SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 8 (File No. 33-40779) [x]
---------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 8 (File No. 812-7731) [x]
---------
(Check appropriate box or boxes)
IDS LIFE ACCOUNT SBS
- --------------------------------------------------------------------------------
(Exact Name of Registrant)
IDS Life Insurance Company
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(Name of Depositor)
IDS Tower 10, Minneapolis, MN 55440-0010
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
- --------------------------------------------------------------------------------
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on April 30, 1999 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
<PAGE>
SYMPHONY ANNUITY
PROSPECTUS/APRIL 30, 1999
Individual flexible premium deferred combination fixed/variable annuity.
IDS LIFE ACCOUNT SBS
Issued by:
IDS Life Insurance Company (IDS Life)
IDS Tower 10
Minneapolis, MN 55440-0010
Telephone: (800) 422-3542
This prospectus contains information that you should know before investing. You
also will receive the following prospectuses:
- - Greenwich Street Series Fund, and
- - IDS Life Retirement Annuity Mutual Funds.
Please read the prospectuses carefully and keep them for future reference. This
contract is available for qualified and nonqualified retirement plans.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THIS ANNUITY IS NOT A DEPOSIT OF A BANK OR FINANCIAL
INSTITUTION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THIS ANNUITY
INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the Securities and Exchange Commission (SEC), and is available without charge by
contacting IDS Life at the telephone number above or by completing and sending
the order form on page 32 of this prospectus. The table of contents of the SAI
is on page 31 of this prospectus.
1 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Key Terms......................................................... 3
The Contract in Brief............................................. 4
Expense Summary................................................... 5
Condensed Financial Information (Unaudited)....................... 8
Financial Statements.............................................. 10
Performance Information........................................... 10
The Variable Account.............................................. 11
The Funds......................................................... 12
The Fixed Account................................................. 14
Buying Your Contract.............................................. 14
Charges........................................................... 16
Valuing Your Investment........................................... 18
Making the Most of Your Contract.................................. 19
Surrenders........................................................ 22
TSA - Special Surrender Provisions................................ 22
Changing Ownership................................................ 23
Benefits in Case of Death......................................... 23
The Annuity Payout Period......................................... 24
Taxes............................................................. 25
Voting Rights..................................................... 28
About the Service Providers....................................... 28
Year 2000......................................................... 29
Table of Contents of the Statement of Additional Information...... 31
</TABLE>
2 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- ------------------------------------------------------------------
KEY TERMS
These terms can help you understand details about your contract.
ACCUMULATION UNIT -- A measure of the value of each variable subaccount before
annuity payouts begin.
ANNUITANT -- The person on whose life or life expectancy the annuity payouts are
based.
ANNUITY PAYOUTS -- An amount paid at regular intervals under one of several
plans.
BENEFICIARY -- The person you designate to receive annuity benefits in case of
the owner's or annuitant's death while the contract is in force and before
annuity payouts begin.
CLOSE OF BUSINESS -- When the New York Stock Exchange (NYSE) closes, normally 4
p.m. Eastern time.
CONTRACT VALUE -- The total value of your contract before we deduct any
applicable charges.
CONTRACT YEAR -- A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
FIXED ACCOUNT -- An account to which you may allocate purchase payments. Amounts
you allocate to this account earn interest at rates that we declare
periodically.
FUNDS -- Mutual funds and/or portfolios that are investment options under your
contract, each with a different investment objective. You may allocate your
purchase payments into variable accounts investing in shares of any or all of
these funds.
OWNER (YOU, YOUR) -- The person who controls the contract (decides on investment
allocations, transfers, payout options, etc.). Usually, but not always, the
owner is also the annuitant. The owner is responsible for taxes, regardless of
whether he or she receives the contract's benefits.
QUALIFIED ANNUITY -- A contract that you purchase for one of the following
retirement plans that is subject to applicable federal law and any rules of the
plan itself:
- - Individual Retirement Annuities (IRAs)
- - Simplified Employee Pension (SEP) plans
- - Section 401(k) plans
- - Custodial and trusteed pension and profit sharing plans
- - Tax Sheltered Annuities (TSAs)
All other contracts are considered NONQUALIFIED ANNUITIES.
RETIREMENT DATE -- The date when annuity payouts are scheduled to begin.
SURRENDER VALUE -- The amount you are entitled to receive if you make a full
surrender from your contract. It is the contract value minus any applicable
charges.
VALUATION DATE -- Any normal business day, Monday through Friday, that the NYSE
is open. Each valuation date ends at the close of business. We calculate the
value of each subaccount at the close of business on each valuation date.
VARIABLE ACCOUNT -- Consists of separate subaccounts to which you may allocate
purchase payments; each invests in shares of one fund. The value of your
investment in each subaccount changes with the performance of the particular
fund.
3 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- ------------------------------------------------------------------
THE CONTRACT IN BRIEF
PURPOSE: The purpose of the contract is to allow you to accumulate money for
retirement. You do this by making one or more investments (purchase payments)
that may earn returns that increase the value of the contract. The contract
provides lifetime or other forms of payouts beginning at a specified date (the
retirement date). As in the case of other annuities, it may not be advantageous
for you to purchase this contract as a replacement for, or in addition to an
existing annuity.
FREE LOOK PERIOD: You may return your contract to your financial consultant or
to our office within 10 days after it is delivered to you and receive a full
refund of the contract value. No charges will be deducted. However, you bear the
investment risk from the time of purchase until you return the contract; the
refund amount may be more or less than the payment you made. (Exception: If the
law requires, we will refund all of your purchase payments.)
ACCOUNTS: Currently, you may allocate your purchase payments among any or all
of:
- - the subaccounts, each of which invests in a fund with a particular investment
objective. The value of each subaccount varies with the performance of the
particular fund in which it invests. We cannot guarantee that the value at the
retirement date will equal or exceed the total purchase payments you allocate
to the subaccounts. (p. 12)
- - the fixed account, which earns interest at a rate that we adjust periodically.
(p. 14)
BUYING YOUR CONTRACT: Your financial consultant will help you complete and
submit an application. Applications are subject to acceptance at our office. You
may buy a nonqualified annuity or a qualified annuity. You must make an initial
lump-sum purchase payment. You have the option of making additional purchase
payments in the future. (p. 14)
- - Minimum initial purchase payment -- $5,000 for nonqualified annuities; $500
for qualified annuities
- - Minimum additional purchase payment -- $500 for nonqualified annuities; $50
for qualified annuities
- - Maximum total purchase payments - $1,000,000
TRANSFERS: Subject to certain restrictions you currently may redistribute your
money among the subaccounts and the fixed account without charge at any time
until annuity payouts begin. You may establish automated transfers among the
fixed account and subaccounts. Fixed account transfers are subject to special
restrictions. (p. 19)
SURRENDERS: You may surrender all or part of your contract value at any time
before the retirement date. You may also establish systematic withdrawals.
Surrenders may be subject to charges and tax penalties (including a 10% IRS
penalty if you surrender prior to your reaching age 59 1/2) and may have other
tax consequences; also, certain restrictions may apply. (p. 22)
CHANGING OWNERSHIP: You may change ownership of a nonqualified annuity by
written instruction, but this may have federal income tax consequences.
Restrictions apply to changing ownership of a qualified annuity. (p. 23)
BENEFITS IN CASE OF DEATH: If you or the annuitant die before annuity payouts
begin, we will pay the beneficiary an amount at least equal to contract value.
(p. 23)
ANNUITY PAYOUTS: You can apply your contract value to an annuity payout plan
that begins on the retirement date. You may choose from a variety of plans to
make sure that payouts continue as long as you like. If you purchased a
qualified annuity, the payout schedule must meet the requirements of the
qualified plan. Payouts will be made on a fixed basis. (p. 24)
TAXES: Generally, your contract grows tax-deferred until you surrender it or
begin to receive payouts. (Under certain circumstances, IRS penalty taxes may
apply). Even if you direct payouts to someone else, you will be taxed on the
income if you are the owner. (p. 25)
4 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- --------------------------------------------------------------------------------
CHARGES:
- - $30 annual contract administrative charge;
- - 0.25% variable account administrative charge;
- - 1.25% mortality and expense risk fee;
- - surrender charge;
- - any premium taxes that may be imposed on us by state or local governments
(currently, we deduct any applicable premium tax when you make a total
withdrawal or when annuity payouts begin); and
- - the operating expenses of the funds.
- --------------------------------------------------------------------------------
EXPENSE SUMMARY
The purpose of this table is to help you understand the various costs and
expenses associated with your contract.
You pay no sales charge when you purchase your contract. We show all costs that
you bear directly or indirectly for the subaccounts and funds below. Some
expenses may vary as we explain under "Charges."
<TABLE>
<CAPTION>
ANNUAL CONTRACT OWNER EXPENSES:
- -------------------------------------------------
SURRENDER CHARGE CONTRACT YEARS PERCENTAGE
-------------- ----------
<S> <C> <C>
(contingent deferred 1 6%
sales charge as a 2 5
percentage of 3 4
purchase 4 3
payments) 5 2
6 1
7 and later 0
CONTRACT ADMINISTRATIVE CHARGE $30
</TABLE>
<TABLE>
<CAPTION>
ANNUAL SUBACCOUNT EXPENSES (as a percentage
of average daily net assets of the
subaccounts:
- --------------------------------------------
<S> <C>
VARIABLE ACCOUNT ADMINISTRATIVE
CHARGE............................... 0.25%
MORTALITY AND EXPENSE RISK FEE....... 1.25%
- --------------------------------------------
TOTAL ANNUAL SUBACCOUNT EXPENSES..... 1.50%
- --------------------------------------------
- --------------------------------------------
</TABLE>
5 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- ------------------------------------------------------------------
ANNUAL OPERATING EXPENSES OF THE FUNDS
<TABLE>
<CAPTION>
(as a percentage of average daily net assets):
- ------------------------------------------------------------------------------------------------------------------
DIVERSIFIED
STRATEGIC EMERGING EQUITY EQUITY
APPRECIATION INCOME GROWTH INCOME INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Management fees.................................. .75% .65% .95% .65% .21%
Other expenses................................... .05 .13 .33 .14 .09
---------------------------------------------------------------
Total(1)......................................... .80% .78% 1.28% .79% .30%(2)
---------------------------------------------------------------
---------------------------------------------------------------
<CAPTION>
(as a percentage of average daily net assets):
- -------------------------------------------------
GROWTH AND INTERMEDIATE INTERNATIONAL MONEY TOTAL
INCOME HIGH GRADE EQUITY MARKET RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Management fees.................................. .65% .60% 1.05% .50% .75%
Other expenses................................... .07 .33 .35 .74 .04
-----------------------------------------------------------------
Total(1)......................................... .72% .93% 1.40% 1.24%(2) .79%
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
(1) Annualized operating expenses of underlying portfolios at Dec. 31, 1998.
(2) Figures in "Management fees," "Other expenses" and "Total" reflects waiver
of expenses by the investment advisor for the Money Market Portfolio and
Equity Index Portfolio. If there had been no reimbursement of expenses in
1998, the "Management fees", "Other expenses" and "Total" that would have
been incurred for the last completed fiscal year would be: 0.21%, 0.21%,
0.42%, respectively for the Equity Index Portfolio, and 0.50%, 1.24%, 1.74%,
respectively, for the Money Market Porfolio.
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and full surrender at the end of each time period.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year................... $ 84.04 $ 83.83 $ 88.96 $ 83.93 $ 78.91 $ 83.22 $ 85.37 $ 90.19 $ 88.55 $ 83.93
3 Years.................. 114.00 113.38 128.71 113.69 98.52 111.53 118.00 132.36 127.49 113.69
5 Years.................. 146.59 145.56 171.00 146.07 120.62 142.47 153.25 177.03 168.99 146.07
10 Years................. 270.48 268.43 318.58 269.45 217.89 262.24 283.74 330.25 314.66 269.45
</TABLE>
You would pay the following expenses on the same investment assuming no
surrender or selection of an annuity payout plan at the end of each time period:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year................... $ 24.04 $ 23.83 $ 28.96 $ 23.93 $ 18.91 $ 23.22 $ 25.37 $ 30.19 $ 28.55 $ 23.93
3 Years.................. 74.00 73.38 88.71 73.69 58.52 71.53 78.00 92.36 87.49 73.69
5 Years.................. 126.59 125.56 151.00 126.07 100.62 122.47 133.25 157.03 148.99 126.07
10 Years................. 270.48 268.43 318.58 269.45 217.89 262.24 283.74 330.25 314.66 269.45
</TABLE>
* In this example, the $30 annual contract administrative charge is approximated
as a 0.045% charge based on our average contract size.
YOU SHOULD NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
6 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IDS LIFE IDS IDS LIFE
CAPITAL LIFE SPECIAL
RESOURCE MANAGED INCOME
-------- ------- --------
<S> <C> <C> <C>
Management fees.................... .59% .59% .60%
Other expenses..................... .07 .04 .07
-----------------------------
Total(1)........................... .66% .63% .67%
-----------------------------
-----------------------------
</TABLE>
(1) Annualized operating expenses of underlying mutual funds at Dec. 31, 1998.
EXAMPLE*
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and full surrender at the end of each time period.
<TABLE>
<S> <C> <C> <C>
1 Year............................. $ 82.60 $ 82.29 $ 82.70
3 Years............................ 109.68 108.75 109.99
5 Years............................ 139.37 137.82 139.89
10 Years........................... 256.02 252.89 257.06
</TABLE>
You would pay the following expenses on the same investment assuming no
surrender or selection of an annuity payout plan at the end of each time period:
<TABLE>
<S> <C> <C> <C>
1 Year............................. $ 22.60 $ 22.29 $ 22.70
3 Years............................ 69.68 68.75 69.99
5 Years............................ 119.37 117.82 119.89
10 Years........................... 256.02 252.89 257.06
</TABLE>
* In this example, the $30 annual contract administrative charge is approximated
as a 0.045% charge based on our average contract size.
YOU SHOULD NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
7 PROSPECTUS
<PAGE>
SYMPHONY
- ------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION (UNAUDITED)
The following tables give per-unit information about the financial history of
each subaccount.
<TABLE>
<CAPTION>
Year ended Dec. 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT AAP(1) (INVESTING IN SHARES OF APPRECIATION
PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $2.10 $1.68 $1.43 $1.12 $1.15 $1.09 $1.05 $1.00
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $2.46 $2.10 $1.68 $1.43 $1.12 $1.15 $1.09 $1.05
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 34,729 48,070 53,860 63,015 68,920 65,534 48,842 10,929
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT ADS(1) (INVESTING IN SHARES OF DIVERSIFIED
STRATEGIC INCOME PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.43 $1.34 $1.23 $1.07 $1.12 $1.01 $1.01 $1.00
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $1.50 $1.43 $1.34 $1.23 $1.07 $1.12 $1.01 $1.01
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 29,052 37,359 41,939 45,720 48,740 36,618 19,768 3,869
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT AEG(2) (INVESTING IN SHARES OF EMERGING
GROWTH PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.85 $1.56 $1.35 $0.96 $1.04 $1.00 -- --
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $2.50 $1.85 $1.56 $1.35 $0.96 $1.04 -- --
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 7,865 10,123 11,449 12,247 11,353 2,022 -- --
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% -- --
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT AEM(1) (INVESTING IN SHARES OF EQUITY INCOME
PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.79 $1.47 $1.41 $1.08 $1.22 $1.12 $1.02 $1.00
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $2.06 $1.79 $1.47 $1.41 $1.08 $1.22 $1.12 $1.02
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 17,404 24,835 29,866 35,868 39,594 48,057 23,184 3,835
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT AEX(1) (INVESTING IN SHARES OF EQUITY INDEX
PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $2.46 $1.89 $1.58 $1.18 $1.19 $1.11 $1.06 $1.00
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $3.12 $2.46 $1.89 $1.58 $1.18 $1.19 $1.11 $1.06
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 6,349 8,512 9,114 8,552 7,552 6,454 3,748 636
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT AGI(1) (INVESTING IN SHARES OF GROWTH AND
INCOME PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $2.03 $1.68 $1.42 $1.11 $1.16 $1.08 $1.01 $1.00
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $2.24 $2.03 $1.68 $1.42 $1.11 $1.16 $1.08 $1.01
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 14,520 19,668 21,299 23,037 25,102 20,774 10,136 1,881
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT AIH(1) (INVESTING IN SHARES OF INTERMEDIATE
HIGH GRADE PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.34 $1.25 $1.25 $1.08 $1.13 $1.06 $1.02 $1.00
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $1.41 $1.34 $1.25 $1.25 $1.08 $1.13 $1.06 $1.02
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 7,968 9,640 10,509 11,659 11,655 8,070 3,417 682
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT AIE(2) (INVESTING IN SHARES OF INTERNATIONAL
EQUITY PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.11 $1.17 $0.97 $0.91 $1.04 $1.00 -- --
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $1.31 $1.12 $1.17 $0.97 $0.91 $1.04 -- --
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 16,880 23,936 27,135 28,243 29,353 5,528 -- --
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% -- --
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
8 PROSPECTUS
<PAGE>
SYMPHONY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Dec. 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBACCOUNT AMO(1) (INVESTING IN SHARES OF MONEY MARKET
PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.15 $1.12 $1.08 $1.04 $1.02 $1.02 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $1.18 $1.15 $1.12 $1.08 $1.04 $1.02 $1.02 $1.00
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 3,418 3,661 4,930 4,822 6,298 3,175 2,061 828
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------------
Simple yield(4) 2.43% 3.05% 2.52% 2.75% 2.14% 0.72% 0.78% 2.00%
- -----------------------------------------------------------------------------------------------------------------------
Compound yield(4) 2.46% 3.09% 2.55% 2.79% 2.16% 0.72% 0.78% 2.02%
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT ATR(2) (INVESTING IN SHARES OF TOTAL RETURN
PORTFOLIO)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.91 $1.66 $1.35 $1.09 $1.03 $1.00 -- --
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $1.97 $1.91 $1.66 $1.35 $1.09 $1.03 -- --
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 14,575 18,783 20,195 20,934 18,918 2,486 -- --
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% -- --
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT ACR(3) (INVESTING IN SHARES OF IDS LIFE
CAPITAL RESOURCE FUND)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.62 $1.33 $1.25 $0.99 $1.00 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $1.98 $1.62 $1.33 $1.25 $0.99 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 368 463 528 519 560 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% -- -- --
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT AMG(3) (INVESTING IN SHARES OF IDS LIFE
MANAGED FUND, INC.)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.61 $1.37 $1.19 $0.97 $1.00 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $1.84 $1.61 $1.37 $1.19 $0.97 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 649 1,100 785 716 298 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% -- -- --
- -----------------------------------------------------------------------------------------------------------------------
SUBACCOUNT ASI(3) (INVESTING IN SHARES OF IDS LIFE
SPECIAL INCOME FUND)
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at beginning of period $1.35 $1.26 $1.20 $0.99 $1.00 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period $1.35 $1.35 $1.26 $1.20 $0.99 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted) 629 869 742 722 351 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% -- -- --
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Operations commenced on Oct. 16, 1991.
(2) Operations commenced on Dec. 2, 1993.
(3) Operations commenced on Oct. 3, 1994.
(4) Net of annual contract administrative charge and mortality and expense risk
fee.
9 PROSPECTUS
<PAGE>
SYMPHONY
- ------------------------------------------------------------------
FINANCIAL STATEMENTS
You can find our audited financial statements and the audited financial
statements of the subaccounts in the SAI.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
Performance information for the subaccounts may appear from time to time in
advertisements or sales literature. This information reflects the performance of
a hypothetical investment in a particular subaccount during a specified time
period. Although we will base performance figures on historical earnings, past
performance does not guarantee future results.
We include non-recurring charges (such as surrender charges) in total return
figures, but not in yield quotations. Excluding non-recurring charges in yield
calculations increases the reported value.
Total return figures reflect deduction of all applicable charges, including:
- - the contract administrative charge,
- - variable account administrative charge,
- - mortality and expense risk fee, and
- - surrender charge (assuming a surrender at the end of the illustrated period).
We also may make optional total return quotations that do not reflect a
surrender charge deduction (assuming no surrender). Total return quotations may
be shown by means of schedules, charts or graphs.
AVERAGE ANNUAL TOTAL RETURN is the average annual compounded rate of return of
the investment over a period of one, five and 10 years (or up to the life of the
variable subaccount if it is less than ten years old).
CUMULATIVE TOTAL RETURN is the cumulative change in the value of an investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return will be higher than average annual total
return because it is not averaged.
ANNUALIZED SIMPLE YIELD (FOR SUBACCOUNTS INVESTING IN MONEY MARKET FUNDS)
"annualizes" the income generated by the investment over a given seven-day
period. That is, we assume the amount of income generated by the investment
during the period will be generated each seven-day period for a year. We show
this as a percentage of the investment.
ANNUALIZED COMPOUND YIELD (FOR SUBACCOUNTS INVESTING IN MONEY MARKET FUNDS) is
calculated like simple yield except that we assume the income is reinvested when
we annualize it. Compound yield will be higher than the simple yield because of
the compounding effect of the assumed reinvestment.
ANNUALIZED YIELD (FOR SUBACCOUNTS INVESTING IN INCOME FUNDS) divides the net
investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage.
You should consider performance information in light of the investment
objectives, policies, characteristics and quality of the fund in which the
subaccount invests and the market conditions during the specified time period.
Advertised yields and total return figures include charges that reduce
advertised performance. Therefore, you should not compare subaccount performance
to that of mutual funds that sell their shares directly to the public. (See the
SAI for a further description of methods used to determine total return and
yield.)
If you would like additional information about actual performance, please
contact us at the address or telephone number on page one of this prospectus.
10 PROSPECTUS
<PAGE>
SYMPHONY
- --------------------------------------------------------------------------------
THE VARIABLE ACCOUNT
You may allocate payments to any or all the subaccounts of the variable account
that invest in shares of the following funds:
<TABLE>
<CAPTION>
SUBACCOUNT INVESTING IN:
- ---------- --------------------------------
<S> <C>
AAP Appreciation Portfolio
ADS Diversified Strategic Income
Portfolio
AEG Emerging Growth Portfolio
AEM Equity Income Portfolio
AEX Equity Index Portfolio
AGI Growth & Income Portfolio
ACG IDS Life Capital Resource Fund
AMG IDS Life Managed Fund
ASI IDS Life Special Income Fund
AIH Intermediate High Grade
Portfolio
AIE International Equity Portfolio
AMO Money Market Portfolio
ATR Total Return Portfolio
</TABLE>
The variable account meets the definition of a separate account under federal
securities laws. We credit or charge income, capital gains and capital losses of
each subaccount only to that subaccount. State insurance law prohibits us from
charging a subaccount with liabilities of any other subaccount or of our general
business.
The U.S. Treasury and the Internal Revenue Service (IRS) indicated that they may
provide additional guidance on investment control. This concerns how many
variable subaccounts an insurance company may offer and how many exchanges among
subaccounts it may allow before the contract owner would be currently taxed on
income earned within subaccount assets. At this time, we do not know what the
additional guidance will be or when action will be taken. We reserve the right
to modify the contract, as necessary, so that the owner will not be subject to
current taxation as the owner of the subaccount assets.
We intend to comply with all federal tax laws so that each contract continues to
qualify as an annuity for federal income tax purposes. We reserve the right to
modify the contract as necessary to comply with any new tax laws.
The variable account was established under Minnesota law on May 9, 1991. On Nov.
3, 1993 the name of the variable account was changed from IDS Life Account SLB
to IDS Life Account SBS. The subaccounts are registered together as a single
unit investment trust under the Investment Company Act of 1940 (the 1940 Act).
This registration does not involve any supervision of our management or
investment practices and policies by the SEC. All obligations arising under the
contracts are general obligations of IDS Life.
11 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- ------------------------------------------------------------------
THE FUNDS
APPRECIATION PORTFOLIO
Objective: long-term appreciation of capital. The Portfolio invests primarily in
equity and equity-related securities that are believed to afford attractive
opportunities for appreciation.
DIVERSIFIED STRATEGIC INCOME PORTFOLIO
Objective: high current income. The Portfolio allocates and reallocates its
assets primarily among three types of fixed-income securities -- U.S. securities
and mortgage-related securities, foreign government securities and corporate
securities rated below investment grade (commonly known as junk bonds). See the
section of the Greenwich Street Series Fund's prospectus entitled "Below
investment grade corporate fixed income securities" for further information on
these bonds.
EMERGING GROWTH PORTFOLIO
Objective: capital appreciation. The Portfolio invests at least 65% of its total
assets in common stocks of small- and medium-sized companies (both domestic and
foreign) in the early stages of their life cycle, that its investment adviser
believes have the potential to become major enterprises.
EQUITY INCOME PORTFOLIO
Objective: current income. Long-term capital appreciation is a secondary goal.
The Portfolio invests principally in dividend-paying common stocks of companies
whose prospects for dividend growth and capital appreciation are considered
favorable, concentrating at least 25% of its assets in the utility industry.
EQUITY INDEX PORTFOLIO
Objective: provide investment results that, before deduction of operating
expenses, match the price and yield performance of U.S. publicly traded common
stocks, as measured by the S&P 500 Index. Once the Portfolio reaches a
sufficient asset size, it will seek to achieve its goal by owning all 500 stocks
in the S&P 500 Index in proportion to their actual market capitalization
weightings.
GROWTH & INCOME PORTFOLIO
Objective: income and long-term capital growth. The Portfolio invests in
income-producing equity securities (including dividend-paying common stocks),
securities that are convertible into common stocks and warrants meeting certain
specified investment criteria.
IDS LIFE CAPITAL RESOURCE FUND
Objective: capital appreciation. Invests primarily in U.S. common stocks.
IDS LIFE MANAGED FUND
Objective: maximum total investment return through a combination of capital
growth and current income. Invests primarily in stocks, convertible securities,
bonds and money market instruments.
IDS LIFE SPECIAL INCOME FUND
Objective: high level of current income while conserving the value of the
investment for the longest time period. Invests primarily in investment-grade
bonds.
INTERMEDIATE HIGH GRADE PORTFOLIO
Objective: provide as high a level of current income as is consistent with the
protection of capital. The Portfolio invests (under normal market conditions)
substantially all, but not less than 65% of its assets in U.S. government
securities and in high-grade corporate bonds of U.S. issuers (i.e., bonds rated
within the three highest rating categories by Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group or, if not rated, bonds believed to be of
comparable quality).
12 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Objective: provide a total return on assets from growth of capital and income.
The Portfolio invests (under normal market conditions) at least 65% of its
assets in a diversified portfolio of equity securities of established non-United
States issuers.
MONEY MARKET PORTFOLIO
Objective: maximum current income to the extent consistent with the preservation
of capital and the maintenance of liquidity. The Portfolio invests in short-term
money market instruments deemed to present minimal credit risks and considered
to be "Eligible Securities" as defined by the SEC.
TOTAL RETURN PORTFOLIO
Objective: provide shareholders with total return, consisting of long-term
capital appreciation and income. The Portfolio primarily invests in a
diversified portfolio of dividend-paying common stocks.
The investment objectives and policies of some of the funds are similar to the
investment objectives and policies of other mutual funds that the investment
advisor or its affiliates manage. Although the objectives and policies may be
similar, each fund will have its own portfolio holdings and its own fees and
expenses. Accordingly, each fund will have its own investment results.
All funds are available to serve as the underlying investments for variable
annuities. Some funds also are available to serve as investment options for
variable life insurance policies and qualified plans. It is possible that in the
future, it may be disadvantageous for variable annuity accounts and variable
life insurance accounts and/or qualified plans to invest in the available funds
simultaneously.
Although the insurance company 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 annuity
owners, policy owners and qualified plans and to determine what action, if any,
should be taken in response to a conflict. If a board were to conclude that it
should establish separate funds for the variable annuity, variable life
insurance and qualified plan accounts, you would not bear any expenses
associated with establishing separate funds. Please refer to the fund
prospectuses for risk disclosure regarding simultaneous investments by variable
annuity, variable life insurance and qualified plan accounts.
The IRS issued final regulations relating to the diversification requirements
under Section 817(h) of the Internal Revenue Code of 1986, as amended (the
Code). Each fund intends to comply with these requirements.
The investment advisors or managers for the funds are as follows:
- - Appreciation Portfolio -- SSBC Fund Management Inc. (SSBC).
- - Diversified Strategic Income Portfolio -- SSBC Smith Barney Global Capital
Management, Inc. serves as sub-investment advisor.
- - Emerging Growth Portfolio -- Van Kampen Asset Management, Inc.
- - Equity Income Portfolio -- SSBC.
- - Equity Index Portfolio -- Travelers Investment Management Company.
- - Growth & Income Portfolio -- SSBC.
- - IDS Life Retirement Annuity Mutual Funds -- IDS Life. AEFC is the investment
advisor for the IDS Life Retirement Annuity Mutual Funds. American Express
Asset Management International, Inc., a wholly-owned subsidiary of AEFC, is
the sub-investment advisor for IDS Life International Equity Fund.
- - Intermediate High Grade Portfolio -- SSBC.
- - International Equity Portfolio -- SSBC.
- - Money Market Portfolio -- SSBC.
- - Total Return Portfolio -- SSBC and Davis Skaggs Investment Management, a
division of SSBC.
13 PROSPECTUS
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SYMPHONY ANNUITY
- --------------------------------------------------------------------------------
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the funds' prospectuses for facts you
should know before investing. These prospectuses are available by contacting us
at the address or telephone number on page one of this prospectus.
- --------------------------------------------------------------------------------
THE FIXED ACCOUNT
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest to the account. Purchase
payments and transfers to the fixed account become part of our general account,
the company's main portfolio of investments. We credit and compound interest
daily to produce an effective annual interest rate. We will change the interest
rate from time to time at our discretion.
Interests in the fixed account are not required to be registered with the SEC.
The SEC staff does not review the disclosures in this prospectus on the fixed
account. Disclosures regarding the fixed account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. (See
"Making the Most of Your Contract -- Transfer policies" for restrictions on
transfers involving the fixed account.)
- --------------------------------------------------------------------------------
BUYING YOUR CONTRACT
Your financial consultant will help you prepare and submit your application, and
send it along with your initial purchase payment to our office. As the owner,
you have all rights and may receive all benefits under the contract. You can own
a nonqualified annuity in joint tenancy with rights of survivorship only in
spousal situations. You cannot own a qualified annuity in joint tenancy. You can
buy a nonqualified annuity or become an annuitant if you are age 75 or younger.
You can buy a qualified annuity or become an annuitant if you are age 65 or
younger.
When you apply, you may select:
- - the fixed account and/or the subaccounts in which you want to invest, and
- - how you wish to make purchase payments.
If your application is complete, we will process it and apply your purchase
payment to the fixed account and subaccounts you selected within two business
days after we receive it at our office. If we accept your application, we will
send you a contract. If we cannot accept your application within five business
days, we will decline it and return your payment. We will credit additional
purchase payments you make to your accounts on the valuation date we receive
them. We will value the additional payments at the next accumulation unit value
calculated after we receive your payments at our office.
THE RETIREMENT DATE
Annuity payouts are to begin on the retirement date. You can align this date
with your actual retirement from a job, or it can be a different future date,
depending on your needs and goals and on certain restrictions. You also can
change the date, provided you send us written instructions at least 30 days
before annuity payouts begin.
FOR NONQUALIFIED ANNUITIES, the retirement date must be:
- - no later than the annuitant's 85th birthday or 10 years after issue, whichever
is later.
FOR QUALIFIED ANNUITIES, to avoid IRS penalty taxes, retirement payments
generally must be:
- - on or after the annuitant turns 59 1/2; and
- - for IRAs, by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2; or
14 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- --------------------------------------------------------------------------------
- - for all other qualified annuities by April 1 of the year which the annuitant
reaches age 70 1/2; or the calendar year when the annuitant retires.
However, in no case can the retirement date be later than the annuitant's 85th
birthday or 10 years after issue, whichever is later.
BENEFICIARY
If death benefits become payable before the retirement date (while this contract
is in force and before annuity payouts begin), we will pay your named
beneficiary all or part of the contract value. If there is no beneficiary, then
your estate will be the beneficiary. (See "Benefits in case of death" for more
about beneficiaries.)
PURCHASE PAYMENT AMOUNTS
<TABLE>
<S> <C>
INITIAL PURCHASE PAYMENT:
Nonqualified: $5,000
Qualified: $500
- -Minimum additional purchase payment*:
Nonqualified: $500
Qualified: $50
</TABLE>
* In Washington you may make additional purchase payments for a nonqualified
annuity until age 80 and until age 65 for a qualified annuity.
<TABLE>
<S> <C>
MAXIMUM PURCHASE PAYMENTS**: $1 million
</TABLE>
** We reserve the right to change maximum limits. For qualified annuities the
qualified plans on the Code's limits on annual contributions also apply.
HOW TO MAKE PURCHASE PAYMENTS
BY LETTER
Send your check along with your name and contract number to:
REGULAR MAIL:
IDS Life Insurance Company
Box 74
Minneapolis, MN 55440-0074
EXPRESS MAIL:
IDS Life Insurance Company
Attn: T8/829
733 Marquette Avenue
Minneapolis, MN 55402
15 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- --------------------------------------------------------------------------------
CHARGES
CONTRACT ADMINISTRATIVE CHARGE
We charge this fee for establishing and maintaining your records. We deduct $30
from the contract value on your contract anniversary at the end of each contract
year. We prorate this charge among the subaccounts and the fixed account in the
same proportion your interest in each account bears to your total contract
value. If you fully surrender your contract, we will deduct a reduced contract
administrative charge that is prorated based on the number of days from your
last contract anniversary to the date of full surrender. We cannot increase the
annual contract administrative charge and it does not apply after annuity
payouts begin or when we pay death benefits.
VARIABLE ACCOUNT ADMINISTRATIVE CHARGE
We charge this fee daily to the subaccounts. The unit values of your subaccounts
reflect this fee and it totals 0.25% of their average daily net assets on an
annual basis. It covers certain administrative and operating expenses of the
subaccounts such as accounting, legal and data processing fees and expenses
involved in the preparation and distribution of reports and prospectuses. We
cannot increase the variable account administrative charge. It does not apply to
values allocated to the fixed account and it does not apply after annuity
payouts begin.
MORTALITY AND EXPENSE RISK FEE
We charge this fee daily to the subaccounts. The unit values of your subaccounts
reflect this fee and it totals 1.25 % of their average daily net assets on an
annual basis. This fee covers the mortality and expense risk that we assume.
Approximately two-thirds of this amount is for assumption of the mortality risk,
and one-third is for our assumption of the expense risk. This fee does not apply
to the fixed account.
Mortality risk arises because of our guarantee to pay a death benefit and our
guarantee to make annuity payments according to the terms of the contracts no
matter how long a specific annuitant lives and no matter how long our entire
group of annuitants live. If, as a group, annuitants outlive the life expectancy
we assumed in the actuarial tables, we must take money from our general assets
to meet our obligations. If, as a group, annuitants do not live as long as
expected, we could profit from the mortality risk fee.
Expense risk arises because we cannot increase the contract administrative
charge or variable account administrative charge and these charges may not cover
our expenses. We would have to make up any deficit from our general assets.
The subaccounts pay us the mortality and expense risk fee they accrued as
follows:
- - first, to the extent possible, the subaccounts pay this fee from any dividends
distributed from the funds in which they invest;
- - then, if necessary, the funds redeem shares to cover any remaining fees
payable.
We may use any profits we realize from the subaccounts' payment to us of the
mortality and expense risk fee for any proper corporate purpose, including,
among others, payment of distribution (selling) expenses. We do not expect that
the surrender charge, discussed in the following paragraphs, will cover sales
and distribution expenses.
SURRENDER CHARGE
If you surrender part or all of your contract, you may be subject to a surrender
charge. A surrender charge applies if all or part of the contract value is
surrendered during the first six payment years following a purchase payment. The
surrender charge starts at 6% of a purchase payment in the first payment year
and is reduced by 1% each payment year thereafter. This means that there is no
surrender charge after six payment years. In addition, there is no surrender
charge when contract values are applied to a retirement payment plan or for a
death benefit. The surrender charge is used to help defray expenses incurred in
the sale of the contract including commissions and other promotional or
distribution expenses associated with the printing and distribution of
prospectuses and sales material.
16 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- ------------------------------------------------------------------
After the first contract year, you may surrender up to 10% of the contract value
on your prior contract anniversary in one or more surrenders each contract year
without incurring a surrender charge. The 10% withdrawal provision is subject to
other contract provisions and terms including those on partial surrenders. In
addition, there is no surrender charge on contract earnings, which equal:
- - the contract value; minus
- - the sum of all purchase payments received that have not been previously
surrendered; minus
- - the amount of the 10% free withdrawal, if applicable.
For purposes of determining the amount of any surrender charge, we deem
surrenders to be taken first from any applicable 10% free withdrawal amount;
next from purchase payments (on a first in-first out basis); and finally from
contract earnings (in excess of any 10% free withdrawal amount).
EXAMPLE OF SURRENDER CHARGE:
<TABLE>
<CAPTION>
ASSUMPTIONS:
<S> <C>
- -----------------------------------------------------------
Initial purchase payment at Annuity issue date of
May 1, 1999....................................... $10,000
Subsequent purchase payment on July 1, 2002....... 20,000
Account value on contract anniversary, April 29,
2003.............................................. 40,000
Account value on October 12, 2003................. 42,000
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FULL SURRENDER ON OCTOBER 12, 2003:
- -------------------------------------------------------------------------------------------------------------
BASIS OF RATE OF DOLLAR AMOUNT
CHARGE SURRENDER CHARGE OF CHARGE EXPLANATION OF CHARGE
<C> <S> <C> <C>
10% of prior contract anniversary contract value surrendered
$ 4,000 None $ 0 free
Payment made in contract year 1; surrendered at payment year
$10,000 2% $ 200 5 rate
Payment made in contract year 4; surrendered at payment year
$20,000 5% $1,000 2 rate
$ 8,000 None $ 0 No charge on contract earnings
- -------------------------------------------------------------------------------------------------------------
Total Surrender Charge: $1,200
</TABLE>
<TABLE>
<CAPTION>
PARTIAL SURRENDER OF $15,000 ON OCTOBER 12, 2003:
- -------------------------------------------------------------------------------------------------------------
BASIS OF RATE OF DOLLAR AMOUNT
CHARGE SURRENDER CHARGE OF CHARGE EXPLANATION OF CHARGE
<C> <S> <C> <C>
10% of prior contract anniversary contract value surrendered
$ 4,000 None $ 0 free
Payment made in contract year 1; surrendered at payment year
$10,000 2% $200 5 rate
Payment made in contract year 4; surrendered at payment year
$ 1,000 5% $ 50 2 rate
- -------------------------------------------------------------------------------------------------------------
Total Surrender Charge: $250
</TABLE>
SURRENDER CHARGE ON PARTIAL SURRENDER -- For a partial surrender that is subject
to a surrender charge, the amount we actually surrender from your contract will
be the amount you request plus any applicable surrender charge. We apply the
surrender charge to this total amount. We pay the amount you requested.
17 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- ------------------------------------------------------------------
POSSIBLE REDUCTION IN CHARGES -- In some cases, we may incur lower sales and
administrative expenses or perform fewer services. In those cases, we may, at
our discretion, reduce or eliminate certain administrative and surrender
charges. However, we expect this to occur infrequently, if at all.
PREMIUM TAXES -- Certain state and local governments impose premium taxes (up to
3.5%). These taxes depend upon the state of residence or the state in which the
contract was sold. In some cases, we deduct premium taxes from your purchase
payments before they are allocated. In other cases, we deduct them when you
surrender your contract or when annuity payouts begin.
- --------------------------------------------------------------------------------
VALUING YOUR INVESTMENT
We value your fixed account and subaccounts as follows:
FIXED ACCOUNT: We value the amounts you allocated to the fixed account directly
in dollars. The fixed account value equals:
- - the sum of your purchase payments and transfer amounts allocated to the fixed
account;
- - plus interest credited;
- - minus the sum of amounts withdrawn (including any applicable surrender
charges) and amounts transferred out; and
- - minus any prorated contract administrative charge.
SUBACCOUNTS: We convert amounts you allocated to the subaccounts into
accumulation units. Each time you make a purchase payment or transfer amounts
into one of the subaccounts, we credit a certain number of accumulation units to
your contract for that subaccount. Conversely, each time you take a partial
withdrawal, transfer amounts out of a subaccount or we assess a contract
administrative charge, we subtract a certain number of accumulation units from
your contract.
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the fund in which the subaccount invests.
The dollar value of each accumulation unit can rise or fall daily depending on
the subaccount expenses, performance of the fund and on certain fund expenses.
Here is how we calculate accumulation unit values:
NUMBER OF UNITS
To calculate the number of accumulation units for a particular subaccount, we
divide your investment, after deduction of any premium taxes, by the current
accumulation unit value.
ACCUMULATION UNIT VALUE
The current accumulation unit value for each subaccount equals the last value
times the subaccount's current net investment factor.
NET INVESTMENT FACTOR
We determine the net investment factor by:
- - adding the fund's current net asset value per share, plus the per share amount
of any accrued income or capital gain dividends to obtain a current adjusted
net asset value per share; then
- - dividing that sum by the previous adjusted net asset value per share; and
- - subtracting the percentage factor representing the mortality and expense risk
fee and the variable account administrative charge from the result.
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a
subaccount.
18 PROSPECTUS
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SYMPHONY ANNUITY
- --------------------------------------------------------------------------------
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:
- - additional purchase payments you allocate to the subaccounts;
- - transfers into or out of the subaccounts;
- - partial withdrawals;
- - surrender charges; and/or
- - prorated portions of the contract administrative charge.
Accumulation unit values will fluctuate due to:
- - changes in funds' net asset value;
- - dividends distributed to the subaccounts;
- - capital gains or losses of funds;
- - fund operating expenses;
- - mortality and expense risk fees; and/or
- - variable account administrative charges.
- --------------------------------------------------------------------------------
MAKING THE MOST OF YOUR CONTRACT
TRANSFERRING MONEY BETWEEN ACCOUNTS
You may transfer money from any one subaccount, or the fixed account, to another
subaccount before annuity payouts begin. (Certain restrictions apply to
transfers involving the fixed account.) We will process your transfer on the
valuation date we receive your request. We will value your transfer at the next
accumulation unit value calculated after we receive your request. There is no
charge for transfers. Before making a transfer, you should consider the risks
involved in switching investments.
We may suspend or modify transfer privileges at any time.
TRANSFER POLICIES
- - You may transfer contract values between the subaccounts or from the
subaccounts to the fixed account at any time. However, if you made a transfer
from the fixed account to the subaccounts, you may not make a transfer from
any subaccount back to the fixed account for six months following that
transfer.
- - You may transfer between the subaccounts and the fixed account up to the six
times per contract year. This limit may be waived if the automated transfer of
contract value is in effect.
19 PROSPECTUS
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HOW TO REQUEST A TRANSFER OR SURRENDER
1 BY LETTER
Send your name, contract number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or surrender to:
REGULAR MAIL:
IDS Life Insurance Company
Attn: T8/829
IDS Tower 10
Minneapolis, MN 55440-0010
EXPRESS MAIL:
IDS Life Insurance Company
Attn: T8/829
733 Marquette Avenue
Minneapolis, MN 55402
MINIMUM AMOUNT
Transfers: $500 or entire account balance
Surrenders: $500 (If a partial surrender would reduce the account balance to
less than $500, you either cannot make the surrender or you
must surrender the full account value.)
MAXIMUM AMOUNT
Transfers or surrenders: Contract value
2 BY AUTOMATED TRANSFERS AND AUTOMATED PARTIAL SURRENDERS
Your financial consultant can help you set up automated transfers among your
subaccounts or fixed account or partial surrenders from the accounts.
You can start or stop this service by written request or other method acceptable
to us. You must allow 30 days for us to change any instructions that are
currently in place.
- - Automated transfers from the fixed account to the subaccounts may not exceed
an amount that, if continued, would deplete the fixed account within 12
months.
- - Automated transfers and automated partial surrenders are subject to all of the
contract provisions and terms, including transfer of contract values between
accounts.
- - Automated partial surrenders may result in IRS taxes and penalties on all or
part of the amount surrendered.
MINIMUM AMOUNT
Transfers: $100
Surrenders: $500 (If a partial surrender would reduce the account balance to
less than $500, you either cannot make the surrender or you
must surrender the full account value.)
20 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
- ------------------------------------------------------------------
3 BY PHONE
Call between 8 a.m. and 4:30 p.m. Central time:
1-800-422-3542 (toll free)
MINIMUM AMOUNT
Transfers: $500 or entire account balance
Surrenders: $500 (If a partial surrender would reduce the account balance to
less than $500, you either cannot make the surrender or you
must surrender the full account value.)
MAXIMUM AMOUNT
Transfers: Contract value
Surrenders: $40,000
We answer telephone requests promptly, but you may experience delays when the
call volume is unusually high. If you are unable to get through, use the mail
procedure as an alternative.
We will honor any telephone transfer or surrender requests that we believe are
authentic and we will use reasonable procedures to confirm that they are. This
includes asking identifying questions and tape recording calls. We will not
allow a telephone surrender within 30 days of a phoned-in address change. As
long as we follow the procedures, we (and our affiliates) will not be liable for
any loss resulting from fraudulent requests.
Telephone transfers or surrenders are automatically available. You may request
that telephone transfers or surrenders NOT be authorized from your account by
writing to us.
4 BY SYSTEMATIC WITHDRAWALS
You may start or stop this service by written request or other method acceptable
to us. You must allow 30 days' notice for us to change any instructions that are
currently in place.
You may withdraw amounts of up to 10 percent of the contract value at the
beginning of the contract year. We will not deduct surrender charges for
first-year systematic withdrawals of amounts up to 10 percent of the initial
purchase payment. Systematic withdrawals may result in IRS taxes and penalties
on all or part of the amount withdrawn. You should consult your tax advisor
regarding the tax consequences of systematic withdrawals.
You may designate withdrawals from the contract in one of the following ways:
- - withdrawing a specific total dollar amount prorated from all accounts in which
you have a balance (if no other choice is made, we will withdraw amounts under
this method);
- - withdrawing a specific total dollar amount and specifying which percentage of
that total amount will be withdrawn from all accounts in which you have a
balance; or
- - withdrawing only the interest credited to the fixed account over the
systematic withdrawal period.
MINIMUM CONTRACT VALUE $5,000
MINIMUM SYSTEMATIC WITHDRAWAL AMOUNT $100
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SURRENDERS
You may surrender all or part of your contract at any time before annuity
payouts begin by sending us a written request or calling us. We will process
your surrender request on the valuation date we receive it. We will compute the
value of your contract at the next accumulation unit value calculated after we
receive your request. For total surrenders we may ask you to return the
contract. You may have to pay surrender charges (see "Charges") and IRS taxes
and penalties (see "Taxes"). You cannot make surrenders after annuity payouts
begin.
SURRENDER POLICIES
If you have a balance in more than one account and you request a partial
surrender, we will withdraw money from all your subaccounts and/or the fixed
account in the same proportion as your value in each account correlates to your
total contract value, unless you request otherwise.
RECEIVING PAYMENT
By regular or express mail:
- - payable to you.
- - mailed to address of record within seven days after receiving your request.
However, we may postpone the payment if:
-- the surrender amount includes a purchase payment check that has not
cleared;
-- the NYSE is closed, except for normal holiday and weekend closings;
-- trading on the NYSE is restricted, according to SEC rules;
-- an emergency, as defined by SEC rules, makes it impractical to sell
securities or value the net assets of the accounts; or
-- the SEC permits us to delay payment for the protection of security
holders.
NOTE: We will charge you a fee if you request express mail delivery.
- --------------------------------------------------------------------------------
TSA -- SPECIAL SURRENDER PROVISIONS
PARTICIPANTS IN TAX-SHELTERED ANNUITIES: The Code imposes certain restrictions
on your right to receive early distributions from a TSA:
- - Distributions attributable to salary reduction contributions (plus earnings)
made after Dec. 31, 1988, or to transfers or rollovers from other contracts,
may be made from the TSA only if:
-- you are at least age 59 1/2;
-- you are disabled as defined in the Code;
-- you separated from the service of the employer who purchased the contract;
or
-- the distribution is because of your death.
- - If you encounter a financial hardship (as defined by the Code), you may
receive a distribution of all contract values attributable to salary reduction
contributions made after Dec. 31, 1988, but not the earnings on them.
- - Even though a distribution may be permitted under the above rules, it may be
subject to IRS taxes and penalties (see "Taxes").
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- - The employer must comply with certain nondiscrimination requirements for
certain types of contributions under a TSA contract to be excluded from
taxable income. You should consult your employer to determine whether the
nondiscrimination rules apply to you.
- - The above restrictions on distributions do not affect the availability of the
amount credited to the contract as of Dec. 31, 1988. The restrictions also do
not apply to transfers or exchanges of contract value within the contract, or
to another registered variable annuity contract or investment vehicle
available through the employer.
- --------------------------------------------------------------------------------
CHANGING OWNERSHIP
You may change ownership of your nonqualified annuity at any time by completing
a change of ownership form we approve and sending it to our office. The change
will become binding upon us when we receive and record it. We will honor any
change of ownership request that we believe is authentic and we will use
reasonable procedures to confirm authenticity. If we follow these procedures, we
will not take any responsibility for the validity of the change.
If you have a nonqualified annuity, you may incur income tax liability by
transferring, assigning or pledging any part of it. (See "Taxes.")
If you have a qualified annuity, you may not sell, assign, transfer, discount or
pledge your contract as collateral for a loan, or as security for the
performance of an obligation or for any other purpose except as required or
permitted by the Code.
- --------------------------------------------------------------------------------
BENEFITS IN CASE OF DEATH
If you or the annuitant die before the retirement date while the contract is in
force we will pay the beneficiary as follows:
Before the initial fifth contract anniversary, the beneficiary receives the
greater of:
- - the contract value; or
- - the amount of purchase payments (minus any surrenders).
On or after the initial fifth contract anniversary, and each subsequent fifth
contract anniversary, the beneficiary receives the greater of:
- - the contract value; or
- - a minimum guaranteed death benefit which equals:
-- the death benefit calculated as of the previous fifth contract
anniversary;
-- plus any purchase payments made since the previous fifth contract
anniversary;
-- minus any surrenders since the previous fifth contract anniversary.
If a contract has more than one person as owner, we will pay benefits upon the
first to die of any owner or the annuitant.
IF YOUR SPOUSE IS SOLE BENEFICIARY under a nonqualified annuity and you die
before the retirement date, your spouse may keep the contract as owner. To do
this your spouse must, within 60 days after we receive proof of death, give us
written instructions to keep the contract in force.
Under a qualified annuity, if the annuitant dies before the Code requires
distributions to begin, and the spouse is the only beneficiary, the spouse may
keep the annuity as owner until the date on which the annuitant would have
reached 70 1/2 or any other date permitted by the Code. To do this, the spouse
must give us written instructions within 60 days after we receive proof of
death.
23 PROSPECTUS
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PAYMENTS: Under a nonqualified annuity we will pay the beneficiary in a single
sum unless you give us other written instructions. We must fully distribute the
death benefit within five years of your death. However, the beneficiary may
receive payouts under any annuity payout plan available under this contract if:
- - the beneficiary asks us in writing within 60 days after we receive proof of
death; and
- - payouts begin no later than one year after your death, or other date as
permitted by the Code; and
- - the payout period does not extend beyond the beneficiary's life or life
expectancy.
When paying the beneficiary, we will process the death claim on the valuation
date our death claims requirements are fulfilled. We will determine the
contract's value at the next accumulation unit value calculated after our death
claim requirements are fulfilled. We will pay interest, if any, from the date of
death at a rate no less than required by law. We will mail payment to the
beneficiary within seven days after our death claim requirements are fulfilled.
Other rules may apply to qualified annuities. (see "Taxes").
- --------------------------------------------------------------------------------
THE ANNUITY PAYOUT PERIOD
The amount available on the retirement date to provide payments under a
retirement payment plan is the current value of your investment, called the
contract value. Because Portfolio or Fund investments (other than those in the
Money Market Portfolio) fluctuate in value each day, there can be no guarantee
that the contract value will exceed, or even equal, the amount of your purchase
payments. You will receive quarterly statements showing your contract value and
any other information required by applicable law at least annually.
On your retirement date, the contract value is applied to our current fixed
annuity settlement rates table, which will be at least as favorable as the fixed
annuity settlement rates table contained in the contract. We then calculate
lifetime annuity payments according to the retirement payment plan you choose.
A unisex table of settlement rates will apply, except when the contract is being
used to fund an IRA or a nonqualified plan. The laws of Montana and the annuity
contract as approved by Massachusetts, require the use of unisex settlement
rates.
PAYOUT OPTIONS AT RETIREMENT
As the owner of the contract, you have the right to decide how we will make
retirement payments. You may select one of the retirement payment plans outlined
below, or we may mutually agree on other payment arrangements. We will make
annuity payments on a fixed basis. A fixed annuity is one with payments that are
guaranteed by us as to dollar amount. Fixed annuity payments after the first
payment will never be less than the first payment.
RETIREMENT PAYMENT PLANS -- You may choose any one of these payment plans by
giving us written instructions at least 30 days before the retirement date:
- - PLAN A - LIFE ANNUITY - NO REFUND -- We make monthly payments until the
annuitant's death. Payments end with the last monthly payment before the
annuitant's death. We will not make any further payments. You should understand
that if the annuitant dies after only the first monthly payment, we will not
make any more payments.
- - PLAN B - LIFE ANNUITY WITH 5, 10 OR 15 YEARS CERTAIN -- We make monthly
payments until the annuitant's death. However, payments are guaranteed for 5, 10
or 15 years. If the annuitant dies before all guaranteed payments have been
made, we will continue making those guaranteed payments to you, if living; if
not, to your beneficiary; or, if no beneficiary is named, to your estate.
- - PLAN C - LIFE ANNUITY - INSTALLMENT REFUND -- We make monthly payments until
the annuitant's death. However, payments are guaranteed to continue for at least
the number of months determined by dividing the contract value at the time of
24 PROSPECTUS
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retirement by the amount of the monthly payment. If the annuitant dies before
all guaranteed payments have been made, we will continue making those guaranteed
payments to you, if living; if not, to your beneficiary; or, if no beneficiary
is named, to your estate.
- - PLAN D - JOINT AND LAST SURVIVOR LIFE ANNUITY - NO REFUND -- We make monthly
payments while both the annuitant and a joint annuitant are living. If either
annuitant dies, we will continue to make monthly payments at the full amount
until the death of the surviving annuitant. Payments end with the death of the
second annuitant, and we will make no further payments. You should understand
that if both the annuitant and the joint annuitant die after only the first
monthly payment, we will make no further payments.
- - PLAN E - PERIOD CERTAIN ANNUITY -- We make monthly payments for a period of
years that you elect. The period of years may be no less than 10 years and no
more than 30 years. Even if the annuitant lives beyond the period of years
selected, we will make no further payments. However, if the annuitant dies
before the end of the period selected, we will continue making monthly payments
to you, if living; if not, to your beneficiary; or, if no beneficiary is named,
to your estate.
RESTRICTIONS FOR SOME QUALIFIED PLANS -- If you purchased a qualified annuity in
connection with a Section 401(k) plan, custodial or trusteed plan, or as an IRA
or TSA, you may be required to select a payment plan (in accordance with the
applicable provisions of the Code) that provides for payments:
- - over the life of the annuitant;
- - over the joint lives of the annuitant and beneficiary;
- - for a period not exceeding the life expectancy of the annuitant; or
- - for a period not exceeding the joint life expectancies of the annuitant and
beneficiary.
IF WE DO NOT RECEIVE INSTRUCTIONS -- You must give us written instructions for
paying retirement benefits at least 30 days before the retirement date. If you
do not, we will make payments under Plan B, with 120 monthly payments
guaranteed.
IF MONTHLY PAYMENTS WOULD BE LESS THAN $50 -- We will calculate your contract
value at the retirement date. If the calculations show that monthly payments
would be less than $50, we reserve the right to change the frequency of the
retirement payments or to pay the contract value in one lump sum.
DEATH AFTER RETIREMENT PAYMENTS BEGIN -- If you or the annuitant die after
retirement payments begin, we will pay any amount payable to the beneficiary as
provided in the retirement payment plan in effect.
- --------------------------------------------------------------------------------
TAXES
Generally, under current law, any increase in your contract value is taxable to
you only when you receive a payout or surrender (see detailed discussion below).
Any portion of the annuity payouts and any surrenders you request that represent
ordinary income are normally taxable. We will send you a tax information
reporting form for any year in which we made a taxable distribution according to
our records.
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions under the contract comply with the law.
Qualified annuities have minimum distribution rules that govern the timing and
amount of distributions during your life and after your death. You should refer
to our retirement plan or adoption agreement, or consult a tax advisor for more
information about these distribution rules.
QUALIFIED ANNUITIES: We designed this contract for use with qualified retirement
plans. Special rules apply to these retirement plans. Your rights to benefits
may be subject to the terms and conditions of these retirement plans regardless
of the terms of the contract.
25 PROSPECTUS
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SYMPHONY ANNUITY
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ANNUITY PAYOUTS UNDER NONQUALIFIED ANNUITIES: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts you receive after your investment in the contract is fully recovered
will be subject to tax.
Tax law requires that all nonqualified deferred annuity contracts issued by the
same company (and possibly its affiliates) to the same owner during a calendar
year be taxed as a single, unified contract when you take distributions from any
one of those contracts.
ANNUITY PAYOUTS UNDER QUALIFIED ANNUITIES: Under a qualified annuity, the entire
payout generally is includable as ordinary income and is subject to tax except
to the extent that contributions were made with after-tax dollars. If you or
your employer invested in your contract with deductible or pre-tax dollars as
part of a qualified retirement plan, such amounts are not considered to be part
of your investment in the contract and will be taxed when paid to you.
SURRENDERS: If you surrender part or all of your contract before your annuity
payouts begin, your surrender payment will be taxed to the extent that the value
of your contract immediately before the surrender exceeds your investment. You
also may have to pay a 10% IRS penalty for surrenders you make before reaching
age 59 1/2 unless certain exceptions apply. For qualified annuities, other
penalties may apply if you surrender your contract before your plan specifies
that you can receive payouts.
DEATH BENEFITS TO BENEFICIARIES: The death benefit under a contract is not
tax-exempt. Any amount your beneficiary receives that represents previously
deferred earnings within the contract is taxable as ordinary income to the
beneficiary in the years he or she receives the payments.
ANNUITIES OWNED BY CORPORATIONS, PARTNERSHIPS OR TRUSTS: For nonqualified
annuities any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. This
provision is effective for purchase payments made after Feb. 28, 1986. However,
if the trust was set up for the benefit of a natural person only, the income
will remain tax-deferred.
PENALTIES: If you receive amounts from your contract before reaching age 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary:
- - because of your death;
- - because you become disabled (as defined in the Code);
- - if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or joint
lives or life expectancies of you and your beneficiary); or
- - if it is allocable to an investment before Aug. 14, 1982 (except for qualified
annuities).
For a qualified annuity, other penalties or exceptions may apply if you
surrender your contract before your plan specifies that payouts can be made.
WITHHOLDING, GENERALLY: If you receive all or part of the contract value, we may
deduct withholding against the taxable income portion of the payment. Any
withholding represents a prepayment of your tax due for the year. You take
credit for these amounts on your annual tax return.
If the payment is part of an annuity payout plan, we generally compute the
amount of withholding using payroll tables. You may provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security Number or Taxpayer Identification
Number, you can elect not to have any withholding occur.
26 PROSPECTUS
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SYMPHONY ANNUITY
- ------------------------------------------------------------------
If the distribution is any other type of payment (such as a partial or full
surrender), we compute withholding using 10% of the taxable portion. Similar to
above, as long as you have provided us with a valid Social Security Number or
Taxpayer Identification Number, you can elect not to have this withholding
occur.
If you take a distribution from a contract offered under a Section 457 plan
(deferred compensation plan of state and local governments and tax-exempt
organizations), we compute withholding using payroll methods, depending upon the
type of payment.
Some states also impose withholding requirements similar to the federal
withholding described above. If this should be the case, we may deduct state
withholding from any payment from which we deduct federal withholding. The
withholding requirements may differ if we are making payment to a non-U.S.
citizen or if we deliver the payment outside the United States.
WITHHOLDING FROM QUALIFIED ANNUITIES: If you receive directly all or part of the
contract value from a qualified annuity (except an IRA, SEP or Section 457
plan), mandatory 20% federal income tax withholding (and possibly state income
tax withholding) generally will be imposed at the time the payout is made. This
mandatory withholding is in place of the elective withholding discussed above.
This mandatory withholding will not be imposed if:
- - instead of receiving the distribution check, you elect to have the
distribution rolled over directly to an IRA or another eligible plan;
- - the payout is one in a series of substantially equal periodic payouts, made at
least annually, over your life or life expectancy (or the joint lives or life
expectancies of you and your designated beneficiary) or over a specified
period of 10 years or more; or
- - the payout is a minimum distribution required under the Code.
Payments we make to a surviving spouse instead of being directly rolled over to
an IRA also may be subject to mandatory 20% income tax withholding.
State withholding also may be imposed on taxable distributions.
TRANSFER OF OWNERSHIP OF A NONQUALIFIED ANNUITY: If you transfer a nonqualified
annuity without receiving adequate consideration, the transfer is a gift and
also may be a surrender for federal income tax purposes. If the gift is a
currently taxable event for income tax purposes, the original owner will be
taxed on the amount of deferred earnings at the time of the transfer and also
may be subject to the 10% IRS penalty discussed earlier. In this case, the new
owner's investment in the contract will be the value of the contract at the time
of the transfer.
COLLATERAL ASSIGNMENT OF A NONQUALIFIED ANNUITY: If you collaterally assign or
pledge your contract, earnings on purchase payments you made after Aug. 13, 1982
will be taxed to you like a surrender.
IMPORTANT: Our discussion of federal tax laws is based upon our understanding of
current interpretations of these laws. Federal tax laws or current
interpretations of them may change. For this reason and because tax consequences
are complex and highly individual and cannot always be anticipated, you should
consult a tax advisor if you have any questions about taxation of your contract.
TAX QUALIFICATION: We intend that the contract qualify as an annuity for federal
income tax purposes. To that end, the provisions of the contract are to be
interpreted to ensure or maintain such tax qualification, in spite of any other
provisions of the contract. We reserve the right to amend the contract to
reflect any clarifications that may be needed or are appropriate to maintain
such qualification or to conform the contract to any applicable changes in the
tax qualification requirements. We will send you a copy of any such amendment.
27 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
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VOTING RIGHTS
As an owner with investments in the subaccounts, you may vote on important fund
policies. We will vote fund shares according to your instructions.
The number of votes you have is determined by applying your percentage interest
in each subaccount to the total number of votes allowed to the subaccount.
We calculate votes separately for each subaccount. We will send notice of these
meetings, proxy materials and a statement of the number of votes to which the
voter is entitled.
We will vote shares for which we have not received instructions in the same
proportion as the votes for which we have received instructions. We also will
vote the shares for which we have voting rights in the same proportion as the
votes for which we have received instructions.
- --------------------------------------------------------------------------------
ABOUT THE SERVICE PROVIDERS
ISSUER AND PRINCIPAL UNDERWRITER
IDS Life issues and is the principal underwriter of the contract. IDS Life is a
stock life insurance company organized in 1957 under the laws of the state of
Minnesota and is located at IDS Tower 10, Minneapolis, MN 55440-0010. IDS Life
conducts a conventional life insurance business.
IDS Life is a wholly-owned subsidiary of AEFC, which itself is a wholly-owned
subsidiary of American Express Company, a financial services company
headquartered in New York City.
The AEFC family of companies offers not only insurance and annuities, but also
mutual funds, investment certificates and a broad range of financial management
services. American Express Financial Advisors Inc. (AEFA) serves individual and
businesses through its nationwide network of more than 180 offices and 9200
advisors.
IDS Life pays total commissions of up to 7.0% of the total purchase payments it
receives on the contracts. From time to time, we may pay or permit other
promotional incentives, in cash or credit or other compensation.
LEGAL PROCEEDINGS
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which IDS Life and AEFC do business involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents, and
other matters. IDS Life and AEFC, like other life and health insurers, from time
to time are involved in such litigation. On December 13, 1996, an action
entitled Lesa Benacquisto and Daniel Benacquisto vs. IDS Life Insurance Company
and American Express Financial Corporation was commenced in Minnesota state
court. The action was brought by individuals who replaced an existing IDS Life
insurance policy with a new IDS Life policy. The plaintiffs purport to represent
a class consisting of all persons who replaced existing IDS Life policies with
new policies from and after January 1, 1985. The complaint puts at issue various
alleged sales practices and misrepresentations, alleged breaches of fiduciary
duties and alleged violations of consumer fraud statutes. IDS Life and AEFC
filed an answer to the complaint on February 18, 1997, denying the allegations.
A second action, entitled Arnold Mork, Isabella Mork, Ronald Melchart and Susan
Melchart vs. IDS Life Insurance Company and American Express Financial
Corporation was commenced in the same court on March 21, 1997. In addition to
claims that are included in the Benacquisto lawsuit, the second action includes
an allegation of improper replacement of an existing IDS Life annuity contract.
A subsequent class action, Richard Thoresen and Elizabeth Thoresen vs. AEFC,
American Partners Life Insurance Company, American Enterprise Life Insurance
Company, American Centurion Life Assurance Company, IDS Life Insurance Company
and IDS Life Insurance Company of New York, was filed in the same court on
October 13, 1998 alleging that the sale of annuities in tax-deferred
contributory retirement investment plans (e.g. IRA's) was done through deceptive
marketing practices, which IDS Life denies.
28 PROSPECTUS
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IDS Life and AEFC believe they have meritorious defenses to the claims raised in
the lawsuits. The outcome of any litigation cannot be predicted with certainty.
In the opinion of management, however, the ultimate resolution of the above
lawsuits and others filed against IDS Life should not have a material adverse
effect on IDS Life's consolidated financial position.
YEAR 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of IDS Life and the
variable account. IDS Life and the variable account have no computer systems of
their own but are dependent upon the systems of AEFC and certain other third
parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's
target date for substantially completing corrective measures on business
critical systems was Dec. 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC currently is on track with this
schedule and also is on track to finish the work on non-critical systems by June
30, 1999. The Year 2000 readiness of other third parties whose system failures
could have an impact on IDS Life's and the variable account's operations
continues to be evaluated. The potential materiality of any such impact is not
known at this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
29 PROSPECTUS
<PAGE>
SYMPHONY ANNUITY
TABLE OF CONTENTS OF THE STATEMENT
OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Performance Information........................... 3
Calculating Annuity Payouts....................... 5
Rating Agencies................................... 5
Principal Underwriter............................. 6
Independent Auditors.............................. 6
Financial Statements
</TABLE>
- --------------------------------------------------------------------------------
30 PROSPECTUS
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SYMPHONY ANNUITY
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Please check the box to receive a copy of the Statement of
Additional Information:
/ / Symphony Annuity
/ / Greenwich Street Series Fund
/ / IDS Life Retirement Annuity Mutual Funds
MAIL YOUR REQUEST TO THE ADDRESS SHOWN ON THE COVER OF THIS
PROSPECTUS.
IDS Life Insurance Company
Attn: T8/829
IDS Tower 10
Minneapolis, Mn 55440-0010
WE WILL MAIL YOUR REQUEST TO:
<TABLE>
<S> <C> <C>
Your name ---------------------
Address ---------------------
City --------------------- State Zip
--------------------- ---------------------
</TABLE>
31 PROSPECTUS
<PAGE>
Symphony
- ---------------------------------
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
IN0122 H1 S-6402 N (4/99)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
SYMPHONY ANNUITY
IDS LIFE ACCOUNT SBS
April 30, 1999
IDS Life Account SBS is a separate account established and maintained by IDS
Life Insurance Company (IDS Life).
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained from your financial consultant, or by writing or calling us at the
address and telephone number below. The prospectus is incorporated in this SAI
by reference.
IDS Life Insurance Company
Unit 829
P.O. Box 458
Minneapolis, MN 55440-0499
800-422-3542
<PAGE>
SYMPHONY ANNUITY-IDS LIFE ACCOUNT SBS
TABLE OF CONTENTS
Performance Information................................p.3
Calculating Annuity Payouts............................p.5
Rating Agencies........................................p.5
Principal Underwriter..................................p.6
Independent Auditors...................................p.6
Financial Statements
<PAGE>
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
The subaccounts may quote various performance figures to illustrate past
performance. We base total return and current yield quotations (if applicable)
on standardized methods of computing performance as required by the Securities
and Exchange Commission (SEC). An explanation of the methods used to compute
performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the subaccounts in
terms of the average annual compounded rate of return of a hypothetical
investment in the contract over a period of one, five and 10 years (or, if less,
up to the life of the subaccounts), calculated according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period, at the end of the
period (or fractional period thereof)
Cumulative Total Return
Aggregate total return represents the cumulative change in value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value). We compute aggregate total return using the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period, at the
end of the period (or fractional period thereof)
The SEC requires that we assume that you withdraw the entire contract at the end
of the one-, five-, and 10- year periods (or, if less, up to the life of the
subaccount). In addition, we may show performance figures without the deduction
of a surrender charge. All total return figures reflect the deduction of all
applicable charges including the contract administrative charge, the variable
account administrative charge and the mortality and expense risk fee.
<PAGE>
Annualized Calculation of Yield for Subaccounts Investing in Money Market Fund
Simple Yield:
For the subaccounts investing in the money market fund, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical subaccount (exclusive of
capital changes and income other than investment income) at the
beginning of a particular seven-day period;
(b) less a pro rata share of the subaccount expenses accrued over the
period;
(c) dividing this difference by the value of the subaccount at the
beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The subaccount's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the period, and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable surrender charge, or o any realized or unrealized
gains or losses.
Annualized Compound Yield:
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] -1
Annualized Yield for Subaccounts Investing in Income Funds
For the subaccounts investing in income funds, we base quotations of yield on
all investment income earned during a particular 30-day period, less expenses
accrued during the period (net investment income) and compute it by dividing net
investment income per accumulation unit by the value of an accumulation unit on
the last day of the period, according to the following formula:
YIELD = 2[( a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of accumulation units
outstanding during the period that were entitled to
receive dividends
d = the maximum offering price per accumulation unit on the
last day of the period
<PAGE>
The subaccount earns yield from the increase in the net asset value of shares of
the fund in which it invests and from dividends declared and paid by the fund,
which are automatically invested in shares of the fund.
Independent rating or statistical services or publishers or publications such as
those listed below may quote subaccount performance, compare it to rankings,
yields or returns, or use it in variable annuity accumulation or settlement
illustrations they publish or prepare.
The Bank Rate Monitor National Index, Barron's, Business Week, CDA
Technologies, Donoghue's Money Market Fund Report, Financial Services
Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's Daily, Kiplinger's
Personal Finance, Lipper Analytical Services, Money, Morningstar,
Mutual Fund Forecaster, Newsweek, The New York Times, Personal
Investor, Stanger Report, Sylvia Porter's Personal Finance, USA Today,
U.S. News and World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
CALCULATING ANNUITY PAYOUTS
We guarantee the fixed annuity payout amounts. Once calculated, the payout will
remain the same and never change. To calculate annuity payouts we:
o take the total value of the fixed account and the subaccounts at the
annuity start date, retirement date, or the date selected to begin
receiving annuity payouts; then
o using an annuity table we apply the value according to the annuity payout plan
selected.
The table will be equal to or greater than the table in the contract.
The annuity payout table we use will be the one in effect at the time chosen to
begin annuity payouts.
RATING AGENCIES
The following chart reflects the ratings given to us by independent rating
agencies. These agencies evaluate the financial soundness and claims-paying
ability of insurance companies based on a number of different factors. This
information does not relate to the management or performance of the subaccounts
of the contract. This information relates only to the fixed account and reflects
our ability to make annuity payouts and to pay death benefits and other
distributions from the contract.
Rating Agency Rating
A.M. Best A+
(Superior)
- -----------------------
Duff & Phelps AAA
- -----------------------
Moody's Aa2
<PAGE>
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is IDS Life which offers the contract
on a continuous basis.
Surrender charges we received for the last three years aggregated total
$17,936,810, $14,502,145, and $11,956,753, respectively.
Commissions we paid for the last three years aggregated total $17,634,855,
$17,883,488, and $17,247,007, respectively.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI have been audited by Ernst &
Young LLP (1400 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN 55402)
independent auditors, as stated in their report appearing herein.
FINANCIAL STATEMENTS
<PAGE>
IDS Life Account SBS
Annual Financial Information
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying individual and combined statements of net
assets of the segregated asset subaccounts of IDS Life Account SBS (comprised of
subaccounts AAP, ADS, AEG, AEM, AEX, AGI, AIH, AIE, AMO, ATR, ACR, AMG and ASI,)
as of December 31, 1998, and the related statements of operations for the year
then ended and the statements of changes in net assets for each of the two years
in the period then ended. These financial statements are the responsibility of
the management of IDS Life Insurance Company. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1998 with the affiliated and
unaffiliated mutual fund managers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
segregated asset subaccounts of IDS Life Account SBS at December 31, 1998 and
the individual and combined results of their operations and the changes in their
net assets for the periods described above, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
March 12, 1999
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Net Assets Dec. 31, 1998
Segregated Asset Subaccount
Assets AAP ADS AEG AEM
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C> <C>
at cost $50,188,492 $40,297,919 $ 13,354,477 $25,491,552
----------- ----------- ------------ -----------
at market value $85,534,501 $43,659,975 $ 19,933,242 $35,858,391
Dividends receivable - - - -
Accounts receivable from IDS Life for contract
purchase payments - - 6,653 -
Receivable from mutual funds and portfolios
for share redemptions 38,444 129,930 - 99,840
------ ------- ------- ------
Total assets 85,572,945 43,789,905 19,939,895 35,958,231
========== ========== ========== ==========
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 92,443 47,359 21,122 39,399
Administrative charge 18,489 9,472 4,224 7,880
Contract terminations 38,444 129,930 - 99,840
Payable to mutual funds and portfolios
for investments purchased - - 6,653 -
----- ----- ----- -----
Total liabilities 149,376 186,761 31,999 147,119
------- ------- ------ -------
Net assets applicable to contracts in
accumulation period $85,423,569 $43,603,144 $ 19,907,896 $35,811,112
=========== =========== ============ ===========
Accumulation units outstanding 34,729,455 29,052,125 7,864,513 17,403,958
========== ========== ========= ==========
Net asset value per accumulation unit $ 2.46 $ 1.50 $ 2.50 $ 2.06
====== ====== ====== ======
Assets AEX AGI AIH
Investments in shares of mutual funds and portfolios:
at cost $ 9,687,071 $22,887,827 $ 10,744,860
----------- ----------- ------------
at market value $19,806,258 $32,614,436 $ 11,233,998
Dividends receivable - - -
Accounts receivable from IDS Life for contract
purchase payments 47,308 - -
Receivable from mutual funds and portfolios
for share redemptions - 25,576 1,359
------ ------ -----
Total assets 19,853,566 32,640,012 11,235,357
========== ========== ==========
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 21,048 35,508 12,241
Administrative charge 4,210 7,101 2,448
Contract terminations - 25,576 1,359
Payable to mutual funds and portfolios
for investments purchased 47,308 - -
------ ------ -----
Total liabilities 72,566 68,185 16,048
------ ------ ------
Net assets applicable to contracts in
accumulation period $19,781,000 $32,571,827 $ 11,219,309
=========== =========== ============
Accumulation units outstanding 6,349,349 14,519,911 7,967,854
========= ========== =========
Net asset value per accumulation unit $ 3.12 $ 2.24 $ 1.41
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Net Assets (continued) Dec. 31, 1998
Segregated Asset Subaccount
Assets AIE AMO ATR ACR
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C> <C>
at cost $16,265,916 $4,054,237 $ 20,261,279 $ 598,680
----------- ---------- ------------ ---------
at market value $22,320,585 $4,054,243 $ 28,970,352 $ 729,783
Dividends receivable - - - -
Accounts receivable from IDS Life
for contract purchase payments - - - 910
Receivable from mutual funds and portfolios for
share redemptions 71,906 93,792 207 -
------ ------ --- -----
Total Assets 22,392,491 4,148,035 28,970,559 730,693
========== ========= ========== =======
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 23,896 4,972 31,143 758
Administration charge 4,780 994 6,228 152
Contract terminations 71,906 93,792 207 -
Payable to mutual funds and portfolios
for investments purchased - - - -
----- ---- ----- ---
Total liabilities 100,582 99,758 37,578 910
------- ------ ------ ---
Net assets applicable to contracts in
accumulation period $22,291,909 $4,048,277 $ 28,932,981 $ 729,783
=========== ========== ============ =========
Accumulation units outstanding 16,879,877 3,417,817 14,575,392 368,106
========== ========= ========== =======
Net asset value per accumulation unit $ 1.31 $ 1.18 $ 1.97 $ 1.98
====== ====== ====== ======
Combined
Variable
Assets AMG ASI Account
Investments in shares of mutual funds and portfolios:
at cost $1,091,073 $ 881,437 $215,804,820
---------- --------- ------------
at market value $1,192,855 $ 851,873 $306,760,492
Dividends receivable - 4,999 4,999
Accounts receivable from IDS Life -
for contract purchase payments 1,522 - 56,393
Receivable from mutual funds and portfolios for -
share redemptions 30 - 461,084
-- ---- -------
Total Assets 1,194,407 856,872 307,282,968
========= ======= ===========
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 1,268 868 332,025
Administration charge 254 173 66,405
Contract terminations 30 - 461,084
Payable to mutual funds and portfolios
for investments purchased - 3,959 57,920
---- ----- ------
Total liabilities 1,552 5,000 917,434
----- ----- -------
Net assets applicable to contracts in
accumulation period $1,192,855 $ 851,872 $306,365,534
========== ========= ============
Accumulation units outstanding 648,969 629,408 154,406,734
======= ======= ===========
Net asset value per accumulation unit $ 1.84 $ 1.35
====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Operations Year ended Dec. 31, 1998
Segregated Asset Subaccount
Investment Income AAP ADS AEG AEM
<S> <C> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 5,042,953 $2,984,834 $3,136,108 $3,581,554
----------- ---------- ---------- ----------
Expenses:
Mortality and expense risk fee 1,178,883 618,583 237,029 516,347
Administrative charge 235,777 123,717 47,406 103,269
------- ------- ------ -------
Total expenses 1,414,660 742,300 284,435 619,616
--------- ------- ------- -------
Investment income (loss) - net 3,628,293 2,242,534 2,851,673 2,961,938
========= ========= ========= =========
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds
and portfolios:
Proceeds from sales 32,323,000 14,870,023 6,034,762 15,522,380
Cost of investments sold 19,943,057 13,739,181 4,568,004 11,402,092
---------- ---------- --------- ----------
Net realized gain (loss) on investments 12,379,943 1,130,842 1,466,758 4,120,288
Net change in unrealized appreciation or
depreciation of investments (1,205,509) (1,053,730) 1,257,497 (1,366,690)
---------- ---------- --------- ----------
Net gain (loss) on investments 11,174,434 77,112 2,724,255 2,753,598
---------- ------ --------- ---------
Net increase (decrease) in net assets
resulting from operations $14,802,727 $2,319,646 $5,575,928 $5,715,536
=========== ========== ========== ==========
Investment Income AEX AGI AIH
Dividend income from mutual funds and portfolios $ 219,647 $ 4,282,167 $ 800,990
--------- ----------- ---------
Expenses:
Mortality and expense risk fee 251,562 459,651 157,898
Administrative charge 50,312 91,930 31,580
------ ------ ------
Total expenses 301,874 551,581 189,478
------- ------- -------
Investment income (loss) - net (82,227) 3,730,586 611,512
======= ========= =======
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds
and portfolios:
Proceeds from sales 6,929,808 12,776,080 4,074,547
Cost of investments sold 3,807,306 8,769,988 3,890,006
--------- --------- ---------
Net realized gain (loss) on investments 3,122,502 4,006,092 184,541
Net change in unrealized appreciation or
depreciation of investments 1,625,907 (4,213,077) (152,945)
--------- ---------- --------
Net gain (loss) on investments 4,748,409 (206,985) 31,596
--------- -------- ------
Net increase (decrease) in net assets
resulting from operations $ 4,666,182 $ 3,523,601 $ 643,108
=========== =========== =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Operations (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccount
Investment income AIE AMO ATR ACR
<S> <C> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 115,036 $ 188,138 $1,752,416 $ 54,335
--------- --------- ---------- --------
Expenses:
Mortality and expense risk fee 315,199 54,581 408,931 9,062
Administrative charge 63,040 10,916 81,786 1,812
------ ------ ------ -----
Total expenses 378,239 65,497 490,717 10,874
------- ------ ------- ------
Investment income (loss) - net (263,203) 122,641 1,261,699 43,461
======== ======= ========= ======
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds
and portfolios:
Proceeds from sales 10,118,953 8,492,900 9,264,214 387,762
Cost of investments sold 7,927,401 8,492,898 6,475,014 325,850
--------- --------- --------- -------
Net realized gain (loss) on investments 2,191,552 2 2,789,200 61,912
Net change in unrealized appreciation or
depreciation of investments 1,901,162 4 (3,066,724) 31,182
--------- - ---------- ------
Net gain (loss) on investments 4,092,714 6 (277,524) 93,094
--------- - -------- ------
Net increase (decrease) in net assets
resulting from operations $ 3,829,511 $ 122,647 $ 984,175 $ 136,555
=========== ========= ========= =========
Combined
Variable
Investment income AMG ASI Account
Dividend income from mutual funds and portfolios $ 136,531 $ 66,821 $22,361,530
--------- -------- -----------
Expenses:
Mortality and expense risk fee 16,175 11,209 4,235,110
Administrative charge 3,235 2,242 847,022
----- ----- -------
Total expenses 19,410 13,451 5,082,132
------ ------ ---------
Investment income (loss) - net 117,121 53,370 17,279,398
======= ====== ==========
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds
and portfolios:
Proceeds from sales 1,004,603 494,663 122,293,695
Cost of investments sold 876,603 492,860 90,710,260
------- ------- ----------
Net realized gain (loss) on investments 128,000 1,803 31,583,435
Net change in unrealized appreciation or
depreciation of investments (59,404) (52,899) (6,355,226)
------- ------- ----------
Net gain (loss) on investments 68,596 (51,096) 25,228,209
------ ------- ----------
Net increase (decrease) in net assets
resulting from operations $ 185,717 $ 2,274 $42,507,607
========= ======= ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Changes in Net Assets Year ended Dec. 31, 1998
Segregated Asset Subaccount
Operations AAP ADS AEG AEM
<S> <C> <C> <C> <C>
Investment income (loss) - net $ 3,628,293 $2,242,534 $2,851,673 $2,961,938
Net realized gain (loss) on investments 12,379,943 1,130,842 1,466,758 4,120,288
Net change in unrealized appreciation or
depreciation of investments (1,205,509) (1,053,730) 1,257,497 (1,366,690)
---------- ---------- --------- ----------
Net increase (decrease) in net assets
resulting from operations 14,802,727 2,319,646 5,575,928 5,715,536
========== ========= ========= =========
Contract transactions
Contract purchase payments 208,824 152,910 11,713 77,018
Net transfers* (2,428,570) 695,149 (236,311) (672,279)
Contract terminations:
Surrender benefits and contract charges (26,954,573) (12,276,001) (4,169,526) (12,554,409)
Death benefits (957,824) (775,825) (179,779) (1,095,912)
-------- -------- -------- ----------
Increase (decrease) from contract transactions (30,132,143) (12,203,767) (4,573,903) (14,245,582)
----------- ----------- ---------- -----------
Net assets at beginning of year 100,752,985 53,487,265 18,905,871 44,341,158
----------- ---------- ---------- ----------
Net assets at end of year $85,423,569 $43,603,144 $ 19,907,896 $35,811,112
=========== =========== ============ ===========
Accumulation unit activity
Units outstanding at beginning of year 48,069,805 37,359,162 10,123,212 24,834,887
Contracts purchase payments 92,068 104,512 5,675 41,234
Net transfers* (1,095,747) 480,146 (140,028) (342,953)
Contract terminations:
Surrender benefits and contract charges (11,912,217) (8,360,096) (2,035,364) (6,541,209)
Death benefits (424,454) (531,599) (88,982) (588,001)
-------- -------- ------- --------
Units outstanding at the end of the year 34,729,455 29,052,125 7,864,513 17,403,958
========== ========== ========= ==========
Operations AEX AGI AIH
Investment income (loss) - net $ (82,227) $ 3,730,586 $ 611,512
Net realized gain (loss) on investments 3,122,502 4,006,092 184,541
Net change in unrealized appreciation or
depreciation of investments 1,625,907 (4,213,077) (152,945)
--------- ---------- --------
Net increase (decrease) in net assets
resulting from operations 4,666,182 3,523,601 643,108
========= ========= =======
Contract transactions
Contract purchase payments 30,852 85,785 9,850
Net transfers* (435,115) (679,124) 934,902
Contract terminations:
Surrender benefits and contract charges (5,226,700) (9,324,770) (2,568,828)
Death benefits (190,930) (1,037,317) (701,318)
-------- ---------- --------
Increase (decrease) from contract transactions (5,821,893) (10,955,426) (2,325,394)
---------- ----------- ----------
Net assets at beginning of year 20,936,711 40,003,652 12,901,595
---------- ---------- ----------
Net assets at end of year $19,781,000 $32,571,827 $ 11,219,309
=========== =========== ============
Accumulation unit activity
Units outstanding at beginning of year 8,511,694 19,667,956 9,639,891
Contracts purchase payments 11,374 38,912 7,016
Net transfers* (183,203) (348,238) 684,570
Contract terminations:
Surrender benefits and contract charges (1,918,131) (4,363,155) (1,857,735)
Death benefits (72,385) (475,564) (505,888)
------- -------- --------
Units outstanding at the end of the year 6,349,349 14,519,911 7,967,854
========= ========== =========
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccount
Operations AIE AMO ATR ACR
<S> <C> <C> <C> <C>
Investment income (loss) - net $ (263,203) $ 122,641 $1,261,699 $ 43,461
Net realized gain (loss) on investments 2,191,552 2 2,789,200 61,912
Net change in unrealized appreciation or
depreciation of investments 1,901,162 4 (3,066,724) 31,182
--------- - ---------- ------
Net increase (decrease) in net assets
resulting from operations 3,829,511 122,647 984,175 136,555
========= ======= ======= =======
Contract transactions
Contract purchase payments 18,993 150 39,661 -
Net transfers (1,972,861) 6,877,075 (1,533,973) 22,696
Contract terminations:
Surrender benefits and contract charges (6,200,605) (7,163,722) (6,266,093) (181,222)
Death benefits (319,301) (4,229) (283,338) -
-------- ------ -------- ------
Increase (decrease) from contract transactions (8,473,774) (290,726) (8,043,743) (158,526)
---------- -------- ---------- --------
Net assets at beginning of year 26,936,172 4,216,356 35,992,549 751,754
---------- --------- ---------- -------
Net assets at end of year $22,291,909 $4,048,277 $ 28,932,981 $ 729,783
=========== ========== ============ =========
Accumulation unit activity
Units outstanding at beginning of year 23,936,240 3,661,496 18,783,339 463,389
Contracts purchase payments 15,343 130 20,486 -
Net transfers* (1,757,254) 5,889,033 (834,980) 12,359
Contract terminations:
Surrender benefits and contract charges (5,047,158) (6,129,230) (3,245,745) (107,642)
Death benefits (267,294) (3,612) (147,708) -
-------- ------ -------- ------
Units outstanding at the end of the year 16,879,877 3,417,817 14,575,392 368,106
========== ========= ========== =======
Combined
Variable
Operations AMG ASI Account
Investment income (loss) - net $ 117,121 $ 53,370 $17,279,398
Net realized gain (loss) on investments 128,000 1,803 31,583,435
Net change in unrealized appreciation or
depreciation of investments (59,404) (52,899) (6,355,226)
------- ------- ----------
Net increase (decrease) in net assets
resulting from operations 185,717 2,274 42,507,607
======= ===== ==========
Contract transactions
Contract purchase payments - - 635,756
Net transfers 7,347 118,679 697,615
Contract terminations:
Surrender benefits and contract charges (451,813) (179,507) (93,517,769)
Death benefits (322,266) (266,481) (6,134,520)
-------- -------- ----------
Increase (decrease) from contract transactions (766,732) (327,309) (98,318,918)
-------- -------- -----------
Net assets at beginning of year 1,773,870 1,176,907 362,176,845
--------- --------- -----------
Net assets at end of year $1,192,855 $ 851,872 $306,365,534
========== ========= ============
Accumulation unit activity
Units outstanding at beginning of year 1,100,487 869,469
Contracts purchase payments - -
Net transfers* 1,065 88,646
Contract terminations:
Surrender benefits and contract charges (262,921) (133,884)
Death benefits (189,662) (194,823)
-------- --------
Units outstanding at the end of the year 648,969 629,408
======= =======
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Changes in Net Assets Year ended Dec. 31, 1997
Segregated Asset Subaccount
Operations AAP ADS AEG AEM
<S> <C> <C> <C> <C>
Investment income (loss) - net $ 5,030,286 $3,638,408 $1,876,621 $ 1,458,433
Net realized gain (loss) on investments 5,247,899 1,181,788 1,362,977 1,703,222
Net change in unrealized appreciation or
depreciation of investments 11,002,023 (1,378,549) (48,984) 5,012,787
---------- ---------- ------- ---------
Net increase (decrease) in net assets
resulting from operations 21,280,208 3,441,647 3,190,614 8,174,442
========== ========= ========= =========
Contract transactions
Contract purchase payments 301,440 254,888 84,482 45,399
Net transfers* 1,316,198 138,231 189,942 (1,406,469)
Surrender benefits and contract charges (12,046,368) (6,087,430) (2,405,363) (5,714,396)
Death benefits (753,685) (623,629) (42,141) (579,202)
-------- -------- ------- --------
Increase (decrease) from contract transactions (11,182,415) (6,317,940) (2,173,080) (7,654,668)
----------- ---------- ---------- ----------
Net assets at beginning of year 90,655,192 56,363,558 17,888,337 43,821,384
---------- ---------- ---------- ----------
Net assets at end of year $100,752,985 $53,487,265 $ 18,905,871 $ 44,341,158
============ =========== ============ ============
Accumulation unit activity
Units outstanding at beginning of year 53,859,928 41,938,582 11,448,609 29,865,818
Contract purchase payments 160,414 187,086 54,420 31,247
Net transfers* 665,621 103,352 70,016 (972,852)
Surrender benefits and contract charges (6,206,651) (4,414,681) (1,423,797) (3,708,260)
Death benefits (409,507) (455,177) (26,036) (381,066)
-------- -------- ------- --------
Units outstanding at end of year 48,069,805 37,359,162 10,123,212 24,834,887
========== ========== ========== ==========
Operations AEX AGI AIH
Investment income (loss) - net $ 271,310 $ 2,630,450 $ 629,781
Net realized gain (loss) on investments 1,311,518 2,397,450 144,405
Net change in unrealized appreciation or
depreciation of investments 3,399,172 2,313,905 105,755
--------- --------- -------
Net increase (decrease) in net assets
resulting from operations 4,982,000 7,341,805 879,941
========= ========= =======
Contract transactions
Contract purchase payments 60,630 135,879 6,135
Net transfers* 980,015 1,832,898 615,171
Surrender benefits and contract charges (2,246,807) (4,498,545) (1,439,085)
Death benefits (85,989) (575,831) (298,826)
------- -------- --------
Increase (decrease) from contract transactions (1,292,151) (3,105,599) (1,116,605)
---------- ---------- ----------
Net assets at beginning of year 17,246,862 35,767,446 13,138,259
---------- ---------- ----------
Net assets at end of year $20,936,711 $ 40,003,652 $12,901,595
=========== ============ ===========
Accumulation unit activity
Units outstanding at beginning of year 9,114,001 21,298,709 10,508,719
Contract purchase payments 28,829 74,576 4,675
Net transfers* 419,604 988,064 484,135
Surrender benefits and contract charges (1,012,697) (2,382,438) (1,123,969)
Death benefits (38,043) (310,955) (233,669)
------- -------- --------
Units outstanding at end of year 8,511,694 19,667,956 9,639,891
========= ========== =========
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1997
Segregated Asset Subaccount
Operations AIE AMO ATR ACR
<S> <C> <C> <C> <C>
Investment income (loss) - net $ (398,528) $ 142,203 $ 936,596 $ 9,880
Net realized gain (loss) on investments 1,088,055 3 1,554,468 2,853
Net change in unrealized appreciation or
depreciation of investments (1,675,323) 8 2,362,940 126,538
---------- - --------- -------
Net increase (decrease) in net assets
resulting from operations (985,796) 142,214 4,854,004 139,271
======== ======= ========= =======
Contract transactions
Contract purchase payments 150,915 1,553 183,857 -
Net transfers* (334,587) 407,232 1,023,114 26,299
Surrender benefits and contract charges (3,303,464) (1,726,758) (3,373,778) (114,143)
Death benefits (226,402) (123,680) (296,996) -
-------- -------- -------- ------
Increase (decrease) from contract transactions (3,713,538) (1,441,653) (2,463,803) (87,844)
---------- ---------- ---------- -------
Net assets at beginning of year 31,635,506 5,515,795 33,602,348 700,327
========== ========= ========== =======
Net assets at end of year $26,936,172 $4,216,356 $35,992,549 $751,754
=========== ========== =========== ========
Accumulation unit activity
Units outstanding at beginning of year 27,135,083 4,930,057 20,195,164 528,001
Contract purchase payments 128,305 1,382 105,152 -
Net transfers* (313,788) 368,257 578,202 17,605
Surrender benefits and contract charges (2,822,214) (1,529,482) (1,928,909) (82,217)
Death benefits (191,146) (108,718) (166,270) -
-------- -------- -------- ------
Units outstanding at end of year 23,936,240 3,661,496 18,783,339 463,389
========== ========= ========== =======
Combined
Variable
Operations AMG ASI Account
Investment income (loss) - net $ 143,483 $ 75,105 $ 16,444,028
Net realized gain (loss) on investments 38,425 8,927 16,041,990
Net change in unrealized appreciation or
depreciation of investments 14,211 (20,027) 21,214,456
------ ------- ----------
Net increase (decrease) in net assets
resulting from operations 196,119 64,005 53,700,474
======= ====== ==========
Contract transactions
Contract purchase payments 26,015 - 1,251,193
Net transfers* 619,647 344,056 5,751,747
Surrender benefits and contract charges (142,406) (167,977) (43,266,520)
Death benefits - - (3,606,381)
------ ------ ----------
Increase (decrease) from contract transactions 503,256 176,079 (39,869,961)
------- ------- -----------
Net assets at beginning of year 1,074,495 936,823 348,346,332
--------- ------- -----------
Net assets at end of year $1,773,870 $1,176,907 $ 362,176,845
========== ========== =============
Accumulation unit activity
Units outstanding at beginning of year 784,734 742,054
Contract purchase payments 15,990 -
Net transfers* 400,985 257,994
Surrender benefits and contract charges (101,222) (130,579)
Death benefits - -
------ ------
Units outstanding at end of year 1,100,487 869,469
========= =======
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Notes to Financial Statements
1. Organization
IDS Life Account SBS (the Variable Account) was established on May 9, 1991 as a
single unit investment trust of IDS Life Insurance Company (IDS Life) under the
Investment Company Act of 1940, as amended (the 1940 Act). Operations of the
Variable Account commenced on Oct. 16, 1991.
The Variable Account is comprised of various subaccounts. Each subaccount
invests exclusively in shares of the following mutual funds or portfolios
(collectively, the Funds), which are registered under the 1940 Act as
diversified, open-end management investment companies and have the following
investment managers.
<S> <C> <C>
Subaccount Invests exclusively in shares of Investment Manager
AAP Appreciation Portfolio Smith Barney Inc.1
ADS Diversified Strategic Income Portfolio Smith Barney Inc.2
AEG Emerging Growth Portfolio Smith Barney Inc.3
AEM Equity Income Portfolio Smith Barney Inc.1
AEX Equity Index Portfolio Smith Barney Inc.4
AGI Growth & Income Portfolio Smith Barney Inc.1
AIH Intermediate High Grade Portfolio Smith Barney Inc.1
AIE International Equity Portfolio Smith Barney Inc.1
AMO Money Market Portfolio Smith Barney Inc.1
ATR Total Return Portfolio Smith Barney Inc.1
ACR IDS Life Capital Resource Fund IDS Life Insurance Company 5
AMG IDS Life Managed Fund IDS Life Insurance Company 5
ASI IDS Life Special Income Fund IDS Life Insurance Company 5
1 Mutual Management Corp. (MMC) is the investment advisor.
2 MMC. is the investment advisor. Smith Barney Global Capital Management, Inc.
is the sub-investment advisor.
3 Van Kampen American Capital Asset Management, Inc. is the investment advisor.
4 Travelers Investment Management Co. is the investment advisor.
5 American Express Financial Corporation (AEFC) is the investment advisor.
The assets of each subaccount of the Variable Account are not chargeable with
liabilities arising out of the business conducted by any other segregated asset
account or by IDS Life.
IDS Life serves as issuer of the contracts.
2. Summary of Significant Accounting Policies
Investments in the Fund
Investments in shares of the Funds are stated at market value which is the net
asset value per share as determined by the respective 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 Funds are reinvested in
additional shares of the Funds and are recorded as income by the subaccounts on
the ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the subaccounts' share of the Funds'
undistributed net investment income, undistributed realized gain or loss and the
unrealized appreciation or depreciation on their investment securities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Federal Income Taxes
IDS Life is taxed as a life insurance company. The Variable Account is treated
as part of IDS Life for federal income tax purposes. Under existing federal
income tax law, no income taxes are payable with respect to any investment
income of the Variable Account.
3. Mortality and Expense Risk Fee
IDS Life makes contractual assurances to the Variable Account that possible
future adverse changes in administrative expenses and mortality experience of
the contract owners and annuitants will not affect the Variable Account. The
mortality and expense risk fee paid to IDS Life is computed daily and is equal,
on an annual basis, to 1.25% of the average daily net assets of the subaccounts.
4. Variable Account Administrative Charge
IDS Life deducts a daily charge equal, on an annual basis, to 0.25% of the daily
net asset value of each subaccount. This charge covers certain administrative
and operating expenses of the subaccounts incurred by IDS Life such as
accounting, legal and data processing fees and expenses involved in the
preparation and distribution of reports and prospectuses.
5. Contract Administrative Charge
IDS Life deducts an administrative charge of $30 per year on each contract
anniversary. This charge reimburses IDS Life for expenses incurred in
establishing and maintaining the Annuity records. This charge cannot be
increased and does not apply after a retirement payment plan begins. IDS Life
does not expect to profit from this charge.
6. Surrender Charge
IDS Life will use a surrender charge to help it recover certain expenses
relating to the sale of the Annuity. The surrender charge is deducted for
surrenders during the first six payment years following a purchase payment.
Charges by IDS Life for surrenders are not identified on an individual
segregated asset account basis. Charges for all segregated asset accounts
amounted to $17,936,810 in 1998 and $14,502,145 in 1997. Such charges are not
treated as a separate expense of the subaccounts. They are ultimately deducted
from contract surrender benefits paid by IDS Life.
7. Investment in Shares
The subaccounts' investment in shares of the Funds as of Dec. 31, 1998 were as
follows:
Subaccount Investment Shares NAV
AAP Appreciation Portfolio 4,042,273 $21.16
ADS Diversified Strategic Income Portfolio 4,005,502 10.90
AEG Emerging Growth Portfolio 1,015,448 19.63
AEM Equity Income Portfolio 2,189,157 16.38
AEX Equity Index Portfolio 660,869 29.97
AGI Growth & Income Portfolio 1,765,806 18.47
AIH Intermediate High Grade Portfolio 1,030,642 10.90
AIE International Equity Portfolio 1,601,190 13.94
AMO Money Market Portfolio 4,054,242 1.00
ATR Total Return Portfolio 1,650,732 17.55
ACR IDS Life Capital Resource Fund 22,349 32.65
AMG IDS Life Managed Fund 64,409 18.52
ASI IDS Life Special Income Fund 76,699 11.11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
8. Investment Transactions
The subaccounts' purchases of Funds' shares, including reinvestment of dividend
distributions, were as follows:
Year ended Dec. 31,
Subaccount Investment 1998 1997
<S> <C> <C>
AAP Appreciation Portfolio $ 5,791,915 $ 8,140,169
ADS Diversified Strategic Income Portfolio 4,892,642 6,703,247
AEG Emerging Growth Portfolio 4,312,141 3,758,651
AEM Equity Income Portfolio 4,225,478 2,944,464
AEX Equity Index Portfolio 1,022,318 2,486,308
AGI Growth & Income Portfolio 5,539,362 5,760,439
AIH Intermediate High Grade Portfolio 2,357,644 1,838,902
AIE International Equity Portfolio 1,373,895 1,481,763
AMO Money Market Portfolio 8,325,001 4,013,867
ATR Total Return Portfolio 2,471,032 3,427,735
ACR IDS Life Capital Resource Fund 271,679 115,637
AMG IDS Life Managed Fund 352,608 914,251
ASI IDS Life Special Income Fund 220,725 431,647
Combined Variable Account $41,156,440 $42,017,080
9. 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 IDS Life and the
Variable Account. IDS Life and the Variable Account have no computer systems of
their own but are dependent upon the systems of AEFC and certain other third
parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's
target date for substantially completing corrective measures on business
critical systems was Dec. 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC is currently on track with this
schedule and is also on track to finish the work on non-critical systems by June
30, 1999. The Year 2000 readiness of unaffiliated investment managers and other
third parties whose system failures could have an impact on IDS Life's and the
Variable Account's operations continues to be evaluated. The potential
materiality of any such impact is not known at this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
</TABLE>
<PAGE>
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
IDS LIFE FINANCIAL INFORMATION
- -----------------------------------------------------------------
The financial statements shown below are those of the insurance company and not
those of any other entity. They are included for the purpose of informing the
investor as to the financial condition of the insurance company and its ability
to carry out its obligations under its variable contracts.
IDS LIFE INSURANCE COMPANY
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS DEC. 31, 1998 DEC. 31, 1997
ASSETS ($ thousands, except share amounts)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value: 1998,
$8,420,035; 1997, $9,743,410).................................... $ 7,964,114 $ 9,315,450
Available for sale, at fair value (amortized cost: 1998,
$13,344,949; 1997, $12,515,030).................................. 13,613,139 12,876,694
Mortgage loans on real estate.................................... 3,505,458 3,618,647
Policy loans..................................................... 525,431 498,874
Other investments................................................ 366,604 318,591
- -------------------------------------------------------------------------------------------------
Total investments................................................ 25,974,746 26,628,256
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents........................................ 22,453 19,686
Amounts recoverable from reinsurers.............................. 262,260 205,716
Amounts due from brokers......................................... 327 8,400
Other accounts receivable........................................ 47,963 37,895
Accrued investment income........................................ 366,574 357,390
Deferred policy acquisition costs................................ 2,496,352 2,479,577
Other assets..................................................... 30,487 22,700
Separate account assets.......................................... 27,349,401 23,214,504
- -------------------------------------------------------------------------------------------------
Total assets..................................................... $ 56,550,563 $ 52,974,124
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Liabilities:
Future policy benefits:
Fixed annuities.................................................. $ 21,172,303 $ 22,009,747
Universal life-type insurance.................................... 3,343,671 3,280,489
Traditional life insurance....................................... 225,306 213,676
Disability income and long-term care insurance................... 660,320 533,124
Policy claims and other policyholders' funds..................... 70,309 68,345
Deferred income taxes, net....................................... 16,930 61,582
Amounts due to brokers........................................... 195,406 381,458
Other liabilities................................................ 410,285 345,383
Separate account liabilities..................................... 27,349,401 23,214,504
- -------------------------------------------------------------------------------------------------
Total liabilities................................................ 53,443,931 50,108,308
- -------------------------------------------------------------------------------------------------
Stockholder's equity:
Capital stock, $30 par value per share; 100,000 shares
authorized, issued and outstanding............................... 3,000 3,000
Additional paid-in capital....................................... 288,327 290,847
Accumulated other comprehensive income, net of tax:
Net unrealized securities gains.................................. 169,584 226,359
Retained earnings................................................ 2,645,721 2,345,610
- -------------------------------------------------------------------------------------------------
Total stockholder's equity....................................... 3,106,632 2,865,816
- -------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity....................... $ 56,550,563 $ 52,974,124
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-1
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DEC. 31,
1998 1997 1996
CONSOLIDATED STATEMENTS OF INCOME ($ thousands)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Revenues:
Premiums:
Traditional life insurance....................................... $ 53,132 $ 52,473 $ 51,403
Disability income and long-term care insurance................... 176,298 154,021 131,518
- ------------------------------------------------------------------------------------------------------------
Total premiums................................................... 229,430 206,494 182,921
- ------------------------------------------------------------------------------------------------------------
Policyholder and contractholder charges.......................... 383,965 341,726 302,999
Management and other fees........................................ 401,057 340,892 271,342
Net investment income............................................ 1,986,485 1,988,389 1,965,362
Net realized gain (loss) on investments.......................... 6,902 860 (159)
- ------------------------------------------------------------------------------------------------------------
Total revenues................................................... 3,007,839 2,878,361 2,722,465
- ------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Death and other benefits:
Traditional life insurance....................................... 29,835 28,951 26,919
Universal life-type insurance and investment contracts........... 108,349 92,814 85,017
Disability income and long-term care insurance................... 27,414 22,333 19,185
Increase in liabilities for future policy benefits:
Traditional life insurance....................................... 6,052 3,946 1,859
Disability income and long-term care insurance................... 73,305 63,631 57,230
Interest credited on universal life-type insurance and investment
contracts........................................................ 1,317,124 1,386,448 1,370,468
Amortization of deferred policy acquisition costs................ 382,642 322,731 278,605
Other insurance and operating expenses........................... 287,326 276,596 261,468
- ------------------------------------------------------------------------------------------------------------
Total benefits and expenses...................................... 2,232,047 2,197,450 2,100,751
- ------------------------------------------------------------------------------------------------------------
Income before income taxes....................................... 775,792 680,911 621,714
Income taxes..................................................... 235,681 206,664 207,138
- ------------------------------------------------------------------------------------------------------------
Net income....................................................... $ 540,111 $ 474,247 $ 414,576
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-2
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY OTHER
TOTAL ADDITIONAL COMPREHENSIVE
STOCKHOLDER'S CAPITAL PAID-IN INCOME, RETAINED
THREE YEARS ENDED DEC. 31, 1998 ($ thousands) EQUITY STOCK CAPITAL NET OF TAX EARNINGS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995................................ $2,331,708 $3,000 $278,814 $ 230,129 $1,819,765
Comprehensive income:
Net income................................................ 414,576 -- -- -- 414,576
Unrealized holding losses arising during the year, net of
deferred policy acquisition costs of $10,325 and taxes of
$82,982................................................... (154,111) -- -- (154,111) --
Reclassification adjustment for losses included in net
income, net of tax of $(5,429)............................ 10,084 -- -- 10,084 --
----------- ----------
Other comprehensive loss.................................. (144,027) -- -- (144,027) --
-----------
Comprehensive income...................................... 270,549 -- -- -- --
Capital contribution from parent.......................... 4,801 -- 4,801 -- --
Other changes............................................. 2,022 -- -- -- 2,022
Cash dividends to parent.................................. (165,000) -- -- -- (165,000)
---------------------------------------------------------------
Balance, December 31, 1996................................ 2,444,080 3,000 283,615 86,102 2,071,363
Comprehensive income:
Net income................................................ 474,247 -- -- -- 474,247
Unrealized holding gains arising during the year, net of
effect on deferred policy acquisition costs of $(7,714)
and taxes of $(75,215).................................... 139,686 -- -- 139,686 --
Reclassification adjustment for losses included in net
income, net of tax of $(308).............................. 571 -- -- 571 --
----------- ----------
Other comprehensive income................................ 140,257 -- -- 140,257 --
-----------
Comprehensive income...................................... 614,504 -- -- -- --
Capital contribution from parent.......................... 7,232 -- 7,232 -- --
Cash dividends to parent.................................. (200,000) -- -- -- (200,000)
---------------------------------------------------------------
Balance, December 31, 1997................................ 2,865,816 3,000 290,847 226,359 2,345,610
Comprehensive income:
Net income................................................ 540,111 -- -- -- 540,111
Unrealized holding losses arising during the year, net of
effect on deferred policy acquisition costs of $6,333 and
taxes of $32,826.......................................... (60,964) -- -- (60,964) --
Reclassification adjustment for losses included in net
income, net of tax of $(2,254)............................ 4,189 -- -- 4,189 --
----------- ----------
Other comprehensive loss.................................. (56,775) -- -- (56,775) --
-----------
Comprehensive income...................................... 483,336 -- -- -- --
Other changes............................................. (2,520) -- (2,520) -- --
Cash dividends to parent.................................. (240,000) -- -- -- (240,000)
---------------------------------------------------------------
Balance, December 31, 1998................................ $3,106,632 $3,000 $288,327 $ 169,584 $2,645,721
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DEC. 31,
1998 1997 1996
CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 540,111 $ 474,247 $ 414,576
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Policy loan issuance, excluding universal life-type insurance.... (53,883) (54,665) (49,314)
Policy loan repayment, excluding universal life-type insurance... 57,902 46,015 41,179
Change in amounts recoverable from reinsurers.................... (56,544) (47,994) (43,335)
Change in other accounts receivable.............................. (10,068) 6,194 (4,981)
Change in accrued investment income.............................. (9,184) (14,077) 4,695
Change in deferred policy acquisition costs, net................. (10,443) (156,486) (294,755)
Change in liabilities for future policy benefits for traditional
life, disability income and long-term care insurance............. 138,826 112,915 97,479
Change in policy claims and other policyholders' funds........... 1,964 (15,289) 27,311
Change in deferred income tax provision (benefit)................ (19,122) 19,982 (65,609)
Change in other liabilities...................................... 64,902 13,305 46,724
Amortization of premium (accretion of discount), net............. 9,170 (5,649) (23,032)
Net realized (gain) loss on investments.......................... (6,902) (860) 159
Policyholder and contractholder charges, non-cash................ (172,396) (160,885) (154,286)
Other, net....................................................... 10,786 7,161 (10,816)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities.............. $ 485,119 $ 223,914 $ (14,005)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed maturities held to maturity:
Purchases........................................................ $ (1,020) $ (1,996) $ (43,751)
Maturities, sinking fund payments and calls...................... 1,162,731 686,503 759,248
Sales............................................................ 236,963 236,761 279,506
Fixed maturities available for sale:
Purchases........................................................ (4,100,238) (3,160,133) (2,299,198)
Maturities, sinking fund payments and calls...................... 2,967,311 1,206,213 1,270,240
Sales............................................................ 278,955 457,585 238,905
Other investments, excluding policy loans:
Purchases........................................................ (555,647) (524,521) (904,536)
Sales............................................................ 579,038 335,765 236,912
Change in amounts due from brokers............................... 8,073 2,647 (11,047)
Change in amounts due to brokers................................. (186,052) 119,471 140,369
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities.............. 390,114 (641,705) (333,352)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Activity related to universal life-type insurance and
investment contracts:
Considerations received.......................................... 1,873,624 2,785,758 3,567,586
Surrenders and death benefits.................................... (3,792,612) (3,736,242) (4,250,294)
Interest credited to account balances............................ 1,317,124 1,386,448 1,370,468
Universal life-type insurance policy loans:
Issuance......................................................... (97,602) (84,835) (86,501)
Repayment........................................................ 67,000 54,513 58,753
Capital transaction with parent.................................. -- 7,232 4,801
Dividends paid................................................... (240,000) (200,000) (165,000)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities........................ (872,466) 212,874 499,813
- ------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents............. 2,767 (204,917) 152,456
Cash and cash equivalents at beginning of year................... 19,686 224,603 72,147
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year......................... $ 22,453 $ 19,686 $ 224,603
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS)
- -----------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
IDS Life Insurance Company (the Company) is a stock life insurance company
organized under the laws of the State of Minnesota. The Company is a wholly
owned subsidiary of American Express Financial Corporation (AEFC), which is a
wholly owned subsidiary of American Express Company. The Company serves
residents of all states except New York. IDS Life Insurance Company of New York
is a wholly owned subsidiary of the Company and serves New York State residents.
The Company also wholly owns American Enterprise Life Insurance Company,
American Centurion Life Assurance Company, American Partners Life Insurance
Company and American Express Corporation.
The Company's principal products are deferred annuities and universal life
insurance, which are issued primarily to individuals. It offers single premium
and flexible premium deferred annuities on both a fixed and variable dollar
basis. Immediate annuities are offered as well. The Company's insurance products
include universal life (fixed and variable), whole life, single premium life and
term products (including waiver of premium and accidental death benefits). The
Company also markets disability income and long-term care insurance.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany accounts
and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles which vary in certain
respects from reporting practices prescribed or permitted by state insurance
regulatory authorities (see Note 4).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENTS
Fixed maturities that the Company has both the positive intent and the ability
to hold to maturity are classified as held to maturity and carried at amortized
cost. All other fixed maturities and all marketable equity securities are
classified as available for sale and carried at fair value. Unrealized gains and
losses on securities classified as available for sale are reported as a separate
component of other comprehensive income, net of deferred policy acquisition
costs and deferred taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed securities
in determining the constant effective yield used to recognize interest income.
Prepayment estimates are based on information received from brokers who deal in
mortgage-backed securities.
Mortgage loans on real estate are carried at amortized cost less reserves for
mortgage loan losses. The estimated fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage interest rates
currently offered for mortgages of similar maturities.
Impairment of mortgage loans is measured as the excess of a loan's recorded
investment over its present value of expected principal and interest payments
discounted at the loan's effective interest rate, or the fair value of
collateral. The amount of the impairment is recorded in a reserve for mortgage
loan losses. The reserve for mortgage loan losses is maintained at a level that
management believes is adequate to absorb estimated losses in the portfolio. The
level of the reserve account is determined based on several factors, including
historical
F-5
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
experience, expected future principal and interest payments, estimated
collateral values, and current and anticipated economic and political
conditions. Management regularly evaluates the adequacy of the reserve for
mortgage loan losses.
The Company generally stops accruing interest on mortgage loans for which
interest payments are delinquent more than three months. Based on management's
judgment as to the ultimate collectibility of principal, interest payments
received are either recognized as income or applied to the recorded investment
in the loan.
The cost of interest rate caps and floors is amortized to investment income over
the life of the contracts and payments received as a result of these agreements
are recorded as investment income when realized. The amortized cost of interest
rate caps and floors is included in other investments. Amounts paid or received
under interest rate swap agreements are recognized as an adjustment to
investment income.
The Company purchases and writes index options to hedge the fee income earned on
the management of equity securities in separate accounts and the underlying
mutual funds. These index options are carried at market value and are included
in other investments or other liabilities, as appropriate. Gains or losses on
index options that qualify as hedges are deferred and recognized in management
and other fees in the same period as the hedged fee income. Gains or losses on
index options that do not qualify as hedges are marked to market through the
income statement.
The Company also uses index options to manage the risks related to a certain
annuity product that pays interest based upon the relative change in a major
stock market index between the beginning and end of the product's term.
Purchased options used in conjunction with this product are reported in other
investments and written options are included in other liabilities. The
amortization of the cost of purchased options, the proceeds of written options
and the changes in intrinsic value of the contracts are included in net
investment income.
Policy loans are carried at the aggregate of the unpaid loan balances which do
not exceed the cash surrender values of the related policies.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such investments
are written down to the fair value by a charge to income.
STATEMENTS OF CASH FLOWS
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These securities are
carried principally at amortized cost, which approximates fair value.
Supplementary information to the consolidated statements of cash flows for the
years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------
CASH PAID DURING THE YEAR FOR:
Income taxes....................... $215,003 $174,472 $317,283
Interest on borrowings............. 14,529 8,213 4,119
- -----------------------------------------------------------------
</TABLE>
RECOGNITION OF PROFITS ON ANNUITY CONTRACTS AND INSURANCE POLICIES
Profits on fixed deferred annuities are recognized by the Company over the lives
of the contracts, using primarily the interest method. Profits represent the
excess of investment income earned from investment of contract considerations
over interest credited to contract owners and other expenses.
F-6
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The retrospective deposit method is used in accounting for universal life-type
insurance. Under this method, profits are recognized over the lives of the
policies in proportion to the estimated gross profits expected to be realized.
Premiums on traditional life, disability income and long-term care insurance
policies are recognized as revenue when due, and related benefits and expenses
are associated with premium revenue in a manner that results in recognition of
profits over the lives of the insurance policies. This association is
accomplished by means of the provision for future policy benefits and the
deferral and subsequent amortization of policy acquisition costs.
Policyholder and contractholder charges include the monthly cost of insurance
charges, issue and administrative fees and surrender charges. These charges also
include the minimum death benefit guarantee fees received from the variable life
insurance separate accounts. Management and other fees include investment
management fees from underlying proprietary mutual funds and mortality and
expense risk fees received from the variable annuity and variable life insurance
separate accounts.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally sales compensation, policy
issue costs, underwriting and certain sales expenses, have been deferred on
insurance and annuity contracts. The deferred acquisition costs for most single
premium deferred annuities and installment annuities are amortized using
primarily the interest method. The costs for universal life-type insurance and
certain installment annuities are amortized as a percentage of the estimated
gross profits expected to be realized on the policies. For traditional life,
disability income and long-term care insurance policies, the costs are amortized
over an appropriate period in proportion to premium revenue.
LIABILITIES FOR FUTURE POLICY BENEFITS
Liabilities for universal life-type insurance and deferred annuities are
accumulation values.
Liabilities for fixed annuities in a benefit status are based on established
industry mortality tables and interest rates ranging from 5% to 9.5%, depending
on year of issue.
Liabilities for future benefits on traditional life insurance are based on the
net level premium method, using anticipated mortality, policy persistency and
interest earning rates. Anticipated mortality rates are based on established
industry mortality tables. Anticipated policy persistency rates vary by policy
form, issue age and policy duration with persistency on cash value plans
generally anticipated to be better than persistency on term insurance plans.
Anticipated interest rates range from 4% to 10%, depending on policy form, issue
year and policy duration.
Liabilities for future disability income and long-term care policy benefits
include both policy reserves and claim reserves. Policy reserves are based on
the net level premium method, using anticipated morbidity, mortality, policy
persistency and interest earning rates. Anticipated morbidity and mortality
rates are based on established industry morbidity and mortality tables.
Anticipated policy persistency rates vary by policy form, issue age, policy
duration and, for disability income policies, occupation class. Anticipated
interest rates for disability income and long-term care policy reserves are 3%
to 9.5% at policy issue and grade to ultimate rates of 5% to 7% over 5 to 10
years.
Claim reserves are calculated based on claim continuance tables and anticipated
interest earnings. Anticipated claim continuance rates are based on established
industry tables. Anticipated interest rates for claim reserves for both
disability income and long-term care range from 6% to 8%.
REINSURANCE
The maximum amount of life insurance risk retained by the Company on any one
life is $750 of life benefit plus $50 of accidental death benefits. The maximum
amount of life insurance risk retained on any joint-life
F-7
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
combination is $1,500. The excesses are reinsured with other life insurance
companies, primarily on a yearly renewable term basis. Long-term care policies
are primarily reinsured on a coinsurance basis. Beginning in 1998, the Company
retains all disability income and waiver of premium risk.
FEDERAL INCOME TAXES
The Company's taxable income is included in the consolidated federal income tax
return of American Express Company. The Company provides for income taxes on a
separate return basis, except that, under an agreement between AEFC and American
Express Company, tax benefit is recognized for losses to the extent they can be
used on the consolidated tax return. It is the policy of AEFC and its
subsidiaries that AEFC will reimburse subsidiaries for all tax benefits.
Included in other liabilities at December 31, 1998 and 1997 are $26,291 payable
to and $12,061, receivable from, respectively, AEFC for federal income taxes.
SEPARATE ACCOUNT BUSINESS
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity and variable life insurance contract
owners. The Company receives investment management fees from the proprietary
mutual funds used as investment options for variable annuities and variable life
insurance. The Company receives mortality and expense risk fees from the
separate accounts.
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the separate accounts will not be
affected by future variations in the actual life expectancy experience of the
annuitants and beneficiaries from the mortality assumptions implicit in the
annuity contracts. The Company makes periodic fund transfers to, or withdrawals
from, the separate account assets for such actuarial adjustments for variable
annuities that are in the benefit payment period. The Company also guarantees
that the rates at which administrative fees are deducted from contract funds
will not exceed contractual maximums.
For variable life insurance, the Company guarantees that the rates at which
insurance charges and administrative fees are deducted from contract funds will
not exceed contractual maximums. The Company also guarantees that the death
benefit will continue payable at the initial level regardless of investment
performance so long as minimum premium payments are made.
ACCOUNTING CHANGES
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires the reporting and display of
comprehensive income and its components. Comprehensive income is defined as the
aggregate change in stockholder's equity excluding changes in ownership
interests. For the Company, it is net income and the unrealized gains or losses
on available-for-sale securities, net of the effect on deferred policy
acquisition costs, taxes and reclassification adjustment.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for Costs of Computer
Software Developed or Obtained for Internal Use." The SOP, which is effective
January 1, 1999, requires the capitalization of certain costs incurred after the
date of adoption to develop or obtain software for internal use. Software
utilized by the Company is owned by AEFC and will be capitalized by AEFC. As a
result, the new rule will not have a material impact on the Company's results of
operations or financial condition.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments," providing guidance for the
timing of recognition of liabilities related to guaranty fund assessments. The
Company will adopt the SOP on January 1, 1999. The Company has historically
carried a balance
F-8
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
in other liabilities on the balance sheet for potential guaranty fund assessment
exposure. Adoption of the SOP will not have a material impact on the Company's
results of operations or financial condition.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective January 1, 2000. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation.
Earlier application of all of the provisions of this Statement is encouraged,
but it is permitted only as of the beginning of any fiscal quarter that begins
after issuance of the Statement. This Statement cannot be applied retroactively.
The ultimate financial impact of the new rule will be measured based on the
derivatives in place at adoption and cannot be estimated at this time.
RECLASSIFICATION
Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
presentation.
- --------------------------------------------------------------------------------
2. INVESTMENTS
Fair values of investments in fixed maturities represent quoted market prices
and estimated values when quoted prices are not available. Estimated values are
determined by established procedures involving, among other things, review of
market indices, price levels of current offerings of comparable issues, price
estimates and market data from independent brokers and financial files.
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at December 31, 1998 are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 39,888 $ 4,460 $ -- $ 44,348
State and municipal obligations.............. 9,683 491 -- 10,173
Corporate bonds and obligations.............. 6,305,476 447,752 27,087 6,726,141
Mortgage-backed securities................... 1,609,067 30,458 152 1,639,373
- ----------------------------------------------------------------------------------------------------
$7,964,114 $483,161 $ 27,239 $ 8,420,035
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 52,043 $ 3,324 $ -- $ 55,367
State and municipal obligations.............. 11,060 1,231 -- 12,291
Corporate bonds and obligations.............. 7,332,344 271,174 155,181 7,448,337
Mortgage-backed securities................... 5,949,502 151,511 3,869 6,097,144
- ----------------------------------------------------------------------------------------------------
Total fixed maturities....................... 13,344,949 427,240 159,050 13,613,139
Equity securities............................ 3,000 158 -- 3,158
- ----------------------------------------------------------------------------------------------------
$13,347,949 $427,398 $159,050 $ 13,616,297
- ----------------------------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
The amortized cost, gross unrealized gains and losses and fair values of
investmentsin fixed maturities and equity securities at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
HELD TO MATURITY COST GAINS LOSSES FAIR VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 41,932 $ 2,949 $ -- $ 44,881
State and municipal obligations.............. 9,684 568 -- 10,252
Corporate bonds and obligations.............. 7,280,646 415,700 9,322 7,687,024
Mortgage-backed securities................... 1,983,188 25,976 7,911 2,001,253
- -----------------------------------------------------------------------------------------------------
$9,315,450 $445,193 $17,233 $ 9,743,410
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
U.S. Government agency obligations........... $ 65,291 $ 4,154 $ -- $ 69,445
State and municipal obligations.............. 11,045 1,348 -- 12,393
Corporate bonds and obligations.............. 5,308,129 232,761 30,198 5,510,692
Mortgage-backed securities................... 7,130,565 160,478 6,879 7,284,164
- -----------------------------------------------------------------------------------------------------
Total fixed maturities....................... 12,515,030 398,741 37,077 12,876,694
Equity securities............................ 3,000 361 -- 3,361
- -----------------------------------------------------------------------------------------------------
$12,518,030 $399,102 $37,077 $ 12,880,055
- -----------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of investments in fixed maturities at December
31, 1998 by contractual maturity are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
HELD TO MATURITY COST VALUE
<S> <C> <C>
- ------------------------------------------------------------------
Due in one year or less................. $ 354,296 $ 359,020
Due from one to five years.............. 2,111,369 2,249,847
Due from five to ten years.............. 3,012,227 3,189,789
Due in more than ten years.............. 877,155 982,006
Mortgage-backed securities.............. 1,609,067 1,639,373
- ------------------------------------------------------------------
$7,964,114 $ 8,420,035
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
AVAILABLE FOR SALE COST VALUE
<S> <C> <C>
- ------------------------------------------------------------------
Due in one year or less................. $ 102,463 $ 104,475
Due from one to five years.............. 682,336 725,859
Due from five to ten years.............. 3,904,326 4,044,378
Due in more than ten years.............. 2,718,659 2,654,382
Mortgage-backed securities.............. 5,937,165 6,084,045
- ------------------------------------------------------------------
$13,344,949 $13,613,139
- ------------------------------------------------------------------
</TABLE>
During the years ended December 31, 1998, 1997 and 1996, fixed maturities
classified as held to maturity were sold with amortized cost of $230,036,
$229,848 and $277,527, respectively. Net gains and losses on these sales were
not significant. The sale of these fixed maturities was due to significant
deterioration in the issuers' credit worthiness.
Fixed maturities available for sale were sold during 1998 with proceeds of
$278,955 and gross realized gains and losses of $15,658 and $22,102,
respectively. Fixed maturities
F-10
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
available for sale were sold during 1997 with proceeds of $457,585 and gross
realized gains and losses of $6,639 and $7,518, respectively. Fixed maturities
available for sale were sold during 1996 with proceeds of $238,905 and gross
realized gains and losses of $571 and $16,084, respectively.
At December 31, 1998, bonds carried at $14,302 were on deposit with various
states as required by law.
At December 31, 1998, investments in fixed maturities comprised 83 percent of
the Company's total invested assets. These securities are rated by Moody's and
Standard & Poor's (S&P), except for securities carried at approximately $3.6
billion which are rated by AEFC's internal analysts using criteria similar to
Moody's and S&P. A summary of investments in fixed maturities, at amortized
cost, by rating on December 31 is as follows:
<TABLE>
<CAPTION>
RATING 1998 1997
<S> <C> <C>
- ------------------------------------------------------------------
Aaa/AAA................................. $ 7,629,628 $ 9,195,619
Aaa/AA.................................. 2,277 --
Aa/AA................................... 308,053 232,451
Aa/A.................................... 301,325 246,792
A/A..................................... 2,525,283 2,787,936
A/BBB................................... 1,148,736 1,200,345
Baa/BBB................................. 6,237,014 5,226,616
Baa/BB.................................. 492,696 475,084
Below investment grade.................. 2,664,051 2,465,637
- ------------------------------------------------------------------
$21,309,063 $21,830,480
- ------------------------------------------------------------------
</TABLE>
At December 31, 1998, 93 percent of the securities rated Aaa/AAA are GNMA, FNMA
and FHLMC mortgage-backed securities. No holdings of any other issuer are
greater than one percent of the Company's total investments in fixed maturities.
At December 31, 1998, approximately 13 percent of the Company's invested assets
were mortgage loans on real estate. Summaries of mortgage loans by region of the
United States and by type of real estate are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
REGION SHEET TO PURCHASE SHEET TO PURCHASE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
East North Central............ $ 750,705 $ 16,393 $ 748,372 $ 32,462
West North Central............ 491,006 81,648 456,934 14,340
South Atlantic................ 839,233 21,020 922,172 14,619
Middle Atlantic............... 476,448 6,169 545,601 15,507
New England................... 263,761 2,824 316,250 2,136
Pacific....................... 195,851 16,946 184,917 3,204
West South Central............ 136,841 1,412 125,227 --
East South Central............ 46,029 -- 60,274 --
Mountain...................... 345,379 8,473 297,545 28,717
- --------------------------------------------------------------------------------------
3,545,253 154,885 3,657,292 110,985
Less allowance for losses..... 39,795 -- 38,645 --
- --------------------------------------------------------------------------------------
$3,505,458 $154,885 $3,618,647 $110,985
- --------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
PROPERTY TYPE SHEET TO PURCHASE SHEET TO PURCHASE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Department/retail stores...... $ 1,139,349 $ 59,305 $ 1,189,203 $ 27,314
Apartments.................... 960,808 9,272 1,089,127 16,576
Office buildings.............. 783,576 50,450 716,729 34,546
Industrial buildings.......... 298,549 13,263 295,889 21,200
Hotels/motels................. 109,185 14,122 101,052 --
Medical buildings............. 124,369 -- 99,979 9,748
Nursing/retirement homes...... 46,696 -- 72,359 --
Mixed Use..................... 65,151 -- 71,007 --
Other......................... 17,570 8,473 21,947 1,601
- -----------------------------------------------------------------------------------------
3,545,253 154,885 3,657,292 110,985
Less allowance for losses..... 39,795 -- 38,645 --
- -----------------------------------------------------------------------------------------
$ 3,505,458 $ 154,885 $ 3,618,647 $ 110,985
- -----------------------------------------------------------------------------------------
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory authorities
to 80 percent or less of the market value of the real estate at the time of
origination of the loan. The Company holds the mortgage document, which gives it
the right to take possession of the property if the borrower fails to perform
according to the terms of the agreement. Commitments to purchase mortgages are
made in the ordinary course of business. The fair value of the mortgage
commitments is $nil.
At December 31, 1998 and 1997, the Company's recorded investment in impaired
loans was $24,941 and $45,714, respectively, with allowances of $6,662 and
$9,812, respectively. During 1998 and 1997, the average recorded investment in
impaired loans was $37,873 and $61,870, respectively.
The Company recognized $1,809, $2,981and $4,889 of interest income related to
impaired loans for the years ended December 31, 1998, 1997 and 1996
respectively.
The following table presents changes in the allowance for investment losses
related to all loans:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------
Balance, January 1................. $38,645 $37,495 $37,340
Provision for investment losses.... 7,582 8,801 10,005
Loan payoffs....................... (800) (3,851) (4,700)
Foreclosures and writeoffs......... (5,632) (3,800) (5,150)
- --------------------------------------------------------------
Balance, December 31............... $39,795 $38,645 $37,495
- --------------------------------------------------------------
</TABLE>
At December 31, 1998, the Company had commitments to purchase investments other
than mortgage loans for $223,011. Commitments to purchase investments are
made in the ordinary course of business. The fair value of these commitments is
$nil.
Net investment income for the years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Interest on fixed maturities....... $1,676,984 $1,692,481 $1,666,929
Interest on mortgage loans......... 301,253 305,742 283,830
Other investment income............ 43,518 25,089 43,283
Interest on cash equivalents....... 5,486 5,914 5,754
- -----------------------------------------------------------------------
2,027,241 2,029,226 1,999,796
Less investment expenses........... 40,756 40,837 34,434
- -----------------------------------------------------------------------
$1,986,485 $1,988,389 $1,965,362
- -----------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENTS (CONTINUED)
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- --------------------------------------------------------------
Fixed maturities................... $12,084 $16,115 $ 8,736
Mortgage loans..................... (5,933) (6,424) (8,745)
Other investments.................. 751 (8,831) (150)
- --------------------------------------------------------------
$ 6,902 $ 860 $ (159)
- --------------------------------------------------------------
</TABLE>
Changes in net unrealized appreciation (depreciation) of investments for the
years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------
Fixed maturities available for sale..... $(93,474) $ 223,441 $(231,853)
Equity securities....................... (203) 53 (52)
- ------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
3. INCOME TAXES
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the
Internal Revenue Code provisions applicable to life insurance companies.
The income tax expense (benefit) for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------
Federal income taxes:
Current............................ $244,946 $176,879 $260,357
Deferred........................... (16,602) 19,982 (65,609)
- -----------------------------------------------------------------
228,344 196,861 194,748
State income taxes-current......... 7,337 9,803 12,390
- -----------------------------------------------------------------
Income tax expense................. $235,681 $206,664 $207,138
- -----------------------------------------------------------------
</TABLE>
Increases (decreases) to the federal tax provision applicable to pretax income
based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
PROVISION RATE PROVISION RATE PROVISION RATE
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Federal income taxes based
on the statutory rate....................................... $271,527 35.0% $238,319 35.0% $217,600 35.0%
(Decreases) increases are attributable to:
Tax-excluded interest and dividend income................... (12,289) (1.6) (10,294) (1.5) (9,636) (1.5)
State taxes, net of federal benefit......................... 4,769 .6 6,372 .9 8,053 1.3
Affordable housing credits.................................. (19,688) (2.5) (20,705) (3.0) (5,090) (.8)
Other, net.................................................. (8,638) (1.1) (7,028) (1.0) (3,789) (.7)
- --------------------------------------------------------------------------------------------------------------------------
Federal income taxes........................................ $235,681 30.4% $206,664 30.4% $207,138 33.3%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
A portion of life insurance company income earned prior to 1984 was not subject
to current taxation but was accumulated, for tax purposes, in a policyholders'
surplus account. At December 31, 1998, the Company had a policyholders' surplus
account balance of $20,114. The policyholders' surplus account is only
F-13
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
3. INCOME TAXES (CONTINUED)
taxable if dividends to the stockholder exceed the stockholder's surplus account
or if the Company is liquidated. Deferred income taxes of $7,040 have not been
established because no distributions of such amounts are contemplated.
Significant components of the Company's deferred tax assets and liabilities as
of December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------
Deferred tax assets:
Policy reserves........................................ $756,769 $748,204
Life insurance guaranty fund assessment reserve........ 15,289 20,101
Other.................................................. 4,253 9,589
- ---------------------------------------------------------------------------
Total deferred tax assets.............................. 776,311 777,894
- ---------------------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs...................... 698,471 700,032
Unrealized gain on investments......................... 91,315 121,885
Investments, other..................................... 3,455 17,559
- ---------------------------------------------------------------------------
Total deferred tax liabilities......................... 793,241 839,476
- ---------------------------------------------------------------------------
Net deferred tax liabilities........................... $ 16,930 $ 61,582
- ---------------------------------------------------------------------------
</TABLE>
The Company is required to establish a valuation allowance for any portion of
the deferred tax assets that management believes will not be realized. In the
opinion of management, it is more likely than not that the Company will realize
the benefit of the deferred tax assets and, therefore, no such valuation
allowance has been established.
- --------------------------------------------------------------------------------
4. STOCKHOLDER'S EQUITY
Retained earnings available for distribution as dividends to the parent are
limited to the Company's surplus as determined in accordance with accounting
practices prescribed by state insurance regulatory authorities. Statutory
unassigned surplus aggregated $1,598,203 as of December 31, 1998 and $1,468,677
as of December 31, 1997 (see Note 3 with respect to the income tax effect of
certain distributions). In addition, any dividend distributions in 1999 in
excess of approximately $353,933 would require approval of the Department of
Commerce of the State of Minnesota.
Statutory net income for the years ended December 31 and capital and surplus as
of December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
- -----------------------------------------------------------------------
Statutory net income............... $ 429,903 $ 379,615 $ 365,585
Statutory capital and surplus...... 1,883,405 1,765,290 1,565,082
- -----------------------------------------------------------------------
</TABLE>
F-14
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
5. RELATED PARTY TRANSACTIONS
The Company loans funds to AEFC under a collateral loan agreement. The balance
of the loan was $nil at December 31, 1998 and 1997. This loan can be increased
to a maximum of $75,000 and pays interest at a rate equal to the preceding
month's effective new money rate for the Company's permanent investments.
Interest income on related party loans totaled $nil, $103 and $780 in 1998, 1997
and 1996, respectively.
The Company participates in the American Express Company Retirement Plan which
covers all permanent employees age 21 and over who have met certain employment
requirements. Employer contributions to the plan are based on participants' age,
years of service and total compensation for the year. Funding of retirement
costs for this plan complies with the applicable minimum funding requirements
specified by ERISA. The Company's share of the total net periodic pension cost
was $211, $201 and $174 in 1998, 1997 and 1996, respectively.
The Company also participates in defined contribution pension plans of American
Express Company which cover all employees who have met certain employment
requirements. Company contributions to the plans are a percent of either each
employee's eligible compensation or basic contributions. Costs of these plans
charged to operations in 1998, 1997 and 1996 were $1,503, $1,245 and $990,
respectively.
The Company participates in defined benefit health care plans of AEFC that
provide health care and life insurance benefits to retired employees and retired
financial advisors. The plans include participant contributions and service
related eligibility requirements. Upon retirement, such employees are considered
to have been employees of AEFC. AEFC expenses these benefits and allocates the
expenses to its subsidiaries. The Company's share of postretirement benefits in
1998, 1997 and 1996 was $1,352, $1,330 and $1,449, respectively.
Charges by AEFC for use of joint facilities, technology support, marketing
services and other services aggregated $411,337, $414,155 and $397,362 for 1998,
1997 and 1996, respectively. Certain of these costs are included in deferred
policy acquisition costs.
- --------------------------------------------------------------------------------
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1998, 1997 and 1996, traditional life insurance and universal
life-type insurance in force aggregated $81,074,928, $74,730,720 and
$67,274,354, respectively, of which $4,912,313, $4,351,904 and $3,875,921 were
reinsured at the respective year ends. The Company also reinsures a portion of
the risks assumed under disability income and long-term care policies. Under all
reinsurance agreements, premiums ceded to reinsurers amounted to $66,378,
$60,495 and $48,250 and reinsurance recovered from reinsurers amounted to
$20,982, $19,042, and $15,612 for the years ended December 31, 1998, 1997 and
1996, respectively. Reinsurance contracts do not relieve the Company from its
primary obligation to policyholders.
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company, its parent and its subsidiaries conduct
business involving insurers' sales practices, alleged agent misconduct, failure
to properly supervise agents, and other matters. The Company has been named as a
defendant in three of these types of actions.
The plaintiffs purport to represent a class consisting of all persons who
purchased policies or contracts from the Company and its subsidiaries. The
complaints put at issue various alleged sales practices and misrepresentations,
alleged breaches of fiduciary duties and alleged violations of consumer fraud
statutes. The Company and its subsidiaries believe they have meritorious
defenses to the claims raised in these lawsuits.
The outcome of any litigation cannot be predicted with certainty. In the opinion
of
F-15
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
management, however, the ultimate resolution of these lawsuits, taken in the
aggregate, should not have a material adverse effect on the Company's
consolidated financial position.
The IRS routinely examines the Company's federal income tax returns, and is
currently auditing the Company's returns for the 1990 through 1992 tax years.
Management does not believe there will be a material adverse effect on the
Company's consolidated financial position as a result of this audit.
- --------------------------------------------------------------------------------
7. LINES OF CREDIT
The Company has available lines of credit with its parent aggregating $100,000.
The interest rate for any borrowings is established by reference to various
indices plus 20 to 45 basis points, depending on the term. Borrowings
outstanding under this agreement were $nil at December 31, 1998 and 1997.
- --------------------------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into transactions involving derivative financial instruments
to manage its exposure to interest rate risk and equity market risk, including
hedging specific transactions. The Company does not hold derivative instruments
for trading purposes. The Company manages risks associated with these
instruments as described below.
Market risk is the possibility that the value of the derivative financial
instruments will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate or equity market index.
The Company is not impacted by market risk related to derivatives held for
non-trading purposes beyond that inherent in cash market transactions.
Derivatives held for purposes other than trading are largely used to manage risk
and, therefore, the cash flow and income effects of the derivatives are inverse
to the effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not fulfill the terms
of the contract. The Company monitors credit risk related to derivative
financial instruments through established approval procedures, including setting
concentration limits by counterparty, and requiring collateral, where
appropriate. A vast majority of the Company's counterparties are rated A or
better by Moody's and Standard & Poor's.
Credit risk related to interest rate caps and floors and index options is
measured by the replacement cost of the contracts. The replacement cost
represents the fair value of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over the
life of the agreement. Notional amounts are not recorded on the balance sheet.
Notional amounts far exceed the related credit risk.
F-16
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 NOTIONAL CARRYING FAIR TOTAL CREDIT
ASSETS: AMOUNT AMOUNT VALUE EXPOSURE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
Assets:
Interest rate caps............ $3,400,000 $15,985 $ 4,256 $ 4,256
Interest rate floors.......... 1,000,000 1,082 13,971 13,971
Options purchased............. 110,912 24,094 29,453 29,453
Liabilities:
Options purchased/written..... 265,454 (10,526 ) (11,062) --
Off balance sheet:
Interest rate swaps........... 1,667,000 -- (73,477) --
- ----------------------------------------------------------------------------
$30,635 $(36,859) $47,680
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997 NOTIONAL CARRYING FAIR TOTAL CREDIT
ASSETS: AMOUNT AMOUNT VALUE EXPOSURE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
Assets:
Interest rate caps............ $4,600,000 $24,963 $ 15,665 $15,665
Interest rate floors.......... 1,000,000 1,561 4,551 4,551
Options purchased/written..... 279,737 9,808 10,449 10,449
Liabilities:
Options written............... 7,373 (89) 114 --
Off balance sheet:
Interest rate swaps........... 1,267,000 -- (45,799) --
- ---------------------------------------------------------------------------------
$36,243 $ (15,020) $30,655
- ---------------------------------------------------------------------------------
</TABLE>
The fair values of derivative financial instruments are based on market values,
dealer quotes or pricing models. The interest rate caps, floors and swaps expire
on various dates from 1999 to 2003. The put and call options expire on various
dates from 1999 to 2005.
Interest rate caps, swaps and floors are used principally to manage the
Company's interest rate risk. These instruments are used to protect the margin
between interest rates earned on investments and the interest rates credited to
related annuity contract holders.
The Company is also using interest rate swaps to manage interest rate risk
related to the level of fee income earned on the management of fixed income
securities in separate accounts and the underlying mutual funds. The amount of
fee income received is based upon the daily market value of the separate account
and mutual fund assets. As a result, changing interest rate conditions could
impact the Company's fee income significantly. The Company entered into interest
rate swaps to hedge anticipated fee income for 1999 related to separate accounts
and mutual funds which invest in fixed income securities. Interest will be
accrued and reported in accrued investment income and other liabilities, as
appropriate, and management and other fees.
The Company offers a certain annuity product that pays interest based upon the
relative change in a major stock market index between the beginning and end of
the product's term. As a means of hedging its obligation under the provisions of
this product, the Company purchases and writes options on the major stock market
index.
Index options are used to manage the equity market risk related to the fee
income that the Company receives from its separate accounts and the underlying
mutual funds. The amount of the fee income received is based upon the daily
market value of the separate account and mutual fund assets. As a result, the
Company's fee income could be impacted significantly by changing economic
conditions in the equity market. The Company entered into index option
F-17
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
collars (combination of puts and calls) to hedge anticipated fee income for 1998
and 1999 related to separate accounts and mutual funds which invest in equity
securities. Testing has demonstrated the impact of these instruments on the
income statement closely correlates with the amount of fee income the Company
realizes. In the event that testing demonstrates that this correlation no longer
exists, or in the event the Company disposes of the index options collars, the
instruments will be marked-to-market through the income statement. At December
31, 1998 deferred losses on purchased put and written call index options were
$2,933 and $7,435, respectively. At December 31, 1997 deferred losses on
purchased put index options were $2,428 and deferred gains on written call index
options were $5,275.
- --------------------------------------------------------------------------------
9. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company discloses fair value information for most on- and off-balance sheet
financial instruments for which it is practicable to estimate that value. Fair
values of life insurance obligations and all non-financial instruments, such as
deferred acquisition costs are excluded.
Off-balance sheet intangible assets, such as the value of the field force, are
also excluded. Management believes the value of excluded assets and liabilities
is significant. The fair value of the Company, therefore, cannot be estimated by
aggregating the amounts presented.
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
FINANCIAL ASSETS
Investments:
Fixed maturities (Note 2):
Held to maturity.............. $ 7,964,114 $ 8,420,035 $ 9,315,450 $ 9,743,410
Available for sale............ 13,613,139 13,613,139 12,876,694 12,876,694
Mortgage loans on real estate
(Note 2)...................... 3,505,458 3,745,617 3,618,647 3,808,570
Other:
Equity securities (Note 2).... 3,158 3,158 3,361 3,361
Derivative financial
instruments (Note 8).......... 41,161 47,680 36,332 30,665
Other......................... 28,872 28,872 82,347 85,383
Cash and cash equivalents
(Note 1)...................... 22,453 22,453 19,686 19,686
Separate account assets
(Note 1)...................... 27,349,401 27,349,401 23,214,504 23,214,504
FINANCIAL LIABILITIES
Future policy benefits for
fixed annuities............... $19,855,203 $19,144,838 $20,731,052 $19,882,302
Derivative financial
instruments (Note 8).......... 10,526 84,539 89 45,685
Separate account
liabilities................... 25,005,732 24,179,115 21,488,282 20,707,620
- ----------------------------------------------------------------------------------
</TABLE>
At December 31, 1998 and 1997, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related contracts
carried at $1,226,985 and $1,185,155, respectively, and policy loans of $90,115
and $93,540, respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1998 and 1997. The fair value of
deferred annuities is estimated as the carrying amount less any applicable
surrender charges and related loans. The fair value for annuities in non-life
contingent payout status is estimated as the present value of projected benefit
payments at rates appropriate for contracts issued in 1998 and 1997.
At December 31, 1998 and 1997, the fair value of liabilities related to separate
accounts is estimated as the carrying amount less any applicable surrender
charges and less variable insurance contracts carried at $2,343,669 and
$1,726,222, respectively.
F-18
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS) (CONTINUED)
- -----------------------------------------------------------------
10. 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 target date for substantially
completing corrective measures on business critical systems was December 31,
1998. Substantial testing of these systems was targeted for completion early in
1999. AEFC is currently on track with this schedule and is also on track to
finish the work on non-critical systems by June 30, 1999.
AEFC continues to evaluate 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.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential 2000 exposure is gathered.
F-19
<PAGE>
IDS LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF AMERICAN EXPRESS FINANCIAL CORPORATION)
- -----------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying consolidated balance sheets of IDS Life
Insurance Company (a wholly owned subsidiary of American Express Financial
Corporation) as of December 31, 1998 and 1997, and the related consolidated
statements of income, stockholder's equity and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of IDS Life Insurance
Company at December 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
February 4, 1999
F-20
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
IDS Life Account SBS:
Statements of Net Assets for year ended Dec. 31, 1998.
Statements of Operations for year ended Dec. 31, 1998.
Statements of Changes in Net Assets for year ended Dec. 31, 1998 and
1997.
Notes to Financial Statements.
Report of Independent Auditors dated March 13, 1999.
IDS Life Insurance Company:
Consolidated Balance Sheets at Dec. 31, 1998 and Dec. 31, 1997.
Consolidated Statements of Income for years ended Dec. 31, 1998, 1997
and 1996.
Consolidated Statements of Stockholder's Equity for years ended Dec.
31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for years ended Dec. 31, 1998,
1997 and 1996.
Notes to Consolidated Financial Statements.
Report of Independent Auditors dated Feb. 5, 1999.
(b) Exhibits:
1.1 Copy of Consent in Writing in Lieu of a Meeting of the Board of Directors
of IDS Life Insurance Company establishing IDS Life Account SLB on May 9,
1991, filed electronically as Exhibit 1.1 to Registrant's Post-Effective
Amendment No. 4 to Registration Statement No. 33-40779 is herein
incorporated by reference.
1.2 Copy of Consent in Writing in Lieu of a Meeting of the Board of Directors
of IDS Life Insurance Company Account SLB establishing three additional
subaccounts on May 9, 1991, filed electronically as Exhibit 1.2 to
Registrant's Post-Effective Amendment No. 4 to Registration Statement No.
33-40779 is herein incorporated by reference.
2. Not applicable.
3. Form of Distribution Agreement between IDS Life Insurance Company and
Shearson Lehman Brothers, Inc., filed electronically as Exhibit 3 to
Registrant's Post-Effective Amendment No. 4 to Registration Statement No.
33-40779 is herein incorporated by reference.
4.1 Copy of Flexible Premium Deferred Variable Annuity Contract (No. 30377)
filed as Exhibit 4 to Registrant's Pre-Effective Amendment No. 1 to
Registration Statement No. 33-40779, is herein incorporated by reference.
<PAGE>
5. Copy of Flexible Premium Deferred Variable Annuity Application (No. 34613),
filed electronically as Exhibit 5 to Registrant's Post-Effective Amendment
No. 4 to Registration Statement No. 33-40779 is herein incorporated by
reference.
6.1 Copy of Certificate of Incorporation of IDS Life dated July 24, 1957, filed
electronically as Exhibit 6.1 to Registrant's Post-Effective Amendment No.
3 to Registration Statement No. 33-40779/812-7731, is hereby incorporated
by reference.
6.2 Copy of Amended By-Laws of IDS Life, filed electronically as Exhibit 6.2 to
Registrant's Post-Effective Amendment No. 3 to Registration Statement No.
33-40779/812-7731, is hereby incorporated by reference.
7. Not applicable.
8. Not applicable.
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered, dated April 28, 1999 filed electronically
herewith.
10. Consent of Independent Auditors, filed electronically herewith.
11. None.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 21, filed electronically as
Exhibit 13 to Registrant's Post-Effective Amendment No. 4 to Registration
Statement 33-40779 is hereby incorporated by reference.
14(a). Power of Attorney to sign this Registration Statement dated August 19,
1997, filed electronically as Exhibit 15.1 to Registrant's Post-Effective
Amendment No. 7 to Registration Statement No. 33-40779 is incorporated
herein by reference.
14(b). Power of Attorney to sign this Registration Statement dated April 9,
1998, filed electronically as Exhibit 15.2 to Registrant's Post-Effective
Amendment No. 7 to Registration Statement No. 33-40779 is incorporated
herein by reference.
<PAGE>
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company)
<TABLE>
<CAPTION>
<S> <C> <C>
Name Principal Business Address Positions and Offices with Depositor
Timothy V. Bechtold IDS Tower 10 Executive Vice President, Risk
Minneapolis, MN 55440 Management Products
David J. Berry IDS Tower 10 Vice President
Minneapolis, MN 55440
Mark W. Carter IDS Tower 10 Executive Vice President, Marketing
Minneapolis, MN 55440
Robert M. Elconin IDS Tower 10 Vice President
Minneapolis, MN 55440
Lorraine R. Hart IDS Tower 10 Vice President, Investments
Minneapolis, MN 55440
Jeffrey S. Horton IDS Tower 10 Vice President, Treasurer and
Minneapolis, MN 55440 Assistant Secretary
David R. Hubers IDS Tower 10 Director
Minneapolis, MN 55440
James M. Jensen IDS Tower 10 Vice President, Insurance Product
Minneapolis, MN 55440 Development
Richard W. Kling IDS Tower 10 Director and President
Minneapolis, MN 55440
Paul F. Kolkman IDS Tower 10 Director and Executive Vice President
Minneapolis, MN 55440
Paula R. Meyer IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President, Assured Assets
James A. Mitchell IDS Tower 10 Director, Chairman of the Board and
Minneapolis, MN 55440 Chief Executive Officer
Pamela J. Moret IDS Tower 10 Executive Vice President, Variable
Minneapolis, MN 55440 Assets
Barry J. Murphy IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President, Client Service
James R. Palmer IDS Tower 10 Vice President, Taxes
Minneapolis, MN 55440
Stuart A. Sedlacek IDS Tower 10 Director and Executive Vice President
Minneapolis, MN 55440
F. Dale Simmons IDS Tower 10 Vice President, Real Estate Loan
Minneapolis, MN 55440 Management
<PAGE>
William A. Stoltzmann IDS Tower 10 Vice President, General Counsel and
Minneapolis, MN 55440 Secretary
Philip C. Wentzel IDS Tower 10 Vice President and Controller
Minneapolis, MN 55440
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
IDS Life Insurance Company is a wholly-owned subsidiary of
American Express Financial Corporation. American Express
Financial Corporation is a wholly-owned subsidiary of American
Express Company (American Express).
The following list includes the names of major subsidiaries of
American Express.
<TABLE>
<CAPTION>
<S> <C>
Jurisdiction of
Name of Subsidiary Incorporation
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Partners LLC Delaware
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
American Express Asset Management Ltd. England
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. Delaware
American Express Financial Advisors Japan Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Arizona Inc. Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express Insurance Agency of Oregon Inc. Oregon
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance Agency of Maryland Inc. Maryland
American Express Property Casualty Insurance Agency of Mississippi Inc. Mississippi
American Express Property Casualty Insurance Agency of Pennsylvania Inc. Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Futures Brokerage Group Minnesota
<PAGE>
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
Investors Syndicate Development Corp. Nevada
Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contractowners
On March 31, 1999, there were 716 contract owners of qualified
contracts. There were 4,045 owners of nonqualified contracts.
Item 28. Indemnification
The By-Laws of the depositor provide that the Corporation
shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that he
is or was a Manager of Variable Annuity Funds A and B,
director, officer, employee or agent of this Corporation, or
is or was serving at the direction of the Corporation as a
Manager of Variable Annuity Funds A and B, director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to any threatened, pending
or completed action, suit or proceeding, wherever brought, to
the fullest extent permitted by the laws of the State of
Minnesota, as now existing or hereafter amended, provided that
this Article shall not indemnify of protect any such Manager
of Variable Annuity Funds A and B, director, officer, employee
or agent against any liability to the Corporation or its
security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence,
in the performance of his duties or by reason of his reckless
disregard of his obligations and duties.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to director, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriters
(a) IDS Life is the principal underwriter for IDS Life Accounts F,
IZ, JZ, G, H, N, KZ, LZ and MZ, IDS Life Variable Annuity Fund
A, IDS Life Variable Annuity Fund B, IDS Life Account RE, IDS
Life Account MGA and IDS Life Account SBS, IDS Life Variable
Account 10, IDS Life Variable Life Separate Account and IDS
Life Variable Account for Smith Barney.
(b) This table is the same as our response to Item 25 of this
Registration Statement.
(c)
<TABLE>
<CAPTION>
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C>
IDS Life $17,634,855 $17,936,810 None None
</TABLE>
Item 30. Location of Accounts and Records
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for so long as payments under the variable annuity contracts
may be accepted.
(b) Registrant undertakes that it will include either (1) as part
of any application to purchase a contract offered by the
prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included the
prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral
request to IDS Life Contract Owner Service at the address or
phone number listed in the prospectus.
(d) The sponsoring insurance company represents that the fees and
charges deducted under the contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the
insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, IDS Life Insurance Company, on behalf of the Registrant, certifies that it
meets the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf in the City of
Minneapolis, and State of Minnesota, on the 28th day of April, 1999.
IDS LIFE ACCOUNT SBS
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 28th day of
April, 1999.
Signature Title
/s/ James A. Mitchell* Director, Chairman of the
James A. Mitchell Board and Chief Executive Officer
/s/ Richard W. Kling* Director and President
Richard W. Kling
/s/ Jeffrey S. Horton** Vice President, Treasurer and Assistant
Jeffrey S. Horton Secretary
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President
<PAGE>
Signature Title
/s/ Philip C. Wentzel** Vice President and
Philip C. Wentzel Controller
*Signed pursuant to Power of Attorney, dated August 19, 1997 filed
electronically as Exhibit 15.1 to Post-Effective Amendment No. 7 to Registration
Statement No. 33-62407, is incorporated herein by reference.
**Signed pursuant to Power of Attorney, dated April 9, 1998 filed electronically
as Exhibit 15.2 to Post-Effective Amendment No. 7 to Registration Statement No.
33-62407, is incorporated herein by reference.
- --------------------------
Mary Ellyn Minenko
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 8
This Registration Statement is comprised of the following papers and documents:
The Cover Page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
IDS LIFE ACCOUNT SBS
Registration No. 33-40779/812-7731
EXHIBIT INDEX
9. Opinion of Counsel and Consent.
10. Consent of Independent Auditors.
April 28, 1999
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
RE: IDS Life Account SBS
File No.: 33-40779/812-7731
Ladies and Gentlemen:
I am familiar with the establishment of the IDS Life Account SBS ("Account"),
which is a separate account of IDS Life Insurance Company ("Company")
established by the Company's Board of Directors according to applicable
insurance law. I also am familiar with the above-referenced Registration
Statement filed by the Company on behalf of the Account with the Securities and
Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to give the following
opinion:
1. The Company is duly incorporated, validly existing and in good standing
under applicable state law and is duly licensed or qualified to do business
in each jurisdiction where it transacts business. The Company has all
corporate powers required to carry on its business and to issue the
contracts.
2. The Account is a validly created and existing separate account of the
Company and is duly authorized to issue the securities registered.
3. The contracts issued by the Company, when offered and sold in accordance
with the prospectus contained in the Registration Statement and in
compliance with applicable law, will be legally issued and represent
binding obligations of the Company in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Group Counsel
Consent of Independent Auditors
We consent to the use of our report dated February 4, 1999 on the financial
statements IDS Life Insurance Company and our report dated March 12, 1999 on the
financial statements of IDS Life Account SBS in Post-Effective Amendment No. 8
to the Registration Statement (Form N-4, No. 33-40779) and related Prospectus
for the registration of the Symphony Annuity Contracts to be offered by IDS Life
Insurance Company.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
April 27, 1999
