SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 33-13375
IDS LIFE ACCOUNT RE
OF
IDS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0823832
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IDS TOWER 10, MINNEAPOLIS, MINNESOTA 55440-0010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 671-3309
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
<PAGE>
The Registrant is a separate account of IDS Life Insurance Company (IDS
Life)established pursuant to the insurance laws of the State of Minnesota
for the purposes of funding real estate variable annuity contracts. Unless
otherwise specifically noted, the information set forth herein only
relates to the operations of the Registrant (the "Account") and not to
the operations of IDS Life.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
BALANCE SHEETS
<TABLE>
Sept. 30, Dec. 31,
1998 1997
(Unaudited)
-- ---------------- -------------
Assets:
<S> <C> <C>
Cash $3,558 $82,887
Investments in securities, at value (Note 1)
(identified cost of $5,295,040 and $5,282,201
at Sept. 30, 1998 and December 31, 1997,
Respectively) 5,294,060 5,282,201
Investments in unconsolidated joint ventures,
at fair value (cost of $36,301,355 and
$36,218,770 at Sept. 30, 1998
and December 31, 1997, respectively) 23,217,348 23,134,763
-------------- -------------
Total assets $28,515,512 $28,499,851
================ =============
Liabilities:
Payable to IDS Life for:
Operating expenses 107,927 72,008
Contract terminations 10,006 22,567
Accrued mortality and expense risk fee 25,866 28,961
Accrued asset management fee 32,332 36,200
------------------- -----------------
Total Liabilities $176,131 $159,736
=================== =================
Contract Owners' Equity:
Net assets applicable to Variable Annuity
contracts in accumulation period $28,339,381 $28,340,115
=================== =================
Accumulation units outstanding 26,227,616 27,339,211
=================== =================
Net asset value per accumulation units $1.08 $1.04
=================== =================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
For the nine months ended
--------------------------------------------
Sept. 30, Sept. 30,
1998 1997
------------------- ------------------
Income:
<S> <C> <C>
Interest income $ 218,160 $ 384,607
Account's equity in earnings of
unconsolidated joint ventures 1,552,801 1,699,636
Other income -- 54,134
------------------- -----------------
Total income 1,770,961 2,138,377
------------------- -----------------
Expenses:
Asset management fee 294,740 333,884
Mortality and expense risk fee 235,792 267,108
Other operating expenses 54,207 46,866
Unrealized depreciation on securities 434 --
------------------ ----------------
Total expenses 585,173 647,858
----------------- ----------------
Net income $ 1,185,788 $ 1,490,519
================== ================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS LIFE ACCOUNT RE
Of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
For the three months ended
------------------------------------------
Sept. 30, Sept. 30,
1998 1997
----------------------- ----------------
Income:
<S> <C> <C>
Interest income $ 71,698 $ 104,754
Account's equity in earnings of
unconsolidated joint ventures 466,501 564,537
------------------- ----------------
Total income 538,199 669,291
------------------- ----------------
Expenses:
Asset management fee 98,841 106,625
Mortality and expense risk fee 79,073 85,300
Other operating expenses 12,575 19,516
Unrealized depreciation on securities 434 --
-------------------- ---------------
Total expenses 190,923 211,441
-------------------- ----------------
Net income (loss) $ 347,276 $ 457,850
==================== ===============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
For the nine months ended
----------------------------------------
Sept. 30, Sept. 30,
1998 1997
------------------ ------------------
Cash flows from operating activities:
<S> <C> <C>
Net Income $ 1,185,788 $ 1,490,519
Adjustments to reconcile net income to net cash
used in operating
activities:
Account's equity in earnings of unconsolidated
joint ventures (1,552,801) (1,699,635)
Change in other assets -- 4,277
Change in payable to IDS Life for operating expenses 35,919 (42,340)
Change in accrued mortality and expense risk fee (3,095) (4,105)
Change in accrued asset management fee (3,868) (5,131)
Change in other liabilities -- 200,940
Change in payables and other liabilities related
to wholly-owned real estate property -- (79,090)
Change in unrealized depreciation of
investment in securities 434 --
-------------------- ------------------
Total adjustments to net income (1,523,411) (1,625,084)
-------------------- ------------------
Net cash used in operating activities (337,623) (134,565)
-------------------- ------------------
Cash flows from investing activities:
Distributions received from joint ventures 1,470,216 1,882,670
Net sales (purchases) of short-term securities (12,840) 3,855,746
-------------------- ------------------
Net cash provided by investing activities 1,457,376 5,738,416
-------------------- ------------------
Cash flows from financing activities:
Proceeds from sales of contracts 3,206 14,536
Payments for contract terminations (1,202,288) (5,721,124)
-------------------- ------------------
Net cash used in financing activities (1,199,082) (5,706,588)
-------------------- ------------------
Net decrease in cash (79,329) (102,737)
Balance of cash at beginning of year 82,887 102,737
-------------------- ------------------
Balance of cash at end of period $ 3,558 $ --
==================== ==================
Supplemental cash flow disclosure:
Cash paid for mortgage interest & revolving loan $ -- $ --
==================== ==================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
September 30, 1998
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
In the opinion of the management of IDS Life, the accompanying
unaudited financial statements for IDS Life Account RE (the "Account")
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its balance sheets as of
September 30, 1998 and December 31, 1997; statements of operations for
the three and nine months ended September 30, 1998 and 1997; and the
statements of cash flows for the nine months ended September 30, 1998
and 1997. These statements are condensed and therefore do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statement disclosure. The
statements should be read in conjunction with the Account's financial
statements as of and for the year ended December 31, 1997 and the notes
thereto contained in the Account's prospectus dated April 30, 1998. The
results of operations for the nine months ended September 30, 1998 are
not necessarily indicative of the results expected for the full year.
<PAGE>
2. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Unconsolidated Joint Ventures - Summary Information
Summary information for the Account of its investments in
unconsolidated joint ventures for the nine months ended September 30, 1998 and
1997 is as follows:
For the nine months ended
September 30
1998 1997
---- ----
Account's share of net
investment income from
unconsolidated joint ventures $1,552,801 $1,699,636
Total net investment income of
unconsolidated joint ventures $18,590,170 $14,426,913
Total income of unconsolidated
joint ventures $35,183,000 $35,277,000
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition and Results of Operations
For the Nine Months Ended September 30, 1998 Compared to the Nine Months Ended
September 30, 1997 -
Net assets increased from $28,499,851 at December 31, 1997 to $28,515,512 at
September 30, 1998. During this same time period, the accumulation unit value
increased from $1.04 to $1.08. The Account experienced net terminations
amounting to $1,199,082 for the nine months ended September 30, 1998 compared to
net terminations of $5,706,588 for the nine months ended September 30, 1997. In
the nine months ended September 30, 1998, and the nine months ended Sept. 30,
1997, IDS Life had not purchased any accumulation units.
Recorded net income for the nine months ended September 30, 1998 was $1,185,788
compared to $1,490,519 for the nine months ended September 30, 1997.
Interest income represents income earned in 1998 on the Account's investment in
short-term securities. Interest generated from short-term investments was
$218,160 for the nine months ended September 30, 1998. Interest income for the
nine months ended September 30, 1997 was $384,607. The decrease in interest
income for the nine months ended September 30, 1998 compared to the nine months
ended September 30, 1997 was due primarily to higher average short-term balances
in 1997. Short term investments decreased towards the end of 1997 due primarily
to net account terminations as discussed below.
For the nine months ended September 30, 1998, the Account's recorded equity in
earnings of its unconsolidated joint ventures (N/S Associates, Monmouth
Associates and 1225 Connecticut) was $1,552,801 compared to $1,699,635 for the
nine months ended September 30, 1997. The decrease is due primarily to lower
rental income achieved at Southridge and Northridge Malls due to lower effective
rents.
Northridge Mall continues to be adversely affected by the perception that it is
an unsafe place to shop. This perception has resulted in declining sales and
occupancy over a three-year period. Compounding the problem of declining sales
are the high operating costs for tenants at the mall. Occupancy has also been
affected by tenant bankruptcies over the past years. As of September 30, 1998,
occupancy of the mall shops was approximately 59%, including temporary tenants
under short term leases.
To counter the negative perception of Northridge Mall, N/S Associates
implemented certain capital improvements and operational programs to improve the
shopping center's safety and appearance, as well as instituted certain marketing
and public relation efforts to enhance its image. Certain recent positive sales
trends appear to indicate a modest improvement; however, elimination of the
negative perception is expected to take some time. In addition, N/S Associates
is seeking to increase occupancy at the shopping center by aggressively
marketing space for new and renewal tenants through leasing incentives, as well
as continuing to cooperate with existing tenants who need short-term rent
reductions in order to retain occupancy of their space. Part of the leasing
strategy includes targeting certain well-recognized retailers as a group that
would become tenants at the shopping center. It is expected that the draw of
this group of tenants would help the shopping center gain leasing momentum and
aid in future leasing efforts.
As of September 30, 1998, occupancy of Southridge Mall which is owned by N/S
Associates was approximately 90%, including temporary tenants under short-term
leases.
The Account paid asset management and mortality expense risk fees of $530,532
and $600,992 for the nine months ended September 30, 1998 and 1997,
respectively.
<PAGE>
Liquidity and Capital Resources
For the Nine Months Ended September 30, 1998 Compared to the Nine Months
Ended September 30, 1997 -
At September 30, 1998, the Account had cash and investments of short-term
securities of approximately $5,298,164 as compared to approximately $5,335,088
at December 31, 1997.
The liquidity requirements of the Account have generally been met by funds
provided from the Account's short-term investments, cash distributions from
unconsolidated joint ventures, operating cash flow, interest income, proceeds
from the sale of West Springfield Terrace Apartments, the loan repayment from
Riverpoint Center, proceeds from sales of contracts, borrowings under the line
of credit from IDS Life and purchases of accumulation units by IDS Life
discussed below. The primary uses of funds currently are expected to be for
asset management and mortality and expense risk fees and payments for contract
terminations and redemption units held by IDS Life.
Effective May 1, 1995, new contract sales of the Account were discontinued.
Additional purchase payments continue to be accepted for existing contracts in
amounts specified in the Account's prospectus, whether by means of the
previously established bank authorizations or otherwise. Existing contracts also
continue to be serviced and surrender requests will be honored.
IDS Life has purchased accumulation units in order to maintain the Account and
its liquidity. IDS Life made these payments so that no contract holder would be
disadvantaged because sales of new contracts have been discontinued. The initial
payments for accumulation units that IDS Life made into the Account were used to
pay off the amount that the Account had borrowed under its revolving line of
credit. As of September 30, 1998, IDS Life had purchased approximately
26,227,616 accumulation units.
By purchasing accumulation units, IDS Life has an ownership interest in the
Account. Since IDS Life does not purchase a contract, it is not subject to
surrender charges. However, IDS Life, as holder of accumulation units,
participates in the increase or decrease in the value of the Account's
investments just as other owners of accumulation units do. IDS Life may realize
a gain or loss on its accumulation units when redeemed.
IDS Life currently expects to hold the accumulation units it purchases until the
surrender of all outstanding contracts or until the Account's liquidity improves
(through, for example, one or more sales of real estate related investments)
thereby permitting the Account to satisfy its anticipated contract obligations.
Because IDS Life may purchase a significant amount of accumulation units, IDS
Life may be subject to certain conflicts of interest it would not otherwise have
if it had not purchased such accumulation units, including, among other things,
a conflict in approving periodic valuations of real estate investments made by
the Investment Adviser.
Since the Account has experienced substantial net contract terminations over the
past several years, the Account does not intend to acquire additional real
estate related investments. During 1996, the Account liquidated two real estate
related investments. Further, the Account intends to liquidate the real estate
related investments that it currently holds when it becomes advantageous or
necessary to do so. To the extent funds of the Account are not used to pay
obligations of the Account, including those under existing contracts, or the
redemption of accumulation units purchased by IDS Life, such funds will be
invested in short-term debt instruments and possibly intermediate-term bonds
with maturities of up to five years.
Through September 30, 1998, Monmouth Associates had funded approximately
$25,905,000 of the renovation loan for Monmouth Mall. Fundings of principal on
the loan have been made from cash reserves held by Monmouth Associates, cash
flow from interest and ground rent payments received from the borrower/lessee
and capital contributions made to Monmouth Associates by its partners pro rata
based upon their respective interests. The aggregate amount of capital
contributions to finance the loan is approximately $9,830,000. The Account's
share of these capital contributions is approximately $685,000. The aggregate
amount of the renovation loan, including accrued and deferred interest of
approximately $1,300,000, is currently expected to be approximately $27,205,000.
Monmouth Associates may also be required to make certain additional loans to pay
a portion of the costs of certain tenant improvements or other ordinary capital
expenditures. In addition, Monmouth Associates may provide additional financing
to the borrower/lessee in order to pay costs to be incurred in connection with
the replacement or expansion of a department store tenant at Monmouth Mall.
However, it is not currently expected that this would occur during 1998.
The renovation is complete. The occupancy of mall shops and outparcel space at
the shopping center as of September 30, 1998 was approximately 85 percent.
However, the mall shops and outparcel space are approximately 94 percent leased.
Leasing and occupancy at the shopping center have been adversely affected by
tenant bankruptcies occurring over the past several years.
N/S Associates currently expects that it will incur approximately $1,400,000 in
1998 for tenant improvement, asbestos removal and other capital items at
Northridge and Southridge Malls. Actual amounts expended in 1998 may vary
depending on a number of factors, including actual leasing activity, results of
property operations, liquidity considerations and market conditions over the
course of the year. N/S Associates undertakes asbestos removal from time to time
at portions of the Northridge and Southridge Malls as tenant spaces are vacated
and prior to occupancy by new tenants. The cost of tenant improvements, asbestos
removal and other capital items generally will be provided out of cash flows
from the properties. N/S Associates expended approximately $2,236,000 for tenant
improvements, asbestos removal and other capital projects in 1997.
In the first quarter of 1998, N/S Associates has selected a third-party broker
and is marketing the Northridge and Southridge Malls. During the quarter, N/S
Associates entered into a non-binding letter of intent to sell the Northridge
and Southridge Malls. The prospective purchaser (an independent third party) is
currently conducting its due diligence review with respect to the properties and
is expected to complete such reviews by the end of 1998. The letter of intent
executed by N/S Associates and the prospective purchaser is non-binding and
consummation of the proposed transaction is subject to the satisfaction of
various conditions. Therefore, there can be no assurance that a sale of these
properties will be consummated on any terms.
The 1225 investment corporation has committed to a plan to sell the property and
during the second quarter of 1998 began marketing the property for sale.
However, there can be no assurance that a sale transaction on acceptable terms
will be consummated.
At September 30, 1998, real property investments (through two unconsolidated
joint ventures, N/S Associates and 1225 Connecticut,) land sale-leaseback
investments (through an unconsolidated joint venture, Monmouth Associates) and
short-term investments represented 51 percent, 31 percent and 19 percent of
total assets, respectively. At September 30, 1997, real property investments,
mortgage loan and land sale-leaseback investments and short-term investments
represented 50 percent, 29 percent and 21 percent of total assets, respectively.
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 1. LEGAL PROCEEDINGS
There are no material current or pending legal proceedings which the
Registrant is a party to, or to which the Registrant's assets are subject.
Item 2. CHANGES IN SECURITIES
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
4.1 Form of Deferred Variable Annuity Contract is hereby
incorporated herein by reference to Exhibit 4 to the Account's Form S-1
(as amended), File Number 33-13375, filed July 17, 1987.
4.2 Copy of mortgage loan documents relating to West Springfield
Terrace Apartments is hereby incorporated herein by reference to
Exhibit 4.2 to the Account's Form S-1 (as amended), File Number
33-13375, filed April 12, 1990.
4.3 Copy of the line of credit agreement, dated March 30, 1994
between IDS Life and the Account (including a copy of the executed
promissory note, dated March 30, 1994) is hereby incorporated by
reference to Exhibit 4.3 to the Account's Form 10-K Report for the year
ended December 31, 1993, File Number 33-13375, filed April 5, 1994.
27.1 Financial Data Schedule of the Account for the period ended
September 30, 1998 is filed herewith.
(B) Report on Form 8-K
No reports on Form 8-K were required to be filed by the Registrant for
the three months ended September 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
______________________________
(Registrant)
Date: November 13, 1998 /S/ Stuart Sedlacek
-----------------------
Stuart A. Sedlacek
Senior Vice President - Finance
Chief Financial Officer
<PAGE>
<PAGE>
IDS Life Account RE
File No. 33-13375
EXHIBIT INDEX
Exhibit 27.1: Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3558
<SECURITIES> 28511954
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28515512
<PP&E> 0
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<TOTAL-ASSETS> 28515512
<CURRENT-LIABILITIES> 176131
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 28339381
<TOTAL-LIABILITY-AND-EQUITY> 28515512
<SALES> 0
<TOTAL-REVENUES> 1770961
<CGS> 0
<TOTAL-COSTS> 348947
<OTHER-EXPENSES> 236226
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<EPS-PRIMARY> 0
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</TABLE>
