-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IlwJmVrjLoNNY7Pno0LSYpcZ0boLej3hjZZaXAkTljJ2tWxppN4doKoNOdvDAzB5 lQ/BQd+9BWjEoOvcrv90jA== 0000881453-95-000057.txt : 19951120 0000881453-95-000057.hdr.sgml : 19951120 ACCESSION NUMBER: 0000881453-95-000057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951115 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN SKANDIA LIFE ASSURANCE CORP/CT CENTRAL INDEX KEY: 0000881453 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE CARRIERS, NEC [6399] IRS NUMBER: 061241288 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-44202 FILM NUMBER: 95593894 BUSINESS ADDRESS: STREET 1: ONE CORP DR CITY: SHELTON STATE: CT ZIP: 06484 BUSINESS PHONE: 2039261888 MAIL ADDRESS: STREET 1: ONE CORPORATE DRIVE CITY: SHELTON STATE: CT ZIP: 06484 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended September 30, 1995 Commission file numbers 33-72968, 33-67614, 33-47754, 33-84306, 33-71110 and 33-58536 American Skandia Life Assurance Corporation Incorporated in the State of Connecticut 06-1241288 (IRS Employer Identification No.) One Corporate Drive Shelton, Connecticut 06484 Telephone Number (203) 926-1888 Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No __ As of October 31, 1995, there were 25,000 shares of outstanding common stock, par value $80 per share, of the registrant, consisting of 100 shares of voting and 24,900 shares of non-voting common stock, all of which were owned by American Skandia Investment Holding Corporation, a wholly-owned subsidiary of Skandia Insurance Company Ltd., a Swedish corporation. American Skandia Life Assurance Corporation Table of Contents
Page PART I. FINANCIAL INFORMATION: Item 1. Financial Statements: Consolidated Statements of Financial Condition - September 30, 1995 (unaudited) and December 31, 1994 4 Consolidated Statements of Operations (unaudited) - Nine months ended September 30, 1995 and September 30, 1994 5 Consolidated Statements of Operations (unaudited) - Three Months Ended September 30, 1995 and September 30, 1994 6 Consolidated Statements of Cash Flows (unaudited) - Nine months ended September 30, 1995 and September 30, 1994 7 Notes to Consolidated Unaudited Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Nine months ended September 30, 1995 10 PART II. OTHER INFORMATION: Item 4. Action Taken by Shareholder 13 Item 6. Exhibits and Reports on Form 8-K 13 Signature 14 Exhibit Index 15
(2) PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS (3) AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------ ------------ ASSETS (unaudited) Investments: Fixed maturities - at amortized cost $ 10,118,259 $ 9,621,865 Investment in mutual funds - at market value 1,659,577 840,637 Short-term investments - at amortized cost 0 24,000,000 ------------ ----------- Total investments 11,777,836 34,462,502 Cash and cash equivalents 6,261,488 23,909,463 Accrued investment income 221,053 173,654 Furniture & equipment(net of accum depr. $509) 50,280 0 Deferred acquisition costs 236,934,373 174,009,609 Receivable from affiliates 757,968 459,960 State insurance licenses 4,900,000 5,012,500 Other assets 2,309,064 1,261,513 Separate account assets 4,208,559,454 2,625,127,128 ------------- ------------- Total Assets $4,471,771,516 $2,864,416,329 ============= ============= LIABILITIES AND SHAREHOLDER'S EQUITY LIABILITIES: Reserve for future contractowner benefits $ 27,540,846 $ 11,422,381 Annuity policy reserves 16,512,818 24,054,255 Income tax payable 0 36,999 Accounts payable and accrued expenses 28,254,323 31,753,380 Payable to affiliates 5,234,568 261,552 Payable to reinsurer 53,531,111 40,105,406 Short-term borrowing-parent 10,000,000 10,000,000 Surplus notes 69,000,000 69,000,000 Deferred contract charges 356,056 449,704 Separate account liabilities 4,208,559,454 2,625,127,128 ------------- ------------- Total Liabilities 4,418,989,176 2,812,210,805 ------------- ------------- SHAREHOLDER'S EQUITY: Common stock, $80 par, 25,000 shares authorized, issued and outstanding 2,000,000 2,000,000 Additional paid-in capital 72,929,572 71,623,932 Unrealized investment gains and losses 183,225 (41,655) Foreign exchange translation (136,815) 0 Accumulated deficit (22,193,642) (21,376,753) ------------- ------------ Total Shareholder's Equity 52,782,340 52,205,524 ------------- ------------ Total Liabilities and Shareholder's Equity $4,471,771,516 $2,864,416,329 ============= =============
See notes to consolidated unaudited financial statements. (4) AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) NINE MONTHS NINE MONTHS ENDED ENDED SEPT 30, 1995 SEPT 30, 1994 ------------- ------------- REVENUES: Net investment income $ 1,279,298 $ 853,668 Annuity premium income 27,480 145,000 Annuity charges & fees 27,438,534 17,701,920 Net realized/unrealized capital losses 28,192 (4,915) Fee income 3,411,409 1,486,229 Other 41,488 21,379 ---------- ---------- Total Revenues 32,226,401 20,203,281 ---------- ---------- BENEFITS AND EXPENSES: Benefits: Annuity benefits 347,115 278,239 Decrease in annuity policy reserves (5,705,857) 4,735,614 Return credited to contractowners (net) 9,167,943 (92,661) --------- --------- 3,809,201 4,921,192 --------- --------- Expenses: Underwriting, acquisition and other insurance expenses 24,257,570 14,413,682 Amortization of insurance license 112,500 112,500 Interest expense 4,828,709 2,295,450 --------- --------- 29,198,779 16,821,632 ---------- ---------- Total Benefits and Expenses 33,007,980 21,742,824 ---------- ---------- Income (loss) from operations before federal income taxes (781,579) (1,539,543) Income taxes 35,311 117,382 ---------- ---------- Net income (loss) $ (816,890) $ (1,656,925) ------------- ------------- See notes to consolidated unaudited financial statements. (5) AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) THREE MONTHS THREE MONTHS ENDED ENDED SEPT 30, 1995 SEPT 30, 1994 ------------- ------------- REVENUES: Net investment income $ 293,335 $ 264,605 Annuity premium income 0 0 Annuity charges & fees 10,564,222 6,806,536 Net realized/unrealized capital losses 44,644 25,914 Fee income 1,379,998 586,620 Other 16,310 18,530 ------------- ------------- Total Revenues 12,298,509 7,702,205 ------------- ------------- BENEFITS AND EXPENSES: Benefits: Annuity benefits 94,534 95,628 Decrease in annuity policy reserves (2,104,559) (5,025) Return credited to contractowners (net) 4,745,061 (178,664) ------------- ------------- 2,735,036 (88,061) ------------- ------------- Expenses: Underwriting, acquisition and other insurance expenses 7,208,417 7,354,402 Amortization of insurance licensE 37,500 37,500 Interest expense 1,619,634 853,694 ------------- ------------- 8,865,551 8,245,596 ------------- ------------- Total Benefits and Expenses 11,600,587 8,157,535 ------------- ------------- Income (loss) from operations before federal income taxes 697,922 (455,330) Income taxes 19,610 48,463 ------------- ------------- Net income (loss) $ 678,312 $ (503,793) ============= =============
See notes to consolidated unaudited financial statements. (6) AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (wholly-owned subsidiary of Skandia Insurance Company Ltd.)
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) NINE MONTHS NINE MONTHS ENDED ENDED SEPT 30, 1995 SEPT 30, 1994 ------------- ------------- CASH FLOW FROM OPERATING ACTIVITIES: Net (loss)/gain $ (816,890) $ (1,656,925) Adjustments to reconcile net income to net cash used in operating activities: (Decrease)/increase in policy reserves (7,541,437) 5,469,691 Increase in policy and contract claims 0 65,019 Amortization of bond discount 17,895 16,367 Amortization of insurance licenses 112,500 112,500 Increase due to/due from affiliates 4,675,008 356,466 Change in other assets (1,097,829) (860,283) Increase in accrued investment income (47,399) (153,012) Increase in accounts payables (3,536,056) (2,300,287) Change in deferred acquisition cost (62,924,764) (62,449,659) Change in deferred contract charges (93,648) (37,042) Realized (gain)/loss on sale of investments (28,192) 1,094 Unrealized gain on mutual funds 0 3,821 ----------- ------------ Net cash used in operating activities (71,280,812) (61,432,250) ----------- ------------ CASH FLOW FROM INVESTING ACTIVITIES: Purchase of fixed maturity investments (614,289) 0 Proceeds from maturity of fixed maturity investments 100,000 0 Purchase of shares in mutual funds (1,368,059) (772,934) Proceeds from sale of mutual funds 798,073 12,330 Purchase of short-term investments (168,500,000) (479,100,000) Proceeds from sale of short-term investments 192,500,000 498,500,000 Change in investments of separate account assets (1,082,573,172) (1,050,747,442) ------------- ------------- Net cash used in investing activities (1,059,657,447) (1,032,108,046) ------------- ------------- CASH FLOW FROM FINANCING ACTIVITIES: Capital & surplus contributions from parent 1,172,942 0 Short term borrowing 0 0 Surplus notes 0 35,000,000 Payable to reinsurer 13,425,705 22,253,667 Proceeds from annuity sales 1,098,691,637 1,054,183,171 ------------- ------------- Net cash provided by financing activities 1,113,290,284 1,111,436,838 ------------- ------------- Net (decrease)/increase in cash & cash equivalents (17,647,975) 17,896,542 ----------- ------------ Cash and cash equivalents at beginning of period 23,909,463 9,834,854 ----------- ------------ Cash and cash equivalents at end of period $ 6,261,488 $ 27,731,396 =========== ============ SUPPLEMENTAL CASH FLOW DISCLOSURE: Income taxes paid $ 72,310 $ 131,008 =========== ============ Interest paid $ 540,319 $ 314,722 =========== ============
See notes to consolidated unaudited financial statements. (7) AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Unaudited Financial Statements September 30, 1995 1. BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For further information, refer to the financial statements and footnotes thereto in the Company's audited financial statements for the year ended December 31, 1994. Beginning with the third quarter of 1995, the accompanying financial statements are presented on a consolidated basis as a result of the acquisition of the foreign entity, Skandia Vida, S.A. de C.V. Intercompany transactions and balances have been eliminated in consolidation. 2. FOREIGN ENTITY As of July 1995, Skandia Vida, S.A. de C.V. was formed by the ultimate parent Skandia Insurance Company, Ltd., a Swedish corporation. The Company owns 99.9% ownership in Skandia Vida, S.A. de C.V. which is a Mexican life insurance company. This Mexican life insurer is a start up company with expectations of selling long term savings product within Mexico. The assets and liabilities of Skandia Vida, S.A. de C.V. are translated at the period ended exchange rate. The effects of these translation adjustments are reported in a separate component of shareholder's equity. Total shareholder's equity of Skandia Vida, S.A. de C.V. is $1,141,339 as of September 30, 1995. 3. SURPLUS NOTES During 1994, the Company received $49 million from its parent in exchange for four surplus notes, two in the amount of $10 million, one in the amount of $15 million and one in the amount of $14 million, at interest rates of 7.28%, 7.90%, 9.13% and 9.78%, respectively. Interest payable at September 30, 1995 for these notes is $4,850,293. (8) During 1993, the Company received $20 million from its parent in exchange for a surplus note in the amount of $20 million at a 6.84% interest rate. Interest payable at September 30, 1995 is $2,435,800. Payment of interest and repayment of principal for these notes require approval of the Commissioner of Insurance of the State of Connecticut. 4. REINSURANCE The Company cedes reinsurance under modified coinsurance arrangements. The reinsurance arrangements provide additional capacity for growth in supporting the cash flow strain from the Company's variable annuity business. The reinsurance is effected under quota share contracts. Effective January 1, 1995, the Company reinsured certain mortality risks. These risks result from the Guaranteed Minimum Death Benefit feature in the variable annuity products. The effect of the reinsurance agreements on the Company's operations was to reduce annuity charges and fee income, death benefit expense, and reserve exposure. The effect of reinsurance is summarized as follows:
For the period ended September 30, 1995 Annuity Annuity Return Credited Charges & Fees Policy Reserves to Contractowners Gross $35,351,011 ($ 1,631,551) $ 9,534,582 Ceded 7,912,477 4,074,306 366,639 Net $27,438,534 ($ 5,705,857) $ 9,167,943
For the period ended September 30, 1994
Annuity Charges & Fees Gross $ 21,036,876 Ceded 3,334,956 Net $ 17,701,920
Such ceded reinsurance does not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet the obligations assumed under the reinsurance agreement. (9) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Nine months ended September 30, 1995 American Skandia Life Assurance Corporation (the Company) is a stock insurance company domiciled in Connecticut with licenses in all 50 states. It is a wholly-owned subsidiary of American Skandia Investment Holding Corporation, whose ultimate parent is Skandia Insurance Company Ltd., a Swedish company. The Company is in the business of issuing annuity policies, and has been so since its business inception in 1988. The Company currently offers the following annuity products: a) certain deferred annuities that are registered with the Securities and Exchange Commission, including variable annuities and fixed interest rate annuities that include a market value adjustment feature; b) certain other fixed deferred annuities that are not registered with the Securities and Exchange Commission; and c) fixed and adjustable immediate annuities. The Company markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, the Company markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. As of July 1995, Skandia Vida, S.A. de C.V. was formed by the ultimate parent Skandia Insurance Company Ltd., a Swedish corporation. The Company owns 99.9% ownership in Skandia Vida, S.A. de C.V. which is a Mexican life insurance company. This Mexican life insurer is a start up company with expectations of selling long term savings product within Mexico. Total shareholder's equity of Skandia Vida, S.A. de C.V. is $1,141,339 as of September 30, 1995. Results of Operations The Company's long term business plan was developed reflecting the current sales and marketing approach. The sales volume for the nine month period ended September 30, 1995 and 1994 was $1.099 billion and $1.054 billion, respectively. This represents an increase of 4% compared to the same period last year. This increase is a direct result of an outstanding third quarter sales effort by the Company coupled with an overall increase in the variable annuity marketplace. Assets grew $1.607 billion or 56% since December 31, 1994. This increase is a direct result of the sales volume increasing separate account assets and deferred acquisition costs. Liabilities grew $1.607 billion or 57% as a result of the reserves required for the increased sales activity and increased reinsurance to support the acquisition costs of the Company's variable annuity business. The Company experienced a net loss of $816,890 after tax for the current period which was in excess of plan. This loss is a result of the asset performance relative to the liability (10) structure for the market value adjusted annuity product along with a strengthening of the reserves for this same business due to historically lower spreads in the corporate bond market, as well as a higher than expected general expense relative to sales volume. For the same period last year, the Company experienced a net loss of $1.657 million which was greater than plan as a result of an additional reserving to cover the guaranteed minimum death benefit exposure in the Company's variable annuity contracts. Revenues: Increasing volume of annuity sales results in higher assets under management. The fees realized on assets under management has resulted in annuity charges & fees to increase 55% and 133% over the periods ended September 30, 1995 and 1994 respectively. Net investment income increased 50% and 57% over the periods ended September 30, 1995 and 1994 respectively. This was a result of an increase in the Company's bonds and short term investments throughout the periods. Fee income increased 130% and 153% for the periods ended September 30, 1995 and 1994 respectively, as a result of income from transfer agency type activities. Benefits: Annuity benefits represent payments on annuity contracts with mortality risks, this being the immediate annuity with life contingencies and supplementary contracts with life contingencies. Increase in annuity policy reserves represent change in reserves for the immediate annuity with life contingencies, supplementary contracts with life contingencies and guaranteed minimum death benefit. During the most recent quarter the Company entered into an agreement to reinsure the guaranteed minimum death benefit exposure on the variable annuity product line. This agreement allows the Company to take a reserve credit for the required reserve on this book of business. The financial result for the period was positively impacted by this transaction in the amount of $4.4 million. Return credited to contractowners represents revenues on the variable and market value adjusted annuities offset by the benefit payments and change in reserves required on this business. Also included are the benefit payments and change in reserves on immediate annuity contracts without significant mortality risks. The amount for the period September 30, 1995 reflects a lower than expected separate account investment return on the market value adjusted contracts in support of the benefits and required reserves. In addition the result represents a strengthening of the reserves on this product. The reserve strengthening is due to historically lower interest rate spreads that are currently being realized in the corporate bond market. (11) Expenses: Underwriting, acquisition and other insurance expenses is made up of $42.4 million of commissions and $28.1 million of general expenses offset by the net capitalization of deferred acquisition costs totaling $46.2 million. This compares to the same period last year of $33.4 million of commissions and $19.3 million of general expenses offset by the net capitalization of deferred acquisition costs totaling $38.3 million. Interest expense increased 110% over the same period last year as a result of the increase in surplus notes. Liquidity and Capital Resources The liquidity requirement of the Company was met by cash from insurance operations, investment activities and borrowings from the parent. The Company had significant growth during the nine month period in 1995. The sales volume of $1.099 million was made up of approximately 75% variable annuities which carry a contingent deferred sales charge. This type of product causes a temporary cash strain in that 100% of the proceeds are invested in separate accounts supporting the product leaving a cash (but not capital) strain caused by the acquisition costs for the new business. This cash strain required the Company to look beyond the insurance operations and investments of the Company. The Company extended its reinsurance agreements (initiated in 1993 and 1994) and entered into a third reinsurance agreement, effective May 1, 1995, with a large reinsurer in support of its cash needs. The reinsurance agreements are modified coinsurance arrangements where the reinsurer shares in the experience of a specific book of business. The income and expense items presented above are net of reinsurance. The Company is reviewing various options to fund the cash strain anticipated from the acquisition costs on the expected future volume. The tremendous growth of this young organization has depended on capital support from its parent. In 1992 and 1993 the parent contributed the capital needed to provide a strong capital base for the Company's planned future growth. As of September 30, 1995 and December 31, 1994, shareholder's equity was $52,782,340 and $52,205,524 respectively, which includes the carrying value of the state insurance licenses in the amount of $4,900,000 and $5,012,500 respectively. The Company has long term surplus notes and short term borrowing with its parent. No dividends have been paid to its parent company. (12) PART II. OTHER INFORMATION ITEM 4. ACTION TAKEN BY SHAREHOLDER Not applicable for this quarter. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index (b) ASLAC did not file any Report Form 8-K during the quarter covered by this report. (13) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. American Skandia Life Assurance Corporation (Registrant) by s/Thomas M. Mazzaferro Thomas M. Mazzaferro Executive Vice President and Chief Financial Officer November 14, 1995 (14) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. American Skandia Life Assurance Corporation (Registrant) by ________________________ Thomas M. Mazzaferro Executive Vice President and Chief Financial Officer November 14, 1995 (14) EXHIBIT INDEX
Exhibit Number Description Location (2) Plan of acquisition, reorganization, arrangement, liquidation or succession None (4) Instruments defining the rights of security holders, including indentures None (10) Material Contracts None (11) Statement re computation of per share earnings None (15) Letter re unaudited interim financial information None (18) Letter re change in accounting principles None (19) Report furnished to security holders None (22) Published report regarding matters submitted to vote of security holders None (23) Consents of experts and counsel None (24) Power of attorney None (99) Additional exhibits None
(15) EX-27 2 FINANCIALS FOR 3RD QUARTER 1995
7 0000881453 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION 9-MOS 12-MOS SEP-30-1995 DEC-31-1994 SEP-30-1995 SEP-30-1994 0 0 10,118,259 9,621,865 0 0 1,659,577 840,637 0 0 0 0 11,777,836 34,462,502 6,261,488 23,909,463 0 0 236,934,373 174,009,609 4,471,771,516 2,864,416,329 44,053,664 35,476,636 0 0 0 0 0 0 79,000,000 79,000,000 2,000,000 2,000,000 0 0 0 0 50,782,340 50,205,524 4,471,771,516 2,864,416,329 0 0 1,279,298 853,668 28,192 (4,915) 30,918,911 19,354,528 3,809,201 4,921,192 24,370,070 14,526,182 0 0 (781,579) (1,539,543) 35,311 117,382 0 0 0 0 0 0 0 0 (816,890) (1,656,925) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Included in Total Assets are Assets Held in Separate Accounts of $4,208,559,454 and $2,625,127,128 as of September 30, 1995 and December 31, 1994, respectively. Included in Total Liabilities and Equity are Liabilities Related to Separate Accounts of $4,208,559,454 and $2,625,127,128 as of September 30, 1995 and December 31, 1994, respectively. -----END PRIVACY-ENHANCED MESSAGE-----