-----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, AvO4ixb5PoQxlBGYZS9rj9jUGxmDtICZHegPtPNAHLkTEQQju6hd/qbb1SfE6KK2 DW3j4oVkJovQobL+khUsLQ== 0000881453-99-000026.txt : 19990403 0000881453-99-000026.hdr.sgml : 19990403 ACCESSION NUMBER: 0000881453-99-000026 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 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-K SEC ACT: SEC FILE NUMBER: 033-44202 FILM NUMBER: 99584415 BUSINESS ADDRESS: STREET 1: ONE CORPORATE DRIVE CITY: SHELTON STATE: CT ZIP: 06484 BUSINESS PHONE: 2039261888 MAIL ADDRESS: STREET 1: ONE CORPORATE DRIVE CITY: SHELTON STATE: CT ZIP: 06484 10-K 1 ASLAC 1998 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1998 Commission file numbers 33-62791, 33-62953, 33-88360, 33-89676, 33-89678, 33-91400, 333-00995, 333-02867, 333-24989, 333-25733, 333-25761 and 333-26695 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION Incorporated in the State of Connecticut Connecticut 06-1241288 ------------------------------ ------------------ (State or other jurisdiction of IRS Employer incorporation or organization) Identification No.) One Corporate Drive, Shelton, Connecticut 06484 -------------------------------------------------- (Address of Principal Executive Offices, Zip Code) Registrant's telephone number, including area code: (203) 926-1888 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ As of March 26, 1999, 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 all of which were owned by American Skandia Investment Holding Corporation, a wholly-owned subsidiary of Skandia Insurance Company Ltd., a Swedish corporation. PART I Item 1. Business American Skandia Life Assurance Corporation ("ASLAC" or "the Company") is a Connecticut corporation with its principal offices in Shelton, Connecticut. American Skandia Investment Holding Corporation (the "Parent") owns all of the issued and outstanding shares of the Company's common stock. The Parent is a wholly-owned ultimate subsidiary of Skandia Insurance Company Ltd., a Swedish corporation. The products sold by the Company are sold to individuals, businesses and pension plans. Annuities are used primarily for long-term savings and retirement purposes. Life insurance is used primarily to address the economic impact of premature death, estate and business planning concerns and supplemental retirement needs. Annuity contracts represent a contractual obligation to make payments over a given period of time (often measured by the life of the recipient), undertaken by the insurer in return for the payment of either a single purchase payment or a series of scheduled or flexible purchase payments. The insurer's obligation to pay may commence immediately or be deferred. If the payments are deferred, the insurer generally incurs an obligation to make a surrender value available during the deferral period based on an account value established using the purchase payments. The account value may be credited interest, or may vary with the performance of investments made by the insurer. Gains in the contracts before distribution are tax deferred. Distributions are taxed as ordinary income. During the deferral period, distributions are assumed to come first from any gain in contract and loans are deemed distributions. Distributions may be subject to a tax penalty. For immediate annuities and annuitized deferred annuities, a portion of each distribution may be treated as the return of the taxpayer's investment in the contract. Life insurance policies represent a contractual obligation to pay proceeds to a beneficiary upon the death of the insured. This obligation is undertaken by the insurer in return for either a single premium, or a series of scheduled or flexible premiums. Cash value life insurance represents an additional obligation to make amounts available upon surrender or, in many cases, for loans collateralized by policy values. Distributions upon the death of the insured are tax free in most circumstances. Gains in the contracts before distribution are tax deferred. Distributions subject to tax are subject to ordinary income treatment. Distributions before the death of the insured from policies deemed to be modified endowment contracts are generally taxed in a manner similar to deferred annuities. Distributions from other policies before the insured's death are assumed to come first from the taxpayer's investment in the policy and loans are not deemed distributions. The Company is obligated to carry in its statutory financial statements, as liabilities, actuarial reserves to meet its obligations on outstanding annuity or life insurance contracts. This is required by the life insurance laws and regulations in the jurisdictions in which ASLAC does business. Such reserves are based on mortality and/or morbidity tables in general use in the United States. In general, reserves are computed amounts that, with additions from premiums to be received, and with interest on such reserves compounded at certain assumed rates, are expected to be sufficient to meet contractual obligations at their maturities if death occurs in accordance with the mortality tables employed. In the accompanying financial statements, these reserves for contractual obligations are determined in accordance with generally accepted accounting principles and are included in the separate account liabilities, reserve for future contractowner benefits and policy reserves. ASLAC is engaged in a business that is highly competitive due to the large number of insurance companies and other institutions competing in the marketing and sale of long-term savings and insurance products. As of December 31, 1998, the Company had 734 direct salaried employees. Item 2. Properties The Company occupies office space leased from an affiliate, American Skandia Information Services and Technology Corporation, and believes that the current facilities are satisfactory for its near term needs. Item 3. Legal Proceedings As of the date of this filing, the Company is not involved in any litigation outside of the ordinary course of business, and knows of no such material claims. Item 4. Submission of Matters to a Vote of Security Holders None PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters All of ASLAC's outstanding shares are owned by American Skandia Investment Holding Corporation, a wholly-owned subsidiary of Skandia Insurance Company Ltd. The Company did not pay any dividends to its Parent in 1998, 1997 and 1996. Item 6. Selected Financial Data The following table summarizes information with respect to the operations of the Company. The selected financial data should be read in conjunction with the financial statements and the notes thereto and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(in thousands) FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Income Statement Data: Revenues: Annuity and life insurance charges and fees* $ 186,211 $ 121,158 $ 69,780 $ 38,837 $ 24,780 Fee income 50,839 27,593 16,420 6,206 2,112 Net investment income 11,130 8,181 1,586 1,601 1,300 Premium income and other revenues 1,360 1,082 265 45 92 ------------- ------------- ------------ ----------- ----------- Total revenues $ 249,540 $ 158,014 $ 88,051 $ 46,689 $ 28,284 ============= ============= ============ =========== =========== Benefits and Expenses: Annuity benefits $ 558 $ 2,033 $ 613 $ 555 $ 370 Change in annuity policy reserves 1,053 37 635 (6,779) 5,766 Cost of minimum death benefit reinsurance 5,144 4,545 2,867 2,057 - Return credited to contractowners (8,930) (2,018) 673 10,613 (517) Underwriting, acquisition and other insurance expenses 167,790 90,496 49,887 35,914 18,943 Interest expense 41,004 24,895 10,791 6,500 3,616 ------------- ------------- ------------ ------------ ------------ Total benefits and expenses $ 206,619 $ 119,988 $ 65,466 $ 48,860 $ 28,178 ============= ============= ============ ============ ============ Income tax expense (benefit)$ 8,154 $ 10,478 $ (4,038) $ 397 $ 247 ============= ============= ============ ============ ============ Net income (loss) $ 34,767 $ 27,548 $ 26,623 $ (2,568) $ (141) ============= ============= ============ ============ ============ Balance Sheet Data: Total Assets $ 18,848,273 $ 12,894,290 $ 8,268,696 $ 4,956,018 $ 2,824,311 ============= ============= ============ ============ ============ Future fees payable to parent $ 368,978 $ 233,034 $ 47,112 $ - $ - ============= ============= ============ ============ ============ Surplus Notes $ 193,000 $ 213,000 $ 213,000 $ 103,000 $ 69,000 ============= ============= ============ ============ ============ Shareholder's Equity $ 250,417 $ 184,421 $ 126,345 $ 59,713 $ 52,206 ============= ============= ============ ============ ============
* On annuity and life insurance sales of $4,159,662, $3,697,990, $2,795,114, $1,628,486, and $1,372,874, during the years ended December 31, 1998, 1997, 1996, 1995, and 1994, respectively, with contractowner assets under management of $17,854,761, $12,119,191, $7,764,891, $4,704,044, and $2,661,161 as of December 31, 1998, 1997, 1996, 1995 and 1994, respectively. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations American Skandia Life Assurance Corporation (the "Company") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states. It is a wholly-owned subsidiary of American Skandia Investment Holding Corporation (the "Parent"), whose ultimate parent is Skandia Insurance Company Ltd., a Swedish company. The Company is primarily in the business of issuing long-term savings and retirement products to individuals, groups and qualified pension plans. Since its business inception in 1988, the Company has offered a wide array of annuities, including: 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; c) non-registered group variable annuities designed as funding vehicles for various types of qualified retirement plans; and d) fixed and adjustable immediate annuities. In April 1998, the Company began offering a term life insurance product in support of an affiliate's mutual fund products. In May 1998, the Company launched a single premium variable life insurance product. In January 1999, the Company launched its second variable life product, which was designed as a flexible premium product. The Company markets its products to independent financial planners and broker-dealers 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 and life insurance. The Company has a 99.9% ownership in Skandia Vida, S.A. de C.V. which is a life insurance company domiciled in Mexico. This Mexican life insurer is a start up company with expectations of selling long-term savings products within Mexico. Skandia Vida, S.A. de C.V had total shareholder's equity of $4,724,000 and $1,509,000 as of December 31, 1998, and 1997, respectively and has generated net losses of $2,514,000, $1,438,000 and $781,000 for the years ended December 31, 1998, 1997 and 1996, respectively. RESULTS OF OPERATIONS Annuity and life insurance sales increased 12%, 32% and 72% in 1998, 1997 and 1996, respectively. The Company continues to show significant growth in sales volume and ranked 6th highest in variable annuity sales during 1998, according to the Variable Annuity Research and Data Service. The Company's growth is a result of innovative product development activities, the recruitment and retention of top producers, and the success of its highly rated customer service teams. The Company offers and sells a wide range of deferred annuities and variable life insurance through three focused marketing, sales and service teams. Each team specializes in addressing one of the Company's primary distribution channels: (a) financial planning firms; (b) broker-dealers that generally are members of the New York Stock Exchange, including "wirehouse" and regional broker-dealer firms; and (c) broker-dealers affiliated with banks or which specialize in marketing to customers of banks. The Company also offers a number of specialized products distributed by select, large distributors. There has been continued growth and success in expanding the number of selling agreements in the primary distribution channels. There has also been increased success in enhancing the relationships with the registered representatives/insurance agents of all the selling firms. Total assets grew 46%, 56% and 66% in 1998, 1997 and 1996, respectively. These increases were a direct result of the substantial sales volume and market growth of the separate account assets. The sales and market growth also drove increases in deferred acquisition costs, as well as, fixed maturity investments, in support of the Company's risk based capital requirements. Liabilities grew 46%, 56%, and 65% in 1998, 1997 and 1996, respectively, as a result of the reserves required for the increased sales activity along with the sale of future fees and charges during these periods. These sales of future fees and charges to the Parent are needed to fund the acquisition costs of the Company's variable annuity and life insurance business. The Company generated net income after tax of $34,767,000 $27,548,000 and $26,623,000 in 1998, 1997 and 1996, respectively. The Company benefited in each of the past three years from strong sales growth and favorable market conditions. In 1996, the Company also benefited from the recognition of the reversal of the deferred tax valuation allowance. Assets under management, from which the Company derives a significant portion of its revenues grew 47%, 56% and 65% in 1998, 1997 and 1996, respectively. REVENUES As a result of the significant growth in sales and assets under management, contractowner fees and charges and fees generated from transfer agency-type activities increased dramatically over the past three years: (annual percentage growth) 1998 1997 1996 ---- ---- ---- Annuity and life insurance fees and charges 54% 74% 80% ==== ==== ==== Transfer agency fee income 84% 68% 165% ==== ==== ==== Net investment income increased 36% and 416% in 1998 and 1997, respectively, and decreased slightly in 1996. The majority of the income was generated from the bond holdings, which were increased in 1998 and 1997 to meet risk based capital goals, which in turn, have increased as a result of the growth in business. Premium income represents premiums earned on sales of immediate annuities with life contingencies, supplementary contracts with life contingencies and certain life insurance products. Sales of these ancillary products decreased slightly in 1998 and 1996 and increased in 1997. BENEFITS Annuity benefits and the change in annuity policy reserves relate to annuity contracts with mortality risks, these being immediate annuity contracts with life contingencies and supplementary contracts with life contingencies. Due to the age of these policies in force and the relative insignificance of these products to the Company's overall portfolio of products, fluctuations in these benefits were of marginal importance to the Company's total operations. The Company reinsures the guaranteed minimum death benefit exposure on most of the variable annuity contracts. The costs (minimum guaranteed premium per reinsurance contracts) associated with reinsuring the guaranteed minimum death benefit reserve exceeded the change in the guaranteed minimum death benefit reserve during 1998, 1997 and 1996. This cost increased in each of the past three years by 13%, 59% and 39%, respectively. Return credited to contractowners includes primarily revenues on the variable and market value adjusted annuities and variable life insurance, offset by the benefit payments and change in reserves required on this business. The 1998 return credited to contractowners in the amount of ($8,930,000) represented higher than expected Separate Account investment returns on the market value adjusted contracts in support of the benefits and required reserves. The 1997 return credited to contractowners in the amount of ($2,018,000) represents a break-even year for the Company's market value adjusted product line. The 1996 return credited to contractowners in the amount of $673,000 represents a favorable investment return on the market value adjusted contracts relating to the benefits and required reserves, offset by the effect of bond market fluctuations on December 31, 1996 in the amount of $1,800,000. While the assets relating to the market value adjusted contracts reflect the market interest rate fluctuations which occurred on December 31, 1996, the liabilities are based on the interest rates set for new contracts which are generally based on the prior day's interest rates. During the first week of January 1997, interest rates were established for new contracts, thereby bringing the liabilities relating to the market value adjusted contracts in line with the related assets. Consequently, the gain realized in 1997 was a result of this liability shift. EXPENSES Underwriting, acquisition and other insurance expenses for 1998, 1997 and 1996 were as follows: (in thousands) 1998 1997 1996 ---- ---- ---- Commissions $ 224,916 $ 186,920 $ 140,459 General expenses 117,678 94,640 63,375 Net capitalization of deferred acquisition costs (174,804) (191,064) (153,947) --------- --------- --------- Underwriting, acquisition and other insurance expenses $ 167,790 $ 90,496 $ 49,887 ========= ========= ========= Commissions increased with the growth in sales. General expenses increased with the growth in sales, along with start up costs associated with the Company's entry into variable life insurance and qualified plans. The net capitalization of deferred acquisition costs decreased in 1998 as a result of increased amortization. Interest expense increased $16,109,000, $14,104,000 and $4,291,000 in 1998, 1997 and 1996, respectively, as a result of additional financing transactions, which consisted of the sale of future fees to the Parent ("securitization transactions"). In addition, the Company had outstanding surplus notes totaling $213,000,000 throughout 1998 ($20,000,000 was retired on December 31, 1998). Surplus notes as of December 31, 1998 and 1997 totaled $193,000,000 and $213,000,000, respectively. The effective income tax rates for the years ended December 31, 1998, 1997 and 1996 were 19%, 28% and (18%), respectively. The effective rate is lower than the corporate rate of 35% due to permanent differences, with the most significant item being the dividend received deduction. Additionally, the Company released a deferred tax valuation allowance of $9,325,000 in 1996. LIQUIDITY AND CAPITAL RESOURCES ASLAC's liquidity requirement was met by cash from insurance operations, investment activities, borrowings from its Parent and sale of rights to future fees and charges to its Parent. Approximately 97% of 1998 sales (94% in 1997 and 1996) were variable annuity and life insurance products, most of 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 cost for the new business. This cash strain required the Company to look beyond the cash made available by insurance operations and investments of the Company to financing in the form of surplus notes, capital contributions, the sale of certain rights to future fees and modified coinsurance arrangements. - During 1996, the Company issued $110,000,000 of surplus notes to its Parent. - During December 1998 and 1997, the Company received $2,600,000 and $27,700,000, respectively, from its Parent to support the capital needs of its U.S. operations during the current year along with the following year's anticipated growth in business. - Funds received from new securitization transactions amounted to $169,881,000, $194,512,000 and $50,221,000 for 1998, 1997 and 1996, respectively. - During 1998, 1997 and 1996, the Company extended its reinsurance agreements (which were initiated in 1993, 1994 and 1995). The reinsurance agreements are modified coinsurance arrangements where the reinsurer shares in the experience of a specific book of business. The Company expects the continued use of reinsurance and securitization transactions to fund the cash strain anticipated from the acquisition costs on the coming years' sales volume. As of December 31, 1998 and 1997, shareholder's equity was $250,417,000 and $184,421,000, respectively. The increases were driven by the previously mentioned capital contributions received from the Parent and net income from operations. ASLAC has long-term surplus notes and a short-term borrowings with its Parent. No dividends have been paid to its Parent. The National Association of Insurance Commissioners ("NAIC") requires insurance companies to report information regarding minimum Risk Based Capital ("RBC") requirements. These requirements are intended to allow insurance regulators to identify companies which may need regulatory attention. The RBC model law requires that insurance companies apply various factors to asset, premium and reserve items, all of which have inherent risks. The formula includes components for asset risk, insurance risk, interest risk and business risk. The Company has complied with the NAIC's RBC reporting requirements and has total adjusted capital well above required capital. YEAR 2000 COMPLIANCE The Company is continuing its ongoing assessment of the potential impact of the Year 2000 issue on various aspects of its business. The Company's computer support is provided by its affiliate, American Skandia Information Services and Technology Corporation, which also provides such support for the Company's affiliated broker-dealer, American Skandia Marketing, Incorporated and the Company's affiliated investment advisory firm, American Skandia Investment Services, Incorporated. Because of the nature of the Company's business, any assessment of the potential impact of the Year 2000 issues on the Company must be an assessment of the potential impact of these issues on all these companies, which are referred to below as "American Skandia". Business Partners Management believes the area where the Company is most vulnerable to Year 2000 issues is in its interfaces with computer systems of investment managers, sub-advisors, third party administrators, vendors and other business partners. The inability to properly recognize date sensitive electronic information and transfer data between systems could cause errors or even a complete systems failure which would result in a temporary inability to process transactions correctly or engage in normal business activities. The American Skandia deferred annuity operational business partners report that all critical interfaces are Year 2000 compliant. All investment managers and sub-advisors are required by the Securities and Exchange Commission to publicly disclose their Year 2000 status in December 1998 and June 1999. American Skandia has initiated formal communications with parties that provide third party administration, record keeping and trust services in connection with its life insurance and qualified retirement plan annuities business. Management has already received several written assurances that these firms will be Year 2000 compliant. The Company expects to have certifications from all remaining parties by July 1999. American Skandia is currently developing contingency plans in the event that these targets are not met. Information Technology Systems American Skandia is a relatively young company whose internally developed systems were designed from the start with four digit year codes. The Company engaged an external information technology specialist to review American Skandia's operating systems and internally developed software. The assessment was completed in December 1997 and the results were favorable. Specific modifications were suggested, evaluated and implemented for the annuity administration system. This project was completed during 1998 and a certificate of compliance has been received. Other non-critical internally developed applications in the client/server area have already been or will be remediated during 1999. The costs associated with this aspect of Year 2000 compliance have not had, and are not expected to have, a significant impact on the Company's results from operations. Suppliers and Non-Information Technology Systems Like most companies, American Skandia is reliant on network, and desktop operating systems and software providers to release compliant versions of their respective systems. American Skandia's network is currently at the most compliant level available. The standard desktop software will be replaced, as fully compliant versions become available. In addition, the Company is in the process of contacting the non-information systems vendors and suppliers regarding their Year 2000 compliance status and will factor the results of these assessments into its contingency plans. Management believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. However, should errors or disruptions in computer service occur, the Company could realize losses. Given the nature and uncertainty of such losses, the amounts cannot be reasonably determined. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Sensitivity At December 31, 1998, the Company held in its general account $149,484,000 of fixed maturity investments that are sensitive to changes in interest rates. These securities are held in support of the Company's fixed immediate annuities and supplementary contracts ($23,699,000 in reserves at December 31, 1998) and in support of the Company's target solvency capital. With respect to the insurance contracts, interest rate risk is managed through an asset/liability matching program which takes into account the risk variables of the insurance liabilities supported by the assets. In addition, the Company has a conservative investment philosophy, with all investments being investment grade corporate securities, government agency or U.S. government securities. In addition, the Company's deferred annuity products offer a fixed option that subjects the Company to interest rate risk. The fixed option guarantees a fixed rate of interest for a period of time selected by the contract holder (options available range from 1 to 10 years). Withdrawal of funds before the end of the guarantee period subjects the contract holder to a market value adjustment ("MVA"). In the event of rising interest rates, which make the fixed maturity securities underlying the guarantee less valuable, the market value adjustment could be negative. In the event of falling interest rates, which make the fixed maturity securities underlying the guarantee more valuable, the market value adjustment could be positive. Should these contracts be surrendered early, this increase or decrease in fair value would be substantially offset through the application of the MVA and its effect on contractholders choosing to withdraw. The risk to the Company on these contracts relates to the ability to reinvest proceeds from interest payments and other activity over the guarantee term at interest rates required to meet interest rate guarantees and the risk of default. This risk is managed through an asset/liability matching program. At December 31, 1998, the Company had $613,057,000 of contracts subject to MVA. Equity Market Exposure The Company has a small portfolio of equity investments; mutual funds which are held in support of a deferred compensation program. In the event of a decline in market values of underlying securities, the value of the portfolio would decline, however the accrued benefits payable under the related deferred compensation program would decline by a corresponding amount. The primary equity market risk to the Company comes from the nature of the variable annuity and variable life products sold by ASLAC. Various fees and charges earned by ASLAC are substantially derived as a percentage of the market value of assets under management. In a market decline, this income would be reduced. This could be further compounded by customer withdrawals, net of applicable surrender charge revenues, partially offset by transfers to the fixed option discussed above. A 10% decline in the market value of the assets under management at December 31, 1998, sustained throughout 1999, would result in a $28,000,000 drop in related fee income. In addition, it is not clear what the impact of a prolonged downturn in the equity markets would have on ongoing sales. Customer's perceptions of a downturn in equity markets coupled with rising interest rates could move them into financial products other than variable annuities or variable life; however, the Company's products might remain attractive to purchasers in relation to other long-term savings vehicles even after such a decline. Item 8. Financial Statements and Supplementary Data AMERICAN SKANDIA LIFE ASSURANCE CORPORATION CONSOLIDATED FINANCIAL STATEMENTS INDEX Page Independent Auditors' Reports 12 Consolidated Statements of Financial Condition as of December 31, 1998 and 1997 14 Consolidated Statements of Income for the Years ended December 31, 1998, 1997 and 1996 15 Consolidated Statements of Shareholder's Equity for the Years ended December 31, 1998, 1997 and 1996 16 Consolidated Statements of Cash Flow for the Years ended December 31, 1998, 1997 and 1996 17 Notes to Consolidated Financial Statements 18 Schedules are omitted because they are either not applicable or because the information required therein is included in the Notes to Consolidated Financial Statements. INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Shareholder of American Skandia Life Assurance Corporation Shelton, Connecticut We have audited the consolidated statements of financial condition of American Skandia Life Assurance Corporation (the "Company" which is a wholly-owned subsidiary of Skandia Insurance Company Ltd.) as of December 31, 1998 and 1997, and the related consolidated statements of income, shareholder's equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Skandia Life Assurance Corporation at December 31, 1998 and 1997, and the consolidated results of its operations and cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Ernst & Young, LLP - ---------------------- Hartford, Connecticut February 20, 1999 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholder of American Skandia Life Assurance Corporation Shelton, Connecticut We have audited the accompanying consolidated statements of operations, shareholder's equity, and cash flows of American Skandia Life Assurance Corporation and subsidiary (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) for the year ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated results of operations and cash flows of American Skandia Life Assurance Corporation and subsidiary for the year ended December 31, 1996 in conformity with generally accepted accounting principles. /s/Deloitte & Touche LLP - ------------------------ New York, New York March 10, 1997 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (in thousands) AS OF DECEMBER 31, 1998 1997 ---------- ---------- ASSETS Investments: Fixed maturities - at amortized cost $ 8,289 $ 9,367 Fixed maturities - at fair value 141,195 108,323 Investment in mutual funds - at fair value 8,210 6,711 Policy loans 569 687 ---------- ----------- Total investments 158,263 125,088 Cash and cash equivalents 77,525 81,974 Accrued investment income 2,880 2,442 Fixed assets 328 356 Deferred acquisition costs 721,507 546,703 Reinsurance receivable 4,191 6,343 Receivable from affiliates 1,161 1,911 Income tax receivable - current - 1,048 Income tax receivable - deferred 38,861 26,174 State insurance licenses 4,413 4,563 Other assets 3,744 2,524 Separate account assets 17,835,400 12,095,164 ---------- ---------- Total assets $18,848,273 $12,894,290 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities: Reserve for future contractowner benefits $ 37,508 $ 43,204 Policy reserves 25,545 24,415 Drafts outstanding 28,941 19,278 Accounts payable and accrued expenses 91,827 71,190 Income tax payable 6,657 - Payable to affiliates - 584 Future fees payable to parent 368,978 233,034 Short-term borrowing 10,000 10,000 Surplus notes 193,000 213,000 Separate account liabilities 17,835,400 12,095,164 ---------- ---------- Total liabilities 18,597,856 12,709,869 ---------- ---------- Shareholders Equity: Common stock, $80 par, 25,000 shares authorized, issued and outstanding 2,000 2,000 Additional paid-in capital 179,889 151,527 Retained earnings 64,993 30,226 Accumulated other comprehensive income 3,535 668 ---------- ---------- Total shareholder's equity 250,417 184,421 ---------- ---------- Total liabilities and shareholder's equity $18,848,273 $12,894,290 =========== =========== See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) CONSOLIDATED STATEMENTS OF INCOME (in thousands)
FOR THE YEAR ENDED DECEMBER 31, 1998 1997 1996 ------------ ------------- ------------ REVENUES Annuity and life insurance charges and fees $186,211 $121,158 $69,780 Fee income 50,839 27,593 16,420 Net investment income 11,130 8,181 1,586 Premium income 874 920 125 Net realized capital gains 99 87 134 Other 387 75 6 ------------ ------------- ------------ Total revenues 249,540 158,014 88,051 ------------ ------------- ------------ BENEFITS AND EXPENSES Benefits: Annuity benefits 558 2,033 613 Change in annuity policy reserves 1,053 37 635 Cost of minimum death benefit reinsurance 5,144 4,545 2,867 Return credited to contractowners (8,930) (2,018) 673 ------------ ------------- ------------ (2,175) 4,597 4,788 ------------ ------------- ------------ Expenses: Underwriting, acquisition and other insurance expenses 167,640 90,346 49,737 Amortization of state insurance licenses 150 150 150 Interest expense 41,004 24,895 10,791 ------------ ------------- ------------ 208,794 115,391 60,678 ------------ ------------- ------------ Total benefits and expenses 206,619 119,988 65,466 ------------ ------------- ------------ Income from operations before income taxes 42,921 38,026 22,585 Income tax expense (benefit) 8,154 10,478 (4,038) ------------ ------------- ------------ Net income $34,767 $27,548 $26,623 ============ ============= ============
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (in thousands)
FOR THE YEAR ENDED DECEMBER 31, 1998 1997 1996 ----------- ----------- ----------- Common stock: Beginning and ending balance $2,000 $ 2,000 $ 2,000 Additional paid in capital: Beginning balance 151,527 122,250 81,875 Additional contributions 28,362 29,277 40,375 ----------- ----------- ---------- Ending balance 179,889 151,527 122,250 Retained earnings (deficit): Beginning balance 30,226 2,678 (23,945) Net income 34,767 27,548 26,623 ----------- ----------- ---------- Ending balance 64,993 30,226 2,678 Accumulated other comprehensive income: Beginning balance 668 (584) (217) Other comprehensive income 2,867 1,252 (367) ----------- ----------- ----------- Ending balance 3,535 668 (584) ----------- ----------- ----------- Total shareholder's equity $250,417 $184,421 $126,345 =========== =========== ===========
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands)
FOR THE YEAR ENDED DECEMBER 31, 1998 1997 1996 ------------ ------------ ------------ Cash flow from operating activities: Net income $ 34,767 $ 27,548 $ 26,623 Adjustments to reconcile net income to net cash used in operating activities: Increase in policy reserves 1,130 3,176 1,852 Amortization of bond discount 101 73 27 Amortization of insurance licenses 150 150 150 Change in receivable from/payable to affiliates 166 (1,321) 540 Change in income tax receivable/payable 7,704 (2,172) 1,688 Increase in other assets (1,191) (604) (661) Increase in accrued investment income (438) (483) (1,764) Decrease/(increase) in reinsurance receivable 2,152 (268) (676) Increase in deferred acquisition costs, net (174,804) (190,969) (153,918) Increase in income tax receivable - deferred (14,242) (9,631) (16,903) Increase in accounts payable and accrued expenses 20,637 5,719 32,323 Increase in drafts outstanding 9,663 6,245 13,032 Change in foreign currency translation, net (22) (34) (77) Realized gain on sale of investments (99) (87) (134) ------------ ------------ ------------ Net cash used in operating activities (114,326) (162,658) (97,898) ------------ ------------ ------------ Cash flow from investing activities: Purchase of fixed maturity investments (31,828) (28,905) (96,813) Proceeds from sale and maturity of fixed maturity investments 4,049 10,755 8,947 Purchase of shares in mutual funds (7,158) (5,595) (2,160) Proceeds from sale of shares in mutual funds 6,086 1,415 1,274 Decrease/(increase) in policy loans 118 (528) (104) ------------ ------------ ------------ Net cash used in investing activities (28,733) (22,858) (88,856) ------------ ------------ ------------ Cash flow from financing activities: Capital contributions from parent 8,362 29,277 40,375 Surplus notes - - 110,000 Increase in future fees payable to Parent 135,944 185,922 47,112 Net (withdrawals from)/deposits to contractowner accounts (5,696) 6,959 5,753 ------------ ------------ ------------ Net cash provided by financing activities 138,610 222,158 203,240 ------------ ------------ ------------ Net increase/(decrease) in cash and cash equivalents (4,449) 36,642 16,486 ------------ ------------ ------------ Cash and cash equivalents at beginning of year 81,974 45,332 28,846 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 77,525 $ 81,974 $ 45,332 ============ ============ ============ Supplemental cash flow disclosure: Income taxes paid $ 14,651 $ 22,308 $ 11,177 ============ ============ ============ Interest paid $ 35,588 $ 16,916 $ 7,095 ============ ============ ============
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements December 31, 1998 1. ORGANIZATION AND OPERATION American Skandia Life Assurance Corporation (the "Company") is a wholly-owned subsidiary of American Skandia Investment Holding Corporation (the "Parent"); whose ultimate parent is Skandia Insurance Company Ltd., a Swedish corporation. The Company develops long-term savings and retirement products which are distributed through its affiliated broker/dealer company, American Skandia Marketing, Incorporated ("ASM"). The Company currently issues variable life insurance and variable, fixed, market value adjusted and immediate annuities for individuals, groups and qualified pension plans. The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. which is a life insurance company domiciled in Mexico. This Mexican life insurer is a start up company with expectations of selling long-term savings products within Mexico. Skandia Vida, S.A. de C.V. had total shareholder's equity of $4,724,000 and $1,509,000 as of December 31, 1998, and 1997, respectively, and has generated net losses of $2,514,000, $1,438,000 and $781,000 for the years ended December 31, 1998, 1997 and 1996, respectively. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Reporting The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles. Intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. B. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and hedging activities. The standard requires that all derivatives be carried on the balance sheets at fair value. The Company is currently not involved in derivatives or hedging instruments as part of its investment strategy. The Company is evaluating the potential impact of a change in accounting for derivative instruments embedded in certain products it issues. This standard is effective for years beginning after June 15, 1999. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Software Developed or Obtained for Internal Use," which provides guidance for determining when computer software developed or obtained for internal use should be capitalized. It also provides guidance on the amortization of capitalized costs and the recognition of impairment. The Company is evaluating the potential impact of adopting this SOP, which is effective for fiscal years beginning after December 15, 1998. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) C. Investments The Company has classified its fixed maturity investments as either held-to-maturity or available-for-sale. Investments classified as held-to-maturity are investments that the Company has the ability and intent to hold to maturity. Such investments are carried at amortized cost. Those investments which are classified as available-for-sale, are carried at fair value and changes in unrealized gains and losses are reported as a component of other comprehensive income. The Company has classified its mutual fund investments as available-for-sale. Such investments are carried at fair value and changes in unrealized gains and losses are reported as a component of other comprehensive income. Policy loans are carried at their unpaid principal balances. Realized gains and losses on disposal of investments are determined by the specific identification method and are included in revenues. D. Cash Equivalents The Company considers all highly liquid time deposits, commercial paper and money market mutual funds purchased with a maturity of three months or less to be cash equivalents. E. State Insurance Licenses Licenses to do business in all states have been capitalized and reflected at the purchase price of $6,000,000 less accumulated amortization. The cost of the licenses is being amortized over 40 years. F. Fixed Assets Fixed assets consisting of furniture, equipment and leasehold improvements are carried at cost and depreciated on a straight-line basis over a period of three to five years. Accumulated depreciation amounted to $142,000 and $96,000 at December 31, 1998 and 1997, respectively. Depreciation expense for the years ended December 31, 1998, 1997 and 1996 was $46,000 and $63,000 and $29,000, respectively. G. Income Taxes The Company is included in the consolidated federal income tax return of Skandia U.S. Investment Holding Corporation and its subsidiaries. In accordance with the tax sharing agreement, the federal and state income tax provision is computed on a separate return basis, as adjusted for consolidated items, such as net operating loss carryforwards. Income taxes are provided in accordance with SFAS 109, "Accounting for Income Taxes", which requires the asset and liability method of accounting for deferred taxes. The object of this method is to recognize an asset and liability for the expected future tax effects due to temporary differences between the financial reporting and the tax basis of assets and liabilities, based on enacted tax rates and other provisions of the tax law. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) H. Recognition of Revenue and Contract Benefits Revenues for variable annuity contracts consist of charges against contractowner account values for mortality and expense risks, administration fees, surrender charges and an annual maintenance fee per contract. Benefit reserves for variable annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Revenues for market value adjusted annuity contracts consist of separate account investment income reduced by benefit payments and changes in reserves in support of contractowner obligations, all of which are included in return credited to contractowners. Benefit reserves for these contracts represent the account value of the contracts, and are included in the general account liability for future contractowner benefits to the extent in excess of the separate account liabilities. Revenues for immediate annuity contracts without life contingencies consist of net investment income. Revenues for immediate annuity contracts with life contingencies consist of single premium payments recognized as annuity considerations when received. Benefit reserves for these contracts are based on the Society of Actuaries 1983 Table-a with assumed interest rates that vary by issue year. Assumed interest rates ranged from 6.25% to 8.25% and 6.5% to 8.25% at December 31, 1998 and December 31, 1997, respectively. Revenues for variable life insurance contracts consist of charges against contractowner account values for the maintenance and expense fees, cost of insurance fees and surrender charges. Benefit reserves for variable life insurance contracts represent the account value of the contracts and are included in the separate account liabilities. I. Deferred Acquisition Costs The costs of acquiring new business, which vary with and are primarily related to the production of new business, are being deferred net of reinsurance. These costs include commissions, costs of contract issuance, and certain selling expenses that vary with production. These costs are being amortized generally in proportion to expected gross profits from surrender charges, policy and asset based fees and mortality and expense margins. This amortization is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Details of the deferred acquisition costs and related amortization for the years ended December 31, are as follows: (in thousands) 1998 1997 1996 ---- ---- ---- Balance at beginning of year $546,703 $355,734 $201,816 Acquisition costs deferred during the year 261,432 243,476 171,253 Acquisition costs amortized during the year (86,628) (52,507) (17,335) --------- --------- --------- Balance at end of year $721,507 $546,703 $355,734 ======== ======== ======== AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) J. Reinsurance The Company cedes reinsurance under modified co-insurance arrangements. The reinsurance arrangements provide additional capacity for growth in supporting the cash flow strain from the Company's variable annuity and variable life insurance business. The reinsurance is effected under quota share contracts. The company reinsures certain mortality risks relating to the variable life insurance product, as well as, the guaranteed minimum death benefit feature in the variable annuity product. At December 31, 1998 and 1997, in accordance with the provisions of a modified coinsurance agreement, the Company accrued $1,976,000 and $0, respectively, for amounts receivable from favorable reinsurance experience on a block of variable annuity business. K. Translation of Foreign Currency The financial position and results of operations of the Company's Mexican subsidiary are measured using local currency as the functional currency. Assets and liabilities of the subsidiary are translated at the exchange rate in effect at each year-end. Statements of income and shareholder's equity accounts are translated at the average rate prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are reported as a component of other comprehensive income. L. Fair Values of Financial Instruments The methods and assumptions used to determine the fair value of financial instruments are as follows: Fair values of fixed maturities with active markets are based on quoted market prices. For fixed maturities that trade in less active markets, fair values are obtained from an independent pricing service. Fair values of investments in mutual funds are based on quoted market prices. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these investments. The carrying value of short-term borrowing approximates fair value due to the short-term nature of these liabilities. Fair values of certain financial instruments, such as future fees payable to parent and surplus notes are not readily determinable and are excluded from fair value disclosure requirements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) M. Separate Accounts Assets and liabilities in Separate Accounts are included as separate captions in the consolidated statements of financial condition. Separate Account assets consist principally of long term bonds, investments in mutual funds, short-term securities and cash and cash equivalents, all of which are carried at fair value. The investments are managed predominately through the Company's investment advisory affiliate, American Skandia Investment Services, Inc. ("ASISI"), utilizing various fund managers as sub-advisors. The remaining investments are managed by independent investment firms. The contractowner has the option of directing funds to a wide variety of mutual funds. The investment risk on the variable portion of a contract is borne by the contractowner. A fixed option with a minimum guaranteed interest rate is also available. The Company is responsible for the credit risk associated with these investments. Included in Separate Account liabilities are $771,195,000 and $773,067,000 at December 31, 1998 and 1997, respectively, relating to annuity contracts for which the contractowner is guaranteed a fixed rate of return. Separate Account assets of $771,195,000 and $773,067,000 at December 31, 1998 and 1997, respectively, consisting of long term bonds, short term securities, transfers due from general account and cash and cash equivalents are held in support of these annuity contracts, pursuant to state regulation. N. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates and assumptions are related to deferred acquisition costs and involve policy lapses, investment return and maintenance expenses. Actual results could differ from those estimates. 3. COMPREHENSIVE INCOME As of January 1, 1998 the Company adopted SFAS 130, "Reporting Comprehensive Income," which sets standards for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's financial position or net income. SFAS 130 requires unrealized gains and losses on the Company's available-for-sale securities and foreign currency translation adjustments, which prior to adoption were reported separately in shareholder's equity, to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of SFAS 130. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) The components of comprehensive income, net of tax, for the years ended December 31, 1998, 1997 and 1996 were as follows:
(in thousands) 1998 1997 1996 ---- ---- ---- Net income $34,767 $27,548 $26,623 Other comprehensive income: Unrealized investment gains/(losses) on available for sale securities 2,751 1,288 (331) Reclassification adjustment for realized losses/(gains) included in investment income 138 (14) (99) --------- --------- ---------- Net unrealized gains/(losses) on securities 2,889 1,274 (430) Foreign currency translation (22) (22) 64 ---------- ---------- ---------- Other comprehensive income 2,867 1,252 (367) -------- -------- ---------- Comprehensive income $37,634 $28,800 $26,257 ======= ======= =======
The components of accumulated other comprehensive income, net of tax, as of December 31, 1998 and 1997 were as follows: (in thousands) 1998 1997 ---- ---- Unrealized investment gains $3,843 $954 Foreign currency translation (308) (286) -------- ----- Accumulated other comprehensive income $3,535 $668 ====== ====
4. INVESTMENTS The amortized cost, gross unrealized gains/losses and estimated fair value of available-for-sale and held-to-maturity fixed maturities and investments in mutual funds as of December 31, 1998 and 1997 are shown below. All securities held at December 31, 1998 are publicly traded. Investments in fixed maturities as of December 31, 1998 consisted of the following:
(in thousands) Held-to-Maturity Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value U.S. Government obligations $3,774 $57 $ - $3,831 Corporate securities 4,515 34 - 4,549 ------- ---- ----- ------- Totals $8,289 $91 $ - $8,380 ====== === ==== ======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued)
(in thousands) Available-for-Sale Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value U.S. Government obligations $ 17,399 $ 678 $ - $ 18,077 Obligations of state and political subdivisions 253 7 - 260 Corporate securities 117,774 5,160 76 122,858 --------- ------- ---- ----------- Totals $135,426 $5,845 $76 $141,195 ======== ====== === ========
The amortized cost and fair value of fixed maturities, by contractual maturity, at December 31, 1998 are shown below.
(in thousands) Held-to-Maturity Available-for-Sale Amortized Fair Amortized Fair Cost Value Cost Value Due in one year or less $4,927 $4,982 $ - $ - Due after one through five years 3,362 3,398 54,789 56,850 Due after five through ten years - - 80,637 84,345 ---------- ---------- ---------- ---------- Total $8,289 $8,380 $135,426 $141,195 ====== ====== ======== ========
Investments in fixed maturities as of December 31, 1997 consisted of the following:
(in thousands) Held-to-Maturity Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value U.S. Government obligations $3,790 $71 $9 $3,852 Obligations of state and political subdivisions 50 - - 50 Corporate securities 5,527 2 19 5,510 ------- ----- ---- ------- Totals $9,367 $73 $28 $9,412 ====== === === ======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued)
(in thousands) Available for Sale ------------------ Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- ----- U.S. Government obligations $ 14,999 $ 202 $ - $ 15,201 Obligations of state and political subdivisions 202 - - 202 Corporate securities 91,470 1,505 55 92,920 ---------- ------- ---- ---------- Totals $106,671 $1,707 $55 $108,323 ======== ====== === ========
Proceeds from sales of fixed maturities during 1998, 1997 and 1996 were $999,000, $5,056,000 and $8,732,000, respectively. Proceeds from maturities during 1998, 1997 and 1996 were $3,050,000, $5,700,000 and $215,000, respectively. The cost, gross unrealized gains/losses and fair value of investments in mutual funds at December 31, 1998 and 1997 are shown below:
(in thousands) Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value ------ ---------- ---------- ------ 1998 $8,068 $416 $274 $8,210 ====== ==== ==== ====== 1997 $6,896 $ 43 $228 $6,711 ====== ==== ==== ======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) Net realized investment gains (losses) were as follows for the years ended December 31:
(in thousands) 1998 1997 1996 ---- ---- ---- Fixed maturities: Gross gains $ - $ 10 $ - Gross losses (1) - - Investment in mutual funds: Gross gains 281 116 140 Gross losses (181) (39) (6) ------- ------ ----- Totals $ 99 $ 87 $134 ====== ===== ====
5. NET INVESTMENT INCOME The sources of net investment income for the years ended December 31, 1998, 1997 and 1996 were as follows:
(in thousands) 1998 1997 1996 ---- ---- ---- Fixed maturities $ 8,534 $6,617 $ 836 Cash and cash equivalents 1,717 1,153 685 Investment in mutual funds 1,013 554 144 Policy loans 45 28 5 ----------- --------- ---------- Total investment income 11,309 8,352 1,670 Investment expenses 179 171 84 ---------- -------- --------- Net investment income $11,130 $8,181 $1,586 ======= ====== ======
6. INCOME TAXES The significant components of income tax expense (benefit) for the years ended December 31, are as follows:
(in thousands) 1998 1997 1996 ---- ---- ---- Current tax expense $22,384 $20,108 $12,865 Deferred tax benefit (14,230) (9,630) (16,903) -------- --------- -------- Total income tax expense (benefit) $ 8,154 $10,478 ($ 4,038) ======== ======= =======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) The tax effects of significant items comprising the Company's deferred tax balance as of December 31, 1998 and 1997, are as follows:
(in thousands) 1998 1997 ---- ---- Deferred tax liabilities: Deferred acquisition costs ($210,731) ($159,766) Payable to reinsurers (25,585) (25,369) Policy fees (859) (656) Unrealized investment gains and losses (2,069) (514) ----------- ------------- Total (239,244) (186,305) --------- --------- Deferred tax assets: Net separate account liabilities 225,600 175,872 Reserve for future contractowner benefits 13,128 15,121 Other reserve differences 25,335 10,534 Deferred compensation 9,619 7,187 Surplus notes interest 3,375 2,729 Foreign exchange translation 166 154 Other 882 882 ------------ ------------ Total 278,105 212,479 --------- --------- Income tax receivable - deferred $ 38,861 $ 26,174 ========= =========
Management believes that based on the taxable income produced in the current year and the continued growth in annuity products, the Company will produce sufficient taxable income in the future to realize its deferred tax asset. As such, the Company released the deferred tax valuation allowance of $9,325,000 in 1996. The income tax expense was different from the amount computed by applying the federal statutory tax rate of 35% to pre-tax income from continuing operations as follows:
(in thousands) 1998 1997 1996 ---- ---- ---- Income (loss) before taxes Domestic $45,435 $39,464 $23,366 Foreign (2,514) (1,438) (781) --------- --------- --------- Total 42,921 38,026 22,585 Income tax rate 35% 35% 35% --------- --------- --------- Tax expense at federal statutory income tax rate 15,022 13,309 7,905 Tax effect of: Change in valuation allowance - - (9,325) Dividend received deduction (9,085) (4,585) (2,266) Losses of foreign subsidiary 880 503 273 Meals and entertainment 487 340 43 State income taxes 673 577 356 Other 177 334 (1,024) -------- ------- --------- Income tax expense (benefit) $ 8,154 $10,478 ($ 4,038) ======== ======= =========
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 7. RECEIVABLE FROM/PAYABLE TO AFFILIATES Certain operating costs (including personnel, rental of office space, furniture, and equipment) have been charged to the Company at cost by American Skandia Information Services and Technology Corporation ("ASIST"), an affiliated company; and likewise, the Company has charged operating costs to ASISI. The total cost to the Company for these items was $7,722,000, $5,572,000 and $11,581,000 for the years ended December 31, 1998, 1997 and 1996, respectively. Income received for these items was $1,355,000, $3,225,000 and $1,148,000 for the years ended December 31, 1998, 1997 and 1996, respectively. Amounts receivable from affiliates under these arrangements were $98,000 and $549,000 as of December 31, 1998 and 1997, respectively. Amounts payable to affiliates under these arrangements were $551,000 and $264,000 as of December 31, 1998 and 1997, respectively. 8. FUTURE FEES PAYABLE TO PARENT In a series of transactions with its Parent, the Company sold certain rights to receive future fees and contract charges expected to be realized on variable portions of designated blocks of deferred annuity contracts. The effective dates and issue periods these transactions cover are as follows: Closing Effective Contract Issue Transaction Date Date Period ----------- -------- --------- ----------------- 1996-1 12/16/96 9/1/96 1/1/94 - 6/30/96 1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97 1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96 1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97 1998-1 6/30/98 6/1/98 1/1/97 - 5/31/98 1998-2 11/10/98 10/1/98 5/1/97 - 8/31/98 1998-3 12/30/98 12/1/98 7/1/96 - 10/31/98 In connection with these transactions, the Parent issued collateralized notes in a private placement which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the Purchase Agreements, the rights sold provide for the Parent to receive a percentage of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (6 to 8 years). The percentage is 100% on transactions 1997-3 and 1998-3 and 80% on all other transactions. The Company did not sell the right to receive future fees and charges after the expiration of the surrender charge period. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) The proceeds from the sales have been recorded as a liability and are being amortized over the remaining surrender charge period of the designated contracts using the interest method. The present value of the transactions as of the respective effective date was as follows:
(in thousands) Present Transaction Discount Rate Value ----------- ------------- ------- 1996-1 7.5% $50,221 1997-1 7.5% 58,767 1997-2 7.5% 77,552 1997-3 7.5% 58,193 1998-1 7.5% 61,180 1998-2 7.0% 68,573 1998-3 7.0% 40,128
Payments representing fees and charges in the aggregate amount of $69,226,000, $22,250,000 and $0, were made by the Company to the Parent for the years ended December 31, 1998, 1997 and 1996, respectively. Related interest expense of $22,978,000, $6,842,000 and $42,000 has been included in the statement of income for the years ended December 31, 1998, 1997 and 1996, respectively. Expected payments of future fees payable to Parent as of December 31, 1998 are as follows: Year Ended (in thousands) December 31, Amount ------------ ---------- 1999 $ 64,520 2000 68,403 2001 67,953 2002 64,238 2003 54,382 2004 35,601 2005 12,441 2006 1,440 ---------- Total $ 368,978 ========== The Commissioner of the State of Connecticut has approved the sale of future fees and charges; however, in the event that the Company becomes subject to an order of liquidation or rehabilitation, the Commissioner has the ability to stop the payments due to the Parent under the Purchase Agreement subject to certain terms and conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 9. LEASES The Company leases office space under a lease agreement established in 1989 with ASIST. The lease expense for 1998, 1997 and 1996 was $3,588,000, $2,428,000 and $1,583,000, respectively. Future minimum lease payments per year and in aggregate as of December 31, 1998 are as follows: (in thousands) 1999 $ 3,619 2000 5,070 2001 5,070 2002 5,070 2003 5,070 2004 and thereafter 40,271 -------- Total $ 64,170 ======== 10. RESTRICTED ASSETS To comply with certain state insurance departments' requirements, the Company maintains cash, bonds and notes on deposit with various states. The carrying value of these deposits amounted to $3,747,000 and $3,757,000 as of December 31, 1998, and 1997, respectively. These deposits are required to be maintained for the protection of contractowners within the individual states. 11. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS Statutory basis shareholder's equity was $285,553,000 and $294,586,000 at December 31, 1998 and 1997, respectively. The statutory basis net loss was $13,152,000, $8,970,000 and $5,405,000 for the years ended December 31, 1998, 1997 and 1996, respectively. Under various state insurance laws, the maximum amount of dividends that can be paid to shareholders without prior approval of the state insurance department is subject to restrictions relating to statutory surplus and net gain from operations. At December 31, 1998, no amounts may be distributed without prior approval. 12. EMPLOYEE BENEFITS The Company has a 401(k) plan for which substantially all employees are eligible. Under this plan, the Company contributes 3% of salary for all participating employees and matches employee contributions at a 50% level up to an additional 3% Company contribution. Company contributions to this plan on behalf of the participants were $2,115,000, $1,220,000 and $850,000 for the years ended December 31, 1998, 1997 and 1996, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) The Company has a deferred compensation plan, which is available to the internal field marketing staff and certain officers. Company contributions to this plan on behalf of the participants were $342,000, $270,000 and $245,000 for the years ended December 31, 1998, 1997 and 1996, respectively. The Company and an affiliate cooperatively have a long-term incentive plan under which units are awarded to executive officers and other personnel. The program consists of multiple plans, with a new plan instituted each year. Generally, participants must remain employed by the Company or its affiliates at the time such units are payable in order to receive any payments under the plan. The accrued liability representing the value of these units was $21,372,000 and $15,720,000 as of December 31, 1998 and 1997, respectively. Payments under this plan were $2,407,000, $1,119,000 and $602,000 for the years ended December 31, 1998, 1997, and 1996, respectively. 13. REINSURANCE The effect of reinsurance for the years ended December 31, 1998, 1997 and 1996 is as follows:
(in thousands) 1998 ---- Policy Change in Return Credited Charges and Fees Policy Reserves to Contractowners ---------------- --------------- ----------------- Gross $215,425 $ 691 ($8,921) Ceded 29,214 (362) 9 -------- ------- ------- Net $186,211 $ 1,053 ($8,930) ======== ======= ======= 1997 ---- Policy Change in Return Credited Charges and Fees Policy Reserves to Contractowners ---------------- --------------- ----------------- Gross $144,417 $955 ($1,972) Ceded 23,259 918 46 -------- ----- ------- Net $121,158 $ 37 ($2,018) ======== ===== ====== 1996 ---- Policy Change in Return Credited Charges and Fees Policy Reserves to Contractowners ---------------- --------------- ----------------- Gross $87,370 $815 $779 Ceded 17,590 180 106 -------- ----- ----- Net $69,780 $635 $673 ======= ==== ====
Such ceded reinsurance does not relieve the Company of 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 agreements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 14. SURPLUS NOTES The Company has issued surplus notes to its Parent in exchange for cash. Surplus notes outstanding as of December 31, 1998 and 1997 were as follows:
(in thousands) Interest for the Interest 1998 1997 Years Ended December 31, Issue Date Rate Amount Amount 1998 1997 1996 ---------- ---- ------ ------ ---- ---- ---- December 29, 1993 6.84% $ - $ 20,000 $ 1,387 $ 1,387 $ 1,391 February 18, 1994 7.28% 10,000 10,000 738 738 740 March 28, 1994 7.90% 10,000 10,000 801 801 803 September 30, 1994 9.13% 15,000 15,000 1,389 1,389 1,392 December 28, 1994 9.78% 14,000 14,000 1,388 1,388 1,392 December 19, 1995 7.52% 10,000 10,000 762 762 765 December 20, 1995 7.49% 15,000 15,000 1,139 1,139 1,142 December 22, 1995 7.47% 9,000 9,000 682 682 684 June 28, 1996 8.41% 40,000 40,000 3,411 3,411 1,747 December 30, 1996 8.03% 70,000 70,000 5,699 5,699 31 -------- -------- ------- ------- ------- - Total $193,000 $213,000 $17,396 $17,396 $10,087 ======== ======== ======= ======= =======
The surplus note for $20,000,000 dated December 29, 1993 was converted to additional paid-in capital on December 31, 1998. All surplus notes mature seven years from the issue date. Payment of interest and repayment of principal for these notes is subject to certain conditions and require approval by the Insurance Commissioner of the State of Connecticut. At December 31, 1998 and 1997, $9,644,000 and $7,796,000, respectively, of accrued interest on surplus notes was not approved for payment under these criteria. 15. SHORT-TERM BORROWING The Company had a $10 million short-term loan payable to the Parent at December 31, 1998 and 1997. The total interest expense to the Company was $622,000, $642,000 and $643,000 and for the years ended December 31, 1998, 1997 and 1996, respectively, of which $182,000 and $201,000 was payable as of December 31, 1998 and 1997, respectively. 16. CONTRACT WITHDRAWAL PROVISIONS Approximately 99% of the Company's separate account liabilities are subject to discretionary withdrawal by contractowners at market value or with market value adjustment. Separate account assets which are carried at fair value are adequate to pay such withdrawals which are generally subject to surrender charges ranging from 10% to 1% for contracts held less than 10 years. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 17. SEGMENT REPORTING In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS 131 establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards related to disclosures about products and services, geographic areas and major customers. SFAS 131 is effective for financial statement periods beginning after December 15, 1997. During 1998, to complement its annuity products, the Company launched specific marketing and operational activities towards the release of variable life insurance and qualified retirement plan annuity products. As of December 31, 1998, sales were not significant enough to warrant full segment disclosures. Sales, as measured by premium received, for the year ended December 31, 1998 and assets under management as of December 31, 1998, for the respective segments were as follows:
(in thousands) Variable Variable Qualified Annuity Life Plans Total ------------ -------- --------- ----------- Sales $ 4,122,272 $1,188 $36,202 $ 4,159,662 =========== ====== ======= =========== Assets under management $17,809,437 $1,295 $44,029 $17,854,761 =========== ====== ======= ===========
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 18. QUARTERLY FINANCIAL DATA (UNAUDITED) The following table summarizes information with respect to the operations of the Company on a quarterly basis:
(in thousands) Three Months Ended March 31 June 30 September 30 December 31 -------- ------- ------------ ----------- 1998 ---- Premiums and other insurance revenues $ 50,593 $ 57,946 $ 62,445 $ 67,327 Net investment income 3,262 2,410 2,469 2,989 Net realized capital gains (losses) 156 13 (46) (24) -------- -------- -------- -------- Total revenues 54,011 60,369 64,868 70,292 Benefits and expenses 46,764 42,220 48,471 69,164 -------- -------- -------- -------- Pre-tax net income 7,247 18,149 16,397 1,128 Income taxes 1,175 4,174 2,223 582 -------- -------- -------- -------- Net income $ 6,072 $ 13,975 $ 14,174 $ 546 ======== ======== ======== ======== 1997 ---- Premiums and other insurance revenues $ 30,186 $ 34,056 $ 41,102 $ 44,402 Net investment income 1,369 2,627 2,031 2,154 Net realized capital gains 20 43 21 3 -------- -------- -------- -------- Total revenues 31,575 36,726 43,154 46,559 Benefits and expenses 18,319 30,465 31,179 40,025 -------- -------- -------- -------- Pre-tax net income 13,256 6,261 11,975 6,534 Income taxes 4,260 2,614 3,354 250 -------- -------- -------- -------- Net income $ 8,996 $ 3,647 $ 8,621 $ 6,284 ======== ======== ======== ======== 1996 ---- Premiums and other insurance revenues $ 16,606 $ 20,453 $ 22,366 $ 26,906 Net investment income 455 283 270 578 Net realized capital gains 92 13 6 23 -------- -------- -------- -------- Total revenues 17,153 20,749 22,642 27,507 Benefits and expenses 12,725 9,430 17,007 26,304 -------- --------- -------- -------- Pre-tax net income 4,428 11,319 5,635 1,203 Income taxes 1,769 3,624 3,096 (12,527) -------- --------- -------- -------- Net income $ 2,659 $ 7,695 $ 2,539 $ 13,730 ======== ========= ======== ========
As described in Note 6, the valuation allowance relating to deferred income taxes was released during the three months ended December 31, 1996. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant Information contained in the "Executive Officers and Directors" section of the prospectus of the Company's registration statement on Form S-1, (Reg. #333-00941) is incorporated herein by reference. Item 11. Executive Compensation Summary Compensation Table: The summary table below summarizes the compensation payable to the Chief Executive Officer and to the most highly compensated of our executive officers whose compensation exceeded $100,000 in 1998.
(in thousands) Name and Annual LTIP Principal Position Year Salary Payouts ----------------------- ---- ------ ------- Jan R. Carendi 1998 $784 $302 Chief Executive Officer 1997 609 172 1996 506 115 Gordon C. Boronow 1998 $325 $278 President & Deputy Chief 1997 261 175 Executive Officer 1996 179 54 Lincoln R. Collins 1998 $285 $99 Executive Vice President & 1997 254 58 Chief Operating Officer 1996 208 19 Thomas M. Mazzaferro 1998 $232 $147 Executive Vice President & 1997 217 78 Chief Financial Officer 1996 140 45 Nathan David Kuperstock 1998 $182 $100 Vice President 1997 215 62 Product Management 1996 145 27
Long Term Incentive Plans (LTIP) - Awards in the last fiscal year: The following table provides information regarding our long-term incentive plan. Units are awarded to executive officers and other personnel. The table shows units awarded to the Chief Executive Officer and the most highly compensated of our executive officers whose compensation exceeded $100,000 in the fiscal year immediately preceding the date of this submission. This program is designed to induce participants to remain with the Company over long periods of time and to tie a portion of their compensation to the fortunes of the Company. Currently, the program consists of multiple plans. A new plan may be instituted each year. Participants are awarded units at the beginning of a plan. Generally, participants must remain employed by the Company or its affiliates at the time such units are payable in order to receive any payments under the plan. There are certain exceptions, such as in cases of retirement or death. Changes in the value of units reflect changes in the "embedded value" of the Company. "Embedded value" is the net asset value of the Company (valued at market value and not including the present value of future profits), plus the present value of the anticipated future profits (valued pursuant to state insurance law) on its existing contracts. Units will not have any value for participants if the embedded value does not increase by certain target percentages during the first four years of a plan. The target percentages may differ between each plan. Any amounts available under a plan are paid out in the fifth through eighth years of a plan. Payments under a particular year's plan will be postponed if the payment would exceed 20% of any pretax profit (as determined under state insurance law) earned by the Company and certain affiliates in the prior fiscal year or 30% of the individual's current year salary. The amount to be received by a participant at the time any payment is due will be the then current number of units payable multiplied by the then current value of such units.
(in thousands) Number Period until Estimated Future Payouts Name of Units Payout Threshold Target Maximum Jan R. Carendi 210,000 Various $2,535 Gordon C. Boronow 200,000 Various 2,496 Thomas M. Mazzaferro 145,000 Various 1,652 Lincoln R. Collins 86,250 Various 942 Nathan David Kuperstock 55,000 Various 690
The following directors' compensation is shown below in 1998: Jan R. Carendi 0 Gordon C. Boronow 0 Nancy F. Brunetti 0 Malcolm M. Campbell 0 Lincoln R. Collins 0 C. Henrik G. Danckwardt 0 Wade A. Dokken 0 Thomas M. Mazzaferro 0 Gunnar J. Moberg 0 Anders O. Soderstrom 0 Amanda C. Sutyak 0 C. Ake Svensson 0 Bayard F. Tracy 0 Item 12. Security Ownership of Certain Beneficial Owners and Management None Item 13. Certain Relationships and Related Transactions None PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Financial Information (1) Financial Statements See Index to Consolidated Financial Statements on Page 11 (2) Financial Statement Schedules None (b) Exhibits (2) Plans of acquisition, reorganization, None Arrangement, liquidation or succession (3) Articles of Incorporation and By-Laws Incorporated by reference to the Company's Form N-4 (Reg. #33-19363) (4) Instruments defining the right of Incorporated by reference security holders including indentures to the Company's Reg. #333-08853, #33-59993, #33-86866, #33-87010, #33-62793, #33-62933, #333-26685, and #33-88362 (9) Voting Trust Agreement None (10) Material Contracts Incorporated by reference to the Company's Forms S-1 (Reg. #33-26122 and #33-86918) (11) Statement of Computation of per share earnings Not required to be filed (12) Statements of Computation of Ratios Not required to be filed (13) Annual Report to security holders None (18) Letter re change in accounting principles None (19) Previously unfiled documents None (21) Subsidiaries of the registrant Incorporated by reference to Part II of Reg #333-26695 (22) Published report regarding matters submitted to vote of security holders None (23) Consents of experts and counsel Not required to be filed (24) Powers of Attorney Incorporated by reference to the Company's Forms S-2 (Reg. #333-25733) (99) Additional exhibits None SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 on March 31, 1999. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION By: /s/Thomas M. Mazzaferro -------------------- Thomas M. Mazzaferro Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 31, 1999. *Jan R. Carendi -------------- Jan R. Carendi Chief Executive Officer, Chairman of the Board and Director Board of Directors *Gordon C. Boronow *Nancy F. Brunetti *Jan R. Carendi *Malcolm M. Campbell *Lincoln R. Collins *C. Henrik G. Danckwardt *Wade A. Dokken *Thomas M. Mazzaferro *Gunnar J. Moberg *Anders O. Soderstrom *Amanda C. Sutyak *C. Ake Svensson *Bayard F. Tracy By: /s/ M. Priscilla Pannell -------------------- M. Priscilla Pannell Corporate Secretary *Pursuant to Powers of Attorney filed with the Registration Statement. EX-27 2 1998 10-K FDS
7 0000881453 ASLAC1298 1,000 U.S Dollars 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 1 141,195 149,484 149,575 8,210 0 0 158,263 77,525 4,191 721,507 18,848,273 63,053 0 0 0 203,000 0 0 2,000 248,417 18,848,273 874 11,130 99 237,437 (2,175) 86,628 81,162 42,921 8,154 0 0 0 0 34,767 0 0 0 0 0 0 0 0 0 Included in Total Assets are Assets Held in Separate Accounts of $17,835,400. Included in Total Liabilities and Equity are Liabilities Related to Separate Accounts of $17,835,400. Other income includes annuity charges and fees of $186,211 and fee income of $50,839.
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