Flexible Premium Survivorship Variable Life Insurance Policy
Prospectus April 29, 1998
The Flexible Premium Survivorship Variable Life Insurance Policy described in
this prospectus is designed to provide life insurance coverage on two insureds,
with a death benefit payable when the last surviving insured dies while the
policy is in force. The policy is intended to qualify as a life insurance policy
under Sections 72, 101 and 7702 of the Internal Revenue Code.
You may allocate policy value to one or more of eight subaccounts of IDS Life of
New York Account 8. The subaccounts invest in the portfolios of IDS Life Series
Fund: Equity, Income, Money Market, Managed, Government Securities and
International Equity. One subaccount invests in the AIM V.I. Growth and Income
Fund. One subaccount invests in Putnam VT New Opportunities Fund. Policy values
increase and decrease with investment experience and reflect certain deductions
and charges. There is no guaranteed minimum policy value with respect to the
subaccounts and you bear the entire investment risk. You may also allocate
policy value to the fixed account which earns at least a guaranteed minimum
interest rate. The fixed account is the general investment account of IDS Life
Insurance Company of New York (IDS Life of New York).
You may withdraw a portion of the policy's cash surrender value after the first
policy year or surrender it in full at any time for its cash surrender value.
Surrender charges are described under "Loads, fees and charges." You may also
take out policy loans.
The frequency and amount of premium payments are flexible, subject to certain
restrictions and conditions. Payment of the scheduled premium will not
necessarily keep a policy from lapsing if the cash surrender value is less than
the amount needed to pay the monthly deduction. (See "Loads, fees and charges.")
However, a policy will not lapse if the premiums needed to keep the death
benefit guarantee to age 100 (DBG-100) or the minimum initial premium period in
effect, are paid.
This prospectus contains detailed information about these and other policy
features, including certain restrictions and limitations that apply. As in the
case of other life insurance policies, it may not be advantageous to purchase
flexible premium survivorship variable life insurance as a replacement for, or
in addition to an existing flexible premium variable or other life insurance
policy.
<PAGE>
IDS Life of New York Account 8
Flexible Premium Survivorship Variable Life Insurance Policy
Issued and sold by: IDS Life Insurance Company of New York, 20 Madison Avenue
Extension, Albany, New York 12203. Telephone: (518) 869-8613; (800) 541-2251
This prospectus is valid only when accompanied or preceded by the prospectuses
of the IDS Life Series Fund, Inc., AIM Variable Insurance Funds, Inc. and the
Putnam Variable Trust. All prospectuses should be retained for future reference.
These securities have not been approved or disapproved by the securities and
exchange commission or any state securities commission, nor has the securities
and exchange or any state securities commission passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
IDS Life of New York is not a bank or financial institution and the securities
it offers are not deposits or obligations of, backed or guaranteed or endorsed
by any bank or financial institution nor are they insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency.
Investments in this policy involve investment risk including the possible loss
of principal.
<PAGE>
Table of contents
Key terms
The policy in brief
The variable account
The funds
IDS Life Series Fund - Equity Portfolio
IDS Life Series Fund - Income Portfolio
IDS Life Series Fund - Money Market Portfolio
IDS Life Series Fund - Managed Portfolio
IDS Life Series Fund - Government Securities Portfolio
IDS Life Series Fund - International Equity Portfolio
AIM V.I. Growth and Income Fund
Putnam VT New Opportunities Fund
Fund objectives
Relationship between funds and subaccounts
Rates of return of the funds and subaccounts
The fixed account
Purchasing your policy
Application
Right to examine policy
Premiums
Keeping the policy in force
Death benefit guarantee to age 100
Minimum initial premium period
Grace period
Reinstatement
Loads, fees and charges
Premium expense charge
Monthly deduction
Surrender charge
Partial surrender fee
Mortality and expense risk charge
Fund expenses
Policy value
Fixed account value
Subaccount values
Proceeds payable upon death
Change in death benefit option
Changes in specified amount
Misstatement of age or sex
Suicide
Beneficiary
Transfers between the fixed account and subaccounts
Fixed account transfer policies
Minimum transfer amounts
Maximum transfer amounts
Maximum number of transfers per year
Two ways to request a transfer, loan or surrender
Automated transfers
Automated dollar-cost averaging
<PAGE>
Policy loans
Policy surrenders
Total surrenders
Partial surrenders
Allocation of partial surrenders
Effects of partial surrenders
Taxes
Optional insurance benefits
Four-Year Term Insurance Rider
Policy Split Option Rider
Payment of policy proceeds
Federal taxes
IDS Life of New York's tax status
Taxation of policy proceeds
Modified endowment contracts
Other tax considerations
IDS Life of New York
Ownership
State regulation
Distribution of the policy
Legal proceedings
Experts
Management of IDS Life of New York
A I M Advisors, Inc. and Putnam Investment Management, Inc.
Other information
Substitution of investments
Voting rights
Reports
Policy illustrations
<PAGE>
Key terms
These terms can help you understand details about your policy.
Accumulation unit: An accounting unit used to calculate the policy value of the
subaccounts. It is a measure of the net investment results of each of the
subaccounts.
Attained insurance age: Each insured's insurance age plus the number of policy
anniversaries since the policy date. Attained insurance age changes only on a
policy anniversary.
Cash surrender value: Proceeds received if the policy is surrendered in full, or
the amount payable on the youngest insured's attained insurance age 100. The
cash surrender value equals the policy value minus indebtedness, minus any
applicable surrender charges.
Code: The Internal Revenue Code of 1986, as amended.
Close of business: Closing time of the New York Stock Exchange, normally 4 p.m.,
Eastern time.
Death benefit guarantee to age 100 (DBG-100): A feature of the policy
guaranteeing that the policy will not lapse before the youngest insured's
attained insurance age 100. This feature is in effect if you meet certain
premium payment requirements.
Death benefit guarantee to age 100 (DBG-100) premium: The premium required to
keep the DBG-100 in effect. The DBG-100 premium is shown in your policy. It
depends on each insured's sex, insurance age, risk classification, optional
insurance benefits added by rider and the initial specified amount.
Fixed account: The general investment account of IDS Life of New York. The fixed
account is made up of all of IDS Life of New York's assets other than those held
in any separate account.
Fixed account value: The portion of the policy value that is allocated to the
fixed account, including indebtedness.
Funds: Mutual funds or portfolios, each with a different investment objective.
You may allocate your premiums into variable subaccounts investing in shares of
any or all of these funds. The following funds are available:
o Under the IDS Life Series Fund, Inc. - Equity Portfolio, Income Portfolio,
Money Market Portfolio, Managed Portfolio, Government Securities Portfolio
and International Equity Portfolio;
o Under the AIM Variable Insurance Funds, Inc. - AIM V.I. Growth and Income
Fund;
o Under the Putnam Variable Trust - Putnam VT New Opportunities Fund.
<PAGE>
IDS Life of New York: In this prospectus, "we," "us," "our" and "IDS Life of New
York" refer to IDS Life Insurance Company of New York.
Indebtedness: All existing loans on the policy plus interest that has either
been accrued or added to the policy loan.
Insurance age: Each insured's age based upon his or her last birthday on the
date of the application.
Insureds: The persons whose lives are insured by the policy.
Minimum initial premium period: A period of time during the early years of the
policy when the policy will not lapse even if the cash surrender value is less
than the amount needed to pay the monthly deduction. This feature is in effect
if you meet certain premium payment requirements.
Monthly date: The same day each month as the policy date. If there is no monthly
date in a calendar month, the monthly date is the first day of the next calendar
month.
Net amount at risk: A portion of the death benefit, equal to the total current
death benefit minus the policy value. This is the amount to which cost of
insurance rates are applied in determining the monthly cost of insurance.
Net premium: The premium paid minus the premium expense charge.
Owner: The entity(ies) to which, or individual(s) to whom, the policy is issued,
or to whom ownership is subsequently transferred. In the prospectus "you" and
"your" refer to the owner.
Policy anniversary: The same day and month as the policy date each year the
policy remains in force.
Policy date: The date the policy is issued and from which policy anniversaries,
policy years and policy months are determined.
Policy value: The sum of the fixed account value plus the variable account
value.
Proceeds: The amount payable under the policy as follows:
o Upon death of the last surviving insured prior to the youngest insured's
attained insurance age 100, proceeds will be the death benefit in effect as
of the date of that insured's death, minus any indebtedness.
o Upon the youngest insured's attained insurance age 100, proceeds will be
the cash surrender value.
o On surrender of the policy, the proceeds will be the cash surrender value.
<PAGE>
Risk classification: A group of insureds that IDS Life of New York expects will
have similar mortality experience.
Scheduled premium: A premium, selected by the owner at the time of application,
of a level amount, at a fixed interval of time.
Specified amount: An amount used to determine the death benefit and the proceeds
payable upon death of the last surviving insured prior to the youngest insured's
attained insurance age 100. The initial specified amount is shown in your
policy.
Subaccount(s): One or more of the investment divisions of the variable account,
each of which invests in a particular fund.
Surrender charge: A contingent deferred issue and administration expense charge
assessed against the policy value at the time of surrender during the first 15
years of the policy.
Valuation date: A normal business day, Monday through Friday, on which the New
York Stock Exchange is open.
Valuation period: The interval commencing at the close of business on each
valuation date and ending at the close of business on the next valuation date.
Variable account: IDS Life Variable Life of New York Account 8 consisting of
subaccounts, each of which invests in a particular fund. The policy value in
each subaccount depends on the performance of the particular fund.
Variable account value: The sum of the values that are allocated to the
subaccounts of the variable account.
The policy in brief
The Flexible Premium Survivorship Variable Life Insurance Policy (the policy) is
designed to provide insurance protection on two insureds and to build policy
value. The policy provides a death benefit that is payable to the beneficiary
upon the last surviving insured's death. The policy allows you, as the owner, to
allocate your net premiums or transfer policy value, to:
The variable account, consisting of subaccounts, each of which invests in a
fund with a particular investment objective. You may direct premiums to any
or all of eight of these subaccounts. Your policy's value may increase or
decrease daily, depending on the investment return. No minimum amount is
guaranteed. (p. )
The fixed account, which earns interest at rates that are adjusted
periodically by IDS Life of New York. This rate will never be lower than
4%. (p. )
The funds: Six subaccounts of the variable account invest in IDS Life Series
Fund, Inc. which includes Equity, Income, Money Market, Managed, Government
Securities and International Equity Portfolios. One subaccount invests in AIM
Variable Insurance Funds, Inc. - AIM V.I. Growth and Income Fund. One subaccount
invests in Putnam Variable Trust - Putnam VT New Opportunities Fund.(p. )
<PAGE>
Purchasing your policy: To apply, send a completed application and premium
payment to IDS Life of New York's home office. For your application to be
accepted, you will need to provide medical and other evidence that the persons
you propose to insure meet the requirements of our underwriting rules. (p. )
Right to examine policy: You may return your policy for any reason and receive a
full refund of your premiums by mailing us the policy and a written request for
cancellation within a specified period. (p. )
Premiums: In applying for your policy, you state how much you intend to pay and
whether you will pay quarterly, semiannually or annually. You may make
additional unscheduled premium payments subject to certain limits. No premium
payments can be made on or after the youngest insured's attained insurance age
100. We may refuse premiums in order to comply with the Code. (p. )
DBG-100: A feature of the policy guaranteeing that the policy will not lapse
before the youngest insured's attained insurance age 100. This feature is in
effect if you meet certain premium payment requirements. (p. )
Minimum initial premium period: A period of time during the early years of the
policy when the policy will not lapse even if the cash surrender value is less
than the amount needed to pay the monthly deduction. This feature is in effect
if you meet certain premium payment requirements. (p. )
Grace period: If the cash surrender value of your policy becomes less than the
amount needed to pay the monthly deduction, and neither the DBG-100 nor the
minimum initial premium period is in effect, you will have 61 days to pay the
premium needed so that the next three monthly deductions can be paid. If you
don't, the policy will lapse. (p. )
Reinstatement: If your policy lapses, it can be reinstated within five years.
The reinstatement is subject to certain conditions including evidence of
insurability satisfactory to IDS Life of New York and the payment of a
sufficient premium. The DBG-100 can not be reinstated. (p. )
Loads, fees and charges: Your policy is subject to the following charges, which
compensate IDS Life of New York for administering and distributing the policy as
well as paying policy benefits and assuming related risks:
o Premium expense charge -- charge deducted from each premium payment to
cover some distribution expenses, state and local premium taxes and federal
taxes. (p. )
o Monthly deduction -- charged against the value of your policy each month
(prior to the youngest insured's attained insurance age 100), covering the
cost of insurance, cost of issuing the policy, certain administrative
expenses and optional insurance benefits. (p. )
o Surrender charge -- applies if you surrender your policy for its full cash
surrender value, or the policy lapses, during the first 15 years. The
surrender charge is a deferred charge for costs of issuing the policy. It
is based on the initial specified amount. (p. )
<PAGE>
o Partial surrender fee -- applies if you surrender part of the value of your
policy; equals $25 or 2% of the amount surrendered, whichever is less. (p.
)
o Mortality and expense risk charge -- applies only to the subaccounts;
equals, on an annual basis, 0.9% of the average daily net asset value of
the subaccounts. (p. )
o Fund expenses -- applies only to the funds. As of Dec. 31, 1997, the
investment management fee was as follows: 0.5% of the average daily net
assets of the IDS Life Series Fund - Money Market Portfolio; 0.95% of IDS
Life Series Fund - International Equity Portfolio; 0.58% of the daily net
assets of Putnam VT New Opportunities Fund; 0.63% of the daily net assets
of the AIM V.I. Growth and Income Fund, and 0.7% of the average daily net
assets of the IDS Life Series Fund - Equity, Income, Managed and Government
Securities Portfolios. Each fund also pays taxes, brokerage commissions and
nonadvisory expenses. IDS Life Insurance Company (IDS Life) has agreed to a
voluntary limit of 0.1%, on an annual basis, of the average daily net
assets of each IDS Life Series Fund Portfolio for these nonadvisory
expenses. (p. )
Proceeds payable upon death: Prior to the youngest insured's attained insurance
age 100, your policy's death benefit can never be less than the specified
amount, less outstanding indebtedness. The relationship between the policy value
and the death benefit depends on which of two options you choose:
o Option 1 level amount: The death benefit is the greater of the specified
amount or a percentage of policy value.
o Option 2 variable amount: The death benefit is the greater of the specified
amount plus the policy value or a percentage of policy value.
You may change the death benefit option or specified amount within certain
limits; doing so will generally affect policy charges.
On the youngest insured's attained insurance age 100, the proceeds payable will
be the cash surrender value. (p. )
Transfers between the fixed account and subaccounts: You may, at no charge,
transfer policy value from one subaccount to another or between subaccounts and
the fixed account. (Certain restrictions apply to transfers involving the fixed
account.) We reserve the right to limit transfers to no more than five transfers
per year by phone or mail. You can also arrange for automated transfers on a
monthly, quarterly, semiannual or annual basis. (p. )
Policy loans: You may borrow against your policy's cash surrender value. A
policy loan, even if repaid, can have a permanent effect on the death benefit
and policy value. A loan may also have tax consequences if your policy lapses or
you surrender it. (p. )
Policy surrenders: You may cancel this policy while it is in force and receive
its cash surrender value. The cash surrender value is the policy value minus
indebtedness, minus any applicable surrender charges. (p. )
<PAGE>
Exchange right: For two years after the policy is issued, you can exchange it
for one that provides benefits that do not vary with the investment return of
the subaccounts. Because the policy itself offers a fixed return option, all you
need to do is transfer all of the policy value in the subaccounts to the fixed
account. (p. )
Payment of policy proceeds: Proceeds will be paid when you surrender the policy;
the last surviving insured dies; or upon the youngest insured's attained
insurance age 100. You or the beneficiary may choose whether payment is to be
made in a lump sum or under one or more of certain options. (p. )
Federal taxes: The death benefit is not considered part of the beneficiary's
income and thus is not subject to federal income taxes. When the proceeds are
paid on the youngest insured's attained insurance age 100, if the amount
received plus any indebtedness exceeds your investment in the policy, the excess
may be taxable as ordinary income. Part or all of any proceeds received through
full or partial surrender, lapse, policy loan or assignment of policy value may
be subject to federal income tax as ordinary income. Proceeds other than death
benefits from certain policies, classified as "modified endowments," are taxed
differently from proceeds of conventional life insurance contracts and may also
be subject to an additional 10% IRS penalty tax if you are younger than 59 1/2.
A policy is considered to be a modified endowment if it was applied for or
materially changed after June 21, 1988, and premiums paid in the early years
exceed certain modified endowment limits. (p. )
The variable account
You can direct your premiums to any or all of eight subaccounts of the variable
account. These subaccounts invest in the following funds:
Subaccount invests exclusively in shares of
Equity IDS Life Series Fund - Equity Portfolio
Income IDS Life Series Fund - Income Portfolio
Money Market IDS Life Series Fund - Money Market Portfolio
Managed IDS Life Series Fund - Managed Portfolio
Government Securities IDS Life Series Fund - Government Securities Portfolio
International Equity IDS Life Series Fund - International Equity Portfolio
YGI AIM V.I. Growth and Income Fund
YNO Putnam VT New Opportunities Fund
The variable account was established on Sept. 12, 1985, under New York law and
is registered as a single unit investment trust under the Investment Company Act
of 1940. Such registration does not involve any SEC supervision of the account's
management or investment practices or policies. International Equity Subaccount
was added to the variable account on Oct. 28, 1994. YGI and YNO subaccounts were
added to the variable account on Nov. 22, 1996.
The variable account meets the definition of a "separate account" under federal
securities laws. Income, capital gains or capital losses of each subaccount are
credited to or charged against the assets of that subaccount alone. No
subaccount will be charged with liabilities of any other subaccount or of any
other business conducted by IDS Life of New York. The variable account's net
assets are held in relation to the policies described in this prospectus as well
as other variable life insurance policies that we issue that are not described
in this prospectus.
<PAGE>
At all times, IDS Life of New York will maintain assets in the subaccounts with
total market value at least equal to the reserves and other liabilities required
to cover insurance benefits under all contracts participating in the subaccount.
The funds
IDS Life Series Fund, Inc., a Minnesota corporation, is a diversified, open-end
management investment company incorporated on May 8, 1985. The International
Equity portfolio was added to the fund on October 28, 1994. IDS Life Series Fund
currently consists of six portfolios:
IDS Life Series Fund - Equity Portfolio
Objective: capital appreciation. Invests primarily in common stocks and other
securities convertible into common stock.
IDS Life Series Fund - Income Portfolio
Objective: to maximize current income while attempting to conserve the value of
the investment and to continue the high level of income for the longest period
of time. At least 50% of net assets will normally be invested in high-quality,
lower-risk corporate bonds, unrated corporate bonds believed to have the same
investment qualities and government bonds. Other investments may include
lower-rated corporate bonds, bonds and common stocks sold together as a unit,
preferred stock and foreign securities.
IDS Life Series Fund - Money Market Portfolio
Objective: to provide maximum current income consistent with liquidity and
conservation of capital. Invests in relatively short-term money market
securities, such as marketable debt securities issued or guaranteed as to
principal and interest by the U.S. government or its agencies or
instrumentalities, bank certificates of deposit, bankers' acceptances, letters
of credit and high-grade commercial paper.
IDS Life Series Fund - Managed Portfolio
Objective: to maximize total investment return through a combination of capital
appreciation and current income. If the investment manager believes the stock
market will be moving higher, it can emphasize stocks that offer potential for
appreciation. At other times, the manager may increase the portfolio's holdings
in bonds and money-market securities providing high current income.
IDS Life Series Fund - Government Securities Portfolio
Objective: to provide a high current return and safety of principal. Invests
primarily in debt obligations issued or guaranteed as to principal and interest
by the U.S. government, its agencies and instrumentalities.
<PAGE>
IDS Life Series Fund - International Equity Portfolio
Objective: capital appreciation. Invests primarily in common stocks of foreign
issuers and foreign securities convertible into common stock. Other investments
may include certain international bonds if the portfolio manager believes they
have greater potential for capital appreciation than equities.
AIM Variable Insurance Funds, Inc., a Maryland corporation, is an open-end,
series, management investment company incorporated on January 22, 1993. The
variable account invests in the following fund:
AIM V.I. Growth and Income Fund
Objective: to seek growth of capital with current income as a secondary
objective. The Fund seeks to achieve its objective by generally investing at
least 65% of its net assets in stocks of companies believed by management to
have the potential for above average growth in revenues and earnings.
Putnam Variable Trust is a Massachusetts business trust organized on September
24, 1987. The variable account invests in the following fund:
Putnam VT New Opportunities Fund
Objective: seeks long-term capital appreciation by investing principally in
common stocks of companies in sectors of the economy Putnam Investment
Management, Inc. ("Putnam Management") believes possess above-average long-term
growth potential.
Fund objectives
Fund objectives for all funds except Putnam VT New Opportunities Fund can be
changed only if holders of a majority of outstanding shares agree. The objective
of Putnam VT New Opportunities Fund may be changed by the Trustees without a
vote of the shareholders, but as a matter of policy, the Trustees would not
materially change the fund's objective without shareholder approval. Because
fund investments are subject to the risk of changing economic conditions and the
ability of the investment manager to anticipate such changes, there can be no
guarantee that the investment objectives of a fund will be achieved.
Relationship between funds and subaccounts
Shares of each fund are sold to the appropriate subaccount at net asset value
without a sales charge. Dividends and capital gain distributions from a fund are
reinvested at net asset value without a sales charge and retained as an asset of
the appropriate subaccount. Fund shares will be redeemed by the appropriate
subaccount, without fee to the subaccount, to the extent necessary to make death
benefit or other payments under the policy.
<PAGE>
Currently, shares of the IDS Life Series Fund Portfolios are available to serve
as the underlying investment for variable life insurance. Shares of the AIM V.I.
Growth and Income Fund and Putnam VT New Opportunities Fund are available to
serve as the underlying investment for variable life insurance contracts,
variable annuities and qualified plans. In the future, shares of the IDS Life
Series Fund Portfolios may be available to serve as the underlying investment
for variable life insurance contracts, variable annuities and qualified plans.
It is conceivable that in the future it may be disadvantageous for variable life
insurance separate accounts, variable annuity separate accounts and/or qualified
plans to invest in the available funds simultaneously. Although IDS Life of New
York and the funds do not currently foresee any such disadvantages, the boards
of directors or trustees of the appropriate funds will monitor events in order
to identify any material conflicts between such policy owners, contract owners
and qualified plans to determine what action, if any, should be taken in
response to a conflict. If a board were to conclude that separate funds should
be established for variable life insurance, variable annuity and qualified plan
separate accounts, the variable life insurance policyholders would not bear any
expenses associated with establishing separate accounts. Please refer to the
fund prospectuses for risk disclosure regarding mixed and shared funding.
IDS Life acts as the investment manager and American Express Financial
Corporation acts as the investment advisor for IDS Life Series Fund, Inc.
American Express Trust Company acts as custodian of the IDS Life Series Fund,
Inc.'s investments.
AIM Advisors, Inc. acts as the investment advisor for AIM V.I. Growth and Income
Fund. Putnam Management acts as the investment manager for Putnam VT New
Opportunities Fund.
The investment managers or advisors receive fees for their services as described
under "Loads, fees and charges."
Detailed information about the funds, their investment objectives, policies and
risks, may be found in the fund prospectuses.
Diversification: The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under Section 817(h) of the Code.
Each fund intends to comply with these requirements.
Ownership rules: The U.S. Treasury and the IRS have indicated they may provide
additional guidance concerning how many subaccounts may be offered and how many
exchanges among subaccounts may be allowed before the owner is considered to
have investment control and thus is currently taxed on income earned within
subaccount assets. We do not know at this time what the additional guidance will
be or when action will be taken. We reserve the right to modify the policy, as
necessary, to ensure that the owner will not be subject to current taxation as
the owner of the subaccount assets.
Rates of return of the funds and subaccounts
This section presents rates of return, first for the funds and then for the
corresponding subaccounts. Rates of return are different in the two cases
because those of the subaccounts reflect additional charges. After this date,
the section shows actual rates of return. All charges and expenses mentioned in
the section are explained fully under "Loads, fees and charges."
<PAGE>
Rates of return of funds
In the following table are average annual rates of return based on the actual
investment performance of the funds after deduction of applicable portfolio
expenses (including the investment management fees and nonadvisory expenses) for
the periods indicated. These rates do not reflect charges that apply to the
subaccounts or the policy and therefore do not illustrate how actual investment
performance will affect policy benefits. Moreover, these rates of return are not
an estimate or guarantee of future performance.
<TABLE>
<CAPTION>
Period ending 12/31/97
10 years or since
Fund 1 year 3 years 5 years Commencement*
- -------------------------------------------------------- ----------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
IDS Life Series Fund - Equity (Beta 0.86**) 21.13% 26.21% 18.55% 18.08
IDS Life Series Fund - Income 8.03 10.60 8.25 9.14
IDS Life Series Fund - Money Market 5.03 5.02 4.27 5.35
IDS Life Series Fund - Managed (Beta 0.62**) 17.91 17.14 14.17 15.75
IDS Life Series Fund - Government Securities 8.60 9.15 6.77 8.42
IDS Life Series Fund - International Equity 6.20 21.47 -- 20.39
AIM V.I. Growth and Income Fund 25.72 -- -- 21.11
Putnam VT New Opportunities Fund 23.29 -- -- 22.86
</TABLE>
*IDS Life Series Fund - International Equity Portfolio commenced operations on
Oct. 28, 1994. AIM V.I. Growth and Income Fund and Putnam VT New Opportunities
Fund each commenced operations on May 2, 1994.
**Beta is a volatility measure based on calculations of the fund's monthly
returns compared to the S&P 500 Index. A beta less than 1 indicates performance
that is less volatile than the market; a beta more than 1 indicates performance
that is more volatile than the market.
Rates of return of subaccounts
Average annual rates of return in the following table reflect all charges
incurred by the funds and charges against the subaccounts (including the
mortality and expense risk charge). The rates do not reflect the premium expense
charge, surrender charge or monthly deduction. For all subaccounts, we show
actual performance from the date the subaccounts began investing in the funds.
We also show performance from the commencement date of the funds.*
<PAGE>
<TABLE>
<CAPTION>
Period Ending 12/31/97
Since Commencement Since Commencement
of the subaccounts of the Funds
10 years or 10 years or
Since since
Subaccount Investment 1 year 3 5 years Commencement** 1 year 3 years 5 Commencement
years years
- ------------------- ------------------- -------- ------- -------- ----------------- ------- -------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Equity 20.05% 25.07% 17.49% 16.97% 20.05% 25.07% 17.49% 16.97%
Income Income 7.04 9.62 7.30 8.19 7.04 9.62 7.30 8.14
Money Market Money Market 4.15 4.17 3.39 4.42 4.15 4.17 3.39 4.44
Managed Managed 16.88 16.08 13.14 14.66 16.88 16.08 13.14 14.66
Government Government 7.66 8.19 5.83 7.35 7.66 8.19 5.83 7.40
Securities Securities
International International 5.25 21.28 - 19.41 5.25 21.28 - 19.41
Equity Equity
YGI Growth and Income 24.59 - - 22.15 24.59 25.23 - 20.00
Fund
YNO New Opportunities 22.18 - - 17.34 22.18 24.19 - 21.76
Fund
</TABLE>
*In most cases, the subaccounts and the funds commenced operations at the same
time, so the performance for both is the same. However, the AIM V.I. Growth and
Income Fund and the Putnam VT New Opportunities fund commenced operations before
the subaccounts that invest in those funds, so the subaccount and fund
performance is different. The performance we show from commencement of these two
funds as if the subaccount had invested in the funds at that time.
**International Equity subaccount commenced operations on Oct. 28, 1994. YGI and
YNO subaccounts each commenced operations on Nov. 22, 1996.
The fixed account
You can allocate premiums to the fixed account or transfer policy value from the
subaccounts to the fixed account (with certain restrictions, explained in
"Transfers between the fixed account and subaccounts").
The fixed account is the general investment account of IDS Life of New York. It
includes all assets owned by IDS Life of New York other than those in the
variable account and other separate accounts. Subject to applicable law, IDS
Life of New York has sole discretion to decide how assets of the fixed account
will be invested.
Placing policy value in the fixed account does not entitle you to share in the
fixed account's investment experience, nor does it expose you to the account's
investment risk. Instead, IDS Life of New York guarantees that the policy value
you place in the fixed account will accrue interest at an effective annual rate
of at least 4%, independent of the actual investment experience of the account.
IDS Life of New York bears the full investment risk for amounts allocated to the
fixed account.
IDS Life of New York is not obligated to credit interest at any rate higher than
4%, although we may do so at our sole discretion. Interest in excess of 4% will
not be credited on any portion of policy value in the fixed account against
which you have a policy loan outstanding. Because of exemptive and exclusionary
provisions, interests in the fixed account have not been registered under the
Securities Act of 1933 and the fixed account has not been registered as an
investment company under the Investment Company Act of 1940. Accordingly,
neither the fixed account nor any interests in it are subject to the provisions
of these Acts and the staff of the SEC has not reviewed the disclosures in this
prospectus relating to the fixed account. Disclosures regarding the fixed
account may, however, be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
<PAGE>
Purchasing your policy
Application
To apply for coverage, complete an application and send it with your premium
payment to IDS Life of New York's home office. In your application, you:
o select a specified amount of insurance;
o select a death benefit option;
o designate a beneficiary; and
o state how premiums are to be allocated among the fixed account and/or the
subaccounts.
Insurability: Before issuing your policy, IDS Life of New York requires
satisfactory evidence of the insurability of the persons whose lives you propose
to insure. Our underwriting department will review your application and any
medical information or other data required to determine whether the proposed
individuals are insurable under our underwriting rules. Your application may be
declined if a person fails to meet the underwriting requirements and any
premiums you have paid will be returned.
Age limit: The policy is available only to persons age 35 and older. In
addition, IDS Life of New York generally will not issue a policy to persons over
the insurance age of 85. It may, however, do so at its sole discretion.
Risk classification: The risk classification for each insured is based on that
insured's health, occupation or other relevant underwriting standards. This
classification will affect the monthly deduction. (See "Loads, fees and charges"
and "Optional insurance benefits.")
Other conditions: In addition to proving insurability, you and the insureds must
also meet certain conditions, stated in the application form, before coverage
will become effective and your policy is issued to you. The lives insured may be
covered under the terms of a conditional insurance agreement prior to a policy
being issued.
Incontestability: IDS Life of New York will have two years from the effective
date of your policy to contest the truth of statements or representations in
your application. After the policy has been in force during the lifetime of
either insured for two years from the policy date, IDS Life of New York cannot
contest the policy.
Right to examine policy
You may return your policy for any reason and receive a full refund of all
premiums paid. To do so, you must mail or deliver the policy to IDS Life of New
York or your financial advisor, with a written request for cancellation, by the
latest of:
o the 10th day after you receive it
o the 10th day after IDS Life of New York mails or personally delivers a
written notice of withdrawal right
o the 45th day after you sign your application.
On the date your request is postmarked or received, the policy will immediately
be considered void from the start.
<PAGE>
Premiums
Payment of premiums:
In applying for your policy, you decide how much you intend to pay and how often
you will make payments. During the early policy years until the policy value is
sufficient to cover the surrender charge, IDS Life of New York requires that you
pay the minimum initial premiums.
You may schedule payments annually, semiannually or quarterly. (Payment at any
other interval must be approved by IDS Life of New York.) This premium schedule
is shown in your policy.
The scheduled premium serves only as an indication of your intent as to the
frequency and amount of future premium payments. You may skip scheduled premium
payments at any time if your cash surrender value is sufficient to pay the
monthly deduction, or if you have paid sufficient premium to keep the DBG-100 or
the minimum initial premium period in effect.
You may also change the amount and frequency of scheduled premium payments by
written request. IDS Life of New York reserves the right to limit the amount of
such changes. Any change in the premium amount is subject to applicable tax laws
and regulations.
Although you have flexibility in paying premiums, the amount and frequency of
your payments will affect the policy value, cash surrender value and length of
time your policy will remain in force, as well as affect whether the DBG-100 or
the minimum initial premium period remain in effect.
Premium limitations:
You may make unscheduled premium payments at any time and in an amount of at
least $50. IDS Life of New York reserves the right to limit the number and
amount of unscheduled premium payments.
No premium payments, scheduled or unscheduled, are allowed on or after the
youngest insured's attained insurance age 100.
Also, in order to receive favorable tax treatment under the Code, premiums paid
during the life of the policy must not exceed certain limitations. To comply
with the Code, IDS Life of New York can either refuse excess premiums as they
are paid, or refund excess premiums with interest no later than 60 days after
the end of the policy year in which they were paid.
Allocation of premiums:
Until the policy date, we hold all premiums in the fixed account, and we credit
interest on the net premiums (gross premiums minus premium expense charge) at
the current fixed account rate. As of the policy date, we will allocate the net
premiums plus accrued interest to the account(s) you have selected in your
application. At that time, we will begin to assess the various loads, fees and
charges.
<PAGE>
Any amount allocated to a subaccount is converted into accumulation units of
that subaccount, as explained under "Policy value." Similarly, when transferring
value between subaccounts, accumulation units in one subaccount are converted
into a cash value, which is then converted into accumulation units of the second
subaccount.
Keeping the policy in force
This section includes a description of the policy provisions that determine if
the policy will remain in force or lapse (terminate). It is important that you
understand them so the appropriate premium payments are made to ensure that
insurance coverage meets your objectives.
If you wish to have a guarantee that the policy will remain in force until the
youngest insured's attained insurance age 100 regardless of investment
performance, you should pay at least the DBG-100 premiums.
If you wish to pay a lower premium and are not concerned with a long-term
guarantee that the policy will remain in force regardless of investment
performance, you can pay premiums so that the cash surrender value on each
monthly date is sufficient to pay the monthly deduction. However, during the
minimum initial premium period, you must pay at least the minimum initial
premium until the policy value is greater than the surrender charge and the cash
surrender value is sufficient to pay the monthly deduction.
Death benefit guarantee to age 100
The DBG-100 provides that your policy will remain in force until the youngest
insured's attained insurance age 100 even if the cash surrender value is
insufficient to pay the monthly deduction. The DBG-100 will remain in effect, as
long as:
the sum of premiums paid minus partial surrenders minus outstanding
indebtedness
equals or exceeds the DBG-100 premiums due since the policy date.
The DBG-100 premium is shown in the policy.
If, on a monthly date, you have not paid enough premiums to keep the DBG-100 in
effect, an additional period of 61 days will be allowed for you to pay a premium
sufficient to bring your total up to the required minimum. If you do not pay
this amount within 61 days, the DBG-100 will terminate. If the DBG-100 is not in
effect, your policy will lapse (terminate) if the cash surrender value is less
than the amount needed to pay the monthly deduction and the minimum initial
premium period is not in effect. Although the policy can be reinstated as
explained below, the DBG-100 cannot be reinstated.
Minimum initial premium period
To allow you to purchase this policy for the lowest premium possible, you may
choose to pay only the minimum initial premium during the minimum initial
premium period as long as the policy value minus indebtedness equals or exceeds
the monthly deduction. The policy will not enter the grace period during the
minimum initial premium period as shown in your policy under "Policy Data," if:
<PAGE>
1. on a monthly date, the policy value minus indebtedness equals or exceeds
the monthly deduction for the policy month following such monthly date; and
2. the sum of all premiums paid, minus any partial surrenders, and minus any
indebtedness equals or exceeds the minimum initial premium, as shown in
your policy under "Policy Data," times the number of months since the
policy date, including the current month.
The minimum initial period is
3 years if the youngest insured's insurance age is 35-39 2 years if the
youngest insured's insurance age is 40-49 1 year if the youngest insured's
insurance age is 50 and over
Grace period
If the cash surrender value of the policy becomes less than that needed to pay
the monthly deduction and neither the DBG-100 nor the minimum initial premium
period is in effect, you will have 61 days to pay the required premium amount.
If the required premium is not paid, the policy will lapse.
IDS Life of New York will mail a notice to your last known address, requesting
payment of the premium needed so that the next three monthly deductions can be
made. If we receive this premium before the end of the 61-day grace period, we
will use the payment to pay all monthly deductions and any other charges then
due. Any balance will be added to the policy value and allocated in the same
manner as other premium payments.
If a policy lapses with outstanding indebtedness, any excess of the outstanding
indebtedness over the premium paid generally will be taxable to the owner. (See
"Federal taxes.") If the last surviving insured dies during the grace period,
any overdue monthly deductions will be deducted from the death benefit.
Reinstatement
Your policy may be reinstated within five years after it lapses, unless you
surrendered it for cash. To reinstate, IDS Life of New York will require:
o a written request;
o evidence satisfactory to IDS Life of New York that both insureds remain
insurable or evidence for the last surviving insured and due proof that the
first death occurred before the date of lapse;
o payment of a premium that will keep the policy in force for at least three
months;
o payment of the monthly deductions that were not collected during the grace
period; and
o payment or reinstatement of any indebtedness.
<PAGE>
The effective date of a reinstated policy will be the monthly date on or next
following the day IDS Life of New York accepts your application for
reinstatement. The suicide period (see "Proceeds payable upon death") will apply
from the effective date of reinstatement. Surrender charges will also be
reinstated.
IDS Life of New York will have two years from the effective date of
reinstatement to contest the truth of statements or representations in the
reinstatement application.
Loads, fees and charges
Policy charges compensate IDS Life of New York for:
o providing the insurance benefits of the policy;
o issuing the policy;
o administering the policy;
o assuming certain risks in connection with the policy; and
o distributing the policy.
Some of these charges are deducted from your premium payments. Others are
deducted periodically from your policy value in the fixed account and/or
subaccounts. You may also be assessed a charge if you surrender your policy or
the policy lapses.
Premium expense charge
We deduct this charge from each premium payment. The amount remaining after the
deduction, called the net premium, is credited to the account(s) you have
selected. The premium expense charge has three parts:
Sales charge: 7.25% of all premiums paid. Partially compensates IDS Life of New
York for expenses in distributing the policy, including agents' commissions,
advertising and printing of prospectuses and sales literature.
Premium tax charge: 1.0% of each premium payment. Compensates IDS Life of New
York for paying taxes imposed by the State of New York on premiums received by
insurance companies.
Federal tax charge: 1.25% of each premium payment. Compensates IDS Life of New
York for paying Federal taxes resulting from the sale of the policy and is a
reasonable charge in relation to IDS Life of New York's federal tax burden. IDS
Life of New York reserves the right to change the amount of this charge if
applicable federal law changes IDS Life of New York's federal tax burden subject
to the approval of the Superintendent of Insurance.
<PAGE>
Monthly deduction
On each monthly date we deduct from the value of your policy in the fixed
account and/or subaccounts an amount equal to the sum of:
1. the cost of insurance for the policy month;
2. the policy fee shown in your policy; and
3. charges for any optional insurance benefits provided by rider for the
policy month.
Each of the three components is explained below.
You specify, in your policy application, what percentage of the monthly
deduction from 0% to 100% will be taken from the fixed account and from each of
the subaccounts. You may change these percentages for future monthly deductions
by written request.
Monthly deductions will be taken from the fixed account and the subaccounts on a
pro rata basis if:
o you do not specify the accounts from which the monthly deduction is to be
taken; or
o the value in the fixed account or any subaccount is insufficient to pay the
portion of the monthly deduction you have specified.
If the cash surrender value of your policy is not enough to pay the monthly
deduction on a monthly anniversary, the policy may lapse. However, the policy
will not lapse if the DBG-100 or the minimum initial premium period is in
effect. (See Death benefit guarantee to age 100, Minimum initial premium
period;" also "Grace period" and "Reinstatement.")
Components of the monthly deduction:
1. Cost of insurance: the cost providing the death benefit under your policy.
The cost of insurance for a policy month is calculated as:
[a x (b - c)] + d
where:
(a) is the monthly cost of insurance rate based on each insureds insurance age,
duration of coverage, sex and risk classification. Generally, the cost of
insurance rate will increase as the attained insurance age of each insured
increases.
Rates are set by IDS Life of New York, based on its expectations as to future
mortality experience. We may change the rates from time to time; any change will
apply to all individuals of the same risk classification. However, rates will
not exceed the Guaranteed Annual Maximum Cost of Insurance Rates shown in your
policy, which are based on the 1980 Commissioners Standard Ordinary Smoker or
Nonsmoker Mortality Tables, Age Last Birthday.
<PAGE>
(b) is the death benefit on the monthly date divided by 1.0032737 (which reduces
IDS Life of New York's net amount at risk, solely for computing the cost of
insurance, by taking into account assumed monthly earnings at an annual rate of
4%);
(c) is the policy value on the monthly date. At this point, the policy value has
been reduced by the policy fee and any charges for optional riders;
(d) is any flat extra insurance charges assessed as a result of special
underwriting considerations.
2. Policy fee: $30 per month for the first 15 policy years. This charge
reimburses IDS Life of New York for expenses of issuing the policy, such as
processing the application (primarily underwriting) and setting up computer
records; and of administering the policy, such as processing claims, maintaining
records, making policy changes and communicating with owners. We reserve the
right to change the charge in the future, but guarantee that it will never
exceed $30 per month.
3. Optional insurance benefit charges: charges for any optional benefits added
to the policy by rider. See "Optional insurance benefits."
Surrender charge
If you surrender your policy or the policy lapses during the first 15 policy
years, a surrender charge will be assessed. The surrender charge is a contingent
deferred issue and administration expense charge. It reimburses IDS Life of New
York for costs of issuing the policy, such as processing the application
(primarily underwriting) and setting up computer records. This charge is $4 per
thousand dollars of initial specified amount. It remains level during the first
five policy years and then decreases monthly until it is zero at the end of 15
policy years.
Partial surrender fee
If you surrender part of the value of your policy, you will be charged $25 (or
2% of the amount surrendered, if less). This fee is guaranteed not to increase
for the duration of your policy.
Mortality and expense risk charge
This charge applies only to the subaccounts and not to the fixed account. It is
equal, on an annual basis, to 0.9% of the daily net asset value of the
subaccounts -- a level guaranteed for the life of the policy. Computed daily,
the charge compensates IDS Life of New York for:
o Mortality risk -- the risk that the cost of insurance charge will be
insufficient to meet actual claims.
o Expense risk -- the risk that the policy fee and the contingent deferred
issue and administration expense charge (described above) may be
insufficient to cover the cost of administering the policy.
<PAGE>
Any profit from the mortality and expense risk charge would be available to IDS
Life of New York for any proper corporate purpose including, among others,
payment of sales and distribution expenses, which we do not expect to be covered
by the sales charge discussed earlier. Any further deficit will have to be made
up from IDS Life of New York's general assets.
Fund expenses
The investment managers receive fees for their services to the funds. The funds
also pay taxes, brokerage commissions and nonadvisory expenses. IDS Life has
agreed to a voluntary limit of 0.1%, on an annual basis, of the average daily
net assets of each of the IDS Life Series Fund Portfolios for these nonadvisory
expenses, such as custodian and trustee fees, registration fees for shares,
postage, fidelity and security bond costs, legal fees and other miscellaneous
fees and charges, even though actual expenses on IDS Life Series Fund-Government
Securities Portfolio ranged up to 0.15%, IDS Life Series Fund-Money Market
Portfolio ranged up to 0.14% and IDS Life Series Fund-International Equity
Portfolio ranged up to 0.27%. IDS Life reserves the right to discontinue
limiting these nonadvisory expenses at 0.1%. However, its present intention is
to continue the limit until the time that actual expenses are less than the
limit. Other expenses for the year ended Dec. 31, 1997 were 0.05% for Putnam VT
New Opportunities Fund. For AIM V.I. Growth and Income Fund other expenses
were 0.06% for the period ended Dec. 31, 1997.
The investment management fee is deducted from the IDS Life Series Fund -
Equity, Income, Money Market, Managed, Government Securities, International
Equity Portfolios and the Putnam VT New Opportunities Fund and AIM V.I. Growth
and Income Fund daily.
As of Dec. 31, 1997, the investment management fee was as follows:
o IDS Life Series Fund - Money Market Portfolio -- 0.5% of average daily net
assets
o Putnam VT New Opportunities Fund -- 0.58% of average daily net assets
o AIM V.I. Growth and Income Fund -- 0.63% of average daily net assets
o IDS Life Series Fund - Equity, Income, Managed and Government Securities
Portfolios -- 0.7% of average daily net assets
o IDS Life Series Fund - International Equity Portfolio -- 0.95% of average
daily net assets
IDS Life of New York has entered into certain agreements under which it is
compensated by the advisors and/or distributors of the AIM V.I. Growth and
Income Fund and Putnam VT New Opportunities Fund for the administrative services
it provides to these funds.
Other information on charges:
IDS Life of New York may reduce or eliminate various fees and charges when we
incur lower sales costs and/or perform fewer administrative services than usual.
<PAGE>
Policy value
The value of your policy is the sum of values in the fixed account and each
subaccount of the variable account.
Fixed account value
The value in the fixed account on the policy date (when the policy is issued)
equals the portion of your initial net premium that you have allocated to the
fixed account, plus interest accrued before the policy date, minus the portion
of the monthly deduction for the first policy month that you have allocated to
the fixed account.
On any later date, the value in the fixed account equals:
o the value on the previous monthly date; plus
o net premiums allocated to the fixed account since the last monthly date;
plus
o any transfers to the fixed account from the subaccounts, including loan
transfers, since the last monthly date; plus
o accrued interest on all of the above; minus
o any transfers from the fixed account to the subaccounts, including loan
repayment transfers, since the last monthly date; minus
o any partial surrenders or partial surrender fees allocated to the fixed
account since the last monthly date; minus
o interest on any transfers or partial surrenders, from the date of the
transfer or surrender to the date of calculation; minus
o any portion of the monthly deduction for the coming month that is allocated
to the fixed account if the date of calculation is a monthly date.
Subaccount values
The value in each subaccount changes daily, depending on the investment
performance of the fund in which that subaccount invests and on other factors
detailed below. There is no guaranteed minimum subaccount value. You, as owner,
bear the entire investment risk.
Calculation of subaccount value: The value in each subaccount on the policy date
equals the portion of your initial net premium allocated to that subaccount plus
interest accrued before the policy date, minus the portion of the monthly
deduction for the first policy month that you have allocated to that subaccount.
The value of each subaccount on each subsequent valuation date equals:
o the value of the subaccount on the preceding valuation date, multiplied by
the net investment factor for the current valuation period (explained
below); plus
o net premiums received and allocated to the subaccount during the current
valuation period; plus
<PAGE>
o any transfers to the subaccount (from the fixed account or other
subaccounts, including loan repayment transfers) during the period; minus
o any transfers from the subaccount including loan transfers during the
current valuation period; minus
o any partial surrenders and partial surrender fees allocated to the
subaccount during the period; minus
o any portion of the monthly deduction allocated to the subaccount during the
period.
The net investment factor measures the investment performance of a subaccount
from one valuation period to the next. Because performance may fluctuate, the
value of a subaccount may increase or decrease from day to day.
Accumulation units: The policy value allocated to each subaccount is converted
into accumulation units. Each time you direct a premium payment or transfer
policy value into one of the subaccounts, a certain number of accumulation units
are credited to your policy for that subaccount. Conversely, each time you take
a partial surrender or transfer value out of a subaccount, a certain number of
accumulation units are subtracted.
Accumulation units are the true measure of investment value in each subaccount.
For subaccounts investing in the funds, they're related to, but not the same as,
the net asset value of the corresponding fund. The dollar value of each
accumulation unit can rise or fall daily, depending on the investment
performance of the underlying fund and on certain charges. Here's how unit
values are calculated:
Number of units: To calculate the number of units for a particular subaccount,
we divide your investment (net premium or transfer amount) by the current
accumulation unit value.
Accumulation unit value: The current value for each subaccount equals the last
value times the current net investment factor.
Net investment factor: Determined at the end of each valuation period, this
factor equals (a divided by b) - c, where:
(a) equals:
o net asset value per share of the fund; plus
o per-share amount of any dividend or capital gain distribution made by the
relevant fund to the subaccount; plus
o any credit or minus any charge for reserves to cover any tax liability
resulting from the investment operations of the subaccount.
<PAGE>
(b) equals:
o net asset value per share of the fund at the end of the preceding valuation
period; plus
o any credit or minus any charge for reserves to cover any tax liability in
the preceding valuation period.
(c) is a percentage factor representing the mortality and expense risk charge,
as described in "Loads, fees and charges," above.
Factors that affect subaccount accumulation units:
Accumulation units may change in two ways; in number and in value. Here are the
factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional purchase payments allocated to the subaccounts;
o transfers into or out of the subaccount(s);
o partial surrenders and partial surrender fees;
o surrender charges; and/or
o monthly deductions
Accumulation unit values will fluctuate due to:
o changes in underlying funds(s) net asset value;
o dividends distributed to the subaccount(s);
o capital gains or losses of underlying funds;
o fund operating expenses; and/or
o mortality and expense risk charges.
Proceeds payable upon death
We will pay a benefit to the beneficiary of the policy when the last surviving
insured dies.
If that death is prior to the youngest insured's attained insurance age 100, the
amount payable is based on the specified amount and death benefit option you
have selected, as described below, less any indebtedness.
On the youngest insured's attained insurance age 100, the amount payable is the
cash surrender value.
<PAGE>
Option 1 (level amount): Under this option, the policy's value is part of the
specified amount. The Option 1 death benefit is the greater of:
o the specified amount on the date of the last surviving insured's death; or
o the applicable percentage of the policy value on the date of the last
surviving insured's death, if that death occurs on a valuation date, or on
the next valuation date following the date of death. (See table below.)
Youngest insured's attained insurance age in the table below refers to the
youngest life insured or the age such person would have reached.
<TABLE>
<CAPTION>
Applicable percentage table
Youngest Insured's Applicable percentage Youngest Insured's Applicable percentage of
attained insurance age of policy value attained insurance age policy value
<S> <C> <C> <C> <C>
40 or younger 250% 61 128%
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75-95 105
55 150 96 104
56 146 97 103
57 142 98 102
58 138 99 101
59 134 100 100
60 130
</TABLE>
The percentage is designed to ensure that the policy meets the provisions of
Federal tax law, which require a minimum death benefit in relation to policy
value for your policy to qualify as life insurance.
Option 2 (variable amount): Under this option, the policy value is added to the
specified amount. The Option 2 death benefit is the greater of:
o the policy value plus the specified amount; or
o the applicable percentage of policy value on the date of the last surviving
insured's death, if that death occurs on a valuation date, or on the next
valuation date following the date of death. (See table above.)
<PAGE>
Examples: Option 1 Option 2
- --------- -------- --------
specified amount $1,000,000 $1,000,000
policy value $50,000 $50,000
death benefit $1,000,000 $1,050,000
policy value increases to $80,000 $80,000
death benefit $1,000,000 $1,080,000
policy value decreases to $30,000 $30,000
death benefit $1,000,000 $1,030,000
If you want to have premium payments and favorable investment performance
reflected partly in the form of an increasing death benefit, you should consider
Option 2. If you are satisfied with the specified amount of insurance protection
and prefer to have premium payments and favorable investment performance
reflected to the maximum extent in the policy value, you should consider Option
1. Under Option 1, the cost of insurance is lower because IDS Life of New York's
net amount at risk is generally lower; for this reason, the monthly deduction is
less, and a larger portion of your premiums and investment returns is retained
in the policy value.
Change in death benefit option
You may make a written request to change the death benefit option once per
policy year. A change in the death benefit option also will change the specified
amount. You do not need to provide additional evidence of insurability.
If you change from Option 1 to Option 2: The specified amount will decrease by
an amount equal to the policy value on the effective date of the change. You
cannot change from Option 1 to Option 2 if the resulting specified amount would
fall below the minimum specified amount shown in policy.
If you change from Option 2 to Option 1: The specified amount will increase by
an amount equal to the policy value on the effective date of the change.
An increase or decrease in specified amount resulting from a change in the death
benefit option will affect the monthly deduction because the cost of insurance
charge depends on the specified amount. The charge for certain optional
insurance benefits may also change. The surrender charge, however, will not be
affected.
Changes in specified amount
Subject to certain limitations, you may make a written request to decrease the
specified amount once each policy year after the first. Decreases in specified
amount may have tax implications, discussed in the section "Modified endowment
contracts" under "Federal taxes."
Decreases: Any decrease in specified amount will take effect on the monthly
anniversary on or next following our receipt of your written request. The
specified amount remaining after the decrease may not be less than the minimum
specified amount shown in the policy. If, following a decrease in specified
amount, the policy would no longer qualify as life insurance under federal tax
law, the decrease may be limited to the extent necessary to meet these
requirements.
<PAGE>
A decrease in specified amount will affect your costs as follows:
o Your monthly deduction will decrease because the cost of insurance
charge depends on the specified amount.
o Charges for certain optional insurance benefits may decrease.
o The surrender charge will not change.
No surrender charge is imposed when you request a decrease in the specified
amount.
Increases: Increases in specified amount are not permitted. If you wish to
purchase additional insurance, you should purchase an additional policy.
Currently, we do not charge the policy fee for the additional policy.
Misstatement of age or sex
If an insured's age or sex has been misstated, the proceeds payable upon the
last surviving insured's death will be:
o the policy value on the date of death; plus
o the amount of insurance that would have been purchased by the cost of
insurance deducted for the policy month during which death occurred, if
that cost had been calculated using rates for the correct age and sex;
minus
o the amount of any outstanding indebtedness on the date of death.
Suicide
If either of the insureds die by suicide within two years from the policy date,
the only amount payable by us will be the premium paid, minus any indebtedness
and partial surrenders. The policy will terminate as of the date of the first
death by suicide. We will pay any amount payable to you, if living, otherwise to
your estate.
You may purchase a new life insurance policy from us on the life of the
surviving insured. You must request, in writing, the new policy no later than 60
days after the date of the first death by suicide. If you are not living, the
request and purchase may be made by the surviving insured. The new policy must
be an individual permanent plan of insurance we are then issuing. The initial
death benefit of the new policy cannot exceed one half of the death benefit of
this policy. The new policy will be issued using the rates in effect, the
surviving insured's attained insurance age, and the risk classification as this
policy for the surviving insured.
Beneficiary
Initially, the beneficiary will be the person you designate in your application
for the policy. You may change the beneficiary by giving written notice to IDS
Life of New York, subject to requirements and restrictions stated in the policy.
If you do not designate a beneficiary, or if the designated beneficiary dies
before the last surviving insured, the beneficiary will be you or your estate.
<PAGE>
Transfers between the fixed account and subaccounts
You may transfer policy values from one subaccount to another or between
subaccounts and the fixed account. For most transfers, we will process your
transfer request at the end of the valuation period in which your request is
received. There is no charge for transfers. Before transferring policy value,
you should consider the risks involved in switching investments.
We may suspend or modify the transfer privilege at any time with the necessary
approval of the SEC and the New York Superintendent of Insurance. Transfers
involving the fixed account are subject to the restrictions below.
Fixed account transfer policies
o Transfers from the fixed account must be made during a 30-day period
starting on a policy anniversary, except for automated transfers, which can
be set up for monthly, quarterly or semiannual transfer periods.
o If we receive your request to transfer amounts from the fixed account
within 30 days before the policy anniversary, the transfer will become
effective on the anniversary.
o If we receive your request on or within 30 days after the policy
anniversary, the transfer will be effective on the day we receive it.
o We will not accept requests for transfers from the fixed account at any
other time.
o If you have made a transfer from the fixed account to one or more
subaccounts, you may not make a transfer from any subaccount back to the
fixed account until the next policy anniversary. We will waive this
limitation once during the first two policy years if you exercise the
policy's right to exchange provision. (See "Exchange right.")
Minimum transfer amounts
From a subaccount to another subaccount or the fixed account:
For mail and phone transfers, $250 or the entire subaccount balance, whichever
is less.
For automated transfers, $50.
From the fixed account to a subaccount: $250 or the entire fixed account balance
minus any outstanding indebtedness, whichever is less.
For automated transfers, $50.
Maximum transfer amounts
From a subaccount to another subaccount or the fixed account: None.
From the fixed account to a subaccount: Entire fixed account balance minus any
outstanding indebtedness.
<PAGE>
Maximum number of transfers per year
We reserve the right to limit mail and telephone transfers to twelve per policy
year. Twelve automated transfers per policy year are allowed.
Two ways to request a transfer, loan or surrender
Provide your name, policy number, Social Security Number or Taxpayer
Identification Number when you request a transfer, loan or partial surrender.
1 By letter
Regular mail:
IDS Life Insurance Company of New York
P.O. Box 5144
Albany, NY 12205
Express mail:
IDS Life Insurance Company of New York
20 Madison Ave. Extension
Albany, NY 12203
2 By phone
Call between 8 a.m. and 6 p.m. (Monday - Thursday); 8 a.m. and 4:30 p.m.
(Friday) All Eastern Times:
1-800-541-2251 (toll free) or
(518) 869-8613 (Albany area)
o We answer phone requests promptly, but you may experience delays when
call volume is unusually high. If you are unable to get through, use
mail procedure as an alternative.
o We will honor any telephone transfer, loan or partial surrender
requests believed to be authentic and will use reasonable procedures to
confirm that they are. These include asking identifying questions and
tape recording calls. As long as these procedures are followed, neither
IDS Life of New York nor its affiliates will be liable for any loss
resulting from fraudulent requests.
o Telephone transfers, loans and partial surrenders are automatically
available. You may request that telephone transfers, loans and partial
surrenders not be authorized from your account by writing IDS Life of
New York.
Automated transfers
In addition to written and phone requests, you can arrange to have policy value
transferred from one account to another automatically. Your financial advisor
can help you set up an automated transfer.
<PAGE>
Automated transfer policies:
o Minimum automated transfer: $50
o Frequency: monthly, quarterly, semiannually or annually
o Only one automated transfer arrangement can be in effect at any time.
Policy values may be transferred to one or more subaccounts and the
fixed account, but can be transferred from only one account.
o You can start or stop this service by written request. You must allow
seven days for us to change any instructions that are currently in
place.
o Automated transfers from the fixed account may not exceed an amount
that, if continued, would deplete the fixed account within 12 months.
o If you have made a transfer from the fixed account to one or more
subaccounts, you may not make a transfer from any subaccount back to
the fixed account until the next policy anniversary.
o If your request is submitted with an application for a policy, it will
not take effect until the policy is issued.
o If the value of the account from which policy value is being
transferred is less than the $50 minimum, the transfer arrangement will
automatically be stopped.
o Automated transfers are subject to all other policy provisions and
terms including provisions relating to the transfer of money between
the fixed account and the subaccounts.
Automated dollar-cost averaging
You can use automated transfers to take advantage of dollar-cost averaging --
investing a fixed amount at regular intervals. For example, you might have a set
amount transferred monthly from a relatively conservative subaccount to a more
aggressive one, or to several others.
This systematic approach can help you benefit from fluctuations in accumulation
unit value, caused by fluctuations in the market value(s) of the underlying
fund. Since you invest the same amount each period, you automatically acquire
more units when the market value falls, fewer units when it rises. The potential
effect is to lower your average cost per unit. There is no charge for
dollar-cost averaging.
How dollar-cost averaging works
Amount Accumulation Number of units
Month invested unit value purchased
Jan $100 $20 5.00
Feb 100 16 6.25
Mar 100 9 11.11
Apr 100 5 20.00
May 100 7 14.29
June 100 10 10.00
July 100 15 6.67
Aug 100 20 5.00
Sept 100 17 5.88
Oct 100 12 8.33
(footnotes to table) By investing an equal number of dollars each month...
(arrow in table pointing to April) you automatically buy more units when the per
unit market price is low.
(arrow in table pointing to August) and fewer units when the per unit market
price is high.
You have paid an average price of only $10.81 per unit over the 10 months, while
the average market price actually was $13.10.
Dollar-cost averaging does not guarantee that any variable subaccount will gain
in value, nor will it protect against a decline in value if market prices fall.
Because this strategy involves continuous investing, your success with
dollar-cost averaging will depend upon your willingness to continue to invest
regularly through periods of low price levels. Dollar-cost averaging can be an
effective way to help meet your long-term goals.
Policy loans
You may borrow against your policy by written or telephone request. (See chart
under "Transfers between the fixed account and subaccounts" for address and
phone numbers for your requests.) We will process your loan request at the end
of the valuation period during which your request is received. (Loans by
telephone are limited to $50,000.)
Interest rate: The interest rate for policy loans is 6% per year. After the
policy's 10th anniversary we expect to reduce the loan interest rate to 4% per
year. Interest is charged daily and due at the end of the policy year.
Minimum loan: $500 or the remaining loan value, whichever is less.
Maximum loan:
o 85% of the policy value minus surrender charges.
We will compute the maximum loan value as of the end of the valuation period
during which we receive your loan request. The amount available at any time for
a new loan is the maximum loan value less any existing indebtedness. In doing
so, we reserve the right to deduct from the loan value interest for the period
until the next policy anniversary and monthly deductions that will be taken
until the next policy anniversary.
Payment of loaned funds: Generally, we will pay loans within seven days after we
receive your request (with certain exceptions - see "Deferral of payments,"
under "Payment of policy proceeds").
<PAGE>
Allocation of loans to accounts: If you do not specify whether the loan is to
come from the fixed account or the subaccounts, it will be made from the
subaccounts and the fixed account in proportion to their values, minus
indebtedness. When a loan is made from a subaccount, accumulation units are
redeemed and the proceeds transferred into the fixed account. We will credit the
policy value loaned with 4% annual interest.
Repayments: Loan repayments will be allocated to subaccounts and/or the fixed
account using the premium allocation percentages in effect unless you tell us
otherwise. Repayments must be in amounts of at least $50.
Overdue interest: If accrued interest is not paid when due, we will increase the
amount of indebtedness in the fixed account to cover the amount due. Interest
added to a policy loan will be charged the same interest rate as the loan
itself. We will take such interest from the fixed account and/or subaccounts,
using the monthly deduction allocation percentages. If the value in the fixed
account or any subaccount is not enough to pay the interest so allocated, all of
the interest will be taken from all of the accounts in proportion to their
value, minus indebtedness.
Effects of policy loans: If you do not repay your loan, it will reduce the death
benefit and policy value. Even if you do repay it, your loan can have a
permanent effect on death benefits and policy values, because money borrowed
against the subaccounts will not share in the investment results of the relevant
portfolio(s).
A loan may terminate the DBG-100 or the minimum initial premium period. The loan
amount is deducted from total premiums paid, which may reduce the total below
the level required to keep the DBG-100 or the minimum initial premium period in
effect.
Taxes: If your policy lapses or you surrender it with an outstanding
indebtedness, and the amount of outstanding indebtedness plus the cash surrender
value is more than the sum of premiums you paid, you will generally be liable
for taxes on the excess. (See "Federal taxes.")
Policy surrenders
You may surrender your policy in full or in part by written or telephone
request. (See chart under "Transfers between the fixed account and
subaccounts.") We will process your surrender request at the end of the
valuation period during which your request is received. We may require that you
return your policy.
We will normally process your payment within seven days; however, we reserve the
right to defer payment. (See "Deferral of payments," under "Payment of policy
proceeds.")
Total surrenders If you surrender your policy totally, you receive its cash
surrender value -- the policy value minus outstanding indebtedness and
applicable surrender charges. (See "Loads, fees and charges.") We will compute
the value of each subaccount as of the end of the valuation period during which
your request is received.
Partial surrenders After the first policy year, you may surrender any amount
from $500 up to 85% of the policy's cash surrender value. (Partial surrenders by
telephone are limited to $50,000.) You will be charged a partial surrender fee,
described under "Loads, fees and charges."
<PAGE>
Allocation of partial surrenders Unless you specify otherwise, IDS Life of New
York will make partial surrenders from the fixed account and subaccounts in
proportion to their values at the end of the valuation period during which your
request is received. In determining these proportions, we first subtract the
amount of any outstanding indebtedness from the fixed account value.
Effects of partial surrenders
o The policy value will be reduced by the amount of the partial surrender and
fee.
o The death benefit will be reduced by the amount of the partial
surrender and fee, or, if the death benefit is based on the applicable
percentage of policy value, by an amount equal to the applicable
percentage times the amount of the partial surrender.
o A partial surrender may terminate the DBG-100 or the minimum initial
premium period. The surrender amount is deducted from total premiums
paid, which may reduce the total below the level required to keep the
DBG-100 or the minimum initial premium period in effect.
o If Option 1 is in effect, the specified amount will be reduced by the
amount of the partial surrender and fee.
Because they reduce the specified amount, partial surrenders may affect the cost
of insurance. IDS Life of New York will not allow a partial surrender if it
would reduce the specified amount below the required minimum. (See "Decreases"
under "Proceeds payable upon death.")
o If Option 2 is in effect, a partial surrender does not affect the specified
amount.
Taxes Upon surrender, you will generally be liable for taxes on any excess of
the cash surrender value plus outstanding indebtedness over the premium paid.
(See "Federal taxes.")
Exchange right
For two years after the policy is issued, you can exchange it for one that
provides benefits that do not vary with the investment return of the
subaccounts. Because the policy itself offers a fixed return option, all you
need to do is transfer all of the policy value in the subaccounts to the fixed
account. We will automatically credit all future premium payments to the fixed
account unless you request a different allocation.
Such transfer will not count against the five-transfers-per-year limit. Also,
any restrictions on transfers into the fixed account will be waived.
There will be no effect on the policy's death benefit, specified amount, net
amount at risk, risk classification(s) or issue age. Only the method of funding
the policy value will be affected.
<PAGE>
Optional insurance benefits
You may choose to add the following benefits to your policy at an additional
cost, in the form of riders (if certain requirements are met). More detailed
information on these benefits are in your policy.
Four-Year Term Insurance Rider (FYT) FYT provides four-year term insurance. An
additional death benefit is paid if both insureds die during the first four
years of the policy.
Policy Split Option Rider (PSO) PSO permits a policy to be split into two
individual permanent plans of life insurance then offered by IDS Life of New
York for exchange, one on the life of each insured, upon the occurrence of a
divorce of the insureds or certain changes in federal estate tax law. (See
"Federal taxes.")
Payment of policy proceeds
Proceeds will be paid when:
o you surrender the policy;
o the last surviving insured dies; or
o the youngest insured's attained insurance age 100.
All proceeds will be paid by check. We will compute the amount of the death
benefit and pay it in a single sum unless you select one of the payment options
below. We will pay interest at a rate not less than 4% per year on single sum
death proceeds, from the date of the last surviving insured's death to the
settlement date (the date on which proceeds are paid in a lump sum or first
placed under a payment option). You will be charged a fee if you request express
mail delivery.
Payment options:
During an insured's lifetime, you may request in writing that we pay policy
proceeds under one or more of the three payment options below. (The beneficiary
may also select a payment option, unless you say that he or she can't.) You
decide how much of the proceeds will be placed under each option (minimum:
$5,000). Any such amount will be transferred to IDS Life of New York's general
account. Unless we agree otherwise, payments under all options must be made to a
natural person.
You may also, by written request, change a prior choice of payment option or
elect a payment option other than the three below, if we agree.
If you elect a payment option for pre-death proceeds, payments under this option
may be subject to federal income tax as ordinary income. If you elect Option A,
the full pre-death proceeds will be taxed as a full surrender as described in
"Taxation of policy proceeds" and may also be subject to an additional 10%
penalty tax if the policy is a modified endowment. The interest paid under
Option A will be ordinary income subject to income tax in the year earned. The
interest payments will not be subject to the 10% penalty tax.
<PAGE>
If you elect Option B or Option C for payment of pre-death proceeds, any
indebtedness at the time of election will be taxed as a partial surrender as
described in "Taxation of policy proceeds" and may also be subject to an
additional 10% penalty tax if the policy is a modified endowment. The remainder
of the proceeds will be used to make payments under the option elected. A
portion of each payment will be taxed as ordinary income and a portion of each
payment will be considered a return of the investment in the policy and will not
be taxed. An owner's investment in the policy is described in "Taxation of
policy proceeds." All payments made after the investment in the policy is fully
recovered will be subject to tax. Amounts paid under Option B or Option C that
are subject to tax may also be subject to an additional 10% penalty tax. (See
"Penalty tax.")
Death benefit proceeds applied to any payment option are not considered part of
the beneficiary's income and thus are not subject to federal income tax.
Payments of interest under Option A will be ordinary income subject to tax.
Under Option B or Option C, a portion of each payment will be ordinary income
subject to tax, and a portion of each payment will be considered a return of the
beneficiary's investment in the policy. The beneficiary's investment in the
policy is the death benefit proceeds applied to the payment option. All payments
made after the investment in the policy is fully recovered will be subject to
tax.
Option A -- Interest payments We will pay interest on any proceeds placed under
this option at a rate of 3% per year compounded annually, at regular intervals
and for a period that is agreeable to both you and us. At the end of any payment
interval, you may withdraw proceeds in amounts of at least $100. At any time,
you may withdraw all of the proceeds that remain, or you may place them under a
different payment option approved by us.
Option B -- Payments for a specified period: We will make fixed monthly payments
for any number of years you specify. Here are examples of monthly payments for
each $1,000 placed under this option:
Payment period Monthly payment per $1,000
(years) placed under Option B
------------------ -----------------------------
10 $9.61
15 6.87
20 5.51
25 4.71
30 4.18
Monthly amounts for other payment periods will be furnished at your request,
free of charge.
Option C -- Lifetime income: We will make monthly payments for the life of the
person (payee) who is to receive the income. Payment will be guaranteed for 10,
15 or 20 years. The amount of each monthly payment per $1,000 placed under this
option will be based on the table of settlement rates in effect at the time of
the first payment. The amount depends on the sex and adjusted age of the payee
on that date. Adjusted age means the age of the payee (on the payee's last
birthday) minus an adjustment as follows:
<PAGE>
<TABLE>
<CAPTION>
Calendar year of payee's Adjustment Calendar year of payee's Adjustment
birth birth
<S> <C> <C> <C> <C> <C>
Before 1920 0 1945 - 1949 6
1920 - 1924 1 1950 - 1959 7
1925 - 1929 2 1960 - 1969 8
1930 - 1934 3 1970 - 1979 9
1935 - 1939 4 1980 - 1989 10
1940 - 1944 5 After 1989 11
</TABLE>
The amount of each monthly payment per $1,000 placed under this option will not
be less than amounts shown in the next table.
Monthly amounts for any adjusted age not shown will be furnished at your
request, without charge.
<TABLE>
<CAPTION>
Adjusted Life income per $1,000 with
age payee payments guaranteed for
- --------------------------- --------------------------------------------------------------------------------
10 years 15 years 20 years
Male Female Male Female Male Female
- --------------------------- ------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 $4.22 $3.89 $4.17 $3.86 $4.08 $3.82
55 4.62 4.22 4.53 4.18 4.39 4.11
60 5.14 4.66 4.96 4.57 4.71 4.44
65 5.81 5.22 5.46 5.05 5.02 4.79
70 6.61 5.96 5.96 5.60 5.27 5.12
75 7.49 6.89 6.38 6.14 5.42 5.35
</TABLE>
Deferral of payments:
We reserve the right to defer payments of cash surrender value, policy loans or
variable death benefits in excess of the specified amount if:
o the payments derive from a premium payment made by a check that has not
cleared the banking system (good payment has not been collected);
o the NYSE is closed (other than customary weekend and holiday closings);
o in accordance with SEC rules, trading on the NYSE is restricted or,
because of an emergency, it is not practical to dispose of securities
held in the subaccount or determine the value of the subaccount's net
assets.
Any loans or surrenders from the fixed account may be delayed up to six months
from the date we receive the request. If we postpone the payment of surrender
proceeds more than 30 days, we will pay you interest on the amount surrendered
at an annual rate of 4% for the period of postponement.
<PAGE>
Federal taxes
The following is a general discussion of the policy's federal income tax
implications. It is not intended as tax advice. Because the effect of taxes on
the value and benefits of your policy depends on your individual situation as
well as IDS Life of New York's tax status, YOU SHOULD CONSULT A TAX ADVISOR TO
FIND OUT HOW THESE GENERAL CONSIDERATIONS APPLY TO YOU. The discussion is based
on our understanding of federal income tax laws as currently interpreted by the
Internal Revenue Service (IRS); both the laws and their interpretation may
change.
The policy is intended to qualify as a life insurance policy for federal income
tax purposes. To that end, the provisions of the policy are to be interpreted to
ensure or maintain this tax qualification. IDS Life of New York reserves the
right to change the policy in order to ensure that it will continue to qualify
as life insurance for tax purposes. We will send you a copy of any changes.
IDS Life of New York's tax status
IDS Life of New York is taxed as a life insurance company under the Code. For
federal income tax purposes, the subaccounts are considered a part of IDS Life
of New York, although their operations are treated separately in accounting and
financial statements. Investment income from the subaccounts is reinvested and
becomes part of the subaccounts' value. This investment income, including
realized capital gains, is not taxed to IDS Life of New York, and therefore no
charge is made against the subaccounts for federal income taxes. IDS Life of New
York reserves the right to make such a charge in the future if there is a change
in the tax treatment of variable life insurance contracts or in IDS Life of New
York's tax status as we currently understand it.
Taxation of policy proceeds
The death benefit is not considered part of the beneficiary's income and thus is
not subject to federal income taxes. When the proceeds are paid on the youngest
insured's attained insurance age 100, if the amount received plus any
indebtedness exceeds your investment in the policy, the excess may be taxable as
ordinary income. Part or all of any pre-death proceeds received through full
surrender, lapse, partial surrender, policy loan or assignment of policy value,
or payment options may be subject to federal income tax as ordinary income. (See
the following table.) In some cases, the tax liability depends on whether the
policy is a modified endowment (explained following the table). The taxable
amount may also be subject to an additional 10% penalty tax if the policy is a
modified endowment.
<PAGE>
Source of proceeds Taxable portion of pre-death proceeds
Full surrender: Amount received plus any indebtedness,
minus your investment in the policy.*
Lapse: Any outstanding indebtedness minus your
investment in the policy.*
Partial surrenders Lesser of:
(modified endowments): the amount received or policy value minus
your investment in the policy.*
Policy loans and assignments Lesser of:
(modified endowments): the amount of the loan/assignment or
policy value minus your
investment in the policy.*
Partial surrenders Generally, if the amount received is
(other policies): greater than your investment in the
policy,* the amount in excess of your
investment is taxable. However,
during the first 15 policy years,
a different amount may be taxable
if the partial surrender results
in or is necessitated by a
reduction in benefits.
Policy loans and assignments None
(other policies):
Payment options: If proceeds of the policy
will be paid under one of the
payment options, see the "Payment
option" section for tax
information.
* The owner's investment is equal to premiums paid, minus the nontaxable portion
of any previous partial surrenders, plus the taxable portion of any previous
policy loans.
Modified endowment contracts
In 1988, Congress created a new class of life insurance policies called
"Modified Endowment Contracts," which are taxed differently from conventional
life insurance contracts. Policies applied for, or materially changed, on or
after June 21, 1988, are considered to be modified endowments if premiums paid
in the first seven years of the policy, or the first seven years following a
material change, exceed certain limits. (Also, any life insurance policy
received in exchange for a modified endowment is itself a modified endowment.)
We have established procedures for monitoring whether a contract may become a
modified endowment contract.
Modified endowment limits are calculated when the policy is issued, and are
based on the benefits provided and on the risk classification of the insureds.
They are later recalculated if certain reductions in benefits occur.
<PAGE>
Reductions in benefits: When benefits are reduced, the limits are recalculated
as if the reduced level of benefits had always been in effect. In most cases,
this recalculation will further restrict the amount of premium that can be paid
without exceeding modified endowment limits. If premiums already paid exceed the
recalculated limits, the policy becomes a modified endowment even if no further
premiums are paid.
Distributions affected: Modified endowment rules apply to distributions in the
year the policy becomes a modified endowment and in all subsequent years. In
addition, the rules apply to distributions taken two years before the policy
becomes a modified endowment, which are presumed to be taken in anticipation of
that event.
Serial purchase of modified endowments: All modified endowments issued by the
same insurer (or affiliated companies of the insurer) to the same owner during
any calendar year are treated as one policy in determining the amount of any
loan or distribution that is taxable.
Penalty tax: If a policy is a modified endowment, the taxable portion of
pre-death proceeds from a full surrender, lapse, partial surrender, policy loan
or assignment of policy value, or certain payment options may be subject to a
10% penalty tax unless:
o the distribution occurs after the owner attains age 59-1/2;
o the distribution is attributable to the owner becoming disabled (within the
meaning of Code Section 72(m)(7); or
o the distribution is part of a series of substantially equal periodic
payments made at least once a year over the life (or life expectancy) of
the owner or over the joint lives (or life expectancies) of the owner and
the owner's beneficiary.
Other tax considerations
Policy Split Option Rider: The Policy Split Option Rider permits a policy to be
split into two individual permanent plans of insurance then offered by IDS Life
of New York for exchange, one on the life of each insured, upon the occurrence
of a divorce of the insureds or certain changes in federal estate tax law. A
policy split could have adverse tax consequences; for example, it is not clear
whether a policy split will be treated as a nontaxable exchange under Sections
1031 through 1043 of the Code. If a policy split is not treated as a nontaxable
exchange, a split could result in the recognition of taxable income in an amount
up to any gain in the policy at the time of the split. In addition, it is not
clear whether, in all circumstances, the individual contracts that result from a
policy split would be treated as life insurance contracts for federal income tax
purposes and, if so treated, whether the individual contracts would be
classified as modified endowment contracts. Before you exercise rights provided
by the policy split option, it is important that you consult with a competent
tax advisor regarding the possible consequences of a policy split.
Interest paid on policy loans: If the loan is used for personal purposes, such
interest is not tax-deductible. Other rules apply if the loan is used for trade
or business or investment purposes, or if the policy is owned by a business or a
corporation.
Policy changes: Changing ownership, exchanging or assigning the policy may have
tax consequences, depending on the circumstances.
<PAGE>
Other taxes: Federal estate tax, state and local estate tax, inheritance tax,
gift tax and other tax consequences of ownership or receipt of policy proceeds
will also depend on the circumstances.
Qualified retirement plans: The policy may be used in conjunction with certain
qualified plans. Since the rules governing such use are complex, a purchaser
should consult a competent pension consultant.
On July 6, 1983, the Supreme Court held in Arizona Governing Committee v. Norris
that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Since the policy's cost of
insurance rates and purchase rates for certain settlement options distinguish
between men and women, employers and employee organizations should consult with
legal counsel before purchasing the policy for any employment-related insurance
or benefit program.
IDS Life of New York
IDS Life of New York is a stock life insurance company organized under the laws
of the State of New York in 1972. Our address is 20 Madison Ave. Extension,
Albany, NY 12203.
IDS Life of New York is licensed in New York and North Dakota, and it conducts a
conventional life insurance business in the state of New York. All annuity
contracts and insurance policies issued by IDS Life of New York, including the
policy described in this prospectus, are non-participating.
Ownership
IDS Life of New York, a New York Corporation, is a wholly-owned subsidiary of
IDS Life, a Minnesota Corporation, which is a wholly-owned subsidiary of
American Express Financial Corporation (AEFC). AEFC, a Delaware Corporation, is
a wholly-owned subsidiary of American Express Company.
State regulation
IDS Life of New York is subject to the laws of New York governing insurance
companies and to regulation by the New York Department of Insurance. An annual
statement in a prescribed form is filed with New York's Department of Insurance.
IDS Life of New York's books and accounts are subject to review by the New York
Department of Insurance at all times and a full examination of its operations is
conducted periodically. Such regulation does not, however, involve any
supervision of management or investment practices or policies.
Distribution of the policy
American Express Financial Advisors Inc., a registered broker/dealer and an
affiliate of IDS Life of New York, is the sole distributor of the policy. IDS
Life of New York pays its representatives a commission of up to 50% of the
initial target premium (annualized) when the policy is sold, plus 2% of all
premiums in excess of the target premium. IDS Life of New York also pays
approximately 27% of the total representative's commission to the field vice
presidents and district sales managers of the selling representative.
<PAGE>
Legal proceedings
There are no material legal proceedings to which the variable account is a party
or to which the assets of the variable account are subject. IDS Life of New York
is engaged in various kinds of routine litigation that, in IDS Life of New
York's judgment, are not of material importance in relation to its total assets.
None of such litigation relates to the variable account.
Experts
The financial statements of IDS Life of New York at Dec. 31, 1997 and 1996, and
for each of the three years in the period ended Dec. 31, 1997, and the
individual and combined financial statements of the segregated asset subaccounts
of IDS Life of New York Account 8 for Flexible Premium Survivorship Variable
Life Insurance at Dec. 31, 1997, and for each of the three years in the period
ended Dec. 31, 1997, except for the following subaccounts: YGI and YNO
subaccounts which are for the year ended Dec. 31, 1997 and the period Nov. 22,
1996 (commencement of operations) to Dec. 31, 1996, appearing in this prospectus
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
Actuarial matters included in the prospectus have been examined by Eugene C.
Chen, Chief Actuary, as stated in his opinion filed as an exhibit to the
Registration Statement.
Management of IDS Life of New York
Directors
John C. Boeder
Vice president, Mature Market Group, AEFC, since March 1994; president and chief
operating officer, IDS Life of New York, from 1991 to 1994; vice president and
chief operating officer, IDS Life of New York, from 1989 to 1991.
Roger C. Corea
Group vice president, Upstate New York, AEFA, since January 1995; vice
president, Northeast Region, AEFA, from May 1987 to December 1994.
Charles A. Cuccinello
Retired since 1982; former senior vice president, American Express Company.
Robert R. Grew
Lawyer and Partner, Carter, Ledyard & Milburn, NYC, 1957 - present
Robert A. Hatton
Vice president and chief operating officer, IDS Life of New York since June
1994; special assignment/Project leader, AEFA, December 1992 to June 1994;
manager/Analyst operations, AEFA, August 1989 to December 1992.
<PAGE>
Richard W. Kling
President and chairman of the board, IDS Life of New York, since April 1994;
director, IDS Life, since February 1984; President, IDS Life, since March 1994;
executive vice president, Marketing and Products, IDS Life, from January 1988 to
March 1994; senior vice president, Risk Management Products, AEFC, since May
1994; vice president, AEFC, from January 1988 to May 1994; director and
president of IDS Life Series Fund, Inc.; chairman of the board of managers and
president of IDS Life Variable Annuity Funds A and B.
Edward Landes
Retired, former Development Consultants; director, IDS Life Series Fund Inc.
since September 1985; member of the board of Managers of IDS Life Variable
Annuity Funds A and B since October 1988. Director of IDS Life Insurance Company
of New York; vice President of Financial YMCA Development, YMCA, since 1985.
Thomas V. Nicolosi
Director since October 1996; group vice president, AEFA, from January 1995 to
present; field vice president, AEFA, from January 1988 to December 1994.
Stephen P. Norman
Secretary, American Express, since 1982.
Carl N. Platou
Retired since 1990; member of the board of directors, St. Thomas University,
since 1990; chief financial officer, Fairview Hospital, from 1953 to 1990.
Gordon H. Ritz
President, Con Rad Broadcasting Corporation (Minneapolis), since 1975.
Richard M. Starr
Director since October 1996; managing counsel, American Express Company, since
March 1995; senior counsel, American Express Company, from May 1992 to March
1995; counsel, American Express Company, from June 1989 to May 1992.
Michael R. Woodward
Senior vice president, Field Management, AEFC, since June 1991; region vice
president, Atlantic Region, AEFC, from 1988 to June 1991.
Principal officers other than directors
Mario Alaia
Claims officer and assistant secretary since 1988.
Darrell C. Beckstrom
Underwriting officer since 1994; underwriting technical manager, IDS Life, since
1990; senior underwriter, IDS Life, from 1987 to 1992.
Eugene C. Chen
Chief actuary since November 1996; manager of Life Planning and Analysis, AEFA,
from May 1995 to November 1996; senior staff actuary - Product Development Risk
Management, IDS Life, from August 1992 to May 1995.
<PAGE>
Darlene S. Farron
Treasurer since June 1996; financial project manager - Finance Department from
September 1994 to June 1996; team leader of Premium, Investment and External
Reporting - Finance Department from March 1988 to September 1994.
Donna M. Gaglione
Secretary since 1995; manager of Administrative Services since 1992; treasurer
from 1985 to 1992.
Margaret M. Grogan, M.D.
Medical director since 1986.
Lorraine R. Hart
Investment officer since March 1992; vice president, Insurance Investments, IDS
Life, since October 1989.
F. Dale Simmons
Vice president and assistant treasurer since 1994; vice president and senior
portfolio manager, Insurance Investments, AEFC, since 1990.
William A. Stoltzmann
Counsel and assistant secretary since March 1990.
The officers, employees and sales force of IDS Life of New York are bonded, in
the amount of $100 million, by virtue of a blanket fidelity bond issued to
American Express Company by Saint Paul Fire and Marine, the leading underwriter.
AIM Advisors, Inc. and Putnam Investment Management, Inc.
AIM Advisors, Inc.
A I M Advisors, Inc. ("AIM") was organized in 1976 and is headquartered in
Houston, Texas. AIM is a wholly owned subsidiary of A I M Management Group Inc.,
a holding Company engaged in the financial services business and an indirect
wholly-owned subsidiary of AMVESCAP PLC.
Putnam Management
Putnam Management has been managing mutual funds since 1937. Today, the firm
serves as the investment manager for the funds in the Putnam Family, with nearly
$182 billion in assets under management in over 9 million shareholder accounts
at December 31, 1997.
Other information
A registration statement has been filed with the Securities and Exchange
Commission (SEC) under the Securities Act of 1933, as amended. For further
information concerning the policy, its separate account (the variable account)
and IDS Life of New York, please refer to the registration statement, as
amended, with exhibits.
<PAGE>
Substitution of investments
If shares of any fund are unavailable for purchase by the appropriate subaccount
or if, in the judgment of IDS Life of New York's management, further investment
in such shares is no longer appropriate, shares of another registered, open-end
management investment company may be substituted or the investments of the
subaccounts may be charged.
In the event of any such substitution or change, IDS Life of New York may,
without the consent or approval of owners, amend the policy and take whatever
action is necessary and appropriate. However, no such substitution or change
will be made without any necessary approval of the SEC or state insurance
departments. IDS Life of New York will notify owners within five days of any
substitution or change.
Voting rights
All shares issued by the fund are the same class (kind) -- capital stock. They
are fully paid and nonassessable and can be redeemed or transferred. They can be
issued as full shares or fractions. All shares have equal voting rights; a
fraction of a share has the same kind of rights and privileges as a full share.
Each of the funds issues its own series of common stock. The shares of each fund
represent an interest only in that fund's assets (and profits or losses) and in
the event of liquidation, each share of a fund would have the same rights to
dividends and assets as every other share of that fund.
Each share of a fund has one vote. On some issues, such as election of directors
of IDS Life Series Fund, all shares of the IDS Life Series Fund Portfolios vote
together as one series. When electing directors, all shares of IDS Life Series
Fund Portfolios have cumulative voting rights. Cumulative voting means that
shareholders are entitled to a number of votes equal to the number of shares
they hold multiplied by the number of directors to be elected and they have the
right to divide votes among candidates.
On an issue affecting only one fund -- for example, a fundamental investment
restriction pertaining only to that fund -- its shares vote as a separate
series. If shareholders of a particular fund vote approval of an agreement, the
agreement becomes effective with respect to that fund, whether or not it is
approved by shareholders of the other funds.
IDS Life of New York is the owner of all fund shares and as such holds all
voting rights. However, IDS Life of New York will vote the shares of each fund
in accordance with instructions received from owners. If we do not receive
timely instructions from you, we will vote your shares in the same proportion as
the shares for which instructions are received. Fund shares that are not
otherwise attributable to owners will also be voted by IDS Life of New York in
the same proportion as those shares in that subaccount for which instructions
are received.
We determine the number of fund shares in each subaccount for which you may give
instructions by applying your percentage interest in the subaccount to the total
number of votes attributable to the subaccount. The number will be determined as
of a date chosen by IDS Life of New York, but not more than 60 days before the
meeting of the fund.
<PAGE>
Fractional votes are counted. You will receive notice of each shareholder
meeting, together with any proxy solicitation materials and a statement of the
number of votes for which you are entitled to give instructions.
If required by state insurance officials, IDS Life of New York may disregard
voting instructions that would change the goals of one or more of the funds or
would result in approval or disapproval of an investment advisory contract. In
addition, IDS Life of New York itself may disregard voting instructions that
would require changes in the investment policy or investment advisor of one or
more of the funds, if IDS Life of New York reasonably disapproves such changes
in accordance with applicable federal regulations. If IDS Life of New York does
disregard voting instructions, it will, in its next report to owners, advise
them of that action and the reasons for it.
Reports
At least once a year IDS Life of New York will mail to you, at your last known
address of record, a report containing all information required by law or
regulation, including a statement showing the current policy value.
Policy illustrations
The following tables illustrate how policy values, cash surrender values and
death benefits may change with the investment experience of the subaccount. The
tables show how these amounts might vary, for a male insurance age 55 and a
female insurance age 55, both nonsmokers, if:
o the annual rate of return of the fund is 0%, 6% or 12%.
o the cost of insurance rates are current rates or guaranteed rates.
Any such illustration involves a number of detailed assumptions. (See chart,
"Understanding the illustrations.") To the extent that your own circumstances
differ from those assumed in the illustrations, your expected results would also
differ.
Upon request, you will be furnished with comparable tables illustrating death
benefits, policy values and cash surrender values based on the actual ages of
the persons you propose to insure and on an initial specified amount and premium
payment schedule. In addition, after you have purchased a policy, you may
request illustrations based on policy values at the time of request.
Understanding the illustrations:
Rates of return: assumed to be uniform, gross, after-tax, annual rates of 0%,
6%, or 12% for the fund. Results would differ depending on allocations among the
subaccounts, if returns averaged 0%, 6% and 12% for the funds as a whole, but
differed across individual funds.
Insureds: assumed to be a male insurance age 55 and a female insurance age 55,
in a standard risk classification, qualifying for the nonsmoker rate. Results
would be lower if one or both of the insureds were in a substandard risk
classification or did not qualify for the non-smoker rate.
<PAGE>
Premiums: A $15,000 premium is assumed to be paid in full at the beginning of
each policy year. Results would differ if premiums were paid on a different
schedule.
Policy loans and partial withdrawals: It is assumed that none have been made.
(Since indebtedness is assumed to be zero, the cash surrender value in all cases
equals the policy value minus the surrender charge.)
Effect of expenses and charges: The net investment return of the subaccounts,
shown in the tables, is lower than the gross, after-tax return of the fund
because expenses paid by the fund and charges made against the subaccounts have
been deducted. These include:
o the daily investment management fee paid by the funds, assumed to be
equivalent to an annual rate of 0.7% of the fund's aggregate average daily
net assets;
o the daily mortality and expense risk charge, equivalent to 0.9% of the
daily net asset value of the subaccounts annually; and
o a nonadvisory expense charge paid by the funds, assumed to be equivalent to
an annual rate of 0.1% of each funds aggregate average daily net assets for
direct expenses incurred by the fund.
The nonadvisory expense charge for the IDS Life Series Fund is capped by IDS
Life at 0.1%, even though actual expenses on IDS Life Series Fund-Government
Securities Portfolio ranged up to 0.15%, IDS Life Series-Money Market Portfolio
ranged up to 0.14% and IDS Life Series Fund-International Equity Portfolio
ranged up to 0.27%. Although IDS Life reserves the right to discontinue capping
these expenses, our present intent is to continue the cap indefinitely until
actual expenses are less than the cap. Should IDS Life discontinue the cap prior
to that time, the policy values and death benefits in the tables generally would
be less. Other expenses for the year ended Dec. 31, 1997 were 0.05% for Putnam
VT New Opportunities Fund. For AIM V.I. Growth and Income Fund other expenses
were 0.06% for the period ended Dec. 31, 1997.
(After deduction of the above expenses and charges, the illustrated gross annual
investment rates of return of 0%, 6% and 12% correspond to approximate net
annual rates of -1.69%, 4.21% and 10.11%, respectively.)
Taxes: Results shown in the tables reflect the fact that IDS Life of New York
does not currently charge the subaccounts for federal income tax. If such a
charge is taken in the future, the funds will have to earn more than they do now
in order to produce the death benefits and policy values illustrated.
<PAGE>
<TABLE>
<CAPTION>
Illustration
- ------------------------------------- ------------------------------------------------------------ --------------------------------
- ------------------------------------- ------------------------------------------------------------ --------------------------------
Initial specified amount $1,000,000 Male - Insurance age 55 - Nonsmoker Current costs assumed
Death benefit Option 1 Female - Insurance age 55 - Nonsmoker annual premium $15,000
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Premium Death benefit Policy Value Cash surrender value
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 15,750 $1,000,000 $1,000,000 $1,000,000 $ 12,873 $ 13,658 $ 14,444 $ 8,873 $ 9,658 $ 10,444
2 32,288 1,000,000 1,000,000 1,000,000 25,530 27,894 30,351 21,530 23,894 26,351
3 49,652 1,000,000 1,000,000 1,000,000 37,861 42,613 47,748 33,861 38,613 43,748
4 67,884 1,000,000 1,000,000 1,000,000 49,762 57,726 66,673 45,762 53,726 62,673
5 87,029 1,000,000 1,000,000 1,000,000 61,357 73,370 87,406 57,357 69,370 83,406
6 107,130 1,000,000 1,000,000 1,000,000 72,345 89,348 109,911 68,835 85,748 106,311
7 128,237 1,000,000 1,000,000 1,000,000 83,118 105,796 134,496 79,918 102,596 131,296
8 150,398 1,000,000 1,000,000 1,000,000 93,206 122,528 161,172 90,406 119,728 158,372
9 173,668 1,000,000 1,000,000 1,000,000 102,715 139,571 190,184 100,315 137,171 187,784
10 198,102 1,000,000 1,000,000 1,000,000 111,665 156,958 221,800 109,665 154,958 219,800
11 223,757 1,000,000 1,000,000 1,000,000 119,966 174,619 256,230 118,366 173,019 254,630
12 250,695 1,000,000 1,000,000 1,000,000 127,742 192,687 293,902 126,542 191,487 292,702
13 278,979 1,000,000 1,000,000 1,000,000 134,904 211,101 335,108 134,104 210,301 334,308
14 308,678 1,000,000 1,000,000 1,000,000 141,366 229,807 380,196 140,966 229,407 379,796
15 339,682 1,000,000 1,000,000 1,000,000 147,249 248,938 429,722 147,249 248,938 429,722
20 520,789 1,000,000 1,000,000 1,000,000 167,997 352,728 766,596 167,997 352,728 766,596
25 751,502 1,000,000 1,000,000 1,390,706 157,050 461,226 1,324,482 157,050 461,226 1,324,482
30 1,046,412 1,000,000 1,000,000 2,327,541 53,339 547,683 2,216,705 53,339 547,683 2,216,705
35 1,422,545 0 1,000,000 3,792,346 0 561,352 3,611,758 0 561,352 3,611,758
40 1,902,596 0 1,000,000 6,052,646 0 425,780 5,764,425 0 425,780 5,764,425
45 2,515,277 0 0 9,254,030 0 0 9,162,406 0 0 9,162,406
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $15,000 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and should not
be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. The death benefit,
policy value and cash surrender value would be different from those shown if
returns averaged 0%, 6% and 12% over a period of years, but fluctuated above and
below those averages for individual policy years. No representation can be made
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Initial specified amount $1,000,000 Male - Insurance age 55 - Nonsmoker Guaranteed costs assumed
Death benefit Option 1 Female - Insurance age 55 - Nonsmoker annual premium $15,000
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Premium Death benefit Policy Value Cash surrender value
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 15,750 $1,000,000 $1,000,000 $1,000,000 $ 12,873 $ 13,658 $ 14,444 $ 8,873 $ 9,658 $ 10,444
2 32,288 1,000,000 1,000,000 1,000,000 25,530 27,894 30,351 21,530 23,894 26,351
3 49,652 1,000,000 1,000,000 1,000,000 37,861 42,613 47,748 33,861 38,613 43,748
4 67,884 1,000,000 1,000,000 1,000,000 49,762 57,726 66,673 45,762 53,726 62,673
5 87,029 1,000,000 1,000,000 1,000,000 61,357 73,370 87,406 57,357 69,370 83,406
6 107,130 1,000,000 1,000,000 1,000,000 72,345 89,348 109,911 68,835 85,748 106,311
7 128,237 1,000,000 1,000,000 1,000,000 83,118 105,796 134,496 79,918 102,596 131,296
8 150,398 1,000,000 1,000,000 1,000,000 93,206 122,528 161,172 90,406 119,728 158,372
9 173,668 1,000,000 1,000,000 1,000,000 102,715 139,571 190,184 100,315 137,171 187,784
10 198,102 1,000,000 1,000,000 1,000,000 111,560 156,855 221,701 109,560 154,855 219,701
11 223,757 1,000,000 1,000,000 1,000,000 119,550 174,206 255,834 117,950 172,606 254,234
12 250,695 1,000,000 1,000,000 1,000,000 126,712 191,660 292,919 125,512 190,460 291,719
13 278,979 1,000,000 1,000,000 1,000,000 132,862 209,056 333,162 132,062 208,256 332,362
14 308,678 1,000,000 1,000,000 1,000,000 137,924 226,334 376,912 137,524 225,934 376,512
15 339,682 1,000,000 1,000,000 1,000,000 141,819 243,440 424,586 141,819 243,440 424,586
20 520,789 1,000,000 1,000,000 1,000,000 133,698 318,689 740,657 133,698 318,689 740,657
25 751,502 1,000,000 1,000,000 1,332,763 28,958 338,168 1,269,298 28,958 338,168 1,269,298
30 1,046,412 1,000,000 1,000,000 2,213,730 0 192,246 2,108,314 0 192,246 2,108,314
35 1,422,545 0 1,000,000 3,556,762 0 0 3,387,393 0 0 3,387,393
40 1,902,596 0 1,000,000 5,532,845 0 0 5,269,376 0 0 5,269,376
45 2,515,277 0 0 8,165,971 0 0 8,085,120 0 0 8,085,120
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $15,000 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and should not
be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. The death benefit,
policy value and cash surrender value would be different from those shown if
returns averaged 0%, 6% and 12% over a period of years, but fluctuated above and
below those averages for individual policy years. No representation can be made
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Initial specified amount $1,000,000 Male - Insurance age 55 - Nonsmoker Current costs assumed
Death benefit Option 2 Female - Insurance age 55 - Nonsmoker annual premium $15,000
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Premium Death benefit Policy value Cash surrender value
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 15,750 $1,012,871 $1,013,656 $1,014,442 $ 12,871 $ 13,656 $ 14,442 $ 8,871 $ 9,656 $ 10,442
2 32,288 1,025,525 1,027,888 1,030,345 25,525 27,888 30,345 21,525 23,888 26,345
3 49,652 1,037,847 1,042,598 1,047,730 37,847 42,598 47,730 33,847 38,598 43,730
4 67,884 1,049,725 1,057,682 1,066,621 49,725 57,682 66,621 45,725 53,682 62,621
5 87,029 1,061,283 1,073,280 1,087,296 61,283 73,280 87,296 57,283 69,280 83,296
6 107,130 1,072,292 1,089,168 1,109,685 72,292 89,168 109,685 68,692 85,568 106,085
7 128,237 1,082,878 1,105,481 1,134,085 82,878 105,481 134,085 79,678 102,281 130,885
8 150,398 1,092,812 1,121,993 1,160,449 92,812 121,993 160,449 90,012 119,193 157,649
9 173,668 1,102,104 1,138,711 1,188,975 102,104 138,711 188,975 99,704 136,311 186,575
10 198,102 1,110,766 1,155,644 1,219,882 110,766 155,644 219,882 108,766 153,644 217,882
11 223,757 1,118,690 1,172,680 1,253,285 118,690 172,680 253,285 117,090 171,080 251,685
12 250,695 1,126,006 1,189,945 1,289,563 126,006 189,945 289,563 124,806 188,745 288,363
13 278,979 1,132,607 1,207,327 1,328,880 132,607 207,327 328,880 131,807 206,527 328,080
14 308,678 1,138,386 1,224,708 1,371,418 138,386 224,708 371,418 137,986 224,308 371,018
15 339,862 1,143,475 1,242,210 1,417,630 143,475 242,210 417,630 143,475 242,210 417,630
20 520,789 1,158,144 1,330,920 1,717,417 158,144 330,920 717,417 158,144 330,920 717,417
25 751,502 1,135,016 1,398,674 2,156,241 135,016 398,674 1,156,241 135,016 398,674 1,156,241
30 1,046,412 1,012,373 1,366,625 2,735,967 12,373 366,625 1,735,967 12,373 366,625 1,735,967
35 1,422,545 0 1,085,371 3,399,883 0 85,371 2,399,883 0 85,371 2,399,883
40 1,902,596 0 0 4,166,038 0 0 3,166,038 0 0 3,166,038
45 2,515,277 0 0 4,610,673 0 0 3,610,673 0 0 3,610,673
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $15,000 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and should not
be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. The death benefit,
policy value and cash surrender value would be different from those shown if
returns averaged 0%, 6% and 12% over a period of years, but fluctuated above and
below those averages for individual policy years. No representation can be made
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
Illustration
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Initial specified amount $1,000,000 Male - Insurance age 55 - Nonsmoker Guaranteed costs assumed
Death benefit Option 2 Female - Insurance age 55 - Nonsmoker annual premium $15,000
- ------------------------------------- ------------------------------------------------------------ ---------------------------------
Premium Death benefit Policy value Cash surrender value
accumulated assuming hypothetical gross assuming hypothetical gross assuming hypothetical gross
End of with annual annual investment return of annual investment return of annual investment return of
policy interest
year at 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------ ------------ ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 15,750 $1,012,871 $1,013,656 1,014,442 $ 12,871 $ 13,656 $ 14,442 $ 8,871 $ 9,656 $ 10,442
2 32,288 1,025,525 1,027,888 1,030,345 25,525 27,888 30,345 21,525 23,888 26,345
3 49,652 1,037,847 1,042,598 1,047,730 37,847 42,598 47,730 33,847 38,598 43,730
4 67,884 1,049,725 1,057,682 1,066,621 49,725 57,682 66,621 45,725 53,682 62,621
5 87,029 1,061,283 1,073,280 1,087,296 61,283 73,280 87,296 57,283 69,280 83,296
6 107,130 1,072,292 1,089,168 1,109,685 72,292 89,168 109,685 68,692 85,568 106,085
7 128,237 1,082,878 1,105,481 1,134,085 82,878 105,481 134,085 79,678 102,281 130,885
8 150,398 1,092,812 1,121,993 1,160,449 92,812 121,993 160,449 90,012 119,193 157,649
9 173,668 1,102,104 1,138,711 1,188,975 102,104 138,711 188,975 99,704 136,311 186,575
10 198,102 1,110,648 1,155,522 1,219,756 110,648 155,522 219,756 108,648 153,522 217,756
11 223,757 1,118,218 1,172,186 1,252,769 118,218 172,186 252,769 116,618 170,586 251,169
12 250,695 1,124,832 1,188,697 1,288,238 124,832 188,697 288,238 123,632 187,497 287,038
13 278,979 1,130,268 1,204,803 1,326,162 130,268 204,803 326,162 129,468 204,003 325,362
14 308,678 1,134,428 1,220,367 1,366,663 134,428 220,367 366,663 134,028 219,967 366,263
15 339,862 1,137,214 1,235,241 1,409,875 137,214 235,241 409,875 137,214 235,241 409,875
20 520,789 1,118,740 1,284,564 1,662,467 118,740 284,564 662,467 118,740 284,564 662,467
25 751,502 0 1,227,701 1,937,570 0 227,701 937,570 0 227,701 937,570
30 1,046,412 0 0 2,126,774 0 0 1,126,774 0 0 1,126,774
35 1,422,545 0 0 1,994,219 0 0 994,219 0 0 994,219
40 1,902,596 0 0 1,170,462 0 0 170,462 0 0 170,462
45 2,515,277 0 0 0 0 0 0 0 0 0
</TABLE>
(1) Assumes no policy loans or partial withdrawals have been made.
(2) Assumes a $15,000 premium is paid at the beginning of each policy year.
Values will be different if premiums are paid in different amounts or with a
different frequency.
The above hypothetical investment results are illustrative only and should not
be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. The death benefit,
policy value and cash surrender value would be different from those shown if
returns averaged 0%, 6% and 12% over a period of years, but fluctuated above and
below those averages for individual policy years. No representation can be made
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
<PAGE>
IDS Life of New York Account 8 -- Flexible Premium Survivorship
Variable Life Subaccounts
Annual Financial Information
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company of New York
We have audited the accompanying individual and combined statements of net
assets of the segregated asset subaccounts of IDS Life of New York Account 8 for
Flexible Premium Survivorship Variable Life Insurance (comprised of subaccounts
YEQ, YIN, YMM, YMA, YGS, YIT, YGI, and YNO) as of December 31, 1997, and the
related statements of operations and changes in net assets for each of the three
years in the period then ended, except for the YGI and YNO subaccounts which are
for the year ended December 31, 1997 and the period November 22, 1996
(commencement of operations) to December 31, 1996. These financial statements
are the responsibility of the management of IDS Life Insurance Company of New
York. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1997 with the affiliated and
unaffiliated mutual fund portfolio managers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
segregated asset subaccounts of IDS Life of New York Account 8 for Flexible
Premium Survivorship Variable Life Insurance at December 31, 1997 and the
individual and combined results of its operations and the changes in its net
assets for the periods described above, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Minneapolis, Minnesota
March 13, 1998
<PAGE>
<TABLE>
<CAPTION>
IDS Life of New York Account 8--Flexible Premium Survivorship Variable Life Subaccounts
Statements of Net Assets Dec. 31, 1997
Segregated Asset Subaccounts Combined
- ------------------------------------------------------------------------------------------------------------------------ Variable
Assets YEQ YIN YMM YMA YGS YIT YGI YNO Account
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in shares of funds and mutual fund portfolios
at market value:
IDS Life Series Fund
Equity Portfolio
1,514,538 shares
at net asset value
of $29.98 per share
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(cost $33,397,298) .............$45,412,138 $-- $-- $-- $-- $-- $-- $-- $45,412,138
IDS Life Series Fund
Income Portfolio
482,937 shares
at net asset value
of $10.23 per share
(cost $4,820,267) .................. -- 4,940,244 -- -- -- -- -- -- 4,940,244
IDS Life Series Fund
Money Market Portfolio
1,152,926 shares
at net asset value
of $1 per share
(cost $1,152,813) .................. -- -- 1,152,818 -- -- -- -- -- 1,152,818
IDS Life Series Fund
Managed Portfolio
1,743,731 shares
at net asset value
of $18.26 per share
(cost $26,897,603) ................. -- -- -- 31,836,091 -- -- -- -- 31,836,091
IDS Life Series Fund
Government Securities Portfolio
52,953 shares
at net asset value
of $10.18 per share
(cost $537,150) .................... -- -- -- -- 539,182 -- -- -- 539,182
IDS Life Series Fund
International Equity Portfolio
544,784 shares
at net asset value
of $15.54 per share
(cost $8,211,734) .................. -- -- -- -- -- 8,464,494 -- -- 8,464,494
AIM V.I. Growth and Income Fund
163,042 shares
at net asset value
of $18.87 per share
(cost $2,893,352) .................. -- -- -- -- -- -- 3,076,597 -- 3,076,597
Putnam VT New Opportunities Fund
125,298 shares
at net asset value
of $21.23 per share
(cost $2,406,602) .................. -- -- -- -- -- -- -- 2,660,082 2,660,082
- ------------------------------------------------------------------------------------------------------------------------------------
45,412,138 4,940,244 1,152,818 31,836,091 539,182 8,464,494 3,076,597 2,660,082 98,081,646
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends receivable .............. -- 29,578 5,430 -- 2,726 -- -- -- 37,734
Accounts receivable from
IDS Life of New York for contract
purchase payments ................. 4,428 1,978 3,258 4,156 10,357 904 -- -- 25,081
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets ....................45,416,566 4,971,800 1,161,506 31,840,247 552,265 8,465,398 3,076,597 2,660,082 98,144,461
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable to IDS Life of New York for
mortality and expense risk fee 71,328 4,000 931 47,406 439 12,341 2,326 2,020 140,791
Payable to mutual fund portfolios
and the funds for investments
purchased 4,428 27,556 7,757 4,156 11,185 904 -- -- 55,986
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 75,756 31,556 8,688 51,562 11,624 13,245 2,326 2,020 196,777
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Variable Life
contracts $45,340,810 $4,940,244 $1,152,818 $31,788,685 $540,641 $8,452,153 $3,074,271 $2,658,062 $97,947,684
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 11,923,765 2,183,554 734,855 9,079,176 256,101 4,819,920 2,465,393 2,226,094
Net asset value per
accumulation unit $ 3.80 $ 2.26 $ 1.57 $ 3.50 $ 2.11 $ 1.75 $ 1.25 $ 1.19
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life of New York Account 8--Flexible Premium Survivorship Variable Life Subaccounts
Statements of Operations Year ended Dec. 31, 1997
Segregated Asset Subaccounts
Combined
Variable
Account
IDS Life of New York Account 8--Flexible Premium Survivorship Variable Life Subaccounts
Statements of Operations Year ended Dec. 31, 1997
Segregated Asset Subaccounts Combined
- ----------------------------------------------------------------------------------------------------------------------- Variable
YEQ YIN YMM YMA YGS YIT YGI YNO Account
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss):
Dividend income from mutual
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
fund portfolios and funds..... $1,459,523 $322,998 $ 49,171 $2,754,122 $ 37,545 $209,995 $3,724 $ -- $ 4,837,078
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 354,681 40,932 8,873 257,676 4,929 62,452 11,474 10,317 751,334
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net 1,104,842 282,066 40,298 2,496,446 32,616 147,543 (7,750) (10,317) 4,085,744
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--net
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on
sales of investments in mutual
fund portfolios and the funds
Proceeds from sales........... 751,190 476,335 1,548,607 679,787 227,327 544,898 52,916 56,134 4,337,194
Cost of investments sold...... 596,675 465,590 1,548,623 571,899 227,369 504,067 50,365 53,706 4,018,294
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments 154,515 10,745 (16) 107,888 (42) 40,831 2,551 2,428 318,900
Net change in unrealized appreciation or
depreciation of investments... 5,965,530 17,158 5 1,711,453 7,613 80,848 180,079 253,559 8,216,245
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 6,120,045 27,903 (11) 1,819,341 7,571 121,679 182,630 255,987 8,535,145
Net increase (decrease) in net assets resulting
from operations............... $7,224,887 $309,969 $ 40,287 $4,315,787 $ 40,187 $269,222 $174,880 $245,670 $12,620,889
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life of New York Account 8--Flexible Premium Survivorship Variable Life Subaccounts
Statements of Operations Year ended Dec. 31, 1996
Segregated Asset Subaccounts Combined
- ------------------------------------------------------------------------------------------------------------------------ Variable
YEQ YIN YMM YMA YGS YIT YGI* YNO* Account
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss):
Dividend income from mutual
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
fund portfolios and funds... $4,256,160 $252,288 $ 27,500 $1,556,968 $ 38,169 $369,589 $ 284 $ -- $6,500,958
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense
risk fee 238,970 34,107 4,683 188,866 5,146 25,967 55 33 497,827
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income
(loss)-- net 4,017,190 218,181 22,817 1,368,102 33,023 343,622 229 (33) 6,003,131
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments -- net
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of
investments in mutual fund
portfolios and the funds:
Proceeds from sales........... 810,674 299,105 1,020,483 594,770 118,200 705,857 1,783 -- 3,550,872
Cost of investments sold...... 647,479 295,360 1,020,488 527,763 119,926 698,109 1,743 -- 3,310,868
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments.................. 163,195 3,745 (5) 67,007 (1,726) 7,748 40 -- 240,004
Net change in unrealized appreciation or
depreciation of investments... 227,037 (101,695) 3 1,242,208 (29,290) (5,575) 3,166 (79) 1,335,775
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 390,232 (97,950) (2) 1,309,215 (31,016) 2,173 3,206 (79) 1,575,779
Net increase (decrease) in net assets resulting
from operations $4,407,422 $120,231 $22,815 $2,677,317 $ 2,007 $345,795 $3,435 $(112) $7,578,910
- ------------------------------------------------------------------------------------------------------------------------------------
* For the period Nov. 22, 1996 (commencement of operations) to Dec. 31, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life of New York Account 8--Flexible Premium Survivorship Variable Life Subaccounts
Statements of Operations Year ended Dec. 31, 1995
Segregated Asset Subaccounts Combined
- ------------------------------------------------------------------------------------------------------------------------ Variable
YEQ YIN YMM YMA YGS YIT Account
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss):
Dividend income from mutual
<S> <C> <C> <C> <C> <C> <C> <C>
fund portfolios and funds... $ 365,168 $191,968 $ 18,332 $ 738,863 $32,693 $ 6,898 $1,353,922
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense
risk fee.................... 148,582 25,384 2,588 139,149 4,797 5,471 325,971
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income
(loss)-- net................ 216,586 166,584 15,744 599,714 27,896 1,427 1,027,951
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments -- net
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of
investments in mutual fund
portfolios and the funds:
Proceeds from sales........... 490,632 272,924 352,853 729,876 80,977 54,522 1,981,784
Cost of investments sold...... 388,384 269,516 352,863 706,047 81,252 47,643 1,845,705
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments.................. 102,248 3,408 (10) 23,829 (275) 6,879 136,079
Net change in unrealized appreciation or
depreciation of investments... 4,708,717 341,906 8 2,003,441 54,903 178,601 7,287,576
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 4,810,965 345,314 (2) 2,027,270 54,628 185,480 7,423,655
Net increase (decrease) in net assets resulting
from operations $5,027,551 $511,898 $ 15,742 $2,626,984 $82,524 $186,907 $8,451,606
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life of New York Account 8--Flexible Premium Survivorship Variable Life Subaccounts
Statements of Changes in Net Assets Year ended Dec. 31, 1997
Segregated Asset Subaccounts Combined
- -------------------------------------------------------------------------------------------------------------------------- Variable
Operations YEQ YIN YMM YMA YGS YIT YGI YNO Account
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(loss)--net $ 1,104,842 $ 282,066 $ 40,298 $ 2,496,446 $ 32,616 $ 147,543 $ (7,750) $ (10,317)$ 4,085,744
Net realized gain (loss)
on investments............ 154,515 10,745 (16) 107,888 (42) 40,831 2,551 2,428 318,900
Net change in unrealized
appreciation or
depreciation of
investments............... 5,965,530 17,158 5 1,711,453 7,613 80,848 180,079 253,559 8,216,245
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations........... 7,224,887 309,969 40,287 4,315,787 40,187 269,222 174,880 245,670 12,620,889
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 7,441,563 784,805 890,628 4,816,210 119,153 2,330,345 828,706 881,192 18,092,602
Net transfers*............ 2,009,267 142,593 (455,707) 1,374,196 (100,924) 1,512,734 2,014,043 1,557,633 8,053,835
Transfers for policy loans (598,478) (66,319) (71,130) (441,258) (5,109) (61,032) (5,786) (11,001) (1,260,113)
Policy charges............ (1,997,018) (286,765) (104,917) (1,554,701) (46,144) (361,587) (68,945) (77,116) (4,497,193)
Contract terminations:
Surrender benefits........ (1,045,185) (233,575) (20,637) (793,080) (37,707) (99,532) (16,584) (20,126) (2,266,426)
Death benefits............ (69,049) (6,276) (43,028) (16,407) (6,354) (1,487) -- -- (142,601)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions..... 5,741,100 334,463 195,209 3,384,960 (77,085) 3,319,441 2,751,434 2,330,582 17,980,104
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning
of year.................. 32,374,823 4,295,812 917,322 24,087,938 577,539 4,863,490 147,957 81,810 67,346,691
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $45,340,810 $4,940,244 $1,152,818 $31,788,685 $540,641 $8,452,153 $3,074,271 $2,658,062 $97,947,684
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at
beginning of year........ 10,218,855 2,032,494 605,111 8,043,384 295,283 2,922,492 147,682 83,723
Contract purchase payments 2,193,598 358,800 577,058 1,469,705 60,085 1,327,806 697,652 805,177
Net transfers*........... 603,566 64,605 (292,656) 425,487 (51,527) 866,461 1,695,960 1,434,487
Transfers for policy loans (176,623) (29,936) (45,562) (134,833) (2,557) (34,345) (4,945) (9,924)
Policy charges........... (588,039) (131,741) (68,238) (475,355) (23,054) (205,879) (57,282) (69,750)
Contract terminations:
Surrender benefits....... (308,629) (107,894) (13,385) (244,414) (19,111) (55,746) (13,674) (17,619)
Death benefits........... (18,963) (2,774) (27,473) (4,798) (3,018) (869) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at
end of year............. 11,923,765 2,183,554 734,855 9,079,176 256,101 4,819,920 2,465,393 2,226,094
- ------------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life of New York's Fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life of New York Account 8--Flexible Premium Survivorship Variable Life Subaccounts
Statements of Changes in Net Assets Year ended Dec. 31, 1996
Segregated Asset Subaccounts Combined
- -------------------------------------------------------------------------------------------------------------------------- Variable
Operations YEQ YIN YMM YMA YGS YIT YGI** YNO** Account
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(loss)--net $ 4,017,190 $ 218,181 $ 22,817 $ 1,368,102 $ 33,023 $ 343,622 $ 229 $ (33)$ 6,003,131
Net realized gain (loss)
on investments............ 163,195 3,745 (5) 67,007 (1,726) 7,748 40 0 240,004
Net change in unrealized
appreciation or
depreciation of
investments............... 227,037 (101,695) 3 1,242,208 (29,290) (5,575) 3,166 (79) 1,335,775
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations........... 4,407,422 120,231 22,815 2,677,317 2,007 345,795 3,435 (112) 7,578,910
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 6,573,071 906,414 421,727 4,258,738 128,415 1,399,027 1,212 2,327 13,690,931
Net transfers*............ 4,592,956 411,398 84,784 1,920,764 (32,588) 2,388,202 143,217 79,670 9,588,403
Transfers for policy loans (505,653) (62,503) 3,059 (356,351) (9,286) (36,027) 203 203 (966,355)
Policy charges............ (1,632,273) (261,231) (59,118) (1,378,652) (53,375) (181,270) (110) (278) (3,566,307)
Contract terminations:
Surrender benefits........ (1,066,592) (138,797) (68,038) (750,212) (37,811) (80,784) -- -- (2,142,234)
Death benefits............ (96,266) (9,994) (488) (64,115) (4,633) (642) -- -- (176,138)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions..... 7,865,243 845,287 381,926 3,630,172 (9,278) 3,488,506 144,522 81,922 16,428,300
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning
of year.................. 20,102,158 3,330,294 512,581 17,780,449 584,810 1,029,189 -- -- 43,339,481
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $32,374,823 $4,295,812 $917,322 $24,087,938 $577,539 $4,863,490 $147,957 $81,810 $67,346,691
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at
beginning of year........ 7,545,186 1,614,264 351,572 6,737,143 300,900 759,139 -- --
Contract purchase payments 2,226,541 448,584 284,151 1,529,296 67,086 862,329 1,221 2,412
Net transfers*........... 1,568,157 201,620 54,143 691,235 (17,357) 1,485,306 146,370 81,389
Transfers for policy loans (172,189) (30,740) 2,027 (127,659) (4,888) (22,490) 201 209
Policy charges........... (555,329) (128,282) (39,921) (495,019) (28,020) (111,831) (110) (287)
Contract terminations:
Surrender benefits....... (361,430) (67,972) (46,534) (269,131) (19,955) (49,577) -- --
Death benefits........... (32,081) (4,980) (327) (22,481) (2,483) (384) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at
end of year............. 10,218,855 2,032,494 605,111 8,043,384 295,283 2,922,492 147,682 83,723
- ------------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life of New York's Fixed account.
**For the period Nov. 22, 1996 (commencement of operations) to Dec. 31, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life of New York Account 8--Flexible Premium Survivorship Variable Life Subaccounts
Statements of Changes in Net Assets Year ended Dec. 31, 1995
Segregated Asset Subaccounts
- --------------------------------------------------------------------------------------------------------------------- Combined
Variable
Operations YEQ YIN YMM YMA YGS YIT Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss)-- net... $ 216,586 $ 166,584 $ 15,744 $ 599,714 $ 27,896 $ 1,427 $1,027,951
Net realized gain (loss)
on investments................... 102,248 3,408 (10) 23,829 (275) 6,879 136,079
Net change in unrealized
appreciation or depreciation
of investments................... 4,708,717 341,906 8 2,003,441 54,903 178,601 7,287,576
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations................. 5,027,551 511,898 15,742 2,626,984 82,524 186,907 8,451,606
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments....... 3,794,832 584,353 81,641 3,321,378 122,755 326,063 8,231,022
Net transfers*................... 1,229,446 157,500 238,223 605,901 (13,926) 465,906 2,683,050
Transfers for policy loans....... (315,444) (17,868) (10,292) (354,356) (8,919) (19,573) (726,452)
Policy charges................... (1,228,453) (220,918) (32,357) (1,200,990) (52,035) (44,302) (2,779,055)
Contract terminations:
Surrender benefits............... (532,822) (102,633) (21,712) (494,500) (16,005) (13,988) (1,181,660)
Death benefits................... (42,827) (2,511) (30,660) (146,900) (723) -- (223,621)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions............ 2,904,732 397,923 224,843 1,730,533 31,147 714,106 6,003,284
Net assets at beginning of year.. 12,169,875 2,420,473 271,996 13,422,932 471,139 128,176 28,884,591
Net assets at end of year........ $20,102,158 $3,330,294 $512,581 $17,780,449 $584,810 $1,029,189 $43,339,481
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning
of year......................... 6,264,819 1,408,215 196,238 5,999,602 283,647 130,380
Contract purchase payments...... 1,670,681 308,878 57,494 1,406,500 68,039 288,272
Net transfers*.................. 534,034 79,609 165,152 256,018 (7,789) 406,561
Transfers for policy loans...... (139,658) (9,737) (7,381) (149,809) (5,170) (16,732)
Policy charges.................. (539,694) (117,478) (22,780) (507,431) (28,858) (38,369)
Contract terminations:
Surrender benefits.............. (226,906) (53,959) (15,145) (207,716) (8,585) (10,973)
Death benefits.................. (18,090) (1,264) (22,006) (60,021) (384) --
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 7,545,186 1,614,264 351,572 6,737,143 300,900 759,139
- ------------------------------------------------------------------------------------------------------------------------------------
* Includes transfer activity from (to) other subaccounts and transfers from
(to) IDS Life of New York's Fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS Life of New York Account 8 -- Flexible Premium Survivorship
Variable Life Subaccounts
Notes to Financial Statements
1. Organization
IDS Life of New York Account 8 (the Variable Account) was established on Sept.
12, 1985 as a segregated asset account of IDS Life Insurance Company of New York
(IDS Life of New York) under New York law and is registered as a single unit
investment trust under the Investment Company Act of 1940. Operations of the
Variable Account commenced on Aug. 31, 1987.
The Variable Account is comprised of various subaccounts. The assets of each
subaccount of the Variable Account are not chargeable with liabilities arising
out of the business conducted by any other Subaccount or by IDS Life of New
York. The assets of the Variable Account shall be available, however, to cover
the liabilities of IDS Life of New York to the extent the assets of the Variable
Account exceed its liabilities arising under the policies supported by it.
Flexible Premium Survivorship Variable Life policy owners allocate their premium
payment to one or more of the eight subaccounts. Such funds are then invested in
shares of six portfolios of IDS Life Series Fund, Inc. (the Mutual Fund); or in
shares of the AIM V.I. Growth and Income Fund; or in shares of the Putnam VT New
Opportunities Fund.
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. AIMVariable Insurance Funds, Inc., a Maryland cooperation,
which was incorporated on Jan. 22, 1993 and Putnam Variable Trust, a
Massachusetts business trust, which was organized on Sept. 24, 1987 are
diversified open-end management companies. Funds allocated to Equity Subaccount
(YEQ) are invested in the shares of the Equity Portfolio; Income Subaccount
(YIN) invests in the shares of the Income Portfolio; Money Market Subaccount
(YMM) invests in the shares of the Money Market Portfolio; Managed Subaccount
(YMA) invests in the shares of the Managed Portfolio; Government Securities
Subaccount (YGS) invests in the shares of the Government Securities Portfolio;
International Equity Subaccount (YIT) invests in shares of the International
Equity Portfolio; YGI Subaccount invests in shares of the AIM V.I. Growth and
Income Fund and YNO Subaccount invests in shares of the Putnam VT New
Opportunities Fund.
IDS Life Insurance Company, parent company of IDSLife of New York, acts as the
investment manager and American Express Financial Corporation acts as the
investment advisor of the Mutual Fund. AIM Management Group Inc. acts as the
investment manager for AIM V.I. Growth and Income Fund. Putnam Investments acts
as the investment manager for Putman VT New Opportunities Fund. American Express
Financial Advisors serves as distributor for the Flexible Premium Survivorship
Variable Life policy.
2. Summary of Significant Accounting Policies
Investments in Mutual Funds
Investments in shares of the mutual fund portfolios and funds are stated at
market value which is the net asset value per share as determined by the
respective portfolios and funds. 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 and funds are reinvested in additional shares of
the portfolios and funds and are recorded as income by the subaccounts on the
ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the subaccounts' share of the portfolios' and
funds' undistributed net investment income, undistributed realized gain or loss
and the unrealized appreciation or depreciation on their investment securities.
Federal Income Taxes
IDS Life of New York is taxed as a life insurance company. The Variable Account
is treated as part of IDS Life of New York 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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
3. Mortality and Expense Risk Fee and Policy Charges
IDS Life of New York makes contractual assurances to the Variable Account that
possible future adverse changes in administrative expenses and mortality
experience of the policy owners and beneficiaries will not affect the Variable
Account. The mortality and expense risk fee paid to IDS Life of New York is
computed daily and is equal on an annual basis to 0.9 percent of the daily net
asset value of the Variable Account. A monthly deduction is made for the cost of
insurance, the policy fee and the death benefit guarantee charge for the policy
month. The cost of insurance for the policy month is determined on the monthly
date by determining the net amount at risk, as of that day, and by then applying
the cost of insurance rates to the net amount at risk which IDS Life of New York
is assuming for the succeeding month. The monthly deduction will be taken from
the subaccounts as specified in the application for the policy.
IDS Life of New York deducts a policy fee of $30 per month for the first 15
years. This charge reimburses IDS Life of New York for expenses incurred in
administering the policy, such as processing claims, maintaining records, making
policy changes and communicating with owners of policies. IDS Life of New York
does not anticipate that it will make any profit on this charge. IDSLife of New
York reserves the right to change this charge in the future, but guarantees that
it will never exceed $30 per month.
4. Optional Insurance Benefit Charge
Each month IDS Life of New York deducts charges for any optional insurance
benefits added to the policy by rider.
5. Premium Expense Charge
IDS Life of New York deducts charges for three separate items from each premium
payment. The total of these charges is called the premium expense charge.
Details regarding these three charges follows.
A sales charge of 7.25 percent of each premium payment will be deducted to
compensate IDS Life of New York for expenses relating to the distribution of the
policy, including agents' commissions, advertising, and the printing of the
prospectuses and sales literature.
The policy provides that a charge of 1 percent of each premium payment will be
deducted to cover the premium taxes imposed by the state of New York.
The policy provides that a charge of 1.25 percent of each premium payment will
be deducted to cover the federal taxes resulting from the sale of the policy.
IDS Life of New York reserves the right to change this charge in the future if
applicable federal law changes.
6. Surrender Charge
There are surrender charges for full surrender in the first 15 years of the
policy. They are generally level for 5 years and decreasing the next 10 years.
The surrender charge is $4.00 per $1,000 of the amount used to determine the
death benefit (specified amount). This surrender charge reimburses IDSLife of
New York for the cost of issuing the policy. Charges by IDS Life of New York for
surrenders are not identified on an individual segregated asset account basis.
Charges for all segregated asset accounts amounted to $688,445 in 1997, $551,374
in 1996, $464,724 in 1995. Such charges are not treated as a separate expense of
the subaccounts or Variable Account. They are ultimately deducted from contract
surrender benefits paid by IDS Life of New York.
<PAGE>
<TABLE>
<CAPTION>
7. Investment Transactions
The subaccounts' purchases of portfolio and fund shares including reinvestment
of dividend distributions, were as follows:
Year ended Dec. 31,
1997 1996 1995
Subaccount Investment
<S> <C> <C> <C>
YEQ Equity Portfolio $ 7,620,803 $12,711,900 $3,623,207
YIN Income Portfolio 1,092,864 1,362,573 837,431
YMM Money Market Portfolio 1,784,114 1,273,437 745,230
YMA Managed Portfolio 6,573,036 5,602,928 3,068,323
YGS Government Securities Portfolio 172,859 150,485 140,020
YIT International Equity Portfolio 4,017,372 4,543,458 771,320
YGI AIM V.I. Growth and Income Fund 2,798,870 146,590* --
YNO Putnam VT New Opportunities Fund 2,378,386 81,922* --
- ---------------------------------------------------------------------------------------------------------------------------
Combined Variable Account $26,438,304 $25,873,293 $9,185,531
- ---------------------------------------------------------------------------------------------------------------------------
*Commenced operations Nov. 22, 1996.
</TABLE>
<PAGE>
8. Year 2000 Issue (Unaudited)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the Variable Account.
The Variable Account has no computer systems of its own but is dependent upon
the systems maintained by AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each system by the end of
1998 and to continue compliance efforts through 1999.
The Year 2000 readiness of unaffiliated investment managers and other third
parties whose system failures could have an impact on the Variable Account's
operations is currently being evaluated. The potential materiality of any such
impact is not known at this time.
<PAGE>
<PAGE>
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company of New York
We have audited the accompanying balance sheets of IDS Life
Insurance Company of New York (a wholly owned subsidiary of IDS
Life Insurance Company) as of December 31, 1997 and 1996, and the
related statements of income, stockholder's equity and cash flows
for each of the three years in the period ended December 31, 1997.
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 financial position
of IDS Life Insurance Company of New York at December 31, 1997
and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Minneapolis, Minnesota
February 5, 1998
<PAGE>
IDS LIFE INSURANCE COMPANY OF NEW YORK
- --------------------------------------------------------------------------
BALANCE SHEETS Dec. 31, 1997 Dec. 31, 1996
ASSETS (thousands)
- --------------------------------------------------------------------------
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1997, $562,979; 1996, $604,635) $ 535,651 $ 585,812
Available for sale, at fair value (Fair value:
1996, $582,962; 1996, $590,608) 603,576 601,623
Mortgage loans on real estate 178,826 160,017
Policy loans 23,349 20,077
Other investments 970 1,374
- --------------------------------------------------------------------------
Total investments 1,342,372 1,368,903
- --------------------------------------------------------------------------
Accrued investment income 20,205 21,068
Deferred policy acquisition costs 126,614 119,183
Other assets 4,227 3,950
Separate account assets 1,236,759 950,018
- --------------------------------------------------------------------------
Total assets $2,730,177 $2,463,122
- --------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
- --------------------------------------------------------------------------
Liabilities:
Future policy benefits:
Fixed annuities $964,483 $1,054,954
Universal life-type insurance 147,744 142,278
Traditional life, disability income
and long-term care insurance 50,469 45,338
Policy claims and other policyholders' funds 4,013 3,155
Deferred income taxes 11,445 9,046
Amounts due to brokers 29,054 3,007
Other liabilities 28,931 25,463
Separate account liabilities 1,236,759 950,018
- --------------------------------------------------------------------------
Total liabilities 2,472,898 2,233,259
- --------------------------------------------------------------------------
Stockholder's equity:
Capital stock, $10 par value per share;
200,000 shares authorized, issued and outstanding 2,000 2,000
Additional paid-in capital 49,000 49,000
Net unrealized gain on investments 13,175 6,937
Retained earnings 193,104 171,926
- --------------------------------------------------------------------------
Total stockholder's equity 257,279 229,863
- --------------------------------------------------------------------------
Total liabilities and stockholder's equity $2,730,177 $2,463,122
- --------------------------------------------------------------------------
See accompanying notes.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENTS OF INCOME
Years ended Dec. 31,
1997 1996 1995
(thousands)
- -------------------------------------------------------------------------------
Revenues:
Traditional life, disability income
and long-term care insurance
premiums $ 12,376 $ 10,931 $ 9,280
Policyholder and contractholder charges 18,319 15,832 13,216
Mortality and expense risk fees 11,312 8,574 6,213
Net investment income 106,274 109,468 110,924
Net realized gains (losses) on investments 547 (1,424) 1,548
- -------------------------------------------------------------------------------
Total revenues 148,828 143,381 141,181
- -------------------------------------------------------------------------------
Benefits and expenses:
Death and other benefits:
Traditional life, disability income
and long-term care insurance 3,633 4,182 3,354
Universal life-type insurance
and investment contracts 3,852 4,409 4,548
Increase in liabilities for future
policy benefits for traditional life,
disability income and
long-term care insurance 3,979 2,324 1,958
Interest credited on universal life-type
insurance and investment contracts 62,294 65,099 68,630
Amortization of deferred policy
acquisition costs 17,201 16,071 13,085
Other insurance and operating expenses 10,220 8,972 7,474
- -------------------------------------------------------------------------------
Total benefits and expenses 101,179 101,057 99,049
- -------------------------------------------------------------------------------
Income before income taxes 47,649 42,324 42,132
Income taxes 16,471 14,640 14,745
- -------------------------------------------------------------------------------
Net income $ 31,178 $ 27,684 $ 27,387
- -------------------------------------------------------------------------------
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1997
(thousands)
Additional Net Unrealized
Capital Paid-In Gains (Losses) Retained
Stock Capital on Investments Earnings Total
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $2,000 $ 49,000 $ (12,369) $133,090 $171,721
Net income -- -- -- 27,387 27,387
Change in net unrealized
gains (losses) on investments -- -- 27,710 -- 27,710
Cash dividends -- -- -- (8,000) (8,000)
Loss on investment transfer
to parent -- -- -- (235) (235)
- ----------------------------------------------------------------------------------------
Balance, December 31, 1995 2,000 49,000 15,341 152,242 218,583
Net income -- -- -- 27,684 27,684
Change in net unrealized
gains (losses) on investments -- -- (8,404) -- (8,404)
Cash dividends -- -- -- (8,000) (8,000)
- ----------------------------------------------------------------------------------------
Balance, December 31, 1996 2,000 49,000 6,937 171,926 229,863
Net income -- -- -- 31,178 31,178
Change in net unrealized
gains (losses) on investments -- -- 6,238 -- 6,238
Cash dividends -- -- -- (10,000) (10,000)
- ----------------------------------------------------------------------------------------
Balance, December 31, 1997 $2,000 $49,000 $ 13,175 $193,104 $257,279
- ----------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS Years ended Dec. 31,
1997 1996 1995
(thousands)
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $31,178 $27,684 $27,387
Adjustments to reconcile net income to net
cash provided by operating activities:
Policy loan issuance, excluding universal
life-type insurance (3,073) (2,473) (2,093)
Policy loan repayment, excluding universal
life-type insurance 1,897 1,571 881
Change in accrued investment income 863 1,504 (1,055)
Change in deferred policy acquisition
costs, net (7,431) (9,087) (11,017)
Change in liabilities for future policy
benefits for traditional life, disability income
and long-term care insurance 5,131 2,861 1,931
Change in policy claims and other
policyholders' funds 858 (489) 427
Deferred income tax benefit (960) (2,095) (1,301)
Change in other liabilities 3,468 4,434 2,429
(Accretion of discount)
amortization of premium, net (352) (652) (480)
Net realized (gain) loss on investments (547) 1,424 (1,548)
Policyholder and contractholder
charges, non-cash (8,772) (7,831) (6,962)
Other, net (557) (1,781) (508)
- --------------------------------------------------------------------------------
Net cash provided by operating activities $21,703 $15,070 $ 8,091
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ -- $ -- $ (37,540)
Maturities, sinking fund payments and calls 36,511 39,082 34,216
Sales 12,616 14,465 28,905
Fixed maturities available for sale:
Purchases (101,818) (97,370) (133,503)
Maturities, sinking fund payments and calls 84,229 71,939 44,234
Sales 27,055 15,669 8,839
Other investments, excluding policy loans:
Purchases (33,243) (14,802) (1,939)
Sales 14,233 12,659 5,993
Change in amounts due from broker 995 -- --
Change in amounts due to broker 26,047 (6,993) 10,000
- --------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 66,625 34,649 (40,795)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received 112,732 131,011 159,431
Surrenders and death benefits (251,259) (236,689) (190,695)
Interest credited to account balances 62,294 65,099 68,630
Universal life-type insurance policy loans:
Issuance (4,848) (4,490) (4,870)
Repayment 2,753 3,350 2,946
Cash dividend to parent (10,000) (8,000) (8,000)
- --------------------------------------------------------------------------------
Net cash (used in) provided by financing
activities (88,328) (49,719) 27,442
- --------------------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents -- -- (5,262)
Cash and cash equivalents at beginning of year -- -- 5,262
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ -- $ -- $ --
- --------------------------------------------------------------------------------
See accompanying notes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS ($ thousands)
1. Summary of significant accounting policies
------------------------------------------
Nature of business
IDS Life Insurance Company of New York (the Company) is engaged in the
insurance and annuity business in the state of New York. The Company's
principal products are deferred annuities and universal life insurance
which are issued primarily to individuals. It offers single premium
and flexible premium deferred annuities on both a fixed and variable
dollar basis. Immediate annuities are offered as well. The Company's
insurance products include universal life (fixed and variable), whole
life, single premium life and term products (including waiver of
premium and accidental death benefits). The Company also markets
disability income and long-term care insurance.
Basis of presentation
The Company is a wholly owned subsidiary of IDS Life Insurance Company
(IDS Life), which is a wholly owned subsidiary of American Express
Financial Corporation (AEFC), which is a wholly owned subsidiary of
American Express Company. The accompanying financial statements have
been prepared in conformity with generally accepted accounting
principles which vary in certain respects from reporting practices
prescribed or permitted by the New York Department of Insurance as
reconciled in Note 11.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Investments
Fixed maturities that the Company has both the positive intent and the
ability to hold to maturity are classified as held to maturity and
carried at amortized cost. All other fixed maturities and all
marketable equity securities are classified as available for sale and
carried at fair value. Unrealized gains and losses on securities
classified as available for sale are reported as a separate component
of stockholder's equity, net of deferred income taxes.
Realized investment gains or losses are determined on an identified
cost basis.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to
recognize interest income. Prepayment estimates are based on
information received from brokers who deal in mortgage-backed
securities.
Mortgage loans on real estate are carried at amortized cost less
allowances for mortgage loan losses. The estimated fair value of the
mortgage loans is determined by a discounted cash flow analysis using
mortgage interest rates currently offered for mortgages of similar
maturities.
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------------------
Impairment of mortgage loans is measured as the excess of the loan's
recorded investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate, or
the fair value of collateral. The amount of the impairment is recorded
in an allowance for mortgage loan losses. The allowance for mortgage
loan losses is maintained at a level that management believes is
adequate to absorb estimated losses in the portfolio. The level of the
allowance account is determined based on several factors, including
historical experience, expected future principal and interest payments,
estimated collateral values, and current and anticipated economic and
political conditions. Management regularly evaluates the adequacy of
the allowance for mortgage loan losses.
The Company generally stops accruing interest on mortgage loans for
which interest payments are delinquent more than three months. Based
on management's judgment as to the ultimate collectibility of
principal, interest payments received are either recognized as income
or applied to the recorded investment in the loan.
The cost of interest rate caps is amortized to investment income over
the life of the contracts and payments received as a result of these
agreements are recorded as investment income when realized. The
amortized cost of interest rate caps is included in other investments.
Policy loans are carried at the aggregate of the unpaid loan balances
which do not exceed the cash surrender values of the related policies.
When evidence indicates a decline, which is other than temporary, in
the underlying value or earning power of individual investments, such
investments are written down to the fair value by a charge to income.
Statements of cash flows
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These
securities are carried principally at amortized cost which approximates
fair value.
Supplementary information to the statements of cash flows for the years
ended December 31 is summarized as follows:
1997 1996 1995
---- ---- ----
Cash paid during the year for:
Income taxes $17,811 $15,247 $15,026
Interest on borrowings 1,026 777 742
Recognition of profits on annuity contracts and insurance policies
Profits on fixed deferred annuities are recognized by the Company over
the lives of the contracts, using primarily the interest method.
Profits represent the excess of investment income earned from
investment of contract considerations over interest credited to
contract owners and other expenses.
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.
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------------------
Premiums on traditional life, disability income and long-term care
insurance policies are recognized as revenue when due, and related
benefits and expenses are associated with premium revenue in a manner
that results in recognition of profits over the lives of the insurance
policies. This association is accomplished by means of the provision
for future policy benefits and the deferral and subsequent amortization
of policy acquisition costs.
Policyholder and contractholder charges include the monthly cost of
insurance charges and issue and administrative fees. These charges
also include the minimum death benefit guarantee fees received from the
variable life insurance separate accounts. Mortality and expense fees
are charged to the variable annuity and variable life insurance
separate accounts.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales compensation,
policy issue costs, underwriting and certain sales expenses, have been
deferred on insurance and annuity contracts.
The deferred acquisition costs for most single premium deferred
annuities and installment annuities are amortized in relation to
accumulation values and surrender charge revenue. The costs for
universal life-type insurance and certain installment annuities are
amortized as a percentage of the estimated gross profits expected to be
realized on the policies. For traditional life, disability income and
long-term care insurance policies, the costs are amortized over an
appropriate period in proportion to premium revenue.
Liabilities for future policy benefits
Liabilities for universal life-type insurance and deferred annuities
are accumulation values.
Liabilities for fixed annuities in a benefit status are based on
mortality tables with various interest rates ranging from 5% to 9.5%,
depending on year of issue.
Liabilities for future benefits on traditional life insurance are based
on the net level premium method, using anticipated mortality, policy
persistency and interest earning rates. Anticipated mortality rates
are based on established industry mortality tables. Anticipated policy
persistency rates vary by policy form, issue age and policy duration
with persistency on cash value plans generally anticipated to be better
than persistency on term insurance plans. Anticipated interest rates
range from 4% to 10%, depending on policy form, issue year and policy
duration.
Liabilities for future disability income and long-term care policy
benefits include both policy reserves and claim reserves. Policy
reserves are based on the net level premium method, using anticipated
morbidity, mortality, policy persistency and interest earning rates.
Anticipated morbidity and mortality rates are based on established
industry morbidity and mortality tables. Anticipated policy
persistency rates vary by policy form, issue age, policy duration and,
for disability income policies, occupation class. Anticipated interest
rates for disability income and long-term care policy reserves are 3%
to 9.5% at policy issue and grade to ultimate rates of 5% to 7% over 4
to 10 years.
Claim reserves are calculated based on claim continuance tables and
anticipated interest earnings. Anticipated claim continuance rates are
based on a national survey. Anticipated interest rates for claim
reserves for both disability income and long-term care range from 6% to
8%.
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------------------
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. Long-term care policies 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 AEFC and American Express Company, tax benefit is
recognized for losses to the extent they can be used on the
consolidated tax return. It is the policy of AEFC and its subsidiaries
that AEFC will reimburse subsidiaries for all tax benefits.
Included in other liabilities at December 31, 1997 and 1996 are $5,026
and $5,161, respectively, payable to IDS Life for federal income taxes.
Separate account business
The separate account assets and liabilities represent funds held for
the exclusive benefit of the variable annuity and variable life
insurance contract owners. The Company receives mortality and expense
risk fees from the variable annuity separate accounts.
The Company makes contractual mortality assurances to the variable
annuity contract owners that the net assets of the separate accounts
will not be affected by future variations in the actual life expectancy
experience of the annuitants and the beneficiaries from the mortality
assumptions implicit in the annuity contracts. The Company makes
periodic fund transfers to, or withdrawals from, the separate accounts
for such actuarial adjustments for variable annuities that are in the
benefit payment period. For variable life insurance, the Company
guarantees that the rates at which insurance charges and administrative
fees are deducted from contract funds will not exceed contractual
maximums. The Company also guarantees that the death benefit will
continue payable at the initial level regardless of investment
performance so long as minimum premium payments are made.
Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform to the
1997 presentation.
<PAGE>
2. Investments
-----------
Fair values of investments in fixed maturities represent quoted market
prices and estimated values when quoted prices are not available.
Estimated values are determined by established procedures involving,
among other things, review of market indices, price levels of current
offerings of comparable issues, price estimates and market data from
independent brokers and financial files.
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1997 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- ---- ----- ------ -----
U.S. Government agency
obligations $ 3,690 $ 253 $ -- $ 3,943
Corporate bonds and
obligations 476,108 27,361 444 503,025
Mortgage-backed securities 55,853 452 294 56,011
------- ------ --- -------
$535,651 $28,066 $738 $562,979
======= ====== === =======
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
------------------ ---- ----- ------ -----
State and municipal
obligations $ 104 $ 10 $ -- $ 114
Corporate bonds and
obligations 281,555 14,272 1,635 294,192
Mortgage-backed securities 301,303 8,253 286 309,270
------- ------ ----- -------
$582,962 $22,535 $1,921 $603,576
======= ====== ===== =======
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1996 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- ---- ----- ------ -----
U.S. Government agency
obligations $ 4,498 $ 144 $ -- $ 4,642
Corporate bonds and
obligations 523,807 23,060 2,964 543,903
Mortgage-backed securities 57,507 409 1,826 56,090
------- ------ ----- -------
$585,812 $23,613 $4,790 $604,635
======= ====== ===== =======
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
------------------ --------- ---------- ---------- -----
State and municipal
obligations $ 105 $ 10 $ -- $ 115
Corporate bonds and
obligations 260,966 8,857 1,181 268,642
Mortgage-backed securities 329,537 5,788 2,459 332,866
------- ------ ----- -------
$590,608 $14,655 $3,640 $601,623
======= ====== ===== =======
<PAGE>
2. Investments (continued)
-----------------------
The amortized cost and fair value of investments in fixed maturities at
December 31, 1997 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 $18,376 $ 18,593
Due from one to five years 84,712 89,432
Due from five to ten years 309,104 325,967
Due in more than ten years 67,606 72,976
Mortgage-backed securities 55,853 56,011
------- -------
$535,651 $562,979
======= =======
Amortized Fair
Available for sale Cost Value
------------------ --------- -----
Due in one year or less $12,635 $ 12,747
Due from one to five years 39,808 42,497
Due from five to ten years 139,686 145,567
Due in more than ten years 89,530 93,495
Mortgage-backed securities 301,303 309,270
------- -------
$582,962 $603,576
======= =======
During the years ended December 31, 1997, 1996 and 1995, fixed
maturities classified as held to maturity were sold with amortized cost
of $12,737, $14,507 and $27,971, respectively. Net gains and losses on
these sales were not significant. The sale of these fixed maturities
was due to significant deterioration in the issuers' creditworthiness.
Fixed maturities available for sale were sold during 1997 with proceeds
of $27,055 and gross realized gains and losses of $461 and $309,
respectively. Fixed maturities available for sale were sold during
1996 with proceeds of $15,669 and gross realized gains and losses of
$28 and $1,541, respectively. Fixed maturities available for sale were
sold during 1995 with proceeds of $8,839 and gross realized gains and
losses of $nil and $74, respectively.
At December 31, 1997, bonds carried at $259 were on deposit with the
state of New York as required by law.
<PAGE>
2. Investments (continued)
-----------------------
At December 31, 1997, investments in fixed maturities comprised
85 percent of the Company's total invested assets. These securities
are rated by Moody's and Standard & Poor's (S&P), except for securities
carried at approximately $117 million which are rated by AEFC internal
analysts using criteria similar to Moody's and S&P. A summary of
investments in fixed maturities, at amortized cost, by rating on
December 31 is as follows:
Rating 1997 1996
--------- ---- ----
Aaa/AAA $ 367,242 $ 396,097
Aa/AA 9,685 13,996
Aa/A 13,646 10,197
A/A 162,275 196,542
A/BBB 81,463 62,488
Baa/BBB 343,519 336,706
Baa/BB 21,519 51,639
Below investment grade 119,264 108,755
--------- ---------
$1,118,613 $1,176,420
========= =========
At December 31, 1997, 96 percent of the securities rated Aaa/AAA are
GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any
other issuer are greater than one percent of the Company's total
investments in fixed maturities.
At December 31, 1997, approximately 13 percent of the Company's
investments were mortgage loans on real estate. Summaries of mortgage
loans by region of the United States and by type of real estate are as
follows:
December 31, 1997 December 31, 1996
----------------------- -----------------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
------ ----- ----------- ----- -----------
West North Central $ 27,833 $ -- $ 23,191 $1,342
East North Central 33,515 -- 33,430 1,708
South Atlantic 34,182 2,750 35,501 --
Middle Atlantic 24,485 -- 22,889 --
Pacific 9,873 -- 12,986 --
Mountain 32,864 6,417 15,425 --
New England 8,624 -- 8,805 --
East South Central 8,698 -- 8,825 --
West South Central 252 -- 265 --
------- ----- ------- -----
180,326 9,167 161,317 3,050
Less allowance for
losses 1,500 -- 1,300 --
------- ----- ------- -----
$178,826 $9,167 $160,017 $3,050
======= ===== ======= =====
December 31, 1997 December 31, 1996
---------------------- ------------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
-------------- ----- ----------- ----- -----------
Apartments $ 68,823 $ -- $ 70,292 $1,708
Department/retail 54,622 6,417 48,476 1,342
stores
Office buildings 25,042 1,650 18,684 --
Industrial buildings 17,975 1,100 11,956 --
Nursing/retirement 6,035 -- 6,477 --
Medical buildings 7,577 -- 5,167 --
Hotels/motels 252 -- 265 --
------- ----- ------- -----
180,326 9,167 161,317 3,050
Less allowance for
losses 1,500 -- 1,300 --
------- ----- ------- -----
$178,826 $9,167 $160,017 $3,050
======= ===== ======= =====
<PAGE>
2. Investments (continued)
-----------------------
Mortgage loan fundings are restricted by state insurance regulatory
authority to 80 percent or less of the market value of the real estate
at the time of origination of the loan. The Company holds the mortgage
document, which gives it the right to take possession of the property
if the borrower fails to perform according to the terms of the
agreement. 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.
At December 31, 1997 and 1996, the Company's recorded investment in
impaired loans was $1,299 and $1,327, with allowances of $300 and $300,
respectively. During 1997 and 1996, the average recorded investment in
impaired loans was $1,312 and $1,628, respectively.
The Company recognized $126 and $152 of interest income related to
impaired loans for the years ended December 31, 1997 and 1996,
respectively.
The following table presents changes in the allowance for investment
losses related to all loans:
1997 1996 1995
---- ---- ----
Balance, January 1 $1,300 $ 445 $445
Provision for investment losses 200 855 --
----- ----- ---
Balance, December 31 $1,500 $1,300 $445
===== ===== ===
Net investment income for the years ended December 31 is summarized as
follows:
1997 1996 1995
---- ---- ----
Interest on fixed maturities $ 92,007 $ 95,574 $ 97,092
Interest on mortgage loans 14,228 14,171 13,888
Other investment income 1,715 1,293 1,291
Interest on cash equivalents 91 67 186
------- ------- -------
108,041 111,105 112,457
Less investment expenses 1,767 1,637 1,533
------- ------- -------
$106,274 $109,468 $110,924
======= ======= =======
Net realized gains (losses) on investments for the years ended December
31 is summarized as follows:
1997 1996 1995
---- ---- ----
Fixed maturities $844 $ (572) $1,997
Mortgage loans (200) (855) (487)
Other investments (97) 3 38
---- ------ -----
$547 $(1,424) $1,548
=== ===== =====
Changes in net unrealized appreciation (depreciation) of investments
for the years ended December 31 are summarized as follows:
1997 1996 1995
---- ---- ----
Fixed maturities
available for sale 9,599 (13,215) 43,726
<PAGE>
3. Income taxes
------------
The Company qualifies as a life insurance company for federal income
tax purposes. As such, the Company is subject to the Internal Revenue
Code provisions applicable to life insurance companies.
The income tax expense for the years ending December 31 consists of the
following:
1997 1996 1995
---- ---- ----
Federal income taxes:
Current $16,371 $15,735 $15,146
Deferred (960) (2,095) (1,301)
------ -------- --------
15,411 13,640 13,845
State income taxes-current 1,060 1,000 900
------ ------ ------
Income tax expense $16,471 $14,640 $14,745
====== ====== ======
Increases (decreases) to the federal tax provision applicable to pretax
income based on the statutory
rate are attributable to:
1997 1996 1995
-------------- -------------- -------------
Provision Rate Provision Rate Provision Rate
--------- ---- --------- ---- --------- ----
Federal income taxes based
on the statutory rate $16,677 35.0% $14,814 35.0% $14,746 35.0%
Increases (decreases)
are attributable to:
Tax-excluded interest
and dividend income (569) (1.2) (458) (1.1) (464) (1.1)
State tax, net benefit 689 1.4 650 1.5 585 1.4
Other, net (326) (0.6) (366) (0.8) (122) (0.3)
------ ---- ------ ---- ------ ----
Federal income taxes $16,471 34.6% $14,640 34.6% $14,745 35.0%
====== ==== ====== ==== ====== ====
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, 1997, the Company
had a policyholders' surplus account balance of $798. 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 $279 have not been established
because no distributions of such amounts are contemplated.
Significant components of the Company's deferred income tax assets and
liabilities as of December 31 are as follows:
1997 1996
Deferred income tax assets:
Policy reserves $28,922 $28,809
Other 5,467 4,018
----- -----
Total deferred income tax assets 34,389 32,827
Deferred income tax liabilities:
Deferred policy acquisition costs 36,594 35,302
Investments 9,240 6,571
------ -------
Total deferred income tax
liabilities 45,834 41,873
------ ------
Net deferred income tax liabilities $11,445 $9,046
====== =====
<PAGE>
3. Income taxes (continued)
------------------------
The Company is required to establish a valuation allowance for any
portion of the deferred income tax assets that management believes will
not be realized. In the opinion of management, it is more likely than
not that the Company will realize the benefit of the deferred tax
assets and, therefore, no such valuation allowance has been established.
4. Stockholder's equity
--------------------
Retained earnings available for distribution as dividends to the parent
are limited to the Company's surplus as determined in accordance with
accounting practices prescribed by the New York Department of
Insurance. All dividend distributions must be approved by the New York
Department of Insurance. Statutory unassigned surplus aggregated
$115,828 and $94,007 as of December 31, 1997 and 1996, respectively
(see Note 3 with respect to the income tax effect of certain
distributions and Note 11 for a reconciliation of net income and
stockholder's equity per the accompanying financial statements to
statutory net income and surplus).
5. Benefit plans
-------------
The Company participates in the American Express Company Retirement
Plan which covers all permanent employees age 21 and over who have met
certain employment requirements. Employer contributions to the plan
are based on participants' age, years of service and total compensation
for the year. Funding of retirement costs for this plan complies with
the applicable minimum funding requirements specified by ERISA. The
Company's share of the total net periodic pension cost was $39, $34 and
$33 in 1997, 1996 and 1995, respectively.
The Company has a "Sales Benefit Plan" which is an unfunded,
noncontributory retirement plan for all eligible financial advisors.
Total plan costs for 1997, 1996 and 1995, which are calculated on the
basis of commission earnings of the individual financial advisors, were
$1,965, $1,474 and $1,392, respectively. Such costs are included in
deferred policy acquisition costs.
The Company also participates in defined contribution pension plans of
American Express Company which cover all employees who have met certain
employment requirements. Company contributions to the plans are a
percent of either each employee's eligible compensation or basic
contributions. Costs of these plans charged to operations in 1997,
1996 and 1995 were $312, $248 and $231, respectively.
The Company participates in defined benefit health care plans of AEFC
that provide health care and life insurance benefits to retired
employees and retired financial advisors. The plans include
participant contributions and service-related eligibility
requirements. Upon retirement, such employees are considered to have
been employees of AEFC. AEFC expenses these benefits and allocates the
expenses to its subsidiaries. Accordingly, costs of such benefits to
the Company are included in employee compensation and benefits and
cannot be identified on a separate company basis.
<PAGE>
6. Incentive plan and related party operating expenses
---------------------------------------------------
The Company maintains a "Persistency Payment Plan." Under the terms of
this plan, financial advisors earn additional compensation based on the
volume and persistency of insurance sales. The total costs for the
plan for 1997, 1996 and 1995 were $1,490, $1,424 and $1,720,
respectively. Such costs are included in deferred policy acquisition
costs.
Charges by IDS Life and AEFC for the use of joint facilities, marketing
services and other services aggregated $11,589, $12,389 and $12,122 for
1997, 1996 and 1995, respectively. Certain of these costs are included
in deferred policy acquisition costs.
7. Commitments and contingencies
-----------------------------
At December 31, 1997 and 1996, traditional life insurance and universal
life-type insurance in force aggregated $4,513,251 and $4,053,561,
respectively, of which $220,798 and $203,963 were reinsured at the
respective year ends.
In addition, the Company has a stop loss reinsurance agreement with IDS
Life covering ordinary life benefits. IDS Life agrees to pay all death
benefits incurred each year which exceed 125 percent of normal claims,
where normal claims are defined in the agreement as .095 percent of the
mean retained life insurance in force. Premiums ceded to IDS Life
amounted to $115, $98 and $85 for the years ended December 31, 1997,
1996 and 1995, respectively. Claim recoveries under the terms of this
reinsurance agreement were $963, $861 and $1,426 in 1997, 1996 and
1995, respectively.
Premiums ceded to reinsurers other than IDS Life amounted to $1,583,
$747 and $667 for the years ended December 31, 1997, 1996 and 1995,
respectively. Reinsurance recovered from reinsurers other than IDS
Life amounted to $1,366, $66 and $576 for the years ended
December 31, 1997, 1996 and 1995.
Reinsurance contracts do not relieve the Company from its primary
obligations to policyholders.
The Company has an agreement to assume a block of extended term life
insurance business. The amount of insurance in force related to this
agreement was $303,263 and $345,943 at December 31, 1997 and 1996,
respectively. The accompanying statement of income includes premiums of
$nil for the years ended December 31, 1997, 1996 and 1995, and decreases
in liabilities for future policy benefits of $1,889, $2,010 and $2,039
related to this agreement for the years ended December 31, 1997, 1996 and
1995, respectively.
8. Lines of credit
---------------
The Company has an available line of credit with AEFC aggregating
$25,000. The line of credit is at 45 basis points over the Federal
Funds rate. A $20,000 line of credit with another bank expired on
June 30, 1997 and the Company did not seek renewal. Outstanding
borrowings under these agreements were $nil at December 31, 1997 and
1996.
9. 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 does not hold derivative
instruments for trading purposes. The Company manages risks associated
with these instruments as described below.
<PAGE>
9. Derivative financial instruments (continued)
--------------------------------------------
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 trading are
largely used to manage risk and, therefore, the cash flow and income
effects of the derivatives are inverse to the effects of the underlying
transactions.
Credit risk is the possibility that the counterparty will not fulfill
the terms of the contract. The Company monitors credit risk related to
derivative financial instruments through established approval
procedures, including setting concentration limits by counterparty and
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.
Credit risk related to interest rate caps is measured by replacement
cost of the contracts. The replacement cost represents the fair value
of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid
over the life of the agreement. Notional amounts are not recorded on
the balance sheet. Notional amounts far exceed the related credit
exposure.
The Company's holdings of derivative financial instruments are as
follows:
Notional Carrying Fair Total Credit
December 31, 1997 Amount Amount Value Exposure
----------------- ------ ------ ----- --------
Assets:
Interest rate caps $200,000 $ 970 $ 62 $ 62
======= === == ==
December 31, 1996
-----------------
Assets:
Interest rate caps $250,000 $1,374 $832 $832
======= ===== === ===
The fair values of derivative financial instruments are based on market
values, dealer quotes or pricing models. The interest rate caps expire
on various dates through 2000.
Interest rate caps are used to manage the Company's exposure to
interest rate risk. These instruments are used primarily to protect
the margin between interest rates earned on investments and the
interest rates credited to related annuity contract holders.
10. Fair values of financial instruments
------------------------------------
The Company discloses fair value information for most on- and
off-balance sheet financial instruments for which it is practicable to
estimate that value. Fair values of life insurance obligations,
receivables and all non-financial instruments, such as deferred
acquisition costs, are excluded. Off-balance sheet intangible assets,
such as the value of the field force, are also excluded. Management
believes the value of excluded assets and liabilities is significant.
The fair value of the Company, therefore, cannot be estimated by
aggregating the amounts presented.
<PAGE>
10. Fair values of financial instruments (continued)
------------------------------------------------
1997 1996
------------------ -----------------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
---------------- ------ ----- ------ -----
Investments:
Fixed maturities (Note 2):
Held to maturity $ 535,651 $ 562,979 $585,812 $604,635
Available for sale 603,576 603,576 601,623 601,623
Mortgage loans on real estate 178,826 187,992 160,017 164,444
(Note 2)
Other:
Derivative financial 970 62 1,374 832
instruments (Note 9)
Separate accounts assets (Note 1) 1,236,759 1,236,759 950,018 950,018
Financial Liabilities
Future policy benefits for
fixed annuities 880,809 852,391 979,030 946,359
Separate account liabilities 1,136,408 1,086,565 880,160 838,492
At December 31, 1997 and 1996, the carrying amount and fair value of
future policy benefits for fixed annuities exclude life
insurance-related contracts carried at $78,853 and $72,252,
respectively, and policy loans of $4,821 and $3,672, respectively. The
fair value of these benefits is based on the status of the annuities at
December 31, 1997 and 1996. The fair value of deferred annuities is
estimated as the carrying amount less any surrender charges and related
loans. The fair value for annuities in non-life contingent payout
status is estimated as the present value of projected benefit payments
at rates appropriate for contracts issued in 1997 and 1996.
At December 31, 1997 and 1996, the fair value of liabilities related to
separate accounts is estimated as the carrying amount less applicable
surrender charges and less variable insurance contracts carried at
$100,351and $69,859, respectively.
<PAGE>
11. Statutory insurance accounting practices
----------------------------------------
Reconciliations of net income for 1997, 1996 and 1995 and stockholder's
equity at December 31, 1997 and 1996, as shown in the accompanying
financial statements, to that determined using statutory accounting
practices are as follows:
1997 1996 1995
---- ---- ----
Net income, per accompanying
financial statements $31,178 $27,684 $27,387
Deferred policy acquisition costs (7,432) (9,087) (11,017)
Adjustments of future policy
benefit liabilities (4,928) (9,683) (10,655)
Deferred income tax benefit (960) (2,095) (1,301)
Provision for losses on 296 877 --
investments
IMR gain/loss transfer and (119) 1,010 (331)
amortization
Adjustment to separate account 10,267 8,863 20,769
reserves
Other, net 430 116 948
------ ------ ------
Net income, on basis of
statutory accounting practices $28,732 $17,685 $25,800
====== ====== ======
Stockholder's equity, per accompanying
financial statements $257,279 $229,863
Deferred policy acquisition costs (126,614) (119,183)
Adjustments of future policy 9,452 13,458
benefit
liabilities
Deferred income taxes 11,445 9,046
Asset valuation reserve (16,698) (19,446)
Adjustments of separate account 53,456 43,189
liabilities
Adjustments of investments to
amortized cost (20,613) (11,016)
Premiums due, deferred and advance 1,237 1,149
Deferred revenue liability 1,941 1,342
Allowance for losses 1,645 1,349
Non-admitted assets (552) (634)
Interest maintenance reserve (1,551) (1,432)
Other, net (1,463) (281)
-------- --------
Stockholder's equity, on basis of
statutory accounting practices $168,963 $147,404
======= =======
<PAGE>
12. Year 2000 Issue (unaudited)
---------------------------
The Year 2000 issue is the result of computer programs having been
written using two digits rather than four to define a year. Any
programs that have time-sensitive software may recognize a date using "00"
as the year 1900 rather than 2000. This could result in the failure of
major systems or miscalculations, which could have a material impact on
the operations of the Company. All of the systems used by the Company are
maintained by AEFC and are utilized by multiple subsidiaries and
affiliates of AEFC. The Company's business is heavily dependent upon
AEFC's computer systems and has significant interactions with systems of
third parties.
A comprehensive review of AEFC's computer systems and business
processes, including those specific to the Company, has been
conducted to identify the major systems that could be affected by the
Year 2000 issue. Steps are being taken to resolve any potential
problems including modification to existing software and the purchase
of new software. These measures are scheduled to be completed and
tested on a timely basis. AEFC's goal is to complete internal remediation
and testing of each system by the end of 1998 and to continue compliance
efforts through 1999.
AEFC is evaluating the Year 2000 readiness of advisors and other third
parties whose system failures could have an impact on the Company's
operations. The potential materiality of any such impact is not known at
this time.
<PAGE>
STATEMENT OF DIFFERENCES
Difference Description
1) Prospectus date 1) The effective date of April 29,
1998 has been added to the prospectus
2) Headings. 2) The headings in the prospectus
are placed in a strip at the top
of the page.
3) Footnotes for charts and 3) The footnotes for each chart or graph
are described at the left are typed below the description of
margin. the chart or graph.
4) Page Numbers 4) Page number have been inserted
in the printed version.
5) Footnote to "Rates of return 5) "We show performance..." has been changed
of subaccounts" table to read "The performance we show..."
6) "Fund expenses" 6) In last sentence "(annualized)" has been
deleted.
7) "Transfers between the fixed 7) "at the" has been added to 2nd sentence
account and subaccounts"
8) "Understanding the 8) In paragraph beginning "The nonadvisory
illustrations" expense charge...", "(annualized)" has
been deleted from the last sentence.
