<PAGE>
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, 1996 Commission file number 33-81010
Aetna Insurance Company of America
(Exact name of registrant as specified in its charter)
Connecticut 06-1286272
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (860) 273-0978
None
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Title of Class at July 31, 1996
- -------------- -----------------
Common Capital Stock,
par value $2,000 1,275
The registrant meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
1
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AETNA INSURANCE COMPANY OF AMERICA
(A wholly-owned subsidiary of Aetna Life Insurance and Annuity Company)
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Income.......................................... 3
Balance Sheets................................................ 4
Statements of Changes in Shareholder's Equity................. 5
Statements of Cash Flows...................................... 6
Condensed Notes to Financial Statements....................... 7
Independent Auditors' Review Report........................... 8
Item 2. Management's Analysis of the Results of Operations.... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................... 11
Item 6. Exhibits and Reports on Form 8-K...................... 11
Signatures...................................................... 12
2
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AETNA INSURANCE COMPANY OF AMERICA
(A wholly-owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Income
(thousands)
<TABLE>
<CAPTION>
3 Months Ended June 30, 6 Months Ended June 30,
----------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- -----
<S> <C> <C> <C> <C>
Revenue:
Charges assessed against
policyholders $ 223.5 $ -- $ 384.4 $ --
Net investment income 158.0 179.0 332.5 353.0
Net realized capital losses (17.1) -- (17.1) --
-------- ------ --------- ------
Total revenue 364.4 179.0 699.8 353.0
Benefits and expenses:
Current and future benefits 181.2 -- 181.2 --
Operating expenses 1,162.5 64.5 1,821.6 119.0
-------- ------ --------- ------
Total benefits and expenses 1,343.7 64.5 2,002.8 119.0
Income (loss) before federal
income taxes (benefits) (979.3) 114.5 (1,303.0) 234.0
Federal income taxes
(benefits) (387.9) 39.9 (546.8) 81.7
-------- ------ --------- ------
Net income (loss) $(591.4) $74.6 $ (756.2) $152.3
-------- ------ --------- ------
-------- ------ --------- ------
</TABLE>
See Condensed Notes to Financial Statements.
3
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AETNA INSURANCE COMPANY OF AMERICA
(A wholly-owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(thousands)
June 30, December 31,
Assets 1996 1995
- ------ ---- -----
Investments:
Debt securities, available for sale
(amortized cost: $8,044.4 and $7,953.0) $ 8,113.1 $ 8,187.4
Cash and cash equivalents 9,718.8 4,044.2
Accrued investment income 143.9 112.6
Deferred policy acquisition costs 8,923.0 2,066.4
Deferred tax asset 1,723.0 467.6
Federal income taxes receivable 942.7 --
Other assets 20.2 0.8
Separate Accounts assets 158,136.2 43,810.0
---------- ---------
Total assets $187,720.9 $58,689.0
---------- ---------
---------- ---------
Liabilities and Shareholder's Equity
- ------------------------------------
Liabilities:
Policyholders' funds left with
the company $ 13,378.7 $ --
Due to parent and affiliates -- 174.6
Other liabilities 4,937.1 1,932.6
Federal income taxes payable -- 638.8
Separate Accounts liabilities 158,136.2 43,810.0
---------- ---------
Total liabilities 176,452.0 46,556.0
---------- ---------
Shareholder's equity:
Common capital stock, par value
$2,000 (1,275 shares authorized,
issued and outstanding) 2,550.0 2,550.0
Paid-in capital 7,550.0 7,550.0
Net unrealized capital gains 44.5 152.4
Retained earnings 1,124.4 1,880.6
---------- ---------
Total shareholder's equity 11,268.9 12,133.0
---------- ---------
Total liabilities and
shareholder's equity $187,720.9 $58,689.0
---------- ---------
---------- ---------
See Condensed Notes to Financial Statements.
4
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AETNA INSURANCE COMPANY OF AMERICA
(A wholly-owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Changes in Shareholder's Equity
(thousands)
6 Months Ended June 30,
-----------------------
1996 1995
---- ----
Shareholder's equity, beginning
of period $12,133.0 $11,675.3
Net change in unrealized capital
gains (losses) (107.9) 208.4
Net income (loss) (756.2) 152.3
--------- ---------
Shareholder's equity, end of period $11,268.9 $12,036.0
--------- ---------
--------- ---------
See Condensed Notes to Financial Statements.
5
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AETNA INSURANCE COMPANY OF AMERICA
(A wholly-owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Cash Flows
(thousands)
<TABLE>
<CAPTION>
6 Months Ended June 30,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (756.2) $ 152.3
Adjustments to reconcile net income (loss) to
net cash (used for) provided by operating activities:
Increase in accrued investment income (31.3) (30.3)
Increase in deferred policy acquisition costs (6,856.6) --
Net change in amounts due to/from parent and affiliates (174.6) (204.7)
Net increase in other assets and liabilities 2,985.1 332.4
Net (decrease) increase in federal income taxes (2,836.9) 51.3
Net amortization of premium on debt securities 22.6 17.8
Net realized capital losses 17.1 --
--------- --------
Net cash (used for) provided by operating activities (7,630.8) 318.8
--------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 2,285.0 3,000.0
Short-term investments -- 500.0
Cost of investment purchases in:
Debt securities available for sale (2,358.3) (3,939.2)
Short-term investments -- (492.1)
--------- --------
Net cash used for investing activities (73.3) (931.3)
--------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 13,378.7 --
--------- --------
Net cash provided by financing activities 13,378.7 --
--------- --------
Net increase (decrease) in cash and cash equivalents 5,674.6 (612.5)
Cash and cash equivalents, beginning of period 4,044.2 4,732.7
--------- --------
Cash and cash equivalents, end of period $9,718.8 $4,120.2
--------- --------
--------- --------
Supplemental cash flow information:
Income taxes paid, net $2,232.0 $ --
--------- --------
--------- --------
</TABLE>
See Condensed Notes to Financial Statements.
6
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AETNA INSURANCE COMPANY OF AMERICA
(A wholly-owned subsidiary of Aetna Life Insurance and Annuity Company)
Condensed Notes to Financial Statements
1. BASIS OF PRESENTATION
Aetna Insurance Company of America (the "Company") is a stock life
insurance company organized in 1990 under the insurance laws of
Connecticut and is a wholly-owned subsidiary of Aetna Life Insurance and
Annuity Company ("ALIAC"). ALIAC is a wholly-owned subsidiary of
Aetna Retirement Holdings, Inc. ("HOLDCO"). HOLDCO is a wholly-owned
subsidiary of Aetna Retirement Services, Inc., which is a wholly-owned
subsidiary of Aetna Services, Inc. (formerly Aetna Life and Casualty
Company).
The financial statements have been prepared in accordance with generally
accepted accounting principles and are unaudited. These interim statements
necessarily rely heavily on estimates, including assumptions as to
annualized tax rates. In the opinion of management, all adjustments
necessary for a fair statement of results for the interim periods have
been made. All such adjustments are of a normal recurring nature.
7
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INDEPENDENT AUDITOR'S REVIEW REPORT
The Board of Directors
Aetna Insurance Company of America:
We have reviewed the accompanying condensed balance sheet of Aetna Insurance
Company of America as of June 30, 1996, and the related condensed statements
of income for the three-month and six-month periods ended June 30, 1996 and
1995, and the related condensed statements of changes in shareholder's equity
and cash flows for the six-month periods then ended. These condensed
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Aetna Insurance Company of America as of
December 31, 1995, and the related statements of income, changes in
shareholder's equity, and cash flows for the year then ended (not presented
herein); and in our report dated March 20, 1996, we expressed an unqualified
opinion on those financial statements. In our opinion, the information set
forth in the accompanying condensed balance sheet as of December 31, 1995, is
fairly presented, in all material respects, in relation to the balance sheet
from which it has been derived.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
July 25, 1996
8
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Item 2. Management's Analysis of the Results of Operations
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
-------- --------
(Thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Charges assessed against policyholders $ 223.5 $ -- $ 384.4 $ --
Net investment income 158.0 179.0 332.5 353.0
Net realized capital losses (17.1) -- (17.1) --
---------- ------ ---------- ------
Total revenue 364.4 179.0 699.8 353.0
Current and future benefits 181.2 -- 181.2 --
Operating expenses 1,162.5 64.5 1,821.6 119.0
---------- ------ ---------- ------
Total expenses 1,343.7 64.5 2,002.8 119.0
Income (loss) before federal income taxes
(benefits) (979.3) 114.5 (1,303.0) 234.0
Federal income taxes (benefits) (387.9) 39.9 (546.8) 81.7
---------- ------ ---------- ------
Net income (loss) $ (591.4) $ 74.6 $ (756.2) $152.3
---------- ------ ---------- ------
---------- ------ ---------- ------
Deposits not included in premiums above:
Fully guaranteed $ 56,892.5 $ .1 $ 59,641.5 $ .1
Experience-rated 12,722.9 -- 13,281.4 --
Non-guaranteed 38,306.4 -- 52,355.7 --
---------- ----- ---------- ------
Total $107,921.8 $ .1 $125,278.6 $ .1
---------- ----- ---------- ------
---------- ----- ---------- ------
Assets under management:
Fully guaranteed $ 66,505.8 $ 89.0
Experience-rated 13,364.4 --
Non-guaranteed 92,451.6 20.0
---------- ------
Total $172,321.8 $109.0
---------- ------
---------- ------
</TABLE>
The Company has reported losses for the three and six months ended June 30,
1996, compared to earnings for the same periods a year ago. Second quarter
and year-to-date results in 1996 primarily reflect start up costs
attributable to the commencement of the Company's business operations in
excess of charges assessed against policyholders.
9
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GENERAL ACCOUNT INVESTMENTS
The Company's invested assets were comprised of the following:
June 30, December 31,
(Thousands) 1996 1995
- ---------------------------------------------------------------------------
Debt securities $ 8,113.1 $ 8,187.4
--------- ---------
--------- ---------
At June 30, 1996 and December 31, 1995, all of the Company's debt securities
were issued by the U. S. Treasury. The average quality rating of the
Company's debt security portfolio was AAA at both June 30, 1996 and December
31, 1995.
10
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and its Board of Directors know of no material legal proceedings
pending to which the Company is a party or which would materially affect the
Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule.
(b) Reports on Form 8-K
None.
11
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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.
AETNA INSURANCE COMPANY OF AMERICA
(Registrant)
August 14, 1996 By /s/ James C. Hamilton
- --------------- ----------------------
(Date) James C. Hamilton
Vice President, Treasurer, and
Director
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FORM 10-Q FOR THE FISCAL QUARTER ENDED
JUNE 30, 1996 FOR AETNA INSURANCE COMPANY OF AMERICA AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 8,113
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 8,113
<CASH> 9,719
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 8,923
<TOTAL-ASSETS> 187,721
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 13,379
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,550
<OTHER-SE> 8,719
<TOTAL-LIABILITY-AND-EQUITY> 187,721
0
<INVESTMENT-INCOME> 158
<INVESTMENT-GAINS> (17)
<OTHER-INCOME> 0
<BENEFITS> 181
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> (979)
<INCOME-TAX> (388)
<INCOME-CONTINUING> (591)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (591)
<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
</TABLE>
