UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1999
Commission file numbers: 33-62791,
33-62953, 33-88360, 33-89676, 33-89678,
33-91400, 333-00995, 333-02867, 333-24989,
333-25733, 333-25761 and 333-26695
American Skandia Life Assurance Corporation
Incorporated in the State of Connecticut
06-1241288
(Federal Employer Identification No.)
One Corporate Drive
Shelton, Connecticut 06484
Telephone Number (203) 926-1888
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes x No __
As of May 14, 1999, 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 common stock, all of which were owned by American
Skandia Investment Holding Corporation, a wholly-owned subsidiary of Skandia
Insurance Company Ltd., a Swedish corporation.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned
subsidiary of Skandia Insurance Company Ltd.)
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Statements of Financial Condition -
March 31, 1999 (unaudited)
and December 31, 1998 3
Consolidated Statements of Income (unaudited) -
Three months ended March 31, 1999
and March 31, 1998 4
Consolidated Statements of Shareholder's Equity
Three months ended March 31, 1999 (unaudited)
and December 31, 1998 5
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 1999
and March 31, 1998 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
- Three months ended March 31, 1999 9
Item 3. Quantitive and Qualitative Disclosures about Market Risk 13
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 16
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company, Ltd.)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(unaudited)
--------------- ---------------
--------------- ---------------
ASSETS
<S> <C> <C>
Investments:
Fixed maturities - at amortized cost $ 8,281 $ 8,289
Fixed maturities - at fair value 137,852 141,195
Mutual funds 9,926 8,210
Policy loans 609 569
--------------- ---------------
Total investments $ 156,668 $ 158,263
Cash and cash equivalents 69,750 77,525
Accrued investment income 2,541 2,880
Fixed assets 335 328
Deferred acquisition costs 785,974 721,507
Reinsurance receivable 8,228 4,191
Receivable from affiliates - 1,161
Income tax receivable - deferred 41,485 38,861
State insurance licenses 4,375 4,413
Other assets 4,239 3,744
Separate account assets 19,900,125 17,835,400
--------------- ---------------
Total assets $ 20,973,720 $ 18,848,273
=============== ===============
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES:
Reserve for future contractowner benefits $ 38,833 $ 37,508
Policy reserves 30,852 25,545
Drafts outstanding 30,183 28,941
Accounts payable and accrued expenses 92,150 91,827
Income tax payable 6,609 6,657
Payable to affiliates 51,949 -
Future fees payable to parent 356,879 368,978
Short-term borrowing 10,000 10,000
Surplus notes 193,000 193,000
Separate account liabilities 19,900,125 17,835,400
--------------- ---------------
Total liabilities $ 20,710,580 $ 18,597,856
--------------- ---------------
SHAREHOLDER'S EQUITY:
Common stock, $80 par, 25,000 shares
authorized, issued and outstanding $ 2,000 $ 2,000
Additional paid-in capital 181,089 179,889
Retained earnings 78,403 64,993
Accumulated other comprehensive income 1,648 3,535
--------------- ---------------
Total shareholder's equity 263,140 250,417
--------------- ---------------
Total liabilities and shareholder's equity $ 20,973,720 $ 18,848,273
=============== ===============
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company, Ltd.)
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
------------- -------------
REVENUES
<S> <C> <C>
Annuity and life insurance charges & fees $ 60,418 $ 39,786
Fee income 16,977 10,688
Net investment income 2,654 3,261
Premium income 749 50
Net realized capital gains 295 156
Other 365 70
------------- -------------
Total Revenues 81,458 54,011
------------- -------------
BENEFITS AND EXPENSES
Benefits:
Annuity benefits 221 366
Change in annuity policy reserves 757 238
Cost of minimum death benefit reinsurance 1,749 1,369
Return credited to contractowners (4,226) 1,667
------------- -------------
(1,499) 3,640
------------- -------------
Expenses:
Underwriting, acquisition and other insurance expenses 51,878 34,293
Interest expense 13,825 8,831
------------- -------------
65,703 43,124
------------- -------------
Total Benefits and Expenses 64,204 46,764
------------- -------------
Income from operations before income taxes 17,254 7,247
Income tax expense 3,844 1,175
------------- -------------
Net income $ 13,410 $ 6,072
============= =============
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company, Ltd.)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(unaudited)
--------------- ---------------
<S> <C> <C>
Common stock:
Beginning and ending balance $ 2,000 $ 2,000
Additional paid in capital:
Beginning balance 179,889 151,527
Additional contributions 1,200 28,362
--------------- ---------------
Ending balance 181,089 179,889
Retained earnings:
Beginning balance 64,993 30,226
Net income 13,410 34,767
--------------- ---------------
Ending balance 78,403 64,993
Accumulated other comprehensive income:
Beginning balance 3,535 668
Other comprehensive income (1,887) 2,867
--------------- ---------------
Ending balance 1,648 3,535
--------------- ---------------
Total shareholder's equity $ 263,140 $ 250,417
=============== ===============
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company, Ltd.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
------------- -------------
Cash Flow from operating activities:
<S> <C> <C>
Net income $ 13,410 $ 6,072
Adjustments to reconcile net income to net cash
(used in)/provided by operating activities:
Increase/(decrease) in policy reserves 5,307 (3,299)
Amortization of bond discount 30 20
Amortization of insurance licenses 38 38
Change in receivable from/payable to affiliates 53,110 4,012
(Decrease)/increase in income tax payable (48) 1,580
Increase in other assets (502) (1,700)
Decrease/(increase) in accrued investment income 339 (89)
(Increase)/decrease in reinsurance receivable (4,037) 2,387
Increase in deferred acquisition costs, net (64,467) (41,508)
Increase in income tax receivable - deferred (1,782) (519)
Increase in accounts payable and accrued expenses 323 24,295
Increase in drafts outstanding 1,242 11,964
Change in foreign currency translation, net 204 9
Realized gain on sale of investments (295) (156)
------------- -------------
Net cash provided by operating activities 2,872 3,106
------------- -------------
Cash flow from investing activities:
Purchase of fixed maturity investments - (17,736)
Proceeds from sale and maturity of fixed maturity investments - 50
Purchase of shares in mutual funds (12,491) (3,833)
Proceeds from sale of shares in mutual funds 11,458 4,606
Increase in policy loans (40) (168)
------------- -------------
Net cash used in investing activities (1,073) (17,081)
------------- -------------
Cash flow from financing activities:
Capital contributions from parent 1,200 1,063
Increase in future fees payable to parent (12,099) (6,532)
Net (withdrawals from)/deposits to contractowner accounts 1,325 (461)
------------- -------------
Net cash used in financing activities (9,574) (5,930)
------------- -------------
Net decrease in cash and cash equivalents (7,775) (19,905)
Cash and cash equivalents at beginning of period 77,525 81,974
------------- -------------
Cash and cash equivalents at end of period $ 69,750 $ 62,069
============= =============
Supplemental cash flow disclosure:
Income taxes paid $ 4,901 $ -
============= =============
Interest paid $ 17,361 $ 8,281
============= =============
</TABLE>
See notes to unaudited consolidated financial statements.
6
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
American Skandia Life Assurance Corporation (the Company) have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31,
1999 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and footnotes thereto in the
Company's audited consolidated financial statements for the year ended
December 31, 1998.
Certain reclassifications have been made to prior period amounts to
conform with the current period presentation.
2. NEW ACCOUNTING PRONOUNCEMENT
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Software Developed or Obtained for Internal Use," which provides
guidance for determining when computer software developed or obtained
for internal use should be capitalized. It also provides guidance on
the amortization of capitalized costs and the recognition of
impairment. The Company has identified and capitalized $543,000 of
costs associated with internal use software through the first three
months of 1999.
3. SEGMENT REPORTING
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS 131 establishes standards
for the way that public enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes
standards related to disclosures about products and services,
geographic areas and major customers. SFAS 131 is effective for
financial statement periods beginning after December 15, 1997.
During 1998, to complement its annuity products, the Company launched
specific marketing and operational activities towards the release of
variable life insurance and qualified retirement plan annuity products.
As of March 31, 1999, sales were not significant enough to warrant full
segment disclosures. Sales, as measured by premium received, for the
year ended March 31, 1999 and assets under management as of March 31,
1999, for the respective segments were as follows:
<TABLE>
<CAPTION>
(in thousands) Variable Variable Qualified
Annuity Life Plans Total
------------ ------ ------- ------------
<S> <C> <C> <C> <C>
Sales $ 1,414,854 $1,208 $13,764 $ 1,429,826
============ ====== ======= ============
Assets under management $ 19,832,584 $2,583 $63,596 $ 19,898,763
============ ====== ======= ============
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 1999
4. COMPREHENSIVE INCOME
As of January 1, 1998 the Company adopted Statement of Financial
Accounting Standards ("SFAS") 130, "Reporting Comprehensive Income".
SFAS 130 sets standards for the reporting and display of comprehensive
income and its components; however, the adoption of this Statement had
no impact on the Company's financial position or net income. SFAS 130
requires unrealized gains and losses on the Company's
available-for-sale securities and foreign currency translation
adjustments, which prior to adoption were reported separately in
shareholder's equity to be included in other comprehensive income.
The components of comprehensive income, net of tax, for the three
months ended March 31, 1999 and 1998 were as follows:
(in thousands) 1999 1998
---- ----
Net income $13,410 $6,072
Other comprehensive income:
Net unrealized gains/(losses) on securities (2,024) 305
Foreign currency translation 137 6
-------- ------
Other comprehensive income (1,887) 311
-------- ------
Comprehensive income $11,523 $6,383
======= ======
The components of accumulated other comprehensive income, net of tax,
as of March 31, 1999 and December 31, 1998 were as follows:
(in thousands) 1999 1998
---- ----
Unrealized investment gains $ 1,819 $3,843
Foreign currency translation (171) (308)
------- ------
Accumulated other comprehensive income $ 1,648 $3,535
======= ======
5. FOREIGN ENTITY
The Company has a 99.9% ownership in Skandia Vida, S.A. de C.V.
("Skandia Vida") which is a life insurance company domiciled in Mexico,
selling long term savings products within Mexico. Skandia Vida had
total shareholders' equity of $5,563,000 as of March 31, 1999 and
$4,724,000 as of December 31, 1998 and has generated losses of $565,000
and $264,000 for the three months ended March 31, 1999 and 1998,
respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three months ended March 31, 1999
American Skandia Life Assurance Corporation (the "Company") is a stock life
insurance company domiciled in Connecticut with licenses in all 50 states. It
is a wholly-owned subsidiary of American Skandia Investment Holding Corporation
(the "Parent"), whose ultimate parent is Skandia Insurance Company Ltd., a
Swedish company.
The Company is primarily in the business of issuing long-term savings and
retirement products to individuals, groups and qualified pension plans. Since
its business inception in 1988, the Company has offered a wide array of
annuities, including: 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; c) non-registered group variable annuities
designed as funding vehicles for various types of qualified retirement plans;
and d) fixed and adjustable immediate annuities.
In April 1998, the Company began offering a term life insurance product in
support of an affiliate's mutual fund products. In May 1998, the Company
launched a single premium variable life insurance product and in January 1999
the Company launched its second variable life product, which was designed as a
flexible premium product.
The Company markets its products to independent financial planners and
broker-dealers 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 and
life insurance.
RESULTS OF OPERATIONS
Annuity and life insurance sales volume for the three months ended March 31,
1999 and 1998 was $1,429,826,000 and $848,826,000, respectively, an increase of
68%. This increase was the result of innovative product development activities,
favorable market conditions, the recruitment and retention of top producers, and
the continued success of the Company's highly rated customer service teams.
Assets grew $2,125,447,000 or 11% since December 31, 1998. This increase is a
direct result of the strong performance of the stock markets over the first
quarter of 1999, which has contributed to the growth in separate account assets,
combined with increases in separate account assets and deferred acquisition
costs over the same period due to sales volume. Liabilities grew $2,112,724,000
or 11% since December 31, 1998 as a result of an increase in additional reserves
required for the market and sales-related growth of separate account assets as
well as an increase in advances from the Parent.
The Company experienced a net gain of $13,410,000 after tax for the current
period compared with $6,072,000 for the same period last year. The increase was
the result of greater than expected sales levels and tremendous growth in assets
under mangement, which generated higher amounts of annuity charges and fees and
transfer agency type fee income, combined with expense levels consistent with
the level of sales volume.
REVENUES
Due to strong market conditions and as a result of the significant growth in
sales and assets under management, contract owner fees and charges and fees
generated from transfer agency type activities increased $26,921,000 or 53% in
the first quarterof 1999 over the first quarter of 1998. This is compared to an
increase of 69% for the three months ended March 31, 1998.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Net investment income decreased 19% as compared with an increase of 36% in 1998.
In the first three months of 1998 the Company held a large amount of short-term
investments, resulting in an unusually high amount of investment income for a
three month period. Additionally, the Company experienced a significant cash
drain from the high sales volume during the first quarter of 1999, limiting
growth in invested assets. In the first quarter of 1998, the increase was a
result of income generated from bond holdings, which were increased in 1998 and
1997 to meet risk based capital goals,which in turn, have increased as a result
of the growth in business.
Premium income represents premiums earned on sales of immediate annuities with
life contingencies, supplementary contracts with life contingencies and certain
life insurance products. There have been minimal sales of these ancillary
products during 1999 and 1998.
BENEFITS
Annuity benefits and the change in annuity policy reserves relate to
annuity contracts with mortality risks, these being immediate annuity contracts
with life contingencies and supplementary contracts with life contingencies.Due
to the age of these policies in force and the relative insignificance of these
products to the Company's overall portfolio of products, fluctuations in these
benefits were of marginal importance to the Company's total operations.
The Company reinsures the guaranteed minimum death benefit exposure on most of
the variable annuity contracts. The costs (minimum guaranteed death benefit
premium per reinsurance contracts) associated with reinsuring the guaranteed
minimum death benefit reserve exceeded the change in the guaranteed minimum
death benefit reserve during the first three months of 1999 and 1998. This cost
increased by 28% in 1999 and 56% in 1998.
Return credited to contractowners includes primarily revenues on the variable
and market value adjusted annuities and variable life insurance, offset by the
benefit payments and change in reserves required on this business. The return
credited to contractowners for the three months ended March 31, 1999, in the
amount of ($4,226,000), represented slightly favorable Separate Account
investment returns on the market value adjusted contracts in support of the
benefits and required reserves. This compares with $1,667,000 at March 31, 1998
which represented a lower than expected return on market value adjusted
contracts, along with a timing difference (loss) related to March 31, 1998 bond
market fluctuations.
EXPENSES
Underwriting, acquisition and other insurance expenses for the three months
ended March 31, 1999 and 1998 were as follows:
(in thousands) March 31, March 31,
1999 1998
Commissions $81,197 $44,673
General expenses 35,148 31,128
Net capitalization of deferred
acquisition costs (64,467) (41,508)
-------- -------
Underwriting, acquisition and
other insurance expenses $51,878 $34,293
======= =======
Commissions increased with the growth in sales and assets under management.
General expenses increased with the growth in sales, along with start up
costs associated with the Company's entry into variable life insurance
and qualified plans. The net capitalization of deferred acquisition costs also
increased with the growth in sales related costs.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Interest expense increased $4,994,000 or 57% over the three months ended March
31, 1998 as a result of additional financing transactions, which consisted of
the sale of future fees to the Parent ("securitization transactions") initiated
throughout 1998. Surplus notes as of March 31, 1999 and December 31, 1998
totaled $193,000,000.
The effective income tax rates for the periods ended March 31, 1999, and 1998
were 22% and 16%, respectively. The effective rate is lower than the corporate
rate of 35% due to permanent differences, with the most significant item being
the dividend received deduction. Management believes that based on the taxable
income produced in 1998 and the first three months of 1999, as well as the
continued growth in annuity sales, the Company will produce sufficient taxable
income in the future to realize its deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company's first quarter 1999 liquidity requirement was met by cash from
insurance operations, reinsurance, investment activities, borrowings from its
Parent and the November and December 1998 sale of rights to future fees
and charges to its Parent.
Through the first three months of 1999 and 1998 approximately 95% and 97%,
respectively, of sales were variable annuity and life insurance products.
Most products carry a contingent deferred sales charge, which 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 cash made available by insurance operations and
investments of the Company to financing in the form of surplus notes, capital
contributions, the sale of certain rights to future fees and modified
coinsurance arrangements.
In the first quarter of 1999, the Company received $52,000,000 from its Parent
in advance of planned securitization transactions scheduled for the second
quarter of 1999.
During 1999 the Company extended its reinsurance agreements (which were
initiated prior to1996). The reinsurance agreements are modified coinsurance
arrangements where the reinsurer shares in the experience of a specific book of
business.
The Company expects the continued use of reinsurance and securitization
transactions to fund the cash strain anticipated from the acquisition costs on
the coming years' sales volume.
The Company has long-term surplus notes and short-term borrowings
with its Parent. No dividends have been paid to its Parent.
The National Association of Insurance Commissioners ("NAIC")
requires insurance companies to report information regarding minimum Risk Based
Capital ("RBC") requirements.These requirements are intended to allow insurance
regulators to identify companies which may need regulatory attention. The RBC
model law requires that insurance companies apply various factors to asset,
premium and reserve items, all of which have inherent risks. The formula
includes components for asset risk, insurance risk, interest risk and business
risk. The Company has complied with the NAIC's RBC reporting requirements and
has total adjusted capital well above required capital.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
YEAR 2000 COMPLIANCE
The Company is continuing its ongoing assessment of the potential impact of the
Year 2000 issue on various aspects of its business. The Company's computer
support is provided by its affiliate, American Skandia Information Services and
Technology Corporation, which also provides such support for the Company's
affiliated broker-dealer, American Skandia Marketing, Incorporated and the
Company's affiliated investment advisory firm, American Skandia Investment
Services, Incorporated. Because of the nature of the Company's business, any
assessment of the potential impact of the Year 2000 issues on the Company must
be an assessment of the potential impact of these issues on all these companies,
which are referred to below as "American Skandia".
Business Partners
Management believes the area where the Company is most vulnerable to Year 2000
issues is in its interfaces with computer systems of investment managers,
sub-advisors, third party administrators, vendors and other business partners.
The inability to properly recognize date sensitive electronic information and
transfer data between systems could cause errors or even a complete systems
failure which would result in a temporary inability to process transactions
correctly or engage in normal business activities.
The American Skandia deferred annuity operational business partners report that
all critical interfaces are Year 2000 compliant. All investment managers and
sub-advisors are required by the Securities and Exchange Commission to publicly
disclose their Year 2000 status in December 1998 and June 1999.
American Skandia has initiated formal communications with parties that provide
third party administration, record keeping and trust services in connection with
its life insurance and qualified retirement plan annuities business. Management
has already received several written assurances that these firms will be Year
2000 compliant. The Company expects to have certifications from all remaining
parties by July 1999.American Skandia is currently developing contingency plans
in the event that these targets are not met.
Information Technology Systems
American Skandia is a relatively young company whose internally developed
systems were designed from the start with four digit year codes. The Company
engaged an external information technology specialist to review American
Skandia's operating systems and internally developed software. The assessment
was completed in December 1997 and the results were favorable. Specific
modifications were suggested, evaluated and implemented for the annuity
administration system. This project was completed during 1998 and a certificate
of compliance has been received. Other non-critical internally developed
applications in the client/server area have already been or will be remediated
during 1999. The costs associated with this aspect of Year 2000 compliance have
not had, and are not expected to have, a significant impact on the Company's
results from operations.
Suppliers and Non-Information Technology Systems
Like most companies, American Skandia is reliant on network, and desktop
operating systems and software providers to release compliant versions of their
respective systems. American Skandia's network is currently at the most
compliant level available. The standard desktop software will be replaced, as
fully compliant versions become available. In addition, the Company is in the
process of contacting the non-information systems vendors and suppliers
regarding their Year 2000 compliance status and will factor the results of these
assessments into its contingency plans.
Management believes it has an effective program in place to resolve the Year
2000 issue in a timely manner. However, should errors or disruptions in computer
service occur, the Company could realize losses. Given the nature and
uncertainty of such losses, the amounts cannot be reasonably determined.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company's market risk during the
first quarter of 1999.The Company has provided a discussion of its market risks
in Item 7A of Part II of the December 31, 1998 Form 10-K.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index
(b) None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
American Skandia Life Assurance Corporation
(Registrant)
by: /s/Thomas M. Mazzaferro
-----------------------
Thomas M. Mazzaferro
Executive Vice President and
Chief Financial Officer
May 14, 1999
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
American Skandia Life Assurance Corporation
(Registrant)
by: ________________________
Thomas M. Mazzaferro
Executive Vice President and
Chief Financial Officer
May 14, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Location
(2) Plan of acquisition, reorganization,
arrangement, liquidation or succession None
(4) Instruments defining the rights of
security holders, including indentures None
(10) Material Contracts None
(11) Statement Re: Computation of per share
earnings None
(15) Letter Re: Unaudited interim financial
information None
(18) Letter Re: Change in accounting
principles None
(19) Report furnished to security holders None
(22) Published report regarding matters
submitted to vote of security holders None
(23) Consents of experts and counsel None
(24) Power of attorney None
(99) Additional exhibits None
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000881453
<NAME> ASLAC0399
<MULTIPLIER> 1,000
<CURRENCY> U.S Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 137,852
<DEBT-CARRYING-VALUE> 146,133
<DEBT-MARKET-VALUE> 146,188
<EQUITIES> 9,926
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 156,668
<CASH> 69,750
<RECOVER-REINSURE> 8,228
<DEFERRED-ACQUISITION> 785,974
<TOTAL-ASSETS> 20,973,720 <F1>
<POLICY-LOSSES> 69,685
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 203,000
0
0
<COMMON> 2,000
<OTHER-SE> 261,140
<TOTAL-LIABILITY-AND-EQUITY> 20,973,720 <F2>
749
<INVESTMENT-INCOME> 2,654
<INVESTMENT-GAINS> 295
<OTHER-INCOME> 77,760 <F3>
<BENEFITS> (1,499)
<UNDERWRITING-AMORTIZATION> 30,521
<UNDERWRITING-OTHER> 35,182
<INCOME-PRETAX> 17,254
<INCOME-TAX> 3,844
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,410
<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
$19,900,125.
<F2> Included in Total Liabilities and Equity are Liabilities Related to
Separate Accounts of $19,900,125.
<F3> Other income includes annuity charges and fees of $60,418 and
fee income of $16,977.
</FN>
</TABLE>
