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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBERS - 333-77441 AND 333-77437
SAGE LIFE ASSURANCE OF AMERICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0258372
(STATE OR OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
300 ATLANTIC STREET, STAMFORD, CONNECTICUT 06901
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(203) 602-6500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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. [X] Yes [ ] No
As of April 15, 2002 there were 1,000 shares of outstanding common stock, par
value $2,500 per share, of the registrant. All outstanding shares were owned by
Sage Life Holdings of America, Inc.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: This Annual Report on Form 10-K includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 which are not historical facts. Although such
forward-looking statements reflect the current views of the Company and
management with respect to future events and financial performance, there are
known and unknown risks, uncertainties and other factors that could cause actual
results to differ materially from those contemplated or indicated by such
forward-looking statements. These include, but are not limited to, risks and
uncertainties inherent in or relating to (i) general economic conditions,
including interest rate movements, equity market performance, inflation and
cyclical industry conditions; (ii) governmental and regulatory policies, as well
as the judicial environment; (iii) accessibility to reasonably priced
reinsurance; (iv) continued financial support from the Company's ultimate
parent, Sage Group Limited ("Sage Group"), a South African corporation and the
ability of the Company and/or its affiliates to access additional capital; (v)
increasing competition in the markets in which the Company operates; (vi)
changes in generally accepted accounting principles; and (vii) the risks and
uncertainties included in the Company's Securities and Exchange Commission
filings. The words "believe", "expect", "anticipate", "project", and similar
expressions identify forward-looking statements, which speak only as of their
dates. Accordingly, there can be no assurance that actual results will conform
to the forward-looking statements in this Annual Report. Neither the Company nor
its management undertakes any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
2
SAGE LIFE ASSURANCE OF AMERICA, INC.
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business 4
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 6
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 10
Item 8. Financial Statements 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
11
PART III
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners and Management 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 17
3
PART I
ITEM 1. BUSINESS
General
Sage Life Assurance of America, Inc. ("Sage Life" or "the Company" or
"We") is a stock life insurance company incorporated in Delaware in
1981 with its principal offices in Stamford, Connecticut. We have
licenses to conduct an insurance business in 49 states and the District
of Columbia. The Company is authorized to write variable annuity
contracts in all jurisdictions in which it is licensed, and is
authorized to write variable life insurance in all but three states.
Although the Company is not licensed in New York, its wholly-owned
subsidiary, Sage Life Assurance Company of New York ("Sage New York")
has applied to the New York Insurance Department for an insurance
license.
We are a wholly-owned subsidiary of Sage Life Holdings of America, Inc.
("Sage Life Holdings"). Sage Insurance Group Inc. ("SIGI") owns 90.1%
of the common stock of Sage Life Holdings. Swiss Re Life and Health
America, Inc. ("Swiss Re" formerly Life Reassurance Corporation of
America), owns the remaining 9.9% of the common stock of Sage Life
Holdings. Before acquiring Sage Life Holdings' common stock, Swiss Re
invested $12,500,000 in non-voting non-redeemable cumulative preferred
stock of Sage Life Holdings. During 2000, Swiss Re exchanged a portion
of the preferred stock it acquired for the common stock. Swiss Re's
ultimate parent is Swiss Reinsurance Company, Switzerland, one of the
world's largest life and health reinsurance groups.
SIGI is a wholly-owned, indirect subsidiary of Sage Group Limited
("Sage Group"), a South African corporation quoted on the Johannesburg
Stock Exchange. Sage Group is a holding company with a thirty-six year
history of extensive operating experience in mutual funds, life
assurance and investment management. Sage Group has directly and
indirectly engaged in insurance marketing activities in the United
States since 1977. In addition to its U.S. and South African
activities, Sage Group also provides insurance products to non-U.S.
citizens through its indirect subsidiary, Sage Life (Bermuda), Ltd.
Effective December 31, 1996, SIGI purchased all of the outstanding
stock of Sage Life, then named Fidelity Standard Life Insurance Company
("Fidelity Standard"), from Security First Life Insurance Company
("SFLIC"). Prior to the purchase and effective October 31, 1996,
Fidelity Standard entered into a modified coinsurance arrangement to
cede all of its separate account liabilities to its then parent, SFLIC.
Assets equal to the total reserves and related liabilities were
transferred to SFLIC. The remaining general account liabilities were
ceded under a 100% coinsurance arrangement with SFLIC. In connection
with the purchase of Fidelity Standard, the Company entered into a
service agreement with SFLIC to provide all necessary administrative
services for all ceded business. Effective September 30, 1998, all of
the in-force business of the Company was novated to SFLIC.
Segment Information
We operate in one business segment, the variable insurance product
market. Products we currently offer include combination fixed and
variable deferred annuities and combination fixed and variable life
insurance products. We may introduce additional variable products in
the future including combination fixed and variable immediate
annuities.
4
Products and Distribution
Our ongoing business strategy is to focus on the development,
underwriting, and marketing of variable annuity and variable life
insurance products (the "Contracts"). Our obligations under these
Contracts are supported by (1) variable accounts -- determined by the
value of investments held in separate accounts, and (2) fixed accounts
-- backed by investments held in separate accounts. The assets in these
separate accounts supporting the Contracts to which they relate are not
chargeable with liabilities arising out of any other business we may
conduct.
Our initial marketing focus has been to distribute our products through
banks and financial planning companies and regional broker-dealers. We
anticipate that, over the long-term, our distribution channels will
expand to include wirehouses.
Rating Agencies
The Company's financial ratings are important in its ability to
accumulate and retain assets. The Company is rated "A" (Excellent) by
A.M. Best and "AA-" (Very Strong) by Fitch Ratings. Rating agencies
periodically review the ratings they issue for any required changes.
These ratings reflect the opinion of the rating agency as to the
relative financial strength of the Company and its ability to meet its
contractual obligations to its contract owners. Many financial
institutions and broker-dealers focus on these ratings in determining
whether to market an insurer's variable products. If any of our ratings
were downgraded from their current levels, sales of our products and
our relationships with distributors could be adversely affected.
Competition
We are engaged in a business that is highly competitive due to the
large number of stock and mutual life insurance companies as well as
other entities marketing insurance products comparable to our products.
There are approximately 1,500 stock, mutual and other types of insurers
in the life insurance business in the United States, a substantial
number of which are significantly larger than us. We are unique in that
we are one of the few life insurers confining activities to the
marketing of separate account variable insurance products.
Employees
At December 31, 2001, we had 65 salaried employees. Many of these
employees also perform duties for affiliated companies.
ITEM 2. PROPERTIES
We maintain our corporate offices in space leased by SIGI. SIGI
currently leases approximately 31,000 square feet and affiliated
companies also occupy the space with us.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this filing, neither we nor our subsidiary is
involved in any lawsuits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
All of the Company's outstanding shares are owned by Sage Life
Holdings. The Company did not pay any dividends to its parent in 2001,
2000 and 1999.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes information with respect to our
operations. The selected financial data should be read in conjunction
with the financial statements and the notes thereto and Item 7 -
Management's Discussion and Analysis of Financial Condition and Results
of Operations. All amounts presented in the following table were
derived from our financial statements for the periods indicated and
certain amounts have been reclassified to conform to the 2001
presentation.
2001 2000 1999 1998 1997
---------------- -------------- -------------- --------------- ---------------
STATEMENT OF OPERATIONS DATA:
Revenues:
Net investment income $ 2,108,497 $ 1,888,172 $ 1,290,19 $ 1,243,522 $ 989,494
Realized capital gains 14,088 - - - -
Administrative service fees 39,260 49,940 37,671 - -
Contract charges and fees 108,986 3,979 861 - -
---------------- -------------- -------------- --------------- ---------------
Total revenues 2,270,831 1,942,091 1,328,728 1,243,522 989,494
Benefits and expenses:
Contract owner benefits 1,078,918 490,964 - - -
Acquisition expenses (50,182) - - - -
Goodwill amortization expense 217,378 234,468 234,468 548,818 325,406
General and administrative 8,303,361 5,969,108 5,521,186 1,263,678 1,015,874
expenses
---------------- -------------- -------------- --------------- ---------------
Total benefits and expenses 9,549,475 6,694,540 5,755,654 1,812,496 1,341,280
---------------- -------------- -------------- --------------- ---------------
Loss before cumulative effect (7,278,644) (4,752,449) (4,426,926) (568,974) (351,786)
adjustment
Cumulative effect adjustment for
change in accounting for
development costs - - (4,269,488) - -
---------------- -------------- -------------- --------------- ---------------
Net loss $ (7,278,644) $ (4,752,449) $(8,696,414) $ (568,974) $ (351,786)
================ ============== ============== =============== ===============
Written Premiums (1)
Gross $ 68,900,272 $ 21,109,921 $ 79,942 $ - $ -
================ ============== ============== =============== ===============
Net $ 28,930,652 $ 7,003,766 $ 75,742 $ - $ -
================ ============== ============== =============== ===============
BALANCES SHEET DATA:
Total Assets $114,237,585 $ 54,726,227 $31,736,580 $36,542,531 $ 36,688,739
================ ============== ============== =============== ===============
Total Liabilities $ 82,330,012 $ 22,209,130 $ 233,435 $ 70,474 $ 3,486,311
================ ============== ============== =============== ===============
Total Stockholder's Equity $ 31,907,573 $ 32,517,097 $31,503,145 $36,472,057 $ 33,202,428
================ ============== ============== =============== ===============
(1) Under accounting principles generally accepted in the United
States, premiums are not reported as revenue.
6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the accompanying
financial statements and notes thereto and Item 6, Selected Financial
Data.
Results of Operations
Contract owners pay us contract charges and fees, while the fund
managers pay us administrative fees. These administrative fees, and
most of the charges received from contract owners, are based on
underlying variable and fixed account values. Therefore, these fees and
charges vary with the amount of premiums we have received and
investment performance of the funds. Annual contract charges we receive
from contract owners are flat fees assessed on each contract's
anniversary date. Accordingly, they vary according to the number of
contracts in force during the course of the year.
Net investment income includes interest earned on separate account
assets allocated to options in the fixed account by contract owners.
The increases in net investment income and contract owner benefits
reflect the increase in total separate account assets supporting the
options in the fixed account.
Before June 30, 2000, we sold a limited number of contracts as we
focused most of our efforts on obtaining ratings from rating agencies
and developing the staff, systems and other elements necessary for us
to begin our underwriting and marketing activities. Although premiums
continue to show significant growth, they are still well below levels
needed to generate significant charges based on variable and fixed
account assets. Accordingly, net investment income continues to
represent most of our revenues. We expect net investment income will
continue to represent the majority of our revenues for the next several
years as our sales and related variable and fixed account assets grow.
The trend of increasing general and administrative expenses reflects
our progress in implementing our business strategy and putting in place
the necessary staff, systems and other elements needed to support our
planned growth. The increase in general and administrative expenses is
in large part due to an increase in the number of employees (including
several senior positions), which was 65 at December 31, 2001 as
compared to 38 at December 31, 2000, and 24 at December 31, 1999.
We do not currently reflect the benefits of deferred federal income
taxes in our results.
Liquidity and Capital Resources
Since the beginning of 1997, our primary cash needs have been for the
development of our insurance products and related infrastructure and
the funding of our daily operations. Our cash needs have been met
primarily through capital contributions from Sage Life Holdings, as
well as through interest income on the invested assets of the general
account.
We expect that our cash needs will continue in order to support our
underwriting and marketing activities. Our ultimate parent, Sage
Group, a publicly traded South African financial services group, has
stated that our operations are of key strategic importance to Sage
Group's business plans and that they intend to take the actions
necessary to meet our liquidity needs. Sage Group is currently
prohibited under South African currency controls from utilizing funds
raised in South Africa for our cash needs other than through capital
issues in foreign currency. Sage Group's current ability to issue stock
outside of South Africa has been hindered by a recent devaluation of
the South African rand relative to the United States dollar and a
decrease in their stock price reflective of a general decline of
financial services stocks in South Africa. Sage Group is actively
exploring a variety of alternatives for providing for our current and
future cash needs, including by issuing new capital to strategic
investors of Sage Life Holdings and/or its affiliates or through the
issuance of new Sage Group capital in the international markets. Sage
Group and its affiliates are currently engaging in discussions with
potential strategic investors and providers of such capital. However,
there can be no assurance that Sage Group will be successful in these
efforts, as Sage Group has not yet finalized negotiations with any
strategic investor.
7
Our future marketing efforts and results of operations could be
adversely affected if Sage Life Holdings and/or its affiliates are
unable to raise additional funding for us. Based on our business
expansion plans, Sage Life Holdings and/or its affiliates will require
outside financing towards the end of the first quarter of 2003 to
enable us to maintain the minimum $25,000,000 capital and surplus
requirements stipulated in the terms of the Preferred Stock Agreement
with Swiss Re. Under the Preferred Stock Purchase Agreement, as
amended, we are required to maintain statutory-basis capital and
surplus of at least $25,000,000. Should our statutory-basis capital
and surplus fall below $25,000,000, and remain uncured for 60 days,
the Preferred Stock Purchase Agreement provides that, subject to
obtaining regulatory approval, each share of preferred
stock shall be entitled to a number of votes sufficient to provide
preferred shareholders 51% of the voting interest in Sage Life
Holdings, our direct parent. Should this occur, there can be no
assurance that our current business strategy will be maintained. In
addition, we have made a commitment to the Michigan Insurance
Department to maintain a statutory capital and surplus of at least
$25,000,000.
With regard to contract owners, our obligation under their contracts
are supported by (1) variable accounts -- determined by the value of
investments held in separate accounts, and (2) fixed accounts -- backed
by investment held in separate accounts. The assets in these separate
accounts, supporting the contracts to which they relate, are not
chargeable with any of our other liabilities.
Reinsurance
In 2000, we entered into a modified coinsurance agreement (the "Modco
Agreement") with Swiss Re. Under the Modco Agreement we cede a
significant portion of our variable business to Swiss Re. This
arrangement provides us with additional capacity for growth of the
variable insurance business.
In addition, we have entered into reinsurance arrangements that
reinsure certain mortality risks associated with the death benefit and
accidental death benefit features of the contracts, as well as other
contract guarantees. We use only highly rated reinsurance companies to
reinsure these risks
Reinsurance does not relieve us from our obligations to contract
owners. We remain primarily liable to the contract owners to the extent
that any reinsurer does not meet its obligations under the reinsurance
agreements.
Reserves
The insurance laws and regulations under which we operate obligate us
to record, as liabilities, actuarially determined reserves to meet our
obligations on outstanding contracts. We base our reserves involving
life contingencies on mortality tables in general use in the United
States. Where applicable, we compute our reserves to equal amounts
which, together with interest on such reserves computed annually at
certain assumed rates, will be sufficient to meet our contract
obligations at their maturities or in the event of the covered person's
death.
Critical Accounting Policies
We amortize deferred acquisition costs ("DAC"), deferred gain on
modified coinsurance agreement, and unearned revenue over the life of
our contracts in relation to estimated gross profits ("EGPs"). Both the
deferred amounts and the EGPs are net of reinsurance. EGPs are based on
assumptions about future contract experience including, persistency,
growth rate of elected investment options, and the level of expense
required to maintain the contracts. At each balance sheet date, EGPs
are replaced with actual gross profits. Future EGPs are also recast
taking into account the volume and mix of the contracts actually in
force and warranted changes in assumptions about future experience.
Finally, amortization is derived based on the combination of actual
gross profits to date and the recast EGPs. For 2001, we have replaced
EGPs with actual gross profits and EGPs have been recast taking into
consideration the volume and mix of contracts in force. Assumptions
about future experience have not been revised.
8
Investments
Our cash and invested assets are comprised entirely of investment grade
securities, money market funds and equity securities representing seed
money in two funds sponsored by Sage Life Investment Trust, a
registered investment company offering a series of mutual funds to
investors in the Company.
Dividend Restrictions
We are subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions as described below, we must obtain approval of the Insurance
Commissioner of the State of Delaware in order to pay, in any 12-month
period, "extraordinary" dividends which are defined as those in excess
of the greater of 10% of surplus as regards contract owners as of the
prior year-end and statutory net income less realized capital gains for
such prior year. We may pay dividends only out of earned surplus. In
addition, we must provide notice to the Insurance Commissioner of the
State of Delaware of all dividends and other distributions to Sage Life
Holdings, within five business days after declaration and at least ten
days prior to payment. At December 31, 2001, we could not pay a
dividend to Sage Life Holdings without prior approval from state
regulatory authorities as we currently do not have earned surplus.
Additionally, we have paid no dividends since the commencement of our
operations.
State Regulation
We are subject to the laws of the State of Delaware governing insurance
companies and to the regulations of its Department of Insurance (the
"Insurance Department"). Annually, we file a detailed financial
statement in the prescribed form (the "Statement") with the Insurance
Department covering our operations for the preceding year and our
financial condition as of the end of that year. Regulation by the
Insurance Department means that it may examine our books and records to
determine, among other things, whether reported contract liabilities
and reserves are computed in accordance with statutory accounting
practices prescribed or permitted by the Insurance Department. The
Insurance Department, under the auspices of the National Association of
Insurance Commissioners ("NAIC"), periodically conducts a full
examination of the Company's operations.
In addition, we are subject to regulation under the insurance laws of
all jurisdictions in which we operate. These laws 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 types and amounts of investments permitted. We must file
the Statement with supervisory agencies in each of the jurisdictions in
which we operate, and our operations and accounts are subject to
examination by these agencies at regular intervals.
Our statutory-basis financial statements are prepared in accordance
with accounting practices prescribed or permitted by the Delaware
Insurance Department. Prior to January 1, 2001, "prescribed" statutory
accounting practices were interspersed throughout state insurance laws
and regulations, the NAIC's Accounting Practices and Procedures Manual
and a variety of NAIC publications. "Permitted" statutory accounting
practices encompass all accounting practices that are not prescribed;
such practices may differ from state to state, may differ from company
to company within a state, and may change in the future.
Effective January 1, 2001, the NAIC has revised the Accounting
Practices and Procedures Manual in a process referred to as
Codification. Delaware has adopted the provisions of the revised
manual. The revised manual has changed, to some extent, prescribed
statutory accounting practices used to prepare statutory-basis
financial statements. However, the effect of these changes did not
result in a reduction in our statutory-basis capital and surplus upon
adoption January 1, 2001.
9
On an annual basis, the NAIC requires insurance companies to report
information regarding minimum Risk Based Capital ("RBC") requirements.
These requirements are intended to allow insurance regulators to
identify companies that may need regulatory attention. The RBC Model
Law requires that insurance companies apply various factors to asset,
premium and reserve items, all of which have inherent risks. The
formula includes components for asset risk, insurance risk, interest
risk and business risk. At December 31, 2001, our total adjusted
capital exceeded RBC requirements.
Further, many states regulate affiliated groups of insurers like us and
our affiliates, under insurance holding company legislation. Under such
laws, intercompany transfers of assets and dividend payments from
insurance subsidiaries may be subject to prior notice or approval,
depending on the size of the transfers and payments in relation to the
financial positions of the companies involved.
Under insurance guaranty fund laws in most states, insurers doing
business therein can be assessed (up to prescribed limits) for contract
owner losses incurred when other insurance companies have become
insolvent. Most of these laws provide that an assessment may be excused
or deferred if it would threaten an insurer's own financial strength.
Although the federal government ordinarily does not directly regulate
the business of insurance, federal initiatives often have an impact on
the business in a variety of ways. Our insurance products are subject
to various federal securities laws and regulations. In addition,
current and proposed federal measures that may significantly affect the
insurance business include: 1) regulation of insurance; 2) company
solvency; 3) employee benefit regulation; 4) tax law changes affecting
the taxation of insurance companies; 5) tax treatment of insurance
products and its impact on the relative desirability of various
personal investment vehicles; and 6) privacy protection initiatives.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
At December 31, 2001, we held in our general account $13,652,000 of
fixed maturity securities that are sensitive to changes in interest
rates. These securities are held in support of our target surplus. We
have a conservative investment philosophy, with all fixed maturity
investments being investment grade corporate securities, government
agency or U.S. government securities. We determine the sensitivity of
our fixed maturity portfolio based on increases or decreases in
interest rates. The effects of an increase or decrease of 100 and 200
basis points ("bps") on our fixed maturity general account portfolio
fair value at December 31, 2001 are:
-200 bps -100 bps Fair value +100 bps +200 bps
----------- ----------- ----------- ----------- -----------
U.S. Government $ 7,355,265 $ 7,217,617 $ 7,073,860 $ 6,922,041 $ 6,782,878
Corporate 6,812,694 6,698,924 6,578,394 6,449,557 6,332,749
General Account $14,167,959 $13,916,541 $13,652,254 $13,371,598 $13,115,627
10
In addition, there are $25,476,000 of fixed maturity securities held in
the separate account in support of fixed accounts. We have a
conservative investment philosophy with respect to these investments,
which consist of investment grade corporate and asset-backed
securities. The effects of an increase or decrease of 100 and 200 bps
on the fixed maturity separate account portfolio at December 31, 2001
are:
-200 bps -100 bps Fair value +100 bps +200 bps
----------- ----------- ----------- ----------- -----------
Corporate $10,346,277 $10,233,653 $10,128,166 $10,011,173 $ 9,905,658
Asset-backed 15,485,203 15,417,524 15,348,006 15,279,531 15,210,745
Fixed Account $25,831,480 $25,651,177 $25,476,172 $25,290,704 $25,116,403
Equity Market Risk
The primary equity market risk to the Company comes from the nature of
the variable annuity and variable life products sold. Various fees and
charges earned by the Company are substantially derived as a percentage
of the market value of the assets under management. In a market
decline, this income would be reduced because the value of assets under
management would be reduced. The impact would be compounded if the
market decline led to an increase in surrenders or withdrawals as well.
It also appears that the prolonged downturn in the equity markets has
had a negative impact on sales.
ITEM 8. FINANCIAL STATEMENTS
The Company's audited consolidated financial statements begin on page
F-1. Reference is made to the Index to Financial Statements on page 17.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the Directors and Executive Officers of the Company:
POSITION WITH SAGE, YEAR OF
NAME, AGE ELECTION OTHER PRINCIPAL POSITIONS FOR PAST FIVE YEARS
- -------------------------------- ------------------------------ ---------------------------------------------------------------
Ronald S. Scowby, 63 Director, January 1997 to Chairman and Trustee, Sage Life Investment Trust, July 1998
December 2001; Chairman, to September 2001; President, Chief Executive Officer, Sage
February 1998 to December Life Assurance of America Inc., January 1997 to February
2001 1998; Director, President, Chief Executive Officer, Sage
Management Services (USA), Inc., June 1996 to December 1999;
Owner, Sheldon Scowby Resources July 1995 to June 1996
Robin I. Marsden, 36 Director, January 1997 to President and Trustee, Sage Life Investment Trust, July 1998
present; President and Chief to present; Director, Sage Distributors, Inc., January 1998
Executive Officer, February to August 2001 and February 2002 to present; President, Sage
1998 to present Distributors, Inc. February 2002 to present; Director,
January 1997 to present, President and Chief Executive
Officer, February 1998 to present, Sage Insurance Group,
Inc.; Chief Investment Officer and Chief Financial Officer,
Sage Life Holdings, Ltd., November 1994 to January 1998
H. Louis Shill, 71 Director, January 1997 to Chairman, Sage Life Assurance of America, Inc. January 1997
present; Chairman December to February 1998; Chairman, Sage Insurance Group, Inc.,
2001 to present January 1997 to present; Founder, Chairman, Sage Group
Limited, 1965 to present
Paul C. Meyer, 49 Director, January 1997 to Partner, Clifford Chance Rogers & Wells, 1986 to present
present
Richard D. Starr, 57 Director, January 1997 to Chairman and Chief Executive Officer, Financial Institutions
present Group, Inc., October 1978 to present; Vice Chairman and
Director, ABN Amro Financial Services, Inc.
Dr. Meyer Feldberg, 60 Director, January 2000 to Dean/Professor, Columbia University Graduate School
present of Business, July 1989 to present; Vice Chairman and
Director, Sage Life Assurance Company of New York;
Director of Revlon, Inc., Federated Department Stores,
Primedia, and Paine-Webber Mutual Funds
John A. Benning, 67 Director, April 2000 to Senior Vice President and General Counsel, Liberty Financial
present Companies, 1986 to 2000; Director of ICI Mutual Insurance
Company, and T.T. International U.S.A. Feeder Trust
12
POSITION WITH SAGE, YEAR OF
NAME, AGE ELECTION OTHER PRINCIPAL POSITIONS FOR PAST FIVE YEARS
- -------------------------------- ------------------------------ ---------------------------------------------------------------
Mitchell R. Katcher, 48 Director, December 1997 to Vice President, Sage Life Investment Trust, July 1998 to
present; Senior Executive present; Director, Sage Distributors, Inc., January 1998 to
Vice President and Chief August 2001; Treasurer, July 1997 to present, Senior
Actuary May 1997 to present; Executive Vice President, December 1997 to present, Sage
Chief Financial Officer, May Insurance Group, Inc.
1997 to October 2000
Lincoln B. Yersin, 38 Executive Vice President - President, Sage Distributors, September 2000 to present;
Marketing, National Sales Executive Vice President, Sage Insurance Group, Inc. January
Manager, May 1999 to 2001 to February 2002; President, AmSouth Investment
February 2002 Services, Inc., June 1993 to May 1999; Senior Vice President,
AmSouth Bancorporation, June 1993 to May 1999
Jeffrey C. Gordon, 40 Senior Vice President and Senior Vice President and Chief Financial Officer, Sage
Chief Financial Officer, Insurance Group Inc., October 2000 to present; Chief
October 2000 to present Financial Officer and Treasurer, Sage Distributors, Inc.,
February 2002 to present; Controller, Frontier Insurance
Group, Inc., January 1999 to September 2000; Senior Manager,
Ernst & Young LLP, January 1988 to December 1998
Nancy F. Brunetti, 39 Executive Vice President and Executive Vice President and Chief Administrative Officer,
Chief Administrative Sage Insurance Group Inc., January 2001 to present; Consultant,
Officer, January 2001 to NFB Consulting, January 2000 to December 2000; Executive Vice
present President and Chief Operating Officer, January 1998 to December
1999 and Senior Vice President January 1996 to December 1997
American Skandia Life Assurance Corporation
All entities with "Sage" in their name are affiliates of Sage Life. The
executive officers of Sage Life hold various other offices and directorships
with affiliates not named above. None of these, however, are considered to be
principal positions.
13
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to the Chief Executive
Officer and certain other Executive Officers of the Company:
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)
- --------------------------------------- ----------- -------- -------- --------------- ---------------
Robin I. Marsden 2001 $390,750 $108,800 $ 17,850 $132,179
(Chief Executive Officer) 2000 354,750 100,000 17,850 119,399
1999 322,500 150,000 16,800 38,018
Ronald S. Scowby (3) 2001 $ -- $ -- $ -- $ --
(Former Chairman, President 2000 -- 75,000 -- 56,538
and CEO) 1999 354,167 200,000 16,800 42,484
Mitchell R. Katcher 2001 $318,750 $150,000 $ 17,850 $ 20,535
(Senior Executive Vice 2000 293,750 137,500 17,850 17,824
President and Chief Actuary) 1999 268,750 150,000 16,800 30,456
Lincoln Yersin(4) 2001 $199,750 $150,000 $ 17,850 $ 3,124
(Former Executive Vice President 2000 186,250 150,000 13,300 47,191
Marketing and National Sales 1999 116,667 100,000 -- 124,692
Manager)
Jeffrey C. Gordon 2001 $205,250 $ 40,000 $ 4,525 $100,229
(Senior Vice President and
Chief Financial Officer)
Nancy F. Brunetti 2001 $279,500 $ 34,375 -- $ 31,000
(Executive Vice President and Chief
Administrative Officer)
(1) Represents amounts credited to executives under a SIGI sponsored defined
contribution plan.
(2) All Other Compensation consists of the following for the executive officers:
Mr. Marsden: 2001, $23,179 - contribution to non-qualified retirement plan,
$109,000 - deferral of partial 2000-2001 fiscal year earned bonus; 2000, $19,399
- - contribution to non-qualified retirement plan, $100,000 - deferral of partial
1999-2000 fiscal year earned bonus; 1999, $17,062 - contribution to
non-qualified retirement plan, $20,956 - contribution to annuity contract issued
by the Company.
Mr. Scowby: 2000, $56,538 - cash-out of earned leave accrued during status as
executive; 1999, $20,387 - contribution to non-qualified retirement plan,
$22,097 - contribution to annuity contract issued by the Company.
Mr. Katcher: 2001, $20,535 - contribution to non-qualified retirement plan;
2000, $12,994 - contribution to non-qualified retirement plan, $4,830 -
contribution to non-qualified plan in lieu of employee benefit; 1999, $11,419 -
contribution to non-qualified retirement plan, $19,037 - contribution to annuity
contract issued by the Company.
Mr. Yersin: 2001, $3,124 - contribution to non-qualified retirement plan; 2000,
$47,191 - moving expenses; 1999, $65,116 - recruitment bonus, $59,576 - moving
expenses.
Mr. Gordon: 2001, $43,750 - recruitment bonus, $4,528 - contribution to
non-qualified retirement plan; $51,951 - moving expenses.
Ms. Brunetti: 2001, $25,000 - recruitment bonus, $6,000 - commuter allowance.
(3) Mr. Scowby retired as an executive officer effective December 31, 1999.
Bonus compensation shown for 2000 is in connection with his former executive
status, and was paid in 2000.
(4) Mr. Yersin's employment with the Company terminated February 27, 2002.
14
Employment Contracts.
Mr. Marsden and the Company are parties to an Employment Agreement effective
April 1, 2000. The agreement provides for Mr. Marsden's title and duties with
the Company, and establishes certain restrictive covenants. It sets forth his
annual remuneration for the year from April 1, 2000, to March 31, 2001, and
provides that such remuneration will be reviewed annually thereafter. Further,
the agreement provides that Mr. Marsden is eligible to participate in the
Company's short-term incentive bonus plan for executive employees, and in a
long-term capital incentive plan to be established by SIGI. The agreement also
provides that if his employment is terminated (except for a "with cause"
termination) (i) he shall continue to be paid 24 months of then-current base
salary with a proportionate bonus under the Company's short-term incentive plan
for the months of service since the last bonus payment; (ii) that his employee
welfare benefits will be continued for 24 months; (iii) that unvested pension
contributions would immediately vest; and (iv) that unvested allocations or
options under the long-term capital incentive plan would be treated in the same
manner as a retirement under the rules of the plan. In addition, if the Company
is no longer controlled by Sage Group and its effective place of business is
relocated by its new owners, Mr. Marsden may, in lieu of relocating and being
reimbursed thereof, elect to terminate his employment and receive the benefits
he would otherwise have received if terminated without cause.
Mr. Katcher and the Company are parties to an Employment Agreement effective
February 1, 1997. The agreement provides for Mr. Katcher's title and duties with
the Company, sets forth his remuneration through March 31, 1999, and provides
that such remuneration will be reviewed annually thereafter. The agreement also
provides that Mr. Katcher is eligible to participate in the Company's short-term
incentive bonus plan for executive employees, and provides that bonuses payable
on certain dates ending April 1, 1999, will not be less than indicated amounts.
The agreement also provides that Mr. Katcher may participate in a long-term
capital incentive plan to be established by SIGI. The agreement also provides
that if his employment is terminated (except for a "with cause" termination) (i)
his monthly compensation and employee welfare benefits shall be continued for a
period of time as determined by a formula; (ii) that unvested allocations or
options under the long-term capital incentive plan and unvested employer
contributions attributable to Mr. Katcher under any pension plan would be
accelerated and deemed to immediately vest. In addition, pursuant to a "change
of control" provision, Mr. Katcher may elect to terminate his employment and
receive the benefits he would otherwise have received if terminated without
cause.
Mr. Yersin resigned February 27, 2002. Prior to his resignation, Mr. Yersin and
the Company were parties to an employment agreement with an effective date of
May 3, 1999. The agreement provided for Mr. Yersin's title and duties with the
Company, and set forth his base salary and other compensation based on sales
("override"), with stated minimums on the override for the first two years. It
also provided for compensation to Mr. Yersin in recognition of long-term
incentives he forfeited with his former employer. Half of the value was advanced
in cash and vested pro rata over the next two years. The other half was credited
to Mr. Yersin's participation in a long-term capital incentive plan to be
established by SIGI.
Mr. Gordon and SIGI are parties to an agreement dated September 11, 2000. The
agreement provides for Mr. Gordon's title and duties with SIGI and the Company,
sets forth his initial annual remuneration, and provides that such remuneration
will be reviewed on an annual basis. The agreement also provides that Mr. Gordon
is eligible to participate in the Company's short-term incentive bonus plan for
employees. The agreement also provides that he is eligible to participate in a
long-term capital incentive plan to be established by SIGI. In addition, the
agreement provides that for the first year of employment, SIGI will make a
special fully vested monthly contribution of 4% of base salary to an Executive
Non-Qualified Deferred Compensation Plan ("Rabbi Trust"). The agreement provides
for bridge financing payable over three years should stock loan obligations to
Mr. Gordon's former employer materialize. Under this provision, during 2001, the
Company provided Mr. Gordon with a $15,000 non-interest bearing loan payable
December 31, 2002. In addition, in the event of a "change of control," if Mr.
Gordon is terminated, or if he elects to terminate his employment, he will be
entitled to receive his basic salary and benefits for a further twelve months,
and will be entitled to a pro-rata bonus for the period up to such termination
based on his prior year's bonus. Ordinary vesting under any benefit or incentive
plan arising in this twelve-month period will also continue. The agreement
provides for indemnification of personal liability arising in the ordinary
course of business.
Ms. Brunetti and SIGI are parties to an agreement dated December 21, 2000. The
agreement provides for Ms. Brunetti's title and duties with SIGI and the
Company, sets forth her initial annual remuneration and other incidental
allowances, and provides that such remuneration will be reviewed on an annual
basis. The agreement
15
also provides that Ms. Brunetti is eligible to participate in the Company's
short-term incentive bonus plan for employees, and that for the period through
March 31, 2002, such bonus will be guaranteed at 50% of base gross salary. The
agreement also provides that she is eligible to participate in a long-term
capital incentive plan to be established by SIGI, and an Executive Non-Qualified
Deferred Compensation Plan ("Rabbi Trust"). The agreement provides for
indemnification of personal liability arising in the ordinary course of
business.
Directors' Compensation. Messrs. Marsden, Katcher and Shill are also
officers-employees of Sage Life and/or its affiliates and parent companies, and
are not therefore separately compensated for serving on the Board. Compensation
for the other directors is inclusive of their services as directors for any of
our affiliates. Messrs. Meyer, Starr and Benning are paid an annual retainer of
$12,000, and $2,000 per meeting attended. Dr. Feldberg, who is also chairman of
our subsidiary, Sage Life Assurance Company of New York, is paid an annual
retainer of $30,000, and $8,000 per meeting attended. Messrs. Meyer, Starr,
Benning, and Feldberg do not receive retirement benefits. Mr. Benning, as
chairman of the audit committee, receives an annual retainer of $3,000, and $500
per meeting attended.
Effective December 5, 2001, Mr. Scowby resigned as director and chairman of Sage
Life and prior to resigning was paid $12,833 per month for these services. In
addition, he was paid a stipend to cover the cost of certain insurance coverages
formerly provided to him as an executive; the amount of the stipend in 2001 was
$27,093. He was also provided with certain retirement benefits and was eligible
to participate in a long-term incentive plan to be established by SIGI.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Paul C. Meyer, a director of the Company, is a partner with the law firm
Clifford Chance Rogers & Wells. Since 1997, the Company has retained Clifford
Chance Rogers & Wells, and its predecessor firm, Rogers & Wells, to provide
legal counseling to the Company.
16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements Page
----
Report of Independent Auditors F-1
Consolidated Balance Sheets as of December 31, 2001 and 2000 F-2
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 F-3
Consolidated Statements of Stockholder's Equity for the years ended December 31, 2001, 2000 and 1999 F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 F-5
Notes to Consolidated Financial Statements F-6
The following consolidated financial statement schedule of Sage Life Assurance
of America, Inc. is included in Item 14(a):
Schedule IV - Reinsurance F-15
All other schedules for which provision is made in Article 7 of Regulation S-X
are omitted because they are either not applicable or because the information
required therein is included in the Notes to the Consolidated Financial
Statements.
Signatures F-16
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter ended
December 31, 2001.
(c) Exhibit Index E-1
17
Report of Independent Auditors
Board of Directors
Sage Life Assurance of America, Inc.
We have audited the accompanying consolidated balance sheets of Sage Life
Assurance of America, Inc. and subsidiary as of December 31, 2001 and 2000, and
the related consolidated statements of operations, stockholder's equity and cash
flows for each of the three years in the period ended December 31, 2001. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Sage
Life Assurance of America, Inc. and subsidiary at December 31, 2001 and 2000,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ Ernst & Young LLP
New York, NY
March 15, 2002
F-1
Sage Life Assurance of America, Inc.
Consolidated Balance Sheets
DECEMBER 31
---------------------------------
2001 2000
------------- -------------
ASSETS
Investments:
Fixed maturity securities available for sale $ 13,652,254 $ 14,660,769
Equity securities available for sale 1,097,000 --
------------- -------------
Total investments 14,749,254 14,660,769
Cash and cash equivalents 9,383,386 9,949,167
Accrued investment income 272,954 243,111
Receivable from affiliates 1,081,710 1,700,014
Deferred federal income taxes -- 146,530
Reinsurance receivables 746,661 290,302
Deferred acquisition costs 2,569,876 327,720
Goodwill 5,776,300 5,993,678
Other assets 774,863 103,761
Separate account assets 78,882,581 21,311,175
------------- -------------
Total assets $ 114,237,585 $ 54,726,227
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Deferred gain from modified coinsurance agreement $ 1,283,790 $ 318,028
Unearned revenue 6,024 901
Deferred federal income taxes 60,807 --
Accrued expenses and other liabilities 2,096,810 579,026
Separate account liabilities 78,882,581 21,311,175
------------- -------------
Total liabilities 82,330,012 22,209,130
Stockholder's equity:
Common stock, $2,500 par value, 1,000 shares authorized, issued and
outstanding 2,500,000 2,500,000
Additional paid-in capital 50,937,804 44,671,161
Deficit (21,648,267) (14,369,623)
Accumulated other comprehensive gain (loss) 118,036 (284,441)
------------- -------------
Total stockholder's equity 31,907,573 32,517,097
------------- -------------
Total liabilities and stockholder's equity $ 114,237,585 $ 54,726,227
============= =============
See accompanying notes to consolidated financial statements.
F-2
Sage Life Assurance of America, Inc.
Consolidated Statements of Operations
YEAR ENDED DECEMBER 31
-----------------------------------------------
2001 2000 1999
----------- ----------- -----------
REVENUES
Net investment income $ 2,108,497 $ 1,888,172 $ 1,290,196
Realized capital gains 14,088 -- --
Administrative service fees 39,260 49,940 37,671
Contract charges and fees 108,986 3,979 861
----------- ----------- -----------
Total revenues 2,270,831 1,942,091 1,328,728
BENEFITS AND EXPENSES
Contract owner benefits 1,078,918 490,964 --
Acquisition expenses (50,182) -- --
Goodwill amortization expense 217,378 234,468 234,468
General and administrative expenses 8,303,361 5,969,108 5,521,186
----------- ----------- -----------
Total benefits and expenses 9,549,475 6,694,540 5,755,654
Loss before cumulative effect adjustment (7,278,644) (4,752,449) (4,426,926)
Cumulative effect adjustment for change in accounting
for development costs -- -- (4,269,488)
----------- ----------- -----------
Net loss $(7,278,644) $(4,752,449) $(8,696,414)
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-3
Sage Life Assurance of America, Inc.
Consolidated Statements of Stockholder's Equity
ACCUMULATED
OTHER
COMPREHENSIVE
ADDITIONAL INCOME
COMMON STOCK PAID-IN CAPITAL DEFICIT (LOSS) TOTAL
------------ --------------- ------------- -------------- ------------
Balances at December 31, 1998 $ 2,500,000 $ 34,875,727 $ (920,760) $ 17,090 $ 36,472,057
Net loss -- -- (8,696,414) -- (8,696,414)
Change in unrealized gain on
investments, net of federal income taxes -- -- -- (747,867) (747,867)
------------
Comprehensive loss (9,444,281)
Purchase price adjustment -- (102,518) -- -- (102,518)
Additional capital contributions -- 4,577,887 -- -- 4,577,887
------------ ------------ ------------ ------------ ------------
Balances at December 31, 1999 2,500,000 39,351,096 (9,617,174) (730,777) 31,503,145
Net loss -- -- (4,752,449) -- (4,752,449)
Change in unrealized loss on
investments, net of federal income taxes -- -- -- 46,336 446,336
------------
Comprehensive loss -- -- -- -- (4,306,113)
Additional capital contributions -- 5,320,065 -- -- 5,320,065
------------ ------------ ------------ ------------ ------------
Balances at December 31, 2000 2,500,000 44,671,161 (14,369,623) (284,441) $ 32,517,097
Net loss -- -- (7,278,644) -- (7,278,644)
Change in unrealized loss on
investments, net of federal income taxes -- -- -- 402,477 402,477
------------
Comprehensive loss (6,876,167)
Additional capital contributions -- 6,266,643 -- -- 6,266,643
------------ ------------ ------------ ------------ ------------
Balances at December 31, 2001 $ 2,500,000 $ 50,937,804 $(21,648,267) $ 118,036 $ 31,907,573
============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements.
F-4
Sage Life Assurance of America, Inc.
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31
--------------------------------------------------
2001 2000 1999
------------ ------------ ------------
OPERATING ACTIVITIES
Net loss $ (7,278,644) $ (4,752,449) $ (8,696,414)
Adjustments to reconcile net loss to net cash used in operating
activities:
Goodwill amortization expense 217,378 234,468 234,468
Amortization of bond discount/premium 109,529 114,223 124,842
Cumulative effect adjustment for change in accounting for
development costs -- -- 4,269,488
Realized capital gains (14,088) -- --
Changes in:
Accrued investment income (29,843) (16,877) (22,809)
Receivable from affiliates 618,304 (1,028,744) (671,270)
Unearned revenue 5,123 901 --
Reinsurance receivables (456,359) (290,302) --
Deferred acquisition costs (2,242,156) (327,720) --
Deferred gain from modified coinsurance agreement 965,762 318,028 --
Accrued expenses and other liabilities 1,525,082 438,600 78,756
Other assets (680,297) (94,530) (4,231)
------------ ------------ ------------
Net cash used in operating activities (7,260,209) (5,404,402) (4,687,170)
INVESTING ACTIVITIES
Purchases of fixed maturity securities -- (453,975) (4,444,806)
Proceeds from sales, maturities and repayments of fixed maturity
securities 1,509,785 2,535,000 --
------------ ------------ ------------
Net cash (used in) provided by investing activities 1,509,785 2,081,025 (4,444,806)
FINANCING ACTIVITIES
Capital contributions from parent 5,184,643 5,320,065 4,577,887
------------ ------------ ------------
Net cash provided by financing activities 5,184,643 5,320,065 4,577,887
------------ ------------ ------------
(Decrease) increase in cash and cash equivalents (565,781) 1,996,688 (4,554,089)
Cash and cash equivalents at beginning of year 9,949,167 7,952,479 12,506,568
------------ ------------ ------------
Cash and cash equivalents at end of year $ 9,383,386 $ 9,949,167 $ 7,952,479
============ ============ ============
See accompanying notes to consolidated financial statements.
F-5
Sage Life Assurance of America, Inc.
Notes to Consolidated Financial Statements
December 31, 2001
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATION
Sage Life Assurance of America, Inc. (the "Company") is domiciled in Delaware
and is a wholly-owned subsidiary of Sage Life Holdings of America, Inc.
("SLHA"). SLHA is owned 9.9% by Swiss Re Life and Health America, Inc. ("Swiss
Re" formerly Life Reassurance Corporation of America), and 90.9% owned by Sage
Insurance Group, Inc. ("SIGI") a wholly-owned indirect subsidiary of Sage Group
Limited, a South African company ("Sage Group").
The Company is licensed to write business in all states with the exception of
New York. In 1998 the Company formed Sage Life Assurance Company of New York
("Sage New York") as a wholly-owned subsidiary. Sage New York is in the process
of obtaining its license in the State of New York.
DESCRIPTION OF BUSINESS
The Company develops and markets variable annuity and variable life insurance
products. Sales of these products to the retail public are made by registered
representatives of unaffiliated broker-dealers that have entered into selling
agreements with the principal underwriter for the product, Sage Distributors,
Inc., an affiliate of the Company.
Significant sales activity began in the third quarter of 2000. Gross sales for
2001 and 2000 were approximately $68,900,000 and $21,110,000, respectively.
Approximately 40% of the gross sales for 2001 and 35% of the separate account
assets under management at December 31, 2001 were produced through two
broker-dealers. A significant amount of the gross sales for 2000 were produced
through one broker-dealer that was subsequently purchased by an unaffiliated
company and is no longer covered under a selling agreement with the Company.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States and reflect the
consolidated accounts of the Company and its wholly-owned subsidiary. All
intercompany balances and transactions have been eliminated.
ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires that management make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The more significant estimates and
assumptions relate to the amortization of deferred acquisition costs and
deferred gain from the modified coinsurance agreement. These involve surrenders,
investment return, growth in allocations to variable funds options by contract
owners, and maintenance expenses. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity of
three months or less from the date of purchase to be cash equivalents. Cash and
cash equivalents are carried at cost, which approximates fair value.
F-6
Sage Life Assurance of America, Inc.
Notes to Consolidated Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS
The Company has classified all of its fixed maturity investments as
available-for-sale. Those investments are carried at fair value and changes in
unrealized gains and losses are reported as a component of stockholder's equity,
net of applicable deferred federal income taxes. Fair values are determined by
quoted market prices.
Equity securities, consisting of seed money investments, are carried at fair
value based on quoted market prices.
Realized gains on the disposal of investments are determined by the specific
identification method.
DEFERRED ACQUISITION COSTS AND SALES INDUCEMENTS
The costs of acquiring new business, which vary with and are primarily related
to the production of new business, are being deferred net of reinsurance. These
costs include commissions, costs of contract issuance, and certain selling
expenses. These costs are being amortized in proportion to expected gross
profits from interest, expense, mortality and surrender margins. This
amortization is adjusted retrospectively and prospectively when estimates of
current and future gross profits to be realized from a group of products are
revised. During 2001 and 2000, the Company capitalized, $2,192,000 and $328,000,
net of reinsurance ceded. During 2001, the Company recorded, net of reinsurance
ceded, amortization and interest accretion of $45,000 and $95,000, respectively.
The Company also offers sales inducements that enhance the investment yield on
the amount allocated to the fixed option by contract owners. Such inducements
are deferred and amortized in a manner similar to deferred acquisition costs. At
December 31, 2001 and 2000 deferred sales inducements were $604,000 and $16,000,
respectively, and are included in other assets in the accompanying balance
sheet.
REINSURANCE
During 2000, the Company entered into a modified coinsurance agreement (the
"Modco Agreement") with Swiss Re. Under the Modco Agreement, the Company cedes a
quota share of the premiums related to the majority of its variable business to
Swiss Re. The Modco Agreement provides the Company with additional capacity for
growth in supporting the cash strain from the Company's variable business.
In addition, the Company has entered into reinsurance arrangements that reinsure
certain morality risks associated with the death benefit and accidental death
benefit features of the contracts as well as other contract guarantees.
Reinsurance contracts are accounted for in a manner consistent with the
underlying contracts.
Deferred acquisition costs in the accompanying balance sheets are net of quota
share ceded under the Modco Agreement. The deferred gain from the Modco
Agreement in the accompanying balance sheets represents the commission received
by the Company in excess of the quota share percentage. Contract liabilities and
associated assets are reported on a gross basis.
Reinsurance premiums ceded for the guarantees in the contracts and the
corresponding reinsurance recoveries on benefits and claims incurred are
included in contract owner benefits.
Reinsurance does not relieve the Company from its obligations to contract
owners. The Company remains primarily liable to the contract owners to the
extent that any reinsurer does not meet its obligations under the reinsurance
agreements.
F-7
Sage Life Assurance of America, Inc.
Notes to Consolidated Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered, principally for the
benefit of certain contract owners who bear the investment risk. The separate
account assets and liabilities are carried at fair value based on quoted market
prices. Revenues and expenses related to the separate account assets and
liabilities, to the extent of benefits paid or provided to the separate account
contract owners, are excluded from the amounts reported in the accompanying
statements of operations.
Separate account assets consist of mutual funds, bonds, short-term investments,
transfers due from the general account and cash and cash equivalents. The
Company provides return guarantees determined periodically by management that
vary based on the length of the guarantee period ranging from one to ten years
subject to a minimum guaranteed return of 3% of the average investment balance
to contract owners selecting any of the fixed options. Withdrawals from fixed
options prior to the end of the guarantee period are subject to a market value
adjustment based on interest rate levels at the time of the withdrawal.
For contract owners that do not select the fixed option, there are no minimum
guarantees and the investment risk associated with market value changes are
borne entirely by the contract owner.
At December 31, 2001 and 2000 the separate account liabilities included
approximately $28,521,000 and $17,780,000, respectively, relating to annuity
contracts for which the contract owner is guaranteed a fixed rate of return.
CONTRACT LIABILITIES
The Company has no contract liabilities in its general account at December 31,
2001 and 2000. All contract liabilities are in the separate account and are
comprised of all payments received adjusted for investment experience, contract
owner charges, assessments and withdrawals related to the underlying contracts.
RECOGNITION OF REVENUE AND CONTRACT BENEFITS
Revenues for variable annuity contracts consist of charges against contract
owner account values for mortality and expense risks, administration fees,
surrender charges and annual maintenance fees. Revenues for variable life
insurance contracts consist of charges against contract owner account values for
mortality and expense risks, administration fees, cost of insurance fees,
surrender charges and annual maintenance fees.
Contract owner benefits include first year bonus credits and the amount of
guaranteed investment income credited to the fixed account.
Benefit reserves for variable annuity and variable life insurance contracts
represent the account values of the contracts and are included in the separate
account liabilities.
The Company defers the non-level portions of mortality and expense risk fees and
annual maintenance fees as unearned revenue. Such revenue is recognized
generally in proportion to expected gross profits on the underlying business.
F-8
Sage Life Assurance of America, Inc.
Notes to Consolidated Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
On December 31, 1996 the Company was purchased by SIGI from Security First Life
Insurance Company. The amount paid in excess of the acquired assets was recorded
as goodwill and is being amortized on a straight-line basis over thirty years.
The carrying value of goodwill is regularly reviewed for indications of
impairment in value. The Company utilizes sales forecasts to project future
distributable earnings as a basis for an indication of impairment of goodwill.
These current projections support the value of goodwill. Accumulated
amortization at December 31, 2001 and 2000 was approximately $1,155,000 and
$938,000, respectively.
DEVELOPMENT EXPENSES
Prior to January 1, 1999, costs incurred in the development of the Company's
products, systems and distribution channels were classified as development
expenses. These development costs were capitalized and amortized on a
straight-line basis over fifteen years. Pursuant to the adoption of Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities", the Company is
required to charge to expense all development costs incurred. In addition, the
Company was required to write-off any unamortized capitalized development costs
on January 1, 1999. The one time write-off of the unamortized capitalized
development expenses was $4,270,000.
FEDERAL INCOME TAXES
Federal income taxes are accounted for using the liability method. Using this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
NEW ACCOUNTING STANDARD
In July 2001, the Financial Accounting Standards Board issued Statement No. 142,
"Goodwill and Other Intangible Assets" ("SFAS No. 142"), that changes how
companies must account for goodwill and other intangible assets. With the
adoption of SFAS No. 142, goodwill is no longer subject to periodic amortization
over its estimated useful life, but rather will be subject to at least an annual
assessment for impairment by applying a fair-value based test. Acquired
intangible assets must be recognized and amortized over their useful lives.
Acquired intangible assets with indefinite lives are not subject to periodic
amortization under the new rules but would be subject to periodic assessment for
impairment The provisions of SFAS No. 142 are effective January 1, 2002 for
goodwill and other intangible assets acquired before July 1, 2001.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of SAFS No. 142 is expected to result in a reduction
of expenses of approximately $235,000 per year. During 2002, the Company will
perform the first of the required impairment tests of goodwill as of January 1,
2002 and has not yet determined what the effect of these tests will be on the
earnings and financial position of the Company.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' financial statement
amounts to conform to the 2001 presentation.
F-9
Sage Life Assurance of America, Inc.
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS
Investments in fixed maturity securities at December 31 consist of the
following:
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED COST GAINS LOSSES FAIR VALUE
-------------- ----------- ----------- -----------
2001
U.S. Government obligations $ 6,988,499 $ 90,183 $ 4,822 $ 7,073,860
Corporate obligations 6,498,015 143,914 63,535 6,578,394
----------- ----------- ----------- -----------
$13,486,514 $ 234,097 $ 68,357 $13,652,254
=========== =========== =========== ===========
2000
U.S. Government obligations $ 7,075,997 $ 17,991 $ 159,070 $ 6,934,918
Corporate obligations 8,015,742 9,093 298,984 7,725,851
----------- ----------- ----------- -----------
$15,091,739 $ 27,084 $ 458,054 $14,660,769
=========== =========== =========== ===========
At December 31, 2001 securities with an amortized cost and fair value of
approximately $5,441,000 and $5,492,000, respectively, were held by trustees in
various amounts in accordance with the statutory requirements of certain states
in which the Company is licensed to conduct business.
The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 2001 are summarized below. Actual maturities will
differ from contractual maturities because certain borrowers have the right to
call or prepay obligations.
AMORTIZED FAIR
COST VALUE
----------- -----------
Due in one year or less $ 401,030 $ 408,562
Due after one year through five years 7,760,333 7,968,515
Due after five years through ten years 5,325,151 5,275,177
----------- -----------
Total $13,486,514 $13,652,254
=========== ===========
During 2001, the Company's parent contributed equity securities with a fair
value of $1,082,000 to the Company. Such equity securities represent seed money
in two funds sponsored by Sage Life Investment Trust. At December 31, 2001, the
fair value of such securities was $1,097,000.
Investment income by major category of investment is summarized as follows:
2001 2000 1999
----------- ----------- -----------
Fixed maturity securities $ 1,874,721 $ 1,397,699 $ 907,068
Cash and cash equivalents 370,075 572,086 461,367
----------- ----------- -----------
Total investment income 2,244,796 1,969,785 1,368,435
Investment expenses (136,299) (81,613) (78,239)
----------- ----------- -----------
Net investment income $ 2,108,497 $ 1,888,172 $ 1,290,196
=========== =========== ===========
Proceeds from the sale of fixed maturity securities were $1,510,000 during 2001
resulting in gross realized gains of $14,000.
F-10
Sage Life Assurance of America, Inc.
Notes to Consolidated Financial Statements (continued)
3. MODIFIED COINSURANCE AGREEMENT
Under the Modco Agreement, the Company cedes a quota share of the premiums
related to the majority of its variable business to Swiss Re. During 2001 and
2000 the Company ceded premiums of approximately $39,970,000 and $14,106,000,
respectively. Contract charges and fees for 2001 and 2000 are net of
approximately $230,000 and $8,000, respectively, ceded to Swiss Re. Contract
owner benefits are net of $123,000 and $30,000 ceded to Swiss Re in 2001 and
2000, respectively.
4. FEDERAL INCOME TAXES
The Company files a separate life insurance company federal income tax return.
Beginning in 2002, the Company will be included in the consolidated federal
income tax return of Sage Holdings (U.S.A.), Inc. and its subsidiaries.
The provision for federal income taxes varies from the amount which would be
computed using the Federal statutory income tax rate as follows:
2001 2000 1999
----------- ----------- -----------
Pre-tax loss $(7,278,644) $(4,752,449) $(8,696,414)
Application of the federal statutory tax rate - 34% (2,474,739) (1,615,833) (2,956,781)
Change in valuation allowance 2,551,734 1,614,188 2,907,523
Other (76,995) 1,645 49,258
----------- ----------- -----------
Total income tax provision $ -- $ -- $ --
=========== =========== ===========
The Company's deferred tax assets and liabilities are comprised of the following
at December 31:
2001 2000
----------- -----------
Deferred tax assets:
Net operating loss carryforwards $ 7,682,789 $ 5,132,087
Unrealized loss on depreciation of investments -- 146,530
Reserves 282,527 37,732
Deferred gain from Modco Agreement 436,489 108,130
Unearned revenue 82,944 32,447
Other 37,718 7,808
----------- -----------
Total deferred tax assets 8,522,467 5,464,734
Deferred tax liabilities:
Goodwill (378,729) (304,214)
Deferred policy acquisition costs (712,167) (116,926)
Unrealized gain on appreciation of investments (60,807) --
Other (13,093) (30,319)
----------- -----------
Total deferred tax liabilities (1,164,796) (451,459)
Valuation allowance for deferred tax assets (7,418,478) (4,866,745)
----------- -----------
Net deferred tax asset (liability) $ (60,807) $ 146,530
=========== ===========
Based upon the lack of historical operating earnings and the uncertainty of
operating earnings in the future, management has determined that it is not more
likely than not that the deferred tax assets will be fully recognized.
Accordingly, a valuation allowance has been recorded.
The Company has separate company net operating loss carryforwards of
approximately $22,596,000 at December 31, 2001, which expire between 2012 and
2016.
F-11
Sage Life Assurance of America, Inc.
Notes to Consolidated Financial Statements (continued)
5. STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS
Statutory-basis net loss and capital and surplus of the Company are as follows:
2001 2000 1999
------------ ------------ ------------
Net loss $ (7,661,509) $ (1,948,877) $ (389,023)
Capital and surplus 25,367,701 26,505,917 25,973,744
The National Association of Insurance Commissioners ("NAIC") requires insurance
companies to report information regarding minimum Risk Based Capital ("RBC")
requirements. These requirements are intended to allow insurance regulators to
identify companies that may need regulatory attention. The RBC Model Law
requires that insurance companies apply various factors to asset, premium and
reserve items, all of which have inherent risks. The formula includes components
for asset risk, insurance risk, interest risk and business risk. At December 31,
2001, the Company's total adjusted capital exceeded RBC requirements.
We are subject to state regulatory restrictions that limit the maximum amount of
dividends payable. Subject to certain net income carryforward provisions as
described below, we must obtain approval of the Insurance Commissioner of the
State of Delaware in order to pay, in any 12-month period, "extraordinary"
dividends which are defined as those in excess of the greater of 10% of surplus
as regards contract owners as of the prior year-end and statutory net income
less realized capital gains for such prior year. We may pay dividends only out
of earned surplus. In addition, we must provide notice to the Insurance
Commissioner of the State of Delaware of all dividends and other distributions
to Sage Life Holdings, within five business days after declaration and at least
ten days prior to payment. At December 31, 2001, we could not pay a dividend to
Sage Life Holdings without prior approval from state regulatory authorities as
we currently do not have earned surplus. Additionally, we have paid no dividends
since the commencement of our operations.
We are subject to the laws of the State of Delaware governing insurance
companies and to the regulations of its Department of Insurance (the "Insurance
Department"). Annually, we file a detailed financial statement in the prescribed
form (the "Statement") with the Insurance Department covering our operations for
the preceding year and our financial condition as of the end of that year.
Regulation by the Insurance Department means that it may examine our books and
records to determine, among other things, whether reported contract liabilities
and reserves are computed in accordance with statutory accounting practices
prescribed or permitted by the Insurance Department. The Insurance Department,
under the auspices of the NAIC, periodically conducts a full examination of the
Company's operations.
In addition, we are subject to regulation under the insurance laws of all
jurisdictions in which we operate. These laws 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 types and amounts of investments
permitted. We must file the Statement with supervisory agencies in each of the
jurisdictions in which we operate, and our operations and accounts are subject
to examination by these agencies at regular intervals.
Our statutory-basis financial statements are prepared in accordance with
accounting practices prescribed or permitted by the Delaware Insurance
Department. Prior to January 1, 2001, "prescribed" statutory accounting
practices are interspersed throughout state insurance laws and regulations, the
NAIC's Accounting Practices and Procedures Manual and a variety of NAIC
publications. "Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state, and may
change in the future.
F-12
Sage Life Assurance of America, Inc.
Notes to Consolidated Financial Statements (continued)
5. STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS (CONTINUED)
Effective January 1, 2001, the NAIC has revised the Accounting Practices and
Procedures Manual in a process referred to as Codification. The revised manual
has changed, to some extent, prescribed statutory accounting practices used to
prepare statutory-basis financial statements. However, the effect of these
changes did not result in a reduction in our statutory-basis capital and
surplus.
6. RELATED PARTY TRANSACTIONS
The Company has a cost sharing agreement with SIGI whereby the entities share
personnel costs, office rent and equipment costs. These costs are allocated
between the companies based upon the estimated time worked, square footage of
space utilized and upon estimated usage of equipment, respectively. At December
31, 2001 and 2000 amounts due from SIGI under this agreement were approximately
$1,081,000 million and $989,000, respectively.
The Company receives administrative fees for investments held under management
by Sage Advisors, Inc. ("Sage Advisors"), an affiliated company. Sage Advisors
is the investment advisor for the Sage Life Investment Trust (the "Trust"). The
Trust is comprised of four investment funds that are available to variable
contract owners of the Company. Income received from Sage Advisors was
approximately $29,000 and $50,000 in 2001 and 2000, respectively. At December
31, 2000, approximately $4,000 was due from Sage Advisors.
During 2001, the Company paid wholesaling allowances of approximately $413,000
to Sage Distributors. These costs were capitalized and are being amortized as
acquisition costs.
7. COMMITMENTS
The Company has made a commitment to the Michigan Department of Insurance to
maintain statutory-basis capital and surplus at an amount not less than
$25,000,000 in order to remain a licensed insurer in that state. Subsequent to
that commitment, SLHA entered into a Preferred Stock Purchase Agreement with
Swiss Re whereby the Company is also required to maintain statutory-basis
capital and surplus of not less than $25,000,000. Should the Company's
statutory-basis capital and surplus fall below $25,000,000 and remain uncured
for 60 days, the Preferred Stock Purchase Agreement provides that, subject to
obtaining Regulatory approval each share of preferred stock shall be entitled to
a number of votes sufficient to provide preferred shareholders 51% of the voting
interest in SLHA.
Based on the Company's business expansion plans, SLHA and /or its affiliates
will require outside financing towards the end of the first quarter of 2003 to
provide for the Company's cash needs in order to maintain statutory-basis
capital and surplus at $25,000,000.
F-13
Sage Life Assurance of America, Inc.
Notes to Consolidated Financial Statements (continued)
8. EMPLOYEE BENEFITS
After completion of one year of service with the Company, all employees
participate in a defined contribution pension plan (the "Plan") sponsored by
SIGI. Under the Plan, benefits are based on a percentage of base annual salary
and are vested 100% after three years of service with the Company. All
contributions to the plan are directly expensed at the time of contribution and
amounted to approximately $86,000, $78,000 and $70,000 in 2001, 2000 and 1999,
respectively.
9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table summarizes information with respect to the operations of the
Company on a quarterly basis:
(in thousands) THREE MONTHS ENDED
------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
2001
Net investment income $ 608 $ 652 $ 502 $ 346
Total revenues 626 680 536 429
Total benefits and expenses 1,999 2,593 2,458 2,499
Net loss (1,373) (1,914) (1,921) (2,071)
2000
Net investment income $ 349 $ 352 $ 489 $ 698
Total revenues 364 651 159 768
Total benefits and expenses 1,878 1,021 2,389 1,405
Net loss (1,514) (370) (2,230) (638)
Certain quarterly amounts presented in the table above have been reclassified to
conform to the financial statement presentation included in the accompanying
statements of operations.
F-14
SAGE LIFE ASSURANCE OF AMERICA, INC.
SCHEDULE IV
REINSURANCE
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
OTHER FROM OTHER ASSUMED TO
GROSS AMOUNT COMPANIES COMPANIES NET AMOUNT NET
------------ ---------- ---------- ---------- ------------
FOR THE YEAR ENDED DECEMBER 31, 2001
Life insurance in force $1,307,104 $1,045,583 $-- $ 261,421 0%
========== ========== === ========== ==========
CONTRACT CHARGES AND FEES
Life insurance and annuities $ 339,242 $ 230,256 $-- $ 108,986 0%
---------- ---------- --- ---------- ----------
TOTAL CONTRACT CHARGES AND FEES $ 482,640 $ 373,654 $-- $ 108,986 0%
========== ========== === ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 2000
Life insurance in force $ 266,424 $ 125,774 $-- $ 140,650 0%
========== ========== === ========== ==========
CONTRACT CHARGES AND FEES
Life insurance and annuities $ 12,305 $ 8,326 $-- $ 3,979 0%
---------- ---------- --- ---------- ----------
TOTAL CONTRACT CHARGES AND FEES $ 12,305 $ 8,326 $-- $ 3,979 0%
========== ========== === ========== ==========
F-15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sage Life Assurance of America, Inc.
/s/ Jeffrey C. Gordon
-----------------------
Jeffrey C. Gordon
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gregory S. Gannon
-----------------------
Gregory S. Gannon
Vice President and Controller
(Chief Accounting Officer)
Date: April 15, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual
report on Form 10-K has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
SIGNATURE AND TITLE DATE
------------------- ----
/s/ ROBIN I. MARSDEN April 15, 2002
--------------------
Robin I. Marsden
President, Chief Executive Officer
and Director (Principal Executive Officer)
/s/ H. LOUIS SHILL April 15, 2002
------------------
H. Louis Shill
Chairman and Director
/s/ PAUL C. MEYER April 15, 2002
-----------------
Paul C. Meyer
Director
/s/ RICHARD D. STARR April 15, 2002
--------------------
Richard D. Starr
Director
/s/ DR. MEYER FELDBERG April 15, 2002
----------------------
Dr. Meyer Feldberg
Director
/s/ JOHN A. BENNING April 15, 2002
-------------------
John A. Benning
Director
/s/ MITCHELL R. KATCHER April 15, 2002
-----------------------
Mitchell R. Katcher
Senior Executive Vice President,
Chief Actuary and Director
F-16
EXHIBIT 21
SAGE LIFE ASSURANCE OF AMERICA, INC.
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARY STATE OF INCORPORATION
---------- ----------------------
Sage Life Assurance Company of New York New York
F-17
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Articles of Incorporation of Sage Life, as amended to date was
filed as Exhibit 6 to the Registration Statement on Form N-4
(File No.333-43329) dated December 24, 1997 and is
incorporated herein by reference.
3.2* Amended and restated By-Laws of Sage Life.
10.1 Services Agreement with Financial Administrative Services,
Inc. was filed as Exhibit 8 to Pre-Effective Amendment No.2 to
the Registration Statement on Form N-4 (File No.333-43329)
dated January 28, 1999 and is incorporated herein by
reference.
10.2 Reinsurance Agreement (Modified Coinsurance Treaty) with Swiss
Re Life and Health America, Inc. (formerly Life Reassurance
Corporation of America) was filed as Exhibit 10.2 to the
Company's Form 10-K for the Fiscal Year ended December 31,
2000 and is incorporated herein by reference. Confidential
treatment has been requested for portions of this document.
10.3+ Employment Agreement with Robin I. Marsden was filed as
Exhibit 10.3 to the Company's Form 10-K for the Fiscal Year
ended December 31, 2000 and is incorporated herein by
reference.
10.4+ Employment Agreement with Mitchell R. Katcher was filed as
Exhibit 10.4 to the Company's Form 10-K for the Fiscal Year
ended December 31, 2000 and is incorporated herein by
reference.
10.5+ Employment Agreement with Lincoln B. Yersin was filed as
Exhibit 10.5 to the Company's Form 10-K for the Fiscal Year
ended December 31, 2000 and is incorporated herein by
reference.
10.6+ Sage Insurance Group, Inc. Non-qualified Compensation Plan was
filed as Exhibit 10.6 to the Company's Form 10-K for the
Fiscal Year ended December 31, 2000 and is incorporated herein
by reference.
10.7+ Sage Insurance Group Rabbi Trust Agreement was filed as
Exhibit 10.7 to the Company's Form 10-K for the Fiscal Year
ended December 31, 2000 and is incorporated herein by
reference.
10.8*+ Employment Agreement with Nancy F. Brunetti
10.9*+ Employment Agreement with Jeffrey C. Gordon
21* Subsidiaries of Sage Life Assurance of America, Inc.
- -------------
* Filed herewith.
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K pursuant to Item 14(c).
E-1