<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period Commission file
ended September 30, 1995 number 33-23376
------------------------ ---------------
Aetna Life Insurance and Annuity Company
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 71-0294708
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
- --------------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (860) 273-0978
---------------------
None
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Title of Class at October 31, 1995
- -------------- -------------------
Common Stock,
par value $50 55,000
The registrant meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Quarterly Report For Period Ended September 30, 1995 on Form 10-Q
TABLE OF CONTENTS
-----------------
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income.............................. 3
Consolidated Balance Sheets.................................... 4
Consolidated Statements of Changes in Shareholder's Equity..... 5
Consolidated Statements of Cash Flows.......................... 6
Condensed Notes to Consolidated Financial Statements........... 7
Independent Auditors' Review Report............................ 8
Item 2. Management's Analysis of the Results of Operations........... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................ 14
Item 6. Exhibits and Reports on Form 8-K.............................. 14
Signatures............................................................ 15
(2)
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Consolidated Statements of Income
(millions)
<TABLE>
<CAPTION>
3 Months Ended September 30, 9 Months Ended September 30,
---------------------------- ----------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Premiums $24.1 $26.7 $94.8 $79.2
Charges assessed against policyholders 80.2 70.6 231.1 207.0
Net investment income 250.1 224.1 732.0 684.9
Net realized capital gains 8.3 3.4 19.3 5.3
Other income 7.5 1.0 30.0 3.9
-------- -------- -------- --------
Total revenue 370.2 325.8 1,107.2 980.3
Benefits and expenses:
Current and future benefits 230.2 206.6 677.1 621.1
Operating expenses 74.3 54.5 222.9 166.7
Amortization of deferred policy acquisition costs 6.9 11.9 27.3 31.7
-------- -------- -------- --------
Total benefits and expenses 311.4 273.0 927.3 819.5
Income before federal income taxes 58.8 52.8 179.9 160.8
Federal income taxes 19.6 16.0 58.8 51.4
-------- -------- -------- --------
Net income $39.2 $36.8 $121.1 $109.4
======== ======== ======== ========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
(3)
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Consolidated Balance Sheets
(millions)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1995 1994
- ------ ---- ----
<S> <C> <C>
Investments:
Debt securities, available for sale:
(amortized cost: $11,540.8 and $10,577.8) $11,999.5 $10,191.4
Equity securities, available for sale:
Non-redeemable preferred stock (cost: $54.8 and $43.3) 61.5 47.2
Investment in affiliated mutual funds (cost: $213.9 and $187.1) 241.7 181.9
Common stock (cost: $5.7 at September 30, 1995) 7.6 --
Short-term investments 16.6 98.0
Mortgage loans 5.6 9.9
Policy loans 305.7 248.7
Limited partnership 24.6 24.4
----------- -----------
Total investments 12,662.8 10,801.5
Cash and cash equivalents 506.4 623.3
Accrued investment income 171.8 142.2
Premiums due and other receivables 54.5 75.8
Deferred policy acquisition costs 1,283.1 1,172.0
Reinsurance loan to affiliate 659.4 690.3
Other assets 21.2 15.9
Separate Accounts assets 9,931.9 7,420.8
----------- -----------
Total assets $25,291.1 $20,941.8
=========== ===========
Liabilities and Shareholder's Equity
- ------------------------------------
Liabilities:
- -----------
Future policy benefits $3,247.2 $2,920.4
Unpaid claims and claim expenses 22.9 23.8
Policyholders' funds left with the Company 10,132.7 8,949.3
----------- -----------
Total insurance reserve liabilities 13,402.8 11,893.5
Other liabilities 261.4 302.1
Federal income taxes:
Current 17.6 3.4
Deferred 167.6 233.5
Separate Accounts liabilities 9,931.9 7,420.8
----------- -----------
Total liabilities 23,781.3 19,853.3
----------- -----------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized; 55,000 shares issued and outstanding) 2.8 2.8
Paid-in capital 407.6 407.6
Net unrealized capital gains (losses) 111.2 (189.0)
Retained earnings 988.2 867.1
----------- -----------
Total shareholder's equity 1,509.8 1,088.5
----------- -----------
Total liabilities and shareholder's equity $25,291.1 $20,941.8
=========== ===========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
(4)
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
9 Months Ended September 30,
------------------------------
1995 1994
---- ----
<S> <C> <C>
Shareholder's equity, beginning of period $1,088.5 $1,246.7
Net change in unrealized capital gains (losses) 300.2 (224.1)
Net income 121.1 109.4
---------- ----------
Shareholder's equity, end of period $1,509.8 $1,132.0
========== ==========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
(5)
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
9 Months Ended September 30,
------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $121.1 $109.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accrued investment income (29.6) (9.8)
Decrease in premiums due and other receivables 28.1 12.4
Increase in policy loans (57.0) (31.3)
Increase in deferred policy acquisition costs (111.1) (52.7)
Decrease in reinsurance loan to affiliate 30.9 21.0
Net increase in universal life account balances 164.0 110.2
Increase in other insurance reserve liabilities 10.6 14.1
Net (increase) decrease in other liabilities and other assets (17.2) 23.3
Increase in federal income taxes (3.6) (17.7)
Net accretion of discount on debt securities (48.9) (62.0)
Net realized capital gains (19.3) (5.3)
------ -----
Net cash provided by operating activities 68.0 111.6
------ -----
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 3,276.2 2,976.0
Equity securities 130.5 87.4
Investment maturities and collections of:
Debt securities available for sale 420.7 1,134.0
Short-term investments 95.6 16.2
Cost of investment purchases in:
Debt securities available for sale (4,581.6) (4,460.5)
Equity securities (170.2) (159.2)
Short-term investments (14.2) (87.5)
Limited partnership -- (25.0)
------ -----
Net cash used for investing activities (843.0) (518.6)
------ -----
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,461.9 1,328.6
Withdrawals of investment contracts (803.8) (705.3)
------ -----
Net cash provided by financing activities 658.1 623.3
------ -----
Net (decrease) increase in cash and cash equivalents (116.9) 216.3
Cash and cash equivalents, beginning of period 623.3 536.1
------ -----
Cash and cash equivalents, end of period $506.4 $752.4
------ -----
Supplemental cash flow information:
Income taxes paid, net $62.4 $69.1
------ -----
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
(6)
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Life and Casualty Company)
Condensed Notes to Consolidated Financial Statements
1. Basis of Presentation
---------------------
The consolidated financial statements include Aetna Life Insurance and
Annuity Company and its wholly owned subsidiaries, Aetna Insurance
Company of America, Systematized Benefits Administrators, Inc., Aetna
Private Capital, Inc. and Aetna Investment Services, Inc. (collectively,
the "Company"). Aetna Life Insurance and Annuity Company is a wholly
owned subsidiary of Aetna Life and Casualty Company ("Aetna").
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and are unaudited. Certain
reclassifications have been made to 1994 financial information to
conform to 1995 presentation. These interim statements necessarily rely
heavily on estimates including assumptions as to annualized tax rates.
In the opinion of management, all adjustments necessary for a fair
statement of results for the interim periods have been made. All such
adjustments are of a normal recurring nature.
2. Federal Income Taxes
--------------------
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. During the nine months ended September 30,
1995, the Company moved from a net unrealized capital loss position of
$189.0 million at December 31, 1994, to a net unrealized capital gain
position of $111.2 million at September 30, 1995, primarily due to
decreases in interest rates. As a result, all valuation allowances
previously established related to deferred tax assets on these capital
losses were reversed, which had no impact on net income for the three
and nine months ended September 30, 1995.
(7)
<PAGE>
Independent Auditors' Review Report
-----------------------------------
The Board of Directors
Aetna Life Insurance and Annuity Company:
We have reviewed the accompanying condensed consolidated balance sheet of
Aetna Life Insurance and Annuity Company and Subsidiaries as of September 30,
1995, and the related condensed consolidated statements of income for the
three-month and nine-month periods ended September 30, 1995 and 1994, and the
related condensed consolidated statements of changes in shareholder's equity
and cash flows for the nine-month periods then ended. These condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Aetna Life Insurance and Annuity
Company and Subsidiaries as of December 31, 1994, and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for the
year then ended (not presented herein); and in our report dated February 7,
1995, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1994, is fairly
presented, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
October 26, 1995
(8)
<PAGE>
Item 2. Management's Analysis of the Results of Operations
Consolidated Results of Operations: Operating Summary
- -----------------------------------------------------
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
Operating Summary (millions) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premiums $ 24.1 $ 26.7 $ 94.8 $ 79.2
Charges assessed against policyholders 80.2 70.6 231.1 207.0
Net investment income 250.1 224.1 732.0 684.9
Net realized capital gains 8.3 3.4 19.3 5.3
Other income 7.5 1.0 30.0 3.9
- -----------------------------------------------------------------------------------------------------------
Total revenue 370.2 325.8 1,107.2 980.3
- -----------------------------------------------------------------------------------------------------------
Current and future benefits 230.2 206.6 677.1 621.1
Operating expenses 74.3 54.5 222.9 166.7
Amortization of deferred policy acquisition costs 6.9 11.9 27.3 31.7
- -----------------------------------------------------------------------------------------------------------
Total benefits and expenses 311.4 273.0 927.3 819.5
- -----------------------------------------------------------------------------------------------------------
Income before federal income taxes 58.8 52.8 179.9 160.8
Federal income taxes 19.6 16.0 58.8 51.4
- -----------------------------------------------------------------------------------------------------------
Net income $ 39.2 $ 36.8 $ 121.1 $ 109.4
===========================================================================================================
- -----------------------------------------------------------------------------------------------------------
Deposits not included in premiums above: (1)
Fully guaranteed $ 232.5 $ 178.9 $ 805.7 $ 531.8
Experience-rated 262.6 278.0 821.7 894.0
Non-guaranteed 471.8 320.5 1,189.7 1,021.7
---------------------------------------------------------
Total $ 966.9 $ 777.4 $ 2,817.1 $ 2,447.5
===========================================================================================================
Assets under management: (2)
Fully guaranteed $ 3,269.8 $ 2,559.8
Experience-rated 10,393.7 9,103.1
Non-guaranteed 10,608.5 7,646.2
----------------------
Total $ 24,272.0 $ 19,309.1
===========================================================================================================
</TABLE>
(1) Under FAS 97, certain deposits are not included in premiums or revenue.
(2) Under FAS 115, included above are net unrealized capital gains of
$458.7 million and net unrealized capital losses of $232.1 million at
September 30, 1995 and 1994, respectively.
Overview
The Company's adjusted earnings (after-tax) follow (in millions):
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
1995 1994 1995 1994
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 39.2 $ 36.8 $ 121.1 $ 109.4
Less:
Net realized capital gains 5.4 2.2 12.5 3.5
---------------------------------------------------------
Adjusted earnings $ 33.8 $ 34.6 $ 108.6 $ 105.9
=========================================================
</TABLE>
The Company's adjusted earnings for the nine months ended September 30, 1995
increased 3% when compared with the same period a year ago, while third quarter
of 1995 adjusted earnings reflected a 2% decrease when compared to the third
quarter of 1994.
Third quarter and year-to-date results in 1995 reflected an increase in
charges assessed against policyholders and net investment income related to the
growth in assets under management offset by an increase in operating expenses.
The increase in operating expenses primarily reflects continued business
growth. Operating expenses for the nine months ended September 30, 1995 also
include increased costs associated with the implementation of a new contract
administration system.
(9)
<PAGE>
Segment Results
Life Insurance Segment
- ----------------------
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
Operating Summary (millions) 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premiums $ 8.3 $ 12.5 $ 33.5 $ 37.3
Charges assessed against policyholders 41.5 38.8 122.9 113.3
Net investment income 44.3 41.7 129.7 128.4
Net realized capital gains 1.5 .2 1.1 .5
Other income 1.3 1.0 4.3 3.5
--------------------------------------------------------------------------------------------------------
Total revenue 96.9 94.2 291.5 283.0
--------------------------------------------------------------------------------------------------------
Current and future benefits 54.8 52.5 149.1 155.9
Operating expenses 13.4 14.4 44.5 45.2
Amortization of deferred policy acquisition costs 5.1 5.8 23.0 13.6
--------------------------------------------------------------------------------------------------------
Total benefits and expenses 73.3 72.7 216.6 214.7
--------------------------------------------------------------------------------------------------------
Income before federal income taxes 23.6 21.5 74.9 68.3
Federal income taxes 9.2 8.0 29.1 25.3
--------------------------------------------------------------------------------------------------------
Net income $ 14.4 $ 13.5 $ 45.8 $ 43.0
==============================================================================================================
- --------------------------------------------------------------------------------------------------------------
Deposits not included in premiums above: (1)
Experience-rated $ 70.4 $ 68.7 $ 235.4 $ 199.6
Non-guaranteed 9.6 6.4 29.5 19.0
----------------------------------------------------------------
Total $ 80.0 $ 75.1 $ 264.9 $ 218.6
==============================================================================================================
Assets under management: (2)
Fully guaranteed $ 603.4 $ 621.1
Experience-rated 1,703.3 1,428.9
Non-guaranteed 117.0 77.5
----------------------------------------------------------------
Total $ 2,423.7 $ 2,127.5
==============================================================================================================
</TABLE>
(1) Under FAS 97, certain deposits are not included in premiums or revenue.
(2) Under FAS 115, included above are net unrealized capital gains of $63.0
million and net unrealized capital losses of $23.0 million at September 30,
1995 and 1994, respectively.
Adjusted earnings in the Life Insurance segment (after-tax) follow (in
millions):
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
1995 1994 1995 1994
-------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 14.4 $ 13.5 $ 45.8 $ 43.0
Less:
Net realized capital gains 1.0 .2 .7 .4
-------------------------------------------------------
Adjusted earnings $ 13.4 $ 13.3 $ 45.1 $ 42.6
=======================================================
</TABLE>
Adjusted earnings for the nine months ended September 30, 1995 increased 6%
when compared with the same period a year ago, while third quarter of 1995
adjusted earnings remained level when compared to the third quarter of 1994.
Third quarter and year-to-date results in 1995 reflected an increase in the
volume of business in force as a result of strong sales over the past year.
Charges assessed against policyholders for universal life and
interest-sensitive whole life insurance increased 7% and 8% for the three and
nine months ended September 30, 1995, respectively, when compared with the same
periods a year ago reflecting an increase in the volume of business in force.
(10)
<PAGE>
Net investment income increased 6% and 1% for the three and nine months
ended September 30, 1995, respectively, when compared with the same periods a
year ago reflecting an increase in universal life assets under management
partially offset by the lower net investment yield on the Company's portfolio
of investments.
Current and future benefits decreased 4% for the nine months ended September
30, 1995 when compared with the same period a year ago reflecting improved
mortality experience related to universal life insurance. Current and future
benefits for the three months ended September 30, 1995 increased 4% reflecting
unfavorable mortality experience when compared with the same period a year ago.
Financial Services Segment
- --------------------------
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
Operating Summary (millions) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premiums $ 15.8 $ 14.2 $ 61.3 $ 41.9
Charges assessed against policyholders 38.7 31.8 108.2 93.7
Net investment income 205.8 182.4 602.3 556.5
Net realized capital gains 6.8 3.2 18.2 4.8
Other income 6.2 - 25.7 .4
------------------------------------------------------------------------------------------------------
Total revenue 273.3 231.6 815.7 697.3
------------------------------------------------------------------------------------------------------
Current and future benefits 175.4 154.1 528.0 465.2
Operating expenses 60.9 40.1 178.4 121.5
Amortization of deferred policy acquisition costs 1.8 6.1 4.3 18.1
------------------------------------------------------------------------------------------------------
Total benefits and expenses 238.1 200.3 710.7 604.8
------------------------------------------------------------------------------------------------------
Income before federal income taxes 35.2 31.3 105.0 92.5
Federal income taxes 10.4 8.0 29.7 26.1
------------------------------------------------------------------------------------------------------
Net income $ 24.8 $ 23.3 $ 75.3 $ 66.4
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
Deposits not included in premiums above: (1)
Fully guaranteed $ 232.5 $ 178.9 $ 805.7 $ 531.8
Experience-rated 192.2 209.3 586.3 694.4
Non-guaranteed 462.2 314.1 1,160.2 1,002.7
------------------------------------------------------------
Total $ 886.9 $ 702.3 $ 2,552.2 $ 2,228.9
================================================================================================================
Assets under management: (2)
Fully guaranteed $ 2,666.4 $ 1,938.7
Experience-rated 8,690.4 7,674.2
Non-guaranteed 10,491.5 7,568.7
--------------------------
Total $21,848.3 $17,181.6
================================================================================================================
</TABLE>
(1) Under FAS 97, certain deposits are not included in premiums or revenue.
(2) Under FAS 115, included above are net unrealized capital gains of
$395.7 million and net unrealized capital losses of $209.1 million at
September 30, 1995 and 1994, respectively.
Adjusted earnings in the Financial Services segment (after-tax) follow (in
millions):
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
1995 1994 1995 1994
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 24.8 $ 23.3 $ 75.3 $ 66.4
Less:
Net realized capital gains 4.4 2.0 11.8 3.1
-----------------------------------------------------------
Adjusted earnings $ 20.4 $ 21.3 $ 63.5 $ 63.3
===========================================================
</TABLE>
(11)
<PAGE>
Effective January 1, 1995 the Company assumed responsibility for two service
organizations, a record keeping service organization and a payment and retiree
administration service organization, with year-to-date combined adjusted losses
of $(.4) million. As a result, other income and operating expenses reflect
variances of $8.5 million and $9.0 million for the three months ended September
30, 1995, and $28.3 million and $28.8 million for the nine months ended
September 30, 1995. The results of these organizations were previously
reported by an affiliate.
Adjusted earnings for the nine months ended September 30, 1995 remained
level when compared with the same period a year ago, while the third quarter of
1995 adjusted earnings reflected a 4% decrease when compared to the third
quarter of 1994. Third quarter and year-to-date results in 1995 reflected an
increase in charges assessed against policyholders and net investment income,
primarily due to an increase in assets under management, offset by increases in
operating expenses.
Charges assessed against policyholders for annuity contracts increased 22%
and 16% for the three and nine months ended September 30, 1995, respectively,
when compared with the same periods a year ago, reflecting the increase in
assets under management.
Net investment income increased 13% for the three months ended September 30,
1995 when compared with the same period a year ago, reflecting the increase in
assets under management and the higher net investment yield on the Company's
portfolio of investments. Net investment income increased 8% for the nine
months ended September 30, 1995 when compared with the same period a year ago,
reflecting the increase in assets under management partially offset by the
lower net investment yield on the Company's portfolio of investments.
Operating expenses for the three and nine months ended September 30, 1995,
excluding the impact of moving the two service organizations into the Company
as discussed above, increased by 29% and 23% when compared to the same periods
a year ago. The increase in operating expenses primarily reflects continued
business growth. Operating expenses for the nine months ended September 30,
1995 also include increased costs associated with the implementation of a new
contract administration system.
General Account Investments
- ---------------------------
The Company's investment strategies and portfolios are intended to match the
duration of the related liabilities and provide sufficient cash flow to meet
obligations while maintaining a competitive rate of return. The duration of
these investments is monitored, and investment purchases and sales are executed
with the objective of having adequate funds available to satisfy the Company's
maturing liabilities. The risks associated with investments supporting
experience-rated products are assumed by those customers subject to, among
other things, certain minimum guarantees.
(12)
<PAGE>
The Company's invested assets were comprised of the following, net of
impairment reserves:
<TABLE>
<CAPTION>
September 30, December 31,
(Millions) 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Debt securities $ 11,999.5 $ 10,191.4
Equity securities:
Non-redeemable preferred stock 61.5 47.2
Investment in affiliated mutual funds 241.7 181.9
Common stock 7.6 -
Short-term investments 16.6 98.0
Mortgage loans 5.6 9.9
Policy loans 305.7 248.7
Limited partnership 24.6 24.4
-----------------------------
Total Investments 12,662.8 10,801.5
Cash and cash equivalents 506.4 623.3
-----------------------------
Total Investments and Cash and Cash Equivalents $ 13,169.2 $ 11,424.8
==========================================================================================
</TABLE>
At September 30, 1995 and December 31, 1994, the Company's carrying value of
investments in debt securities were $12.0 billion and $10.2 billion, 95% and
94%, respectively, of total general account invested assets. At September 30,
1995 and December 31, 1994, $9.2 billion and $8.0 billion, 77% and 78%,
respectively, of total debt securities supported experience-rated products.
It is management's objective that the portfolio of debt securities be of
high quality and be well-diversified by market sector. The debt securities in
the Company's portfolio are generally rated by external rating agencies, and,
if not externally rated, are rated by the Company on a basis believed to be
similar to that used by the rating agencies. The average quality rating of the
Company's debt security portfolio was AA- at September 30, 1995 and AA at
December 31, 1994.
<TABLE>
<CAPTION>
Debt Securities Quality Ratings
at September 30, 1995
- ---------------------------------
<S> <C>
AAA 47.0%
AA 11.4
A 24.1
BBB 12.6
BB 3.8
B 1.1
--------
100.0%
========
</TABLE>
<TABLE>
<CAPTION>
Debt Securities Investments by Market Sector
at September 30, 1995
- ------------------------------------------------------------
<S> <C>
U.S. Corporate Securities 43.7%
Residential Mortgage-Backed Securities 27.5
Foreign Securities - U.S. Dollar Denominated 11.0
Asset-Backed Securities 6.3
Commercial/Multifamily Mortgage-Backed Securities 5.6
U.S. Treasuries/Agencies 5.4
Other .5
--------
100.0%
========
</TABLE>
(13)
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and its Board of Directors know of no material legal proceedings
pending to which the Company is a party or which would materially affect the
Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule.
(b) Reports on Form 8-K
None.
(14)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
(Registrant)
November 10, 1995 By /s/ Eugene M. Trovato
------------------- ------------------------
(Date) Eugene M. Trovato
Vice President and Controller
(Chief Accounting Officer)
(15)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FORM 10-Q FOR THE FISCAL QUARTER ENDED
SEPTEMBER 30, 1995 FOR AETNA LIFE INSURANCE AND ANNUITY COMPANY AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 11,999
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 311
<MORTGAGE> 6
<REAL-ESTATE> 0
<TOTAL-INVEST> 12,663
<CASH> 506
<RECOVER-REINSURE> 9
<DEFERRED-ACQUISITION> 1,283
<TOTAL-ASSETS> 25,291
<POLICY-LOSSES> 3,247
<UNEARNED-PREMIUMS> 2
<POLICY-OTHER> 21
<POLICY-HOLDER-FUNDS> 10,133
<NOTES-PAYABLE> 0
<COMMON> 3
0
0
<OTHER-SE> 1,507
<TOTAL-LIABILITY-AND-EQUITY> 25,291
95
<INVESTMENT-INCOME> 732
<INVESTMENT-GAINS> 19
<OTHER-INCOME> 30
<BENEFITS> 677
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 180
<INCOME-TAX> 59
<INCOME-CONTINUING> 121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
