-----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, HzUJIETPb+gwFw9r/34bmY6uP3A/Kmn8/lOrQQfuH0VaF1iDfPghFjNjKFqFciOI hXoHqyAxhrAGT2rqmb/Nmg== 0000881453-99-000080.txt : 19990517 0000881453-99-000080.hdr.sgml : 19990517 ACCESSION NUMBER: 0000881453-99-000080 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN SKANDIA LIFE ASSURANCE CORP/CT CENTRAL INDEX KEY: 0000881453 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE CARRIERS, NEC [6399] IRS NUMBER: 061241288 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-44202 FILM NUMBER: 99623321 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-Q 1 ASLAC 3/31/99 10-Q 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, 1999 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 06-1241288 (Federal 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 May 14, 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 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 (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION: Item 1. Financial Statements: Consolidated Statements of Financial Condition - March 31, 1999 (unaudited) and December 31, 1998 3 Consolidated Statements of Income (unaudited) - Three months ended March 31, 1999 and March 31, 1998 4 Consolidated Statements of Shareholder's Equity Three months ended March 31, 1999 (unaudited) and December 31, 1998 5 Consolidated Statements of Cash Flows (unaudited) Three months ended March 31, 1999 and March 31, 1998 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Three months ended March 31, 1999 9 Item 3. Quantitive and Qualitative Disclosures about Market Risk 13 PART II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit Index 16 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company, Ltd.) CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (in thousands)
March 31, December 31, 1999 1998 (unaudited) --------------- --------------- --------------- --------------- ASSETS Investments: Fixed maturities - at amortized cost $ 8,281 $ 8,289 Fixed maturities - at fair value 137,852 141,195 Mutual funds 9,926 8,210 Policy loans 609 569 --------------- --------------- Total investments $ 156,668 $ 158,263 Cash and cash equivalents 69,750 77,525 Accrued investment income 2,541 2,880 Fixed assets 335 328 Deferred acquisition costs 785,974 721,507 Reinsurance receivable 8,228 4,191 Receivable from affiliates - 1,161 Income tax receivable - deferred 41,485 38,861 State insurance licenses 4,375 4,413 Other assets 4,239 3,744 Separate account assets 19,900,125 17,835,400 --------------- --------------- Total assets $ 20,973,720 $ 18,848,273 =============== =============== LIABILITIES AND SHAREHOLDER'S EQUITY LIABILITIES: Reserve for future contractowner benefits $ 38,833 $ 37,508 Policy reserves 30,852 25,545 Drafts outstanding 30,183 28,941 Accounts payable and accrued expenses 92,150 91,827 Income tax payable 6,609 6,657 Payable to affiliates 51,949 - Future fees payable to parent 356,879 368,978 Short-term borrowing 10,000 10,000 Surplus notes 193,000 193,000 Separate account liabilities 19,900,125 17,835,400 --------------- --------------- Total liabilities $ 20,710,580 $ 18,597,856 --------------- --------------- SHAREHOLDER'S EQUITY: Common stock, $80 par, 25,000 shares authorized, issued and outstanding $ 2,000 $ 2,000 Additional paid-in capital 181,089 179,889 Retained earnings 78,403 64,993 Accumulated other comprehensive income 1,648 3,535 --------------- --------------- Total shareholder's equity 263,140 250,417 --------------- --------------- Total liabilities and shareholder's equity $ 20,973,720 $ 18,848,273 =============== ===============
See notes to unaudited consolidated financial statements. 3 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company, Ltd.) CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands)
Three Months Ended March 31, 1999 1998 ------------- ------------- REVENUES Annuity and life insurance charges & fees $ 60,418 $ 39,786 Fee income 16,977 10,688 Net investment income 2,654 3,261 Premium income 749 50 Net realized capital gains 295 156 Other 365 70 ------------- ------------- Total Revenues 81,458 54,011 ------------- ------------- BENEFITS AND EXPENSES Benefits: Annuity benefits 221 366 Change in annuity policy reserves 757 238 Cost of minimum death benefit reinsurance 1,749 1,369 Return credited to contractowners (4,226) 1,667 ------------- ------------- (1,499) 3,640 ------------- ------------- Expenses: Underwriting, acquisition and other insurance expenses 51,878 34,293 Interest expense 13,825 8,831 ------------- ------------- 65,703 43,124 ------------- ------------- Total Benefits and Expenses 64,204 46,764 ------------- ------------- Income from operations before income taxes 17,254 7,247 Income tax expense 3,844 1,175 ------------- ------------- Net income $ 13,410 $ 6,072 ============= =============
See notes to unaudited consolidated financial statements. 4 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company, Ltd.) CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (in thousands)
March 31, December 31, 1999 1998 (unaudited) --------------- --------------- Common stock: Beginning and ending balance $ 2,000 $ 2,000 Additional paid in capital: Beginning balance 179,889 151,527 Additional contributions 1,200 28,362 --------------- --------------- Ending balance 181,089 179,889 Retained earnings: Beginning balance 64,993 30,226 Net income 13,410 34,767 --------------- --------------- Ending balance 78,403 64,993 Accumulated other comprehensive income: Beginning balance 3,535 668 Other comprehensive income (1,887) 2,867 --------------- --------------- Ending balance 1,648 3,535 --------------- --------------- Total shareholder's equity $ 263,140 $ 250,417 =============== ===============
See notes to unaudited consolidated financial statements. 5 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company, Ltd.) CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Three Months Ended March 31, 1999 1998 ------------- ------------- Cash Flow from operating activities: Net income $ 13,410 $ 6,072 Adjustments to reconcile net income to net cash (used in)/provided by operating activities: Increase/(decrease) in policy reserves 5,307 (3,299) Amortization of bond discount 30 20 Amortization of insurance licenses 38 38 Change in receivable from/payable to affiliates 53,110 4,012 (Decrease)/increase in income tax payable (48) 1,580 Increase in other assets (502) (1,700) Decrease/(increase) in accrued investment income 339 (89) (Increase)/decrease in reinsurance receivable (4,037) 2,387 Increase in deferred acquisition costs, net (64,467) (41,508) Increase in income tax receivable - deferred (1,782) (519) Increase in accounts payable and accrued expenses 323 24,295 Increase in drafts outstanding 1,242 11,964 Change in foreign currency translation, net 204 9 Realized gain on sale of investments (295) (156) ------------- ------------- Net cash provided by operating activities 2,872 3,106 ------------- ------------- Cash flow from investing activities: Purchase of fixed maturity investments - (17,736) Proceeds from sale and maturity of fixed maturity investments - 50 Purchase of shares in mutual funds (12,491) (3,833) Proceeds from sale of shares in mutual funds 11,458 4,606 Increase in policy loans (40) (168) ------------- ------------- Net cash used in investing activities (1,073) (17,081) ------------- ------------- Cash flow from financing activities: Capital contributions from parent 1,200 1,063 Increase in future fees payable to parent (12,099) (6,532) Net (withdrawals from)/deposits to contractowner accounts 1,325 (461) ------------- ------------- Net cash used in financing activities (9,574) (5,930) ------------- ------------- Net decrease in cash and cash equivalents (7,775) (19,905) Cash and cash equivalents at beginning of period 77,525 81,974 ------------- ------------- Cash and cash equivalents at end of period $ 69,750 $ 62,069 ============= ============= Supplemental cash flow disclosure: Income taxes paid $ 4,901 $ - ============= ============= Interest paid $ 17,361 $ 8,281 ============= =============
See notes to unaudited consolidated financial statements. 6 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March 31, 1999 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of American Skandia Life Assurance Corporation (the Company) 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, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto in the Company's audited consolidated financial statements for the year ended December 31, 1998. Certain reclassifications have been made to prior period amounts to conform with the current period presentation. 2. NEW ACCOUNTING PRONOUNCEMENT 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 has identified and capitalized $543,000 of costs associated with internal use software through the first three months of 1999. 3. 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 March 31, 1999, sales were not significant enough to warrant full segment disclosures. Sales, as measured by premium received, for the year ended March 31, 1999 and assets under management as of March 31, 1999, for the respective segments were as follows:
(in thousands) Variable Variable Qualified Annuity Life Plans Total ------------ ------ ------- ------------ Sales $ 1,414,854 $1,208 $13,764 $ 1,429,826 ============ ====== ======= ============ Assets under management $ 19,832,584 $2,583 $63,596 $ 19,898,763 ============ ====== ======= ============
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) March 31, 1999 4. COMPREHENSIVE INCOME As of January 1, 1998 the Company adopted Statement of Financial Accounting Standards ("SFAS") 130, "Reporting Comprehensive Income". SFAS 130 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. The components of comprehensive income, net of tax, for the three months ended March 31, 1999 and 1998 were as follows: (in thousands) 1999 1998 ---- ---- Net income $13,410 $6,072 Other comprehensive income: Net unrealized gains/(losses) on securities (2,024) 305 Foreign currency translation 137 6 -------- ------ Other comprehensive income (1,887) 311 -------- ------ Comprehensive income $11,523 $6,383 ======= ====== The components of accumulated other comprehensive income, net of tax, as of March 31, 1999 and December 31, 1998 were as follows: (in thousands) 1999 1998 ---- ---- Unrealized investment gains $ 1,819 $3,843 Foreign currency translation (171) (308) ------- ------ Accumulated other comprehensive income $ 1,648 $3,535 ======= ====== 5. FOREIGN ENTITY The Company has a 99.9% ownership in Skandia Vida, S.A. de C.V. ("Skandia Vida") which is a life insurance company domiciled in Mexico, selling long term savings products within Mexico. Skandia Vida had total shareholders' equity of $5,563,000 as of March 31, 1999 and $4,724,000 as of December 31, 1998 and has generated losses of $565,000 and $264,000 for the three months ended March 31, 1999 and 1998, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three months ended March 31, 1999 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 and 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. RESULTS OF OPERATIONS Annuity and life insurance sales volume for the three months ended March 31, 1999 and 1998 was $1,429,826,000 and $848,826,000, respectively, an increase of 68%. This increase was the result of innovative product development activities, favorable market conditions, the recruitment and retention of top producers, and the continued success of the Company's highly rated customer service teams. Assets grew $2,125,447,000 or 11% since December 31, 1998. This increase is a direct result of the strong performance of the stock markets over the first quarter of 1999, which has contributed to the growth in separate account assets, combined with increases in separate account assets and deferred acquisition costs over the same period due to sales volume. Liabilities grew $2,112,724,000 or 11% since December 31, 1998 as a result of an increase in additional reserves required for the market and sales-related growth of separate account assets as well as an increase in advances from the Parent. The Company experienced a net gain of $13,410,000 after tax for the current period compared with $6,072,000 for the same period last year. The increase was the result of greater than expected sales levels and tremendous growth in assets under mangement, which generated higher amounts of annuity charges and fees and transfer agency type fee income, combined with expense levels consistent with the level of sales volume. REVENUES Due to strong market conditions and as a result of the significant growth in sales and assets under management, contract owner fees and charges and fees generated from transfer agency type activities increased $26,921,000 or 53% in the first quarterof 1999 over the first quarter of 1998. This is compared to an increase of 69% for the three months ended March 31, 1998. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net investment income decreased 19% as compared with an increase of 36% in 1998. In the first three months of 1998 the Company held a large amount of short-term investments, resulting in an unusually high amount of investment income for a three month period. Additionally, the Company experienced a significant cash drain from the high sales volume during the first quarter of 1999, limiting growth in invested assets. In the first quarter of 1998, the increase was a result of income generated from 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. There have been minimal sales of these ancillary products during 1999 and 1998. 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 death benefit premium per reinsurance contracts) associated with reinsuring the guaranteed minimum death benefit reserve exceeded the change in the guaranteed minimum death benefit reserve during the first three months of 1999 and 1998. This cost increased by 28% in 1999 and 56% in 1998. 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 return credited to contractowners for the three months ended March 31, 1999, in the amount of ($4,226,000), represented slightly favorable Separate Account investment returns on the market value adjusted contracts in support of the benefits and required reserves. This compares with $1,667,000 at March 31, 1998 which represented a lower than expected return on market value adjusted contracts, along with a timing difference (loss) related to March 31, 1998 bond market fluctuations. EXPENSES Underwriting, acquisition and other insurance expenses for the three months ended March 31, 1999 and 1998 were as follows: (in thousands) March 31, March 31, 1999 1998 Commissions $81,197 $44,673 General expenses 35,148 31,128 Net capitalization of deferred acquisition costs (64,467) (41,508) -------- ------- Underwriting, acquisition and other insurance expenses $51,878 $34,293 ======= ======= Commissions increased with the growth in sales and assets under management. 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 also increased with the growth in sales related costs. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Interest expense increased $4,994,000 or 57% over the three months ended March 31, 1998 as a result of additional financing transactions, which consisted of the sale of future fees to the Parent ("securitization transactions") initiated throughout 1998. Surplus notes as of March 31, 1999 and December 31, 1998 totaled $193,000,000. The effective income tax rates for the periods ended March 31, 1999, and 1998 were 22% and 16%, 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. Management believes that based on the taxable income produced in 1998 and the first three months of 1999, as well as the continued growth in annuity sales, the Company will produce sufficient taxable income in the future to realize its deferred tax assets. LIQUIDITY AND CAPITAL RESOURCES The Company's first quarter 1999 liquidity requirement was met by cash from insurance operations, reinsurance, investment activities, borrowings from its Parent and the November and December 1998 sale of rights to future fees and charges to its Parent. Through the first three months of 1999 and 1998 approximately 95% and 97%, respectively, of sales were variable annuity and life insurance products. Most products carry a contingent deferred sales charge, which 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. In the first quarter of 1999, the Company received $52,000,000 from its Parent in advance of planned securitization transactions scheduled for the second quarter of 1999. During 1999 the Company extended its reinsurance agreements (which were initiated prior to1996). 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. The Company has long-term surplus notes and 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. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (a wholly-owned subsidiary of Skandia Insurance Company Ltd.) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes to the Company's market risk during the first quarter of 1999.The Company has provided a discussion of its market risks in Item 7A of Part II of the December 31, 1998 Form 10-K. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index (b) None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. American Skandia Life Assurance Corporation (Registrant) by: /s/Thomas M. Mazzaferro ----------------------- Thomas M. Mazzaferro Executive Vice President and Chief Financial Officer May 14, 1999 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. American Skandia Life Assurance Corporation (Registrant) by: ________________________ Thomas M. Mazzaferro Executive Vice President and Chief Financial Officer May 14, 1999 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 EX-27 2 FDS -- 1999 1ST Q
7 0000881453 ASLAC0399 1,000 U.S Dollars 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 1 137,852 146,133 146,188 9,926 0 0 156,668 69,750 8,228 785,974 20,973,720 69,685 0 0 0 203,000 0 0 2,000 261,140 20,973,720 749 2,654 295 77,760 (1,499) 30,521 35,182 17,254 3,844 0 0 0 0 13,410 0 0 0 0 0 0 0 0 0 Included in Total Assets are Assets Held in Separate Accounts of $19,900,125. Included in Total Liabilities and Equity are Liabilities Related to Separate Accounts of $19,900,125. Other income includes annuity charges and fees of $60,418 and fee income of $16,977.
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