Filed with the Securities and Exchange Commission on April 27, 2001
Registration No. 33-89676
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Post-effective Amendment No. 6
On Form S-2
Registration Statement Under The Securities Act of 1933*
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
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(Exact name of registrant as specified in its charter)
CONNECTICUT
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(State or other jurisdiction of incorporation or organization)
63
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(Primary Standard Industrial Classification Code Number)
06-1241288
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(I.R.S. Employer Identification No.)
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 926-1888
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(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
KATHLEEN A. CHAPMAN, ASSISTANT CORPORATE SECRETARY
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 926-1888
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(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copy To:
SCOTT K. RICHARDSON, ESQ.
SENIOR COUNSEL
One Corporate Drive, Shelton, Connecticut 06484 (203) 925-3830
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Approximate date of commencement of proposed sale to the public:
May 1, 2001 or as soon as practical after the effective date of this Registration Statement
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the following: X .
--
If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile
thereof, pursuant to Item 11(a)(1) of the Form, check the following: ___.
Calculation of Registration Fee
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Title of each Proposed Proposed
class of maximum maximum
securities Amount offering aggregate Amount of
to be to be price offering registration
registered registered per unit price** fee
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Annuity Contracts $0 $0
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*Pursuant to Rule 429 under the Securities Act of 1934, the prospectus contained in this Registration Statement also
relates to annuity contracts which are covered by earlier registration statements, including Registration File Numbers
33-26122, 33-58536 and 33-84306.
**The proposed aggregate offering price is estimated solely for determining the registration fee. The amount to be
registered and the proposed
maximum offering price per unit are not applicable since these securities are not issued in predetermined amounts or
units.
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GMA
GMA S2
Cross reference sheet pursuant to Regulation S-K, Item 501(b)
Form S-2 Item No. and Caption Prospectus Heading
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1. Forepart of the Registration Outside Front Cover
Statement and Outside
Front Cover Page of
Prospectus
2. Inside Front and Outside Inside Front Cover
Back Cover Pages of
Prospectus
3. Summary Information, Risk Summary; Interest
Factors and Ratio of Crediting; Surrenders
Earnings to Fixed Charges
4. Use of Proceeds Investments
5. Determination of Offering Price Not applicable
6. Dilution Not applicable
7. Selling Security Holders Not applicable
8. Plan of Distribution Distribution
9. Description of Securities Annuity Features
to be Registered
10. Interests of Named Experts Not applicable
and Counsel
11. Information with Respect The Company
to the Registrant
12. Incorporation of Certain Documents by Reference Incorporation of Certain Documents by Reference
13. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities Indemnification
Part II Heading
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14. Other Expenses of Issuance Other Expenses of Issuance
and Distribution and Distribution
15. Indemnification of Directors Indemnification of
and Officers Directors and Officers
16. Exhibits Exhibits
17. Undertakings Undertakings
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
One Corporate Drive, Shelton, Connecticut 06484
This Prospectus describes the Guaranteed Maturity Annuity (the "Annuity") issued by American Skandia Life Assurance Corporation
("American Skandia"). We may simultaneously offer several types of contracts. You may or may not be eligible for more than one
type of contract. Certain features, such as the existence of or level of certain charges, may differ among various types of
contracts. We may also declare different interest rates for different types of contracts. Various rights and benefits may differ
among jurisdictions to meet applicable laws and/or regulations.
This Annuity is made available as participating interests in a group contract or as an individual contract. Participants in a
group contract are issued certificates reflecting their rights and privileges. Eligible individuals who may participate in a
group contract include those who have established accounts with certain broker-dealers who have entered into a distribution
agreement to offer participating interests in a contract, as well as members of other eligible groups, such as employees of an
employer. Purchasers of individual contracts are issued a contract (see "Distribution"). Both the certificates and individual
contracts are hereafter referred to as the "Contract." Contracts or certain types of Contracts may not be available in all
jurisdictions.
We offer various interest rate Guarantee Periods (see "Guarantee Periods"). The minimum premium we will accept from you is
$5,000, which may be used to purchase multiple Contracts with different Guarantee Periods. Our minimum amount per Contract is
$2,000. The minimum premium we will accept from you which may be used to purchase a contract in conjunction with a qualified plan
is $2,000. A Contract is issued as evidence of the acceptance of each premium or portion of a premium. We issue an additional
Contract for any subsequent premium accepted (see "Application and Initial Payment").
Values and benefits provided by the Annuity are funded by the general account assets of American Skandia (see "Investments").
These securities may be subject to substantial charges which could result in your receipt of less than your premium if you
surrender your contract. Whether such a result actually occurs depends on the timing of any surrender, the amount of such charges
and the interest rates we are crediting to contracts. Such charges are the market value adjustment, any sales charge we may
deduct from your premium, and any surrender charge. The actual charges will be shown in your Contract. (see "Market Value
Adjustment", "Sales Charge" and "Surrenders").
The interest rate in subsequent guarantee periods may be more or less than the rate in a previous period. However, the rates may
not be lower than a minimum determined in relation to an index, but may be higher. Such index is not controlled by American
Skandia. A 3.0% minimum rate may be required for contracts issued in certain jurisdictions, including contracts issued for
delivery in New York, if available (see "Interest Rates").
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Purchase payments under these Annuities are not deposits or obligations of, or guaranteed or endorsed by, any bank or bank
subsidiary, are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency
and are not insured by the Securities Investor Protection Corporation ("SIPC") as to the loss of the principal amount invested.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
FOR FURTHER INFORMATION CALL 1-800-752-6342.
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GMA-PROS-(5/2001) Issued by: American Skandia Life Assurance Corporation
Prospectus Dated: May 1, 2001
This page has been intentionally left blank.
TABLE OF CONTENTS
Glossary of Terms.........................................................................................................7
Summary of Annuity Features...............................................................................................9
Guarantee Periods & Interest Rates........................................................................................9
Death Benefits and Annuitization..........................................................................................9
Access to Account Value..................................................................................................10
Charges..................................................................................................................10
Miscellaneous............................................................................................................10
Purchasing your Annuity..................................................................................................10
APPLICATION AND INITIAL PAYMENT.......................................................................................10
RIGHT TO CANCEL.......................................................................................................11
Fees and Charges.........................................................................................................11
SALES CHARGE..........................................................................................................11
Surrender Charge......................................................................................................12
Managing Your Annuity....................................................................................................12
PARTICIPANT, ANNUITANT AND BENEFICIARY DESIGNATIONS...................................................................12
ADDITIONAL AMOUNTS ON QUALIFYING PURCHASE PAYMENTS....................................................................13
Managing Your Account Value..............................................................................................14
Guarantee Periods.....................................................................................................14
Alternate Guarantee Periods...........................................................................................14
Interest Rates........................................................................................................15
Market Value Adjustment...............................................................................................16
Access To Account Value..................................................................................................16
SURRENDERS............................................................................................................16
MEDICALLY-RELATED WITHDRAWALS.........................................................................................17
FREE WITHDRAWAL PRIVILEGE.............................................................................................17
QUALIFIED PLAN WITHDRAWAL LIMITATIONS.................................................................................18
DEFERRAL OF PAYMENT...................................................................................................18
ANNUITY DATE..........................................................................................................18
ANNUITY OPTIONS.......................................................................................................18
Death Benefit............................................................................................................19
Tax Considerations.......................................................................................................20
WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?....................................................20
HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?...........................................................20
IN GENERAL, HOW ARE ANNUITIES TAXED?................................................................................20
HOW ARE DISTRIBUTIONS TAXED?........................................................................................20
WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS?........................22
HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?...............................................................23
GENERAL TAX CONSIDERATIONS..........................................................................................24
General Information......................................................................................................25
REPORTS TO YOU........................................................................................................25
WHO IS AMERICAN SKANDIA?..............................................................................................25
Separate Account D....................................................................................................25
ADMINISTRATION OF TRANSACTIONS........................................................................................26
AGE LIMITS............................................................................................................26
ASSIGNMENTS OR PLEDGES................................................................................................26
MISSTATEMENT OF AGE OR SEX............................................................................................26
CONTRACT MODIFICATION.................................................................................................26
INVESTMENT MANAGEMENT.................................................................................................27
CURRENT INVESTMENT GUIDELINES.........................................................................................27
DISTRIBUTION..........................................................................................................27
LEGAL EXPERTS.........................................................................................................27
LEGAL PROCEEDINGS.....................................................................................................27
EXPERTS...............................................................................................................27
INDEMNIFICATION.......................................................................................................27
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................................................................27
HOW TO CONTACT US.....................................................................................................28
EXECUTIVE OFFICERS AND DIRECTORS......................................................................................28
FINANCIAL STATEMENTS..................................................................................................32
APPENDIX A Financial information about American Skandia Life Assurance Corporation........................................1
APPENDIX B - ILLUSTRATION OF MARKET VALUE ADJUSTMENT......................................................................1
APPENDIX C - ILLUSTRATION OF INTEREST CREDITING...........................................................................1
GLOSSARY OF TERMS
ANNUITANT is the person upon whose life your Contract is issued.
ANNUITY is the Guaranteed Maturity Annuity.
ANNUITY DATE is the date on which annuity payments are to commence.
BENEFICIARY(IES) is (are) the person(s) designated by you, either as of the Contract Date or at a later date, as the recipient of
the death benefit.
CONTINGENT ANNUITANT is the person designated by you to become the Annuitant on the Annuitant's death prior to the Annuity Date.
CONTRACT, for purposes of this Prospectus, is your individual Annuity, or with respect to a group Annuity, the certificate
evidencing your participation in an underlying group Annuity. It also represents an account we set up and maintain to track our
obligations to you.
CONTRACT DATE is the effective date of your Contract (shown as your "Certificate Date" with respect to a group Annuity).
CONTRACT YEARS are continuous 12-month periods commencing on the Contract Date and each anniversary of the Contract Date.
CURRENT RATE is the applicable interest rate we offer for a Guarantee Period for your type of Contract. Current Rates are
contained in a schedule of rates established by us from time to time for the Guarantee Periods then being offered. We may
establish different schedules for different types of Contracts.
GROSS SURRENDER VALUE is, as of any date, that portion of the Interim Value you specify for a full or partial surrender.
GUARANTEE PERIOD is the period during which the rate at which interest is credited to your Contract is guaranteed.
IN WRITING is in a written form satisfactory to us and filed at the Office.
INITIAL GUARANTEE RATE is the rate of interest credited during the initial Guarantee Period for a Contract.
INTERIM VALUE is, as of any date, the Net Premium credited to a Contract plus all interest credited on such Net Premium, less the
sum of all previous Gross Surrender Values and interest thereon from the date of each surrender, plus or minus any market value
adjustment made when choosing an alternate Guarantee Period and interest thereon from the date such alternate Guarantee Period
begins.
NET PREMIUM is a premium less any applicable sales charge applied to premium when received and any applicable premium tax deducted
upon receipt of premium.
NET SURRENDER VALUE is the amount payable on a full or partial surrender after the application of any charges and market value
adjustment.
OFFICE is our business office, American Skandia Life Assurance Corporation, One Corporate Drive, P.O. Box 883, Shelton,
Connecticut 06484.
PARTICIPANT is either an eligible entity or person who participates in a group Contract or is named as having ownership rights in
relation to an Annuity issued as an individual contract. Eligibility depends on the specific Contract.
SUBSEQUENT GUARANTEE RATE is the rate of interest established by us for crediting to your Contract during a subsequent Guarantee
Period.
SURRENDER DATE is the date we receive a completed request In Writing for a surrender.
"We", "us", "our" or "the Company" means American Skandia Life Assurance Corporation.
"You" or "your" means the Participant.
SUMMARY OF ANNUITY FEATURES
The Guaranteed Maturity Annuity is designed to allow you to accumulate funds for long term goals, such as retirement, on a
tax-deferred basis. You may apply the accumulated funds on the Annuity Date to receive a stream of income payments.
GUARANTEE PERIODS & INTEREST RATES
Initial Guarantee Periods: You select an initial Guarantee Period among those we currently offer. If we accept the premium, we
then issue a Contract. The initial Guarantee Period begins on the Contract Date (see "Application and Initial Payment" and
"Guarantee Periods").
Subsequent Guarantee Periods: At the end of a Guarantee Period, a subsequent Guarantee Period begins, unless you have chosen such
date as the Annuity Date. We reserve the right to make available different Guarantee Periods than those which were available when
your Contract was issued. The subsequent Guarantee Period will be the same as the previous one (or the next shortest one if that
duration is no longer available) unless we receive instructions from you In Writing at least two business days before the close of
the Guarantee Period then ending. However, the subsequent Guarantee Period may not end beyond the Annuity Date (see "Guarantee
Periods").
Alternate Guarantee Periods: You may choose, subject to certain limitations, to switch to an alternate Guarantee Period that would
begin before your current Guarantee Period would normally end. Exercising this privilege will subject your Interim Value to a
market value adjustment, but not to a surrender charge. You may also need to change your Annuity Date in order to exercise this
privilege (see "Alternate Guarantee Periods").
Interest Rates: We declare interest rates for the available Guarantee Periods from time to time. The rate applicable throughout
any Guarantee Period is the one in effect when such Guarantee Period begins. The rates we declare are subject to a minimum, but
we may declare higher rates. The minimum is determined in relation to an index we do not control. For Contracts issued for
delivery in certain jurisdictions, including New York, if available, rates may not be lower than 3%, irrespective of the index.
We reserve the right to simultaneously declare Subsequent Guarantee Rates for existing Contracts that are higher than Current
Rates for the Guarantee Periods of the same duration applicable to newly issued Contracts of the same type, where allowed by law
and regulation (see "Interest Rates").
Market Value Adjustment: The market value adjustment may increase or decrease the amount payable to you on a full or partial
surrender. Such a surrender at the end of a Guarantee Period, and, where required by law, the 30 days prior to the end of a
Guarantee Period, is not affected by this adjustment. In addition, the market value adjustment will be applied to the Interim
Value when choosing an alternate Guarantee Period.
The adjustment reflects the relationship as of the time of its calculation between: (a) the rate then being credited to your
Contract; and (b) the Current Rate for your type of Contract with a Guarantee Period equal to the time remaining to the end of
your current Guarantee Period. Our Current Rates are expected to be sensitive to interest rate fluctuations, thereby making this
adjustment equally sensitive to such changes. There would be a downward adjustment when the applicable Current Rate plus an
adjustment rate exceeds the rate currently being credited to your Contract. There would be an upward adjustment when the
applicable Current Rate plus the adjustment rate is lower than the rate currently being credited to your Contract. The adjustment
rate is the same for all contracts of the same type, and cannot exceed 0.25% of interest for any type of Contract. (see "Market
Value Adjustment").
DEATH BENEFITS AND ANNUITIZATION
Death Benefits: A death benefit of the greater of your Contract's Interim Value or 100% of premium less the sum of all prior Gross
Surrender Values, is provided in the event of your death or the Annuitant's death (if there is no Contingent Annuitant) if
occurring both (a) prior to the Annuity Date, and (b) before the beginning of the Contract Year which starts following the earlier
of your or the Annuitant's 85th birthday (see "Death Benefit").
Annuity Date and Annuity Options: You may choose the Annuity Date. However, it must be the first day of the first month on or
after the end of a Guarantee Period, and after the third Contract Year. You may choose among a number of annuity options (see
"Annuity Date" and "Annuity Options").
ACCESS TO ACCOUNT VALUE
Surrenders: Total and partial surrenders of your Contract are permitted prior to the Annuity Date. Such total or partial
surrenders may be assessed a surrender charge and/or a market value adjustment (see "Surrenders"). A full or partial surrender
may result in a taxable event, and in certain situations, a tax penalty (see "Certain Tax Considerations").
Free Withdrawal Privilege: Once each Contract Year after the first you may withdraw an amount without any applicable surrender
charge being assessed. This amount equals the "growth" in the Contract. "Growth" is defined as: (a) the interest credited to
your Contract in the prior Contract Year, plus (b) the interest credited to your Contract in Contract Years previous to the last,
subject to a market value adjustment, provided that immediately after the withdrawal (including any market value adjustment) the
remaining Interim Value times the market value adjustment is at least equal to the unliquidated premium plus the value at the time
credited of any amounts added due to premium size (see "Free Withdrawal Privilege").
Medically-Related Withdrawals: Where permitted by law, any applicable surrender charge or market value adjustment is waived on a
full surrender if we receive satisfactory evidence of certain medically-related events or conditions (see "Medically-Related
Withdrawals").
CHARGES
Sales Charge: This Contract does not feature a sales charge. However, we also offer a version of this Contract that does feature
a sales charge. If you purchase a version of this Contract that features a sales charge, the amount and schedule of the sales
charge will be shown on a Supplement to this Prospectus as well as in your Contract. Any such sales charge percentages may be
level or decrease according to a specified schedule (see "Sales Charge").
Surrender Charge: This Contract imposes a surrender charge upon any full or partial surrender taken within six (6) years of a
premium payment. However, we also offer a version of this Contract that does not feature a surrender charge. If you purchase a
version of this Contract that does not feature a surrender charge, the Contract will have a sales charge as discussed above and as
shown on a Supplement to this Prospectus as well as in your Contract. For those Contracts that feature a surrender charge, the
amount of the charge is calculated at 6.0% of the Gross Surrender Value deemed to be a liquidation of premium.
Premium Taxes: In several states, a premium tax is payable, either when premiums are received or, when the Interim Value is
applied under an annuity option. We will deduct the amount of the premium tax payable, if any, from your premiums or Interim
Value. The amount of the premium tax varies from jurisdiction to jurisdiction, which any state legislature may change. Also, any
state legislature may decide to impose the tax when premium payments are made. In those jurisdictions imposing such a tax, the
tax rates currently in effect range up to 3 1/2%. However, local taxes may be higher.
MISCELLANEOUS
Additional Amounts on Qualifying Purchase Payments: We reserve the right to make additions to the Interim Values of Contracts of
Owners submitting large amounts of premium, wherever allowed by law. As of the date of this Prospectus, the breakpoints for such
treatment are premiums of $500,000, $1,000,000 and $5,000,000. We reserve the right to change these breakpoints (see "Additional
Amounts on Qualifying Purchase Payments").
Multiple Contracts: We issue a Contract for each acceptable premium or portion thereof, subject to our rules for minimum amounts
per Contract. Subsequent discussion in this Prospectus will be in terms of a single Contract.
PURCHASING YOUR ANNUITY
APPLICATION AND INITIAL PAYMENT
We may require a properly completed application or enrollment form, a premium, and any other materials under our underwriting
rules before we agree to issue an Annuity. We may issue an Annuity without completion of an application or enrollment form for
certain classes of Annuities, where permitted by law.
We offer various initial Guarantee Periods. Subject to our rules, you may choose to have your Net Premium or portions thereof
accumulate interest for one or more of the Guarantee Periods then available. While we may issue multiple Contracts, such multiple
Contracts may be treated for tax purposes as if they were a single Contract (see "Certain Tax Considerations"). No Guarantee
Period may end later than the Annuity Date.
Once we accept your premium and all our requirements are met, we issue a Contract for each initial Guarantee Period you choose.
The minimum premium we will accept from you is $5,000. Our minimum amount per Contract is $2,000. Therefore, you could choose
one but not more than two Guarantee Periods if you sent the minimum premium amount. The minimum premium we will accept from you
which may be used to purchase a Contract in conjunction with a qualified plan is $2,000. Our prior approval is required before we
will accept a premium of any amount that would cause the combined Interim Value of all your Contracts to exceed $500,000.
We confirm each premium payment in writing.
RIGHT TO CANCEL
You may return your Contract for a refund within a specified period. Depending on the applicable legal and regulatory
requirements, this period may be within ten days of receipt, twenty-one days of receipt or longer. Unless we are required by law
to return the premium amount, the amount of the refund will equal the Interim Value times the market value adjustment as of the
date we receive the cancellation request plus any amount deducted for premium tax and/or any sales charge, less the accumulated
value of any additions we make because of the amount of premium paid. When your Contract is issued, you will be informed of the
amount due if you exercise this right. Exercising the right requires return of the Contract to us or to the representative who
solicited your purchase.
FEES AND CHARGES
SALES CHARGE
This Contract does not feature a sales charge.
However, we also offer a version of this Contract that does feature a sales charge. If you purchase a version of this Contract
that features a sales charge, the amount and schedule of the sales charge will be shown on a Supplement to this Prospectus as well
as in your Contract. Any such sales charge percentages may be level or decrease according to a specified schedule (see "Sales
Charge"). As of the date of this Prospectus, we were not offering Contracts with sales charges in excess of 6% of premium upon
receipt. However, we reserve the right to offer new types of Contracts with sales charges of not more than 8.5% of premium upon
receipt. Sales charge percentages may be level or may decrease according to a specified schedule. For example, a Contract could
have a schedule of sales charges such that 5% is assessed against the first $10,000 of the cumulative premiums paid by a
Participant, 4% is assessed against the next $10,000 of cumulative premiums paid by that Participant, and 3% assessed against
cumulative premiums paid by a Participant in excess of $20,000. This example is hypothetical. The actual amount and schedule for
such a charge, if any, will be shown on a Supplement to the Prospectus as well as in your Contract.
From time to time we may structure sales charges for a group Contract, or we may reduce or waive sales charges for individual
Contracts, when either are sold in a manner that reduces sales expenses or spreads them out over time. We would consider various
factors, including (1) the size and type of group, (2) the amount of premiums, (3) additional premiums from existing Participants,
and/or (4) other transactions where our sales expenses are likely to be reduced, eliminated or spread out over time.
No sales charge is imposed when any group Contract or any individual Contract issued pursuant to this Prospectus is owned on its
Contract Date by: (a) any parent company, affiliate or subsidiary of ours; (b) an officer, director, employee, retiree, sales
representative, or in the case of an affiliated broker-dealer, registered representative of such company; (c) a director, officer
or trustee of any underlying mutual fund; (d) a director, officer or employee of any investment manager, sub-advisor, transfer
agent, custodian, auditing, legal or administrative services provider that is providing investment management, advisory, transfer
agency, custodianship, auditing, legal and/or administrative services to an underlying mutual fund or any affiliate of such firm;
(e) a director, officer, employee or registered representative of a broker-dealer or insurance agency that has a then current
selling agreement with us and/or with American Skandia Marketing, Incorporated; (f) a director, officer, employee or authorized
representative of any firm providing us or our affiliates with regular legal, actuarial, auditing, underwriting, claims,
administrative, computer support, marketing, office or other services; (g) the then current spouse of any such person noted in (b)
through (f), above; (h) the parents of any such person noted in (b) through (g), above; (i) such person's child(ren) or other
legal dependent under the age of 21; and (j) the siblings of any such persons noted in (b) through (h) above. No such group
Contract or individual Contract is eligible for any Additional Amount due to the size of premiums (see "Additional Amounts on
Qualifying Purchase Payments").
Any elimination of any sales charge or any reduction to the amount of such charges will not discriminate unfairly between Contract
purchasers. We will not make any such changes to this charge where prohibited by law.
Depending on the Guarantee Period you choose and the Interest Rate Credited to your Contract, assessment of a substantial Sales
Charge could result in your receipt of less than your premium even if you surrender your Contract at the end of a Guarantee
Period. For example, if you chose a one-year Guarantee Period, we were crediting 4% interest per year when your Guarantee Period
began, and the sales charge was 5% of your premium, you would receive less than your premium if you surrendered your Contract at
the end of the initial Guarantee Period. You could also receive less than your premium due to any applicable surrender charge and
the market value adjustment (see "Surrenders").
Surrender Charge
This Contract imposes a surrender charge upon any full or partial surrender taken within six (6) years of a premium payment. The
amount of the charge is calculated at 6.0% of the Gross Surrender Value deemed to be a liquidation of premium.
However, we also offer a version of this Contract that does not feature a surrender charge. If you purchase a version of this
Contract that does not feature a surrender charge, the Contract will have a sales charge as discussed above and as shown on a
Supplement to this Prospectus as well as in your Contract.
For those Contracts that feature a surrender charge, the type and level of charges will be shown in your Contract. The charge may
be level for a specified number of years or it may start at a particular level and then grade down to zero over a specified number
of years. The charge may also depend on the duration of the Initial Guarantee Period you select. As of the date of this
Prospectus, we were not offering Contracts with surrender charges in excess of 6% of premium. However, we reserve the right to
offer new types of Contracts with sales charges of not more than 8.5% of premium. In addition, if both a Sales Charge and a
Surrender Charge exist in the same Contract, the total of both charges will not exceed 8.5% of premium.
When the surrender charge is assessable against the amount of premium being liquidated, then surrenders or partial surrenders,
except for those amounts taken under the free withdrawal provision, are deemed for the purpose of this charge to be first a
liquidation of premium. Amounts taken under the free withdrawal privilege are not considered a liquidation of premium. On a
partial surrender, Gross Surrender Value is deemed to come first from: (a) any interest then available under the free withdrawal
provision; then from (b) any premium not yet liquidated, and then from (c) any remaining interest and any amounts credited due to
premium size (see "Additional Amounts on Qualifying Purchase Payments"). This does not coincide with the treatment of such
surrenders for tax purposes (see "Certain Tax Considerations).
From time to time we may structure surrender charges for a group Contract, or we may reduce or waive surrender charges for
individual Contracts, when either are sold in a manner that reduces sales expenses or spreads them out over time. We would
consider various factors including (1) the size and type of group, (2) the amount of premiums, (3) additional premiums from
existing Participants, and/or (4) other transactions where our sales expenses are likely to be reduced, eliminated or spread out
over time.
No surrender charge is imposed when any group Contract or any individual Contract issued pursuant to this Prospectus is owned on
its Contract Date by: (a) any parent company, affiliate or subsidiary of ours; (b) an officer, director, employee, retiree, sales
representative, or in the case of an affiliated broker-dealer, registered representative of such company; (c) a director, officer
or trustee of any underlying mutual fund; (d) a director, officer or employee of any investment manager, sub-advisor, transfer
agent, custodian, auditing, legal or administrative services provider that is providing investment management, advisory, transfer
agency, custodianship, auditing, legal and/or administrative services to an underlying mutual fund or any affiliate of such firm;
(e) a director, officer, employee or registered representative of a broker-dealer or insurance agency that has a then current
selling agreement with us and/or with American Skandia Marketing, Incorporated; (f) a director, officer, employee or authorized
representative of any firm providing us or our affiliates with regular legal, actuarial, auditing, underwriting, claims,
administrative, computer support, marketing, office or other services; (g) the then current spouse of any such person noted in (b)
through (f), above; (h) the parents of any such person noted in (b) through (g), above; (i) such person's child(ren) or other
legal dependent under the age of 21; and (j) the siblings of any such persons noted in (b) through (h) above. No such group
Contract or individual Contract is eligible for any Additional Amount due to the size of premiums (see "Additional Amounts on
Qualifying Purchase Payments").
Any elimination of any surrender charge or any reduction to the amount of such charges will not discriminate unfairly between
Contract purchasers. We will not make any such changes to this charge where prohibited by law.
MANAGING YOUR ANNUITY
PARTICIPANT, ANNUITANT AND BENEFICIARY DESIGNATIONS
When you purchase an Annuity, you must make certain designations, including a Participant and an Annuitant. You may also make
certain other designations. These designations include a contingent Participant, a Contingent Annuitant, a Beneficiary, and a
contingent Beneficiary. Certain designations are required, as indicated below. Such designations will be revocable unless you
indicate otherwise or we endorse your Annuity to indicate that such designation is irrevocable to meet certain regulatory or
statutory requirements.
Some of the tax implications of the various designations are discussed in the section entitled "Certain Tax Considerations".
However, there are other tax issues than those addressed in that section, including, but not limited to, estate and inheritance
tax issues. You should consult with a competent tax counselor regarding the tax implications of various designations. You should
also consult with a competent legal advisor as to the implications of certain designations in relation to an estate, bankruptcy,
community property where applicable and other matters.
A Participant must be designated. You may designate more than one Participant. If you do, all rights reserved to Participants
are then held jointly. We require consent In Writing of all joint Participants for any transaction for which we require the
written consent of Participants. Where required by law, we require the consent of the spouse of any person with a vested interest
in an Annuity. Naming someone other than the payor of a premium as the Participant may have gift, estate or other tax
implications.
You may designate more than one primary or contingent Beneficiary and if you do, the proceeds will be paid in equal shares to the
survivors in the appropriate beneficiary class, unless you have requested otherwise In Writing. The Beneficiary is the person or
persons entitled to receive the death benefit or remaining certain payments under an annuity option with certain payments. Unless
you indicated that a prior choice was irrevocable, you may change these designations at any time during the Annuitant's lifetime
by sending a request In Writing.
If a Participant's spouse is designated as the sole primary Beneficiary of the Annuity and the Participant dies prior to the
Annuity Date, the Participant's Spouse, as Beneficiary, may elect to be treated as Participant and continue the Annuity at its
current Account Value, subject to its terms and conditions. If the Annuity is owned jointly by both spouses, and the primary
Beneficiary is designated as "surviving spouse", each spouse named individually, or a designation of similar intent, then upon the
death of either Participant, the surviving spouse may elect to be treated as Participant.
If the primary Beneficiary dies before death proceeds become payable, the proceeds will become payable to the contingent
Beneficiary. If no Beneficiary is alive at the time of the death upon which death proceeds become payable or in the absence of
any Beneficiary designation, the proceeds will vest in you or your estate.
You may name one or more Contingent Annuitants. There may be adverse tax consequences if a Contingent Annuitant succeeds an
Annuitant and the Contract is owned by a trust that is neither tax exempt nor does not qualify for preferred treatment under
certain sections of the Code, such as Section 401 (a "non-qualified" trust). In general, the Code is designed to prevent the
benefit of tax deferral from continuing for long periods of time on an indefinite basis. Continuing the benefit of tax deferral
by naming one or more Contingent Annuitants when the Contract is owned by a non-qualified trust might be deemed an attempt to
extend the tax deferral for an indefinite period. Therefore, adverse tax treatment may depend on the terms of the trust, who is
named as Contingent Annuitant, as well as the particular facts and circumstances. You should consult your tax advisor before
naming a Contingent Annuitant if you expect to use a Contract in such a fashion. You must name Contingent Annuitants according to
our rules when a Contract is used as a funding vehicle for certain retirement plans designed to meet the requirements of Section
401 of the Internal Revenue Code.
ADDITIONAL AMOUNTS ON QUALIFYING PURCHASE PAYMENTS
Wherever allowed by law, we reserve the right to make additions to the Interim Values of Contracts of Participants submitting
large amounts of premium.
The current breakpoints for qualifying for such additional amounts and the amount we credit are as follows:
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Purchase Payment Additional Amount*
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At least $500,000 but less than $1,000,000 1.25%
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Between $1,000,000 and $4,999,999 3.00%
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$5,000,000 or greater 3.75%
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* as a percentage of the Purchase Payment.
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As of the date of the Prospectus we make such a program available for Contracts that do not otherwise differentiate sales charges
or surrender charges on the amount of premium received. However, we reserve the right to modify, suspend or terminate it at any
time, or from time to time, without notice.
If you submit premium to purchase multiple Contracts, we divide the additions to the Contracts then being purchased in the same
proportion as the premium is being divided among such Contracts.
Should you have a right to cancel your Contract (see "Right to Cancel") and exercise such a right, the accumulated value of the
additional amount credited will not be included in the amount returned to you.
We do not consider additional amounts credited due to premium size to be an increase in your "investment in the contract" (see
"Certain Tax Considerations).
Additional amounts credited are not included in any amounts you may withdraw without assessment of any applicable surrender charge
(see "Free Withdrawal Privilege").
MANAGING YOUR ACCOUNT VALUE
Guarantee Periods
As of the date of this Prospectus, we offer Guarantee Periods with annual durations of one to ten years. We may change the
Guarantee Periods we offer at some future date; however, any such change will not have an impact on any Guarantee Period then in
effect. See Appendix C for an illustration of how interest is credited during a Guarantee Period.
At the end of a Guarantee Period that occurs prior to the Annuity Date, a subsequent Guarantee Period begins. At least 30 days
prior to the end of any Guarantee Period of at least a year's duration, or earlier where required by law or regulation, we inform
you of the Guarantee Periods available as of the date of such notice. We do not provide a similar notice if the Guarantee Period
that is ending is of less than a year's duration. Subject to our rules, a subsequent Guarantee Period will begin according to
your instructions, if received at our Office not less than two business days prior to the last day of the Guarantee Period then
coming to an end. If you don't send us instructions or instructions are not received in a timely fashion, the subsequent
Guarantee Period will be equal in duration to the one just ended.
We may change the guarantee periods available at any time, including the period between the date we mail you notice and the date
your subsequent guarantee period begins. If you choose a duration that is no longer available on the date your subsequent
Guarantee Period begins and we cannot reach you to choose a different duration, the next shortest duration will apply. Similarly,
if you have made no choice but we no longer are making available Guarantee Periods equaling the one then ending for your Contract,
the next shortest duration will apply. However, in no event will the Guarantee Period end after the Annuity Date.
Alternate Guarantee Periods
You may choose to switch to an alternate Guarantee Period that would begin before your current Guarantee Period would normally
end, subject to the following rules:
1........We must receive your request In Writing at our Office.
2. The beginning of the new Guarantee Period is the first business day after the date we receive all the information
we need to process your request.
3. The Guarantee Period you choose must be one we are making available on the date the new Guarantee Period is to
begin.
4. Your Annuity Date must be the first day of the month on or immediately after an anniversary of the date on which
the new Guarantee Period begins. If necessary to meet this requirement, you must choose a new Annuity Date
before we will process your request.
5. The new Guarantee Period may not extend beyond the Annuity Date.
6. We will process only one such request per Contract per Contract Year.
7. In certain Contracts, you may not choose a shorter Guarantee Period than the Initial Guarantee Period until after
the date the Initial Guaranteed Period was scheduled to end.
Any applicable market value adjustment formula will be applied to your Contract's Interim Value immediately prior to the beginning
of the new Guarantee Period. No surrender charge will be assessed. The resulting Interim Value will be credited interest at the
Subsequent Guarantee Rate for the new Guarantee Period.
Exercising this privilege may or may not increase your interim value over time. That will depend on such factors as any market
value adjustment applicable at the time the privilege is exercised, the Guarantee Period you choose and Subsequent Guarantee Rate
we are then crediting for that Guarantee Period, the length of time you subsequently hold your Contract, and any subsequent
partial surrenders or withdrawals under the Free Withdrawal Privilege.
Interest Rates
Declared rates are effective annual rates of interest. The rate is guaranteed throughout the Guarantee Period. The Initial
Guarantee Rate applies to the Net Premium less all Gross Surrender Values during the initial Guarantee Period. The Subsequent
Guarantee Rate for any subsequent Guarantee Period applies to the Interim Value on the date such subsequent Guarantee Period
begins less all Gross Surrender Values after that date.
We inform you of the Initial Guarantee Rate when we confirm acceptance of your premium and issuance of your Contract. You will be
informed of the Subsequent Guarantee Rate applicable to any subsequent Guarantee Period as part of the annual report we send you.
At any time we may change interest rates. Any such change does not have an impact on the rates applicable to Guarantee Periods
already in effect. However, such a change will affect the Market Value Adjustment (see "Market Value Adjustment).
When a subsequent Guarantee Period begins, the rate applied to your Contract will not be less than the rate then applicable to new
Contracts of the same type with the same Guarantee Period.
Interest rates are subject to a minimum. We may declare higher rates. The minimum for each Guarantee Period is based on both an
index and a reduction to the interest rate determined according to the index.
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Each index is based on the published rate for certificates of indebtedness (bills, notes or bonds, depending on the term of
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indebtedness) of the United States Treasury at the most recent Treasury auction held at least 30 days prior to the beginning of
the Guarantee Period to which the minimum is to apply. The term (length of time from issuance to maturity) of the certificates of
indebtedness upon which the index used for any Guarantee Period is the same as the Guarantee Period. If no certificates of
indebtedness are available for such term, the next shortest term is used. If the United States Treasury's auction program is
discontinued, we will substitute indexes which in our opinion are comparable. If required, implementation of such substitute
indexes will be subject to approval by the Securities and Exchange Commission and the Insurance Department of the jurisdiction in
which the Contract was delivered. (For group Contracts, it is our expectation that approval of only the jurisdiction in which the
underlying group contract was delivered would apply.)
The reduction used in determining the minimum is an amount not to exceed 2% percent of interest. We may reduce this amount for a
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particular type of Contract if we can expect reduced sales expenses or other expenses in relation to sales of that Contract.
In certain jurisdictions, including New York, if available, in no event will the minimum be less than 3% per year, compounded
yearly.
Your Contract may include a provision committing us to declare Subsequent Guarantee Rates applicable to certain Subsequent
Guarantee Periods at higher rates than the Current Rates for that type of Contract. The manner in which Subsequent Guarantee
Rates are increased will be uniform for all Participants in any one particular group Contract. The manner in which such
Subsequent Guarantee Rates are increased will be uniform for all owners of any one particular type of individual Contract,
wherever such an increase in rates is allowed by law and/or regulation. For any particular Contract, the number of Contract Years
required before such an increase in rates applies or the size of such increase will depend on our expectations as to sales
expenses and other expenses in relation to sales of that type of Contract.
We have no specific formula for determining the interest rates we declare. Rates may differ, between types of Contracts, even for
Guarantee Periods of the same duration starting at the same time. We expect such rates to reflect the returns available on the
type of investments we make to support these types of Contracts. However, we may also take into consideration in determining
rates such factors including, but not limited to, the duration of the Guarantee Period, regulatory and tax requirements, the
liquidity of the secondary markets for the type of investments we make, commissions, administrative expenses, investment expenses,
general economic trends and competition. Our management makes the final determination as to interest rates to be credited. We
cannot predict the rates we will declare in the future.
You may obtain our current rates by writing us or calling us at 1-800-766-4530.
Market Value Adjustment
The market value adjustment ("MVA") may increase or decrease the amount payable to you on a full or partial surrender. Such a
surrender at the end of a Guarantee Period, and, where required by law, the 30 days prior to the end of a Guarantee Period, or
which qualifies under our rules as a medically-related withdrawal is not affected by the MVA.
In addition, the market value adjustment will be applied to the Interim Value when choosing an alternate Guarantee Period, except
where required by law, if the change to an alternate Guarantee Period occurs not more than 30 days before the end of the Guarantee
Period.
The MVA reflects the relationship as of the time it is calculated between: (a) the rate then being credited to your Contract; and
(b) our Current Rate for your type of Contract with a Guarantee Period equal to the time remaining to the end of your current
Guarantee Period. Our Current Rates are expected to be sensitive to interest rate fluctuations, thereby making this adjustment
sensitive to such fluctuations. There would be a downward adjustment when the applicable Current Rate plus an adjustment rate
exceeds the rate currently being credited to your Contract. There would be an upward adjustment when the applicable Current Rate
plus the adjustment rate is lower than the rate currently being credited to your Contract. The adjustment rate is the same for
all Contracts of the same type, and cannot exceed 0.25% for any type of Contract.
We reserve the right, from time to time, to determine the MVA using an interest rate lower than the Current Rate for all
transactions applicable to a class of Contracts. This would benefit all such Contracts if transactions to which the MVA applies
occur while we use such lower interest rate.
The formula we use to determine the MVA is:
[(1+I)/(1+J+the adjustment amount)] N/12
where:
I is the Guarantee Rate applicable to the Guarantee Period for your Contract;
J is the Current Rate for your type of Contract for the Guarantee Period equal to the number of years (rounded to the
next higher number when occurring on other than an anniversary of the beginning of the current Guarantee Period)
remaining in your current Guarantee Period; and
N is the number of months (rounded to the next higher number when occurring on other than a monthly anniversary of the
beginning of the current Guarantee Period) remaining to the end of your Guarantee Period.
The formula that applies if amounts are surrendered pursuant to the right to return the Annuity is [(1+I)/(1+J)]N/12.
Nonetheless, a full or partial surrender at the end of a Guarantee Period is not affected by the MVA.
See Appendix B for illustrations of how the MVA works.
ACCESS TO ACCOUNT VALUE
SURRENDERS
You may request a full or partial surrender. Your Annuity must accompany your surrender request. Partial surrenders may only be
made if:
(a) the Gross Surrender Value is at least $1,000; and
(b) the Gross Surrender Value plus $1,000 does not exceed the amount payable if you completely surrender your
Contract on that date.
The amount payable to you is the Net Surrender Value. The method for determining the Net Surrender Value is shown in your
Contract, and is either expressed as a percentage of the Gross Surrender Value or as a percentage of the premium being
liquidated. Assuming that:
A = the Gross Surrender Value;
B = the surrender charge, if any, as of the date we receive the surrender request In Writing; and
C = the market value adjustment described below as of the date we receive the surrender request In Writing;
i. if the surrender charge is expressed as a percentage of the Gross Surrender Value, then the Net Surrender Value
equals (A - B) X C;
ii. if the surrender charge is expressed as a percentage of the premium being liquidated, then the Net Surrender
Value equals (A X C) - B; and
iii. if there is no surrender charge, then the Net Surrender Value equals A X C.
These securities may be subject to a substantial surrender charge and/or market value adjustment if not held to the end of a
guarantee period, which could result in your receipt of less than your premium. You may avoid any applicable surrender charge by
holding your Contract until the time surrender charges no longer apply, which will be shown in your Contract. No market value
adjustment applies to any surrender occurring at the end of a Guarantee Period, and, where required by law, the 30 days prior to
the end of the Guarantee Period. However, any sales charges, if applicable, could also result in your receipt of less than your
premium under certain circumstances (see "Sales Charge").
Where permitted by law, any applicable surrender charge is waived if a full surrender qualifies under our rules as a
medically-related withdrawal (see "Medically-Related Withdrawals").
Under certain circumstances, some or all of the monies surrendered may be considered as taxable income and may also be subject to
certain penalty provisions of the Internal Revenue Code (see "Certain Tax Considerations").
MEDICALLY-RELATED WITHDRAWALS
Where permitted by law, you may apply to surrender your rights under your Contract for its Interim Value prior to the Annuity Date
upon occurrence of a "Contingency Event". The Annuitant must be alive as of the date we pay the proceeds of such surrender
request. If the Owner is one or more natural persons, all such Owners must be alive at such time. This waiver of any applicable
surrender charge and market value adjustment is subject to our rules. For contracts issued before May 1, 1996, a "Contingency
Event" occurs if the Annuitant is:
1. First confined in a "Medical Care Facility" while your Contract is in force and remains confined for at least 90
days in a row; or
2. First diagnosed as having a Fatal Illness while your Contract is in force.
"Medical Care Facility" means any state licensed facility providing medically necessary in-patient care which is prescribed by a
licensed "Physician" in writing and based on physical limitations which prohibit daily living in a non-institutional setting.
"Fatal Illness" means a condition diagnosed by a licensed Physician which is expected to result in death within 2 years for 80% of
the diagnosed cases. "Physician" means a person other than you, the Annuitant or a member of either your or the Annuitant's
families who is state licensed to give medical care or treatment and is acting within the scope of that license. We must receive
satisfactory proof of the Annuitant's confinement or Fatal Illness In Writing.
Specific details and definitions of terms in relation to this benefit may differ in certain jurisdictions.
FREE WITHDRAWAL PRIVILEGE
Once each Contract Year after the first you may withdraw an amount without any applicable surrender charge being assessed. This
amount equals the "growth" in the Contract. "Growth" is defined as: (a) the interest credited to your Contract in the prior
Contract Year, plus (b) the interest credited to your Contract in Contract Years previous to the last, subject to a market value
adjustment, provided that immediately after the withdrawal (including any market value adjustment) the remaining Interim Value
times the market value adjustment is at least equal to the unliquidated premium plus the value at the time credited of any amounts
or due to premium size. Amounts credited due to premium size are not considered to be interest only for purposes of this free
withdrawal privilege (see "Additional Amounts on Qualifying Purchase Payments"). Withdrawals of any type made prior to age 59 1/2
may be subject to 10% tax penalty (see "Penalty on Distributions").
QUALIFIED PLAN WITHDRAWAL LIMITATIONS
There are surrender or withdrawal limitations in relation to certain retirement plans for employees which qualify under various
sections of the Internal Revenue Code of 1986, as amended (the "Code"). These limitations do not affect certain roll-overs or
exchanges between qualified plans. Generally, distribution of amounts attributable to contributions made pursuant to a salary
reduction agreement (as defined in Code section 402(g)(3)(A)), or attributable to transfers from a custodial account (as defined
in Code section 403(b)(7)), is restricted to the employee's: (a) separation from service; (b) death; (c) disability (as defined
in Section 72(m)(7) of the Code); (d) reaching age 59 1/2; or (e) hardship (as defined for purposes of Code Section 401(k)).
Hardship withdrawals are restricted to amounts attributable to salary reduction contributions, and do not include investment
results. In the case of tax sheltered annuities, these limitations do not apply to certain salary reduction contributions made
and investment results earned prior to dates specified in the Code. In addition, the limitation on hardship withdrawals does not
apply to salary reduction contributions made and investment results earned prior to dates specified in the Code which have been
transferred from custodial accounts. Rollovers from the types of plans noted to an individual retirement account or individual
retirement annuity are not subject to the limitations noted. Certain distributions, including rollovers, that are not transferred
directly to the trustee of another qualified plan, the custodian of an individual retirement account or the issuer of an
individual retirement annuity may be subject to automatic 20% withholding for Federal income tax. This may also trigger
withholding for state income taxes.
DEFERRAL OF PAYMENT
We may defer payment of any partial or total surrender for the period permitted by law. In no event may this deferral of payment
exceed 6 months from the date we receive the request In Writing. If we defer payment for more than 30 days, we pay interest on
the amount deferred in accordance with your Contract.
ANNUITY DATE
You may choose an Annuity Date when you purchase an Annuity or at a later date. It must be the first day of the first month on or
after the end of a Guarantee Period. It must also be after the third Contract Year unless the Annuitant has a medically-related
condition that would permit a medically-related withdrawal (see "Medically-Related Withdrawals"). It can be changed at any time
but such requests must be received In Writing at our Office at least 30 days before the current Annuity Date. In the absence of
an election In Writing and where permitted by law: (a) the Annuity Date is the start of the Contract Year first following the
later of the Annuitant's 85th birthday or the fifth anniversary of our receipt at our Office of your request to purchase an
Annuity. Your choice of Annuity Date may be limited in certain jurisdictions.
ANNUITY OPTIONS
You may select an annuity option when you purchase an Annuity, or at a later date. You may change this at any time up to 30 days
before the Annuity Date by sending us a request In Writing. In the absence of an election from you, payments will automatically
commence on the Annuity Date under option 2, with 120 payments certain. The amount to be applied is the value of your Contract on
the Annuity Date. Annuity options in addition to those shown are available with our consent.
You may elect to have any amount of the proceeds due to the Beneficiary applied under any of the options described below. Except
where a lower amount is required by law, the minimum monthly annuity payment is $50.
If you have not made an election prior to proceeds becoming due, the Beneficiary may elect to receive the death benefit under one
of the annuity options. However, if you made an election, the Beneficiary may not alter such election.
Option 1
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Life Annuity: This annuity is payable monthly during the lifetime of the payee, terminating with the last payment due prior to
the death of the payee. Since no minimum number of payments is guaranteed, this option offers the maximum level of monthly
payments of the annuity options. It is possible that the payee could receive only one payment if he or she died before the date
the second payment was due, and no others payments nor death benefits would be payable.
Option 2
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Life Annuity with 120, 180, or 240 Monthly Payments Certain:
This annuity provides monthly income to the payee for a fixed period of 120, 180, or 240 months, as selected, and for as long
thereafter as the payee lives. Should the payee die before the end of the fixed period, the remaining payments are paid to the
Beneficiary to the end of such period.
Option 3
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Payments Based on Joint Lives:
Under this option, income is payable monthly during the joint lifetime of two key lives, and thereafter during the remaining
lifetime of the survivor, ceasing with the last payment prior to the survivor's death. No minimum number of payments is
guaranteed under this option. It is possible that only one payment will be payable if the death of all key lives occurs before
the date the second payment was due, and no other payments nor death benefits would be payable.
Option 4
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Payments for a Designated Period:
This annuity provides an amount payable for a specified number of years. The number of years is subject to our then current rules.
Should the payee die before the end of the specified number of years, the remaining payments are paid to the Beneficiary to the
end of such period. Note that under this option, payments are not based on how long we expect Annuitants to live.
The monthly payment varies according to the annuity option you select. The monthly payment is determined by multiplying the value
of your Contract on the Annuity Date (expressed in thousands of dollars) less any amount then assessed for premium tax, by the
amount of the first monthly payment per $1,000 obtained from our annuity rates. These rates will not be less than those provided
in the tables included in the Contract. These tables are derived from the 1983a Individual Annuity Mortality Table with ages set
back one year for males and two years for females and with an assumed interest rate of 4% per annum. Where required by law or
regulation, such annuity tables will have rates that do not differ according to the gender of the key life. Otherwise the rates
will differ according to the gender of the key life.
Annuity payments will be made on the first day of each month once payments begin.
DEATH BENEFIT
On the Contracts we offer as of the date of this Prospectus, "death" means either your death, or the Annuitant's death if there is
no Contingent Annuitant. The amount payable on death prior to the Annuity Date and before the Contract anniversary following the
earlier of your or the Annuitant's 85th birthday is the greater of (1) the Interim Value of your Contract as of the date we
receive due proof of death, or (2) the premium allocated to your Contract less the sum of all prior Gross Surrender Values. The
amount of the death benefit at any later date prior to the Annuity Date is the Interim Value as of the date we receive "due proof
of death". The following constitutes "due proof of death": (a)(i) a certified copy of a death certificate, (ii) a certified copy
of a decree of a court of competent jurisdiction as to the finding of death, or (iii) any other proof satisfactory to us; (b) all
representations we require or which are mandated by applicable law or regulation in relation to the death claim and the payment of
death proceeds; and (c) any applicable election of the mode of payment of the death benefit, if not previously elected by the
Participant. The amount of the death benefit is reduced by any annuity payments made prior to the date we receive In Writing due
"proof of death".
We may offer contracts that pay the death benefit upon the death of: (a) the Participant when the Participant is a natural
person; and (b) the Annuitant (unless a Contingent Annuitant was previously designated) when the Participant is not a natural
person (such as a trustee). In such Contracts the death benefit would be payable if the death occurred before the 85th birthday
of the applicable decedent.
In the absence of your election In Writing prior to proceeds becoming due, the Beneficiary may elect to receive the death benefit
under one of the annuity options. However, if you made an election, the Beneficiary may not modify such election. In the event
of your death, the benefit must be distributed within: (a) five years of the date of death; or (b) over a period not extending
beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Distribution after your death to be paid under
(b) above must commence within one year of the date of death.
If the Annuitant dies before the Annuity Date, the Contingent Annuitant will become the Annuitant. However, if the Contingent
Annuitant predeceased the Annuitant or there is no Contingent Annuitant designation, the death benefit becomes payable to the
Beneficiary.
The death of the first of any joint Participant is deemed the death of the Participant for determining payment of the death
benefit.
If the Beneficiary is your spouse and your death occurs prior to the Annuity Date and the Annuitant or Contingent Annuitant is
living, then in lieu of receiving the death benefit, your spouse may elect to be treated as the Participant and continue the
Annuity at its current Account Value, subject to its terms and conditions. A Participant's spouse may only assume ownership of
the Annuity if such spouse is designated as the sole primary Beneficiary.
TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?
Following is a brief summary of some of the Federal tax considerations relating to this Annuity. However, since the tax laws are
complex and tax consequences are affected by your individual circumstances, this summary of our interpretation of the relevant tax
laws is not intended to be fully comprehensive nor is it intended as tax advice. Therefore, you may wish to consult a
professional tax advisor for tax advice as to your particular situation.
HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?
The Separate Accounts are taxed as part of American Skandia. American Skandia is taxed as a life insurance company under Part I,
subchapter L of the Code. No taxes are due on interest, dividends and short-term or long-term capital gains earned by the
Separate Accounts with respect to the Annuities.
IN GENERAL, HOW ARE ANNUITIES TAXED?
Section 72 of the Code governs the taxation of annuities in general. Taxation of the Annuity will depend in large part on:
1. whether the Annuity is used by:
|X| a qualified pension plan, profit sharing plan or other retirement arrangement that is eligible for special treatment
under the Code (for purposes of this discussion, a "Qualified Contract"); or
|X| an individual or a corporation, trust or partnership (a "Non-qualified Contract"); and
2. whether the Owner is:
|X| an individual person or persons; or
|X| an entity including a corporation, trust or partnership.
Individual Ownership: If one or more individuals own an Annuity, the Owner of the Annuity is generally not taxed on any increase
in the value of the Annuity until an amount is received (a "distribution"). This is commonly referred to as "tax deferral". A
distribution can be in the form of a lump sum payment including payment of a Death Benefit, or in annuity payments under one of
the annuity payment options. Certain other transactions may qualify as a distribution and be subject to taxation.
Entity Ownership: If the Annuity is owned by an entity and is not a Qualified Contract, generally the Owner of the Annuity must
currently include any increase in the value of the Annuity during a tax year in its gross income. An exception from current
taxation applies for annuities held by an employer with respect to a terminated tax-qualified retirement plan, a trust holding an
annuity as an agent for a natural person, or by a decedent's estate by reason of the death of the decedent. A tax-exempt entity
for Federal tax purposes will not be subject to income tax as a result of this provision.
HOW ARE DISTRIBUTIONS TAXED?
Distributions from an Annuity are taxed as ordinary income and not as capital gains.
Distributions Before Annuitization: Distributions received before annuity payments begin are generally treated as coming first
from "income on the contract" and then as a return of the "investment in the contract". The amount of any distribution that is
treated as receipt of "income on the contract" is includible in the taxpayer's gross income and taxable in the year it is
received. The amount of any distribution treated as a return of the "investment in the contract" is not includible in gross
income.
|X| "Income on the contract" is calculated by subtracting the taxpayer's "investment in the contract" from the aggregate
value of all "related contracts" (discussed below).
|X| "Investment in the contract" is equal to total purchase payments for all "related contracts" minus any previous
distributions or portions of such distributions from such "related contracts" that were not includible in gross income.
"Investment in the contract" may be affected by whether an annuity or any "related contract" was purchased as part of a
tax-free exchange of life insurance, endowment, or annuity contracts under Section 1035 of the Code. The "investment in the
contract" for a Qualified Contract will be considered zero for tax reporting purposes.
Distributions After Annuitization: A portion of each annuity payment received on or after the Annuity Date will generally be
taxable. The taxable portion of each annuity payment is determined by a formula which establishes the ratio that the "investment
in the contract" bears to the total value of annuity payments to be made. This is called the "exclusion ratio." The investment
in the contract is excluded from gross income. Any portion of an annuity payment received that exceeds the exclusion ratio will
be entirely includible in gross income. The formula for determining the exclusion ratio differs between fixed and variable
annuity payments. When annuity payments cease because of the death of the person upon whose life payments are based and, as of
the date of death, the amount of annuity payments excluded from taxable income by the exclusion ratio does not exceed the
"investment in the contract," then the remaining portion of unrecovered investment is allowed as a deduction by the beneficiary in
the tax year of such death.
Penalty Tax on Distributions: Generally, any distribution from an annuity not used in conjunction with a Qualified Contract
(Qualified Contracts are discussed below) is subject to a penalty equal to 10% of the amount includible in gross income. This
penalty does not apply to certain distributions, including:
|X| Distributions made on or after the taxpayer has attained age 591/2;
|X| Distributions made on or after the death of the contract owner, or, if the owner is an entity, the death of the annuitant;
|X| Distributions attributable to the taxpayer's becoming disabled;
|X| Distributions which are part of a series of substantially equal periodic payments for the life (or life expectancy) of
the taxpayer (or the joint lives of the taxpayer and the taxpayer's Beneficiary);
|X| Distributions of amounts which are treated as "investments in the contract" made prior to August 14, 1982;
|X| Payments under an immediate annuity as defined in the Code;
|X| Distributions under a qualified funding asset under Code Section 130(d); or
|X| Distributions from an annuity purchased by an employer on the termination of a qualified pension plan that is held by the
employer until the employee separates from service.
Special rules applicable to "related contracts": Contracts issued by the same insurer to the same contract owner within the same
calendar year (other than certain contracts owned in connection with a tax-qualified retirement arrangement) are to be treated as
one annuity contract when determining the taxation of distributions before annuitization. We refer to these contracts as "related
contracts." In situations involving related contracts we believe that the values under such contracts and the investment in the
contracts will be added together to determine the proper taxation of a distribution from any one contract described under the
section "Distributions before Annuitization." Generally, distributions will be treated as coming first from income on the
contract until all of the income on all such related contracts is withdrawn, and then as a return of the investment in the
contract. There is some uncertainty regarding the manner in which the Internal Revenue Service would view related contracts when
one or more contracts are immediate annuities or are contracts that have been annuitized. The Internal Revenue Service has not
issued guidance clarifying this issue as of the date of this Prospectus. You are particularly cautioned to seek advice from your
own tax advisor on this matter.
Special concerns regarding "substantially equal periodic payments": (also known as "72(t)" or "72(q)" distributions) Any
modification to a program of distributions which are part of a series of substantially equal periodic payments that occur before
the later of the taxpayer reaching age 59 1/2or five (5) years from the first of such payments will result in the requirement to pay
the 10% premature distribution penalty that would have been due had the payments been treated as subject to the 10% premature
distribution penalty in the years received, plus interest. This does not apply when the modification is by reason of death or
disability. American Skandia does not currently support a Section 72(q) program.
Special concerns regarding immediate annuities: The Internal Revenue Service has ruled that the immediate annuity exception to the
10% penalty described above under "Penalty Tax on Distributions" for "non-qualified" immediate annuities as defined under the Code
may not apply to annuity payments under a contract recognized as an immediate annuity under state insurance law obtained pursuant
to an exchange of a contract if: (a) purchase payments for the exchanged contract were contributed or deemed to be contributed
more than one year prior to the annuity starting date under the immediate annuity; and (b) the annuity payments under the
immediate annuity do not meet the requirements of any other exception to the 10% penalty.
Special rules in relation to tax-free exchanges under Section 1035: Section 1035 of the Code permits certain tax-free exchanges of
a life insurance, annuity or endowment contract for an annuity. If an annuity is purchased through a tax-free exchange of a life
insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any distributions other than as annuity
payments will be considered to come:
First, from the amount of "investment in the contract" made prior to August 14, 1982 and exchanged into the annuity;
Then, from any "income on the contract" that is attributable to the purchase payments made prior to August 14, 1982 (including
income on such original purchase payments after the exchange);
Then, from any remaining "income on the contract"; and
Lastly, from the amount of any "investment in the contract" made after August 13, 1982.
Therefore, to the extent a distribution is equal to or less than the remaining investment in the contract made prior to August 14,
1982, such amounts are not included in taxable income. Further, distributions received that are considered to be a return of
investment on the contract from purchase payments made prior to August 14, 1982, such distributions are not subject to the 10% tax
penalty. In all other respects, the general provisions of the Code apply to distributions from annuities obtained as part of such
an exchange.
Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current
taxation of any gains in the contract as well as the 10% IRS tax penalty on pre-age 59 1/2withdrawals. The IRS reserved the right
to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what
transactions may be considered abusive. For example, we do not know how the IRS may view early withdrawals or annuitizations
after a partial exchange. As of the date of this Prospectus, we continue to report partial surrenders of non-qualified annuities
as subject to current taxation to the extent of any gain. However, we may change our reporting procedures to treat certain of
these transactions as partial 1035 exchanges. Should we do so, we reserve the right to report transactions that may have been
designed to receive partial 1035 exchange treatment as partial surrenders subject to current taxation if we, as a reporting and
withholding agent, believe that we would be expected to deem a transaction to be abusive.
There is no guidance from the Internal Revenue Service as to whether a partial exchange from a life insurance contract is eligible
for non-recognition treatment under Section 1035 of the Code. In addition, please be cautioned that no specific guidance has been
provided as to the impact of such a transaction for the remaining life insurance policy, particulary as to the subsequent methods
to be used to test for compliance under the Code for both the definition of life insurance and the definition of a modified
endowment contract.
WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS?
An annuity may be suitable as a funding vehicle for various types of tax-qualified retirement plans. We have provided summaries
of the types of tax-qualified retirement plans with which we may issue an Annuity. These summaries provide general information
about the tax rules and are not intended to be complete discussions. The tax rules regarding qualified plans are complex. These
rules may include limitations on contributions and restrictions on distributions, including additional taxation of distributions
and additional penalties. The terms and conditions of the tax-qualified retirement plan may impose other limitations and
restrictions that are in addition to the terms of the Annuity. The application of these rules depends on individual facts and
circumstances. Before purchasing an Annuity for use in a qualified plan, you should obtain competent tax advice, both as to the
tax treatment and suitability of such an investment. American Skandia does not offer all of its annuities to all of these types of
tax-qualified retirement plans.
Corporate Pension and Profit-sharing Plans: Annuities may be used to fund employee benefits of various corporate pension and
profit-sharing plans established by corporate employers under Section 401(a) of the Code including 401(k) plans. Contributions
to such plans are not taxable to the employee until distributions are made from the retirement plan. The Code imposes limitations
on the amount that may be contributed and the timing of distributions. The tax treatment of distributions is subject to special
provisions of the Code, and also depends on the design of the specific retirement plan. There are also special requirements as to
participation, nondiscrimination, vesting and nonforfeitability of interests.
H.R. 10 Plans: Annuities may also be used to fund benefits of retirement plans established by self-employed individuals for
themselves and their employees. These are commonly known as "H.R. 10 Plans" or "Keogh Plans". These plans are subject to most of
the same types of limitations and requirements as retirement plans established by corporations. However, the exact limitations
and requirements may differ from those for corporate plans.
Tax Sheltered Annuities: Under Section 403(b) of the Code, a tax sheltered annuity ("TSA") is a contract into which contributions
may be made by certain qualifying employers such as public schools and certain charitable, educational and scientific
organizations specified in Section 501(c)(3) for the benefit of their employees. Such contributions are not taxable to the
employee until distributions are made from the TSA. The Code imposes limits on contributions, transfers and distributions.
Nondiscrimination requirements also apply.
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Under a TSA, you may be prohibited from taking distributions from the contract attributable to contributions made pursuant to a
salary reduction agreement unless the distribution is made:
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|X| After the participating employee attains age 59 1/2;
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|X| Upon separation from service, death or disability; or
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|X| In the case of financial hardship (subject to restrictions).
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Section 457 Plans: Under Section 457 of the Code, deferred compensation plans established by governmental and certain other tax
exempt employers for their employees may invest in annuity contracts. The Code limits contributions and distributions, and
imposes eligibility requirements as well. Contributions are not taxable to employees until distributed from the plan. However,
plan assets remain the property of the employer and are subject to the claims of the employer's general creditors until such
assets are made available to participants or their beneficiaries.
Individual Retirement Programs or "IRAs": Section 408 of the Code allows eligible individuals to maintain an individual retirement
account or individual retirement annuity ("IRA"). IRAs are subject to limitations on the amount that may be contributed, the
contributions that may be deducted from taxable income, the persons who may be eligible to establish an IRA and the time when
distributions must commence. Further, an Annuity may be established with "roll-over" distributions from certain tax-qualified
retirement plans and maintain the tax-deferred status of these amounts.
Roth IRAs: A form of IRA is also available called a "Roth IRA". Contributions to a Roth IRA are not tax deductible. However,
distributions from a Roth IRA are free from Federal income taxes and are not subject to the 10% penalty tax if five (5) tax years
have passed since the first contribution was made or any conversion from a traditional IRA was made and the distribution is made
(a) once the taxpayer is age 59 1/2or older, (b) upon the death or disability of the taxpayer, or (c) for qualified first-time home
buyer expenses, subject to certain limitations. Distributions from a Roth IRA that are not "qualified" as described above may be
subject to Federal income and penalty taxes.
Purchasers of IRAs and Roth IRAs will receive a special disclosure document, which describes limitations on eligibility,
contributions, transferability and distributions. It also describes the conditions under which distributions from IRAs and
qualified plans may be rolled over or transferred into an IRA on a tax-deferred basis and the conditions under which distributions
from traditional IRAs may be rolled over to, or the traditional IRA itself may be converted into, a Roth IRA.
SEP IRAs: Eligible employers that meet specified criteria may establish Simplified Employee Pensions or SEP IRAs. Employer
contributions that may be made to employee SEP IRAs are larger than the amounts that may be contributed to other IRAs, and may be
deductible to the employer.
HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?
Distributions from Qualified Contracts are generally taxed under Section 72 of the Code. Under these rules, a portion of each
distribution may be excludable from income. The excludable amount is the proportion of a distribution representing after-tax
contributions. Generally, a 10% penalty tax applies to the taxable portion of a distribution from a Qualified Contract made prior
to age 59 1/2. However, the 10% penalty tax does not apply when the distribution:
|X| is part of a properly executed transfer to another IRA or another eligible qualified account;
|X| is subsequent to the death or disability of the taxpayer (for this purpose disability is as defined in Section 72(m)(7)
of the Code);
|X| is part of a series of substantially equal periodic payments to be paid not less frequently than annually for the
taxpayer's life or life expectancy or for the joint lives or life expectancies of the taxpayer and a designated beneficiary;
|X| is subsequent to a separation from service after the taxpayer attains age 55*;
|X| does not exceed the employee's allowable deduction in that tax year for medical care*;
|X| is made to an alternate payee pursuant to a qualified domestic relations order*; and
|X| is made pursuant to an IRS levy.
The exceptions above which are followed by an asterisk (*) do not apply to IRAs. Certain other exceptions may be available.
Minimum Distributions after age 70 1/2: A participant's interest in a Qualified Contract must generally be distributed, or begin to
be distributed, by the "required beginning date". This is April 1st of the calendar year following the later of:
|X| the calendar year in which the individual attains age 70 1/2; or
|X| the calendar year in which the individual retires from service with the employer sponsoring the plan. The retirement
option is not available to IRAs.
The IRS has released proposed Treasury regulations containing new Minimum Distribution rules. Under the new rules, the Minimum
Distribution amount will be lower for the vast majority of individuals. The new rules are available, at the option of the
individual, for Minimum Distributions required in the year 2001. For Minimum Distributions required in 2002 and beyond, the
individual must utilize the new Minimum Distribution rules.
Under existing Minimum Distribution rules, the participant's entire interest must be distributed beginning no later than the
required beginning date over a period which may not extend beyond a maximum of the life or life expectancy of the participant (or
the life expectancies of the owner and a designated beneficiary). Each annual distribution must equal or exceed a "minimum
distribution amount" which is determined by dividing the account value by the applicable life expectancy or pursuant to an annuity
payout. If the account balance is used, it generally is based upon the Account Value as of the close of business on the last day
of the previous calendar year.
If the participant dies before reaching his or her "required beginning date", his or her entire interest must generally be
distributed within five (5) years of death. However, this rule will be deemed satisfied if distributions begin before the close
of the calendar year following death to a designated beneficiary (or over a period not extending beyond the life expectancy of the
beneficiary). If the Beneficiary is the individual's surviving spouse, distributions may be delayed until the deceased owner would
have attained age 701/2. A surviving spouse would also have the option to assume the IRA as his or her own if he or she is the
sole designated beneficiary. If a participant dies after reaching his or her required beginning date or after distributions have
commenced, the individual's interest must generally be distributed at least as rapidly as under the method of distribution in
effect at the time of the individual's death.
If the amount distributed is less than the minimum required distribution for the year, the participant is subject to a 50% tax on
the amount that was not properly distributed.
Under the new Minimum Distribution rules, a uniform life expectancy table will be utilized by all participants except those with a
spouse who is more than ten (10) years younger than the participant. In that case, the new rules permit the participant to
utilize the actual life expectancies of the participant and the spouse. In addition, the designated beneficiary under the new
rules is not determined until December 31 of the year following the year of the participant's death. In most cases, the
beneficiary may be changed during the participant's lifetime with no affect on the Minimum Distributions. At death, the
designated Beneficiary may take Minimum Distributions over his/her life expectancy or in a lump sum. In the absence of a
designated beneficiary, the beneficiary may take a lump sum or distributions over five (5) years.
It is important to note that the new Minimum Distribution rules may not apply to certain qualified retirement plans (at this
time), but currently generally apply to IRA's and 403(b)'s.
GENERAL TAX CONSIDERATIONS
Diversification: Section 817(h) of the Code provides that a variable annuity contract, in order to qualify as an annuity, must
have an "adequately diversified" segregated asset account (including investments in a mutual fund by the segregated asset account
of insurance companies). If the diversification requirements under the Code are not met and the annuity is not treated as an
annuity, the taxpayer will be subject to income tax on the annual gain in the contract. The Treasury Department's regulations
prescribe the diversification requirements for variable annuity contracts. We believe the underlying mutual fund portfolios should
comply with the terms of these regulations.
Federal Income Tax Withholding: Section 3405 of the Code provides for Federal income tax withholding on the portion of a
distribution which is includible in the gross income of the recipient. Amounts to be withheld depend upon the nature of the
distribution. However, under most circumstances a recipient may elect not to have income taxes withheld or have income taxes
withheld at a different rate by filing a completed election form with us.
Certain distributions, known as eligible rollover distributions, from Qualified Contracts, are subject to automatic 20%
withholding for Federal income taxes. The following distributions are not eligible rollover distributions and not subject to 20%
withholding::
|X| any portion of a distribution paid as Minimum Distributions;
|X| direct transfers to the trustee of another retirement plan;
|X| distributions from an individual retirement account or individual retirement annuity;
|X| distributions made as substantially equal periodic payments for the life or life expectancy of the participant in the
retirement plan or the life or life expectancy of such participant and his or her designated beneficiary under such plan;
|X| distributions that are part of a series of substantial periodic payments pursuant to Section 72(q) or 72(t) of the Code;
and
|X| certain other distributions where automatic 20% withholding may not apply.
Loans, Assignments and Pledges: Any amount received directly or indirectly as a loan from, or any assignment or pledge of any
portion of the value of, an annuity before annuity payments have begun are treated as a distribution subject to taxation under the
distribution rules set forth above. Any gain in an annuity on or after the assignment or pledge of an entire annuity and while
such assignment or pledge remains in effect is treated as "income on the contract" in the year in which it is earned. For
annuities not issued as Qualified Contracts, the cost basis of the annuity is increased by the amount of any assignment or pledge
includible in gross income. The cost basis is not affected by any repayment of any loan for which the annuity is collateral or by
payment of any interest thereon.
Gifts: The gift of an annuity to someone other than the spouse of the owner (or former spouse incident to a divorce) is treated,
for income tax purposes, as a distribution.
Estate and Gift Tax Considerations: You should obtain competent tax advice with respect to possible federal and state estate and
gift tax consequences flowing from the ownership and transfer of annuities.
Generation-Skipping Transfers: Under the Code certain taxes may be due when all or part of an annuity is transferred to, or a
death benefit is paid to, an individual two or more generations younger than the contract holder. These generation-skipping
transfers generally include those subject to federal estate or gift tax rules. There is an aggregate $1 million exemption from
taxes for all such transfers. We may be required to determine whether a transaction is a direct skip as defined in the Code and
the amount of the resulting tax. We will deduct from your Annuity or from any applicable payment treated as a direct skip any
amount of tax we are required to pay.
Considerations for Contingent Annuitants: There may be adverse tax consequences if a contingent annuitant succeeds an annuitant
when the Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of
the Code. In general, the Code is designed to prevent indefinite deferral of tax. Continuing the benefit of tax deferral by
naming one or more contingent annuitants when the Annuity is owned by a non-qualified trust might be deemed an attempt to extend
the tax deferral for an indefinite period. Therefore, adverse tax treatment may depend on the terms of the trust, who is named as
contingent annuitant, as well as the particular facts and circumstances. You should consult your tax advisor before naming a
contingent annuitant if you expect to use an Annuity in such a fashion.
GENERAL INFORMATION
REPORTS TO YOU
We send any statements and reports required by applicable law or regulation to you at your last known address of record. You
should therefore give us prompt notice of any address change. We reserve the right, to the extent permitted by law and subject to
your prior consent, to provide any prospectus, prospectus supplements, confirmations, statements and reports required by
applicable law or regulation to you through our Internet Website at http://www.americanskandia.com or any other electronic means,
including diskettes or CD ROMs. We send a confirmation statement to you each time a transaction is made affecting Account Value,
such as making additional Purchase Payments, transfers, exchanges or withdrawals. We also send quarterly statements detailing the
activity affecting your Annuity during the calendar quarter. You may request additional reports. We reserve the right to charge
up to $50 for each such additional report. Instead of immediately confirming transactions made pursuant to some type of periodic
transfer program (such as a dollar cost averaging program) or a periodic Purchase Payment program, such as a salary reduction
arrangement, we may confirm such transactions in quarterly statements. You should review the information in these statements
carefully.
All errors or corrections must be reported to us at our Office as soon as possible to assure proper accounting to your Annuity.
For transactions that are confirmed immediately, we assume all transactions are accurate unless you notify us otherwise within 10
days from the date you receive the confirmation. For transactions that are only confirmed on the quarterly statement, we assume
all transactions are accurate unless you notify us within 10 days from the date you receive the quarterly statement. All
transactions confirmed immediately or by quarterly statement are deemed conclusive after the applicable 10 day period. We may
also send an annual report and a semi-annual report containing applicable financial statements, as of December 31 and June 30,
respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or
other electronic means.
WHO IS AMERICAN SKANDIA?
American Skandia Life Assurance Corporation ("American Skandia") is a stock life insurance company domiciled in Connecticut with
licenses in all 50 states and the District of Columbia. American Skandia is a wholly-owned subsidiary of American Skandia, Inc.,
whose ultimate parent is Skandia Insurance Company Ltd., a Swedish company. American Skandia markets its products to
broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through
and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities.
American Skandia is in the business of issuing variable annuity and variable life insurance contracts. American Skandia currently
offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are
registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; (c) certain group
variable annuities that are exempt from registration with the SEC that serve as funding vehicles for various types of qualified
pension and profit sharing plans; (d) a single premium variable life insurance policy that is registered with the SEC; and (e) a
flexible premium life insurance policy that is registered with the SEC.
Separate Account D
Our investments are subject to the requirements of applicable state laws. Such laws address the nature and quality of
investments, as well as the percentage of our assets which we may commit to a particular type of investment. Subject to certain
limitations and qualifications, such laws generally permit investment in federal, state and municipal obligations, corporate
bonds, preferred and common stock, real estate mortgages, real estate and certain other investments.
Assets supporting the Annuities are accounted for in one or more non-unitized separate accounts established by us under the laws
of the State of Connecticut. Such separate accounts may contain assets from various types of annuities we offer, the assets of
which are permitted to be held in such accounts under applicable law and regulation. Neither you nor the owner of any underlying
group Annuity participate in the performance of the assets through any unit values in such a non-unitized separate account. There
are no discrete units for such a separate account. Contracts do not represent units of ownership of assets belonging to this
separate account.
We own the assets in each separate account. The assets accrue solely to our benefit. Neither you nor any group Contract owner
participate in the investment gain or loss from assets belonging to such separate account(s). Such gain or loss accrues solely to
us.
We believe that the assets equal to the reserve and other liabilities of such separate accounts are not chargeable with
liabilities arising from our other business if so stated in our annuity contract and certificate forms. We have obtained approval
in each jurisdiction in which our annuities are available for sale of language stating that:
(A) Income, gains and losses, whether or not realized, from assets allocated to any such separate account
are credited to or charged against such separate account without regard to our other income, gains or
losses;
(B) Assets equal to the reserves and other liabilities of such separate accounts are not chargeable with
liabilities that arise from any business we conduct other than from the operation of the Annuities or
other annuities which are supported by such separate accounts; and
(C) We have the right to transfer to our general account any assets of such separate account which are in
excess of such reserves and other liabilities.
All benefits attributable to Contracts and interests purchased in the group contracts are contract guarantees we make and are
accounted for in the separate account(s). However, all of our general account assets are available to meet our obligations under
the Contracts.
ADMINISTRATION OF TRANSACTIONS
In administering transactions, we may require presentation of proper identification prior to processing, including the use of a
personal identification number ("PIN") issued by us, prior to accepting any instruction by telephone or other electronic means.
We forward your PIN to you shortly after your Annuity is issued. To the extent permitted by law or regulation, neither we or any
person authorized by us will be responsible for any claim, loss, liability or expense in connection with a switch to an alternate
Guarantee Period or any other transaction for which we accept instructions by telephone if we or such other person acted on
telephone instructions in good faith in reliance on your telephone instruction authorization and on reasonable procedures to
identify persons so authorized through verification methods which may include a request for your Social Security or tax I.D.
number or a personal identification number (PIN) as issued by us. We may be liable for losses due to unauthorized or fraudulent
instructions should we not follow such reasonable procedures.
AGE LIMITS
Both you and the Annuitant, if you are not the Annuitant, must be less than 85 years of age on the Contract Date.
ASSIGNMENTS OR PLEDGES
Generally, your rights in a Contract may be assigned or pledged for loans at any time. However, these rights may be limited
depending on your use of the Annuity. The assignment and/or loan proceeds may be subject to income taxes and certain penalty taxes
(see "Certain Tax Considerations"). You may assign your rights to another person at any time, during the Annuitant's lifetime.
You must give us a copy of the assignment In Writing. An assignment is subject to our acceptance. Prior to receipt of this
notice, we will not be deemed to know of or be obligated under the assignment prior to our receipt and acceptance thereof. We
assume no responsibility for the validity or sufficiency of any assignment.
MISSTATEMENT OF AGE OR SEX
If the age and/or sex of the Annuitant has been misstated, we make adjustments to conform to the facts. Any underpayments by us
will be remedied on the next payment following correction. Any overpayments by us will be charged against future amounts payable
by us under your annuity.
CONTRACT MODIFICATION
We reserve the right to make changes that are necessary to maintain the tax status of the Annuity under the Internal Revenue Code
and/or make changes required by any change in other Federal or state laws relating to retirement annuities or annuity contracts.
Where required by law or regulation, approval of the contract owner will be obtained prior to any such change.
INVESTMENT MANAGEMENT
We have the sole discretion to employ investment managers that we believe are qualified, experienced and reputable to manage the
assets supporting the Guaranteed Maturity Annuity including, but not limited to, J. P. Morgan Investment Management Inc. Each
manager is responsible for investment management of different portions of a separate account supporting one or more Contracts. We
are under no obligation to employ or continue to employ any investment manager(s).
CURRENT INVESTMENT GUIDELINES
Some of the guidelines of our current investment strategy are outlined below. However, we are not obligated to invest according
to this or any other strategy except as may be required by Connecticut and other state insurance laws.
Our current guidelines for the portfolio of investments in any non-unitized separate account include, but are not limited to the
following:
1. Investments may be made in cash; debt securities issued by the United States Government or its agencies and instrumentalities;
money market instruments; short, intermediate and long-term corporate obligations; private placements; asset-backed obligations;
and municipal bonds.
2. At the time of purchase, fixed income securities will be in one of the top four generic lettered rating classifications as
established by a nationally recognized statistical rating Organization ("NRSRO") such as Standard & Poor's or Moody's Investor
Services, Inc. or any Should a fixed income security fall below one of these top four generic lettered rating classifications
subsequent to purchase, we may or may not sell such security. We may change these guidelines at any time.
DISTRIBUTION
American Skandia Marketing, Incorporated, a wholly-owned subsidiary of American Skandia, Inc., acts as the principal underwriter
of the Annuities. ASM, Inc.'s principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM, Inc. is a
member of the National Association of Securities Dealers, Inc. ("NASD").
ASM, Inc. will enter into distribution agreements with certain broker-dealers registered under the Securities and Exchange Act of
1934 or with entities which may otherwise offer the Annuities that are exempt from such registration. Under such distribution
agreements such broker-dealers or entities may offer Annuities to persons who have established an account with the broker-dealer
or the entity. In addition, ASM, Inc. may solicit other eligible groups and certain individuals. The maximum concession to be
paid on premiums received is 6.0%. We reserve the right to provide higher levels of compensation for the sale of Contracts when
Participants select initial Guarantee Periods with longer durations than we pay in relation to shorter initial Guarantee Periods.
As of the date of this Prospectus, we were promoting the sale of our products and solicitation of additional purchase payments,
where applicable, for our products, including contracts offered pursuant to this Prospectus, through a program of non-cash rewards
to registered representatives of participating broker-dealers. We may withdraw or alter this promotion at any time.
LEGAL EXPERTS
The General Counsel of American Skandia Life Assurance Corporation has passed on on the legal matters with respect to Federal laws
and regulations applicable to the issue and sale of the Annuities and with respect to Connecticut law.
LEGAL PROCEEDINGS
As of the date of this Prospectus, neither we nor ASM, Inc. were involved in any litigation outside of the ordinary course of
business, and know of no material claims.
EXPERTS
The consolidated financial statements of American Skandia Life Assurance Corporation at December 31, 1999 and 1998, and for the
years then ended, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, which is included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore
unenforceable.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
To the extent and only to the extent that any statement in a document incorporated by reference into this Prospectus is modified
or superseded by a statement in this Prospectus or in a later-filed document, such statement is hereby deemed so modified or
superseded and not part of this Prospectus. The Annual Report on Form 10-K for the year ended December 31, 2000 previously filed
by the Company with the SEC under the Exchange Act is incorporated by reference in this Prospectus.
We will furnish you without charge a copy of any or all of the documents incorporated by reference in this Prospectus, including
any exhibits to such documents which have been specifically incorporated by reference. We will do so upon receipt of your written
or oral request.
HOW TO CONTACT US
You can contact us by:
|X| calling our Customer Service Team at 1-800-752-6342 or our automated telephone access and response system (STARS) at
1-800-766-4530
|X| writing to us at American Skandia Life Assurance Corporation, Attention: Customer Service, P.O. Box 7038, Bridgeport,
Connecticut 06601-7038
|X| sending an email to customerservice@americanskandia.com or visiting our Internet Website at www.americanskandia.com
|X| accessing information about your Annuity through our Internet Website at www.americanskandia.com
You can obtain account information through our automated telephone access and response system (STARS) and at
www.americanskandia.com, our Internet Website. Our Customer Service representatives are also available during business hours to
provide you with information about your account. You can request certain transactions through our telephone voice response
system, our Internet Website or through a customer service representative. You can provide authorization for a third party,
including your attorney-in-fact acting pursuant to a power of attorney or a financial professional, to access your account
information and perform certain transactions on your account. You will need to complete a form provided by us which identifies
those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party
to perform any such transactions. We require that you or your representative provide proper identification before performing
transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that
will be provided to you upon issue of your Annuity or you may establish or change your PIN through our automated telephone access
and response system (STARS) and at www.americanskandia.com, our Internet Website. Any third party that you authorize to perform
financial transactions on your account will be assigned a PIN for your account.
Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims,
loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such
transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on
your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of
electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such
procedures.
American Skandia does not guarantee access to telephonic and electronic information or that we will be able to accept transaction
instructions via the telephone or electronic means at all times. American Skandia reserves the right to limit, restrict or
terminate telephonic and electronic transaction privileges at any time.
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers, directors and certain significant employees, their ages, positions with us and principal occupations are
indicated below. The immediately preceding work experience is provided for officers that have not been employed by us or an
affiliate for at least five years as of the date of this Prospectus.
Name/ Position with American Skandia
Age Life Assurance Corporation Principal Occupation
- --- -------------------------- --------------------
Patricia J. Abram Senior Vice President Senior Vice President:
49 and Director (since September, 2000) American Skandia
Marketing, Incorporated
Ms. Abram joined us in 1998. She previously held the position of Senior Vice President, Chief Marketing Officer with Mutual
Service Corporation. Ms. Abram was employed there since 1982.
Lori Allen Vice President Vice President:
31 American Skandia
Marketing, Incorporated
Robert M. Arena Vice President Vice President:
32 American Skandia Life
Assurance Corporation
Gordon C. Boronow Deputy Chief Executive Officer Deputy Chief Executive Officer:
48 and Director (since July, 1991) American Skandia Life
Assurance Corporation
Robert W. Brinkman Senior Vice President Senior Vice President:
36 American Skandia
Marketing, Incorporated
Malcolm M. Campbell Director (since July, 1991) Director of Operations and
45 Chief Actuary, Assurance and
Financial Services Division:
Skandia Insurance Company Ltd.
Carl Cavaliere Vice President Vice President:
38 American Skandia Life
Assurance Corporation
Mr. Cavaliere joined us in 1998. He previously held the position of Director of Operations with Aetna, Inc. since 1989.
Y.K. Chan Senior Vice President Senior Vice President
43 and Director (since September, 2000) and Chief Information Officer:
American Skandia Information
Services and Technology Corporation
Mr. Chan joined us in 1999. He previously held the position of Chief Information Officer with E.M. Warburg Pincus from January
1995 until April 1999 and the position of Vice President, Client Server Application Development with Scudder, Stevens and Clark
from January 1991 until January 1995.
Lucinda C. Ciccarello Vice President Vice President:
42 American Skandia
Marketing, Incorporated
Ms. Ciccarello joined us in 1997. She previously held the position of Assistant Vice President with Phoenix Duff & Phelps since
1984.
Lincoln R. Collins Senior Vice President Senior Vice President:
40 Director (since February, 1996) American Skandia Life
Assurance Corporation
Tim Cronin Vice President Vice President:
35 American Skandia Life
Assurance Corporation
Mr. Cronin joined us in 1998. He previously held the position of Manager/Client Investor with Columbia Circle Investors since
1995.
Harold Darak Vice President Vice President:
40 American Skandia Life
Assurance Corporation
Mr. Darak joined us in 1999. He previously held the position of Consultant/Senior Manager with Deloitte & Touche since 1998 and
the positions of Second Vice President with The Guardian since 1996 and The Travelers from October, 1982 until December, 1995.
Wade A. Dokken President and Chief Executive Officer President and
41 and Chairman of the Board Chief Executive Officer:
American Skandia, Inc.
Elaine C. Forsyth Vice President Vice President:
39 American Skandia Life
Assurance Corporation
Larisa Gromyko Director, Insurance Compliance Director, Insurance Compliance:
54 American Skandia Life
Assurance Corporation
Maureen Gulick Director, Business Operations Director, Business Operations:
38 American Skandia Life
Assurance Corporation
Ian Kennedy Senior Vice President Senior Vice President:
53 and Director (since September, 2000) American Skandia
Marketing, Incorporated
Mr. Ian Kennedy joined us in 1998. He previously was self-employed since 1996 and held the position of Vice President, Customer
Service with SunLife of Canada from September, 1968 to August, 1995.
N. David Kuperstock Vice President Vice President:
49 American Skandia Life
Assurance Corporation
Robert K. Leach Vice President and Vice President,
46 Chief Actuary Chief Actuary:
American Skandia Life
Assurance Corporation
Mr. Robert K. Leach joined us in 2000. He previously was employed in the U.S. Retirement Products and Services Division of Sun
Life of Canada and held the position of Vice President, Finance and Product.
Thomas M. Mazzaferro Executive Vice President and Executive Vice President and
48 Chief Financial Officer, Chief Financial Officer:
Director (since September, 1994) American Skandia Life
Assurance Corporation
Gunnar J. Moberg Director (since October, 1994) Director - Marketing and Sales,
46 Assurances and Financial
Services Division:
Skandia Insurance Company Ltd.
David R. Monroe Senior Vice President, Senior Vice President,
39 Treasurer and Treasurer and
Corporate Controller Corporate Controller:
American Skandia Life
Assurance Corporation
Michael A. Murray Senior Vice President Senior Vice President:
32 American Skandia
Marketing, Incorporated
Polly Rae Vice President Vice President:
38 American Skandia Life
Assurance Corporation
Rebecca Ray Vice President Senior Vice President:
45 American Skandia
Marketing, Incorporated
Ms. Ray joined us in 1999. She previously held the position of First Vice President with Prudential Securities since 1997 and
Vice President with Merrill Lynch since 1995.
Rodney D. Runestad Vice President Vice President:
51 American Skandia Life
Assurance Corporation
Hayward L. Sawyer Senior Vice President Senior Vice President:
56 American Skandia
Marketing, Incorporated
Lisa Shambelan Vice President Vice President:
35 American Skandia Life
Assurance Corporation
Karen Stockla Vice President Vice President:
34 American Skandia Life
Assurance Corporation
Ms. Stockla joined us in 1998. She previously held the position of Manager, Application Development with Citizens Utilities
Company since 1996 and HRIS Tech Support Representative with Yale New Haven Hospital since 1993.
William H. Strong Vice President Vice President:
57 American Skandia Life
Assurance Corporation
Mr. Strong joined us in 1997. He previously held the position of Vice President with American Financial Systems from June 1994 to
October 1997 and the position of Actuary with Connecticut Mutual Life from June 1965 to June 1994.
Guy Sullivan Vice President Vice President:
40 American Skandia Life
Assurance Corporation
Mr. Sullivan joined us in 2000. He previously held the positions of Managing Director, Wholesale Distribution with Allmerica
Financial Services since 1999 and Managing Director and Member of the Executive Committee with Putnam Investments since 1995.
Leslie S. Sutherland Vice President Vice President:
47 American Skandia
Marketing, Incorporated
Amanda C. Sutyak Vice President Vice President:
43 Director (since July, 1991) American Skandia Life
Assurance Corporation
Christian W. Thwaites Senior Vice President Senior Vice President:
43 and Director (since September, 2000) American Skandia
Marketing, Incorporated
Mary Toumpas Vice President Vice President and
49 Compliance Director:
American Skandia
Marketing, Incorporated
Ms. Toumpas joined us in 1997. She previously held the position of Assistant Vice President with Chubb Life/Chubb Securities
since 1973.
Bayard F. Tracy Senior Vice President and Senior Vice President:
53 Director (since September, 1994) American Skandia
Marketing, Incorporated
Deborah G. Ullman Senior Vice President Senior Vice President:
46 and Director (since September, 2000) American Skandia Life
Assurance Corporation
Ms. Ullman joined us in 1998. She previously held the position of Vice President with Aetna, Inc. since 1977.
Jeffrey M. Ulness Vice President Vice President:
40 American Skandia Life
Assurance Corporation
Kirk Wickman General Counsel General Counsel:
44 American Skandia Life
Assurance Corporation
Mr. Wickman joined us in 2001. He previously held the position of Senior Vice President and General Counsel with Aetna Financial
Services since 1992.
Brett M. Winson Senior Vice President and Senior Vice President:
45 Director (since March 2000) American Skandia, Inc.
Mr. Winson joined us in 1998. He previously held the position of Senior Vice President with Sakura Bank, Ltd. since 1990.
31
FINANCIAL STATEMENTS
The consolidated financial statements which follow in Appendix A are those of American Skandia Life Assurance Corporation as of
December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000.
APPENDIXES
APPENDIX A Financial INFORMATION about American Skandia Life Assurance Corporation
APPENDIX B ILLUSTRATION OF MARKET VALUE ADJUSTMENT
APPENDIX C ILLUSTRATION OF INTEREST CREDITING
APPENDIX A FINANCIAL INFORMATION ABOUT
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
SELECTED FINANCIAL DATA
The following table summarizes information with respect to the operations of the Company:
(in thousands) For the Year Ended December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA
- ----------------------------
Revenues:
Annuity and life insurance charges and fees* $424,578 $289,989 $186,211 $121,158 $69,780
Fee income
130,610 83,243 50,839 27,593 16,420
Net investment income
11,656 10,441 11,130 8,181 1,586
Premium income and other revenues
4,778 3,688 1,360 1,082 265
----- ----- ----- ----- ---
Total revenues $ 571,622 $ 387,361 $ 249,540 $ 158,014 $ 88,051
====== ========= ======= ========= ============
Benefits and Expenses:
Annuity and life insurance benefits $ 751 $ 612 $ 558 $ 2,033 $ 613
Change in annuity and life insurance 45,018 3,078 1,053 37 635
policy reserves
Cost of minimum death benefit reinsurance - 2,945 5,144 4,545 2,867
Return credited to contractowners
9,046 (1,639) (8,930) (2,018) 673
Underwriting, acquisition and other insurance
expenses
335,213 206,350 167,790 90,496 49,887
Interest expense 85,998 69,502 41,004 24,895 10,791
--------- --------- --------- --------- ------------
Total benefits and expenses $ 476,026 $ 280,848 $ 206,619 $ 119,988 $ 65,466
====== ============= ============= ============= ===========
Income tax expense (benefit) $ 30,779 $ 30,344 $ 8,154 $ 10,478 $ (4,038)
======== ============== ========== ============== =
Net income $ 64,817 $ 76,169 $ 34,767 $ 27,548 $ 26,623
======== ======== ======== ============== ===========
STATEMENT OF FINANCIAL CONDITION DATA
- -------------------------------------
Total Assets $31,702,705 $30,881,579 $18,848,273 $12,894,290 $8,268,696
=========== =========== =========== =========== ==========
Future fees payable to parent $ 934,410 $ 576,034 $ 368,978 $ 233,034 $ 47,112
====== ============= ============= ============= ============
Surplus Notes $ 159,000 $ 179,000 $ 193,000 $ 213,000 $ 213,000
========== ============= ========== ============= ===========
Shareholder's Equity $ 496,911 $ 359,434 $ 250,417 $ 184,421 $ 126,345
====== ============= ====== ============= ===========
* On annuity and life insurance sales of $8,216,167, $6,862,968, $4,159,662, $3,697,990, and $2,795,114 during the
years ended December 31, 2000, 1999, 1998, 1997, and 1996, respectively, with contractowner assets under management
of $29,751,822, $29,396,693, $17,854,761, $12,119,191, and $7,764,891 as of December 31, 2000, 1999, 1998, 1997 and
1996, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction
with the consolidated financial statements and the notes thereto and Item 6, Selected Financial Data.
Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking
statements pursuant to the Private Securities Litigation Reform Act of 1995. These forward-looking statements are
based on estimates and assumptions that involve certain risks and uncertainties, therefore actual results could differ
materially due to factors not currently known. These factors include significant changes in financial markets and
other economic and business conditions, state and federal legislation and regulation, ownership and competition.
Results of Operations
---------------------
Annuity and life insurance sales increased 20% in 2000 to $8,216,167,000 as compared to 65% in 1999. Overall sales
growth in 2000 was driven by significant sales volume in the first quarter of 2000 due to the strong equity market
performance. However, the decline in the equity markets during the remainder of the year negatively impacted sales as
the first quarter growth rate was not sustained. The Company continues to focus on increasing sales through innovative
product development activities, the recruitment and retention of top producers, high quality customer service and
improvements in web-based technology. All three major distribution channels achieved sales growth in 2000.
Average assets under management totaled $31,413,809,000 in 2000 and $21,984,759,000 in 1999, representing an increase
of 43%. As a result of the growth in sales and average assets under management, annuity and life insurance charges and
fees increased 46% in 2000 and 56% in 1999. Fee income generated from transfer agency-type and investment support
activities increased 57% in 2000 and 64% in 1999.
Net investment income increased 12% in 2000 compared to 1999 and decreased 6% in 1999 compared to 1998. The increase
in 2000 is primarily due to a higher level of investments, partially offset by $6,939,000 of amortization of premiums
paid on derivative instruments. The decrease in 1999 was primarily the result of $1,036,000 of amortization of the
premium paid on a derivative instrument purchased during 1999. See Note 2D to the consolidated financial statements
for information related to derivative instruments used to hedge the guaranteed minimum death benefit ("GMDB") reserve
fluctuations. Excluding the derivative amortization, net investment income increased 62% in 2000 and increased 3% in
1999 as a result of increased bond holdings that support the Company's risk-based capital objectives.
Premium income represents premiums earned on the sale of ancillary contracts such as immediate annuities with life
contingencies, supplementary contracts with life contingencies and certain life insurance products. Increased sales of
these products led to an increase in premium income in 2000. The increase in 2000 and 1999 was primarily due to higher
sales of supplementary contracts. Management expects supplementary contracts to grow over time with the maturing of
core business lines.
Net realized investment losses totaled $688,000 in 2000, compared to gains of $578,000 in 1999 and $99,000 in 1998.
The change from 1999 to 2000 is primarily due to realized losses on sales of securities in the fixed maturity
portfolio. These losses were partially offset by realized gains on sales of fixed maturities and mutual funds. The
increase in realized gains in 1999 compared to 1998 is due to higher gains on sales of mutual fund investments.
The change in annuity policy reserves includes changes in reserves related to annuity contracts with mortality risks as
well as the Company's GMDB liability. In 2000, equity markets declined and the underlying fund performance was lower
than the prior year. In contrast, the equity markets and underlying fund performance were up significantly in 1999
compared to 1998. The combination of these events resulted in an increase in GMDB reserves of $39,866,000 in 2000.
This compares to an increase in GMDB reserves of $2,323,000 in 1999.
In 1999, the Company began to develop a program utilizing equity put options to manage the risks embedded in the GMDB
in annuity contracts that would result from significant declines in the equity markets. Prior to the implementation of
the hedge strategies utilizing equity put options, the Company had reinsured substantially all of its exposure on the
GMDB liability. The reinsurance was terminated during the second quarter of 1999 as the reinsurer had exited this
market.
Return credited to contractowners consists of revenues on the variable and market value adjusted annuities and variable
life insurance, offset by the benefit payments and changes in reserves required on this business. Market value
adjusted annuity activity has the largest impact on this benefit. In 2000 and 1999, the Separate Account investment
returns on the market value adjusted annuities were less than the expected returns as calculated in the reserves,
contributing to the significant increase in the return credited to contractholders benefit. In addition, this benefit
increased as a result of the amortization of unearned Performance Advantage target value credits, which increased
$6,826,000 in 2000 over 1999. Other significant contributors to the change from 1999 to 2000 include guaranteed
minimum death benefit payments on variable annuities which were driven up due to the market declines in 2000 as well as
increased costs associated with processing of backdated financial transactions. These increased costs were partially
offset by a 2000 experience refund on certain reinsurance treaties in the amount of $4,339,000.
Underwriting, acquisition and other insurance expenses for 2000, 1999 and 1998 were as follows:
(in thousands) 2000 1999 1998
---- ---- ----
Commissions and purchase credits $ 393,494 $ 358,279 $ 201,008
General operating expenses 252,206 214,269 141,586
Acquisition costs deferred during the year (495,103) (450,059) (261,432)
Acquisition costs amortized during the year 184,616 83,861 86,628
------- - ------ - ------
Net capitalization of deferred acquisition costs (310,487) (366,198) (174,804)
- --------- --------- ---------
Underwriting, acquisition and other
insurance expenses $ 335,213 $ 206,350 $ 167,790
========= ========= =========
Underwriting, acquisition and other insurance expenses increased 62% and 23% in 2000 and 1999, respectively.
Increased commissions and purchase credits reflect the increase in sales in both 2000 and 1999. Significant
investments in new product development and internet-based technology contributed to general operating expense
increases in both 2000 and 1999. The amortization of acquisition costs increased substantially in 2000 compared to
1999 as the associated costs from record sales in late 1999 and early 2000 were recognized in accordance with
accounting principles generally accepted in the United States profit and expense recognition models.
Interest expense increased $16,496,000 in 2000 and $28,498,000 in 1999 as a result of additional securitized financing
transactions, which consist of the transfer of rights to receive future fees to the Parent ("securitization
transactions"). In addition, the Company retired surplus notes on December 10, 2000 and December 31, 1999 of
$20,000,000 and $14,000,000, respectively. Surplus notes outstanding as of December 31, 2000 and 1999 totaled
$159,000,000 and $179,000,000, respectively.
The effective income tax rates for the years ended December 31, 2000, 1999 and 1998 were 32%, 28% and 19%,
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 the past two years, as well as the continued growth in annuity sales, the Company will produce sufficient taxable
income in future years to realize its deferred tax assets.
The Company generated net income after tax of $64,817,000, $76,169,000 and $34,767,000 in 2000, 1999 and 1998,
respectively. Revenue increases in 2000 were more than offset by higher benefits and expenses driven primarily from
the increase in the reserve requirement related to the GMDB as a result of the decline in the equity markets.
Investments in new product development and technology also contributed to the increase in expenses. These factors
resulted in the 15% decline in net income. Net income increased 119% in 1999 due to strong sales growth and favorable
market conditions which led to higher asset-based revenue. The Company considers Mexico an emerging market and has
invested in the Skandia Vida operations with the expectation of generating profits from long-term savings products in
future years. As such, Skandia Vida has generated net losses of $2,540,000, $2,523,000 and $2,514,000 for the years
ended December 31, 2000, 1999 and 1998, respectively. The Company expects to transfer ownership of Skandia Vida to an
upstream affiliate during 2001.
On March 22, 2001, the Company announced that it will begin an aggressive operating expense reduction program to better
align its operating infrastructure with the current investment environment. The planned moves include a reduction of
approximately 150 positions, representing 13% of the Company's workforce, reductions in the compensation and benefit
programs and the curtailment of certain discretionary expenses.
Total assets grew 3% in 2000 partially as a result of the modest increase in separate account assets reflecting the
impact of strong sales which were almost entirely offset by the decline in equity markets. Increased deferred
acquisition costs also contributed to the increase in assets. Liabilities grew 2% in 2000 due to higher reserves
required to support the increase in annuity and life insurance business, and increased financing activity related to
the transfer of rights to receive future fees and charges.
Liquidity and Capital Resources
-------------------------------
The Company's liquidity requirement was met by cash from insurance operations, investment activities, borrowings from
ASI and the securitization transactions with ASI.
The majority of the operating cash outflow resulted from the sale of variable annuity and variable life products that
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,
securitization transactions and modified coinsurance reinsurance arrangements:
o During 2000 and 1999, the Company received $69,000,000 and $34,800,000, respectively, from ASI to support the
capital needs and anticipated growth in business of its U.S. operations. In addition, the Company received
$2,450,000 and $1,690,000 from ASI in 2000 and 1999, respectively, to support its investment in Skandia Vida.
o Funds received from new securitization transactions amounted to $476,288,000 in 2000 and $265,710,000 in 1999
(see Note 8 to the consolidated financial statements).
o During 2000 and 1999, the Company extended its reinsurance agreements. The Company also entered into an
agreement with SICL in 2000. 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, 2000 and 1999, shareholder's equity totaled $496,911,000 and $359,434,000, respectively. The
increases were driven by the previously mentioned capital contributions received from ASI and net income from
operations.
The Company has long-term surplus notes and short-term borrowings with ASI. No dividends have been paid to ASI.
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 that 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 rate risk and business risk. The Company has complied
with the NAIC's RBC reporting requirements and has total adjusted capital well above required capital.
Effects of Inflation
--------------------
The rate of inflation has not had a significant effect on the Company's financial statements.
Outlook
- -------
The Company believes that it is well positioned to retain and enhance its position as a leading provider of financial
products for long-term savings and retirement purposes as well as to address the economic impact of premature death,
estate and business planning concerns and supplemental retirement needs. The Company continues to focus on offering
innovative long-term savings and income products and providing superior customer service in order to gain market share
and improve profitability in an increasingly competitive market.
The Gramm-Leach-Bliley Act of 1999 (the Financial Services Modernization Act) permits affiliation among banks,
securities firms and insurance companies. This legislative change has created opportunities for continued
consolidation in the financial services industry and increased competition as large companies offer a wide array of
financial products and services.
Various other legislative initiatives could impact the Company such as pension reform, capital gains and estate tax
changes, privacy standards and internet regulation. Pension reform may change current tax deferral rules and allow
increased contributions to retirement plans, which may lead to higher investments in tax-deferred products and create
growth opportunities for the Company. A capital gains tax reduction may cause tax-deferred products to be less
attractive to consumers, which could adversely impact the Company. New privacy standards and internet regulation may
impact the Company's strategic initiatives especially related to potential partnerships with web-based technology
providers.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to potential fluctuations in earnings and the fair value of certain of its assets and
liabilities, as well as variations in expected cash flows due to changes in market interest rates and equity prices.
The following discussion focuses on specific exposures the Company has to interest rate and equity price risk and
describes strategies used to manage these risks. The discussion is limited to financial instruments subject to market
risks and is not intended to be a complete discussion of all of the risks to which the Company is exposed.
Interest Rate Risk
------------------
Fluctuations in interest rates can potentially impact the Company's profitability and cash flows. The Company has 97%
of assets held under management that are in non-guaranteed Separate Accounts for which the Company's exposure is not
significant as the contractowner assumes substantially all the investment risk. On the remaining 3% of assets, the
interest rate risk from contracts that carry interest rate exposure is managed through an asset/liability matching
program which takes into account the risk variables of the insurance liabilities supported by the assets.
At December 31, 2000, the Company held fixed maturity investments in its general account that are sensitive to changes
in interest rates. These securities are held in support of the Company's fixed immediate annuities, supplementary
contracts, the fixed components of variable life insurance contracts, and in support of the Company's target solvency
capital. The Company has a conservative investment philosophy with regard to these investments. All investments are
investment grade corporate securities, government agency or U.S. government securities.
The Company's deferred annuity products offer a fixed option which subjects the Company to interest rate risk. The
fixed option guarantees a fixed rate of interest for a period of time selected by the contractowner. Guarantee period
options available range from one to ten years. Withdrawal of funds before the end of the guarantee period subjects the
contractowner 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 MVA could be negative. In the event of declining
interest rates, which make the fixed maturity securities underlying the guarantee more valuable, the MVA could be
positive. The resulting increase or decrease in the value of the fixed option, from calculation of the MVA, should
substantially offset the increase or decrease in the market value of the securities underlying the guarantee. The
Company maintains strict asset/liability matching to enable this offset. However, the Company still takes on the
default risk for the underlying securities, the interest rate risk of reinvestment of interest payments and the risk of
failing to maintain the asset/liability matching program with respect to duration and convexity.
Liabilities held in the Company's general account and guaranteed separate account as of December 31, 2000 totaled
$1,095,100,000. Fixed income investments supporting those liabilities had a fair value of $1,098,500,000. The Company
performed a sensitivity analysis on these interest-sensitive liabilities and assets at December 31, 2000. The analysis
showed that an immediate decrease of 100 basis points in interest rates would result in a net increase in liabilities
and the corresponding assets of approximately $37,300,000 and $41,500,000, respectively. An analysis of a 100 basis
point decline in interest rates at December 31, 1999 showed a net increase in interest-sensitive liabilities and the
corresponding assets of approximately $10,200,000 and $24,800,000, respectively.
Equity Market Exposure
----------------------
The primary equity market risk to the Company comes from the nature of the variable annuity and variable life products
sold by the Company. Various fees and charges earned 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, 2000, sustained
throughout 2001, would result in an approximate drop in related annual fee income of $54,000,000. This result was not
materially different than the result obtained from the analysis performed as of December 31, 1999.
Another equity market risk exposure of the Company relates to the guaranteed minimum death benefit liability. Declines
in equity markets and correspondingly the performance of the underlying mutual funds, increases the guaranteed minimum
death benefit liabilities. As discussed in Note 2D of the consolidated financial statements, the Company utilizes
derivative instruments to hedge against the risk of significant decreases in equity markets. Prior to the
implementation of this program the Company utilized reinsurance to transfer this risk.
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.
Estimates of interest rate risk and equity price risk were obtained using computer models that take into consideration
various assumptions about the future. Given the uncertainty of future interest rate movements, volatility in the
equity markets and consumer behavior, actual results may vary from those predicted by the Company's models.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
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, 2000 and 1999, and the
related consolidated statements of operations, shareholder's equity and cash flows for the three year period ended
December 31, 2000. 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 auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of American Skandia Life Assurance Corporation at December 31, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States.
/s/Ernst & Young
February 2, 2001
Hartford, Connecticut
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Financial Condition
(in thousands)
See notes to consolidated financial statements.
As of December 31,
2000 1999
--------------- ----------------
ASSETS
- ------
Investments:
Fixed maturities - at fair value 285,708 $ 198,165 $
Fixed maturities - at amortized cost 3,360
-
Equity securities - at fair value 20,402 16,404
Derivative instruments
3,015 189
Policy loans 3,746 1,270
-------------- --------------
-------------- --------------
Total investments 312,871 219,388
Cash and cash equivalents 76,499 89,212
Accrued investment income 5,209 4,054
Deferred acquisition costs 1,398,192 1,087,705
Reinsurance receivable 3,642 4,062
Receivable from affiliates 3,327
-
Income tax receivable
34,620 -
Income tax receivable - deferred 51,726
-
State insurance licenses 4,113 4,263
Fixed assets 10,737 3,305
Other assets 96,403 36,698
Separate account assets 29,757,092 29,381,166
--------------- ----------------
--------------- ----------------
Total assets $ 31,702,705 $ 30,881,579
=============== ================
=============== ================
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
Liabilities:
Reserves for future insurance policy and contract benefits 135,545 $ 73,292 $
Drafts outstanding 63,758 51,059
Accounts payable and accrued expenses 137,040 158,590
Income tax payable 24,268
-
Income tax payable - deferred
8,949 -
Payable to affiliates
- 68,736
Future fees payable to parent 934,410
576,034
Short-term borrowing 10,000 10,000
Surplus notes 159,000 179,000
Separate account liabilities 29,757,092 29,381,166
--------------- ----------------
--------------- ----------------
Total liabilities 31,205,794 30,522,145
--------------- ----------------
--------------- ----------------
Shareholder's equity:
Common stock, $100 par value, 25,000 shares authorized,
issued and outstanding 2,500 2,500
Additional paid-in capital 287,329 215,879
Retained earnings 205,979 141,162
Accumulated other comprehensive income (loss) 1,103 (107)
--------------- ----------------
--------------- ----------------
Total shareholder's equity 496,911 359,434
--------------- ----------------
--------------- ----------------
Total liabilities and shareholder's equity 31,702,705 $ 30,881,579 $
=============== ================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Operations
(in thousands)
See notes to consolidated financial statements.
For the Year Ended December 31,
2000 1999 1998
---------------- --------------- ---------------
---------------- --------------- ---------------
REVENUES
- --------
Annuity and life insurance charges and fees $ $ $
424,578 289,989 186,211
Fee income 130,610 83,243 50,839
Net investment income 11,656 10,441 11,130
Premium income 3,118 1,278 874
Net realized capital (losses) gains (688) 578 99
Other 2,348 1,832 387
---------------- --------------- ---------------
---------------- --------------- ---------------
Total revenues 571,622 387,361 249,540
---------------- --------------- ---------------
---------------- --------------- ---------------
EXPENSES
- --------
Benefits:
Annuity and life insurance benefits 751 612 558
Change in annuity and life insurance policy reserves 45,018 3,078 1,053
Cost of minimum death benefit reinsurance
- 2,945 5,144
Return credited to contractowners 9,046 (1,639) (8,930)
---------------- --------------- ---------------
---------------- --------------- ---------------
54,815 4,996 (2,175)
Expenses:
Underwriting, acquisition and other insurance
expenses 335,213 206,350 167,790
Interest expense 85,998 69,502 41,004
---------------- --------------- ---------------
---------------- --------------- ---------------
421,211 275,852 208,794
---------------- --------------- ---------------
---------------- --------------- ---------------
Total benefits and expenses 476,026 280,848 206,619
---------------- --------------- ---------------
---------------- --------------- ---------------
Income from operations before income tax 95,596 106,513 42,921
Income tax expense
30,779 30,344 8,154
---------------- --------------- ---------------
---------------- --------------- ---------------
Net income $ $ $
64,817 76,169 34,767
================ =============== ===============
================ =============== ===============
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Shareholder's Equity
(in thousands)
See notes to consolidated financial statements.
For the Year Ended December 31,
2000 1999 1998
--------------- ----------------- -----------------
--------------- ----------------- -----------------
Common stock:
Beginning balance $ $ $
2,500 2,000 2,000
Increase in par value
- 500 -
--------------- ----------------- -----------------
--------------- ----------------- -----------------
Ending balance
2,500 2,500 2,000
--------------- ----------------- -----------------
--------------- ----------------- -----------------
Additional paid in capital:
Beginning balance 215,879 179,889 151,527
Transferred to common stock
- (500) -
Additional contributions 71,450 36,490 28,362
--------------- ----------------- -----------------
--------------- ----------------- -----------------
Ending balance 287,329 215,879 179,889
--------------- ----------------- -----------------
--------------- ----------------- -----------------
Retained earnings:
Beginning balance 141,162 64,993 30,226
Net income 64,817 76,169 34,767
--------------- ----------------- -----------------
--------------- ----------------- -----------------
Ending balance 205,979 141,162 64,993
--------------- ----------------- -----------------
--------------- ----------------- -----------------
Accumulated other comprehensive income (loss):
Beginning balance
(107) 3,535 668
Other comprehensive income (loss)
1,210 (3,642) 2,867
--------------- ----------------- -----------------
--------------- ----------------- -----------------
Ending balance
1,103 (107) 3,535
--------------- ----------------- -----------------
--------------- ----------------- -----------------
Total shareholder's equity $ $ $
496,911 359,434 250,417
=============== ================= =================
=============== ================= =================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Consolidated Statements of Cash Flow
(in thousands)
See notes to consolidated financial statements.
For the Year Ended December 31,
2000 1999 1998
------------- -------------- -------------
Cash flow from operating activities:
Net income $ $ $
64,817 76,169 34,767
Adjustments to reconcile net income to net
cash used in operating activities:
Amortization and depreciation
7,565 1,495 251
Deferred tax expense
60,023 (10,903) (14,242)
Change in unrealized losses on derivatives
(2,935) 3,749 -
Increase in policy reserves
50,892 4,367 1,130
(Decrease) increase in payable to affiliates
(72,063) 69,897 166
Change in income tax payable/receivable
(58,888) 17,611 7,704
Increase in other assets
(59,987) (32,954) (1,173)
Increase in accrued investment income
(1,155) (1,174) (438)
Decrease in reinsurance receivable
420 129 2,152
Net increase in deferred acquisition costs
(310,487) (366,198) (174,804)
(Decrease) increase in accounts payable and accrued
expenses (21,550) 66,763 20,637
Increase in drafts outstanding
12,699 22,118 9,663
Change in foreign currency translation, net
(101) 701 (22)
Net realized capital gain on expiration of derivatives
(500) - -
Net realized capital losses (gains)
688 (578) (99)
------------- -------------- -------------
Net cash used in operating activities (330,562) (148,808) (114,308)
------------- -------------- -------------
Cash flow from investing activites:
Purchase of fixed maturity investments
(380,737) (99,250) (31,828)
Proceeds from sale and maturity of fixed
maturity investments
303,736 36,226 4,049
Purchase of derivatives
(6,722) (4,974) -
Purchase of shares in mutual funds
(18,136) (17,703) (7,158)
Proceeds from sale of shares in mutual funds
8,345 14,657 6,086
Purchase of fixed assets
(7,348) (3,178) (18)
Increase in policy loans
(2,476) (701) 118
------------- -------------- -------------
Net cash used in investing activities
(103,338) (17,703) (28,751)
------------- -------------- -------------
Cash flow from financing activities:
Capital contribution from parent
51,450 22,490 8,362
Increase in future fees payable to parent, net
358,376 207,056 135,944
Net deposits to (withdrawals from) contractowner
accounts 11,361 5,872 (5,696)
- -------------------------------------------------------------------------- -------------- -------------
Net cash provided by financing activities
421,187 235,418 138,610
------------- -------------- -------------
Net (decrease) increase in cash and cash
equivalents
(12,713) 11,687 (4,449)
Cash and cash equivalents at beginning of period
89,212 77,525 81,974
------------- -------------- -------------
Cash and cash equivalents at end of period $ $ $
76,499 89,212 77,525
============= ============== =============
Income taxes paid $ $ $
29,644 23,637 14,651
============= ============== =============
Interest paid $ $ $
85,551 69,697 35,588
============= ============== =============
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements
December 31, 2000
1. ORGANIZATION AND OPERATION
American Skandia Life Assurance Corporation (the "Company") is a wholly-owned subsidiary of American Skandia,
Inc. ("ASI") whose ultimate parent is Skandia Insurance Company Ltd., ("SICL") 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
and term 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. ("Skandia Vida") which is a life insurance
company domiciled in Mexico. Skandia Vida had total shareholder's equity of $4,402,000 and $4,592,000 as of
December 31, 2000, and 1999, respectively. The Company considers Mexico an emerging market and has invested in
the Skandia Vida operations with the expectation of generating profits from long-term savings products in
future years. As such, Skandia Vida has generated net losses of $2,540,000, $2,523,000 and $2,514,000 for the
years ended December 31, 2000, 1999 and 1998, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Reporting
------------------
The accompanying consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States. 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 Standard
-----------------------
The FASB has issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS 137 and SFAS 138 (collectively, "SFAS 133").
SFAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000;
accordingly, the Company adopted SFAS 133 on January 1, 2001. This statement establishes accounting
and reporting standards for derivative instruments, including certain derivative instruments embedded
in other contracts, and for hedging activities. SFAS No. 133 requires that all derivative financial
instruments be measured at fair value and recognized in the statement of condition as either assets or
liabilities. Changes in the fair value of the derivative financial instruments will be reported in
either earnings or comprehensive income, depending on the use of the derivative and whether or not it
qualifies for hedge accounting.
Special hedge accounting treatment is permitted only if specific criteria are met, including that the
hedging relationship be highly effective both at inception and on an ongoing basis. Accounting for
hedges varies based on the type of hedge - fair value or cash flow. Results of effective hedges are
recognized in current earnings for fair value hedges and in other comprehensive income for cash flow
hedges. Ineffective portions of hedges are recognized immediately in earnings.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The derivative instruments held by the Company in 2000 and 1999 consisted of equity put options
utilized to manage the market risk and reserve fluctuations associated with the guaranteed minimum
death benefit ("GMDB"). The adoption of SFAS No. 133 did not have a material effect on the Company's
financial statements.
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 held in support of a deferred compensation plan
(see Note 13) 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. Derivative Instruments
----------------------
The Company uses derivative instruments which consist of equity option contracts for risk management
purposes, and not for trading or speculation. The Company hedges the market value fluctuations of the
GMDB exposure embedded in its policy reserves. Premiums paid on option contracts are amortized into
net investment income over the terms of the contracts. The options are carried at amortized cost plus
intrinsic value, if any, at the valuation date. An option has intrinsic value if it is
"in-the-money." For a put option to be "in-the-money," the exercise price must be greater than the
value of the underlying index. Changes in intrinsic value are recorded as a component of the change
in annuity and life insurance policy reserves consistent with changes in the GMDB reserve.
E. Cash Equivalents
----------------
The Company considers all highly liquid time deposits, commercial paper and money market mutual funds
purchased with a maturity at date of acquisition of three months or less to be cash equivalents.
F. 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.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair values of investments in mutual funds are based on quoted market prices.
The intrinsic value portion of the derivative instrument is determined based on the current value of
the underlying index.
The carrying value of cash and cash equivalents (cost) approximates fair value due to the short-term
nature of these investments.
The carrying value of short-term borrowings (cost) 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.
G. 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 on a
straight-line basis over 40 years.
H. Software Capitalization
-----------------------
The Company capitalizes certain costs associated with internal use software in accordance with the
American Institute of Certified Public Accountants Statement of Position 98-1 ("SOP 98-1"),
"Accounting for the Costs of Software Developed or Obtained for Internal Use. The SOP, which was
adopted prospectively as of January 1, 1999, requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software. Prior to the adoption of SOP 98-1, the
Company expensed all internal use software related costs as incurred. Details of the capitalized
software costs, which are included in fixed assets, and related amortization for the years ended
December 31, are as follows:
(in thousands) 2000 1999
---- ----
Balance at beginning of year $2,920 $ -
------ ----
Software costs capitalized during the year 4,804 3,035
Software costs amortized during the year (512) (115)
----- -----
4,292 2,920
----- -----
Balance at end of year $7,212 $2,920
====== ======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
I. Income Taxes
------------
The Company is included in the consolidated federal income tax return and combined state income tax
return of an upstream company, Skandia AFS Development Holding Corporation and certain of its
subsidiaries. In accordance with the tax sharing agreement, the federal and state income tax
provisions are computed on a separate return basis as adjusted for consolidated items such as net
operating loss carryforwards.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes.
J. Recognition of Revenue and Contract Benefits
--------------------------------------------
Revenues for variable deferred 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 variable immediate annuity contracts with and without life contingencies consist of
certain charges against contractowner account values including mortality and expense risks and
administration fees. Benefit reserves for variable immediate annuity contracts represent the account
value of the contracts and are included in the separate account liabilities.
Revenues for market value adjusted fixed 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 reserve for
future contractowner benefits to the extent in excess of the separate account assets.
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% at December 31, 2000 and 1999.
Revenues for variable life insurance contracts consist of charges against contractowner account values
for mortality and expense risk fees, cost of insurance fees, taxes and surrender charges. Certain
contracts also include charges against premium to pay state premium taxes. Benefit reserves for
variable life insurance contracts represent the account value of the contracts and are included in the
separate account liabilities.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
K. 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) 2000 1999 1998
---- ---- ----
Balance at beginning of year $1,087,705 $721,507 $546,703
---------- -------- --------
Acquisition costs deferred during the year 495,103 450,059 261,432
Acquisition costs amortized during the year (184,616) (83,861) (86,628)
--------- ------------ ---------
310,487 366,198 174,804
---- ------- ------- --------
Balance at end of year $1,398,192 $1,087,705 $721,507
========== ========== ========
L. Reinsurance
-----------
The Company cedes reinsurance under modified co-insurance arrangements. These 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 reinsured its exposure to market fluctuations associated with its GMDB liability
in the first half of 1999 and in 1998. Under this reinsurance agreement, the Company ceded premiums
of $2,945,000 and $5,144,000; received claim reimbursements of $242,000 and $9,000; and, recorded
increases/(decreases) in reserves of ($2,763,000) and $323,000 in 1999 and 1998, respectively.
At December 31, 2000 and 1999, in accordance with the provisions of modified coinsurance agreements, the Company accrued $4,339,000
and $41,000, respectively, for amounts receivable from favorable reinsurance experience on certain
blocks of variable annuity business.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
M. Translation of Foreign Currency
-------------------------------
The financial position and results of operations of Skandia Vida are measured using local currency as
the functional currency. Assets and liabilities 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.
N. 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 reserves of $1,059,987,000 and $896,205,000 at December
31, 2000 and 1999, respectively, relating to annuity contracts for which the contractowner is
guaranteed a fixed rate of return. Separate Account assets of $1,059,987,000 and $896,205,000 at
December 31, 2000 and 1999, respectively, consisting of long term bonds, short-term securities,
transfers due from the general account and cash and cash equivalents are held in support of these
annuity contracts, pursuant to state regulation.
O. Estimates
---------
The preparation of financial statements in conformity with accounting principles generally accepted in
the United States 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.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
3. COMPREHENSIVE INCOME
The components of comprehensive income, net of tax, for the years ended December 31 were as follows:
(in thousands) 2000 1999 1998
---- ---- ----
Net income $64,817 $76,169 $34,767
Other comprehensive income:
Unrealized investment (losses) gains on
available for sale securities (1,681) (3,438) 2,801
Reclassification adjustment for realized losses (gains)
included in investment income 2,957 (660) 88
--------- ----- ----- ----------
Net unrealized gains (losses) on securities 1,276 (4,098) 2,889
Foreign currency translation (66) 456 (22)
------- ---------- -----------
Other comprehensive income (loss) 1,210 (3,642) 2,867
--------- ------- ------
Comprehensive income $66,027 $72,527 $37,634
======= ======= =======
The components of accumulated other comprehensive income, net of tax, as of December 31 were as follows:
(in thousands) 2000 1999
---- ----
Unrealized investment gains (losses) $1,021 ($255)
Foreign currency translation 82 148
------ ------
Accumulated other comprehensive income (loss) $1,103 ($107)
====== ======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
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, 2000 and 1999 are shown
below. All securities held at December 31, 2000 and 1999 were publicly traded.
Investments in fixed maturities as of December 31, 2000 consisted of the following:
(in thousands) Available-for-Sale
------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government obligations $206,041 $4,445 $ (11) $210,475
Foreign government obligations 2,791 195 - 2,986
Obligations of state and political
subdivisions 253 1 - 254
Corporate securities 72,237 1,565 (1,809) 71,993
------ ----- ------- ------
Totals $281,322 $6,206 $(1,820) $285,708
======== ====== ======== ========
The amortized cost and fair value of fixed maturities, by contractual maturity, at December 31, 2000 are shown
below.
(in thousands) Available-for-Sale
------------------
Amortized Fair
Cost Value
---- -----
Due in one year or less $ 7,005 $ 7,018
Due after one through five years 157,111 158,344
Due after five through ten years 107,729 110,469
Due after ten years 9,477 9,877
-------- ---------
Total $281,322 $285,708
======== ========
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
4. INVESTMENTS (continued)
Investments in fixed maturities as of December 31, 1999 consisted of the following:
(in thousands) Available-for-Sale
------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government obligations $ 81,183 $ - $(678) $ 80,505
Obligations of state and political
subdivisions 253 - (3) 250
Corporate securities 121,859 - (4,449) 117,410
------- ------- -------
Totals $203,295 $ - $(5,130) $198,165
======== === ======== ========
(in thousands) Held-to-Maturity
----------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
U.S. Government obligations $1,105 $ - $ (1) $1,104
Corporate securities 2,255 - (15) 2,240
------- -- ---- ------
Totals $3,360 $ - $(16) $3,344
====== === ===== ======
Proceeds from sales of fixed maturities during 2000, 1999 and 1998 were $302,632,000, $32,196,000, and
$999,000, respectively. Proceeds from maturities during 2000, 1999 and 1998 were $1,104,000, $4,030,000, and
$3,050,000, respectively.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
4. INVESTMENTS (continued)
The cost, gross unrealized gains/losses and fair value of investments in mutual funds at December 31, 2000 and 1999 are shown
below:
(in thousands) Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
2000 $23,218 $ 372 $(3,188) $20,402
======= ===== ======== =======
1999 $11,667 $4,763 $ (26) $16,404
======= ====== ====== =======
Net realized investment gains (losses) were as follows for the years ended December 31:
(in thousands) 2000 1999 1998
---- ---- ----
Fixed maturities:
Gross gains $1,002 $ 253 $ -
Gross losses (3,450) (228) (1)
Investment in mutual funds:
Gross gains 1,913 990 281
Gross losses (153) (437) (181)
--- ----- -- ----- -----
Totals $ (688) $ 578 $ 99
======= ===== ====
5. NET INVESTMENT INCOME
The sources of net investment income for the years ended December 31 were as follows:
(in thousands) 2000 1999 1998
---- ---- ----
Fixed maturities $13,502 $ 9,461 $ 8,534
Cash and cash equivalents 5,154 2,159 1,717
Investment in mutual funds 99 32 1,013
Policy loans 97 31 45
Derivative instruments (6,939) (1,036) -
------- -------
Total investment income 11,913 10,647 11,309
Investment expenses 257 206 179
------ ------ ------
Net investment income $11,656 $10,441 $11,130
======= ======= =======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES
The significant components of income tax expense for the years ended December 31 were as follows:
(in thousands) 2000 1999 1998
---- ---- ----
Current tax (benefit) expense ($29,244) $41,248 $22,384
Deferred tax expense (benefit) 60,023 (10,904) (14,230)
------- -------- -------
Total income tax expense $30,779 $30,344 $8,154
======= ======= ======
The tax effects of significant items comprising the Company's deferred tax balance as of December 31, 2000 and
1999 are as follows:
(in thousands) 2000 1999
---- ----
Deferred tax liabilities:
Deferred acquisition costs ($411,417) ($321,873)
Payable to reinsurers (29,985) (26,733)
Future contractowner benefits (11,526)
-
Internal use software (2,524)
(1,022)
Policy fees (1,551) (1,146)
Net unrealized gains (550)
-
Foreign exchange translation (45) (80)
--------- ---- --------- ----
Total (457,598) (350,854)
--------- ---------
Deferred tax assets:
Net separate account liabilities
421,662 333,521
Future contractowner benefits
- 3,925
Other reserve differences
2,675 39,645
Deferred compensation
17,869 18,844
Surplus notes interest
5,536 5,030
Net unrealized losses
- 137
Other
907 1,478
-------- --- -----
Total
-
448,649 402,580
------- -------
Income tax (payable) receivable - deferred ($ 8,949) $51,726
=========== =======
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES (continued)
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) 2000 1999 1998
---- ---- ----
Income (loss) before taxes
Domestic $98,136 $109,036 $45,435
Foreign (2,540) (2,523) (2,514)
------- --- ------- -------
Total 95,596 106,513 42,921
Income tax rate 35% 35% 35%
------- ------ --------
Tax expense at federal statutory income tax rate 33,459 37,280 15,022
Tax effect of:
Dividend received deduction (7,350) (9,572) (9,085)
Losses of foreign subsidiary 889 883 880
Meals and entertainment 841 664 487
State income taxes (524) 1,071 673
Other 3,464 18 177
-------- ---------- ---------
Income tax expense $ 30,779 $ 30,344 $ 8,154
======== ======== =======
7. COST ALLOCATION AGREEMENTS WITH 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. The Company has also charged operating costs to ASISI. The total cost to the Company
for these items was $13,974,000, $11,136,000, and $7,722,000 for the years ended December 31, 2000, 1999 and
1998, respectively. Income received for these items was $11,186,000, $3,919,000 and $1,355,000 for the years
ended December 31, 2000, 1999 and 1998, respectively.
Beginning in 1999, the Company was reimbursed by ASM for certain distribution related costs associated with the
sales of business through an investment firm where ASM serves as an introducing broker dealer. Under this
agreement, the expenses reimbursed were $5,842,000 and $1,441,000 for the years ended December 31, 2000 and
1999. As of December 31, 2000 and 1999, amounts receivable under this agreement were $492,000 and $245,000,
respectively.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
8. FUTURE FEES PAYABLE TO PARENT
In a series of transactions with ASI, the Company transferred certain rights to receive future fees and
contract charges expected to be realized on variable portions of designated blocks of deferred annuity
contracts.
The proceeds from the transfers 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 Company did not transfer
the right to receive future fees and charges after the expiration of the surrender charge period.
In connection with these transactions, ASI issued collateralized notes in private placements, 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 transferred provide for ASI to receive a percentage
(60%, 80% or 100% depending on the underlying commission option) 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).
Payments representing fees and charges in the aggregate amount of $219,454,000, $131,420,000 and $69,226,000
were made by the Company to the Parent for the years ended December 31, 2000, 1999 and 1998, respectively.
Related interest expense of $70,667,000, $52,840,000 and $22,978,000 has been included in the statement of
income for the years ended December 31, 2000, 1999 and 1998, respectively.
The Commissioner of the State of Connecticut has approved the transfer 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.
The present values of the transactions as of the respective effective date were as follows:
Closing Effective Contract Issue Discount Present
Transaction Date Date Period Rate Value
----------- ---- ---- ------ ---- -----
1996-1 12/16/96 9/1/96 1/1/94 - 6/30/96 7.5% $50,221
1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97 7.5% 58,767
1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96 7.5% 77,552
1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97 7.5% 58,193
1998-1 6/30/98 6/1/98 1/1/97 - 5/31/98 7.5% 61,180
1998-2 11/10/98 10/1/98 5/1/97 - 8/31/98 7.0% 68,573
1998-3 12/30/98 12/1/98 7/1/96 - 10/31/98 7.0% 40,128
1999-1 6/23/99 6/1/99 4/1/94 - 4/30/99 7.5% 120,632
1999-2 12/14/99 10/1/99 11/1/98 - 7/31/99 7.5% 145,078
2000-1 3/22/00 2/1/00 8/1/99 - 1/31/00 7.5% 169,459
2000-2 7/18/00 6/1/00 2/1/00 - 4/30/00 7.25% 92,399
2000-3 12/28/00 12/1/00 5/1/00 - 10/31/00 7.25% 107,291
2000-4 12/28/00 12/1/00 1/1/98 - 10/31/00 7.25% 107,139
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
8. FUTURE FEES PAYABLE TO PARENT (continued)
Expected payments of future fees payable to ASI as of December 31, 2000 are as follows:
Year Ended
(in thousands) December 31, Amount
------------ ------
2001 $164,892
2002 169,511
2003 165,626
2004 151,516
2005 128,053
2006 and thereafter 154,812
-------
Total $934,410
========
9. LEASES
The Company leases office space under a lease agreement established in 1989 with ASIST. The Company entered
into a lease agreement for office space in Westminster, Colorado, effective January 1, 2001. Lease expense for
2000, 1999 and 1998 was $6,593,000, $5,003,000 and $3,588,000 respectively. Future minimum lease payments per
year and in aggregate as of December 31, 2000 are as follows:
(in thousands) 2001 $6,487
2002 8,032
2003 8,098
2004 8,209
2005 8,756
2006 and thereafter 51,922
-----------
Total $91,504
===========
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 $4,636,000 and $4,868,000 as
of December 31, 2000, and 1999, respectively. These deposits are required to be maintained for the protection
of contractowners within the individual states.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
11. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory basis shareholder's equity was $342,804,000 and $286,385,000 at December 31, 2000 and 1999,
respectively.
The statutory basis net income for the year ended December 31, 2000 was $11,550,000, as compared to losses of
$17,672,000 and $13,152,000 for the years ended December 31, 1999 and 1998, 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, 2000, no amounts may be distributed without prior approval.
On November 8, 1999, the Board of Directors authorized the Company to increase the par value of its capital
stock from $80 per share to $100 per share in order to comply with minimum capital levels as required by the
California Department of Insurance. This transaction resulted in a corresponding decrease in paid in and
contributed surplus of $500,000 and had no effect on capital and surplus.
12. STATUTORY ACCOUNTING PRACTICES
The National Association of Insurance Commissioners ("NAIC") revised the Accounting Practices and Procedures
Manual in a process referred to as Codification. The State of Connecticut has adopted the provisions of the
revised manual, which is effective January 1, 2001. The revised manual has changed, to some extent, prescribed
statutory accounting practices and will result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements. The adoption of the revised accounting practices is not
expected to have a material adverse effect on the Company's statutory-basis capital and surplus.
13. 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 $3,734,000, $3,164,000 and $2,115,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
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 $399,000, $193,000 and
$342,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
The Company and certain affiliates cooperatively have a long-term incentive program under which units are
awarded to executive officers and other personnel. The Company and certain affiliates also have a profit
sharing program which benefits all employees below the officer level. These programs consist of multiple plans
with new plans 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 programs. The accrued
liability representing the value of these units was $31,632,000 and $42,619,000 as of December 31, 2000 and
1999, respectively. Payments under these programs were $13,542,000, $4,079,000 and $2,407,000 for the years
ended December 31, 2000, 1999, and 1998, respectively.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
14. REINSURANCE
The effect of reinsurance for the years ended December 31, 2000, 1999 and 1998 is as follows:
(in thousands) 2000
----
Annuity and Life Insurance Change in Annuity and Life Return Credited
Charges and Fees Insurance to Contractowners
---------------- -----------------
Policy Reserves
---------------
Gross $477,802 $45,784 $13,607
Ceded (53,224) (766) (4,561)
-------- ------ -------
Net $424,578 $45,018 $ 9,046
======== ======= =======
1999
----
Annuity and Life Insurance Change in Annuity and Life Return Credited
Charges and Fees Insurance to Contractowners
---------------- -----------------
Policy Reserves
---------------
Gross $326,670 $4,151 ($1,382)
Ceded (36,681) (1,073) (257)
-------- ------- -----
Net $289,989 $3,078 ($1,639)
======== ====== ========
1998
----
Annuity and Life Insurance Change in Annuity and Life Return Credited
Charges and Fees Insurance to Contractowners
---------------- -----------------
Policy Reserves
---------------
Gross $215,425 $ 691 ($8,921)
Ceded (29,214) 362 (9)
-------- --- ---------
Net $186,211 $1,053 ($8,930)
======== ====== ========
In December 2000, the Company entered into a modified coinsurance agreement with SICL effective January 1996.
During 2000, ceded premiums received net of commission expenses and reserve adjustments were $10,360,000. At
December 31, 2000, $6,109,000 was payable to SICL under this agreement.
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 its
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)
15. SURPLUS NOTES
The Company has issued surplus notes to its Parent in exchange for cash. Surplus notes outstanding as of December 31, 2000
and 1999 were as follows:
(in thousands)
Interest for the
---------------------------------
Interest 2000 1999 Years Ended December 31,
---------------------------------
Issue Date Rate Amount Amount 2000 1999 1998
---------- ---- ------ ------ ---- ---- ----
---------------------------------
---------------------------------
December 29, 1993 6.84% - - - - 1,387
---------------------------------
February 18, 1994 7.28% 10,000 732 738 738
-
---------------------------------
March 28, 1994 7.90% 10,000 794 801 801
-
---------------------------------
September 30, 1994 9.13% 15,000 15,000 1,392 1,389 1,389
---------------------------------
December 28, 1994 9.78% - - 1,308 1,388
-
---------------------------------
December 19, 1995 7.52% 10,000 10,000 765 762 762
---------------------------------
December 20, 1995 7.49% 15,000 15,000 1,142 1,139 1,139
---------------------------------
December 22, 1995 7.47% 9,000 9,000 684 682 682
---------------------------------
June 28, 1996 8.41% 40,000 40,000 3,420 3,411 3,411
---------------------------------
December 30, 1996 8.03% 70,000 70,000 5,715 5,698 5,699
--- ------ --- ------ --- ----- --- ----- --- -----
---------------------------------
Total $159,000 $179,000 $14,644 $15,928 $17,396
======== ======== ======= ======= =======
---------------------------------
Surplus notes for $10,000,000 dated February 18, 1994 and $10,000,000 dated March 28, 1994 were converted to
additional paid-in capital on December 27, 2000. A surplus note for $14,000,000 dated December 28, 1994 was
converted to additional paid-in capital on December 10, 1999. 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, 2000 and 1999, $15,816,000
and $14,372,000, respectively, of accrued interest on surplus notes was not approved for payment under these
criteria.
16. SHORT-TERM BORROWING
The Company had a $10,000,000 short-term loan payable to ASI at December 31, 2000 and 1999 as part of a
revolving loan agreement. The loan has an interest rate of 7.13% and matures on March 12, 2001. The total
interest expense to the Company was $687,000, $585,000 and $622,000 and for the years ended December 31, 2000,
1999 and 1998, respectively. Accrued interest payable was $222,000 and $197,000 as of December 31, 2000 and
1999, respectively.
17. 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)
18. SEGMENT REPORTING
In recent years, in order to complete the array of products offered by the Company and its affiliates to meet a
wide variety of financial planning, the Company developed the variable life insurance and qualified retirement
plan annuity products. Assets under management and sales for the products other than variable annuities have
not been significant enough to warrant full segment disclosures as required by SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information."
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
19. 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
-------- ------- ------------ -----------
2000
Premiums and other insurance
revenues $137,255 $139,317 $147,923 $136,159
Net investment income 2,876 3,628 4,186 966
Net realized capital gains (losses) 729 (1,436) (858) 877
------- ------- ----- -------
Total revenues 140,860 141,509 151,251 138,002
Benefits and expenses 106,641 121,356 137,514 110,515
------- -------- -------- -------
Pre-tax net income 34,219 20,153 13,737 27,487
Income taxes 10,038 5,225 3,167 12,349
------ --------- ------ ------
Net income $24,181 $14,928 $10,570 $15,138
======= ======= ======= =======
1999
Premiums and other insurance
revenues $78,509 $88,435 $97,955 $111,443
Net investment income 2,654 2,842 2,735 2,210
Net realized capital gains 295 25 206 52
------- --------- ------- ---------
Total revenues 81,458 91,302 100,896 113,705
Benefits and expenses 64,204 67,803 71,597 77,244
------ --------- ------- ------
Pre-tax net income 17,254 23,499 29,299 36,461
Income taxes 3,844 7,142 7,898 11,460
------ ------ ---------- -------
Net income $ 13,410 $ 16,357 $ 21,401 $ 25,001
======== ======== ======== ========
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
====== ======= ======= ========
APPENDIX B - ILLUSTRATION OF MARKET VALUE ADJUSTMENT
The formula used to determine the market value adjustment ("MVA") is applied as of the date we receive a request In
Writing for a full or partial surrender. When choosing an alternate Guarantee Period, the formula is applied as of the first
business day after the date we receive all the information we need to process your request. Values and time durations used in the
formula are as of such date. Current Rates and available Guarantee Periods are those for your type of Contract. The formula is:
[ (1+I) / (1+J+ the adjustment amount) ] N/12
where:
I is the Guarantee Rate applicable to the Guarantee Period for your Contract;
J is the Current Rate for the Guarantee Period equal to the number of years (rounded to the next higher number when
occurring on other than an anniversary of the beginning of the current Guarantee Period) remaining in your current
Guarantee Period ("Remaining Period");
N is the number of months (rounded to the next higher number when occurring on other than a monthly anniversary of the
beginning of the current Guarantee Period) remaining in your Guarantee Period.
Nonetheless, a full or partial surrender at the end of a Guarantee Period is not affected by the MVA.
If we are no longer offering a Guarantee Period equal to the Remaining Period but are offering Guarantee Periods that are
both shorter and longer than the Remaining Period, we will interpolate a rate for J between our Current Rates for the next
shortest and next longest Guarantee Periods then being offered. If we are no longer offering a Guarantee Period equal to the
Remaining Period and also are no longer offering Guarantee Periods that are both longer and shorter than the Remaining Period, we
will determine rates for both I and J based on the Moody's Corporate Bond Yield Average - Monthly Average Corporates (the
"Average"), as published by Moody's Investor Services, Inc., its successor, or an equivalent service should such Average no longer
be published by Moody's. For determining I, we will use the Average for the applicable Guarantee Period published on or
immediately prior to the start of your current Guarantee Period. For determining J, we will use the Average for the Remaining
Period published on or immediately prior to the date the MVA is calculated.
In the special case where I = J, the MVA is set equal to 1.
The following examples show the effect of the MVA on a surrender. The examples assume surrender charges do not apply
and:
Interim Value at Beginning of Guarantee Period: $50,000
Guarantee Period: 5 years
Guarantee Rate: 5% effective annual rate
Date of Calculation: End of the third year since
the beginning of the
Guarantee Period
(two exact years remaining
to the end of the Guarantee
Period)
Adjustment Amount: 0.25% of interest
Example of Upward Adjustment
Assume J = 3.5% (Current Rate for Contracts electing a two year Guarantee Period)
At this point I = 5% (0.05) and N = 24 (number of months remaining in the Guarantee Period)
Interim Value prior to application of MVA: $57,881.25
MVA = [(1+I)/(1+J+0.0025)] N/12 = [1.05/1.0375] 2 = 1.024242
Net Surrender Value = Interim Value X MVA = $59,284.38.
Example of Downward Adjustment
Assume J = 6% (Current Rate for Contracts electing a two year Guarantee Period)
At this point I = 5% (0.05) and N = 24 (number of months remaining in the Guarantee Period)
Interim Value prior to application of MVA: $57,881.25.
MVA = [(1+I)/(1+J+0.0025)] N/12 = [1.05/1.0625] 2 = .97661
Net Surrender Value = Interim Value X MVA = $56,527.35.
- ------------------------------------------------------------------------------------------------------------------------------------
APPENDIX C - ILLUSTRATION OF INTEREST CREDITING
THIS EXAMPLE ASSUMES NO PARTIAL SURRENDERS DURING THE GUARANTEE PERIOD. WHETHER A SURRENDER CHARGE APPLIES TO ANY INTERIM PARTIAL
SURRENDERS OR TO A FULL OR PARTIAL SURRENDER AT THE END OF THE GUARANTEE PERIOD DEPENDS ON THE STRUCTURE OF SURRENDER CHARGES AS
SHOWN IN YOUR CONTRACT, AND WHETHER THAT GUARANTEE PERIOD EXTENDS BEYOND THE DATE SURRENDER CHARGES APPLY. THE MARKET VALUE
ADJUSTMENT WOULD APPLY TO ANY INTERIM PARTIAL SURRENDER EXCEPT, WHERE REQUIRED BY LAW, AN INTERIM PARTIAL SURRENDER OCCURRING NOT
MORE THAN 30 DAYS BEFORE THE END OF A GUARANTEE PERIOD.
THE HYPOTHETICAL INTEREST RATE USED IS ILLUSTRATIVE ONLY AND IS NOT INTENDED TO PREDICT FUTURE INTEREST RATES TO BE DECLARED FOR
ANY CONTRACT. ACTUAL INTEREST RATES DECLARED FOR ANY GIVEN CONTRACT AT ANY GIVEN TIME MAY BE MORE OR LESS THAN THOSE SHOWN.
In this example the Guarantee Period begins on the Contract Date. Should an alternate Guarantee Period be chosen, Guarantee
Periods may begin and end on other than anniversaries of the Contract Date.
Interim Value at beginning of Guarantee Period: $50,000
Guarantee Period: 5 Years
Guaranteed Rate: 5% Effective Annual Rate
Interest Credited Cumulative
During Interest
Year Contract Year Credited
---- ------------- --------
1 $2,500.00 $2,500.00
2 2,625.00 5,125.00
3 2,756.25 7,881.25
4 2,894.06 10,775.31
5 3,038.77 13,814.08
ADDITIONAL INFORMATION
Inquiries will be answered by calling your representative or by writing to:
American Skandia Life Assurance Corporation
at
P.O. Box 883
Shelton, Connecticut 06484
or
customerservice@americanskandia.com
Issued by: Serviced by:
AMERICAN SKANDIA LIFE AMERICAN SKANDIA LIFE
ASSURANCE CORP. ASSURANCE CORP.
One Corporate Drive P.O. Box 883
Shelton, Connecticut 06484 Shelton, Connecticut 06484
Telephone: 1-800-752-6342 Telephone: 1-800-752-6342
http://www.americanskandia.com http://www.americanskandia.com
Distributed by:
AMERICAN SKANDIA MARKETING, INCORPORATED
One Corporate Drive
Shelton, Connecticut 06484
Telephone: 203-926-1888
http://www.americanskandia.com
gma
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Not Applicable
Item 15. Indemnification of Directors and Officers
Under Section 33-320a of the Connecticut General Statutes, the Registrant must indemnify a director or
officer against judgments, fines, penalties, amounts paid in settlement and reasonable expenses
including attorneys' fees, for actions brought or threatened to be brought against him in his capacity
as a director or officer when certain disinterested parties determine that he acted in good faith and
in a manner he reasonably believed to be in the best interests of the Registrant. In any criminal
action or proceeding, it also must be determined that the director or officer had no reason to believe
his conduct was unlawful. The director or officer must also be indemnified when he is successful on
the merits in the defense of a proceeding or in circumstances where a court determines that he is
fairly and reasonably entitled to be indemnified, and the court approves the amount. In shareholder
derivative suits, the director or officer must be finally adjudged not to have breached his duty to
the Registrant, or a court must determine that he is fairly and reasonably entitled to be indemnified
and must approve the amount. In a claim based upon the director's or officer's purchase or sale of
the Registrant's securities, the director or officer may obtain indemnification only if a court
determines that, in view of all the circumstances, he is fairly and reasonably entitled to be
indemnified and then for such amount as the court shall determine. The By-Laws of Skandia Life also
provide directors and officers with rights of indemnification, consistent with Connecticut law.
The foregoing statements are subject to the provisions of Section 33-320a.
Directors and officers of Skandia Life and American Skandia Marketing, Incorporated ("ASM, Inc.") can
also be indemnified pursuant to Indemnity Agreements between each director and officer and American
Skandia, Inc., a corporation organized under the laws of the state of Delaware. The provisions of the
Indemnity Agreements are governed by Section 45 of the General Corporation Law of the State of
Delaware.
The directors and officers of Skandia Life and ASM, Inc. are covered under a directors and officers
liability insurance policy issued to Skandia Insurance Company Ltd., their ultimate parent. Such
policy will reimburse Skandia Life or ASM, Inc., as applicable, for any payments that it shall make to
directors, officers and controlling persons of Registrant pursuant to law and, subject certain
exclusions in the policy, will pay any other costs, charges, expenses, settlements or judgements
arising from any proceeding involving any director or officer of Skandia Life or ASM, Inc., as
applicable in his or her past present capacity as such.
Item 16. Exhibits
Exhibits Page
1 Underwriting agreement incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement No. 333-25733, filed via EDGAR March 2, 1998.
2 Plan of acquisition, reorganization, arrangement, liquidation or succession Not applicable
3 Articles of incorporation and by-laws Incorporated by reference to Post-Effective
Amendment No. 6 to Registration Statement No. 33-87010, filed via EDGAR March 2, 1998.
4 Instruments defining the rights of security holders, including indentures (Incorporated by reference to initial
Registration Statement No. 33-89676, filed February 22, 1995)
FILED VIA EDGAR with Post-Effective Amendment No. 3 to this Registration Statement No.
33-89676, filed April 28, 1998.
5 Opinion re legality (included as Exhibit 23b)
6 - 9 Not applicable
10 Material contracts (Investment Management Agreement)
(a) Agreement with J.P. Morgan Investment Management Inc. incorporated by reference to Post-Effective
Amendment No. 1 to Registration Statement No. 333-00941, filed via EDGAR February 25, 1997.
(b) Agreement with Fleet Investment Advisors Inc., incorporated by reference to Post-Effective Amendment No.
1 to Registration Statement No. 333-00941, filed via EDGAR February 25, 1997
11 - 22 Not applicable
23a Consent of Ernst & Young LLP FILED HEREWITH
23b Opinion & Consent of Counsel FILED HEREWITH
24 Power of Attorney
a) Directors Boronow, Campbell, Carendi, Danckwardt, Dokken, Sutyak, Mazzaferro, Moberg, Soderstrom, Tracy,
Svensson, and Collins filed via EDGAR with Initial Registration to Registration
Statement No. 333-25733, filed April 24, 1997.
b) Directors Kennedy and Winson filed via EDGAR with Post-Effective Amendment No. 4 to Registration Statement No.
333-25733.
25 - 28 Not applicable
- ---------------------------------------------------------------------------------------------------------------------------
An index to the financial statement schedules is omitted because it is not required or is not applicable.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, post-effective amendments to this
registration statement:
(i) To include any prospectus required by section 10 (a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan of distribution not previously
disclosed in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement relating the securities
offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
(4) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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LEGAL EXPERTS: The General Counsel of American Skandia Life Assurance Corporation has passed on the legal matters with
respect to Federal laws and regulations applicable to the issue and sale of the Annuities and with respect to Connecticut
law.
Exhibits
Exhibit 23a Consent of Ernst & Young LLP
Exhibit 23b Opinion & consent of Counsel
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-2 and has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Shelton, State of Connecticut, on
the 27th day of April, 2001.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Registrant
By:/s/ Kathleen A. Chapman Attest:/s/ Scott K. Richardson
Kathleen A. Chapman, Assistant Corporate Secretary Scott K. Richardson
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
(Principal Executive Officer)
Wade A. Dokken* President and Chief Executive Officer,
--------------- 4/27/01
Wade A. Dokken Chairman of the Board and Director
(Principal Financial Officer and Principal Accounting Officer)
/s/ Thomas M. Mazzaferro Executive Vice President and
4/27/01
Thomas M. Mazzaferro Chief Financial Officer
/s/ David R. Monroe Senior Vice President, Treasurer
4/27/01
David R. Monroe and Corporate Controller
(Board of Directors)
Patricia Abram* Gordon C. Boronow* Malcolm M. Campbell*
--------------- ------------------ --------------------
Patricia Abram Gordon C. Boronow Malcolm M. Campbell
Wade A. Dokken* Y.K. Chan* Lincoln R. Collins*
--------------- ---------- -------------------
Wade A. Dokken Y.K. Chan Lincoln R. Collins
Ian Kennedy* Thomas M. Mazzaferro* Gunnar Moberg*
-------------- ------------------- --------------
Ian Kennedy Thomas M. Mazzaferro Gunnar Moberg
Christian Thwaites* Bayard F. Tracy* Deborah G. Ullman*
------------------- ---------------- ------------------
Christian Thwaites Bayard F. Tracy Deborah G. Ullman
Brett M. Winson*
----------------
Brett M. Winson
*By: /s/ Kathleen A. Chapman
----------------------------
Kathleen A. Chapman
*Pursuant to Powers of Attorney previously filed with Post-Effective Amendment No. 1 to Registration Statement No.
333-53596.