-----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, A1jk7ROff1/YDH215aC4wwr3K54pUwGBGE96MLKmkFj5YkT2hg86yTA2hfjY4KUw 5niHl25uqepAnE/k3DdSAw== 0000881453-95-000017.txt : 19950612 0000881453-95-000017.hdr.sgml : 19950612 ACCESSION NUMBER: 0000881453-95-000017 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950609 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 033-44202 FILM NUMBER: 95546080 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/A 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 March 31, 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 April 30, 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: Statements of Financial Condition - March 31, 1995 (unaudited) and December 31, 1994 4 Statements of Operations (unaudited) - Three Months Ended March 31, 1995 and March 31, 1994 5 Statements of Cash Flows (unaudited) - Three Months Ended March 31, 1995 and March 31, 1994 6 Notes to Unaudited Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Three Months Ended March 31, 1995 9 PART II. OTHER INFORMATION: Item 4. Action Taken by Shareholder 12 Item 6. Exhibits and Reports on Form 8-K 12 Signature 13 Exhibit Index 14
(2) PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS (3)
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) STATEMENTS OF FINANCIAL CONDITION 1995 1994 --------- ----------- (unaudited) ASSETS Investments: Fixed maturities - at amortized cost $ 10,122,921 $ 9,621,865 Investment in mutual funds - at market value 1,134,857 840,637 Short-term investments - at amortized cost 19,500,000 24,000,000 ------------- ------------ Total investments 30,757,778 34,462,502 Cash and cash equivalents 6,096,234 23,909,463 Accrued investment income 230,803 173,654 Deferred acquisition costs 191,737,163 174,009,609 Receivable from affiliates 385,589 459,960 State insurance licenses 4,975,000 5,012,500 Other assets 2,158,773 1,261,513 Separate account assets 3,002,215,490 2,625,127,128 -------------- ------------- Total Assets $ 3,238,556,830 $ 2,864,416,329 ============== ============= LIABILITIES AND SHAREHOLDER'S EQUITY LIABILITIES: Reserve for future contractowner benefits $ 16,332,806 $ 11,422,381 Annuity policy reserves 23,782,990 24,054,255 Income tax payable 0 36,999 Accounts payable and accrued expenses 23,317,759 31,753,380 Payable to affiliates 174,665 261,552 Payable to reinsurer 43,098,781 40,105,406 Short-term borrowing-parent 10,000,000 10,000,000 Surplus notes 69,000,000 69,000,000 Deferred contract charges 413,979 449,704 Separate account liabilities 3,002,215,490 2,625,127,128 ------------- ------------- Total Liabilities 3,188,336,470 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 71,623,932 71,623,932 Unrealized investment gains and losses 41,524 (41,655) Accumulated deficit (23,445,096) (21,376,753) ------------- ------------- Total Shareholder's Equity 50,220,360 52,205,524 ------------- ------------- Total Liabilities and Shareholder's Equity $ 3,238,556,830 $ 2,864,416,329 ============= =============
See notes to unaudited financial statements (4)
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) STATEMENT OF OPERATIONS (unaudited) THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 1995 MARCH 31, 1994 -------------- -------------- REVENUES: Net investment income $ 551,690 $ 252,914 Annuity premium income 0 0 Annuity charges & fees 7,823,421 5,163,880 Net realized/unrealized capital gains/loss (16,082) 0 Fee income 1,046,000 429,122 Other 22,482 1,063 --------- -------- Total Revenues 9,427,511 5,846,979 --------- --------- BENEFITS AND EXPENSES: Benefits: Annuity benefits 115,819 89,567 Increase in annuity policy reserves (25,109) 1,963,447 Return credited to contractowners (net) 1,700,825 (141,406) --------- --------- 1,791,535 1,911,608 --------- --------- Expenses: Underwriting, acquisition and other insu 8,005,929 3,172,956 Amortization of insurance license 37,500 37,500 Interest expense 1,603,834 579,396 --------- ------- 9,647,263 3,789,852 --------- --------- Total Benefits and Expenses 11,438,798 5,701,460 ---------- --------- Income (loss) from operations before federal income taxes (2,011,287) 145,519 Federal income taxes 15,401 40,883 --------- ------- Net income (loss) $ (2,026,688) $ 104,636 ========= =========
See notes to unaudited financial statements. (5)
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) STATEMENT OF CASH FLOWS (unaudited) THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 1995 MARCH 31, 1994 -------------- -------------- CASH FLOW FROM OPERATING ACTIVITIES: Net income (loss) $ (2,026,688) $ 104,636 Adjustments to reconcile net income to net cash used in operating activities: Decrease in policy reserves (271,265) 2,689,734 Increase/(decrease) in policy and contract claims 0 Amortization of bond discount 5,038 5,463 Amortization of insurance licenses 37,500 37,500 (Increase)/decrease in receivables (822,889) (268,375) (Increase)/decrease in accrued investment income (57,149) (135,781) (Increase)decrease in accounts payables (8,559,509) (960,623) Change in deferred acquisition cost (17,727,553) (20,651,263) Change in deferred contract charges (35,725) 8,061 Realized loss (gain) on sale of investments 16,082 0 ---------- ---------- Net cash used in operating activities (29,442,158) (19,170,648) ---------- ---------- CASH FLOW FROM INVESTING ACTIVITIES: Purchase of fixed maturity investments (506,094) 0 Purchase of shares in mutual funds (833,080) 0 Proceeds from sale of mutual funds 564,303 0 Purchase of short-term investments (19,500,000) (445,100,000) Proceeds from sale of short-term investments 24,000,000 464,500,000 Change in investments of separate account assets (308,708,760) (337,296,266) ----------- ----------- Net cash used in investing activities (304,983,631) (317,896,266) ----------- ----------- CASH FLOW FROM FINANCING ACTIVITIES: Surplus notes 0 20,000,000 Payable to reinsurer 2,993,375 1,144,382 Proceeds from annuity sales 313,619,185 337,221,927 ----------- ----------- Net cash provided by financing activities 316,612,560 358,366,309 ----------- ----------- Net decrease in cash & cash equivalents (17,813,229) 21,299,395 ---------- ----------- Cash and cash equivalents at beginning of period 23,909,463 9,834,854 ---------- ----------- Cash and cash equivalents at end of period $ 6,096,234 $ 31,134,249 ---------- ----------- SUPPLEMENTAL CASH FLOW DISCLOSURE: Income taxes paid $ 50,000 $ 17,661 ---------- ----------- Interest paid $ 180,625 $ 0 ========== ===========
See notes to unaudited financial statements. (6) AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly owned subsidiary of Skandia Insurance Company Ltd.) Notes to Unaudited Financial Statements March 31, 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 three month period ended March 31, 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. 2. 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 March 31, 1995 for these notes is $2,682,667. 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 March 31, 1995 is $1,740,400. Payment of interest and repayment of principal for these notes require approval of the Commissioner of Insurance of the State of Connecticut. (7) 3. REINSURANCE The Company cedes reinsurance under a modified coinsurance arrangement. The reinsurance arrangement provides additional capacity for growth in supporting the cash flow strain from the Company's variable annuity business. The reinsurance is effected under a quota share contract. The effect of the reinsurance agreement on the Company's operations was to reduce annuity charges and fee income. The effect on annuity charges and fees for the period is as follows:
March 31, 1995 1994 ---------- ---------- Gross $9,969,593 $5,783,181 Ceded 2,146,172 619,301 ---------- ---------- Net $7,823,421 $5,163,880 ========== ==========
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. (8) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended March 31, 1995 American Skandia Life Assurance Corporation (ASLAC) 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 (ASIHC), 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. Results of Operations The Company's long term business plan was developed reflecting the current sales and marketing approach. The sales volume for the three month period ended March 31, 1995 and 1994 was $314 million and $337 million respectively. The first quarter represents a decrease of 7% compared to the same period last year however that is compared to a drop of 26% in the variable annuity marketplace for the same period. Assets grew $374 million or 13% since December 31, 1994. This increase is a direct result of the sales volume increasing separate account assets and deferred acquisition costs. Liabilities grew $376 million or 13% 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 after tax for the current period which was in excess of plan. This loss is a result of the performance of our assets relative to our liability structure for our market value adjusted annuity as well as a higher than expected general expense relative to sales volume. For the same period last year, the Company achieved profits of $105,000 which was less than anticipated as a result of an additional reserving to cover the guaranteed minimum death benefit exposure in the Company's variable annuity contracts. (9) Revenues: Increasing sale 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 52% and 179% over the periods ended March 31, 1995 and 1994 respectively. Net investment income increased 118% and decreased 15% over the periods ended March 31, 1995 and 1994 respectively. The increase in 1995 was a result of an increase in short term investments throughout the period. The decrease in 1994 was a result of liquidating investments to support the cash needs required to fund the acquisition costs on the variable annuity business. Fee income increased 144% and 191% for the periods ended March 31, 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. The significant increase for the period ended March 31, 1994 reflects the required increase in the guaranteed minimum death benefit reserve on variable annuity contracts. This increase covers the escalating death benefit, in certain products, which was further enhanced as a result of poor performance of the underlying mutual funds within the variable annuity contract. 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 result for the period reflects a lower than expected separate account investment return on the market value adjusted contracts in support of the benefits and required reserves. (10) Expenses: Underwriting, acquisition and other insurance expenses is made up of $11 million of commissions and $9.7 million of general expenses offset by the net capitalization of deferred acquisition costs totaling $12.7 million. This compares to the same period last year of $13.7 million of commissions and $8.5 million of general expenses offset by the net capitalization of deferred acquisition costs totaling $18.4 million. Interest expense increased 177% over the same period last year as a result of a $49 million increase in surplus notes. Liquidity and Capital Resources The liquidity requirement of ASLAC was met by cash from insurance operations, investment activities and borrowings from ASLAC's parent. The Company had significant growth during the first quarter of 1995. The sales volume of $314 million was made up of approximately 65% 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) 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 March 31, 1995 and December 31, 1994, shareholder's equity was $50,220,360 and $52,205,524 respectively, which includes the carrying value of the state insurance licenses in the amount of $4,975,000 and $5,012,500 respectively. ASLAC has long term surplus notes and short term borrowing with its parent. No dividends have been paid to its parent company. (11) 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. (12) 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 Senior Vice President and Chief Financial Officer May 12, 1995 (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 ________________________ Thomas M. Mazzaferro Senior Vice President and Chief Financial Officer May 12, 1995 (13) 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 (14) EX-27 2 FINANCIALS FOR 1ST QUARTER 1995
7 0000881453 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION 1 3-MOS 3-MOS MAR-31-1995 DEC-31-1994 MAR-31-1995 MAR-31-1994 0 0 10,122,921 9,621,865 0 0 1,134,857 840,637 0 0 0 0 30,757,778 34,462,502 6,096,234 23,909,463 0 0 191,737,163 174,,009,609 3,238,556,830 2,864,416,329 40,115,796 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 48,220,360 50,205,524 3,238,556,830 2,864,416,329 0 0 551,690 252,914 (16,082) 0 8,891,903 5,594,065 1,791,535 1,911,608 8,043,429 3,210,456 0 0 (2,011,287) 145,519 15,401 40,883 (2,026,688) 104,636 0 0 0 0 0 0 (2,026,688) 104,636 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 $3,002,215,490 and $2,625,127,128 as of March 31, 1995 and December 31, 1994, respectively. Included in Total Liabilities and Equity are liabilities related to Separate Accounts of $3,002,215,490 and $2,625,127,128 as of March 31, 1995 and December 31, 1994, respectively.
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