-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hHMbe7ct4dF3oOTPDYCFrHRqww663jML/thd2XNzJ+psov/AOXWZAsqUS4MUPiL8 Vd2MtqhN25O1kxcd2mEOCQ== 0000820027-94-000185.txt : 19940407 0000820027-94-000185.hdr.sgml : 19940407 ACCESSION NUMBER: 0000820027-94-000185 CONFORMED SUBMISSION TYPE: POS AMI PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19940406 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS LIFE INSURANCE CO /MN CENTRAL INDEX KEY: 0000727892 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 410823832 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AMI SEC ACT: 33 SEC FILE NUMBER: 033-28976 FILM NUMBER: 94520495 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6126711257 MAIL ADDRESS: STREET 1: IDS TOWER 10 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 POS AMI 1 IDS LIFE MARKET VALUE ANNUITY PAGE 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-1 POST-EFFECTIVE AMENDMENT NO. 5 TO REGISTRATION STATEMENT NO. 33-28976 Under The Securities Act of 1933 IDS Life Insurance Company (Exact name of registrant as specified in charter) Minnesota (State or other jurisdiction of incorporation or organization) 63 ___________________________________________________________________ (Primary Standard Industrial Classification Code Number) 41-0823832 ___________________________________________________________________ (I.R.S. Employer Identification No.) IDS Tower 10, Minneapolis, MN 55440-0010 (612) 671-3131 ___________________________________________________________________ (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Mary Ellyn Minenko, Counsel IDS Life Insurance Company IDS Tower 10, Minneapolis, Minnesota 55440-0010 (612) 671-3678 (Name, address, including zip code, and telephone number, including area code, of agent for service) It is proposed that this filing become effective on April 29, 1994. If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] PAGE 2
Calculation of Registration Fee Proposed Title of each class Proposed maximum of securities to be Amount to be maximum offering aggregate offering Amount of registered registered price per unit price registration fee N/A /TABLE PAGE 3 IDS LIFE ACCOUNT MGA GROUP AND INDIVIDUAL MARKET VALUE ANNUITY CONTRACTS ISSUED BY IDS LIFE INSURANCE COMPANY Cross-Reference Sheet Pursuant to Regulation S-K Item 501(b)
Page Number in Form S-1 Item Number and Caption Location in Prospectus Prospectus 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus......................Outside Front Cover 5-6 2. Inside Front and Outside Back Cover Pages of Prospectus.....................Table of Contents 7-8 (inside front cover) 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges.......................................Summary or, as to ratio 9-10 of earnings to fixed charges, Not Applicable 4. Use of Proceeds...............................Investments by IDS Life 23-24 5. Determination of Offering Price...............Not Applicable 6. Dilution......................................Not Applicable 7. Selling Security Holders......................Not Applicable 8. Plan of Distribution..........................Distribution of Contracts 24 9. Description of Securities to Be Registered....................................Description of Contracts 12-23 10. Interests of Named Experts and Counsel.......................................Not Applicable 11. Information with Respect to the Registrant....................................The Company; 26-33 Directors and Executive 33-35 Officers of the Registrant; Executive Compensation; 35 Security Ownership of 35 Management; Legal Proceedings and 36 Opinion; and Financial Statements 42-57 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities...............................See Item 14 in Part II 58-59 /TABLE PAGE 4 PART I. INFORMATION REQUIRED IN PROSPECTUS Attached hereto and made a part hereof is the Prospectus. PAGE 5 IDS Life Market Value Annuity Prospectus, April 29, 1994 This prospectus describes interests in a group market value annuity contract and individual market value annuity contracts (Preferred Choice Annuities) offered by IDS Life Insurance Company (IDS Life) to the general public for non-tax benefited purchases. With respect to the group contract, eligible individuals include members of the general public. Participation in a group contract will be accounted for separately by the issuance of a certificate showing your interest under the group contract. Participation in an individual contract is shown by the issuance of an individual annuity contract. The certificate and the individual contract are both referred to as the "Contract." In addition, IDS Life may offer these Contracts in the following tax benefited programs: (1) plans qualified under Section 401(a), 401(k) or 403(a) of the Internal Revenue Code of 1986, as amended (the Code); (2) annuity purchase plans adopted by public school systems and certain tax-exempt organizations pursuant to Section 403(b) of the Code; (3) individual retirement annuities established by persons, eligible under Section 408 of the Code (IRA); (4) contracts purchased by the U.S. Government, the government of any state or political subdivision thereof, or by any agency or instrumentality (within the meaning of Section 414(d) of the Code), for use in satisfying its obligation to provide a benefit under a governmental plan; and (5) deferred compensation plans under Section 457 of the Code. A minimum purchase payment of at least $5,000 must accompany the application for a Contract. No additional payment is permitted under a Contract. The Accumulation Value will be guaranteed by the general assets of IDS Life. IDS Life generally intends to invest funds received in relation to Contracts in a variety of debt instruments having price durations which tend to match the applicable Contract. IDS Life Account MGA Group and Individual Market Value Annuity Contracts Sold by: IDS Life Insurance Company IDS Tower 10 Minneapolis, MN 55440-0010 Telephone: 800-422-3542 THESE SECURITIES MAY BE SUBJECT TO A SUBSTANTIAL SURRENDER CHARGE AND/OR MARKET VALUE ADJUSTMENT IF NOT HELD TO THE RENEWAL DATE WHICH COULD RESULT IN YOUR RECEIPT OF LESS THAN YOUR ORIGINAL PURCHASE PAYMENT. FOR RENEWAL GUARANTEE PERIODS, THE RENEWAL INTEREST RATE WILL BE DECLARED BY IDS LIFE BASED ON VARIOUS FACTORS. IT MAY BE HIGHER OR LOWER THAN THE PREVIOUS GUARANTEED INTEREST RATE. PAGE 6 THE MINIMUM GUARANTEED RENEWAL INTEREST RATE IS 3 PERCENT. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. IDS LIFE INSURANCE COMPANY IS NOT A BANK AND THE SECURITIES IT OFFERS ARE NOT BACKED OR GUARANTEED BY ANY BANK, NOR ARE THEY INSURED BY THE FDIC. PAGE 7 Table of Contents Page Summary................................................... Glossary of Special Terms................................. Description of Contracts.................................. General................................................... Application and Purchase Payment.......................... Right to Cancel........................................... Guarantee Periods......................................... Surrenders................................................ Surrender Charge.......................................... Market Value Adjustment................................... Premium Taxes............................................. Death Benefit Prior to Settlement......................... Statement................................................. Electing the Settlement Date and Form of Annuity.......... Investments by IDS Life................................... Amendment of Contracts.................................... Distribution of Contracts................................. Assignment of Contracts................................... Federal Tax Considerations................................ The Company............................................... Business.................................................. Selected Financial Data................................... Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations............. Reserves.................................................. Investments............................................... Competition............................................... Employees................................................. Properties................................................ State Regulation.......................................... Directors and Executive Officers.......................... Executive Compensation.................................... Security Ownership of Management.......................... Legal Proceedings and Opinion............................. Experts................................................... PAGE 8 Appendix A (Partial Surrender Illustration)............... Appendix B (Market Value Adjustment Illustration)......... IDS Life Financial Information............................ PAGE 9 Summary IDS Life is offering group and individual market value annuities to the general public for non-tax benefited and tax benefited purchases. IDS Life is a wholly owned subsidiary of IDS Financial Corporation (IDS), which itself is a wholly owned subsidiary of American Express Company (American Express). As described in this prospectus, market value annuity Contracts have a guaranteed interest rate that is credited to the purchase payment when it is held to the end of the Guarantee Period (the Renewal Date). Surrenders before the Renewal Date are subject to a Market Value Adjustment and a surrender charge (if applicable). When a payment is made under an application, the applicant selects a Guarantee Period from among those then offered by IDS Life. During this Guarantee Period, the purchase payment earns interest at the applicable guaranteed interest rate as established by IDS Life. Interest is credited on a daily basis and the interest credited earns interest at the applicable guaranteed interest rate as established by IDS Life. (See Guarantee Periods page ). At the end of each Guarantee Period, a renewal Guarantee Period of one year will begin, unless the Owner elects a different duration. The Owner must elect the length of a renewal Guarantee Period during the 30 days before the end of the previous Guarantee Period. Failure to make an election will result in an automatic renewal for a period of one year. As of the first day of each renewal Guarantee Period the renewal value will earn interest at the then applicable renewal guaranteed interest rate and the interest credited will earn interest at the then applicable renewal guaranteed interest rate. (See Guarantee Periods page ). Subject to certain restrictions, partial or total surrenders are permitted. We may defer payment of any surrender for a period up to six months from the date we receive notice of surrender or the period permitted by state law, if less. A deferral of payment will not be for a period greater than seven days except under extraordinary circumstances. We will pay annual interest of at least 3 percent of any amounts deferred for more than thirty days during such period if we choose to exercise this deferral right. (See Surrenders page ). Surrenders may be subject to a surrender charge and/or a Market Value Adjustment. Before the eighth Contract anniversary, a surrender charge beginning at a maximum of 8 percent will be assessed if you surrender. No surrender charge will be applied for any surrenders after the eighth Contract anniversary or if the surrender occurs on the last day of a Guarantee Period. We will PAGE 10 waive the surrender charge in certain instances. (See Surrender Charge page ). A Market Value Adjustment will be applied when the surrender occurs before the Renewal Date. No Market Value Adjustment will be applied to any surrender effective as of the end of a Guarantee Period. The Market Adjusted Value will reflect the relationship, at the time of surrender, between the rate we then are crediting on purchase payments to new Contracts with the same durations as the time remaining in the Guarantee Period, and the guaranteed interest rate applicable to that Contract. Generally, significant factors affecting the amount of the Market Value Adjustment are the level of interest rates on investments that are similar to those supporting current Contract purchase payments and the time remaining to the end of the Guarantee Period. The Market Adjusted Value is sensitive, therefore, to changes in Current Interest Rates. The level of the Market Value Adjustment is dependent on the Current Interest Rate at the time of surrender. The Market Value Adjustment may increase or decrease the value of this investment before the Renewal Date. It is possible that the amount you receive on surrender would be less than your original purchase payment if interest rates increase. Also, if interest rates decrease, the amount you receive on surrender may be more than your original purchase payment and accrued interest. The Market Adjusted Value also affects settlements under an annuity payment plan. (See Market Value Adjustment page ). We reserve the right to deduct applicable premium taxes from the Accumulation Value of the Contract. (See Premium Taxes page ). The Contract provides for a guaranteed death benefit. In the event of the death of the Annuitant or Owner prior to the Settlement Date, IDS Life will pay to the Owner or beneficiary the death benefit in lieu of any other payment under the Contract. The amount of the death benefit will equal the Accumulation Value. (See Death Benefit Prior to Settlement page ). On the Settlement Date specified by the Owner, IDS Life will pay the Owner a lump sum payment or start to pay a series of payments. A series of payments may be elected under certain Annuity Plans. (See Electing the Settlement Date and Form of Annuity page ). PAGE 11 Glossary of Special Terms In this prospectus "we" "us" and "IDS Life" refer to IDS Life Insurance Company and "you" and "yours" refer to an Owner who has been issued a Contract. In addition, as used in this prospectus, the following terms have the indicated meanings: Accumulation Value - The value of the purchase payment plus interest credited, adjusted for any surrenders. Annuitant - The person on whose life monthly annuity payments depend. Cash Surrender Value - The Market Adjusted Value less any applicable surrender charge. Contract Anniversary - The same day and month as the Contract Date each year that the Contract remains in force. Contract Date - The effective date of the Contract as designated in the Contract. Current Interest Rate - The applicable interest rate contained in a schedule of rates established by us from time to time for various Guarantee Periods. Initial Guarantee Period - The period during which the Initial Guarantee Rate will be credited. Initial Guarantee Rate - The rate of interest credited to the purchase payment during the Initial Guarantee Period. Market Adjusted Value - The Accumulation Value adjusted by the Market Adjusted Value formula, on any date before the end of the Guarantee Period. Market Value Adjustment - The Market Adjusted Value minus the Accumulation Value. Owner - The person or entity to whom the annuity Contract is issued. Renewal Date - The first day of a Renewal Guarantee Period. It will always be on a Contract Anniversary. Renewal Guarantee Period - A Renewal Guarantee Period will begin at the end of each Guarantee Period. Renewal Guarantee Rate - The rate of interest credited to the Renewal Value during the Renewal Guarantee Period. Renewal Value - The accumulation value at the end of the current Guarantee Period. PAGE 12 Settlement - The application of the Market Adjusted Value of the Contract to provide annuity payments. Settlement Date - The date on which annuity payments are to begin. Written Request - A request in writing signed by you and delivered to us at our Home Office. Description of Contracts General This prospectus describes interests in market value annuities offered by IDS Life for non-tax benefited purchases. In addition, IDS Life may offer the Contracts in the following tax benefited programs: (1) Section 401(a), 401(k) and 403(a) Plans; (2) Section 403(b) Plans; (3) IRAs; (4) certain governmental plans; and (5) deferred compensation plans. As described in this prospectus, the Contracts have a guaranteed interest rate that is credited to a purchase payment in the Contract when the purchase payment is held to its Renewal Date. Surrenders prior to the Renewal Date are subject to a Market Value Adjustment and a surrender charge (if applicable). Application and Purchase Payment To apply for a Contract, you must complete an application and make a minimum purchase payment of $5,000. For individuals age 75 and younger, the maximum purchase payment is $1,000,000 without prior approval. For individuals age 76 to 85, it is $500,000. If you purchase the Contract to fund a tax benefited plan, that plan's limit on contributions also will apply. We will return an improperly completed application, along with the corresponding purchase payment, five days after we receive it if the application has not, by that time, been properly completed. A payment is credited to a Contract on the date we receive a properly completed application along with the purchase payment. Interest is earned the next day. IDS Life then issues a Contract and confirms the purchase payment in writing. Right to Cancel State or Federal law may give you the right to cancel the Contract within a specific period of time after receipt of the Contract and receive a refund of the entire purchase payment. For revocation to be effective, mailing or delivery of notice of cancellation must be made in writing to our Home Office at IDS Tower 10, Minneapolis, Minnesota 55440-0010. PAGE 13 Guarantee Periods The Owner selects the duration of the Guarantee Period from among those durations we offer. As of the date of this prospectus, we are offering Guarantee Periods with annual durations from one to 10 years; however, the Guarantee Periods we offer in the future could be different. The duration selected will determine the guaranteed interest rate and the purchase payment (less surrenders made and less applicable premium taxes, if any) will earn interest at this guaranteed interest rate during the entire Guarantee Period. All interest earned will be credited daily; this compounding effect is reflected in the guaranteed interest rate. Below is an illustration of how we will credit interest during the Guarantee Period. For the purpose of this example, we have made the assumptions as indicated. Example of Guaranteed Rate of Accumulation Beginning Account Value: $50,000 Guaranteed Period: 10 years Guaranteed Rate: 5 percent Annual Effective Rate Interest Credited to the Account Cumulative Interest Year During Year Credited to the Account 1 $2,500.00 $ 2,500.00 2 2,625.00 5,125.00 3 2,756.25 7,881.25 4 2,894.06 10,775.31 5 3,038.77 13,814.08 6 3,190.70 17,004.78 7 3,350.24 20,355.02 8 3,517.75 23,872.77 9 3,693.64 27,566.41 10 3,878.32 31,444.73 Guaranteed Accumulation Value at the end of 10 years is: $50,000 + $31,444.73 = $81,444.73 Note: This example assumes no surrenders of any amount during the entire ten-year period. A Market Value Adjustment applies and a surrender charge may apply to any interim surrender. (See Surrenders). The hypothetical interest rates are illustrative only and are not intended to predict future interest rates to be declared under the Contract. Actual interest rates declared for any given time may be more or less than those shown. Renewal Guarantee Periods - At the end of any Guarantee Period, a Renewal Guarantee Period will begin. We will notify you in writing about the Renewal Guarantee Periods available before the Renewal Date. This written notification will not specify the interest rate for the Renewal Value. You may elect in writing, during the 30-day period before the end of the Guarantee Period, a Renewal Guarantee PAGE 14 Period of a different duration from among those we offer at that time. If no election is made, we will automatically apply the Renewal Value to a Guarantee Period of one year. In no event may Renewal Guarantee Periods extend beyond the Settlement Date then in effect for the Contract. For example, if the Annuitant is age 62 at the end of a Guarantee Period and the Settlement Date for the Annuitant is age 65, a three-year Guarantee Period is the maximum Guarantee Period that may be selected under the Contract. The Renewal Value will then earn interest at a guaranteed interest rate that we have declared for such duration. We may declare new schedules of guaranteed interest rates as frequently as daily. At the beginning of any Renewal Guarantee Period, the Renewal Value will be the Accumulation Value at the end of the Guarantee Period just ending. The Renewal Value is guaranteed by our general assets. This amount will earn interest for the Renewal Guarantee Period at the then applicable guaranteed interest rate for the period selected, that may be higher or lower than the previous guaranteed interest rate. At your Written Request, we will notify you of the Renewal Guarantee Rates for the periods then available. You also may call us to inquire about Renewal Guarantee Rates. Establishment of Guaranteed Interest Rates - The guaranteed interest rate for a chosen Guarantee Period will be known at the time a purchase payment is received or an Accumulation Value is renewed. We will send a confirmation that will show the amount and the applicable guaranteed interest rate. The minimum guaranteed interest rate for Renewal Values is 3 percent per year. The rate on Renewal Values will be equal to or greater than the rate credited on new comparable purchase payments at that time. IDS Life has no specific formula for determining the rate of interest that it will declare as guaranteed interest rates in the future. We will declare the guaranteed interest rates from time to time based on our analysis of current market conditions. (See Investments by IDS Life). In addition, IDS Life also may consider various other factors in determining guaranteed interest rates for a given period, including, regulatory and tax requirements; sales commission and administrative expenses we bear; general economic trends; and competitive factors. IDS Life management will make the final determination as to the guaranteed interest rates to be declared. We cannot predict nor can we guarantee future guaranteed interest rates above the 3 percent rate. Surrenders General - Subject to certain tax law and retirement plan restrictions noted below, total and partial surrenders may be made under a Contract at any time. PAGE 15 In the case of all surrenders, the Accumulation Value will be reduced by the amount surrendered on the surrender date and that amount will be payable to the Owner. The Accumulation Value also will be reduced by any applicable surrender charge and either reduced or increased by any Market Value Adjustment applicable to the surrender. IDS Life will, on request, inform you of the amount payable in a total or partial surrender. Any total or partial surrender may be subject to tax and tax penalties. Surrenders from certain tax benefited Contracts also may be subject to 20 percent income tax withholding. (See Federal Tax Considerations). Tax-Sheltered Annuities - The Code imposes certain restrictions on an Owner's right to receive early distributions attributable to salary reduction contributions from a Contract purchased for a retirement plan qualified under Section 403(b) of the Code as a Tax-Sheltered Annuity (TSA). Distributions attributable to salary reduction contributions made after Dec. 31, 1988, plus the earnings on them, or to transfers or rollovers of such amounts from other contracts may be made from the TSA contract only if the Owner has attained age 59-1/2, has become disabled as defined in the Code, has separated from the service of the employer that purchased the Contract or has died. Additionally, if the Owner should encounter a financial hardship (within the meaning of the Code), he or she may receive a distribution of all Contract values attributable to salary reduction contributions made after Dec. 31, 1988, but not of the earnings on them. Even though a distribution may be permitted under these rules (e.g., for hardship or after separation from service), it may nonetheless be subject to a 10 percent IRS penalty tax (in addition to income tax) as a premature distribution and to 20 percent income tax withholding. (See Federal Tax Considerations). These restrictions do not apply to transfers of Contract value to another TSA investment vehicle available through the employer. Partial Surrenders - The minimum amount you may surrender is $250. You cannot make a partial surrender if it would reduce the Accumulation Value of your annuity to less than $2,000. You may request the net check amount you wish to receive. We will determine how much Accumulation Value needs to be surrendered to yield the net check amount after any applicable Market Value Adjustments and surrender charge deductions. A partial surrender request not exceeding $40,000 may be made by telephone. We have the authority to honor any telephone partial surrender request believed to be authentic and will use reasonable procedures to confirm that they are. This includes asking identifying questions and tape recording calls. As long as reasonable procedures are followed, neither IDS Life nor its affiliates will be liable for any loss resulting from fraudulent requests. At times when the volume of telephone requests is PAGE 16 unusually high, we will take special measures to ensure that your call is answered as promptly as possible. A telephone surrender request will not be allowed within 30 days of a phoned-in address change. Total Surrenders - We will compute the value of your Contract at the close of business after we receive your request for a complete surrender. We may ask you to return the Contract. Payment on Surrender - We may defer payment of any partial or total surrender for a period not exceeding 6 months from the date we receive your notice of surrender or the period permitted by state insurance law, if less. Only under extraordinary circumstances will we defer a surrender payment more than 7 days, and if we defer payment for more than 30 days, we will pay annual interest of at least 3 percent on the amount deferred. While all circumstances under which we could defer payment upon surrender may not be foreseeable at this time, such circumstances could include, for example, our inability to liquidate assets due to a general financial crisis. If we intend to withhold payment more than 30 days, we will notify you in writing. Surrender Charge A surrender charge may be assessed on any total or partial surrender taken prior to the eighth Contract anniversary unless the surrender occurs on the last day of a Guarantee Period. The amount of the surrender charge will be based on the length of the Guarantee Period. The table below shows the maximum amount of the surrender charge. Surrender Charge Percentage Guarantee Period Contract Years as measured from the beginning of a Guarantee Period 1 2 3 4 5 6 7 8 1 Year 1% 2 Years 2 1% 3 Years 3 2 1% 4 Years 4 3 2 1% 5 Years 5 4 3 2 1% 6 Years 6 5 4 3 2 1% 7 Years 7 6 5 4 3 2 1% 8 Years 8 7 6 5 4 3 2 1% 9 Years 8 7 6 5 4 3 2 1 10 Years 8 7 6 5 4 3 2 1 For Renewal Guarantee Periods, the surrender charge will be based on the lesser of: PAGE 17 o the length of the new Guarantee Period, or o the number of years remaining until the eighth Contract anniversary. For example, if a Contract Owner chose an Initial Guarantee Period of 5 years and later a Renewal Guarantee Period of 4 years, the surrender charge percentages would be: Contract Year Surrender Charge 1 5% 2 4 3 3 4 2 5 1* 6 3 7 2 8 1 9+ 0 *0% on last day of 5th Contract year. There will never be any surrender charges after the eighth Contract anniversary. Also, after the first Contract anniversary, surrender charges will not apply to surrenders of amounts totalling up to 10 percent of the Accumulation Value as of the last Contract anniversary. Surrender Charge Calculation - If there is a surrender charge, it is calculated as: (A minus B) multiplied by P where: A = Market Adjusted Value surrendered B = 10 percent of Accumulation Value on last Contract anniversary not already taken as a partial surrender this Contract year. P = applicable surrender charge percentage For an illustration of a partial surrender and applicable surrender charges, see Appendix A. Waiver of Surrender Charge - There will be no surrender charge: o on the last day of a Guarantee Period; o after the eighth Contract anniversary; o after the first Contract anniversary for surrenders of amounts totalling up to 10 percent of the Contract Accumulation Value as of the last Contract anniversary; o upon the death of the Annuitant or Owner; or PAGE 18 o upon the application of the Market Adjusted Value to provide annuity payments under an annuity payment plan (if such application occurs on a Renewal Date, there will be no surrender charge or Market Value Adjustment, and the full Accumulation Value will be applied under an annuity payment plan). In some cases, such as when an employer makes this annuity available to employees, we may expect to incur lower sales and administrative expenses or perform fewer services due to the size of the group, the average contribution and the use of group enrollment procedures. Then we may be able to reduce or eliminate surrender charges. However, we expect this to occur infrequently. Market Value Adjustment The Accumulation Value, including the interest credited, is guaranteed if the Contract is held until the end of the Guarantee Period. However, a Market Value Adjustment will be applied if a surrender occurs prior to the end of the Guarantee Period. The Market Adjusted Value also affects Settlements under an annuity payment plan. The Market Adjusted Value is your Accumulation Value (purchase payment plus interest credited minus surrenders and surrender charges) adjusted by a formula. The Market Adjusted Value reflects the relationship between the guaranteed interest rate on your Contract and the interest rate we are crediting on new contracts with Guarantee Periods that are the same as the time remaining in your Guarantee Period. The Market Adjusted Value is sensitive to changes in Current Interest Rates. The difference between your Accumulation Value and Market Adjusted Value on any day will depend on our current schedule of guaranteed interest rates on that day, the time remaining in your Guarantee Period and your guaranteed interest rate. Your Market Adjusted Value may be more or less than your Accumulation Value. If your guaranteed interest rate is lower than the Current Interest Rate, your Market Adjusted Value probably will be lower than your Accumulation Value. If your guaranteed interest rate is higher than the Current Interest Rate, your Market Adjusted Value probably will be higher than your Accumulation Value. For example, assume you bought a Contract with a Guarantee Period of 10 years and a guaranteed interest rate of 4.5 percent annually. Assume that after 3 years you decide to surrender your Contract (you have 7 years left in your Guarantee Period). If the Current Interest Rate we are offering on new Contracts with 7-year Guarantee Periods is 5 percent, your Market Adjusted Value will be lower than your Accumulation Value. On the other hand, if the Current Interest Rate we are then offering on new Contracts with 7-year Guarantee Periods is 4 percent, your Market Adjusted Value will be higher than your Accumulation Value. PAGE 19 Market Adjusted Value Formula: Market Adjusted Value = (Renewal Value) (1 + ic + .0025)(N + t) Renewal Value -- The Accumulation Value at the end of the current Guarantee Period ic -- The Current Interest Rate offered for new Contract sales and renewals for the number of years remaining in the Guarantee Period N -- The number of complete Contract years to the end of the current Guarantee Period t -- The fraction of the Contract year remaining to the end of the Contract year (for example, if 180 days remain in a 365 day year, t would be .493) The current guaranteed interest rate (ic) is declared by us periodically. It is the rate which we are then paying on purchase payments and renewals paid under this class of Contracts for Guarantee Period durations equaling the remaining Guarantee Period duration of the Contract to which the formula is being applied. If the remaining Guarantee Period is a number of complete years, the specific complete year guarantee rate will be used. If the remaining Guarantee Period is less than 1 year, the one year guarantee rate will be used. If the remaining Guarantee Period is a number of complete years plus fractional years, the rate will be determined by straight line interpolation between the two years' rates. For example, if the remaining Guarantee Period duration is 8.5 years, and the current guaranteed interest rate for 8 years is 4 percent and for 9 years is 5 percent, IDS Life will use a guaranteed interest rate of 4.5 percent. Market Value Adjustment Formula: Market Value Adjustment = Market Adjusted Value less Accumulation Value For an illustration showing an upward and downward adjustment, see Appendix B. Premium Taxes We reserve the right to deduct an amount from the Accumulation Value of the Contract at the time that any applicable premium taxes not previously deducted are payable. If a tax is payable at the time of the purchase payment and we choose to not deduct it at that time, we further reserve the right to deduct it at a later date. Current premium taxes range in an amount up to 3.5 percent depending on jurisdiction. PAGE 20 Death Benefit Prior to Settlement If the Annuitant or Owner dies before the Settlement Date, the death benefit payable to the beneficiary will equal the Accumulation Value. If your Spouse is Sole Beneficiary or Co-Owner - If you, as Owner or Co-Owner, die before the Settlement Date and your spouse is the only beneficiary or Co-Owner, your spouse may keep the annuity as Owner. To do this, your spouse must, within 60 days after we receive proof of death, give us written instructions to keep the Contract in force. Section 401(k) Plans, Section 403(b) Plans (TSAs), Section 457 Plans, Custodial and Trusteed Plans, and IRAs - If the Contract is purchased under a Section 401(k) plan, Section 403(b) plan, Section 457 plan, custodial or trusteed plan or for an IRA and we receive proof of the annuitant's death before the Settlement Date, we will pay the beneficiary the death benefit described above. If the annuitant dies before reaching age 70-1/2 and the spouse is the only beneficiary, the spouse may keep the annuity in force until the date on which the annuitant would have reached 70-1/2. To do this, the spouse must, within 60 days after we receive proof of death, give us written instructions to keep the Contract in force. Paying the Beneficiary - Unless you have given us other written instructions, we will pay the beneficiary in a single payment. The beneficiary may elect to receive this payment at any time within 5 years after the date of death. Payment from a tax benefited Contract (except an IRA) made to a surviving spouse instead of being directly rolled over to an IRA may be subject to 20 percent income tax withholding. We may make payments under any payment plan available under this Contract if: o the beneficiary asks us in writing within 60 days after we receive proof of death; o payments begin no later than one year after death; and o the payment period does not extend beyond the beneficiary's life or life expectancy. We will determine the Market Adjusted Value at the next close of business after our death claim requirements are fulfilled. We will mail payment to the beneficiary within seven days after our death claim requirements are fulfilled. Statement Prior to the Settlement Date, at least annually, we will send a statement showing a summary of the Contract. PAGE 21 Electing the Settlement Date and Form of Annuity A Settlement Date is established when you apply for the Contract. The Settlement Date may be changed, but any such change must be made in writing and received by us at least 30 days prior to the scheduled Settlement Date. The Settlement Date cannot be later than the later of: o the Contract anniversary nearest the Annuitant's 85th birthday; or o the 10th Contract anniversary. Annuity Payments - The first payment will be made as of the Settlement Date. Once annuity payments have started for an Annuitant, no surrender of the annuity benefit can be made for the purpose of receiving a lump sum in lieu of payments. Death After Settlement Date - If you or the Annuitant dies after the Settlement Date, the amount payable to the beneficiary, if any, will continue as provided in the annuity payment plan then in effect. Annuity Plans - There are different ways to receive annuity payments. We call these plans. You may select one of these plans, or another payment arrangement to which we agree, by giving us written notice at least 30 days before the Settlement Date. The Market Adjusted Value (less applicable premium taxes, if any) may be applied on the Settlement Date under any of the annuity plans described below, but in the absence of an election, the Market Adjusted Value will be applied on the Settlement Date under Plan B to provide a life annuity with 120 monthly payments certain. If the amount to be applied to an annuity plan is not at least $2,000 or if payments are to be made to other than a natural person, we have the right to make a lump sum payment of the Cash Surrender Value. If a lump sum payment is made from a tax benefited Contract (except an IRA), 20 percent income tax withholding may apply. o Plan A - This provides monthly annuity payments for the lifetime of the Annuitant. No payments will be made after the Annuitant dies. o Plan B - This provides monthly annuity payments for the lifetime of the Annuitant with a guarantee by us that payments will be made for a period of at least 5, 10 or 15 years. You must select the period. o Plan C - This provides monthly annuity payments for the lifetime of the Annuitant with a guarantee by us that payments will be made for a certain number of months. We determine the PAGE 22 number of months by dividing the Market Adjusted Value applied under this plan by the amount of the monthly annuity payment. o Plan D - We call this a Joint and Survivor life annuity. Monthly payments will be paid for the lifetime of the Annuitant and a joint annuitant. When either the Annuitant or joint annuitant dies we will continue to make monthly payments for the lifetime of the survivor. No payments will be paid after the death of both the Annuitant and joint annuitant. o Plan E - This provides monthly fixed dollar annuity payments for a period of years. The period of years may be no less than 10 nor more than 30. The Contract provides for annuity payment plans on a fixed basis only. The amount of each annuity payment will not change during the annuity payment period. The amount of the annuity payment will depend on: - -- the Market Adjusted Value (less any applicable premium tax not previously deducted) on the date; - -- the annuity table we are then using for annuity settlements (never less than the table guaranteed in the Contract); - -- the Annuitant's age; and - -- the annuity payment plan selected. The tables for Plans A, B, C and D are based on the "1983 Individual Annuitant Mortality Table A" and an assumed rate of 4 percent per year. The table for Plan E is based on an interest rate of 4 percent. IDS Life may, at our discretion, if mortality appears more favorable and interest rates justify, apply other tables that will result in higher monthly payments. Restrictions for Some Tax Benefited Plans - If your annuity was purchased under a Section 401(k) plan, custodial or trusteed plan, Section 457 plan, Section 403(b) plan (TSA), or as an IRA, you must select a payment plan that provides for payments: o during the life of the Annuitant; o during the joint lives of the Annuitant and beneficiary; o for a period not exceeding the life expectancy of the Annuitant; or o for a period not exceeding the joint life expectancies of the Annuitant and beneficiary. Reference also must be made to the terms of the tax benefited plan and applicable law for any limitations or restrictions on the Settlement Date or annuity payment plan that may be selected. PAGE 23 Investments by IDS Life Assets of IDS Life must be invested in accordance with requirements established by applicable state laws regarding the nature and quality of investments that may be made by life insurance companies and the percentage of their assets that may be committed to any particular type of investment. In general, these laws permit investments, within specified limits and subject to certain qualifications, in federal, state, and municipal obligations, corporate bonds, preferred and common stocks, real estate mortgages, real estate and certain other investments. All claims by purchasers of the Contracts, and other general account products, will be funded by the general account. IDS Life intends to construct and manage the investment portfolio using a strategy known as "immunization." Immunization seeks to lock in a defined return on the pool of assets versus the pool of liabilities over a specified time horizon. Since the return on the assets versus the liabilities is locked in, it is "immune" to any potential fluctuations in interest rates during the given time. Immunization is achieved by constructing a portfolio of assets with a price sensitivity to interest rate changes (i.e., price duration) that is essentially equal to the price duration of the corresponding portfolio of liabilities. Portfolio immunization provides flexibility and efficiency to IDS Life in creating and managing the asset portfolio, while still assuring safety and soundness for funding liability obligations. IDS Life's investment strategy will incorporate the use of a variety of debt instruments having price durations tending to match the applicable guaranteed interest periods. These instruments include, but are not necessarily limited to, the following: o Securities issued by the U.S. government or its agencies or instrumentalities, which issues may or may not by guaranteed by the U.S. government; o Debt securities that have an investment grade, at the time of purchase, within the four highest grades assigned by the nationally recognized rating agencies; o Debt instruments that are unrated, but which are deemed by IDS Life to have an investment quality within the four highest grades; o Other debt instruments, which are rated below investment grade, limited to 10 percent of assets at the time of purchase; and o Real estate mortgages, limited to 30 percent of portfolio assets at the time of acquisition. In addition, options and futures contracts on fixed income securities will be used from time to time to achieve and maintain appropriate investment and liquidity characteristics on the overall asset portfolio. PAGE 24 While this information generally describes our investment strategy, we are not obligated to follow any particular strategy except as may be required by Federal law and Minnesota and other state insurance laws. Amendment of Contracts We reserve the right to amend the Contracts to meet the requirements of applicable federal or state laws or regulations. We will notify you in writing of any such amendments. Distribution of Contracts IDS Life is the principal underwriter for the Contracts. IDS Life is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (1934 Act) as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. IDS Life may enter into Distribution Agreements with certain broker-dealers registered under the 1934 Act. IDS Life will pay a maximum commission of 5 percent for the sale of a Contract. In the future, we may pay a commission on an election of a subsequent Guarantee Period by an Owner. Assignment of Contracts You may change ownership of your annuity at any time by filing a change of ownership with us at our home office. No change of ownership will be binding upon us until we receive and record it. We take no responsibility for the validity of the change. If you have a tax-benefited plan, the Contract may not be sold, assigned, transferred, discounted or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose to any person other than IDS Life; provided, however, that if the Owner is a trust or custodian, or an employer acting in a similar capacity, ownership of a Contract may be transferred to the Annuitant. The value of any part of a non-tax benefited annuity contract assigned or pledged is taxed like a cash withdrawal to the extent allocable to investment in annuity contracts after Aug. 13, 1982. Transfer of a non-tax benefited annuity Contract to another person without adequate consideration is considered a gift and the transfer will be considered a surrender of the Contract for federal income tax purposes. The income in the Contract will be taxed to the transferor who may be subject to the 10 percent IRS penalty tax for early withdrawal. The transferee's investment in the annuity will be the value of the annuity at the time of the transfer. Consult with your tax adviser before taking any action. Federal Tax Considerations Under current law, there is no liability for federal income tax on any increase in the annuity's value until payments are made (except for change of ownership discussed above in "Assignment of Contracts"). However, since federal tax consequences cannot always PAGE 25 be anticipated, you should consult a tax adviser if you have any questions about the taxation of your annuity Contract. You are not taxed on your investment in the Contract. Your investment in the Contract generally includes purchase payments made into the Contract with after-tax dollars. If the investment in the Contract was made by you or on your behalf with pre-tax dollars as part of a tax benefited retirement plan, such amounts are not considered to be part of your investment in the Contract and will be taxed when paid to you. If you surrender part or all of your Contract before the date on which you have decided to begin to receive annuity payments, you will be taxed on the payments which you receive, to the extent that the value of your Contract exceeds your investment in the Contract, and you may have to pay an IRS penalty tax for early withdrawal. If you begin receiving annuity payments under a non-tax benefited annuity Contract, a portion of each payment will be subject to tax and a portion of each payment will be considered to be part of your investment in the Contract and will not be taxed. All amounts received after your investment in the annuity is recovered will be subject to tax. If you begin receiving payments from a tax benefited annuity, for example an IRA, Section 403(b) plan, or Section 457 plan, all of the payments generally will be subject to taxation except to the extent that the contributions were made with after-tax dollars. Unlike life insurance proceeds, the death benefit under an annuity contract is not tax exempt. The gain, if any, is taxable as ordinary income to the beneficiary in the year(s) he or she receives the payments. Tax law requires that all non-qualified deferred annuity contracts issued by the same company to the same contract owner during a calendar year are to be treated as a single, unified contract. The amount of income included and taxed in a distribution (or a transaction deemed a distribution under tax law) taken from any one of such contracts is determined by summing all such contracts. The income earned on an annuity contract held by such entities as corporations, partnerships or trusts generally will be treated as ordinary income received during that year. You may have to pay a 10 percent IRS penalty tax on any amount includible in your ordinary income. This penalty will not apply to any amount received: o after you reach age 59-1/2; o because of your death; o because you become disabled (as defined in the Code); o if the distribution is part of a series of substantially equal periodic payments over your life or life expectancy (or joint lives or life expectancies of you and your designated beneficiary); or PAGE 26 o if it is allocable to an investment before Aug. 14, 1982 (except for Contracts in tax benefited plans). These are the major exceptions to the 10 percent IRS penalty tax. Additional exceptions may apply depending upon whether or not the annuity is tax benefited. For tax benefited Contracts, other penalties apply if you surrender an annuity bought under your plan before the plan specifies that payments can be made under the plan. If you receive all or part of the Contract value from a tax benefited annuity (except an IRA), mandatory 20 percent income tax withholding generally will be imposed at the time the payment is made. In addition, federal income tax and the 10 percent IRS penalty tax for early withdrawals may apply to amounts properly includible in income. This mandatory 20 percent income tax withholding will not be imposed if: o instead of receiving the payment, you elect to have the payment rolled over directly to an IRA or another eligible plan; o the payment is one of a series of substantially equal periodic payments, made at least annually, over your life or life expectancy (or joint lives or life expectancies of you and your designated beneficiary) or made over a period of 10 years or more; or o the payment is a minimum distribution required under the Code. These are the major exceptions to the mandatory 20 percent income tax withholding. Payments made to a surviving spouse instead of being directly rolled over to an IRA may be subject to 20 percent income tax withholding. For taxable distributions that are not subject to the mandatory 20 percent withholding, federal income tax will be withheld from the taxable part of your distribution unless you elect otherwise. State withholding also may be imposed on taxable distributions. You will receive a tax statement for any year that you receive a taxable distribution from your annuity Contract. Our discussion of federal tax laws is based upon our understanding of these laws as they are currently interpreted. Either federal tax laws or current interpretations of them may change. You are urged to consult your tax adviser concerning your specific circumstances. The Company Business IDS Life is a stock insurance company organized in 1957 under the laws of the State of Minnesota. IDS Life is a wholly owned subsidiary of IDS Financial Corporation, which is a wholly owned PAGE 27 subsidiary of American Express Company. IDS Life acts as a direct writer of insurance policies and annuities and as the investment manager of various investment companies. IDS Life is licensed to write life insurance and annuity contracts in 49 states and the District of Columbia. The headquarters of IDS Life is IDS Tower 10, Minneapolis, MN 55440-0010. Selected Financial Data The following selected financial data for IDS Life and its subsidiaries should be read in conjunction with the consolidated financial statements and notes included in the prospectus beginning on page __.
Years ended Dec. 31, (Thousands) 1993 1992 1991 1990 1989 Premiums $ 127,245 $ 114,379 $ 102,338 $ 89,749 $ 135,700 Net investment income 1,783,219 1,616,821 1,422,866 1,204,934 1,030,232 Net gain (loss) on investments (6,737) (3,710) (5,837) 1,022 17,668 Other 304,344 240,959 198,344 165,742 136,809 Total revenues 2,208,071 1,968,449 1,717,711 1,461,447 1,320,409 Income before income taxes 412,726 315,821 259,467 227,742 214,639 Net income $ 270,079 $ 211,170 $ 182,037 $ 157,748 $ 144,019 Total assets $33,057,753 $27,295,773 $22,558,809 $18,088,351 $15,119,628
Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations Results of Operations 1993 Compared to 1992: Consolidated income before income taxes totaled $413 million in 1993, compared with $316 million in 1992. In 1993, $104 million was from the life, disability income, health and long-term care insurance segment, compared with $96 million in 1992. In 1993, $315 million was from the annuity segment, compared with $223 million in 1992. The remaining $6.7 million loss in 1993 was a net loss on investments, compared with a net loss on investments of $3.7 million in 1992. Total premiums received increased to $5.3 billion in 1993, compared with $4.4 billion in 1992. This increase is primarily due to strong sales of variable annuities due to the low interest rate environment. In addition, IDS Life reported small increases in its fixed single premium deferred annuity line. Universal life-type insurance and variable universal life insurance premiums received also increased from the prior year. Total revenues increased to $2.2 billion in 1993, compared with $2.0 billion in 1992. Of this, net investment income was $1.8 billion in 1993, compared with $1.6 billion in 1992, reflecting an increase in invested assets. Total invested assets grew 14 percent to $21.9 billion at Dec. 31, 1993, from $19.2 billion at Dec. 31, 1992. PAGE 28 Policyholder and contractholder charges, which consist primarily of cost of insurance charges on universal life-type policies, increased 18 percent to $184 million in 1993, compared with $156 million in 1992. This increase reflects higher total life insurance in force which grew 13 percent to $46.1 billion at Dec. 31, 1993. Management and other fees increased 41 percent to $120 million in 1993, compared with $85 million in 1992. This is primarily due to an increase in assets held in segregated asset accounts, which grew 45 percent to $9.0 billion at Dec. 31, 1993, resulting from strong sales of variable products. IDS Life provides investment management services for the mutual funds used as investment options for variable annuities and variable life insurance. IDS Life also receives a mortality and expense risk fee from the segregated asset accounts. In 1993, IDS Life reported a net loss on investments of $6.7 million, compared with a net loss on investments of $3.7 million in 1992. During 1993, net realized losses from the sale of investments amounted to $12.5 million. This was offset by a net decrease in allowance for losses of $5.8 million, including an increase of $9.3 million for mortgage investments and real estate, offset by a decrease of $15.1 million for below investment grade bonds (those rated below BBB). Total benefits and expenses increased to $1.8 billion in 1993, compared with $1.7 billion in 1992. The largest component of expenses, interest credited to policyholder accounts for universal life-type insurance and investment contracts aggregated $1.2 billion and was essentially unchanged from the prior year. This reflected interest credited to higher accumulation values offset by lower interest credited rates. Amortization of deferred policy acquisition costs increased to $212 million in 1993, compared with $140 million in 1992, reflecting prior years' growth of life insurance and annuity business and a cumulative adjustment driven by the long-term decrease in accrual rates on fixed annuities. Other insurance and operating expenses, which include non- capitalized commissions and indirect selling expenses, direct and indirect operating expenses, premium taxes and guaranty association expenses increased to $242 million in 1993, compared with $216 million in 1992. In May 1993, the Financial Accounting Standards Board issued SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which IDS Life will implement, effective Jan. 1, 1994. Under the new rules, debt securities that IDS Life has both the positive intent and ability to hold to maturity will be carried at amortized cost. Debt securities that IDS Life does not have the positive intent and ability to hold to maturity and all marketable equity securities will be classified as available-for-sale and carried at fair value. Unrealized gains and losses on securities PAGE 29 classified as available-for-sale will be carried as a separate component of stockholder's equity. The effect of the new rules will be to increase stockholder's equity by approximately $181 million, net of taxes, as of Jan. 1, 1994, but the new rules will have no material impact on IDS Life's results of operations. SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," and FASB Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts," are expected to have no material impact on IDS Life's results of operations or financial condition. 1992 Compared to 1991: Consolidated income before income taxes totaled $316 million in 1992, compared with $259 million in 1991. In 1992, $96 million was from the life, disability income, health and long-term care insurance segment, compared with $90 million in 1991. In 1992, $223 million was from the annuity segment, compared with $175 million in 1991. The remaining $3.7 million loss in 1992 was a net loss on investments, compared with a net loss on investments of $5.8 million in 1991. Total premiums received increased to $4.4 billion in 1992, compared with $3.3 billion in 1991. This increase is primarily due to strong sales of annuities with equity investment options as investors were attracted to the stock market due to the low interest rate environment. In addition, IDS Life reported increases in its fixed single premium deferred annuity line. Universal life-type insurance and variable universal life insurance premiums increased from the prior year. Traditional life insurance premiums were essentially unchanged from the prior year, while long-term care sales increased. Total revenues increased to $2.0 billion in 1992, compared with $1.7 billion in 1991. Of this, net investment income was $1.6 billion in 1992, compared with $1.4 billion in 1991, reflecting an increase in invested assets, partially offset by lower yields. Total invested assets grew 20 percent to $19.2 billion at Dec. 31, 1992, from $16.0 billion at Dec. 31, 1991. Policyholder and contractholder charges, which consist primarily of cost of insurance charges on universal life-type policies, increased to $156 million in 1992, compared with $137 million in 1991. This increase reflects higher total life insurance in force which grew 12 percent to $40.9 billion at Dec. 31, 1992. Management and other fees increased to $85 million in 1992, compared with $61 million in 1991. This is primarily due to an increase in assets held in segregated asset accounts, which grew 33 percent to $6.2 billion at Dec. 31, 1992, resulting from strong sales of variable products and market appreciation. IDS Life provides investment management services for the mutual funds used as investment options for variable annuities and variable life insurance. IDS Life also receives a mortality and expense risk fee from the segregated asset accounts. PAGE 30 In 1992, IDS Life reported a net loss on investments of $3.7 million, compared with a net loss on investments of $5.8 million in 1991. During 1992, net realized gains from the sale of investments amounted to $1.2 million. This was offset by a net increase in allowance for losses of $4.9 million, including an increase of $12.5 million for mortgage investments and real estate, offset by a decrease of $7.6 million for below investment grade bonds (those rated below BBB). During 1991, net realized gains from the sale of investments of $16.0 million were offset by an increase in allowance for losses of $21.8 million, resulting in a net loss of $5.8 million. Total benefits and expenses increased to $1.7 billion in 1992, compared with $1.5 billion in 1991. The largest component of expenses, interest credited to policyholder accounts for universal life-type insurance and investment contracts, increased to $1.2 billion in 1992, compared with $1.1 billion in 1991. This reflects an increase in liabilities for future policy benefits for universal life-type insurance, which grew 8.8 percent to $2.6 billion at Dec. 31, 1992, and an increase in liabilities for future policy benefits for fixed annuities, which grew 20 percent to $16 billion at Dec. 31, 1992. Amortization of deferred policy acquisition costs increased to $140 million in 1992, compared with $116 million in 1991, reflecting prior years' growth of life insurance and annuity business. Other insurance and operating expenses, which include non- capitalized commissions and indirect selling expenses, direct and indirect operating expenses, premium taxes and guaranty association expenses increased to $216 million in 1992, compared with $154 million in 1991. The increase is primarily due to an increased provision for assessments by state guaranty associations. The assessments are used to fund claims of policyholders of insolvent insurance companies. Liquidity and Capital Resources The liquidity requirements of IDS Life are met by funds provided from operations and investment activity. The components of the funds provided are premiums, investment income, proceeds from sales of investments as well as maturities and periodic repayments of investment principal. The primary uses of funds are policy benefits, commissions and operating expenses, policy loans and new investment purchases. IDS Life has available lines of credit with two banks aggregating $75 million, which are used strictly as short-term sources of funds. Borrowings outstanding under the agreements were $1.5 million at Dec. 31, 1993. IDS Life also uses reverse repurchase agreements for short-term liquidity needs. Reverse repurchase agreements aggregated $30 million at Dec. 31, 1993. PAGE 31 At Dec. 31, 1993, investments in fixed maturities comprised 89 percent of IDS Life's total invested assets. Of the fixed maturity portfolio, approximately 51 percent is invested in GNMA, FNMA and FHLMC mortgage-backed securities which are considered AAA/Aaa quality. At Dec. 31, 1993, approximately 8.8 percent of IDS Life's investments in fixed maturities were below investment grade bonds. These investments may be subject to a higher degree of risk than the more "traditional" issues because of the borrower's generally greater sensitivity to adverse economic conditions, such as recession or increasing interest rates, and in certain instances, the lack of an active secondary market. Expected returns on below investment grade bonds reflect consideration of such factors. IDS Life has established an allowance for losses for below investment grade bonds totaling $23 million at Dec. 31, 1993. Management believes that the allowance for losses is adequate, however, future economic factors could impact the ratings of securities owned and additional reserves for losses may be required. At Dec. 31, 1993, net unrealized appreciation on fixed maturities included $1.1 billion of gross unrealized appreciation and $82 million of gross unrealized depreciation. At Dec. 31, 1993, IDS Life had an allowance for losses for mortgage loans totaling $35 million and for real estate totaling $11 million. The economy and other factors have caused an increase in the number of insurance companies that are under regulatory supervision. This circumstance has resulted in an increase in assessments by state guaranty associations to cover losses to policyholders of insolvent or rehabilitated companies. Some assessments can be partially recovered through a reduction in future premium taxes in certain states. IDS Life established an asset for guaranty association assessments from those states allowing a reduction in future premium taxes over a reasonable period of time. The asset will be amortized as future premium taxes are reduced. IDS Life has also estimated the potential effect of future assessments on IDS Life's financial position and results of operations and has established a reserve for such potential assessments. In the first quarter of 1994, IDS Life paid a $40 million dividend to its parent. In 1993, dividends paid to its parent were $25 million. Segment Information IDS Life's operations consist of two business segments: Individual and group life, disability income, long-term care and health insurance; and fixed and variable annuity products designed for individuals, pension plans, small businesses and employer-sponsored groups. IDS Life is not dependent upon any single customer and no single customer accounted for more than 10 percent of revenue in 1993, 1992 or 1991. (See Note 8, Segment information, in the "Notes to Consolidated Financial Statements".) PAGE 32 Reinsurance Reinsurance arrangements are used to reduce exposure to large losses. The maximum amount of risk retained by IDS Life on any one life is $750,000 of life and waiver of premium benefits plus $50,000 of accidental death benefits. The excesses are reinsured with other life insurance companies. At Dec. 31, 1993, traditional life and universal life-type insurance in force aggregated $46.1 billion, of which $3.0 billion was reinsured. IDS Life has a reinsurance agreement with an affiliated company, whereby IDS Life assumed 100 percent of a block of single premium life insurance business. Reserves related to this agreement were $760 million at Dec. 31, 1993. IDS Life also has a reinsurance agreement to cede 50 percent of its long-term care insurance business to an affiliated company. Reserves and reinsurance receivables related to this agreement both amounted to $44.1 million at Dec. 31, 1993. Reserves In accordance with the insurance laws and regulations under which IDS Life operates, it is obligated to carry on its books, as liabilities, actuarially determined reserves to meet its obligations on its outstanding life and health insurance policies and annuity contracts. Reserves for policies and contracts are based on mortality and morbidity tables in general use in the United States. These reserves are computed amounts that, with additions from premiums to be received, and with interest on such reserves compounded annually at assumed rates, will be sufficient to meet IDS Life's policy obligations at their maturities or in the event of an insured's death. In the accompanying financial statements these reserves are determined in accordance with generally accepted accounting principles. (See Note 1, Liabilities for future policy benefits, in the "Notes to Consolidated Financial Statements.") Investments Of IDS Life's consolidated total investments of $21.9 billion at Dec. 31, 1993, 46 percent was invested in mortgage-backed securities, 43 percent in corporate and other bonds, 9.4 percent in primary mortgage loans on real estate, 1.6 percent in policy loans and the remaining 0.5 percent in other investments. Competition IDS Life is engaged in a business that is highly competitive due to the large number of stock and mutual life insurance companies and other entities marketing insurance products. There are over 2,600 stock, mutual and other types of insurers in the life insurance business. In Fortune magazine's May 1993 listing of the 50 largest life insurance companies as ranked by assets, IDS Life ranked fourteenth. Best's Insurance Reports, Life-Health edition, 1993, assigned IDS Life one of its highest classifications, A+ (Superior). PAGE 33 Employees As of Dec. 31, 1993, IDS Life and its subsidiaries had 764 employees; including 711 employed at the home office in Minneapolis, MN, and 53 employed at IDS Life Insurance Company of New York located in Albany, NY. Properties IDS Life occupies office space in Minneapolis, MN, which is rented by its parent, IDS Financial Corporation. IDS Life reimburses IDS Financial Corporation for rent based on direct and indirect allocation methods. Facilities occupied by IDS Life and its subsidiaries are believed to be adequate for the purposes for which they are used and are well maintained. State Regulation IDS Life is subject to the laws of the State of Minnesota governing insurance companies and to the regulations of the Minnesota Department of Commerce. An annual statement in the prescribed form is filed with the Minnesota Department of Commerce each year covering IDS Life's operation for the preceding year and its financial condition at the end of such year. Regulation by the Minnesota Department of Commerce includes periodic examination to determine IDS Life's contract liabilities and reserves so that the Minnesota Department of Commerce may certify that these items are correct. IDS Life's books and accounts are subject to review by the Minnesota Department of Commerce at all times. Such regulation does not, however, involve any supervision of the account's management or IDS Life's investment practices or policies. In addition, IDS Life is subject to regulation under the insurance laws of other jurisdictions in which it operates. A full examination of IDS Life's operations is conducted periodically by the National Association of Insurance Commissioners. Under insurance guaranty fund laws, in most states, insurers doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer's own financial strength. Directors and Executive Officers* The members of the Board of Directors and the principal executive officers of IDS Life, together with the principal occupation of each during the last five years, are as follows: Directors Louis C. Fornetti, 44 Director since March 1994; Senior Vice President and Director, IDS, since February 1985. PAGE 34 David R. Hubers, 51 Director since September 1989; President and Chief Executive Officer, IDS, since August 1993, and Director, IDS, since January 1984. Senior Vice President, Finance and Chief Financial Officer, IDS, from January 1984 to August 1993. Richard W. Kling, 53 Director since February 1984; President since March 1994. Executive Vice President, Marketing and Products from January 1988 to March 1994. Vice President, IDS, since January 1988. Director of IDS Life Series Fund, Inc. and Manager of IDS Life Variable Annuity Funds A & B. Paul F. Kolkman, 47 Director since May 1984; Executive Vice President since March 1994; Vice President, Finance from May 1984 to March 1994; Vice President, IDS, since January 1987. Peter A. Lefferts, 52 Director and Executive Vice President, Marketing since March 1994; Senior Vice President and Director, IDS, since February 1986. Janis E. Miller, 42 Director and Executive Vice President, Variable Assets since March 1994; Vice President, IDS, since June 1990. Director, Mutual Funds Product Development and Marketing, IDS, from May 1987 to May 1990. Director of IDS Life Series Fund, Inc. and Manager of IDS Life Variable Annuity Funds A & B. James A. Mitchell, 52 Chairman of the Board since March 1994; Director since July 1984; Chief Executive Officer since November 1986; President from July 1984 to March 1994; Senior Vice President and Director, IDS, since July 1984. Barry J. Murphy, 43 Director and Executive Vice President, Client Service since March 1994; Senior Vice President, Operations, Travel Related Services (TRS), a subsidiary of American Express Company, since July 1992; Vice President, TRS, from November 1989 to July 1992; Chief Operating Officer, TRS, from March 1988 to November 1989. Stuart A. Sedlacek, 36 Director and Executive Vice President, Assured Assets since March 1994; Vice President, IDS, since September 1988. Melinda S. Urion, 40 Director and Controller since September 1991; Executive Vice President since March 1994; Vice President and Treasurer from September 1991 to March 1994; Vice President, IDS, since September 1991; Chief Accounting Officer, IDS, from July 1988 to September 1991. PAGE 35 Officers Other Than Directors Morris Goodwin Jr., 42 Vice President and Treasurer since March 1994; Vice President and Corporate Treasurer, IDS, since July 1989; Chief Financial Officer and Treasurer, IDS Bank & Trust, from January 1988 to July 1989. William A. Stoltzmann, 45 Vice President, General Counsel and Secretary since 1985. *The address for all of the directors and principal officers is: IDS Tower 10, Minneapolis, MN 55440-0010. Executive Compensation Executive officers of IDS Life also may serve one or more affiliated companies. The following table reflects cash compensation paid to the five most highly compensated executive officers as a group for services rendered in 1993 to IDS Life and its affiliates. The table also shows the total cash compensation paid to all executive officers of IDS Life, as a group, who were executive officers at any time during 1993. Name of individual Cash or number in group Position held compensation Five most highly compensated executive officers as a group: $ 1,929,713 James A. Mitchell President Richard W. Kling Exec. Vice President, Marketing and Products ReBecca K. Roloff Exec. Vice President, Operations Alan R. Dakay Vice President, Institutional Insurance Marketing Paul F. Kolkman Vice President, Finance All executive officers as a group (12) $ 2,811,894 Security Ownership of Management IDS Life's directors and officers do not beneficially own any outstanding shares of stock of IDS Life. All of the outstanding shares of stock of IDS Life are beneficially owned by its parent, IDS Financial Corporation. The percentage of shares of IDS Financial Corporation owned by any director, and by all directors and officers of IDS Life as a group, does not exceed one percent of the class outstanding. PAGE 36 Legal Proceedings and Opinion Legal matters in connection with federal laws and regulations affecting the issue and sale of the Contracts described in this prospectus and the organization of IDS Life, its authority to issue Contracts under Minnesota law and the validity of the forms of the Contracts under Minnesota law have been passed on by the General Counsel of IDS Life. Experts The consolidated financial statements of IDS Life Insurance Company at Dec. 31, 1993, and 1992, and for each of the three years in the period ended Dec. 31, 1993, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young, independent auditors, as set forth in their reports thereon appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. Appendix A Partial Surrender Illustration Involving a Surrender Charge and a Market Value Adjustment Annuity Assumptions: Single Payment $10,000 Guarantee Period 10 Years Guarantee Rate (ig) 4.5 percent effective annual yield End of Contract year Contract Surrender Accumulation Values year Charge % if no surrenders 1 8% $10,450.00 2 7 $10,920.25 3 6 $11,411.66 4 5 $11,925.19 5 4 $12,461.82 6 3 $13,022.60 7 2 $13,608.62 8 1 $14,221.01 9 0 $14,860.95 10 0 $15,529.69 Partial Surrender Assumptions: On the first day of your 4th Contract year you request a partial surrender of: Example I - $2,000 of your Accumulation Value Example II - A $2,000 net surrender check You may surrender 10 percent of $11,411.66 (end of 3rd Contract year Accumulation Value) without surrender charge but subject to a Market Value Adjustment -- this is $1,141.17 PAGE 37 The excess Market Adjusted Value surrendered is subject to both a 5 percent (4th Contract year) surrender charge and a Market Value Adjustment. The current rate (ic) for applicable new sales and renewals = 4 percent The number of full years left in your Guarantee Period (N) = 7 The number of fractional years left in your Guarantee Period (t) = 0 Example I - $2,000 of Accumulation Value Surrendered What Will Be Your Market Value Adjustment Amount? The Market Adjusted Value of your $2,000 partial surrender will be: Renewal Value of Accumulation Value Surrendered (1 + ic + .0025)(N+t) = $2,000 (1 + ig)7 (1 + ic + .0025)7 = $2,000 (1.045)7 (1.0425)7 = $2,033.82 The Market Value Adjustment = the Market Adjusted Value surrendered less the Accumulation Value surrendered $2,033.82 - $2,000 = $33.82 (NOTE: This Market Value Adjustment is Positive. In Other Cases The Market Value Adjustment May Be Negative.) What Will Be Your Surrender Charge Amount? The surrender charge will be 5 percent multiplied by the excess of the Market Adjusted Value over the Accumulation Value that may be surrendered without surrender charge: ($2,033.82 - $1,141.17) x .05 = $44.63 What Net Amount Will You Receive? Your Contract's Accumulation Value will decrease by $2,000 and we will send you a check for: Accumulation Value surrendered $2,000.00 Plus Market Value Adjustment 33.82 Less surrender charge (44.63) Net surrender amount $1,989.19 PAGE 38 Example II - $2,000 Net Surrender Check Requested What Will Be The Accumulation Value Surrendered? Tell us if you want a specific net surrender check amount. We will work backwards using an involved formula to determine how much Accumulation Value must be surrendered to result in a net check to you for a specific amount. For a $2,000 net check to you, the formula results in $2,011.20 of Accumulation Value to be surrendered. What Will Be Your Market Value Adjustment Amount? The Market Adjusted Value is: Renewal Value of Accumulation Value Surrendered (1 + ic + .0025)(N+t) = $2,011.20 (1 + ig)7 (1 + ic + .0025)7 = $2,011.20 (1.045)7 (1.0425)7 = $2,045.21 The Market Value Adjustment = the Market Adjusted Value surrendered less the Accumulation Value surrendered $2,045.21 - $2,011.20 = $34.00 (NOTE: This Market Value Adjustment is Positive. In Other Cases The Market Value Adjustment May Be Negative.) What Will Be Your Surrender Charge Amount? The surrender charge will be 5 percent multiplied by the excess of the Market Adjusted Value over the Accumulation Value that may be surrendered without surrender charge: ($2,045.21 - $1,141.17) x .05 = $45.20 What Net Amount Will You Receive? Your Contract's Accumulation Value will decrease by $2,011.20 and we will send you a check for: Accumulation Value surrendered $2,011.20 Plus Market Value Adjustment 34.00 Less surrender charge (45.20) Net surrender amount $2,000.00 PAGE 39 Appendix B Market Value Adjustment Illustration Annuity Assumptions: Single Payment $50,000 Guarantee Period 10 Years Guarantee Rate 4.5 percent effective annual yield Market Adjustment Assumptions: These examples show how the Market Value Adjustment may affect your Contract values. The surrenders in these examples occur one year after the Contract date. There are no previous surrenders. The Accumulation Value at the end of one year is $52,250. If there aren't any surrenders, the Renewal Value at the end of the 10 year Guarantee Period will be $77,648.47. The Market Value Adjustment is based on the rate we are crediting (at the time of your surrender) on new Contracts with the same length Guarantee Period as the time remaining in your Guarantee Period. After one year, you have 9 years left of your 10 year Guarantee Period. Example I shows a downward Market Value Adjustment. Example II shows an upward Market Value Adjustment. These examples do not show the surrender charge (if any) which would be calculated separately after the Market Value Adjustment. Surrender charge calculations are shown in Appendix A. Market Adjusted Value Formula: Market Adjusted = (Renewal Value) Value (1 + ic + .0025)(N+t) Renewal Value -- The Accumulation Value at the end of the current Guarantee Period ic -- The Current Interest Rate offered for new Contract sales and renewals for the number of years remaining in the Guarantee Period N -- The number of complete Contract years to the end of the current Guarantee Period t -- The fraction of the Contract year remaining to the end of the Contract year Example I - Downward Market Value Adjustment A surrender results in a downward Market Value Adjustment when interest rates have increased. Assume after 1 year, we are now crediting 5 percent for a new Contract with a 9 year Guarantee Period. If you fully surrender, the Market Adjusted Value would be: PAGE 40 Renewal Value (1 + ic + .0025)(N+t) = $77,648.47 (1 + .05 + .0025)9 = $48,993 The Market Value Adjustment is a $3,257 reduction of the Accumulation Value: ($3,257) = $48,993 - $52,250 If you surrendered half of your Contract instead of all, the Market Adjusted Value of the surrendered portion would be one-half that of the full surrender: $38,824.24 $24,496.50 = (1 + .05 + .0025)9 Example II - Upward Market Value Adjustment A surrender results in an upward Market Value Adjustment when interest rates have decreased. Assume after 1 year, we are now crediting 4 percent for a new Contract with a 9 year guarantee period. If you fully surrender, the Market Adjusted Value would be: Renewal Value (1 + ic + .0025)(N+t) = $77,648.47 (1 + .04 + .0025)9 = $53,388.58 The Market Value Adjustment is a $1,138.58 increase of the Accumulation Value: $1,138.58 = $53,388.50 - $52,250 If you surrendered half of your Contract instead of all, the Market Adjusted Value of the surrendered portion would be one-half that of the full surrender: $38,824.24 $26,694.29 = (1 + .04 + .0025)9 PAGE 41 Annual Financial Information Report of Independent Auditors The Board of Directors IDS Life Insurance Company We have audited the accompanying consolidated balance sheets of IDS Life Insurance Company (a wholly owned subsidiary of IDS Financial Corporation) as of December 31, 1993 and 1992, and the related consolidated statement of income and cash flows for each of the three years in the period ended December 31, 1993. 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. 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 consolidated financial position of IDS Life Insurance Company at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Ernst & Young Minneapolis, Minnesota February 3, 1994 PAGE 42 IDS Life Financial Information The Financial statements shown below are those of the insurance company and not those of the Account. They are included in the prospectus for the purpose of informing investors as to the financial condition of the insurance company and its ability to carry out its obligations under the variable annuity contracts. IDS Life Insurance Company
Consolidated Balance Sheets Dec. 31, 1993 Dec. 31,1992 Assets (Thousands) ______________________________________________________________________________________________________________________________ Investments: Fixed maturities (Fair value: 1993, $20,425,979; 1992, $17,896,374) $19,392,424 $17,185,879 Mortgage loans on real estate (Fair value: 1993, $2,125,686; 1992, $1,785,970) 2,055,450 1,688,490 Policy loans 350,501 320,016 Other investments 56,307 51,955 ______________________________________________________________________________________________________________________________ Total investments 21,854,682 19,246,340 ______________________________________________________________________________________________________________________________ Cash and cash equivalents 146,281 73,563 Receivables: Reinsurance 55,298 - Amounts due from brokers 5,719 20,202 Other accounts receivable 21,459 20,095 Premiums due 1,329 1,361 ______________________________________________________________________________________________________________________________ Total receivables 83,805 41,658 ______________________________________________________________________________________________________________________________ Accrued investment income 307,177 285,120 Deferred policy acquisition costs 1,652,384 1,440,875 Other assets 21,730 18,672 Assets held in segregated asset accounts, primarily common stocks at market 8,991,694 6,189,545 ______________________________________________________________________________________________________________________________ Total assets $33,057,753 $27,295,773 ______________________________________________________________________________________________________________________________ Liabilities and Stockholder's Equity ______________________________________________________________________________________________________________________________ Liabilities: Fixed annuities - future policy benefits $18,492,135 $16,342,419 Universal life-type insurance - future policy benefits 2,753,455 2,567,687 Traditional life-type insurance - future policy benefits 210,205 210,886 Disability income, health and long-term care insurance - future policy benefits 185,272 104,896 Policy claims and other policyholders' funds 44,516 49,899 Deferred federal income taxes 43,620 87,913 Amounts due to brokers 351,486 258,654 Other liabilities 292,024 235,509 Liabilities related to segregated asset accounts 8,991,694 6,189,545 ______________________________________________________________________________________________________________________________ Total liabilities 31,364,407 26,047,408 ______________________________________________________________________________________________________________________________ Stockholder's equity: Capital stock, $30 per value per share; 100,000 shares authorized, issued and outstanding 3,000 3,000 Additional paid-in capital 222,000 22,000 Net unrealized appreciation on equity securities 114 214 Retained earnings 1,468,232 1,223,151 ______________________________________________________________________________________________________________________________ Total stockholder's equity 1,693,346 1,248,365 ______________________________________________________________________________________________________________________________ Total liabilities and stockholder's equity $33,057,753 $27,295,773 Commitments and contingencies (Note 6) ______________________________________________________________________________________________________________________________ See accompanying notes to consolidated financial statements. /TABLE PAGE 43
Consolidated Statement of Income Years ended Dec. 31, 1993 1992 1991 (Thousands) __________________________________________________________________________________________________________________________________ Revenues: Premiums: Traditional life insurance $ 48,137 $ 49,719 $ 49,706 Disability income and long-term care insurance 79,108 64,660 52,632 __________________________________________________________________________________________________________________________________ 127,245 114,379 102,338 Policyholder and contractholder charges 184,205 156,368 137,202 Management and other fees 120,139 84,591 61,142 Net investment income 1,783,219 1,616,821 1,422,866 Net loss on investments (6,737) (3,710) (5,837) __________________________________________________________________________________________________________________________________ Total revenues 2,208,071 1,968,449 1,717,711 __________________________________________________________________________________________________________________________________ Benefits and expenses: Death and other benefits - traditional life insurance 32,136 34,139 30,170 Death and other benefits - universal life-type insurance and investment contracts 49,692 42,174 38,529 Death and other benefits - disability income, health and long-term care insurance 13,148 10,701 8,242 Increase (decrease) in liabilities for future policy benefits - traditional life insurance (4,513) (5,788) (6,425) Increase (decrease) in liabilities for future policy benefits - disability income, health and long-term care insurance 32,528 27,172 19,700 Interest credited on universal life-type insurance and investment contracts 1,218,647 1,188,379 1,098,281 Amortization of deferred policy acquisition costs 211,733 140,159 116,078 Other insurance and operating expenses 241,974 215,692 153,669 __________________________________________________________________________________________________________________________________ Total benefits and expenses 1,795,345 1,652,628 1,458,244 __________________________________________________________________________________________________________________________________ Income before income taxes 412,726 315,821 259,467 Income taxes 142,647 104,651 77,430 __________________________________________________________________________________________________________________________________ Net income $ 270,079 $ 211,170 $ 182,037 __________________________________________________________________________________________________________________________________ See accompanying notes to consolidated financial statements. /TABLE PAGE 44
Consolidated Statements of Cash Flows Years ended Dec. 31, 1993 1992 1991 (Thousands) __________________________________________________________________________________________________________________________________ Cash flows from operating activities: Net income $ 270,079 $ 211,170 $ 182,037 Adjustments to reconcile net income to net cash provided by operating activities: Issuance - policy loans, excluding universal life-type insurance (35,886) (32,881) (29,309) Repayment - policy loans, excluding universal life-type insurance 29,557 26,750 19,928 Change in reinsurance receivable (55,298) - - Change in other accounts receivable (1,364) (4,772) (1,558) Change in accrued investment income (22,057) (15,853) (26,022) Change in deferred policy acquisition costs, net (211,509) (229,252) (175,442) Change in liabilities for future policy benefits for traditional life, disability income, health and long-term care insurance 79,695 21,384 13,275 Change in policy claims and other policyholders' funds (5,383) (1,347) 11,801 Change in deferred federal income taxes (44,237) (30,385) (29,207) Change in other liabilities 56,515 88,997 45,323 Amortization of premium (accretion of discount), net (27,438) (4,289) 19,726 Net loss on investments 6,737 3,710 5,837 Premiums related to universal life-type insurance 397,883 312,621 264,504 Surrenders and death benefits related to universal life-type insurance (255,133) (166,162) (109,307) Interest credited to account balances related to universal life-type insurance 156,885 161,873 160,585 Policyholder and contractholder charges, non-cash (115,140) (100,975) (96,211) Other, net (1,907) (10,647) 2,258 __________________________________________________________________________________________________________________________________ Net cash provided by operating activities $ 221,999 $ 229,942 $ 258,218 __________________________________________________________________________________________________________________________________ Cash flows from investing activities: Acquisition of investments, excluding policy loans $(7,102,546) $(7,001,348) $(5,518,481) Maturities, sinking fund payments and calls of investments, excluding policy loans 3,931,819 2,700,479 838,589 Sale of investments, excluding policy loans 613,571 1,073,950 2,274,401 Change in amounts due from brokers 14,483 289,335 (134,312) Change in amounts due to brokers 92,832 42,182 72,382 __________________________________________________________________________________________________________________________________ Net cash used in investing activities (2,449,841) (2,895,402) (2,467,421) __________________________________________________________________________________________________________________________________ Cash flows from financing activities: Considerations received related to investment contracts 2,843,668 2,821,069 2,316,333 Surrenders and death benefits related to investment contracts (1,765,869) (1,168,633) (871,808) Interest credited to account balances related to investment contracts 1,071,917 1,026,506 937,696 Issuance - universal life-type insurance policy loans (70,304) (72,007) (76,010) Repayment - universal life-type insurance policy loans 46,148 40,351 31,860 Capital contribution from parent 200,000 - - Cash dividend to parent (25,000) (20,000) (20,000) __________________________________________________________________________________________________________________________________ Net cash provided by financing activities 2,300,560 2,627,286 2,318,071 __________________________________________________________________________________________________________________________________ Net increase (decrease) in cash and cash equivalents 72,718 (38,174) 108,868 Cash and cash equivalents at beginning of year 73,563 111,737 2,869 __________________________________________________________________________________________________________________________________ Cash and cash equivalents at end of year $ 146,281 $ 73,563 $ 111,737 __________________________________________________________________________________________________________________________________ See accompanying notes to consolidated financial statements. /TABLE PAGE 45 Notes to Consolidated Financial Statements ($ Thousands) Dec. 31, 1993, 1992, 1991 1. Summary of significant accounting policies Nature of business IDS Life Insurance Company (the Company) is engaged in the insurance and annuity business. The Company sells various forms of fixed and variable individual life insurance, group life insurance, individual and group disability income insurance, long-term care insurance, and single and installment premium fixed and variable annuities. Basis of presentation The Company is a wholly owned subsidiary of IDS Financial Corporation (IDS), which is a wholly owned subsidiary of American Express Company. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, IDS Life Insurance Company of New York and American Enterprise Life Insurance Company. All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which vary in certain respects from reporting practices prescribed or permitted by state insurance regulatory authorities. Also, the consolidated financial statements are presented on a historical cost basis without adjustment of the net assets attributable to the 1984 acquisition of IDS by American Express Company. Investments Investments in fixed maturities are carried at cost, adjusted where appropriate for amortization of premiums and accretion of discounts. Mortgage loans on real estate are carried principally at the unpaid principal balances of the related loans. Policy loans are carried at the aggregate of the unpaid loan balances which do not exceed the cash surrender values of the related policies. Other investments include interest rate caps, real estate and equity securities. When evidence indicates a decline, which is other than temporary, in the underlying value or earning power of individual investments, such investments are written down to the estimated realizable value by a charge to income. Equity securities are carried at market value and the related net unrealized appreciation or depreciation is reported as a credit or charge to stockholder's equity. The Company has the ability and the intent to recover the costs of these investments by holding them for the forseeable future. The ability to hold investments to scheduled maturity dates is dependent on, among other things, annuity contract owners maintaining their annuity contracts in force. The Company will implement, effective January 1, 1994, Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Under the new rules, debt securities that the Company has both the positive intent and ability to hold to maturity will be carried at amortized cost. Debt securities that the Company does not have the positive intent PAGE 46 1. Summary of significant accounting policies (continued) and ability to hold to maturity and all marketable equity securities will be classified as available-for-sale and carried at fair value. Unrealized gains and losses on securites classified as available-for-sale will be carried as a separate component of stockholder's equity. The effect of the new rules will be to increase stockholder's equity by approximately $181 million, net of taxes, as of January 1, 1994, but the new rules will have no material impact on the Company's results of operations. Realized investment gain or loss is determined on an identified cost basis. Interest rate cap contracts are purchased to reduce the Company's exposure to rising interest rates which would increase the cost of future policy benefits for interest sensitive products. Costs are amortized over the lives of the agreements and benefits are recognized when realized. Prepayments are anticipated on certain investments in mortgage-backed securities in determining the constant effective yield used to recognize interest income. Prepayment estimates are based on information received from brokers who deal in mortgage-backed securities. Statement of cash flows The Company considers investments with a maturity at the date of their acquisition of three months or less to be cash equivalents. These securities are carried principally at amortized cost which approximates fair value. Supplementary information to the consolidated statement of cash flows for the years ended Dec. 31 is summarized as follows: 1993 1992 1991 ___________________________________________________________________ Cash paid during the year for: Income taxes $188,204 $140,445 $111,809 Interest on borrowings 2,661 1,265 108 ___________________________________________________________________ Recognition of profits on annuity contracts and insurance policies The Company issues single premium deferred annuity contracts that provide for a service fee (surrender charge) at annually decreasing rates upon withdrawal of the annuity accumulation value by the contract owner. No sales fee is deducted from the contract considerations received on these contracts ("no load" annuities). Single premium deferred annuities issued prior to 1980 had a sales fee and no surrender charge. All of the Company's single premium deferred annuity contracts provide for crediting the contract owners' accumulations at specified rates of interest. Such rates are revised by the Company from time to time based on changes in the market investment yield rates for fixed-income securities. PAGE 47 1. Summary of significant accounting policies (continued) Profits on single premium deferred annuities and installment annuities are recognized by the Company over the lives of the contracts and represent the excess of investment income earned from investment of contract considerations over interest credited to contract owners and other expenses. The retrospective deposit method is used in accounting for universal life-type insurance. This method recognizes profits over the lives of the policies in proportion to the estimated gross profits expected to be realized. Premiums on traditional life, disability income, health and long-term care insurance policies are recognized as revenue when collected or due, and related benefits and expenses are associated with premium revenue in a manner that results in recognition of profits over the lives of the insurance policies. This association is accomplished by means of the provision for future policy benefits and the deferral and subsequent amortization of policy acquisition costs. Deferred policy acquisition costs The costs of acquiring new business, principally sales compensation, policy issue costs, underwriting and certain sales expenses, have been deferred on insurance and annuity contracts. The deferred acquisition costs for single premium deferred annuities and installment annuities are amortized based upon surrender charge revenue and a portion of the excess of investment income earned from investment of the contract considerations over the interest credited to contract owners. The costs for universal life-type insurance are amortized over the lives of the policies as a percentage of the estimated gross profits expected to be realized on the policies. For traditional life, disability income, health and long-term care insurance policies, the costs are amortized over an appropriate period in proportion to premium revenue. Liabilities for future policy benefits Liabilities for universal life-type insurance, single premium deferred annuities and installment annuities are accumulation values. Liabilities for fixed annuities in a benefit status are based on the Progressive Annuity Table with interest at 5 percent, the 1971 Individual Annuity Table with interest at 7 percent or 8.25 percent, or the 1983a Table with various interest rates ranging from 5.5 percent to 9.5 percent, depending on year of issue. Liabilities for future benefits on traditional life insurance have been computed principally by the net level premium method, based on anticipated rates of mortality (approximating the 1965-1970 Select and Ultimate Basic Table for policies issued after 1980 and the 1955-1960 Select and Ultimate Basic Table for policies issued prior to 1981), policy persistency derived from Company experience data (first year rates ranging from approximately 70 percent to 90 percent and increasing rates thereafter), and estimated future investment yields of 4 percent for policies issued before 1974 and PAGE 48 1. Summary of significant accounting policies (continued) 5.25 percent for policies issued from 1974 to 1980. Cash value plans issued in 1980 and later assume future investment rates that grade from 9.5 percent to 5 percent over 20 years. Term insurance issued from 1981 to 1984 assumes an 8 percent level investment rate and term insurance issued after 1984 assumes investment rates that grade from 10 percent to 6 percent over 20 years. Liabilities for future disability income policy benefits have been computed principally by the net level premium method, based on the 1964 Commissioners Disability Table with the 1958 Commissioners Standard Ordinary Mortality Table at 3 percent interest for 1980 and prior, 8 percent interest for persons disabled from 1981 to 1991 and 6 percent interest for persons disabled after 1991. Liabilities for future benefits on long-term care insurance have been computed principally by the net level premium method, using morbidity rates based on the 1985 National Nursing Home Survey and mortality rates based on the 1983a Table. The interest rate basis is 9.5 percent grading to 7 percent over ten years for policies issued from 1989 to 1992, 7.75 percent grading to 7 percent over four years for policies issued after 1992, 8 percent for claims incurred in 1989 to 1991 and 6 percent for claims incurred after 1991. At Dec. 31, 1993 and 1992, the carrying amount and fair value of fixed annuities future policy benefits, after excluding life insurance-related contracts carried at $913,127 and $834,909, were $17,579,008 and $15,507,510, and $16,881,747 and $14,867,066, respectively. The fair value is net of policy loans of $59,132 and $51,394 at Dec. 31, 1993 and 1992, respectively. The fair value of these benefits is based on the status of the annuities at Dec. 31, 1993 and 1992. The fair value of deferred annuities is estimated as the carrying amount less any surrender charges and related loans. The fair value for annuities in non-life contingent payout status is estimated as the present value of projected benefit payments at the rate appropriate for contracts issued in 1993 and 1992. Reinsurance The maximum amount of life insurance risk retained by the Company on any one life is $750 of life and waiver of premium benefits plus $50 of accidental death benefits. The maximum amount of disability income risk retained by the Company on any one life is $6 of monthly benefit for benefit periods longer than three years. The excesses are reinsured with other life insurance companies on a yearly renewable term basis. Graded premium whole life policies and long term care are primarily reinsured on a coinsurance basis. In 1993 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts." Under SFAS No. 113, amounts paid or deemed to have been paid for reinsurance contracts are recorded as reinsurance receivables. Prior to 1993, these amounts were recorded as a reduction of the liability for future insurance policy benefits. The cost of reinsurance is accounted for over the period covered by the reinsurance contract. PAGE 49 1. Summary of significant accounting policies (continued) Federal income taxes The Company's taxable income is included in the consolidated federal income tax return of American Express Company. The Company provides for income taxes on a separate return basis, except that, under an agreement between IDS and American Express Company, tax benefit is recognized for losses to the extent they can be used on the consolidated tax return. It is the policy of IDS and its subsidiaries that IDS will reimburse a subsidiary for any tax benefit. Included in other liabilities at Dec. 31, 1993 and 1992 are $14,709 and $18,181, respectively, payable to IDS for federal income taxes. Segregated asset account business The segregated asset account assets and liabilities represent funds held for the exclusive benefit of the variable annuity and variable life insurance contract owners. The Company receives investment management and mortality and expense assurance fees from the variable annuity and variable life insurance mutual funds and segregated asset accounts. The Company also deducts a monthly cost of insurance charge and receives a minimum death benefit guarantee fee and issue and administrative fee from the variable life insurance segregated asset accounts. The Company makes contractual mortality assurances to the variable annuity contract owners that the net assets of the segregated asset accounts will not be affected by future variations in the actual life expectancy experience of the annuitants and the beneficiaries from the mortality assumptions implicit in the annuity contracts. The Company makes periodic fund transfers to, or withdrawals from, the segregated asset accounts for such actuarial adjustments for variable annuities that are in the benefit payment period. The Company guarantees, for the variable life insurance policyholders, the cost of the contractual insurance rate and that the death benefit will never be less than the death benefit at the date of issuance. At Dec. 31, 1993 and 1992 the fair value of liabilities related to segregated asset accounts was $8,305,209 and $5,727,402, respectively. The fair value of these liabilities at Dec. 31, 1993 and 1992 is estimated as the carrying amount less variable insurance contracts carried at $346,276 and $226,946, respectively, and surrender charges, if applicable. Reclassification Certain 1992 and 1991 amounts have been reclassified to conform to the 1993 presentation. 2. Investments Market values of investments in fixed maturities represent quoted market prices and estimated fair values when quoted prices are not available. Estimated fair values are determined by established procedures involving, among other things, review of market indices, price levels of current offerings of comparable issues, price estimates and market data from independent brokers and financial files. PAGE 50 2. Investments (continued) Net gain (loss) on investments for the years ended Dec. 31 is summarized as follows:
1993 1992 1991 ________________________________________________________________________________________________ Fixed maturities $ 5,460 $ 14,474 $ 22,750 Mortgage loans (11,422) (5,004) (1,064) Other investments (6,606) (8,265) (5,695) (12,568) 1,205 15,991 Net (increase) decrease in allowance for losses 5,831 (4,915) (21,828) $ (6,737) $ (3,710) $ (5,837) ________________________________________________________________________________________________ Changes in net unrealized appreciation (depreciation) of investments for the years ended Dec. 31 are summarized as follows: 1993 1992 1991 ________________________________________________________________________________________________ Fixed maturities $323,060 $(128,683) $861,355 Equity securities (156) 300 418 ________________________________________________________________________________________________ Fair values of and gross unrealized gains and losses on investments in fixed maturities carried at amortized cost at Dec. 31 are as follows: Gross Gross Amortized Unrealized Unrealized Fair 1993 Cost Gains Losses Value ________________________________________________________________________________________________ U.S. Government agency obligations $ 63,532 $ 3,546 $ 1,377 $ 65,701 State and municipal obligations 11,072 2,380 - 13,452 Corporate bonds and obligations 9,362,074 768,747 45,706 10,085,115 Mortgage-backed securities 9,978,523 341,067 57,879 10,261,711 19,415,201 1,115,740 104,962 20,425,979 Less allowance for losses 22,777 - 22,777 - $19,392,424 $1,115,740 $ 82,185 $20,425,979 ________________________________________________________________________________________________ Gross Gross Amortized Unrealized Unrealized Fair 1992 Cost Gains Losses Value ________________________________________________________________________________________________ U.S. Government agency obligations $ 36,753 $ 3,658 $ 4 $ 40,407 State and municipal obligations 11,234 1,542 - 12,776 Corporate bonds and obligations 7,688,190 431,781 104,707 8,015,264 Mortgage-backed securities 9,487,601 377,539 37,213 9,827,927 17,223,778 814,520 141,924 17,896,374 Less allowance for losses 37,899 - 37,899 - $17,185,879 $ 814,520 $104,025 $17,896,374 ________________________________________________________________________________________________ The amortized cost and fair value of investments in fixed maturities at Dec. 31, 1993 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Fair Cost Value ________________________________________________________________________________________________ Due in one year or less $ 89,160 $ 90,928 Due from one to five years 1,430,756 1,532,298 Due from five to ten years 5,488,955 5,924,580 Due in more than ten years 2,427,807 2,616,462 Mortgage-backed securities 9,978,523 10,261,711 $19,415,201 $20,425,979 ________________________________________________________________________________________________ /TABLE PAGE 51 2. Investments (continued) Proceeds from sales of investments in fixed maturities during 1993 and 1992 were $482,523 and $996,619, respectively. During 1993 and 1992, gross gains of $48,499 and $94,915, respectively, and gross losses of $43,039 and $80,441, respectively, were realized on those sales. At Dec. 31, 1993, the amount of net unrealized appreciation on equity securities included $160 of gross unrealized appreciation, $nil of gross unrealized depreciation and deferred tax credits of $46. At Dec. 31, 1992, the amount of net unrealized appreciation on equity securities included $328 of gross unrealized appreciation, $12 of gross unrealized depreciation and deferred tax credits of $102. The fair value of equity securities was $1,900 and $2,005 at Dec. 31, 1993 and 1992, respectively. Included in other investments at Dec. 31, 1993 are interest rate caps at amortized cost of $26,923 with a fair value of $14,201. These interest rate caps carry a notional amount of $4,400,000 and expire on various dates from 1994 to 1998. At Dec. 31, 1993, bonds carried at $4,184 were on deposit with various states as required by law. Net investment income for the years ended Dec. 31 is summarized as follows:
1993 1992 1991 ______________________________________________________________________________________ Interest on fixed maturities $1,589,802 $1,449,234 $1,279,317 Interest on mortgage loans 175,063 148,693 122,723 Other investment income 29,345 24,281 20,005 Interest on cash equivalents 2,137 5,363 8,729 1,796,347 1,627,571 1,430,774 Less investment expenses 13,128 10,750 7,908 ______________________________________________________________________________________ $1,783,219 $1,616,821 $1,422,866 ______________________________________________________________________________________
At Dec. 31, 1993, investments in fixed maturities comprised 89 percent of the Company's total invested assets. These securities are rated by Moody's and Standard & Poor's (S&P), except for approximately $2.1 billion which is rated by IDS internal analysts using criteria similar to Moody's and S&P. A summary of investments in fixed maturities by rating on Dec. 31 is as follows:
Dec. 31, Dec. 31, Rating 1993 1992 ________________________________________________________________________ Aaa/AAA $ 9,959,884 $ 9,480,345 Aa/AA 258,659 219,370 Aa/A 160,638 109,806 A/A 2,021,177 1,735,750 A/BBB 654,949 447,592 Baa/BBB 3,936,366 3,352,192 Baa/BB 717,606 392,361 Below investment grade 1,705,922 1,486,362 ________________________________________________________________________ $19,415,201 $17,223,778 ________________________________________________________________________
PAGE 52 2. Investments (continued) At Dec. 31, 1993, 99 percent of the securities rated Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any other issuer are greater than 1 percent of the Company's total investments in fixed maturities. At Dec. 31, 1993, approximately 9.4 percent of the Company's invested assets were mortgage loans on real estate. Summaries of mortgage loans by region of the United States and by type of real estate at Dec. 31, 1993 and 1992 are as follows:
Dec. 31, 1993 Dec. 31, 1992 On Balance Commitments On Balance Commitments Region Sheet to Purchase Sheet to Purchase ______________________________________________________________________________________ East North Central $ 552,150 $ 20,933 $ 484,808 $ 21,728 West North Central 361,704 16,746 357,388 14,327 South Atlantic 452,679 52,440 320,593 32,022 Middle Atlantic 260,239 41,090 188,294 56,816 New England 155,214 17,620 114,170 24,677 Pacific 120,378 15,492 89,636 5,148 West South Central 43,948 525 46,296 716 East South Central 73,748 - 83,994 10,085 Mountain 70,410 14,594 26,906 8,882 ______________________________________________________________________________________ 2,090,470 179,440 1,712,085 174,401 Less allowance for losses 35,020 - 23,595 - ______________________________________________________________________________________ $2,055,450 $179,440 $1,688,490 $174,401 ______________________________________________________________________________________ Dec. 31, 1993 Dec. 31, 1992 On Balance Commitments On Balance Commitments Property type Sheet to Purchase Sheet to Purchase ______________________________________________________________________________________ Apartments $ 744,788 $ 79,153 $ 541,855 $ 70,198 Department/retail stores 624,651 65,402 504,331 74,671 Office buildings 234,042 15,583 327,216 12,950 Industrial buildings 217,648 9,279 203,361 15,150 Nursing/retirement homes 83,768 917 56,431 716 Hotels/motels 33,138 - 34,631 716 Medical buildings 30,429 5,954 23,006 - Residential 78 - 6,618 - Other 121,928 3,152 14,636 - ______________________________________________________________________________________ 2,090,470 179,440 1,712,085 174,401 Less allowance for losses 35,020 - 23,595 - ______________________________________________________________________________________ $2,055,450 $179,440 $1,688,490 $174,401 ______________________________________________________________________________________
Mortgage loan fundings are restricted by state insurance regulatory authorities to 80 percent or less of the market value of the real estate at the time of origination of the loan. The Company holds the mortgage document, which gives the right to take possession of the property if the borrower fails to perform according to the terms of the agreement. The fair value of the mortgage loans is determined by a discounted cash flow analysis using mortgage interest rates currently offered for mortgages of similar maturities. Commitments to purchase mortgages are made in the ordinary course of business. The fair value of the mortgage commitments is $nil. PAGE 53 3. Income taxes The Company qualifies as a life insurance company for federal income tax purposes. As such, the Company is subject to the Internal Revenue Code provisions applicable to life insurance companies. Income tax expense consists of the following:
1993 1992 1991 _______________________________________________________________________________ Federal income taxes: Current $180,558 $130,998 $104,292 Deferred (44,237) (30,385) (29,207) _______________________________________________________________________________ 136,321 100,613 75,085 State income taxes-Current 6,326 4,038 2,345 _______________________________________________________________________________ Income tax expense $142,647 $104,651 $ 77,430 _______________________________________________________________________________
Increases (decreases) to the federal tax provision applicable to pretax income based on the statutory rate are attributable to:
1993 1992 1991 _________________________________________________________________________________________________________ Provision Rate Provision Rate Provision Rate _________________________________________________________________________________________________________ Federal income taxes based on the statutory rate $144,454 35.0% $107,379 34.0% $88,219 34.0% Increases (decreases) are attributable to: Tax-excluded interest and dividend income (11,002) (2.7) (8,209) (2.6) (9,496) (3.7) Other, net 2,869 0.7 1,443 0.4 (3,638) (1.4) _________________________________________________________________________________________________________ Federal income taxes $136,321 33.0% $100,613 31.8% $75,085 28.9% _________________________________________________________________________________________________________
A portion of life insurance company income earned prior to 1984 was not subject to current taxation but was accumulated, for tax purposes, in a "policyholders' surplus account." At Dec. 31, 1993, the Company had a policyholders' surplus account balance of $19,032. The policyholders' surplus account is only taxable if dividends to the stockholder exceed the stockholder's surplus account or if the Company is liquidated. Deferred income taxes of $6,661 have not been established because no distributions of such amounts are contemplated. Significant components of the Company's deferred tax assets and liabilities as of Dec. 31 are as follows:
Deferred tax assets: 1993 1992 ______________________________________________________________________________________ Policy reserves $453,436 $356,712 Life insurance guarantee fund assessment reserve 35,000 21,794 ______________________________________________________________________________________ Total deferred tax assets 488,436 378,506 ______________________________________________________________________________________ Deferred tax liabilities: ______________________________________________________________________________________ Deferred policy acquisition costs 509,868 446,579 Investments 10,105 2,435 Other 12,083 17,405 ______________________________________________________________________________________ Total deferred tax liabilities 532,056 466,419 ______________________________________________________________________________________ Net deferred tax liabilities $ 43,620 $ 87,913 ______________________________________________________________________________________ /TABLE PAGE 54 4. Stockholder's equity Retained earnings available for distribution as dividends to parent are limited to the Company's surplus as determined in accordance with accounting practices prescribed by state insurance regulatory authorities. Statutory unassigned surplus aggregated $922,246 as of Dec. 31, 1993 and $685,103 as of Dec. 31, 1992 (see Note 3 with respect to the income tax effect of certain distributions). In addition, any dividend distributions in 1994 in excess of approximately $259,063 would require approval of the Department of Commerce of the State of Minnesota. Statutory net income for 1993, 1992 and 1991 and stockholder's equity as of Dec. 31, 1993, 1992 and 1991 are summarized as follows:
1993 1992 1991 ___________________________________________________________________________________ Statutory net income $ 275,015 $180,296 $200,704 Statutory stockholder's equity 1,157,022 714,942 551,939 ___________________________________________________________________________________
Dividends paid to IDS were $25,000 in 1993, $20,000 in 1992 and $20,000 in 1991. 5. Related party transactions The Company has loaned funds or agreed to loan funds to IDS under two separate loan agreements. The balance of the first loan was $75,000 and $nil at Dec. 31, 1993 and 1992, respectively. This loan can be increased to a maximum of $100,000 and pays interest at a rate equal to the preceding month's effective new money rate for the Company's permanent investments. It is collateralized by equities valued at $96,790 at Dec. 31, 1993. The second loan was used to fund the construction of the IDS Operations Center. This loan had an outstanding balance of $84,588 and $85,278 at Dec. 31, 1993 and 1992, respectively. The loan is secured by a first lien on the IDS Operations Center property and has an interest rate of 9.89 percent. The Company also has a loan to an affiliate which was used to fund construction of the IDS Learning Center. At Dec. 31, 1993 and 1992, the balance outstanding was $22,573 and $22,755, respectively. The loan is secured by a first lien on the IDS Learning Center property and has an interest rate of 9.82 percent. Interest income on the above loans totaled $11,116, $10,711 and $14,783 in 1993, 1992 and 1991, respectively. The Company purchased a five year secured note from an affiliated company which had an outstanding balance of $27,222 and $31,111 at Dec. 31, 1993 and 1992, respectively. The note bears a market interest rate, revised semi-annually, which at Dec. 31, 1993 was 8.42 percent. The Company has a reinsurance agreement whereby it assumed 100 percent of a block of single premium life insurance business from an affiliated company. The accompanying consolidated balance sheet at Dec. 31, 1993 and 1992 includes $759,714 and $746,060, respectively, of future policy benefits related to this agreement. PAGE 55 5. Related party transactions (continued) The accompanying consolidated statement of income includes revenue from policyholder charges of $21, $109 and $243, and expenses of $4,931, $5,897 and $6,445 related to this agreement for 1993, 1992 and 1991, respectively. The Company has a reinsurance agreement to cede 50 percent of its long-term care insurance business to an affiliated company. The accompanying consolidated balance sheet at Dec. 31, 1993 includes $44,086 of reinsurance receivables related to this agreement. Liabilities for future policy benefits were reduced by $27,028 at Dec. 31, 1992 for the effect of this agreement. Premiums ceded amounted to $16,230, $12,499 and $6,365 and reinsurance recovered from reinsurers amounted to $404, $250 and $187 for the years ended Dec. 31, 1993, 1992 and 1991, respectively. The Company participates in the retirement plan of IDS which covers all permanent employees age 21 and over who have met certain employment requirements. The benefits are based on the number of years the employee participates in the plan, their final average monthly salary, the level of social security benefits the employee is eligible for and the level of vesting the employee has earned in the plan. IDS' policy is to fund retirement plan costs accrued subject to ERISA and federal income tax considerations. The Company's share of the total net periodic pension cost was $nil in 1993, 1992 and 1991. The Company also participates in defined contribution pension plans of IDS which cover all employees who have met certain employment requirements. Company contributions to the plans are a percent of either each employee's eligible compensation or basic contributions. Costs of these plans charged to operations in 1993, 1992 and 1991 were $2,008, $1,826 and $1,682, respectively. The Company participates in defined benefit health care plans of IDS that provide health care and life insurance benefits to retired employees and retired financial planners. The plans include participant contributions and service-related eligibility requirements. Upon retirement, such employees are considered to have been employees of IDS. IDS expenses these benefits and allocates the expenses to its subsidiaries. Accordingly, costs of such benefits to the Company are included in employee compensation and benefits and cannot be identified on a separate company basis. Charges by IDS for use of joint facilities and other services aggregated $243,346, $204,675 and $174,500 for 1993, 1992 and 1991, respectively. Certain of these costs are included in deferred policy acquisition costs. In addition, the Company rents its home office space from IDS on an annual renewable basis. Such rentals aggregated $4,513, $4,074 and $3,469 for 1993, 1992 and 1991, respectively. Certain commission and marketing services expenses are allocated to the Company by its affiliates. The expenses for 1993, 1992 and 1991 were $127,000, $110,064 and $95,367, respectively. Certain of the costs assessed to the Company are included in deferred policy acquisition costs. PAGE 56 6. Commitments and contingencies At Dec. 31, 1993 and 1992, traditional life insurance and universal life-type insurance in force aggregated $46,125,515 and $40,904,345, respectively, of which $3,038,426 and $2,937,590 were reinsured at the respective year ends. The Company also reinsures a portion of the risks assumed under disability income policies. Under the agreements, premiums ceded to reinsurers amounted to $28,276, $24,222 and $16,908 and reinsurance recovered from reinsurers amounted to $3,345, $6,766 and $6,447 for the years ended Dec. 31, 1993, 1992 and 1991. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders. The Company is a defendant in various lawsuits, none of which, in the opinion of the Company counsel, will result in a material liability. The Company received the revenue agent's report for the tax years 1984 through 1986 in February 1992, and has settled on all agreed audit issues. The Company will protest the remaining open issues and, while the outcome of the appeal is not known at this time, management does not believe there will be any material impact as a result of this audit. 7. Lines of credit The Company has available lines of credit with two banks aggregating $75,000 at 45 to 80 basis points over the banks' cost of funds or equal to the prime rate, depending on which line of credit agreement is used. Borrowings outstanding under these agreements were $1,519 and $nil at Dec. 31, 1993 and 1992, respectively. 8. Segment information The Company's operations consist of two business segments; first, individual and group life insurance, disability income, health and long-term care insurance, and second, annuity products designed for individuals, pension plans, small businesses and employer-sponsored groups. The consolidated statement of income for the years ended Dec. 31, 1993, 1992 and 1991 and total assets at Dec. 31, 1993, 1992 and 1991 by segment are summarized as follows: PAGE 57 8. Segment information (continued)
1993 1992 1991 ___________________________________________________________________________________________________________ Net investment income: Life, disability income, health and long-term care insurance $ 250,224 $ 246,676 $ 233,828 Annuities 1,532,995 1,370,145 1,189,038 ___________________________________________________________________________________________________________ $ 1,783,219 $ 1,616,821 $ 1,422,866 ___________________________________________________________________________________________________________ Premiums and other considerations: Life, disability income and long-term care insurance $ 281,284 $ 250,386 $ 220,754 Annuities 143,876 104,952 79,928 ___________________________________________________________________________________________________________ $ 425,160 $ 355,338 $ 300,682 ___________________________________________________________________________________________________________ Income before income taxes: Life, disability income, health and long-term care insurance $ 104,127 $ 96,215 $ 90,050 Annuities 315,336 223,316 175,254 Net loss on investments (6,737) (3,710) (5,837) ___________________________________________________________________________________________________________ $ 412,726 $ 315,821 $ 259,467 ___________________________________________________________________________________________________________ Total assets: Life, disability income, health and long-term care insurance $ 4,810,145 $ 4,093,778 $ 3,670,197 Annuities 28,247,608 23,201,995 18,888,612 ___________________________________________________________________________________________________________ $33,057,753 $27,295,773 $22,558,809 ___________________________________________________________________________________________________________
Allocations of net investment income and certain general expenses are based on various assumptions and estimates. Assets are not individually identifiable by segment and have been allocated principally based on the amount of future policy benefits by segment. Capital expenditures and depreciation expense are not material, and consequently, are not reported. PAGE 58 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution. The expenses of the issuance and distribution of the interests in the IDS Life Account MGA of IDS Life Insurance Company to be registered, other than commissions on sales of the Contracts, are to be borne by the registrant. Item 14. Indemnification of Directors and Officers Section 300.083 of Minnesota Law provides in part that a corporation organized under such law shall have power to indemnify anyone made, or threatened to be made, a party to a threatened, pending or completed proceeding, whether civil or criminal, administrative or investigative, because he is or was a director or officer of the corporation, or served as a director or officer of another corporation at the request of the corporation. Indemnification in such a proceeding may extend to judgments, penalties, fines and amounts paid in settlement, as well as to reasonable expenses, including attorneys' fees and disbursements. In a civil proceeding, there can be no indemnification under the statute, unless it appears that the person seeking indemnification has acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and its shareholders and unless such person has received no improper personal benefit; in a criminal proceeding, the person seeking indemnification must also have no reasonable cause to believe his conduct was unlawful. Article IX of the By-laws of the IDS Life Insurance Company requires the IDS Life Insurance Company to indemnify directors and officers to the extent indemnification is permitted as stated by the preceding paragraph, and contains substantially the same language as the above-mentioned Section 300.083. Article IX, paragraph (2), of the By-laws of the IDS Life Insurance Company provides as follows: "Section 2. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that he is or was a director, officer, employee or agent of this Corporation, or is or was serving at the direction of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended, provided that this Article shall not indemnify or protect any such director, officer, employee or agent against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence, in the performance of his duties or by reason of his reckless disregard of his obligations and duties." PAGE 59 The parent company of IDS Life Insurance Company maintains an insurance policy which affords liability coverage to directors and officers of the IDS Life Insurance Company while acting in that capacity. IDS Life Insurance Company pays its proportionate share of the premiums for the policy. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 15. Recent Sales of Unregistered Securities None Item 16. Exhibits and Financial Statement Schedules (a) Exhibits 3.1 Copy of Certificate of Incorporation of IDS Life Insurance Company is filed electronically herewith. 3.2 Copy of the Amended By-laws of IDS Life Insurance Company is filed electronically herewith. 3.3 Copy of Resolution of the Board of Directors of IDS Life Insurance Company, dated May 5, 1989, establishing IDS Life Account MGA is filed electronically herewith. 4.1 Form of Group Annuity Contract, Form 30363C, is filed electronically herewith. 4.2 Form of Group Annuity Certificate, Form 30360C, is filed electronically herewith. 4.3 Copy of Endorsement No. 30340C-GP to the Group Annuity Contract is filed electronically herewith. 4.4 Copy of Endorsement No. 30340C to the Group Annuity Certificate is filed electronically herewith. 5. Copy of Opinion of Counsel regarding legality of contracts, dated Oct. 3, 1990, is filed electronically herewith. PAGE 60 22. Copy of List of Subsidiaries is filed electronically herewith. 24. Consent of Independent Auditors is filed electronically herewith. 25. Power of Attorney, dated March 31, 1994, is filed electronically herewith. (b) Financial Statement Schedules 27. Report of Independent Auditors dated February 3, 1994. Schedule I - Consolidated Summary of Investments Other than Investments in Related Parties Schedule V - Supplementary Insurance Information Schedule VI - Reinsurance Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-Term Borrowings All other schedules to the consolidated financial statements required by Article 7 of Regulation S-X are not required under the related instructions or are inapplicable and, therefore, have been omitted. Item 17. Undertakings A. The Registrant undertakes: (a) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement, (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement, (b) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment may be deemed to be a new Registration Statement relating to the securities offered therein and the offering of such securities at that time may be deemed to be the initial bona fide offering thereof, (c) that all post-effective amendments will comply with the applicable forms, rules and regulations of the Commission in effect at the time such post-effective amendments are filed, and (d) to remove from registration by means of a post-effective amendment any of the securities being registered which will remain at the termination of the offering. B. The Registrant represents that it is relying upon the no-action assurance given to the American Council of Life Insurance (pub. avail. Nov. 28, 1988). Further, the Registrant represents that it has complied with the provisions of paragraphs (1) - (4) of the no- action letter. PAGE 61 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, IDS Life Insurance Company has duly caused this Registration Statement to be signed on behalf of the Registrant by the undersigned, thereunto duly authorized in this City of Minneapolis, and State of Minnesota on the 5th day of April, 1994. IDS Life Insurance Company (Registrant) By IDS Life Insurance Company By /s/ James A. Mitchell* James A. Mitchell Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on the 5th day of April, 1994. Signature Title /s/ James A. Mitchell* Chairman of the Board James A. Mitchell and Chief Executive Officer /s/ Richard W. Kling* Director and President Richard W. Kling /s/ Louis C. Fornetti* Director Louis C. Fornetti /s/ David R. Hubers* Director David R. Hubers /s/ Paul F. Kolkman* Director and Executive Vice Paul F. Kolkman President /s/ Peter A. Lefferts* Director and Executive Vice Peter A. Lefferts President, Marketing /s/ Janis E. Miller* Director and Executive Vice Janis E. Miller President, Variable Assets /s/ Barry J. Murphy* Director and Executive Vice Barry J. Murphy President, Client Service /s/ Stuart A. Sedlacek* Director and Executive Vice Stuart A. Sedlacek President, Assured Assets PAGE 62 /s/ Melinda S. Urion* Director, Exective Vice Melinda S. Urion President and Controller *Signed pursuant to Power of Attorney dated March 31, 1994, filed as Exhibit 25 to Registration Statement No. 33-28976 for IDS Life Insurance Company (IDS Life Account MGA). By: Mary Ellyn Minenko EX-99 2 EXHIBIT INDEX IDS Life Account MGA Registration Number 33-28976 EXHIBIT INDEX 3.1 Copy of Certificate of Incorporation of IDS Life Insurance Company is filed electronically herewith. 3.2 Copy of the Amended By-laws of IDS Life Insurance Company is filed electronically herewith. 3.3 Copy of Resolution of the Board of Directors of IDS Life Insurance Company, dated May 5, 1989, establishing IDS Life Account MGA is filed electronically herewith. 4.1 Form of Group Annuity Contract, Form 30363C, is filed electronically herewith. 4.2 Form of Group Annuity Certificate, Form 30360C, is filed electronically herewith. 4.3 Copy of Endorsement No. 30340C-GP to the Group Annuity Contract is filed electronically herewith. 4.4 Copy of Endorsement No. 30340C to the Group Annuity Certificate is filed electronically herewith. 5. Copy of Opinion of Counsel regarding legality of contracts, dated Oct. 3, 1990, is filed electronically herewith. 22. Copy of List of Subsidiaries is filed electronically herewith. 24. Consent of Independent Auditors is filed electronically herewith. 25. Power of Attorney, dated March 31, 1994, is filed electronically herewith. 27. Financial Statement Schedules and Report of Independent Auditors EX-99 3 EXHIBIT 3.1 - COPY OF CERTIFICATE OF INCORPORATION PAGE 1 CERTIFICATE OF INCORPORATION OF IDS LIFE INSURANCE COMPANY We, the undersigned, for the purpose of forming an insurance corporation under and pursuant to the provisions of the Minnesota Statutes, Chapter 300 relating thereto, and of any amendments thereof, do hereby associate ourselves as a body corporate and do hereby adopt the following Articles of Incorporation: ARTICLE I The name of this Corporation shall be IDS Life Insurance Company. ARTICLE II The purposes of and general nature of its business shall be: (a) To engage in the general business of a life insurance company, and to effect all forms, types, variations and combinations of life insurance, endownment or annuity contracts or policies, on a group or individual basis, for the payment of money in a single sum or in installments upon the contingencies of death, disability or survivorship. To provide in such policies or contracts supplemental thereto, for additional benefits in the event of the death of the insured by accidental means, total and permenent disability of the insured, or specific dismemberment or disablement suffered by the insured. (b) To engage in the general business of an accident and health insurance company, for the purpose of effecting insurance against loss or damage by the sickness, bodily injury or death by accident of the assured or his dependents, on a group or individual basis; to effect all forms, types, variations and combinations of policies or contracts of insurance providing for indemnities in the event of death, sickness or disability. (c) To effect contracts of reinsurance or co-insurance of any individual or group risk underwritten by this Corporation, to reinsure risks of this Corporation or any part thereof with any other company or to reinsure the whole of or any portion of the risks of any other company. (d) To effect all other contracts of insurance authorized by clauses (4) and (5)(a) of subdivision 1 of Section 60.29 of Minnesota Statutes. (e) To have one or more offices and to conduct business in this state or elsewhere. (f) To acquire, hold and dispose of shares of stock, notes, bonds or other evidences of indebtedness or securities of any other corporation or corporations. PAGE 2 (g) To transact all business and to do all other things necessary or incidental to the foregoing purposes. ARTICLE III The duration of this Corporation shall be perpetual. ARTICLE IV The principal place of transacting the business of this Corporation shall be the City of Minneapolis, State of Minnesota. ARTICLE V 2/9/72 10/18/85 The capital stock of this Corporation shall consist of One Hundred Thousand (100,000) shares of stock with a par value of Thirty Dollars ($30.00) per share. The amount of stated capital of this Corporation shall be Three Million Dollars ($3,000,000). ARTICLE VI (1) The general management of this Corporation shall be vested in a Board of Directors. (2) The names and post office addresses of the members of the first Board of Directors are respectively as follows: Joseph M. Fitzsimmons 800 Investors Building Minneapolis 2, Minnesota John W. McCartin 800 Investors Building Minneapolis 2, Minnesota Virgil C. Sullivan 800 Investors Building Minneapolis 2, Minnesota A. Edward Archibald 800 Investors Building Minneapolis 2, Minnesota Harold E. Miller, M.D. 1531 Medical Arts Building Minneapolis 2, Minnesota Said named Directors shall serve as such until the first annual meeting of the shareholders of the Corporation and until their successors have been duly elected and qualified. ARTICLE VII The first Board of Directors of this Corporation shall have full power and authority to make and adopt By-Laws for the government of this Corporation and its affairs as they may deem advisable or necessary and as shall not be inconsistent with the PAGE 3 provisions of these Articles. The By-Laws may be amended or altered by the shareholders at any regular or special meeting called therefore. ARTICLE VIII These Articles of Incorporation may be amended by the affirmative vote of the holders of a majority of the voting power of the capital stock. ARTICLE IX The first meeting of the Corporation shall be a meeting of the Incorporators and Subscribers to the capital stock of the Corporation. Three days' written notice of such meeting shall be given unless there is a written Waiver of Notice. ARTICLE X The names and post office addresses of the Incorporators are as follows: Lloyd J. Muehlberg 800 Investors Building Minneapolis 2, Minnesota Joseph F. Grinnell 800 Investors Building Minneapolis 2, Minnesota Edward M. Burke 800 Investors Building Minneapolis 2, Minnesota IN TESTIMONY WHEREOF we have set our hands this 23rd day of July, 1957. IN PRESENCE OF: Lloyd J. Muehlberg M. Gould Joseph F. Grinnell D. Fairchild Edward M. Burke State of Minnesota) )SS. County of Hennepin) On this 23rd day of July, 1957, before me, a Notary Public, personally appeared Lloyd J. Muehlberg, Joseph F. Grinnell, and Edward M. Burke, to me known to be the persons named in and who executed the foregoing instrument, and they acknowledged to me that they executed the same as their free act and deed and for the uses and purposes therein expressed. PAGE 4 (Notarial seal) Helen M. Bochnak Helen M. Bochnak Notary Public, Hennepin County, Minn. My Commission Expired Nov. 12, 1958 APPROVAL OF COMMISSIONER OF INSURANCE The foregoing Certificate of Incorporation of Investors Syndicate Life Insurance and Annuity Company is hereby approved this 24th day of July, 1957. Cyril C. Sheehan Commissioner of Insurance State of Minnesota J.O.M. EX-99 4 EXHIBIT 3.2 - COPY OF AMENDED BY-LAWS PAGE 1 AMENDED BY-LAWS OF IDS LIFE INSURANCE COMPANY ARTICLE I OFFICES Section 1. The principal place of transacting the business of this Corporation shall be in the City of Minneapolis, State of Minnesota. Section 2. The Corporation may also have offices at such other places, within or without the State, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDER'S MEETINGS Secction 1. All meetings of stockholders for the election of Directors shall be held at the principal office of the Corporation in the City of Minneapolis, Minnesota. Meetings of stockholders for any other purpose may be held at such place, within or without the State of Minnesota, and at such time as may be designated in the call and notice thereof. Section 2. The annual meeting of stockholders for the election of Directors and the transaction of such other business as may properly come before the meeting shall be held on the Wednesday following the first Tuesday on or after the nineteenth day of April in each year, at 10:30 o'clock A.M. Election of Directors shall be by plurality vote. Section 3. In the event the stockholders shall fail to hold an annual meeting at the time specified therefore in Section 2 of this Article, or the Directors are not elected thereat, Directors may be elected at a special meeting held for that purpose upon call and notice as hereinafter provided for a special meeting of stockholders. Section 4. Special meetings of stockholders may be called for any purpose or purposes at any time by the President, the Secretary, the Board of Directors, any two or more members of the Board of Directors or in the manner hereinafter provided by one or more stockholders holding not less than one-tenth of the issued and outstanding stock entitled to vote. Upon request in writing by registered mail or delivered in person to the President, any Vice President, or Secretary, by any person or persons entitled to call a meeting of stockholders, such officer shall forthwith cause notice to be given to the stockholders entitled to vote at a special meeting of stockholders to be held at such time and place as such officer shall fix, not less than ten or more than sixty days after the receipt of such request. Any such request shall state the purpose or purposes of the proposed meeting. PAGE 2 Section 5. Written notice of each meeting of stockholders, stating the time and place, and in case of a special meeting the purpose thereof, shall be served upon or mailed to each stockholder of record entitled to vote thereat at such address as appears on the stock register of the Corporation, at least ten days before such meeting. Section 6. Notice of the time, place and purpose of any meeting of shareholders, whether required by statute, by the Articles of Incorporation or by these By-Laws, may be waived in writing by any stockholder. Such waiver may be given before or after the meeting, and shall be filed with the Secretary or entered upon the records of the meeting. Section 7. Business transacted at all special meetings shall be confined to the objects stated in the call. Section 8. The presence, at any meeting of stockholders, in person or by proxy of the holder of a majority of the stock entitled to vote thereat shall constitute a quorum for the transaction of business, except as otherwise provided by statute. If, however, a quorum shall not be present at any meeting of the stockholders, the stockholders present in person or by proxy shall have power to adjourn the meeting from time to time, until a quorum shall be present. If any meeting of stockholders be adjourned to another time or place, whether for lack of quorum or otherwise, no notice as to such adjourned meeting need by given other than by an announcement, giving the time and place thereof, at the meeting at which the adjournment is taken. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly called or held meeting at which a quorum is present may continue to transact business until final adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Section 9. At each meeting of the stockholders, every stockholder of record at the date fixed by the Board of Directors as the record date for the determination of the persons entitled to vote at a meeting of stockholders, or, of no date has been fixed, then at the date of the meeting, shall be entitled at such meeting to one vote for each share having voting power standing in his name on the books of the Corporation. A stockholder may cast his vote or votes in person or by proxy. The appointment of a proxy shall be in writing filed with the Secretary at or before the meeting. ARTICLE III BOARD OF DIRECTORS Section 1. The number of directors which shall constitute the whole Board shall not be less than three nor more than fourteen, as the stockholders may from time to time determine. The President of the Corporation shall be a Director. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except PAGE 3 that if the number of directors is increased at any time other than at an annual meeting of stockholders, an additional Director or Directors to fill the places on the Board created by any such increase may be elected at a special meeting of stockholders called for that purpose. Each Director shall be elected to serve until the next annual meeting of the stockholders and until his successor shall be elected and shall qualify. Section 2. Vacancies in the Board of Directors, not to exceed one-third of the members of the Board in any one year, shall be filled by the remaining members of the Board, though less than a quorum, and each person so elected shall be a Director until his successor is elected by the stockholders who may make such election at their next annual meeting or at any special meeting called for that purpose. A vacancy in the Board of Directors, which cannot be filled by the remaining members of the Board, shall be filled by the stockholders at any special meeting called for that purpose. Section 3. The Board of Directors shall have the general management, control and supervision of all business and affairs of the Corporation, and shall fix and change, as it may from time to time determine, by majority vote, the compensation to be paid Directors, officers and agents of the Corporation, and do all such lawful acts and things as are not by statue or by the Articles of Incorporation or by the By-Laws directed or required to be exercised or done by the stockholders. ARTICLE IV EXECUTIVE COMMITTEE Section 1. The Board of Directors may, by affirmative action of the entire Board, designate two or more of their number, one of which shall be the President, to constitute an Executive Committee, which, to the extent determined by affirmative action of the entire Board, shall have and exercise the authority of the Board in the management of the business of the Corporation. Any such Executive Committee shall act only in the interval between meetings of the Board, and shall be subject at all times to the control and direction of the Board. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board. ARTICLE V MEETINGS OF THE BOARD OF DIRECTORS Section 1. The annual meeting of the Board of Directors of the Corporation shall be held at its principal office in the City of Minneapolis, Minnesota, as soon as practicable after the final adjournment of the annual meeting of the stockholders in each year, and no notice of such meeting shall be necessary to the newly elected Directors in order to legally constitute the meeting provided a quorum shall be present; except, however, that such PAGE 4 meeting may be held at such other place, whether in this state or elsewhere, as a majority of the Board of Directors may have previously determined. Section 2. Regular meetings of the Board of Directors may be held without notice at such time and place either within or without the State of Minnesota, as shall from time to time have been previously determined by the Board. Section 3. Special meetings of the Board may be called by the President on two days notice to each Director, either personally or by mail or telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two Directors. Any Directors, may in writing, either before or after the meeting, waive notice thereof; and, without notice, any Director by his attendance at and participation in the action taken at the meeting shall be deemed to have waived notice. Section 4. At all meetings of the Board of Directors, a majority of the Directors shall be necessary and sufficient to constitute a quorum for the transaction of business; and the acts of a majority of the Directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. If a quorum shall not be present at any meeting of Directors, the Directors present thereat may adjourn the meeting from time to time, until a quorum shall be present. No notice of an adjourned meeting, whether for lack of quorum or otherwise, need be given other than by announcement, giving the time and place thereof, at the meeting at which the adjournment is taken. Section 5. Any action, which might be taken at a meeting of the Board of Directors, may be taken without a meeting if done in writing signed by all of the Directors. ARTICLE VI NOTICES Section 1. Whenever under the provisions of statutes or of the Articles of Incorporation or of the By-Laws, notice is required to be given to any Directors or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing by depositing the same in a post office or letter box, in a postpaid sealed wrapper, addressed to such Director or stockholder at such address as appears on the stock register or books of this Corporation, or, in default of address appearing in the stock register of the Corporation or any known address, to such Director or stockholder at the Main Post Office in the City of Minneapolis, Minnesota, and such notice shall be deemed to be given at the time when the same shall thus be mailed. PAGE 5 ARTICLE VII OFFICERS Section 1. The officers of the Corporation shall be a Chairman of the Board, a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer, a Secretary, a Medical Director, and such Assistant Treasurers, Assistant Secretaries, and such other officers as the Board of Directors may deem necessary. All officers of the Corporation shall exercise such powers and perform such duties as shall be set forth in these By-Laws and as shall be determined from time to time by the Board of Directors or by the President. Any two of the offices, except those of President and Vice President, Treasurer and Assistant Treasurer, and Secretary and Assistant Secretary may be held by the same person. Section 2. The Board of Directors, at its annual meeting, shall elect a Chairman of the Board, a President, a Secretary, a Treasurer, a Medical Director and such Executive Vice Presidents or Senior Vice Presidents as the Board shall determine. Only the Chairman of the Board and the President need be a member of the Board. The President, or his designee, may appoint any other officers permitted by Section 1 of this Article. Section 3. The officers of the Corporation shall, except in the event of death, resignation, or removal by the Board of Directors, hold office until their successors are chosen and qualify in their stead. Any officer elected by the Board of Directors may be removed at any time by the Board of Directors with or without cause; such removal, however, shall be without prejudice to the contract rights, if any, of the person so removed. When a vacancy for any reason occurs among the officers, the Board of Directors shall have the power to elect a successor to fill such vacancy for the unexpired term. Section 4. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors, and will perform such other duties as are assigned to him by the Board of Directors. Section 5. President. The President shall be the chief executive officer of the Corporation. He shall have general and active supervision and direction over the business affairs of the Corporation and over its several officers, subject to the control of the Board of Directors whose policies he shall execute. He shall see that all lawful orders and resolutions of the Board of Directors and of the Executive Committee are carried into effect and he shall make or cause to be made timely and appropriate reports to the Board of Directors of all matters which in the interest of the Corporation are required to be brought to their notice. He shall be a member of the Executive Committee and shall preside at its meetings and he shall ex officio be a member of all standing committees or other committees as may be from time to time constituted or appointed by the Board of Directors. PAGE 6 Section 6. Secretary. The Secretary shall attend all meetings of the Board of Directors and of the stockholders and record their proceedings in a book to be kept for that purpose, and shall perform like duties for the Executive Committee when required. In case the Secretary shall be absent from any meeting, the Chairman of the meeting may appoint a temporary secretary to act at such meeting. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors. He shall have the custody of the stock register, minute books and the seal of the Corporation, and shall make such reports and perform such other duties as are incident to this office or are properly required of him by the Board of Directors. Section 7. Treasurer. The Treasurer, unless otherwise ordered by the Board of Directors, shall have the custody of all the funds and securities of the Corporation, and shall deposit all monies and valuables in the name of and to the credit of the Corporation in such banks or depositories as the Board of Directors may designate, and shall keep regular books of account, and shall have custody of the books and records incident to his office and such as the Board of Directors may direct, and he shall have such other powers and shall perform such other duties as are incident to his office or which are properly required of him by the Board of Directors. Section 8. Medical Director. The Medical Director shall, under the direction of the Board of Directors, appoint all medical examiners for this Corporation and shall have such other powers and shall perform such other duties as are incident to his office or which are properly required of him by the Board of Directors. In his absence or inability to act, an assistant, designated by the Executive Committee, may act for and in his stead. Section 9. The powers and duties of all other officers shall be such as are usual in like corporations under the direction and control of the Board of Directors. ARTICLE VIII CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD DATE Section 1. The Board of Directors may fix a time, not less than twenty nor more than forty days preceding the date of any meeting of stockholders, as a record date for the determination of the stockholders entitled to notice of and to vote at such meeting, and in such case by stockholders of record on the date so fixed, or their legal representatives, shall be entitled to notice of and to vote at such meeting, notwithstanding any transfer of any shares on the books of the Corporation after any record date so fixed. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of such period. PAGE 7 Section 2. The Board of Directors may fix a time not exceeding forty days preceding the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or, subject to contract rights with respect thereto, the date when any change or conversion or exchange of shares shall be made or go into effect, as a record date for the determination of the stockholders entitled to receive payment of any such dividend, distribution or allotment of rights or to exercise rights in respect to any such change, conversion or exchange of shares, and in such case only stockholders of record on the date so fixed shall be entitled to receive payment of such dividend, distribution or allotment of rights or to exercise such rights of change, conversion or exchange of shares, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date fixed as aforesaid. The Board of Directors may close the books of the Corporation against the transfer of shares during the whole or any part of such period. ARTICLE IX MISCELLANEOUS Section 1. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and, accordingly, shall not be found to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of the State of Minnesota. Section 2. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that he is or was a Manager of Variable Annuity Funds A and B, director, officer, employee or agent of this Corporation, or is or was serving at the direction of the Corporation as a Manager of Variable Annuity Funds A and B, director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended, provided that this Article shall not indemnify or protect any such Manager of Variable Annuity Funds A and B, director, officer, employee or agent against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence, in the performance of his duties or by reason of his reckless disregard of his obligations and duties. PAGE 8 ARTICLE X LOST STOCK CERTIFICATES Section 1. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been destroyed or lost upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed, and the Board of Directors, when authorizing such issue of a new certificate or certificates, may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct, to indemnify the Corporation against any claim arising from the issue of such new certificate. ARTICLE XI POLICIES, CONTRACTS AND CONVEYANCES Section 1. Subject to the provisions of Section 2 of this Article, the President or any Vice President may with the Secretary or any Assistant Secretary, sign, cause the corporate seal to be affixed thereto when necessary, acknowledge and deliver all conveyances, contracts, deeds, notes, mortgages, satisfactions, leases, assignments, licenses, transfers, powers of attorney, certificates for shares of stock, and all other similar and dissimilar instruments. The Board of Directors may by resolution authorize any officer or officers alone or with another officer or officers, to sign or counter-sign, cause the corporate seal to be affixed thereto when necessary, acknowledge and deliver any written instrument, or class of written instruments, for and on behalf of this Corporation. Section 2. All insurance, annuity or endowment policies or contracts issued by this Corporation and all reinsurance agreements of this Corporation shall be signed by the President or a Vice President and the Secretary or an Assistant Secretary. The signature of any of said officers, on the foregoing or any other instrument may be a facsimile signature, if the same is countersigned by an officer or employee duly authorized by the Board of Directors or Executive Committee of this Corporation to counter-sign the same. Section 3. All checks, demands for money, and notes of the Corporation shall be signed by such officer or officers or such other person or persons as may from time to time be authorized by the Board of Directors. PAGE 9 ARTICLE XII AMENDMENTS OF BY-LAWS Section 1. These By-Laws may be altered at any regular meeting of the stockholders, or at any special meeting of the stockholders at which a quorum is present or represented, provided notice of the proposed alteration is contained in the notice of such meeting, by the affirmative vote of the holders of a majority of the shares issued and outstanding and entitled to vote at such meeting and present or represented thereat. EX-99 5 EXHIBIT 3.3 - COPY OF RESOLUTION OF THE BOARD OF DIRECTORS PAGE 1 MINUTES OF A SPECIAL MEETING of the Board of Directors IDS Life Insurance Company May 5, 1989 Pursuant to the call of the President and notice duly given, a special meeting in lieu of the Annual Meeting of the Board of Directors of IDS Life Insurance Company was held at 11:30 a.m., May 5, 1989, at the offices of the Corporation in the IDS Tower, Minneapolis, Minnesota. Members present were: Ms. Roloff and Messrs. Kling, Kolkman, Kudrna, Mitchell and Smith. The Secretary, Mr. O'Brien, was also present and recorded the minutes of the meeting. Mr. Mitchell said that the first item of business was to consider a proposal to ratify the investment transactions of the Corporation during 1988. All such transactions were listed in the 1988 NAIC Convention Blanks, which were available to the directors at the meeting. After a discussion, upon motion duly made and seconded, the following resolution was unanimously adopted: RESOLVED, that the investment transactions entered into by the Corporation during 1988 for its general and separate accounts, as listed in the 1988 Annual Statement on the NAIC Convention Blanks, are hereby ratified and confirmed in all respects. The Board next considered the election of officers to serve until the next annual meeting. After a discussion, upon motion duly made and seconded, the following resolution was duly adopted: RESOLVED, that the individuals listed below are elected to the office set forth opposite their names, to serve at the pleasure of this Board until the next annual election: Harvey Golub Chairman of the Board James A. Mitchell President and Chief Executive Officer Richard W. Kling Executive Vice President, Marketing and Products ReBecca K. Roloff Executive Vice President, Operations Timothy V. Bechtold Vice President, Insurance Product Development John L. Burbidge Vice President William H. Dudley Vice President Theodore H. Busboom Vice President, Investments Roger P. Husemoller Vice President, Intercorporate Insurance Operations Thomas J. Kelly Vice President, New Business Paul F. Kolkman Vice President, Finance Donald E. Kreider Vice President, Intercorporate Insurance Products Christopher R. Kudrna Vice President, Systems & Technology Development Ryan R. Larson Vice President, Annuity Product Development Patricia A. Mitshulis Vice President, Real Estate Loan Management William F. Nuessle, MD Vice President, Medical Director Richard J. O'Brien Vice President, General Counsel and Secretary PAGE 2 James R. Palmer Vice President, Taxes William A. Smith Vice President, Controller and Taxer Cathy H. Waldhauser Vice President, Corporate Actuarial, Planning and Analysis Nancy R. Hughes Assistant Vice President Laurie Anderson Assistant Secretary Nancy R. Anderson Assistant Secretary Sena M. Barr Assistant Secretary Sandra Berg Assistant Secretary Carrie Bergum Assistant Secretary Karen G. Brajdich Assistant Secretary Teresa Butts Assistant Secretary Mary Clasemann Assistant Secretary Margaret Coyle Assistant Secretary Joni Dalman Assistant Secretary Patricia Engelstad Assistant Secretary Janet M. Foster Assistant Secretary Elizabeth Gamber Assistant Secretary Kim Goodsell Assistant Secretary Lisa Graney Assistant Secretary Bob Hammond Assistant Secretary John J. Hirsch Assistant Secretary Paula Hodges Assistant Secretary Paul E. Horvath Assistant Secretary Dawn M. Johnson Assistant Secretary Andrea Kelly Assistant Secretary Heidi Keske Assistant Secretary Jack R. Kispert Assistant Secretary Milton S. Lysdahl Assistant Secretary Jane Mayer Assistant Secretary N. Clyde Nielsen Assistant Secretary Sandra K. Norby Assistant Secretary Becky Orrock Assistant Secretary Ronald W. Powell Assistant Secretary Michelle L. Price Assistant Secretary Diana L. Roberts Assistant Secretary Paul D. Sand Assistant Secretary William A. Stoltzmann Assistant Secretary Joyce Ternus Assistant Secretary Lori Thompson Assistant Secretary Karen Underwood Assistant Secretary Daniel J. Willius Assistant Secretary Robert Young Assistant Secretary Norma Zachow Assistant Secretary Richard W. Burnham Assistant Treasurer Lavern Johnson Assistant Treasurer Lowell A. Turner Assistant Treasurer F. Dale Simmons Assistant Treasurer Melinda S. Urion Assistant Treasurer Gary C. Ziemer Assistant Treasurer The Board them considered the composition of the Investment Committee. After discussion, upon motion duly made and seconded, the following resolution was unanimously adopted: PAGE 3 RESOLVED, that the following individuals shall serve as the Corporation's Investment Committee until the next annual meeting of this Board: Theodore H. Busboom William H. Dudley Richard W. Kling Paul F. Kolkman James A. Mitchell William A. Smith, and David R. Hubers - Advisor Mr. Mitchell then said that the final item of business was to consider certain actions to facilitate the introduction of a new product - a modified guaranteed annuity. After a discussion, upon motion duly made and seconded, the following resolutions were unanimously adopted: RESOLVED, That a separate account, to be known as IDS Life Separate Account MGA, is hereby established in accordance with Section 61A.14, Minnesota Statutes, for use in connection with the Corporation's proposed modified guaranteed annuity product; and RESOLVED FURTHER, That the proper officers of the Corporation are hereby authorized and directed to accomplish all filings and registrations necessary to enable the corporation to offer a modified guaranteed annuity product. There being no further business to come before the meeting, it was duly voted to adjourn. \s\ Richard J. O'Brien Secretary EX-99 6 EXHIBIT 4.1 - FORM OF GROUP ANNUITY CONTRACT PAGE 1 GROUP ANNUITY CONTRACT o Purchase payments are payable in a single sum. o Annuity payments begin on the settlement date. o This contract is nonparticipating. Dividends are not payable. Contractholder: Contract Number: Contract Date: IDS Life Insurance Company, herein called the Company, will pay the benefits provided by this contract in accordance with and subject to all provisions of this contract. We issue this contract in consideration of the application of the contractholder. THE GROUP ANNUITY CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA WHICH MAY RESULT IN BOTH UPWARD AND DOWNWARD ADJUSTMENTS IN CASH SURRENDER BENEFITS. Surrenders are available without market value adjustment on the last day of each certificate guarantee period. Signed for and issued by IDS Life Insurance Company, Minneapolis, Minnesota, as of the contract date shown above. President: James A. Mitchell Secretary: William A. Stoltzmann PAGE 2 CONTRACT DATA GROUP CONTRACT HOLDER: GROUP CONTRACT NUMBER: Surrender Charge Percentage (Applied to Market Adjusted Value Surrendered) Guarantee Participant's Certificate Years as measured from the Period beginning of a Guarantee Period 1 2 3 4 5 6 7 8 1 Year 1% 2 Years 2% 1% 3 Years 3% 2% 1% 4 Years 4% 3% 2% 1% 5 Years 5% 4% 3% 2% 1% 6 Years 6% 5% 4% 3% 2% 1% 7 Years 7% 6% 5% 4% 3% 2% 1% 8 Years 8% 7% 6% 5% 4% 3% 2% 1% 9 Years 8% 7% 6% 5% 4% 3% 2% 1% 10 Years 8% 7% 6% 5% 4% 3% 2% 1% For renewal guarantee periods, the surrender charge percentages will be based on the lesser of: 1. The length of the new guarantee period, or 2. The number of years remaining until the eighth certificate anniversary. There are no surrender charges on the last day of a guarantee period. Therw will never be surrender charges beyond the eighth certificate anniversary. PAGE 3 GUIDE TO CONTRACT PROVISIONS Definitions Important words and meanings/Page 4 The Annuity Contract Entire contract; Modification; Incontestability; Misstatement of birthdate or sex/Page 6 Contractholder and Owner Contractholder; Owner's rights; Change of ownership; Assignment/Page 7 Beneficiary and Payments to Beneficiary Who is thebeneficiary; Change of beneficiary; Payments to beneficiary/Page 8 Purchase Payment Payment of the purchase payment/Page 9 Accumulation Value, Cash Surrender Value, and Market Adjusted Value How the accumulation value is determined; Surrender of the certificate for the cash surrender value; How the market adjusted value is determined; Annual statement of value/Page 10 Annuity Payment Plans When annuity payments begin; Different ways to receive annuity payments/Page 14 Tables of Settlement Rates Table showing monthly annuity payment amounts for the various plans/Page 16 PAGE 4 DEFINITIONS The following words are used often in this contract. When we use these words, this is what we mean: the annuitant The person on whose life monthly annuity payments depend. owner The owner of the certificate. The owner may be someone other than the annuitant. The owner is shown in the enrollment application unless the owner has been changed as provided in this contract. we, our, us IDS Life Insurance Company certificate date It is the date from which certificate anniversaries, certificate years, and certificate months are determined. The certificate date is shown under certificate data, in the certificate. certificate anniversary The same day and month as the certificate date each year that the certificate remains in force. initial guarantee period The period during which the initial guarantee rate will be credited. It is shown under certificate data, in the certificate. initial guarantee rate The rate of interest credited to the purchase payment as described in the accumulation value section. It is shown under certificate data, in the certificate. renewal guarantee period A renewal guarantee period will begin at the end of each guarantee period. It is determined in accordance with the terms of the contract. renewal guarantee rate The rate of interest credited to the renewal value as described in the accumulation value section. renewal date The first day of a renewal guarantee period. It will always be on a certificate anniversary. current rate The applicable interest rate contained in a schedule of rates established by us from time to time for various guarantee periods. accumulation value The value of the purchase payment plus interest credited, adjusted for any surrenders. market adjusted value The accumulation value adjusted by the market adjusted value formula. PAGE 5 market value adjustment The market adjusted value minus the accumulation value. renewal value The accumulation value at the end of the guarantee period. cash surrender value The market adjusted value less any applicable surrender charge. written request A request in writing signed by the owner and delivered to us at our home office. settlement The application of the market adjusted value of a certificate to provide annuity payments. settlement date The date on which annuity payments are to begin under a certificate. This date may be changed as provided in the contract. PAGE 6 The Annuity Contract What is the entire contract? The entire contract consists of this Group Contract, the application of the Group Contractholder, which is attached to the Group Contract, and the enrollment applications. No one except one of our corporate officers (President, Vice President, Secretary or Assistant Secretary) can change or waive any of our rights or requirements under the contract. That person must do so in writing. None of our agents or other persons has the authority to change or waive any of our rights or requirements under the contract. In issuing the certificates, we have relied upon the applications. The statements contained in the applications are, in the absence of fraud, considered representations and not warranties. No statements made in connection with the applications will be used by us to void the contract or to deny a claim unless that statement is part of the applications. Can this contract be modified? This contract may be modified at any time by written agreement between the contractholder and us. The modification must be signed by one of our corporate officers (President, Vice President, Secretary or Assistant Secretary). No modification will affect the amount of term of any certificates issued before the effective date of the modification unless it is required to conform the contract to, or give the contractholder the benefit of, any Federal or State statutes. When will the certificate become incontestable? After the certificate has been in force during the annuitant's lifetime for two years from the date of issue, we cannot contest the certificate. What if the annuitant's birthdate or sex has been misstated? If the annuitant's birthdate or sex has been misstated, payments under the certificate will be based on what would have been provided at the correct birthdate and sex. Any underpayments made by us will be made up immediately. Any overpayments made by us will be subtracted from the future payments. What laws govern the contract? The contract is governed by the law of the state in which it is delivered. The values and benefits of the certificates are at least equal to those required by such state. PAGE 7 Contractholder and Owner Who is the Group Contractholder? The group contractholder is listed on the cover page of this contract. The contract provides for a successor contractholder. In the event the contractholder should merge with another corporation, the new corporation would be the group contractholder. What are the rights of the owners of the certificates? As long as the annuitant is living and unless otherwise provided in this contract, the owner may exercise all rights and privileges in this contract or allowed by us. How can the ownership be changed on the certificate? The owner can change the ownership of the certificate by written request on a form approved by us. The change must be made while the annuitant is living. Once the change is recorded by us, it will take effect as of the date of the request, subject to any action taken or payment made by us before the recording. Can the owner assign the certificate as collateral? Yes. While the annuitant is living, the owner can assign the certificate or any interest in it. The owner's interest and the interest of any beneficiary is subject to the interest of the assignee. An assignment is not a change of ownership and an assignee is not an owner as these terms are used in the contract. Any amounts payable to the assignee will be paid in a single sum. A copy of any assignment must be submitted to us at our home office. Any assignment is subject to any action taken or payment made by us before the assignment was recorded at our home office. We are not responsible for the validity of any assignment. PAGE 8 Beneficiary and Payments to Beneficiary What death benefits are paid if the annuitant or certificate owner dies before settlement? If the annuitant or owner dies before settlement while the certificate is in force, we will pay the beneficiary: 1. the greater of the market adjusted value or the purchase payment adjusted for surrenders (if death occurred before the annuitant's attaining age 75); otherwise 2. the market adjusted value (if death occurred on or after age 75). The market adjusted value will be determined as of the date due proof of death is received at our home office. The above described payment will also be made upon the first to die if ownership is in a joint tenancy except where spouses are joint owners with right of survivorship and the surviving spousal joint owner elects to continue the certificate. Unless the owner has provided otherwise during the lifetime of the annuitant, the beneficiary may elect by written request to have the amount payable applied under the terms of the annuity payment plans section of the contract. If any amounts are so applied to a plan, the references to "annuitant" in the annuity payment plans section of the contract will apply to the beneficiary. Any election to have the amount payable to a beneficiary under the terms of the annuity payment plans section is also subject to the following: 1. the beneficiary must elect the plan within 60 days after we receive due proof of death; and 2. payments must begin no later than one year after the date of death; and 3. the plan must provide equal or substantially equal payments over a period which does not exceed the life of the beneficiary or the life expectancy of the beneficiary. To whom are death benefits payable? Benefits will be paid equally to all primary beneficiaries surviving the annuitant. If none survive, proceeds will be paid equally to all contingent beneficiaries surviving the annuitant. If no beneficiary survives the annuitant, we will pay the benefits to the owner, if living, otherwise to the owner's estate. Who is the beneficiary? The beneficiary or beneficiaries are as named in the enrollment application unless the owner has since changed the beneficiary as provided below. If the beneficiary has been changed, we will pay any benefits in accordance with the owner's last change of beneficiary request. PAGE 9 How does the owner change the beneficiary? The owner may change the beneficiary any time while the annuitant is living by satisfactory written request to us. Once the change is recorded by us, it will take effect as of the date of the owner's request, subject to any action taken or payment made by us before the recording. What is the spouse's option to continue the certificate? If the owner's death occurs prior to the settlement date, the owner's spouse, if designated as sole beneficiary, may elect in writing to forego receipt of the death benefit and instead continue the certificate in force as its owner. The election by the spouse must be made within 60 days after we receive due proof of death. What if the annuitant dies after settlement? If the annuitant dies after settlement, the amount payable, if any, will be as provided in the annuity payment plan then in effect. Purchase Payment What is the purchase payment for a certificate? The purchase payment for a certificate is shown under certificate data on the certificate. It is payable to us on or before we deliver the certificate. It must be paid or mailed to us at our home office or to an authorized agent. Accumulation Value Cash Surrender Value Market Adjusted Value How is the accumulation value determined? On the certificate date the accumulation value of the certificate is the purchase payment. Thereafter interest accrues from day to day for the guarantee periods initially at the rate shown under certificate data in the certificate and later at the renewal rate(s). These rates represent an effective annual yield. At no time while the certificate is in force shall interest accrue at a rate less than 3% compounded annually. The accumulation value will be adjusted for any amounts surrendered. Are there premium tax charges? We reserve the right to deduct an amount from the accumulation value of the certificate at the time that any applicable premium taxes not previously deducted are payable. If a tax is payable at the time of the purchase payment and we choose to not deduct it at that time, we further reserve the right to deduct it at a later date. How are renewal guarantee periods determined? At the end of any guarantee period a renewal guarantee period will begin. We will notify the owner in writing 45 days before the renewal guarantee period. Each renewal guarantee period will be one year unless the owner elects a different length from those offered at the time. We must receive the owner's written request at least 15 days before the renewal date. The renewal guarantee period may never extend beyond the settlement date. PAGE 10 The accumulation value on the renewal date will be equal to the accumulation value at the end of the guarantee period just ending. This value will earn interest at the renewal guarantee rate. Upon written request within 45 days of the renewal guarantee period, we will notify the owner of the renewal guarantee rate then in effect for certificates renewing at that time. The actual renewal guarantee rate will be determined on the renewal date. What is the market adjusted value and how is it determined? The market adjusted value is the accumulation value on any date before the end of the current guarantee period adjusted by a formula. The formula adjustment reflects the relationship between: 1. the interest rate we are then crediting for new certificate sales and renewals (Form 30360) for the time remaining in the certificate's current guarantee period; and 2. the guaranteed interest rate applicable to the certificate's current guarantee period. The market adjusted value may be more or less than the accumulation value. The market adjusted value formula is as follows: market adjusted value = the accumulation value at the end of the owner's current guarantee period. N = the number of complete certificate years to the end of the owner's guarantee period. t = the fraction of the certificate year remaining to the end of the owner's certificate year (for example, if 180 days remain in a 365 day certificate year, it would be .493) ic = the current rate offered for new certificate sales and renewals (Form 30360) for the number of years left in the owner's guarantee period (straight line interpolation between whole year rates). If N is zero, ic is the rate for one year guarantee periods. The market value adjustment is as follows: market value adjustment = market adjusted value - accumulation value There will be no market value adjustment made on the last day of a guarantee period. PAGE 11 Can the owner request surrender of any amounts under the certificate before settlement? Yes. By written request to us and subject to the rules below the owner may: 1. surrender the certificate for the total cash surrender value; 2. partially surrender the certificate for a part of the cash surrender value. How is the cash surrender value determined? The cash surrender value is the market adjusted value less a surrender charge. The surrender charge is based on the amount surrendered and the certificate year in which the surrender is made. The schedule of surrender charges is shown under certificate data in the certificate. After the first certificate anniversary, surrender charges will not apply to surrenders of amounts totalling up to 10% of the certificate accumulation value as of the last certificate anniversary. What are the rules for a surrender or partial surrender? The amount surrendered and any applicable market value adjustment or surrender charge will be deducted from the accumulation value of the certificate on the date of surrender. The owner may surrender all or a portion of the cash surrender value. However the accumulation value that remains after a partial surrender must be at least $2,000. Any partial surrender must be at least $250. The surrender payment will normally be mailed to the owner within seven days of the receipt of the owner's written request. Upon surrender of the certificate for the total cash surrender value, the certificate will terminate. We may require that the owner return the certificate to our home office before we pay the total cash surrender value. Can we delay or suspend payment of a partial or full surrender? We may defer payment of any partial or full surrender for a period not to exceed 6 months from the date we receive the owner's surrender request or the period permitted by state insurance law, if less. If we defer payment more than 30 days, we will pay annual interest of at least 3% on the amount deferred. Will the owner receive information about the certificate value? Yes. At least once a year we will send the owner a statement showing both the accumulation value and the cash surrender value of the certificate. The statement will specify the surrender charge and market value adjustment used to determine the cash surrender value. This statement will be based on any laws or regulations that apply. We will also notify the owner 45 days before the end of a guarantee period concerning renewal periods available and the owner's right to surrender without a market value adjustment on the last day of the guarantee period. PAGE 12 Annuity Payment Plans When will annuity payments begin? The first payment will be made as of the settlement date. Before payments begin we will require satisfactory proof that the annuitant is alive. We may also require that the owner exchange the certificate for a supplemental contract which provides the annuity payments. Can the owner change the settlement date? Yes. The owner must tell us the new date by written request. However, the settlement date cannot be later than the later of: 1. the certificate anniversary nearest the annuitant's 85th birthday; or 2. the 10th certificate anniversary. Also, if the owner selects a new date, it must be at least 30 days after we receive the owner's written request at our home office. What are the annuity payment plans? There are different ways to receive annuity payments. We call these plans. Plan A - This provides monthly annuity payments for the lifetime of the annuitant. No payments will be made after the annuitant dies. Plan B - This provides monthly annuity payments for the lifetime of the annuitant with a guarantee by us that payments will be made for a period of at least five, ten or fifteen years. The owner must select the guaranteed period. Plan C - This provides monthly annuity payments for the lifetime of the annuitant with a guarantee by us that payments will be made for a certain number of months. We determine the number of months by dividing the market adjusted value applied under this plam by the amount of the monthly annuity payment. Plan D - We call this a joint and survivor life annuity. Monthly payments will be paid for the lifetime of the annuitant and a joint annuitant. When either the annuitant or joint annuitant dies we will continue to make monthly payments for the lifetime of the survivor. No payments will be paid after the death of both the annuitant and joint annuitant. Plan E - This provides monthly fixed dollar annuity payments for a period of years. The period of years may be no less than 10 nor more than 30. What are the requirements for selecting a plan? By written request to us at least 30 days before the settlement date, the owner may select the plan or change to another plan. If at least 30 days before the settlement date we have not received at our home office the owner's written request to select a plan, we will make payments according to plan B with payments guaranteed for ten years. PAGE 13 If the amount to be applied to a plan is not at least $2,000, or if payments are to be made to other than a natural person, we have the right to make a lump sum payment of the cash surrender value. How will payments be made? Payments will be made by us by check. The check must be personally endorsed by the payee or payees as well as the annuitant (or joint annuitant under plan D). If the annuitant or joint annuitant does not endorse the check, other evidence must be furnished to show that the annuitant or joint annuitant is still alive. TABLE OF SETTLEMENT RATES What will be the amount of the monthly annuity payments? The amount of each monthly annuity payment for each $1,000 of market adjusted value applied under any payment Plan will be based on our Table of Settlement Rates in effect at the time of the first payment. The amounts will not be less than those shown in the table below. The amount of such payments under Plans A, B, and C will depend upon the sex and the adjusted age of the annuitant on the settlement date. The amount of such payments under plan D will depend on the sex and the adjusted age of the annuitant and the joint annuitant on the settlement dates. Adjusted age means the age on the annuitant's nearest birthday minus an "adjustment" based on the calendar year of birth of the annuitant as follows: Calendar Year of Annuitant's Birth Adjustment Prior to 1920 0 1920 through 1924 1 1925 through 1929 2 1930 through 1934 3 1935 through 1939 4 1940 through 1944 5 1945 through 1949 6 1950 through 1959 7 1960 through 1969 8 1970 through 1979 9 1980 through 1989 10 After 1989 11 PAGE 14
Amount of Each Monthly Annuity Payment Per $1,000 Applied Plan A Plan B Plan C Life 5 Years 10 Years 15 Years With Adj. Income Certain Certain Certain Refund Age* M F M F M F M F M F 55 5.29 4.84 5.26 4.83 5.20 4.80 5.09 4.74 5.05 4.71 56 5.39 4.92 5.36 4.91 5.29 4.87 5.17 4.81 5.13 4.77 57 5.49 5.00 5.47 4.99 5.38 4.95 5.25 4.88 5.21 4.85 58 5.61 5.09 5.58 5.08 5.48 5.03 5.33 4.96 5.30 4.92 59 5.73 5.19 5.70 5.17 5.59 5.12 5.42 5.04 5.40 5.00 60 5.86 5.29 5.82 5.27 5.70 5.22 5.51 5.12 5.50 5.09 61 6.00 5.40 5.96 5.38 5.82 5.32 5.60 5.21 5.60 5.18 62 6.16 5.52 6.10 5.50 5.95 5.42 5.69 5.30 5.72 5.27 63 6.32 5.65 6.26 5.62 6.08 5.53 5.79 5.39 5.83 5.37 64 6.49 5.78 6.42 5.75 6.21 5.65 5.89 5.49 5.96 5.48 65 6.68 5.92 6.60 5.89 6.35 5.77 5.98 5.58 6.09 5.59 66 6.88 6.08 6.78 6.03 6.50 5.90 6.08 5.69 6.23 5.71 67 7.09 6.24 6.98 6.19 6.65 6.04 6.18 5.79 6.38 5.83 68 7.31 6.42 7.18 6.36 6.81 6.19 6.28 5.90 6.53 5.97 69 7.56 6.61 7.40 6.54 6.97 6.34 6.37 6.01 6.69 6.11 70 7.82 6.81 7.64 6.74 7.14 6.50 6.47 6.12 6.86 6.26 71 8.09 7.04 7.88 6.95 7.31 6.67 6.55 6.22 7.04 6.42 72 8.39 7.28 8.14 7.17 7.48 6.84 6.64 6.33 7.23 6.59 73 8.71 7.54 8.41 7.41 7.65 7.02 6.72 6.44 7.43 6.77 74 9.05 7.83 8.70 7.67 7.83 7.21 6.80 6.54 7.64 6.97 75 9.41 8.14 9.00 7.95 8.00 7.40 6.87 6.64 7.86 7.17 /TABLE PAGE 15
[Table A, cont'd] Plan D - Joint and Survivor Adj. Adjusted Age of Female Joint Annuitant Male 10 Years 5 Years Same 5 Years 10 Years Age* Younger Younger Age Older Older 55 4.11 4.27 4.45 4.62 4.79 56 4.15 4.32 4.51 4.70 4.88 57 4.19 4.37 4.57 4.77 4.96 58 4.24 4.43 4.64 4.85 5.06 59 4.28 4.49 4.71 4.94 5.16 60 4.34 4.55 4.79 5.03 5.27 61 4.39 4.62 4.87 5.13 5.38 62 4.45 4.69 4.96 5.24 5.50 63 4.51 4.77 5.06 5.35 5.64 64 4.57 4.85 5.16 5.48 5.78 65 4.64 4.94 5.27 5.61 5.93 66 4.71 5.03 5.38 5.75 6.09 67 4.79 5.13 5.51 5.90 6.27 68 4.87 5.24 5.64 6.06 6.46 69 4.96 5.35 5.78 6.24 6.66 70 5.06 5.47 5.94 6.43 6.87 71 5.16 5.60 6.10 6.63 7.11 72 5.26 5.74 6.28 6.84 7.36 73 5.38 5.89 6.47 7.08 7.62 74 5.50 6.05 6.68 7.33 7.91 75 5.63 6.22 6.90 7.60 8.22 *Adjusted Age of annuitant. M = Male F = Female The table above is based on the "1983 Individual Annuitant Mortality Table A" assuming an interest rate of 4% per year compounded annually. Settlement rates for any age, or any combination of age and sex not shown above, will be calculated on the same basis as those rates shown in the table above. Such rates will be furnished by us upon request. Amounts shown in the table below are based on an assumed interest rate of 4% per year compounded annually. Plan E - Dollar Amount of Each Monthly Fixed Dollar Annuity Payment Per $1,000 Applied Years Monthly Years Monthly Years Monthly Payable Payment Payable Payment Payable Payment 10 $10.06 17 $6.71 24 $5.35 11 9.31 18 6.44 25 5.22 12 8.69 19 6.21 26 5.10 13 8.17 20 6.00 27 5.00 14 7.72 21 5.81 28 4.90 15 7.34 22 5.64 29 4.80 16 7.00 23 5.49 30 4.72
EX-99 7 EXHIBIT 4.2 - FORM OF GROUP ANNUITY CERTIFICATE PAGE 1 GROUP ANNUITY CERTIFICATE o Purchase payment is payable in a single sum. o Annuity payments to begin on the settlement date. o This certificate is nonparticipating. Dividends are not payable. This annuity certificate summarizes the provisions of the Group Annuity Contract specified on the enrollment application. It does not amend or modify any of the provisions of the Group Contract. All rights, privileges and benefits are governed by the provisions of the Group Contract. The Group Contract may be inspected by the certificate owner or annuitant at the Contractholder's office during office hours. THE GROUP ANNUITY CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA WHICH MAY RESULT IN BOTH UPWARD AND DOWNWARD ADJUSTMENTS IN CASH SURRENDER BENEFITS. Surrenders are available without market value adjustment on the last day of each certificate guarantee period. If the annuitant is living on the Settlement Date, we will begin to pay you monthly annuity payments. Any payments made by us are subject to the Terms of the Group Contract. We issue this certificate in consideration of your enrollment application, and payment of the single purchase payment. Signed for and issued by IDS Life Insurance Company, Minneapolis, Minnesota, as of the certificate date shown below. President: James R. Mitchell Secretary: William A. Stoltzmann IDS Life Insurance Company IDS Tower 10 Minneapolis, Minnesota 55440 PAGE 2 CERTIFICATE DATA GROUP CONTRACTHOLDER: GROUP CONTRACT NUMBER: GROUP ANNUITY CERTIFICATE OWNER: PURCHASE PAYMENT: INITIAL GUARANTEE RATE: INITIAL GUARANTEE PERIOD: ACCUMULATION VALUE AT END OF INITIAL GUARANTEE PERIOD: Surrender Charge Percentage (Applied to Market Adjusted Value Surrendered) Guarantee Participant's Certificate Years as measured from the Period beginning of a Guarantee Period 1 2 3 4 5 6 7 8 1 Year 1% 2 Years 2% 1% 3 Years 3% 2% 1% 4 Years 4% 3% 2% 1% 5 Years 5% 4% 3% 2% 1% 6 Years 6% 5% 4% 3% 2% 1% 7 Years 7% 6% 5% 4% 3% 2% 1% 8 Years 8% 7% 6% 5% 4% 3% 2% 1% 9 Years 8% 7% 6% 5% 4% 3% 2% 1% 10 Years 8% 7% 6% 5% 4% 3% 2% 1% For renewal guarantee periods, the surrender charge percentages will be based on the lesser of: 1. The length of the new guarantee period, or 2. The number of years remaining until the eighth certificate anniversary. There are no surrender charges on the last day of a guarantee period. There will never be surrender charges beyond the eighth certificate anniversary. ANNUITANT: CERTIFICATE NUMBER: CERTIFICATE DATE: CERTIFICATE SETTLEMENT DATE: PAGE 3 Guide to Certificate Provisions Definitions Important words and meanings/Page 4 The Annuity Contract Entire contract; Incontestability; Misstatement of birthdate or sex/Page 6 Owner Owner's rights; Change of ownership; Assignment/Page 7 Beneficiary and Payments to Beneficiary Who is the beneficiary; Change of beneficiary; Payments to beneficiary/Page 8 Purchase Payment Payment of the purchase payment/Page 10 Accumulation Value, Cash Surrender Value, and Market Adjusted Value How the accumulation value is determined; Surrender of the certificate for the cash surrender value; How the market adjusted value is determined; Annual statement of value/Page 10 Annuity Payment Plans When annuity payments begin; Different ways to receive annuity payments/Page 13 Table of Settlement Rates Table showing monthly annuity payment amounts for the various plans/Page 15 PAGE 4 DEFINITIONS The following words are used often in this certificate. When we use these words, this is what we mean: the annuitant The person on whose life monthly annuity payments depend. you, your The owner of this certificate. The owner may be someone other than the annuitant. The owner is shown in the enrollment application unless the owner has been changed as provided in this certificate. we, our, us IDS Life Insurance Company certificate date It is the date from which certificate anniversaries, certificate years, and certificate months are determined. Your certificate date is shown under Certificate Data. certificate anniversary The same day and month as the certificate date each year that the certificate remains in force. initial guarantee period The period during which the initial guarantee rate will be credited. It is shown under certificate data. initial guarantee rate The rate of interest credited to the purchase payment as described in the accumulation value section. It is shown under certificate data. renewal guarantee period A renewal guarantee period will begin at the end of each guarantee period. It is determined in accordance with the terms of the certificate. renewal guarantee rate The rate of interest credited to the renewal value as described in the accumulation value section. renewal date The first day of a renewal guarantee period. It will always be on a certificate anniversary. current rate The applicable interest rate contained in a schedule of rates established by us from time to time for various guarantee periods. accumulation value The value of the purchase payment plus interest credited, adjusted for any surrenders. market adjusted value The accmulation value adjusted by the market adjusted value formula. PAGE 5 market value adjustment The market adjusted value minus the accumulation value. renewal value The accumulation value at the end of the guarantee period. cash surrender value The market adjusted value less any applicable surrender charge. written request A request in writing signed by you and delivered to us at our home office. settlement The application of the market adjusted value of this certificate to provide annuity payments. settlement date The date on which annuity payments are to begin. This date may be changed as provided in this certificate. PAGE 6 The Annuity Contract What is the entire contract? The entire contract consists of the Group Contract, the application of the Group Contractholder, which is attached to the Group Contract, and the enrollment application. No one except one of our corporate officers (President, Vice President, Secretary or Assistant Secretary) can change or waive any of our rights or requirements under the contract. That person must do so in writing. None of our agents or other persons has the authority to change or waive any of our rights or requirements under the contract. In issuing this certificate, we have relied upon the applications. The statements contained in the applications are, in the absence of fraud, considered representations and not warranties. No statements made in connection with the applications will be used by us to void the certificate or to deny a claim unless that statement is part of the applications. When will the certificate become incontestable? After this certificate has been in force during the annuitant's lifetime for two years from the date of issue, we cannot contest the certificate. What if the annuitant's birthdate or sex has been misstated? If the annuitant's birthdate or sex has been misstated, payments under this certificate will be based on what would have been provided at the correct birthdate and sex. Any underpayments made by us will be made up immediately. Any overpayments made by us will be subtracted from the future payments. What laws govern the contract? The contract is governed by the law of the state in which it is delivered. The values and benefits of this certificate are at least equal to those required by such state. PAGE 7 Owner What are your rights as owner of this certificate? As long as the annuitant is living and unless otherwise provided in the contract, you may exercise all rights and privileges in the contract or allowed by us. How can you change ownership for this certificate? You can change the ownership of this certificate by written request on a form approved by us. The change must be made while the annuitant is living. Once the change is recorded by us, it will take effect as of the date of your request, subject to any action taken or payment made by us before the recording. Can you assign this certificate as collateral? Yes. While the annuitant is living, you can assign this certificate or any interest in it. Your interest and the interest of any beneficiary is subject to the interest of the assignee. An assignment is not a change of ownership and an assignee is not an owner as these terms are used int he contract. Any amounts payable to the assignee will be paid in a single sum. A copy of any assignment must be submitted to us at our home office. Any assignment is subject to any action taken or payment made by us before the assignment was recorded at our home office. We are not responsible for the validity of any assignment. PAGE 8 Beneficiary and Payments to Beneficiary What death benefits are paid if the annuitant or owner dies before settlement? If the annuitant or owner dies before settlement while this certificate is in force, we will pay the beneficiary: 1. the greater of the market adjusted value or the purchase payment adjusted for surrenders (if death occurred before the annuitant's attaining age 75); otherwise 2. the market adjusted value (if death occurred on or after age 75). The market adjusted value will be determined as of the date due proof of death is received at our home office. The above described payment will also be made upon the first to die if ownership is in a joint tenancy except where spouses are joint owners with right of survivorship and the surviving spousal joint owner elects to continue the certificate. Unless you have provided otherwise during the lifetime of the annuitant, the beneficiary may elect by written request to have the amount payable applied under the terms of the annuity payment plans section of the contract. If any amounts are so applied to a plan, the references to "annuitant" in the annuity payment plans section of the contract will apply to the beneficiary. Any election to have the amount payable to a beneficiary under the terms of the annuity payment plans section is also subject to the following: 1. the beneficiary must elect the plan within 60 days after we receive due proof of death; and 2. payments must begin no later than one year after the due date of death; and 3. the plan must provide equal or substantially equal payments over a period which does not exceed the life of the beneficiary or the life expectancy of the beneficiary. To whom are death benefits payable? Benefits will be paid equally to all primary beneficiaries surviving the annuitant. If none survive, proceeds will be paid equally to all contingent beneficiaries surviving the annuitant. If no beneficiary survives the annuitant, we will pay the benefits to you, if living, otherwise to your estate. Who is the beneficiary? The beneficiary or beneficiaries are as named in the enrollment application unless you have since changed the beneficiary as provided below. If the beneficiary has been changed, we will pay any benefits in accordance with your last change of beneficiary request. PAGE 9 How do you change the beneficiary? You may change the beneficiary any time while the annuitant is living by satisfactory written request to us. Once the change is recorded by us, it will take effect as of the date of your request, subject to any action taken or payment made by us before the recording. What is the spouse's option to continue this certificate? If the owner's death occurs prior to the settlement date, the owner's spouse, if designated as sole beneficiary, may elect in writing to forego receipt of the death benefit and instead continue the certificate in force as its owner. The election by the spouse must be made within 60 days after we receive due proof of death. What if the annuitant dies after settlement? If the annuitant dies after settlement, the amount payable, if any, will be as provided in the annuity payment plan then in effect. PAGE 10 Purchase Payment What is the purchase payment for this certificate? The purchase payment for this certificate is shown under certificate data. It is payable to us on or before the date we deliver this certificate. It must be paid or mailed to us at our home office or to an authorized agent. Accumulation Value Cash Surrender Value Market Adjusted Value How is the accumulation value determined? On the certificate date the accumulation value of this certificate is the purchase payment. Thereafter interest accrued from day to day for the guarantee period at the rate shown under certificate data. This rate represents an effective annual yield. At no time while the certificate is in force shall interest accrue at a rate less than 3% compounded annually. The accumulation value will be adjusted for any amounts surrendered. Are there premium tax charges? We reserve the right to deduct an amount from the accumulation value of this certificate at the time that any applicable premium taxes not previously deducted are payable. If a tax is payable at the time of your purchase payment and we choose to not deduct it at that time, we further reserve the right to deduct it at a later date. How are renewal guarantee periods determined? At the end of any guarantee period a renewal guarantee period will begin. We will notify you in writing 45 days before the renewal guarantee period. Each renewal guarantee period will be one year unless you elect a different length from those offered at the time. We must receive your written request at least 15 days before the renewal date. The renewal guarantee period may never extend beyond the settlement date. The accumulation value on the renewal date will be equal to the accumulation value at the end of the guarantee period just ending. This value will earn interest at the renewal guarantee rate. Upon written request within 45 days of the renewal guarantee period, we will notify you of the renewal guarantee rate then in effect for certificates renewing at that time. The actual renewal guarantee rate will be determined on the renewal date. What is the market adjusted value and how is it determined? The market adjusted value is the accumulation value on any date before the end of the current guarantee period adjusted by a formula. The formula adjustment reflects the relationship between: 1. the interest rate we are then crediting for new certificate sales and renewals (Form 30360) for the time remaining in your certificate's current guarantee period; and 2. the guaranteed interest rate applicable to your certificate's current guarantee period. PAGE 11 The market adjusted value may be more or less than the accumulation value. The market adjusted value formula is as follows: market adjusted value = renewal value (1 + ic + .0025) (N + t) where: renewal value = the number of complete certificate years to the end of your guarantee period. N = the number of complete certificate years to the end of your guarantee period. t = the fraction of the certificate year remaining to the end of your certificate year (for example, if 180 days remain in a 365 day certificate year, t would be .493) ic = the current rate offered for new certificate sales and renewals (Form 30360) for the number of years left in your guarantee period (straight line interpolation between whole year rates). If N is zero, ic is the rate for one year guarantee periods. The market value adjustment is as follows: market value adjustment = market adjusted value - accumulation value There will be no market value adjustment made on the last day of a guarantee period. Can you request surrender of any amounts under this certificate before settlement? Yes. By written request to us and subject to the rules below you may: 1. surrender this certificate for the total cash surrender value; 2. partially surrender this certificate for a part of the cash surrender value. How is the cash surrender value determined? The cash surrender value is the market adjusted value less a surrender charge. The surrender charge is based on the amount surrendered and the certificate year in which the surrender is made. The schedule of surrender charges is shown under certificate data. After the first certificate anniversary, surrender charges will not apply to surrenders of amounts totalling up to 10% of the certificate accumulation value as of the last certificate anniversary. PAGE 12 What are the rules for a surrender or partial surrender? The amount surrendered and any applicable market value adjustment or surrender charge will be deducted from the accumulation value of the certificate on the date of surrender. You may surrender all or a portion of the cash surrender value. However, the accumulation value that remains after a partial surrender must be at least $2,000. Any partial surrender must be at least $250. The surrender payment will normally be mailed to you within seven days of the receipt of your written request. Upon surrender of this certificate for the total cash surrender value, this certificate will terminate. We may require that you return this certificate to our home office before we pay the total cash surrender value. Can we delay or suspend payment of a partial or full surrender? We may defer payment of any partial or full surrender for a period not to exceed 6 months from the date we receive your surrender request or the period permitted by state insurance law, if less. If we defer payment more than 30 days, we will pay annual interest of at least 3% on the amount deferred. Will you receive information about your certificate values? Yes. At least once a year we will send you a statement showing both the accumulation value and the cash surrender value of this certificate. The statement will specify the surrender charge and market value adjustment used to determine the cash surrender value. This statement will be based on any laws or regulations that apply. We will also notify you 45 days before the end of a guarantee period concerning renewal periods available and your right to surrender without a market value adjustment on the last day of your guarantee period. PAGE 13 Annuity Payment Plans When will annuity payments begin? The first payment will be made as of the settlement date. Before payments begin we will require satisfactory proof that the annuitant is alive. We may also require that the owner exchange the certificate for a supplemental contract which provides the annuity payments. Can the owner change the settlement date? Yes. The owner must tell us the new date by written request. However, the settlement date cannot be later than the later of: 1. the certificate anniversary nearest the annuitant's 85th birthday; or 2. the 10th certificate anniversary. Also, if the owner selects a new date, it must be at least 30 days after we receive the owner's written request at our home office. What are the annuity payment plans? There are different ways to receive annuity payments. We call these plans. Plan A - This provides monthly annuity payments for the lifetime of the annuitant. No payments will be made after the annuitant dies. Plan B - This provides monthly annuity payments for the lifetime of the annuitant with a guarantee by us that payments will be made for a period of at least five, ten or fifteen years. The owner must select the guaranteed period. Plan C - This provides monthly annuity payments for the lifetime of the annuitant with a guarantee by us that payments will be made for a certain number of months. We determine the number of months by dividing the market adjusted value applied under this plam by the amount of the monthly annuity payment. Plan D - We call this a joint and survivor life annuity. Monthly payments will be paid for the lifetime of the annuitant and a joint annuitant. When either the annuitant or joint annuitant dies we will continue to make monthly payments for the lifetime of the survivor. No payments will be paid after the death of both the annuitant and joint annuitant. Plan E - This provides monthly fixed dollar annuity payments for a period of years. The period of years may be no less than 10 nor more than 30. What are the requirements for selecting a plan? By written request to us at least 30 days before the settlement date, the owner may select the plan or change to another plan. If at least 30 days before the settlement date we have not received at our home office the owner's written request to select a plan, we will make payments according to plan B with payments guaranteed for ten years. PAGE 14 If the amount to be applied to a plan is not at least $2,000, or if payments are to be made to other than a natural person, we have the right to make a lump sum payment of the cash surrender value. How will payments be made? Payments will be made by us by check. The check must be personally endorsed by the payee or payees as well as the annuitant (or joint annuitant under plan D). If the annuitant or joint annuitant does not endorse the check, other evidence must be furnished to show that the annuitant or joint annuitant is still alive. PAGE 15 TABLE OF SETTLEMENT RATES The amount of the first and all subsequent monthly fixed dollar annuity payments for each $1,000 of value applied under any payment plan will be based on our fixed dollar Table of Settlement Rates in effect on the settlement date. Such rates are guaranteed to be not less than those shown in Table A. In addition, the amount of such fixed annuity payments will not be less than that which would be provided if a single premium immediate annuity certificate then offered by us to annuitants in the same class were to be purchased with the greater of: 1. the cash surrender value of the certificate; or 2. 95% of the accumulation value of the certificate. The amount of such fixed annuity payments under Plans A, B and C will depend upon the sex and the adjusted age of the annuitant on the date of settlement. The amount of such annuity payments under Plan D will depend on the sex and adjusted age of the annuitant and the joint annuitant on the date of settlement. Adjusted age shall be equal to the age on the nearest birthday minus an "adjustment" depending on the calendar year of birth of the annuitant as follows: Calendar Year of Annuitant's Birth Adjustment Prior to 1920 0 1920 through 1924 1 1925 through 1929 2 1930 through 1934 3 1935 through 1939 4 1940 through 1944 5 1945 through 1949 6 1950 through 1959 7 1960 through 1969 8 1970 through 1979 9 1980 through 1989 10 After 1989 11 PAGE 16
TABLE A - TABLE OF FIXED DOLLAR SETTLEMENT RATES NON-QUALIFIED AND IRA CERTIFICATES Amount of Each Monthly Fixed Dollar Annuity Payment Per $1,000 Applied Life 5 Years 10 Years 15 Years With Adj. Income Certain Certain Certain Refund Age* M F M F M F M F M F 45 4.53 4.24 4.52 4.23 4.50 4.23 4.46 4.21 4.42 4.19 46 4.59 4.28 4.58 4.28 4.55 4.27 4.51 4.25 4.47 4.23 47 4.65 4.33 4.64 4.33 4.61 4.32 4.56 4.30 4.52 4.27 48 4.72 4.38 4.71 4.38 4.67 4.37 4.62 4.34 4.58 4.32 49 4.79 4.44 4.77 4.43 4.74 4.42 4.68 4.39 4.63 4.36 50 4.86 4.50 4.85 4.49 4.81 4.47 4.74 4.45 4.69 4.41 51 4.94 4.56 4.92 4.55 4.88 4.53 4.80 4.50 4.76 4.47 52 5.02 4.62 5.00 4.61 4.95 4.59 4.87 4.56 4.82 4.52 53 5.10 4.69 5.08 4.68 5.03 4.66 4.94 4.62 4.90 4.58 54 5.19 4.76 5.17 4.75 5.11 4.72 5.01 4.68 4.97 4.64 55 5.29 4.84 5.26 4.83 5.20 4.80 5.09 4.74 5.05 4.71 56 5.39 4.92 5.36 4.91 5.29 4.87 5.17 4.81 5.13 4.77 57 5.49 5.00 5.47 4.99 5.38 4.95 5.25 4.88 5.21 4.85 58 5.61 5.09 5.58 5.08 5.48 5.03 5.33 4.96 5.30 4.92 59 5.73 5.19 5.70 5.17 5.59 5.12 5.42 5.04 5.40 5.00 60 5.86 5.29 5.82 5.27 5.70 5.22 5.51 5.12 5.50 5.09 61 6.00 5.40 5.96 5.38 5.82 5.32 5.60 5.21 5.60 5.18 62 6.16 5.52 6.10 5.50 5.95 5.42 5.69 5.30 5.72 5.27 63 6.32 5.65 6.26 5.62 6.08 5.53 5.79 5.39 5.83 5.37 64 6.49 5.78 6.42 5.75 6.21 5.65 5.89 5.49 5.96 5.48 65 6.68 5.92 6.60 5.89 6.35 5.77 5.98 5.58 6.09 5.59 66 6.88 6.08 6.78 6.03 6.50 5.90 6.08 5.69 6.23 5.71 67 7.09 6.24 6.98 6.19 6.65 6.04 6.18 5.79 6.38 5.83 68 7.31 6.42 7.18 6.36 6.81 6.19 6.28 5.90 6.53 5.97 69 7.56 6.61 7.40 6.54 6.97 6.34 6.37 6.01 6.69 6.11 70 7.82 6.81 7.64 6.74 7.14 6.50 6.47 6.12 6.86 6.26 71 8.09 7.04 7.88 6.95 7.31 6.67 6.55 6.22 7.04 6.42 72 8.39 7.28 8.14 7.17 7.48 6.84 6.64 6.33 7.23 6.59 73 8.71 7.54 8.41 7.41 7.65 7.02 6.72 6.44 7.43 6.77 74 9.05 7.83 8.70 7.67 7.83 7.21 6.80 6.54 7.64 6.97 75 9.41 8.14 9.00 7.95 8.00 7.40 6.87 6.64 7.86 7.17 /TABLE PAGE 17
[Table A, cont'd] Plan D - Joint and Survivor Adj. Adjusted Age of Female Joint Annuitant Male 10 Years 5 Years Same 5 Years 10 Years Age* Younger Younger Age Older Older 45 3.80 3.89 3.99 4.10 4.19 46 3.82 3.92 4.03 4.14 4.24 47 3.85 3.95 4.07 4.18 4.29 48 3.87 3.98 4.10 4.22 4.34 49 3.90 4.02 4.15 4.27 4.39 50 3.93 4.06 4.19 4.32 4.45 51 3.96 4.09 4.23 4.38 4.51 52 4.00 4.13 4.28 4.43 4.57 53 4.03 4.18 4.33 4.49 4.64 54 4.07 4.22 4.39 4.56 4.72 55 4.11 4.27 4.45 4.62 4.79 56 4.15 4.32 4.51 4.70 4.88 57 4.19 4.37 4.57 4.77 4.96 58 4.24 4.43 4.64 4.85 5.06 59 4.28 4.49 4.71 4.94 5.16 60 4.34 4.55 4.79 5.03 5.27 61 4.39 4.62 4.87 5.13 5.38 62 4.45 4.69 4.96 5.24 5.50 63 4.51 4.77 5.06 5.35 5.64 64 4.57 4.85 5.16 5.48 5.78 65 4.64 4.94 5.27 5.61 5.93 66 4.71 5.03 5.38 5.75 6.09 67 4.79 5.13 5.51 5.90 6.27 68 4.87 5.24 5.64 6.06 6.46 69 4.96 5.35 5.78 6.24 6.66 70 5.06 5.47 5.94 6.43 6.87 71 5.16 5.60 6.10 6.63 7.11 72 5.26 5.74 6.28 6.84 7.36 73 5.38 5.89 6.47 7.08 7.62 74 5.50 6.05 6.68 7.33 7.91 75 5.63 6.22 6.90 7.60 8.22 *Adjusted Age of annuitant. Refer to the explanation of adjusted age on page 22. M = Male F = Female The table above is based on the "1983 Individual Annuitant Mortality Table A" assuming an interest rate of 4% per year compounded annually. Settlement rates for any age, or any combination of age and sex not shown above, will be calculated on the same basis as those rates shown in the table above. Such rates will be furnished by us upon request. Amounts shown in the table below are based on an assumed interest rate of 4% per year compounded annually. Plan E - Dollar Amount of Each Monthly Fixed Dollar Annuity Payment Per $1,000 Applied Years Monthly Years Monthly Years Monthly Payable Payment Payable Payment Payable Payment 10 $10.06 17 $6.71 24 $5.35 11 9.31 18 6.44 25 5.22 12 8.69 19 6.21 26 5.10 13 8.17 20 6.00 27 5.00 14 7.72 21 5.81 28 4.90 15 7.34 22 5.64 29 4.80 16 7.00 23 5.49 30 4.72
Group Annuity Certificate o Purchase payment is payable in a single sum. o Annuity payments to begin on the settlement date. o This certificate is nonparticipating. Dividends are not payable. IDS Life Insurance Company IDS Tower 10 Minneapolis, Minnesota 55440 EX-99 8 EXHIBIT 4.3 - COPY OF ENDORSEMENT NO. 30340C-GP PAGE 1 Annuity Endorsement ___________________________________________________________________ This endorsement is made a part of the annuity contract to which it is attached. It changes the terms and provisions therein with respect to the death benefits payable if the annuitant or owner dies before settlement for certificates issued pursuant to the group annuity on or after the effective date shown below. ___________________________________________________________________ Beneficiary and Payments To Beneficiary The following provisions are deleted from this group annuity for certificates issued on or after the effective date shown below: What death benefits are paid if the annuitant or owner dies before settlement? If the annuitant or owner dies before settlement while the certificate is in force, we will pay the beneficiary: 1. the greater of the market adjusted value or the purchase payment adjusted for any surrenders (if death occurred before the annuitant's attaining age 75); otherwise 2. the market adjusted value (if death occurred on or after age 75). The market adjusted value will be determined as of the date on which due proof of death is received at our home office. The following provision is added to this group annuity for certificates issued on or after the effective date shown below: What death benefits are paid if the annuitant or owner dies before settlement? If the annuitant or owner dies before settlement while the certificate is in force, we will pay the beneficiary the accumulation value. This endorsement is issued and executed the effective date shown below,or the contract date, if later. Effective date____________________ IDS Life Insurance Company Secretary /s/William A. Stoltzman EX-99 9 EXHIBIT 4.4 - COPY OF ENDORSEMENT NO. 30340C PAGE 1 Annuity Endorsement ___________________________________________________________________ This endorsement is made a part of the annuity certificate to which it is attached. It changes the terms and provisions therein with respect to the death benefits payable if the annuitant or owner dies before settlement. ___________________________________________________________________ Beneficiary and Payments To Beneficiary The following provisions are deleted from: What death benefits are paid if the annuitant or owner dies before settlement? If the annuitant or owner dies before settlement while this certificate is in force, we will pay the beneficiary: 1. the greater of the market adjusted value or the purchase payment adjusted for any surrenders (if death occurred before the annuitant's attaining age 75); otherwise 2. the market adjusted value (if death occurred on or after age 75). The market adjusted value will be determined as of the date on which due proof of death is received at our home office. The following provision is added to: What death benefits are paid if the annuitant or owner dies before settlement? If the annuitant or owner dies before settlement while this certificate is in force, we will pay the beneficiary the accumulation value. This endorsement is issued and executed as of the certificate date. IDS Life Insurance Company Secretary /s/ William A. Stoltzmann William A. Stoltzmann EX-99 10 EXHIBIT 5 - COPY OF OPINION OF COUNSEL PAGE 1 IDS Life Insurance Company IDS Tower 10 Minneapolis, Minnesota 55440 October 3, 1990 Board of Directors IDS Life Insurance Company IDS Tower 10 Minneapolis, Minnesota 55440 Gentlemen: As General Counsel of IDS Life Insurance Company ("Company"), I am familiar with its legal affairs and with IDS Life Account MGA, which is a separate account of the Company established by the Company's Board of Directors pursuant to Section 61A.14 of the Minnesota Statutes. I am also familiar with the Registration Statement on Form S-1 and Pre-Effective Amendment No. 1 thereto (File No. 33-28976), filed by the Company on behalf of the Account with the Securities and Exchange Commission with respect to $150,000 000 interests in IDS Life Account MGA pursuant to Group and Individual Modified Guaranteed Annuity Contracts ("Contracts"). I have made such examination of law and examined such documents and records as in my judgment are necessary and appropriate to enable me to express the following opinions. I am of the opinion that: 1. The Company is duly incorporated, validly existing and in good standing under the laws of the State of Minnesota, and is duly licensed or qualified to do business in each other jurisdiction wherein the business transacted by it requires such licensing or qualification. The Company has all corporate powers required to carry on its business as now conducted and to issue the Contracts. 2. IDS Life Account MGA is a separate account of the Company, duly established and validly existing pursuant to Minnesota law. 3. The Contracts, when issued, offered and sold in accordance with the Prospectus contained in the aforesaid Registration Statement and, upon compliance with local law, will be legal and binding obligations of the Company in accordance with their terms. PAGE 2 4. There is no limitation as to the interests in the Account that may be issued. There is no material pending or threatened litigation, claims or assessments (including any unasserted claims or assessments) against the Company. Please be advised you are correct in your understanding that I will advise and cunsult with you concerning questions of disclosure and the applicable requirements of Statements of Financial Accounting Standards No. 5 if, and when, in the course of performing legal services for the Company or the Account with respect to a matter recognized by me to involve an unasserted claim or assessment that may require financial statement disclosure or consider disclosure of any such possible claim or assessment in your financial statements. You may furnish a copy of this letter to your accountants. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Sincerely, \s\ William A. Stoltzmann William A. Stoltzmann Vice President, General Counsel & Secretary WAS/bkp EX-99 11 EXHIBIT 22 - COPY OF LIST OF SUBSIDIARIES PAGE 1 LIST OF SUBSIDIARIES The wholly-owned subsidiaries of IDS Life Insurance Company are: IDS Life Insurance Company of New York American Enterprise Life Insurance Company EX-99 12 EXHIBIT 24 - CONSENT OF INDEPENDENT AUDITORS PAGE 1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" and to the use of our reports dated February 3, 1994 on the financial statements and financial statement schedules of IDS Life Insurance Company in Post-Effective Amendment No. 5 to the Registration Statement (Form S-1 No. 33-28976) and related Prospectus of IDS Life Insurance Company for the registration of interests in group and individual market value annuity contracts. Ernst & Young Minneapolis, Minnesota April 5, 1994 EX-99 13 EXHIBIT 25 - POWER OF ATTORNEY PAGE 1 IDS LIFE INSURANCE COMPANY DIRECTORS POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as directors of the below listed unit investment trusts that previously have filed registration statements and amendments thereto pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 with the Securities and Exchange Commission:
1933 Act 1940 Act Reg. Number Reg. Number IDS Life Accounts F, IZ, JZ, G, H and N IDS Life Flexible Annuity 33-4173 811-3217 IDS Life Accounts F, IZ, JZ, G, H and N IDS Life Variable and Combination Retirement Annuities 2-73114 811-3217 IDS Life Accounts F, IZ, JZ, G, H and N IDS Life Employee Benefit Annuity 33-52518 811-3217 IDS Life Accounts F, IZ, JZ, G, H and N IDS Life Group Variable Annuity Contract 33-47302 811-3217 IDS Life Insurance Company IDS Life Group Variable Annuity Contract (Fixed Account) 33-48701 N/A IDS Life Insurance Company IDS Life Market Value Annuity 33-28976 N/A IDS Life Insurance Company IDS Life Preferred Choice Annuity 33-50968 N/A IDS Life Variable Life Separate Account Flexible Premium Variable Life Insurance Policy 33-11165 811-4298 IDS Life Variable Life Separate Account IDS Life Single Premium Variable Life 2-97637 811-4298 IDS Life Variable Account for Smith Barney Shearson LifeVest Single Premium Variable Life 33-5210 811-4652 IDS Life Account SBS IDS Life Symphony Annuity 33-40779 812-7731 IDS Life Account RE IDS Life Real Estate Variable Annuity 33-13375 N/A IDS Life Variable Annuity Fund A 2-29081 811-1653 IDS Life Variable Annuity Fund B 2-47430 811-1674
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko and Colleen Curran or either one of them, as her or his attorney-in-fact and agent, to sign for her or him in her or his name, place and stead any and all filings, applications (including applications for exemptive relief), periodic reports, registration statements (with all exhibits and other documents required or desirable in connection therewith) other documents, and amendments thereto and to file such filings, applications, periodic reports, registration statements other documents, and amendments thereto with the Securities and Exchange Commission, and any necessary states, and grants to any or all of them the full power and PAGE 2 authority to do and perform each and every act required or necessary in connection therewith. Dated the 31st day of March, 1994. /s/ Louis C. Fornetti /s/ Janis E. Miller Louis C. Fornetti Janis E. Miller /s/ David R. Hubers /s/ James A. Mitchell David R. Hubers James A. Mitchell /s/ Richard W. Kling /s/ Barry J. Murphy Richard W. Kling Barry J. Murphy /s/ Paul F. Kolkman /s/ Stuart A. Sedlacek Paul F. Kolkman Stuart A. Sedlacek /s/ Peter A. Lefferts /s/ Melinda S. Urion Peter A. Lefferts Melinda S. Urion EX-99 14 EXHIBIT 27 - FINANCIAL STATEMENT SCHEDULES AND REPORT of Independent Auditors PAGE 1 Report of Independent Auditors The Board of Directors IDS Life Insurance Company We have audited the consolidated financial statements of IDS Life Insurance Company as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, and have issued our report thereon dated February 3, 1994 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedules I, V, VI, VIII and IX included elsewhere in this Registration Statement. These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Ernst & Young Minneapolis, Minnesota February 3, 1994 PAGE 2
IDS LIFE INSURANCE COMPANY SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands) AS OF DECEMBER 31, 1993 ________________________________________________________________________________________ Column A Column B Column C Column D Type of Investment Cost Value Amount at which shown in the balance sheet ________________________________________________________________________________________ Fixed maturities: Bonds: United States Government and government agencies and authorities (a) $ 5,591,309 $ 5,737,439 $ 5,591,309 States, municipalities and polictical subdivisions 11,072 13,452 11,072 All other corporate bonds 13,790,043 14,675,088 13,790,043 ____________ _____________ ______________ Total fixed maturities 19,392,424 20,425,979 19,392,424 Mortgage loans on real estate 2,055,450 XXXXXXXXX 2,055,450 Policy loans 350,501 XXXXXXXXX 350,501 Other investments 56,307 XXXXXXXXX 56,307 ____________ ______________ ______________ Total investment $ 21,854,682 $ XXXXXXXXX $ 21,854,682 ____________ ______________ ______________ (a) - Includes mortgage-backed securities with a cost and market value of $5,527,777 and $5,671,738, respectively. /TABLE PAGE 3 IDS LIFE INSURANCE COMPANY SCHEDULE V - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands) FOR THE YEAR ENDED DECEMBER 31, 1991
Column A Column B Column C Column D Column E Column F Segment Deferred Future Unearned Other policy Premium policy policy premiums claims and revenue acquisition benefits benefits cost losses, payable claims and loss expenses Annuities $ 693,184 $13,663,477 $ - $ 30,041 $ - Life, DI, Long-Term Care and Health Insurance 518,439 2,654,915 - 21,205 102,338 Total $1,211,623 $16,318,392 $ - $ 51,246 $102,338
Column A Column G Column H Column I Column J Column K Segment Net Benefits, Amortization Other Premiums investment claims, of deferred operating written income losses and policy expenses settlement acquisition expenses costs Annuities $1,189,038 $ 1,639 $ 63,821 $ 66,068 $ N/A Life, DI, Long-Term Care and Health Insurance 233,828 88,577 52,257 87,601 N/A Total $1,422,866 $90,216 $116,078 $ 153,669 N/A
PAGE 4 DS LIFE INSURANCE COMPANY SCHEDULE V - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands) FOR THE YEAR ENDED DECEMBER 31, 1992
Column A Column B Column C Column D Column E Column F Segment Deferred Future Unearned Other policy Premium policy policy premiums claims and revenue acquisition benefits benefits cost losses, payable claims and loss expenses Annuities $ 860,027 $16,342,419 $ - $ 28,705 $ - Life, DI, Long-Term Care and Health Insurance 580,848 2,883,469 - 21,194 114,379 Total $1,440,875 $19,225,888 $ - $ 49,899 $114,379
Column A Column G Column H Column I Column J Column K Segment Net Benefits, Amortization Other Premiums investment claims, of deferred operating written income losses and policy expenses settlement acquisition expenses costs Annuities $1,370,145 $ 1,870 $ 81,706 $ 100,928 $ N/A Life, DI, Long-Term Care and Health Insurance 246,676 106,528 58,453 114,764 N/A Total $1,616,821 $108.398 $140,159 $ 215,692 N/A
PAGE 5 IDS LIFE INSURANCE COMPANY SCHEDULE V - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands) FOR THE YEAR ENDED DECEMBER 31, 1993
Column A Column B Column C Column D Column E Column F Segment Deferred Future Unearned Other policy Premium policy policy premiums claims and revenue acquisition benefits benefits cost losses, payable claims and loss expenses Annuities $1,008,378 $18,492,135 $ - $ 21,508 $ - Life, DI, Long-Term Care and Health Insurance 644,006 3,148,932 - 23,008 127,245 Total $1,652,384 $21,641,067 $ - $ 44,516 $127,245
Column A Column G Column H Column I Column J Column K Segment Net Benefits, Amortization Other Premiums investment claims, of deferred operating written income losses and policy expenses settlement acquisition expenses costs Annuities $1,532,995 $ 3,656 $139,602 $ 122,999 $ N/A Life, DI, Long-Term Care and Health Insurance 250,224 119,335 72,131 118,975 N/A Total $1,783,219 $122,991 $211,733 $ 241,974 N/A
PAGE 6
IDS LIFE INSURANCE COMPANY SCHEDULE VI - REINSURANCE ($ thousands) FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 ____________________________________________________________________________________________________________________ Column A Column B Column C Column D Column E Column F Gross amount Ceded to other Assumed from Net % of amount companies other companies Amount assumed to net ____________________________________________________________________________________________________________________ For the year ended December 31, 1993 Life insurance in force $ 44,188,493 $ 3,038,426 $ 2,015,382 $ 43,165,449 4.67% ____________________________________________________________________________________________________________________ Premiums: Life insurance $ 51,764 $ 3,627 $ -- $ 48,137 0.00% DI & health insurance 96,250 17,142 -- 79,108 0.00% ____________________________________________________________________________________________________________________ Total premiums $ 148,014 $ 20,769 $ -- $ 127,245 0.00% ____________________________________________________________________________________________________________________ For the year ended December 31, 1992 Life insurance in force $ 38,888,963 $ 2,937,590 $ 2,015,382 $ 37,966,755 5.31% ____________________________________________________________________________________________________________________ Premiums: Life insurance $ 53,238 $ 3,849 $ 330 $ 49,719 0.66% DI & health insurance 78,347 13,687 -- 64,660 0.00% ____________________________________________________________________________________________________________________ Total premiums $ 131,585 $ 17,536 $ 330 $ 114,379 0.29% ____________________________________________________________________________________________________________________ For the year ended December 31, 1991 Life insurance in force $ 34,596,113 $ 2,902,381 $ 2,020,900 $ 33,714,632 5.99% _____________________________________________________________________________________________________________________ Premiums: Life insurance $ 53,223 $ 3,902 $ 385 $ 49,706 0.77% DI & health insurance 59,844 7,212 -- 52,632 0.00% ____________________________________________________________________________________________________________________ Total premiums $ 113,067 $ 11,114 $ 385 $ 102,338 0.38% ____________________________________________________________________________________________________________________ /TABLE PAGE 7
IDS LIFE INSURANCE COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS ($ thousands) FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 ____________________________________________________________________________________________________________________ Column A Column B Column C Column D Column E Additions -------------- Balance at Charged to Description Beginning Charged to Other Accounts- Deductions- Balance at End of Period Costs & Expenses Describe * Describe ** of Period ____________________________________________________________________________________________________________________ For the year ended December 31, 1993 - ------------------------------ Reserve for Mortgage Loans $23,595 $13,635 $0 $2,210 $35,020 Reserve for Fixed Maturities $37,899 ($15,122) $0 $22,777 Reserve for Other Investments $12,834 ($4,344) $0 ($2,210) $10,700 For the year ended December 31, 1992 - ------------------------------- Reserve for Mortgage Loans $16,131 $8,440 $0 $976 $23,595 Reserve for Fixed Maturities $45,100 ($7,601) $400 $0 $37,899 Reserve for Other Investments $7,782 $4,076 $0 ($976) $12,834 For the year ended December 31, 1991 - ------------------------------ Reserve for Mortgage Loans $12,655 $6,860 $0 $3,384 $16,131 Reserve for Fixed Maturities $26,096 $19,004 $0 $0 $45,100 Reserve for Other Investments $8,434 ($4,036) $0 ($3,384) $7,782 * Cash received on bond previously written down ** Transfer between reserve accounts /TABLE PAGE 8
IDS LIFE INSURANCE COMPANY SCHEDULE IX - SHORT-TERM BORROWINGS ($ thousands) FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 ______________________________________________________________________________________________________ Column A Column B Column C Column D Column E Column F Maximum Average Weighted Weighted amount amount average Category of aggregate Balance average outstanding outstanding interest rate short-term borrowing at end interest during the during the during the of period rate period period period ______________________________________________________________________________________________________ 1993 Line of Credit $1,519 N/A $22,700 $1,297 3.70% 1992 Line of Credit $ 0 N/A $20,000 $ 825 5.45% 1991 Line of Credit $ 0 N/A $32,725 $1,483 7.28%
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