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(icon of) four squares with a circle in the middle.
Smith Barney LifeVest(sm)
Smith
Barney
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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 Account for Smith Barney for Single Premium Variable Life
Insurance as of December 31, 1994, and the related statements of
operations and changes in net assets for each of the three years in
the period then ended. These financial statements are the
responsibility of the management of IDS Life Insurance Company.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation by the underlying affiliated
mutual fund and unit investment trusts of securities owned at
December 31, 1994. 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 Account for Smith Barney for Single Premium Variable Life
Insurance at December 31, 1994 and the individual and combined
results of their operations and the changes in their net assets for
each of the three years in the period then ended, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Minneapolis, Minnesota
March 17, 1995
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<TABLE>
<CAPTION>
IDS Life Variable Account for Smith Barney
Statements of Net Assets Dec. 31, 1994
Combined
Segregated Asset Subaccounts Variable
Assets SAP SMM SHI STR SGO S95 S04 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments in shares of mutual
fund portfolios and units of the
trusts, at market value:
IDS Life Series Fund Equity
Portfolio -- 532,730 shares at
net asset value of $19.06 per
share (cost $6,791,930).... $10,155,324 $ -- $ -- $ -- $ -- $ -- $ -- $10,155,324
IDS Life Series Fund Money
Market Portfolio -- 986,620
shares at net asset value of
$1.00 per share
(cost $986,564)............ -- 986,537 -- -- -- -- -- 986,537
IDS Life Series Fund Income
Portfolio -- 133,476 shares
at net asset value of $9.28
per share (cost $1,499,914). -- -- 1,238,895 -- -- -- -- 1,238,895
IDS Life Series Fund Managed
Portfolio -- 438,998 shares
at net asset value of $14.21
per share (cost $5,842,618). -- -- -- 6,238,020 -- -- -- 6,238,020
IDS Life Series Fund
Government Securities
Portfolio -- 147,432 shares
at net asset value of $9.53
per share (cost $1,422,868). -- -- -- -- 1,404,509 -- -- 1,404,509
Smith Barney Inc. Stripped
("Zero Coupon") U.S. Treasury
Securities Fund, Series A
1995 Trust -- 829,049 units
at net asset value of $0.94
per unit (cost $683,352).... -- -- -- -- -- 782,311 -- 782,311
Smith Barney Inc. Stripped
("Zero Coupon") U.S. Treasury
Securities Fund, Series A
2004 Trust -- 464,000 units
at net asset value of $0.47
per unit (cost $160,876).... -- -- -- -- -- -- 217,467 217,467
10,155,324 986,537 1,238,895 6,238,020 1,404,509 782,311 217,467 21,023,063
Dividends receivable........ -- 4,269 8,114 994 7,528 -- -- 20,905
Accounts receivable from
IDS Life for contract
purchase payments........... 20,000 -- -- -- -- -- -- 20,000
Receivable from mutual fund
portfolios for share
redemptions................. -- 20,000 -- -- -- -- -- 20,000
Total assets................ 10,175,324 1,010,806 1,247,009 6,239,014 1,412,037 782,311 217,467 21,083,968
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Liabilities
Payable to IDS Life for:
Mortality and expense
risk charge................. 39,787 2,033 2,429 24,784 2,765 384 106 72,288
Minimum death benefit
guarantee risk charge....... -- -- -- -- -- 256 71 327
Issue and administrative
charge...................... -- -- -- -- -- 256 71 327
Distribution charge......... -- -- -- -- -- 192 53 245
Mortality charge............ -- -- -- -- -- 320 88 408
Premium tax charge.......... -- -- -- -- -- 128 35 163
Transaction charge.......... -- -- -- -- -- 160 44 204
Contract terminations....... -- 20,000 -- -- -- -- -- 20,000
Payable to mutual fund
portfolios for investments
purchased................... 20,000 2,237 5,685 -- 4,763 -- -- 32,685
Total liabilities........... 59,787 24,270 8,114 24,784 7,528 1,696 468 126,647
Net assets applicable
to Variable Life contracts
in accumulation period..... $10,115,537 $ 986,536 $1,238,895 $6,214,230 $1,404,509 $780,615 $216,999 $20,957,321
Accumulation units
outstanding................ 4,142,587 786,564 1,064,043 3,145,108 994,719 544,506 139,733
Net asset value per
accumulation unit.......... $ 2.44 $ 1.25 $ 1.16 $ 1.98 $ 1.41 $ 1.43 $ 1.55
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
IDS Life Variable Account for Smith Barney
Statements of Operations Year ended Dec. 31, 1994
Combined
Segregated Asset Subaccounts Variable
SAP SMM SHI STR SGO S95 S04 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from
mutual fund portfolios.....$1,063,619 $ 38,282 $ 95,109 $ 758,258 $ 110,768 $ -- $ -- $2,066,036
Expenses:
Mortality and expense
risk charge (Note 4)....... 70,402 6,483 2,628 44,393 9,859 4,854 1,318 139,937
Minimum death benefit
guarantee risk charge
(Note 5)................... 37,747 4,330 6,513 25,122 6,586 3,236 879 84,413
Issue and administrative
expense charge (Note 6).... 37,747 4,330 6,513 25,122 6,586 3,236 879 84,413
Distribution expense
charge (Note 8)............ 28,254 3,241 4,875 18,804 4,929 2,427 659 63,189
Mortality charge (Note 3).. 47,015 5,394 8,112 31,289 8,203 4,045 1,095 105,153
Premium tax charge
(Note 7)................... 18,761 2,152 3,237 12,486 3,273 1,618 442 41,969
Transaction charge (Note 9) -- -- -- -- -- 2,022 549 2,571
Total expenses............. 239,926 25,930 31,878 157,216 39,436 21,438 5,821 521,645
Investment income (loss) --
net....................... 823,693 12,352 63,231 601,042 71,332 (21,438) (5,821) 1,544,391
Realized and Unrealized Gain (Loss) on Investments -- Net
Net realized gain (loss) on sales
of investments in mutual fund
portfolios and in the trusts:
Proceeds from sales........ 1,122,644 1,238,579 202,700 953,599 481,242 358,380 13,821 4,370,965
Cost of investments sold... 737,207 1,238,587 235,785 849,236 462,641 312,437 9,126 3,845,019
Net realized gain (loss)
on investments............. 385,437 (8) (33,085) 104,363 18,601 45,943 4,695 525,946
Net change in unrealized
appreciation or depreciation
of investments.............(1,175,401) (28) (124,885) (817,558) (215,484) (34,087) (26,816)(2,394,259)
Net gain (loss) on
investments................ (789,964) (36) (157,970) (713,195) (196,883) 11,856 (22,121)(1,868,313)
Net increase (decrease) in
net assets resulting from
operations ................$ 33,729 $ 12,316 $ (94,739) $ (112,153) $(125,551) $ (9,582)$(27,942)$ (323,922)
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
IDS Life Variable Account for Smith Barney
Statements of Operations Year ended Dec. 31, 1993
Combined
Segregated Asset Subaccounts Variable
Assets SAP SMM SHI STR SGO S95 S04 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from mutual
fund portfolios............ $ 307,339 $38,325 $95,105 $656,815 $137,778 $ -- $ -- $1,235,362
Expenses:
Mortality and expense risk
charge (Note 4)............ 58,631 8,761 8,064 38,803 12,653 5,012 1,733 133,657
Minimum death benefit
guarantee risk charge
(Note 5)................... 39,165 5,852 5,387 25,632 8,452 3,341 1,156 88,985
Issue and administrative
expense charge (Note 6).... 39,165 5,852 5,387 25,632 8,452 3,341 1,156 88,985
Distribution charge
(Note 8)................... 29,315 4,380 4,032 19,185 6,326 2,506 867 66,611
Mortality charge (Note 3).. 48,781 7,289 6,709 31,924 10,527 4,179 1,440 110,849
Premium tax charge
(Note 7)................... 19,465 2,909 2,677 12,739 4,201 1,668 583 44,242
Transaction charge
(Note 9)................... -- -- -- -- -- 2,088 722 2,810
Total expenses............. 234,522 35,043 32,256 153,915 50,611 22,135 7,657 536,139
Investment income
(loss) -- net.............. 72,817 3,282 62,849 502,900 87,167 (22,135) (7,657) 699,223
Realized and Unrealized Gain (Loss) on Investments -- Net
Net realized gain (loss) on sales
of investments in mutual fund
portfolios and in the trusts:
Proceeds from sales........ 1,345,003 1,203,405 89,939 497,368 447,885 26,049 227,221 3,836,870
Cost of investments sold... 828,587 1,203,397 98,000 441,282 402,245 22,666 146,742 3,142,919
Net realized gain (loss)
on investments............. 516,416 8 (8,061) 56,086 45,640 3,383 80,479 693,951
Net change in unrealized
appreciation or depreciation
of investments............. 382,899 (12) 90,410 446,748 57,303 42,819 (14,049) 1,006,118
Net gain (loss) on
investments................ 899,315 (4) 82,349 502,834 102,943 46,202 66,430 1,700,069
Net increase in net assets
resulting from operations.. $972,132 $3,278 $145,198 $1,005,734 $190,110 $24,067 $58,773 $2,399,292
See accompanying notes to financial statements.
</TABLE>
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PAGE 7
<TABLE>
<CAPTION>
IDS Life Variable Account for Smith Barney
Statements of Operations Year ended Dec. 31, 1992
Combined
Segregated Asset Subaccounts Variable
Assets SAP SMM SHI STR SGO S95 S04 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from mutual
fund portfolios............ $ 449,612 $ 67,137 $ 78,166 $ 767,982 $ 134,437 $ -- $ -- $ 1,497,334
Expenses:
Mortality and expense risk
charge (Note 4)............ 54,840 12,098 5,923 34,723 12,091 4,139 2,878 126,692
Minimum death benefit
guarantee risk charge
(Note 5)................... 36,633 8,082 3,957 23,195 8,077 2,760 1,920 84,624
Issue and administrative
expense charge (Note 6).... 36,633 8,082 3,957 23,195 8,077 2,760 1,920 84,624
Distribution charge
(Note 8)................... 27,420 6,049 2,962 17,362 6,045 2,067 1,440 63,345
Mortality charge (Note 3).. 45,627 10,066 4,928 28,890 10,060 3,450 2,409 105,430
State premium tax charge
(Note 7)................... 18,207 4,017 1,967 11,528 4,014 1,383 949 42,065
Transaction charge (Note 9) -- -- -- -- -- 1,725 1,199 2,924
Total expenses............. 219,360 48,394 23,694 138,893 48,364 18,284 12,715 509,704
Investment income (loss)
-- net..................... 230,252 18,743 54,472 629,089 86,073 (18,284) (12,715) 987,630
Realized and Unrealized Gain (Loss) on Investments -- Net
Net realized gain (loss) on
sales of investments in
mutual fund portfolios and
in the trusts:
Proceeds from sales........ 1,683,859 1,465,872 112,418 797,152 490,926 856,925 704,727 6,111,879
Cost of investments sold... 1,067,667 1,465,891 142,108 693,473 468,772 674,555 445,547 4,958,013
Net realized gain (loss)
on investments............. 616,192 (19) (29,690) 103,679 22,154 182,370 259,180 1,153,866
Net change in unrealized
appreciation or depreciation
of investments............. (697,008) 28 42,517 (296,698) (36,078) (118,696) (189,214) (1,295,149)
Net gain (loss) on
investments................ (80,816) 9 12,827 (193,019) (13,924) 63,674 69,966 (141,283)
Net increase in net assets
resulting from operations.. $149,436 $ 18,752 $ 67,299 $ 436,070 $ 72,149 $ 45,390 $ 57,251 $ 846,347
See accompanying notes to financial statements.
</TABLE>
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PAGE 8
<TABLE>
<CAPTION>
IDS Life Variable Account for Smith Barney
Statements of Changes in Net Assets Year Ended Dec. 31, 1994
Combined
Segregated Asset Subaccounts Variable
Operations SAP SMM SHI STR SGO S95 S04 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income
(loss) -- net......... $ 823,693 $ 12,352 $ 63,231 $ 601,042 $ 71,332 $(21,438) $ (5,821) $1,544,391
Net realized gain
(loss) on investments. 385,437 (8) (33,085) 104,363 18,601 45,943 4,695 525,946
Net change in unrealized
appreciation or depreciation
of investments........ (1,175,401) (28) (124,885) (817,558) (215,484) (34,087) (26,816) (2,394,259)
Net increase (decrease) in
net assets resulting from
operations............ 33,729 12,316 (94,739) (112,153) (125,551) (9,582) (27,942) (323,922)
Contract Transactions
Net transfers*........ 204,398 28,171 56,429 17,261 (316,901) 9,618 1,580 556
Transfers for policy
loans................. (154,689) (17,876) (18,631) (122,120) (17,390) (11,647) (449) (342,802)
Contract terminations:
Surrender benefits
(Note 10)............. (252,988) (253,707) (109,500) (377,514) (53,297) (162,800) -- (1,209,806)
Death benefits........ (67,012) -- (21,013) (20,525) (3,470) -- -- (112,020)
Increase (decrease) from
contract transactions. (270,291) (243,412) (92,715) (502,898) (391,058) (164,829) 1,131 (1,664,072)
Net assets at beginning
of year............... 10,352,099 1,217,632 1,426,349 6,829,281 1,921,118 955,026 243,810 22,945,315
Net assets at end
of year............... $10,115,537 $ 986,536 $1,238,895 $6,214,230 $1,404,509 $780,615 $216,999 $20,957,321
Accumulation Unit Activity
Units outstanding at
beginning of year..... 4,254,205 981,708 1,143,994 3,397,116 1,264,164 660,189 138,773
Net transfers*........ 86,542 22,488 45,456 8,100 (218,043) 5,961 1,251
Transfers for policy
loans................. (64,791) (14,355) (15,372) (61,148) (11,674) (8,155) (291)
Contract terminations:
Surrender benefits.... (104,732) (203,277) (92,623) (187,978) (37,314) (113,489) --
Death benefits........ (28,637) -- (17,412) (10,982) (2,414) -- --
Units outstanding at
end of year........... 4,142,587 786,564 1,064,043 3,145,108 994,719 544,506 139,733
*Includes transfer activity from (to) other subaccounts.
See accompanying notes to financial statements.
</TABLE>
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PAGE 9
<TABLE>
<CAPTION>
IDS Life Variable Account for Smith Barney
Statements of Changes in Net Assets Year Ended Dec. 31, 1993
Combined
Segregated Asset Subaccounts Variable
Operations SAP SMM SHI STR SGO S95 S04 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income
(loss) -- net......... $ 72,817 $ 3,282 $ 62,849 $ 502,900 $ 87,167 $(22,135) $ (7,657) $ 699,223
Net realized gain
(loss) on investments. 516,416 8 (8,061) 56,086 45,640 3,383 80,479 693,951
Net change in unrealized
appreciation or depreciation
of investments........ 382,899 (12) 90,410 446,748 57,303 42,819 (14,049) 1,006,118
Net increase in net assets
resulting from
operations............ 972,132 3,278 145,198 1,005,734 190,110 24,067 58,773 2,399,292
Contract Transactions
Net transfers*........ (103,927) (387,053) 287,269 164,627 (260,851) 521,208 (225,496) (4,223)
Transfers for policy
loans................. (308,346) (7,070) 28,406 (200,579) (51,754) (9,440) (1,725) (550,508)
Contract terminations:
Surrender benefits
(Note 10)............. (189,094) (190,667) (24,840) (140,531) (17,778) (16,527) -- (579,437)
Death benefits........ (111,939) -- (12,036) (37,784) -- -- -- (161,759)
Increase (decrease) from
contract transactions. (713,306) (584,790) 278,799 (214,267) (330,383) 495,241 (227,221) (1,295,927)
Net assets at beginning
of year............... 10,093,273 1,799,144 1,002,352 6,037,814 2,061,391 435,718 412,258 21,841,950
Net assets at end
of year............... $10,352,099 $1,217,632 $1,426,349 $6,829,281 $1,921,118 $955,026 $243,810 $22,945,315
Accumulation Unit Activity
Units outstanding at
beginning of year..... 4,592,261 1,452,324 901,445 3,515,251 1,485,851 313,484 279,808
Net transfers*........ (54,533) (311,599) 247,635 89,671 (174,974) 364,753 (140,041)
Transfers for policy
loans................. (142,193) (5,688) 24,763 (110,894) (35,008) (6,596) (994)
Contract terminations:
Surrender benefits.... (89,875) (153,329) (19,927) (76,282) (11,705) (11,452) --
Death benefits........ (51,455) -- (9,922) (20,630) -- -- --
Units outstanding at
end of year........... 4,254,205 981,708 1,143,994 3,397,116 1,264,164 660,189 138,773
*Includes transfer activity from (to) other subaccounts.
See accompanying notes to financial statements.
</TABLE>
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PAGE 10
<TABLE>
<CAPTION>
IDS Life Variable Account for Smith Barney
Statements of Changes in Net Assets Year Ended Dec. 31, 1992
Combined
Segregated Asset Subaccounts Variable
Operations SAP SMM SHI STR SGO S95 S04 Account
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income
(loss) -- net......... $ 230,252 $ 18,743 $ 54,472 $ 629,089 $ 86,073 $(18,284) $(12,715) $ 987,630
Net realized gain
(loss) on
investments........... 616,192 (19) (29,690) 103,679 22,154 182,370 259,180 1,153,866
Net change in unrealized
appreciation or depreciation
of investments........ (697,008) 28 42,517 (296,698) (36,078) (118,696) (189,214) (1,295,149)
Net increase in net assets
resulting from
operations............ 149,436 18,752 67,299 436,070 72,149 45,390 57,251 846,347
Contract Transactions
Net transfers*........ 141,821 (387,213) 53,329 275,500 (99,055) (141,038) 161,295 4,639
Transfers for policy
loans................. (336,538) (29,365) (31,135) (80,972) (35,264) (243,697) (5,279) (762,250)
Contract terminations:
Surrender benefits
(Note 10)............. (350,903) (39,984) (71,098) (471,971) (149,104) -- (162,340) (1,245,400)
Death benefits........ -- -- -- (153,828) (23,901) -- -- (177,729)
Decrease from contract
transactions.......... (545,620) (456,562) (48,904) (431,271) (307,324) (384,735) (6,324) (2,180,740)
Net assets at beginning
of year............... 10,489,457 2,236,954 983,957 6,033,015 2,296,566 775,063 361,331 23,176,343
Net assets at end
of year............... $10,093,273 $1,799,144 $1,002,352 $6,037,814 $2,061,391 $435,718 $412,258 $21,841,950
Accumulation Unit Activity
Units outstanding at
beginning of year..... 4,902,441 1,821,765 947,338 3,784,467 1,724,462 584,551 261,400
Net transfers*........ 46,202 (313,424) 51,369 176,454 (79,011) (85,649) 132,500
Transfers for policy
loans................. (176,027) (23,712) (29,737) (51,856) (26,564) (185,418) (3,619)
Contract terminations:
Surrender benefits.... (180,355) (32,305) (67,525) (297,503) (114,337) -- (110,473)
Death benefits........ -- -- -- (96,311) (18,699) -- --
Units outstanding at
end of year........... 4,592,261 1,452,324 901,445 3,515,251 1,485,851 313,484 279,808
Includes transfer activity from (to) other subaccounts.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 11
IDS Life Variable Account for Smith Barney
Notes to Financial Statements
1. Organization
IDS Life Variable Account for Smith Barney, formerly IDS Life
Variable Account for Smith Barney Shearson, (the Variable Account)
was established on April 23, 1986 as a segregated asset account of
IDS Life Insurance Company (IDS Life) under Minnesota law and is
registered as a single unit investment trust under the Investment
Company Act of 1940. Operations of the Variable Account commenced
on Oct. 3, 1986.
The Variable Account is comprised of seven subaccounts. The assets
of each subaccount of the Variable Account are not chargeable with
liabilities arising out of the business conducted by any other
Subaccount, Account or by IDS Life. The assets of the Variable
Account shall be available, however, to cover the liabilities of
IDS Life to the extent the assets of the Variable Account exceed
its liabilities arising under the policies supported by it.
Currently, five of the Variable Account subaccounts invest in
shares of the corresponding portfolios of the IDS Life Series Fund,
Inc. (the mutual fund). The other two subaccounts invest in units
of the Smith Barney Inc., formerly Smith Barney Shearson, Stripped
("Zero Coupon") U.S. Treasury Securities Fund (individually, a
Trust or collectively, the Trusts). Policy owners allocate their
premium payment to one or more of the seven subaccounts. Such
funds are then invested in shares of five portfolios of IDS Life
Series Fund, Inc. or two units of Smith Barney Inc. Stripped
("Zero Coupon") U.S. Treasury Securities Fund. Organizational
expenses for the Variable Account were paid by IDS Life.
The mutual fund, which commenced operations Jan. 20, 1986, is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. Funds
allocated to Subaccount SAP are invested in the shares of the
Equity Portfolio; Subaccount SMM invests in the shares of the Money
Market Portfolio; Subaccount SHI invests in the shares of the
Income Portfolio; Subaccount STR invests in the shares of the
Managed Portfolio; and Subaccount SGO invests in the shares of the
Government Securities Portfolio.
The Trusts, which commenced operations Aug. 4, 1986, are
registered under the Investment Company Act of 1940 as a unit
investment trust. Subaccounts 1995 (S95) and 2004 (S04) invest in
units of the Trusts, with maturity dates of 1995 and 2004,
respectively.
Prior to Dec. 28, 1990, the Subaccounts invested in the shares of
the Shearson Lehman Series Fund, which was formed on April 18,
1986. It is registered under the Investment Company Act of 1940 as
a diversified, open-end management investment company and commenced
operations on Nov. 3, 1986. Prior to Dec. 28, 1990, funds
allocated to Subaccount SAP were invested in the shares of the
Appreciation Portfolio; Subaccount SMM invested in the shares of
the Money Market Portfolio; Subaccount SHI invested in the shares
of the High Income Bond Portfolio; Subaccount STR invested in the
shares of the Total Return Portfolio; and Subaccount SGO invested
in the shares of the Government Securities Portfolio.<PAGE>
PAGE 12
IDS Life serves as manager and investment adviser for the Variable
Account and the underlying series mutual fund. Smith Barney Inc.
serves as sponsor for the Trusts.
2. Summary of Significant Accounting Policies
Investments in Mutual Fund
Investments in shares of the mutual fund portfolios are stated at
market value which is the net asset value per share as determined
by the respective portfolios. Investment transactions are
accounted for on the date the shares are purchased and sold. The
cost of investments sold and redeemed is determined on the average
cost method. Dividend distributions received from the portfolios
are reinvested, net of any expenses payable to IDS Life, in
additional shares of the portfolios and 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 portfolios' undistributed net investment income,
undistributed realized gain or loss and the unrealized appreciation
or depreciation on their investment securities.
Investments in Trusts
Investments in units of the Trusts are stated at market value which
is the net asset value per unit as determined by the respective
trust. Investment transactions are accounted for on the date the
units are purchased and sold. The cost of investments sold and
redeemed is determined on the average cost method.
Unrealized appreciation or depreciation of investments in the
accompanying financial statements represents the subaccounts' share
of the Trusts' undistributed net investment income, undistributed
realized gain or loss and the unrealized appreciation or
depreciation on their investment securities.
Federal Income Taxes
IDS Life is taxed as a life insurance company. The Variable
Account is treated as part of IDS Life for federal income tax
purposes.
Under existing federal income tax law, no income taxes are payable
with respect to any investment income of the Variable Account.
3. Mortality Charge
IDS Life deducts a mortality charge equal (except as explained
below), on an annual basis, to 0.5 percent of the daily net asset
value of the Variable Account. Prior to the maturity date of the
policy, the death benefit will always be higher than the policy
value. This deduction will enable IDS Life to pay this additional
amount. Although IDS Life does not expect to charge more than the
rate mentioned above, its charge for providing life insurance
protection could be greater. If, at any time, IDS Life assesses a
charge higher than 0.5 percent for a policy, it will waive any
surrender charges which may exist on that policy.
<PAGE>
PAGE 13
4. Mortality and Expense Risk Charge
IDS Life makes contractual assurances to the Variable Account that
possible future adverse changes in administrative expense 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 0.6 percent of the daily net asset value of the Variable
Account.
5. Minimum Death Benefit Guarantee Risk Charge
IDS Life deducts a minimum death benefit guarantee risk charge
equal, on an annual basis, to 0.4 percent of the daily net asset
value of the Variable Account. This deduction is made to
compensate IDS Life for the risk it assumes by providing a
guaranteed minimum death benefit. The deduction will be made from
the Variable Account and computed on a daily basis. This charge is
guaranteed for the life of the contract and may not be increased.
6. Issue and Administrative Expense Charge
IDS Life deducts a charge to compensate it for expenses it incurs
in administering the policy, such as the costs of underwriting the
policy, conducting any medical examinations, establishing and
maintaining records, and providing reports to policy owners. This
charge is deducted daily and is equivalent, on an annual basis, to
0.4 percent of the daily net asset value of the Variable Account
during the first 10 years of the policy, and to 0.3 percent
thereafter. There is not necessarily a relationship between the
amount of the charge imposed on a particular policy and the amount
of administrative expenses that may be attributable to that policy.
7. State Premium Tax Charge
To cover the premium taxes assessed by the various states and to
compensate IDS Life for the average premium tax expense it incurs
when issuing the policy, IDS Life deducts a charge equivalent, on
an annual basis, to 0.2 percent of the daily net asset value of
the Variable Account during the first 10 policy years, and 0
percent thereafter.
8. Distribution Expense Charge
IDS Life incurs certain sales and other distribution expenses at
the time the policies are issued. This charge is equal, on an
annual basis, to 0.3 percent of the daily average net asset value
of the Variable Account for the first 10 policy years and 0 percent
thereafter. IDS Life anticipates that this charge, together with
any applicable surrender charge, will cover the expected costs of
distributing the policies. In no event will the sum of the
surrender charge deducted on surrender and cumulative distribution
expense charges previously deducted exceed 9 percent of the single
premium paid.<PAGE>
PAGE 14
9. Transaction Charge
IDS Life makes a daily charge against the assets of each subaccount
investing in the Trusts. This charge is intended to reimburse IDS
Life for the transaction charge paid directly by IDS Life to Smith
Barney Inc. on the sale of the Trust units to the Variable Account.
IDS Life pays these amounts from its general account assets. The
amount of the asset charge is equivalent to an effective annual
rate of 0.25 percent of the account value invested in the Trusts.
This amount may be increased in the future but in no event will it
exceed an effective annual rate of 0.5 percent of the Variable
Account value. The charge will be cost-based (taking into account
a loss of interest) with no anticipated element of profit for IDS
Life. This charge also varies directly with the size of the
account value.
10. Surrender Charge
IDS Life will use a surrender charge to help it recover certain
selling expenses. The surrender charge will be deducted during the
first eight policy years. Further, IDS Life guarantees that the
total cumulative distribution expense charges and the surrender
charge will never exceed 9 percent of the single premium. Charges
by IDS Life for surrenders are not available on an individual
segregated asset account basis. Charges for all segregated asset
accounts amounted to $6,969,493 in 1994, $4,408,562 in 1993 and
$3,649,836 in 1992. Such charges are not an expense of the
subaccounts or Variable Account. They are deducted from contract
surrender benefits paid by IDS Life.
11. Investment Transactions
The subaccounts' purchases of portfolio shares or trust units (net
of charges), including reinvestment of dividend distributions,
were as follows:
<TABLE>
<CAPTION>
Year Ended Dec. 31,
Subaccount Investment 1994 1993 1992
<S> <C> <C> <C> <C>
SAP Equity Portfolio.................. $1,673,247 $ 706,537 $1,368,490
SMM Money Market Portfolio............ 1,007,521 621,896 1,028,053
SHI Income Portfolio.................. 173,216 431,587 117,986
STR Managed Portfolio................. 1,047,157 789,666 996,265
SGO Government Securities Portfolio... 161,516 204,669 269,675
S95 1995 Trust........................ 171,662 500,326 453,082
S04 2004 Trust........................ 9,056 (8,389) 685,089
$4,243,375 $3,246,292 $4,918,640
</TABLE>
<PAGE>
PAGE 15
<TABLE>
<CAPTION>
Condensed Financial Information (unaudited) Period from
Oct. 3, to
Year Ended Dec. 31, Dec. 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subaccount SAP (invests in Equity Portfolio)
Accumulation unit value at beginning of
period.................................... $2.43 $2.20 $2.14 $1.32 $1.35 $1.05 $0.97 $1.01 $1.00
Accumulation unit value at end of period.. $2.44 $2.43 $2.20 $2.14 $1.32 $1.35 $1.05 $0.97 $1.01
Number of accumulation units outstanding
at end of period (000 omitted)............ 4,143 4,254 4,592 4,902 5,464 5,590 6,111 7,324 1,048
Subaccount SMM (invests in Money Market Portfolio)
Accumulation unit value at beginning of
period.................................... $1.24 $1.24 $1.23 $1.18 $1.13 $1.08 $1.04 $1.01 $1.00
Accumulation unit value at end of period.. $1.25 $1.24 $1.24 $1.23 $1.18 $1.13 $1.08 $1.04 $1.01
Number of accumulation units outstanding
at end of period (000 omitted)............ 787 982 1,452 1,822 2,038 2,005 1,603 2,169 102
Subaccount SHI (invests in Income Portfolio)
Accumulation unit value at beginning of
period.................................... $1.24 $1.11 $1.04 $0.92 $1.13 $1.18 $1.06 $1.01 $1.00
Accumulation unit value at end of period.. $1.16 $1.24 $1.11 $1.04 $0.92 $1.13 $1.18 $1.06 $1.01
Number of accumulation units outstanding
at end of period (000 omitted)............ 1,064 1,144 901 947 1,310 2,331 3,401 2,666 541
Subaccount STR (invests in Managed Portfolio)
Accumulation unit value at beginning of
period.................................... $2.01 $1.72 $1.59 $1.23 $1.25 $1.09 $0.95 $1.00 $1.00
Accumulation unit value at end of period.. $1.98 $2.01 $1.72 $1.59 $1.23 $1.25 $1.09 $0.95 $1.00
Number of accumulation units outstanding
at end of period (000 omitted)............ 3,145 3,397 3,515 3,784 4,173 4,388 4,789 4,668 409
Subaccount SGO (invests in Government Securities Portfolio)
Accumulation unit value at beginning of
period.................................... $1.52 $1.39 $1.33 $1.17 $1.12 $1.04 $1.00 $1.01 $1.00
Accumulation unit value at end of period.. $1.41 $1.52 $1.39 $1.33 $1.17 $1.12 $1.04 $1.00 $1.01
Number of accumulation units outstanding
at end of period (000 omitted)............ 995 1,264 1,486 1,724 1,548 1,598 1,672 1,792 360
Subaccount S95 (invests in 1995 Trust)**
Accumulation unit value at beginning of
period.................................... $1.44 $1.39 $1.32 $1.17 $1.09 $0.97 $0.92 $1.00 --
Accumulation unit value at end of period.. $1.43 $1.44 $1.39 $1.32 $1.17 $1.09 $0.97 $0.92 --
Number of accumulation units outstanding
at end of period (000 omitted)............ 545 660 313 585 811 499 467 176 --
Subaccount S04 (invests in 2004 Trust)
Accumulation unit value at beginning of
period.................................... $1.74 $1.47 $1.38 $1.17 $1.16 $0.96 $0.86 $0.98 $1.00
Accumulation unit value at end of period.. $1.55 $1.74 $1.47 $1.38 $1.17 $1.16 $0.96 $0.86 $0.98
Number of accumulation units outstanding
at end of period (000 omitted)............ 140 139 280 261 605 636 464 282 72
*Operations commenced on Oct. 3, 1986.
**Subaccount S95 commenced operations on Jan. 6, 1987.
</TABLE>
<PAGE>
PAGE 16
IDS Life Financial Information
The financial statements shown below are those of the insurance
company and not those of the Fund, the Trusts or the Subaccounts.
They are included in the prospectus for the purpose of informing
investors as to the financial condition of the insurance company
and its ability to carry out its obligations under the variable
contracts.
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS 1994 1993
(thousands)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1994, $10,694,800) $11,269,861 $ -
Available for sale, at fair value (Amortized cost:
1994, $8,459,128) 8,017,555 -
Investment securities, at amortized cost (Fair value:
1993, $20,425,979) - 19,392,424
Mortgage loans on real estate
(Fair value: 1994, $2,342,520; 1993, $2,125,686) 2,400,514 2,055,450
Policy loans 381,912 350,501
Other investments 51,795 56,307
Total investments 22,121,637 21,854,682
Cash and cash equivalents 267,774 146,281
Receivables:
Reinsurance 80,304 55,298
Amounts due from brokers 7,933 5,719
Other accounts receivable 49,745 21,459
Premiums due 1,594 1,329
Total receivables 139,576 83,805
Accrued investment income 317,510 307,177
Deferred policy acquisition costs 1,865,324 1,652,384
Deferred income taxes 124,061 -
Other assets 30,426 21,730
Assets held in segregated asset
accounts, primarily common stocks
at market 10,881,235 8,991,694
Total assets $35,747,543 $33,057,753
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 17
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1994 1993
(thousands)
Liabilities:
Future policy benefits:
Fixed annuities $19,361,979 $18,492,135
Universal life-type insurance 2,896,100 2,753,455
Traditional life insurance 206,754 210,205
Disability income, health and
long-term care insurance 244,077 185,272
Policy claims and other
policyholders' funds 50,068 44,516
Deferred income taxes - 43,620
Amounts due to brokers 226,737 351,486
Other liabilities 291,902 292,024
Liabilities related to segregated
asset accounts 10,881,235 8,991,694
Total liabilities 34,158,852 31,364,407
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 222,000 222,000
Net unrealized gain (loss) on investments (275,708) 114
Retained earnings 1,639,399 1,468,232
Total stockholder's equity 1,588,691 1,693,346
Total liabilities and stockholder's equity $35,747,543 $33,057,753
======== ========
Commitments and contingencies (Note 6)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 18
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
1994 1993 1992
(thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 48,184 $ 48,137 $ 49,719
Disability income and
long-term care insurance 96,456 79,108 64,660
Total premiums 144,640 127,245 114,379
Policyholder and contractholder
charges 219,936 184,205 156,368
Management and other fees 164,169 120,139 84,591
Net investment income 1,781,873 1,783,219 1,616,821
Net loss on investments (4,282) (6,737) (3,710)
Total revenues 2,306,336 2,208,071 1,968,449
Benefits and expenses:
Death and other benefits:
Traditional life insurance 28,263 32,136 34,139
Universal life-type insurance
and investment contracts 52,027 49,692 42,174
Disability income, health and
long-term care insurance 13,393 13,148 10,701
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance (3,229) (4,513) (5,788)
Disability income, health and
long-term care insurance 37,912 32,528 27,172
Interest credited on universal life-type
insurance and investment contracts 1,174,985 1,218,647 1,188,379
Amortization of deferred policy
acquisition costs 280,372 211,733 140,159
Other insurance and operating expenses 210,101 241,974 215,692
Total benefits and expenses 1,793,824 1,795,345 1,652,628
Income before income taxes 512,512 412,726 315,821
Income taxes 176,343 142,647 104,651
Net income $ 336,169 $ 270,079 $ 211,170
======= ======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 19
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
1994 1993 1992
(thousands)
Cash flows from operating activities:
Net income $ 336,169 $ 270,079 $ 211,170
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance (37,110) (35,886) (32,881)
Repayment 33,384 29,557 26,750
Change in reinsurance receivable (25,006) (55,298) -
Change in other accounts receivable (28,286) (1,364) (4,772)
Change in accrued investment income (10,333) (22,057) (15,853)
Change in deferred policy acquisition
costs, net (192,768) (211,509) (229,252)
Change in liabilities for future policy
benefits for traditional life,
disability income, health and
long-term care insurance 55,354 79,695 21,384
Change in policy claims and other
policyholders' funds 5,552 (5,383) (1,347)
Change in deferred income taxes (19,176) (44,237) (30,385)
Change in other liabilities (122) 56,515 88,997
Amortization of premium
(accretion of discount), net 30,921 (27,438) (4,289)
Net loss on investments 4,282 6,737 3,710
Activity related to universal
life-type insurance:
Premiums 409,035 397,883 312,621
Surrenders and death benefits (290,427) (255,133) (166,162)
Interest credited to account
balances 150,955 156,885 161,873
Policyholder and contractholder
charges, non-cash (126,918) (115,140) (100,975)
Other, net (8,974) (1,907) (10,647)
Net cash provided by operating
activities $ 286,532 $ 221,999 $ 229,942
See accompanying notes to consolidated financial statements.
<PAGE>
PAGE 20
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years ended December 31,
1994 1993 1992
(thousands)
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ (879,740) $ - $ -
Maturities, sinking fund payments and calls 1,651,762 - -
Sales 58,001 - -
Fixed maturities available for sale:
Purchases (2,763,278) - -
Maturities, sinking fund payments and calls 1,234,401 - -
Sales 374,564 - -
Fixed maturities:
Purchases - (6,548,852) (6,590,279)
Maturities, sinking fund payments and calls - 3,934,055 2,696,239
Sales - 487,983 1,011,093
Other investments, excluding policy loans:
Purchases (634,807) (553,694) (411,069)
Sales 243,862 123,352 67,097
Change in amounts due from brokers (2,214) 14,483 289,335
Change in amounts due to brokers (124,749) 92,832 42,182
Net cash used in investing activities (842,198) (2,449,841) (2,895,402)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 3,157,778 2,843,668 2,821,069
Surrenders and death benefits (3,311,965) (1,765,869) (1,168,633)
Interest credited to account balances 1,024,031 1,071,917 1,026,506
Universal life-type insurance policy loans:
Issuance (78,239) (70,304) (72,007)
Repayment 50,554 46,148 40,351
Capital contribution from parent - 200,000 -
Cash dividend to parent (165,000) (25,000) (20,000)
Net cash provided by financing activities 677,159 2,300,560 2,627,286
Net increase (decrease) in cash and
cash equivalents 121,493 72,718 (38,174)
Cash and cash equivalents at
beginning of year 146,281 73,563 111,737
Cash and cash equivalents at
end of year $ 267,774 $ 146,281 $ 73,563
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 21
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dec. 31, 1994, 1993 and 1992
($ thousands)
1. Summary of significant accounting policies
Nature of business
IDS Life Insurance Company (the Company) is engaged in the
insurance and annuity business. The Company sells various forms of
fixed and variable individual life insurance, group life insurance,
individual and group disability income insurance, long-term care
insurance, and single and installment premium fixed and variable
annuities.
Basis of presentation
The Company is a wholly owned subsidiary of American Express
Financial Corporation (formerly IDS Financial Corporation), which
is a wholly owned subsidiary of American Express Company. The
accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, IDS Life
Insurance Company of New York, American Enterprise Life Insurance
Company and American Partners Life Insurance Company. All material
intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles which vary in certain respects from reporting practices
prescribed or permitted by state insurance regulatory authorities.
Investments
As of January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under SFAS No. 115,
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 carried as a
separate component of stockholder's equity. The effect of adopting
SFAS No. 115 was to increase stockholder's equity by approximately
$181 million, net of tax, as of January 1, 1994, but the adoption
had no impact on the Company's net income.
Management determines the appropriate classification of fixed
maturities at the time of purchase and reevaluates the
classification at each balance sheet date.
<PAGE>
PAGE 22
1. Summary of significant accounting policies (continued)
Mortgage loans on real estate are carried principally at the unpaid
principal balances of the related loans. Policy loans are carried
at the aggregate of the unpaid loan balances which do not exceed
the cash surrender values of the related policies. Other
investments include interest rate caps and equity securities. When
evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such
investments are written down to the fair value by a charge to
income. Equity securities are carried at market value and the
related net unrealized appreciation or depreciation is reported as
a credit or charge to stockholder's equity.
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.
Statement of cash flows
The Company considers investments with a maturity at the date of
their acquisition of three months or less to be cash equivalents.
These securities are carried principally at amortized cost which
approximates fair value.
Supplementary information to the consolidated statement of cash
flows for the years ended Dec. 31 is summarized as follows:
1994 1993 1992
Cash paid during the year for:
Income taxes $226,365 $188,204 $140,445
Interest on borrowings 1,553 2,661 1,265
Recognition of profits on annuity contracts and insurance policies
The Company issues single premium deferred annuity contracts that
provide for a service fee (surrender charge) at annually decreasing
rates upon withdrawal of the annuity accumulation value by the
contract owner. No sales fee is deducted from the contract
considerations received on these contracts ("no load" annuities).
All of the Company's single premium deferred annuity contracts
provide for crediting the contract owners' accumulations at
specified rates of interest. Such rates are revised by the Company
from time to time based on changes in the market investment yield
rates for fixed-income securities.
Profits on single premium deferred annuities and installment
annuities are recognized by the Company over the lives of the
contracts and represent the excess of investment income earned from
investment of contract considerations over interest credited to
contract owners and other expenses.
<PAGE>
PAGE 23
1. Summary of significant accounting policies (continued)
The retrospective deposit method is used in accounting for
universal life-type insurance. This method recognizes profits over
the lives of the policies in proportion to the estimated gross
profits expected to be realized.
Premiums on traditional life, disability income, health and
long-term care insurance policies are recognized as revenue when
collected or due, and related benefits and expenses are associated
with premium revenue in a manner that results in recognition of
profits over the lives of the insurance policies. This association
is accomplished by means of the provision for future policy
benefits and the deferral and subsequent amortization of policy
acquisition costs.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales
compensation, policy issue costs, underwriting and certain sales
expenses, have been deferred on insurance and annuity contracts.
The deferred acquisition costs for single premium deferred
annuities and installment annuities are amortized based upon
surrender charge revenue and a portion of the excess of investment
income earned from investment of the contract considerations over
the interest credited to contract owners. The costs for universal
life-type insurance are amortized over the lives of the policies as
a percentage of the estimated gross profits expected to be realized
on the policies. For traditional life, disability income, health
and long-term care insurance policies, the costs are amortized over
an appropriate period in proportion to premium revenue.
Liabilities for future policy benefits
Liabilities for universal life-type insurance, single premium
deferred annuities and installment annuities are accumulation
values.
Liabilities for fixed annuities in a benefit status are based on
the Progressive Annuity Table with interest at 5 percent, the 1971
Individual Annuity Table with interest at 7 percent or 8.25
percent, or the 1983a Table with various interest rates ranging
from 5.5 percent to 9.5 percent, depending on year of issue.
Liabilities for future benefits on traditional life insurance have
been computed principally by the net level premium method, based on
anticipated rates of mortality (approximating the 1965-1970 Select
and Ultimate Basic Table for policies issued after 1980 and the
1955-1960 Select and Ultimate Basic Table for policies issued prior
to 1981) and the 1975-1980 Select and Ultimate Basic Table for term
insurance policies issued after 1984, policy persistency derived
from Company experience data (first year rates ranging from
approximately 70 percent to 90 percent and increasing rates
thereafter), and estimated future investment yields of 4 percent
for policies issued before 1974 and 5.25 percent for policies
issued from 1974 to 1980. Cash value plans issued in 1980 and
later assume future investment rates that grade from 9.5 percent to
<PAGE>
PAGE 24
1. Summary of significant accounting policies (continued)
5 percent over 20 years. Term insurance issued from 1981 to 1984
assumes an 8 percent level investment rate, term insurance issued
from 1985-1993 assumes investment rates that grade from 10 percent
to 6 percent over 20 years and term insurance issued after 1993
assumes investment rates that grade from 8.7 percent to 6.57
percent over 7 years.
Liabilities for future disability income policy benefits have been
computed principally by the net level premium method, based on the
1964 Commissioners Disability Table with the 1958 Commissioners
Standard Ordinary Mortality Table at 3 percent interest for 1980
and prior, 8 percent interest for persons disabled from 1981 to
1991, 7.7 percent interest for persons disabled in 1992 and 6
percent interest for persons disabled after 1992.
Liabilities for future benefits on long-term care insurance have
been computed principally by the net level premium method, using
morbidity rates based on the 1985 National Nursing Home Survey and
mortality rates based on the 1983a Table. The interest rate basis
is 9.5 percent grading to 7 percent over ten years for policies
issued from 1989 to 1992, 7.75 percent grading to 7 percent over
four years for policies issued after 1992, 8 percent for claims
incurred in 1989 to 1991, 7.7 percent for claims incurred in 1992
and 6.7 percent for claims incurred after 1992.
Reinsurance
The maximum amount of life insurance risk retained by the Company
on any one life is $750 of life and waiver of premium benefits plus
$50 of accidental death benefits. The maximum amount of disability
income risk retained by the Company on any one life is $6 of
monthly benefit for benefit periods longer than three years. The
excesses are reinsured with other life insurance companies on a
yearly renewable term basis. Graded premium whole life policies
and long term care are primarily reinsured on a coinsurance basis.
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 American Express Financial Corporation
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 American Express Financial Corporation and its
subsidiaries that American Express Financial Corporation will
reimburse a subsidiary for any tax benefit.
Included in other receivables at Dec. 31, 1994 is $22,034
receivable from American Express Financial Corporation for federal
income taxes. Included in other liabilities at December 31, 1993
is $14,709 payable to American Express Financial Corporation for
federal income taxes.
<PAGE>
PAGE 25
1. Summary of significant accounting policies (continued)
Segregated asset account business
The segregated asset account assets and liabilities represent funds
held for the exclusive benefit of the variable annuity and variable
life insurance contract owners. The Company receives investment
management and mortality and expense assurance fees from the
variable annuity and variable life insurance mutual funds and
segregated asset accounts. The Company also deducts a monthly cost
of insurance charge and receives a minimum death benefit guarantee
fee and issue and administrative fee from the variable life
insurance segregated asset accounts.
The Company makes contractual mortality assurances to the variable
annuity contract owners that the net assets of the segregated asset
accounts will not be affected by future variations in the actual
life expectancy experience of the annuitants and the beneficiaries
from the mortality assumptions implicit in the annuity contracts.
The Company makes periodic fund transfers to, or withdrawals from,
the segregated asset accounts for such actuarial adjustments for
variable annuities that are in the benefit payment period. The
Company guarantees, for the variable life insurance policyholders,
the contractual insurance rate and that the death benefit will
never be less than the death benefit at the date of issuance.
Reclassification
Certain 1993 and 1992 amounts have been reclassified to conform to
the 1994 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.
Net gain (loss) on investments for the years ended Dec. 31 is
summarized as follows:
1994 1993 1992
Fixed maturities $(1,575) $ 20,583 $ 22,075
Mortgage loans (3,013) (25,056) (13,444)
Other investments 306 (2,264) (12,341)
$(4,282) $ (6,737) $ (3,710)
===== ===== =====
Changes in net unrealized appreciation (depreciation) of
investments for the years ended Dec. 31 are summarized as follows:
<PAGE>
PAGE 26
2. Investments (continued)
1994 1993 1992
Fixed maturities:
Held to maturity $(1,329,740) $ -- $ --
Available for sale (720,449) -- --
Investment securities -- 323,060 (128,683)
Equity securities (2,917) (156) 300
The amortized cost, gross unrealized gains and losses and fair
values of investments in fixed maturities and equity securities at
Dec. 31, 1994 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 $ 21,500 $ 43 $ 4,372 $ 17,171
State and municipal
obligations 9,687 132 -- 9,819
Corporate bonds
and obligations 8,806,707 100,468 459,568 8,447,607
Mortgage-backed
securities 2,431,967 10,630 222,394 2,220,203
$11,269,861 $111,273 $686,334 $10,694,800
======== ======= ======= ========
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government
agency obligations $ 128,093 $ 756 $ 1,517 $ 127,332
State and municipal
obligations 11,008 702 -- 11,710
Corporate bonds
and obligations 1,142,321 24,166 7,478 1,159,009
Mortgage-backed
securities 7,177,706 9,514 467,716 6,719,504
Total fixed maturities 8,459,128 35,138 476,711 8,017,555
Equity securities 4,663 -- 2,757 1,906
$8,463,791 $35,138 $479,468 $8,019,461
======= ======= ======= =======
</TABLE>
The change in net unrealized gain (loss) on available for sale
securities included as a separate component of stockholder's equity
was $(275,822) in 1994.
The amortized cost, gross unrealized gains and losses and fair
values of investments in fixed maturities carried at amortized cost
at Dec. 31, 1993 are as follows:
<TABLE><CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government
agency obligations $ 63,532 $ 3,546 $ 1,377 $ 65,701
State and municipal
obligations 11,072 2,380 -- 13,452
Corporate bonds
and obligations 9,339,297 768,747 22,929 10,085,115
Mortgage-backed
securities 9,978,523 341,067 57,879 10,261,711
$19,392,424 $1,115,740 $ 82,185 $20,425,979
======== ======== ======== ========
</TABLE>
<PAGE>
PAGE 27
2. Investments (continued)
At Dec. 31, 1993, net unrealized appreciation on equity securities
included $160 of gross unrealized appreciation, $nil of gross
unrealized depreciation and deferred tax credits of $46. The fair
value of equity securities was $1,900 at December 31, 1993.
The amortized cost and fair value of investments in fixed
maturities at Dec. 31, 1994 by contractual maturity are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 108,056 $ 109,228
Due from one to five years 1,412,335 1,423,394
Due from five to ten years 5,467,826 5,245,742
Due in more than ten years 1,849,677 1,696,233
Mortgage-backed securities 2,431,967 2,220,203
$11,269,861 $10,694,800
======== ========
Amortized Fair
Available for sale Cost Value
Due from one to five years $ 757,160 $ 756,842
Due from five to ten years 433,717 449,057
Due in more than ten years 90,545 92,152
Mortgage-backed securities 7,177,706 6,719,504
$8,459,128 $8,017,555
======= =======
During the year ended Dec. 31, 1994, fixed maturities classified as
held to maturity were sold with proceeds of $58,001 and gross
realized gains and losses on such sales were $226 and $3,515,
respectively. The sale of these fixed maturities was due to credit
deterioration.
In addition, fixed maturities available for sale were sold during
1994 with proceeds of $374,564 and gross realized gains and losses
on such sales were $1,861 and $7,602, respectively.
Proceeds from sales of investments in fixed maturities during 1993
were $487,983. During 1993, gross gains of $48,499 and gross
losses of $43,039, respectively, were realized on those sales.
At Dec. 31, 1994, bonds carried at $6,536 were on deposit with
various states as required by law.
Net investment income for the years ended Dec. 31 is summarized as
follows:
<PAGE>
PAGE 28
2. Investments (continued)
1994 1993 1992
Interest on fixed maturities $1,556,756 $1,589,802 $1,449,234
Interest on mortgage loans 196,521 175,063 148,693
Other investment income 38,366 29,345 24,281
Interest on cash equivalents 6,872 2,137 5,363
1,798,515 1,796,347 1,627,571
Less investment expenses 16,642 13,128 10,750
$1,781,873 $1,783,219 $1,616,821
======= ======= =======
At Dec. 31, 1994, investments in fixed maturities comprised 87
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 cost approximately $1.7 billion which are
rated by American Express Financial Corporation internal analysts
using criteria similar to Moody's and S&P. A summary of
investments in fixed maturities, at amortized cost, by rating on
Dec. 31 is as follows:
Rating 1994 1993
Aaa/AAA $ 9,708,047 $ 9,959,884
Aa/AA 242,914 258,659
Aa/A 119,952 160,638
A/A 2,567,947 2,021,177
A/BBB 725,755 654,949
Baa/BBB 3,849,188 3,936,366
Baa/BB 796,063 717,606
Below investment grade 1,719,123 1,683,145
$19,728,989 $19,392,424
======== ========
At Dec. 31, 1994, 97 percent of the securities rated Aaa/AAA are
GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of
any other issuer are greater than 1 percent of the Company's total
investments in fixed maturities.
At Dec. 31, 1994, approximately 10.9 percent of the Company's
invested assets were mortgage loans on real estate. Summaries of
mortgage loans by region of the United States and by type of real
estate at Dec. 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
Dec. 31, 1994 Dec. 31, 1993
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
East North Central $ 581,142 $ 62,291 $ 552,150 $ 20,933
West North Central 257,996 7,590 361,704 16,746
South Atlantic 597,896 63,010 452,679 52,440
Middle Atlantic 408,940 34,478 260,239 41,090
New England 209,867 23,087 155,214 17,620
Pacific 138,900 -- 120,378 15,492
West South Central 50,854 -- 43,948 525
East South Central 67,503 -- 73,748 --
Mountain 122,668 18,750 70,410 14,594
2,435,766 209,206 2,090,470 179,440
Less allowance for losses 35,252 -- 35,020 --
$2,400,514 $209,206 $2,055,450 $179,440
======= ======= ======= =======
<PAGE>
PAGE 29
2. Investments (continued)
Dec. 31, 1994 Dec. 31, 1993
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
Apartments $ 904,012 $ 56,964 $ 744,788 $ 79,153
Department/retail stores 802,522 88,325 624,651 65,402
Office buildings 321,761 21,691 234,042 15,583
Industrial buildings 232,962 18,827 217,648 9,279
Nursing/retirement homes 89,304 4,649 83,768 917
Hotels/motels 32,666 -- 33,138 --
Medical buildings 36,490 15,651 30,429 5,954
Residential 20 -- 78 --
Other 16,029 3,099 121,928 3,152
2,435,766 209,206 2,090,470 179,440
Less allowance for losses 35,252 -- 35,020 --
$2,400,514 $209,206 $2,055,450 $179,440
======= ======= ======= =======
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real
estate at the time of origination of the loan. The Company holds
the mortgage document, which gives the right to take possession of
the property if the borrower fails to perform according to the
terms of the agreement. The fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage
interest rates currently offered for mortgages of similar
maturities. Commitments to purchase mortgages are made in the
ordinary course of business. The fair value of the mortgage
commitments is $nil.
3. Income taxes
The Company qualifies as a life insurance company for federal
income tax purposes. As such, the Company is subject to the
Internal Revenue Code provisions applicable to life insurance
companies.
Income tax expense consists of the following:
1994 1993 1992
Federal income taxes:
Current $186,508 $180,558 $130,998
Deferred (19,175) (44,237) (30,385)
167,333 136,321 100,613
State income taxes-current 9,010 6,326 4,038
Income tax expense $176,343 $142,647 $104,651
====== ====== ======
Increases (decreases) to the federal tax provision applicable to
pretax income based on the statutory rate are attributable to:
<PAGE>
PAGE 30
3. Income taxes (continued)
<TABLE>
<CAPTION>
1994 1993 1992
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income
taxes based on
the statutory rate $179,379 35.0% $144,454 35.0% $107,379 34.0%
Increases (decreases)
are attributable to:
Tax-excluded interest
and dividend income (9,939) (2.0) (11,002) (2.7) (8,209) (2.6)
Other, net (2,107) (0.4) 2,869 0.7 1,443 0.4
Federal income taxes $167,333 32.6% $136,321 33.0% $100,613 31.8%
====== === ====== === ====== ===
</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,
1994, the Company had a policyholders' surplus account balance of
$19,032. The policyholders' surplus account is only taxable if
dividends to the stockholder exceed the stockholder's surplus
account or if the Company is liquidated. Deferred income taxes of
$6,661 have not been established because no distributions of such
amounts are contemplated.
Significant components of the Company's deferred tax assets and
liabilities as of Dec. 31 are as follows:
1994 1993
Deferred tax assets:
Policy reserves $533,433 $453,436
Investments 116,736 --
Life insurance guarantee
fund assessment reserve 32,235 35,000
Total deferred tax assets 682,404 488,436
Deferred tax liabilities:
Deferred policy acquisition costs 553,722 509,868
Investments -- 10,151
Other 4,621 12,037
Total deferred tax
liabilities 558,343 532,056
Net deferred tax assets (liabilities) $124,061 $(43,620)
====== ======
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.
<PAGE>
PAGE 31
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
$1,020,981 as of December 31, 1994 and $922,246 as of December 31,
1993 (see Note 3 with respect to the income tax effect of certain
distributions). In addition, any dividend distributions in 1995 in
excess of approximately $288,601 would require approval of the
Department of Commerce of the State of Minnesota.
Statutory net income for 1994, 1993 and 1992 and capital and
surplus as of Dec. 31, 1994, 1993 and 1992 are summarized as
follows:
1994 1993 1992
Statutory net income $ 294,699 $ 275,015 $180,296
Statutory capital and surplus 1,261,958 1,157,022 714,942
Dividends paid to American Express Financial Corporation were
$165,000 in 1994, $25,000 in 1993 and $20,000 in 1992.
5. Related party transactions
The Company has loaned funds to American Express Financial
Corporation under three loan agreements. The balance of the first
loan was $40,000 and $75,000 at December 31, 1994 and 1993,
respectively. 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.
It is collateralized by equities valued at $110,034 at December 31,
1994. The second loan was used to fund the construction of the IDS
Operations Center. This loan was paid off during 1994 and had an
outstanding balance of $84,588 at December 31, 1993. The loan was
secured by a first lien on the IDS Operations Center property and
had an interest rate of 9.89 percent. The Company also had a loan
to an affiliate which was used to fund construction of the IDS
Learning Center. This loan was sold to the parent during 1994 and
the balance outstanding was $22,573 at December 31, 1993. The loan
was secured by a first lien on the IDS Learning Center property and
had an interest rate of 9.82 percent. Interest income on the above
loans totaled $2,894, $11,116 and $10,711 in 1994, 1993 and 1992,
respectively.
The Company purchased a five year secured note from an affiliated
company which had an outstanding balance of $23,333 and $27,222 at
December 31, 1994 and 1993, respectively. The note bears a fixed
rate of 8.42 percent. Interest income on the above note totaled
$2,278, $2,605 and $2,278 in 1994, 1993 and 1992, respectively.
The Company has a reinsurance agreement whereby it assumed 100
percent of a block of single premium life insurance business from
an affiliated company. The accompanying consolidated balance sheet
at Dec. 31, 1994 and 1993 includes $765,366 and $759,714,
respectively, of future policy benefits related to this agreement.
<PAGE>
PAGE 32
5. Related party transactions (continued)
The accompanying consolidated statement of income includes revenue
from policyholder charges of $8, $21 and $109, and expenses of
$6,912, $4,931 and $5,897 related to this agreement for 1994, 1993
and 1992, respectively.
The Company has a reinsurance agreement to cede 50 percent of its
long-term care insurance business to an affiliated company. The
accompanying consolidated balance sheet at December 31, 1994 and
1993 includes $65,123 and $44,086, respectively, of reinsurance
receivables related to this agreement. Premiums ceded amounted to
$20,360, $16,230 and $12,499 and reinsurance recovered from
reinsurers amounted to $62, $404 and $250 for the years ended Dec.
31, 1994, 1993 and 1992, respectively.
The Company participates in the retirement plan of American Express
Financial Corporation which covers all permanent employees age 21
and over who have met certain employment requirements. The
benefits are based on years of service and the employee's monthly
average of basic annual salary rates in effect on January 1, or
such other date as determined by American Express Financial
Corporation of the highest five consecutive annual salaries of the
last 10 years. American Express Financial Corporation's policy is
to fund retirement plan costs accrued subject to ERISA and federal
income tax considerations. The Company's share of the total net
periodic pension cost was $nil in 1994, 1993 and 1992.
The Company also participates in defined contribution pension plans
of American Express Financial Corporation 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 1994, 1993 and 1992 were $957, $2,008 and
$1,826, respectively.
The Company participates in defined benefit health care plans of
American Express Financial Corporation 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 American Express Financial
Corporation. American Express Financial Corporation expenses these
benefits and allocates the expenses to its subsidiaries.
Accordingly, costs of such benefits to the Company are included in
employee compensation and benefits and cannot be identified on a
separate company basis. At Dec. 31, 1994, the total accumulated
post retirement benefit obligation, determined in accordance with
SFAS 106 and based on an assumed interest rate of 8.75 percent and
a health care cost trend rate of 7 percent, has been recorded as a
liability by American Express Financial Corporation.
Charges by American Express Financial Corporation for use of joint
facilities, marketing services and other services aggregated
$335,183, $243,346 and $204,675 for 1994, 1993 and 1992,
respectively. Certain of these costs are included in deferred
<PAGE>
PAGE 33
5. Related party transactions (continued)
policy acquisition costs. In addition, the Company rents its home
office space from American Express Financial Corporation on an
annual renewable basis. Such rentals aggregated $965, $4,513 and
$4,074 for 1994, 1993 and 1992, respectively.
6. Commitments and contingencies
At December 31, 1994 and 1993, traditional life insurance and
universal life-type insurance in force aggregated $52,666,567 and
$46,125,515, respectively, of which $3,246,608 and $3,038,426 were
reinsured at the respective year ends. The Company also reinsures
a portion of the risks assumed under disability income policies.
Under the agreements, premiums ceded to reinsurers amounted to
$29,489, $28,276 and $24,222 and reinsurance recovered from
reinsurers amounted to $5,505, $3,345 and $6,766 for the years
ended Dec. 31, 1994, 1993 and 1992.
Reinsurance contracts do not relieve the Company from its primary
obligation to policyholders.
The Company is a defendant in various lawsuits, none of which, in
the opinion of the Company counsel, will result in a material
liability.
The Company settled all remaining IRS audit issues for the tax
years 1984 through 1986 in September of 1994. There was no
material impact as a result of this audit. Also, the IRS is
currently auditing the Company's 1987 through 1989 tax years.
Management does not believe there will be a material impact as a
result of this audit.
7. Lines of credit
The Company has available lines of credit with three banks
aggregating $100,000 at 40 to 80 basis points over the banks' cost
of funds or equal to the prime rate, depending on which line of
credit agreement is used. Borrowings outstanding under these
agreements were $nil and $1,519 at December 31, 1994 and 1993,
respectively.
8. Derivative financial instruments
The Company enters into transactions involving derivative
financial instruments to manage its exposure to interest rate risk,
including hedging specific transactions. The Company manages risks
associated with these instruments as described below. The Company
does not hold derivative instruments for trading purposes.
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. 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<PAGE>
PAGE 34
8. Derivative financial instruments (continued)
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
exposure related to derivative financial instruments through
established approval procedures, including setting concentration
limits by counterparty and industry, 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.
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 exposure.
Credit exposure related to interest rate caps is measured by the
replacement cost of the contracts. The replacement cost
represents the fair value of the instruments. Financial futures
contracts are settled in cash daily.
<TABLE>
<CAPTION>
Notional Carrying Total Credit
Assets Amount Value Fair Value Exposure
<S> <C> <C> <C> <C>
Financial futures contracts $ 159,800 $ 2,072 $ 2,072 $ -
Interest rate caps 4,400,000 29,054 42,365 42,365
$4,559,800 $31,126 $44,437 $42,365
======= ===== ===== =====
</TABLE>
The fair values of derivative financial instruments are based on
market values, dealer quotes or pricing models. The financial
futures contracts expire in 1995. The interest rate caps expire on
various dates from 1995 to 1999.
Financial futures contracts and interest rate caps are used
principally to manage the Company's exposure to rising interest
rates. These instruments are used primarily to protect the margin
between interest rate earned on investments and the interest rate
credited to related annuity contract holders.
Changes in the fair value of financial futures contracts are
accounted for as adjustments to the carrying amount of the hedged
investments and amortized over the remaining lives of such
investments. The cost of interest rate caps is amortized to
interest expense over the life of the contracts and payments
received as a result of these agreements are recorded as a
reduction of interest expense when realized. The amortized cost of
interest rate cap contracts is included in other investments.
9. Fair values of financial instruments
The Company is required to disclose fair value information for most
on- and off-balance sheet financial instruments for which it is<PAGE>
PAGE 35
9. Fair values of financial instruments (continued)
practical to estimate that value. Certain financial instruments
such as life insurance obligations, receivables and all
non-financial instruments, such as deferred acquisition costs are
excluded from required disclosure. Off-balance sheet intangible
assets, such as the value of the field force, are also excluded.
Management believes the value of excluded assets is significant.
The fair value of the Company, therefore, cannot be estimated by
aggregating the amounts presented.
<TABLE>
<CAPTION>
1994 1993
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $11,269,861 $10,694,800 $ -- $ --
Available for sale 8,017,555 8,017,555 -- --
Investment securities -- -- 19,392,424 20,425,979
Mortgage loans on
real estate (Note 2) 2,400,514 2,342,520 2,055,450 2,125,686
Other:
Equity securities (Note 2) 1,906 1,906 1,900 1,900
Derivative financial
instruments (Note 8) 31,126 44,437 26,923 14,201
Cash and
cash equivalents (Note 1) 267,774 267,774 146,281 146,281
Assets held in segregated
asset accounts (Note 1) 10,881,235 10,881,235 8,991,694 8,991,694
Financial Liabilities
Future policy benefits
for fixed annuities 18,325,870 17,651,897 17,519,876 16,881,747
Liabilities related to
segregated asset accounts 10,398,861 9,943,672 8,645,418 8,305,209
</TABLE>
At December 31, 1994 and 1993, the carrying amount and fair value
of future policy benefits for fixed annuities exclude life
insurance-related contracts carried at $971,897 and $913,127,
respectively, and policy loans of $64,212 and $59,132,
respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1994 and 1993. 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 the
rate appropriate for contracts issued in 1994 and 1993.
At December 31, 1994 and 1993 the fair value of liabilities related
to segregated asset accounts is estimated as the carrying amount
less variable insurance contracts carried at $482,374 and $346,276,
respectively, and surrender charges, if applicable.
10. Segment information
The Company's operations consist of two business segments; first,
individual and group life insurance, disability income, health and
long-term care insurance, and second, annuity products designed for<PAGE>
PAGE 36
individuals, pension plans, small businesses and employer-sponsored
groups. The consolidated statement of income for the years ended
Dec. 31, 1994, 1993 and 1992 and total assets at Dec. 31, 1994,
1993 and 1992 by segment are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net investment income:
Life, disability income,
health and long-term
care insurance $ 247,047 $ 250,224 $ 246,676
Annuities 1,534,826 1,532,995 1,370,145
$1,781,873 $1,783,219 $1,616,821
======= ======= =======
Premiums, charges
and fees:
Life, disability income,
health and long-term
care insurance $335,375 $281,284 $250,386
Annuities 193,370 143,876 104,952
$528,745 $425,160 $355,338
====== ====== ======
Income before income taxes:
Life, disability income,
health and long-term
care insurance $122,677 $104,127 $ 96,215
Annuities 394,117 315,336 223,316
Net loss
on investments (4,282) (6,737) (3,710)
$512,512 $412,726 $315,821
====== ====== ======
Total assets:
Life, disability income,
health and long-term
care insurance $ 5,269,188 $ 4,810,145 $ 4,093,778
Annuities 30,478,355 28,247,608 23,201,995
$35,747,543 $33,057,753 $27,295,773
========= ======== ========
</TABLE>
Allocations of net investment income and certain general expenses
are based on various assumptions and estimates.
Assets are not individually identifiable by segment and have been
allocated principally based on the amount of future policy benefits
by segment.
Capital expenditures and depreciation expense are not material, and
consequently, are not reported.
<PAGE>
PAGE 37
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, 1994 and 1993,
and the related consolidated statements of income and cash flows
for each of the three years in the period ended December 31, 1994.
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, 1994 and
1993, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, the Company changed its method of accounting for
certain investments in debt and equity securities in 1994.
Ernst & Young LLP
Minneapolis, Minnesota
February 3, 1995
<PAGE>
PAGE 38
[ARTICLE] 6
[NAME] IDS Life Variable Account for Smith Barney
[FISCAL-YEAR-END] DEC-31-1994
[PERIOD-START] JAN-01-1994
[PERIOD-END] DEC-31-1994
[PERIOD-TYPE] YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 15888208
[INVESTMENTS-AT-VALUE] 21023063
[RECEIVABLES] 60905
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 21083968
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] (126647)
[TOTAL-LIABILITIES] (126647)
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 10817260
[SHARES-COMMON-PRIOR] 11840149
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 20957321
[DIVIDEND-INCOME] 2066036
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] (521645)
[NET-INVESTMENT-INCOME] 1544391
[REALIZED-GAINS-CURRENT] 525946
[APPREC-INCREASE-CURRENT] (2394259)
[NET-CHANGE-FROM-OPS] (323922)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 169798
[NUMBER-OF-SHARES-REDEEMED] (1192687)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (1987994)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] (521645)
[AVERAGE-NET-ASSETS] 21951318
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
<PAGE>
PAGE 39
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
PAGE 40
[ARTICLE] 7
[LEGEND]
[CIK]
[NAME] IDS Life Insurance Company
[MULTIPLIER] 1000
[CURRENCY] U.S. DOLLAR
[FISCAL-YEAR-END] DEC-31-1993 DEC-31-1994
[PERIOD-START] JAN-01-1993 JAN-01-1994
[PERIOD-END] DEC-31-1993 DEC-31-1994
[PERIOD-TYPE] YEAR YEAR
[EXCHANGE-RATE] 1 1
[DEBT-HELD-FOR-SALE] 0 8017555
[DEBT-CARRYING-VALUE] 19392424 11269861
[DEBT-MARKET-VALUE] 20425979 10694800
[EQUITIES] 1900 1906
[MORTGAGE] 2055450 2400514
[REAL-ESTATE] 27484 20835
[TOTAL-INVEST] 21854682 22121637
[CASH] 146281 267774
[RECOVER-REINSURE] 1293 1110
[DEFERRED-ACQUISITION] 1652384 1865324
[TOTAL-ASSETS] 33057753 35747543
[POLICY-LOSSES] 21641067 22708910
[UNEARNED-PREMIUMS] 0 0
[POLICY-OTHER] 0 0
[POLICY-HOLDER-FUNDS] 44516 50068
[NOTES-PAYABLE] 0 0
[COMMON] 3000 3000
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 0 0
[OTHER-SE] 1690346 1585691
[TOTAL-LIABILITY-AND-EQUITY]33057753 35747543
[PREMIUMS] 127245 144640
[INVESTMENT-INCOME] 1783219 1781873
[INVESTMENT-GAINS] (6737) (4282)
[OTHER-INCOME] 304344 384105
[BENEFITS] 1341638 1303351
[UNDERWRITING-AMORTIZATION] 211733 280372
[UNDERWRITING-OTHER] 241974 210101
[INCOME-PRETAX] 412726 512512
[INCOME-TAX] 142647 176343
[INCOME-CONTINUING] 270079 336169
[NET-INCOME] 270079 336169
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] 270079 336169
[EPS-PRIMARY] 0 0
[EPS-DILUTED] 0 0
[RESERVE-OPEN] 18004 20636
[PROVISION-CURRENT] 94976 93683
[PROVISION-PRIOR] 0 0
[PAYMENTS-CURRENT] 92344 91091
[PAYMENTS-PRIOR] 0 0
[RESERVE-CLOSE] 20636 23228
[CUMULATIVE-DEFICIENCY] 0 0
