Back to GetFilings.com



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________

Commission File Number 033-43462

KEMPER INVESTORS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
     
ILLINOIS
(State of Incorporation)		   36-3050975
(IRS Employer Identification Number)
 
1400 AMERICAN LANE
SCHAUMBURG, ILLINOIS
(Address of Principal Executive Offices)		   60196
(Zip Code)

Registrant’s telephone number, including area code: (206) 232-8400

Securities registered pursuant to Section 12(b) of the Act: none

Securities registered pursuant to Section 12(g) of the Act: none

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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.  þ Yes  o No

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  o Yes  þ No

      As of July 31, 2004, there were outstanding 250,000 shares of common stock, $10.00 par value per share, of the registrant.

     Documents incorporated by reference: None.

KEMPER INVESTORS LIFE INSURANCE COMPANY

FORM 10-Q

PART I. FINANCIAL STATEMENTS

ITEM 1. Interim Financial Statements        
 
Balance Sheets -        
       June 30, 2004 and December 31, 2003    1  
 
Consolidated Statements of Operations -  
       Three and six months ended June 30, 2004 and 2003    2  
 
Consolidated Statements of Comprehensive Income (Loss) -  
       Six months ended June 30, 2004 and 2003    3  
 
Consolidated Statements of Cash Flows -  
       Six months ended June 30, 2004 and 2003    4  
 
Notes to Consolidated Financial Statements    5  
 
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations    13  
 
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk    25  
 
ITEM 4. Controls and Procedures    27  

PART II. OTHER INFORMATION

ITEM 1. Other Information      28  
 
ITEM 6. Exhibits and Reports on Form 8-K      28  
 
Signatures      29  

PART 1. FINANCIAL STATEMENTS

ITEM 1. Interim Financial Statements

Kemper Investors Life Insurance Company
Balance Sheets
(in thousands, except share data)

June 30, 2004 December 31,
(unaudited) 2003
Assets            
   Fixed maturity securities, available for sale, at fair value (amortized cost:  
     June 30, 2004, $639,612; December 31, 2003, $627,793)   $ 631,305   $ 619,055  
   Equity securities, at fair value (cost: June 30, 2004 $14,214; December  
     31, 2003, $2,458)    14,937    2,774  
   Short-term investments    85,090    34,181  
   Joint venture mortgage loans    7,417    7,417  
   Third-party mortgage loans    —    52,955  
   Other real estate-related investments    7,259    5,495  
   Policy loans    24,049    —  
   Other invested assets    1,931    2,117  
      Total investments    771,988    723,994  
   Cash and cash equivalents    54,410    28,331  
   Accrued investment income    7,466    10,475  
   Reinsurance recoverable    4,027,560    3,992,659  
   Deferred insurance acquisition costs    25,972    273,307  
   Deferred income taxes    178,422    203,383  
   Federal income tax receivable    43,865    33,067  
   Modified coinsurance receivable — related party    767,289    762,480  
   Other assets and receivables    89,703    71,131  
   Assets held in separate accounts    15,297,447    15,122,214  
     Total assets   $ 21,264,122   $ 21,221,041  
Liabilities  
   Future policy benefits   $ 4,447,943   $ 4,319,667  
   Other policyholder benefits and funds payable    145,225    150,092  
   Payable to reinsurers    —    97,573  
   Modified coinsurance payable — related party    755,764    758,853  
   Deferred income tax liabilities    11,771    114,600  
   Other accounts payable and liabilities    130,024    19,748  
   Liabilities related to separate accounts    15,297,447    15,122,214  
     Total liabilities    20,788,174    20,582,747  
Commitments and contingent liabilities  
Stockholder’s equity  
   Capital stock-$10 par value, authorized 300,000 shares; issued and  
     outstanding 250,000 shares    2,500    2,500  
   Additional paid-in capital    841,633    841,633  
   Accumulated other comprehensive (loss)    (10,048 )  (12,283 )
   Retained deficit    (358,137 )  (193,556 )
     Total stockholder’s equity    475,948    638,294  
     Total liabilities and stockholder’s equity   $ 21,264,122   $ 21,221,041  

See accompanying notes to consolidated financial statements.

1

Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Operations
(in thousands)
(unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Revenue                    
  Net investment income   $ 7,769   $ 54,624   $ 14,982   $ 111,065  
  Net realized investment gains    534    1,765    4,777    4,925  
  Premium income    —    119    —    554  
  Separate account fees and charges    15,617    25,597    32,097    47,869  
  Broker-dealer commission revenue    —    6,432    —    13,533  
  Modified coinsurance income (expense)—related party    (22,318 )  —    (3,855 )  —  
  Other income    776    4,274    450    8,167  
     Total revenue    2,378    92,811    48,451    186,113  
Benefits and Expenses  
  Interest credited to policyholders    4,676    40,572    7,543    79,625  
  Claims incurred and other policyholder benefits    12,676    (4,814 )  23,551    8,091  
  Taxes, licenses and fees    204    (3,668 )  2,040    (3,860 )
  Commissions    5,403    10,813    10,588    30,056  
  Broker-dealer commission expense    —    6,504    —    13,422  
  Operating expenses    2,568    9,690    5,124    21,672  
  Deferral of insurance acquisition cost    —    (12,527 )  —    (33,479 )
  Amortization of deferred insurance acquisition costs    4,169    19,081    9,825    30,594  
  Amortization of value of business acquired    —    (627 )  —    2,822  
  Amortization of other intangible assets    —    189    —    379  
     Total benefits and expenses    29,696    65,213    58,671    149,322  
  Income (loss) before income tax expense    (27,318 )  27,598    (10,220 )  36,791  
  Income tax expense (benefit)  
     Current    182    26,487    (10,796 )  15,716  
     Deferred    (9,732 )  (16,829 )  7,234    (2,639 )
       Total income tax expense (benefit)    (9,550 )  9,658    (3,562 )  13,077  
  Net income (loss) before cumulative effect of  
  accounting change, net of tax    (17,768 )  17,940    (6,658 )  23,714  
       Cumulative effect of accounting change, net of    —    —    (157,923 )  —  
  Net income (loss)   $ (17,768 ) $ 17,940   $ (164,581 ) $ 23,714  

See accompanying notes to consolidated financial statements.

2

Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Net income (loss)     $ (17,768 ) $ 17,940   $ (164,581 ) $ 23,714  
Other comprehensive income (loss), before tax:  
 
Unrealized holding gains (losses) on securities:  
  Unrealized gains on derivatives    2,518    1,783    2,338    1,236  
  Unrealized holding gains (losses) on investments    (13,042 )  73,769    (4,739 )  104,592  
  Unrealized holding gains (losses) on separate  
      accounts investments, reclassified to the  
      general account assets per SOP 03-1    (2,050 )  —    791    —  
  Reclassification adjustment for (gains) losses  
      included in net income    473    (1,490 )  4,761    (6,612 )
     Net unrealized holding gains (losses) on securities    (12,101 )  74,062    3,151    99,216  
 
Reclassification adjustments for items included in net  
income (loss):  
  Adjustment to value of business acquired    —    (1,380 )  —    (1,673 )
  Adjustment for deferred insurance acquisition costs    —    (6,412 )  (984 )  (12,444 )
Other comprehensive income (loss), before related  
income tax expense (benefit)    (12,101 )  66,270    2,167    85,099  
Related income tax expense (benefit)    (718 )  23,195    (68 )  29,785  
     Other comprehensive income (loss), net of tax    (11,383 )  43,075    2,235    55,314  
     Comprehensive income (loss)   $ (29,151 ) $ 61,015   $ (162,346 ) $ 79,028  

See accompanying notes to consolidated financial statements.

3

Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Six months ended
June 30,
2004 2003
Cash flows from operating activities            
   Net (loss) income   $ (164,581 ) $ 23,714  
   Adjustments to reconcile net income (loss) to net cash provided by (used  
     in) operating activities:  
       Cumulative effect accounting change    157,923    —  
       Net realized investment gains    (4,777 )  (4,925 )
       Interest credited and other charges    7,543    79,625  
       Amortization of deferred insurance acquisition costs and VOBA    9,825    33,416  
       Amortization of net discount/premium on investments    8,690    10,630  
       Capitalization of deferred policy acquisition costs and VOBA    —    (33,479 )
       Depreciation and other amortization    —    1,213  
       Deferred income tax expense    7,234    27,147