1.04 $1.10 $0.90
Accumulation unit
value at end of period $4.32 $4.00 $3.33 $2.80 $2.04 $2.01 $1.79 $1.71 $1.04 $1.10
Number of accumulation
units outstanding at end
of period (000 omitted) 205,971 181,225 153,373 112,398 86,672 54,422 35,765 20,713 13,993 9,013
Subaccount V (Investing in shares of IDS Life Series Fund Income Portfolio)
Accumulation unit value at
beginning of period $2.18 $2.03 $1.98 $1.65 $1.74 $1.53 $1.41 $1.23 $1.17 $1.06
Accumulation unit
value at end of period $2.28 $2.18 $2.03 $1.98 $1.65 $1.74 $1.53 $1.41 $1.23 $1.17
Number of accumulation
units outstanding at end
of period (000 omitted) 36,390 30,615 26,775 21,094 16,248 13,255 8,848 6,088 4,646 3,207
Subaccount W (Investing in shares of IDS Life Series Fund Money Market Portfolio)
Accumulation unit value
at beginning of period $1.58 $1.52 $1.46 $1.40 $1.36 $1.34 $1.31 $1.25 $1.17 $1.08
Accumulation unit value
at end of period $1.65 $1.58 $1.52 $1.46 $1.40 $1.36 $1.34 $1.31 $1.25 $1.17
Number of accumulation
units outstanding at end
of period (000 omitted) 21,082 17,864 11,458 7,292 4,148 2,911 2,981 2,876 2,221 1,497
Subaccount X (Investing in shares of IDS Life Series Fund Managed Portfolio)
Accumulation unit value
at beginning of period $3.54 $3.03 $2.67 $2.27 $2.27 $1.91 $1.75 $1.34 $1.25 $0.97
Accumulation unit value
at end of period $4.02 $3.54 $3.03 $2.67 $2.27 $2.27 $1.91 $1.75 $1.34 $1.25
Number of accumulation
units outstanding at end
of period (000 omitted) 139,809 125,875 109,309 89,226 70,903 45,870 30,475 21,753 15,649 10,496
Subaccount Y (Investing in shares of IDS Life Series Fund Government Securities Portfolio)
Accumulation unit value
at beginning of period $2.05 $1.89 $1.89 $1.62 $1.71 $1.54 $1.46 $1.26 $1.20 $1.05
Accumulation unit value
at end of period $2.20 $2.05 $1.89 $1.89 $1.62 $1.71 $1.54 $1.46 $1.26 $1.20
Number of accumulation
units outstanding at end
of period (000 omitted) 5,729 4,936 4,856 3,992 3,949 3,444 2,556 1,504 1,096 491
Subaccount IL1 (Investing in shares of IDS Life Series Fund International Equity Portfolio)
Accumulation unit value
at beginning of period $1.75 $1.67 $1.36 $0.99 $1.00 -- -- -- -- --
Accumulation unit value
at end of period $2.11 $1.75 $1.67 $1.36 $0.99 -- -- -- -- --
Number of accumulation
units outstanding at end
of period (000 omitted) 114,892 93,664 59,453 18,303 2,582 -- -- -- -- --
Subaccount FGI2 (Investing in shares of AIM V.I. Growth and Income Fund)
Accumulation unit value
at beginning of period $1.25 $1.00 $1.00 -- -- -- -- -- -- --
Accumulation unit value
at end of period $1.58 $1.25 $1.00 -- -- -- -- -- -- --
Number of accumulation
units outstanding at end
of period (000 omitted) 102,426 41,101 1,289 -- -- -- -- -- -- --
Subaccount FNO2 (Investing in shares of Putnam VT New Opportunities Fund)
Accumulation unit value
at beginning of period $1.19 $0.98 $1.00 -- -- -- -- -- -- --
Accumulation unit value
at end of period $1.47 $1.19 $0.98 -- -- -- -- -- -- --
Number of accumulation
units outstanding at end
of period (000 omitted) 92,520 41,574 2,406 -- -- -- -- -- -- --
1 Operations commenced on Oct. 28, 1994.
2 Operations commenced on Nov. 22, 1996.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
IDS LIFE FINANCIAL INFORMATION
- -----------------------------------------------------------------
The financial statements shown below are those of the insurance company and not
those of any other entity. They are included for the purpose of informing the
investor as to the financial condition of the insurance company and its ability
to carry out its obligations under its variable contracts.
IDS LIFE INSURANCE COMPANY
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS DEC. 31, 1998 DEC. 31, 1997
ASSETS ($ thousands, except share amounts)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value: 1998,
$8,420,035; 1997, $9,743,410).................................... $ 7,964,114 $ 9,315,450
Available for sale, at fair value (amortized cost: 1998,
$13,344,949; 1997, $12,515,030).................................. 13,613,139 12,876,694
Mortgage loans on real estate.................................... 3,505,458 3,618,647
Policy loans..................................................... 525,431 498,874
Other investments................................................ 366,604 318,591
- -------------------------------------------------------------------------------------------------
Total investments................................................ 25,974,746 26,628,256
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents........................................ 22,453 19,686
Amounts recoverable from reinsurers.............................. 262,260 205,716
Amounts due from brokers......................................... 327 8,400
Other accounts receivable........................................ 47,963 37,895
Accrued investment income........................................ 366,574 357,390
Deferred policy acquisition costs................................ 2,496,352 2,479,577
Other assets..................................................... 30,487 22,700
Separate account assets.......................................... 27,349,401 23,214,504
- -------------------------------------------------------------------------------------------------
Total assets..................................................... $ 56,550,563 $ 52,974,124
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Liabilities:
Future policy benefits:
Fixed annuities.................................................. $ 21,172,303 $ 22,009,747
Universal life-type insurance.................................... 3,343,671 3,280,489
Traditional life insurance....................................... 225,306 213,676
Disability income and long-term care insurance................... 660,320 533,124
Policy claims and other policyholders' funds..................... 70,309 68,345
Deferred income taxes, net....................................... 16,930 61,582
Amounts due to brokers........................................... 195,406 381,458
Other liabilities................................................ 410,285 345,383
Separate account liabilities..................................... 27,349,401 23,214,504
- -------------------------------------------------------------------------------------------------
Total liabilities................................................ 53,443,931 50,108,308
- -------------------------------------------------------------------------------------------------
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....................................... 288,327 290,847
Accumulated other comprehensive income, net of tax:
Net unrealized securities gains.................................. 169,584 226,359
Retained earnings................................................ 2,645,721 2,345,610
- -------------------------------------------------------------------------------------------------
Total stockholder's equity....................................... 3,106,632 2,865,816
- -------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity....................... $ 56,550,563 $ 52,974,124
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-1
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DEC. 31,
1998 1997 1996
CONSOLIDATED STATEMENTS OF INCOME ($ thousands)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Revenues:
Premiums:
Traditional life insurance....................................... $ 53,132 $ 52,473 $ 51,403
Disability income and long-term care insurance................... 176,298 154,021 131,518
- ------------------------------------------------------------------------------------------------------------
Total premiums................................................... 229,430 206,494 182,921
- ------------------------------------------------------------------------------------------------------------
Policyholder and contractholder charges.......................... 383,965 341,726 302,999
Management and other fees........................................ 401,057 340,892 271,342
Net investment income............................................ 1,986,485 1,988,389 1,965,362
Net realized gain (loss) on investments.......................... 6,902 860 (159)
- ------------------------------------------------------------------------------------------------------------
Total revenues................................................... 3,007,839 2,878,361 2,722,465
- ------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Death and other benefits:
Traditional life insurance....................................... 29,835 28,951 26,919
Universal life-type insurance and investment contracts........... 108,349 92,814 85,017
Disability income and long-term care insurance................... 27,414 22,333 19,185
Increase in liabilities for future policy benefits:
Traditional life insurance....................................... 6,052 3,946 1,859
Disability income and long-term care insurance................... 73,305 63,631 57,230
Interest credited on universal life-type insurance and investment
contracts........................................................ 1,317,124 1,386,448 1,370,468
Amortization of deferred policy acquisition costs................ 382,642 322,731 278,605
Other insurance and operating expenses........................... 287,326 276,596 261,468
- ------------------------------------------------------------------------------------------------------------
Total benefits and expenses...................................... 2,232,047 2,197,450 2,100,751
- ------------------------------------------------------------------------------------------------------------
Income before income taxes....................................... 775,792 680,911 621,714
Income taxes..................................................... 235,681 206,664 207,138
- ------------------------------------------------------------------------------------------------------------
Net income....................................................... $ 540,111 $ 474,247 $ 414,576
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-2
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY OTHER
TOTAL ADDITIONAL COMPREHENSIVE
STOCKHOLDER'S CAPITAL PAID-IN INCOME, RETAINED
THREE YEARS ENDED DEC. 31, 1998 ($ thousands) EQUITY STOCK CAPITAL NET OF TAX EARNINGS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995................................ $2,331,708 $3,000 $278,814 $ 230,129 $1,819,765
Comprehensive income:
Net income................................................ 414,576 -- -- -- 414,576
Unrealized holding losses arising during the year, net of
deferred policy acquisition costs of $10,325 and taxes of
$82,982................................................... (154,111) -- -- (154,111) --
Reclassification adjustment for losses included in net
income, net of tax of $(5,429)............................ 10,084 -- -- 10,084 --
----------- ----------
Other comprehensive loss.................................. (144,027) -- -- (144,027) --
-----------
Comprehensive income...................................... 270,549 -- -- -- --
Capital contribution from parent.......................... 4,801 -- 4,801 -- --
Other changes............................................. 2,022 -- -- -- 2,022
Cash dividends to parent.................................. (165,000) -- -- -- (165,000)
---------------------------------------------------------------
Balance, December 31, 1996................................ 2,444,080 3,000 283,615 86,102 2,071,363
Comprehensive income:
Net income................................................ 474,247 -- -- -- 474,247
Unrealized holding gains arising during the year, net of
effect on deferred policy acquisition costs of $(7,714)
and taxes of $(75,215).................................... 139,686 -- -- 139,686 --
Reclassification adjustment for losses included in net
income, net of tax of $(308).............................. 571 -- -- 571 --
----------- ----------
Other comprehensive income................................ 140,257 -- -- 140,257 --
-----------
Comprehensive income...................................... 614,504 -- -- -- --
Capital contribution from parent.......................... 7,232 -- 7,232 -- --
Cash dividends to parent.................................. (200,000) -- -- -- (200,000)
---------------------------------------------------------------
Balance, December 31, 1997................................ 2,865,816 3,000 290,847 226,359 2,345,610
Comprehensive income:
Net income................................................ 540,111 -- -- -- 540,111
Unrealized holding losses arising during the year, net of
effect on deferred policy acquisition costs of $6,333 and
taxes of $32,826.......................................... (60,964) -- -- (60,964) --
Reclassification adjustment for losses included in net
income, net of tax of $(2,254)............................ 4,189 -- -- 4,189 --
----------- ----------
Other comprehensive loss.................................. (56,775) -- -- (56,775) --
-----------
Comprehensive income...................................... 483,336 -- -- -- --
Other changes............................................. (2,520) -- (2,520) -- --
Cash dividends to parent.................................. (240,000) -- -- -- (240,000)
---------------------------------------------------------------
Balance, December 31, 1998................................ $3,106,632 $3,000 $288,327 $ 169,584 $2,645,721
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DEC. 31,
1998 1997 1996
CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 540,111 $ 474,247 $ 414,576
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Policy loan issuance, excluding universal life-type insurance.... (53,883) (54,665) (49,314)
Policy loan repayment, excluding universal life-type insurance... 57,902 46,015 41,179
Change in amounts recoverable from reinsurers.................... (56,544) (47,994) (43,335)
Change in other accounts receivable.............................. (10,068) 6,194 (4,981)
Change in accrued investment income.............................. (9,184) (14,077) 4,695
Change in deferred policy acquisition costs, net................. (10,443) (156,486) (294,755)
Change in liabilities for future policy benefits for traditional
life, disability income and long-term care insurance............. 138,826 112,915 97,479
Change in policy claims and other policyholders' funds........... 1,964 (15,289) 27,311
Change in deferred income tax provision (benefit)................ (19,122) 19,982 (65,609)
Change in other liabilities...................................... 64,902 13,305 46,724
Amortization of premium (accretion of discount), net............. 9,170 (5,649) (23,032)
Net realized (gain) loss on investments.......................... (6,902) (860) 159
Policyholder and contractholder charges, non-cash................ (172,396) (160,885) (154,286)
Other, net....................................................... 10,786 7,161 (10,816)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities.............. $ 485,119 $ 223,914 $ (14,005)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed maturities held to maturity:
Purchases........................................................ $ (1,020) $ (1,996) $ (43,751)
Maturities, sinking fund payments and calls...................... 1,162,731 686,503 759,248
Sales............................................................ 236,963 236,761 279,506
Fixed maturities available for sale:
Purchases........................................................ (4,100,238) (3,160,133) (2,299,198)
Maturities, sinking fund payments and calls...................... 2,967,311 1,206,213 1,270,240
Sales............................................................ 278,955 457,585 238,905
Other investments, excluding policy loans:
Purchases........................................................ (555,647) (524,521) (904,536)
Sales............................................................ 579,038 335,765 236,912
Change in amounts due from brokers............................... 8,073 2,647 (11,047)
Change in amounts due to brokers................................. (186,052) 119,471 140,369
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities.............. 390,114 (641,705) (333,352)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Activity related to universal life-type insurance and
investment contracts:
Considerations received.......................................... 1,873,624 2,785,758 3,567,586
Surrenders and death benefits.................................... (3,792,612) (3,736,242) (4,250,294)
Interest credited to account balances............................ 1,317,124 1,386,448 1,370,468
Universal life-type insurance policy loans:
Issuance......................................................... (97,602) (84,835) (86,501)
Repayment........................................................ 67,000 54,513 58,753
Capital transaction with parent.................................. -- 7,232 4,801
Dividends paid................................................... (240,000) (200,000) (165,000)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities........................ (872,466) 212,874 499,813
- ------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents............. 2,767 (204,917) 152,456
Cash and cash equivalents at beginning of year................... 19,686 224,603 72,147
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year......................... $ 22,453 $ 19,686 $ 224,603
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS)
- -----------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
IDS Life Insurance Company (the Company) is a stock life insurance company
organized under the laws of the State of Minnesota. The Company is a wholly
owned subsidiary of American Express Financial Corporation (AEFC), which is a
wholly owned subsidiary of American Express Company. The Company serves
residents of all states except New York. IDS Life Insurance Company of New York
is a wholly owned subsidiary of the Company and serves New York State residents.
The Company also wholly owns American Enterprise Life Insurance Company,
American Centurion Life Assurance Company, American Partners Life Insurance
Company and American Express Corporation.
The Company's principal products are deferred annuities and universal life
insurance, which are issued primarily to individuals. It offers single premium
and flexible premium deferred annuities on both a fixed and variable dollar
basis. Immediate annuities are offered as well. The Company's insurance products
include universal life (fixed and variable), whole life, single premium life and
term products (including waiver of premium and accidental death benefits). The
Company also markets disability income and long-term care insurance.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. 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 (see Note 4).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENTS
Fixed maturities that the Company has both the positive intent and the ability
to hold to maturity are classified as held to maturity and carried at amortized
cost. All other fixed maturities and all marketable equity securities are
classified as available for sale and carried at fair value. Unrealized gains and
losses on securities classified as available for sale are reported as a separate
component of other comprehensive income, net of deferred policy acquisition
costs and deferred taxes.
Realized investment gain or loss is determined on an identified cost basis.
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.
Mortgage loans on real estate are carried at amortized cost less reserves for
mortgage loan losses. The estimated 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.
Impairment of mortgage loans is measured as the excess of a loan's recorded
investment over its present value of expected principal and interest payments
discounted at the loan's effective interest rate, or the fair value of
collateral. The amount of the impairment is recorded in a reserve for mortgage
loan losses. The reserve for mortgage loan losses is maintained at a level that
management believes is adequate to absorb estimated losses in the portfolio. The
level of the reserve account is determined based on several factors, including
historical
F-5
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
experience, expected future principal and interest payments, estimated
collateral values, and current and anticipated economic and political
conditions. Management regularly evaluates the adequacy of the reserve for
mortgage loan losses.
The Company generally stops accruing interest on mortgage loans for which
interest payments are delinquent more than three months. Based on management's
judgment as to the ultimate collectibility of principal, interest payments
received are either recognized as income or applied to the recorded investment
in the loan.
The cost of interest rate caps and floors is amortized to investment income over
the life of the contracts and payments received as a result of these agreements
are recorded as investment income when realized. The amortized cost of interest
rate caps and floors is included in other investments. Amounts paid or received
under interest rate swap agreements are recognized as an adjustment to
investment income.
The Company purchases and writes index options to hedge the fee income earned on
the management of equity securities in separate accounts and the underlying
mutual funds. These index options are carried at market value and are included
in other investments or other liabilities, as appropriate. Gains or losses on
index options that qualify as hedges are deferred and recognized in management
and other fees in the same period as the hedged fee income. Gains or losses on
index options that do not qualify as hedges are marked to market through the
income statement.
The Company also uses index options to manage the risks related to a certain
annuity product that pays interest based upon the relative change in a major
stock market index between the beginning and end of the product's term.
Purchased options used in conjunction with this product are reported in other
investments and written options are included in other liabilities. The
amortization of the cost of purchased options, the proceeds of written options
and the changes in intrinsic value of the contracts are included in net
investment income.
Policy loans are carried at the aggregate of the unpaid loan balances which do
not exceed the cash surrender values of the related policies.
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 fair value by a charge to income.
STATEMENTS OF CASH FLOWS
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These securities are
carried principally at amortized cost, which approximates fair value.
Supplementary information to the consolidated statements of cash flows for the
years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------
CASH PAID DURING THE YEAR FOR:
Income taxes....................... $215,003 $174,472 $317,283
Interest on borrowings............. 14,529 8,213 4,119
- -----------------------------------------------------------------
</TABLE>
RECOGNITION OF PROFITS ON ANNUITY CONTRACTS AND INSURANCE POLICIES
Profits on fixed deferred annuities are recognized by the Company over the lives
of the contracts, using primarily the interest method. Profits represent the
excess of investment income earned from investment of contract considerations
over interest credited to contract owners and other expenses.
F-6
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The retrospective deposit method is used in accounting for universal life-type
insurance. Under this method, profits are recognized over the lives of the
policies in proportion to the estimated gross profits expected to be realized.
Premiums on traditional life, disability income and long-term care insurance
policies are recognized as revenue when 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.
Policyholder and contractholder charges include the monthly cost of insurance
charges, issue and administrative fees and surrender charges. These charges also
include the minimum death benefit guarantee fees received from the variable life
insurance separate accounts. Management and other fees include investment
management fees from underlying proprietary mutual funds and mortality and
expense risk fees received from the variable annuity and variable life insurance
separate accounts.
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 most single
premium deferred annuities and installment annuities are amortized using
primarily the interest method. The costs for universal life-type insurance and
certain installment annuities are amortized as a percentage of the estimated
gross profits expected to be realized on the policies. For traditional life,
disability income 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 and deferred annuities are
accumulation values.
Liabilities for fixed annuities in a benefit status are based on established
industry mortality tables and interest rates ranging from 5% to 9.5%, depending
on year of issue.
Liabilities for future benefits on traditional life insurance are based on the
net level premium method, using anticipated mortality, policy persistency and
interest earning rates. Anticipated mortality rates are based on established
industry mortality tables. Anticipated policy persistency rates vary by policy
form, issue age and policy duration with persistency on cash value plans
generally anticipated to be better than persistency on term insurance plans.
Anticipated interest rates range from 4% to 10%, depending on policy form, issue
year and policy duration.
Liabilities for future disability income and long-term care policy benefits
include both policy reserves and claim reserves. Policy reserves are based on
the net level premium method, using anticipated morbidity, mortality, policy
persistency and interest earning rates. Anticipated morbidity and mortality
rates are based on established industry morbidity and mortality tables.
Anticipated policy persistency rates vary by policy form, issue age, policy
duration and, for disability income policies, occupation class. Anticipated
interest rates for disability income and long-term care policy reserves are 3%
to 9.5% at policy issue and grade to ultimate rates of 5% to 7% over 5 to 10
years.
Claim reserves are calculated based on claim continuance tables and anticipated
interest earnings. Anticipated claim continuance rates are based on established
industry tables. Anticipated interest rates for claim reserves for both
disability income and long-term care range from 6% to 8%.
REINSURANCE
The maximum amount of life insurance risk retained by the Company on any one
life is $750 of life benefit plus $50 of accidental death benefits. The maximum
amount of life insurance risk retained on any joint-life
F-7
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
combination is $1,500. The excesses are reinsured with other life insurance
companies, primarily on a yearly renewable term basis. Long-term care policies
are primarily reinsured on a coinsurance basis. Beginning in 1998, the Company
retains all disability income and waiver of premium risk.
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 AEFC 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 AEFC and its
subsidiaries that AEFC will reimburse subsidiaries for all tax benefits.
Included in other liabilities at December 31, 1998 and 1997 are $26,291 payable
to and $12,061, receivable from, respectively, AEFC for federal income taxes.
SEPARATE ACCOUNT BUSINESS
The separate 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 fees from the proprietary
mutual funds used as investment options for variable annuities and variable life
insurance. The Company receives mortality and expense risk fees from the
separate accounts.
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the separate accounts will not be
affected by future variations in the actual life expectancy experience of the
annuitants and beneficiaries from the mortality assumptions implicit in the
annuity contracts. The Company makes periodic fund transfers to, or withdrawals
from, the separate account assets for such actuarial adjustments for variable
annuities that are in the benefit payment period. The Company also guarantees
that the rates at which administrative fees are deducted from contract funds
will not exceed contractual maximums.
For variable life insurance, the Company guarantees that the rates at which
insurance charges and administrative fees are deducted from contract funds will
not exceed contractual maximums. The Company also guarantees that the death
benefit will continue payable at the initial level regardless of investment
performance so long as minimum premium payments are made.
ACCOUNTING CHANGES
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires the reporting and display of
comprehensive income and its components. Comprehensive income is defined as the
aggregate change in stockholder's equity excluding changes in ownership
interests. For the Company, it is net income and the unrealized gains or losses
on available-for-sale securities, net of the effect on deferred policy
acquisition costs, taxes and reclassification adjustment.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for Costs of Computer
Software Developed or Obtained for Internal Use." The SOP, which is effective
January 1, 1999, requires the capitalization of certain costs incurred after the
date of adoption to develop or obtain software for internal use. Software
utilized by the Company is owned by AEFC and will be capitalized by AEFC. As a
result, the new rule will not have a material impact on the Company's results of
operations or financial condition.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments," providing guidance for the
timing of recognition of liabilities related to guaranty fund assessments. The
Company will adopt the SOP on January 1, 1999. The Company has historically
carried a balance
F-8
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
in other liabilities on the balance sheet for potential guaranty fund assessment
exposure. Adoption of the SOP will not have a material impact on the Company's
results of operations or financial condition.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective January 1, 2000. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation.
Earlier application of all of the provisions of this Statement is encouraged,
but it is permitted only as of the beginning of any fiscal quarter that begins
after issuance of the Statement. This Statement cannot be applied retroactively.
The ultimate financial impact of the new rule will be measured based on the
derivatives in place at adoption and cannot be estimated at this time.
RECLASSIFICATION
Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
presentation.
- --------------------------------------------------------------------------------
2. INVESTMENTS
Fair values of investments in fixed maturities represent quoted market prices
and estimated values when quoted prices are not available. Estimated 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.
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at December 31, 1998 are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 39,888 $ 4,460 $ -- $ 44,348
State and municipal obligations.............. 9,683 491 -- 10,173
Corporate bonds and obligations.............. 6,305,476 447,752 27,087 6,726,141
Mortgage-backed securities................... 1,609,067 30,458 152 1,639,373
- ----------------------------------------------------------------------------------------------------
$7,964,114 $483,161 $ 27,239 $ 8,420,035
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 52,043 $ 3,324 $ -- $ 55,367
State and municipal obligations.............. 11,060 1,231 -- 12,291
Corporate bonds and obligations.............. 7,332,344 271,174 155,181 7,448,337
Mortgage-backed securities................... 5,949,502 151,511 3,869 6,097,144
- ----------------------------------------------------------------------------------------------------
Total fixed maturities....................... 13,344,949 427,240 159,050 13,613,139
Equity securities............................ 3,000 158 -- 3,158
- ----------------------------------------------------------------------------------------------------
$13,347,949 $427,398 $159,050 $ 13,616,297
- ----------------------------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
The amortized cost, gross unrealized gains and losses and fair values of
investmentsin fixed maturities and equity securities at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
HELD TO MATURITY COST GAINS LOSSES FAIR VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 41,932 $ 2,949 $ -- $ 44,881
State and municipal obligations.............. 9,684 568 -- 10,252
Corporate bonds and obligations.............. 7,280,646 415,700 9,322 7,687,024
Mortgage-backed securities................... 1,983,188 25,976 7,911 2,001,253
- -----------------------------------------------------------------------------------------------------
$9,315,450 $445,193 $17,233 $ 9,743,410
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 65,291 $ 4,154 $ -- $ 69,445
State and municipal obligations.............. 11,045 1,348 -- 12,393
Corporate bonds and obligations.............. 5,308,129 232,761 30,198 5,510,692
Mortgage-backed securities................... 7,130,565 160,478 6,879 7,284,164
- -----------------------------------------------------------------------------------------------------
Total fixed maturities....................... 12,515,030 398,741 37,077 12,876,694
Equity securities............................ 3,000 361 -- 3,361
- -----------------------------------------------------------------------------------------------------
$12,518,030 $399,102 $37,077 $ 12,880,055
- -----------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of investments in fixed maturities at December
31, 1998 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.
<TABLE>
<CAPTION>
AMORTIZED FAIR
HELD TO MATURITY COST VALUE
<S> <C> <C>
- ------------------------------------------------------------------
Due in one year or less................. $ 354,296 $ 359,020
Due from one to five years.............. 2,111,369 2,249,847
Due from five to ten years.............. 3,012,227 3,189,789
Due in more than ten years.............. 877,155 982,006
Mortgage-backed securities.............. 1,609,067 1,639,373
- ------------------------------------------------------------------
$7,964,114 $ 8,420,035
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
AVAILABLE FOR SALE COST VALUE
<S> <C> <C>
- ------------------------------------------------------------------
Due in one year or less................. $ 102,463 $ 104,475
Due from one to five years.............. 682,336 725,859
Due from five to ten years.............. 3,904,326 4,044,378
Due in more than ten years.............. 2,718,659 2,654,382
Mortgage-backed securities.............. 5,937,165 6,084,045
- ------------------------------------------------------------------
$13,344,949 $13,613,139
- ------------------------------------------------------------------
</TABLE>
During the years ended December 31, 1998, 1997 and 1996, fixed maturities
classified as held to maturity were sold with amortized cost of $230,036,
$229,848 and $277,527, respectively. Net gains and losses on these sales were
not significant. The sale of these fixed maturities was due to significant
deterioration in the issuers' credit worthiness.
Fixed maturities available for sale were sold during 1998 with proceeds of
$278,955 and gross realized gains and losses of $15,658 and $22,102,
respectively. Fixed maturities
F-10
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
available for sale were sold during 1997 with proceeds of $457,585 and gross
realized gains and losses of $6,639 and $7,518, respectively. Fixed maturities
available for sale were sold during 1996 with proceeds of $238,905 and gross
realized gains and losses of $571 and $16,084, respectively.
At December 31, 1998, bonds carried at $14,302 were on deposit with various
states as required by law.
At December 31, 1998, investments in fixed maturities comprised 83 percent of
the Company's total invested assets. These securities are rated by Moody's and
Standard & Poor's (S&P), except for securities carried at approximately $3.6
billion which are rated by AEFC's internal analysts using criteria similar to
Moody's and S&P. A summary of investments in fixed maturities, at amortized
cost, by rating on December 31 is as follows:
<TABLE>
<CAPTION>
RATING 1998 1997
<S> <C> <C>
- ------------------------------------------------------------------
Aaa/AAA................................. $ 7,629,628 $ 9,195,619
Aaa/AA.................................. 2,277 --
Aa/AA................................... 308,053 232,451
Aa/A.................................... 301,325 246,792
A/A..................................... 2,525,283 2,787,936
A/BBB................................... 1,148,736 1,200,345
Baa/BBB................................. 6,237,014 5,226,616
Baa/BB.................................. 492,696 475,084
Below investment grade.................. 2,664,051 2,465,637
- ------------------------------------------------------------------
$21,309,063 $21,830,480
- ------------------------------------------------------------------
</TABLE>
At December 31, 1998, 93 percent of the securities rated Aaa/AAA are GNMA, FNMA
and FHLMC mortgage-backed securities. No holdings of any other issuer are
greater than one percent of the Company's total investments in fixed maturities.
At December 31, 1998, approximately 13 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 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
REGION SHEET TO PURCHASE SHEET TO PURCHASE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
East North Central............ $ 750,705 $ 16,393 $ 748,372 $ 32,462
West North Central............ 491,006 81,648 456,934 14,340
South Atlantic................ 839,233 21,020 922,172 14,619
Middle Atlantic............... 476,448 6,169 545,601 15,507
New England................... 263,761 2,824 316,250 2,136
Pacific....................... 195,851 16,946 184,917 3,204
West South Central............ 136,841 1,412 125,227 --
East South Central............ 46,029 -- 60,274 --
Mountain...................... 345,379 8,473 297,545 28,717
- --------------------------------------------------------------------------------------
3,545,253 154,885 3,657,292 110,985
Less allowance for losses..... 39,795 -- 38,645 --
- --------------------------------------------------------------------------------------
$3,505,458 $154,885 $3,618,647 $110,985
- --------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
PROPERTY TYPE SHEET TO PURCHASE SHEET TO PURCHASE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Department/retail stores...... $ 1,139,349 $ 59,305 $ 1,189,203 $ 27,314
Apartments.................... 960,808 9,272 1,089,127 16,576
Office buildings.............. 783,576 50,450 716,729 34,546
Industrial buildings.......... 298,549 13,263 295,889 21,200
Hotels/motels................. 109,185 14,122 101,052 --
Medical buildings............. 124,369 -- 99,979 9,748
Nursing/retirement homes...... 46,696 -- 72,359 --
Mixed Use..................... 65,151 -- 71,007 --
Other......................... 17,570 8,473 21,947 1,601
- -----------------------------------------------------------------------------------------
3,545,253 154,885 3,657,292 110,985
Less allowance for losses..... 39,795 -- 38,645 --
- -----------------------------------------------------------------------------------------
$ 3,505,458 $ 154,885 $ 3,618,647 $ 110,985
- -----------------------------------------------------------------------------------------
</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 it
the right to take possession of the property if the borrower fails to perform
according to the terms of the agreement. Commitments to purchase mortgages are
made in the ordinary course of business. The fair value of the mortgage
commitments is $nil.
At December 31, 1998 and 1997, the Company's recorded investment in impaired
loans was $24,941 and $45,714, respectively, with allowances of $6,662 and
$9,812, respectively. During 1998 and 1997, the average recorded investment in
impaired loans was $37,873 and $61,870, respectively.
The Company recognized $1,809, $2,981and $4,889 of interest income related to
impaired loans for the years ended December 31, 1998, 1997 and 1996
respectively.
The following table presents changes in the allowance for investment losses
related to all loans:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------
Balance, January 1................. $38,645 $37,495 $37,340
Provision for investment losses.... 7,582 8,801 10,005
Loan payoffs....................... (800) (3,851) (4,700)
Foreclosures and writeoffs......... (5,632) (3,800) (5,150)
- --------------------------------------------------------------
Balance, December 31............... $39,795 $38,645 $37,495
- --------------------------------------------------------------
</TABLE>
At December 31, 1998, the Company had commitments to purchase investments other
than mortgage loans for $223,011. Commitments to purchase investments are
made in the ordinary course of business. The fair value of these commitments is
$nil.
Net investment income for the years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Interest on fixed maturities....... $1,676,984 $1,692,481 $1,666,929
Interest on mortgage loans......... 301,253 305,742 283,830
Other investment income............ 43,518 25,089 43,283
Interest on cash equivalents....... 5,486 5,914 5,754
- -----------------------------------------------------------------------
2,027,241 2,029,226 1,999,796
Less investment expenses........... 40,756 40,837 34,434
- -----------------------------------------------------------------------
$1,986,485 $1,988,389 $1,965,362
- -----------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------
Fixed maturities................... $12,084 $16,115 $ 8,736
Mortgage loans..................... (5,933) (6,424) (8,745)
Other investments.................. 751 (8,831) (150)
- --------------------------------------------------------------
$ 6,902 $ 860 $ (159)
- --------------------------------------------------------------
</TABLE>
Changes in net unrealized appreciation (depreciation) of investments for the
years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------
Fixed maturities available for sale..... $(93,474) $ 223,441 $(231,853)
Equity securities....................... (203) 53 (52)
- ------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
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.
The income tax expense (benefit) for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------
Federal income taxes:
Current............................ $244,946 $176,879 $260,357
Deferred........................... (16,602) 19,982 (65,609)
- -----------------------------------------------------------------
228,344 196,861 194,748
State income taxes-current......... 7,337 9,803 12,390
- -----------------------------------------------------------------
Income tax expense................. $235,681 $206,664 $207,138
- -----------------------------------------------------------------
</TABLE>
Increases (decreases) to the federal tax provision applicable to pretax income
based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
PROVISION RATE PROVISION RATE PROVISION RATE
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Federal income taxes based
on the statutory rate....................................... $271,527 35.0% $238,319 35.0% $217,600 35.0%
(Decreases) increases are attributable to:
Tax-excluded interest and dividend income................... (12,289) (1.6) (10,294) (1.5) (9,636) (1.5)
State taxes, net of federal benefit......................... 4,769 .6 6,372 .9 8,053 1.3
Affordable housing credits.................................. (19,688) (2.5) (20,705) (3.0) (5,090) (.8)
Other, net.................................................. (8,638) (1.1) (7,028) (1.0) (3,789) (.7)
- --------------------------------------------------------------------------------------------------------------------------
Federal income taxes........................................ $235,681 30.4% $206,664 30.4% $207,138 33.3%
- --------------------------------------------------------------------------------------------------------------------------
</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 December 31, 1998, the Company had a policyholders' surplus
account balance of $20,114. The policyholders' surplus account is only
F-13
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
3. INCOME TAXES (CONTINUED)
taxable if dividends to the stockholder exceed the stockholder's surplus account
or if the Company is liquidated. Deferred income taxes of $7,040 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 December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------
Deferred tax assets:
Policy reserves........................................ $756,769 $748,204
Life insurance guaranty fund assessment reserve........ 15,289 20,101
Other.................................................. 4,253 9,589
- ---------------------------------------------------------------------------
Total deferred tax assets.............................. 776,311 777,894
- ---------------------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs...................... 698,471 700,032
Unrealized gain on investments......................... 91,315 121,885
Investments, other..................................... 3,455 17,559
- ---------------------------------------------------------------------------
Total deferred tax liabilities......................... 793,241 839,476
- ---------------------------------------------------------------------------
Net deferred tax liabilities........................... $ 16,930 $ 61,582
- ---------------------------------------------------------------------------
</TABLE>
The Company is required to establish a valuation allowance for any portion of
the deferred tax assets that management believes will not be realized. In the
opinion of management, it is more likely than not that the Company will realize
the benefit of the deferred tax assets and, therefore, no such valuation
allowance has been established.
- --------------------------------------------------------------------------------
4. STOCKHOLDER'S EQUITY
Retained earnings available for distribution as dividends to the 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 $1,598,203 as of December 31, 1998 and $1,468,677
as of December 31, 1997 (see Note 3 with respect to the income tax effect of
certain distributions). In addition, any dividend distributions in 1999 in
excess of approximately $353,933 would require approval of the Department of
Commerce of the State of Minnesota.
Statutory net income for the years ended December 31 and capital and surplus as
of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Statutory net income............... $ 429,903 $ 379,615 $ 365,585
Statutory capital and surplus...... 1,883,405 1,765,290 1,565,082
- -----------------------------------------------------------------------
</TABLE>
F-14
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
5. RELATED PARTY TRANSACTIONS
The Company loans funds to AEFC under a collateral loan agreement. The balance
of the loan was $nil at December 31, 1998 and 1997. This loan can be increased
to a maximum of $75,000 and pays interest at a rate equal to the preceding
month's effective new money rate for the Company's permanent investments.
Interest income on related party loans totaled $nil, $103 and $780 in 1998, 1997
and 1996, respectively.
The Company participates in the American Express Company Retirement Plan which
covers all permanent employees age 21 and over who have met certain employment
requirements. Employer contributions to the plan are based on participants' age,
years of service and total compensation for the year. Funding of retirement
costs for this plan complies with the applicable minimum funding requirements
specified by ERISA. The Company's share of the total net periodic pension cost
was $211, $201 and $174 in 1998, 1997 and 1996, respectively.
The Company also participates in defined contribution pension plans of American
Express Company 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 1998, 1997 and 1996 were $1,503, $1,245 and $990,
respectively.
The Company participates in defined benefit health care plans of AEFC that
provide health care and life insurance benefits to retired employees and retired
financial advisors. The plans include participant contributions and service
related eligibility requirements. Upon retirement, such employees are considered
to have been employees of AEFC. AEFC expenses these benefits and allocates the
expenses to its subsidiaries. The Company's share of postretirement benefits in
1998, 1997 and 1996 was $1,352, $1,330 and $1,449, respectively.
Charges by AEFC for use of joint facilities, technology support, marketing
services and other services aggregated $411,337, $414,155 and $397,362 for 1998,
1997 and 1996, respectively. Certain of these costs are included in deferred
policy acquisition costs.
- --------------------------------------------------------------------------------
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1998, 1997 and 1996, traditional life insurance and universal
life-type insurance in force aggregated $81,074,928, $74,730,720 and
$67,274,354, respectively, of which $4,912,313, $4,351,904 and $3,875,921 were
reinsured at the respective year ends. The Company also reinsures a portion of
the risks assumed under disability income and long-term care policies. Under all
reinsurance agreements, premiums ceded to reinsurers amounted to $66,378,
$60,495 and $48,250 and reinsurance recovered from reinsurers amounted to
$20,982, $19,042, and $15,612 for the years ended December 31, 1998, 1997 and
1996, respectively. Reinsurance contracts do not relieve the Company from its
primary obligation to policyholders.
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company, its parent and its subsidiaries conduct
business involving insurers' sales practices, alleged agent misconduct, failure
to properly supervise agents, and other matters. The Company has been named as a
defendant in three of these types of actions.
The plaintiffs purport to represent a class consisting of all persons who
purchased policies or contracts from the Company and its subsidiaries. The
complaints put at issue various alleged sales practices and misrepresentations,
alleged breaches of fiduciary duties and alleged violations of consumer fraud
statutes. The Company and its subsidiaries believe they have meritorious
defenses to the claims raised in these lawsuits.
The outcome of any litigation cannot be predicted with certainty. In the opinion
of
F-15
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
management, however, the ultimate resolution of these lawsuits, taken in the
aggregate, should not have a material adverse effect on the Company's
consolidated financial position.
The IRS routinely examines the Company's federal income tax returns, and is
currently auditing the Company's returns for the 1990 through 1992 tax years.
Management does not believe there will be a material adverse effect on the
Company's consolidated financial position as a result of this audit.
- --------------------------------------------------------------------------------
7. LINES OF CREDIT
The Company has available lines of credit with its parent aggregating $100,000.
The interest rate for any borrowings is established by reference to various
indices plus 20 to 45 basis points, depending on the term. Borrowings
outstanding under this agreement were $nil at December 31, 1998 and 1997.
- --------------------------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into transactions involving derivative financial instruments
to manage its exposure to interest rate risk and equity market risk, including
hedging specific transactions. The Company does not hold derivative instruments
for trading purposes. The Company manages risks associated with these
instruments as described below.
Market risk is the possibility that the value of the derivative financial
instruments will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate or equity market index.
The Company is not impacted by market risk related to derivatives held for
non-trading purposes beyond that inherent in cash market transactions.
Derivatives held for purposes other than trading are largely used to manage risk
and, therefore, the cash flow and income effects of the derivatives are inverse
to the effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not fulfill the terms
of the contract. The Company monitors credit risk related to derivative
financial instruments through established approval procedures, including setting
concentration limits by counterparty, and requiring collateral, where
appropriate. A vast majority of the Company's counterparties are rated A or
better by Moody's and Standard & Poor's.
Credit risk related to interest rate caps and floors and index options is
measured by the replacement cost of the contracts. The replacement cost
represents the fair value of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over the
life of the agreement. Notional amounts are not recorded on the balance sheet.
Notional amounts far exceed the related credit risk.
F-16
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>
TOTAL
DECEMBER 31, 1998 NOTIONAL CARRYING FAIR CREDIT
ASSETS: AMOUNT AMOUNT VALUE EXPOSURE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
Assets:
Interest rate caps............ $ 3,400,000 $ 15,985 $ 4,256 $ 4,256
Interest rate floors.......... 1,000,000 1,082 13,971 13,971
Options purchased............. 110,912 24,094 29,453 29,453
Liabilities:
Options purchased/written..... 265,454 (10,526) (11,062) --
Off balance sheet:
Interest rate swaps........... 1,667,000 -- (73,477) --
- -------------------------------------------------------------------------------
$ 30,635 $ (36,859) $47,680
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997 NOTIONAL CARRYING FAIR TOTAL CREDIT
ASSETS: AMOUNT AMOUNT VALUE EXPOSURE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
Assets:
Interest rate caps............ $4,600,000 $24,963 $ 15,665 $15,665
Interest rate floors.......... 1,000,000 1,561 4,551 4,551
Options purchased/written..... 279,737 9,808 10,449 10,449
Liabilities:
Options written............... 7,373 (89) 114 --
Off balance sheet:
Interest rate swaps........... 1,267,000 -- (45,799) --
- ---------------------------------------------------------------------------------
$36,243 $ (15,020) $30,655
- ---------------------------------------------------------------------------------
</TABLE>
The fair values of derivative financial instruments are based on market values,
dealer quotes or pricing models. The interest rate caps, floors and swaps expire
on various dates from 1999 to 2003. The put and call options expire on various
dates from 1999 to 2005.
Interest rate caps, swaps and floors are used principally to manage the
Company's interest rate risk. These instruments are used to protect the margin
between interest rates earned on investments and the interest rates credited to
related annuity contract holders.
The Company is also using interest rate swaps to manage interest rate risk
related to the level of fee income earned on the management of fixed income
securities in separate accounts and the underlying mutual funds. The amount of
fee income received is based upon the daily market value of the separate account
and mutual fund assets. As a result, changing interest rate conditions could
impact the Company's fee income significantly. The Company entered into interest
rate swaps to hedge anticipated fee income for 1999 related to separate accounts
and mutual funds which invest in fixed income securities. Interest will be
accrued and reported in accrued investment income and other liabilities, as
appropriate, and management and other fees.
The Company offers a certain annuity product that pays interest based upon the
relative change in a major stock market index between the beginning and end of
the product's term. As a means of hedging its obligation under the provisions of
this product, the Company purchases and writes options on the major stock market
index.
Index options are used to manage the equity market risk related to the fee
income that the Company receives from its separate accounts and the underlying
mutual funds. The amount of the fee income received is based upon the daily
market value of the separate account and mutual fund assets. As a result, the
Company's fee income could be impacted significantly by changing economic
conditions in the equity market. The Company entered into index option
F-17
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
collars (combination of puts and calls) to hedge anticipated fee income for 1998
and 1999 related to separate accounts and mutual funds which invest in equity
securities. Testing has demonstrated the impact of these instruments on the
income statement closely correlates with the amount of fee income the Company
realizes. In the event that testing demonstrates that this correlation no longer
exists, or in the event the Company disposes of the index options collars, the
instruments will be marked-to-market through the income statement. At December
31, 1998 deferred losses on purchased put and written call index options were
$2,933 and $7,435, respectively. At December 31, 1997 deferred losses on
purchased put index options were $2,428 and deferred gains on written call index
options were $5,275.
- --------------------------------------------------------------------------------
9. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company discloses fair value information for most on- and off-balance sheet
financial instruments for which it is practicable to estimate that value. Fair
values of life insurance obligations and all non-financial instruments, such as
deferred acquisition costs are excluded.
Off-balance sheet intangible assets, such as the value of the field force, are
also excluded. Management believes the value of excluded assets and liabilities
is significant. The fair value of the Company, therefore, cannot be estimated by
aggregating the amounts presented.
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
FINANCIAL ASSETS
Investments:
Fixed maturities (Note 2):
Held to maturity.............. $ 7,964,114 $ 8,420,035 $ 9,315,450 $ 9,743,410
Available for sale............ 13,613,139 13,613,139 12,876,694 12,876,694
Mortgage loans on real estate
(Note 2)...................... 3,505,458 3,745,617 3,618,647 3,808,570
Other:
Equity securities (Note 2).... 3,158 3,158 3,361 3,361
Derivative financial
instruments (Note 8).......... 41,161 47,680 36,332 30,665
Other......................... 28,872 28,872 82,347 85,383
Cash and cash equivalents
(Note 1)...................... 22,453 22,453 19,686 19,686
Separate account assets
(Note 1)...................... 27,349,401 27,349,401 23,214,504 23,214,504
FINANCIAL LIABILITIES
Future policy benefits for
fixed annuities............... $19,855,203 $19,144,838 $20,731,052 $19,882,302
Derivative financial
instruments (Note 8).......... 10,526 84,539 89 45,685
Separate account
liabilities................... 25,005,732 24,179,115 21,488,282 20,707,620
- ----------------------------------------------------------------------------------
</TABLE>
At December 31, 1998 and 1997, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related contracts
carried at $1,226,985 and $1,185,155, respectively, and policy loans of $90,115
and $93,540, respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1998 and 1997. The fair value of
deferred annuities is estimated as the carrying amount less any applicable
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 rates appropriate for contracts issued in 1998 and 1997.
At December 31, 1998 and 1997, the fair value of liabilities related to separate
accounts is estimated as the carrying amount less any applicable surrender
charges and less variable insurance contracts carried at $2,343,669 and
$1,726,222, respectively.
F-18
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- -----------------------------------------------------------------
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 American Express Financial
Corporation) as of December 31, 1998 and 1997, and the related consolidated
statements of income, stockholder's equity and cash flows for each of the three
years in the period ended December 31, 1998. 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, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
February 4, 1999
F-19
<PAGE>
(REG2)
PART II
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission hereto or hereafter duly adopted pursuant to authority conferred in
that section.
RULE 484 UNDERTAKING
The By-Laws of IDS Life Insurance Company provide that:
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that he is or was a Manager
of Variable Annuity Funds A and B, director, officer, employee or agent of this
Corporation, or is or was serving at the direction of the Corporation as a
Manager of Variable Annuity Funds A and B, director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
to any threatened, pending or completed action, suit or proceeding, wherever
brought, to the fullest extent permitted by the laws of the State of Minnesota,
as now existing or hereafter amended, provided that this Article shall not
indemnify or protect any such Manager of Variable Annuity Funds A and B,
director, officer, employee or agent against any liability to the Corporation or
its security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of his duties or
by reason of his reckless disregard of his obligations and duties.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940
The sponsoring insurance company represents that the fees and charges deducted
under the contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
insurance company.
REPRESENTATIONS PURSUANT TO RULE 6E-3(T)
This filing is made pursuant to Rule 6c-3 and 6e-3(T) under the Investment
Company Act of 1940.
<PAGE>
CONTENTS OF THE REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 73 pages.
The undertakings to file reports.
The signatures.
The following exhibits:
1. A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2 to the Registration Statement.
(1) (a) Resolution of Board of Directors of IDS Life
Insurance Company establishing the Trust, adopted
May 9, 1985, filed electronically as Exhibit 1(a)
to Post-Effective Amendment No. 12, File
No. 33-11165 is incorporated herein by reference.
(b) Resolution of Board of Directors of IDS Life
Insurance Company reconstituting the Trust, adopted
October 16, 1985, filed electronically as
Exhibit 1(b) to Post-Effective Amendment No. 12,
File No. 33-11165 is incorporated herein by
reference.
(2) Not applicable.
(3) (a) Not applicable.
(b) (1) Form of Division Vice President's Employment
Agreement dated November 1991, filed
electronically as Exhibit 3(b)1 to Post
Effective Amendment No. 13, File No. 33-11165
is incorporated herein by reference.
(2) Form of District Manager's Rider to IDS Life
Insurance Company, Personal Financial Planner's
Agreement dated November 1986, filed
electronically as Exhibit 3(b)2 to Post
Effective Amendment No. 13, File No. 33-11165
is incorporated herein by reference.
(3) Form of Personal Financial Planner's
Agreement dated November 1986, filed
electronically as Exhibit 3(b)3 to
Post Effective Amendment No. 13,
File No. 33-11165 is incorporated
herein by reference.
<PAGE>
(c) Schedules of Sales Commissions are filed
electronically herewith.
(4) Not applicable.
(5) (a) Flexible Premium Variable Life Insurance Policy
filed with the Original Registration Statement
(File No. 33-11165) on December 31, 1986 and
incorporated herein by reference.
(b) Flexible Premium Variable Life Insurance
Policy (VUL-3) is filed electronically herewith.
(6) (a) Certificate of Incorporation of IDS Life
Insurance Company, dated July 23, 1957,
filed electronically as Exhibit 1.A.(6)(a)
to Post-Effective Amendment No. 12, File No.
33-11165 is incorporated herein by
reference.
(b) Amended By-Laws of IDS Life Insurance Company, filed
electronically to Post-Effective Amendment No. 12,
File No. 33-11165 is incorporated herein by
reference.
(7) Not applicable.
(8) (a) Form of Investment Management and
Services Agreement dated December 17, 1985
between IDS Life and IDS Life Series Fund,
Inc., filed electronically as Exhibit 8(a)
to Post-Effective Amendment No. 13, File No.
33-11165 is incorporated herein by
reference.
(b) Form of Investment Advisory Agreement dated July 11, 1984
between IDS Life and IDS Financial Services Inc. relating
to the Variable Accounts, filed electronically as
Exhibit 8(a)to Post-Effective Amendment No. 13, File
No. 33-11165 is incorporated herein by reference.
(9) None.
(10) Application form for the Flexible Premium Variable Life
Insurance Policy is filed electronically herewith as
Exhibit 1.A.(10) to Registrant's Form S-6 Pre-Effective
Amendment No. 1, File No. 333-69777.
(11) IDS Life Insurance Company's Description of Transfer
and Redemption Procedures and Method of Conversion to
Fixed Benefit Policies is filed electronically herewith as
Exhibit 1.A.(11) to Registrant's Form S-6 with Pre-Effective
Amendment No. 1, File No. 333-69777.
B. (1) Not applicable.
(2) Not applicable.
<PAGE>
C. Not applicable.
2. Opinion of counsel is filed electronically herewith.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Actuarial opinion of Mark Gorham, F.S.A., M.A.A.A., Actuarial Director,
Insurance Product Development is filed electronically herewith.
7. (a) Written actuarial consent of Mark Gorham, F.S.A., M.A.A.A.,
Actuarial Director, Insurance Product Development is filed
electronically herewith.
(b) Written auditor consent of Ernst & Young LLP is filed
electronically herewith.
(c) Power of Attorney to sign amendments to this Registration
Statement dated August 19, 1997, filed as an Exhibit to
Post-Effective Amendment No. 3 to the Registration
Statement on Form S-6, File No. 33-62457 is incorporated
herein by reference.
(d) Power of Attorney to sign amendments to this Registration
Statement date April 8, 1998 filed electronically as Exhibit
7(d) to Post-Effective Amendment No. 17 to the Registration
Statement on Form S-6, File No. 33-11165 is incorporated
herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, IDS Life Insurance Company, on behalf of the Registrant,
certifies that it meets all of the requirements for effectivesnes of this
Amendment to its Registration Statement putsuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration Statement to be
signed on behalf of the Registrant by the undersigned, thereunto duly
authorized, in the City of Minneapolis, and State of Minnesota on the 23rd day
of April, 1999.
IDS Life Variable Life Separate Account
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
Richard W. Kling, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities indicated on the 23rd day of April, 1999.
Signature Title
/s/ James A. Mitchell* Director, Chairman of the Board
James A. Mitchell and Chief Executive Officer
/s/ Richard W. Kling* Director and President
Richard W. Kling
/s/ Jeffrey S. Horton** Vice President, Treasurer and
Jeffrey S. Horton Assistant Secretary
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ ____________________ Director and Executive Vice President,
Paula R. Meyer Assured Assets
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
/s/ Stuart A. Sedlacek* Director and Executive Vice President
Stuart A. Sedlacek
/s/ Philip C. Wentzel** Vice President and Controller
Philip C. Wentzel
<PAGE>
*Signed pursuant to Power of Attorney dated August 19, 1997 filed
electronically as an Exhibit to Amendment No. 5 of the original Registration
Statement to Form N-8B-2, File No. 811-4298 is incorporated herein by reference.
**Signed pursuant to Power of Attorney dated April 8, 1998,
filed electronically as an Exhibit to Post-Effective Amendment No. 3
to the Registration Statement on Form S-6, File No. 33-62457 is incorporated
herein by reference.
By:
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
EXHIBIT INDEX
EXHIBIT 1.A.(3)(c) Schedules of Sales Commissions
EXHIBIT 1.A.(5)(b) Flexible Premium Variable Life Insurance Policy (VUL-3)
EXHIBIT 1.A.(10) Application form for Flexible Premium Variable Life
Insurance Policy
EXHIBIT 1.A.(11) IDS Life Insurance Company's Description of Transfer and
Redemption Procedures and Method of Conversion to
Fixed Benefit Policies
EXHIBIT 2 Opinion of Counsel
EXHIBIT 6 Actuarial opinion
EXHIBIT 7.A Written actuarial consent
EXHIBIT 7.b Written auditor consent
<TABLE>
<CAPTION>
- ---------------------------- ---------------------------------------------------------------------------------
Variable Universal Life Commission and production schedule
---------------------------------------------------------------------------------
Life Insurance
- ---------------------------- ---------------------------------------------------------------------------------
- ---------------------------- ----------------------------------------- ---------------------------------------
Variable Commission Production
- -------------- ------------- ------------------ ---------------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C>
PERCENT OF PREMIUM PREMIUMS PAID IN
PERCENT OF PAID IN EXCESS OF TARGET PREMIUM EXCESS OF TARGET
RATE BAND* CATEGORY TARGET PREMIUM TARGET PREMIUM X FACTOR PREMIUM X FACTOR
- -------------- ------------- ------------------ ---------------------- -------------------- ------------------
1 and 2 Non-smoker:
Issue age
20-70 50.0% 3.0% 28 1.7
Smoker:
Issue age
0-70 42.5 3.0 24 1.7
All issue age
71-71 40.0 2.0 23 1.1
76-80 30.0 2.0 17 1.1
81-90 20.0 2.0 11 1.1
- -------------- ------------- ------------------ ---------------------- -------------------- ------------------
3 All issue age
0-75 36.5 2.0 22 1.1
76-80 28.5 2.0 17 1.1
81.90 20.0 2.0 11 1.1
- -------------- ------------- ------------------ ---------------------- -------------------- ------------------
4 All issue age
0-75 31.0 2.0 18 1.1
76-80 25.0 2.0 15 1.1
81.90 20.0 2.0 11 1.1
- -------------- ------------- ------------------ ---------------------- -------------------- ------------------
</TABLE>
* The Rate Band is determined by the Initial Specified Amount as follows:
o Rate Band 1: $25,000 - 99,999
o Rate Band 2: $100,000 - 249,999
o Rate Band 3: $250,000 - 999,999
o Rate Band 4: $1,000,000+
- ------------ ---------------------------------------------------------------
Variable(s) Client Service Commissions
- ------------ ---------------------------------------------------------------
YEAR COMMISSION PER $1,000 MARKET VALUE OF THE
AVERAGE QUARTERLY CASH VALUE* (LESS LOANS)
PROPRIETARY NONPROPRIETARY ASSETS
- ------------ ----------------------------- ---------------------------------
1+ $1.25** $.75**
- ------------ ----------------------------- ---------------------------------
* Average quarterly cash value (less loans) is calculated by
taking the cash values from the previous and current
quarter's consolidated statement and dividing by two.
** Paid quarterly (i.e., $.3125 per $1,000 each quarter for
proprietary assets and $.1875 per $1,000 for nonproprietary
assets). Quarterly service fee is paid when the quarterly
client Consolidated Statement is printed.
IDS Life Insurance Company
IDS Tower 10
Minneapolis, Minnesota 55440
Flexible Premium Variable Life Insurance Policy
- - Policy continues until death or surrender.
- - Flexible premiums payable as described herein.
- - No-lapse guarantee as described herein.
- - This policy is nonparticipating. Dividends are not payable.
Insured: John Doe
Policy Date: January 15, 1998
This is a life insurance policy. It is a legal contract between you, as the
owner, and us, IDS Life Insurance Company, A Stock Company. PLEASE READ YOUR
POLICY CAREFULLY.
In consideration of your application and payment of the initial premium, we
issue this policy and we promise to pay the proceeds described in this policy
to the beneficiary if we receive proof satisfactory to us that the insured died
while this policy was in force.
The owner and beneficiary are as named in the application unless they are
changed as provided in this policy.
The amount and duration of the death benefit of this policy may increase or
decrease as described herein depending on the investment experience of the
subaccounts.
The policy value of this policy may increase or decrease daily depending on
the investment experience of the subaccounts. There is no guaranteed minimum
policy value.
Policy Number: 9090-1234,567
Initial Specified Amount: $100,000
NOTICE OF YOUR RIGHT TO EXAMINE THIS POLICY FOR 10 DAYS. If for any reason you
are not satisfied with this policy, return it to us or our representative
within 10 days after you receive it. We will then cancel this policy and refund
all premiums which you have paid. This policy will then be considered void
from its start.
Signed for and issued by IDS Life Insurance Company in Minneapolis, Minnesota,
as of the policy date shown above.
President:
/s/ Richard W. Kling
Secretary:
/s/ William A. Stoltzmann
<PAGE>
GUIDE TO POLICY PROVISIONS
Rate Table Tables of Guaranteed Maximum Monthly
Cost of Insurance Rates/Pate 4,5
Definitions Important words and meanings/Page 6
Insurance Contract Entire contract; Incontestability;
Suicide provision; Misstatement of
age or sex; Termination/Page 7
Owner and Beneficiary Owner's rights; Successor owner; Change of
ownership; Beneficiary designation; Change of
beneficiary; Assignment/Page 9
Premiums Payment of premiums; Premium allocations;
Grave period; No-lapse guarantee; Reinstatement/Page 10
Death Benefits Death benefit options 1 and 2/Page 12
Policy Change How to increase or decrease the specified amount
or to change the death benefit options/Page 13
Policy Values The policy's value and how it is determined; Monthly
deduction; Cost of insurance; Basis of policy
values/Page 14
Policy Loans How to request a loan; Interest rate;
Amount of loan; Loan repayment/Page 17
Policy Surrender Cash surrender value; Full and partial
surrenders/Page 18
Subaccounts The subaccounts; Net investment factor; Deductions
from the subaccounts; Transfer of values/Page 19
Payments of Policy How the proceeds are paid; Payment option/Page 21
Proceeds
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Insured: John Doe Initial Specified Amount: $100,000
Issue Age: 35 Minimum Specified Policy year 1 - $100,000;
Amount Allowed: years 2-5 - $ 80,000;
Risk Classification: Standard Non-Smoker years 6-10 - $ 60,000;
years 11-15 - $ 40,000
Type of Policy: Flexible Premium thereafter - $ 1,000
Variable Life
Initial Death Initial Premium: $100.00
Benefit Option: Option 1
Scheduled Premium: $1,200.00 per year
payable monthly
Policy Number: 9090-01234567 Minimum Monthly
(no-lapse guarantee)
Policy Date: January 15, 1998 Premium: $88.19 per month
Monthly Date: 15 Premium Expense Charge: 5% of premium
Guaranteed Interest Current Policy Fee: $5.00 per month
Rate: 4% per year
Guaranteed Policy Fee: $7.50 per month
Guaranteed Interest
Rate Factor: 1.0032737 Partial Surrender Fee: $25.00 or 2% of amount
surrendered, whichever is less
Current Loan
Interest Rate: Current Mortality and
First 10 policy years: 6% per year Expense Risk Charge:
All other First 10 policy years: .9% per year
policy years: 4% per year All other policy years: .45% per year
Guaranteed Loan Guaranteed Mortality and
Interest Rate: 6% per year Expense Risk Charge:
All policy years: .9% per year
No-lapse guarantee
period: The insured's attained age
70 or 5 years from the policy
date, whichever is later
</TABLE>
Table of Surrender Charges
Policy Year Beginning of year End of year
1-5 $901.00 $901.00
6 901.00 702.80
7 720.80 540.60
8 540.60 360.40
9 360.40 180.20
10 180.20 0.00
This table applies to the initial specified amount for the first 10 policy
years. After year 5, surrender charges decrease monthly. Additional charges will
apply to each increase in the specified amount for 10 years after the effective
date of the increase.
Coverage will expire when the policy values are insufficient to pay the charges
assessed on a monthly anniversary. Because the policy values may be based on the
investment results of the subaccounts, the payment of scheduled premiums or
unscheduled premiums in any amount or frequency will not guarantee that the
policy will remain in force unless the premiums needed to keep the no-lapse
guarantee in effect have been paid.
<PAGE>
<TABLE>
<CAPTION>
Investment Options Initial Premium Allocations
<S> <C>
IDS Life Fixed Account 0.0%
IDS Life Variable Life Separate Account
Subaccounts that invest in portfolios ("the Portfolios") of the
IDS Life Series Fund, Inc.:
U Equity Portfolio 100.0%
V Income Portfolio 0.0%
W Money Market Portfolio 0.0%
X Managed Portfolio 0.0%
Y Government Securities Portfolio 0.0%
IL International Equity Portfolio 0.0%
FEI Equity Income Portfolio 0.0%
Subaccounts that invest other investments:
FGI AIM V.I. Growth and Income Fund 0.0%
FNO Putnam VT New Opportunities Fund - Class IA Shares 0.0%
FPH Putnam VT High Yield Fund - Class IB Shares 0.0%
FSC Warburg Pincus Trust/Small Company Growth Portfolio 0.0%
FVL American Century VP Value 0.0%
FIF Templeton International Fund - Class C 0.0%
</TABLE>
<TABLE>
<CAPTION>
Schedule of Additional Benefits and Riders
<S> <C> <C> <C>
Monthly
Effective Date Expiration Date Cost of Insurance
Flexible Premium January 15, 1998 see policy form see policy form
Variable Life
Accelerated Benefit January 15, 1998 see rider form see rider form
Rider for Terminal Illness
Accidental Death January 15, 1998 January 15, 2033 $3.12
Benefit Rider
- - $50,000 -
Automatic Increase January 15, 1998 January 15, 2008 see rider form
Benefit Rider
Increase Percentage: 5%
Maximum Increase Amount $25,000
Total Increase Limit: $100,000
Children's Level Term January 15, 1998 January 15, 2028 $ .60 per unit
Insurance - 10.0 units
with Waiver of Monthly
Deduction (1.0 unit = $1,000)
Other Insured Rider See Policy Data Supplemental Page for information as to coverage, amounts,
and cost of insurance.
Waiver of Monthly January 15, 1998 January 15, 2023 see rider form
Deduction Rider
for Total Disability
</TABLE>
<PAGE>
Policy Data Supplemental Page
Other Insured Rider
Policy Number: 9090-12345678
Insured: Jane J. Doe
Issue Age: 35
Face Amount: $25,000
Minimum Face Amount: $25,000
Effective Date: January 15, 1998
Expiration Date: January 15, 2063
Monthly Cost of Insurance See rider form. The guaranteed monthly cost of
insurance rates shown on pages 4 and 5 of policy
will apply.
Risk Classification: Standard Non-Smoker
<PAGE>
<TABLE>
<CAPTION>
Male Rate Table
Guaranteed Maximum Monthly Cost of Insurance Rates per $1,000 for Insureds with a Standard Risk Classification
Standard Standard
Attained Attained Standard Non- Attained Standard Non-
Age Standard Age Smoker Smoker Age Smoker Smoker
<S> <C> <C> <C> <C> <C> <C> <C>
0 $0.2175 35 $0.2250 $0.1425 70 $ 4.8525 $ 3.0875
1 0.0850 36 0.2425 0.1500 71 5.2850 3.4275
2 0.0825 37 0.2625 0.1600 72 5.7775 3.8250
3 0.0800 38 0.2875 0.1725 73 6.3250 4.2725
4 0.0775 39 0.3125 0.1825 74 6.9300 4.7700
5 0.0725 40 0.3450 0.1975 75 7.5800 5.3050
6 0.0675 41 0.3775 0.2125 76 8.2500 5.8725
7 0.0650 42 0.4150 0.2275 77 8.9250 6.4675
8 0.0625 43 0.4550 0.2450 78 9.6150 7.0975
9 0.0600 44 0.5000 0.2650 79 10.3425 7.7825
10 0.0625 45 0.5450 0.2875 80 11.1325 8.5450
11 0.0675 46 0.5950 0.3100 81 12.0075 9.4075
12 0.0750 47 0.6475 0.3350 82 12.9875 10.3900
13 0.0875 48 0.7050 0.3625 83 14.0600 11.4925
14 0.1025 49 0.7675 0.3925 84 15.1925 12.6975
15 0.1175 50 0.8350 0.4275 85 16.3450 13.9800
16 0.1325 51 0.9150 0.4675 86 17.4900 15.3250
17 0.1425 52 1.0025 0.5125 87 18.6825 16.7175
18 0.1500 53 1.0250 0.5650 88 19.9400 18.1500
19 0.1550 54 1.2125 0.6225 89 21.2100 19.6475
55 1.3300 0.6875 90 22.5100 21.2325
56 1.4550 0.7575 91 23.8825 22.9475
Standard 57 1.5850 0.8325 92 25.5000 24.8700
Attained Standard Non- 58 1.7250 0.9150 93 27.6200 27.2000
Age Smoker Smoker 59 1.8725 1.0075 94 30.5957 30.4275
20 $0.1925 $0.1400 60 2.0400 1.1125 95 34.5957 34.5957
21 0.1925 0.1375 61 2.2275 1.2300 96 41.3950 41.3950
22 0.1900 0.1350 62 2.4375 1.3650 97 53.1975 53.1975
23 0.1850 0.1325 63 2.6750 1.5175 98 73.2725 73.2725
24 0.1800 0.1275 64 2.9375 1.6850 99 83.3325 83.3325
25 0.1750 0.1250 65 3.2125 1.8725
26 0.1725 0.1225 66 3.5050 2.0750
27 0.1700 0.1200 67 3.8050 2.2900
28 0.1700 0.1200 68 4.1225 2.5275
29 0.1725 0.1200 69 4.4700 2.7900
30 0.1775 0.1200
31 0.1825 0.1225
32 0.1900 0.1250
33 0.2000 0.1300
34 0.2125 0.1375
</TABLE>
For insureds with a preferred risk classification, the above standard
non-smoker guaranteed monthly cost of insurance rates will apply. For insureds
with other than a preferred or standard risk classification, the guaranteed
monthly cost of insurance rates are calculated by multiplying the above
monthly rates by the Special Class Risk Factor shown under Policy Data.
<PAGE>
<TABLE>
<CAPTION>
Female Rate Table
Guaranteed Maximum Monthly Cost of Insurance Rates per $1,000 for Insureds with a Standard Risk Classification
Standard Standard
Attained Attained Standard Non- Attained Standard Non-
Age Standard Age Smoker Smoker Age Smoker Smoker
<S> <C> <C> <C> <C> <C> <C> <C>
0 $0.1550 35 $0.1675 $0.1250 70 $ 2.4625 $ 1.8725
1 0.0700 36 0.1800 0.1325 71 2.7025 2.0775
2 0.0650 37 0.1975 0.1425 72 2.9975 2.3275
3 0.0650 38 0.2175 0.1550 73 3.3500 2.6275
4 0.0625 39 0.2375 0.1650 74 3.7525 2.9750
5 0.0625 40 0.2625 0.1800 75 4.1950 3.3625
6 0.0600 41 0.2900 0.1950 76 4.6675 3.7875
7 0.0575 42 0.3150 0.2100 77 5.1650 4.2425
8 0.0575 43 0.3425 0.2250 78 5.6925 4.7375
9 0.0575 44 0.3700 0.2400 79 6.2700 5.2900
10 0.0550 45 0.3975 0.2575 80 6.9225 5.9225
11 0.0575 46 0.4275 0.2750 81 7.6675 6.6550
12 0.0600 47 0.4575 0.2925 82 8.5225 7.5050
13 0.0625 48 0.4900 0.3125 83 9.5175 8.4775
14 0.0675 49 0.5250 0.3350 84 10.6125 9.5575
15 0.0725 50 0.5650 0.3600 85 11.7875 10.7425
16 0.0750 51 0.6050 0.3900 86 13.0400 12.0275
17 0.0800 52 0.6525 0.4200 87 14.3600 13.4100
18 0.0825 53 0.7050 0.4550 88 15.7550 14.9025
19 0.0850 54 0.7575 0.4925 89 17.2300 16.5150
55 0.8125 0.5300 90 18.8925 18.2725
56 0.8650 0.5700 91 20.7175 20.2225
Standard 57 0.9175 0.6075 92 22.7875 22.4525
Attained Standard Non- 58 0.9675 0.6450 93 25.2800 25.1475
Age Smoker Smoker 59 1.0200 0.6875 94 28.7350 28.7350
20 $0.0975 $0.0825 60 1.0825 0.7375 95 33.5325 33.5325
21 0.0975 0.0850 61 1.1625 0.8000 96 40.6975 40.6975
22 0.1000 0.0850 62 1.2650 0.8775 97 52.8275 52.8275
23 0.1025 0.0875 63 1.3875 0.9725 98 73.1550 73.1550
24 0.1050 0.0900 64 1.5275 1.0800 99 83.3325 83.3325
25 0.1075 0.0900 65 1.6750 1.1950
26 0.1125 0.0925` 66 1.8225 1.3150
27 0.1150 0.0950 67 1.9675 1.4375
28 0.1200 0.0975 68 2.1150 1.5650
29 0.1250 0.1000 69 2.2750 1.7075
30 0.1300 0.1025
31 0.1350 0.1075
32 0.1425 0.1100
33 0.1500 0.1150
34 0.1575 0.1200
</TABLE>
For insureds with a preferred risk classification, the above standard
non-smoker guaranteed monthly cost of insurance rates will apply. For insureds
with other than a preferred or standard risk classification, the guaranteed
monthly cost of insurance rates are calculated by multiplying the above
monthly rates by the Special Class Risk Factor shown under Policy Data.
<PAGE>
DEFINITIONS
The following words are often used in this policy. When we use these words,
this is what we mean:
accumulation unit
An accounting unit used to calculate the variable account value. It is a measure
of the net investment results of each of the subaccounts.
age anniversary
The policy anniversary on which the insured becomes a certain attained
insurance age.
cash surrender value
The policy proceeds if the policy is surrendered, or the amount payable if the
insured's death occurs on or after the insured's age 100 anniversary. It is
the policy value minus indebtedness, minus surrender charges as shown under
Policy Data.
fixed account
Our general account. It is made up of our assets other than those in the
subaccounts and those in any other segregated asset account.
fixed account value
The portion of the policy value that is allocated to the fixed account,
including indebtedness.
in force
The insured's life remains insured under the terms of this policy.
indebtedness
All existing loans on this policy plus policy loan interest that has been
accrued or added to the policy loan.
insurance age
The insurance age of the insured on the policy date is the issue age shown
under Policy Data. It is the age of the insured on the date of application.
Attained insurance ages are determined from the policy date.
insured
The person whose life is insured by this policy.
monthly date
The same day each month as the policy date. If there is no monthly date in a
calendar month, the monthly date will be the first day of the next
calendar month.
net premium
The portion of a premium paid that is credited to the policy as described in the
Policy Values section. It is the premium paid minus the premium expense charge
shown under Policy Data.
policy anniversary
The same day and month as the policy date each year that the policy remains
in force.
policy date
The date from which policy anniversaries, policy years, and policy months
are determined. Your policy date is shown under Policy Data.
policy value
The sum of the fixed account value and the variable account value.
proceeds
The amount payable by this policy as follows:
1. upon death of the insured prior to the insured's age 100 anniversary,
proceeds will be the death benefit under the option in effect as of the
date of the insured's death, minus any indebtedness;
2. upon death of the insured on or after the insured's age 100 anniversary,
proceeds will be the cash surrender value;
3. on surrender of the policy, proceeds will be the cash surrender value.
pro-rata basis
Allocation to the fixed account and each of the subaccounts. It is proportionate
to the value (minus any indebtedness in the fixed account) that each bears
to the policy value, minus indebtedness.
specified amount
An amount used to determine the death benefit and the proceeds payable upon
death prior to the insured's age 100 anniversary. The initial specified
amount is shown under Policy Data.
subaccounts
The subaccounts named under Policy Data. Each is an investment division of the
variable account and invests in a particular portfolio.
terminate
This policy is no longer in force. All insurance coverage under this policy
has stopped.
valuation date
Each day on which the New York Stock Exchange is open for trading, or any other
day on which there is a sufficient degree of trading in the investments of
the subaccounts such that the current value might be materially affected.
valuation period
The interval of time commencing at the close of business on each valuation date
and ending at the close of business on the next valuation date.
variable account value
The sum of the values of the subaccounts under this policy.
we, our, us
IDS Life Insurance Company
written request
A request in writing signed by you.
you, your
The owner of this policy. The owner may be someone other than the insured.
The owner is shown in the application unless the owner has been changed as
provided in this policy.
<PAGE>
The Insurance Contract
What is the entire contract of Insurance?
This policy and the copy of the application attached to it are the entire
contract between you and us.
No one except one of our corporate officers (President, Vice President,
Secretary, or Assistant Secretary) can change or waive any of our rights or
requirements under this policy. That person must do so in writing. None of
our representatives or other persons have the authority to change or waive
any of our rights or requirements under this policy.
In issuing this policy, we have relied upon the application. The statements
contained in the application are considered, in the absence of fraud,
representations and not warranties. No statement made in connection with
the application will be used by us to void the policy or to deny a claim
unless that statement is part of the application.
When will the policy become incontestable?
After this policy has been in force during the insured's lifetime for two
years from the policy date, we cannot contest the policy except for
nonpayment of premiums.
While this policy is contestable, we, on the basis of a misstatement or
misrepresentation made in the application, may rescind or reform this
policy and we may deny a claim.
Any additional specified amount, other than that resulting solely from a
change in death benefit option, issued after the policy date will be
incontestable only after such amount has been in force during the insured's
lifetime for two years from the effective date of such amount.
Is there a suicide exclusion?
Suicide by the insured, whether sane or insane, within two years from the
policy date is not covered by this policy. In this event, the only amount
payable by us to the beneficiary will be the premium that you have paid,
minus any indebtedness and partial surrenders.
If the insured commits suicide while sane or insane within the two years
after the effective date of:
1. any additional specified amount other than that resulting solely
from a change in death benefit option; or
2. any rider attached to this policy;
the amount payable by us will be limited to the monthly deductions for such
additional amount or rider.
Can you exchange this policy?
Yes. Once during the first two policy years, you have the right to exchange
this policy for a flexible premium adjustable life policy that provides for
benefits that do not vary with investment return of the subaccounts. This
is done by transferring, without charge, the entire policy value to the
fixed account.
Do you have voting rights?
All policy owners with variable account values will have voting rights. So
long as federal law requires, you may have the right to vote at the
meetings of the Variable Policy Owners. If you have voting rights, we will
send you a notice of the time and place of any such meetings. The notice
will also explain matters to be voted upon and how many votes you will
have.
<PAGE>
Do state laws apply?
Yes. This policy is governed by the law of the state in which it is
delivered. The values and benefits of this policy are at least equal to
those required by such state.
What if the insured's age or sex has been misstated?
If the insured's age or sex has been misstated, the proceeds payable upon
death will be:
1. the policy value on the date of death; plus
2. the amount of insurance that the cost of insurance on the
insured, which was deducted from the policy value for the policy
month during which the death occurred, would have been
purchased had the cost of the insurance been calculated using
the cost of insurance rates for the correct age and sex; minus
3. any indebtedness on the date of death.
When does this policy terminate?
This policy will terminate on the earliest of the following:
1. the date you request that coverage ends; or
2. the date you surrender the policy in full; or
3. the end of the grace period; or
4. the date of death of the insured.
Does this policy qualify for favorable tax treatment?
This policy is intended to qualify for treatment as a life insurance policy
under Sections 72, 101, and 7702 of the Internal Revenue Code as they now
exist or may later be amended.
We reserve the right to endorse this policy to comply with:
1. future changes in the Internal Revenue Code;
2. any regulations or rulings issued under the Code; and
3. any other requirements imposed by the Internal Revenue Service;
with respect to remaining qualified for treatment as a life insurance
policy under these Code sections.
We will provide the owner with a copy of any such endorsement.
<PAGE>
Owner and Beneficiary
What are your rights as owner of this policy?
As long as the insured is living and unless otherwise provided in this
policy, you may exercise all rights and privileges provided in this policy
or allowed by us.
How can you change ownership of this policy?
You can change the ownership of this policy by written request on a form
approved by us. The change must be made while the insured is living. Once
the change is recorded by us, it will take effect as of the date of your
request, subject to any action taken or payment made by us before the
recording.
To whom are the proceeds paid on the insured's death?
We will pay the proceeds to the beneficiary or beneficiaries whom you have
named in the application unless you have since changed the beneficiary as
provided below. If the beneficiary has been changed, we will pay the
proceeds in accordance with your last change of beneficiary request.
If one or all of the beneficiaries die before the insured, to whom are the
proceeds payable?
Only those beneficiaries who survive the insured's death may share in the
proceeds. If no beneficiary survives the insured, we will pay the proceeds
to you, if living; otherwise, to your estate.
How do you change the beneficiary?
By making a satisfactory written request to us, you may change the
beneficiary anytime while the insured is living. Once we record the change,
it will take effect as of the date of your request, subject to any action
taken or payment made by us before the recording.
Can you assign this policy as collateral?
Yes. While the insured is living, you can assign this policy or any
interest in it. Your interest and the interest of any beneficiary are
subject to the interest of the assignee. An assignment is not a change of
ownership and an assignee is not an owner as these terms are used in this
policy. We will pay any policy proceeds payable to the assignee in a single
sum.
You must give us a copy of any assignment. Any assignment is subject to any
action taken or payment made by us before the assignment was recorded at
our home office. We are not responsible for the validity of any assignment.
<PAGE>
Premiums
What are the premium payments for this policy?
Three types of premium payments apply to this policy. We call these:
1. the initial premium;
2. scheduled premiums; and
3. unscheduled premiums.
What is the initial premium?
The initial premium is the premium due on the policy date of this policy.
What is the scheduled premium? Can it be changed?
The scheduled premium is the premium shown under Policy Data. It is payable
at the stated interval that you selected in the application. However, no
scheduled premium may be paid on or after the insured's age 100
anniversary.
The scheduled premium will serve only as an indication of your intent as
to the frequency and amount of future premium payments. You may change the
amount or interval at any time by written request. You may also skip
scheduled premium payments. Any change in amount may be subject to
applicable tax laws and regulations.
Scheduled premiums may be paid annually, semi-annually, or quarterly.
Payment at any other interval must be approved by us. Scheduled premium
payments must be at least $25. We reserve the right to limit the amount
of any increase in scheduled premiums.
Can you make unscheduled premium payments?
Yes. You can make additional premium payments of at least $25 at any time
prior to the insured's age 100 anniversary. We reserve the right to limit
the number and amount of these unscheduled premiums. This includes our
right to refuse such premiums if there is indebtedness on this policy.
How are premium payments allocated?
Premium payments applied to the fixed account and the subaccounts will be
allocated as specified in your application for this policy. You may choose
any whole percentage for each account from 0% to 100%. By written request,
you may change this allocation. The change will be effective for all
premiums received after our receipt of the change. Premiums received before
the policy date will be allocated initially to the fixed account. ON the
policy date, the policy value in the fixed account will be transferred
to the subaccounts or remain in the fixed account in accordance with
your premium allocation percentages. For any premium received on or after
the policy date, the premium will be allocated in accordance with your
premium allocation percentages.
Can we restrict premium payments?
We reserve the right to refuse premiums and to return premiums with
interest if such premiums would disqualify your policy from
1. treatment as a life insurance policy under Code Sections
72, 101, and 7702; or
2. favorable tax treatment under Code Sections 72 and 101.
Is there a grace period for paying premiums?
Yes. If, on a monthly date, the cash surrender value is less than the
monthly deduction for the policy month following such monthly date, a
grace period of 61 days will begin.
The grace period will give you time to pay a premium sufficient to continue
your coverage. We will mail, to your last known address, a notice as to the
premium needed so that the next three monthly deductions can be taken.
If such premium is not paid within the grace period, all coverage under
this policy will terminate without value at the end of the 61-day grace
period.
If a claim by death during the grace period becomes payable under the
policy, any overdue monthly deductions will be deducted from the proceeds.
If the no-lapse guarantee is in effect as described in the provision below,
the policy will not enter the grace period.
<PAGE>
Death Benefits
What are the proceeds payable upon death of the insured by this policy prior to
the insured's age 100 anniversary?
The proceeds payable upon death will be the death benefit in effect on the
date of the insured's death, minus any indebtedness. The death benefit
will be calculated based on the death benefit option in effect as of the
date of the insured's death. One of two options will apply: Option 1 or 2.
Both options are described below.
What is Option 1?
The death benefit under this option will be the greater of:
1. the specified amount; or
2. the percentage of policy value for the insured's attained age
shown in the table below.
Under this option, the policy value of this policy is part of the
specified amount. The initial specified amount is shown under Policy Data.
Such amount may be changed as explained in the Policy Change section. A
partial surrender will reduce the specified amount.
What is Option 2?
The death benefit under this option will be the greater of:
1. the policy value of this policy, plus the specified amount; or
2. the percentage of policy value for the insured's attained age
shown in the table below.
Under this option, the policy value is not a part of the specified amount.
The initial specified amount is shown under Policy Data. Such amount
may be changed as explained in the Policy Change section.
Insured's Applicable Insured's Applicable
Attained Age Percentage Attained Age Percentage
40 or less 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75-95 105
55 150 96 104
56 146 97 103
57 142 98 102
58 138 99 101
59 134 100 100
60 130
The percentage is designed to ensure that the policy meets the provisions
of Federal tax law which require a minimum death benefit in relation to
policy value for the policy to qualify as life insurance.
Which death benefit option will apply?
You chose the death benefit you wanted when you applied for this policy.
The initial death benefit option is shown under the Policy Data. While this
policy is in force, you may change the option as explained in Policy
Change section.
What are the proceeds payable upon death of the insured on or after the
insured's age 100 anniversary?
The proceeds payable upon death of the insured will be the cash surrender
value.
<PAGE>
Policy Change
Can you request to change the benefits of this policy?
Yes. While this policy is in force, you may request to decrease or increase
the specified amount. You may also change the death benefit option from 1
to 2 or from 2 to 1. All such changes may be made only prior to the
insured's age 100 anniversary and will be subject to the rules below.
What are the rules for changing the specified amount?
Decreases of the Specified Amount
You may decrease the specified amount once per policy year by written
request. A decrease may only be made after the first policy year and
is subject to the following rules.
1. Any decrease will be effective on the monthly date on or next
following our receipt of your written request. Any such decrease
will be applied in the following order:
(a) against the specified amount provided by the most recent
increase; then
(b) against the next most recent increases successively; then
(c) against the initial specified amount shown under Policy
Data.
2. The specified amount that remains in force after a requested
decrease may not be less than the minimum specified amount
allowed shown under Policy Data.
3. We reserve the right to decline to make any specified amount
decrease that we determine would cause this policy to fail to
qualify as life insurance under applicable tax laws.
Increases of the Specified amount
You may increase the specified amount at any time by written request.
The following rules apply to any increase in specified amount other
than that resulting solely from a change in death benefit option.
1. You must apply for an increase by written request on a form
satisfactory to us, and not later than the insured's age 85
anniversary.
2. You must furnish satisfactory evidence of insurability of the
insured.
3. Any increase will be subject to our issue rules and limits at
the time of increase.
4. The minimum increase in the specified amount is $10,000.
5. Any increase will be effective on the monthly date on or next
following the date your application is approved.
6. A new schedule of surrender charges will apply to the amount of
any increase in the specified amount.
How do you change the death benefit option?
You may change the death benefit option once per policy year by written
request. The change in option will be effective on the monthly date on or
next following the date we approve your request.
If the death benefit is Option 2, it may be changed to Option 1. The new
specified amount will be the Option 2 death benefit as of the effective
date of change.
If the death benefit is Option 1, it may be changed to Option 2. The new
specified amount will be the Option 1 death benefit, minus the policy value
as of the effective date of change.
The death benefit after a change may not be less than the minimum
specified amount allowed shown under Policy Data.
We reserve the right to decline to make any death benefit option change
that we determine would cause this policy to fail to qualify as life
insurance under applicable tax laws.
<PAGE>
Policy Values
What is the policy's value?
On a given date, the policy value is equal to the fixed account value plus
the variable account value.
What is the fixed account value?
On the policy date, the fixed account value equals: 1) the portion of the
initial net premium allocated to the fixed account, plus any interest
credited on such portion before the policy date; minus 2) the portion of
the monthly deduction allocated to the fixed account for the first policy
month.
On any subsequent date, the fixed account value will be calculated as:
a + b + c - d - e - f
where:
(a) is the fixed account value on the preceding monthly date plus
interest thereon from the preceding monthly date to the date of
calculation;
(b) is the portion of net premiums allocated to the fixed account and
received since the preceding monthly date, plus interest on
such portions from the date such net premiums were received to the
date of calculation;
(c) is the amount of any transfers from the subaccounts, including loan
transfers, to the fixed account since the preceding monthly date,
plus interest on such transferred amounts from the effective dates
of such transfers to the date of calculation;
(d) is the amount of any transfers from the fixed account, including
loan repayment transfers, to the subaccounts since the preceding
monthly date, plus interest on such transferred amounts from the
effective dates of such transfers to the date of calculation;
(e) is the amount of any partial surrenders and partial surrender fees
allocated to the fixed account since the preceding monthly date, plus
interest on such surrendered mounts from the effective date of such
partial surrenders to the date of calculation; and
(f) if the date of calculation is a monthly date, the portion of the
monthly deduction allocated to the fixed account for the policy
month following the monthly date.
What is the variable account value?
The variable account value is the sum of the values of the subaccounts
under this policy as shown under Policy Data.
On the policy date, the value of each subaccount equals: 1) the portion of
the initial net premium allocated to the subaccount, plus any interest
credited on such portion before the policy date; minus 2) the portion of
the monthly deduction allocated to the subaccount for the first policy
month.
On any subsequent date, the value of each subaccount will be calculated as:
a + b + c - d - e - f
where:
(a) is the value of the subaccount on the preceding valuation date,
multiplied by the net investment factor for the current valuation
period;
(b) is the net premiums received and allocated to the subaccount during
the current valuation period;
(c) is the amount of any transfers from other subaccounts or the fixed
account, including loan repayment transfers, to the subaccount
during the current valuation period;
(d) is the amount of any transfers to other subaccounts or the fixed
account, including loan transfers, from the subaccount during the
current valuation period;
(e) is the amount of partial surrender and partial surrender fee
allocated to the subaccount during the current valuation period;
(f) is the portion of any monthly deduction during the current
valuation period allocated to the subaccount for the policy month
following the monthly date.
<PAGE>
What is the monthly deduction?
A deduction will be made each monthly date prior to the insured's age 100
anniversary for the cost of insurance, policy fee, and the cost of any
riders, for the policy month following such monthly date. The monthly
deduction for a policy month will be calculated as:
(a) + (b) + (c)
where:
(a) is the cost of insurance for the policy month;
(b) is the policy fee shown under Policy Data. We reserve the right to
change the policy fee, but it will never exceed the guaranteed policy
fee shown under Policy Data; and
(c) is the cost of any policy riders for the policy month.
The monthly deduction will be taken from the fixed account and the
subaccounts with value according to the monthly deduction allocation
percentages specified in your application for this policy. You may choose
any whole percentage for each account from 0% to 100%. By written request,
you may change the percentages. Any change will be effective for monthly
deductions taken thereafter.
The monthly deduction will be taken from the fixed account and the
subaccounts with value on a prorata basis if: 1) the value in the fixed
account or in any subaccount is insufficient to pay the portion of the
monthly deduction so allocated; or 2) you do not specify the account or
subaccounts from which the monthly deduction is to be taken.
How is the cost of insurance calculated?
The cost of insurance for a policy month is calculated as:
a x (b-c) + d
1000
where:
(a) is the cost of insurance rate described below;
(b) is the death benefit on the monthly date divided by the guaranteed
interest rate factor shown under Policy Data;
(c) is the policy value at the beginning of the policy month. At this
point, the policy value has been reduced by the monthly deduction
except for the part of the monthly deduction that pays for the
cost of insurance; and
(d) is the amount of any flat extra insurance charges as shown under
Policy Data.
If the policy value is included in the specified amount and there have
been changes in the specified amount, the policy value is considered a
prorata part of each specified amount.
What is the cost of insurance rate?
The cost of insurance rate is the rate applied to the insurance under this
policy to determine the monthly deduction. It is based on the sex, attained
age, and risk classification of the insured. "Attained Age" means age on
the prior policy anniversary.
We may change monthly cost of insurance rates from time to time. Any change
in the cost of insurance rate will apply to all individuals of the same
risk class as the insured. Any change will be in accordance with procedures
and standards on file with the state insurance department. Cost of
insurance rates will be determined by us based on our expectations as to
future mortality experience.
The guaranteed maximum monthly cost of insurance rates shown in this
policy on pages 4 and 5, for ages 20 and over, are based on the 1980
Commissioners Standard Ordinary Smoker or Nonsmoker, Male or Female
Mortality Tables, Age Last Birthday.
The rates for ages under 20 do not distinguish between smokers and
nonsmokers and are based on the 1980 Standard Ordinary Mortality Table,
Male or Female, Age Last Birthday. Shortly before the Insured's becomes
age 20, we will send you a notice that we may begin charging smoker rates
upon the insured's age 20 policy anniversary. If you do not apply for
nonsmoker rates, or the insured does not qualify for nonsmoker rates, the
insured will be reclassified as a smoker, and the smoker guaranteed
maximum monthly cost of insurance rates will apply to the policy.
<PAGE>
What interest rate is used to determine the fixed account value?
The guaranteed interest rate applied in the calculation of the fixed
account value is shown under Policy Data. Interest in excess of the
guaranteed interest rate shown under Policy Data may be applied in the
calculation of the fixed account value at such increased rates and in such
manner as we may determine.
Interest in excess of the guaranteed interest rate as shown under Policy
Data however, will not be applied to the portion of the policy value that
equals any indebtedness due us.
For how long will the policy value continue your insurance?
If sufficient scheduled premium payments are not continued, insurance
coverage under this policy and any benefits provided by riders will be
continued until the cash surrender value is insufficient to cover the
monthly deduction, as provided in the Grace Period provision. This
provision will not continue any rider beyond the date for its termination
as provided in the rider.
What is the basis used for policy values?
Values and reserves are equal to or greater than those required by law.
Where required, a detailed statement of the method of computation of
values and reserves has been filed with the insurance department of the
state where this policy was delivered.
Will you receive information about the values of this policy?
Yes. At least once a year, we will send to your last known address, a
report that shows:
1. the currency policy value;
2. premiums paid since the last report;
3. all charges since the last report;
4. indebtedness on this policy;
5. the current cash surrender value;
6. the current death benefit; and
7. partial surrenders since the last report.
At any time, upon written request by you, we will provide a projection of
future death benefits and policy values. The projection will be based on
(1) assumptions as to the specified amount(s), type of coverage option and
future premium payments as are necessary and specified by us and/or you.
<PAGE>
Policy Loans
Can you borrow money on this policy? How?
By written request, you may obtain a loan from us whenever this policy
has a loan value. The loan value of this policy is the only security
required for your loan. A loan must be for at least $500. We will pay
interest on the loaned amount at an annual rate as stated under Policy
Data. Loans may affect the no-lapse guarantee as described in the Premiums
section of this policy.
If you do not specify the accounts from which the loan is to be made, the
loan will be made from the fixed account and the subaccounts with value
on a pro-rata basis.
The amount of any loan and any loan interest from the subaccounts will be
transferred from the subaccounts to the fixed account.
Can we delay or suspend payment of a loan?
We will normally pay the portion of any loan from the subaccounts within
7 days after we receive your written request in our home office. We have
the right, however, to suspend or delay the date of any loan from the
subaccounts for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists, and as a result:
(a) disposal of securities held in the subaccounts is not reasonably
practicable; or
(b) it is not reasonably practicable to fairly determine the value
of the assets of the subaccounts; or
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of security holders.
Rules and regulations of the Securities and Exchange Commission will
govern as to whether the conditions set forth in the above items 2 and 3
exist.
For any loans from the fixed account, we have the right to postpone the
loan for up to 6 months unless the loan is used to pay premiums on any
policies you have with us.
What is the interest rate for a policy loan?
The current loan interest rate for policy loans is shown under Policy
Data. We reserve the right to increase the current loan interest rate
charge, but it will never exceed the guaranteed loan interest rate shown
under Policy Data.
Interest is charged daily and payable at the end of the policy year. If
interest is not paid when it is due, it will be added to your
indebtedness and charged the same interest rate as your loan. The
additional interest will be taken from the fixed account and the
subaccounts with value on a pro-rata basis.
What is the maximum loan value of this policy?
You can borrow an amount up to 90% of the policy value minus surrender
charges. We calculate the policy value as of the date of the loan.
Interest to pay for the loan until the next policy anniversary will be
included in determining the maximum loan value.
When can you repay your loan?
Your loan can be repaid in full or in part at any time before the insured's
death and while this policy is in force. A loan that exists at the end
of the grace period may not be repaid unless this policy is reinstated.
Repayments should be clearly marked as "loan repayments"; otherwise, they
will be credited to this policy as premiums. Loan repayments must be in
amounts of at least $25. Remaining loan amounts of less than $25 can be
paid in full. Loan repayments will be allocated to the fixed account and
the subaccounts according to the premium allocation percentages in effect
unless you tell us otherwise.
What if your loan is not repaid?
Failure to repay a loan or to pay loan interest will not terminate this
policy unless the cash surrender value is insufficient to cover the monthly
deduction, as provided in the Grace Period provision. This would happen
if indebtedness exceeded the policy value, minus surrender charges.
<PAGE>
Policy Surrender
Can you surrender this policy?
Yes. You may surrender this policy for its cash surrender value at any
time. Your request must be in writing. Upon surrender for the cash
surrender value, this policy will terminate.
The cash surrender value of this policy is:
1. the policy value at the time of surrender; minus
2. any indebtedness on this policy; minus
3. any applicable surrender charges as shown under Policy Data.
Surrender charges are shown under Policy Data.
Is a partial surrender possible?
Yes. By written request or other requests acceptable to us, you may
partially surrender this policy for an amount less than the cash
surrender value. Partial surrenders are subject to the rules below and
payment of the Partial Surrender Fee shown under Policy Data. We reserve
the right to limit the frequency of partial surrenders you may request.
Partial surrenders may affect the no-lapse guarantee as described in the
Premiums section of this policy.
If death benefit Option 1 is in effect, both the specified amount and the
policy value will be reduced by the amount of surrender and partial
surrender fee. If death benefit Option 2 is in effect, the policy value
will be reduced by the amount of surrender and the partial surrender fee.
What are the rules for a partial surrender?
The following rules will apply to any partial surrender:
1. partial surrenders may not be made in the first policy year;
2. the minimum amount that may be surrendered is $500;
3. the partial surrender amount cannot exceed 90% of the full cash
surrender value;
4. the death benefit that remains in force may not be less than the
minimum specified amount allowed shown under Policy Data;
5. the partial surrender fee is as stated under Policy Data. The
surrender amount and partial surrender fee will be deducted from
the policy value at the time of each partial surrender; and
6. we reserve the right to decline a request for a partial surrender
that we determine would cause this policy to fail to qualify as
life insurance under applicable tax laws.
If you do not specify the accounts from which the surrender is to be made,
the surrender will be made from the fixed account and the subaccounts
with value on a pro-rata basis.
Can we delay or suspend payment of a surrender?
We will normally pay the portion of any surrendered amount from the
subaccounts within 7 days after we receive your written request in our
home office. We have the right, however, to suspend or delay the date of
any surrender payment from the subaccounts for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists, and as a result:
(a) disposal of securities held in the subaccounts is not reasonably
practicable; or
(b) it is not reasonably practicable to fairly determine the value
of the assets of the subaccounts; or
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of security holders.
Rules and regulations of the Securities and Exchange Commission will
govern as to whether the conditions set forth in the above items 2 and 3
exist.
For any surrender request from the fixed account, we have the right to
postpone the payment for up to 6 months. If we postpone payment more than
30 days, we will also pay you interest. The interest will be paid at the
rate of 3% per year based on the amount surrendered for the period of
postponement.
<PAGE>
Subaccounts
What are the subaccounts?
The subaccounts are separate investment accounts of ours. They are named
under Policy Data. We have allocated a part of our assets for this and
certain other policies to the subaccounts. Such assets remain our property.
They cannot be charged, however, with liabilities from any other business
in which we may take part.
What are the investments of the subaccounts?
Net premiums and transfers will be allocated as you specify. Each
subaccount will buy the investment shown for that subaccount under Policy
Data or as later added or changed.
How do we value the subaccounts?
The subaccount value is determined by multiplying the number of
accumulation units credited to the subaccount by the appropriate
accumulation unit values.
What are the subaccount accumulation units?
The number of accumulation units for each of the subaccounts is found by
dividing: (1) the amount allocated to the subaccount; by (2) the
subaccount's accumulation unit value for the valuation period in which we
received the premium payment, transfer request, or partial surrender
request.
What is the subaccount accumulation unit value?
The value of an accumulation unit for each of the subaccounts was
arbitrarily set at $1 when the first investments were bought.
The value for any later valuation period is found as follows: The
accumulation unit value for a subaccount for the last prior valuation
period is multiplied by each subaccount's net investment factor for
the following valuation period. The result is the accumulation unit value.
The value of an accumulation unit may increase or decrease from one
valuation period to the next.
What is the net investment factor? How is it determined?
The net investment factor is an index applied to measure the investment
performance of a subaccount from one valuation period to the next. The
net investment factor may be greater or less than one; therefore, the value
of an accumulation unit may increase or decrease.
To find the net investment factor of any such subaccount for any valuation
period, we divide (1) by (2), and subtract (3) from the result, where:
(1) is the net result of:
a. the net asset value per share of the portfolios or funds held in
the subaccount determined at the end of the current valuation
period; plus
b. the per-share amount of any dividend or capital gain
distributions made by the investment held in the subaccount, if
the "ex-dividend" date occurs during the current valuation
period; plus or minus
c. a per-share charge or credit for any taxes reserved for the
current valuation period that we determine to have resulted from
the investment operations of the subaccount;
(2) is the net result of:
a. the net asset value per share of the portfolios or funds held in
the subaccount, determined at the end of the last prior
valuation period; plus or minus
b. the per-share charge or credit for any taxes reserved for the
last prior valuation period; and
(3) is a factor representing the mortality and expense risk charge.
<PAGE>
What deductions are made from the subaccounts?
The mortality and expense risk charge compensates us for assuming the
mortality and expense risks under this policy. It is equal on an annual
basis to the percentage, as stated under Policy Data, of the daily value
of the subaccounts. The deduction will be (1) made from each subaccount
with value; and (2) computed on a daily basis.
Can the investments of the subaccounts be changed?
This would happen if laws or regulations changed, the investment became
unavailable, or, in the judgment of IDS Life Insurance Company, the
investments were no longer suitable for the subaccounts. If any of these
situations occurred, we would have the right to substitute investments
other than those shown under Policy Data. We would first seek the approval
of the Securities and Exchange Commission, and, where required, the
insurance regulator of the state where this policy is delivered.
Can transfers be made among your subaccounts and fixed account?
By written request or other requests acceptable to us, you may transfer all
or part of the value of a subaccount to one or more of the other
subaccounts or to the fixed account. The amount transferred, however,
must be at least: 1) $250; or 2) the total value in the subaccount, if
less. We reserve the right to limit such transfers to 5 per policy year.
We may suspend or modify this transfer privilege at any time with the
necessary approval of the Securities and Exchange Commission.
You may also transfer from the fixed account to the subaccounts once a
year, but only on the policy anniversary or within 30 days after such
policy anniversary. If you make this transfer, you cannot transfer from
the subaccounts back into the fixed account until the next policy
anniversary. If we receive your written request within 30 days before the
policy anniversary date, the transfer from the fixed account to the
subaccounts will be effective on the anniversary date. If we receive
your written request within 30 days after the policy anniversary date,
the transfer from the fixed account to the subaccounts will be effective on
the date we receive the request. The minimum transfer amount is $250 or
the fixed account value minus indebtedness, if less. The maximum transfer
amount is the fixed account value, minus indebtedness. We may suspend or
modify this transfer privilege at any time.
<PAGE>
Payment of Policy Proceeds
How are the proceeds paid?
We will pay the proceeds in a single sum unless a payment option has been
selected. The date on which the proceeds are paid in a lump sum or first
placed under a payment option is the settlement date. All proceeds are
payable at our home office. We will pay interest at a rate not less than
4% per year on single sum death proceeds from the date of the insured's
death to the settlement date.
What are the payment options other than a single sum?
During the insured's lifetime, you may request in writing that we pay the
proceeds under one or more of the payment options shown below, or that we
change a prior election. You may elect other payment options not shown if
we agree. Unless we agree otherwise, however, a payment option may be
selected only if the payments are to be made to a natural person in that
person's own right. Also, the amount of proceeds placed under a payment
option must be at least $5,000.
Option A - Interest Payments
We will pay interest on proceeds placed under this option at the rate of
3% per year compounded annually. We will make regular interest payments at
intervals and for a period that is agreeable to both you and us. At the
end of any payment interval, a withdrawal of proceeds may be made in
amounts of at least $100. At any time, all of the proceeds that remain may
be withdrawn or placed under a different payment option approved by us.
Option B - Payments for a Specified Period
We will make monthly payments for a specified number of years. The amount
of each monthly payment for each $1,000 placed under this option is shown
in the table below. Monthly payment amounts for years not shown will be
furnished upon request.
Option B Table
Number Monthly
of Years Payment/$1000
10 9.61
15 6.87
20 5.51
25 4.71
30 4.18
Option C - Lifetime Income
We will make monthly payments for the life of the person (the payee) who
is to receive the income. Payment will be guaranteed for either 10, 15, or
20 years. The amount of each monthly payment for each $1,000 placed under
this option will be based on our Table of Settlement Rates in effect at the
time of the first payment. The amounts will not be less than those shown
in the table below for the sex and Adjusted Age of the payee on the due
date of the first payment. (See Adjusted Age Table.)
Monthly income amounts for any adjusted age not shown in the following
table will be furnished upon request.
Option C Table M = Male F = Female
Adjusted Age Life Income per $1,000 with
Payee Payments Guaranteed for
10 years 15 years 20 years
M F M F M F
50 4.22 3.89 4.17 3.86 4.08 3.82
55 4.62 4.22 4.53 4.18 4.39 4.11
60 5.14 4.66 4.96 4.57 4.71 4.44
65 5.81 5.22 5.46 5.05 5.02 4.79
70 6.61 5.96 5.96 5.60 5.27 5.12
75 7.49 6.89 6.38 6.14 5.42 5.35
Adjusted Age Table
The adjusted age is the age on the payee's nearest birthday, minus an
"adjustment" based on the year of birth of the payee as follows:
Calendar Calendar
Year of Year of
Payee's Birth Adjustment Payee's Birth Adjustment
Prior to 1920 0 1945 - 1949 6
1920 - 1924 1 1950 - 1959 7
1925 - 1929 2 1960 - 1969 8
1930 - 1934 3 1970 - 1979 9
1935 - 1939 4 1980 - 1989 10
1940 - 1944 5 After 1989 11
Will a supplemental contract be prepared if proceeds are placed under a
payment option?
If a payment option is requested, we will prepare an agreement stating the
terms under which payments will be made. The agreement will include
statements about withdrawal value, if any, and to whom remaining proceeds
will be paid if the payee dies.
Can a beneficiary request a payment option?
After the insured's death but before any proceeds are paid, the beneficiary
may select a payment option by written request to us. You may provide,
however, that the beneficiary will not be permitted to change the payment
option you have selected.
Are excess interest earnings payable by us?
On each anniversary of the settlement date, we will determine excess
interest, if any, on payment option deposits. Any such excess interest
will be paid under Option A or B.
<PAGE>
Flexible Premium Variable Life Insurance Policy
- - Policy continues until death or surrender.
- - Flexible premiums payable as described herein.
- - No-lapse guarantee as describe herein.
- - This policy is nonparticipating. Dividends are not payable.
IDS Life Insurance Company
IDS Tower 10
Minneapolis, Minnesota 55440
<PAGE>
Other Insured Rider
Term Insurance
Based on the application for this rider and the payment of its monthly
deduction this rider is made a part of the policy. This rider is subject
to all policy terms and provisions unless this rider changes them. This
rider does not increase your policy values.
Definition of "Other Insured"
Each person whose life is insured by this rider. Each other insured is
shown under Policy Data. If there is more than one other insured, the
provisions of this rider will apply individually as to each other insured.
Definition of "Face Amount"
The amount of the death benefit provided by this rider. The face amount for
each other insured is shown under Policy Data.
What benefit does this rider provide?
If we receive proof satisfactory to us that the other insured died while
this rider was in force, we will pay a death benefit to the beneficiary
of this rider. The death benefit will be the face amount in force as of
the date of death of the insured. The beneficiary is named in the
application for this rider unless changed as provided below.
Subject to the terms of the policy, the death benefit payable may be
applied under one of the payment options shown in the policy.
How do you change the beneficiary of this rider?
You may change a named beneficiary by satisfactory written request to us
provided:
1. the base policy is in force;
2. this rider is in force; and
3. the other insured is alive.
Once the change is recorded by us, it will take effect as of the date it
is signed subject to any action taken or payment made by us before the
recording.
When you name, add, or change a beneficiary, we will assume that it applies
to the base policy unless you tell us that it applies to this rider.
Is there a monthly deduction for the cost of this rider?
Yes. While this rider is in force, a monthly deduction for the cost of this
rider is taken from the policy's value for each other insured. The amount
of the deduction is the face amount of each other insured as shown under
Policy Data divided by 1,000 times the monthly cost of insurance rate.
If a Waiver of Monthly Deduction rider is attached to the policy, the
monthly deduction for the cost of the Waiver of Monthly Deduction rider for
each other insured is equal to 1 x 2 divided by 1000 where:
(1) is the Waiver of Monthly Deduction rate from the Waiver of Monthly
Deduction Rider Cost of Insurance Table, based on the then attained
age of the insured;
(2) is the face amount for each other insured shown under Policy Data.
What is the cost of insurance rate?
The cost of insurance rate is the rate applied to the face amount of this
rider to determine the monthly deduction. It is based on the sex, attained
age, and risk classification of the other insured. For purposes of this
rider, "attained age" means age of the other insured on the prior rider
anniversary.
We may charge monthly cost of insurance rates from time to time. Any change
in the cost of insurance rate will apply to all individuals of the same
risk class as the other insured. Any change will be in accordance with
procedures and standards on file with the state insurance department. Cost
of insurance rates will be determined by us based on our expectations as
to future mortality experience.
The guaranteed maximum monthly cost of insurance rates in the policy, for
ages 20 and over, are based on the 1980 Commissioners Standard Ordinary
Smoker or Nonsmoker, Male or Female Mortality Tables, Age Last Birthday.
The rates for ages under 20 do not distinguish between smokers and
nonsmokers and are based on the 1980 Standard Ordinary Mortality Table,
Male or Female, Age Last Birthday. Shortly before the other insured
becomes age 20, we will send you a notice that we may begin charging
smoker rates upon the other insured's age 20 policy anniversary. If you do
not apply for nonsmoker rates, or the other insured does not qualify for
non-smoker rates, the other insured will be reclassified as a smoker, and
smoker guaranteed maximum monthly cost of insurance rates will apply to
this rider.
Can you change the face amount of this rider?
Decreases of the Face Amount
While this rider is in force, you may decrease the face amount once per
year by written request. The decrease may only be made after the first
rider year and is subject to the following rules:
1. Any decrease will be effective on the monthly date on or next
following our receipt of your written request. Any such decrease will
be applies in the following order:
(a) against the face amount provided by the most recent increase;
then
(b) against the next most recent increases successively; then
(c) against the original face amount of this rider.
2. The face amount that remains in force after a decrease may not be less
than the minimum face amount under Policy Data.
Increases of the Face Amount
While this ride is in force, you may increase the face amount at any time
by written request. You may not, however, make any increase in the face
amount during a period of disability of the insured. Increases are subject
to the following rules.
1. You must apply for an increase on a form satisfactory to us and before
the other insured's attained age 75.
2. You must furnish satisfactory evidence of insurability of the other
insured. If the policy includes a disability waiver of monthly
deductions rider, you must also provide evidence of insurability
of the insured under the base policy.
3. Any increase will be subject to our issue rules and limits at the time
of increase.
4. The minimum increase in the face amount is $10,000.
5. Any increase will be effective on the monthly date on or next
following the date your application is approved.
Can coverage under this rider be converted to a new policy?
After the first year of coverage, you may convert such coverage to a new
individual life insurance policy on the life of the other insured. No
evidence of insurability will be required. Coverage, however, may be
converted only:
(1) if the other insured is alive;
(2) while this rider is in force with respect to the other insured;
(3) before the other insured's attained age 75; and
(4) while the base policy is in force or within 31 days after the
insured's death.
Application must be made by written request. During your lifetime, only
you may apply for conversion. If you are the insured, then the other
insured will have 31 days after the death of the insured to apply for
conversion.
The New Policy
The amount of the new policy may be for an amount up to the face amount of
this rider in force at the time of conversion. The new policy date will
be the 15th of the month on or next following the date we receive your
request or another date agreed to by us. The new policy must be one of our
level premium whole life, endowment, or flexible premium adjustable whole
life policies we are then issuing. The new policy will be in the same risk
class as this rider.
When will coverage under this rider terminate?
Coverage under this rider will terminate on the earliest of the following:
1. the monthly date on or next following receipt of your written request
for coverage to end; or
2. the date the policy terminates due to other than the insured's death;
or
3. 31 days after the insured's death. During these 31 days, we will not
charge you for coverage under this rider; or
4. the date of conversion of coverage as provided in this rider; or
5. the insured's age 100 anniversary; or
6. the other insured's attained age 100.
Can this rider be reinstated if the policy has lapsed?
If the policy and this rider lapsed as provided in the policy's Grace
Period provision, this rider may be reinstated within 5 years of the date
of lapse if:
1. this rider was in effect when the policy lapsed; and
2. the policy is reinstated; and
3. the requirements stated below are met.
In order to reinstate coverage for this rider, you must:
1. furnish satisfactory evidence of insurability for the other insured;
and
2. pay a premium sufficient to keep this rider in force for 3 months; and
3. pay the monthly deductions that were not collected during the grace
period.
The effective date of reinstatement will be the monthly date on or next
following the date we approve the application for reinstatement.
We will have two years from the effective date of reinstatement during
the other insured's lifetime to contest the truth of statements or
representations in the reinstatement application.
What if the age or sex of the other insured has been misstated?
In this event, any amount payable under this rider will be the amount of
insurance, if any, that the rider cost for the policy month during which
such death occurred, would have purchased had the cost of the benefits
provided under the rider been calculated using the rider Cost of Insurance
Rates for the correct age and sex.
When will this rider become incontestable?
After coverage with respect to the other insured has been in force during
the other insured's lifetime for two years from its effective date, we
cannot contest the coverage.
Any increase in face amount will be incontestable only after such amount
has been in force during the other insured's lifetime for two years
from the effective date of such increase.
Is there a suicide exclusion?
Yes. Suicide by the other insured, whether sane or insane, within two years
from the effective date of coverage is not covered. In this event, our
liability under this rider will be limited to the total of the monthly
deductions taken for the other insured's coverage.
If the other insured commits suicide while sane or insane within two years
after the effective date of any increase in face amount, our liability
will be limited to an amount equal to the cost of the additional coverage.
<PAGE>
What is the effective date of this rider?
This rider is issued as of the policy date of the policy unless a different
date is shown under Policy Data.
IDS Life Insurance Company
(signature of) William A. Stoltzmann
Secretary
<PAGE>
Children's Level Term Insurance Rider
Based on the application for this rider and the payment of its monthly
deduction, this rider is made a part of the policy. This rider is subject
to all policy terms and provisions unless this rider changes them. This
rider does not increase your policy values.
Definition of Insured
When we use the term "insured" in this rider, we mean the person who is
the insured under the policy to which this rider is attached.
Definition of Insured Child
When we use the term "insured child" in this rider, we mean:
1. any child, step-child, or legally adopted child of the insured who is
named in the application for this rider. The child must be at least
15 years old before coverage is provided. On the date of the
application, the child must be less than 19 years old; and
2. any child born to or legally adopted by the insured after the date
of application for this rider, or any step-child acquired by the
insured after the date of application for this rider and who is a
member of the insured's household. The child must be at least 15 days
old before coverage is provided. On the date of adoption or the date
the step-child is acquired, the child must be less than 19 years old.
What benefit does this rider provide?
If we receive proof satisfactory to us that an insured child died:
1. while this rider was in force; and
2. before the insured child's 22nd birthday; and
3. before the insured's Age 65 Anniversary;
we will pay a death benefit to you. The amount of the benefit will be the
amount shown for this rider under Policy Data.
Is there a paid-up term insurance benefit?
If the insured dies while the rider is in force, we will automatically
change this rider to paid-up term insurance on the life of each insured
child. The amount of each paid-up term insurance policy will be the same as
the death benefit shown for this rider. The paid-up term policy will
continue until such child's 22nd birthday, or if earlier, the insured's
Age 65 Anniversary had the insured lived.
Who will be the owner of the paid-up term policy?
The person whose life is insured by the paid-up term policy will also be
its owner unless provided differently in the policy.
Can this rider or the paid-up term policy be converted to a new policy?
Yes. Insurance on each insured child provided by the policy can be
converted if the insurance is in force on the earlier of: (1) the insured
child's 22nd birthday; or (2) the insured's Age 65 Anniversary.
You have the right to convert the insurance provided by this rider to a
new policy. You will be the owner of the new policy unless provided
differently in the policy.
The owner of the paid-up term policy has the right to convert the paid-up
term insurance to a new policy. The owner of the paid-up term policy
will be the owner of the new policy unless provided differently in the
new policy.
Any conversion will be subject to the requirements below.
<PAGE>
What are the requirements for conversion on an insured child's 22nd birthday?
To convert the insurance in force on an insured child's 22nd birthday,
written request must be received by us:
1. within 31 days following such child's 22nd birthday; and
2. during the life of the child; and
3. with the full first premium for the new policy.
The new policy will be effective as of such child's 22nd birthday. If
conversion is not made, the insurance in force will terminate on such
child's 22nd birthday.
What are the requirements for conversion at the insured's age 65 birthday?
Only the insurance in force on each insured child who has not reached his
or her 22nd birthday can be converted.
Written request for conversion must be received by us:
1. within 31 days following the insured's Age 65 Anniversary; and
2. during the life of each such insured child; and
3. with the full first premium for each new policy.
Each new policy will become effective as of the insured's Age 65
Anniversary.
What will be the type of insurance, amount and premium for the new policy?
The new policy must be a level premium whole life, endowment, or flexible
premium adjustable whole life insurance policy that we are issuing at the
time of conversion. The maximum amount of insurance for each new policy
may be up to 5 times the amount stated for this rider under Policy Data.
The minimum amount is $2,000. The premium will depend on the policy chosen
and will be based on the amount of insurance and the insured child's age
at the time of conversion. Policy forms, premiums, and values for each
new policy will be those offered by us for other new policies at the time
of conversion.
Is there a monthly deduction for the cost of this rider?
Yes. While this rider is in force a monthly deduction is taken from the
policy's value for the cost of this rider. The amount of such deduction
for this rider is shown under Policy Data.
Does the suicide provision of the policy apply to this rider?
If within two years of this rider's effective date the insured commits
suicide, while sane or insane, the provisions in this rider for paid-up
term insurance will automatically apply. No other benefit provided by this
rider will be payable. Any monthly deductions taken for this rider will
not be refunded.
What is the age of the insured or an insured child has been misstated?
In this event, any amount payable under this rider will be the amount, if
any, of insurance that the rider cost for the policy month during which
such death occurred would have purchased had the cost of benefits provided
under the rider been calculated using the Rider Cost of Insurance Rates
for the correct age.
How does the policy's reinstatement provision apply to this rider?
To reinstate this rider, you must provide satisfactory evidence of
insurability for all person whose lives will be insured under this rider.
You must pay a premium that will keep this rider in force for at least
3 months.
When does this rider become incontestable?
This rider will be incontestable after it has been in force during the
insured's life for two years from the effective date of this rider.
<PAGE>
When will this rider terminate?
This rider will terminate on the earliest of the following:
1. the monthly date on or next following receipt of your written request
for coverage to end; or
2. the date of death of the insured subject to the provision of this
rider for paid-up term insurance; or
3. the date the policy terminates; or
4. the insured's Age 65 Anniversary.
What is the effective date of this rider?
This rider is issued as of the policy date of the policy unless a different
date is shown under Policy Data.
IDS Life Insurance Company
(signature of) William A. Stoltzmann
Secretary
<PAGE>
Waiver of Monthly Deduction Rider for Total Disability
Based on the application for this rider and the payment of its monthly
deduction, this rider is made a part of the policy. This rider is subject
to all policy terms and provisions unless this rider changes them. This
rider does not increase your policy values.
Definition of Injury
Accidental bodily injury that occurs while this rider is in force. It must
result, directly and independently of all other causes, in total
disability.
Definition of Sickness
Disease or illness that first appears and causes total disability while
this rider is in force.
Definition of Total Disability
The inability of the insured, due to injury or sickness, to perform the
material and substantial duties of his or her principal occupation. After
2 years of such continuous disability, we will consider the insured to be
totally disables only if he or she is unable to perform the material and
substantial duties of any gainful occupation. By "gainful occupation", we
mean one for which the insured is or becomes reasonably fitted by
education, training, or experience.
Certain losses will be considered "presumptive total disability".
If injury or sickness causes the total and irrecoverable loss of the
following, we will consider the insured totally disabled, even while the
insured performs in an occupation:
1. the sight of both eyes; or
2. the use of both hands; or
3. the use of both feet; or
4. the use of one hand and one foot.
Such loss must occur or first appear after the effective date of this
rider and while this rider is in force.
What benefit does this rider provide?
This rider provides for the waiver of monthly deductions for the policy if
the insured becomes totally disabled, and meets the requirements shown
below.
To qualify for this benefit, you must give timely proof that the insured's
total disability:
1. has been continuous for 6 months or more; and
2. began while this rider was in force; and
3. began after the insured's 5th birthday, but before the Age 60
anniversary.
Provided these requirements are met, we will waive the monthly deductions
as long as total disability lasts. The waiver of monthly deductions will
also apply to this and all other riders attached to the policy unless
stated otherwise under Policy Data.
Until your claim is approved by us, you must pay the premiums needed so
that your policy does not lapse as provided in the grace period provision
of the policy. We will also take monthly deductions as usual.
If we approve your claim, monthly deductions taken during total disability
will be added to the value of the policy, using the premium allocation
percentages then in effect.
<PAGE>
Does coverage under the policy remain the same during disability?
During a period of disability, you may not:
1. increase the specified amount of the policy; or
2. change from death benefit Option 2 to death benefit Option 1; or
3. increase any benefits under the policy or any riders attached to it.
Are there any exclusions?
We will not waive any monthly deductions if total disability results from:
1. intentionally self-inflicted injuries; or
2. war, declared or not, an act of war, or any type of military conflict.
If total disability begins within the grace period for the policy, the
monthly deduction due at the time the policy entered the grace period will
not be waived.
When should you furnish proof of a disability?
We must receive proof of total disability in our home office within one
year after the monthly date of the monthly deduction that you ask us to
waive. If you don't give us proof within this time, your claim will not be
affected if proof was given:
1. as soon as reasonably possible; and
2. within on year after the insured's death or recovery from total
disability;
otherwise, monthly deductions made more than one year before proof was
furnished will not be waived.
How often is proof of disability required to be given?
At reasonable intervals, we have the right to require proof that total
disability is continuing. If such proof is not given when required, no
further monthly deductions will be waived.
Is there a monthly deduction for the cost of this rider?
Yes. While this rider is in force, a monthly deduction for the cost of
this rider is taken from the policy value. The amount can be determined
from the Rider Cost of Insurance Table.
When will this rider become incontestable?
After this rider has been in force during the insured's lifetime for two
years from its effective date, we cannot contest this rider. The two year
period will not include time during which the insured is totally disabled.
<PAGE>
When will this rider terminate?
This rider will terminate on the earliest of the following:
1. the monthly date on or next following receipt of your written request
for coverage to end; or
2. the insured's Age 60 anniversary; or
3. the date the policy terminates.
Termination of this rider will not affect a valid claim for benefits for
total disability that starts before the termination.
What is the effective date of this rider?
This rider is issued as of the policy date of the policy unless a different
date is shown under Policy Data.
IDS Life Insurance Company
(signature of) William A. Stoltzmann
Secretary
<PAGE>
Rider Cost of Insurance Table
The monthly deduction of the cost of this rider is equal to the sum of A + B
described below.
A is the result of 1 x (2 - 3), where:
1000
(1) is the WMD rate from the table below, based on the then attained age of
the insured;
(2) is the base policy's death benefit, divided by the guaranteed interest
rate factor shown under Policy Data;
(3) is the base policy's value at the beginning of the policy month.
B is the monthly cost of this rider for any additional riders attached to the
policy.
<TABLE>
<CAPTION>
SMD Rate* WMD Rate* WMD Rate* WMD Rate*
Male Female Male Female
Attained Std. Std. Attained Std. Std.
Age of Std. Non- Std. Non- Age of Std. Non- Std. Non-
Insured Smoker Smoker Smoker Smoker Insured Smoker Smoker Smoker Smoker
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 $0.0100 $0.0100 $0.0100 $0.0100 35 $0.0200 $0.0175 $0.0250 $0.0225
6 0.0100 0.0100 0.0100 0.0100 36 0.0200 0.0175 0.0275 0.0250
7 0.0100 0.0100 0.0100 0.0100 37 0.0225 0.0175 0.0275 0.0250
8 0.0100 0.0100 0.0100 0.0100 38 0.0225 0.0200 0.0300 0.0250
9 0.0100 0.0100 0.0100 0.0100 39 0.0250 0.0200 0.0300 0.0275
10 0.0100 0.0100 0.0100 0.0100 40 0.0275 0.0225 0.0325 0.0275
11 0.0100 0.0100 0.0100 0.0100 41 0.0275 0.0225 0.0325 0.0275
12 0.0100 0.0100 0.0100 0.0100 42 0.0300 0.0250 0.0350 0.0300
13 0.0125 0.0100 0.0125 0.0125 43 0.0325 0.0250 0.0375 0.0300
14 0.0125 0.0125 0.0125 0.0125 44 0.0350 0.0275 0.0375 0.0300
15 0.0150 0.0125 0.0125 0.0125 45 0.0375 0.0300 0.0400 0.0325
16 0.0150 0.0125 0.0125 0.0125 46 0.0400 0.0300 0.0425 0.0325
17 0.0150 0.0125 0.0150 0.0125 47 0.0450 0.0350 0.0450 0.0350
18 0.0150 0.0150 0.0150 0.0150 48 0.0500 0.0375 0.0475 0.0375
19 0.0150 0.0150 0.0150 0.0150 49 0.0550 0.0400 0.0500 0.0400
20 0.0150 0.0150 0.0175 0.0150 50 0.0600 0.0450 0.0550 0.0425
21 0.0150 0.0150 0.0175 0.0150 51 0.0675 0.0525 0.0625 0.0475
22 0.0150 0.0150 0.0175 0.0150 52 0.0775 0.0600 0.0700 0.0525
23 0.0150 0.0150 0.0175 0.0175 53 0.0925 0.0700 0.0800 0.0575
24 0.0150 0.0150 0.0175 0.0175 54 0.1075 0.0825 0.0900 0.0675
25 0.0150 0.0150 0.0200 0.0175 55 0.1300 0.0975 0.1050 0.0775
26 0.0150 0.0150 0.0200 0.0175 56 0.1550 0.1175 0.1225 0.0925
27 0.0150 0.0150 0.0200 0.0200 57 0.1875 0.1400 0.1450 0.1100
28 0.0150 0.0150 0.0200 0.0200 58 0.2275 0.1700 0.1700 0.1300
29 0.0150 0.0150 0.0200 0.0225 59 0.2775 0.2075 0.2000 0.1550
30 0.0150 0.0150 0.0225 0.0200
31 0.0175 0.0150 0.0225 0.0225
32 0.0175 0.0150 0.0225 0.0225
33 0.0175 0.0150 0.0250 0.0225
34 0.0175 0.0175 0.0250 0.0225
</TABLE>
*For insureds with a preferred risk classification, the above standard
non-smoker rates will apply. If other than a preferred or standard risk
classification applies to the specified amount or to this rider, the WMD rate
will be adjusted by multiplying the above monthly rates by the appropriate risk
factor shown under Policy Data.
<PAGE>
Accidental Death Benefit Rider
Based on the application for this rider and the payment of its monthly
deduction, this rider is made a part of the policy. The rider is subject
to all policy terms and provisions unless this rider changes them. This
rider does not increase your policy values.
What benefit does this rider provide?
We pay the Accidental Death Benefit shown under Policy Data if we receive
proof satisfactory to us that the insured's death:
1. resulted, directly and independently of all other causes, from
accidental bodily injury; and
2. occurred while this rider was in force; and
3. occurred within 90 days of the injury.
This benefit is in addition to any other benefits payable under the policy.
If payable, it will be included in the proceeds of the policy.
What risks are not covered by this rider?
The benefits of this rider are not payable if death resulted from or was
contributed to by any of the following:
1. suicide or attempted suicide, whether sane or insane;
2. bodily or mental infirmity, illness, or disease;
3. infection of any nature not resulting from accidental bodily injury;
4. poison, gas, or fumes taken, administered, or inhaled voluntarily or
otherwise, except in the course of the insured's occupation;
5. the voluntary taking of drugs or narcotics unless prescribed by a
licensed physician;
6. the insured's commission of or attempt to commit a felony;
7. an act or incident of war, declared or not, or any type of military
conflict;
8. travel in or descent from any kind of aircraft if:
a. the insured was taking part in training or had duties
aboard the aircraft; or
b. the aircraft was operated by or for the armed forces of any
country.
Is there a monthly deduction for the cost of this rider?
Yes. While this rider is in force, a monthly deduction is taken from the
policy's value for the cost of this rider. The amount can be determined
from the Rider Cost of Insurance Table shown below.
When will this rider become incontestable?
After this rider has been in force during the insured's lifetime for two
years from its effective date, we cannot contest this rider.
<PAGE>
When will this rider terminate?
This rider will terminate on the earliest of the following:
1. the monthly date on or next following receipt of your written request
for coverage to end; or
2. the date the policy terminates; or
3. the insured's age 70 anniversary.
What is the effective date of this rider?
This rider is issued as of the policy date of the policy unless a different
date is shown under Policy Data.
IDS Life Insurance Company
(signature of) William A. Stoltzmann
Secretary
<PAGE>
Rider Cost of Insurance Table
The monthly deduction for the cost of this rider is equal to A x B where:
1,000
A is the Accidental Death Benefit; and
B is the ADB Rate from the table below based on the then attained age of the
insured.
Attained Attained
Age of Monthly ADB Rate* Age of Monthly ADB Rate*
Insured Male Female Insured Male Female
5 $.07 $.04 40 $.08 $.04
6 .07 .04 41 .08 .04
7 .07 .04 42 .08 .04
8 .07 .05 43 .08 .04
9 .08 .05 44 .08 .04
10 .08 .05 45 .08 .04
11 .08 .05 46 .08 .04
12 .09 .05 47 .08 .04
13 .09 .06 48 .08 .04
14 .10 .06 49 .08 .04
15 .10 .06 50 .08 .04
16 .10 .06 51 .08 .04
17 .11 .07 52 .08 .04
18 .12 .07 53 .09 .05
19 .12 .07 54 .09 .05
20 .12 .07 55 .09 .05
21 .12 .07 56 .09 .05
22 .11 .06 57 .09 .05
23 .10 .06 58 .10 .06
24 .10 .05 59 .10 .06
25 .09 .05 60 .10 .06
26 .09 .05 61 .10 .06
27 .08 .04 62 .11 .06
28 .08 .04 63 .11 .07
29 .08 .04 64 .11 .07
30 .08 .04 65 .12 .07
31 .08 .04 66 .13 .08
32 .08 .04 67 .14 .09
33 .08 .04 68 .15 .10
34 .08 .04 69 .16 .11
35 .08 .04
36 .08 .04
37 .08 .04
38 .08 .04
39 .08 .04
*If this rider is issued with other than a standard rating classification, the
ADB Rates will be adjusted by multiplying the above monthly rates by the ADB
Rating Factor shown under Policy Data.
<PAGE>
Automatic Increase Benefit Rider
Based on the application for this Rider, this Rider is made a part of the
policy. This Rider is subject to all policy terms and provisions unless
this Rider changes them.
Definitions as used in this Rider
The definitions stated below apply to this Rider. They are in addition to
those of the Policy.
Automatic Increase Benefit is the increase in Specified Amount, provided by
this Rider, which occurs on each Policy Anniversary.
Increase Percentage is the percent, as shown under Policy Data, by which
the Specified Amount will be increased on each Policy Anniversary.
Maximum Increase Amount is the maximum amount for each increase allowed,
as shown under Policy Data.
Total Increase Limit is the combined total amount of Automatic Increase
Benefits available under this Rider, as shown under Policy Data.
Benefit Provided by this Rider
This Rider provides for an increase in the Specified Amount on each Policy
Anniversary without evidence of insurability. Each Automatic Increase
Benefit:
1. will apply on each Policy Anniversary while this Rider is in force;
and
2. will be equal to the Specified Amount in effect at the time of the
increase, multiplied by the Increase Percentage as shown under Policy
Data; and
3. will never exceed the Maximum Increase Amount as shown under Policy
Data; and
4. will not affect the surrender charges applicable to the policy at the
time of the increase.
Monthly Deduction for the Cost of this Rider
There is no monthly deduction taken for the cost of this Rider. When an
increase is made in the Specified Amount, an increase in the policy's
monthly deduction will occur. If there is a waiver of monthly deduction
rider attached to the policy, the monthly deduction for its cost will also
increase.
If the Automatic Increase Benefit occurs when any no lapse guarantee
period, death benefit guarantee period, or minimum monthly premium period
provided by the policy is in effect, the minimum monthly premium as
described in the policy will change.
Benefits when Monthly Deductions are Waived
If the Insured becomes eligible for benefits under a waiver of monthly
deduction rider, Automatic Increase Benefits will continue to be available.
Rejection of Automatic Increase Benefit
You must notify Us at least 10 days prior to the date of an Automatic
Increase Benefit if You wish to decline the increase. If an Automatic
Increase Benefit is declined, this Rider will terminate.
<PAGE>
Rider Termination
This Rider will terminate on the earliest of the following:
1. the monthly date on or next following receipt of Your written request
for coverage to end; or
2. the Rider expiration date, as shown under Policy Data; or
3. the date the policy terminates; or
4. application of Your policy's cash surrender value under a paid-up
insurance option, if applicable; or
5. any decrease in the total Specified Amount of Your policy, except as
a result of a partial surrender of death benefit option change; or
6. Your rejection of any Automatic Increase Benefit provided under this
Rider; or
7. total Automatic Increase Benefits provided under this Rider reach the
Total Increase Limit as shown under Policy Data.
Effective Date of this Rider
The effective date of this Rider is the policy date of the policy unless
a different date is shown under Policy Data.
IDS Life Insurance Company
(signature of) William A. Stoltzmann
Secretary
<PAGE>
ACCELERATED BENEFIT RIDER FOR TERMINAL ILLNESS
NOTICE: Benefits advanced under this Rider may or may not be taxable. Whether
You incur a tax liability when benefits are advanced depends on how the IRS
interprets applicable portions of the Tax Code. As with all tax matters, You
should consult a personal tax advisor to assess the impact of this benefit.
Based on the application for this Rider, this Rider is made a part of the
Policy. This Rider is subject to all policy terms and provisions unless this
Rider changes them.
DEFINITIONS
We, Our, Us. As used in this Rider, the terms "We", "Our", and "Us" refer to IDS
Life Insurance Company.
You, Your. The owner of the Policy to which this Rider is attached.
Effective Date. The Effective Date of this Rider will be as follows:
1. For a Rider requested in the original application for the Policy, the
Effective Date will be the Policy Date.
2. For a Rider requested after the Policy Date, the Effective Date will be
the date shown under Policy Data.
3. For any insurance that has been reinstated, or for any increase in
coverage, the Effective Date of such coverage under this Rider will be the
effective date of such coverage described in the Policy.
Accelerated Benefit Insured. Accelerated Benefit Insured means the Insured of
the Policy to which this Rider is attached or Other Insureds of any Other
Insured Riders attached to the Policy.
Eligible Death Benefit. At any point in time, the Eligible Death Benefit for
each Accelerated Benefit Insured is the lesser of (1) or (2) where:
(1) is the sum of A plus B minus C where:
A is any Death Benefit or Face Amount of Insurance on the life of the
Accelerated Benefit Insured provided by the Policy. In order for such Death
Benefit or Face Amount of Insurance to be part of the Eligible Death
Benefit, the Policy must have at least two years remaining from the date of
the Initial Accelerated Benefit until its expiration, maturity, or
termination date, if any.
B is any death benefit on the life of the Accelerated Benefit Insured
provided by a rider to the Policy, other than an Accidental Death Benefit
Rider. In order for such death benefit to be part of the Eligible Death
Benefit, such rider must have at least two years remaining from the date of
the Initial Accelerated Benefit until its expiration, maturity, or
termination date, if any.
C is any outstanding policy loans and unpaid loan interest.
Any increase or decrease in any of these items will automatically be reflected
in the calculation of the Eligible Death Benefit at the time the increase or
decrease becomes effective.
(2) is $500,000.
Accelerated Benefit. An Accelerated Benefit is the advance of any part of the
Eligible Death Benefit prior to the date of death of the Accelerated Benefit
Insured. Under the terms of this Rider, each Accelerated Benefit advance and
interest charge results in the establishment of a prior and paramount lien
against the Eligible Death Benefit of the Policy equal to the amount advanced.
Any benefits that are not part of the Eligible Death Benefit are not affected
by any Accelerated Benefit Advanced under the terms of this Rider.
Administrative Expense Charge. The Administrative Expense Charge, if any, will
be determined at the time the Initial Accelerated Benefit is applied for. It
will not exceed the greater of (1) $300, or (2) 1% of the Initial Accelerated
Benefit. It will be paid to us using a Subsequent Accelerated Benefit
immediately following advance of the Initial Accelerated Benefit.
Initial Accelerated Benefit. The Initial Accelerated Benefit will be calculated
as of the date that satisfactory Proof of Terminal Illness is received by Us
and will be the least of:
1. the amount You request to receive in cash; or
2. 50% of the Eligible Death Benefit; or
3. 80% of the Eligible Death Benefit minus any outstanding policy loans and
unpaid loan interest and Administrative Expense Charge.
Maximum Accelerated Benefit. At any point in time, the Maximum Accelerated
Benefit is 80% of the Eligible Death Benefit.
Any increase or decrease in the Eligible Death Benefit will automatically be
reflected in the calculation of the Maximum Accelerated Benefit at the time
the increase or decrease becomes effective.
<PAGE>
Subsequent Accelerated Benefit. A Subsequent Accelerated Benefit is any
Accelerated Benefit advanced after the date of the Initial Accelerated Benefit.
A Subsequent Accelerated Benefit may only be used to pay premiums required to
keep the Policy in force, repay policy loans, pay the Administrative Expense
charge, or pay interest charges on the lien.
Physician. Physician means an individual who is licensed to practice medicine
and treat illness or injury in the state in which treatment is received and who
is acting within the scope of that license. Physician does not include:
1. the Accelerated Benefit Insured;
2. You;
3. a person who lives with the Accelerated Benefit Insured or You; or
4. a person who is part of the Accelerated Benefit Insured's or Your
Immediate Family.
Immediate Family. Immediate Family means a spouse, child, grandchild, brother,
sister, parent, or grandparent of the accelerated Benefit Insured or You, or a
child, grandchild, brother, sister, parent, or grandparent of the spouse of the
Accelerated Benefit Insured or You.
Terminal Illness. Terminal Illness is a medical condition that:
1. with reasonable medical certainty, will result in the death of the
Accelerated Benefit Insured in 6 months or less from the date of the Proof
of Terminal Illness; and
2. was first diagnosed on or after the Effective Date of this Rider.
Proof of Terminal Illness. Before payment of any Accelerated Benefit, We will
require You to provide Us with proof satisfactory to Us that the Accelerated
Benefit Insured's life expectancy is 6 months or less from the date of the
request for the Accelerated Benefit. This proof will include the certification
of a Physician. We reserve the right to obtain a second medical opinion at
Our expense.
BENEFITS
Description of Benefits. We will advance the Initial Accelerated Benefit if the
Accelerated Benefit Insured develops a Terminal Illness, subject to the
provisions of this Rider. We will advance the Initial Accelerated Benefit as a
lump sum, unless You request payment of the advance in an alternative form that
is approved by Us.
We may charge a one time Administrative Expense Charge as described in the
Administrative Expense Charge definition.
Any interest charge for the Accelerated Benefit becoming due will be paid by the
proceeds of a Subsequent Accelerated Benefit until the Maximum Accelerated
Benefit has been advanced.
If You request, the proceeds of a Subsequent Accelerated Benefit may be used to
pay each eligible premium until the Maximum Accelerated Benefit has been
advanced. Any premium needed to prevent policy lapse after the date the Initial
Accelerated Benefit is advanced will be eligible for payment using the proceeds
of a Subsequent Accelerated Benefit.
Future Premiums. The advance of an Accelerated Benefit under this Rider will
have no effect on the amount of future premiums, if any, required under the
Policy.
Waiver of Premiums or Waiver of Monthly Deductions. If all of the following
occur:
1. a Waiver of Premium Rider or a Waiver of Monthly Deduction Rider on the
Accelerated Benefit Insured is attached to the Policy;
2. that Rider is in force at the time of the claim for this Rider's benefits;
and
3. Proof of Terminal Illness is submitted and approved;
then for purposes of the Waiver of Premium Rider or for purposes of the Waiver
of Monthly Deduction Rider, the Accelerated Benefit Insured will be deemed to
be Totally Disabled for as long as the most recently provided Proof of Terminal
Illness continues to apply.
Conditions for Advance of Initial Accelerated Benefit. The advance of the
Initial Accelerated Benefit is subject to the following conditions:
1. The Policy must be in force other than as Extended Term Insurance.
2. The sum of the Initial Accelerated Benefit and any existing liens against
any other policies issued by Us on the life of the Accelerated Benefit
Insured must not exceed $250,000.
3. The amount of the Initial Accelerated Benefit must be at least $10,000.
4. During the lifetime of the Accelerated Benefit Insured, We must receive
Proof of Terminal Illness that is acceptable to us.
5. The Policy must not be legally or equitably assigned except to Us as
security for the lien. We must receive an assignment form making Us
assignee of the Policy for the sum of the Initial Accelerated Benefit and
any Subsequent Accelerated Benefits. No changes to the Policy are
permitted without Our consent.
<PAGE>
6. We must receive a consent form from all irrevocable beneficiaries, if any.
We also reserve the right to require a consent form from a spouse, the
Accelerated Benefit Insured, other beneficiaries, or any other person if,
in Our discretion, such person's consent is necessary to protect Our
interests.
7. This Rider provides for the advance of a portion of the Eligible Death
Benefit of the Policy. This is not meant to cause involuntarily access to
proceeds ultimately payable to the beneficiary. Therefore, this benefit
is not available:
a. if either You or the Accelerated Benefit Insured is required by law
to use this benefit to meet the claims of creditors, whether in
bankruptcy or otherwise; or
b. if either You or the Accelerated Benefit Insured is required by a
government agency to use this benefit in order to apply for, obtain,
or otherwise keep a government benefit or entitlement.
Conditions for Advance of Subsequent Accelerated Benefit. The advance of a
Subsequent Accelerated Benefit is subject to the following conditions:
1. An Initial Accelerated Benefit must have been previously advanced.
2. The lien created by the advance of the Initial Accelerated Benefit must
not have been fully repaid.
3. The Policy must be in force other than as Extended Term Insurance.
4. The sum of the Subsequent Accelerated Benefit and any existing liens
against the Policy must not exceed the Maximum Accelerated Benefit
determined at the time of the Subsequent Accelerated Benefit.
5. Proof of Terminal Illness that is acceptable to Us.
Limitations. No benefit will be provided by this Rider if Terminal Illness
results from intentionally self-inflicted injuries.
EFFECT OF RIDER BENEFITS ON POLICY VALUES
Future Benefit Adjustment. A lien will be established against the Eligible
Death Benefit of the Policy in the amount of (1) plus (2) minus (3) where:
(1) is all Accelerated Benefits previously advanced.
(2) is any lien interest that has been charged but not yet paid by the proceeds
of a Subsequent Accelerated Benefit.
(3) is Accelerated Benefits previously repaid.
Interest Charge. We will charge interest on the lien at the rate then in effect.
The lien rate is an effective annual rate. It will not exceed the greatest of
(1) the current yield on 90 day Treasury bills, (2) the current maximum
statutory adjustable policy loan interest rate or (3) if the Policy has a loan
provision, the policy loan interest rate expressed as an effective annual rate.
However, the interest rate charged will never be greater than (3) above for the
portion of the Accelerated Benefit that does not exceed the Policy's value that
is available for policy loans. In addition, the portion of the Policy's value
that does not exceed the Accelerated Benefit amount will earn interest, if
applicable, at the same rate as if that amount were a policy loan. Interest
will be charged daily and payable at the end of each Policy year.
Subject to the conditions and limitations described in the Benefits section,
interest that becomes due will be paid by the proceeds of a Subsequent
Accelerated Benefit.
Premiums and Monthly Deductions after Initial Accelerated Benefit. If the Policy
requires regularly scheduled premiums, we will continue to bill for premiums
after the advance of the Initial Accelerated Benefit. Subject to the conditions
and limitations described in the Benefits Section, a regularly scheduled
premium that becomes due may be paid by the proceeds of a Subsequent Accelerated
Benefit. Any premium not paid before the end of the grace period will cause the
Policy to lapse or terminate in accordance with the provisions of the Policy.
If the Policy requires regular monthly deductions from the Policy Value, we will
continue to make monthly deductions after the advance of any Accelerated
Benefit. Subject to the conditions and limitations described in the Benefits
section, any premium payment that is required to prevent policy lapse may be
paid by the proceeds of a Subsequent Accelerated Benefit. Any such premium not
paid before the end of the grace period will cause the Policy to lapse or
terminate in accordance of the provisions of the Policy.
Existing Policy Loans. A Subsequent Accelerated Benefit will be used to repay
any outstanding policy loans and unpaid loan interest immediately following
advance of the Initial Accelerated Benefit. Future policy loans will also be
immediately repaid with Subsequent Accelerated Benefits.
Access to Surrender Value. Your access to the cash surrender value of the Policy
for, if applicable, policy loans, partial surrenders, full surrender, or
Reduced Paid-Up Insurance is limited to the excess, if any, of the cash
surrender value over the total Accelerated Benefits plus unpaid lien interest
at that point in time.
Repayment of Lien. You may voluntarily pay all or any portion of the lien
against the Eligible Death Benefit. The lien must be immediately repaid:
1. in full upon the death of the Accelerated Benefit Insured by deducting the
total Accelerated Benefits plus unpaid lien interest, if any, from the
proceeds payable upon death;
2. in full upon the termination of the Policy, by deducting from the cash
surrender value an amount equal to the total Accelerated Benefits plus
unpaid lien interest, if any;
3. in full upon the election of or laps to Reduced Paid-Up Insurance, by
deducting the total Accelerated Benefits plus unpaid lien interest, if any,
from the cash surrender value prior to the calculation of the amount of
Reduced Paid-Up Insurance.
4. in part when the Maximum Accelerated Benefit is less than the total
Accelerated Benefits plus unpaid lien interest. The amount that must be
repaid is equal to A minus B where:
A is the total Accelerated Benefits plus unpaid lien interest.
B is the Maximum Accelerated Benefit.
Any lien not repaid before the end of the grace period described in the Policy
will cause the Policy to lapse or terminate in accordance with its provisions.
Extended Term Insurance. If Extended Term Insurance is available, no part of
any existing lien need be repaid at the time of election of or lapse to
Extended Term Insurance, provided the total Accelerated Benefits plus unpaid
lien interest does not exceed the Maximum Accelerated Benefit immediately after
such election or lapse.
GENERAL PROVISIONS
Representations and Contestibility. All statements made in the application for
this Rider by or on behalf of the Accelerated Benefit Insured will, in the
absence of fraud, be deemed representations and not warranties. The validity
of this Rider with respect to the Accelerated Benefit Insured will not be
contestable after it has been in force for 2 years during the lifetime of the
Accelerated Benefit Insured.
Any increase in coverage effective after the Policy Data or any reinstatement
will not be contestable after such increase or reinstatement has been in force
during the lifetime of the Accelerated Benefit Insured for 2 years from its
effective date. A contest will be based only on the application for the increase
or reinstatement.
Reinstatement. If the Policy is reinstated, this Rider will also be reinstated.
The lien, if any, that existed at the time of termination and accrued interest
thereon from the date of termination to the date of reinstatement will be
reinstated along with this Rider.
Claims. We must receive Your written request for an Accelerated Benefit in a
form acceptable to Us. Upon receipt of Your request, We will provide a claim
form within 10 working days.
Termination of Rider. This Rider will terminate on the earliest of the
following:
1. Your written request for coverage to end; or
2. The date the Policy terminates.
This Rider is issued as of the Policy Date of the Policy unless a different
date is shown under Policy Data.
IDS Life Insurance Company
(signature of) William A. Stoltzmann
Secretary
<TABLE><CAPTION>
IDS Life Insurance Company Life and Disability
IDS Tower 10 Income Insurance
Minneapolis, Minnesota 55440 Application
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<S> <C>
Insured Other Insured Rider (OIR)/2nd Insured
Please provide both day and evening telephone numbers Please provide both day and evening telephone numbers
Day (____) ____________ Evening (____) _____________ Day (____) ____________ Evening (____) _____________
Best time to call for a medical interview__ Day __ Evening Best time to call for a medical interview___ Day ___ Evening
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Section A Insured and Owner Information
1. Insured: Is insured the owner? __ Yes __ No Other Insured Rider (OIR)__ or 2nd Insured __ ?
Is OIR/2nd Insured the owner? __ Yes __ No
----------------------------------------------------- ----------------------------------------------------------------------
__ Mr. __ Mrs. __ Miss __ Ms. __ Mr. __ Mrs. __ Miss __ Ms.
----------------------------------------------------- ----------------------------------------------------------------------
Insured's name (first) (full middle) (last) OIR/2nd Insured's name (first) (full middle) (last)
----------------------------------------------------- ----------------------------------------------------------------------
Home address (street) Home address (street)
----------------------------------------------------- ----------------------------------------------------------------------
City, State, Zip City, State, Zip
----------------------------------------------------- ----------------------------------------------------------------------
Social Security No. Driver's License No. and State Social Security No. Driver's License No. and State
----------------------------------------------------- ----------------------------------------------------------------------
Birthdate Marital status State of birth __ Male Birthdate Marital status State of birth __ Male
__ Female __ Female
----------------------------------------------------- ----------------------------------------------------------------------
Citizenship Self-Employed Citizenship Self-Employed
__ U.S. __ Other _________________ __Yes __No U.S. __ Other _________________________ __ Yes __ No
----------------------------------------------------- ----------------------------------------------------------------------
Occupation Tax Bracket Occupation Tax Bracket
% %
----------------------------------------------------- ----------------------------------------------------------------------
Individual occ. income Net worth Household income Individual income from occupation Relationship to insured
$ $ $ $
----------------------------------------------------- ----------------------------------------------------------------------
Employer name Employer name
----------------------------------------------------- ----------------------------------------------------------------------
Address (street) Address (street)
----------------------------------------------------- ----------------------------------------------------------------------
City, State, Zip City, State, Zip
----------------------------------------------------- ----------------------------------------------------------------------
2. Owner (Complete if owner is different from Insured/OIR/2nd Insured)
--------------------------------------------------------------------------------------------------------------------------------
__ Individual
__ Mr. __ Mrs. Owner's name (first) (full middle) (last) Birthdate __ Male
__ Miss __ Ms. __ Female
--------------------------------------------------------------------------------------------------------------------------------
Individual occ. income Net worth Household income Bus. Tax ID, Taxpr. ID or Social Security No. Tax Bracket
$ $ $ %
--------------------------------------------------------------------------------------------------------------------------------
Relationship to insured Home address (street) (city) (state) (zip)
--------------------------------------------------------------------------------------------------------------------------------
Employer name Address (street) (city) (state) (zip)
--------------------------------------------------------------------------------------------------------------------------------
__ Business Business name Address (street) (city) (state) (zip)
__ Sole Proprietorship (03) __ S Corporation (01) __ Partnership (02) __ C Corporation (01)
Type of Business Insurance: __ Buy/Sell __ Business Debt Protection __ Split Dollar __ Key Person
__ Executive Bonus/GEBA __ Deferred Compensation(nongovernmental) __ Other _________________
__ Trust: Name of Trust ____________________________________________________________________ Date of Trust
__ Revocable Grantor's taxpayer identification number _______________________________
__ Irrevocable Trust's taxpayer identification number _________________________________
__ Other ______________________________________________________________________________________________________________________
<PAGE>
Section B Life Insurance
1. Life Insurance Plan
--------------------------------------------------------------------------------------------------------------------------------
Insured Amount $ OIR Amount $
--------------------------------------------------------------------------------------------------------------------------------
(You must select either Option 1 or Option 2 for these plans)
__ Life Protection Plus
__ Variable Universal Life __ Death Benefit Option 1: Initial death benefit is insured amount.
__ Death Benefit Option 2: Initial death benefit is insured amount plus
__ Survivorship Variable Life (V2D) accumulated cash value. Cost of insurance is greater than Option 1.
__ 1-Year Term __ 10-Year Term
__ Whole Life
__ Other ____________________________________________________________________________________________________________________
--------------------------------------------------------------------------------------------------------------------------------
Variable Universal Life & Survivorship Variable Life Allocations (complete financial suitability statement on signature page).
--------------------------------------------------------------------------------------------------------------------------------
Premium allocation: (premium amount to be directed to specific investment options within policy)
Monthly deductions: (investment options within the policy from which the cost of insurance will be deducted)
Owner's tax bracket _____________% (required for VUL & V2D policies)
Investment Premium Monthly Investment Premium Monthly Investment Premium Monthly
options allocation deductions options allocation deductions options allocation deductions
Fixed _________% _________% Equity __________% _________% AIM _________% _________%
Income _________% _________% Money Market __________% _________% Putnam VT N Opp _________ _________% _________%
Managed _________% _________% Gov't securities __________% _________% Other _________ _________% _________%
Int'l Equity _________% _________% 2004 Trust __________% _________% 100% 100%
Monthly deductions should be taken using __ Monthly deduction% __ Premium allocation % __ Pro-rata by volume
--------------------------------------------------------------------------------------------------------------------------------
2. Life Insurance Riders
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__ Other Insured Rider (OIR). Complete OIR in Section A and OIR Amount $ and Beneficiary in Section B.
__ Accelerated Benefit Rider for Terminal Illness
__ Waiver of Premium or Waiver of Monthly Deduction
__ Accidental Death Benefit of $_____________________________
__ Four-Year Term of $_______________ (V2D Only)
__ Policy Split Option (V2D Only)
__ Other ____________________________________________________________________________________________________________________
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__ Children's Insurance (CIR) __________ Units
Complete FIR/CIR information below.
__ Family Insurance (FIR) __________ Units
Children's Insurance Rider and Family Insurance Rider Information:
A. __ Mr. __ Mrs. Spouse information (first, middle and last name) Birthdate State of birth Height Weight
__ Miss __ Ms. __________________________________________________ _____________ __________________ __________ __________
B. Name(s) of children to be covered by rider (must be under age 19 and unmarried) Physical/mental abnormalities at birth?
Name (first) (full middle) (last) Birthdate Sex (if yes, explain here)
______________________________________________________________________________ __ Yes __ No __________________________
______________________________________________________________________________ __ Yes __ No __________________________
______________________________________________________________________________ __ Yes __ No __________________________
C. Has anyone listed above received treatment for any disease, physical or mental condition in the past five years?
__ Yes __ No
D. Is this insurance intended to replace any existing insurance and/or annuity? __ Yes __ No
E. If yes to C or D above, explain here ______________________________________________________________________________________
___________________________________________________________________________________________________________________________
F. Are there any children under the age of 19 and unmarried not listed above __ Yes __ No
If yes, list name, birthdate and reason for exclusion _____________________________________________________________________
___________________________________________________________________________________________________________________________
<PAGE>
Section B Life Insurance (continued)
3. Life Insurance Premiums
--------------------------------------------------------------------------------------------------------------------------------
Amount of scheduled/ Amount paid with Lump-sum amount to be Premium Payment Frequency
annual premiums application paid on delivery of policy __ Monthly __ Quarterly
$________________________ $________________________ $_____________________________ __ Semiannually __ Annually
--------------------------------------------------------------------------------------------------------------------------------
Method of Payment: __ New Bank Authorization __ Add to Existing Bank Authorization account no. ___________________________
(BA can be set up for monthly or quarterly frequencies only. Complete attached BA form.)
__ Direct Billing __ Other ____________________________________________________________________________
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4. Life Insurance Beneficiary (for Survivorship Variable Life, complete b. below)
--------------------------------------------------------------------------------------------------------------------------------
a. Option A. Beneficiary is: Insured's designated spouse, if living, otherwise the beneficiaries are the living lawful children
of the Insured and they will receive equal shares of the proceeds.
Option B. Beneficiary is: Insured's designated spouse, if living, otherwise, the beneficiaries are the living lawful children
of the Insured and they will receive equal shares of the proceeds; provided, however, that if a child of the Insured
has died before the Insured, the share which the child would have received if he/she survived the Insured will be
paid to his/her living lawful children in equal shares.
Option C. Other designation.
Insured: OIR:
__ Option A __ Option B __ Option C __ Option A __ Option B __ Option C
For Option A or B: For Option A or B:
Insured's spouse's full name ______________________________________ OIR's spouse's full name ________________________________
Option C: Other designation _______________________________________ Option C: Other designation _____________________________
___________________________________________________________________ _________________________________________________________
___________________________________________________________________ _________________________________________________________
Relationship to Insured ___________________________________________ Relationship to OIR ____________________________________
b. Survivorship Variable Life Beneficiary designation ___________________________________________________________________________
______________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________
Relationship to Insureds _____________________________________________________________________________________________________
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5. Juvenile Insurance
--------------------------------------------------------------------------------------------------------------------------------
COMPLETE IF INSURED IS UNDER AGE 15
--------------------------------------------------------------------------------------------------------------------------------
Did the representative see this child? Is there similar insurance in force or applied for on all brothers and sisters?
__ Yes __ No __ Yes __ No If not, why? _____________________________________________________
Amount of life insurance already in force on the person responsible for child's primary support $_____________________________
X _______________________________________________ X ____________________________________________ ________________________
Signature of Parent or Legal Guardian Signature of Witness Date
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<PAGE>
Section C Disability Income and Business Expense Protection Insurance
1. Disability Income Insurance Plan
--------------------------------------------------------------------------------------------------------------------------------
Monthly Benefit Insured's Occupation Class Waiting Period
$ __ 1A __ 2A __ 3A __ 30 days __ 60 days __ 90 days
__ 4A __ 5A __ 180 days __ 365 days
--------------------------------------------------------------------------------------------------------------------------------
Duration of Benefit Multiple Case Discount Premium Pattern
__ 1 yr __ 3 yrs __ 5 yrs __ to age 65 __ Yes __ No __ Level __ Step Rate
--------------------------------------------------------------------------------------------------------------------------------
Employer Plan Coverage Unisex Rates (Two participants and employer billing required) __ Yes __ No
--------------------------------------------------------------------------------------------------------------------------------
Disability Provision Occupation Classes 1A, 2A & 3A: __ 2 Years Occupation Protection
Occupation Classes 4A & 5A: __ 5 Years Occupation Protection __ Gradual Recovery Benefits
__ Gradual Recovery Benefits/5 Year Occupation Protection Option
--------------------------------------------------------------------------------------------------------------------------------
2. Disability Underwriting Information
--------------------------------------------------------------------------------------------------------------------------------
A. Complete description of job duties. Years of service __________ Number of hours worked per week __________
______________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________
If self-employed: 1. Date business began ___________________________ Number of employees ______________
2. What % of duties are supervisory? ____________________________
B. Any contemplated change in occupation? __ Yes __ No If yes, explain ____________________________________________________
C. Previous occupation if changed in the past five years _____________________________________________________________________
___________________________________________________________________________________________________________________________
D. Amount of unearned income $_______________________________ Source _______________________________________________________
E. Is the Insured a member of a State, Public, or Federal Retirement System? __ Yes __ No
If yes, which one? _____________________________________________________
F. Is the Insured eligible for or does the Insured have any Disability Income Insurance through his/her employer?
a. Short-term __ Yes __ No at $_____________ per month for ______ months and ______ day waiting period
b. Long-term __ Yes __ No at $_____________ per month for ______ years and ______ day waiting period
c. If yes to b., is the group long-term disability integrated with Social Security? __ Yes __ No
G. Will the Insured's employer be paying the premiums for the IDS Life Disability Insurance? __ Yes __ No
H. Is the Insured eligible for benefits from a required state Cash Sickness disability program? __ Yes __ No
--------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Section C Disability Income and Business Expense Protection Insurance (continued)
3. Disability Income Insurance Riders
--------------------------------------------------------------------------------------------------------------------------------
__ Social Benefits Rider $____________ per month with waiting period of ______ days.
__ Supplemental DI $____________ per month for ______ months and ______ day waiting period
__ Cost-of-Living Maximum (classes 2A, 3A, 4A and 5A)
Maximum __ 3% __ 4% __ 5% __ 6% __ 7% __ 8% __ 9% __ 10%
__ Future Purchase Option $____________ Pool Amount
__ Hospital Indemnity $____________ per month
__ Other ___________________________________________________________________________________________________________________
--------------------------------------------------------------------------------------------------------------------------------
__ Accidental Death and Dismemberment (AD&D) $_______________ Complete AD&D Beneficiary information below
AD&D Beneficiary
__ Option A __ Option B Insured's spouse's full name _________________________________________________________________
__ Option C Other designation _____________________________________________________________________________________________
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
Relationship to Insured __________________________________________________________________________________________________
--------------------------------------------------------------------------------------------------------------------------------
4. Disability Income Insurance Premiums
Annual premiums Amount paid with Amount to be paid on Premium payment Frequency
application delivery of policy __ Monthly __ Quarterly
$_________________________ $__________________________ $_____________________________ __ Semiannually __ Annually
Method of Payment: __ New Bank Authorization __ Add to Existing Bank Authorization account no. _____________________________
(BA can be set up for monthly or quarterly frequencies only. Complete attached BA form.)
__ Direct Billing __ Other ______________________________________________________________________________
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Business Expense Protection Insurance
- -----------------------------------------------------------------------------------------------------------------------------------
1. Business Expense Protection Insurance Plan
(Cannot be applied for without personal Disability Income Protection in force or applied for.)
Complete Disability Underwriting Information Section
--------------------------------------------------------------------------------------------------------------------------------
Monthly Benefit Insured's Occupation Class Waiting Period Benefit Pattern
$___________________________________ __ 3A __ 4A __ 5A __ 30 days __ 60 days __ Level
Submit Form 34591 __ 90 days __ Increasing
(Available on DI Proposal System)
Multiple Case Discount __ Yes __ No
--------------------------------------------------------------------------------------------------------------------------------
2. Business Expense Protection Insurance Premiums
--------------------------------------------------------------------------------------------------------------------------------
Annual premiums Amount paid with Amount to be paid on Premium Payment Frequency
application delivery of policy __ Monthly __ Quarterly
$___________________________ $_____________________________ $_________________________________ __ Semiannually __ Annually
Method of Payment: __ New Bank Authorization __ Add to Existing Bank Authorization account no. _____________________________
(BA can be set up for monthly or quarterly frequencies only. Complete attached BA form.)
__ Direct Billing __ Other ______________________________________________________________________________
<PAGE>
Section D Medical History
<S> <C>
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Insured: Other Insured Rider (OIR)/2nd Insured:
- ----------------------------------------------------------- -------------------------------------------------------------------
Doctor or Clinic Doctor or Clinic
1. 1.
- ----------------------------------------------------------- -------------------------------------------------------------------
Patient number Phone number Patient number Phone number
- ----------------------------------------------------------- -------------------------------------------------------------------
Address City State Zip Address City State Zip
- ----------------------------------------------------------- -------------------------------------------------------------------
Date last seen Reason last seen Date last seen Reason last seen
- ----------------------------------------------------------- -------------------------------------------------------------------
2. Height __________ Weight _________________ 2. Height __________ Weight _________________
3. Have you ever had, or been told you had, consulted 3. Have you ever had, or been told you had, consulted
with, been tested for or treated by a doctor or medical with, been tested for or treated by a doctor or medical
practitioner for any of the following: (circle disorder practitioner for any of the following: (circle disorder
for "Yes" answers) for "Yes" answers)
A. Cancer or tumor, unusual fatigue, problems with or A. Cancer or tumor, unusual fatigue, problems with or
of the muscles, bones, neck, back, joints, skin, liver, of the muscles, bones, neck, back, joints, skin, liver,
kidneys, urinary tract, digestive, or reproductive kidneys, urinary tract, digestive, or reproductive
system? __ Yes __ No system? __ Yes __ No
Date of last consultation, test or treatment ___________ Date of last consultation, test or treatment ___________
B. Chest pain, disorder of the heart, circulation, high B. Chest pain, disorder of the heart, circulation, high
blood pressure, lung or breathing, memory loss, diabetes, blood pressure, lung or breathing, memory loss, diabetes,
high blood sugar, epilepsy, stroke, loss of consciousness, high blood sugar, epilepsy, stroke, loss of consciousness,
paralysis, brain, or nervous system? __ Yes __ No paralysis, brain, or nervous system? __ Yes __ No
Date of last consultation, test or treatment ___________ Date of last consultation, test or treatment ___________
C. Mental illness, stress, anxiety, depression, emotional C. Mental illness, stress, anxiety, depression, emotional
disorder, or alcohol or drug/substance abuse? __ Yes __ No disorder, or alcohol or drug/substance abuse? __ Yes __ No
Date of last consultation, test or treatment ___________ Date of last consultation, test or treatment ___________
4. Have you ever used marijuana, cocaine, heroin or 4. Have you ever used marijuana, cocaine, heroin or
amphetamines? __ Yes __ No amphetamines? __ Yes __ No
Date of last use _______________ Date of last use _______________
5. Have you ever been diagnosed or received treatment by 5. Have you ever been diagnosed or received treatment by
a health care provider for AIDS (Acquired Immune Deficiency a health care provider for AIDS (Acquired Immune Deficiency
Syndrome) or ARC (AIDS-Related Complex?) __ Yes __ No Syndrome) or ARC (AIDS-Related Complex?) __ Yes __ No
Date of last consultation, test or treatment ______________ Date of last consultation, test or treatment ______________
6. Within the past five years have you stayed overnight in a 6. Within the past five years have you stayed overnight in a
hospital or gone to an emergency room for any illness, hospital or gone to an emergency room for any illness,
or injury; been to a medical clinic, therapist, doctor, or or injury; been to a medical clinic, therapist, doctor, or
health care provider; or presently have a physical impairment health care provider; or presently have a physical impairment
or illness not listed above? __ Yes __ No or illness not listed above? __ Yes __ No
Date of last consultation, test or treatment ______________ Date of last consultation, test or treatment ______________
If yes, give reason: If yes, give reason:
_________________________________________________________ _________________________________________________________
_________________________________________________________ _________________________________________________________
_________________________________________________________ _________________________________________________________
7. Have you ever used tobacco or nicotine in any form? 7. Have you ever used tobacco or nicotine in any form?
__ Yes __ No __ Yes __ No
B. If yes, what is/was used?_____________________________ B. If yes, what is/was used?_____________________________
C. What amount? ________________________________________ C. What amount? ________________________________________
D. Date last used? ______________________________________ D. Date last used? ______________________________________
(month and year) (month and year)
<PAGE>
Section E Underwriting Information
- ------------------------------------------------------------- -----------------------------------------------------------------
Insured Other Insured Rider (OIR)/2nd Insured:
1. Do you have any current plans to travel outside of the Do you have ny current plans to travel outside the
United States?: __ Yes __ No United States?: __ Yes __ No
If yes, where ____________________________________________ If yes, where __________________________________________
For how long ______________________ Reason _______________ For how long ______________________ Reason _____________
__________________________________________________________ ________________________________________________________
__________________________________________________________ ________________________________________________________
2. During the past five years have you: During the past five years have you?
A. Flown, or do you contemplate flying as a pilot, student A. Flown, or do you contemplate flying as a pilot, student
pilot or crew member? __ Yes __ No pilot or crew member? __ Yes __ No
B. Participated in or do you contemplate participating in B. Participated in or do you contemplate participating in
motorcycle riding, racing (automobile, snowmobile, motorcycle riding, racing (automobile, snowmobile,
motorcycle, boat), skin/scuba diving, skydiving, hang- motorcycle, boat), skin/scuba diving, skydiving, hang-
gliding, or other similar activities? gliding, or other similar activities?
__ Yes __ No __ Yes __ No
If yes, what activity? ________________________________ If yes, what activity? ________________________________
C. Had your driver's license revoked, received a moving C. Had your driver's license revoked, received a moving
violation or been cited for a DUI/DWI __ Yes __ violation or been cited for a DUI/DWI __ Yes __
- ------------------------------------------------------------- -----------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Insured:
3. Have you ever had an application for insurance declined, postponed or modified in any way? __ Yes __ No
If yes, provide date ___________________ Company name _________________________________________________________________________
Reason ________________________________________________________________________________________________________________________
4. Do you have any annuities or live or disability income insurance currently in force or applied for? __ Yes __ No
If yes, provide the information below and indicate if this insurance is replacing any of the existing policies.
If replacing an existing IDS Life Policy, the cash value should be: __ applied to the new IDS Life Policy __ returned to client
Plan Policy Ins. amount/ D.I. yrs ADB Will this
Company name type Policy number date mo. income payable amount be replaced?*
_________________ ______ _____________________ ___________ $_________________ _____________ $___________ __ Yes __ No
_________________ ______ _____________________ ___________ $_________________ _____________ $___________ __ Yes __ No
_________________ ______ _____________________ ___________ $_________________ _____________ $___________ __ Yes __ No
If the insurance applied for will replace any existing insurance, Submit replacement form(s) if required.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Other Insured Rider (OIR)/2nd Insured:
7. Have you ever had an application for insurance declined, postponed or modified in any way? __ Yes __ No
If yes, provide date ___________________ Company name _________________________________________________________________________
Reason ________________________________________________________________________________________________________________________
8. Do you have any annuities or live or disability income insurance currently in force or applied for? __ Yes __ No
If yes, provide the information below and indicate if this insurance is replacing any of the existing policies.
If replacing an existing IDS Life Policy, the cash value should be: __ applied to the new IDS Life Policy __ returned to client
Plan Policy Ins. amount/ D.I. yrs ADB Will this
Company name type Policy number date mo. income payable amount be replaced?*
_________________ ______ _____________________ ___________ $_________________ _____________ $___________ __ Yes __ No
_________________ ______ _____________________ ___________ $_________________ _____________ $___________ __ Yes __ No
_________________ ______ _____________________ ___________ $_________________ _____________ $___________ __ Yes __ No
If the insurance applied for will replace any existing insurance, Submit replacement form(s) if required.
<PAGE>
IDS Life Insurance Company Life and Disability
P.O. Box 499 Income Insurance
Minneapolis, Minnesota 55440-0499 Application
Agreement and Signature
- -----------------------------------------------------------------------------------------------------------------------------------
Agreement
By signing this application, you acknowledge all the following terms and conditions.
Adequate information. You have received the IDS Life's Client Information Practices, and you have read and
understood it.
When coverage begins. You agree that an Insured for life or disability insurance will be covered prior to policy delivery
only when all of the following requirements have been met:
The owner has paid the full first premium, according to the mode of premium payment selected, for all insurance
applied for in this application (any check or draft for that payment must be honored by the bank); and
The premium has not been returned by the company; and
The Insured has submitted all medical and other information required by the company's written underwriting rules; and
The Insured is insurable on the Effective Date, as defined below, under the company's underwriting rules, for the plan
and amount of coverage at the rate applied for with no modification. "Effective Date" as used herein means the later of:
(a) the date of this application; or (b) the date of completion of all medical examinations and other information (which may
include the company's medical information gathering interview) required by the company's written underwriting rules.
In cases where the Insured is not insurable for the plan of insurance, amount of insurance, or at the premium rate applied
for, coverage begins if and when the company insures that person under a policy accepted by the owner.
when the company includes that person under a policy accepted by the owner.
For disability coverage, all disability policies specified to be discontinued in this application must also be discontinued
before coverage will begin. (This limitation is subject to the incontestability provision in the policy.)
Amount of Life Insurance Coverage. If coverage begins prior to delivery of the policy under the conditions described above,
the amount of life insurance coverage on each Insured will be the total requested for that person by this application and
any other applications for life insurance on the Insured being considered by the company, up to a maximum of $500,000.
Except as limited by this agreement, any coverage provided will be under the terms of the policy applied for.
Amount of Disability Insurance Coverage. If coverage begins prior to delivery of the policy under the conditions described
above, the disability coverage monthly benefit on the Insured will be the lesser of (1) $3,500 of monthly benefit, (2) the
monthly benefit applied for in this application, or (3) the maximum monthly benefit based on the company's written
underwriting rules. Coverage on the Insured for this monthly benefit will be provided under the terms of the policy until
the first of the following to occur: (1) benefits paid and payable total $500,000; or (2) the Insured is no longer eligible
for benefits under the terms of the policy because the Insured is no longer disabled or the maximum benefit period has been
reached. When the first of (1) or (2) occur, all benefits will cease and coverage under this agreement and the policy will
cease.
Company's responsibilities. You understand that:
Only the officers of the company have the authority to decide on insurability and risk classification and to bind the
company to insure a proposed Insured. The officers of the company are the President, Vice President, Secretary and
Assistant Secretary;
If a policy does not go into effect, the company's sole liability will be to refund any premium paid, plus interest if
required by law;
No change in or waiver of anything in this application or alteration of an insurance policy is binding unless it is in
writing and signed by an officer of the company; and
By accepting a policy, the owner ratifies any changes entered at any time on the Home Office Endorsement form
attached to the policy. However, the owner must sign a separate written document for any change in type of plan,
amount, benefits or Insured's risk classification. (Not applicable in New Hampshire, New Jersey and West Virginia.)
Any insurance provided by this agreement will be subject to the conditions and terms of the policy applied for.
Release of Information. You understand and agree that the company will use and release information about you as
described in the attached IDS Life's Client Information Practices. You may inform us not to use information for certain
marketing purposes described in IDS Life's Client Information Practices.
Qualified Plans only. You certify that the plan under Ownership of the insurance application is qualified under
Section 401(a) of the United States Internal Revenue Code. This policy will be issued based on representations by
you that the Plan is qualified.
Life Protection Plus/Universal Life Insurance. If you have applied for this type of insurance, you acknowledge that you have
been informed that (1) the company may periodically change the current interest rate being credited on cash values, and
(2) that surrender charges may apply in certain circumstances.
Declaration
You declare that each of the answers made in this application is true and complete to the best of your knowledge and
belief and will be a basis for any policy issued. You also acknowledge that you have received a copy of this agreement
and receipt for any premium paid with this application.
Client Copy
------------
<PAGE>
Financial Suitability Statement Variable Universal Life/Survivorship Variable Life. If you have applied for this type of
insurance, check each of the following to acknowledge that you have received and read them:
__ Adequate information. You have received the current prospectuses for the policy applied for and any funds involved.
__ Purpose. You agree that this variable type of insurance is in accord with your insurance and financial objectives.
__ You understand that there can be no assurance that such objectives will be achieved.
__ Your risk tolerance for investment is: __ Low __ Medium __ High
__ Your specific long-term goals and objectives are:
__ Protection __ Tax Deferral __ Capital Appreciation __ Stability of Principal
__ Variable values. The amount of Death Benefit and Policy Value can both increase and decrease; however, the
Death Benefit will never be less than any Guaranteed Minimum Death Benefit.
__ Fees and charges. The fees and charges have been explained to you and are also explained in detail in the policy.
- -----------------------------------------------------------------------------------------------------------------------------------
Social Security or Taxpayer Identification Number Certification
You certify, under the penalties of perjury as required by Form W-9 of the Internal Revenue Service, that:
1.The number shown on this form is your correct taxpayer identification number (or you are waiting for a number
to be issued to you), and
2.You are not subject to backup withholding because:(a) you are exempt from backup withholding, or (b) you have
not been notified by the Internal Revenue Service that you are subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified you that you are no longer subject to backup
withholding.
Certification Instructions -- You must cross out Item 2 above if you have been notified by the IRS that you are
currently subject to backup withholding because of underreporting interest or dividends on your tax return.
- --------------------------------------------------------------------------------------------------------------------------
Authorization to Obtain Information -- IDS Life Insurance Company
You authorize any physician, medical practitioner, hospital, other medical facility, the Medical Information Bureau,
employer, and consumer reporting agency having medical and other information about you and your minor children to
give that information to the company or its reinsurer. You understand that the company will use this information to
determine eligibility for insurance and benefits. You acknowledge that your medical records, including any alcohol or drug
abuse information, may be protected by the Federal Alcohol and Drug Abuse Regulation 42 CFR Part 2.
You authorize the company to obtain investigative consumer reports on you and your minor children. You understand that
you have the right to request a personal interview if an investigative consumer report is obtained.
You agree that a photographic copy of this authorization will be as valid as the original.
You agree that this authorization will be valid for two and one-half years from the date shown below.
You acknowledge that you have received a copy of this authorization.
- --------------------------------------------------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications
required to avoid backup withholding.
- --------------------------------------------------------------------------------------------------------------------------
Signatures (Insureds under age 15 need not sign.)
Insured (base plan) X____________________________________ OIR/2nd Insured X_________________________________________________
FIR Spouse X____________________________________ OIR Insured X_____________________________________________________
Owner's signature (omit if owner already signed as an insured) X_____________________________________________________________
Signed on (date) ____ - ____ - ____, (state) __________, at (city), X___________________________________________________________
Receipt
- -----------------------------------------------------------------------------------------------------------------------------------
All checks must be completed in full and be made payable to the company (not to the representative).
Received from ______________________________________________ the sum of $______________________________ with this application.
__ No money paid with this application.
Representative's Report
- -----------------------------------------------------------------------------------------------------------------------------------
Is Insured related to representative? __ Yes __ No If yes, give relationship ________________________________________________
You certify that you personally requested the information in this application and witnessed its signing and received any
money that was paid. You also certify that you truly and accurately recorded on the application the information supplied by
the applicant. You are not aware of anything detrimental to the risk that is not recorded in this application.
You certify that, to the best of your knowledge and belief, the information provided on Page 7 of this application regarding
replacement of existing insurance and annuities is true and accurate.
Representative's signature X______________________________________________________ No. _______________ Area Office ___________
Compensation _____________________________% Phone (________) ________ - ________________________ Team ID ______________________
Representative's name (print) ____________________________________________________________________________
Joint Representative's signature X___________________________________________________ No. _____________ Area Office ___________
Compensation _____________________________% Phone (________) ________ - ________________________ Team ID ______________________
Compensation percentages must equal 100%.
Indicate Fax No. (________) ________ - ________________________ If you want to receive status information via fax
instead of Telememo.
31470 A
</TABLE>
IDS LIFE INSURANCE COMPANY'S DESCRIPTION OF TRANSFER AND REDEMPTION PROCEDURES
AND METHOD OF CONVERSION TO FIXED BENEFIT POLICIES
This document sets forth, as required by Rule 6e-3(T) (b) (12) (ii), the
administrative procedures that will be followed by IDS Life Insurance Company
("IDS Life") in connection with the issuance of its flexible premium variable
life insurance policy ("Policy"), the transfer of assets held thereunder, and
the redemption by Policyowners of their interests in said Policies. The document
also describes the method that IDS Life will use when a Policy is exchanged for
a fixed benefit insurance policy pursuant to Rule 6e-3 (T) (b) (13) (v) (B).
TRANSFER AND REDEMPTION PROCEDURES
I. Purchase and Related Transactions
A. Premium Schedules and Underwriting Standards
This Policy is a flexible premium policy. The Policyowner has
flexibility, subject to certain restrictions, in determining the
amount and frequency of premium payments. At the time of application,
the Policyowner will determine A Scheduled Premium. The Scheduled
Premium is a level amount at a fixed interval of time. However, the
Policyowner can change the Scheduled Premium, skip premium payments or
make additional premium payments. Generally, the Policyowner may,
subject to certain restrictions, make premium payments in any amount
and at any frequency.
Failure to pay a Scheduled Premium will not itself cause a Policy to
lapse. Payment of Scheduled Premiums, however, will not guarantee that
it will remain in force. (For further information about when a Policy
will lapse, see page 7.)
<PAGE>
Each month, a deduction is made form the Policy Value for the cost of
insurance and the cost of any riders. This deduction is based on the
age, sec and rate classification of the Insured.
The Policies will be offered and sold pursuant to established
underwriting standards, and in accordance with state insurance laws,
which prohibit unfair discrimination among Policyowners, but recognize
that insurance costs must be based upon factors such as age, sex,
health or occupation.
B. Application and Initial Premium Processing
Upon receipt of a completed application, IDS Life will follow certain
insurance underwriting (i.e., evaluation of risks) procedures designed
to determine whether the proposed Insured is insurable. This process
may involve such verification procedures as medical examinations and
may require that further information be provided by the proposed
Insurance before a determination can be made. A Policy will not be
issued and consequently a Policy Data established, until this
underwriting procedure has been completed.
If a premium is submitted with the policy application, insurance
coverage will begin immediately if the Insured is insurable under a
temporary insurance agreement. Otherwise, insurance coverage will not
begin until coverage is approved by IDS Life.
If a premium is not paid with the application, insurance coverage
will begin on the date the premium is received, if the Insured is
insurable under a temporary insurance agreement, or on the later of
the date the premium is received or the date IDS Life approves
coverage if the Insured is not insurable under a temporary insurance
agreement.
<PAGE>
C. Premium Allocation
In the application for a Policy, the Policyowner can allocate
premiums to the Fixed Account and/or the subaccounts. Until the date
that an application is approved by IDS Life's underwriting department,
the premiums received by IDS Life are held in IDS Life's Fixed Account
and interest at the current Fixed Account rate is credited on the net
premiums. As of the date IDS Life's underwriting department approves
the application, the net premiums plus interest accrued thereon will
be allocated to the Fixed Account and/or the subaccounts in accordance
with the allocation instructions received from the Policyowner in the
application. Future net premiums will be allocated to the Fixed
Account and/or the subaccounts, in accordance with the application
allocation instructions unless the Policyowner changes the allocation
instructions by written request. Net premiums received after the date
IDS Life receives the new instructions, will be allocated to the Fixed
Account and/or the subaccounts, based on the new allocation
instructions.
D. Repayment of Loan
A loan made under the policy will be subject to an interest rate
of 6% per year. The Policyowner can at any time make a loan repayment
which must be at least $25 or 100% of the amount of the outstanding
loan, if less.
When a loan is made, any loan taken from the subaccounts will be
transferred to the Fixed Account. The portion of the Fixed Account
Value which equals indebtedness will be credited with interest at a
rate of 4%.
<PAGE>
All loan repayments will be allocated to the Fixed Account and/or
the subaccounts, using the premium allocation percentages in effect at
the time of payment unless the Policyowner specifies that the loan
repayment is to be allocated in a different manner.
II. Transfer Among the Subaccounts and the Fixed Account.
The Policy currently has a Fixed Account and thirteen subaccounts. Seven of
the subaccounts invest in portfolios of IDS Life Series Fund, Inc. The
other subaccounts invest in Putnam VT New Opportunities Fund, Putnam VT
High Yield Fund, AIM V.I. Growth and Income Fund, Warburg Pincus
Trust/Small Company Growth Portfolio, American Century VP Value and
Templeton International Fund.
Except as noted in the next paragraph, the Policyowner may transfer at any
time all or part of the value of a subaccount to other subaccounts, or to
the Fixed Account by written request or other requests acceptable to IDS
Life. Each transfer must be for a minimum of $250 or, if the value of the
subaccount is less than $250, the value of the subaccount. The transfer
will take effect on the date the request is received by IDS Life. IDS Life
reserves the right to limit transfers to five each policy year.
The Policyowner may also transfer from the Fixed Account to the subaccounts
once a year but only on the policy anniversary or within 30 days after such
policy anniversary. If such a transfer is made, the Policyowner cannot
transfer from the subaccounts back to the Fixed Account until the next
policy anniversary. If IDS Life received a request within 30 days before a
policy anniversary date, the transfer will be effective on the anniversary
date. If IDS Life receives a request within 30 days after a policy
anniversary date, the transfer will be effective on the date the request is
received
<PAGE>
by IDS Life. The minimum transfer amount is $250 or the Fixed
Account Value less indebtedness, if less. The maximum transfer amount is
the Fixed Account Value less indebtedness.
The owner also may request a transfer by calling IDS Life. IDS Life has the
authority to honor any telephone transfer request believed to be authentic.
IDS Life is not responsible for determining the authenticity of such calls.
A transfer request received before 3 p.m. Central time (which is 4 p.m. New
York time) will be processed the same day. If a call or written request is
received after 3:00 p.m. Central time, the request will be processed the
following business day.
III. "Redemption" Procedures: Surrender and Related Transactions
A. Surrender for Cash Value
At any time before the death of the Insured, the Policyowner may
completely Surrender the Policy by written request. Any Surrender
payment from the subaccounts will be made within seven days after IDS
Life received the Written request, unless payment is postponed
pursuant to the relevant provisions of the Investment Company Act or
1940. Any surrender payment from the Fixed Account may be postponed
for up to 6 months. If IDS Life postpones payment more than 30 days,
interest at an annual rate of 3 percent will be paid on the amount
surrendered for the period of postponement. The Surrender payment will
equal the Policyowner's Policy Value minus Indebtedness and, during
the first ten Policy Years, or during the ten years after a requested
increase in Specified Amount, the Surrender Charge.
<PAGE>
After the first policy year, the Policyowner may also request a
partial surrender up to 90% of the Policy's Cash Surrender Value by
written request or by calling IDS Life. IDS Life has the authority to
honor any telephone surrender request believed to be authentic. IDS
Life is not responsible for determining the authenticity of such
calls. A surrender request received before 3 p.m. Central time (which
is 4 p.m. New York time) will be processed the same day. If the call
or written request is received after 3 p.m., the request will be
processed the following business day. A fee of $25, but not exceeding
2% of the amount surrendered is assessed for each partial surrender.
The amount of any partial surrender must be at least $500.
B. Benefit Claims
As long a the Policy remains in force, IDS Life will pay a death
benefit to the named beneficiary after receipt of due proof of death
of the Insured unless the Policy is contested. The amount of the death
benefit will be determined as of the date of death of the Insured. The
death benefit proceeds will include interest from the date of death
until the date of payment. The death benefit proceeds payable will be
reduced by any Loan Balance.
The policy provides two Death Benefit Options - Option 1 (a level
amount option) and Option 2 (a variable amount option). The
Policyowner chooses which option applies.
Under Option 1, the death benefit is the greater of
1) the Specified Amount; or
2) the applicable percentage of the Policy Value.
<PAGE>
Under Option 2, the death benefit is the greater of
1) the Policy Value plus the Specified Amount; or
2) the applicable percentage of the Policy Value.
In lieu of payment of the death benefit in a single sum, an election
may be made to apply all or a portion of the proceeds under one of the
fixed benefit settlement options described in the Policy. The
beneficiary may make an election unless the Policyowner has already
done so. The fixed benefit settlement options are subject to the
restriction and limitations set forth in the policy.
C. Policy Lapsation
A lapse will occur if, on the monthly date, the Cash Surrender Value
is less than the monthly deduction for the policy month following such
monthly date, and the policy is not being continued under the No Lapse
Guarantee provision. It lapse is going to occur, IDS Life will notify
the Policyowner, and the Policyowner will have a 61 day grace period
to make a premium payment so that the estimated Cash Surrender Value
will be sufficient to cover the next three monthly deductions.
The No Lapse Guarantee provision provides that, until the insured's
attained age 70, or five years from the Policy Date, whichever is
later, the policy will not lapse even if the Cash Surrender Value
cannot cover the monthly deduction on a monthly date if (a) equals or
exceeds (b) where:
(a) is the sum of all premiums paid minus any partial surrenders
and minus any indebtedness, and
(b) in the minimum monthly premiums shown in the Policy times
the number of months since the Policy Date, including the
current month.
<PAGE>
D. Loans
The Policyowner may take loans under the Policy at any time as long as
the resulting Indebtedness (including any existing indebtedness) does
not exceed 90% of the Policy Value, less surrender charges. The Policy
is the only security for the loan. The requested loan amount will be
taken from the Fixed Account and the subaccounts in proportion to
their respective Values on the date of the loan, unless the
Policyowner requests a different allocation. Any loan taken from the
subaccounts will be transferred to the Fixed Account. (For further
information about the loan provisions, see page 3.)
The owner may obtain a loan by sending a written request or calling
IDS Life. IDS Life has the authority to honor any telephone loan
request believed to be authentic. IDS Life is not responsible for
determining the authenticity of such calls. A loan request received
before 3 p. m. Central time (which is 4 p.m. New York time) will be
processed the same day. If the call or written request is received
after 3 p.m., the request will be processed the following business
day.
CASH ADJUSTMENT UPON EXCHANGE OF CONTRACT
At any time within 24 months of the Policy's Policy Date, the
Policyowner may exchange the Policy for a Flexible Premium Adjustable
Whole Life Policy which provides for benefits that do not vary with
the investment return of the Variable Account. The exchange is
accomplished by transferring all of the Policy Value in the
subaccounts to the Fixed Account.
April 23, 1999
IDS Life Insurance Company
IDS Tower 10
Minneapolis, Minnesota 55440-0010
RE: IDS Life Variable Life Separate Account, Form S-6
Pre-Effective Amendment No. 1
File No. 333-69777
Ladies and Gentlemen:
I am familiar with the establishment of the IDS Life Variable Life Separate
Account ("Account"), which is a separate account of IDS Life Insurance Company
("Company") established by the Company's Board of Directors according to
applicable insurance law. I also am familiar with the above-referenced
Registration Statement filed by the Company on behalf of the Account with the
Securities and Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgement are necessary and appropriate to enable me to give the following
opinion:
1. The Company is duly incorporated, validly existing and in good standing
under applicable state law and is duly licensed or qualified to do
business in each jurisdiction where it transacts business. The Company
has all corporate powers required to carry on its business and to issue
the contracts.
2. The Account is a validly created and existing separate account of the
Company and is duly authorized to issue the securities registered.
3. The contracts issued by the Company, when offered and sold in
accordance with the prospectus contained in the Registration Statement
and in compliance with applicable law, will be legally issued and
represent binding obligations of the Company in accordance with their
terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Group Counsel
April 23, 1999
IDS Life Insurance Company
IDS Tower 10
Minneapolis, Minnesota 55440
Gentlemen:
This opinion is furnished in connection with the Pre-Effective Amendment No. 1
(Amendment) by IDS Life Insurance Company for the filing of the Flexible Premium
Variable Life Insurance Policy ("the VUL-3 Policy"), File No. 333-69777, under
the Securities Act of 1933. The prospectus included on Form S-6 in the Amendment
describes the VUL-3 Policy. I am familiar with the VUL-3 Policy, the Amendment
and the exhibits thereto. In my opinion, the illustrations of Death Benefits,
Policy Values, and Surrender Values included in the section of the prospectus
entitled "Illustrations", under the assumptions stated in that section, are
consistent with the provisions of the VUL-3 Policy.
I hereby consent to the use of this opinion as an exhibit to the registration
statement and to the reference to my name under the heading "Experts" in this
prospectus.
Very Truly Yours,
/s/ Mark Gorham
Mark Gorham, F.S.A., M.A.A.A.
Actuarial Director - Insurance Product Development
CONSENT OF ACTUARY
The Board of Directors
IDS Life Insurance Company
I consent to the reference to me under the caption "Experts" and to the use of
my opinion dated April 23, 1999 on the Illustrations used by IDS Life Insurance
Company in the Prospectus for the Flexible Premium Variable Life Insurance
Policy (VUL-3) offered by IDS Life Insurance Company as part of the
Pre-Effective Amendment No. 1 being filed under the Securities Act of 1933.
/s/ Mark Gorham
Mark Gorham, F.S.A., M.A.A.A.
Actuarial Director - Insurance Product Development
Minneapolis, Minnesota
April 23, 1999
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 4, 1999 on the consolidated financial
statements of IDS Life Insurance Company and our report dated March 12, 1999 on
the financial statements of IDS Life Variable Life Separate Account -- Flexible
Premium Variable Life Subaccounts in Pre-Effective Amendment No. 1
to the Registration Statement (Form S-6, No. 333-69777) and related Prospectus
for the registration of the Flexible Premium Variable Life Insurance Policy
(VUL-3) to be offered by IDS Life Insurance Company.
/s/ Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
April 23, 1999
