OFIS Filer Support
SEC Operations Center
6432 General Greenway
Alexandria, VA 22312-2413
RE: Rule 30b2-1
Below are copies of financial statements which are being filed
pursuant to Rule 30b2-1 under the Investment Company Act of 1940.
Annual Registration Statement Amendments are not being filed in
reliance on the Great West line of no action letters and Item 18
in the November 15, 1991 (Dear Registrant) industry wide no action
letter.
If you have any questions, please contact me at (605) 335-5700,
extension 400.
Sincerely,
Paul M. Phalen, CLU, FLMI
Compliance Officer
Investors Life Insurance Company of Nebraska
One Midland Plaza
Sioux Falls, SD 57193
<PAGE>
INVESTORS LIFE SEPARATE ACCOUNT D
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
C O N T E N T S
Page(s)
Report of Independent Accountants 1
Financial Statements:
Statement of Assets and Liabilities 2-3
Statements of Operations and Changes in Net Assets 4
Notes to Financial Statements 5-7
Report of Independent Accountants
The Board of DirectorsInvestors Life Insurance Company of
Nebraska: We have audited the accompanying statement of assets
and liabilities of Investors Life Separate Account D (comprising,
respectively, the portfolios of the Variable Insurance Products
Fund and the Variable Insurance Products Fund II) at December 31,
1995, and the related statements of operations and changes in net
assets for each of the two years ended December 31, 1995. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Investors Life
Separate Account D at December 31, 1995, and the results of their
operations and changes in their net assets for each of the two
years ended December 31, 1995, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota
March 8, 1996
Investors Life Separate Account D
Statement of Assets and Liabilities
December 31, 1995
ASSETS
Shares Value Per Share
Investments at net asset value:
Variable Insurance Products Fund:
Money Market Portfolio (cost $16,629) 16,629 $ 1.00 $ 16,629
High Income Portfolio (cost $17,315) 1,596 12.08 19,286
Equity-Income Portfolio (cost $165,689) 10,310 19.36 199,594
Growth Portfolio (cost $212,140) 7,964 29.29 233,277
Overseas Portfolio (cost $52,748) 3,425 17.17 58,813
Variable Insurance Products Fund II:
Asset Manager Portfolio (cost $33,239) 2,342 15.83 37,075
Investment Grade Bond Portfolio
(cost $14,462) 1,293 12.48 16,132
Index 500 Portfolio (cost $35,483) 528 76.33 40,339
Contra Portfolio (cost $1,718) 126 13.77 1,738
Total investments (cost $549,423) 622,883
LIABILITIES
Accrued liabilities to be paid from:
Variable Insurance Products Fund:
Money Market Portfolio 21
High Income Portfolio 23
Equity-Income Portfolio 236
Growth Portfolio 278
Overseas Portfolio 69
Variable Insurance Products Fund II:
Asset Manager Portfolio 44
Investment Grade Bond Portfolio 19
Index 500 Portfolio 47
Contra Portfolio 2
Total liabilities 739
Net assets $ 622,144
Investors Life Separate Account D
Statement of Assets and Liabilities, Continued
December 31, 1995
Units Unit Value
Net assets represented by:
Variable Insurance Products Fund:
Money Market Portfolio 1,559 $ 10.65 $ 16,608
High Income Portfolio 1,696 11.36 19,263
Equity-Income Portfolio 14,293 13.95 199,358
Growth Portfolio 18,179 12.82 232,999
Overseas Portfolio 5,527 10.63 58,744
Variable Insurance Products Fund II:
Asset Manager Portfolio 3,410 10.86 37,031
Investment Grade Bond Portfolio 1,436 11.22 16,113
Index 500 Portfolio 2,988 13.49 40,292
Contra Portfolio 147 11.84 1,736
Net assets $ 622,144
Investors Life Separate Account D
Statements of Operations and Changes in Net
Assets for the years ended December 31, 1995 and
1994
Combined
Variable Insurance Products Fund
Money Market
Portfolio
High Income Portfolio
Equity-Income Portfolio
1995 1994 1995
1994 1995 1995 1994
Investment income:
Dividend income $ 5,698
$ 936 $ 1,449 $ 50 $ - $ 3,749
$ 884
Capital gains distribution
2,851 - - - -
2,628 -
8,549 936 1,449
50 - 6,377 884
Expenses:
Administrative expense 652
148 39 4 18 226
56
Mortality and expense risk
5,712 1,231 323 21 154
1,934 469
Net investment income (loss)
2,185 (443) 1,087 25 (172)
4,217 359
Realized and unrealized gains (losses) on
investments:
Net realized gains (losses) on investments
8,024 29 - - 46
5,576 21
Net unrealized appreciation (depreciation)
on investments 70,945
2,514 - - 1,971 31,715
2,189
Net realized and unrealized gains
(losses) on investments 78,969
2,543 - - 2,017 37,291
2,210
Net increase (decrease) in net assets
resulting from operations $ 81,154 $
2,100 $ 1,087 $ 25 $ 1,845 $ 41,508 $
2,569
Net assets at beginning of period
$ 156,603 $ - $ 24 $ - $ -
$ 51,588 $ -
Net increase (decrease) in net assets
resulting from operations
81,154 2,100 1,087 25 1,845
41,508 2,569
Capital share transactions:
Net premiums 384,701
154,503 31,997 (1) 17,418 129,194
49,019
Interfund transfers -
- (16,500) - - (22,833)
- Other (314) -
- - - - - (99) -
Net increase (decrease) in net assets
from capital share transactions 384,387
154,503 15,497 (1) 17,418 106,262
49,019
Total increase in net assets
465,541 156,603 16,584 24 19,263
147,770 51,588
Net assets at end of year $
622,144 $ 156,603 $ 16,608 $ 24 $ 19,263
$ 199,358 $ 51,588
Growth Portfolio
Overseas Portfolio
Asset Manager Portfolio
Investment Grade Bond Portfolio
Index 500 Portfolio
Contra Portfolio
1995 1994 1995 1994 1995 1994
1995 1995 1995
$ 233 $ - $ 208 $ - $ 52
$ 2 $ - $ - $ 7
- - 208 - -
- - - - - 15
233 - 416 - 522 - - 22
172 28 120 58 34
2 17 25 1
1,542 241 1,074 486 324
14 143 23 5
(1,481) (269) (778) (544)
(306) (14) (160) (238) 16
535 (7) 1,786 14 26
1 35 18 2
19,914 1,223 6,918 (853) 3,881
(45) 1,670 4,856 20
20,449 1,216 8,704 (839) 3,907
(44) 1,705 4,874 22
$ 18,968 $ 947 $ 7,926 $ (1,383) $
3,601 $ (58) $ 1,545 $ 4,636 $ 38
$ 48,833 $ - $ 53,713 $ - $ 2,445
$ - $ - $ - $ -
18,968 947 7,926 (1,383)
3,601 (58) 1,545 4,636 38
90,940 47,886 48,495 55,096 30,985
2,503 14,568 19,406 1,698
74,258 - (51,175) - -
- - 16,250 -
- - (215) - -
- - - -
165,198 47,886 (2,895) 55,096
30,985 2,503 14,568 35,656 1,698
184,166 48,833 5,031 53,713
34,586 2,445 16,113 40,292 1,736
$ 232,999 $ 48,833 $ 58,744 $ 53,713 $
37,031 $ 2,445 $ 16,113 $ 40,292 $ 1,736
1. Organization and Significant Accounting Policies:
Investors Life Separate Account D ("Separate Account"), a unit
investment trust, was established in 1993 as a segregated
investment account of Investors Life Insurance Company of Nebraska
("the Company") in accordance with the provisions of the South
Dakota Insurance laws. There were no transactions in the Separate
Account prior to January 1, 1994. The assets and liabilities of
the Separate Account are clearly identified and distinguished from
the other assets and liabilities of the Company. The Separate
Account is used to fund variable annuity contracts of the Company.
The Separate Account invests solely in specified portfolios of
Variable Insurance Products Fund and Variable Insurance Products
Fund II, diversified open-end management companies registered
under the Investment Company Act of 1940, as directed by
participants. The Contra Portfolio was introduced in 1995.
Investments in shares of the Funds are valued at the net asset
values of the respective portfolios of the Funds corresponding to
the investment portfolios of the Separate Account. Fair value of
investments is also the net asset value. North American
Management Company, an affiliate, serves as the underwriter of the
Separate Account. Investment transactions are recorded on the
trade date. Dividends are recorded as received and are
automatically reinvested in shares of the Funds. The first-in,
first-out (FIFO) method is used to determine realized gains and
losses on investments.
The operations of the Separate Account are included in the federal
income tax return of the Company. Under the provisions of the
policies, the Company has the right to charge the Separate Account
for federal income tax attributable to the Separate Account. No
charge is currently being made against the Separate Account for
such tax since, under current tax law, the Company pays no tax on
investment income and capital gains reflected in variable life
insurance policy reserves. However, the Company retains the right
to charge for any federal income tax incurred which is
attributable to the Separate Account if the law is changed.
Charges for state and local taxes, if any, attributable to the
Separate Account may also be made.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results
could differ from those estimates.
2. Expense Charges:
The Company is compensated for certain expenses. A contract
administration fee is charged at an effective annual rate of .15% of
the value of the assets in the Separate Account to cover the
Company's recordkeeping and other administrative expenses incurred
to operate the Separate Account
2. Expense Charges, continued:
A mortality and expense risk fee is charged at an effective annual
rate of 1.25% of the value of the assets in the
Separate Account in return for the Company's assumption of risks
associated with adverse mortality experience or excess
administrative expenses in connection with policies issued. A
$33 charge is deducted from the Separate Account value at the
end of each contract year, upon full withdrawal or at maturity.
A transfer charge of $25 is imposed on each transfer between
portfolios of the Separate Account in excess of 15 transfers in
any one contract year. A deferred sales charge may be imposed
in the event of a full or partial withdrawal within the first
six contract years. The charge as described in the Separate
Account's prospectus is a percentage of the premium withdrawn.
A free partial withdrawal can be made after the first contract
year if the amount of the withdrawal is less than 10% of the
total premiums paid and represents the first withdrawal in the
contract year.
3. Purchases and Sales of Investment Securities:
The aggregate cost of purchases and proceeds from sales of
investments for the years ended December 31, 1995 and 1994 were
as follows:
Portfolio
1995 1994
Purchases
Sales Purchases Sales
Variable Insurance Products Fund:
Money Market $
449,952 $ 433,351 $ 153,993 $ 153,965
High Income
21,975 4,706 - -
Equity-Income
158,393 47,740 49,903 464
Growth 173,609
9,657 47,886 226
Overseas 63,466
67,133 55,095 480
Variable Insurance Products Fund II:
Asset Manager
31,709 989 2,505 13
Investment Grade Bond
19,115 4,688 - -
Index 500 35,655
190 - -
Contra 1,720
4 - -
$ 955,594 $ 568,458 $
309,382 $ 155,148
4. Summary of Changes From Unit Transactions:
Transactions in units for the years ended December 31, 1995
and 1994 were as follows:
Portfolio
Purchases Sales
1995 1994
1995 1994
Variable Insurance Products Fund:
Money Market 43,284
15,334 41,727 15,332
High Income 2,156
- 460 -
Equity-Income
13,195 4,983 3,885 -
Growth 13,854 5,178
853 -
Overseas 6,567
5,531 6,571 -
Variable Insurance Products Fund II:
Asset Manager 3,221
261 72 -
Investment Grade Bond
1,893 - 457 -
Index 500 2,988
- - -
Contra 147 -
- -
87,305 31,287 54,025
15,332
5. Net Assets:
Net assets at December 31, 1995 consisted of the following:
Capital Share Transactions
Accumulated Net
Investment Income and Net Realized Gains (Losses)
Net Unrealized Appreciation (Depreciation) of Investments
Total
Variable Insurance Products Fund:
Money Market $
15,496 $ 1,112 $ - $ 16,608
High Income
17,418 (126) 1,971 19,263
Equity-Income
155,281 10,173 33,904 199,358
Growth 213,084
(1,222) 21,137 232,999
Overseas 52,201
478 6,065 58,744
Variable Insurance Products Fund II:
Asset Manager
33,488 (293) 3,836 37,031
Investment Grade Bond
14,568 (125) 1,670 16,113
Index 500 35,656
(220) 4,856 40,292
Contra 1,698
18 20 1,736
$ 538,890 $ 9,795 $
73,459 $ 622,144
The accompanying notes are an integral part of the financial statements.
Investors Life Separate Account D
Notes to Financial Statements
FINANCIAL STATEMENTS - STATUTORY BASIS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 199
C O N T E N T S
Page(s)
Report of Independent Accountants 1
Financial Statements:
Balance Sheets - Statutory Basis 2 Statements of Operations
- Statutory Basis 3
Statements of Changes in Capital and Surplus - Statutory Basis 4
Statements of Cash Flows - Statutory Basis 5
Notes to Financial Statements 6-15
Schedule of Supplemental Data:
Report of Independent Accountants 16
Supplemental Schedule 17-20
Report of Independent Accountants
To the Board of Directors Investors Life Insurance Company of Nebraska:
We have audited the accompanying balance sheets - statutory-basis
of Investors Life Insurance Company of Nebraska as of December 31,
1995 and 1994, and the related statements of operations, changes in
capital and surplus, and cash flows - statutory-basis for each of the
three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan 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 on the accompanying financial
statements.
As described in Note 1, these financial statements were prepared in
conformity with accounting practices prescribed or permitted by the
South Dakota Department of Insurance, which is a comprehensive basis
of accounting other than generally accepted accounting principles.
The effects on the financial statements of the variances between such
practices and generally accepted accounting principles are described
in Note 9.
In our opinion, because of the matters discussed in the preceding
paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles,
the financial position of the Investors Life Insurance Company of
Nebraska as of December 31, 1995 and 1994, and the results of its
operations and cash flows for each of the three years in the period
ended December 31, 1995.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the balance sheets - statutorybasis
of Investors Life Insurance Company of Nebraska as of December 31,
1995 and 1994, and the results of its operations and its cash flows -
statutory-basis for each of the three years in the period ended
December 31, 1995, in conformity with accounting practices prescribed
or permitted by the South Dakota Department of Insurance.
Minneapolis, Minnesota
March 8, 199
Investors Life Insurance Company of Nebraska
Balance Sheets - Statutory Basis
as of December 31, 1995 and 1994
(dollars in thousands)
ADMITTED ASSETS
1995 1994
Bonds $ 282,151 $
262,552
Policy loans
11,580 10,639
Cash and short-term investments
26,311 34,454
Total cash and investments
320,042 307,645
Policy premiums due, deferred and uncollected
20,745 20,235
Accrued investment income
5,525 4,063
Due from parent under tax allocation agreement
- 820 Other
assets
1,012 572
Separate account assets
632 157
Total admitted assets $
347,956 $ 333,492
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Contractholders' liabilities:
Liabilities for future policy benefits
$ 280,483 $ 267,971
Policy and contract claims
4,481 3,650
Other policyholder funds
880 821
Total contractholders' liabilities
285,844 272,442
Security lending liability
- 4,938
Interest maintenance reserve
2,891 1,620
Asset valuation reserve
2,170 2,432
Claim drafts outstanding
1,685 1,868
Due to parent under tax allocation agreement
134 -
Other liabilities
11,218 8,533
Separate account liabilities
632 157
Total liabilities
304,574 291,990
Commitments and contingencies
Capital and surplus:
Common stock, $10 par value:
278,760 shares authorized, issued and outstanding
2,788 2,788 Additional
paid-in capital l
8,245 8,245
Unassigned surplus
32,349 30,469
Total capital and surplus
43,382 41,502
Total liabilities and capital and surplus
$ 347,956 $ 333,492
Investors Life Insurance Company of Nebraska
Statements of Operations - Statutory Basis
for the years ended December 31, 1995, 1994 and 1993
(dollars in thousands)
1995 1994
1993
Revenue:
Premiums and annuity considerations
$ 44,647 $ 43,528 $ 55,600
Investment income, net of related expenses
23,336 22,415 21,477
Commissions and expense allowance on reinsurance ceded
8,226 7,940 9,795 Other
income
303 152 467
76,512 74,035
87,339
Benefits and expenses:
Benefits paid or provided:
Life and annuity policy benefits
32,194 32,215 25,936
Increase in liabilities for future life and annuity policy
benefits 12,188
13,884 29,386
44,382 46,099
55,322
Insurance expenses:
Commissions 13,079
11,940 14,099
General 9,162
5,643 6,259
Insurance taxes
1,630 1,868 2,245
68,253 65,550
77,925
Net gain from operations before federal income taxes
and net realized capital losses
8,259 8,485 9,414
Federal income taxes
5,129 5,129 3,848
Net gain from operations before net realized capital losses
3,130 3,356 5,566
Net realized capital losses, net of income taxes (1995 - $667,
1994 - $(673) and 1993 - $1,143) and amounts transferred to
interest maintenance reserve (1995 - $1,414, 1994 - $(902) and
1993 - $2,088)
(240) (376) (100)
Net income $ 2,890
$ 2,980 $ 5,466
Investors Life Insurance Company of Nebraska
Statements of Changes in Capital and Surplus - Statutory Basis
for the years ended December 31, 1995, 1994 and 1993
(dollars in thousands)
Common Stock Additional
Paid-In Capital Unassigned Surplus
Total Capital and Surplus
Balance at January 1, 1993
$ 2,788 $ 8,245 $ 21,434 $
32,467
Net income -
- 5,466 5,466
Change in net unrealized capital gains
- - 73 73
Decrease in nonadmitted assets
- - 738 738
Increase in asset valuation reserve
- - (463) (463)
Balance at December 31, 1993
2,788 8,245 27,248
38,281
Net income -
- 2,980 2,980
Change in net unrealized capital gains
- - (73) (73)
Decrease in nonadmitted assets
- - 612 612
Decrease in asset valuation reserve
- - 26 26
Increase in reserve resulting from
change in valuation basis
- - (324) (324)
Balance at December 31, 1994
2,788 8,245 30,469
41,502
Net income -
- 2,890 2,890
Increase in nonadmitted assets
- - (949) (949)
Decrease in asset valuation reserve
- - 262 262
Increase in reserve resulting from
change in valuation basis
- - (323) (323)
Balance at December 31, 1995
$ 2,788 $ 8,245 $ 32,349 $
43,382
Investors Life Insurance Company of Nebraska
Statements of Cash Flows - Statutory Basis
for the years ended December 31, 1995, 1994 and 1993
(dollars in thousands)
1995 1994
1993
Cash flows from operating activities:
Premiums and annuity considerations
$ 44,602 $ 43,519 $ 55,640
Net investment income
23,345 23,256 22,415
Other income
8,384 8,048 9,977
Benefits
(31,454) (32,047) (25,085)
Insurance expenses
(21,452) (19,857) (23,210)
Federal income taxes paid
(4,842) (5,812) (6,109)
Other (6,690)
6,923 (816)
Net cash provided by operating activities
11,893 24,030 32,812
Cash flows from investing activities:
Proceeds from investments sold, matured or repaid:
Bonds 167,897
124,804 92,286
Preferred stocks
3,163 23,205 10,630
Common stocks -
4,492 9,172
Mortgage loans -
- 6
171,060 152,501
112,094
Costs of investments acquired:
Bonds (186,992)
(163,743) (129,828)
Preferred stocks
(3,163) (6,368) (15,546)
Common stock -
(273) (13,759)
Policy loans, net
(941) (1,044) (1,153)
(191,096) (171,428)
(160,286)
Net cash used in investing activities
(20,036) (18,927) (48,192)
(Decrease) increase in cash and short-term investments
(8,143) 5,103
(15,380)
Cash and short-term investments, beginning of year
34,454 29,351 44,731
Cash and short-term investments, end of year
$ 26,311 $ 34,454 $ 29,351
1. Summary of Significant Accounting Policies:
Organization:
Investors Life Insurance Company of Nebraska (Investors Life) is a
stock life insurance company domiciled in the State of South Dakota.
Investors Life operates predominantly in the individual life and
annuity business of the life insurance business in 49 states.
Investors Life is a wholly-owned subsidiary of Midland National Life
Insurance Company (Midland), which is majorityowned by Sammons
Enterprises, Inc. (SEI).
Basis of Presentation:
The preparation of financial statements in conformity with the basis
of accounting practices prescribed or permitted by the South Dakota
Department of Insurance requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results
could differ from those estimates. The most significant areas which
require the use of management's estimates relate to determinations of
the fair values of financial instruments and the liabilities for
future policy benefits.
Basis of Financial Reporting:
The financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the South Dakota
Department of Insurance, which practices differ in some respects from
generally accepted accounting principles. The more significant of
these differences are as follows: (1) acquisition costs of acquiring
new business are charged to current operations
as incurred rather than deferred and amortized over the life of the
policies; (2) policy reserves on traditional life products are based
on statutory mortality and interest rates which may differ from
reserves based on reasonable assumptions of expected mortality,
interest and withdrawals which include a provision for possible
unfavorable deviation from such assumptions; (3) policy reserves on
universal life and investment products use discounting methodologies
utilizing statutory interest rates rather than full account values;
(4) deferred income taxes are not provided for the difference between
the financial statement and income tax bases of assets and
liabilities; (5) an Interest Maintenance Reserve (IMR) liability has
been recorded as prescribed by the National Association of Insurance
Commissioners (NAIC) that represents the net accumulated unamortized
realized capital gains and losses, net of tax, attributable to
changes in market interest rates. Such gains and losses are deferred
into the reserve when incurred, rather than recognized as gains or
losses in the statement of operations, then released back into income
on a straight-line basis over the expected remaining period to
maturity of the bond that was sold; (6) an Asset Valuation Reserve
(AVR) liability has been recorded in accordance with the formula
prescribed by the NAIC which represents a provision for possible
fluctuations in the values of bonds, equity securities and other
invested assets including temporary declines in the estimated
realizable value of such investments. Changes in the AVR reserve are
charged directly to unassigned surplus; (7) agents' balances and
certain other assets designated as "nonadmitted assets" have been
charged to surplus rather than being reported as assets; and (8)
revenues for universal life and investment products consist of
premiums received
rather than policy charges for the cost of insurance, policy
administration charges, amortization of policy initiation fees and
surrender charges assessed
1. Summary of Significant Accounting Policies, continued:
Investments:
Bonds are stated at amortized cost. Policy loans are stated at
the aggregate unpaid balances. Short-term investments are reflected
at amortized cost which approximates market. Investment income is
recorded when earned. Realized capital gains and losses are
determined on the basis of specific identification and are recorded
net of related federal income taxes and IMR.
Investors Life also enters into agreements to sell and repurchase
securities. The commitment to repurchase securities sold under these
agreements are reported as liabilities and the
investments acquired with the funds received from the securities sold
are included in short-term investments.
Separate Accounts:
Separate account assets and liabilities represent funds held for the
exclusive benefit of variable universal life and annuity
contractholders. Fees are received for administrative expenses and
for assuming certain mortality, distribution and expense risks.
Operations of the separate accounts are not included in these
statutory financial statements.
Policy Benefits:
The liabilities for future policy benefits provide amounts adequate
to discharge estimated future obligations on policies in force.
Reserves for life policies are computed principally by the
Commissioners' Reserve Valuation Method using interest rates (2.5% to
6.0%) and mortality assumptions (American Experience, 1958 and 1980
Tables) as prescribed by regulatory authorities. Reserves for
annuities are computed on the basis of interest rates ranging from
2.5% to 11.25%.
Liabilities for policy and contract claims include provisions for
reported claims and estimates for claims incurred but not reported.
Changes in estimates are reflected in operating results in the year
the change is made. Liabilities for claims adjustment expenses are
based on estimates of allocated and unallocated expenses.
Federal Income Taxes:
Investors Life is a member of SEI's consolidated United States
federal income tax group. The policy for intercompany allocation of
federal income taxes provides that Investors Life compute the
provision for federal income taxes on a separate Company basis
assuming that Investors Life files a separate return. Investors Life
makes payments to, or receives payment from, Midland in the amount it
would have paid or received from the Internal Revenue Service had it
not been a member of the consolidated tax group. The separate
Company provisions and payments are computed using the tax elections
made by SEI
1. Summary of Significant Accounting Policies, continued:
Premiums and Related Costs:
Premiums are recognized as revenue over the premium paying
period. Commissions and other costs applicable to the
acquisition of policies are charged to operations as incurred.
Fair Values of Financial Instruments:
The following methods and assumptions were used by Investors
Life in estimating its fair value disclosures for financial
instruments:
Cash and short-term investments: The carrying amounts
reported in the balance sheet for these instruments
approximate their fair values.
Investment securities: Fair values for bonds are based on
quoted market prices, where available. For bonds not actively
traded, fair values are estimated using values obtained from
independent pricing services or, in the case of private placements,
are estimated by discounting expected future cash flows using a
current market rate applicable to the yield, credit quality and
maturity of the investments.
Policy loans: Investors Life does not believe an estimate of
the fair value of policy loans can be made without incurring excessive
cost.
Investment-type contracts: Fair values for Investors Life's
liabilities under investment-type insurance contracts are
estimated based on the cash surrender values of the underlying
contracts.
Insurance contracts: Fair values for Investors Life's
insurance contracts other than investment-type contracts are
not required to be disclosed.
Security lending liability: The carrying amount
approximates fair value because of the short maturity of these
instruments.
The amortized cost, carrying value and estimated fair values of
Investors Life's financial instruments are as follows (dollars in
thousands):
December 31, 1995
Amortized Cost Carrying Value
Fair Value
Financial assets:
Bonds $ 282,151 $
282,151 $ 289,811
Cash and short-term investments
26,311 26,311 26,311
Financial liabilities:
Investment-type insurance contracts
* 189,601 188,134 Security
lending liability
- - -
* Cost is not applicable
1. Summary of Significant Accounting Policies:
Fair Values of Financial Instruments, continued:
December 31, 1994
Amortized Cost Carrying Value
Fair Value
Financial assets:
Bonds $ 262,552 $
262,552 $ 255,917
Cash and short-term investments
34,454 34,454 34,454
Financial liabilities:
Investment-type insurance contracts
* 187,278 180,412
Security lending liability
4,938 4,938 4,938
* Cost is not applicable
Dividend Restrictions:
Generally, the net assets of Investors Life available for
distribution to its stockholder are limited to the amounts by
which the net assets, as determined in accordance with statutory
accounting practices, exceed minimum regulatory statutory capital
requirements. All payments of dividends or other distributions to
its stockholder are subject to approval by regulatory authorities.
The maximum amount of dividends which can be paid by Investors
Life during any 12-month period to its stockholder without prior
approval of the insurance commissioner is limited according to
statutory regulations and is a function of statutory equity and
statutory net income. The maximum amount of dividends payable in
1996 without prior approval of regulatory authorities is
approximately $3,100,000.
2. Prescribed Statutory Accounting Practices:
Investors Life, which is domiciled in South Dakota, prepares its
statutory basis financial statements in accordance with accounting
practices prescribed or permitted by the Division of Insurance of
the State of South Dakota. Prescribed statutory accounting
practices include state laws, regulations and general
administrative rules, as well as a variety of publications of the
NAIC. Permitted practices encompass all accounting practices not
so prescribed. Investors Life uses prescribed practices or, if
prescribed statutory accounting practices do not address the
accounting for a transaction, Investors Life uses generally
accepted accounting principles to prepare its statutory basis
financial statements.
3. Investments and Investment Income:
The admitted value and estimated market value of investments in
bonds are as follows (dollars in thousands):
December 31, 1995 Admitted Value
Gross Unrealized Gains Gross Unrealized Losses
Estimated Market Value
U.S. government $ 107,891
$ 1,636 $ 455 $ 109,072
Other government and special revenue
62,292 1,175 6
63,461
Public utilities 26,318
1,183 27 27,474
Industrial and miscellaneous 85,650
4,239 85
89,804
Total bonds $ 282,151 $
8,233 $ 573 $ 289,811
December 31, 1994 Admitted Value
Gross Unrealized Gains Gross Unrealized Losses
Estimated Market Value
U.S. government $ 74,031
$ 236 $ 2,073 $ 72,194
Other government and special revenue
45,684 95 3,422
42,357
Public utilities 45,942
1,005 1,077 45,870
Industrial and miscellaneous
96,895 1,688 3,087
95,496
Total bonds $ 262,552 $
3,024 $ 9,659 $ 255,917
The admitted value and estimated market value (dollars in
thousands) of investments in bonds at December 31, 1995 by contractual
maturities are shown below. Expected and contractual maturities may differ
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Admitted Value
Estimated Market Value
Due in one year or less
$ 97,424 $ 97,278
Due after one year through five years
66,425 68,393
Due after five years through ten years
8,752 9,611
Due after ten years
29,473 32,201
Mortgage-backed securities
80,077 82,328
Total bonds $ 282,151
$ 289,811
Investments with an admitted carrying value of approximately
$284,000,000 and $265,000,000 at December 31, 1995 and 1994,
respectively, were on deposit with regulatory authorities or
custodial banks as policyholder security in accordance with state
regulations
3. Investments and Investment Income, continued:
Major categories of investment income are summarized below (dollars
in thousands):
1995 1994
1993
Bonds $ 20,278 $
19,918 $ 17,577
Stocks:
Preferred 58
707 1,131
Common -
278 790
cy loans 616
532 456
Cash and short-term investments
2,633 1,522 1,633
23,585 22,957
21,587
Less investment expenses
249 542 110
Net investment income $
23,336 $ 22,415 $ 21,477
Proceeds from the sale of investments in bonds during 1995, 1994
and 1993 and the gross gains and losses realized on these sales
are summarized below (dollars in thousands):
1995 1994
1993
Proceeds from sales $
155,719 $ 99,782 $ 72,909
Gross realized gains
2,453 777 3,143
Gross realized losses
607 1,531 29
Included in the proceeds from sales were proceeds from calls as
summarized below (dollars in thousands):
1995 1994
1993
Proceeds from calls $
37,211 $ 8,761 $ 66,240
Realized and unrealized investment gains and losses are
summarized below (dollars in thousands):
December 31, 1995
Realized Unrealized
Bonds $ 1,846 $
14,295
Short-term investments
(5) -
Less income tax effects
(667) (5,020)
Net gains on investments $
1,174 $ 9,275
3. Investments and Investment Income, continued:
December 31, 1994
Realized Unrealized
Bonds $ (1,479) $
(15,158)
Stocks:
Preferred (167)
(417)
Common (305)
(73)
Less income tax effects
673 5,495
Net losses on investments $ (1,278)
$ (10,153)
December 31, 1993
Realized Unrealized
Bonds $ 3,268 $
(1,712)
Stocks:
Preferred 14 216
Common (108) 73
Short-term investments
(43) -
Less income tax effects (1,143)
500
Net gains (losses) on investments
$ 1,988 $ (923)
Investors Life had a U.S. Treasury note under repurchase
agreement with a brokerage firm at December 31, 1994. The carrying
value and market value of the U.S. Treasury note sold was $4,800,000
as of December 31, 1994. The interest rate on the liability was
5.0%. Investors Life had no investments under repurchase agreements
at December 31, 1995.
4. Federal Income Taxes:
Investors Life is taxed at usual corporate rates on taxable income
based on existing laws which may result in a provision for federal
income taxes which does not have the customary relationship of taxes
to income. These differences are principally related to differences
in the handling of policy reserves and related amounts and deferred
acquisition costs. Under provisions of the Life Insurance Company
Income Tax Act of
1959, as revised by the 1984 Act, certain special deductions were
allowed life insurance companies for federal income tax purposes.
The special deductions for 1983 and prior years were accumulated in a
memorandum tax account designated as "Policyholders' Surplus". Such
amounts will usually become subject to tax at the then current rates
only if the accumulated balance exceeds certain maximum limitations
or certain cash distributions are deemed to be paid out of this
account. It is management's opinion that such events are not likely
to occur. Accordingly, no provision for income tax has been made on
the approximate $3,400,000 balance in the policyholders' surplus
account at December 31, 1995
5. Commitments and Contingencies:
Investors Life is a defendant in various lawsuits related to the
normal conduct of its insurance business. Litigation is subject to
many uncertainties and the outcome of individual litigated matters is
not predictable with assurance; however, in the opinion of
management, the ultimate resolution of such
litigation will not materially impact Investors Life's financial position.
Investors Life is also subject to insurance guaranty laws in the
states in which it writes business. These laws provide for assessments
against insurance companies for the benefit of policyholders and claimants
in the event of insolvency of other life insurance companies. Investors
Life has accrued for the estimated present value of future guaranty fund
assessments, net of estimated recoveries through premium tax offsets, for
known insolvencies.
6. Reinsurance:
Investors Life presently reinsures the excess of each individual risk over
$500,000 on ordinary life insurance policies in order to spread its risk of
loss. Investors Life also reinsures 90% of certain business with Midland.
To the extent that reinsurers may not be able to meet the obligations
assumed under the reinsurance contracts, Investors Life is contingently
liable to pay policy benefits.
The following schedule presents a summary of the life insurance in force
and premium income as affected by reinsurance transactions, primarily with
Midland (dollars in thousands):
Direct Ceded to Other
Companies Assumed From Other Companies
Net
Life insurance in force,
December 31, 1995 $ 13,433,464 $
7,370,278 $ 909,920 $ 6,973,106
1995 Premiums:
Individual life and annuity $ 65,298
$ 21,565 $ - $ 43,733
Other 267 267
914 914
Total $ 65,565 $
21,832 $ 914 $ 44,647
6. Reinsurance, continued:
Direct Ceded to Other
Companies Assumed From Other Companies
Net
Life insurance in force,
December 31, 1994 $ 12,856,415 $
7,336,445 $ 899,282 $ 6,419,252
1994 Premiums:
Individual life and annuity $ 64,130
$ 21,499 $ - $ 42,631
Other 339 339
897 897
Total $ 64,469 $
21,838 $ 897 $ 43,528
Life insurance in force,
December 31, 1993 $ 12,586,622 $
7,488,627 $ 923,869 $ 6,021,864
1993 Premiums:
Individual life and annuity $ 76,761
$ 22,112 $ - $ 54,649
Other 433 433
951 951
Total $ 77,194 $
22,545 $ 951 $ 55,600
7. Annuity Reserves and Other Deposit Liabilities:
A portion of Investors Life's liabilities for future policy
benefits relates to liabilities established on a variety of products that
are not subject to significant mortality and morbidity risk; however, there
may be certain restrictions placed upon the amount of funds that can be
withdrawn without penalty. The amount of reserves on these products, by
withdrawal characteristics, and the related percentage of the total, are
summarized as follows at December 31, 1995 (dollars in thousands):
Amount Percent
Subject to discretionary withdrawal at book value less
surrender
charge $ 91,911
48.4%
Subject to discretionary withdrawal at book value with minimal
or
no charge or adjustment
95,025 50.2
Not subject to discretionary withdrawal
2,666 1.4
Total annuity reserves and deposit fund liabilities $
189,602 100.0%
8. Related Party Transactions:
Investors Life pays fees to Midland under management and service
contracts. Investors Life was charged $4,666,000, $4,044,000 and
$4,242,000 in 1995, 1994 and 1993, respectively, related to these
contracts.
9. Variances From Generally Accepted Accounting Principles:
As described in Note 1, the accounting practices as prescribed
or permitted by the South Dakota Department of Insurance differ in
certain respects from generally accepted accounting principles (GAAP)
followed by other types of enterprises in determining financial
position, results of operations and cash flows. The effects of these
differences at December 31, 1995 and 1994 would be to increase
admitted assets by $44,701,000 and $31,380,000, respectively, and to
increase capital and surplus by $32,743,000 and $24,161,000,
respectively. These differences
would also increase net income for the years ended December 31, 1995,
1994 and 1993 by $1,635,000, $2,177,000 and $689,000, respectively.
Report of Independent Accountants on Supplemental Data
To the Board of Directors
Investors Life Insurance Company of Nebraska:
Our audit was conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedule is presented for purposes of additional analysis and is not
a required part of the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated,
in all material respects, in relation to the basic financial
statements taken as a whole.
Minneapolis, Minnesota
March 8, 1996
Investors Life Insurance Company of Nebraska
Schedule 1 - Selected Financial Data
Annual Statement for the year ended December 31, 1995
(dollars in thousands)
The following is a summary of certain financial data included in
other exhibits and schedules subjected to audit procedures by
independent auditors and utilized by actuaries in the determination
of reserves.
Investment income earned:
Government bonds
$ 4,926
Other bonds (unaffiliated)
15,352
Bonds of affiliates
-
Preferred stocks (unaffiliated)
58
Preferred stocks of unaffiliates -
Common stocks (unaffiliated)
-
Common stocks of affiliates
-
Mortgage loans
-
Real estate
Premium notes, policy loans and liens
616
Collateral loans
-
Cash on hand and on deposit
2
Short-term investments
2,625
Other invested assets
-
Derivite Instruments
-
Aggregate write-ins for investment income 6
Gross investments
$ 23,585
Real estate owned - book value less encumbrances $
-
Mortgage loans - book value:
Farm mortgages
$ -
Residential mortgages
-
Commercial mortgages
-
Total mortgage loans
$ -
Mortgage loans by standing - book value:
Good standing
$ -
Good standing with restructured terms
$ -
Interest overdue more than three months, not in foreclosure $
-
Foreclosure in process
$ -
Other long-term assets - statement value
$ -
Collateral loans
$ -
Bonds and stocks of parents, subsidiaries and affiliates - book
value:
Bonds
$ -
Preferred stocks
$ -
Common stocks
$ -
Bonds and short-term investments by class and maturity:
Bonds by maturity - statement value:
Due within one year less
$ 103,433
Over one year through five years
96,361
Over five years through 10 years
42,864
Over 10 years through 20 years
59,161
Over 20 years
5,580
Total by maturity
$ 307,399
Bonds by class - statement value:
Class 1
$ 243,925
Class 2
60,496
Class 3
2,978
Class 4
-
Class 5
-
Class 6
-
Total by class
$ 307,399
Total bonds publicly traded
$ 297,886
Total bonds privately placed
$ 9,513
Preferred stocks - statement value
$ -
Common stocks - market value
$ -
Short-term investment - book value
$ 25,248
Financial options owned - statement value
$ -
Financial options written and in force - statement value $
-
Financial futures contracts open - current price $
-
Cash on deposit
$ 1,063
Life insurance in force:
Industrial
$%% -
Ordinary
$ 6,063,132
Credit Life
$ 53
Group Life
$ 909,921
Amount of accidental death insurance in force under ordinary
policies
$ 210,198
Life insurance policies with disability provisions in force:
Industrial
$ -
Ordinary
$ 678,075
Credit Life
$ -
Group Life
$ -
Supplementary contracts in force:
Ordinary - not involving life contingencies:
Amount on deposit
$ 315
Income payable
$ 22
Ordinary - involving life contingencies:
Income payable
$ 5
Group - not involving life contingencies:
Amount on deposit
$ -
Income payable
$ -
Group - involving life contingencies:
Income payable
$ -
Annuities - ordinary:
Immediate - amount of income payable
$ 400
Deferred - fully paid account balance
$ 88,913
Deferred - not fully paid - account balance $
95,138
Annuities - group:
Amount of income payable
$ -
Fully paid account balance
$ -
Not fully paid - account balance
$ -
Accident and health insurance - premiums in force:
Ordinary
$ -
Group
$ -
Credit
$ -
Deposit funds and dividend accumulations:
Deposit funds - account balance
$ 430
Dividend accumulations - account balance $
350
Claim payments 1995:
Group accident and health, year ended December 31, 1995:
1995
$ -
1994
$ -
1993
$ -
Other accident and health:
1995
$ -
1994
$ -
1993
$ -
Other coverages that use developmental methods to calculate claims
reserves:
1995
$ -
1994
$ -
1993
$ -
The accompanying notes are an integral part of the financial statements.
