SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended 12/31/95 Commission file numbers 33-89564,
33-89674, 33-59955, 33-89676,
33-89566, 33-88360, 33-89678,
33-91400 and 33-91402
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Connecticut 06-1241288
----------- ----------
(State or other jurisdiction of IRS Employer
incorporation or organization) Identification No.)
One Corporate Drive, Shelton, Connecticut 06484
-----------------------------------------------
(Address of Principal Executive Offices, Zip Code)
Registrant's telephone number, including area code: (203) 926-1888
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
As of March 25, 1996, there were 25,000 shares of outstanding common stock, par
value $80 per share, of the registrant, consisting of 100 shares of voting and
24,900 shares of non-voting all of which were owned by American Skandia
Investment Holding Corporation, a wholly-owned subsidiary of Skandia Insurance
Company Ltd., a Swedish corporation.
PART I
Item 1. Business
American Skandia Life Assurance Corporation ("ASLAC" or "the
Company") is a Connecticut corporation with its principal offices
in Shelton, Connecticut.
American Skandia Investment Holding Corporation (the "Parent")
owns all of the issued and outstanding shares of the Company's
common stock. The Parent is a wholly-owned ultimate subsidiary of
Skandia Insurance Company Ltd., a Swedish corporation.
The Company currently develops and offers annuity products. All
annuity products requiring registration as securities are offered
through its affiliated broker-dealer company, American Skandia
Marketing, Incorporated. ASLAC currently offers single or
flexible premium variable and guaranteed maturity deferred
annuities and immediate annuities. The Company may, in the
future, offer other forms of life and health insurance.
Annuity contracts represent a contractual obligation to make
payments over a given period of time (often measured by the life
of the recipient), undertaken by the insurer in return for the
payment of either a single premium or a series of scheduled or
flexible premiums. The insurer's obligation to pay may commence
immediately or be deferred. The amount to be paid may be either
fixed or variable. The product is sold to pension plans and
individuals, primarily for the management of financial assets and
for retirement. Income earned by or credited to a deferred
annuity contract generally is not taxed until distributed. For
immediate annuities, or annuitized deferred annuities, a portion
of each annuity distribution received is taxed as ordinary income
to the policyholder, based on the ratio of the investment in the
contract to the total distribution expected to be received.
The Company is obligated to carry in its statutory financial
statements, as liabilities, actuarial reserves to meet its
obligations on outstanding annuity or life insurance contracts.
This is required by the life insurance laws and regulations in
the jurisdictions in which it does business. Such reserves are
based on mortality and/or morbidity tables in general use in the
United States. In general, reserves are computed amounts that,
with additions from premiums to be received, and with interest on
such reserves compounded at certain assumed rates, are expected
to be sufficient to meet our contract obligations at their
maturities if death occurs in accordance with the mortality
tables employed. In the accompanying financial statements these
reserves for contract obligations are determined in accordance
with generally accepted accounting principles and are included in
the separate account liabilities, reserve for future
contractowner benefits and annuity policy reserves.
ASLAC is engaged in a business that is highly competitive due to
the large number of insurance companies and other entities
competing in the marketing and sale of insurance products. There
are approximately 2,300 stock, mutual, and other types of
insurance companies in the life insurance business in the United
States.
As of December 31, 1995, the Company had 201 direct salaried
employees.
2
Item 2. Properties
The Company occupies office space leased from an affiliate,
American Skandia Information Services and Technology Corporation,
and believes that the current facilities are satisfactory for its
near term needs.
Item 3. Legal Proceedings
As of the date of this filing, the Company is not involved in any
litigation outside of the ordinary course of business, and knows
of no material claims.
Item 4. Submission of Matters to a Vote of Security Holders
None
3
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
All of ASLAC's outstanding shares are owned by American Skandia
Investment Holding Corporation, a wholly-owned subsidiary of
Skandia Insurance Company Ltd. The Company did not pay any
dividends to its Parent in 1995, 1994 and 1993.
Item 6. Selected Financial Data
The following table summarizes information with respect to the
operation of the Company. The selected financial data should be
read in conjunction with the financial statements and the notes
thereto and Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operation.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Income Statement Data:
Revenues:
<S> <C> <C> <C> <C> <C>
Net investment income $ 1,600,674 $ 1,300,217 $ 692,758 $ 892,053 $ 723,253
Annuity premium income 0 70,000 101,643 1,304,629 2,068,452
Annuity charges and fees* 38,837,358 24,779,785 11,752,984 4,846,134 1,335,079
Net realized capital
gains/(losses) 36,774 (1,942) 330,024 195,848 4,278
Fee income 6,205,719 2,111,801 938,336 125,179 0
Other income 64,882 24,550 1,269 15,119 45,010
-------------- -------------- -------------- ------------ ------------
Total revenues $ 46,745,407 $ 28,284,411 $ 13,817,014 $ 7,378,962 $ 4,176,072
============== ============== ============== ============ ============
Benefits and Expenses:
Return credited
to contractowners 10,612,858 (516,730) 252,132 560,243 235,470
Cost of minimum death benefit
reinsurance 2,056,606 0 0 0 0
Annuity benefits 555,421 369,652 383,515 276,997 107,536
Increase/(decrease) in annuity
policy reserves (6,778,756) 5,766,003 1,208,454 1,331,278 2,045,722
Underwriting, acquisition and
other insurance expenses 35,970,524 18,942,720 9,547,951 11,338,765 7,294,400
Interest expense 6,499,414 3,615,845 187,156 0 0
-------------- -------------- -------------- ------------ ------------
Total benefits and expenses $ 48,916,067 $ 28,177,490 $ 11,579,208 $ 13,507,283 $ 9,683,128
============== ============== ============== ============ ============
Income tax $ 397,360 $ 247,429 $ 182,965 $ 0 $ 0
============== ============== ============== ============ ============
Net income (loss) $ (2,568,020) $ (140,508) $ 2,054,841 $ (6,128,321) $ (5,507,056)
============== ============== ============== ============ ============
Balance Sheet Data:
Total Assets $5,021,012,890 $2,864,416,329 $1,558,548,537 $552,345,206 $239,435,675
============== ============== ============== ============ ============
Surplus Notes $ 103,000,000 $ 69,000,000 $ 20,000,000 $ 0 $ 0
-------------- =============== ============== ============ ============
Shareholder's Equity $ 59,713,000 $ 52,205,524 $ 52,387,687 $ 46,332,846 $ 14,292,772
============== =============== ============== ============ ============
</TABLE>
*On annuity sales of $1,628,486,000, $1,372,874,000,
$890,640,000, $287,596,000 and $141,017,000 during the years
ended December 31, 1995, 1994, 1993, 1992, and 1991,
respectively, with contractowner assets under management of
$4,704,044,001, $2,661,161,000, $1,437,554,000, $495,176,000 and
$217,425,000 as of December 31, 1995, 1994, 1993, 1992 and 1991,
respectively.
4
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
American Skandia Life Assurance Corporation (ASLAC) is a stock
insurance company domiciled in Connecticut with licenses in all
50 states. It is a wholly-owned subsidiary of American Skandia
Investment Holding Corporation (ASIHC), whose ultimate parent is
Skandia Insurance Company Ltd., a Swedish company.
The Company is in the business of issuing annuity policies, and
has been so since its business inception in 1988. The Company
currently offers the following annuity products: a) certain
deferred annuities that are registered with the Securities and
Exchange Commission, including variable annuities and fixed
interest rate annuities that include a market value adjustment
feature; b) certain other fixed deferred annuities that are not
registered with the Securities and Exchange Commission; and c)
fixed and adjustable immediate annuities.
The Company markets its products to broker-dealers and financial
planners through an internal field marketing staff. In addition,
the Company markets through and in conjunction with financial
institutions such as banks that are permitted directly, or
through affiliates, to sell annuities.
During 1995, Skandia Vida, S.A. de C.V. was formed by the
ultimate parent Skandia Insurance Company Ltd. The Company owns
99.9% ownership in Skandia Vida, S.A. de C.V. which is a life
insurance company domiciled in Mexico. This Mexican life insurer
is a start up company with expectations of selling long term
savings product within Mexico. Total shareholders' equity of
Skandia Vida, S.A. de C.V. is $881,648 at December 31, 1995.
RESULTS OF OPERATIONS
The Company's long term business plan was developed reflecting
the current sales and marketing approach. Annuity sales increased
19%, 54% and 210% in 1995, 1994 and 1993, respectively. The
Company continues to show significant growth in sales volume and
increased market share within the variable annuity industry.
Total assets grew 75%, 84% and 182% in 1995, 1994 and 1993,
respectively. These increases were a direct result of the
substantial sales volume increasing separate account assets and
deferred acquisition costs. Liabilities grew 76%, 87%, and 198%
in 1995, 1994 and 1993, respectively, as a result of the reserves
required for the increased sales activity and borrowing during
1995, 1994 and 1993. The borrowing is needed to fund the
acquisition costs of the Company's variable annuity business.
The Company experienced a net loss after tax in 1995 and 1994,
which was in excess of plan. The 1995 result was related to
higher than anticipated expense levels and additional reserving
requirements on our market value adjusted annuities. The increase
in expenses was primarily attributable to improving our service
infrastructure and marketing related costs.
The 1994 loss is a result of additional reserving of
approximately $4.6 million to cover the minimum death benefit
exposure in the Company's annuity contracts along with higher
than expected general expenses relative to sales volume. The
additional reserve may be required from time to time, within the
variable annuity market place, and is a result of volatility in
the financial markets as it relates to the underlying separate
account investments. The Company achieved profits in 1993 of $2
million which was expected.
5
REVENUES
Increasing volume of annuity sales results in higher assets under
management. The fees realized on assets under management has
resulted in annuity charges and fees to increase 57%, 111% and
143% in 1995, 1994 and 1993, respectively.
Net investment income increased 23% and 88% in 1995 and 1994
respectively, and decreased 22% in 1993. The increase in 1995 is
a result of a higher average level of Company bonds and
short-term investments. The increase in 1994 is a result of an
increase in the Company's bonds and short-term investments, which
were $33.6 million and $29.1 million at December 31, 1994 and
1993, respectively. The decrease in 1993 is a result of the need
to liquidate investments to support the cash needs required to
fund the acquisition costs on the variable annuity business.
Fee income has increased 194%, 125% and 650% in 1995, 1994 and
1993, respectively, as a result of income from transfer agency
type activities.
BENEFITS
Annuity benefits represent payments on annuity contracts with
mortality risks, this being the immediate annuity with life
contingencies and supplementary contracts with life
contingencies.
Increase in annuity policy reserves represent change in reserves
for the immediate annuity with life contingencies, supplementary
contracts with life contingencies and minimum death benefit.
During 1995 the Company entered into an agreement to reinsure the
guaranteed minimum death benefit exposure on most of the variable
annuity contracts. The costs associated with reinsuring the
minimum death benefit reserve approximates the change in the
minimum death benefit reserve during 1995, thereby having no
significant effect on the statement of operations. The
significant increase in 1994 reflects the required increase in
the minimum death benefit reserve on variable annuity contracts.
This increase covers the escalating death benefit in the product
which was further enhanced as a result of poor performance of the
underlying mutual funds within the variable annuity contract.
Return credited to contractowners represents revenues on the
variable and market value adjusted annuities offset by the
benefit payments and change in reserves required on this
business. Also included are the benefit payments and change in
reserves on immediate annuity contracts without significant
mortality risks. In 1995, the Company earned a lower than
anticipated separate account investment return on the market
value adjusted contracts in support of the benefits and required
reserves. In addition, the 1995 result includes an increase in
the required reserves associated with this product.
The result for 1994 was better than anticipated due to separate
account investment return on the market value adjusted contracts
being in excess of the benefits and required reserves.
6
EXPENSES
Underwriting, acquisition and other insurance expenses for 1995
is made up of $62.8 million of commissions and $42.2 million of
general expenses offset by the net capitalization of deferred
acquisition costs totaling $69.2 million. This compares to the
same period last year of $46.2 million of commissions and $26.2
million of general expenses offset by the net capitalization of
deferred acquisition costs totaling $53.7 million.
Underwriting, acquisition and other insurance expenses in 1993
were made up of $36.7 million of commissions and $19.3 million of
general expenses offset by the net capitalization of deferred
acquisition costs totaling $46.3 million.
Interest expense increased $2.9 million and $3.4 million in 1995
and 1994 respectively as a result of Surplus Notes totaling $103
million and $69 million, at 1995 and 1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity requirement of ASLAC was met by cash from insurance
operations, investment activities and borrowings from its parent.
As previously stated, the Company had significant growth during
1995. The sales volume of $1.628 billion was primarily
(approximately 80%) variable annuities which carry a contingent
deferred sales charge. This type of product causes a temporary
cash strain in that 100% of the proceeds are invested in separate
accounts supporting the product leaving a cash (but not capital)
strain caused by the acquisition cost for the new business. This
cash strain required the Company to look beyond the insurance
operations and investments of the Company. During 1995, the
Company borrowed an additional $34 million from its parent in the
form of Surplus Notes and extended the reinsurance agreement
(which was initiated in 1993 and 1994) along with entering into a
third reinsurance agreement with a large reinsurer in support of
its cash needs. The reinsurance agreements are modified
coinsurance arrangements where the reinsurer shares in the
experience of a specific book of business. The income and expense
items presented above are net of reinsurance.
The Company is reviewing various options to fund the cash strain
anticipated from the acquisition costs on the coming years' sales
volume.
The tremendous growth of this young organization has depended on
capital support from its parent.
As of December 31, 1995 and December 31, 1994, shareholder's
equity was $59,713,000 and $52,205,524 respectively, which
includes the carrying value of the state insurance licenses in
the amount of $4,862,500 and $5,012,500 respectively.
ASLAC has long term surplus notes with its parent and a short
term borrowing with an affiliate. No dividends have been paid to
its parent company.
7
Item 8. Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
INDEX
Page(s)
<S> <C>
Independent Auditors' Report 9
Statements of Consolidated Financial Condition
as of December 31, 1995 and 1994 10
Statements of Consolidated Operations for the
Years Ended December 31, 1995, 1994 and 1993 11
Statements of Consolidated Shareholder's Equity for the
Years Ended December 31, 1995, 1994 and 1993 12
Statements of Consolidated Cash Flows for the
Years Ended December 31, 1995, 1994 and 1993 13
Notes to Consolidated Financial Statements 14-26
</TABLE>
Schedules are omitted because they are either not applicable or
because the information required therein is included in the Notes
to Financial Statements.
8
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying consolidated statements of financial condition
of American Skandia Life Assurance Corporation (a wholly-owned subsidiary of
Skandia Insurance Company Ltd.) as of December 31, 1995 and 1994, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of American Skandia Life
Assurance Corporation as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
March 14, 1996
9
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1995 1994
--------------------- ----------------------
ASSETS
Investments:
<S> <C> <C>
Fixed maturities - at amortized cost $ 10,112,705 $ 9,621,865
Investment in mutual funds - at market value 1,728,875 840,637
Short-term investments - at amortized cost 15,700,000 24,000,000
--------------------- ----------------------
Total investments 27,541,580 34,462,502
Cash and cash equivalents 13,146,384 23,909,463
Accrued investment income 194,074 173,654
Fixed assets 82,434 0
Deferred acquisition costs 270,222,383 174,009,609
Reinsurance receivable 1,988,042 0
Receivable from affiliates 860,991 459,960
Income tax receivable 563,850 0
State insurance licenses 4,862,500 5,012,500
Other assets 1,589,006 1,261,513
Separate account assets 4,699,961,646 2,625,127,128
--------------------- ----------------------
Total Assets $ 5,021,012,890 $ 2,864,416,329
===================== ======================
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES:
Reserve for future contractowner benefits $ 30,493,018 $ 11,422,381
Annuity policy reserves 19,386,490 24,054,255
Income tax payable 0 36,999
Accounts payable and accrued expenses 32,816,517 31,753,380
Payable to affiliates 314,699 261,552
Payable to reinsurer 64,995,470 40,105,406
Short-term borrowing-affiliate 10,000,000 10,000,000
Surplus notes 103,000,000 69,000,000
Deferred contract charges 332,050 449,704
Separate account liabilities 4,699,961,646 2,625,127,128
--------------------- ----------------------
Total Liabilities 4,961,299,890 2,812,210,805
--------------------- ----------------------
SHAREHOLDER'S EQUITY:
Common stock, $80 par, 25,000 shares
authorized, issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 81,874,666 71,623,932
Unrealized investment gains and losses 111,359 (41,655)
Foreign currency translation (328,252) 0
Accumulated deficit (23,944,773) (21,376,753)
--------------------- ----------------------
Total Shareholder's Equity 59,713,000 52,205,524
--------------------- ----------------------
Total Liabilities and Shareholder's $ 5,021,012,890 $ 2,864,416,329
Equity
===================== ======================
</TABLE>
See notes to consolidated financial statements
10
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
---------------- ---------------- ---------------
REVENUES:
<S> <C> <C> <C>
Annuity charges and fees $ 38,837,358 $ 24,779,785 $ 11,752,984
Fee Income 6,205,719 2,111,801 938,336
Net investment income 1,600,674 1,300,217 692,758
Annuity premium income 0 70,000 101,643
Net realized capital gains/(losses) 36,774 (1,942) 330,024
Other 64,882 24,550 1,269
---------------- ---------------- ---------------
Total Revenues 46,745,407 28,284,411 13,817,014
---------------- ---------------- ---------------
BENEFITS AND EXPENSES:
Benefits:
Annuity benefits 555,421 369,652 383,515
Increase/(decrease) in annuity policy reserves (6,778,756) 5,766,003 1,208,454
Cost of minimum death benefit reinsurance 2,056,606 0 0
Return credited to contractowners 10,612,858 (516,730) 252,132
---------------- ---------------- ---------------
6,446,129 5,618,925 1,844,101
---------------- ---------------- ---------------
Expenses:
Underwriting, acquisition and other insurance expenses 35,820,524 18,792,720 9,397,951
Amortization of state insurance licenses 150,000 150,000 150,000
Interest expense 6,499,414 3,615,845 187,156
---------------- ---------------- ---------------
42,469,938 22,558,565 9,735,107
---------------- ---------------- ---------------
Total Benefits and Expenses 48,916,067 28,177,490 11,579,208
---------------- ---------------- ---------------
Income (loss) from operations before federal income taxes (2,170,660) 106,921 2,237,806
Income tax 397,360 247,429 182,965
---------------- ---------------- ---------------
Net income (loss) $ (2,568,020) $ (140,508) $ 2,054,841
================ ================ ===============
</TABLE>
See notes to consolidated financial statements
11
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
----------------- --------------- ---------------
<S> <C> <C> <C>
Common stock, balance at beginning and end of year $ 2,000,000 $ 2,000,000 $ 2,000,000
----------------- --------------- ---------------
Additional paid-in capital:
Balance at beginning of year 71,623,932 71,623,932 67,623,932
Additional contributions 10,250,734 0 4,000,000
----------------- --------------- ---------------
Balance at end of year 81,874,666 71,623,932 71,623,932
----------------- --------------- ---------------
Unrealized investment gains and losses:
Balance at beginning of year (41,655) 0 0
Change in unrealized investment gains and losses 153,014 (41,655) 0
----------------- --------------- ---------------
Balance at end of year 111,359 (41,655) 0
----------------- --------------- ---------------
Foreign currency translation:
Balance at beginning of year 0 0 0
Change in foreign currency translation (328,252) 0 0
----------------- --------------- ---------------
Balance at end of year (328,252) 0 0
----------------- --------------- ---------------
Accumulated deficit:
Balance at beginning of year (21,376,753) (21,236,245) (23,291,086)
Net income (loss) (2,568,020) (140,508) 2,054,841
----------------- --------------- ---------------
Balance at end of year (23,944,773) (21,376,753) (21,236,245)
----------------- --------------- ---------------
TOTAL SHAREHOLDER'S EQUITY $ 59,713,000 $ 52,205,524 $ 52,387,687
================= =============== ===============
</TABLE>
See notes to consolidated financial statements
12
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1993
------------------ ------------------- -----------------
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ (2,568,020) $ (140,508) $ 2,054,841
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
(Decrease)/increase in annuity policy reserves (4,667,765) 6,004,603 4,223,289
Decrease in policy and contract claims 0 0 (52,400)
Amortization of bond discount 23,449 21,964 6,754
Amortization of state insurance licenses 150,000 150,000 150,000
(Decrease)/increase in due to/from affiliates (347,884) 256,779 (397,125)
Change in income tax payable/receivable (600,849) 36,999 0
Increase in other assets (409,927) (742,041) (220,172)
(Increase)/decrease in accrued investment income (20,420) (44,847) 154,902
Change in reinsurance receivable (1,988,042) 0 0
Increase in accounts payables and accrued expenses 1,063,137 13,396,502 14,005,962
Change in deferred acquisition costs (96,212,774) (83,986,073) (57,387,042)
Change in deferred contract charges (117,654) (71,117) 13,898
Change in foreign currency translation (328,252) 0 0
Realized (gain)/loss on sale of investments (36,774) 1,942 (330,024)
------------------ ------------------- -----------------
Net cash used in operating activities (106,061,775) (65,115,797) (37,777,117)
------------------ ------------------- -----------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed maturity investments (614,289) (1,989,120) (6,847,630)
Proceeds from the maturity of fixed maturity investments 100,000 2,010,000 0
Proceeds from the sale of fixed maturity investments 0 0 10,971,574
Purchase of shares in mutual funds (1,566,194) (922,822) 0
Proceeds from sale of shares in mutual funds 867,744 38,588 0
Purchase of short-term investments (202,700,000) (513,100,000) (1,207,575,307)
Sale of short-term investments 211,000,000 508,500,000 1,202,333,907
Investments in separate accounts (1,609,415,439) (1,365,775,177) (890,125,018)
------------------ ------------------- -----------------
Net cash used in investing activities (1,602,328,178) (1,371,238,531) (891,242,474)
------------------ ------------------- -----------------
CASH FLOW FROM FINANCING ACTIVITIES:
Capital contributions from parent 10,250,734 0 4,000,000
Surplus notes 34,000,000 49,000,000 20,000,000
Short-term borrowing 0 0 10,000,000
Increase in payable to reinsurer 24,890,064 28,555,190 11,550,216
Proceeds from annuity sales 1,628,486,076 1,372,873,747 890,639,947
------------------ ------------------- -----------------
Net cash provided by financing activities 1,697,626,874 1,450,428,937 936,190,163
------------------ ------------------- -----------------
Net increase/(decrease) in cash and cash equivalents (10,763,079) 14,074,609 7,170,572
Cash and cash equivalents at beginning of year 23,909,463 9,834,854 2,664,282
------------------ ------------------- -----------------
Cash and cash equivalents at end of year $ 13,146,384 $ 23,909,463 $ 9,834,854
================== =================== =================
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Income taxes paid $ 995,496 $ 161,398 $ 169,339
================== =================== =================
Interest paid $ 540,319 $ 557,639 $ 111,667
================== =================== =================
</TABLE>
See notes to consolidated financial statements
13
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements
1. BUSINESS OPERATIONS
American Skandia Life Assurance Corporation (the "Company") is a
wholly-owned subsidiary of American Skandia Investment Holding
Corporation (the "Parent"), which in turn is a wholly-owned subsidiary
of Skandia Insurance Company Ltd., a Swedish corporation.
The Company develops annuity products and issues its products through
its affiliated broker/dealer company, American Skandia Marketing,
Incorporated. The Company currently issues variable, fixed, market
value adjusted and immediate annuities.
During 1995, Skandia Vida, S.A. de C.V. was formed by the ultimate
parent Skandia Insurance Company Ltd. The Company owns 99.9% ownership
in Skandia Vida, S.A. de C.V. which is a life insurance company
domiciled in Mexico. This Mexican life insurer is a start up company
with expectations of selling long term savings product within Mexico.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Reporting
------------------
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles. Intercompany transactions and balances have been
eliminated in consolidation.
B. Investments
-----------
The Company has classified its fixed maturity investments as
held to maturity as the Company has the ability and intent to
hold those investments to maturity. Such investments are
carried at amortized cost.
The Company has classified its mutual fund investments as
available for sale. Such investments are carried at market
value and changes in unrealized gains and losses are reported
as a component of shareholder's equity.
Short-term investments are reported at cost which approximates
market value.
Realized gains and losses on disposal of investments are
determined by the specific identification method and are
included in revenues.
The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", effective January 1, 1994. The
adoption of SFAS No. 115 had no impact on the Company's
financial statements.
14
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
C. Cash Equivalents
----------------
The Company considers all highly liquid time deposits
purchased with a maturity of three months or less to be cash
equivalents.
D. State Insurance Licenses
------------------------
Licenses to do business in all states have been capitalized
and reflected at the purchase price of $6 million less
accumulated amortization. The cost of the licenses is being
amortized over 40 years.
E. Fixed Assets
------------
Fixed Assets consisting of furniture, equipment and leasehold
improvements are carried at cost and depreciated on a straight
line basis over a period of three to five years. Accumulated
depreciation at December 31, 1995 and related depreciation
expense for the year ended December 31, 1995 was $3,749.
F. Recognition of Revenue and Contract Benefits
--------------------------------------------
Annuity contracts without significant mortality risk, as
defined by Financial Accounting Standard No. 97, are
classified as investment contracts (variable, market value
adjusted and certain immediate annuities) and those with
mortality risk (immediate annuities) as insurance products.
The policy of revenue and contract benefit recognition is
described below.
Revenues for variable annuity contracts consist of charges
against contractowner account values for mortality and expense
risks and administration fees and an annual maintenance fee
per contract. Benefit reserves for variable annuity contracts
represent the account value of the contracts, and are included
in the separate account liabilities.
Revenues for market value adjusted annuity contracts consist
of separate account investment income reduced by benefit
payments and change in reserves in support of contractowner
obligations, all of which is included in return credited to
contractowners. Benefit reserves for these contracts represent
the account value of the contracts, and are included in the
general account liability for future contractowner benefits to
the extent in excess of the separate account liabilities.
Revenues for immediate annuity contracts without life
contingencies consist of net investment income. Revenues for
immediate annuity contracts with life contingencies consist of
single premium payments recognized as annuity considerations
when received. Benefit reserves for these contracts are based
on the Society of Actuaries 1983 - a Table with an assumed
interest rate of 8.25%.
Annuity sales were $1,628,486,000, $1,372,874,000 and
$890,640,000 for 1995, 1994 and 1993, respectively. Annuity
contract assets under management were $4,704,044,000,
$2,661,161,000 and $1,437,554,000 at December 31, 1995, 1994
and 1993, respectively.
15
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
G. Deferred Acquisition Costs
--------------------------
The costs of acquiring new business, which vary with and are
primarily related to the production of new business, are being
amortized in relation to the present value of estimated gross
profits. These costs include commissions, cost of contract
issuance, and certain selling expenses that vary with
production. Details of the deferred acquisition costs for the
years ended December 31 follow:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $174,009,609 $ 90,023,536 $32,636,494
Acquisition costs deferred
during the year 106,063,698 85,801,180 59,676,296
Acquisition costs amortized
during the year 9,850,924 1,815,107 2,289,254
------------- --------------- -------------
Balance at end of year $270,222,383 $174,009,609 $90,023,536
============ ============= ===========
</TABLE>
H. Deferred Contract Charges
-------------------------
Certain contracts are assessed a front-end fee at the time of
issue. These fees are deferred and recognized in income in
relation to the present value of estimated gross profits of
the related contracts. Details of the deferred contract
charges for the years ended December 31 follow:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $449,704 $520,821 $506,923
Contract charges deferred
during the year 21,513 87,114 144,537
Contract charges amortized
during the year 139,167 158,231 130,639
--------- --------- ---------
Balance at end of year $332,050 $449,704 $520,821
======== ======== ========
</TABLE>
16
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
I. Separate Accounts
-----------------
Assets and liabilities in Separate Account are shown as
separate captions in the consolidated statement of financial
condition. The assets consist of long-term bonds, investments
in mutual funds and short-term securities, all of which are
carried at market value.
Included in Separate Account liabilities is $586,233,752 and
$259,556,863 at December 31, 1995 and 1994, respectively,
relating to annuity contracts for which the contractholder is
guaranteed a fixed rate of return. Separate Account assets of
$588,835,051 and $269,488,557 at December 31, 1995 and 1994,
respectively, consisting of long term bonds, short term
securities, transfers due from general account and cash are in
support of these annuity contracts, as pursuant to state
regulation.
J. Income taxes
------------
The Company is included in the consolidated federal income tax
return with all Skandia Insurance Company Ltd. subsidiaries in
the U.S. The federal and state income tax provision is
computed on a separate return basis in accordance with the
provisions of the Internal Revenue Code, as amended. Prior to
1995, the Company filed a separate federal income tax return.
K. Translation of Foreign Currency
-------------------------------
The financial position and results of operations of the
Company's foreign operations are measured using local currency
as the functional currency. Assets and liabilities of the
operations are translated at the exchange rate in effect at
each year-end. Statements of operations and shareholder's
equity accounts are translated at the average rate prevailing
during the year. Translation adjustments arising from the use
of differing exchange rates from period to period are included
in shareholder's equity.
L. Estimates
---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires that
management make estimates and assumptions that affect the
reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. The more significant
estimates and assumptions are related to deferred acquisition
costs and involve policy lapses, investment return and
maintenance expenses. Actual results could differ from those
estimates.
17
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
M. Reinsurance
-----------
The Company cedes reinsurance under modified co-insurance
arrangements. The reinsurance arrangements provides additional
capacity for growth in supporting the cash flow strain from
the Company's variable annuity business. The reinsurance is
effected under quota share contracts.
Effective January 1, 1995, the Company reinsured certain
mortality risks. These risks result from the guaranteed
minimum death benefit feature in the variable annuity
products.
3. INVESTMENTS
The carrying value (amortized cost), gross unrealized gains (losses)
and estimated market value of investments in fixed maturities by
category as of December 31, 1995 and 1994 are shown below. All
securities held at December 31, 1995 are publicly traded.
Investments in fixed maturities as of December 31, 1995 consist of the
following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Government
Obligations $ 4,304,731 $183,201 $1,778 $4,486,154
Obligations of
State and Political
Subdivisions 256,095 0 3,165 252,930
Corporate
Securities 5,551,879 13,252 346 5,564,785
------------- ---------- -------- ------------
Totals $10,112,705 $196,453 $5,289 $10,303,869
=========== ======== ====== ===========
</TABLE>
The amortized cost and market value of fixed maturities, by contractual
maturity, at December 31, 1995 are shown below.
<TABLE>
<CAPTION>
<S> <C> <C>
Amortized Market
Cost Value
Due in one year or less $ 379,319 $ 393,745
Due after one through five years 6,358,955 6,519,880
Due after five through ten years 3,374,431 3,390,244
------------ -------------
$10,112,705 $10,303,869
=========== ===========
</TABLE>
18
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
Investments in fixed maturities as of December 31, 1994 consist of the
following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Government
Obligations $3,796,390 $2,119 $156,759 $3,641,750
Obligations of
State and Political
Subdivisions 261,852 0 9,156 252,696
Corporate
Securities 5,563,623 0 547,023 5,016,600
----------- ---------- --------- -----------
Totals $9,621,865 $2,119 $712,938 $8,911,046
========== ====== ======== ==========
</TABLE>
Proceeds from maturities and sales of fixed maturity investments during
1995, 1994 and 1993, were $100,000, $2,010,000 and $10,971,574,
respectively.
<TABLE>
<CAPTION>
Gross gains and gross losses realized were as follows:
<S> <C> <C>
Gross Gross
Gains Losses
----- ------
1995 $ 0 $ 0
1994 $ 0 $ 0
1993 $329,000 $ 0
</TABLE>
19
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The cost, gross unrealized gains (losses) and market value of
investments in mutual funds at December 31, 1995 and 1994 are shown
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
1995 $1,617,516 $111,686 $ 327 $1,728,875
========== ======== ========= ==========
1994 $ 882,292 $ 4,483 $ 46,138 $ 840,637
========== ======== ========= ==========
</TABLE>
Proceeds from sales of investments in mutual funds during 1995 and 1994
were $867,744 and $38,588.
Mutual fund gross gains and gross losses were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Gross Gross
Gains Losses
----- ------
1995 $65,236 $28,462
======= =======
1994 $ 510 $ 2,452
======== =======
</TABLE>
4. NET INVESTMENT INCOME
Additional information with respect to net investment income for the
years ended December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fixed Maturities $ 629,743 $ 616,987 $409,552
Mutual Funds 59,895 12,049 0
Short-Term Investments 256,351 142,421 394,545
Cash and Cash Equivalents 730,581 633,298 15,034
Interest on Policy Loans 4,025 1,275 1,015
------------- ------------- ----------
Total Investment Income 1,680,595 1,406,030 820,146
Investment Expenses 79,921 105,813 127,388
------------ ----------- ---------
Net investment income $1,600,674 $1,300,217 $692,758
========== ========== ========
</TABLE>
20
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) operating loss and tax credit carryforwards. The tax
effects of significant items comprising the Company's deferred tax
balance as of December 31, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
Deferred Tax (Liabilities):
<S> <C> <C>
Deferred acquisition costs ($57,399,960) ($37,885,053)
Payable to reinsurer (19,802,861) (12,754,591)
Unrealized investment gains and losses (38,976) 14,579
Other (308,304) (214,505)
-------------- --------------
Total ($77,550,101) ($50,839,570)
------------ ------------
Deferred Tax Assets:
Deferred contract charge $ 116,218 $ 157,396
Net separate account liabilities 72,024,094 51,637,155
Reserve for future contractowner benefits 10,672,556 3,997,833
Net operating loss carryforward 0 1,813,670
AMT credit carryforward 286,094 0
Foreign exchange translation 114,888 0
Other 3,661,104 878,030
------------ -------------
Total $86,874,954 $58,484,084
----------- -----------
Net before valuation allowance $ 9,324,853 $ 7,644,514
Valuation allowance (9,324,853) (7,644,514)
------------ ------------
Net deferred tax balance $ 0 $ 0
----------------- -----------------
</TABLE>
The significant components of federal tax expense are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current tax expense $ 394,648 $184,771 $182,965
Deferred tax benefit:
(exclusive of the effects of
the change in valuation allowance) (1,680,339) (365,288) (404,480)
Change in valuation allowance 1,680,339 365,288 404,480
----------- ---------- ---------
Total deferred tax expense 0 0 0
------------ ---------- ---------
Total income tax expense $ 394,648 $184,771 $182,965
============ ======== ========
</TABLE>
21
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The state income tax expense was $2,712 and $62,658 for the years ended
1995 and 1994, respectively.
The federal income tax expense was different from the amount computed
by applying the federal statutory tax rate of 35% to pre-tax income
from continuing operations as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income (loss) before taxes ($2,170,660) $106,921 $2,237,806
Income tax rate 35% 35% 35%
------------ ---------- -----------
Tax expense at federal
statutory income tax rate (759,731) 37,422 783,232
Tax effect of:
Permanent tax differences (253,101) (82,188) 63,535
Difference between financial
statement and taxable income 2,986,464 3,161,331 2,414,254
Utilization of net operating
loss carryforwards (1,487,144) (3,116,565) (3,261,021)
Utilization of AMT credits (91,840) 0 0
Alternative minimum tax 0 184,771 182,965
-------------- ----------- -----------
Income tax expense $ 394,648 $ 184,771 $ 182,965
=========== ========== ==========
</TABLE>
6. RELATED PARTY TRANSACTIONS
Certain operating costs (including personnel, rental of office space,
furniture, and equipment) and investment expenses have been charged to
the Company at cost by American Skandia Information Services and
Technology Corporation, an affiliated company; and likewise, the
Company has charged operating costs to American Skandia Investment
Services, Incorporated, an affiliated company. Income received for
these items was $396,573, $248,799 and $146,134 for the years ended
December 31, 1995, 1994 and 1993, respectively. The total cost to the
Company for these items was $12,687,337, $8,524,840 and $3,537,566 for
the years ended December 31, 1995, 1994 and 1993, respectively. Amounts
receivable from affiliates under this arrangement were $857,156 and
$317,285 as of December 31, 1995 and 1994, respectively. Amounts
payable to affiliates under this arrangement were $304,525 and $261,552
as of December 31, 1995 and 1994, respectively.
22
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
7. LEASES
The Company leases office space under a lease agreement established in
1989 with an affiliate (American Skandia Information Services and
Technology Corporation). The lease expense for 1995, 1994 and 1993 was
$1,265,771, $961,080 and $280,363, respectively. Future minimum lease
payments per year and in aggregate as of December 31, 1995 are as
follows:
1996 1,178,550
1997 1,178,550
1998 1,178,550
1999 1,178,550
2000 and thereafter 6,831,312
-----------
Total $11,545,512
===========
8. RESTRICTED ASSETS
In order to comply with certain state insurance departments'
requirements, the Company maintains bonds/notes on deposit with various
states. The carrying value of these deposits amounted to $3,267,357 and
$3,410,135 as of December 31, 1995, and 1994, respectively. These
deposits are required to be maintained for the protection of
contractowners within the individual states.
9. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory basis shareholder's equity was $132,493,899, $95,001,971 and
$60,666,243 at December 31, 1995, 1994 and 1993, respectively.
The statutory basis net income (loss) was ($7,183,003), ($9,789,297)
and $387,695 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Under state insurance laws, the maximum amount of dividends that can be
paid shareholders without prior approval of the state insurance
departments is subject to restrictions relating to statutory surplus
and net gain from operations. At December 31, 1995, no amounts may be
distributed without prior approval.
10. EMPLOYEE BENEFITS
In 1989, the Company established a 401(k) plan for which substantially
all employees are eligible. Company contributions to this plan on
behalf of the participants were $627,161, $431,559 and $250,039 for the
years ended December 31, 1995, 1994 and 1993, respectively.
The Company has a long-term incentive plan where units are awarded to
executive officers and other personnel. The program consists of
multiple plans. A new plan is instituted each year. Generally,
participants must remain employed by the Company or its affiliates at
the time such units are payable in order to receive any payments under
the plan. The accrued liability representing the value of these units
is $4,600,831 and $1,564,407 as of December 31, 1995 and 1994,
respectively.
23
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
In 1994, the Company established a deferred compensation plan which is
available to the internal field marketing staff and certain officers.
Company contributions to this plan on behalf of the participants were
$139,209 in 1995 and $106,882 in 1994.
11. REINSURANCE
The effect of the reinsurance agreements on the Company's operations
was to reduce annuity charges and fee income, death benefit expense and
policy reserves. The effect of reinsurance for the years ended December
31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- --------------- -----------------
Gross $50,334,280 ($4,790,714) $10,945,831
Ceded 11,496,922 1,988,042 332,973
------------- ------------- -------------
Net $38,837,358 ($6,778,756) $10,612,858
=========== =========== ===========
</TABLE>
1994 1993
---------------- ----------------
Annuity Annuity
Charges and Fees Charges and Fees
---------------- ----------------
Gross $30,116,166 $12,446,277
Ceded 5,336,381 693,293
------------- -------------
Net $24,779,785 $11,752,984
=========== ===========
Such ceded reinsurance does not relieve the Company from its
obligations to policyholders. The Company remains liable to its
policyholders for the portion reinsured to the extent that any
reinsurer does not meet the obligations assumed under the reinsurance
agreements.
24
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
12. SURPLUS NOTES
During 1995, the Company received $34 million from its parent in
exchange for three surplus notes. The amounts were $10 million, $15
million and $9 million, at interest rates of 7.52%, 7.49% and 7.47%,
respectively. Interest expense for these notes was $83,281 for the
year ended December 31, 1995.
During 1994, the Company received $49 million from its parent in
exchange for four surplus notes, two in the amount of $10 million, one
in the amount of $15 million and one in the amount of $14 million, at
interest rates of 7.28%, 7.90%, 9.13% and 9.78%, respectively. Interest
expense for these notes was $4,319,612 and $1,618,504 for the years
ended December 31, 1995 and 1994, respectively.
During 1993, the Company received $20 million from its parent in
exchange for a surplus note in the amount of $20 million at a 6.84%
interest rate. Interest expense for this note was $1,387,000,
$1,387,000 and $11,400 for the years ended December 31, 1995, 1994 and
1993, respectively.
Payment of interest and repayment of principal for these notes requires
approval by the Commissioner of the State of Connecticut. In 1995,
approval was granted for the payment of surplus note interest with the
stipulation that it be funded through a capital contribution from the
Parent.
13. SHORT-TERM BORROWING
During 1993, the Company received a $10 million loan from Skandia AB, a
Swedish affiliate. Upon the last renewal the loan became payable to the
Parent rather than Skandia AB. The loan matures on March 6, 1996 and
bears interest at 6.75.%. The total interest expense to the Company was
$709,521, $569,618 and $149,861 for the years ended December 31, 1995,
1994 and 1993, respectively, of which $219,375 and $50,174 was payable
as of December 31, 1995 and 1994, respectively.
14. CONTRACT WITHDRAWAL PROVISIONS
Approximately 98% of the Company's separate account liabilities are
subject to discretionary withdrawal with market value adjustment by
contractholders. Separate account assets which are carried at market
value are adequate to pay such withdrawals which are generally subject
to surrender charges ranging from 7.5% to 1% for contracts held less
than 7 years.
25
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes information with respect to the
operations of the Company.
<TABLE>
<CAPTION>
Three Months Ended
------------------
1995 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
<S> <C> <C> <C> <C>
revenues $ 8,891,903 $10,066,478 $11,960,530 $14,189,048
Net investment income 551,690 434,273 293,335 321,376
Net realized capital gains (losses) (16,082) (370) 44,644 8,582
------------- ---------------- -------------- ---------------
Total revenues $ 9,427,511 $10,500,381 $12,298,509 $14,519,006
============ =========== =========== ===========
Benefits and expenses $11,438,798 $ 9,968,595 $11,600,587 $15,908,087
=========== ============ =========== ===========
Net income (loss) ($ 2,026,688) $ 531,486 $ 678,312 ($1,751,130)
============ ============= ============= ===========
Three Months Ended
1994 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
revenues $5,594,065 $6,348,777 $7,411,686 $7,631,608
Net investment income 252,914 336,149 264,605 446,549
Net realized capital gains (losses) 0 (30,829) 25,914 2,973
----------------- ------------- -------------- -------------
Total revenues $5,846,979 $6,654,097 $7,702,205 $8,081,130
========== ========== ========== ==========
Benefits and expenses $5,701,460 $7,883,829 $8,157,535 $6,434,666
========== ========== ========== ==========
Net income (loss) $ 104,636 ($1,257,768) ($503,793) $1,516,417
============ =========== ========= ==========
</TABLE>
o o o o o o
26
PART III
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item 10. Directors and Executive Officers of the Registrant
Information contained in "Executive Officers and Directors"
of the Company's registration statement on Form S-1,
(Reg. #333-00941) is incorporated herein by reference.
Item 11. Executive Compensation
Summary Compensation Table: The summary table below summarizes
the compensation payable to the Chief Executive Officer and to
the most highly compensated of our executive officers whose
compensation exceeded $100,000 in 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name and Principal Annual Annual Other Annual
Position Year Salary Bonus Compensation
Jan R. Carendi 1995 $200,315
Chief Executive Officer 1994 170,569
1993 214,121
Gordon C. Boronow 1995 $157,620
President & Chief 1994 129,121
Operating Officer 1993 123,788
Lincoln R. Collins 1995 $156,550
Senior Vice President 1994 92,700
Product Management 1993 72,100
N. David Kuperstock 1995 $133,120
Vice President, Product 1994 103,000
Development 1993 88,864
Bayard F. Tracy 1995 $168,052
Senior Vice President 1994 127,050
Institutional Sales 1993 123,363
</TABLE>
Long-Term Incentive Plans - Awards in the last fiscal year: The
following table provides information regarding our long-term
incentive plan. Units are awarded to executive officers and other
personnel. The table shows units awarded to our Chief Executive
Officer and the most highly compensated of our executive officers
whose compensation exceeded $100,000 in the fiscal year
immediately preceding the date of this submission. This program
is designed to induce participants to remain with the Company
over long periods of time and to tie a portion of their
compensation to the fortunes of the Company.
27
Currently, the program consists of multiple plans. A new plan may
be instituted each year. Participants are awarded units at
the beginning of a plan. Generally, participants must remain
employed by the Company or its affiliates at the time such
units are payable in order to receive any payments under
the plan. There are certain exceptions, such as in cases of
retirement or death.
Changes in the value of units reflect changes in the "embedded
value" of the Company. "Embedded value" is the net asset value of
the Company (valued at market value and not including the present
value of future profits), plus the present value of the
anticipated future profits (valued pursuant to state insurance
law) on its existing contracts. Units will not have any value for
participants if the embedded value does not increase by certain
target percentages during the first four years of a plan. The
target percentages may differ between each plan. Any amounts
available under a plan are paid out in the fifth through eighth
years of a plan. Payments will be postponed if the payment would
exceed 20% of any profit (as determined under state insurance
law) earned by the company in the prior fiscal year or 30% of the
individual's current year salary. The amount to be received by a
participant at the time any payment is due will be the then
current number of units payable multiplied by the then current
value of such units.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Number Period until Estimated Future Payouts
Name of Units Payout Threshold Target Maximum
Jan R. Carendi 120,000 Various $648,060
Gordon C. Boronow 110,000 Various $561,558
Lincoln R. Collins 36,750 Various $198,807
N. David Kuperstock 32,000 Various $200,968
Bayard E. Tracy 52,500 Various $286,263
</TABLE>
The following directors were compensated as shown below in 1995:
Jan R. Carendi 0
Gordon C. Boronow 0
Malcolm M. Campbell $4,000
C. Henrik G. Danckwardt $4,000
Wade A. Dokken 0
Thomas M. Mazzaferro 0
Gunnar J. Moberg $2,500
Anders O. Soderstrom 0
Amanda C. Sutyak 0
Claes Ake Svensson 0
Bayard F. Tracy 0
28
Item 12. Security Ownership of Certain Beneficial Owners and Management
None
Item 13. Certain Relationships and Related Transactions
None
29
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
<TABLE>
<CAPTION>
<S> <C> <C>
(1) Financial Statements See Index to Financial
Statements of Page 6
(2) Financial Statement Schedules None
(3) Exhibits
(3) Articles of Incorporation and By-Laws Incorporated by reference to
the Company's Form N-4
(Reg. #33-19363)
(4) Instruments defining the right of Incorporated by reference to
security holders including indentures the Company's Forms N-4
(Reg. #33-19363, #33-44436,
#33-56770, #33-47753,
#33-71118 and #33-47976)
(9) Voting Trust Agreement None
(10) Material Contracts Incorporated by reference to
the Company's Forms S-1
(Reg. #33-26122 and
#33-86918)
(11) Statement of Computation of per share
earnings Not required to be filed
(12) Statements of Computation of Ratios Not required to be filed
(13) Annual Report to security holders None
(18) Letter re change in accounting principles None
(19) Previously unfiled documents None
(22) Subsidiaries of the registrant None
(23) Published report regarding matters
submitted to vote of security holders None
(25) Powers of Attorney Incorporated by reference to
the Company's Forms N-4
(Reg. #33-19363), S-1
(Reg. #33-86918) and S-1
(Reg. #33-88360)
(28) Additional exhibits None
</TABLE>
30
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
(29) Information from reports furnished
to state insurance regulatory authorities None
(b) Reports on Form 8-K None
</TABLE>
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 25, 1996.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
By: /s/Thomas M. Mazzaferro
-----------------------
Thomas M. Mazzaferro
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 25, 1996.
*Jan R. Carendi
---------------
Jan R. Carendi
Chief Executive Officer
Chairman of the Board, Director
Board of Directors
*Gordon C. Boronow *Nancy F. Brunetti *Jan R. Carendi
*Malcolm M. Campbell *Lincoln R. Collins *C. Henrik G. Danckwardt
*Wade A. Dokken *Thomas M. Mazzaferro *Dianne B. Michael
*Gunnar J. Moberg *Anders O. Soderstrom *Amanda C. Sutyak
*Claes Ake Svensson *Bayard F. Tracy
By: /s/ M. Patricia Paez
--------------------
M. Patricia Paez
Assistant Vice President and
Corporate Secretary
*Pursuant to Powers of Attorney filed with the Registration Statement.
32
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 881453
<NAME> ASLAC1295
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 10,112,705
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1,728,875
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 27,541,580
<CASH> 13,146,384
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 270,222,383
<TOTAL-ASSETS> 5,021,012,890 <F1>
<POLICY-LOSSES> 49,879,508
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 103,000,000
0
0
<COMMON> 2,000,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,021,012,890 <F2>
0
<INVESTMENT-INCOME> 1,600,674
<INVESTMENT-GAINS> 36,774
<OTHER-INCOME> 45,107,959
<BENEFITS> 6,446,129
<UNDERWRITING-AMORTIZATION> 35,970,524
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> (2,170,660)
<INCOME-TAX> 397,360
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,568,020)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> Included in Total Assets are assets held in Separate Accounts of
$4,699,961,646.
<F2> Included in Total Liabilities and Equity are Liabilities related to
Separate Acocunts of $4,699,961,646.
</FN>
</TABLE>
