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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2003
OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-44202
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Exact name of Registrant as specified in its charter)
Connecticut 06-1241288
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(State or other jurisdiction, (IRS Employer Identification No.)
incorporation or organization)
One Corporate Drive, Shelton, Connecticut 06484
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(Address of principal executive offices) (Zip Code)
(203) 926-1888
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(Registrant's Telephone Number, including area code)
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. YES X NO ___
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Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES ___ NO
X
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State the aggregate market value of the voting stock held by non-affiliates of the registrant: NONE
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of
March 19, 2004. Common stock, par value of $100 per share: 25,000 shares outstanding
American Skandia Life Assurance Corporation meets the conditions set
forth in General Instruction (I) (1) (a) and (b) on Form 10-K and
is therefore filing this Form with the reduced disclosure format.
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AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Registrant)
INDEX
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Page No.
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Cover Page -
Index 2
PART I Item 1. Business 3
Item 2 Properties 6
Item 3. Legal Proceedings 6
PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 7
Item 7. Management's Discussion and Analysis of Financial Position
and Results of Operations 7
Item 7a. Quantitative and Qualitative Disclosures About Market Risk 11
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Independent Accountants on Accounting
and Financial Disclosure 13
Item 9a. Controls and Procedures 13
PART III Item 10. Directors and Executive Officers of the Registrant 14
Item 14. Principal Accounting Fees and Services 14
PART IV Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 15
Signatures 17
Forward-Looking Statement Disclosure
Certain of the statements included in this Annual Report on Form 10-K, including but not limited to those in the Management's
Discussion and Analysis of Financial Condition and Results of Operations, constitute forward-looking statements within the meaning of
the U.S. Private Securities Litigation Reform Act of 1995. Words such as "expects," "believes," "anticipates," "includes," "plans,"
"assumes," "estimates," "projects," "intends", or variations of such words are generally part of forward-looking statements.
Forward-looking statements are made based on management's current expectations and beliefs concerning future developments and their
potential effects upon American Skandia Life Assurance Corporation ("the Company"). There can be no assurance that future
developments affecting the Company will be those anticipated by management. These forward-looking statements are not a guarantee of
future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to
differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including without
limitation: general economic, market and political conditions, including the performance of financial markets, interest rate
fluctuations and the continuing negative impact of the current economic environment; various domestic or international military or
terrorist activities or conflicts; volatility in the securities markets; reestimates of our reserves for future policy benefits and
claims; changes in our assumptions related to deferred policy acquisition costs; our exposure to contingent liabilities; catastrophe
losses; investment losses and defaults; changes in our claims-paying or credit ratings; competition in our product lines and for
personnel; fluctuations in foreign currency exchange rates and foreign securities markets; the impact of changing regulation or
accounting practices; adverse litigation results; and changes in tax law. The Company does not intend, and is under no obligation
to, update any particular forward-looking statement included in this document.
PART 1
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Item 1. Business
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Overview
American Skandia Life Assurance Corporation (the "Company"), with its principal offices in Shelton, Connecticut, is an indirect
wholly-owned subsidiary of Prudential Financial, Inc. ("Prudential Financial"). On December 19, 2002, Skandia Insurance Company Ltd.
(publ) ("SICL"), an insurance company organized under the laws of the Kingdom of Sweden, and the ultimate parent company of the
Company prior to May 1, 2003, entered into a definitive purchase agreement with Prudential Financial, a New Jersey corporation,
whereby Prudential Financial would acquire the Company and certain of its affiliates (the "Acquisition"). On May 1, 2003, the
initial phase of the Acquisition was consummated. This included Prudential Financial acquiring 90% of Skandia U.S., Inc.'s ("SUSI"),
an indirect parent of the Company, outstanding common stock. On September 9, 2003, Prudential Financial acquired the remaining 10%
of SUSI's outstanding common stock for $165 million (see Notes 4 and 6 to the Consolidated Financial Statements included herein for
additional information on the Acquisition).
Prior to April 30, 2003, the Company had a 99.9% ownership in Skandia Vida, S.A. de C.V. ("Skandia Vida") which is a life insurance
company domiciled in Mexico. As part of the Acquisition, the Company sold its ownership interest in Skandia Vida to SICL on April
30, 2003 for $4.6 million. This transaction resulted in a loss of $422 thousand.
The Company was established in 1988 and is a significant provider of variable annuity contracts for the individual market in the
United States. Affiliates of the Company sponsor and distribute shares of registered investment companies ("mutual funds"). Because
these mutual funds are not sponsored or distributed by the Company, such products are not discussed herein and are not reflected in
the Company's financial statements.
The Company's products are sold primarily to individuals to provide for long-term savings and retirement and to address the economic
impact of premature death, estate planning concerns and supplemental retirement needs. The investment performance of the registered
investment companies supporting the variable annuity contracts, which is principally correlated to equity market performance, can
significantly impact the market for the Company's products.
American Skandia, Inc. ("ASI"), the direct parent of the Company, may make additional capital contributions to the Company, as
needed, to enable it to comply with its reserve requirements and fund expenses in connection with its business. The Company has
complied with the National Association of Insurance Commissioner's ("NAIC") Risk-Based Capital ("RBC") reporting requirements and has
total adjusted capital well above required capital. The Company expects to maintain statutory capital between 310% and 330% of
Company Action Level Risk Based Capital. Generally, ASI is under no obligation to make such contributions and its assets do not back
the benefits payable under the Company's policyholder contracts. During 2003, 2002 and 2001, ASI made capital contributions to the
Company of $2.2 million, $259.7 million and $48 million, respectively.
The Company is engaged in a business that is highly competitive because of the large number of stock and mutual life insurance
companies and other entities engaged in marketing individual annuities.
The following paragraphs describe the Company's products, marketing and distribution, and underwriting and pricing.
Products
The Company offers a wide array of annuities, including: a) certain deferred and immediate annuities that are registered with the
Securities and Exchange Commission, including variable annuities with fixed interest rate investment options that include a market
value adjustment feature; b) certain other fixed deferred annuities that are not registered with the Securities and Exchange
Commission; and c) fixed, adjustable and variable immediate annuities. Prior to July 31, 2002, the Company had offered
non-registered group variable annuities designed as funding vehicles for various types of qualified retirement plans. The Company
has continued to accept additional contributions to qualified plans existing on July 31, 2002. Prior to June 30, 2003, the Company
also offered and sold single premium variable life insurance products, and, prior to April 15, 2002, offered and sold flexible
premium variable life insurance products. The Company has continued to service and accept additional premiums for its existing
flexible premium variable life insurance contracts but is no longer accepting new business.
Annuity contracts represent the insurer's contractual obligation to make payments over a given period of time (often measured by the
life of the recipient) in return for a single deposit or a series of scheduled or flexible deposits. The insurer's obligation to pay
may commence immediately or be deferred. If the insurer's payments are deferred, the insurer generally incurs an obligation to make
a surrender value available during the deferral period based on an account value, and guarantees as applicable. The account value
consists of the deposits and may earn interest, or may vary with the performance of investments in the funds selected by the insurer
and made available for election by contract holders. Gains on deposits made by the contract holder, before distribution, generally
are tax deferred for the contract holder. Distributions are taxed as ordinary income to the contract holder. During the deferral
period, distributions are assumed to come first from any gains in the contract and may be subject to a tax penalty. For immediate
annuities and annuitized deferred annuities, a portion of each distribution may be treated as a return of the taxpayer's investment
in the contract.
Marketing and Distribution
The Company sells its wide array of annuity products through multiple distribution channels including, (a) independent financial
planners; (b) broker-dealers that generally are members of the New York Stock Exchange, including "wirehouse" and regional
broker-dealer firms; and (c) broker-dealers affiliated with banks or that specialize in marketing to customers of banks. Although
the Company is active in each of those distribution channels, the majority of the Company's sales have come from independent
financial planners. The Company has selling agreements with approximately twelve hundred broker/dealer firms and financial
institutions.
Although many of the Company's competitors have acquired or are looking to acquire their distribution channels as a means of securing
sales, the Company has not done so. Instead, the Company believes its success is dependent on its ability to enhance its
relationships with both the selling firms and their registered representatives. In cooperation with its affiliated broker-dealer,
American Skandia Marketing, Incorporated, the Company uses marketing teams to provide support to its primary distribution channels.
In addition, the Company also offers a number of private label and proprietary products distributed by select large distributors.
Underwriting and Pricing
We earn fees calculated on the average separate account assets invested in the mutual funds underlying our variable annuity products,
and mortality and expense fees and other fees for various insurance-related options and features based on average daily net assets of
the value of the annuity separate accounts. We price the fixed-rate options of our variable annuities based on assumptions as to
investment returns, expenses and persistency. Competition also influences our pricing. We seek to maintain a spread between the
return on our invested assets and the interest we credit on our fixed-rate option annuities. To encourage persistency, all of our
variable annuities have withdrawal restrictions and declining surrender or withdrawal charges for a specified number of years.
Reserves
The Company is obligated by the insurance laws and regulations in the jurisdictions in which the Company does business to carry in
its statutory financial statements, as liabilities, actuarially calculated reserves to meet its obligations on outstanding annuity
and life insurance contracts. Such reserves are based on mortality and/or morbidity tables in general use in the United States. In
general, reserves are computed amounts that, with additions from premiums to be received, and with interest on such reserves
compounded at certain assumed rates, are expected to be sufficient to meet contractual obligations. In the accompanying financial
statements, these reserves for contractual obligations are determined in accordance with accounting principles generally accepted in
the United States ("U.S. GAAP") and are included in the balance sheet captions "Separate account liabilities," "Policyholders'
account balances" and "Future policy benefits and other policyholder liabilities." The Company's statutory-based reserves differ
from those reported under U.S. GAAP, primarily because U.S. GAAP did not require an explicit reserve prior to January 1, 2004 (see
Note 2 to the Consolidated Financial Statements included herein) for guaranteed minimum death ("GMDB") and living benefits and
reserves held for deferred annuity contracts are held at account value under U.S. GAAP, rather than at an actuarially calculated
amount.
Regulatory Environment
In order to continue to market annuity products, the Company must meet or exceed the statutory capital and surplus requirements of
the insurance departments of the states in which it conducts business. Statutory accounting practices differ from U.S. GAAP in two
major respects. First, under statutory accounting practices, the acquisition costs of new business are charged to expense, while
under U.S. GAAP they are initially deferred and amortized over a period of time. Second, under statutory accounting practices, the
required additions to statutory reserves for new business in some cases may initially exceed the statutory revenues attributable to
such business. These practices result in a reduction of statutory income and surplus at the time of recording new business.
Insurance companies are subject to RBC guidelines, monitored by insurance regulatory authorities, that measure the ratio of the
Company's statutory surplus with certain adjustments to its required capital, based on the risk characteristics of its insurance
liabilities and investments. Required capital is determined by statutory formulae that consider risks related to the type and quality
of invested assets, insurance-related risks associated with the Company's products, interest rate risks, and general business risks.
The RBC calculations are intended to assist regulators in measuring the adequacy of the Company's statutory capitalization.
The Company considers RBC implications in its asset/liability management strategies. Each year, the Company conducts a thorough
review of the adequacy of statutory insurance reserves and other actuarial liabilities. The review is performed to ensure that the
Company's statutory reserves are computed in accordance with accepted actuarial standards, reflect all contractual obligations, meet
the requirements of state laws and regulations and include adequate provisions for any other actuarial liabilities that need to be
established. All significant statutory reserve changes are reviewed by the Board of Directors and are subject to approval by the
State of Connecticut Insurance Department (the "Insurance Department"). The Company believes that its statutory capital is adequate
for its currently anticipated levels of risk as measured by regulatory guidelines.
In March 1998, the NAIC adopted the Codification of Statutory Accounting Principles guidance ("Codification"), which replaced the
current Accounting Practices and Procedures manual as the NAIC's primary guidance on statutory accounting as of January 1, 2001. The
Codification provided guidance for areas where statutory accounting had been silent and changed current statutory accounting in
certain areas. Certain of the standards had an impact on the measurement of statutory capital, which, in turn, affected RBC ratios
of insurance companies. The Company adopted the Codification guidance effective January 1, 2001. As a result of these changes, the
Company reported an increase to statutory surplus of $12.0 million.
The NAIC has developed a set of financial relationships or tests known as the Insurance Regulatory Information System ("IRIS") to
assist state regulators in monitoring the financial condition of insurance companies and identifying companies that require special
attention or action by insurance regulatory authorities. Insurance companies generally submit data annually to the NAIC, which in
turn analyzes the data using prescribed financial data ratios, each with defined "usual ranges." Generally, regulators will begin to
investigate or monitor an insurance company if ratios fall outside the usual ranges for four or more of the ratios. If an insurance
company has insufficient capital, regulators may act to reduce the amount of insurance it can issue. The Company is not currently
subject to regulatory scrutiny based on these ratios.
The Company is subject to the regulations of the Insurance Department. A detailed financial statement in the prescribed form (the
"Annual Statement") is filed with the Insurance Department each year covering the Company's operations for the preceding year and its
financial position as of the end of that year. Regulation by the Insurance Department includes periodic examinations to verify the
accuracy of contract liabilities and reserves. The Company's books and accounts are subject to review by the Insurance Department at
all times. A full examination of the Company's operations is conducted periodically by the Insurance Department and under the
auspices of the NAIC.
The Company is subject to regulation under the insurance laws of all jurisdictions in which it operates. The laws of the various
jurisdictions establish supervisory agencies with broad administrative powers with respect to various matters, including licensing to
transact business, overseeing trade practices, licensing agents, approving contract forms, establishing reserve requirements, fixing
maximum interest rates on life insurance contract loans and minimum rates for accumulation of surrender values, prescribing the form
and content of required financial statements and regulating the type and amounts of investments permitted. The Company is required to
file the Annual Statement with supervisory agencies in each of the jurisdictions in which it does business, and its operations and
accounts are subject to examination by these agencies at regular intervals.
Although the federal government generally does not directly regulate the business of insurance, federal initiatives often have an
impact on the business in a variety of ways. Certain insurance products of the Company are subject to various federal securities laws
and regulations. In addition, current and proposed federal measures which may significantly affect the insurance business include
regulation of insurance company solvency, employee benefit regulation, removal of barriers preventing banks from engaging in the
insurance business, tax law changes affecting the taxation of insurance companies and the tax treatment of insurance products and its
impact on the relative desirability of various personal investment vehicles.
Competition
The Company is competing for management of individuals' savings dollars in the United States. Competitors in this business include
banks, investment companies, insurance companies and other financial institutions. According to Info-One's Variable Annuity Research
& Data Service ("VARDS"), the combined annuity business of Prudential Financial, which includes the Company, was ranked 8th in sales
of variable annuities for the year ended December 31, 2003, and 6th in assets under management as of December 31, 2003. Competitive
factors in this industry include investment performance, product design, visibility in the marketplace, financial strength ratings,
distribution capabilities, levels of charges and credited rates, reputation, customer service and sales force service and education.
The Company believes it derives its competitive advantage from its innovative and creative product designs, and its strong
relationship with the sales force through service and education. As of the filing date, the Company's financial strength or claims
paying ratings from Fitch Ratings, A.M. Best Co. and Standard and Poor's is AA-, A+ and A+, respectively.
Segments
The Company currently operates as one reporting segment. Revenues, net income and total assets for this segment can be found on the
Company's Consolidated Statements of Financial Position as of December 31, 2003 and 2002 and Consolidated Statements of Operations
and Comprehensive Income for the eight months ended December 31, 2003, four months ended April 30, 2003 and years ended December 31,
2002 and 2001. The Company's total assets as of December 31, 2003, 2002 and 2001 were $27.2 billion, $23.7 billion and $28.0
billion, respectively. Revenues and assets generated from the Company's variable life and qualified plan product offerings have been
insignificant in comparison to the revenues and assets generated from the Company's core product, variable annuities.
Employees
As of December 31, 2003, the Company had 571 employees.
Item 2. Properties
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The Company occupies office space in Shelton, Connecticut, which is leased from an affiliate, American Skandia Information Services
and Technology Corporation. The Company entered into a lease for office space in Westminster, Colorado, effective January 1, 2001,
and established an additional customer service center at that location. The Company believes that its current facilities are
satisfactory for its near term needs.
Item 3. Legal Proceedings
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The Company is subject to legal and regulatory actions in the ordinary course of its businesses, including class actions and
individual lawsuits. Pending legal and regulatory actions include proceedings relating to aspects of the businesses and operations
that are specific to the Company and that are typical of the businesses in which the Company operates. Class action and individual
lawsuits involve a variety of issues and/or allegations, which include sales practices, underwriting practices, claims payment and
procedures, premium charges, policy servicing and breach of fiduciary duties to customers. We are also subject to litigation arising
out of our general business activities, such as our investments and third party contracts. In certain of these matters, the
plaintiffs are seeking large and/or indeterminate amounts, including punitive or exemplary damages.
In recent years, a number of annuity companies have been named as defendants in class action lawsuits relating to the use of variable
annuities as funding vehicles for tax-qualified retirement accounts. The Company is currently a defendant in one lawsuit, a
purported nationwide class action complaint, filed in the United States District Court for the Southern District of New York in
December 2002, Donovan v. American Skandia Life Ass. Corp. et al. The complaint alleges that the Company and certain of its
affiliates violated federal securities laws in marketing variable annuities and seeks injunctive relief and compensatory damages in
unspecified amounts. In July 2003, the court granted the Company's motion to dismiss the complaint with prejudice. On August 29,
2003, Plaintiffs filed a notice of appeal of that decision with the United States Court of Appeals for the Second Circuit.
The Company's parent and sole shareholder, ASI, is currently a named defendant in six purported nationwide class action lawsuits.
Each of these lawsuits alleges that ASI and others violated federal securities laws in connection with late trading and market timing
activities and seeks remedies, including compensatory and punitive damages in unspecified amounts. The cases are as follows:
Lowinger v. Invesco Advantage Health Sciences Fund, et al., filed in the United States District Court for the Southern District of
New York in December, 2003 and served on ASI in February 2004; Russo, et al. v. Invesco Advantage Health Sciences Fund, et al., filed
in the United States District Court for the Southern District of New York in December , 2003, this suit has not been served on ASI;
Lori Weinrib v. Invesco Advantage Health Sciences Fund, et al., filed in the United States District Court for the Southern District
of New York in January, 2004, this suit has not been served on ASI; Erhlich v. Invesco Advantage Health Sciences Fund, et al., filed
in the United States District Court for the District of Colorado in December, 2003, this suit was served on ASI in February, 2004;
Fattah v. Invesco Advantage Health Sciences Fund, et al.,filed in the United States District Court for the District of Colorado in
December, 2003, this suit has not been served on ASI. The Company believes that these cases will be consolidated in Multi-District
litigation located in the Baltimore Division of the United States District Court for the District of Maryland.
The Company is also aware that ASI is a defendant designated as "Does 1-500" in a suit filed in October, 2003 in the United States
District Court for the Central District of California entitled Mike Sayegh v. Janus Capital Corporation, et al. This suit alleges
that various defendants engaged in improper late trading and market timing activities in various funds also named as defendants. The
complaint further alleges that such activities were in violation of California Business and Professional Code Section 17200. This
suit has not been served on ASI. The Company believes that this suit may be included in the Multi-District action discussed above.
The Company's litigation is subject to many uncertainties, and given the complexity and scope, the outcomes cannot be predicted. It
is possible that the results of operations or the cash flow of the Company in a particular quarterly or annual period could be
materially affected by an ultimate unfavorable resolution of pending litigation and regulatory matters. Management believes,
however, that the ultimate outcome of all pending litigation and regulatory matters, after consideration of applicable reserves and
indemnification should not have a material adverse effect on the Company's financial position.
It should be noted that the judgments, settlements and expenses associated with many of these lawsuits, administrative and regulatory
matters, including the complaints described above, may, after satisfaction of certain retention requirements, fall within the purview
of SICL's indemnification obligations to Prudential Financial and its subsidiaries under the terms of the Acquisition. Those
obligations of SICL provide for indemnification of certain judgments, settlements, and costs and expenses associated with lawsuits
and other claims against the Company ("matters"), and apply only to matters, or groups of related matters, for which the costs and
expenses exceed $25 thousand individually. Those obligations only apply to such costs and expenses that exceed $10 million in the
aggregate, subject to reduction for insurance proceeds, certain accruals and any tax benefit applicable to such amounts, and those
obligations do not apply to the extent that such aggregate exceeds $1 billion.
PART II
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Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
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The Company is a wholly owned subsidiary of ASI. There is no public market for the Company's common stock.
Item 7. Management's Discussion and Analysis of Financial Position and Results of Operations
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Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") addresses the consolidated financial
condition of American Skandia Life Assurance Corporation as of December 31, 2003, compared with December 31, 2002, and its
consolidated results of operations for the years ended December 31, 2003, 2002 and 2001.
For purposes of MD&A, no explicit distinction is made between the pre-purchase accounting periods and the post purchase accounting
periods.
The Company offers a wide array of annuities, including: a) certain deferred and immediate annuities that are registered with the
Securities and Exchange Commission, including variable annuities with fixed interest rate investment options that include a market
value adjustment feature; b) certain other fixed deferred annuities that are not registered with the Securities and Exchange
Commission; and c) fixed, adjustable and variable immediate annuities. These markets are subject to regulatory oversight with
particular emphasis placed on company solvency and sales practices. These markets are also subject to increasing competitive
pressure as the legal barriers, which have historically segregated the markets of the financial services industry, have been changed
through both legislative and judicial processes. Regulatory changes have opened the insurance industry to competition from other
financial institutions, particularly banks and mutual funds that are positioned to deliver competing investment products through
large, stable distribution channels.
Besides policy charges and fee income, the Company also earns revenues from asset management fees calculated on the average separate
account fund balances. The Company's operating expenses principally consist of insurance benefits provided, general business
expenses, commissions and other costs of selling and servicing the various products we sell.
The Company's profitability depends principally on its ability and Prudential Financial's ability to price and manage risk on
insurance products, to attract and retain customer assets, and to manage expenses. Specific drivers of our profitability include:
o the ability of the Company and Prudential Financial to manufacture and distribute products and services and to introduce
new products gaining market acceptance on a timely basis;
o the ability to price our insurance products at a level that enables us to earn a margin over the cost of providing benefits
and the expense of acquiring customers and administering those products;
o the mortality and morbidity experience on annuity products;
o persistency experience, which affects our ability to recover the cost of acquiring new business over the lives of the
contracts;
o the cost of administering insurance contracts and providing asset management products and services;
o the returns on invested assets, net of the amounts we credit to policyholders' accounts;
o the amount of our assets under management and changes in their fair value, which affect the amount of asset management fees
we receive; and
o the ability to generate favorable investment results through asset-liability management and strategic and tactical asset
allocation.
Application of Critical Accounting Policies
The preparation of financial statements in conformity with U.S. GAAP requires the application of accounting policies that often
involve a significant degree of judgment. Management, on an ongoing basis, reviews estimates and assumptions used in the preparation
of financial statements. If management determines that modifications in assumptions and estimates are appropriate given current facts
and circumstances, results of operations and financial position as reported in the Consolidated Financial Statements may change
significantly.
The following sections discuss the accounting policies applied in preparing our financial statements that management believes are
most dependent on the application of estimates and assumptions.
Purchase accounting
In accordance with purchase accounting guidelines, the Company "fair valued" its assets and liabilities as of the date of
acquisition. The most significant adjustments related to the value of the unamortized deferred policy acquisition costs ("DAC")
asset being assigned a value of zero, the future fees payable to ASI liability was decreased by $256.6 million and an asset for
valuation of business acquired ("VOBA") was established for $440.1 million (see Notes 4, 5 and 6 in the December 31, 2003 financial
statements included herein for further discussion).
Valuation of investments
For fixed maturities classified as available for sale, the impact of changes in fair value is recorded in "Accumulated other
comprehensive (loss) income," a separate component of equity. However, the carrying value of these securities is reduced, with a
corresponding charge to earnings, when a decline in value is considered to be other than temporary. Factors we consider in
determining whether a decline in value is other than temporary include: whether the decline is substantial; the length of time the
fair value has been less than cost, generally six months; the financial strength rating of the issuer; the Company's ability and
intent to hold the investment; and the financial condition and near-term prospects of the issuer. This corresponding charge is
referred to as an impairment and is reflected in "Realized investment (losses) gains, net" in the Consolidated Statements of
Operations and Comprehensive Income. The level of impairment losses can be expected to increase when economic conditions worsen and
decrease when economic conditions improve.
As of the date of acquisition, the Company changed its classification of equity securities held in support of a deferred compensation
plan from available-for-sale to trading. New management made this decision to align with Prudential Financial's accounting policy.
These equity securities were fair valued on May 1, 2003 under purchase accounting and therefore there was no income statement impact
for the change in classification. Such investments are now carried at fair value with changes in unrealized gains and losses
reported in the Consolidated Statements of Operations and Comprehensive Income, as a component of "Other income."
Deferred policy acquisition costs
For most annuity products that we sell, we defer costs, net of reinsurance, that vary with and are related primarily to the
production of new business to the extent these costs are deemed recoverable from future profits, and we record these costs as an
asset known as DAC in the Consolidated Statements of Financial Position. We amortize this DAC asset, as well as VOBA, over the
expected lives of the contracts, based on the level and timing of estimated profits. The amortization rate is periodically updated
to reflect current period experience or changes in assumptions that affect future profitability, such as lapse rates, investment
returns, mortality experience, expense margins and surrender charges.
Expected profitability considers, among other assumptions, our best estimate of future asset returns to estimate the future fees we
expect to earn, the costs associated with GMDB and living benefit guarantees we expect to incur and other profitability factors. For
the average remaining life of our variable annuity contracts in force as of December 31, 2003, our evaluation of DAC and VOBA is
based on an 8.0% annual blended rate of return. Deterioration of market conditions may result in increases in the amortization of
DAC and VOBA, while a further improvement in market conditions may result in a decrease in the amortization of DAC and VOBA. These
changes in DAC and VOBA balances are included as a component of "General, administrative and other expenses" in our Consolidated
Statements of Operations and Comprehensive Income.
See "Results of Operations" for discussion of the impact of DAC amortization on our results of our annuities products, including
increased amortization recorded in 2002 reflecting lower estimates of future gross profits.
Future fees payable to ASI
In a series of transactions with ASI, the Company sold certain rights to receive a portion of future fees and contract charges
expected to be realized on designated blocks of deferred annuity contracts.
The proceeds from the sales have been recorded as a liability and are being amortized over the remaining surrender charge period of
the designated contracts using the interest method. The Company did not sell the right to receive future fees and charges after the
expiration of the surrender charge period.
In connection with these sales, ASI, through special purpose trusts, issued collateralized notes in private placements, which were
secured by the rights to receive future fees and charges purchased from the Company. As part of the Acquisition, the notes issued by
ASI were repaid.
Under the terms of the securitization purchase agreements, the rights sold 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 (generally 6 to 8
years). As a result of purchase accounting, the liability was reduced to reflect the discounted estimated future payments to be
made and has been subsequently reduced by amortization according to a revised schedule. If actual mortality and expense charges and
contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction
by transaction basis, ASI has no recourse against the Company.
The Company has determined, using assumptions for lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the
Company's assets under management, that the discounted estimated future payments to ASI would be $337.1 million and $429.8 million as
of December 31, 2003 and 2002, respectively.
Deferred taxes
Deferred income taxes are generally recognized, based on enacted rates, when assets and liabilities have different values for
financial statement and tax reporting purposes. A valuation allowance is recorded to reduce a deferred tax asset to that portion
that is expected to more likely than not be realized.
Management believes that based on its historical pattern of taxable income, the Company will produce sufficient income in the future
to realize its deferred tax assets. Adjustments to the valuation allowance will be made if there is a change in management's
assessment of the amount of the deferred tax asset that is realizable.
Reserves for contingencies
A contingency is an existing condition that involves a degree of uncertainty that will ultimately be resolved upon the occurrence of
future events. Under U.S. GAAP, reserves for contingencies are required to be established when the future event is probable and its
impact can be reasonably estimated. An example is the establishment of a reserve for losses in connection with an unresolved legal
matter. The initial reserve reflects management's best estimate of the probable cost of ultimate resolution of the matter and is
revised accordingly as facts and circumstances change and, ultimately, when the matter is brought to closure. In situations in which
the Company is to be indemnified by SICL, there will be no financial impact on the Consolidated Statements of Operations and
Comprehensive Income. See Note 11 to the Consolidated Financial Statements for a further discussion of indemnification agreements.
Other significant estimates
In addition to the items discussed above, the application of U.S. GAAP requires management to make other estimates and assumptions.
Recently Issued Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.
The Company's Changes in Financial Position and Results of Operations are described below.
Changes in Financial Position
2003 versus 2002
From December 31, 2002 to December 31, 2003 there was an increase of $3.5 billion in total assets from $23.7 billion to $27.2
billion. The largest increase was in separate account assets, which increased by $3.9 billion primarily from market value
appreciation as a result of recoveries in the equity markets during 2003. DAC decreased by $995.0 million, deferred tax assets
increased by $218.7 million and VOBA increased by $402.2 million, all primarily due to or related to purchase accounting.
During the year, liabilities increased by $3.6 billion from $23.0 billion to $26.7 billion. Corresponding with the asset change,
Separate account liabilities increased by $3.9 billion, as described above. Income taxes payable, which is a net number comprised of
payables and receivables, increased by $28.0 million primarily as a result of the Acquisition. Other liabilities increased by $68.3
million primarily due to the establishment of liabilities through purchase accounting for vacant office space, severance and an
indemnification agreement. Short-term borrowing increased by $106.0 million in order to fund the cash strain generated from
acquisition costs. Future fees payable to ASI decreased by $400.4 million primarily due to purchase accounting. Surplus notes
decreased due to the conversion of the notes to paid in capital as part of the Acquisition.
Results of Operations
2003 versus 2002
Net Income
Net income of $98.7 million for 2003 was an improvement of $264.0 million from the loss of $165.3 million for 2002. 2002 had an
additional charge for DAC amortization of approximately $278.0 million, which did not recur in 2003. Further details regarding the
components of revenues and expenses are described in the following paragraphs.
Revenues
Revenues decreased by $23.4 million, from $507.5 million to $484.1 million. Realized investment gains decreased by $27.3 million
mainly due to lower derivative income of $41.2 million. The prior year included economic hedge related gains from the Company's
derivative investments of $31.8 million compared to losses of $9.4 million in the current year. The Company has had no outstanding
derivative positions since May 2003.
Policy charges and fee income decreased by $12.3 million. M&E charges decreased by $11.1 million as a result of the decline in the
in-force business. Annuity fees are mainly asset-based fees, which are dependent on the fund balances. Average annuity separate
account fund balances have declined as a result of unfavorable valuation changes in the securities market over the past several years
resulting in a decrease in policy charges and fee income.
Net investment income increased by $7.0 million primarily as a result of a $13.9 million increase in net investment results on the
Company's separate account supporting its fixed, market value adjusted investment option due to an increase in average separate
account balances. Favorable net investment results were partially offset by decreased income from fixed maturities of $5.1 million.
Asset management fees decreased by $3.5 million as a result of lower average assets under management compared to last year. Asset
management fees are asset-based fees, which are dependent on the amount of assets under management.
Other income increased by $6.5 million due to the Company's change in its classification of equity securities from available-for-sale
to trading which resulted in an increase of $6.5 million of realized and unrealized gains in the current year.
Benefits and Expenses
Policyholders' benefits increased by $7.2 million primarily from increased GMDB payments. GMDB payments increased by $3.6 million
from $55.1 million in 2002 to $58.7 million for 2003.
As of December 31, 2003, the death benefit coverage in force (representing the amount that we would have to pay if all annuitants had
died on that date) was approximately $3.7 billion. The death benefit coverage in force for an annuity contract represents the excess
of the guaranteed benefit amount over the account value. The GMDB feature provides annuity contract holders with a guarantee that
the benefit received at death will be no less than a prescribed minimum amount. This minimum amount is generally based on the net
deposits paid into the contract and, for greater than 80% of the business in force as of December 31, 2003, this minimum guarantee is
applicable only for the first ten contract years or until a specified attained age. To the extent that the GMDB is higher than the
current account value at the time of death, the Company incurs a cost. This results in increased annuity policy benefits in periods
of declining financial markets and in periods of stable financial markets following a decline. Previously, accounting literature did
not prescribe the recognition of a liability for the expected future net costs associated with GMDB provisions. However, effective
January 1, 2004, we will adopt American Institute of Certified Public Accountants Statement of Position ("SOP") 03-01, "Accounting
and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts," which requires
us to record such a liability based on application of an expected benefit ratio to "cumulative assessments" through the balance sheet
date, and then subtracting "cumulative excess payments" from that date. We currently estimate this liability to be approximately
$3.0 million based on the difference between the "cumulative assessments" and "cumulative excess payments" measured from May 1, 2003,
the date of acquisition. In our periodic evaluation of unamortized VOBA and DAC associated with our variable annuity business, we
considered the expected net costs associated with the GMDB in our calculation of expected gross profits from this business.
Accordingly, the effect of establishing the GMDB reserve related to this business will be partially offset by an estimated increase
of approximately $1.0 million in unamortized VOBA and DAC, resulting in higher future amortization.
In addition to establishing a liability associated with the GMDB feature, SOP 03-01 requires a change in valuation and presentation
of our liability associated with the market value adjustment ("MVA") feature contained in certain annuity contracts. The MVA feature
requires the Company to pay to the contract holder upon surrender the accreted value of the fund as well as a market value adjustment
based on the crediting rates on the contract surrendered compared to crediting rates on newly issued contracts. Currently, this
liability is reflected at market value, which considers the effects of unrealized gains and losses in contract value resulting from
changes in crediting rates. Upon adoption of SOP 03-01, the Company will reclassify this liability from "Separate account
liabilities" to "Policyholders' account balances" and reduce it to reflect accreted value, which excludes the effect of unrealized
gains and losses in contract value resulting from changes in crediting rates. However, in valuing the VOBA established at the date
of acquisition, we considered the effect of unrealized gains and losses in contract value associated with annuities containing the
MVA feature on future cash flows. As a result, the reduction in the liability for the MVA feature will result in a net decrease in
VOBA of approximately $130.0 million, and lower future amortization. We currently estimate the net income statement impact of the
reduction in liability associated with the MVA feature to be approximately $20.0 million, which primarily represents the impact of
changes in crediting rates from May 1, 2003, the date of the Acquisition, through January 1, 2004, the date of the adoption of SOP
03-01.
Interest credited to policyholder account balances decreased by $65.5 million due to decreased amortization of deferred purchase
credits consistent with decreased amortization of DAC primarily as a result of purchase accounting.
General, administrative, and other expenses decreased by $373.6 million from the prior year. The primary reason was a decrease in
DAC amortization of $382.5 million as the prior year had an additional charge for DAC amortization of approximately $278.0 million.
Also contributing to decreased DAC amortization was the Company's DAC asset being assigned a fair value of zero, consistent with
purchase accounting guidance as of the date of acquisition. Partially offsetting this was an increase in net VOBA amortization of
$38.0 million related to purchase accounting.
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 planning concerns and
supplemental retirement needs. The Company has renewed its focus on its core variable annuity business, offering innovative
long-term savings and income products, strengthening its wholesaling efforts and providing consistently good customer service in
order to gain market share and improve profitability in an increasingly competitive market.
Tax Legislation
Current federal income tax laws generally permit certain holders to defer taxation on the build-up of value of annuities and life
insurance products until payments are actually made to the policyholder or other beneficiary and to exclude the build-up of value,
which is paid as a death benefit under a life insurance contract. Congress from time to time considers legislation that could make
our products less attractive to consumers, including legislation that would reduce or eliminate the benefit of this deferral on some
annuities and insurance products, as well as other types of changes that could reduce or eliminate the attractiveness of annuities
and life insurance products to consumers.
In June 2001, the Economic Growth and Tax Relief Reconciliation Act of 2001 (the "2001 Act") was enacted. The 2001 Act contains
provisions that will, over time, significantly lower individual tax rates. This will have the effect of reducing the benefits of tax
deferral on the build-up of value of annuities and life insurance products. The 2001 Act also includes provisions that will
eliminate, over time, the estate, gift and generation-skipping taxes and partially eliminates the step-up in basis rule applicable to
property held in a decedent's estate. Some of these changes might hinder our sales and result in the increased surrender of insurance
and annuity products.
In May 2003, the Jobs and Growth Tax Relief Reconcilation Act of 2003 (the "2003 Act") was enacted Individual taxpayers are the
principal beneficiaries of the 2003 Act, which includes an acceleration of certain of the income tax rate reductions enacted
originally under the 2001 Act, as well as capital gains and dividend tax rate reductions. Although most of these rate reductions
expire after 2008 or later, these reductions have the effect of reducing the benefits of tax deferral on the build-up of value of
annuities and life insurance products. These changes may hinder our sales and result in increased surrender of insurance and annuity
products.
The Bush Administration has also recently proposed (i) that many of the foregoing rate reductions be made permanent and (ii) several
tax- favored savings initiatives that, if enacted by Congress, could also adversely affect the sale of our annuity, life and
tax-qualified retirement products and increase the surrender of such products.
In addition, NAIC statutory reserving guidelines and/or interpretations of those guidelines may change in the future. Such changes
may require the Company to modify, perhaps materially, its statutory-based reserves for variable annuity contracts.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------------
Risk Management and Market Risk
As an indirect wholly-owned subsidiary of Prudential Financial, the Company benefits from the risk management strategies implemented
by its parent. Risk management includes the identification and measurement of various forms of risk, establishment of acceptable
risk thresholds, and creation of processes intended to maintain risks within these thresholds while optimizing returns on the
underlying assets or liabilities. Prudential Financial considers risk management an integral part of its core businesses.
Market risk is the risk of change in the value of financial instruments as a result of absolute or relative changes in interest
rates, foreign currency exchange rates or equity or commodity prices. To varying degrees, the investment activities supporting all
of the Company's products and services generate market risks. Market risks incurred and the strategies for managing these risks vary
by product.
With respect to our fixed rate options in our variable annuity products, the Company incurs market risk primarily in the form of
interest rate risk. The Company manages this risk through asset/liability management strategies that seek to match the interest rate
sensitivity of the assets to that of the underlying liabilities. The Company also mitigates this risk through a MVA provision on the
Company's fixed investment option. This MVA provision limits interest rate risk when a contract owner withdraws funds or transfers
funds to variable investment options before the end of the guarantee period. The Company's overall objective in these strategies is
to limit the net change in value of assets and liabilities arising from interest rate movements. While it is more difficult to
measure the interest sensitivity of the Company's insurance liabilities than that of the related assets, to the extent the Company
can measure such sensitivities the Company believes that interest rate movements will generate asset value changes that substantially
offset changes in the value of the liabilities relating to the underlying products.
For variable annuities, excluding the fixed rate options in these products, the Company's main exposure is the risk that asset-based
fees may decrease as a result of declines in assets under management due to changes in market performance. For variable annuity
products with minimum guaranteed death and living benefits, the Company also faces the risk that declines in the value of underlying
investments as a result of changes in securities prices may increase the Company's net exposure to death and living benefits under
these contracts.
Asset/Liability Management
The Company's asset/liability management strategies seek to match the interest rate sensitivity of the assets to that of the
underlying liabilities and to construct asset mixes consonant with product features, such as interest crediting strategies. The
Company also considers risk-based capital implications in its asset/liability management strategies. The Company seeks to maintain
interest rate and equity exposures within established ranges, which are periodically adjusted based on market conditions and the
design of related insurance products sold to customers. The Company's risk managers, who work with portfolio and asset managers but
under separate management, establish investment risk limits for exposures to any issuer, or type of security and oversee efforts to
manage risk within policy constraints set by management and approved by the Board of Directors.
The Company uses duration and convexity analyses to estimate the price sensitivity of assets and liabilities to interest rate
changes. Duration is an estimate of the sensitivity of the fair value of a financial instrument relative to changes in interest
rates. Convexity is an estimate of the rate of change of duration with respect to changes in interest rate, and is commonly used for
managing assets with prepayment risk, such as mortgage-backed securities. The Company seeks to manage its interest rate exposure by
matching the relative sensitivity of asset and liability values to interest rate changes, or controlling "duration mismatch" of
assets and liabilities. The Company has a target duration mismatch level of plus or minus 0.5 years. As of December 31, 2003, the
difference between the pre-tax duration of assets and the target duration of liabilities in the Company's duration managed portfolio
was plus 0.04 years.
The Company also performs portfolio stress testing as part of its regulatory cash flow testing. In this testing, the Company
evaluates the impact of altering its interest-sensitive assumptions under various moderately adverse interest rate environments.
These interest-sensitive assumptions relate to the timing and amounts of redemptions and pre-payments of fixed-income securities and
lapses and surrenders of insurance products. The Company evaluates any shortfalls that this cash flow testing reveals to determine if
there is a need to increase statutory reserves or adjust portfolio management strategies.
Market Risk Related to Interest Rate Risk
Fluctuations in interest rates can potentially impact the Company's profitability and cash flows. At December 31, 2003, 93% of
assets held under management by the Company are in non-guaranteed separate accounts for which the Company's interest rate and equity
market exposure is not significant, as the contract owner assumes substantially all of the investment risk. Of the remaining 7% 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 estimates of the risk variables of the insurance liabilities supported by the assets.
At December 31, 2003, 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, fixed supplementary contracts, the fixed
investment option offered in its 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 assesses interest rate sensitivity for its financial assets, financial liabilities and derivatives using hypothetical
test scenarios which assume both upward and downward 100 basis point parallel shifts in the yield curve from prevailing interest
rates. The following tables set forth the potential loss in fair value from a hypothetical 100 basis point upward shift at December
31, 2003 and 2002, because this scenario results in the greatest net exposure to interest rate risk of the hypothetical scenarios
tested at those dates. While the test scenario is for illustrative purposes only and does not reflect management's expectations
regarding future interest rates or the performance of fixed income markets, it is a near-term, reasonably possible hypothetical
change that illustrates the potential impact of such events. These test scenarios do not measure the changes in value that could
result from non-parallel shifts in the yield curve, which would be expected to produce different changes in discount rates for
different maturities. As a result, the actual loss in fair value from a 100 basis point change in interest rates could be different
from that indicated by these calculations.
December 31, 2003
-----------------------------------------------
-----------------------------------------------
Fair Value
After + 100
Basis Point
Estimated Parallel Hypothetical
Fair Yield Curve Change in
Value Shift Fair Value
-----------------------------------------------
Financial Assets with Interest Rate (In millions)
Risk:
Financial Assets:
Fixed Maturities:
Available for Sale $ 425 $ 411 $ (14)
Policy Loans 8 8 -
----------------
Total Estimated Potential Loss $ (14)
================
December 31, 2002
-----------------------------------------------
-----------------------------------------------
Fair Value
After + 100
Basis Point
Estimated Parallel Hypothetical
Fair Yield Curve Change in
Value Shift Fair Value
-----------------------------------------------
Financial Assets with Interest Rate (In millions)
Risk:
Financial Assets:
Fixed Maturities:
Available for Sale $ 399 $ 386 $ (13)
Policy Loans 8 8 -
----------------
Total Estimated Potential Loss $ (13)
================
The estimated changes in fair values of the financial assets shown above relate to assets invested in support of the Company's
insurance liabilities, but do not include assets associated with products for which investment risk is borne primarily by the
contract holders rather than the Company.
The Company's deferred annuity products offer a fixed investment 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 contract owner. Guarantee period options available
range from one to ten years. Withdrawal of funds, or transfer of funds to variable investment options, before the end of the
guarantee period subjects the contract owner to a 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 decrease or increase in the market
value of the securities underlying the guarantee. However, the Company still takes on the default risk for the underlying securities
and the interest rate risk of reinvestment of interest payments.
As of December 31, 2003, assets held in the Company's guaranteed separate account, primarily fixed income investments supporting the
liability associated with the MVA, had a fair value of $1.8 billion. The Company performed a sensitivity analysis on these
interest-sensitive assets and liabilities at December 31, 2003. The analysis showed that an immediate decrease of 100 basis points
in interest rates would result in a net increase in assets and the corresponding liabilities of approximately $63.0 million and $60.0
million, respectively. An analysis of a 100 basis point decline in interest rates at December 31, 2002, showed a net increase in
interest-sensitive assets and the corresponding liabilities of approximately $69.0 million.
Market Risk Related to Equity Prices
The Company has a portfolio of equity investments consisting of 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.
For equity investments within the separate accounts, the investment risk is borne primarily by the contract holder rather than by the
Company.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
Information required with respect to this Item 8 regarding Financial Statements and Supplementary Data is set forth commencing on
page F-3 hereof. See Index to Consolidated Financial Statements elsewhere in this Annual Report.
Item 9. Changes in and Disagreements with Independent Accountants on Accounting and Financial Disclosure
- ---------------------------------------------------------------------------------------------------------
None.
Item 9a. Controls and Procedures
- -----------------------------------
In order to ensure that the information we must disclose in our filings with the Securities and Exchange Commission is recorded,
processed, summarized, and reported on a timely basis, the Company's management, including our Chief Executive Officer and Chief
Financial Officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e), as of December 31, 2003. Based on such evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that, as of December 31, 2003, our disclosure controls and procedures were effective in timely
alerting them to material information relating to us required to be included in our periodic SEC filings. There has been no change
in our internal control over financial reporting during the quarter ended December 31, 2003, that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
We have adopted a code of conduct, known as Making the Right Choices, which applies to our chief executive officer, chief financial
officer, and our controller, as well as to our directors and other employees. Making the Right Choices contains a code of ethics,
which is posted on our website at www.investor.prudential.com. Our code of ethics, any amendments and any waiver under our code of
ethics granted to any of our directors or executive officers will be available free of charge on our website at
www.investor.prudential.com.
Item 14. Principal Accounting Fees and Services
- --------------------------------------------------
The Audit Committee of the Board of Directors of Prudential Financial (the "Audit Committee") has appointed PricewaterhouseCoopers
LLP ("PwC") as the independent auditors of Prudential Financial and certain of its domestic and international subsidiaries, including
the Company. The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services
provided by the independent auditor. With respect to the services of PwC, the specific information called for by this item is hereby
incorporated by reference to the section entitled "Item 2 - Ratification of the Appointment of Independent Auditors" in Prudential
Financial's definitive proxy statement for the Annual Meeting of Shareholders to be held on June 8, 2004, to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the year ended December 31, 2003.
Prior to the Acquisition, Ernst & Young LLP ("E&Y") served as the Company's certifying accountants. The following is a summary and
description of fees for services provided by E&Y during 2003 and 2002.
Audit Fees
The aggregate fees for professional services rendered for audits of consolidated financial statements of American Skandia Life
Assurance Corporation, issuance of comfort letters, agreed-upon procedures required by regulation, consents and assistance with
review of documents filed with the Securities and Exchange Commission were $49 thousand for 2003 and $488 thousand for 2002.
Audit Related Fees
The aggregate fees for assurance and related services including due diligence, internal control reports and benefit plan audits were
$63 thousand for 2003 and $73 thousand for 2002.
Tax Fees
The aggregate fees for services rendered for tax return preparation, tax advice, employee benefit plans and requests for rulings were
$364 thousand in 2003 and $645 thousand in 2002.
All Other Fees
The aggregate fees for all other services rendered, including financial information systems and design, were $0 for 2003 and $0 for
2002.
PART IV
-------
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------------------------------------------------------------------------
(a)
(1) Financial Statements Financial Statements of the Registrant and its subsidiary are listed in the
accompanying "Index to Consolidated Financial Statements" on page F-1 hereof and
are filed as part of this Report.
(2) Financial Statement Schedules None.*
(3) Exhibits
--------
2. None.
3. (i) Certificate Restating the Certificate of Incorporation of American Skandia Life Assurance Corporation, dated
February 8, 1988, is filed herewith.
(ii) Certificate of Amendment to the Restated Certificate of Incorporation of American Skandia Life Assurance
Corporation, dated December 17, 1999, is filed herewith.
(iii) By-Laws of American Skandia Life Assurance Corporation, as amended June 17, 1998, are
filed herewith.
4. Instruments defining the right of security holders including indentures are incorporated by reference to the
Company's Registration No. 333-103889, 33-88360, 33-89676, 33-91400, 333-00995, 333-02867, 333-24989, 333-25761,
333-97939, 333-26695, 333-97943 and 333-97941.
9. None.
10. None.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. Not applicable.
16. Letter regarding Change in Certifying Accountant - Incorporated by reference to Company's Form 8-K, Commission file
number 33-44202, filed October 9, 2003.
18. None.
21. Not applicable.
22. None.
23. Not applicable.
24. Powers of Attorney are filed herewith.
31.1 Section 302 Certification of the Chief Executive Officer
31.2 Section 302 Certification of the Chief Financial Officer
32.1 Section 906 Certification of the Chief Executive Officer
32.2 Section 906 Certification of the Chief Financial Officer
(b) Report on Form 8-K
Form 8-K, Commission file number 33-44202, filed on October 9, 2003, reporting a Change in
the Company's Certifying Accountant, as of October 3, 2003.
* Schedules are omitted because they are either not applicable or because the information required therein is included in the Notes
to Consolidated Financial Statements.
SIGNATURES
-----------
Pursuant to the requirements of Section 13, or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Shelton, and state of Connecticut on
the 19th day of March 2004.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Registrant)
By: /s/ Zafar Rashid
-------------------
Zafar Rashid
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities indicated on March 19, 2004.
Name Title
- ---- -----
James J. Avery, Jr. * Director
- ----------------------
James J. Avery, Jr.
Vivian L. Banta * Director
- ------------------------
Vivian L. Banta
Richard J. Carbone * Director
- ---------------------------
Richard J. Carbone
Helen M. Galt * Director
- ----------------------
Helen M. Galt
Ronald Paul Joelson * Director
- ---------------------------
Ronald Paul Joelson
/s/ David R. Odenath, Jr. Chief Executive Officer, President and Director
- ----------------------------
David R. Odenath, Jr.
Andrew J. Mako * Director
- -------------------------
Andrew J. Mako
* By: /s/ Zafar Rashid
------------------------
Zafar Rashid
(Attorney-in-Fact)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Consolidated Financial Statements and
Report of Independent Auditors
December 31, 2003 and 2002
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Statements Page No.
- -------------------- --------
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Reports of Independent Auditors F - 2
Consolidated Financial Statements:
Consolidated Statements of Financial Position
December 31, 2003 and 2002 F - 4
Consolidated Statements of Operations and Comprehensive Income
Eight months ended December 31, 2003, Four months ended April 30, 2003 and
Years ended December 31, 2002 and 2001 F - 5
Consolidated Statements of Stockholder's Equity
Eight months ended December 31, 2003, Four months ended April 30, 2003 and
Years ended December 31, 2002 and 2001 F - 6
Consolidated Statements of Cash Flows
Eight months ended December 31, 2003, Four months ended April 30, 2003 and
Years ended December 31, 2002 and 2001 F - 7
Notes to Consolidated Financial Statements F - 8
Report of Independent Auditors
To the Board of Directors and Stockholder
of American Skandia Life Assurance Corporation:
In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial
position of American Skandia Life Assurance Corporation (an indirect wholly-owned subsidiary of Prudential Financial, Inc.,
effective May 1, 2003) at December 31, 2003, and the results of its operations and its cash flows for the eight months ended December 31,
2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our
audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of
America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
February 27, 2004
Report of Independent Auditors
To the Board of Directors and Stockholder
of American Skandia Life Assurance Corporation:
In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the results of
operations and cash flows of American Skandia Life Assurance Corporation (an indirect wholly-owned subsidiary of Prudential
Financial, Inc., effective May 1, 2003) and its subsidiary for the period from January 1, 2003 through April 30, 2003 in conformity with
accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
February 27, 2004
Report of Independent Auditors
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying consolidated statements of financial position of American Skandia Life Assurance Corporation (the
Company) as of December 31, 2002 and 2001, and the related consolidated statements of operations and comprehensive income (loss),
stockholder's equity, and cash flows for each of the two years in the period ended December 31, 2002. These financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these 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, 2002 and 2001, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.
As discussed in Note 2, in 2002 the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets.
As discussed in Note 2, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities.
/s/ ERNST & YOUNG LLP
Hartford, Connecticut
February 3, 2003
American Skandia Life Assurance Corporation
Consolidated Statements of Financial Position
December 31, 2003 and 2002 (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Successor Predecessor
------------------ -----------------
2003 2002
------------------ -----------------
ASSETS
Fixed maturities available for sale,
at fair value (amortized cost, 2003: $427,705; 2002: $379,422) $ 425,231 $ 398,601
Equity securities trading, at fair value (cost of $54,792) 59,485 -
Equity securities available for sale, at fair value (cost of $52,017) - 51,769
Policy loans 8,371 7,559
Short-term investments 39,587 -
Other short-term investments - 10,370
------------------ -----------------
Total investments 532,674 468,299
Cash and cash equivalents - 51,339
Deferred policy acquisition costs 122,572 1,117,544
Accrued investment income 3,969 4,196
Reinsurance recoverable 3,819 5,447
Receivables from Parent and affiliates 3,200 2,810
Deferred tax asset 256,950 38,206
Valuation of business acquired 402,169 -
Other assets 94,568 115,131
Separate account assets 25,817,612 21,905,613
------------------ -----------------
TOTAL ASSETS $ 27,237,533 $ 23,708,585
================== =================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Policyholders' account balances $ 132,234 $ 140,496
Future policy benefits and other policyholder liabilities 13,681 8,853
Income taxes payable 34,528 6,547
Payables to Parent and affiliates 16,396 2,223
Securities sold under agreements to repurchase 20,850 -
Short-term borrowing 116,000 10,000
Future fees payable to American Skandia, Inc. ("ASI") 307,879 708,249
Surplus notes - 110,000
Other liabilities 201,856 133,543
Separate account liabilities 25,817,612 21,905,613
------------------ -----------------
Total liabilities 26,661,036 23,025,524
------------------ -----------------
Contingencies (See Footnote 11)
Stockholder's Equity
Common stock, $100 par value;
25,000 shares, authorized,
issued and outstanding 2,500 2,500
Paid-in-capital 485,100 595,049
Retained earnings 90,856 73,821
Deferred compensation (360) -
Accumulated other comprehensive (loss) income (1,599) 11,691
------------------ -----------------
Total stockholder's equity 576,497 683,061
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 27,237,533 $ 23,708,585
================== =================
See Notes to Consolidated Financial Statements
The purchase method of accounting was used to record the fair values of assets acquired and liabilities assumed by Prudential
Financial, Inc. and "pushed-down" to the Company. This accounting will most notably result in decreased amortization and
depreciation reported in future periods. Accordingly, the accompanying financial statements of the Company, when indirectly
wholly-owned by Skandia Insurance Company Ltd., and the Company, currently indirectly wholly-owned by Prudential Financial, Inc., are
not comparable in many material respects.
American Skandia Life Assurance Corporation
Consolidated Statements of Operations and Comprehensive Income
Eight months ended December 31, 2003, Four months ended April 30, 2003 and
- ----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31, 2002 and 2001 (in thousands)
Successor Predecessor Predecessor Predecessor
-------------- -------------- -------------- ---------------
-------------- -------------- ---------------
Eight months Four months
ended ended April 30,
December 31,
2003 2003 2002 2001
-------------- -------------- -------------- ---------------
--------------
REVENUES
Premiums $ 7,439 $ 2,496 $ 3,895 $ 2,600
Policy charges and fee income 241,955 109,213 363,420 391,694
Net investment income (loss) 26,707 (1,289) 18,415 27,308
Realized investment (losses) gains, (472) (4,601) 22,189 12,955
net
Asset management fees 66,108 28,092 97,650 111,196
Other income 7,862 618 1,945 1,594
-------------- -------------- -------------- ---------------
Total revenues 349,599 134,529 507,514 547,347
-------------- -------------- -------------- ---------------
BENEFITS AND EXPENSES
Policyholders' benefits 43,680 23,946 60,415 (3,379)
Interest credited to policyholders'
account balances 4,689 13,693 83,911 61,818
General, administrative and other
expenses 159,973 97,640 631,255 448,641
-------------- -------------- -------------- ---------------
Total benefits and expenses 208,342 135,279 775,581 507,080
-------------- -------------- -------------- ---------------
Income (loss) from operations before
income taxes 141,257 (750) (268,067) 40,267
-------------- -------------- -------------- ---------------
Income tax expense (benefit) 50,401 (8,544) (102,810) 7,168
-------------- -------------- -------------- ---------------
NET INCOME (LOSS) 90,856 7,794 (165,257) 33,099
-------------- -------------- -------------- ---------------
Other comprehensive (loss) income, net
of tax (1,599) (269) 10,930 (342)
-------------- -------------- -------------- ---------------
TOTAL COMPREHENSIVE INCOME
(LOSS) $ 89,257 $ 7,525 $(154,327) $ 32,757
============== ============== ============== ===============
See Notes to Consolidated Financial Statements
The purchase method of accounting was used to record the fair values of assets acquired and liabilities assumed by Prudential
Financial, Inc. and "pushed-down" to the Company. This accounting will most notably result in decreased amortization and
depreciation reported in future periods. Accordingly, the accompanying financial statements of the Company, when indirectly
wholly-owned by Skandia Insurance Company Ltd., and the Company, currently indirectly wholly-owned by Prudential Financial, Inc., are
not comparable in many material respects.
American Skandia Life Assurance Corporation
Consolidated Statements of Stockholder's Equity
Eight months ended December 31, 2003, Four months ended April 30, 2003 and Years ended December 31, 2002 and 2001 (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------------------
Accumulated
other Total
Paid-in- Retained Deferred comprehensive stockholder's
Common capital earnings compensation income equity
Stock
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Balance, January 1, 2001 (Predecessor) $ $ $ 205,979 $ - $ 1,103 $ 496,911
2,500 287,329
Net income - - - 33,099 - - 33,099
Capital contributions - 48,000 - - 48,000
Change in foreign currency
translation adjustments, net of - - - - - (67) (67)
taxes
Change in net unrealized investment
gains, net of reclassification
adjustment and taxes - - - - - (275) (275)
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Balance, December 31, 2001
(Predecessor) 2,500 335,329 239,078 - 761 577,668
Net loss - - - (165,257) - - (165,257)
Capital contributions - - 259,720 - - - 259,720
Change in foreign currency
translation adjustments, net of - - - - (630) (630)
taxes
Change in net unrealized investment
gains, net of reclassification
adjustment and taxes - - - - - 11,560 11,560
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Balance, December 31, 2002
(Predecessor) 2,500 595,049 73,821 - 11,691 683,061
Net income - - - 7,794 - - 7,794
Capital contributions - - 2,183 - - - 2,183
Change in foreign currency
translation adjustments, net of - - - - - 615 615
taxes
Change in net unrealized investment
gains, net of reclassification
adjustment and taxes - - - (884) (884)
- -
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Balance, April 30, 2003 (Predecessor) 2,500 81,615 - 11,422 692,769
597,232
Acquisition purchase accounting
adjustments (See Footnote 4) - (112,187) (81,615) - (11,422) (205,224)
-----------------------------------------------------------------------------------------------
Balance, May 1, 2003 opening balance
sheet (Successor) 2,500 485,045 - - - 487,545
Net income - - 90,856 - - 90,856
Stock-based compensation - 55 - - - 55
Deferred compensation program - - - (360) - (360)
Change in net unrealized investment
gains, net of reclassification
adjustment and taxes - - - - - (1,599) (1,599)
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Balance, December 31, 2003 (Successor) $ 2,500 $ 485,100 $ 90,856 $ (360) $ (1,599) $ 576,497
===============================================================================================
See Notes to Consolidated Financial Statements
The purchase method of accounting was used to record the fair values of assets acquired and liabilities assumed by Prudential
Financial, Inc. and "pushed-down" to the Company. This accounting will most notably result in decreased amortization and
depreciation reported in future periods. Accordingly, the accompanying financial statements of the Company, when indirectly
wholly-owned by Skandia Insurance Company Ltd., and the Company, currently indirectly wholly-owned by Prudential Financial, Inc., are
not comparable in many material respects.
American Skandia Life Assurance Corporation
Consolidated Statements of Cash Flows
Eight months ended December 31, 2003, Four months ended April 30, 2003 and Years ended December 31, 2002 and 2001 (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------------------
Successor Predecessor Predecessor Predecessor
------------------- ---------------- ---------------- ---------------
Eight months Four months
ended December ended April
31, 2003 30, 2003 2002 2001
------------------- ---------------- ---------------- ---------------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income (loss) $ 90,856 $ 7,794 $ (165,257) $ 33,099
Adjustments to reconcile net income (loss) to net cash from
(used in) operating activities:
Realized investment losses (gains), net 472 4,601 (22,189) (12,955)
Amortization and depreciation 58,447 5,288 21,649 13,374
Change in:
Policy reserves 6,580 4,288 3,293 (38,742)
Accrued investment income 515 (288) 541 472
Net receivable/payable to Parent and affiliates 13,509 124 (98,339) 104,123
Policy loans (774) (38) (1,000) (2,813)
Deferred policy acquisition costs (122,572) (12,601) 265,737 14,911
Income taxes payable/receivable (3,030) (464) 37,084 4,083
Other, net (1,249) (3,588) (169,312) 77,400
------------------- ---------------- ---------------- ---------------
Cash Flows From (Used in) Operating Activities 42,754 5,116 (127,793) 192,952
------------------- ---------------- ---------------- ---------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Proceeds from the sale/maturity of
fixed maturities available for sale 75,101 131,628 367,263 390,816
Payments for the purchase of
fixed maturities available for sale (103,237) (135,885) (388,053) (462,820)
Proceeds from the sale of shares in equity securities 39,920 10,955 34,220 25,228
Payments for the purchase of shares in equity
securities and dividend reinvestments (25,951) (24,809) (49,713) (55,430)
Short-term investments, net (39,587) - - -
Other short-term investments, net - 1,019 26,958 9,518
------------------- ---------------- ---------------- ---------------
Cash Flows Used in Investing Activities (53,754) (17,092) (9,325) (92,688)
------------------- ---------------- ---------------- ---------------
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES:
Capital contribution - 2,183 259,720 48,000
Decrease in future fees payable to ASI, net (80,393) (63,343) (91,223) (137,982)
Securities sold under agreements to repurchase 20,850 - - -
Net increase in short-term borrowing 71,000 35,000 - -
Pay down of surplus notes - - (34,000) (15,000)
Stock-based compensation 55 - - -
Deferred compensation program (360) - - -
Deposits to contract owner accounts 42,361 155,034 192,263 276,827
Withdrawals from contract owner accounts (153,384) (63,357) (164,964) (130,476)
Change in contract owner accounts, net of
investment earnings 82,853 (77,809) 27,631 (154,271)
------------------- ---------------- ---------------- ---------------
Cash Flows (Used in) From Financing Activities (17,018) (12,292) 189,427 (112,902)
------------------- ---------------- ---------------- ---------------
Net (decrease) increase in cash and cash equivalents (28,018) (24,268) 52,309 (12,638)
Change in foreign currency translation, net - 947 (970) (103)
Cash and cash equivalents, beginning of period 28,018 51,339 - 12,741
------------------- ---------------- ---------------- ---------------
------------------- ---------------- ---------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ - $ 28,018 $ 51,339 $ -
=================== ================ ================ ===============
=================== ================ ================ ===============
Income taxes paid (received) $ 877 $ 13 $ (40,823) $ (43,130)
=================== ================ ================ ===============
=================== ================ ================ ===============
Interest paid (received) $ 14,454 $ (7,788) $ 23,967 $ 56,831
=================== ================ ================ ===============
See Notes to Consolidated Financial Statements
The purchase method of accounting was used to record the fair values of assets acquired and liabilities assumed by Prudential
Financial, Inc. and "pushed-down" to the Company. This accounting will most notably result in decreased amortization and
depreciation reported in future periods. Accordingly, the accompanying financial statements of the Company, when indirectly
wholly-owned by Skandia Insurance Company Ltd., and the Company, currently indirectly wholly-owned by Prudential Financial, Inc., are
not comparable in many material respects.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
1. BUSINESS
American Skandia Life Assurance Corporation (the "Company"), with its principal offices in Shelton, Connecticut, is an indirect
wholly-owned subsidiary of Prudential Financial, Inc. ("Prudential Financial"). On December 19, 2002, Skandia Insurance Company Ltd.
(publ) ("SICL"), an insurance company organized under the laws of the Kingdom of Sweden, and the ultimate parent company of the
Company prior to May 1, 2003, entered into a definitive purchase agreement with Prudential Financial, a New Jersey corporation,
whereby Prudential Financial would acquire the Company and certain of its affiliates (the "Acquisition"). On May 1, 2003, the
initial phase of the Acquisition was consummated. This included Prudential Financial acquiring 90% of Skandia U.S. Inc.'s ("SUSI"),
an indirect parent of the Company, outstanding common stock. On September 9, 2003, Prudential Financial acquired the remaining 10%
of SUSI's outstanding common stock for $165 million (see Notes 4 and 6 for additional information on the Acquisition).
The Company develops long-term savings and retirement products, which are distributed through its affiliated broker/dealer company,
American Skandia Marketing, Incorporated. The Company currently issues variable deferred and immediate annuities for individuals and
groups in the United States of America and its territories.
Prior to April 30, 2003, the Company had a 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 shareholders' equity of $5.0 million as of December 31, 2002 and had generated
losses of $2.2 million, $2.7 million and $2.6 million for the four months ended April 30, 2003 and years ended December 31, 2002 and
2001, respectively. As part of the Acquisition, the Company sold its ownership interest in Skandia Vida to SICL on April 30, 2003
for $4.6 million. This transaction resulted in a loss of $422 thousand.
American Skandia, Inc. ("ASI"), the direct parent of the Company, intends to make additional capital contributions to the Company, as
needed, to enable it to comply with its reserve requirements and fund expenses in connection with its business. The Company has
complied with the National Association of Insurance Commissioner's ("NAIC") Risk-Based Capital ("RBC") reporting requirements and has
total adjusted capital well above required capital. The Company expects to maintain statutory capital between 310% and 330% of
Company Action Level Risk Based Capital. Generally, ASI is under no obligation to make such contributions and its assets do not back
the benefits payable under the Company's policyholder contracts. The Company received capital contributions of $0, $2.2 million,
$259.7 million and $48.0 million during the eight months ended December 31, 2003, four months ended April 30, 2003 and years ended
December 31, 2002 and 2001, respectively. Of this, $0, $1.3 million, $4.5 million and $2.5 million, respectively, was used to
support its investment in Skandia Vida.
The Company is engaged in a business that is highly competitive because of the large number of stock and mutual life insurance
companies and other entities engaged in marketing insurance products, and individual and group annuities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the accounts of the Company and until April 30, 2003, its ownership interest in Skandia
Vida. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States ("U.S. GAAP").
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, in particular deferred policy acquisition costs ("DAC") and future policy
benefits, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the period. Actual results could differ from those estimates.
Investments
Fixed maturities classified as "available for sale" are carried at estimated fair value. The amortized cost of fixed maturities is
written down to estimated fair value if a decline in value is considered to be other than temporary. See the discussion below on
realized investment gains and losses for a description of the accounting for impairment adjustments. Unrealized gains and losses on
fixed maturities "available for sale" are included in "Accumulated other comprehensive (loss) income", net of income taxes.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity securities, trading, as of the date of the Acquisition, the Company changed its classification of equity securities held in
support of a deferred compensation plan from available-for-sale to trading. New management made this decision to align with
Prudential Financial's accounting policy. Prior to May 1, 2003, these equity securities were carried at estimated fair value with
unrealized gains and losses included in "Accumulated other comprehensive (loss) income", net of income taxes. These equity
securities were fair valued on May 1, 2003 under purchase accounting and, therefore, there was no income statement impact for
the change in classification. Such investments are now carried at fair value with changes in unrealized gains and losses reported in
the Consolidated Statements of Operations and Comprehensive Income, as a component of "Other income". The cost of equity securities
is written down to estimated fair value when a decline in value is considered to be other than temporary. See the discussion below
on realized investment gains and losses for a description of the accounting for impairment adjustments.
Policy loans are carried at unpaid principal balances.
Short-term investments consist of highly liquid debt instruments with a maturity of greater than three months and less than twelve
months when purchased. These investments are carried at amortized cost, which because of their short-term nature, approximates fair
value.
Other short-term investments consist of the Company's investment in derivatives held for purposes other than trading. Prior to May
2003, the Company entered into derivative instruments, which consisted of equity put option contracts, for risk management purposes,
and not for trading or speculation. The Company economically hedged the guaranteed minimum death benefit ("GMDB") exposure
associated with equity market fluctuations. As the equity markets decline, the Company's exposure to future GMDB claims increases.
Conversely, as the equity markets increase, the Company's exposure to future GMDB claims decreases. The claims exposure is reduced
by the market value effect of the option contracts purchased.
Based on criteria described in Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS 137 and SFAS 138 (collectively "SFAS 133"), the Company's fair value hedges did not
qualify as "effective" hedges and, therefore, hedge accounting was not applied. Accordingly, the derivative investments were carried
at fair value with changes in unrealized gains and losses being recorded in income as those changes occurred. As such, both realized
and unrealized gains and losses are reported in the Consolidated Statements of Operations and Comprehensive Income, as a component of
"Realized investment (losses) gains, net".
The Company has had no outstanding derivative positions since May 17, 2003. As of December 31, 2002, the accumulated difference
between cost and market value on the Company's derivatives was an unrealized gain of $1.4 million. The amount of realized and
unrealized gains (losses) on the Company's derivatives recorded during the eight months ended December 31, 2003, four months ended
April 30, 2003 and years ended December 31, 2002 and 2001 was ($516) thousand, ($8.8) million $31.8 million and $12.0 million,
respectively.
Realized investment (losses) gains, net are computed using the specific identification method. Costs of fixed maturities and equity
securities are adjusted for impairments, which are declines in value that are considered to be other than temporary. Impairment
adjustments are included in "Realized investment (losses) gains, net" for fixed maturities and "Other income" for equity securities.
In evaluating whether a decline in value is other than temporary, the Company considers several factors including, but not limited to
the following: (1) whether the decline is substantial; (2) the duration (generally greater than six months); (3) the reasons for the
decline in value (credit event, interest related or market fluctuation); (4) the Company's ability and intent to hold the investments
for a period of time to allow for a recovery of value; and (5) the financial condition of and near-term prospects of the issuer.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, amounts due from banks, money market instruments, and other debt issues with a
maturity of three months or less when purchased.
Valuation of business acquired
As a result of purchase accounting, the Company reports a financial asset representing the valuation of business acquired ("VOBA").
VOBA represents the present value of future profits embedded in acquired insurance and annuity contracts. VOBA is determined by
estimating the net present value of future cash flows from the contracts in force at the date of acquisition. Future positive cash
flows generally include fees and other charges assessed to the contracts as long as they remain in force as well as fees collected
upon surrender, if applicable, while future negative cash flows include costs to administer contracts, and benefit payments. The
Company amortizes VOBA over the effective life of the acquired contracts. VOBA is amortized in proportion to estimated gross profits
arising from the contracts and anticipated future experience, which is evaluated regularly. The effect of changes in estimated gross
profits on unamortized VOBA is reflected in "General, administrative and other expenses" in the period such estimates of expected
future profits are revised.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred policy acquisition costs
The costs that vary with and that are related primarily to the production of new insurance and annuity business are deferred to the
extent such costs are deemed recoverable from future profits. Such costs include commissions, costs of policy issuance and
underwriting, and variable expenses. DAC is subject to recoverability testing at the end of each accounting period.
Policy acquisition costs are deferred and amortized over the expected life of the contracts (approximately 25 years) in proportion to
estimated gross profits arising principally from investment results, mortality and expense margins, and surrender charges based on
historical and anticipated future experience, which is updated periodically. The effect of changes to estimated gross profits on
unamortized deferred acquisition costs is reflected in "General administrative and other expenses" in the period such estimated gross
profits are revised. The deferred policy acquisition cost asset was assigned a fair value of zero, net of tax, as part of purchase
accounting.
As asset growth rates, during 2002 and 2001, were far below the Company's long-term assumption, the adjustment to the short-term
asset growth rate had risen to a level, before being capped, that in management's opinion was excessive in the current market
environment. Based on an analysis of those short-term rates, the related estimates of future gross profits and an impairment study,
management of the Company determined that the short-term asset growth rate should be reset to the level of the long-term growth rate
expectation as of September 30, 2002. This resulted in an acceleration of amortization of approximately $206.0 million.
Throughout 2002, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting
actual experience and the decline in the equity markets resulting in additional increased amortization of approximately $72.0 million.
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase are treated as financing arrangements and are carried at the amounts at which the
securities will be subsequently reacquired, including accrued interest, as specified in the respective agreements. Assets to be
repurchased are the same, or substantially the same, as the assets transferred and the transferor, through right of substitution,
maintains the right and ability to redeem the collateral on short notice. The market value of securities to be repurchased is
monitored and additional collateral is obtained, where appropriate, to protect against credit exposure. The Company's policies
require a minimum of 100% of the fair value of securities purchased under repurchase agreements to be maintained as collateral.
Securities repurchase agreements are used to generate net investment income. These instruments are short-term in nature (usually 30
days or less). Securities sold under repurchase agreements are collateralized principally by cash. The carrying amounts of these
instruments approximate fair value because of the relatively short period of time between the origination of the instruments and
their expected realization.
Separate account assets and liabilities
Separate account assets and liabilities are reported at estimated fair value and represent segregated funds, which are invested for
certain policyholders and other customers. The assets consist of equity securities, fixed maturities, short-term investments, and
cash and cash equivalents. The assets of each account are legally segregated and are generally not subject to claims that arise out
of any other business of the Company. Investment risks associated with market value changes are borne by the customers, except to
the extent of minimum guarantees made by the Company with respect to certain accounts. The investment income and gains or losses for
separate accounts generally accrue to the policyholders and are not included in the Consolidated Statements of Operations and
Comprehensive Income. Mortality, policy administration and surrender charges on the accounts are included in "Policy charges and fee
income". Asset management fees calculated on account assets are included in "Asset management fees".
"Separate account assets" are predominately shares in American Skandia Trust co-managed by American Skandia Investment Services,
Incorporated ("ASISI") and Prudential Investments LLC, which utilizes various fund managers as sub-advisors. The remaining assets
are shares in other mutual funds, which are managed by independent investment firms. The contract holder has the option of directing
funds to a wide variety of investment options, most of which invest in mutual funds. The investment risk on the variable portion of
a contract is borne by the contract holder, except to the extent of any guarantees by the Company, which are not separate account
liabilities. Fixed options with minimum guaranteed interest rates are also available. The Company bears the credit risk associated
with the investments that support these fixed options.
Included in "Separate account liabilities" are reserves of $1.8 billion at December 31, 2003 and 2002 relating to deferred annuity
investment options for which the contract holder is guaranteed a fixed rate of return. These reserves are calculated using the
Commissioners Annuity Reserve Valuation Method. "Separate account assets" of $1.8 billion at December 31, 2003 and 2002, consisting
of fixed maturities, equity securities, short-term securities, cash and cash equivalents, accrued investment
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
income, accrued liabilities and amounts due to/from the General Account, are held in support of these annuity obligations, pursuant
to state regulation.
Included in the general account, within "Policyholders' account balances", is the difference between the statutory liability, which
is held in the separate account, and the U.S. GAAP liability associated with the guaranteed, fixed rate investment options.
Other assets and other liabilities
"Other assets" consists primarily of deferred purchase credits. "Other liabilities" consists primarily of accrued expenses,
technical overdrafts and a liability to the participants of a deferred compensation plan.
The Company provides sales inducements to contract holders, which primarily include an up-front bonus added to the contract holder's
initial deposit for certain annuity contracts. These costs are deferred and recognized in "Other assets". They are amortized using
the same methodology and assumptions used to amortize DAC. The amortization expense is included as a component of "Interest credited
to policyholders' account balances".
Prior to May 1, 2003, the Company deferred certain bonus credits applied to contract holder deposits. The credit was reported as a
contract holder liability within "Separate account liabilities" and the deferred expense was reported as a component of "Other
assets". As the contract holder must keep the contract in-force for 10 years to earn the bonus credit, the Company amortized the
deferred expense on a straight-line basis over 10 years. If the contract holder surrenders the contract or the contract holder dies
prior to the end of 10 years, the bonus credit is returned to the Company. This component of the bonus credit was amortized in
proportion to expected surrenders and mortality. As of December 31, 2003 and 2002, the unearned performance credit asset was $0 and
$83.3 million, respectively. The deferred bonus credit asset was assigned a fair value of zero, net of tax, as part of purchase
accounting. Updated versions of the Company's core products no longer contain this feature.
"Other assets" also consists of state insurance licenses. Licenses to do business in all states have been capitalized and reflected
at the purchase price of $4.0 million at December 31, 2003. Due to the adoption of SFAS No. 142 "Accounting for Goodwill and
Intangible Assets", the cost of the licenses is no longer being amortized but is subjected to an annual impairment test. As of
December 31, 2003, the Company estimated the fair value of the state insurance licenses to be in excess of book value and, therefore,
no impairment charge was required.
Contingencies
Amounts related to contingencies are accrued if it is probable that a liability has been incurred and an amount is reasonably
estimable.
Insurance revenue and expense recognition
Revenues for variable deferred annuity contracts consist of charges against contract owner account values or separate accounts for
mortality and expense risks, administration fees, surrender charges and an annual maintenance fee per contract. Revenues for
mortality and expense risk charges and administration fees are recognized as assessed against the contract holder. Surrender charge
revenue is recognized when the surrender charge is assessed against the contract holder at the time of surrender. Annual maintenance
fees are earned ratably throughout the year.
Benefit reserves for the variable investment options on annuity contracts represent the account value of the contracts and are
included in "Separate account liabilities".
Revenues for variable immediate annuity and supplementary contracts with life contingencies consist of certain charges against
contract owner account values including mortality and expense risks and administration fees. These charges and fees are recognized
as revenue as assessed against the contract holder. Benefit reserves for variable immediate annuity contracts represent the account
value of the contracts and are included in "Separate account liabilities".
Revenues for the market value adjusted fixed investment option on annuity contracts consist of separate account investment income
reduced by amounts credited to the contract holder for interest. This net spread is included in "Net investment income (loss)" on
the Consolidated Statements of Operations and Comprehensive Income. Benefit reserves for these contracts represent the account value
of the contracts plus a market value adjustment, and are included in the general account "Policyholders' account balances" to the
extent in excess of the separate account assets, typically for the market value adjustment at the reporting date.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenues for fixed immediate annuity and fixed supplementary contracts without life contingencies consist of net investment income.
Revenues for fixed 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 applicable actuarial standards with assumed interest
rates that vary by issue year and are included in the general account "Policyholders' account balances". Assumed interest rates
ranged from 6.25% to 8.25% at December 31, 2003 and 2002.
Revenues for variable life insurance contracts consist of charges against contract owner account values or separate accounts for
mortality and expense risk fees, administration fees, cost of insurance fees, taxes and surrender charges. Certain contracts also
include charges against premium to pay state premium taxes. All of these charges are recognized as revenue when assessed against the
contract holder. Benefit reserves for variable life insurance contracts represent the account value of the contracts and are
included in "Separate account liabilities".
Certain annuity contracts provide the holder a guarantee that the benefit received upon death will be no less than a minimum
prescribed amount that is based upon a combination of net deposits to the contract, net deposits to the contract accumulated at a
specified rate or the highest historical account value on a contract anniversary. To the extent the GMDB exceeds the current account
value at the time of death, the Company incurs a cost that is recorded as "Policyholders' benefits" for the period in which death
occurs.
Premiums, benefits and expenses are stated net of reinsurance ceded to other companies. Estimated reinsurance recoverables and the
cost of reinsurance are recognized over the life of the reinsured policies using assumptions consistent with those used to account
for the underlying policies.
Foreign currency translation adjustments
The financial position and results of operations of Skandia Vida were measured using local currency as the functional currency.
Assets and liabilities were translated to U.S. dollars at the exchange rate in effect at the end of the period. Revenues, benefits
and other expenses were translated at the average rate prevailing during the period. Cumulative translation adjustments arising from
the use of differing exchange rates from period to period were charged or credited directly to "Other comprehensive (loss) income."
The cumulative effect of changes in foreign exchange rates was included in "Accumulated other comprehensive (loss) income".
Asset management fees
In accordance with an agreement with ASISI, the Company receives fee income calculated on policyholder account balances invested in
the American Skandia Trust. In addition, the Company receives fees calculated on policyholder account balances invested in funds
managed by companies other than ASISI. Asset management fees are recognized as income when earned. These revenues are recorded as
"Asset management fees" in the Consolidated Statements of Operations and Comprehensive Income.
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.
At December 31, 2003 and 2002, in accordance with the provisions of the modified coinsurance agreements, the Company accrued
approximately $3.8 million and $5.4 million, respectively, for amounts receivable from favorable reinsurance experience on certain
blocks of variable annuity business.
Income taxes
Prior to the acquisition of SUSI by Prudential Financial, the Company was included in the consolidated federal income tax return of
SUSI and filed separate state income tax returns. Due to provisions in the Internal Revenue Code, the Company will not be eligible
to join in the filing of the Prudential Financial consolidated federal income tax return until 2009. As a result, the Company will
file a separate federal tax return through 2008. In addition, the Company will continue to file separate state income tax returns.
Deferred income taxes are generally recognized, based on enacted rates, when assets and liabilities have different values for
financial statement and tax reporting purposes. A valuation allowance is recorded to reduce a deferred tax asset to that portion
that is expected to more likely than not be realized.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Future fees payable to ASI
In a series of transactions with ASI, the Company sold certain rights to receive a portion of future fees and contract charges
expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the sales have been recorded as a
liability and are being amortized over the remaining surrender charge period of the designated contracts using the interest method.
Stock-based compensation
In 2003, Prudential Financial issued stock-based compensation including stock options, restricted stock, restricted stock units and
performance shares. Effective January 1, 2003, Prudential Financial changed its accounting for employee stock options to adopt the
fair value recognition provisions of SFAS No. 123 "Accounting for Stock-Based Compensation," as amended, prospectively for all new
awards granted to employees on or after January 1, 2003. Accordingly, results of operations of the Company for the eight months
ended ended December 31, 2003, include costs of $106 thousand associated with stock-based compensation issued by Prudential Financial
to certain employees and non-employees of the Company and the Consolidated Statements of Financial Position at December 31, 2003,
includes a reduction in equity for deferred compensation. Prior to January 1, 2003, Prudential Financial accounted for employee
stock options using the intrinsic value method of APB No. 25 "Accounting for Stock Issued to Employees," and related
interpretations. Under this method, Prudential Financial and the Company did not recognize any stock-based compensation costs as all
options granted had an exercise price equaled to the market value of Prudential Financial's Common Stock on the date of grant.
New accounting pronouncements
In July 2003, the Accounting Standards Executive Committee ("AcSEC") of the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 03-01, "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional
Long-Duration Contracts and for Separate Accounts." AcSEC has developed the SOP to address the evolution of product designs since the
issuance of SFAS No. 60, "Accounting and Reporting by Insurance Enterprises," and SFAS No. 97, "Accounting and Reporting by Insurance
Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments" and the need for
interpretive guidance to be developed in three areas: separate account presentation and valuation; the accounting recognition given
sales inducements (bonus interest, bonus credits, persistency bonuses); and the classification and valuation of certain long-duration
contract liabilities.
The most significant accounting implications of the SOP are as follows: (1) reporting and measuring assets and liabilities of
separate account products as general account assets and liabilities when specified criteria are not met; (2) reporting and measuring
seed money in separate accounts as general account assets based on the insurer's proportionate beneficial interest in the separate
account's underlying assets; (3) capitalizing sales inducements that meet specified criteria and amortizing such amounts over the
life of the contracts using the same methodology as used for amortizing deferred acquisition costs, but immediately expensing those
sales inducements accrued or credited if such criteria are not met; (4) recognizing contractholder liabilities for: (a) modified
guaranteed (market value adjusted) annuities at accreted balances that do not include the then current market value surrender
adjustment, (b) two-tier annuities at the lower (non-annuitization) tier account value, (c) persistency bonuses at amounts that are
not reduced for expected forfeitures, (d) group pension participating and similar general account "pass through" contracts that are
not accounted for under SFAS No. 133 at amounts based on the fair value of the assets or index that determines the investment return
pass through; (5) establishing an additional liability for GMDB and similar mortality and morbidity benefits only for contracts
determined to have mortality and morbidity risk that is other than nominal and when the risk charges made for a period are not
proportionate to the risk borne during that period; and (6) for contracts containing an annuitization benefits contract feature, if
such contract feature is not accounted for under the provisions of SFAS No. 133 establishing an additional liability for the contract
feature if the present value of expected annuitization payments at the expected annuitization date exceeds the expected account
balance at the expected annuitization date.
The Company will adopt the SOP effective January 1, 2004. The effect of initially adopting this SOP will be reported as a cumulative
effect of a change in accounting principle in the 2004 results of operations, which the Company expects to be a charge of
approximately $22 million before taxes or approximately $14 million, net of taxes. This charge is caused primarily by an increase in
reserves for GMDB relating to our individual variable annuity contracts and the impact of converting certain individual market value
adjusted annuity ("MVA") contracts from separate account accounting treatment to general account accounting treatment.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In June 2001, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets."
SFAS No. 142 requires that an intangible asset acquired either individually or with a group of other assets shall initially be
recognized and measured based on fair value. An intangible asset with a finite life is amortized over its useful life to the
reporting entity; an intangible asset with an indefinite useful life, including goodwill, is not amortized. All intangible assets
shall be tested for impairment in accordance with the statement.
The Company applied the new rules on the accounting for goodwill and other intangible assets in the first quarter of 2002. The
adoption of SFAS 142 did not have a significant impact on the Company's financial statements.
Effective April 1, 2001, the Company adopted the Emerging Issues Task Force ("EITF") Issue 99-20, "Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Under the consensus, investors in
certain asset-backed securities are required to record changes in their estimated yield on a prospective basis and to evaluate these
securities for an other than temporary decline in value. If the fair value of the asset-backed security has declined below its
carrying amount and the decline is determined to be other than temporary, the security is written down to fair value. The adoption
of EITF Issue 99-20 did not have a significant effect on the Company's financial statements.
Effective January 1, 2001, the Company adopted SFAS No. 133. Derivative instruments held by the Company consisted of equity put
option contracts utilized to manage the economic risks associated with GMDB. These derivative instruments were carried at fair
value. Realized and unrealized gains and losses were reported in the Consolidated Statements of Operations and Comprehensive Income
as a component of "Realized investment (losses) gains, net". The adoption of SFAS No. 133 did not have a material effect on the
Company's financial statements.
Reclassifications
Certain amounts in the prior years have been reclassified to conform to the current year presentation.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
3. INVESTMENTS
Fixed Maturities and Equity Securities:
The following tables provide additional information relating to fixed maturities and equity securities as of December 31:
2003
----------------------------------------------------------------
------------- -------------- -------------- ---------------
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- -------------- -------------- ---------------
(in thousands)
Fixed maturities available for sale
Bonds:
U.S. Treasury securities and obligations
of
U.S. government corporations and
agencies $ 101,843 $ 115 $ (500) $ 101,458
States, municipalities and political
subdivisions 164,590 47 (1,434) 163,203
Mortgage-backed securities 2,638 9 - 2,647
Public utilities 11,192 47 (123) 11,116
All other corporate bonds 147,442 501 (1,136) 146,807
------------- -------------- -------------- --------------
Total fixed maturities available for sale $ 427,705 $ 719 $ (3,193) $ 425,231
============= ============== ============== ==============
Equity securities trading $ 54,792 $ 4,866 $ (173) $ 59,485
============= ============== ============== ==============
2002
---------------------------------------------------------------
-------------- -------------- -------------- --------------
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------------- -------------- -------------- --------------
(in thousands)
Fixed maturities available for sale
Bonds:
U.S. Treasury securities and obligations
of $ 257,969 $ 15,658 $ - $ 273,627
U.S. government corporations and
agencies
States, municipalities and political 253 9 (1) 261
subdivisions
Mortgage-backed securities 13,000 - (78) 12,922
Public utilities 6,093 376 (18) 6,451
All other corporate bonds 102,107 3,255 (22) 105,340
-------------- -------------- -------------- --------------
Total fixed maturities available for sale $ 379,422 $ 19,298 $ (119) $ 398,601
============== ============== ============== ==============
Equity securities available for sale $ 52,017 $ 136 $ (384) $ 51,769
============== ============== ============== ==============
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
3. INVESTMENTS (continued)
The amortized cost and estimated fair value of fixed maturities, by contractual maturities at December 31, 2003 is shown below:
Available for sale
--------------------------------------
Amortized Estimated
cost fair value
----------------- -------------------
(in thousands)
Due in one year or less $ 21,412 $ 21,424
Due after one year through five years 239,186 238,777
Due after five years through ten years 149,879 148,020
Due after ten years 14,590 14,363
Mortgage-backed securities 2,638 2,647
----------------- -------------------
Total $ 427,705 $ 425,231
================= ===================
Actual maturities may differ from contractual maturities because issuers have the right to call or prepay obligations.
Proceeds from the sale of fixed maturities available for sale during the eight months ended December 31, 2003, four months ended
April 30, 2003 and years ended December 31, 2002 and 2001, were $7.7 million, $129.0 million, $367.2 million and $386.8 million,
respectively. Proceeds from the maturity of fixed maturities available for sale during the eight months ended December 31, 2003,
four months ended April 30, 2003, and years ended December 31, 2002 and 2001, were $67.4 million, $2.6 million, $50 thousand and $4.0
million, respectively. Gross gains of $430 thousand, $5.6 million, $8.2 million and $8.9 million, and gross losses of $386 thousand,
$150 thousand, $4.5 million, and $4.4 million were realized on those sales during the eight months ended December 31, 2003, four
months ended April 30, 2003, and years ended December 31, 2002 and 2001, respectively.
Due to the application of purchase accounting on May 1, 2003, all fixed maturities and equity securities, which are in an unrealized
loss position as of December 31, 2003, have been in such a position for less than 12 months as of December 31, 2003. Based on the
above information in conjunction with other factors as outlined in our policy surrounding other than temporary impairments (see Note
2), we have concluded that an adjustment for other than temporary impairments is not warranted at December 31, 2003. Writedowns for
impairments which were deemed to be other than temporary for equity securities was $3.8 million for the year ended December 31,
2002. There were no writedowns during the other periods.
As of the date of the Acquisition, the Company changed its classification of equity securities held in support of a deferred
compensation plan from available-for-sale to trading. New management made this decision to align with Prudential Financial's
accounting policy. These equity securities were fair valued on May 1, 2003 under purchase accounting and, therefore, there was no
income statement impact for the change in classification. Such investments are now carried at fair value with changes in unrealized
gains and losses reported in the Consolidated Statements of Operations and Comprehensive Income, as a component of "Other income".
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
3. INVESTMENTS (continued)
Investment Income and Investment Gains and Losses
Net investment income (loss) arose from the following sources for the eight months ended December 31, 2003, four months ended April
30, 2003, and years ended December 31, 2002 and 2001:
Successor Predecessor
--------------------- ----------------------------------------------
Eight months ended Four months ended
December 31, 2003 April 30, 2003 2002 2001
--------------------- ----------------------------------------------
(in thousands)
Fixed maturities - available for sale $ 7,547 $ 5,342 $ 18,015 $ 18,788
Fixed, market value adjusted investment 20,713 (6,350) 482 8,873
return
Equity securities - available for sale - 412 809 622
Policy loans 335 101 403 244
Short-term investments and cash equivalents 230 319 1,116 909
--------------------- ----------------------------------------------
--------------------- ----------------------------------------------
Gross investment income (loss) 28,825 (176) 20,825 29,436
Less: investment expenses (2,118) (1,113) (2,410) (2,128)
--------------------- ----------------------------------------------
Net investment income (loss) $ 26,707 $ (1,289) $ 18,415 $ 27,308
===================== ==============================================
Realized investment (losses) gains, net including charges for other than temporary reductions in value, for the eight months ended
December 31, 2003, four months ended April 30, 2003, and years ended December 31, 2002 and 2001 were from the following sources:
Successor Predecessor
----------------------------------------------------------------------
Eight months ended Four months ended 2002 2001
December 31, 2003 April 30, 2003
----------------------------------------------------------------------
(in thousands)
Fixed maturities $ 44 $ 5,465 $ 3,746 $ 4,462
Equity securities - available for sale - (809) (13,362) (3,534)
Derivatives (516) (8,835) 31,803 12,027
Sale of Skandia Vida - (422) - -
Other - - 2 -
----------------------------------------------------------------------
Realized investment (losses) gains, net $ (472) $ (4,601) $ 22,189 $ 12,955
======================================================================
Net Unrealized Investment Gains (Losses)
Net unrealized investment gains (losses) on securities available for sale are included in the Consolidated Statements of Financial
Position as a component of "Accumulated other comprehensive (loss) income." Changes in these amounts include reclassification
adjustments to exclude from "Other comprehensive (loss) income," those items that are included as part of "Net income" for a period
that also had been part of "Other comprehensive (loss) income" in earlier periods. The amounts for the years ended December 31, net
of tax, are as follows:
American Skandia Life Assurance Corporation
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------------------------------------------------------------
3. INVESTMENTS (continued)
Accumulated
other
comprehensive
income (loss)
Deferred related to net
Unrealized gains Foreign income tax unrealized
(losses) on currency (liability) investment
investments translation benefit gains (losses)
------------------ -------------- ------------------------------
(in thousands)
Balance, January 1, 2001 (Predecessor) $ 1,569 $ 126 $ (592) $ 1,103
Net investment losses on investments arising
during the period (401) - 140 (261)
Reclassification adjustment for gains included
in net income (22) - 8 (14)
Net investment losses on foreign currency
translation during the period - (103) 36 (67)
------------------ -------------- --------------- --------------
Balance, December 31, 2001 (Predecessor) 1,146 23 (408) 761
Net investment gains on investments arising
during the period 16,053 - (5,619) 10,434
Reclassification adjustment for losses
included in net income 1,732 - (606) 1,126
Net investment losses on foreign currency
translation during the period - (969) 339 (630)
------------------ -------------- ------------------------------
Balance, December 31, 2002 (Predecessor) 18,931 (946) (6,294) 11,691
Net investment gains on investments arising
during the period 3,861 - (1,345) 2,516
Reclassification adjustment for gains included
in net income (5,231) - 1,831 (3,400)
Net investment gains on foreign currency
translation during the period - 946 (331) 615
------------------ -------------- ------------------------------
Balance, April 30, 2003 (Predecessor) 17,561 - (6,139) 11,422
Acquisition purchase accounting adjustments (17,561) - 6,139 (11,422)
------------------ -------------- ------------------------------
Balance, May 1, 2003 opening balance sheet
(Successor) - - - -
Net investment losses on investments arising
during the period (2,474) - 875 (1,599)
------------------ -------------- ------------------------------
Balance, December 31, 2003 (Successor) $ (2,474) $ - $ 875 $ (1,599)
================== ============== ==============================
The table below presents unrealized gains (losses) on investments by asset class at December 31,
2003 2002 2001
---------------- ------------------ ------------------
(in thousands)
Fixed maturities $ (2,474) $ 19,179 $ 5,949
Equity securities, available for sale - (248) (4,803)
---------------- ------------------ ------------------
Unrealized gains on investments $ (2,474) $ 18,931 $ 1,146
================ ================== ==================
Securities Pledged and Special Deposits
The Company pledges investment securities it owns to unaffiliated parties through securities sold under agreements to repurchase
transactions. At December 31, 2003 and 2002, the carrying value of fixed maturities available for sale pledged to third parties as
reported in the Consolidated Statements of Financial Position were $20.4 million and $0, respectively.
Fixed maturities of $4.9 million and $4.8 million at December 31, 2003 and 2002, respectively, were on deposit with governmental
authorities or trustees as required by certain insurance laws.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
4. PURCHASE PRICE AND INTEGRATION
Prudential Financial's acquisition of SUSI was accounted for by applying the purchase method of accounting prescribed by Statement of
Financial Accounting Standards No. 141. The purchase accounting adjustments have been "pushed-down" to the Company, as applicable.
Accordingly, the assets and liabilities assumed of SUSI and its wholly owned subsidiaries, including the Company, were recorded at
their fair values as of the date of acquisition. The most significant adjustments related to the value of the unamortized DAC asset
being assigned a value of zero, the future fees payable to ASI liability was decreased by $256.6 million and an asset for VOBA was
established for $440.1 million. The allocation of the purchase price attributed to the Company at May 1, 2003, was as follows (in
thousands):
Total investments at market value $ 479,046
Cash and cash equivalents 28,018
VOBA 440,130
Other assets at fair value 352,235
Separate account assets 22,311,085
Policyholder account balances (167,505)
Other liabilities at fair value (644,379)
Separate account liabilities (22,311,085)
--------------
Total purchase price $ 487,545
==============
Included in other liabilities above is an accrual of approximately $55 million representing costs relating to severance,
consolidation of leased office space and other exit costs expected to be incurred as a result of the integration of the Company with
Prudential Financial, of which $10 million has been paid through December 31, 2003. The integration is expected to continue through
the first quarter of 2005. Currently, the distribution, marketing and product development functions as well as many administrative,
support, and control functions have been combined and assimilated. Key management from both organizations have been retained, and
all major decisions related to the integration have been communicated. In 2004, integration efforts will focus on consolidating
systems platforms and operating functions. Thus far, the integration of the Company is proceeding as planned.
5. DEFERRED POLICY ACQUISITION COSTS
The balances of and changes in DAC as of and for the eight months ended December 31, 2003, four months ended April 30, 2003 and years
ended December 31, 2002 and 2001 are as follows:
Successor Predecessor
--------------- -------------------------------------------------
Eight months Four months
ended December ended April 30,
31, 2003 2003 2002 2001
--------------- -------------------------------------------------
(in thousands)
Balance, beginning of period $ - $ 1,117,544 $ 1,383,281 $ 1,398,192
Capitalization of commissions, sales and issue 126,891 69,723 244,322 209,136
expenses
Amortization (4,319) (57,122) (510,059) (224,047)
----------------------------------------------------------------
Balance, end of period $ 122,572 $ 1,130,145 $ 1,117,544 $ 1,383,281
================================================================
The DAC asset was assigned a fair value of zero on May 1, 2003, net of tax, as part of purchase accounting.
6. VALUATION OF BUSINESS ACQUIRED
VOBA represents the present value of future profits embedded in the acquired contracts. The VOBA is determined by estimating the net
present value of future cash flows expected to result from contracts in force at the date of the transaction. Future positive cash
flows include fees and other charges assessed to the contracts for as long as they remain in force as well as fees collected upon
surrender, while future negative cash flows include costs to administer the contracts, and benefit payments including payments under
the GMDB provisions of the contracts. VOBA will be amortized over the overall expected life of the contracts in proportion to
estimated gross profits arising principally from investment results, mortality and expense margins, and surrender charges based upon
historical and estimated future experience, which is updated periodically.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
6. VALUATION OF BUSINESS ACQUIRED (continued)
The GMDB feature provides annuity contract holders with a guarantee that the benefit received at death will be no less than a
prescribed minimum amount. This minimum amount is generally based on the net deposits paid into the contract and, for greater than
80% of the business in force as of December 31, 2003, this minimum guarantee is applicable only for the first ten contract years or
until a specified attained age. To the extent that the GMDB is higher than the current account value at the time of death, the
Company incurs a cost. This results in increased annuity policy benefits in periods of declining financial markets and in periods of
stable financial markets following a decline. Previously, accounting literature did not prescribe the recognition of a liability for
the expected future net costs associated with GMDB provisions. However, effective January 1, 2004, we will adopt SOP 03-01 which
requires us to record such a liability based on application of an expected benefit ratio to "cumulative assessments" through the
balance sheet date, and then subtracting "cumulative excess payments" from that date. We currently estimate this liability to be
approximately $3.0 million based on the difference between the "cumulative assessments" and "cumulative excess payments" measured
from May 1, 2003, the date of acquisition. In our periodic evaluation of unamortized VOBA and DAC associated with our variable
annuity business, we considered the expected net costs associated with the GMDB in our calculation of expected gross profits from
this business. Accordingly, the effect of establishing the GMDB reserve related to this business will be partially offset by an
estimated increase of approximately $1.0 million in unamortized VOBA and DAC, resulting in higher future amortization.
In addition to establishing a liability associated with the GMDB feature, SOP 03-01 requires a change in valuation and presentation
of our liability associated with the market value adjustment ("MVA") feature contained in certain annuity contracts. The MVA feature
requires the Company to pay to the contract holder upon surrender the accreted value of the fund as well as a market value adjustment
based on the crediting rates on the contract surrendered compared to crediting rates on newly issued contracts. Currently, this
liability is reflected at market value, which considers the effects of unrealized gains and losses in contract value resulting from
changes in crediting rates. Upon adoption of SOP 03-01, the Company will reclassify this liability from "Separate account
liabilities" to "Policyholders' account balances" and reduce it to reflect accreted value, which excludes the effect of unrealized
gains and losses in contract value resulting from changes in crediting rates. However, in valuing the VOBA established at the date
of acquisition, we considered the effect of unrealized gains and losses in contract value associated with annuities containing the
MVA feature on future cash flows. As a result, the reduction in the liability for the MVA feature will result in a net decrease in
VOBA of approximately $130.0 million, and lower future amortization. We currently estimate the net income statement impact of the
reduction in liability associated with the MVA feature to be approximately $20.0 million, which primarily represents the impact of
changes in crediting rates from May 1, 2003, the date of the Acquisition, through January 1, 2004, the date of the adoption of SOP
03-01.
Details of VOBA and related interest and gross amortization for the eight months ended December 31, 2003 is as follows (in thousands):
Balance, May 1, 2003 $ 440,130
Interest 16,077
Amortization (54,038)
---------------
Balance, December 31, 2003 $ 402,169
==============
Estimated future net amortization of VOBA as of December 31, 2003 is as follows (in thousands):
2004 $ 68,301
2005 59,587
2006 50,914
2007 42,756
2008 36,025
2009 and thereafter 144,586
--------------
Total $ 402,169
==============
The following table provides estimated future amortization of VOBA, including the effect of adoption of SOP 03-01, for the periods
indicated (in thousands):
2004 $ 45,907
2005 40,050
2006 34,221
2007 28,737
2008 24,213
2009 and thereafter 97,181
--------------
Total $ 270,309
==============
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
7. REINSURANCE
The Company cedes insurance to other insurers in order to fund the cash strain generated from commission costs on current sales and
to limit its risk exposure. The Company uses modified coinsurance reinsurance arrangements whereby the reinsurer shares in the
experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an
upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving in the future, a percentage of the
future fees generated from that book of business. Such transfer does not relieve the Company of its primary liability and, as such,
failure of reinsurers to honor their obligation could result in losses to the Company. The Company reduces this risk by evaluating
the financial condition and credit worthiness of reinsurers.
The effect of reinsurance for the eight months ended December 31, 2003, four months ended April 30, 2003, and years ended December
31, 2002 and 2001 was as follows (in thousands):
Eight months ended December 31, 2003 (Successor) Gross Ceded Net
--------------- ------------- --------------
--------------- ------------- --------------
Policy charges and fee income $ 264,835 $ (22,880) $ 241,955
Policyholders' benefits $ 43,246 $ 434 $ 43,680
General, administrative and other expenses $ 162,116 $ (2,143) $ 159,973
Four months ended April 30, 2003 (Predecessor)
Policy charges and fee income $ 120,392 $ (11,179) $ 109,213
Policyholders' benefits $ 24,355 $ (409) $ 23,946
General, administrative and other expenses $ 104,795 $ (7,155) $ 97,640
2002 (Predecessor)
Policy charges and fee income $ 401,974 $ (38,554) $ 363,420
Policyholders' benefits $ 60,440 $ (25) $ 60,415
General, administrative and other expenses $ 630,001 $ 1,254 $ 631,255
2001 (Predecessor)
Policy charges and fee income $ 426,718 $ (35,024) $ 391,694
Policyholders' benefits $ (3,471) $ 92 $ (3,379)
General, administrative and other expenses $ 422,806 $ 25,835 $ 448,641
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
8. INCOME TAXES
The components of income tax expense (benefit) for the eight months ended December 31, 2003, four months ended April 30, 2003 and
years ended December 31, 2002 and 2001 are as follows:
Successor Predecessor
------------------------------------------------------------------------
Eight months ended Four months ended
December 31, 2003 April 30, 2003 2002 2001
------------------------------------------------------------------------
(in thousands)
Current tax (benefit) expense:
U.S. and foreign $ (1,950) $ (2,706) $ (3,739) $ (38,870)
State and local (22) (464) - (177)
------------------------------------------------------------------------
Total (1,972) (3,170) (3,739) (39,047)
------------------------------------------------------------------------
Deferred tax expense (benefit):
U.S. and foreign 51,475 (5,374) (99,071) 46,215
State and local 898 - - -
------------------------------------------------------------------------
Total 52,373 (5,374) (99,071) 46,215
------------------------------------------------------------------------
Total income tax expense (benefit) $ 50,401 $ (8,544) $(102,810) $ 7,168
========================================================================
The income tax expense (benefit) for the eight months ended December 31, 2003, four months ended April 30, 2003 and years ended
December 31, 2002 and 2001 differs from the amount computed by applying the expected federal income tax rate of 35% to income from
operations before income taxes for the following reasons:
Successor Predecessor
-------------------- ----------------------------------------------------
Eight months ended Four months ended
December 31, 2003 April 30, 2003 2002 2001
-------------------- ----------------------------------------------------
(in thousands)
Expected federal income tax expense $ 49,440 $ (263) $ (93,823) $ 14,093
(benefit)
Dividends received deduction - (2,800) (12,250) (8,400)
Loss on foreign subsidiary - (5,374) 947 917
Meals and entertainment 490 113 603 603
State income taxes 570 (301) - (62)
Other (99) 81 1,713 17
------------------------------------------------------------------------
Total income tax expense (benefit) $ 50,401 $ (8,544) $(102,810) $ 7,168
========================================================================
Deferred tax assets and liabilities at December 31, resulted from the items listed in the following table:
2003 2002
------------------ ------------------
(in thousands)
Deferred tax assets
Insurance reserves $ 251,486 $ 165,348
Future fees payable to ASI 104,816 21,475
Compensation reserves 25,628 20,603
Net operating loss carry forward - 147,360
Net unrealized losses on securities 876 -
Other 9,316 6,530
------------------ ------------------
Deferred tax assets 392,122 361,316
------------------ ------------------
Deferred tax liabilities
VOBA and deferred acquisition costs, net (133,750) (312,933)
Net unrealized gains on fixed maturity - (6,713)
securities
Other (1,422) (3,464)
------------------ ------------------
Deferred tax liabilities (135,172) (323,110)
------------------ ------------------
Net deferred tax asset $ 256,950 $ 38,206
================== ==================
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
8. INCOME TAXES (continued)
Management believes that based on its historical pattern of taxable income, the Company will produce sufficient income in the future
to realize its deferred tax assets. It is intended that the Company will join in the consolidated federal income tax return of
Prudential Financial once it becomes an eligible company. A valuation allowance would be recorded in the event of a change in
management's assessment of the amount of the deferred tax asset that is realizable.
9. STATUTORY NET INCOME AND SURPLUS AND DIVIDEND RESTRICTIONS
The Company is required to prepare statutory financial statements in accordance with accounting practices prescribed or permitted by
the State of Connecticut Insurance Department. Prescribed statutory accounting practices include publications of the NAIC, as well
as state laws, regulations and general administrative rules. Statutory accounting practices primarily differ from U.S. GAAP by
charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial
assumptions and valuing investments, deferred taxes, and certain assets on a different basis.
Statutory net loss of the Company amounted to $13.7 million, $192.5 million and $122.0 million, for the years ended December 31,
2003, 2002, and 2001, respectively. Statutory surplus of the Company amounted to $329.5 million and $280.0 million at December 31,
2003 and 2002, respectively.
In March 1998, the NAIC adopted the Codification of Statutory Accounting Principles guidance ("Codification"), which replaced the
current Accounting Practices and Procedures manual as the NAIC's primary guidance on statutory accounting as of January 1, 2001.
Codification provided guidance for areas where statutory accounting had been silent and changed current statutory accounting in
certain areas. The Company adopted the Codification guidance effective January 1, 2001. As a result of these changes, the Company
reported an increase to statutory surplus of $12.0 million.
In addition, during 2001, based on a recommendation from the State of Connecticut Insurance Department, the Company changed its
statutory method of accounting for its liability associated with securitized variable annuity fees. Under the new method of
accounting, the liability for securitized fees is established consistent with the method of accounting for the liability associated
with variable annuity fees ceded under reinsurance contracts. This equates to the statutory liability at any valuation date being
equal to the Commissioners Annuity Reserve Valuation Method ("CARVM") offset related to the securitized contracts. The impact of
this change in accounting, representing the difference in the liability calculated under the old method versus the new method as of
January 1, 2001, was reported as a cumulative effect of change in accounting benefit recorded directly in statutory surplus of
approximately $20.2 million.
In 2001, the Company, in agreement with the Connecticut Insurance Department, changed its reserving methodology to recognize free
partial withdrawals and to reserve on a "continuous" rather than "curtate" basis. The impact of these changes, representing the
difference in reserves calculated under the new methods versus the old methods, was recorded directly to surplus as changes in
reserves on account of valuation basis. This resulted in an increase to the unassigned deficit of approximately $40.5 million.
Effective January 1, 2002, the Company adopted Statement of Statutory Accounting Principles No. 82, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use and Web Site Development Costs" ("SSAP 82"). SSAP 82 requires the
capitalization of certain costs incurred in connection with developing or obtaining internal use software. Prior to the adoption of
SSAP 82, the Company expensed all internal use software related costs as incurred. The Company has identified and capitalized $5.9
million of costs associated with internal use software as of January 1, 2002 and is amortizing the applicable costs on a
straight-line basis over a three year period. The costs capitalized as of January 1, 2002 resulted in a direct increase to surplus.
Amortization expense for the years ended December 31, 2003 and 2002 was $2.9 million and $2.8 million, 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. For 2004, no
amounts may be distributed without prior approval.
The Company has sold variable annuity contracts containing a GMDB feature that reduce on a dollar-for-dollar basis when partial
withdrawal occurs. During 2003, the NAIC adopted a revision to Actuarial Guideline XXXIV, "Variable Annuity Guaranteed Death Benefit
Reserves", that clarified how the dollar-for-dollar benefit should be considered in the calculation of the reserve. The methodology
the Company is following is acceptable under this Guideline and no additional reserves need to be held.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values presented below have been determined using available market information and by applying valuation
methodologies. Considerable judgment is applied in interpreting data to develop the estimates of fair value. Estimated fair values
may not be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies could have
a material effect on the estimated fair values. The following methods and assumptions were used in calculating the estimated fair
values (for all other financial instruments presented in the table, the carrying value approximates estimated fair value).
Fixed maturities and Equity securities
Estimated fair values for fixed maturities and equity securities are based on quoted market prices or estimates from independent
pricing services.
Derivative financial instruments
The estimated fair value of derivative financial instruments is determined based on the current value of the underlying index.
Surplus notes
Fair value of surplus notes are determined based on a discounted cash flow basis with a projected payment of principal and all
accrued interest at the maturity date (see Note 12 for payment restrictions).
The following table discloses the carrying amounts and estimated fair values of the Company's financial instruments at December 31:
2003 2002
---------------------------------------------------------------------
---------------------------------------------------------------------
Estimated Estimated
Carrying value fair value Carrying value fair value
---------------------------------------------------------------------
(in thousands)
Financial assets:
Fixed maturities $ 425,231 $ 425,231 $ 398,601 $ 398,601
Equity securities 59,485 59,485 51,769 51,769
Policy loans 8,371 8,371 7,559 7,559
Short-term investments 39,587 39,587 - -
Other short-term investments - - 10,370 10,370
Cash and cash equivalents - - 51,339 51,339
Separate account assets 25,817,612 25,817,612 21,905,613 21,905,613
Financial liabilities:
Securities sold under agreements to 20,850 20,850 - -
repurchase
Short-term borrowing 116,000 116,000 10,000 10,000
Surplus notes and accrued interest of
$29.2 - - 139,230 140,777
million in 2002
Separate account liabilities 25,817,612 25,817,612 21,905,613 21,905,613
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
11. CONTINGENCIES AND LITIGATION
Contingencies
On an ongoing basis, our internal supervisory and control functions review the quality of our sales, marketing and other customer
interface procedures and practices and may recommend modifications or enhancements. In certain cases, if appropriate, we may offer
customers remediation and may incur charges, including the cost of such remediation, administrative costs and regulatory fines.
The Company has received formal requests for information from regulators including, among others, the New York Attorney General's
Office and the Securities and Exchange Commission in connection with its variable annuity businesses. The Company is cooperating
with these inquiries and is conducting its own internal review. These matters could lead to proceedings that result in disgorgement,
fines or other sanctions. The Company is unable to estimate its exposure, if any, at this time.
It is possible that the results of operations or the cash flow of the Company in a particular quarterly or annual period could be
materially affected as a result of payments in connection with the matters discussed above depending, in part, upon the results of
operations or cash flow for such period. Management believes, however, that the ultimate payments in connection with these matters,
after consideration of applicable reserves and indemnification, should not have a material adverse effect on the Company's financial
position.
Litigation
The Company is subject to legal and regulatory actions in the ordinary course of its businesses, including class actions and
individual lawsuits. Pending legal and regulatory actions include proceedings relating to aspects of the businesses and operations
that are specific to the Company and that are typical of the businesses in which the Company operates. Class action and individual
lawsuits involve a variety of issues and/or allegations, which include sales practices, underwriting practices, claims payment and
procedures, premium charges, policy servicing and breach of fiduciary duties to customers. We are also subject to litigation arising
out of our general business activities, such as our investments and third party contracts. In certain of these matters, the
plaintiffs are seeking large and/or indeterminate amounts, including punitive or exemplary damages.
In recent years, a number of annuity companies have been named as defendants in class action lawsuits relating to the use of variable
annuities as funding vehicles for tax-qualified retirement accounts. The Company is currently a defendant in one lawsuit, a
purported nationwide class action complaint, filed in the United States District Court for the Southern District of New York in
December 2002, Donovan v. American Skandia Life Ass. Corp. et al. The complaint alleges that the Company and certain of its
affiliates violated federal securities laws in marketing variable annuities and seeks injunctive relief and compensatory damages in
unspecified amounts. In July 2003, the court granted the Company's motion to dismiss the complaint with prejudice. On August 29,
2003, Plaintiffs filed a notice of appeal of that decision with the United States Court of Appeals for the Second Circuit.
The Company's parent and sole shareholder, ASI, is currently a named defendant in six purported nationwide class action lawsuits.
Each of these lawsuits alleges that ASI and others violated federal securities laws in connection with late trading and market timing
activities and seeks remedies, including compensatory and punitive damages in unspecified amounts. The cases are as follows:
Lowinger v. Invesco Advantage Health Sciences Fund, et al., filed in the United States District Court for the Southern District of
New York in December, 2003 and served on ASI in February, 2004; Russo, et al. v. Invesco Advantage Health Sciences Fund, et al.,
filed in the United States District Court for the Southern District of New York in December, 2003, this suit has not been served on
ASI; Lori Weinrib v. Invesco Advantage Health Sciences Fund, et al., filed in the United States District Court for the Southern
District of New York in January, 2004, this suit has not been served on ASI; Erhlich v. Invesco Advantage Health Sciences Fund et
al., filed in the United States District Court for the District of Colorado in December, 2003, this suit was served on ASI in
February, 2004; Fattah v. Invesco Advantage Health Sciences Fund, et al., filed in the United States District Court for the District
of Colorado in December, 2003, this suit has not been served on ASI. The Company believes that these cases will be consolidated in
Multi-District litigation located in the Baltimore Division of the United States District Court for the District of Maryland.
The Company is also aware that ASI is a defendant designated as "Does 1-500" in a suit filed in October, 2003 in the United States
District Court for the Central District of California entitled Mike Sayegh v. Janus Capital Corporation, et al. This suit alleges
that various defendants engaged in improper late trading and market timing activities in various funds also named as defendants. The
complaint further alleges that such activities were in violation of California Business and Professional Code Section 17200. This
suit has not been served on ASI. The Company believes that this suit may be included in the Multi-District action discussed
above.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
11. CONTINGENCIES AND LITIGATION (continued)
The Company's litigation is subject to many uncertainties, and given the complexity and scope, the outcomes cannot be predicted. It
is possible that the results of operations or the cash flow of the Company in a particular quarterly or annual period could be
materially affected by an ultimate unfavorable resolution of pending litigation and regulatory matters. Management believes,
however, that the ultimate outcome of all pending litigation and regulatory matters, after consideration of applicable reserves and
indemnification, should not have a material adverse effect on the Company's financial position.
It should be noted that the judgments, settlements and expenses associated with many of these lawsuits, administrative and regulatory
matters, including the complaints described above, may, after satisfaction of certain retention requirements, fall within the purview
of SICL's indemnification obligations to Prudential Financial and its subsidiaries under the terms of the Acquisition. Those
obligations of SICL provide for indemnification of certain judgments, settlements, and costs and expenses associated with lawsuits
and other claims against the Company ("matters"), and apply only to matters, or groups of related matters, for which the costs and
expenses exceed $25 thousand individually. Those obligations only apply to such costs and expenses that exceed $10 million in the
aggregate, subject to reduction for insurance proceeds, certain accruals and any tax benefit applicable to such amounts, and those
obligations do not apply to the extent that such aggregate exceeds $1 billion.
12. RELATED PARTY TRANSACTIONS
Affiliated Asset Management Fee Income
In accordance with an agreement with ASISI, the Company receives fee income calculated on policyholder account balances invested in
the American Skandia Trust. Income received from ASISI related to this agreement was $43.7 million, $19.0 million, $67.4 million and
$78.0 million for the eight months ended December 31, 2003, four months ended April 30, 2003 and years ended December 31, 2003 and
2002, respectively. These revenues are recorded as "Asset management fees" in the Consolidated Statements of Operations and
Comprehensive Income.
Cost Allocation Agreements with Affiliates
Certain operating costs (including 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. ASLAC signed a written service
agreement with ASIST for these services executed and approved by the Connecticut Insurance Department in 1995. This agreement
automatically continues in effect from year to year and may be terminated by either party upon 30 days written notice.
Allocated depreciation expense was $4.2 million, $2.2 million, $7.4 million and $8.8 million for the eight months ended December 31,
2003, four months ended April 30, 2003, and years ended December 31, 2002 and 2001, respectively. Allocated lease expense was $4.6
million, $2.0 million, $5.8 million and $6.5 million for the eight months ended December 31, 2003, four months ended April 30, 2003
and years ended December 31, 2002 and 2001, respectively. Allocated sub-lease rental income, recorded as a reduction to lease
expense, was $1.2 million, $622 thousand, $738 thousand, $30 thousand for the eight months ended December 31, 2003, four months ended
April 30, 2003 and years ended December 31, 2002 and 2001, respectively. Assuming that the written service agreement between ASLAC
and ASIST continues indefinitely, ASLAC's allocated future minimum lease payments and sub-lease receipts per year and in aggregate as
of December 31, 2003 are as follows (in thousands):
Lease Sub-Lease
---------------- --------------
---------------- --------------
2004 $ 9,357 $ 2,248
2005 9,227 2,200
2006 8,890 2,135
2007 8,890 1,962
2008 8,890 1,589
2009 and thereafter 20,254 6,034
----------- -----------
Total $ 65,508 $ 16,168
=========== ===========
Beginning in 1999, the Company was reimbursed by its affiliate American Skandia Marketing, Incorporated ("ASM") for certain
distribution related costs associated with the sales of variable annuities from revenues ASM receives under a 12b-1 plan of AST.
Under this agreement, the expenses reimbursed were $4.9 million, $2.1 million, $8.3 million, $6.6 million for the eight months ended
December 31, 2003, four months ended April 30, 2003 and years ended December 31, 2002 and 2001, respectively. As of December 31,
2003 and 2002, amounts receivable under this agreement were approximately $554 thousand and $458 thousand, respectively.
American Skandia Life Assurance Corporation
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
12. RELATED PARTY TRANSACTIONS (continued)
The Company has granted ASISI a non-exclusive license to use all future intellectual capital developed by the Company relating to
certain support services programs and work, and the Company provides certain services to ASISI relating to the programs. The Company
has a written Licensing of Know How and Service Agreement with ASISI regarding this license and the provision of services. The
Agreement was approved by the Connecticut Insurance Department on January 5, 1996 and amended by informational filing to the
Connecticut Insurance Department on September 2, 1998. ASISI paid $1.6 million, $1.7 million, $6.1 million and $4.3 million to ASLAC
during the eight months ended December 31, 2003, four months ended April 30, 2003, and years ended December 31, 2002 and 2001,
respectively, pursuant to the agreement.
The Company and ASM have a written Service Agreement, approved by the Connecticut Insurance Department on September 13, 1996, whereby
ASM pays, on behalf of the Company, information consulting fees payable in connection with the sale of the Company's insurance
products. The Company reimburses ASM for ASM's payment of such fees on the Company's behalf. The Company paid ASM $21.4 million,
$9.6 million, $34.2 million and $32.7 million during the eight months ended December 31, 2003, four months ended April 30, 2003, and
years ended December 31, 2002 and 2001, respectively, pursuant to the agreement. This Agreement will automatically continue in
effect from year to year. This Agreement may be terminated upon 30-calendar days' written notice to the other party.
The Company pays commissions and certain other fees to ASM in consideration for ASM's marketing and underwriting of the Company's
products, which commissions and fees are paid by ASM to unaffiliated broker-dealers who sell the Company's products. Commissions and
fees paid by the Company to ASM during the eight months ended December 31, 2003, four months ended April 30, 2003, and years ended
December 31, 2002 and 2001 were $136.5 million, $46.0 million, $193.4 million and $193.1 million, respectively.
Debt Agreements
Short-term borrowing
The Company had a $10.0 million short-term loan payable to ASI at December 31, 2003 and 2002 as part of a revolving loan agreement.
The loan had an interest rate of 1.71% and matured on January 30, 2004. The loan was subsequently rolled over with a new interest
rate of 1.48% and a new maturity date of April 30, 2004. The total related interest expense to the Company was $116 thousand, $60
thousand, $271 thousand and $522 thousand for the eight months ended December 31, 2003, four months ended April 30, 2003, and years
ended December 31, 2002 and 2001, respectively. Accrued interest payable was $29 thousand and $10 thousand as of December 31, 2003
and 2002, respectively.
On January 3, 2002, the Company entered into a $150.0 million credit facility with ASI. This credit facility terminates on December
31, 2005 and bears interest at the offered rate in the London interbank market (LIBOR) plus 0.35 percent per annum for the relevant
interest period. Interest expense related to these borrowings was $534 thousand, $56 thousand and $2.2 million for the eight months
ended December 31, 2003, four months ended April 30, 2003 and year ended December 31, 2002. As of December 31, 2003 and 2002, $106.0
million and $0 was outstanding under this credit facility. Accrued interest payable was $153 thousand and $0 as of December 31, 2003
and 2002, respectively.
Surplus notes
The Company had issued surplus notes to ASI in exchange for cash. On May 1, 2003, the Company converted all outstanding surplus
notes to paid in capital as part of the Acquisition. The conversion included the principal amount of $110.0 million and related
interest of $32.2 million. Surplus notes outstanding as of December 31, 2002 was $110.0 million. Interest expense for the eight
months ended December 31, 2003, four months ended April 30, 2003 and years ended December 31, 2002 and 2001 was $0, $3.0 million,
$10.9 million and $13.0 million, respectively. Payment of interest and repayment of principal for these notes was subject to certain
conditions and required approval by the Insurance Commissioner of the State of Connecticut. At December 31, 2003 and 2002, $0 and
$29.2 million, respectively, of accrued interest on surplus notes was not permitted for payment under these criteria.
Future fees payable to ASI
In a series of transactions with ASI, the Company sold certain rights to receive a portion of future fees and contract charges
expected to be realized on designated blocks of deferred annuity contracts.
The proceeds from the sales have been recorded as a liability and are being amortized over the remaining surrender charge period of
the designated contracts using the interest method. The Company did not sell the right to receive future fees and charges after the
expiration of the surrender charge period.
In connection with these sales, ASI, through special purpose trusts, issued collateralized notes in private placements, which were
secured by the rights to receive future fees and charges purchased from the Company. As part of the Acquisition, the notes issued by
ASI were repaid.
American Skandia Life Assurance Corporation
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
12. RELATED PARTY TRANSACTIONS (continued)
Under the terms of the securitization purchase agreements, the rights sold 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 (generally 6 to 8
years). As a result of purchase accounting, the liability was reduced to reflect the discounted estimated future payments to be
made and has been subsequently reduced by amortization according to a revised schedule. If actual mortality and expense charges and
contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction
by transaction basis, ASI has no recourse against the Company.
The Company has determined, using assumptions for lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the
Company's assets under management, that the discounted estimated future payments to ASI would be $337.1 million and $429.8 million as
of December 31, 2003 and 2002, respectively.
On April 12, 2002, the Company entered into a new securitization purchase agreement with ASI. This transaction covers designated
blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April
12, 2002, using a discount rate of 6.00%, was $101.7 million.
Payments, representing fees and charges in the aggregate amount, of $94.3 million, $50.5 million, $186.8 million and $207.7 million
were made by the Company to ASI during the eight months ended December 31, 2003, four months ended April 30, 2003 and years ended
December 31, 2002 and 2001, respectively. Related expense (income) of $11.1 million, ($11.6) million, $828 thousand and $59.9
million has been included in the Consolidated Statements of Operations and Comprehensive Income for the eight months ended December
31, 2003, four months ended April 30, 2003 and years ended December 31, 2002 and 2001, 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 restrict the payments due
to ASI, into a restricted account, 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 (dollars in thousands):
Closing Effective Contract Issue Discount Present
Transaction Date Date Period Rate Value
------------------- ------------- ------------- ------------------------ ------------- -------------
------------------- ------------- ------------- ------------------------ ------------- -------------
1996-1 12/17/96 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
2002-1 4/12/02 3/1/02 11/1/00 - 12/31/01 6.00% 101,713
American Skandia Life Assurance Corporation
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
12. RELATED PARTY TRANSACTIONS (continued)
Future amortization of future fees payable to ASI as of December 31, 2003, according to a revised amortization schedule, are as
follows (in thousands):
Year Amount
-------------- ------------
-------------- ------------
2004 $ 107,283
2005 87,446
2006 64,619
2007 36,361
2008 11,421
2009 749
-----------
Total $ 307,879
===========
13. LEASES
The Company entered into an eleven-year lease agreement for office space in Westminster, Colorado, effective January 1, 2001. Lease
expense for the eight months ended December 31, 2003, four months ended April 30, 2003 and years ended December 31, 2002 and 2001 was
$1.7 million, $899 thousand, $2.6 million and $1.6 million, respectively. Sub-lease rental income was $297 thousand, $129 thousand,
$227 thousand and $0 for the eight months ended December 31, 2003, four months ended April 30, 2003 and years ended December 31, 2002
and 2001. Future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2003 are as follows (in
thousands):
Lease Sub-Lease
------------------ -----------------
------------------ -----------------
2004 $ 2,634 $ 455
2005 2,691 190
2006 2,691 -
2007 2,704 -
2008 2,838 -
2009 and thereafter 8,279 -
---------- ----------
Total $ 21,837 $ 645
========== ==========
14. EMPLOYEE BENEFITS
On July 1, 2003, the Company's employees transitioned from SICL's benefit plans to Prudential Financial's. Prudential sponsors a
noncontributory defined benefit pension plan that covers substantially all of the Company's employees. Benefits are generally based
on career average earnings and credited length of service. Prudential Financial's funding policy is to contribute annually an amount
necessary to satisfy the Internal Revenue Service contribution guidelines.
Prudential plans also provide certain life insurance and health care benefits for its retired employees, their beneficiaries and
covered dependents. The health-care plan is contributory; the life insurance plan is noncontributory.
The costs relating to the aforementioned benefit plans amounted to $3.1 million for the eight months ended December 31, 2003.
Prior to May 1, 2003, the Company had a 401(k) plan for which substantially all employees are eligible. Under this plan, the Company
provides a 50% match on employees' contributions up to 6% of an employee's salary (for an aggregate match of up to 3% of the
employee's salary). Additionally, the Company may contribute additional amounts based on profitability of the Company and certain of
its affiliates. Expenses (income) related to this program for the eight months ended December 31, 2003, four months ended April 30,
2003, and years ended December 31, 2002 and 2001 were ($70) thousand, $425 thousand, $719 thousand and $2.7 million, respectively.
Company contributions to this plan on behalf of the participants were $4 thousand, $896 thousand, $921 thousand and $2.5 million for
the eight months ended December 31, 2003, four months ended April 30, 2003, and years ended December 31, 2002 and 2001, respectively.
Prior to July 1, 2003, the Company had a deferred compensation plan, which is available to the field marketing staff and certain
other employees. (Income) expenses related to this program for the eight months ended December 31, 2003, four months ended April 30,
2003, and the years ended December 31, 2002 and 2001 were ($41) thousand, $279 thousand, $3.5 million and $1.6 million,
respectively. Company contributions to this plan on behalf of the participants were $27 thousand, $126 thousand, $5.3 million and
$1.7 million for the eight months ended December 31, 2003, four months ended April 30, 2003, and years ended December 31, 2002 and
2001, respectively.
American Skandia Life Assurance Corporation
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
14. EMPLOYEE BENEFITS (continued)
The Company and certain affiliates cooperatively have a long-term incentive program under which units are awarded to executive
officers and other personnel. This plan will terminate in March 2004. Prior to May 1, 2003, the Company and certain affiliates also
had 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
$1.2 million and $7.1 million as of December 31, 2003 and 2002, respectively. (Income) expenses related to these programs for the
eight months ended December 31, 2003, four months ended April 30, 2003 and years ended December 31, 2002 and 2001 were ($468)
thousand, $249 thousand, $1.5 million and ($9.8) million, respectively. Payments under these programs were $1.0 million, $4.7
million, $8.0 million and $8.4 million for the eight months ended December 31, 2003, four months ended April 30, 2003 and years ended
December 31, 2002 and 2001, respectively.
15. CONTRACT WITHDRAWAL PROVISIONS
Approximately 99% of the Company's separate account liabilities are subject to discretionary withdrawal by contract owners 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.
16. RESTRUCTURING CHARGES
On March 22, 2001 and December 3, 2001, the Company announced separate plans to reduce expenses to better align its operating
infrastructure with the current investment market environment. As part of the two plans, the Company's workforce was reduced by
approximately 140 positions and 115 positions, respectively, affecting substantially all areas of the Company. Estimated pre-tax
severance benefits of $8.5 million have been charged against 2001 operations related to these reductions. These charges have been
reported in the Consolidated Statements of Income as a component of Underwriting, Acquisition and Other Insurance Expenses. As of
December 31, 2003 and 2002, the remaining restructuring liability, relating primarily to the December 3, 2001 plan, was $0 and $12
thousand, respectively.
17. SEGMENT REPORTING
Assets under management and sales for 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," and the Company does not
anticipate that they will be so in the future due to changes in the Company's strategy to focus on its core variable annuity
business.
American Skandia Life Assurance Corporation
- ---------------------------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------------------------------------------------------------------
18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited quarterly results of operations for the years ended December 31, 2003 and 2002 are summarized in the table below:
Predecessor Successor
-----------------------------------------------------------------------------
Three months One month Two months Three months Three months
ended ended ended ended ended
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
March 31 April 30 June 30 September 30 December 31
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2003 (in thousands)
- ----
Total revenues $ 104,470 $ 30,059 $ 89,807 $ 126,498 $ 133,294
Total benefits and expenses 124,243 11,036 52,837 72,227 83,278
(Loss) income from operations before
income taxes (19,773) 19,023 36,970 54,271 50,016
Net (loss) income (11,554) 19,348 25,184 37,183 28,489
Three months ended (Predecessor)
-------------------------------------------------------------
-------------------------------------------------------------
March 31 June 30 September 30 December 31
-------------------------------------------------------------
2002 (in thousands)
- ----
Total revenues $ 120,767 $ 141,815 $ 155,888 $ 89,044
Total benefits and expenses 111,604 172,792 360,685 130,500
Income (loss) from operations before income
taxes 9,163 (30,977) (204,797) (41,456)
Net income (loss) 7,460 (19,231) (132,043) (21,443)
Exhibit 3 (i)
CERTIFICATE
AMENDING OR RESTATING CERTIFICATE
OF INCORPORATION
By action of ___INCORPORATORS
___BOARD OF DIRECTORS
XX BOARD OF DIRECTORS
AND SHAREHOLDERS
(Stock Corporation)
___BOARD OF DIRECTORS
AND MEMBERS
(Nonstock Corporation)
100.00
For office use only
Account No.
Initials
STATE OF CONNECTICUT
SECRETARY OF THE STATE
1. NAME OF CORPORATION DATE
American Skandia Life Assurance Corporation Feb. 8, 1988
2. The Certificate of incorporation is XX A. AMENDED ONLY
___B. AMENDED AND RESTATED
___C. RESTATED ONLY by the following
resolution
See Attached Rider
3. (Omit if 2A is checked)
(a)The above resolution merely restates and does not change the provisions
of the original Certificate of Incorporation as supplemented and amended
to date, except as follows: (Indicate amendments made, if any, if none,
so indicate)
(b) Other than as indicated in Par. 3(a), there is no discrepancy between
the provisions of the original Certificate of Incorporation as supplemented to
date, and the provisions of this Certificate Restating the Certificate of
Incorporation.
BY ACTION OF INCORPORATORS
__4. The above resolution was adopted by vote of at least two-thirds of the
incorporators before the organization meeting of the corporation, and
approved in writing by all subscribers (if any) for shares of the
corporation, (or if nonstock corporation, by all applicants for membership
entitled to vote if any)
We (at least two-thirds of the incorporators) hereby declare, under the penalties of false statement that the statements made in
the foregoing certificate are true.
SIGNED SIGNED SIGNED
APPROVED
(All subscribers, or, if nonstock corporation, all applicants for membership entitled to vote, if none, so indicate)
SIGNED SIGNED SIGNED
Continued
BY ACTION OF BOARD OF DIRECTORS
__4. (Omit if 2C is checked.) The above resolution was adopted by the board of directors acting alone,
__there being no shareholders or subscribers.
__the board of directors being so authorized pursuant to Section 33-341, Conn. G.S. as amended
__the corporation being a nonstock corporation and having no members and no applicants for membership entitled to vote on such
resolution.
5. The number of affirmative votes required to adopt such resolution is:
6. The number of directors' votes in favor of the resolution was:
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
SIGNED (President or Vice President)
SIGNED (SECRETARY OR ASSISTANT SECRETARY)
BY ACTION OF BOARD OF DIRECTORS AND SHAREHOLDERS
X 4. The above resolution was adopted by the board of directors and by
shareholders.
5. Vote of shareholders:
(a) (Use if no shares are required to be voted as a class) NUMBER OF
SHARES ENTITLED TO VOTE
100
TOTAL VOTING POWER
100
VOTE REQUIRED FOR ADOPTION
67
VOTE FAVORING ADOPTION
100
(b) (If the shares of any class are entitled to vote as a class,
indicate the designation and number of outstanding shares of each
such class, the voting power thereof, and the vote of each such
class for the amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
Robert B. Goode, Jr. President
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
William J. Lazarou, Secretary
SIGNED (President or Vice President)
/s/Robert B. Goode, Jr
SIGNED (Secretary or Assistant Secretary)
/s/William J. Lazarou, Secretary
BY ACTION OF BOARD OF DIRECTORS AND MEMBERS
__ 4.The above resolution was adopted by the board of directors and by members.
5. Vote of members:
(a) (Use if no members are required to vote as a class.)
NUMBER OF MEMBERS VOTING
TOTAL VOTING POWER
VOTE REQURIED FOR ADOPTION
VOTE FAVORING ADOPTION
(b)(If the members of any class are entitled to vote as a class,
indicate the designation and number of members of each such class,
the voting power thereof, and the vote of each such class for the
amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
SIGNED (President or Vice President)
SIGNED (Secretary or Assistant Secretary)
FOR OFFICE USE ONLY
FILING FEE
$30.20
CERTIFICATION FEE
$40.80
TOTAL FEES
$170.00
SIGNED (For secretary of the State) (4CC's)
CERTIFIED COPY SENT ON (Date)
TO
CARD REC & 4CC'S
2/14/89
INFOSEARCH, INC
30 HIGH STREET
HARTFORD, CT 06103
INFOSEARCH WILL PICK UP
RIDER
RESOLVED, that the Certificate of Incorporation be amended to reflect the change
in the Corporation's principal office to Shelton, Connecticut as follows:
Section 4, line 2, delete "City of Hartford" and substitute "Town of Shelton".
RESOLVED, that the par value of the Corporation's shares of Class A and Class B
common stock be decreased from $100.00 per share to $80.00 per share thereby
decreasing the current stated capital of the Corporation from its present level
of $2,500,000.00 to $2,000,000.00 said decrease to be accomplished through a
corresponding increase in the Corporation's surplus accounts and that the
officers of the Corporation be and hereby are authorized and directed to take
such action as is necessary to amend the Corporation's Certificate of
Incorporation in order to effect such change in par value, including preparing
and filing amendments to the Corporation's Certificate of Incorporation and
obtaining such state insurance regulatory approvals as may be required.
RESOLVED, that the present requirement for a staggered Board of Directors be
eliminated by amending the Corporation's Certificate of Incorporation as
follows:
Section 4, line 6, delete the phrase, "and provided further the classification
shall be such that the term of one or more classes shall expire each succeeding
year" and insert a period in line 6 following the word years".
[NW] CSM.323
CERTIFICATE OF SECRETARY
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
The undersigned, being duly elected Secretary of American Skandia Life Assurance
Corporation (the "Corporation"), does hereby certify that the annexed
Certificate of Incorporation of the Corporation, together with the annexed
amendments to such Certificate of Incorporation, are true and correct copies of
the originals, as are currently in full force and effect.
In witness whereof, the undersigned has executed this certificate this 25th day
of July, 1988.
/s/William J. Lazarou
William J. Lazarou
Secretary, American Skandia
Life Assurance Corporation
JTB 31.15
HOUSE BILL NO. 5920.
SPECIAL ACT NO. 136
AN ACT CONCERNING THE INCORPORATION OF HARTFORD INSURANCE GROUP LIFE INSURANCE
COMPANY.
Be it enacted by the Senate and House of Representatives in General Assembly
convened:
SECTION 1. H.V. Williams, J.W. Clarke and D.C. Thomas, with such other persons
as may hereafter be associated with them, their successors and assigns forever,
are created a body politic and corporate by the name of Hartford Insurance Group
Life Insurance Company, with power under that name to sue and be sued; to plead
and be impleaded in the courts of this state and elsewhere; to adopt a common
seal and alter the same at pleasure; to purchase, acquire and hold both real and
personal property of every kind, and, to sell, grant, alien, invest, use and
dispose of the same for the purposes of the corporation; to make such bylaws and
regulations as may be deemed proper for the management of the affairs of the
corporation, and from time to time to amend the same; and generally to do and
cause to be done and executed all such acts as may seem necessary and proper
within the limitations herein contained. If any of said incorporators is, for
any reason, unable to act, the remaining incorporators are authorized to name a
successor to act in his place and stead.
SEC. 2. Said corporation may make insurance upon lives, may grant and issue
annuities, either in connection with or separate from contracts of insurance
predicated upon life risks, may issue policies stipulated to be with or without
participation in profits, may issue policies or certificates of insurance
against loss of life or personal injury resulting from any cause, and against
loss resulting from disease or accident, and against any other casualty or risk
which may be subject to life, accident or health insurance. Said corporation in
addition to the foregoing is authorized generally to do a life, accident and
health insurance business, and is authorized to insure against any and all
hazards against which life, accident and health insurance companies are on the
effective date of this act, or may thereafter at any time be, authorized to
insure by the laws of this state, or of any other state or territory of the
United States or foreign countries in which the company may be licensed to carry
on business. In addition to the foregoing powers, the purposes of said
corporation are all those permitted by the Stock Corporation Act and other
applicable laws of this state.
SEC. 3. (a) The capital with which said corporation shall commence business
shall not be less than two hundred and fifty thousand dollars and may, from time
to time, be increased when authorized by the stockholders to any sum not
exceeding in the whole twenty million dollars, and shall be divided into shares
of the par value of not less than one dollar each.
(b) The corporation, from time to time, may change the par value and number of
shares of its issued and outstanding capital stock, but no such change shall be
valid unless approved by a vote of at least two-thirds of the stock represented
at a meeting of the stockholders duly warned and held for that purpose nor
unless a majority of the directors shall make, sign and swear to and file in the
office of the secretary of the state a certificate stating that such change has
been duly approved by the stockholders and setting forth a copy of the vote of
the stockholders, which vote shall show the details of such change.
(c) The corporation may, from time to time, and to the amount of capital stock
authorized by its certificate of incorporation, issue shares of stock with the
same par value as its then outstanding capital stock. There shall be no
pre-emptive right to additional shares of stock issued by the corporation.
(d) The shares of the capital stock shall be subscribed and paid for at such sum
in cash per share, not less than par, as the incorporators shall prescribe, and
the subscribers therefor shall, at the time of subscription, pay to the
commissioners hereinafter named, for the use of the corporation, not less than
ten per cent of the par value thereof. The balance due upon such subscriptions
shall be paid to the corporation in such installments and at such times as the
directors shall determine, provided the entire capital stock to the amount of
not less than two hundred and fifty thousand dollars and a surplus of not less
than two hundred and fifty thousand dollars shall be paid in, in cash, before
said corporation shall commence business.
SEC. 4. The principal office of the corporation shall be located in the city of
Hartford, and the affairs of the corporation shall be managed by a board of not
fewer than nine directors. Such directors may be classified as to their terms of
office for terms established by the bylaws, provided no directors shall be
elected for a shorter term than one year nor for a longer term than five years,
and provided further the classification shall be such that the term of one or
more classes shall expire each succeeding year. The first meeting of the
subscribers shall be held at a time and place within the city of Hartford to be
appointed for that purpose by the commissioners hereinafter named, and written
notice of such meeting, stating the time and place thereof, shall be given by
the commissioners to each subscriber in person or by mail at least five days
before such meeting. At such meeting or at any adjournment thereof the
subscribers to the capital stock may adopt such bylaws, rules and regulations as
may be deemed proper for the regulation of the affairs of the corporation, and
shall elect by ballot not less than nine persons to serve as directors until the
first annual meeting and until others are chosen in their stead.
SEC. 5. The annual meetings of the corporation, after the first meeting as
aforesaid, shall be held at such time in each year and upon such notice as the
bylaws shall prescribe. If the corporation fails to hold its annual meeting at
the time specified for the same in any year, or fails to elect directors
thereat, the corporation shall not be dissolved nor its rights impaired thereby,
but a special meeting for that purpose shall be called by the president or by a
majority of the directors of said corporation in case of his refusal or neglect
so to do, and in case of the refusal of the president and of the directors to
call such meeting, such special meeting may be called by the holders of
one-tenth of the capital stock, upon the same notice as is required by the
bylaws for calling an annual meeting, and at such meeting, directors to fill the
places of the directors whose terms of office shall have expired may be elected.
SEC. 6. The directors shall determine how many of their number, not fewer than
five, shall constitute a quorum for the transaction of business, and may fill
any vacancy which may occur in the board between the annual meetings of the
stockholders, by choosing a director to act until the next annual meeting and
until a successor shall be chosen.
SEC. 7. The directors shall choose a president, a vice president, a treasurer
and one or more secretaries of the corporation, and may appoint such other
officers and authorize the employment or appointment of clerks, agents or other
employees or representatives and may authorize the establishment of such
agencies in this state and elsewhere as shall be deemed advisable for conducting
the business of the corporation, prescribe the duties and fix the compensation
of officers and employees and take bonds of any of them for the faithful
performance of his duty. The president shall be chosen from the directors, and
any officer or employee of the corporation may be displaced and a new one
appointed at the pleasure of the directors.
SEC. 8. The president shall have power at any time to call a special meeting of
stockholders, upon such notice as the bylaws shall prescribe, and he shall call
such special meeting when requested in writing by the holders of at least
one-tenth of the capital stock, and in case of his refusal or neglect to call a
meeting on such request, such stockholders may call the same.
SEC. 9. At all meetings of the stockholders all questions shall be determined by
a majority vote of those present, allowing one vote to each share, and
stockholders shall be entitled to vote in person or by proxies duly appointed.
SEC. 10. Subject to the approval of the insurance commissioner, said corporation
my enter into a merger or consolidation with one or more other insurance
companies organized within or without this state or acquire the assets thereof
by issuance of shares of its stock or otherwise, whether or not the charter of
such other company expressly so provides. The provisions of the general statutes
relating to the merger or consolidation of corporations, or relating to the
acquisition of assets of other corporations, shall apply to any such merger,
consolidation or acquisition of assets.
SEC. 11. To carry out the purposes of this act and to organize said corporation,
H.V. Williams, J.W. Clarke and D.C. Thomas are appointed commissioners to open
books of subscription and to receive subscriptions to the capital stock of said
corporation, to receive the first installment on such subscriptions, to close
the subscription books when the capital stock shall have been subscribed to the
full amount, not less than two hundred and fifty thousand dollars, with which
the incorporators shall have determined to commence business, and, if the
capital stock is oversubscribed, to apportion the same in their discretion among
the subscribers. When the capital stock has been so subscribed, said
commissioners, or a majority of them, shall call the first meeting of the
subscribers as provided in section 4 of this act for the purposes therein set
forth, and when the bylaws have been adopted and the directors chosen, and the
board of directors so chosen have been organized by the choice of a president
and a secretary, the commissioners shall pay over to the officers of the
corporation all moneys received by them upon subscriptions to the capital stock,
and said corporation shall thereupon be deemed to be fully organized. If any of
said commissioners is, for any reason, unable to act, the remaining
commissioners are authorized to name a successor or successors to act in his
place and stead.
SEC. 12. This charter shall be void unless said corporation shall be organized
and a certificate of such organization shall be executed and filed according to
law on or before October 3, 1971.
Certified as correct by
-----------------------------------------
Legislative Commissioner.
-----------------------------------------
Clerk of the Senate.
-----------------------------------------
Clerk of the House.
Approved May 21, 1969.
-----------------------------------------
Governor.
FILED State of Connecticut
Jul 24 1969 - 8:30 AM
Ella T. Grasso Secretary of State By________
/s/_________
Card
List
Proof HN-LA
Day, Berry & Howard
1 Constitution Plaza
Hartford, Conn
/s/Michael Halloran
CERTIFICATE AMENDING CERTIFICATE OF INCORPORATION
BY ACTION OF INCORPORATORS
1. The name of the corporation is Hartford Insurance Group Life Insurance
Company.
2. The Certificate of Incorporation is amended only by the following resolution
of incorporators:
RESOLVED: That subsections (a) and (d) of Section 3, Section 4,
Section 6, Section 9 and Section 11 of the Corporation's certificate of
incorporation, as that term is defined in the Connecticut Stock Corporation Act,
is amended to read as follows:
Section 3(a). The capital with which said Corporation shall
commence business shall be not less than two hundred and fifty thousand dollars
and may, from time to time, be increased when authorized by the stockholders to
any sum not exceeding in the whole twenty million dollars. The initial capital
stock of the Corporation shall consist of one hundred shares of Common Stock,
ten dollars par value per share, and twenty-four thousand nine hundred shares of
Non-Voting Common Stock, ten dollars par value per share, which Non-Voting
Common Stock shall be identical in all respects to the Common Stock of the
Corporation except that the Non-Voting Common Stock shall have no voting power
or right to notice of any meeting.
(d) The shares of the capital stock shall be subscribed and paid
for at such sum in cash per share, not less than par, as the incorporators shall
prescribe, and the subscribers therefor shall, at the time of subscription, pay
to the commissioners hereinafter named, for the use of the corporation, not less
than ten per cent of the par value thereof. The balance due upon such
subscriptions shall be paid to the corporation in such installments and at such
times as the directors shall determine, provided the entire capital stock to the
amount of not less than two hundred and fifty thousand dollars and a surplus of
not less than two hundred and fifty thousand dollars shall be paid in, in cash,
before said corporation shall commence any insurance business.
Section 4. The principal office of the corporation shall be
located in the city of Hartford, and the affairs of the corporation shall be
managed by a board of not fewer than three directors. Such directors may be
classified as to their terms of office for terms established by the by-laws,
provided no directors shall be elected for a shorter term than one year nor for
a longer term than five years, and provided further the classification shall be
such that the term of one or more classes shall expire each succeeding year. The
first meeting of the subscribers shall be held at a time and place within the
city of Hartford to be appointed for that purpose by the commissioners
hereinafter named, and written notice of such meeting, stating the time and
place thereof, shall be given by the commissioners to each subscriber in person
or by mail at least five days before such meeting. At such meeting or at any
adjournment thereof the subscribers to the capital stock may adopt such by-laws,
rules and regulations as may be deemed proper for the regulation of the affairs
of the corporation, and shall elect by ballot not less than three persons to
serve as directors until the first annual meeting and until others are chosen in
their stead.
Section 6. The directors shall determine how many of their
number, not fewer than two, shall constitute a quorum for the transaction of
business, and may fill any vacancy which may occur in the board between the
annual meetings of the stockholders, by choosing a director to act until the
next annual meeting and until a successor shall be chosen.
Section 9. At all meetings of the stockholders all questions
shall be determined by a majority vote of those present, allowing one vote to
each share of Common Stock, and stockholders shall be entitled to vote in person
or by proxies duly appointed.
Section 11. To carry out the purposes of this act and to
organize said corporation, H.V. Williams, J.W. Clarke and D.C. Thomas are
appointed commissioners to open books of subscription and to receive
subscriptions to the capital stock of said corporation, to receive the first
installment on such subscriptions, to close the subscription books when the
capital stock shall have been subscribed to the full amount, not less than two
hundred and fifty thousand dollars, with which the incorporators shall have
determined to commence any insurance business, and, if the capital stock is
oversubscribed, to apportion the same in their discretion among the subscribers.
When the capital stock has been so subscribed, said commissioners, or a majority
of them, shall call the first meeting of the subscribers as provided in section
4 of this act for the purpose therein set forth, and when the by-laws have been
adopted and the directors chosen, and the board of directors so chosen have been
organized by the choice of a president and a secretary, the commissioners shall
pay over to the officers of the corporation all moneys received by them upon
subscriptions to the capital stock, and said corporation shall thereupon be
deemed to be fully organized. If any of said commissioners is, for any reason,
unable to act, the remaining commissioners are authorized to name a successor or
successors to act in his place and stead.
3. There are no subscribers to the shares of the capital stock of the
Corporation and, as provided in Section 33-360(b)(1) of the Connecticut General
Statutes, as amended, the above resolution was adopted by vote of two-thirds of
the incorporators.
Dated at Hartford, Connecticut, this 23rd day of July, 1969.
------------------------------
/s/ H.V. Williams
------------------------------
/s/ D.C. Thomas
BEING TWO-THIRDS OF THE INCORPORATORS
STATE OF CONNECTICUT :
: ss. July 23, 1969
COUNTY OF HARTFORD :
Personally appeared H.V. Williams and D.C. Thomas and made oath to the
truth of the foregoing certificate by them signed, before me.
_/s/Michael Halloran
Notary Public
FILED State of Connecticut
Jul 24 1969 - 8:30 AM
Ella T. Grasso Secretary of State
/s/________________
Card
List
Proof HN-LA
Day, Berry & Howard
1 Constitution Plaza
Hartford, Conn
/s/ Michael Halloran
CERTIFICATE AMENDING CERTIFICATE OF INCORPORATION BY
ACTION OF BOARD OF DIRECTORS AND SHAREHOLDERS
1. The name of the Corporation is Hartford Variable Annuity Life Insurance
Company.
2. The Certificate of Incorporation is amended only by the following Resolution
of Directors and Shareholders:
RESOLVED: That Subsection 3(a) of the Corporation's Certificate of
Incorporation is amended to increase the par value of the Corporation's shares
from sixty dollars ($60) to eighty dollars ($80) per share, as follows:
The capital stock of the Corporation shall consist of one hundred
(100) shares of Common Stock, eighty dollars ($80) par value per share, and
twenty-four thousand nine hundred (24,900) shares of Non-Voting Common Stock,
eighty dollars ($80) par value per share, which Non-Voting Common Stock shall be
identical in all respects to the Common Stock of the Corporation except that the
Non-Voting Common Stock shall have no voting power or right to notice of any
meeting.
3. The above Resolution was adopted by the Board of Directors and by the
Shareholders.
4. Vote of Shareholders:
No. of Shares Total Voting Vote Required Vote
Entitled to Power of Shares for Favoring
Vote Entitled to Vote Adoption Adoption
100 100 67 100
5. The number of affirmative votes of Directors required to adopt such
Resolution is 12. The number of Director votes in favor of the Resolution was
12.
Dated at Hartford, Connecticut this 30th day of September, 1980.
We hereby declare, under penalties of false statement, that the statements made
in the foregoing Certificate are true.
/s/ George H. Rieger /s/ William A. McMahon
Senior Vice President Secretary
State of Connecticut
Filed
Sep 30, 1980
Secretary of State
Seal
STATE OF CONNECTICUT
INSURANCE DEPARTMENT
STATE OFFICE BUILDING HARTFORD, CONNECTICUT 06115
This Is to Certify, that HARTFORD VARIABLE ANNUITY LIFE INSIJRANCE COMPANY is
authorized to amend its Restated Certificate of incorporation by increasing
the par value of its shares of common capital stock to $100.00 each for a
total authorized capital of $2,500,000.00.
Witness my hand and official seal, at Hartford,
this 3rd day of August 1984
/s/
Insurance Commissioner
FILED
STATE OF CONNECTICUT
Aug - 3 1984
/s/
Secretary of the State
By /s/______3:00 P.M. F.F. $4.00
CERTIFICATE
AMENDING OR RESTATING CERTIFICATE
OF INCORPORATION By ACTION OF___INCORPORATORS
___BOARD OF DIRECTORS
__X BOARD OF DIRECTORS
AND SHAREHOLDERS
(Stock Corporation)
__BOARD OF DIRECTORS AND MEMBERS
(Nonstock Corporation)
STATE OF CONNECTICUT For office use only
SECRETARY OF STATE ACCOUNT NO.
INITIALS
1. Name of Corporation Date
Hartford Variable Annuity Life Insurance Company August 2, 1984
2. The Certificate of incorporation is X A AMENDED ONLY B. AMENDED AND RESTATED
C. RESTATED ONLY by the following resolution
RESOLVED, that Section 3 of the Corporation's Restated Certificate of
Incorporation be amended to read as follows:
"Section 3. The capital stock of the Corporation shall consist of one
hundred (100) shares of Common Stock, one hundred dollars ($100) par
value per share and twenty-four thousand nine hundred (24,900) shares
of Non-Voting Common Stock, one hundred dollars ($100) par value per
share, for a total authorized capital of two million five hundred
thousand dollars ($2,500,000). The Non-Voting Common Stock shall be
identical in all respects to the Common Stock of the Corporation
except that the Non-Voting Stock shall have no voting power or right
to notice of any meeting. There shall be no preemptive right to
additional shares of stock issued by the Corporation."
3. (Omit if 2 A is checked.)
(a) The above resolution merely restates and does not change the
provisions of the original Certificate of Incorporation as supplemented and
amended to date, except as follows: Indicate amendments made, if any, if more,
so indicate)
(b) Other than as indicated in Par. 3(a), there is no discrepancy
between the provisions of the original Certificate of Incorporation as
supplemented to date, and the provisions of the Certificate of Incorporation.
BY ACTION OF INCORPORATORS
__4. The above resolution was adopted by vote of at least two-thirds of the
incorporators before the organization meeting of the corporation, and
approved in writing by all subscribers (if any) for shares of the
corporation, (or if nonstock corporation, by all applicants for membership
entitled to vote if any)
We (at least two-thirds of the incorporators) hereby declare, under the penalties of false statement that the statements made in
the foregoing certificate are true.
SIGNED SIGNED SIGNED
APPROVED
(All subscribers, or if nonstock corporation, all applicants for membership entitled to vote, if none, so indicate)
SIGNED SIGNED SIGNED
Continued
BY ACTION OF BOARD OF DIRECTORS
__4. (Omit if 2C is checked.) The above resolution was adopted by the board of directors acting alone,
__there being no shareholders or subscribers.
__the board of directors being so authorized pursuant to Section 33-341, Conn. G.S. as amended
__the corporation being a nonstock corporation and having no members and no applicants for membership entitled to vote on such
resolution.
5. The number of affirmative votes required to adopt such resolution is:
6. The number of directors' votes in favor of the resolution was:
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
SIGNED (President or Vice President)
/s/
SIGNED (Secretary or Assistant Secretary)
/s/
BY ACTION OF BOARD OF DIRECTORS AND SHAREHOLDERS
X 4. The above resolution was adopted by the board of directors and by
shareholders.
5. Vote of shareholders:
(a) (Use if no shares are required to be voted as a class) NUMBER OF
SHARES ENTITLED TO VOTE
100
TOTAL VOTING POWER
100
VOTE REQUIRED FOR ADOPTION
67
VOTE FAVORING ADOPTION
100
(b) (If shares of any class are entitled to vote as a class, indicate
the designation and number of outstanding shares of each such
class, the voting power thereof, and the vote of each such class
for the amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
Edward N. Bennett (Sr. Vice President)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
Robert C. Fischer (Secretary)
SIGNED (President or Vice President)
/s/Edward N. Bennett
SIGNED (Secretary or Assistant Secretary)
/s/Robert C, Fischer
BY ACTION OF BOARD OF DIRECTORS AND MEMBERS
__4.The above resolution was adopted by the board of directors and by members.
5. Vote of members:
(a) (Use if no members are required to vote as a class.)
NUMBER OF MEMBERS VOTING
TOTAL VOTING POWER
VOTE REQURIED FOR ADOPTION
VOTE FAVORING ADOPTION
(b)(If the members of any class are entitled to vote as a class,
indicate the designation and number of members of each such class,
the voting power thereof, and the vote of each such class for the
amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
FILED
STATE OF CONNECTICUT
8/3/84
/S/ secretary of State
SIGNED (President or Vice President)
/s/
SIGNED (SECRETARY OR ASSISTANT SECRETARY
/s/
FOR OFFICE USE ONLY
FILING FEE
$30.00
CERTIFICATION FEE
$27
TOTAL FEES
$57
SIGNED (For secretary of the State)
Rec to: sent 8/31
CERTIFIED COPY SENT ON (Date)
8/6/84 INITIALS /s/
TO
Hartford Variable Annuity Life Ins. Co.
Hartford Plaza, Hartford, Ct 06115
CARD LIST PROOF
FILED
STATE OF CONNECTICUT
AUG - 3 1984
/s/
SECRETARY OF THE STATE
By [ ]/s/ Time 3:00 P.M.
FILED
STATE OF CONNECTICUT
Aug 4 1976
/s/ SECRETARY OF STATE
/s/ Time 9:50 A.M.
Hartford Variable Annuity Life Insurance of Connecticut
CERTIFICATE AMENDING CERTIFICATE OF
INCORPORATION BY ACTION OF BOARD
OF DIRECTORS AND SHAREHOLDERS
1. The name of the Corporation is Hartford Insurance Group Life Insurance
Company.
2. The Certificate of Incorporation is amended only by the following Resolution
of directors and shareholders:
RESOLVED: That Section 1, Subsections (b) and (d) of Section 3, and
Section 7 of the Corporation's Certificate of Incorporation are amended to read
as follows:
Section 1.H.V. Williams, J.W. Clarke and D.C. Thomas, with such other
persons as may hereafter be associated with them, their successors and assigns
forever, are created a body politic and corporate by the name of Hartford
Variable Annuity Life Insurance Company of Connecticut, with power under that
name to sue and be sued; to plead and be impleaded in the courts of this state
and elsewhere; to adopt a common seal and alter the same at pleasure; to
purchase, acquire and hold both real and personal property of every kind, and to
sell, grant, alien, invest, use and dispose of the same for the purposes of the
Corporation, and from time to time to amend the same; and generally to do and
cause to be done and executed all such acts as may seem necessary and proper
within the limitations herein contained. If any of said incorporators is, for
any reason, unable to act, the remaining incorporators are authorized to name a
successor to act in his place and stead.
Section 3(b). The Corporation, from time to time, may change the par value
and number of shares of its issued and outstanding capital stock, but no such
change shall be valid unless approved by a vote of at least two-thirds of the
stock represented at a meeting of the stockholders duly warned and held for that
purpose nor unless a certificate shall be sworn to and filed in the office of
the secretary of the state stating that such change has been duly approved by
the stockholders and setting forth a copy of the vote of the stockholders, which
vote shall show the details of such change.
Section 3(d). The shares of the capital stock shall be subscribed and paid
for at such sum in cash per share, not less than par, as the incorporators shall
prescribe, and the subscribers therefor shall, at the time of subscription, pay
to the commissioners hereinafter named, for the use of the Corporation, not less
than ten percent of the par value thereof. The balance due upon such
subscriptions shall be paid to the Corporation in such installments and at such
times as the directors shall determine, provided the entire capital stock to the
amount of not less than two hundred and fifty thousand dollars shall be paid in,
in cash, before said Corporation shall commence any insurance business.
Section 7.The directors shall choose a president, a vice president, a
treasurer and one or more secretaries of the Corporation and may appoint such
other officers and authorize the employment or appointment of clerks, agents or
other employees or representatives and may authorize the establishment of such
agencies in this state and elsewhere as shall be deemed advisable for conducting
the business of the Corporation, prescribe the duties and fix the compensation
of officers and employees and take bonds of any of them for the faithful
performance of his duty. Any officer or employee of the Corporation may be
displaced and a new one appointed at the pleasure of the directors.
3. The above Resolution was adopted by the Board of Directors and by the
shareholders.
4. Vote of Shareholders:
No. of Shares Total Voting Vote Required Vote
Entitled to Power of Shares for Favoring
Vote Entitled to Vote Adoption Adoption
100 100 67 100
5. The number of affirmative votes of Directors required to adopt such
Resolution is two (2). The number of Directors votes in favor of the Resolution
was three (3).
Dated at Hartford, Connecticut this 2nd day of August, 1976.
We hereby declare, under penalties of false statement, that the statements made
in the foregoing Certificate are true.
/s/ Robert R. Baird s/s Michael O'Halloran
Vice President Assistant Secretary
[ ] to: The Hartford
Htfd Plaza, Htfd 06115
Attn: Michael O'Halloran, Esq.
FILED
STATE OF CONNECTICUT
AUG 31 1976
/s/_____SECRETARY OF STATE By
/s/_________Time 4:00P.M.
Hartford Variable Annuity Life Insurance Company of
Connecticut
CERTIFICATE OF MERGER
of
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY, INC.
and
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT
1. The name of the surviving Corporation in the merger is HARTFORD VARIABLE
ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT.
2. The Plan of Merger is as attached hereto.
3. The Plan of Merger was adopted by the merging Corporations in the following
manner:
(a) The Plan was approved by resolution adopted by the Board of Directors
of each merging Corporation.
(b) Vote of Shareholders:
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY, INC.
(A Delaware Corporation)
No. of Shares Total Voting Vote Required Vote
Entitled to Power of Shares for Favoring
Vote Entitled to Vote Adoption Adoption
350 350 176 350
Common Shares
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT
(A Connecticut Corporation)
No. of Shares Total Voting Vote Required Vote
Entitled to Power of Shares for Favoring
Vote Entitled to Vote Adoption Adoption
100 100 67 100
Voting Common
Shares
Dated at Hartford, Connecticut this 31st day of August, 1976.
We hereby declare, under the penalties of false statement, that the statements
made in the foregoing Certificate, insofar as they pertain to Hartford Variable
Annuity Life Insurance Company of Connecticut, are true.
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT
(Surviving Corporation)
By /s/Robert R. Baird /s/Michael O'Halloran
Vice President Assistant Secretary
We hereby declare, under the penalties of false statement, that the statements
made in the foregoing Certificate, insofar as they pertain to Hartford Variable
Annuity Life Insurance Company, Inc., are true.
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY, INC.
(Terminating Corporation)
By /s/Robert R. Baird By /s/Michael O'Halloran
Vice President Assistant Secretary
AGREEMENT AND ARTICLES OF MERGER
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY, INC.
(A Delaware Corporation)
and
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT
(A Connecticut Corporation)
THIS AGREEMENT AND ARTICLES OF MERGER (hereinafter referred to as "Agreement")
made and entered into this 23rd day of August, 1976, by and between HARTFORD
VARIABLE ANNUITY LIFE INSURANCE COMPANY, INC. (hereinafter "HVA-Delaware"), a
stock insurance company incorporated and existing under the laws of the State of
Delaware and having its registered office in Wilmington, Delaware and its
principal place of business in Hartford, Connecticut; and HARTFORD VARIABLE
ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT (hereinafter "HVA-Connecticut" or
"the Surviving Corporation"), a stock insurance company incorporated and
existing under the laws of the State of Connecticut and having its principal
place of business in Hartford, Connecticut; HVA-Delaware and HVA-Connecticut are
sometimes hereinafter referred to as "the Constituent Corporations".
WITNESSETH:
WHEREAS, HVA-Connecticut has authorized, issued and outstanding, capital stock
consisting of One Hundred (100) shares of voting common stock, $10 par value per
share, and of Twenty-Four Thousand Nine Hundred (24,900) shares of non-voting
common stock, $10 par value per share; and HVA-Delaware has issued and
outstanding Three Hundred Fifty (350) shares of common stock, $1,000 par value
per share, and is authorized to issue Two Thousand (2,000) shares of said common
stock; and Hartford Life Insurance Company, a Connecticut corporation, owns all
of the aforesaid issued and outstanding shares of HVA-Connecticut and
HVA-Delaware; and
WHEREAS, the Boards of Directors of the Constituent Corporations have decreed it
in the best interests of the corporations and their shareholders that the
domicile of HVA-Delaware be transferred from the State of Delaware to the State
of Connecticut, and that such change of domicile be accomplished by a merger of
HVA-Delaware into HVA-Connecticut, pursuant to the applicable laws of the States
of Delaware and Connecticut; and that as a result of said merger HVA-Connecticut
will be the Surviving Corporation and each holder of each share of the common
stock of HVA-Connecticut shall be deemed to hold one identical share of the
common stock of the Surviving Corporation and all shares of capital stock of
HVA-Delaware shall be canceled; and
WHEREAS, the intent of this Agreement is to accomplish the aforementioned
purposes;
NOW, THEREFORE, in consideration of the promises and of the mutual provisions,
agreements, covenants, conditions and grants herein contained, HVA-Connecticut
and HVA-Delaware, by their respective Boards of Directors and in accordance with
the applicable provisions of the laws of the State of Delaware and Connecticut
have agreed and do hereby agree, each with the other, as follows:
FIRST: Merger. On the effective date of the merger (as defined in Article
SIXTH, Paragraph 2 of this Agreement), HVA-Delaware shall be merged, pursuant to
the General Corporation Law of the State of Delaware and the Connecticut General
Statutes, into and with HVA-Connecticut, and HVA-Connecticut on such date shall
merge HVA-Delaware with and into itself. HVA-Connecticut shall be the
corporation which survives such merger, and HVA-Connecticut, as Surviving
Corporation, shall continue and be deemed to continue for all purposes
whatsoever after the merger of HVA-Delaware with and into itself.
SECOND: Jurisdiction and Name. The Surviving Corporation shall be
governed by the laws of the State of Connecticut and its name shall be Hartford
Variable Annuity Life Insurance Company of Connecticut.
THIRD: Certificate of Incorporation and By-Laws. From and after the
effective date of the merger, the Certificate of Incorporation and By-Laws of
the Surviving Corporation shall be the Certificate of Incorporation and By-Laws
of HVA-Connecticut as constituted on the effective date of the merger. A true
and exact copy of said Certificate of Incorporation is attached hereto as
Exhibit "A".
FOURTH: Board of Directors of the Surviving Corporation. The initial Board
of Directors of the Surviving Corporation upon the effective date of the merger,
and thereafter until a regular or special meeting of stockholders called for the
purpose of electing Directors, shall consist of the following persons:
William A. McMahon 124 Ridgewood Road
West Hartford, Connecticut
Michael O'Halloran 105 Sherbrooke Avenue
Hartford, Connecticut
Michael S. Wilder 3 Rocklyn Drive
West Simsbury, Connecticut
In addition, the officers of the Surviving Corporation shall be the officers of
HVA-Connecticut immediately prior to the effective date of the merger.
FIFTH: Conversion of Securities on Merger. The manner of converting the
shares of the Constituent Corporations into shares of the Surviving Corporation
shall be as follows:
1. Each share of voting common stock and each share of non-voting common
stock of HVA-Connecticut issued and outstanding on the effective date of the
merger and all rights in respect thereof shall be, immediately upon the
effective date of the merger and without further action, deemed to be one
identical share of the common stock of the Surviving Corporation.
2. Each share of common stock of HVA-Delaware issued and outstanding on
the effective date of merger and all rights in respect thereof shall be,
immediately upon the effective date of the merger, and without further action,
canceled as of that date.
SIXTH: Effective Date and Effects of Merger.
1. This Agreement is expressly conditioned and contingent upon its
adoption and approval by (a) the stockholders of the Constituent Corporations,
and (b) the Insurance Commissioners of the States of Delaware and Connecticut,
and of other appropriate governmental regulatory agencies. The officers and
directors of the Constituent Corporations agree to do and perform each and every
act and to execute and acknowledge all documents of every character required to
obtain the adoption and approval of said stockholders and governmental agencies;
and agree to do and perform each and every act and to execute and acknowledge
all documents of every character required to make the merger effective under the
General Corporation Law and Insurance Code of the State of Delaware, and the
Connecticut General Statutes.
2. Upon the performance of the conditions and the happening of the
contingencies set forth in subparagraph 1 of this Article SIXTH, this Agreement
shall be filed in the manner required by the Insurance Code of the State of
Delaware and the General Corporation Law of the State of Delaware. The merger
shall become effective and the effective date of the merger for purposes of
Delaware Law shall be, and hereby is defined to mean, the date on which the
Secretary of State shall approve this Agreement and Articles of Merger and shall
issue a certificate as provided by 18 Del. C. 4941. On the same or the following
day, an executed counterpart of this Agreement and Articles of Merger shall be
filed in the office of the Secretary of State of the State of Connecticut in the
manner required by the Connecticut General Statutes. The merger shall become
effective and the effective date of the merger for purposes of Connecticut law
shall be, and is hereby defined to mean, 12:01 a.m. on the first day of the
month following such filing in the State of Connecticut.
3. Except as herein otherwise specifically set forth, as of the effective
date, the identity, existence, purposes, powers, assets, franchises, property
rights and immunities of HVA-Connecticut shall continue unimpaired and
unaffected by the merger; and the corporate identity, existence, purposes,
powers, assets, property rights and immunities of HVA-Delaware, including real
and personal and tangible and intangible assets of whatsoever character and
wherever located, and including all separate accounts of HVA-Delaware, shall
become the assets of HVA-Connecticut, and shall be merged into HVA-Connecticut,
and pursuant to any and all applicable laws, HVA-Connecticut shall be fully
vested therewith. Likewise, as of the effective date, HVA-Connecticut, as the
Surviving Corporation, shall assume and shall be liable and responsible for any
and all of the legal liabilities and legal obligations of HVA-Delaware,
including, without limitation, all liabilities for taxes, all liabilities under
insurance contracts theretofore issued or then on binder, and all other legal
liabilities and obligations of HVA-Delaware. The existence of HVA-Delaware,
except insofar as it may be continued by statute, shall cease on the effective
date and thereupon, HVA-Connecticut and HVA-Delaware shall become a single
corporation, namely HVA-Connecticut. The Surviving Corporation shall continue as
a stock insurance company, and shall have the objects and purposes stated in its
Certificate of Incorporation, and in general terms shall have the power and
authority to transact any business which HVA-Delaware was empowered and
authorized to transact prior to the merger.
4. HVA-Delaware shall from time to time execute and deliver or cause to be
executed and delivered all such deeds or other instruments, and shall take or
cause to be taken such further or other action, as the Surviving Corporation may
deem necessary or desirable in order to vest in and confirm to the Surviving
Corporation title to and possession of all of the aforesaid rights, privileges,
powers and franchises and property, and otherwise to carry out the intent and
purpose of this Agreement.
5. Prior to the effective date, the Board of Directors of HVA-Connecticut
shall adopt a resolution to be effective as of the effective date of the merger,
providing that such separate account or accounts as may be established and
maintained by HVA-Delaware at the time of the merger shall be deemed to be
separate accounts of the Surviving Corporation pursuant to the provisions of
Connecticut law and that the existence of such separate account or accounts
shall continue uninterrupted.
SEVENTH: Voidability and Abandonment. Anything herein contained to the
contrary notwithstanding, this Agreement of Merger, at any time prior to the
effective date of the merger, may be terminated and abandoned by the mutual
consent of the Board of Directors of each of the Constituent Corporations.
EIGHT: Connecticut Registered Agent. The name and address of the
registered agent in the State of Connecticut of HVA-Connecticut are Michael S.
Wilder, The Hartford, Hartford Plaza, Hartford, Connecticut 06115. The principal
office of the Surviving Corporation shall be in the City of Hartford, County of
Hartford, State of Connecticut.
NINTH: Right to Amend Certificate of Incorporation. The Surviving
Corporation reserves the right to amend, alter, change or repeal its Certificate
of Incorporation in the manner now or hereafter prescribed by Connecticut law,
and all rights and powers conferred therein on stockholders, directors and
officers are subject to this reserved power.
TENTH: Expenses of Merger. The Surviving Corporation shall pay all
expenses of carrying the Agreement of Merger into effect and accomplishing the
merger herein provided for; provided, however, that in the event the merger
herein provided for shall not be effectuated for any reason, each of the
Constituent Corporations shall assume and bear all expenses incurred by or
attributable to it. No director or officer of either of the Constituent
Corporations or of any parent corporation or subsidiary insurer, shall receive
any fee, commission, other compensation or valuable consideration whatever other
than regular salary, directly or indirectly, for in any manner aiding, promoting
or assisting in the merger.
ELEVENTH: Service in Delaware Upon Surviving Corporation. The Surviving
Corporation agrees that it may be served with process in the State of Delaware
in any proceeding for enforcement of any obligation of HVA-Delaware as well as
for any obligation of the Surviving Corporation arising from the merger,
including any suit or other proceeding to enforce the right of any stockholder
as determined in appraisal proceedings pursuant to the provisions of Section 262
of the General Corporation Law of the State of Delaware, and hereby irrevocably
appoints the Secretary of State of the State of Delaware as its agent to accept
service of process in any such suit or other proceeding. The address to which a
copy of such process shall be mailed by the Secretary of State of the State of
Delaware is: Hartford Variable Annuity Life Insurance Company of Connecticut,
Hartford Plaza, Hartford, Connecticut 06115.
TWELFTH: Descriptive Headings. The descriptive headings of the several
Articles and paragraphs of the Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
THIRTEENTH: Counterparts. For the convenience of the parties and to
facilitate the filing or recording of the Agreement, any number of counterparts
hereof may be executed and each such executed counterpart shall be deemed to be
an original instrument.
IN WITNESS WHEREOF, the Constituent Corporations have caused this
Agreement and Articles of Merger to be signed in their respective corporate
names by their respective Presidents or Vice Presidents and their corporate
seals to be hereunto affixed and attested, all as of the day and year first
above written.
HARTFORD VARIABLE ANNUITY LIFE
INSURANCE COMPANY, INC.
By: /s/George H. Rieger
President
[SEAL] Attest: /s/Michael O'Halloran
Assistant Secretary
Approved by the Directors of Hartford Variable Annuity Life Insurance
Company, Inc. by unanimous consent at Hartford, Connecticut this 23rd day of
August, 1976.
HARTFORD VARIABLE ANNUITY LIFE
INSURANCE COMPANY OF CONNECTICUT
By: /s/George H. Rieger
President
[SEAL] Attest: /s/Michael O'Halloran
Assistant Secretary
Approved by the Directors of Hartford Variable Annuity Life Insurance
Company of Connecticut by unanimous consent at Hartford, Connecticut this 23rd
day of August, 1976.
CERTIFICATE RESTATING THE CERTIFICATE
OF INCORPORATION BY ACTION OF
BOARD OF DIRECTORS
1. The name of the Corporation is Hartford Variable Annuity Life Insurance
Company of Connecticut.
2. The Certificate of Incorporation is restated only by the following Resolution
of the Board of Directors acting alone:
RESOLVED: That the Restated Certificate of Incorporation, as supplemented
and amended to date, is restated only to read as follows:
Section 1.H.V. Williams, J.W. Clarke and D.C. Thomas, with such other
persons as may hereafter be associated with them, their successors and assigns
forever, are created a body politic and corporate by the name of Hartford
Variable Annuity Life Insurance Company of Connecticut, with power under that
name to sue and be sued; to plead and be impleaded in the courts of this state
and elsewhere; to adopt a common seal and alter the same at pleasure; to
purchase, acquire and hold both real and personal property of every kind, and to
sell, grant, alien, invest, use and dispose of the same for the purposes of the
Corporation, and from time to time to amend the same; and generally to do and
cause to be done and executed all such acts as may seem necessary and proper
within the limitations herein contained. If any of said incorporators is, for
any reason, unable to act, the remaining incorporators are authorized to name a
successor to act in his place and stead.
Section 2.Said Corporation may make insurance upon lives, may grant and
issue annuities, either in connection with or separate from contracts of
insurance predicated upon life risks, may issue policies stipulated to be with
or without participation in profits, may issue policies or certificates of
insurance against loss of life or personal injury resulting from any cause, and
against loss resulting from disease or accident, and against any other casualty
or risk which may be subject to life, accident or health insurance. Said
Corporation in addition to the foregoing is authorized generally to do a life,
accident and health insurance business, and is authorized to insure against any
and all hazards against which life, accident and health insurance companies are
on the effective date of this act, or may thereafter at any time be, authorized
to insure by the laws of this state, or of any other state or territory of the
United States or foreign countries in which the company may be licensed to carry
on business. In addition to the foregoing powers, the purposes of said
Corporation are all those permitted by the Stock Corporation Act and other
applicable laws of this state.
Section 3(a). The capital with which said Corporation shall commence
business shall be not less than two hundred and fifty thousand dollars and may,
from time to time, be increased when authorized by the stockholders to any sum
not exceeding in the whole twenty million dollars. The initial capital stock of
the Corporation shall consist of one hundred shares of Common Stock, ten dollars
par value per share, and twenty-four thousand nine hundred shares of Non-Voting
Common Stock, ten dollars par value per share, which Non-Voting Common Stock
shall be identical in all respects to the Common Stock of the Corporation except
that the Non-Voting Common Stock shall have no voting power or right to notice
of any meeting.
Section 3(b). The Corporation, from time to time, may change the par value
and number of shares of its issued and outstanding capital stock, but no such
change shall be valid unless approved by a vote of at least two-thirds of the
stock represented at a meeting of the stockholders duly warned and held for that
purpose nor unless a certificate shall be sworn to and filed in the office of
the secretary of the state stating that such change has been duly approved by
the stockholders and setting forth a copy of the vote of the stockholders, which
vote shall show the details of such change.
Section 3(c). The Corporation may, from time to time, and to the amount of
capital stock authorized by its Certificate of Incorporation, issue shares of
stock with the same par value as its then outstanding capital stock. There shall
be no pre-emptive right to additional shares of stock issued by the Corporation.
Section 3(d). The shares of the capital stock shall be subscribed and paid
for at such sum in cash per share, not less than par, as the incorporators shall
prescribe, and the subscribers therefor shall, at the time of subscription, pay
to the commissioners hereinafter named, for the use of the Corporation, not less
than ten percent of the par value thereof. The balance due upon such
subscriptions shall be paid to the Corporation in such installments and at such
times as the directors shall determine, provided the entire capital stock to the
amount of not less than two hundred and fifty thousand dollars shall be paid in,
in cash, before said Corporation shall commence any insurance business.
Section 4.The principal office of the Corporation shall be located in the
City of Hartford, and the affairs of the Corporation shall be managed by a Board
of not fewer than three directors. Such directors may be classified as to their
terms of office for terms established by the By-Laws, provided no directors
shall be elected for a shorter term than one year nor for a longer term than
five years, and provided further the classification shall be such that the term
of one or more classes shall expire each succeeding year. The first meeting of
the subscribers shall be held at a time and place within the City of Hartford to
be appointed for that purpose by the commissioners hereinafter named, and
written notice of such meeting, stating the time and place thereof, shall be
given by the commissioners to each subscriber in person or by mail at least five
days before such meeting. At such meeting or at any adjournment thereof the
subscribers to the capital stock may adopt such By-Laws, rules and regulations
as may be deemed proper for the regulation of the affairs of the Corporation,
and shall elect by ballot not less than three persons to serve as directors
until the first annual meeting and until others are chosen in their stead.
Section 5.The annual meetings of the Corporation, after the first meeting
as aforesaid, shall be held at such time in each year and upon such notice as
the By-Laws shall prescribe. If the Corporation fails to hold its annual meeting
at the time specified for the same in any year, or fails to elect directors
thereat, the Corporation shall not be dissolved nor its rights impaired thereby,
but a special meeting for that purpose shall be called by the president or by a
majority of the directors of said Corporation in case of his refusal or neglect
so to do, and in case of the refusal of the president and of the directors to
call such meeting, such special meeting may be called by the holders of
one-tenth of the capital stock, upon the same notice as is required by the
By-Laws for calling an annual meeting, and at such meeting, directors to fill
the places of the directors whose terms of office shall have expired may be
elected.
Section 6.The directors shall determine how many of their number, not
fewer than two, shall constitute a quorum for the transaction of business, and
may fill any vacancy which may occur in the Board between the annual meetings of
the stockholders, by choosing a director to act until the next annual meeting
and until a successor shall be chosen.
Section 7.The directors shall choose a president, a vice president, a
treasurer and one or more secretaries of the Corporation and may appoint such
other officers and authorize the employment or appointment of clerks, agents or
other employees or representatives and may authorize the establishment of such
agencies in this state and elsewhere as shall be deemed advisable for conducting
the business of the Corporation, prescribe the duties and fix the compensation
of officers and employees and take bonds of any of them for the faithful
performance of his duty. Any officer or employee of the Corporation may be
displaced and a new one appointed at the pleasure of the directors.
Section 8.The president shall have power at any time to call a special
meeting of stockholders, upon such notice as the By-Laws shall prescribe, and he
shall call such special meeting when requested in writing by the holders of at
least one-tenth of the capital stock, and in case of his refusal or neglect to
call a meeting on such request, such stockholders may call the same.
Section 9.At all meetings of the stockholder, all questions shall be
determined by a majority vote of those present, allowing one vote to each share
of Common Stock, and stockholders shall be entitled to vote in person or by
proxies duly appointed.
Section 10. Subject to the approval of the insurance commissioner, said
Corporation may enter into a merger or consolidation with one or more other
insurance companies organized within or without this state or acquire the assets
thereof by issuance of shares of its stock or otherwise, whether or not the
charter of such other company expressly so provides. The provisions of the
general statutes relating to the merger or consolidation of corporations, shall
apply to any such merger, consolidation or acquisition of assets.
Section 11. To carry out the purposes of this act and to organize said
Corporation, H.V. Williams, J.W. Clarke and D.C. Thomas are appointed
commissioners to open books of subscription and to receive subscriptions to the
capital stock of said Corporation, to receive the first installment on such
subscriptions, to close the subscription books when the capital stock shall have
been subscribed to the full amount, not less than two hundred and fifty thousand
dollars, with which the incorporators shall have determined to commence any
insurance business, and, if the capital stock is oversubscribed, to apportion
the same in their discretion among the subscribers. When the capital stock has
been so subscribed, said commissioners, or a majority of them, shall call the
first meeting of the subscribers as provided in Section 4 of this act for the
purposes therein set forth, and when the By-Laws have been adopted and the
directors chosen, and the Board of Directors so chosen have been organized by
the choice of a president and a secretary, the commissioners shall pay over to
the officers of the Corporation all moneys received by them upon subscriptions
to the capital stock, and said Corporation shall thereupon be deemed to be fully
organized. If any of said commissioners is, for any reason, unable to act, the
remaining commissioners are authorized to name a successor or successors to act
in his place and stead.
Section 12. This charter shall be void unless said Corporation shall be
organized and a certificate of such organization shall be executed and filed
according to law on or before October 3, 1971.
3. (a) The above Resolution merely restates and does not change the provisions
of the original Certificate of Incorporation as amended to date.
(b) Other than as indicated in Paragraph 3(a), there is no discrepancy
between the provisions of the original Certificate of Incorporation as
supplemented and amended to date and the provisions of this Certificate
Restating the Certificate of Incorporation.
4. The number of affirmative votes required to adopt such Resolution is two (2).
5. The number of directors' votes in favor of the Resolution was three (3).
Dated at Hartford, Connecticut this 2nd day of August, 1976.
We hereby declare, under the penalties of false statement, that the statements
made in the foregoing Certificate are true.
/s/Robert R. Baird /s/Michael O'Halloran
Vice President Assistant Secretary
FILED
STATE OF CONNECTICUT
AUG 4 1976
/s/_________SECRETARY OF STATE
By /s/______Time 9:55 A.M.
CERTIFICATE AMENDING CERTIFICATE OF INCORPORATION BY
ACTION OF BOARD OF DIRECTORS AND SHAREHOLDERS
1. The name of the Corporation is Hartford Variable Annuity Life Insurance
Company of Connecticut.
2. The Certificate of Incorporation is amended only by the following Resolution
of Directors and Shareholders:
RESOLVED: That Subsection 3(a) of the Corporation's Certificate of
Incorporation is amended to increase the par value of the Corporation's shares
from ten dollars ($10) to sixty dollars ($60) per share, as follows:
The capital with which said Corporation shall commence business shall
be not less than two hundred and fifty thousand dollars ($250,000) and may, from
time to time, be increased when authorized by the stockholders to any sum not
exceeding in the whole twenty million dollars ($20,000,000). The capital stock
of the Corporation shall consist of one hundred (100) shares of Common Stock,
sixty dollars ($60) par value per share, and twenty-four thousand nine hundred
(24,900) shares of Non-Voting Common Stock, sixty dollars ($60) par value per
share, which Non-Voting Common Stock shall be identical in all respects to the
Common Stock of the Corporation except that the Non-Voting Common Stock shall
have no voting power or right to notice of any meeting.
3. The above Resolution was adopted by the Board of Directors and by the
Shareholders.
4. Vote of Shareholders:
No. of Shares Total Voting Vote Required Vote
Entitled to Power of Shares for Favoring
Vote Entitled to Vote Adoption Adoption
100 100 67 100
5. The number of affirmative votes of Directors required to adopt such
Resolution is two (2). The number of Director votes in favor of the Resolution
was three (3).
Dated at Hartford, Connecticut this 30th day of December, 1976.
We hereby declare, under penalties of false statement, that the statements made
in the foregoing Certificate are true.
/s/George H. Rieger /s/Michael O'Halloran
President Assistant Secretary
seal STATE OF CONNECTICUT
INSURANCE DEPARTMENT
STATE OFFICE BUILDINGHARTFORD, CONNECTICUT 06115
This is to Certify, that the name change of the Hartford Variable Annuity Life
Insurance Company to Skandia Life Assurance Corporation of America is approved.
Witness my hand and official seal, at Hartford,
this 6th day of June 1988
/s/________
Insurance Commissioner
FILED
STATE OF CONNECTICUT
JUN 10 1988
/s/__________
SECRETARY OF THE STATE
/s/______-time 12:00 P.M.
F.F. 4
Form 2
STATE OF CONNECTICUT
INSURANCE DEPARTMENT
STATE OFFICE BUILDING - HARTFORD, CONNECTICUT 06115
This is to Certify, that the name change of the Hartford Variable Annuity Life
Insurance Company to Skandia Life Assurance Corporation of America is approved.
FILED
STATE OF CONNECTICUT
June ______ 1988
/s/ Secretary of State
Witness my hand and official
seal, at Hartford. This 6th day
of June _____ 1988.
/s/ Insurance Commissioner
CERTIFICATE
AMENDING OR RESTATING CERTIFICATE
OF INCORPORATION
By action of ___INCORPORATORS
___BOARD OF DIRECTORS
XX BOARD OF DIRECTORS
AND SHAREHOLDERS
(Stock Corporation)
___BOARD OF DIRECTORS
AND MEMBERS
(Nonstock Corporation)
For office use only
Account No.
20.00
Initials
STATE OF CONNECTICUT
SECRETARY OF THE STATE
1. NAME OF CORPORATION DATE
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY May 27, 1988
2. The Certificate of incorporation is XX A. AMENDED ONLY
___B. AMENDED AND RESTATED
___C. RESTATED ONLY
by the following resolution
Resolved Article "1" of the Certificate of Incorporation of this corporation be
and it hereby is amended to read in its entirety:
"1. The name of the corporation is: Skandia Life Assurance Corporation
of America."
3. (Omit if 2A is checked)
(a)The above resolution merely restates and does not change the provisions
of the original Certificate of Incorporation as supplemented and amended
to date, except as follows: (Indicate amendments made, if any, if none,
so indicate)
(b) Other than as indicated in Par. 3(a), there is no discrepancy between
the provisions of the original Certificate of Incorporation as supplemented to
date, and the provisions of this Certificate Restating the Certificate of
Incorporation.
BY ACTION OF INCORPORATORS
__4. The above resolution was adopted by vote of at least two-thirds of the
incorporators before the organization meeting of the corporation, and
approved in writing by all subscribers (if any) for shares of the
corporation, (or if nonstock corporation, by all applicants for membership
entitled to vote if any)
We (at least two-thirds of the incorporators) hereby declare, under the penalties of false statement that the statements made in
the foregoing certificate are true.
SIGNED SIGNED SIGNED
APPROVED
(All subscribers, or, if nonstock corporation, all applicants for membership entitled to vote, if none, so indicate)
SIGNED SIGNED SIGNED
Continued
BY ACTION OF BOARD OF DIRECTORS
__4. (Omit if 2C is checked.) The above resolution was adopted by the board of directors acting alone,
__there being no shareholders or subscribers.
__the board of directors being so authorized pursuant to Section 33-341, Conn. G.S. as amended
__the corporation being a nonstock corporation and having no members and no applicants for membership entitled to vote on such
resolution.
5. The number of affirmative votes required to adopt such resolution is:
6. The number of directors' votes in favor of the resolution was:
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
SIGNED (President or Vice President)
SIGNED (SECRETARY OR ASSISTANT SECRETARY)
BY ACTION OF BOARD OF DIRECTORS AND SHAREHOLDERS
X 4. The above resolution was adopted by the board of directors and by
shareholders.
5. Vote of shareholders:
(a) (Use if no shares are required to be voted as a class) NUMBER OF
SHARES ENTITLED TO VOTE
100
TOTAL VOTING POWER
100
VOTE REQUIRED FOR ADOPTION
67
VOTE FAVORING ADOPTION
100
(b) (If shares of any class are entitled to vote as a class, indicate
the designation and number of outstanding shares of each such
class, the voting power thereof, and the vote of each such class
for the amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
Jon H. Nicholson, Vice President
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
William J. Lazarou, Secretary
SIGNED (President or Vice President)
/s/Jon H. Nicholson
SIGNED (Secretary or Assistant Secretary)
/s/William J. Lazarou
BY ACTION OF BOARD OF DIECTORS AND MEMBERS
__ 4.The above resolution was adopted by the board of directors and by members.
5. Vote of members:
(a) (Use is no members are required to vote as a class.)
NUMBER OF MEMBERS VOTING
TOTAL VOTING POWER
VOTE REQURIED FOR ADOPTION
VOTE FAVORING ADOPTION
(b)(If the members of any class are entitled to vote as a class,
indicate the designation and number of members of each such class,
the voting power thereof, and the vote of each such class for the
amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
SIGNED (President or Vice President)
SIGNED (Secretary or Assistant Secretary)
FOR OFFICE USE ONLY
FILING FEE
$30.
CERTIFICATION FEE
$27 (3CC's)
TOTAL FEES
$137
SIGNED (For secretary of the State)
Rec3CC's
CERTIFIED COPY SENT ON (Date)
TO
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P/u 6/7/88 11:00
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New York, NY 10023
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FILED
STATE OF CONNECTICUT
Jun 6 12:00 PM '88
seal STATE OF CONNECTICUT
INSURANCE DEPARTMENT
STATE OFFICE BUILDINGHARTFORD, CONNECTICUT 06115
This is to Certify, that the name change of the Skandia Life Assurance
Corporation of America to America Skandia Life Assurance Corporation is
approved..
Witness my hand and official seal, at Hartford,
this 26th day of July 1988
/s/________
Acting Insurance Commissioner
FILED
STATE OF CONNECTICUT
JUL 26 1988
/s/__________
SECRETARY OF THE STATE
/s/______-time 3:00 P.M.
F.F. 4
Form 2
CERTIFICATE
AMENDING OR RESTATING CERTIFICATE
OF INCORPORATION
By action of ___INCORPORATORS
___BOARD OF DIRECTORS
XX BOARD OF DIRECTORS
AND SHAREHOLDERS
(Stock Corporation)
___BOARD OF DIRECTORS
AND MEMBERS
(Nonstock Corporation)
For office use only
Account No.
Initials
STATE OF CONNECTICUT
SECRETARY OF THE STATE
1. NAME OF CORPORATION DATE
SKANDIA LIFE ASSURANCE CORPORATION OF AMERICA July 18, 1988
2. The Certificate of incorporation is XX A. AMENDED ONLY
___B. AMENDED AND RESTATED
___C. RESTATED ONLY
by the following resolution
Resolved Article "1" of the Certificate of Incorporation of the corporation be
and it hereby is amended to read in its entirety:
"1. The name of the corporation is: American Skandia Life
Assurance Corporation of America."
3. (Omit if 2A is checked)
(a)The above resolution merely restates and does not change the provisions
of the original Certificate of Incorporation as supplemented and amended
to date, except as follows: (Indicate amendments made, if any, if none,
so indicate)
(b) Other than as indicated in Par. 3(a), there is no discrepancy between
the provisions of the original Certificate of Incorporation as supplemented to
date, and the provisions of this Certificate Restating the Certificate of
Incorporation.
BY ACTION OF INCORPORATORS
__4. The above resolution was adopted by vote of at least two-thirds of the
incorporators before the organization meeting of the corporation, and
approved in writing by all subscribers (if any) for shares of the
corporation, (or if nonstock corporation, by all applicants for membership
entitled to vote if any)
We (at least two-thirds of the incorporators) hereby declare, under the penalties of false statement that the statements made in
the foregoing certificate are true.
SIGNED SIGNED SIGNED
APPROVED
(All subscribers, or, if nonstock corporation, all applicants for membership entitled to vote, if none, so indicate)
SIGNED SIGNED SIGNED
Continued
BY ACTION OF BOARD OF DIRECTORS
__4. (Omit if 2C is checked.) The above resolution was adopted by the board of directors acting alone,
__there being no shareholders or subscribers.
__the board of directors being so authorized pursuant to Section 33-341, Conn. G.S. as amended
__the corporation being a nonstock corporation and having no members and no applicants for membership entitled to vote on such
resolution.
5. The number of affirmative votes required to adopt such resolution is:
6. The number of directors' votes in favor of the resolution was:
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
SIGNED (President or Vice President)
SIGNED (SECRETARY OR ASSISTANT SECRETARY
BY ACTION OF BOARD OF DIRECTORS AND SHAREHOLDERS
X 4. The above resolution was adopted by the board of directors and by
shareholders.
5. Vote of shareholders:
(a) (Use if no shares are required to be voted as a class) NUMBER OF
SHARES ENTITLED TO VOTE
100
TOTAL VOTING POWER
100
VOTE REQUIRED FOR ADOPTION
67
VOTE FAVORING ADOPTION
100
(b) (If shares of any class are entitled to vote as a class, indicate
the designation and number of outstanding shares of each such
class, the voting power thereof, and the vote of each such class
for the amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
Jon H. Nicholson, Vice President
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
William J. Lazarou, Secretary
SIGNED (President or Vice President)
/s/Jon H. Nicholson
SIGNED (Secretary or Assistant Secretary)
/s/William J. Lazarou
BY ACTION OF BOARD OF DIRECTORS AND MEMBERS
__ 4.The above resolution was adopted by the board of directors and by members.
5. Vote of members:
(a) (Use if no members are required to vote as a class.)
NUMBER OF MEMBERS VOTING
TOTAL VOTING POWER
VOTE REQUIRED FOR ADOPTION
VOTE FAVORING ADOPTION
(b)(If the members of any class are entitled to vote as a class,
indicate the designation and number of members of each such class,
the voting power thereof, and the vote of each such class for the
amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
SIGNED (President or Vice President)
SIGNED (Secretary or Assistant Secretary)
FOR OFFICE USE ONLY
FILED
STATE OF CONNECTICUT
/s/ Secretary of State
FILING FEE
$30.
CERTIFICATION FEE
$10
TOTAL FEES
$80
SIGNED (For secretary of the State)
Rec & CC's sent 3:00PM 7/26/88 (260001A)
CERTIFIED COPY SENT ON (Date)
TO
Infosearch
30 High St.
Hartford, Ct
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FILED
STATE OF CONNECTICUT
Jul 26 3:00PM
CERTIFICATE OF MERGER
of
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY
and
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT
1. The name of the surviving Corporation in the merger is HARTFORD VARIABLE
ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT.
2. The Plan of Merger is an attached hereto. The effective date thereof is May
1, 1977.
3. The Plan of Merger was adopted by the merging Corporations in the following
manner.
(a) The Plan was approved by resolution adopted by the Board of Directors
of each merging Corporation.
(b) Vote of shareholders:
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY
(A South Carolina Corporation)
No. of Shares Total Voting Vote Required Vote
Entitled to Power of Shares for Favoring
Vote Entitled to Vote Adoption Adoption
15,000 Common 15,000 7,501 15,000
10,000 Preferred 10,000 6,667 10,000
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT
(A Connecticut Corporation)
No. of Shares Total Voting Vote Required Vote
Entitled to Power of Shares for Favoring
Vote Entitled to Vote Adoption Adoption
100 100 67 100
Dated at Hartford, Connecticut this 27th day of April, 1977.
We hereby declare, under the penalties of false statement, that the statements
made in the foregoing Certificate, insofar as they pertain to Hartford Variable
Annuity Life Insurance Company of Connecticut, are true.
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT
(Surviving Corporation)
By /s/Robert R. Baird /s/Michael O'Halloran
Vice President Assistant Secretary
We hereby declare, under the penalties of false statement, that the statements
made in the foregoing Certificate, insofar as they pertain to Hartford Variable
Annuity Life Insurance Company, are true.
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY
(Terminating Corporation)
By /s/Robert R. Baird /s/Michael S. Wilder
Vice President Secretary
FILED
STATE OF CONNECTICUT
APR 29 1977
/s/_________SECRETARY OF STATE
By /s/________Time 8:50 A.M.
$20. filing
17.CC
..42 SC
..42 overpayment
$37.84 Total
AGREEMENT OF MERGER
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY
(A South Carolina Corporation)
and
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT
(A Connecticut Corporation)
THIS AGREEMENT OF MERGER (hereinafter referred to as "Agreement") made and
entered into this 1st day of March, 1977, by and between HARTFORD VARIABLE
ANNUITY LIFE INSURANCE COMPANY (hereinafter "HVA-South Carolina"), a stock
insurance company incorporated and existing under the laws of the State of South
Carolina and having its place of business in Hartford, Connecticut; and HARTFORD
VARIABLE ANNUITY LIFE INSURANCE COMPANY OF CONNECTICUT (hereinafter
"HVA-Connecticut" or the "Surviving Corporation"), a stock insurance company
incorporated and existing under the laws of the State of Connecticut and having
its principal place of business in Hartford, Connecticut; HVA-South Carolina and
HVA-Connecticut are sometimes hereinafter referred to as "The Constituent
Corporations".
WITNESSETH:
WHEREAS, HVA-Connecticut has authorized, issued and outstanding capital stock
consisting of One Hundred (100) shares of voting common stock, $60 par value per
share, and of Twenty-Four Thousand Nine Hundred (24,900) shares of non-voting
common stock, $60 par value per share; and HVA-South Carolina has issued and
outstanding Fifteen Thousand (15,000) shares of common stock, $100 par value per
share, and of Ten Thousand (10,000) shares of preferred stock, $1 par value per
share; and
WHEREAS, Hartford Life Insurance Company, a Massachusetts corporation, owns all
of the aforesaid issued and outstanding shares of HVA-South Carolina and
HVA-South Carolina owns all of the aforesaid issued and outstanding shares of
HVA-Connecticut; and
WHEREAS, the Boards of Directors of the Constituent Corporations have decreed it
in the best interests of the corporations and their shareholders that the
domicile of HVA-South Carolina be transferred from the State of South Carolina
to the State of Connecticut, and that such change of domicile be accomplished by
a merger of HVA-South Carolina into HVA-Connecticut, pursuant to the applicable
laws of the States of South Carolina and Connecticut; and that as a result of
said merger HVA-Connecticut will be the Surviving Corporation and each holder of
each share of the common stock of HVA-South Carolina shall be deemed to hold the
shares of the common stock of the Surviving Corporation and all shares of
capital stock of HVA-South Carolina shall be canceled; and
WHEREAS, the intent of this Agreement is to accomplish the aforementioned
purposes:
NOW, THEREFORE, in consideration of the promises and of the mutual provisions,
agreements, covenants, conditions and grants herein contained, HVA-Connecticut
and HVA-South Carolina, by their respective Boards of Directors and in
accordance with the applicable provisions of the laws of the State of South
Carolina and Connecticut have agreed and do hereby agree, each with the other,
as follows:
FIRST: Merger. On the effective date of the merger (as defined in Article SIXTH,
Paragraph 2 of this Agreement), HVA-South Carolina shall be merged, pursuant to
the South Carolina Business Corporation Act of 1962 and the Connecticut General
Statutes, into and with HVA-Connecticut, and HVA-Connecticut on such date shall
merge HVA-South Carolina with and into itself. HVA-Connecticut shall be the
corporation which survives such merger, and HVA-Connecticut, as Surviving
Corporation, shall continue and be deemed to continue for all purposes
whatsoever after the merger of HVA-South Carolina with and into itself.
SECOND: Jurisdiction and Name. The Surviving Corporation shall be governed by
the laws of the State of Connecticut and its name shall be Hartford Variable
Annuity Life Insurance Company.
THIRD: Certificate of Incorporation and By-Laws. From and after the effective
date of the merger, the Certificate of Incorporation and By-Laws of the
Surviving Corporation shall be the Certificate of Incorporation and By-Laws of
HVA-Connecticut as constituted on the effective date of the merger except that
the name of the Surviving Corporation shall be Hartford Variable Annuity Life
Insurance Company.
FOURTH: Board of Directors of the Surviving Corporation. The initial Board of
Directors of the Surviving Corporation upon the effective date of the merger,
and thereafter until a regular or special meeting of stockholders called for the
purpose of electing Directors, shall consist of the following persons:
Harry V. Williams Raoul J. Grandpre
Herbert P. Schoen Robert R. Baird
DeRoy C. Thomas Howard T. Cohn
William M. Griffin George H. Rieger
Raymond H. Deck Dean L. Hones
Robert B. Goode, Jr. Donald R. Sondergeld
In addition, the officers of the Surviving Corporation shall be the officers of
HVA-South Carolina immediately prior to the effective date of the merger.
FIFTH: Conversion of Securities on Merger. The manner of converting the shares
of the Constituent Corporations into shares of the Surviving Corporation shall
be as follows:
1. Each share of voting common stock and each share of non-voting common stock
of HVA-Connecticut issued and outstanding on the effective date of the merger
and all rights in respect thereof shall be, immediately upon the effective date
of the merger and without further action, deemed to be one identical share of
the common stock of the Surviving Corporation to be owned by the holder of the
shares of HVA-South Carolina.
2. Each share of common stock of HVA-South Carolina issued and outstanding on
the effective date of merger and all rights in respect thereof shall be,
immediately upon the effective date of the merger, and without further action,
canceled as of that date.
SIXTH: Effective Date and Effects of Merger.
1. This Agreement is expressly conditioned and contingent upon its adoption and
approval by (a) the stockholders of the Constituent Corporations, (b) a majority
of the variable annuity contract owners of the HVA-South Carolina Separate
Account, and (c) the Insurance Commissioners of the States of South Carolina and
Connecticut, and of other appropriate governmental regulatory agencies. The
officers and directors of the Constituent Corporations agree to do and perform
each and every act and to execute and acknowledge all documents of every
character required to obtain the adoption and approval of said stockholders and
governmental agencies; and agree to do and perform each and every act and to
execute and acknowledge all documents of every character required to make the
merger effective under the General Corporation Law and Insurance Code of the
State of South Carolina, and the Connecticut General Statutes.
2. Upon the performance of the conditions and the happening of the contingencies
set forth in subparagraph 1 of this Article SIXTH the effective date of the
merger shall be, and is hereby defined to mean, 12:01 a.m. on such date as the
directors of both Constituent Corporations shall adopt by resolution, provided
that the effective date will in no event be later than January 1, 1978.
3. Except as herein otherwise specifically set forth, as of the effective date,
the identity, existence, purposes, powers, assets, franchises, property rights
and immunities of HVA-South Carolina, including real and personal and tangible
and intangible assets of whatsoever character and wherever located, and
including all separate accounts of HVA-South Carolina, shall become the assets
of HVA-Connecticut, and shall be merged into HVA-Connecticut, and pursuant to
any and all applicable laws, HVA-Connecticut shall be fully vested therewith.
Likewise, as of the effective date, HVA-Connecticut, as the Surviving
Corporation, shall assume and shall be liable and responsible for any and all of
the legal liabilities and legal obligations of HVA-South Carolina then
outstanding, including, without limitation, all liabilities for taxes, all
liabilities under insurance contracts theretofore issued or then on binder, and
all other legal liabilities and obligations of HVA-South Carolina. The existence
of HVA-South Carolina, except insofar as it may be continued by statute, shall
cease on the effective date and thereupon, HVA-Connecticut and HVA-South
Carolina shall become a single corporation. The Surviving Corporation shall
continue as a stock insurance company, and shall have the objects and purposes
stated in its Certificate of Incorporation, and in general terms shall have the
power and authority to transact any business which HVA-South Carolina was
empowered and authorized to transact prior to the merger.
4. HVA-South Carolina shall from time to time execute and deliver or cause to be
executed and delivered all such deeds or other instruments, and shall take or
cause to be taken such further or other action, as the Surviving Corporation may
deem necessary or desirable in order to vest in and confirm to the Surviving
Corporation title to and possession of all of the aforesaid rights, privileges,
powers and franchises and property, and otherwise to carry out the intent and
purpose of this Agreement.
SEVENTH: Voidability and Abandonment. Anything herein contained to the contrary
notwithstanding, this Agreement of Merger, at any time prior to the effective
date of the merger, may be terminated and abandoned by the mutual consent of the
Board of Directors of each of the Constituent Corporations.
EIGHTH: Connecticut Registered Agent. The name and address of the registered
agent in the State of Connecticut of HVA-Connecticut are Michael S. Wilder, The
Hartford, Hartford Plaza, Hartford, Connecticut 06115. The principal office of
the Surviving Corporation shall be in the City of Hartford, County of Hartford,
State of Connecticut.
NINTH: Right to Amend Certificate of Incorporation. The Surviving Corporation
reserves the right to amend, alter, change or repeal its Certificate of
Incorporation in the manner now or hereafter prescribed by Connecticut law, and
all rights and powers conferred therein on stockholders, directors and officers
are subject to this reserved power.
TENTH: Expenses of Merger. The Surviving Corporation shall pay all expenses of
carrying the Agreement of Merger into effect and accomplishing the merger herein
provided for; provided, however, that in the event the merger herein provided
for shall not be effectuated for any reason, each of the Constituent
Corporations shall assume and bear all expenses incurred by or attributable to
it. No director or officer of either of the Constituent Corporations or of any
parent corporation or subsidiary insurer, shall receive any fee, commission,
other compensation or valuable consideration whatever other than regular salary,
directly or indirectly, for in any manner aiding, promoting or assisting in the
merger.
ELEVENTH: Service in South Carolina Upon Surviving Corporation. The Surviving
Corporation agrees that it may be served with process in the State of South
Carolina in any proceeding for enforcement of any obligation of HVA-South
Carolina as well as for any obligation of the Surviving Corporation arising from
the merger, including any suit or other proceeding to enforce the right of any
stockholder as determined in appraisal proceedings pursuant to the provisions of
South Carolina Business Corporation Act and hereby irrevocably appoints the
Secretary of State of the State of South Carolina as its agent to accept service
of process in any such suit or other proceeding. The address to which a copy of
such process shall be mailed by the Secretary of State of the State of South
Carolina is: Hartford Variable Annuity Life Insurance Company, Hartford Plaza,
Hartford, Connecticut 06115.
TWELFTH: Descriptive Headings. The descriptive headings of the several Articles
and paragraphs of the Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
THIRTEENTH: Counterparts. For the convenience of the parties and to facilitate
the filing or recording of the Agreement, any number of counterparts hereof may
be executed and each such executed counterpart shall be deemed to be an original
instrument.
IN WITNESS WHEREOF, the Constituent Corporations have caused this Agreement of
Merger to be signed in their respective corporate names by their respective
Presidents or Vice Presidents and their corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY
ATTEST:
/s/Michael S. Wilder By /s/George H. Rieger
Senior Vice President
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY
OF CONNECTICUT
ATTEST:
/s/Michael O'Halloran By /s/George H. Rieger
President
CERTIFICATE
AMENDING OR RESTATING CERTIFICATE
OF INCORPORATION
By action of ___INCORPORATORS
___BOARD OF DIRECTORS
XX BOARD OF DIRECTORS
AND SHAREHOLDERS
(Stock Corporation)
___BOARD OF DIRECTORS
AND MEMBERS
(Nonstock Corporation)
For office use only
Account No.
Initials
STATE OF CONNECTICUT
SECRETARY OF THE STATE
1. NAME OF CORPORATION DATE
Hartford Variable Annuity Life Insurance Company November 10, 1981
2. The Certificate of incorporation is A. AMENDED ONLY
XX B. AMENDED AND RESTATED
___C. RESTATED ONLY
by the following resolution
See attached Restated Certificate of Incorporation
3. (Omit if 2A is checked)
(a)The above resolution merely restates and does not change the provisions
of the original Certificate of Incorporation as supplemented and amended
to date, except as follows: (Indicate amendments made, if any, if none,
so indicate)
(b) Other than as indicated in Par. 3(a), there is no discrepancy between
the provisions of the original Certificate of Incorporation as supplemented to
date, and the provisions of this Certificate Restating the Certificate of
Incorporation.
BY ACTION OF INCORPORATORS
__4. The above resolution was adopted by vote of at least two-thirds of the
incorporators before the organization meeting of the corporation, and
approved in writing by all subscribers (if any) for shares of the
corporation, (or if nonstock corporation, by all applicants for membership
entitled to vote if any)
We (at least two-thirds of the incorporators) hereby declare, under the penalties of false statement that the statements made in
the foregoing certificate are true.
SIGNED SIGNED SIGNED
APPROVED
(All subscribers, or if nonstock corporation, all applicants for membership entitled to vote, if none, so indicate)
SIGNED SIGNED SIGNED
Continued
BY ACTION OF BOARD OF DIRECTORS
__4. (Omit if 2C is checked.) The above resolution was adopted by the board of directors acting alone,
__there being no shareholders or subscribers.
__the board of directors being so authorized pursuant to Section 33-341, Conn. G.S. as amended
__the corporation being a nonstock corporation and having no members and no applicants for membership entitled to vote on such
resolution.
5. The number of affirmative votes required to adopt such resolution is:
6. The number of directors' votes in favor of the resolution was:
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
SIGNED (President or Vice President)
SIGNED (SECRETARY OR ASSISTANT SECRETARY)
BY ACTION OF BOARD OF DIRECTORS AND SHAREHOLDERS
X 4. The above resolution was adopted by the board of directors and by
shareholders.
5. Vote of shareholders:
(a) (Use if no shares are required to be voted as a class) NUMBER OF
SHARES ENTITLED TO VOTE
100
TOTAL VOTING POWER
100
VOTE REQUIRED FOR ADOPTION
67
VOTE FAVORING ADOPTION
100
(b) (If shares of any class are entitled to vote as a class, indicate
the designation and number of outstanding shares of each such
class, the voting power thereof, and the vote of each such class
for the amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT Executive Vice President and Chief Operating
Officer(Print or Type)
Robert B. Goode, Jr. President
NAME OF SECRETARY OR ASSISTANT SECRETARY General Counsel and Secretary (Print or
Type)
SIGNED (President or Vice President)
/s/Robert B. Goode, Jr
SIGNED (SECRETARY OR ASSISTANT SECRETARY
/s/William A. McMahon, Secretary
BY ACTION OF BOARD OF DIRECTORS AND MEMBERS
__ 4.The above resolution was adopted by the board of directors and by members.
5. Vote of members:
(a) (Use if no members are required to vote as a class.)
NUMBER OF MEMBERS VOTING
TOTAL VOTING POWER
VOTE REQURIED FOR ADOPTION
VOTE FAVORING ADOPTION
(b)(If the members of any class are entitled to vote as a class ,
indicate the designation and number of members of each such class,
the voting power thereof, and the vote of each such class for the
amendment resolution.)
We hereby declare, under the penalties of false statement that the statements
made in the foregoing certificate are true.
NAME OF PRESIDENT OR VICE PRESIDENT (Print or Type)
NAME OF SECRETARY OR ASSISTANT SECRETARY (Print or Type)
SIGNED (President or Vice President)
SIGNED (SECRETARY OR ASSISTANT SECRETARY)
FOR OFFICE USE ONLY
FILING FEE
$30.
CERTIFICATION FEE
$12.50
TOTAL FEES
$42.50
SIGNED (For secretary of the State)
12-14-81 L. M.
CERTIFIED COPY SENT ON (Date) INITIALS
REC
12/17
TO
Htfd Insurance Co.
Htfd Plaza, Htfd Ct. 06115
CARD
LIST
PROOF
FILED
STATE OF CONNCTICUT
DEC 9 1981
Barbara B. Kannelly
SECRETARY OF STATE
By /s/ LM Time 11:45 A.M.
Question 3
1) Section 1 is amended to read "The name of the corporation is Hartford
Variable Annuity Life Insurance Company" and it shall have all the powers
granted by general statutes, as now enacted or hereinafter amended, to
corporations under the Stock Corporation Act.
2) The following sentence has been added to the end of Section 3:
"There shall be no preemptive right to additional shares. of stock issued by the
corporation."
3) Sections 3(b)-(d) are deleted.
4) Section 4 is deleted.
5) Section 5 is deleted.
6) Section 6 is deleted.
7) Section 7 is deleted.
8) Section 8 is deleted.
9) Section 9 is deleted.
10) Section 10 is deleted.
11) Section 11 is deleted.
12) Section 12 is deleted.
RESTATED CERTIFICATE OF INCORPORATION
HARTFORD VARIABLE ANNUITY LIFE INSURANCE COMPANY
This Restricted Certificate of Incorporation gives effect to amendments of
the Certificate of Incorporation and otherwise purports merely to restate those
provisions already in effect. This Restated Certificate of Incorporation has
been adopted by vote of the Board of Directors and Shareholders.
Section 1.The name of the corporation is Hartford Variable Annuity Life
Insurance Company and it shall have all the powers granted by general statutes,
as now enacted or hereinafter amended, to corporations under the Stock
Corporation Act.
Section 2.Said Corporation may make insurance upon lives, may grant and
issue annuities, either in connection with or separate from contracts of
insurance predicated upon life risks, may issue policies stipulated to be with
or without participation in profits, may issue policies or certificates of
insurance against loss of life or personal injury resulting from any cause, and
against loss resulting from disease or accident, and against any other casualty
or risk which may be subject to life, accident or health insurance. Said
Corporation in addition to the foregoing is authorized generally to do a life,
accident and health insurance business, and is authorized to insure against any
and all hazards against which life, accident and health insurance companies are
on the effective date of this act, or may thereafter at any time be, authorized
to insure by the laws of this state, or of any other state or territory of the
United States or foreign countries in which the company may be licensed to carry
on business. In addition to the foregoing powers, the purposes of said
Corporation are all those permitted by the Stock Corporation Act and other
applicable laws of this state.
Section 3.The capital with which said Corporation shall commence business
shall be not less than two hundred and fifty thousand dollars ($250,000) and
may, from time to time, be increased when authorized by the stockholders to any
sum not exceeding in the whole twenty million dollars ($20,000,000). The capital
stock of the Corporation shall consist of one hundred (100) shares of Common
Stock, eighty dollars ($80) par value per share, and twenty-four thousand nine
hundred (24,900) shares of Non-Voting Common Stock, eighty dollars ($80) par
value per share, which Non-Voting Common Stock shall be identical in all respect
to the Common Stock of the Corporation except that the Non-Voting Common Stock
shall have no voting power or right to notice of any meeting. There shall be no
preemptive right to additional shares of stock issued by the corporation.
We hereby declare, under the penalties of false statement that the statements
made in the foregoing Certificate are true.
Date: November 10, 1981 Hartford Variable Annuity Life
Insurance Company
By: Robert B. Goode, Jr.
Executive Vice President and
Chief Operating Officer
Attest:
William A. McMahon
General Counsel and Secretary
3453D/47D
CERTIFICATE OF ORGANIZATION
OF HARTFORD INSURANCE GROUP LIFE INSURANCE COMPANY
THIS IS TO that at Hartford, Connecticut on the 23rd day of July, 1969,
H.V. Williams and [ ], being a majority of the persons authorized to [ ]
Hartford Insurance Group Life Insurance Company as a corporation under Special
Act No. 136 passed by the January, [ ] session of the General Assembly of the
State of Connecticut and approved May 21, 1969, incorporating the Hartford
Insurance Group Life Insurance Company located in the city of Hartford, took all
action required by the terms and provisions of [ ] Special Act and the General
Statutes of the State of Connecticut to duly effect the organization as a
corporation of Hartford Insurance Group Life Insurance Company.
We hereby declare, under the penalty of perjury, that the statements
made in the foregoing certificate are true. Dated at New York, N.Y., this 19th
day of August, 1969.
/s/
Vice President
/s/
Assistant Secretary
Exhibit 3 (ii)
CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
OF
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
1. The name of the Corporation is American Skandia Life Assurance Corporation.
2. The Restated Certificate of Incorporation of the Corporation is amended only.
3. The Restated Certificate of Incorporation of the Corporation be, and hereby is amended by deleting Paragraph Three in its
entirety and substituting the following:
Section 3. The capital with which said Corporation shall commence business shall not be less than two hundred and fifty
thousand dollars ($250,000) and may, from time to time, be increased when authorized by the stockholders to any sum not
exceeding in whole twenty million dollars ($20,000,000). The capital stock of the Corporation shall consist of one hundred
(100) shares of Common Stock, one hundred dollars ($100) par value per share, and twenty-four thousand nine hundred (24,900)
shares of Non-Voting Common Stock, one hundred dollars ($100) par value per share, which Non-Voting Common Stock shall be
identical in all respects to the Common Stock of the Corporation except that the Non-Voting Common Stock shall have no
voting power or right to notice of any meeting. There shall be no preemptive right to additional shares of stock issued by
the Corporation.
4. The above amendment was adopted by the Board of Directors of the Corporation on November 8, 1999 and by the stockholders on
December 1, 1999.
5. Vote of stockholders:
No. of Shares Total Voting Vote Required Vote
Entitled to Power of Shares for Favoring
Vote Entitled to Vote Adoption Adoption
----------- ------------- ------------- ---------
100 100 67 100
Dated at Shelton, Connecticut this 17th day of December, 1999.
-----
/s/ Gordon Boronow
- ------------------
Gordon Boronow, President and
Deputy Chief Executive Officer
STATE OF CONNECTICUT
ss. Shelton
COUNTY OF FAIRFIELD
On this the 17th day of December, 1999, before me, Kathleen A. Chapman, the undersigned officer, personally appeared Gordon Boronow,
----- --------------
who acknowledged himself to be the President and Deputy Chief Executive
------------------------------------
Officer of American Skandia Life Assurance Corporation, a corporation, and that he as such President and Deputy Chief Executive
- ------- -------------------------------------
Officer being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the
- -------
corporation himself as President and Deputy Chief Executive Officer
--------------------------------------------
IN WITNESS WHEREOF I HEREUNTO SET MY HAND AND SEAL
/s/ Kathleen A. Chapman
- ------------------------------------
Kathleen A. Chapman
Notary Public
My Commission Expires Oct. 31, 2000
Exhibit 3 (iii)
BY-LAWS
OF
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(As Amended June 17, 1998 and ratified on April 22, 1999)
BY-LAWS
OF
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(As Amended June 17, 1998)
ARTICLE I - OFFICES
The principal office of Skandia Life American Corporation (the "Corporation") shall be located in the State of Connecticut.
The Corporation may also maintain offices at such other places within or without the State as the Board of Directors may determine
from time to time.
ARTICLE II - MEETINGS AND ACTIONS
OF SHAREHOLDERS
SECTION 1. Annual Meetings.
----------------
The first annual meeting of the shareholders of the Corporation for the election of directors and for the transaction of
such other business as may properly come before said meeting, being the annual meeting for the year 1988, shall be held on the third
Tuesday of February, 1988, and thereafter the annual meeting of shareholders of the Corporation shall be held on the third Tuesday of
February of each succeeding year or on such other date as the Board of Directors may determine, at such time and place as shall be
designated by the Board of Directors and stated in the notice of such annual meeting.
SECTION 2. Special Meetings.
----------------
Special Meetings of the shareholders may be called at any time by the Board of Directors or by the Chief Executive Officer
and shall be called by the President or the Secretary at the written request of holders of not less than ten percent (10%) of the
shares then outstanding and entitled to vote, thereat, or as otherwise required under the provisions of the Connecticut Stock
Corporation Act and the Insurance Law.
SECTION 3. Place of Meetings.
-----------------
All Meetings of shareholders shall be held at the principal office of the Corporation, or at such other place within or
without the State of Connecticut as shall be established by resolution of the Board of Directors and designated in the notices or
waivers of any notice of such meetings.
SECTION 4. Notice of Meetings.
------------------
(A) Written notice of each meeting of shareholders, whether annual or special, stating the time when and place where it is
to be held, shall be served either personally or by mail, not less than seven (7) or more then fifty (50) days before the meeting,
upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be
required by law. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the
direction of, the person or persons calling the meeting. If mailed, such notice shall be directed to each such shareholder at his
address, as it appears on the records of the shareholders of the Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case, it shall
be mailed to the address designated in such request.
(B) Notice of any meeting need not be given to any person who may become a shareholder of record after the mailing of such
notice and prior to the meeting, or to any shareholder who attends such meeting, in person or by proxy, or to any shareholder who, in
person or by proxy, submits a signed waiver of notice either before or after such meeting. Notice of any adjourned meeting of
shareholders need not be given, unless otherwise required by law.
SECTION 5. Quorum.
------
(A) Except as otherwise provided herein, or by statute, or in the Certificate of Incorporation (such Certificate and any
amendments thereof being hereinafter collectively referred to as the "Certificate of Incorporation"), at all meetings of shareholders
of the Corporation, the presence at the commencement of such meetings in person or by proxy of shareholders holding of record a
majority of the total number of shares of the Corporation then issued and outstanding and entitled to vote, shall be necessary and
sufficient to constitute a quorum for the transaction of any business. The withdrawal of any shareholder after the commencement of a
meeting shall have no effect on the existence of a quorum, after a quorum has been established at such meeting.
(B) Despite the absence of a quorum at any annual or special
meeting of shareholders,
the shareholders, by a majority of the votes cast by the holders of shares entitled to vote thereon, may adjourn the meeting. At any
such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting
as originally called if a quorum had been present.
SECTION 6. Proxies; Voting.
---------------
(A) Except as otherwise provided by statute or by the Certificate of Incorporation, any corporate action, other than the
election of directors, to be taken by vote of the shareholders shall be authorized by a majority of votes cast at a meeting of
shareholders by the holders of shares entitled to vote thereon.
(B) Except as otherwise provided by statute or by the Certificate of Incorporation, at each meeting of shareholders, each
holder of record of stock of the Corporation entitled to vote thereat shall be entitled to one vote for each share of stock
registered in his name on the books of the Corporation.
(C) Each shareholder entitled to vote or to express consent or dissent without a meeting may do so by proxy; provided,
however, that the instrument authorizing such proxy to act shall have been executed in writing by the shareholder himself, or by his
attorney-in-fact thereunto duly authorized in writing. No proxy shall be valid after the expiration of eleven (11) months from the
date of its execution, unless the persons executing it shall have specified therein the length of time it is to continue in force.
Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation.
(D) Any resolution in writing, signed by all of the shareholders entitled to vote thereon, shall be and constitute action
by such shareholders to the effect therein expressed, with the same force and effect as if the same had been duly passed by unanimous
vote at a duly called meeting of shareholders and such resolution so signed shall be inserted in the Minute Book of the Corporation
under its proper date.
SECTION 7. Selection of Inspectors of Election.
-----------------------------------
In advance of any meeting of the shareholders, the Board of Directors may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a meeting of the shareholders may,
and on request of any shareholder shall, appoint one or more inspectors. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by the Board in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of
inspector at the meeting with strict impartiality and according to the best of his ability.
SECTION 8. Business Transacted.
-------------------
At the annual meeting, directors shall be elected and such other business transacted as may be properly brought before the
meeting. At any special meeting, no business shall be transacted other than that specified in the notice of such meeting unless all
shareholders entitled to notice thereof consent to the transaction of such business.
SECTION 9. Action without Meeting.
----------------------
Any action, including an election of directors, required or permitted to be taken at a meeting of shareholders may be taken
without a meeting if all the shareholders consent thereto in writing.
Except in the election of directors, any action required or permitted to be taken at a meeting of shareholders may be taken
without a meeting upon the written consent of less than all the shareholders entitled to vote thereon if the shareholders who so
consent would be entitled to cast at least the minimum number of votes which would be required to take such action at a meeting of
shareholders. If such action by written consent of less than all shareholders is proposed to be taken, as herein authorized, notice
in writing of such proposed action shall be given to each shareholder of the corporation. Such notice shall be given in the manner
of giving notice of a meeting of shareholders not less than twenty days and not more than fifty days before the date that any such
consent is to become effective.
SECTION 10. Annual Statement.
----------------
The Board of Directors shall present at each annual meeting, and at any special meeting of the shareholders when called for
by a vote of the shareholders a full and clear statement of the business and financial condition of the Corporation.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1. Number, Election, Qualification and Term of Office.
--------------------------------------------------
(A) The members of the Board of Directors of the Corporation need not be shareholders and shall be elected to their terms
as set forth herein by a majority of the votes cast at a shareholder's meeting by the holders of shares entitled to vote in such
election. The Board of Directors shall consist of not less than three (3) persons nor more than fifteen (15) persons as may be
decided from time to time by vote of the shareholder(s). No decrease in said Board of Directors shall shorten the term of any
incumbent director. Each director shall be at least eighteen (18) years of age.
(B) At each annual meeting, the successors to the directors whose terms expire in that year shall be elected for the term
of one (1) year.
SECTION 2. Duties and Powers.
-----------------
The Board of Directors shall be responsible for the control and management of the affairs, property and interests of the
Corporation, and may exercise all powers of the Corporation, except as are in the Certificate of Incorporation or by statute
expressly conferred upon or reserved to the shareholders.
SECTION 3. Annual and Regular Meetings; Notice.
-----------------------------------
(A) A regular annual meeting of the Board of Directors shall be held immediately following the annual meeting of the
shareholders, at the place of such annual meeting of shareholders.
(B) The Board of Directors, from time to time, may provide by resolution for the holding of other regular meetings of the
Board of Directors, and may fix the time and place thereof.
(C) Notice of any regular meeting of the Board of Directors shall not be required to be given and, if given, need not
specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of
any regular meeting, notice of such action shall be given to each director who shall not have been present at the meeting at which
such an action was taken within the time limited, and in the manner set forth, in paragraph (B) of Section 4 of this Article III,
with respect to special meetings, unless such notice shall be waived in the manner set forth in paragraph (C) of such Section 4.
SECTION 4. Special Meetings; Notice.
------------------------
(A) Special meetings of the Board of Directors may be called by the Chairman of the Board, or the President, and shall be
called by the Secretary when directed to do so by a writing signed by at least a majority of the directors, at such time and place as
may be specified in the respective notices or waivers of notice thereof.
(B) Notice of special meetings shall be mailed directly to each director, addressed to him at his residence or usual place
of business, at least two (2) days before the day on which the meeting is to be held, or shall be sent to him at such place by
telegram, telex, telefax radio or cable, or shall be delivered to him personally or given to him orally, not later than the day
before the day on which the meeting is to be held. A notice, or waiver of notice, except as required by Article IV, need not specify
the purpose of the meeting.
(C) Notice of any special meeting shall not be required to be given to any director who shall attend such meeting without
protesting, prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before
or after the meeting. Notice of any adjourned meeting shall not be required to be given.
SECTION 5. Chairman of the Board and Chief Executive Officer.
-------------------------------------------------
The Chairman of the Board may be elected from among the members of the Board of Directors. The Chairman of the Board shall
also be the Chief Executive Officer. At all meetings of the Board of Directors, the Chairman of the Board, if any and if present,
shall preside. If there shall be no Chairman, or he shall be absent, then the President shall preside, and in his absence, a
Chairman chosen by the directors shall preside.
SECTION 6. Quorum and Adjournments.
-----------------------
(A) At all meetings of the Board of Directors, the presence of a majority of the entire Board shall be necessary and
sufficient to constitute a quorum for the transactions of business, except as otherwise provided by law, by the Certificate of
Incorporation, or by these By-Laws. Participation of any one or more members of the Board by means of a conference telephone or
similar communications equipment, allowing all persons participating in the meeting to hear each other at the same time, shall
constitute presence in person at any such meeting.
(B) A majority of the directors present at the time and place of any regular or special meeting, although less than a
quorum, may adjourn the same from time to time without notice, until a quorum shall be present.
SECTION 7. Manner of Acting.
----------------
(A) At meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares
of stock, if any, which he may hold.
(B) Except as otherwise provided by statute, by the Certificate of Incorporation, or these By-Laws, the action of a
majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. If all the
directors severally or collectively consent in writing to any action taken or to be taken by the Corporation, and the number of
directors constitutes a quorum for such action, such action shall be as valid corporate action as though it had been authorized at a
meeting of the Board of Directors.
SECTION 8. Vacancies.
---------
Any vacancy in the Board of Directors occurring by reason of an increase in the number of directors, or by reason of the
death, resignation, disqualification, removal (unless a vacancy created by the removal of a director by the shareholders shall be
filled by the shareholders at the meeting at which the removal had been effected) or inability to act of any director, or otherwise,
shall be filled for the unexpired portion of the term by a majority vote of the remaining directors, though less than a quorum, at
any regular meeting or special meeting of the Board of Directors called for that purpose.
SECTION 9. Resignation.
-----------
Any director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of
the Corporation. Unless otherwise specified in such written notice, such written resignation shall take effect upon receipt thereof
by the Board of Directors or such officer, and the acceptance of such resignation shall not be necessary to make it effective.
SECTION 10. Removal.
-------
Any director may be removed with or without cause at any time by the shareholders, at a special meeting of the shareholders
called for that purpose, and may be removed for cause by action of the Board of Directors.
SECTION 11. Compensation.
------------
No stated compensation shall be paid to directors, as such, for their services, but by resolution of the Board of Directors,
a fixed sum and expense of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of
Directors or a Committee thereof; provided, however, that nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation therefor.
SECTION 12. Contracts.
---------
(A) No contract or other transaction between the Corporation and any other corporation shall be impaired, affected or
invalidated, nor shall any director be liable in any way by reason of the fact that any one or more of the directors of the
Corporation is or are interested in, or is a director of officer or are directors or officers of, such other corporation, provided
that such facts are disclosed or made known to the Board of Directors and the contract is not unfair as to the Corporation.
(B) Any director, personally and individually, may be a party to
or may be interested in any contract or transaction of the Corporation, and no director shall be liable in any way by
reason of such interest, provided that the fact of such interest is disclosed or made known to the Board of Directors
and the contract or transaction is not unfair as to the Corporation, and provided that the Board of Directors shall
authorize, approve or ratify such contract or transaction by the vote (not counting the vote of any such director) of
a majority of a quorum,
notwithstanding the presence of any such director at the meeting at which such action is taken. Such director or directors may be
counted in determining the presence of a quorum at such meeting. This Section shall not be construed to impair or invalidate or in
any way affect any contract or other transaction which would otherwise be valid under the law (common, statutory or otherwise)
applicable thereto.
(C) All contracts and transactions under this Section 12 shall be governed by Section 33-323 of the Connecticut Stock
Corporation Act.
SECTION 13. Committees
----------
(A) The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from
among its members an Executive Committee and such other Committees, and alternate members thereof, as they deem advisable, each
consisting of two or more members with such powers and authority (to the extent permitted by law) as may be provided in such
resolution. Each such Committee shall serve at the pleasure of the Board. At all meetings of a Committee, a majority of the members
shall constitute a quorum for the transaction of business, except as otherwise provided by such said resolution or by these By-laws.
Participation of any one or more members of the Committee by means of a conference telephone or similar communications equipment
allowing all the persons participating in the meeting to hear each other at the same time shall constitute presence in person at any
such meeting. Any action authorized in writing by all of the members of a Committee entitled to vote thereon and filed with the
minutes of the Committee shall be the act of the Committee with the same force and effect as if the same had been passed by unanimous
vote at a duly called meeting
of the Committee. Each committee shall be composed of at least three (3) directors.
(B) The Board of Directors may designate two or more directors to constitute an audit committee. The audit committee
shall perform such functions as the By-Laws or a resolution of the Board of Directors of the Corporation may provide, except that if
the Corporation engages or proposes to engage an independent public accountant to review the preparation of and render reports on the
financial statements of the corporation, notwithstanding any provisions of the By-Laws or such resolution, the audit committee shall
review, evaluate and advise the Board of Directors with respect to (A) the proposed engagement and any succeeding engagement of the
accountant or any successor, and (B) the functions performed by the accountant pursuant to the terms of the accountant's engagement.
SECTION 14. Subcommittees
-------------
Any Committee may appoint one or more subcommittees from its members. Any such subcommittee may consist of two or more
members and may be charged with the duty of considering and reporting to the appointing Committee on any matter within the
responsibility of the Committee appointing such subcommittee.
ARTICLE IV - WAIVER OF NOTICE
SECTION 1. Waiver of Notice.
----------------
Whenever any notice of time, place, purpose or any other matter, including any special
notice or form of notice, is required or permitted to be given to any person by law or under the provisions of the Certificate of
Incorporation or By-Laws of the Corporation, or of a resolution of the shareholders or directors, a written waiver of notice signed
by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving
of such notice. The Secretary of the Corporation shall cause any such waiver to be filed with or entered upon the records of the
Corporation or, in the case of a waiver of notice of a meeting, the records of the meeting. The attendance of any person at a
meeting without protesting, prior to or at the commencement of the meeting, the lack of proper notice shall be deemed to be a waiver
by him of notice of such meeting.
ARTICLE V - CERTAIN RESTRICTIONS
SECTION 1. Issuance of Shares.
------------------
The Corporation may issue or agree to issue shares of common stock of the Corporation, such as (but not limited to) options
or warrants to acquire common stock, or securities convertible into common stock, only by action of its Shareholder(s), and not by
action of its Board of Directors.
ARTICLE VI - OFFICERS
SECTION 1. Number, Qualifications, Election and Term of Office.
---------------------------------------------------
(A) The officers of the Corporation shall be a Chief Executive
Officer, a President,
one or more Vice-Presidents, a Secretary, a Treasurer, a Controller, and an Actuary and such other officers, including a Chairman of
the Board of Directors, as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman of the
Board of Directors may be, but is not required to be, a director of the Corporation. Any two or more offices may be held by the same
person, except that the same person may not hold the offices of both President and Secretary.
(B) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board
following the annual meeting of shareholders.
(C) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and
until his successor shall have been elected and qualified, or until his death, resignation or removal.
SECTION 2. Resignation.
-----------
Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, or to the
President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or by such officer, and the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 3. Removal.
-------
Any officer may be removed, either with or without cause, and a successor elected, by the Board of Directors at any time.
Removal of officers is without prejudice to their contract rights; however, the appointment or election of an officer for a given
term, or a general provision in the By-Laws or Certificate of Incorporation with respect to the term of the office, shall not of
itself create contract rights.
SECTION 4. Vacancies.
---------
A vacancy in any office by reason of death, resignation, inability to act, disqualification, or any other cause, may at any
time be filled for the unexpired portion of the term by the Board of Directors.
SECTION 5. Chief Executive Officer.
-----------------------
The Chief Executive Officer shall oversee all operations of the Corporation and the Board of Directors, and shall be
responsible for overseeing the implementation of all orders and resolutions of the Board. As Chairman of the Board of Directors and
Chief Executive Officer, he shall preside at all meetings of the Board and at all meetings of the shareholders. He may execute all
authorized conveyances, contracts, certificates representing shares of the Corporation, or other instruments except in cases where
the signing and execution shall be required by law to be otherwise signed or executed.
Section 6. President and Chief Operating Officer.
-------------------------------------
The offices of President and Chief Operating Officer may be held by different persons. The Chairman, in his sole
discretion, may delegate the following duties to one or both such officers. He shall, when present, preside at all meetings of the
shareholders in the absence of the Chief Executive Officer and, if there shall be no Chairman or the Chairman shall be absent, at all
meetings of the Board of Directors. He may sign, with the Secretary or any other proper officer of the Corporation thereunto
authorized by the Board of Directors, certificates representing shares of the Corporation, any deeds, mortgages, bonds, contracts, or
other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation, or
shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors from time to time.
SECTION 7. Vice Presidents.
---------------
In the absence of the President or in the event of his death, inability or refusal to act, the Vice Presidents, in the order
designated at the time of their election, or in the absence of any designation, then in the order of their election, shall perform
the duties of the President, and when so acting, shall have the authority of and be subject to all the restrictions upon the
President. Any Vice President may sign, with the Secretary or any other proper officer of the Corporation thereunto authorized by
the Board of Directors, certificates representing shares of the Corporation; and shall perform such other duties as are commensurate
with his title and as
from time to time may be assigned to him by the President or by the Board of Directors.
SECTION 8. Secretary.
---------
The secretary shall: (1) keep the minutes of the proceedings of the shareholders, Board of Directors, and committees, if
any, in one or more books provided for that purpose; (2) see that all notices are duly given in accordance with the provisions of
these By-Laws or as required by law; (3) be custodian of the corporate records and of the seal of the Corporation and see that the
seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is duly
authorized; (4) file each written request by a shareholder that notices to him be mailed to some address other than his address as it
appears on the record of shareholders; (5) sign, with the President or a Vice President, certificates representing shares of the
Corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (6) have general charge of the
record of shareholders of the Corporation; and (7) in general perform all duties incident to the office of the Secretary and such
other duties as from time to time may be assigned to him by the President or by the Board of Directors.
Section 9. Treasurer.
---------
If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. He shall: (1) have charge and custody of and be
responsible for all funds and securities of the Corporation, receive and give receipts for moneys due and payable to the Corporation
from any source whatsoever, and deposit all such moneys in the name of the
Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of these
By-Laws; (2) have charge and custody of and be responsible for the keeping of correct and complete books and records of account of
the corporation; sign, with the President or a Vice President, certificates representing shares of the Corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors; and (3) in general perform all of the duties incident to
the office of Treasurer and such other duties as from time to time may be assigned to him by the President or by the Board of
Directors.
SECTION 10. Controller.
----------
The Controller shall be responsible for keeping and maintaining the books of account of the Company, subject to the control
of the Board of Directors and the President. The Controller shall exercise such powers and perform such other duties as relate to
the office of the Controller, and also such powers and duties as may be delegated or assigned to or required of him by these By-Laws
or by or pursuant to authorization of the Board or the President.
SECTION 11. Actuary.
-------
The Actuary shall be responsible for all actuarial calculations and the preparation of all policy forms to be issued by the
Corporation, subject to the control of the Board of Directors and the President. The Actuary shall exercise such powers and perform
such other duties as relate to the offices of the Actuary, and also such powers and duties as may be delegated or assigned to or
required of him by the By-Laws or by or pursuant to the authorization of the Board or President.
SECTION 12. Shares of Other Corporations.
----------------------------
Whenever the Corporation is the holder of shares of any other corporation, any right or power of the Corporation as such
shareholder (including the attendance, acting and voting at shareholders' meetings and execution of waivers, consents, proxies, or
other instruments) may be exercised on behalf of the Corporation only as authorized by resolution of the Board of Directors.
ARTICLE VII - SHARES OF STOCK
SECTION 1. Certificate of Stock.
--------------------
(A) The certificates representing shares of the Corporation shall be in such form as shall be adopted by the Board of
Directors, and shall be numbered and registered in the order issued. They shall bear the holder's name, the number of shares, a
statement that the Corporation is organized under the laws of Connecticut, and shall be signed by (i) the Chairman of the Board or
the President or a Vice President, and (ii) the Secretary or the Treasurer, or any Assistant Secretary or Assistant Treasurer, and
may bear the corporate seal.
(B) No certificate representing shares shall be issued until the full amount of consideration therefor has been paid,
except as otherwise permitted by law.
(B) The Board of Directors may authorize the issuance of
certificates for which shall
entitle the holder to exercise voting rights, receive dividends and participate in any liquidating distributions, or it may authorize
the payment in cash of the fair value of shares as of the time when those entitled to receive such payments are determined; or it may
authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the
signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares, but such scrip shall not
entitle the holder to any rights of a shareholder, except as therein provided.
SECTION 2. Lost or Destroyed Certificates.
------------------------------
The holder of any certificate representing shares of the Corporation shall immediately notify the Corporation of any loss or
destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate
theretofore issued by it alleged to have been lost or destroyed upon production of such evidence of loss or destruction as the Board
of Directors in its discretion may require. The Board of Directors may, in its discretion, require the owner of the lost or
destroyed certificate, or his legal representatives, to give the Corporation a bond in such sum as the Board may direct, and with
such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability or
damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such
evidence or bond when, in the judgment of the Board, it is proper to do so.
SECTION 3. Transfers of Shares.
-------------------
(A) Transfers of shares of the Corporation shall be made on the share records of the Corporation only by the holder of
record thereof, in person or by his duly authorized attorney, upon the surrender for cancellation of the certificate or certificates
representing such shares, with an assignment or power of transfer endorsed thereon or delivered therewith, duly executed, with such
proof at the authenticity of the signature and authority to transfer and of payment of transfer taxes as the Corporation or its
agents may require.
(B) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof
for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share
or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise
expressly provided by law.
SECTION 4. Record Date.
-----------
In lieu of closing the share records of the Corporation, the Board of Directors may fix, in advance, a date not exceeding
fifty (50) days nor less than ten (10) days, as the record date for the determination of shareholders entitled to receive notice of,
or to vote at, any meeting of shareholders, or to consent to any proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no
record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held;
the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the
resolution of the Board of Directors relating thereto is adopted. When a determination of shareholders of record entitled to notice
of or to vote at any meeting of shareholders has been made as provided for herein, such determination shall apply to any adjournment
thereof, unless the directors fix a new record date for the adjourned meeting.
ARTICLE VIII - DIVIDENDS
SECTION 1. When Declared.
-------------
The Board of Directors may declare dividends in cash, in other property, or in shares of the Corporation from the earned
surplus of the Corporation subject to all of the provisions and restrictions of Connecticut Stock Corporation Act and other
applicable statutes, whenever, in its opinion, the condition of the Corporation's affairs renders it advisable that such dividends be
declared.
SECTION 2. Payment.
-------
The Board of Directors, in declaring any dividend, may determine the shareholders entitled to receive such dividend by
fixing a record date for the determination of shareholders and making any such dividend payable only to those persons who are
shareholders of record as of such date. The Board may also determine the date when payment of any such dividend is to
be made.
ARTICLE IX - CHECKS, NOTES AND DEPOSITARIES
SECTION 1. Execution of Instruments.
------------------------
All checks or other orders for the payment of money and all notes or other instruments evidencing indebtedness of the
Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to
time designate.
SECTION 2. Instruments.
-----------
As used in Article IV and in this Article VII, the term "instrument" includes, but is not limited to, contracts and
agreements, checks, drafts and other orders for payment of money, transfers of bonds, stocks, notes and other securitie, and powers
of attorney, deeds, leases, releases of mortgages, satisfactions and all other instruments entitled to be recorded in any
jurisdiction.
SECTION 3. Depositaries.
------------
The Board of Directors shall designate the trust company, or trust companies, bank or banks, in which shall be deposited
money or securities of the Corporation.
ARTICLE X - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of Directors from time to time, subject to applicable law.
ARTICLE XI - FINANCIAL STATEMENTS AND AUDIT
SECTION 1. Annual Statement and Reports.
----------------------------
At the meeting of the Board of Directors following the annual meeting of the Stockholders, the Annual Statement of the
Company for the preceding year, together with a certificate of verification thereof by such independent Public Accountants as may
have been selected by the Board of Directors, shall be submitted to the Board. Interim quarterly reports, certified by the Actuary
and the Controller on the financial condition of the Company shall also be submitted to the Board. The Annual Statement and interim
reports shall be filed with the records of the Board and a note of such submission shall be included in the minutes. The Controller
shall also report from time to time to the Board at any committee any other matters coming to his attention in the course of his
duties which in his judgment should be brought to their attention.
SECTION 2. Independent Public Accountants.
------------------------------
The books and accounts of the Company shall be audited throughout each year by such independent Public Accountants as shall
be selected by the Board of Directors.
ARTICLE XII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from time to time by the Board of Directors.
ARTICLE XIII - INDEMNIFICATION
SECTION 1. Proceedings Other Than by or in the Right of the Corporation.
------------------------------------------------------------
The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that he, or the person whose representative he is, is or was a shareholder,
director, officer, employee or agent of the Corporation, or is or was serving solely at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines, penalties, and amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if the person is successful on the merits in the defense of the proceeding or as provided in
Section 3 hereof, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, the person had no reasonable cause to believe his conduct was
unlawful or if upon application to the court as provided in Section 5 hereof, the court shall have determined that in view of all the
circumstances such person is fairly
and reasonably entitled to be indemnified, and then for such amount as the court shall determine; except that, in connection with an
alleged claim based upon his purchase or sale of securities of the Corporation or of another enterprise, which he serves or served at
the request of the Corporation, the Corporation shall only indemnify such person after the court shall have determined, on
application as provided in Section 5 hereof, that in view of all the circumstances such person is fairly and reasonably entitled to
be indemnified, and then for such amount as the court shall determine. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendre or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the
best interests of the Corporation or of the participants and beneficiaries of such employee benefit plan or trust and consistent with
the provisions of such employee benefit plan or trust, or, with respect to any criminal action or proceeding, that he had reasonable
cause to believe that his conduct was unlawful.
SECTION 2. Proceedings by or in the Right of the Corporation.
-------------------------------------------------
The Corporation shall indemnify any person who was or is a party or threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, by or in the right of the Corporation, to procure a judgment in its favor by reason of the
fact that he, or the person whose legal representative he is, is or was a shareholder, director, officer, employee or agent of the
Corporation, or is or was serving solely at the request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or enterprise, against expenses (including attorney fees) actually and reasonably
incurred by him in connection with such proceeding in relation to matters as to which such person, or the person
whose legal representative his is, is finally adjudged not to have breached his duty to the Corporation, or where the court, on
application as provided in Section 6 hereof, shall have determined that in view of all the circumstances such person is fairly and
reasonably entitled to be indemnified, and then for such amount as the court shall determine. The Corporation shall not so indemnify
any such person for amounts paid to the Corporation, to a plaintiff or to counsel for a plaintiff in settling or otherwise disposing
of a proceeding, with or without court approval; or for expenses incurred in defending a proceeding which is settled or otherwise
disposed of without court approval.
SECTION 3. Determination of Right of Indemnification.
-----------------------------------------
The conclusion provided for in Section 1 hereof may be reached by any one of the following: (1) The Board of Directors of
the Corporation by a consent in writing signed by a majority of those directors who were not parties to such proceeding; (2)
independent legal counsel selected by a consent in writing signed by a majority of those directors who were not parties to such
proceeding; (3) in the case of any employee or agent who is not an officer or director of the Corporation, the Corporation's general
counsel; or (4) the shareholders of the Corporation by the affirmative vote of at least a majority of the voting power of shares not
owned by parties to such proceeding, represented at an annual or special meeting of shareholders, duly called with notice of such
purpose stated. Such person shall also be entitled to apply to a court for such conclusion, upon application as provided in Section
5 hereof, even though the conclusion reached by any of the foregoing shall have been adverse to him or to the person whose legal
representative he is.
SECTION 4. Advances of Expenses.
--------------------
Expenses which may be indemnifiable incurred in defending a proceeding may be paid by the Corporation in advance of the
final disposition of such proceeding as authorized by the board of directors upon agreement by or on behalf of the shareholder,
director, officer, employee, agent or his legal representative, to repay such amount if he is later found not entitled to be
indemnified by the Corporation as authorized. Notwithstanding the foregoing, no advance shall be made by the Corporation if a
determination is reasonably and promptly made by the board of directors by a majority vote of a quorum of disinterested directors, or
(if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs) by independent legal
counsel in a written opinion, that, based upon the facts known to the board or counsel at the time such determination is made, such
person acted in bad faith and in a manner that such person did not believe to be in or not opposed to the best interest of the
Corporation, or, with respect to any criminal proceeding, that such person believed or had reasonable cause to believe his conduct
was unlawful. In no event shall any advance be made in instances where the board or independent legal counsel reasonably determines
that such person deliberately breached his duty to the Corporation or its shareholders.
SECTION 5. Right to Indemnification Upon Application; Procedure Upon Application.
---------------------------------------------------------------------
Where an application for indemnification or for a conclusion is made to a court, it shall be made to the court in which the
proceeding is pending or to the superior court for the judicial district where the principal office of the Corporation is located.
The application shall be made in such manner and form as may be required by the applicable rules of the court or, in the absence
thereof, by direction of the court. The court may also direct that notice be given in such manner as it may require at the expense
of the Corporation to the shareholders of the Corporation and to such other persons as the court may designate. In the case of an
application to a court in which a proceeding is pending in which the person seeking indemnification is a party by reason of the fact
that he, or the person whose legal representative he is, is or was serving at the request of the Corporation as a director, partner,
trustee, officer, employee or agent of another enterprise, or as a fiduciary of an employee benefit plan or trust maintained for the
benefit of employees of any other enterprise, timely notice of such application shall be given by such person to the Corporation.
Any indemnification or advance under this Article, shall be made promptly, and in any event within ninety days, upon the
written request of the agent, unless with respect to applications under this Article, a determination is reasonably and promptly made
by the board of directors by a majority vote of a quorum of disinterested directors that such agent acted in a manner set forth under
this Article as to justify the Corporation's not indemnifying or making an advance to the agent. In the event no quorum of
disinterested directors is obtainable, the board of directors shall promptly direct that independent legal counsel shall decide
whether the agent acted in the manner set forth in this Article as to justify the Corporation's not indemnifying or making an advance
to the agent. The right to indemnification or advances as granted by this Article shall be enforceable by the agent in any court of
competent jurisdiction, if the board or independent legal counsel denies the claim, in whole or in part, or if no disposition of such
claim is made within ninety days. The agent's expenses incurred in connection with successfully establishing his right to
indemnification, in whole or part, in any such proceeding shall also be indemnified by the Corporation.
SECTION 6. Types of Indemnification Consistent with Statutory Rights and Remedies.
----------------------------------------------------------------------
All rights to indemnification under this Article shall be deemed to be provided by a contract between the Corporation and
the director, officer, employee or agent who serves in such capacity at any time while this Article and other relevant provisions of
the Connecticut Stock Corporation Act and other applicable law, if any, are in effect. Any repeal or modification thereof shall not
affect any rights or obligations then existing.
SECTION 7. Insurance.
---------
Upon resolution passed by the board, the Corporation may purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of his status as such. The corporation may procure
insurance providing greater indemnification and may share the premium cost with any shareholder, director, officer, employee, agent
or eligible outside party as may be agreed upon.
SECTION 8. Constituent Corporations.
------------------------
For the purposes of this Article, references to "the Corporation" include the domestic and foreign corporations and all
constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation, so that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions
at this Article with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
SECTION 9. Other Enterprises, Fines, and Serving at Corporation's Request.
--------------------------------------------------------------
For purposes of this Article, references to "other enterprises" shall include any other foreign or domestic corporation,
partnership, joint venture, trust or other enterprise; reference to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan or trusts maintained for the benefit of employees of the corporation or
employees of any other enterprise, its participants, or beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article.
SECTION 10. Savings Clause.
--------------
If this Article or any portion thereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Corporation shall nevertheless indemnify each agent of the Corporation as to expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including a grand jury proceeding and an action by the Corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been invalidated or by any other applicable law.
All payments of indemnification, advancement, or allowance shall be subject to the notice provisions of the Connecticut
Stock Corporation Act.
ARTICLE XIV - AMENDMENTS
SECTION 1. By Shareholders.
---------------
The By-Laws of the Corporation are subject to alteration or repeal, and new By-Laws may be made, by a majority vote of the
shareholders at the time entitled to vote in the election of directors.
SECTION 2. By Directors.
------------
The Board of Directors shall not make, adopt, alter, amend or repeal the By-Laws of the Corporation; and further provided
the Board of Directors shall have no power to change the quorum for meetings of shareholders or the Board of Directors, or to change
any provision of the By-Laws with respect to the removal of any directors or the filling of vacancies in the Board
resulting from the removal of directors by the shareholders.
ARTICLE XV - EFFECTIVE DATE OF BY-LAWS
The By-Laws shall become effective upon their adoption by the Corporation as set forth in the Statement of Organization.
Exhibit 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Timothy P.
Harris, David R. Odenath, Jr., and Zafar Rashid, each of them severally, his true and lawful attorney-in-fact with power of
substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute
any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934, and any rules,
regulations and requirements of the Securities and Exchange Commission (the "Commission") in connection with filing with the
Commission of an Annual Report on Form 10-K of American Skandia Life Assurance Corporation (the "Registrant") for the fiscal year
ended December 31, 2003 ("Form 10-K"); including specifically, but without limiting the generality of the foregoing, the power and
authority to sign his name in his respective capacity as a member of the Board of Directors of the Registrant to the Form 10-K and
such other form or forms as may be appropriate to be filed with the Commission as any of them may deem appropriate, together will all
exhibits thereto, and to any and all amendments thereto and to any other documents filed with the Commission, as fully for all
intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each
acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of March 2004.
/s/ James J. Avery, Jr.
------------------------
James J. Avery, Jr.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Timothy P.
Harris, David R. Odenath, Jr., and Zafar Rashid, each of them severally, his true and lawful attorney-in-fact with power of
substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute
any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934, and any rules,
regulations and requirements of the Securities and Exchange Commission (the "Commission") in connection with filing with the
Commission of an Annual Report on Form 10-K of American Skandia Life Assurance Corporation (the "Registrant") for the fiscal year
ended December 31, 2003 ("Form 10-K"); including specifically, but without limiting the generality of the foregoing, the power and
authority to sign his name in his respective capacity as a member of the Board of Directors of the Registrant to the Form 10-K and
such other form or forms as may be appropriate to be filed with the Commission as any of them may deem appropriate, together will all
exhibits thereto, and to any and all amendments thereto and to any other documents filed with the Commission, as fully for all
intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each
acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of February 2004.
/s/ Vivian L. Banta
--------------------
Vivian L. Banta
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Timothy P.
Harris, David R. Odenath, Jr., and Zafar Rashid, each of them severally, his true and lawful attorney-in-fact with power of
substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute
any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934, and any rules,
regulations and requirements of the Securities and Exchange Commission (the "Commission") in connection with filing with the
Commission of an Annual Report on Form 10-K of American Skandia Life Assurance Corporation (the "Registrant") for the fiscal year
ended December 31, 2003 ("Form 10-K"); including specifically, but without limiting the generality of the foregoing, the power and
authority to sign his name in his respective capacity as a member of the Board of Directors of the Registrant to the Form 10-K and
such other form or forms as may be appropriate to be filed with the Commission as any of them may deem appropriate, together will all
exhibits thereto, and to any and all amendments thereto and to any other documents filed with the Commission, as fully for all
intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each
acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of February 2004.
/s/ Richard J. Carbone
-----------------------
Richard J. Carbone
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Timothy P.
Harris, David R. Odenath, Jr., and Zafar Rashid, each of them severally, his true and lawful attorney-in-fact with power of
substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute
any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934, and any rules,
regulations and requirements of the Securities and Exchange Commission (the "Commission") in connection with filing with the
Commission of an Annual Report on Form 10-K of American Skandia Life Assurance Corporation (the "Registrant") for the fiscal year
ended December 31, 2003 ("Form 10-K"); including specifically, but without limiting the generality of the foregoing, the power and
authority to sign his name in his respective capacity as a member of the Board of Directors of the Registrant to the Form 10-K and
such other form or forms as may be appropriate to be filed with the Commission as any of them may deem appropriate, together will all
exhibits thereto, and to any and all amendments thereto and to any other documents filed with the Commission, as fully for all
intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each
acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 5th day of March 2004.
/s/ Helen M. Galt
------------------
Helen M. Galt
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Timothy P.
Harris, David R. Odenath, Jr., and Zafar Rashid, each of them severally, his true and lawful attorney-in-fact with power of
substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute
any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934, and any rules,
regulations and requirements of the Securities and Exchange Commission (the "Commission") in connection with filing with the
Commission of an Annual Report on Form 10-K of American Skandia Life Assurance Corporation (the "Registrant") for the fiscal year
ended December 31, 2003 ("Form 10-K"); including specifically, but without limiting the generality of the foregoing, the power and
authority to sign his name in his respective capacity as a member of the Board of Directors of the Registrant to the Form 10-K and
such other form or forms as may be appropriate to be filed with the Commission as any of them may deem appropriate, together will all
exhibits thereto, and to any and all amendments thereto and to any other documents filed with the Commission, as fully for all
intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each
acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of February 2004.
/s/ Ronald P. Joelson
----------------------
Ronald P. Joelson
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Timothy P.
Harris, David R. Odenath, Jr., and Zafar Rashid, each of them severally, his true and lawful attorney-in-fact with power of
substitution and resubstitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute
any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934, and any rules,
regulations and requirements of the Securities and Exchange Commission (the "Commission") in connection with filing with the
Commission of an Annual Report on Form 10-K of American Skandia Life Assurance Corporation (the "Registrant") for the fiscal year
ended December 31, 2003 ("Form 10-K"); including specifically, but without limiting the generality of the foregoing, the power and
authority to sign his name in his respective capacity as a member of the Board of Directors of the Registrant to the Form 10-K and
such other form or forms as may be appropriate to be filed with the Commission as any of them may deem appropriate, together will all
exhibits thereto, and to any and all amendments thereto and to any other documents filed with the Commission, as fully for all
intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each
acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of February 2004.
/s/ Andrew J. Mako
-------------------
Andrew J. Mako
Exhibit 31.1
SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I, David R. Odenath, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of American Skandia Life Assurance Corporation;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: March 19, 2004
/s/ David R. Odenath, Jr.
--------------------------
David R. Odenath, Jr.
Chief Executive Officer and President
Exhibit 31.2
SECTION 302 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
I, Zafar Rashid, certify that:
1. I have reviewed this annual report on Form 10-K of American Skandia Life Assurance Corporation;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: March 19, 2004
/s/ Zafar Rashid
----------------
Zafar Rashid
Executive Vice President and Chief Financial Officer
Exhibit 32.1
SECTION 906 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350, I, David R. Odenath, Jr., Chief Executive Officer and President of American Skandia Life
Assurance Corporation (the "Company"), hereby certify that the Company's Annual Report on Form 10-K for the year ended December 31,
2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Dated: March 19, 2004
/s/ David R. Odenath, Jr.
----------------------------
Name: David R. Odenath, Jr.
Title: Chief Executive Officer and President
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report
or as a separate disclosure document.
Exhibit 32.2
SECTION 906 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350, I, Zafar Rashid, Executive Vice President and Chief Financial Officer of American Skandia Life
Assurance Corporation (the "Company"), hereby certify that the Company's Annual Report on Form 10-K for the year ended December 31,
2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Dated: March 19, 2004
/s/ Zafar Rashid
-----------------------------
Name: Zafar Rashid
Title: Executive Vice President and Chief Financial Officer
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report
or as a separate disclosure document.