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 June 30, 2000
Commission file numbers: 33-77213, 33-62953,
33-88360, 33-89676, 333-00995, 333-02867,
333-24989, 333-25761, 33-91400, 333-25733,
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 August 11, 2000, there were 25,000 shares of outstanding common stock, par
value $100 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 Inc., 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 -
June 30, 2000 (unaudited)
and December 31, 1999 3
Consolidated Statements of Income (unaudited) -
Six months ended June 30, 2000
and June 30, 1999 4
Consolidated Statements of Income (unaudited) -
Three months ended June 30, 2000
and June 30, 1999 5
Consolidated Statements of Shareholder's Equity -
Six months ended June 30, 2000 (unaudited)
and year ended December 31, 1999 6
Consolidated Statements of Cash Flows (unaudited) -
Six months ended June 30, 2000
and June 30, 1999 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Six months ended June 30, 2000 11
Item 3. Quantitative and Qualitative Disclosures of Market Risk 15
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Colsolidated Statements of Financial Condition
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------------- ----------------
(unaudited)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities - at amortized cost $ - $ 3,360
Fixed maturities - at fair value 205,294 198,165
Investment in mutual funds - at fair value 22,531 16,404
Derivative instruments - 189
Policy loans 1,932 1,270
-------------- --------------
Total investments 229,757 219,388
Cash and cash equivalents 106,999 89,212
Accrued investment income 3,698 4,054
Deferred acquisition costs 1,322,191 1,087,705
Reinsurance receivable 1,453 4,062
Income tax receivable - deferred 42,001 51,726
Income tax recoverable 200 -
State insurance licenses 4,188 4,263
Fixed assets 5,425 3,305
Other assets 74,056 36,698
Separate account assets 32,277,596 29,381,166
---------------- ----------------
Total assets $ 34,067,564 $ 30,881,579
================ ================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Reserves for future insurance policies and contracts $ 86,614 $ 73,292
Drafts outstanding 54,231 51,059
Accounts payable and accrued expenses 155,971 158,590
Income tax payable - 24,268
Payable to affiliates 196,819 68,736
Future fees payable to parent 706,566 576,034
Short-term borrowing 10,000 10,000
Surplus notes 179,000 179,000
Separate account liabilities 32,277,596 29,381,166
---------------- ----------------
Total Liabilities 33,666,797 30,522,145
---------------- ----------------
Shareholder's equity:
Common stock, $100 par value, 25,000 shares authorized,
issued and outstanding 2,500 2,500
Additional paid-in capital 217,479 215,879
Retained earnings 180,271 141,162
Accumulated other comprehensive income 517 (107)
---------------- ----------------
Total Shareholder's equity 400,767 359,434
---------------- ----------------
Total liabilities and shareholder's equity $ 34,067,564 $ 30,881,579
================ ================
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Income
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------- --------------
REVENUES
<S> <C> <C>
Annuity and life insurance charges and fees $ 211,208 $ 128,807
Fee income 62,056 36,290
Net investment income 6,504 5,496
Premium income 2,259 908
Net realized capital gains (707) 320
Other 1,118 842
------------- --------------
Total revenues 282,438 172,663
------------- --------------
EXPENSES
Benefits:
Annuity and life insurance benefits 278 380
Change in annuity and life insurance policy reserves 9,505 9,278
Cost of minimum death benefit reinsurance - 2,955
Return credited to contractowners (2,362) (3,862)
------------- --------------
7,421 8,751
Expenses:
Underwriting, acquisition and other insurance
expenses 164,425 93,941
Interest expense 56,220 29,218
------------- --------------
220,645 123,159
------------- --------------
Total benefits and expenses 228,066 131,910
------------- --------------
Income from operations before income tax 54,372 40,753
Income tax expense 30,342 10,986
------------- --------------
Net income $ 39,109 $ 29,767
============= ==============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Income
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
------------- --------------
REVENUES
<S> <C> <C>
Annuity and life insurance charges and fees $ 106,375 $ 68,486
Fee income 30,913 19,313
Net investment income 3,628 2,842
Premium income 1,656 159
Net realized capital gains (1,436) 25
Other 442 477
------------- --------------
Total revenues 141,578 91,302
------------- --------------
EXPENSES
Benefits:
Annuity and life insurance benefits 145 159
Change in annuity and life insurance policy reserves 6,881 8,521
Cost of minimum death benefit reinsurance - 1,206
Return credited to contractowners 314 (432)
------------- --------------
7,340 9,454
Expenses:
Underwriting, acquisition and other insurance
expenses 88,133 42,956
Interest expense 25,952 15,393
------------- --------------
114,085 58,349
------------- --------------
Total benefits and expenses 121,425 67,803
------------- --------------
Income from operations before income tax 20,153 23,499
Income tax expense 5,225 7,142
------------- --------------
Net income $ 14,928 $ 16,357
============= ==============
</TABLE>
See notes to unaudited consolidated financial statements.
<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>
June 30, December 31,
2000 1999
--------------- ------------------
(unaudited)
Common stock:
<S> <C> <C>
Beginning balance $ 2,500 $ 2,000
Increase in par value - 500
--------------- ------------------
Ending balance 2,500 2,500
--------------- ------------------
Additional paid in capital:
Beginning balance 215,879 179,889
Transferred to common stock - (500)
Additional contributions 1,600 36,490
--------------- ------------------
Ending balance 217,479 215,879
--------------- ------------------
Retained earnings:
Beginning balance 141,162 64,993
Net income 39,109 76,169
--------------- ------------------
Ending balance 180,271 141,162
--------------- ------------------
Accumulated other comprehensive income:
Beginning balance (107) 3,535
Other comprehensive income 624 (3,642)
--------------- ------------------
Ending Balance 517 (107)
--------------- ------------------
Total shareholder's equity $ 400,767 $ 359,434
=============== ==================
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
consolidated Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------- -------------
Cash flow from operating activities:
<S> <C> <C>
Net income $ 39,109 $ 29,767
Adjustments to reconcile net income to net
cash used in operating activities:
Amortization and depreciation 2,514 135
Deferred tax expense/(benefit) 9,389 (673)
Increase in policy reserves 9,381 11,633
Increase in payable to affiliates 128,083 638
Decrease in income tax payable (24,468) (4,545)
Increase in other assets (69,523) (1,068)
Decrease/(increase) in accrued investment income 356 (220)
Decrease/(increase) in reinsurance receivable 2,609 (638)
Increase in deferred acquisition costs (234,485) (163,591)
Decrease/increase in accounts payable and accrued expenses (2,620) 16,404
Increase in drafts outstanding 3,172 2,133
Change in foreign currency translation, net (248) 704
Net realized capital gain 707 (320)
------------- -------------
Net cash used in operating activities (136,024) (109,641)
------------- -------------
Cash flow from investing activites:
Purchase of fixed maturity investments (102,374) (29,582)
Proceeds from sale and maturity of fixed
maturity investments 100,268 29,504
Purchase of derivatives (2,274) -
Purchase of shares in mutual funds (10,600) (13,918)
Proceeds from sale of shares in mutual funds 3,274 11,879
Purchase of fixed assets (2,059) -
Increase in policy loans (662) (168)
------------- -------------
Net cash used in investing activities (14,427) (2,285)
------------- -------------
Cash flow from financing activities:
Capital contribution from parent 1,600 11,690
Increase in future fees payable to parent, net 130,532 95,932
Net deposits to/(withdrawals from) contractowner accounts 36,106 (3,551)
------------- -------------
Net cash provided by financing activities 168,238 104,071
------------- -------------
Net increase/(decrease) in cash and cash
equivalents 17,787 (7,855)
Cash and cash equivalents at beginning of period 89,212 77,525
------------- -------------
Cash and cash equivalents at end of period $ 106,999 $ 69,670
============= =============
Income taxes paid $ 15,263 $ 16,205
============= =============
Interest paid $ 50,284 $ 29,900
============= =============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
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 six-month period ended June 30,
2000 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2000. For further information, refer
to the consolidated financial statements and footnotes thereto in the
Company's audited consolidated financial statements on Form 10-K for
the year ended December 31, 1999.
Certain reclassifications have been made to prior period amounts to
conform to the current period presentation.
2. NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard 133 ("FAS 133"), "Accounting
for Derivative Instruments and Hedging Activities" (FAS 133).
Subsequently, in July 1999, the FASB issued FAS 137 "Deferral of the
Effective Date of FASB Statement 133". The adoption date was delayed to
fiscal years beginning after June 15, 2000. The Company is currently
evaluating the potential impact of this statement on its financial
position.
3. SEGMENT REPORTING
During 1998, to complement its annuity products, the Company launched
marketing and operational activities towards the release of variable
life insurance and qualified retirement plan annuity products. Assets
under management and sales for the products other than variable
annuities have not been significant enough to warrant full segment
disclosures as required by FAS 131, "Disclosures about Segments of an
Enterprise and Related Information."
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 2000
4. COMPREHENSIVE INCOME
The components of comprehensive income, net of tax, for the six months
ended June 30, 2000 and 1999 were as follows:
(in thousands) 2000 1999
Net income $39,109 $29,767
Other comprehensive income:
Net Unrealized investment gain/(loss) on
available for sale securities 785 (4,083)
Foreign currency translation (161) 456
Other comprehensive income 624 (3,627)
Comprehensive income $39,733 $26,140
The components of accumulated other comprehensive income, net of tax,
as of June 30, 2000 and December 31, 1999 were as follows:
(in thousands) 2000 1999
Unrealized investment gains/(losses) $ 530 ($ 255)
Foreign currency translation (13) 148
Accumulated other comprehensive income $ 517 ($ 107)
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, which
is fully consolidated in the accompanying financial statements, had
total shareholders' equity of $5,392,000 as of June 30, 2000 and
$4,592,000 as of December 31, 1999 and has generated losses of $552,000
and $1,220,000 for the six months ended June 30, 2000 and 1999,
respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 2000
6. FUTURE FEES PAYABLE TO PARENT
On March 22, 2000, the Company sold to its Parent, American Skandia,
Inc. ("ASI"), certain rights to receive future fees and charges
expected to be realized on the variable portion of a designated block
of deferred annuity contracts issued during the period August 1, 1999
through January 31, 2000. In connection with this transaction, ASI,
through a trust, issued collateralized notes in a private placement
which are secured by the rights to receive future fees and charges
purchased from the Company.
Under the terms of the Purchase Agreement, the rights sold provide for
ASI to receive a percentage of future mortality and expense charges and
contingent deferred sales charges expected to be realized over the
remaining surrender charge period of the designated contracts,
generally seven years. The Company did not sell the rights to receive
future fees and charges after the expiration of the surrender charge
period.
The proceeds from the sale have been recorded as a liability and are
being amortized over the remaining surrender charge period of the
designated contracts using the interest method. The present value of
the future fees and charges expected to be realized on the designated
contracts at March 22, 2000, discounted at 7.5%, was $169,459,000.
Expected payments of future fees payable to ASI under this transaction
are as follows:
(in thousands)
Period Ending
December 31, Amount
2000 $ 11,807
2001 18,068
2002 20,266
2003 22,653
2004 25,243
2005 28,053
2006 28,097
2007 15,272
--------
Total $169,459
========
7. SUBSEQUENT EVENT
On July 18, 2000, the Company sold certain rights to receive future
fees and contract charges expected to be received on variable portions
of a designated block of deferred annuity contracts issued between
February 1, 2000 and April 30, 2000. This transaction is the latest in
a series of agreements with ASI, as described in Note 6.
This transaction has an effective date of July 18, 2000. The present
value as of this date, discounted at 7.25%, was $92,399,000.
<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
Six months ended June 30, 2000
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the June 30, 2000 financial
statements and the notes included herein.
American Skandia Life Assurance Corporation ("the Company"), with its principal
offices in Shelton, Connecticut, is a wholly owned subsidiary of American
Skandia, Inc. ("ASI"), whose ultimate parent is Skandia Insurance Company Ltd.,
a Swedish corporation. The Company has 99.9% ownership in Skandia Vida, S.A. de
C.V. ("Skandia Vida") which is a life insurance company domiciled in Mexico.
The Company's products are sold to individuals, businesses and pension plans to
provide for long-term savings and retirement purposes and to address the
economic impact of premature death, estate and business planning concerns and
supplemental retirement needs.
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.
The Company is primarily in the business of issuing long-term savings and
retirement products to individuals, groups and qualified pension plans. The
Company was the second largest provider of variable annuity contracts for the
individual market in the United States during the first six months of 2000
according to The Variable Annuity Research & Data Service ("VARDS").
Since its business inception in 1988, the Company has offered an increasingly
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 May 1999, the Company introduced a benefit feature to all of its variable
annuity products which provides certain benefits if the policyowner's account
value has not reached a "target value" on its tenth anniversary. At the option
of the policyowner, the benefit will be distributed in the form of an annual or,
if annuitization is selected, a lump-sum credit to the contractowner's account.
The Company also offers single premium and flexible premium variable life
insurance products and a term life insurance product in support of an
affiliate's mutual fund products.
<PAGE>
Results of Operations
Annuity and life insurance sales volume for the six months ended June 30, 2000
and 1999 was $5,080,947,000 and $3,260,180,000, respectively, an increase of
56%. This increase was the result of favorable market conditions in the first
three months of 2000 combined with the continued development of new products and
new product features and business relationships with top producers. The Company
also attributes much of its sales growth over the past several quarters to the
strong performance of the underlying mutual funds, which support the Separate
Account assets.
Sales of annuity and life insurance products for the three month period ended
June 30, 2000 were $2,358,000,000 as compared with $2,723,000,000 for the three
months ended March 31, 2000, a decrease of 13%. The Company believes that this
decrease was largely the result of recent volatility in equity markets.
As a result of the growth in sales and assets under management, contractowner
fees and charges and charges generated from transfer agency-type and investment
support activities increased $108,167,000 or 66% over the six months ended June
30, 1999. The increase in fee income for the six month period ended June 30,
1999 from the six month period ended June 30, 1998 was 52%.
The increase in premium income of $1,351,000 from the six months ended June 30,
1999 was due to issuance of supplementary contracts. Sales of immediate
annuities with life contingencies and certain life insurance products have been
minimal during both 2000 and 1999.
Annuity benefits relate to annuity contracts with mortality risks, such as,
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 change in annuity policy reserves includes changes in reserves related to
annuity contracts with mortality risks as well as the Company's guaranteed
minimum death benefit("GMDB") liability. During the second quarter of 1999, the
Company's agreement to reinsure substantially all of its exposure on the GMDB
was terminated and the business was recaptured, as the reinsurer had announced
its intention to exit this market. The increase in reserves resulting from this
change was offset by a decrease in reserves associated with the change in
reserve methodology on the GMDB. The new reserve methodology complies with the
National Association of Insurance Commissioners Actuarial Guideline XXXIV. In
the latter half of 1999, the Company instituted a hedge program to manage the
market risk and reserve fluctuations associated with the GMDB liability through
the use of equity put options. The Company is currently continuing this program
while evaluating alternative hedging strategies.
The reinsurance premium associated with the GMDB exposure was based on levels
of assets under management. Due to increased sales and account growth, this cost
had increased in recent years and reached $2,955,000 for the six months of 1999
before the treaty was terminated.
Return credited to contractowners consists of revenues on the variable and
market value adjusted annuities and variable life insurance, offset by the
benefit payments and changes in reserves required on this business. Through the
first six months of 2000 and 1999, the Separate Account investment returns on
the market value adjusted annuities exceeded the expected returns as calculated
in the reserves. Despite the positive returns in the second quarter of 2000, the
return credited to contractowners increased as a result of the amortization of
unearned target value credits.
<PAGE>
Underwriting, acquisition and other insurance expenses for the six months ended
June 30, 2000 and 1999 were as follows:
(in thousands) 2000 1999 Change
Commissions and general expenses $396,860 $257,532 $139,328
Net capitalization of deferred
acquisition costs (232,435) (163,591) (68,844)
Underwriting, acquisition and other
insurance expenses $164,425 $ 93,941 $ 70,484
Commissions, general operating expenses and the net deferral of acquisition
costs have all increased in 2000, due largely to record sales. Current sales
trends have resulted in a shift to asset based commission agreements. This
coupled with increased asset levels from increased sales and equity market
appreciation have led to a 54% increase in commissions and general expenses.
Interest expense increased $27,002,000 or 92% over the six months ended June 30,
2000 as a result of additional financing transactions, which consisted of the
sale of future fees to ASI, through a trust ("securitization transactions")
initiated throughout 1999 and 2000, offset by a decrease in surplus notes
outstanding. Surplus notes as of June 30, 2000 and December 31, 1999 totaled
$179,000,000.
The effective income tax rate for the six months ended June 30, 2000, and 1999
was 28% and 27%, 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 1999 and the first six months of 2000, 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.
The Company generated net income after tax of $39,109,000 and $29,767,000 for
the six months ended June 30, 2000 and 1999, respectively, as a result of strong
sales growth and favorable market conditions. The Company considers Mexico an
emerging market and has invested in the Skandia Vida operations with the
expectation of generating profits from long-term savings products in future
years. As such, Skandia Vida has generated net losses of $552,000 and $1,220,000
during the same time periods, respectively.
Total assets grew $3,185,985,000 or 10% since December 31, 1999 as a result of
the substantial sales volume and market performance of the separate account
assets. The net sales growth also drove increases in deferred acquisition costs,
as well as fixed maturity investments held in support of the Company's risk
based capital requirements. Liabilities grew $3,144,652,000 or 10%, since
December 31, 1999 as a result of the reserve increases required based on sales
activity along with the sale of future fees and charges during these periods.
These sales of future fees and charges to ASI are needed to fund the acquisition
costs of the Company's variable annuity and life insurance business.
Liquidity and Capital Resources
The Company's liquidity requirement was met by cash from insurance operations,
investment activities, borrowings from ASI and the sale of rights to future fees
and charges to ASI.
The majority of the operating cash outflow resulted from the sale of variable
annuity and variable life products 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 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 charges as well as modified coinsurance reinsurance arrangements:
o During the first six months of 2000 and 1999, the Company received
$1,600,000 and $1,690,000, respectively, from ASI to support its
investment in Skandia Vida.
o Funds received from new securitization transactions amounted to
$169,459,000 and $120,632,000 for the first six months of 2000 and
1999, respectively.
o The Company continues to extend its reinsurance agreements for new blocks
of business. 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 acquisition costs on the
coming years' sales volume.
The Company has long-term surplus notes and short-term borrowings with ASI. No
dividends have been paid to ASI.
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.
Year 2000 Compliance
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".
The Company experienced no significant errors or disruptions in computer
service, interfaces with computer systems of investment managers, sub-advisors,
third party administrators, vendors and other business partners on or after
January 1, 2000.
American Skandia engaged external information technology specialists to review
its operating systems and internally developed software.
American Skandia continues to review new and existing systems and has
contingency plans in place as part of its Business Continuity Plan. This plan
involves virtually all aspects of the business and will continue to be a focus
of management beyond the Year 2000 event.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company's market risk during the
first half of 2000. The Company has provided a discussion of its market risks in
Item 7A of Part II of the December 31, 1999 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
August 4, 2000
<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
August 4, 2000
<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
