SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995 Commission file number 33-81010
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Aetna Insurance Company of America
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(Exact name of registrant as specified in its charter)
Connecticut 06-1286272
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (203) 273-0978
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None
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Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_________
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Title of Class at April 30, 1995
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Common Capital Stock,
par value $2,000 1,275
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with the reduced disclosure
format.
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AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life insurance and Annuity Company)
Quarterly Report For Period Ended March 31, 1995 on Form 10-Q
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Income............................................................ 3
Balance Sheets.................................................................. 4
Statements of Changes in Shareholder's Equity................................... 5
Statements of Cash Flows........................................................ 6
Condensed Notes to Financial Statements......................................... 7
Independent Auditors' Review Report............................................. 8
Item 2. Management's Analysis of the Results of Operations.......................... 9
PART II. OTHER INFORMATION........................................................... 10
Signatures............................................................................. 11
2
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Income
(thousands)
3 Months Ended March 31,
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1995 1994
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Revenue:
Net investment income $174.0 $141.2
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Total revenue 174.0 141.2
Expenses:
Operating expenses 54.5 26.2
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Total expenses 54.5 26.2
Income before federal income taxes 119.5 115.0
Federal income taxes 41.8 40.3
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Net Income $77.7 $74.7
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See Condensed Notes to Financial Statements.
3
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Balance Sheets
(thousands)
March 31, December 31,
Assets 1995 1994
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Investments:
Debt securities available for sale:
(amortized cost $7,451.7 and $7,043.9) $7,376.0 $6,906.5
Short-term investments 495.0 --
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Total investments 7,871.0 6,906.5
Cash and cash equivalents 3,857.2 4,732.7
Accrued investment income 203.1 91.5
Deferred tax asset 0.4 0.4
Other assets 0.4 5.1
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Total assets $11,932.1 $11,736.2
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Liabilities and Shareholder's Equity
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Liabilities:
Due to parent and affiliates $ 4.7 $ 10.5
Other liabilities 41.5 21.0
Current federal income taxes payable 71.2 29.4
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Total liabilities 117.4 60.9
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Shareholder's equity:
Common capital stock, par value $2000 (1,275 shares
authorized, issued and outstanding) 2,550.0 2,550.0
Paid-in capital 7,550.0 7,550.0
Net unrealized capital losses (75.7) (137.4)
Retained earnings 1,790.4 1,712.7
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Total shareholder's equity 11,814.7 11,675.3
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Total liabilities and shareholder's equity $11,932.1 $11,736.2
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See Condensed Notes to Financial Statements.
4
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Changes in Shareholder's Equity
(thousands)
3 Months Ended March 31,
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1995 1994
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Shareholder's equity, beginning of period $11,675.3 $11,584.2
Net change in unrealized capital gains (losses) 61.7 (88.4)
Net income 77.7 74.7
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Shareholder's equity, end of period $11,814.7 $11,570.5
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See Condensed Notes to Financial Statements.
5
AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Statements of Cash Flows
(thousands)
3 Months Ended March 31,
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1995 1994
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Cash Flows from Operating Activities:
Net income $ 77.7 $ 74.7
Increase in accrued investment income (111.6) (111.6)
Net change in amounts due to/from parent and affiliates (5.8) --
Increase (decrease) in other receivables 4.7 (1.7)
Net increase in other assets and liabilities 20.5 0.2
Increase (decrease) in federal income taxes 41.8 (162.8)
Net amortization of a premium on debt securities 18.6 21.1
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Net cash provided by (used by) operating activities 45.9 (180.1)
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Cash Flows from Investing Activities:
Cost of investment purchases in:
Debt securities (429.3) --
Short-term investments (492.1) --
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Net cash used for investing activities (921.4) --
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Net decrease in cash and cash equivalents (875.5) (180.1)
Cash and cash equivalents, beginning of period 4,732.7 4,512.9
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Cash and cash equivalents, end of period $ 3,857.2 $ 4,332.8
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Supplemental cash flow information:
Income taxes paid, net $ -- $ 203.0
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See Condensed Notes to Financial Statements.
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AETNA INSURANCE COMPANY OF AMERICA
(A wholly owned subsidiary of Aetna Life Insurance and Annuity Company)
Condensed Notes to Financial Statements
1. Basis of Presentation
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Aetna Insurance Company of America (the "Company") is a stock life insurance
company organized in 1990 under the insurance laws of Connecticut. The
Company is a wholly owned subsidiary of Aetna Life Insurance and Annuity
Company ("ALIAC"). ALIAC is a wholly owned subsidiary of Aetna Life and
Casualty Company ("Aetna"). The Company is expected to begin marketing and
servicing individual and group annuity contracts in 1995.
These financial statements have been prepared in conformity with generally
accepted accounting principles. These interim statements necessarily rely
heavily on estimates including assumptions as to annualized tax rates. In the
opinion of management, all adjustments necessary for a fair statement of
results for the interim periods have been made. All such adjustments are of a
normal recurring nature.
2. Federal Income Tax
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Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes. At March 31, 1995, $75.7 thousand of net unrealized
capital losses were reflected in shareholder's equity without deferred tax
benefits. For federal income tax purposes, capital losses are deductible only
against capital gains in the year of sale or during the carryback and
carryforward periods (three and five years, respectively). Due to the
expected full utilization of capital gains in the carryback period and the
uncertainty of future capital gains, a valuation allowance of $26.5 thousand
related to the net unrealized capital losses has been reflected in
shareholder's equity. Any reversals of the valuation allowance are contingent
upon the recognition of future capital gains in Aetna's federal income tax
return or a change in circumstances which causes the recognition of the
benefits to become more likely than not. Non-recognition of the deferred tax
benefits on net unrealized losses described above had no impact on net income
for the first quarter of 1995, but has the potential to adversely affect
future results if such losses are realized.
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Independent Auditors' Review Report
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The Board of Directors
Aetna Insurance Company of America:
We have reviewed the accompanying balance sheet of Aetna Insurance Company of
America as of March 31, 1995, and the related statements of income for the
three-month periods ended March 31, 1995 and 1994, and the related statements of
changes in shareholder's equity and cash flows for the three-month periods ended
March 31, 1995 and 1994. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Aetna Insurance Company of America as of
December 31, 1994, and the related statements of income, changes in
shareholder's equity, and cash flows for the year then ended (not presented
herein); and in our report dated March 17, 1995, we expressed an unqualified
opinion on those financial statements. In our opinion, the information set forth
in the accompanying balance sheet as of December 31, 1994, is fairly presented,
in all material respects, in relation to the balance sheet from which it has
been derived.
/s/ KMPG Peat Marwick LLP
Hartford, Connecticut
April 27, 1995
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Item 7. Management's Analysis of the Results of Operations
Results of Operations
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Three Months Ended March 31,
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(Thousands) 1995 1994
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Net investment income $174.0 $141.2
Operating expenses 54.5 26.2
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Income before federal income taxes 119.5 115.0
Federal income taxes 41.8 40.3
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Net income $ 77.7 $ 74.7
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The Company's net income increased 4% in the first quarter of 1995 when
compared with the same period a year ago. The improvement in the first
quarter of 1995 net income reflected an increase in net investment income
primarily due to increasing yields on cash equivalents partially offset by an
increase in operating expenses related to taxes, licenses and fees.
Investments
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As of March 31, 1995 and December 31, 1994, all of the Company's debt
securities were issued by the U.S. Treasury.
(Thousands) 1995 1994
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Debt securities $7,376.0 $6,906.5
Short-term investments 495.0 --
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Total Investments 7,871.0 6,906.5
Cash and cash equivalents 3,857.2 4,732.7
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Total Investments, cash and
cash equivalents $11,728.2 $11,639.2
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PART II. OTHER INFORMATION
None of the items under part II are applicable.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AETNA INSURANCE COMPANY OF AMERICA
(Registrant)
May 5, 1995 By /s/ James C.Hamilton
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(Date) James C. Hamilton
Vice President, Treasurer, and
Director
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