UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K


(Mark One)

[ X ]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT   OF 1934

                   For the fiscal year ended December 31, 1998

                                       OR

[    ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE   ACT OF 1934

                        For the transition period from to

                         Commission file number 33-28976

                            IDS LIFE INSURANCE COMPANY                 
             (Exact name of registrant as specified in its charter)

                     MINNESOTA                    41-0823832
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)

                 IDS TOWER 10, MINNEAPOLIS, MINNESOTA 55440-0534
           (Address of principal executive offices)   (Zip Code)

(Registrant's telephone number, including area code) (612) 671-3131

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 
of Regulation S-K is not containedherein, and will not be contained, to the 
best of registrant's knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this Form 10-K or any amendment to 
this Form 10-K.  [Not Applicable]

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS I(1) (a) 
and (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE PERMITTED 
ABBREVIATED NARRATIVE DISCLOSURE.
<PAGE>

                                     PART I
ITEM 1.  BUSINESS

IDS Life Insurance Company (the Company) is a stock life insurance company
organized under the laws of the State of Minnesota.  The Company is a wholly 
owned subsidiary of American Express Financial Corporation (AEFC), which is a 
wholly owned subsidiary of American Express Company.  The Company serves 
residents of all states except New York.  The Company is the fourteenth largest
life insurance company in the United States, with consolidated assets at 
December 31, 1998 of $56.6 billion.  IDS Life Insurance Company of New York 
and American Centurion Life Assurance Company are wholly owned subsidiaries of
the Company and serve New York State residents.  The Company also wholly owns 
American Enterprise Life Insurance Company, American Partners Life Insurance
Company and American Express Corporation.

The Company's principal products are deferred annuities and universal life 
insurance, which are issued primarily to individuals.  It offers single premium
and flexible premium deferred annuities on both a fixed and variable dollar 
basis.  Immediate annuities are offered as well.  The Company's insurance
products include universal life (fixed and variable), whole life, single 
premium life and term products (including waiver of premium and accidental 
death benefits).  The Company also markets disability income and long-term 
care insurance.

The Company's fixed annuity contracts guarantee a minimum interest rate during 
the accumulation period (the time before annuity payments begin), although the 
Company has the option of paying a higher rate reflective of current market 
rates. The Company has also adopted a practice whereby the higher current rate 
is guaranteed for a specified period.  The Company also offers fixed/variable 
annuity products offering the purchaser a choice among mutual funds with 
portfolios of equities, bonds, managed assets and/or short-term securities, and
the Company's general account, as the underlying investment vehicles.  With 
respect to funds applied to the variable portion of the annuity, the purchaser,
rather than the Company, assumes the investment risks and receives the rewards
inherent in the ownership of the underlying investment.  At December 31, 1998, 
the Company had $46.2 billion of fixed and variable annuities in force, an 
increase of 6 percent from the prior year end.

The Company's principal insurance product is the flexible-premium, 
adjustable-benefit universal life insurance policy.  In this type of insurance 
policy, premium payments either accumulate interest in a fixed account or 
purchase units in one or more variable accounts.  The policyholder has access 
to the cash surrender value in whole or in part after the first year.  The size
of the cash value of the fund can also be controlled by the policyholder by 
increasing or decreasing premiums, subject only to maintaining a required 
minimum to keep the policy in force.  Monthly deductions from the cash value of
the policy are made for the cost of insurance, expense charges and any policy 
riders.  At December 31, 1998, the Company had $64.2 billion of fixed and 
variable universal life-type insurance in force, up 8 percent from 
December 31, 1997.

<PAGE>

Assets held in segregated accounts which fund the variable annuity and variable
life insurance products totaled $27.3 billion at December 31, 1998, an 18 
percent increase from December 31, 1997.

IDS Life Insurance Company, American Enterprise Life Insurance Company and 
American Partners Life Insurance Company are subject to comprehensive 
regulation by the Minnesota Department of Commerce (Insurance Division), the 
Indiana Department of Insurance and the Arizona Department of Insurance, 
respectively. IDS Life Insurance Company of New York and American Centurion 
Life Assurance Company are both subject to comprehensive regulation by the New 
York Department of Insurance.  The laws of the other states in which the 
Company does business regulate such matters as the licensing of sales personnel
and, in some cases, the marketing and contents of insurance policies and 
annuity contracts.  The purpose of such regulation and supervision is 
primarily to protect the interests of policyholders.  Recently there has been 
an increased focus on the variable annuity business by regulators. In the 
United States, the McCarran-Ferguson Act provides that the primary regulation 
of the insurance industry is left to the individual states.  Typically, states 
regulate such matters as company licensing, agent licensing, cancellation or 
nonrenewal of policies, minimum health insurance policy benefits, life 
insurance cost disclosure, solicitation and replacement practices, unfair trade
and claims practices, rates, forms, advertising, investment type and quality, 
minimum capital and surplus levels and changes in control.  Virtually all 
states mandate participation in insurance guaranty associations, which assess 
insurance companies in order to fund claims of policyholders of insolvent 
insurance companies.  In addition to state laws, the Company is affected by a 
variety of federal laws, and there is periodic federal interest in various 
aspects of the insurance industry including taxation of variable annuities and 
life insurance policies, solvency and accounting procedures, as well as the 
treatment of persons differently because of gender, with respect to terms, 
conditions, rates or benefits of an insurance contract.  New federal 
regulation in any of these areas could potentially have an adverse effect 
upon the Company.

As a distributor of variable contracts, the Company is registered as a 
broker-dealer and is a member of the National Association of Securities 
Dealers, Inc.  As the investment manager for various investment companies, the
Company is registered as an investment advisor under applicable federal 
requirements.

The insurance and annuity business is highly competitive and the Company's 
competitors consist of both stock and mutual insurance companies and other 
financial institutions.  Competitive factors applicable to the business of
the Company include the interest rates credited to its products, the charges 
deducted from the cash values of such products, the financial strength of the 
organization and the services provided to policyholders.


ITEM 2.  PROPERTIES

The Company occupies office space in Minneapolis, Minnesota, which is leased 
by its parent, AEFC.  The Company reimburses AEFC for rent based on direct and 
indirect allocation methods.  IDS Life Insurance Company of New York and 
American Centurion Life Assurance Company rent office space in Albany, New 
York.  Facilities occupied by the Company and its subsidiaries are believed to 
be adequate for the purposes for which they are used and are well maintained.
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

A number of lawsuits have been filed against life and health insurers in 
jurisdictions in which the Company and AEFC do business involving insurers' 
sales practices, alleged agent misconduct, failure to properly supervise 
agents, and other matters.  The Company and AEFC, like other life and health 
insurers, from time to time are involved in such litigation.  On December 13, 
1996, an action entitled Lesa Benacquisto and Daniel Benacquisto vs. IDS Life 
Insurance Company and American Express Financial Corporation was commenced in 
Minnesota state court.  The action is brought by individuals who replaced an 
existing Company insurance policy with a new Company policy.  The plaintiffs 
purport to represent a class consisting of all persons who replaced existing 
Company policies with new policies from and after January 1, 1985.  The 
complaint puts at issue various alleged sales practices and misrepresentations,
alleged breaches of fiduciary duties and alleged violations of consumer fraud 
statutes.  The Company and AEFC filed an answer to the Complaint on February 
18, 1997, denying the allegations. A second action, entitled Arnold Mork, 
Isabella Mork, Ronald Melchart and Susan Melchart vs. IDS Life Insurance 
Company and American Express Financial Corporation was commenced in the same 
court on March 21, 1997.  In addition to claims that are included in the 
Benacquisto lawsuit, the second action includes an allegation of improper 
replacement of an existing IDS Life annuity contract.  A subsequent class 
action, Richard Thoresen and Elizabeth Thoresen vs. AEFC, American Partners 
Life Insurance Company, American Enterprise Life Insurance Company, American 
Centurion Life Assurance Company, IDS Life Insurance Company and IDS Life 
Insurance Company of New York, was filed in the same court on October 13, 
1998 alleging that the sale of annuities in tax-deferred contributory 
retirement investment plans (e.g. IRA's) was done through deceptive 
marketing practices, which the company denies.  Plaintiffs in each of the 
aforementioned actions seek damages in an unspecified amount and 
also seek to establish a claims resolution facility for the determination of 
individual issues.

The Company and its parent believe they have meritorious defenses to the claims
raised in the lawsuits.  The outcome of any litigation cannot be predicted with
certainty.  In the opinion of management, however, the ultimate resolution of 
the above lawsuits and others filed against the Company should not have a 
material adverse effect on the Company's consolidated financial position.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.
<PAGE>

                                     PART II


ITEM 5.    MARKET FOR REGISTRANT's COMMON EQUITY AND RELATED STOCKHOLDER    
MATTERS

Not applicable.

ITEM 6.  SELECTED FINANCIAL DATA

Item omitted pursuant to General Instructions I(2) (a) of Form 10-K.
<PAGE>

ITEM 7.  MANAGEMENT's DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

1998 Compared to 1997:

Consolidated net income increased 14 percent to $540 million in 1998, compared 
to $474 million in 1997.  Earnings growth resulted primarily from increases in 
management fees and policyholder and contractholder charges.  These
increases reflect higher average insurance and annuities in force during 1998.

Consolidated income before income taxes totaled $776 million in 1998, compared 
with $681 million in 1997.

Total premiums and investment contract deposits received decreased to $4.4
billion in 1998, compared with $5.2 billion in 1997.  This decrease is 
primarily due to a decrease in sales of fixed annuities in 1998, reflecting 
the low interest rate environment.

Total revenues increased to $3.0 billion in 1998, compared with $2.9 billion in
1997.  The increase is primarily due to increased policyholder and 
contractholder charges and management fees.  Net investment income, the largest
component of revenues, decreased slightly from the prior year, reflecting 
slight decreases in investments owned and investment yields.

Policyholder and contractholder charges, which consist primarily of cost of
insurance charges on universal life-type policies, increased 12 percent to $384
million in 1998, compared with $342 million in 1997.  This increase reflects 
increased total life insurance in force, which grew 8 percent to $81 billion 
at December 31, 1998.

Management and other fees increased 18 percent to $401 million in 1998, 
compared with $341 million in 1997.  This is primarily due to an increase in 
separate account assets, which grew 18 percent to $27.3 billion at December 
31, 1998, due to market appreciation and sales.  The Company provides 
investment management services for the mutual funds used as investment options 
for variable annuities and variable life insurance.  The Company also receives 
a mortality and expense risk fee from the separate accounts.

Total benefits and expenses increased slightly to $2.2 billion in 1998.  The 
largest component of expenses, interest credited to policyholder accounts for 
universal life-type insurance and investment contracts, decreased to $1.3
billion, reflecting a decrease in fixed annuities in force and lower interest
rates.  Amortization of deferred policy acquisition costs increased to $383 
million, compared to $323 million in 1997.  This increase was due primarily to 
increased aggregate amounts in force, as well as accelerating amortization to 
reflect actual lapse experience on certain fixed annuities.

<PAGE>

1997 Compared to 1996:

Consolidated net income increased 14 percent to $474 million in 1997, compared 
to $415 million in 1996.  Earnings growth resulted primarily from increases in 
management fees and policyholder and contractholder charges.  These increases 
reflect higher average insurance and annuities in force during 1997.

Consolidated income before income taxes totaled $681 million in 1997, compared 
with $622 million in 1996.  In 1997, $179 million was from the life, disability
income and long-term care insurance segment, compared with $161 million in 1996
and $502 million was from the annuity segment, compared with $461 million in 
1996.

Total premiums received decreased to $5.2 billion in 1997, compared with $6.1 
billion in 1996.  This decrease is primarily due to a decrease in sales of 
fixed annuities in 1997.

Total revenues increased to $2.9 billion in 1997, compared with $2.7 billion in
1996.  The increase is primarily due to increases in net investment income, 
policyholder and contractholder charges, and management fees.  Net investment 
income, the largest component of revenues, increased slightly from the prior
year, reflecting slight increases in investments owned and investment yields.

Policyholder and contractholder charges, which consist primarily of cost of 
insurance charges on universal life-type policies, increased 13 percent to 
$342 million in 1997, compared with $303 million in 1996.  This increase 
reflects increased total life insurance in force which grew 12 percent to 
$75 billion at December 31, 1997.

Management and other fees increased 26 percent to $341 million in 1997, 
compared with $271 million in 1996.  This is primarily due to an increase in 
separate account assets, which grew 25 percent to $23 billion at December 31, 
1997, due to market appreciation and sales.  The Company provides investment 
management services for the mutual funds used as investment options for 
variable annuities and variable life insurance.  The Company also receives a
mortality and expense risk fee from the separate accounts.

Total benefits and expenses increased slightly to $2.2 billion in 1997.  The 
largest component of expenses, interest credited to policyholder accounts for 
universal life-type insurance and investment contracts, remained steady at 
$1.4 billion.  Amortization of deferred policy acquisition costs increased to 
$323 million compared to $279 million in 1996.  These increases were due
primarily to increased aggregate amounts in force.

<PAGE>

Risk Management

The sensitivity analysis of two different tests of market risk discussed below 
estimates the effects of hypothetical sudden and sustained changes in the 
applicable market conditions on the ensuing year's earnings based on year-end 
positions.  The market changes, assumed to occur as of year-end, are a 100 
basis point increase in market interest rates and a 10% decline in equity 
prices.  Computations of the prospective effects of hypothetical interest rate 
and equity price changes are based on numerous assumptions, including relative 
levels of market interest rates and equity prices, as well as the levels of 
assets and liabilities.  The hypothetical changes and assumptions will be 
different from what actually occurs in the future.  Furthermore, the
computations do not anticipate actions that may be taken by management if the 
hypothetical market changes actually occurred over time.  As a result, actual 
earnings effects in the future will differ from those quantified below.

The Company primarily invests in fixed income securities over a broad range of
maturities for the purpose of providing fixed annuity clients with a 
competitive rate of return on their investments while minimizing risk, and to 
provide a dependable and targeted spread between the interest rate earned on 
investments and the interest rate credited to contractholders' accounts.  The 
Company does not invest in securities to generate trading profits.

The Company has an investment committee that holds regularly scheduled meetings
and, when necessary, special meetings.  At these meetings, the committee 
reviews models projecting different interest rate scenarios and their impact on
profitability.  The objective of the committee is to structure the investment 
security portfolio based upon the type and behavior of products in the 
liability portfolio so as to achieve targeted levels of profitability.

Rates credited to contractholders' accounts are generally reset at shorter 
intervals than the maturity of underlying investments.  Therefore, margins may
be negatively impacted by increases in the general level of interest rates.  
Part of the committee's strategy includes the purchase of some types of 
derivatives, such as interest rate caps, swaps and floors, for hedging 
purposes.  These derivatives protect margins by increasing investment returns 
if there is a sudden and severe rise in interest rates, thereby mitigating the 
impact of an increase in rates credited to contractholders' accounts.

The fees earned by the Company for managing fixed income securities in mutual 
funds are generally based on the value of the portfolios.  To manage the level 
of 1999 fee income, the committee's strategy is to enter into a series of swaps
designed to mitigate the negative effect on fees that would result from an 
increase in interest rates.

The negative effect on the Company's pretax earnings of a 100 basis point 
increase in interest rates, which assumes repricings and customer behavior 
based on the application of proprietary models to the book of business at 
December 31, 1998, would be approximately $34 million.

On a certain annuity product, the interest is credited to contractholders' 
accounts based upon the relative change in a major stock market index between 
the beginning and end of the product's term.  As a means of hedging the 
Company's obligation under the provisions of this product, the committee's 
strategy is to purchase and write options on the major stock market index.

<PAGE>

The amount of the fee income the Company receives is based upon the daily 
market value of the separate account assets.  As a result, the Company's fee 
income would be negatively impacted  by a decline in the equity markets. 
Another part of the committee's strategy is to enter into index option collars 
(combination of puts and calls) for hedging purposes.  These derivatives 
protect fee income by providing option income when there is a significant 
decline in the equity markets.  The Company finances the cost of this 
protection through selling aportion of the upside potential from an increasing 
market through written options.

The negative effect on the Company's pretax earnings of the 10% decline in 
equity prices would be approximately $32 million based on assets under 
management and the index options as of December 31, 1998.

Liquidity and Capital Resources

The liquidity requirements of the Company are met by funds provided by 
premiums, investment income, proceeds from sales of investments as well as 
maturities and periodic repayments of investment principal.

The primary uses of funds are policy benefits, commissions and operating 
expenses, policy loans, dividends and investment purchases.

The Company has an available line of credit with its parent aggregating $100 
million.  The line of credit is used strictly as short-term sources of funds.  
No borrowings were outstanding under the agreement at December 31, 1998.  
At December 31, 1998, outstanding reverse repurchase agreements totaled $187 
million.

At December 31, 1998, investments in fixed maturities comprised 83 percent of 
the Company's total invested assets.  Of the fixed maturity portfolio, 
approximately 33 percent is invested in GNMA, FNMA and FHLMC mortgage-backed 
securities which are considered AAA/Aaa quality.

At December 31, 1998, approximately 13 percent of the Company's investments in 
fixed maturities were below investment grade bonds.  These investments may be 
subject to a higher degree of risk than the investment grade issues because of 
the borrower's generally greater sensitivity to adverse economic conditions, 
such as recession or increasing interest rates, and in certain instances, the 
lack of an active secondary market.  Expected returns on below investment grade
bonds reflect consideration of such factors.  The Company has identified those 
fixed maturities for which a decline in fair value is determined to be other 
than temporary, and has written them down to fair value with a charge to 
earnings.

At December 31, 1998, net unrealized appreciation on fixed maturities held to
maturity included $483 million of gross unrealized appreciation and $27 million
of gross unrealized depreciation.  Net unrealized appreciation on fixed 
maturities available for sale included $427 million of gross unrealized 
appreciation and $159 million of gross unrealized depreciation.

<PAGE>

At December 31, 1998, the Company had an allowance for losses for mortgage 
loans totaling $40 million and for real estate investments totaling $6 million.

The economy and other factors have caused a number of insurance companies to go
under regulatory supervision. This circumstance has resulted in assessments by 
state guaranty associations to cover losses to policyholders of insolvent or 
rehabilitated companies.  Some assessments can be partially recovered through 
a reduction in future premium taxes in certain states.  The Company established
an asset for guaranty association assessments paid to those states allowing a 
reduction in future premium taxes over a reasonable period of time.  The asset 
is being amortized as  premium taxes are reduced.  The Company has also 
estimated the potential effect of future assessments on the Company's financial
position and results of operations and has established a reserve for such
potential assessments.  The Company has not adopted Statement of Position 97-3 
providing guidance when an insurer should recognize a liability for guaranty 
fund assessments.  The SOP is effective for fiscal years beginning after 
December 15, 1998.  Adoption will not have a material impact on the Company's 
results of operations or financial condition.

In the first quarter of 1999, the Company paid a $70 million dividend to its 
parent.  In 1998, dividends paid to its parent were $240 million.

The National Association of Insurance Commissioners has established risk-based 
capital standards to determine the capital requirements of a life insurance
company based upon the risks inherent in its operations.  These standards 
require the computation of a risk-based capital amount which is then compared 
to a company's actual total adjusted capital.  The computation involves 
applying factors to various statutory financial data to address four primary 
risks: asset default, adverse insurance experience, interest rate risk and 
external events.  These standards provide for regulatory attention when the 
percentage of total adjusted capital to authorized control level risk-based 
capital is below certain levels.  As of December 31, 1998, the Company's total 
adjusted capital was well in excess of the levels requiring regulatory 
attention.
<PAGE>


Year 2000 Issue

The Company is a wholly owned subsidiary of American Express Financial 
Corporation (AEFC), which is a wholly owned subsidiary of American Express 
Company (American Express). All of the major systems used by the Company are
maintained by AEFC and are utilized by multiple subsidiaries and affiliates of 
AEFC.  American Express is coordinating Year 2000 (Y2K) efforts on behalf of 
all of its businesses and subsidiaries.  Representatives of AEFC are 
participating in these efforts.  The Y2K issue is the result of computer 
programs having been written using two digits rather than four to define a 
year.  Some programs may recognize a date using "00" as the year 1900 rather 
than 2000. This misinterpretation could result in the failure of major systems 
or miscalculations, which could have a material impact on American Express and 
its businesses or subsidiaries through business interruption or shutdown, 
financial loss, reputation damage and legal liability to third parties. 
American Express and AEFC began addressing the Y2K issue in 1995 and have 
established a plan for resolution, which involves the remediation, 
decommissioning and replacement of relevant systems, including mainframe, 
mid-range and desktop computers, application software, operating systems, 
systems software, date back-up archival and retrieval services, telephone and 
other communications systems, and hardware peripherals and facilities dependent
on embedded technology. As a part of their plan, American Express has generally 
followed and utilized the specific policies and guidelines established by the 
Federal Financial Institutions Examination Council, as well as other U.S. and 
international regulatory agencies.  Additionally, American Express continues to
participate in Y2K related industry consortia sponsored by various partners and
suppliers. Progress is reviewed regularly with the Company's senior management 
and American Express's senior management and Board of Directors.

American Express' and AEFC's Y2K compliance effort related to information 
technology (IT) systems is divided into two initiatives. The first, which is 
the much larger initiative, is known internally as "Millenniax," and relates
to mainframe and other technological systems maintained by the American Express
Technologies organization.  The second, known as "Business T," relates to the 
technological assets that are owned, managed or maintained by American Express'
individual business units, including AEFC.  Business T also encompasses the 
remediation of non-IT systems.  These initiatives involve a substantial number 
of employees and external consultants.  This multiple sourcing approach is 
intended to mitigate the risk of becoming dependent on any one vendor or 
resource. While the vast majority of American Express' and AEFC's systems that 
require modification are being remediated, in some cases they have chosen to 
migrate to new applications that are already Y2K compliant.

<PAGE>


American Express' and AEFC's plans for remediation with respect to Millenniax 
and Business T include the following program phases: (i) employee awareness and
mobilization, (ii) inventory collection and assessment, (iii) impact analysis, 
(iv) remediation/decommission, (v) testing and (vi) implementation.  As part of
the first three phases, American Express and AEFC have identified their 
mission-critical systems for purposes of prioritization. American Express' and 
AEFC's goals are to complete testing of critical systems by early 1999, and
to continue compliance efforts, including but not limited to, the testing of 
systems on an integrated basis and independent validation of such testing, 
through 1999.**  American Express and AEFC are currently on schedule to
meet these goals.  With respect to systems maintained by American Express and 
AEFC, the first three phases referred to above have been substantially 
completed for both Millenniax and Business T.  In addition, remediation of 
critical systems is substantially complete.  As of December 31, 1998, for 
Millenniax for American Express, the remediation/decommission, testing and 
implementation phases for critical and non-critical systems in total are 82%, 
75% and 60% complete, respectively.  For Millenniax for AEFC, such phases are 
99%, 97% and 97% complete, respectively.  For Business T for American Express, 
such phases are 85%, 70% and 69% complete, respectively.  For Business T for 
AEFC, such phases are 74%, 62% and 62% complete, respectively.

American Express' most commonly used methodology for remediation is the sliding
window.  Once an application/system has been remediated, American Express 
applies specific types of tests, such as stress, regression, unit, future date 
and baseline to ensure that the remediation process has achieved Y2K compliance
while maintaining the fundamental data processing integrity of the particular 
system.  To assist with remediation and testing, American Express is using 
various standardized tools obtained from a variety of vendors.

American Express' cumulative costs since inception of the Y2K initiatives were 
$383 million through December 31, 1998 and are estimated to be in the range of 
$135-$160 million for the remainder through 2000.**  AEFC's cumulative costs 
since inception of the Y2K initiative were $56 million through December 31, 
1998 and are estimated to be in the range of $13-$19 million for the remainder
through 2000.**  These include both remediation costs and costs related to 
replacements that were or will be required as a result of Y2K.  These costs, 
which are expensed as incurred, relate to both Millenniax and Business T, and 
have not had, nor are they expected to have, a material adverse impact on
American Express', AEFC's, or the Company's results of operations or financial
condition.**  Costs related to Milleniax, which represent most of the total Y2K
costs of American Express, are managed by and included in the American Express 
corporate level financial results; costs related to Business T are included in 
American Express' individual business segment's financial results, including 
AEFC's.  American Express and AEFC have not deferred other critical technology 
projects or investment spending as a result of Y2K. However, because American 
Express and AEFC must continually prioritize the allocation of finite 
financial and human resources, certain non-critical spending initiatives have 
been deferred.
<PAGE>

American Express' and AEFC's major businesses are heavily dependent upon 
internal computer systems, and all have significant interaction with systems of
third parties, both domestically and internationally. American Express and AEFC
are working with key external parties, including merchants, clients, 
counterparties, vendors, exchanges, utilities, suppliers, agents and regulatory
agencies to mitigate the potential risks to American Express and AEFC of Y2K. 
The failure of external parties to resolve their own Y2K issues in a timely 
manner could result in a material financial risk to American Express or AEFC.  
As part of their overall compliance program, American Express and AEFC are 
actively communicating with third parties through face-to-face meetings and
correspondence, on an ongoing basis, to ascertain their state of readiness. 
Although numerous third parties have indicated to American Express and AEFC in 
writing that they are addressing their Y2K issues on a timely basis, the 
readiness of third parties overall varies across the spectrum.  Because 
American Express' and AEFC's Y2K compliance is dependent on key third parties 
being compliant on a timely basis, there can be no assurances that American
Express' and AEFC's efforts alone will resolve all Y2K issues.

At this point, American Express and AEFC are in the process of performing an 
assessment of reasonably likely Y2K systems failures and related consequences. 
American Express is also preparing specific Y2K contingency plans for all key 
American Express business units, including AEFC, to mitigate the potential 
impact of such failures.  This effort is a full-scale initiative that includes 
both internal and external experts under the guidance of an American 
Express-wide steering committee. The contingency plans, which will be based in 
part on an assessment of the magnitude and probability of potential risks, will
primarily focus on proactive steps to prevent Y2K failures from occurring, or 
if they should occur, to detect them quickly, minimize their impact and 
expedite their repair. The Y2K contingency plans will supplement disaster 
recovery and business continuity plans already in place, and are expected to 
include measures such as selecting alternative suppliers and channels of 
distribution, and developing American Express' and AEFC's own technology 
infrastructure in lieu of those provided by third parties.  Development of the 
Y2K contingency plans is expected to be substantially complete by the end of
the first quarter of 1999, and will continue to be refined throughout 1999 as 
additional information related to American Express' and AEFC's exposures is 
gathered.**


** Statements in this Y2K discussion marked with two asterisks are 
forward-looking statements which are subject to risks and uncertainties.  
Important factors that could cause results to differ materially from these
forward-looking statements include, among other things, the ability of American
Express or AEFC to successfully identify systems containing two-digit codes, 
the nature and amount of programming required to fix the affected
systems, the costs of labor and consultants related to such efforts, the 
continued availability of such resources, and the ability of third parties that
interface with American Express or AEFC to successfully address their Y2K 
issues.

<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Items required under this section are included in the Mangement's Discussion  
and Analysis of financial condition and results of operations under the section
titled risk management.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

1.  Financial Statements and Schedules Required under Regulation S-X.

     Index to financial statements

         The following consolidated financial statements of IDS Life Insurance 
              Company are included in Item 8:

         Report of Independent Auditors                                      

         Consolidated Balance Sheets at December 31, 1998 and 1997           

         Consolidated Statements of Income for the years ended
                 December 31, 1998, 1997 and 1996                    
         Consolidated Statements of Stockholder's Equity for the years ended
             December 31, 1998, 1997 and 1996                               

         Consolidated Statements of Cash Flows for the years ended
                 December 31, 1998, 1997 and 1996                          

         Notes to Consolidated Financial Statements                     

     All information on schedules to the consolidated financial statements 
     required by Article 7 of Regulation S-X is included in the consolidated 
     financial statements or is not required.  Therefore, all schedules have 
     been omitted.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
          AND FINANCIAL DISCLOSURE

None.
<PAGE>

                                    PART III


ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Item omitted pursuant to General Instructions I(2) (c) of Form 10-K.

ITEM 11.      EXECUTIVE COMPENSATION

Item omitted pursuant to General Instructions I(2) (c) of Form 10-K.

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Item omitted pursuant to General Instructions I(2) (c) of Form 10-K.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Item omitted pursuant to General Instructions I(2) (c) of Form 10-K.

<PAGE>


                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON  
           FORM 8-K

     (a)   (1)  Financial Statements

                     See Index to Financial Statements and Financial Statement 
                     Schedules on page 14.

           (2)  Financial Statement Schedules

                     All information on schedules to the consolidated financial
                     statements required by Article 7 of  Regulation S-X is 
                     included in the consolidated financial statements or is 
                     not required.  Therefore, all schedules have been omitted.

           (3)  Exhibits

                     3.1   Copy of Certificate of Incorporation of IDS Life 
                           Insurance Company filed electronically as Exhibit 
                           3.1 to Post Effective Amendment No. 5 to 
                           Registration Statement No. 33-28976 is incorporated 
                           herein by reference.

                     3.2   Copy of the Amended By-laws of IDS Life Insurance
                           Company filed electronically as Exhibit 3.2 to 
                           Post-Effective Amendment No. 5 to Registration
                           Statement No. 33-28976 is incorporated herein by 
                           reference.

                     3.3   Copy of Resolution of the Board of Directors of IDS 
                           Life Insurance Company, dated May 5, 1989, 
                           establishing IDS Life Account MGA filed 
                           electronically as Exhibit 3.3 to Post-Effective
                           Amendment No. 5 to Registration Statement No.
                           33-28976 is incorporated herein by reference.

                     4.1   Copy of Group Annuity Contract, Form 30363C, filed 
                           electronically as Exhibit 4.1 to Post-Effective 
                           Amendment No. 5 to Registration Statement No. 
                           33-28976 is incorporated herein by reference.

                     4.2   Copy of Group Annuity Certificate, Form 30360C, 
                           filed electronically as Exhibit 4.2 to 
                           Post-Effective Amendment No. 5 to Registration 
                           Statement No. 33-28976 is incorporated herein by 
                           reference.

                     4.3   Copy of Endorsement No. 30340C-GP to the Group 
                           Annuity Contract filed electronically as Exhibit 4.3
                           to Post-Effective Amendment No. 5 to Registration


                     4.4   Copy of Endorsement No. 30340C to the Group Annuity 
                           Certificate filed electronically as Exhibit 4.4 to 
                           Post-Effective Amendment No. 5 to Registration
                           Statement No. 33-28976 is incorporated herein by 
                           reference.

                     4.5   Copy of Tax qualified Group Annuity Contract, Form
                           30369C, filed electronically as Exhibit 4.1 to 
                           Post-Effective Amendment No. 2 to Registration 
                           Statement No. 33-28976 is incorporated herein by 
                           reference.

                     4.6   Copy of Tax qualified Group Annuity Certificate, 
                           Form 30368C, filed electronically as Exhibit 4.6 to 
                           Post-Effective Amendment No. 10 to Registration 
                           Statement No. 33-28976 is incorporated herein by 
                           reference.

                     4.7   Copy of Group IRA Annuity Contract, Form 30372C, 
                           filed electronically as Exhibit 4.7 to 
                           Post-Effective Amendment No. 10 to Registration 
                           Statement No. 33-28976 is incorporated herein by 
                           reference.

                     4.8   Copy of IRA Annuity Certificate, Form 30371C, filed 
                           electronically as Exhibit to Post-Effective 
                           Amendment No. 10 to Registration Statement No. 
                           33-28976 is incorporated herein by reference.

                     4.9   Copy of Non-tax qualified Individual Annuity 
                           Contract, Form 30365D, filed electronically as 
                           Exhibit 4.9 to Post-Effective Amendment No. 10 to 
                           Registration Statement No. 33-28976 is incorporated 
                           herein by reference.

                     4.10  Copy of Endorsement No. 30379 to the Individual
                           Annuity Contract, filed electronically as Exhibit
                           4.10 to Post Effective Amendment No. 10 to 
                           Registration Statement No. 33-28976 is incorporated 
                           herein by reference.

                     4.11  Copy of Tax qualified Individual Annuity Contract, 
                           Form 30370C, filed electronically as Exhibit 4.11 to
                           Post-Effective Amendment No. 10 to Registration 
                           Statement No. 33-28976 is incorporated herein by 
                           reference.

                     4.12  Copy of Individual IRA Annuity Contract, Form 
                           30373C, filed electronically as Exhibit 4.12 to 
                           Post-Effective Amendment No. 10 to Registration
                           Statement No. 33-28976 is incorporated herein by 
                           reference.

                     21.   Copy of List of Subsidiaries filed electronically as
                           Exhibit 21 to Post-Effective Amendment No. 7 to
                           Registration Statement No. 33-28976 is herein
                           incorporated by reference.

                     27.   Financial data schedule is filed electronically 
                           herewith.

     (b) Reports on Form 8-K filed in the fourth quarter of 1998

No reports on Form 8-K were required to be filed by the Company for the quarter
ended December 31, 1998.

<PAGE>


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.

                           IDS LIFE INSURANCE COMPANY
                                   Registrant


3/12/99                       By       /s/ James A. Mitchell
Date                                   James A. Mitchell, Chairman of the
                                       Board and Chief Executive Officer

3/12/99                       By       /s/ Philip C. Wentzel
Date                                   Philip C. Wentzel, Vice   President and
                                       Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been duly signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated.

3/12/99                       By       /s/ David R. Hubers
Date                                   David R. Hubers, Director

3/12/99                       By       /s/ Richard W. Kling
Date                                   Richard W. Kling, President

3/12/99                       By       /s/ Paul F. Kolkman
Date                                   Paul F. Kolkman, Executive Vice
                                       President

3/12/99                       By       /s/ James A. Mitchell
Date                                   James A. Mitchell, Chairman of the
                                       Board and Chief Executive Officer

3/12/99                       By       /s/ Paula R. Meyer
Date                                   Paula R. Meyer, Executive Vice
                                       President, Assured Assets

3/12/99                       By       /s/ Barry J. Murphy
Date                                   Barry J. Murphy, Executive Vice
                                       President, Client Service

<PAGE>

Report of Independent Auditors

The Board of Directors
IDS Life Insurance Company

We have audited the accompanying consolidated balance sheets of IDS Life 
Insurance Company (a wholly owned subsidiary of American Express Financial 
Corporation) as of December 31, 1998 and 1997, and the related
consolidated statements of income, stockholder's equity and cash flows for 
each of the three years in the period ended December 31, 1998.  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 generally accepted auditing 
standards.  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 IDS Life 
Insurance Company at December 31, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted 
accounting principles.



February 4, 1999
Minneapolis, Minnesota
<PAGE>
<TABLE>
<CAPTION>

                           IDS LIFE INSURANCE COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                  December 31,
                                  ($ thousands)

ASSETS                                                     1998            1997

<S>                                               <C>              <C>

Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value:
1998, $8,420,035; 1997, $9,743,410)               $  7,964,114     $  9,315,450
Available for sale, at fair value (amortized cost:
1998, $13,344,949; 1997, $12,515,030)               13,613,139       12,876,694
Mortgage loans on real estate                        3,505,458        3,618,647
Policy loans                                           525,431          498,874
Other investments                                      366,604          318,591
Total investments                                   25,974,746       26,628,256
Cash and cash equivalents                               22,453           19,686
Amounts recoverable from reinsurers                    262,260          205,716
Amounts due from brokers                                   327            8,400
Other accounts receivable                               47,963           37,895
Accrued investment income                              366,574          357,390
Deferred policy acquisition costs                    2,496,352        2,479,577
Other assets                                            30,487           22,700
Separate account assets                             27,349,401       23,214,504
Total assets                                       $56,550,563      $52,974,124
</TABLE>

<PAGE>

                           IDS LIFE INSURANCE COMPANY
                     CONSOLIDATED BALANCE SHEETS (continued)
                                  December 31,
                       ($ thousands, except share amounts)
<TABLE>
<CAPTION>

LIABILITIES AND STOCKHOLDER's EQUITY                  1998             1997
<S>                                            <C>              <C>

Liabilities:
Future policy benefits:
Fixed annuities                                $21,172,303      $22,009,747
Universal life-type insurance                    3,343,671        3,280,489
Traditional life insurance                         225,306          213,676
Disability income and long-term care insurance     660,320          533,124
Policy claims and other policyholders' funds        70,309           68,345
Deferred income taxes, net                          16,930           61,582
Amounts due to brokers                             195,406          381,458
Other liabilities                                  410,285          345,383
Separate account liabilities                    27,349,401       23,214,504
Total liabilities                               53,443,931       50,108,308
Commitments and contingencies
Stockholder's equity:
Capital stock, $30 par value per share;
100,000 shares authorized, issued and outstanding    3,000            3,000
Additional paid-in capital                         288,327          290,847
Accumulated other comprehensive income, net of tax:
Net unrealized securities gains                    169,584          226,359
Retained earnings                                2,645,721        2,345,610
Total stockholder's equity                       3,106,632        2,865,816
Total liabilities and stockholder's equity     $56,550,563      $52,974,124
                                                ==========       ==========
</TABLE>

See accompanying notes.
<PAGE>

                           IDS LIFE INSURANCE COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME
                            Years ended December 31,
                                  ($ thousands)
<TABLE>
<CAPTION>

                                                              1998              1997              1996
<S>                                                     <C>               <C>              <C>

Revenues:
Premiums:
Traditional life insurance                              $    53,132       $    52,473      $    51,403
Disability income and long-term care insurance              176,298           154,021          131,518

Total premiums                                              229,430           206,494          182,921

Policyholder and contractholder charges                     383,965           341,726          302,999
Management and other fees                                   401,057           340,892          271,342
Net investment income                                     1,986,485         1,988,389        1,965,362
Net realized gain (loss) on investments                       6,902               860             (159)

Total revenues                                            3,007,839         2,878,361        2,722,465

Benefits and expenses:
Death and other benefits:
Traditional life insurance                                   29,835            28,951           26,919
Universal life-type insurance
and investment contracts                                    108,349            92,814           85,017
Disability income and long-term care insurance               27,414            22,333           19,185
Increase in liabilities for
future policy benefits:
Traditional life insurance                                    6,052             3,946            1,859
Disability income and long-term care insurance               73,305            63,631           57,230
Interest credited on universal life-type
insurance and investment contracts                        1,317,124         1,386,448        1,370,468
Amortization of deferred policy
acquisition costs                                           382,642           322,731          278,605
Other insurance and operating expenses                      287,326           276,596          261,468

Total benefits and expenses                               2,232,047         2,197,450        2,100,751

Income before income taxes                                  775,792           680,911          621,714

Income taxes                                                235,681           206,664          207,138

Net income                                               $  540,111        $  474,247       $  414,576

See accompanying notes.
</TABLE>

<PAGE>

                           IDS LIFE INSURANCE COMPANY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDER's EQUITY
                       Three years ended December 31, 1998
                                  ($ thousands)
<TABLE>
<CAPTION>

                                                                                                 Accumulated Other
                                                                                                   Comprehensive
                                                           Total                   Additional
                                                       Stockholder's    Capital      Paid-In          Income,         Retained
                                                           Equity        Stock       Capital       Net of Tax        Earnings
<S>                                                      <C>             <C>        <C>             <C>             <C> 

Balance, December 31, 1995                               $2,331,708      $3,000     $278,814        $230,129        $1,819,765
Comprehensive income:
Net income                                                  414,576          --           --              --           414,576
Unrealized holding losses arising during
the year, net of deferred policy acquisition
costs of $10,325 and taxes of $82,982                      (154,111)         --           --        (154,111)               --
Reclassification adjustment for losses
included in net income, net of tax
of $(5,429)                                                  10,084          --           --          10,084                --
                                                      -----------------                         --------------------
                                                      -----------------                         --------------------
Other comprehensive loss                                   (144,027)         --           --        (144,027)               --
                                                      -----------------
Comprehensive income                                       270,549           --           --              --                --
Capital contribution from parent                             4,801           --        4,801              --                --
Other changes                                                2,022           --           --              --             2,022
Cash dividends to parent                                  (165,000)          --           --              --          (165,000)
                                                      ----------------------------------------------------------------------------

Balance, December 31, 1996                               2,444,080        3,000      283,615          86,102         2,071,363
Comprehensive income:
Net income                                                 474,247           --           --              --           474,247
Unrealized holding gains arising during
the year, net of effect on deferred policy
acquisition costs of $(7,714) and taxes of
$(75,215)                                                  139,686          --            --         139,686                --
Reclassification adjustment for losses
included in net income, net of tax of $(308)                   571          --            --             571                --
                                                      -----------------                         --------------------
                                                      -----------------                         --------------------
Other comprehensive income                                 140,257          --            --         140,257                --
                                                      -----------------
Comprehensive income                                       614,504          --            --              --                --
Capital contribution from parent                             7,232          --         7,232              --                --
Cash dividends to parent                                  (200,000)         --            --              --          (200,000)
                                                      ----------------------------------------------------------------------------

Balance, December 31, 1997                               2,865,816       3,000       290,847         226,359         2,345,610
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                           IDS LIFE INSURANCE COMPANY
           CONSOLIDATED STATEMENTS OF STOCKHOLDER's EQUITY (continued)
                       Three years ended December 31, 1998
                                  ($ thousands)


                                                                                                    Accumulated
                                                                                                Other Comprehensive
                                                           Total                    Additional
                                                        Stockholder's     Capital      Paid-In         Income,          Retained
                                                           Equity         Stock       Capital       Net of Tax         Earnings
<S>                                                      <C>              <C>        <C>             <C>             <C>    

Balance, December 31, 1997                               $2,865,816       $3,000     $290,847        $226,359        $2,345,610
Comprehensive income:
Net income                                                  540,111          --           --              --            540,111
Unrealized holding losses arising during
the year, net of effect on deferred policy
acquisition costs of $6,333 and taxes of $32,826
                                                            (60,964)         --           --         (60,964)               --
Reclassification adjustment for losses
included in net income, net of tax
of $(2,254)                                                   4,189          --           --           4,189                --
                                                      -----------------                         --------------------
                                                      -----------------                         --------------------
Other comprehensive loss                                    (56,775)         --           --         (56,775)               --
                                                      -----------------
Comprehensive income                                        483,336          --           --              --                --
Other changes                                                (2,520)         --       (2,520)             --                --
Cash dividends to parent                                   (240,000)         --           --              --           (240,000)
                                                      ----------------------------------------------------------------------------

Balance, December 31, 1998                               $3,106,632      $3,000     $288,327        $169,584         $2,645,721
                                                      ============================================================================


See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                           IDS LIFE INSURANCE COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            Years ended December 31,
                                  ($ thousands)

                                                                        1998             1997              1996
<S>                                                                 <C>               <C>              <C>

Cash flows from operating activities:
Net income                                                          $ 540,111         $ 474,247        $ 414,576
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Policy loans, excluding universal
life-type insurance:
Issuance                                                              (53,883)          (54,665)         (49,314)
Repayment                                                              57,902            46,015           41,179
Change in amounts recoverable from reinsurers                         (56,544)          (47,994)         (43,335)
Change in other accounts receivable                                   (10,068)            6,194           (4,981)
Change in accrued investment income                                    (9,184)          (14,077)           4,695
Change in deferred policy acquisition costs, net                      (10,443)         (156,486)        (294,755)
Change in liabilities for future policy benefits for
traditional life, disability income and long-term
care insurance                                                        138,826           112,915           97,479
Change in policy claims and other
policyholders' funds                                                    1,964           (15,289)          27,311
Deferred income tax provision (benefit)                               (19,122)           19,982          (65,609)
Change in other liabilities                                            64,902            13,305           46,724
Amortization of premium
(accretion of discount), net                                            9,170            (5,649)         (23,032)
Net realized (gain) loss on investments                                (6,902)             (860)             159
Policyholder and contractholder charges, non-cash                    (172,396)         (160,885)        (154,286)
Other, net                                                             10,786             7,161          (10,816)

Net cash provided by (used in) operating
activities                                                          $ 485,119         $ 223,914        $ (14,005)
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                           IDS LIFE INSURANCE COMPANY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                            Years ended December 31,
                                  ($ thousands)

                                                                        1998              1997             1996
<S>                                                            <C>               <C>                <C>

Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases                                                      $      (1,020)    $       (1,996)    $   (43,751)
Maturities, sinking fund payments and calls                        1,162,731            686,503         759,248
Sales                                                                236,963            236,761         279,506
Fixed maturities available for sale:
Purchases                                                         (4,100,238)        (3,160,133)     (2,299,198)
Maturities, sinking fund payments and calls                        2,967,311          1,206,213       1,270,240
Sales                                                                278,955            457,585         238,905
Other investments, excluding policy loans:
Purchases                                                           (555,647)          (524,521)       (904,536)
Sales                                                                579,038            335,765         236,912
Change in amounts due from brokers                                     8,073              2,647         (11,047)
Change in amounts due to brokers                                    (186,052)           119,471         140,369
Net cash provided by (used in)
investing activities                                                 390,114           (641,705)       (333,352)

Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received                                            1,873,624         2,785,758       3,567,586
Surrenders and other benefits                                     (3,792,612)       (3,736,242)     (4,250,294)
Interest credited to account balances                              1,317,124         1,386,448       1,370,468
Universal life-type insurance policy loans:
Issuance                                                             (97,602)          (84,835)        (86,501)
Repayment                                                             67,000            54,513          58,753
Capital transaction with parent                                           --             7,232           4,801
Dividends paid                                                      (240,000)         (200,000)       (165,000)
Net cash (used in) provided by
financing activities                                                (872,466)          212,874         499,813

Net increase (decrease) in cash and cash equivalents                   2,767          (204,917)        152,456

Cash and cash equivalents at beginning of year                        19,686           224,603          72,147

Cash and cash equivalents at end of year                        $     22,453      $     19,686       $ 224,603

See accompanying notes
</TABLE>
<PAGE>

                           IDS LIFE INSURANCE COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  ($ thousands)

1.   Summary of significant accounting policies

     Nature of business

IDS Life  Insurance  Company  (the  Company) is a stock life  insurance  company
organized  under the laws of the State of  Minnesota.  The  Company  is a wholly
owned subsidiary of American Express Financial  Corporation  (AEFC),  which is a
wholly  owned  subsidiary  of  American  Express  Company.  The  Company  serves
residents of all states except New York. IDS Life Insurance  Company of New York
is a wholly owned subsidiary of the Company and serves New York State residents.
The  Company  also wholly  owns  American  Enterprise  Life  Insurance  Company,
American  Centurion Life  Assurance  Company,  American  Partners Life Insurance
Company and American Express Corporation.

     The Company's principal products are deferred annuities and universal life 
     insurance, which are issued primarily to individuals.  It offers single 
     premium and flexible premium deferred annuities on both a fixed and 
     variable dollar basis.  Immediate annuities are offered as well.  The 
     Company's insurance products include universal life (fixed and variable), 
     whole life, single premium life and term products (including waiver of 
     premium and accidental death benefits).  The Company also markets 
     disability income and long-term care insurance.

     Basis of presentation

     The accompanying consolidated financial statements include the accounts of 
     the Company and its wholly owned subsidiaries.  All material intercompany 
     accounts and transactions have been eliminated in consolidation.

     The accompanying consolidated financial statements have been prepared in 
     conformity with generally accepted accounting principles which vary in 
     certain respects from reporting practices prescribed or permitted by state 
     insurance regulatory authorities (see Note 4).

     The preparation of financial statements in conformity with generally 
     accepted accounting principles requires management to make estimates and 
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the 
     financial statements and the reported amounts of revenues and expenses 
     during the reporting period.  Actual results could differ from those
     estimates.

     Investments

Fixed  maturities  that the Company has both the positive intent and the ability
to hold to maturity are  classified as held to maturity and carried at amortized
cost.  All other fixed  maturities  and all  marketable  equity  securities  are
classified as available for sale and carried at fair value. Unrealized gains and
losses on securities classified as available for sale are reported as a separate
component of accumulated  other  comprehensive  income,  net of deferred  policy
acquisition costs and deferred taxes.

     Realized investment gain or loss is determined on an identified cost basis.

     Prepayments are anticipated on certain investments in mortgage-backed 
     securities in determining the constant effective yield used to recognize 
     interest income.  Prepayment estimates are based on information received
     from brokers who deal in mortgage-backed securities.
<PAGE>
                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

1.    Summary of significant accounting policies (continued)

     Mortgage loans on real estate are carried at amortized cost less reserves 
     for mortgage loan losses.  The estimated fair value of the mortgage loans 
     is determined by a discounted cash flow analysis using mortgage interest 
     rates currently offered for mortgages of similar maturities.

Impairment  of mortgage  loans is  measured  as the excess of a loan's  recorded
investment  over its present value of expected  principal and interest  payments
discounted  at the  loan's  effective  interest  rate,  or  the  fair  value  of
collateral.  The amount of the  impairment is recorded in a reserve for mortgage
loan losses.  The reserve for mortgage loan losses is maintained at a level that
management believes is adequate to absorb estimated losses in the portfolio. The
level of the reserve account is determined based on several  factors,  including
historical   experience,   expected  future  principal  and  interest  payments,
estimated  collateral values, and current and anticipated economic and political
conditions.  Management  regularly  evaluates  the  adequacy  of the reserve for
mortgage loan losses.

     The Company generally stops accruing interest on mortgage loans for which 
     interest payments are delinquent more than three months.  Based on 
     management's judgment as to the ultimate collectibility of principal,
     interest payments received are either recognized as income or applied to 
     the recorded investment in the loan.

     The cost of interest rate caps and floors is amortized to investment 
     income over the life of the contracts and payments received as a result of 
     these agreements are recorded as investment income when realized.  The
     amortized cost of interest rate caps and floors is included in other 
     investments.  Amounts paid or received under interest rate swap agreements 
     are recognized as an adjustment to investment income.

     The Company purchases and writes index options to hedge the fee income 
     earned on the management of equity securities in separate accounts and the 
     underlying mutual funds.  These index options are carried at market
     value and are included in other investments or other liabilities, as 
     appropriate. Gains or losses on index options that qualify as hedges are 
     deferred and recognized in management and other fees in the same period
     as the hedged fee income.  Gains or losses on index options that do not 
     qualify as hedges are marked to market through the income statement.

     The  Company  also uses  index  options  to manage  the risks  related to a
     certain  annuity  product that pays interest based upon the relative change
     in a  major  stock  market  index  between  the  beginning  and  end of the
     product's term. Purchased options used in conjunction with this product are
     reported in other  investments  and written  options are  included in other
     liabilities.  The  amortization  of the  cost  of  purchased  options,  the
     proceeds  of written  options  and the  changes in  intrinsic  value of the
     contracts are included in net investment income.

     Policy loans are carried at the aggregate of the unpaid loan balances which
     do not exceed the cash surrender values of the related policies.

     When evidence indicates a decline, which is other than temporary, in the
     underlying value or earning power of individual investments, such 
     investments are written down to the fair value by a charge to income.
<PAGE>


                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

1.   Summary of significant accounting policies (continued)

     Statements of cash flows

     The Company considers investments with a maturity at the date of their 
     acquisition of three months or less to be cash equivalents.  These 
     securities are carried principally at amortized cost, which approximates 
     fair value.

     Supplementary information to the consolidated statements of cash flows for 
     the years ended December 31 is
     summarized as follows:
<TABLE>
<CAPTION>

                                        1998             1997             1996
    <S>                             <C>              <C>               <C>

    Cash paid during the year for:
    Income taxes                    $215,003         $174,472          $317,283
    Interest on borrowings            14,529            8,213             4,119
</TABLE>

     Recognition of profits on annuity contracts and insurance policies

     Profits on fixed deferred  annuities are recognized by the Company over the
     lives of the  contracts,  using  primarily  the  interest  method.  Profits
     represent  the  excess of  investment  income  earned  from  investment  of
     contract considerations over interest credited to contract owners and other
     expenses.

     The retrospective deposit method is used in accounting for universal 
     life-type insurance.  Under  this method, profits are recognized over the 
     lives of the policies in proportion to the estimated gross profits
     expected to be realized.

     Premiums  on  traditional  life,   disability  income  and  long-term  care
     insurance policies are recognized as revenue when due, and related benefits
     and expenses are associated  with premium  revenue in a manner that results
     in  recognition of profits over the lives of the insurance  policies.  This
     association  is  accomplished  by means of the  provision for future policy
     benefits and the deferral and subsequent amortization of policy acquisition
     costs.

     Policyholder and contractholder charges include the monthly cost of 
     insurance charges, issue and administrative fees and surrender charges.  
     These charges also include the minimum death benefit guarantee fees 
     received from the variable life insurance separate accounts.  Management 
     and other fees include investment management fees from underlying 
     proprietary mutual funds and mortality and expense risk fees received from 
     the variable annuity and variable life insurance separate accounts.

     Deferred policy acquisition costs

     The costs of acquiring new business, principally sales compensation, policy
     issue costs, underwriting and certain sales expenses, have been deferred on
     insurance and annuity  contracts.  The deferred  acquisition costs for most
     single premium deferred  annuities and installment  annuities are amortized
     using  primarily the interest  method.  The costs for  universal  life-type
     insurance and certain  installment  annuities are amortized as a percentage
     of the estimated gross profits expected to be realized on the policies. For
     traditional life,  disability income and long-term care insurance policies,
     the costs are amortized over an appropriate period in proportion to premium
     revenue.
<PAGE>

                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

1.   Summary of significant accounting policies (continued)

     Liabilities for future policy benefits

     Liabilities for universal life-type insurance and deferred annuities are 
     accumulation values.

     Liabilities for fixed annuities in a benefit status are based on 
     established industry mortality tables and interest rates ranging from 5% 
     to 9.5%, depending on year of issue.

     Liabilities for future benefits on traditional life insurance are based on 
     the net level premium method, using anticipated mortality, policy 
     persistency and interest earning rates.  Anticipated mortality rates are
     based on established industry mortality tables.  Anticipated policy 
     persistency rates vary by policy form, issue age and policy duration with 
     persistency on cash value plans generally anticipated to be better than
     persistency on term insurance plans.  Anticipated interest rates range 
     from 4% to 10%, depending on policy form, issue year and policy duration.

     Liabilities for future disability income and long-term care policy benefits
     include both policy reserves and claim reserves.  Policy reserves are based
     on the net level premium method,  using anticipated  morbidity,  mortality,
     policy  persistency and interest earning rates.  Anticipated  morbidity and
     mortality rates are based on established  industry  morbidity and mortality
     tables.  Anticipated  policy  persistency  rates vary by policy form, issue
     age, policy duration and, for disability income policies, occupation class.
     Anticipated  interest rates for disability income and long-term care policy
     reserves are 3% to 9.5% at policy  issue and grade to ultimate  rates of 5%
     to 7% over 5 to 10 years.

     Claim reserves are calculated based on claim continuance tables and 
     anticipated interest earnings. Anticipated claim continuance rates are 
     based on established industry tables.  Anticipated interest rates
     for claim reserves for both disability income and long-term care range 
     from 6% to 8%.

     Reinsurance

     The maximum  amount of life  insurance  risk retained by the Company on any
     one life is $750 of life benefit plus $50 of accidental death benefits. The
     maximum   amount  of  life   insurance  risk  retained  on  any  joint-life
     combination is $1,500. The excesses are reinsured with other life insurance
     companies,  primarily  on a yearly  renewable  term basis.  Long-term  care
     policies are primarily reinsured on a coinsurance basis. Beginning in 1998,
     the Company retains all disability income and waiver of premium risk.

     Federal income taxes

     The Company's taxable income is included in the consolidated federal income
     tax return of American  Express  Company.  The Company  provides for income
     taxes on a separate return basis,  except that, under an agreement  between
     AEFC and American Express Company,  tax benefit is recognized for losses to
     the  extent  they can be used on the  consolidated  tax  return.  It is the
     policy of AEFC and its subsidiaries  that AEFC will reimburse  subsidiaries
     for all tax benefits.

     Included in other liabilities at December 31, 1998 and 1997 are $26,291 
     payable to and $12,061, receivable from, respectively, AEFC for federal 
     income taxes.
<PAGE>


                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

1.   Summary of significant accounting policies (continued)

     Separate account business

     The separate account assets and liabilities represent funds held for the 
     exclusive benefit of the variable annuity and variable life insurance 
     contract owners.  The Company receives investment management fees from
     the proprietary mutual funds used as investment options for variable 
     annuities and variable life insurance. The Company receives mortality and 
     expense risk fees from the separate accounts.

     The Company makes contractual  mortality assurances to the variable annuity
     contract  owners that the net assets of the separate  accounts  will not be
     affected by future  variations in the actual life expectancy  experience of
     the annuitants and beneficiaries from the mortality assumptions implicit in
     the annuity  contracts.  The Company makes  periodic fund  transfers to, or
     withdrawals   from,   the  separate   account  assets  for  such  actuarial
     adjustments for variable  annuities that are in the benefit payment period.
     The Company also guarantees that the rates at which administrative fees are
     deducted from contract funds will not exceed contractual maximums.

     For variable life insurance, the Company guarantees that the rates at which
     insurance charges and administrative  fees are deducted from contract funds
     will not exceed contractual maximums.  The Company also guarantees that the
     death  benefit will  continue  payable at the initial  level  regardless of
     investment performance so long as minimum premium payments are made.

     Accounting changes

     Effective  January 1, 1998,  the Company  adopted SFAS No. 130,  "Reporting
     Comprehensive  Income."  SFAS No. 130 requires the reporting and display of
     comprehensive income and its components. Comprehensive income is defined as
     the aggregate change in stockholder's equity excluding changes in ownership
     interests.  For the Company,  it is net income and the unrealized  gains or
     losses on  available-for-sale  securities,  net of the  effect on  deferred
     policy acquisition costs, taxes and reclassification adjustment.

     In March 1998,  the  American  Institute of  Certified  Public  Accountants
     (AICPA) issued  Statement of Position (SOP) 98-1,  "Accounting for Costs of
     Computer  Software  Developed or Obtained for Internal Use." The SOP, which
     is effective January 1, 1999,  requires the capitalization of certain costs
     incurred  after the date of  adoption  to  develop or obtain  software  for
     internal use. Software utilized by the Company is owned by AEFC and will be
     capitalized  by AEFC.  As a result,  the new rule will not have a  material
     impact on the Company's results of operations or financial condition.

     In December 1997,  the AICPA issued SOP 97-3,  "Accounting by Insurance and
     Other Enterprises for  Insurance-Related  Assessments,"  providing guidance
     for the timing of  recognition  of  liabilities  related to  guaranty  fund
     assessments. The Company will adopt the SOP on January 1, 1999. The Company
     has  historically  carried a balance in other  liabilities  on the  balance
     sheet for potential guaranty fund assessment exposure.  Adoption of the SOP
     will not have a material  impact on the Company's  results of operations or
     financial condition.
<PAGE>


                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

1.   Summary of significant accounting policies (continued)

     In June 1998, the Financial  Accounting Standards Board issued Statement of
     Financial   Accounting   Standards  No.  133,  "Accounting  for  Derivative
     Instruments and Hedging  Activities,"  which is effective  January 1, 2000.
     This  Statement   establishes   accounting  and  reporting   standards  for
     derivative  instruments,  including certain derivative instruments embedded
     in other contracts, and for hedging activities.  It requires that an entity
     recognize all  derivatives  as either assets or  liabilities in the balance
     sheet and measure  those  instruments  at fair value.  The  accounting  for
     changes in the fair value of a  derivative  depends on the  intended use of
     the derivative and the resulting designation. Earlier application of all of
     the provisions of this Statement is encouraged, but it is permitted only as
     of the  beginning of any fiscal  quarter that begins after  issuance of the
     Statement.  This Statement  cannot be applied  retroactively.  The ultimate
     financial  impact of the new rule will be measured based on the derivatives
     in place at adoption and cannot be estimated at this time.

     Reclassification

     Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
     presentation.

2.   Investments

     Fair values of investments in fixed maturities represent quoted market 
     prices and estimated values when quoted prices are not available.  
     Estimated values are determined by established procedures involving, among
     other things, review of market indices, price levels of current offerings 
     of comparable issues, price estimates and market data from independent 
     brokers and financial files.

     The amortized cost, gross unrealized gains and losses and fair values of 
     investments in fixed maturities and equity securities at December 31, 1998 
     are as follows:
<TABLE>
<CAPTION>

                                                                       Gross            Gross
                                                    Amortized       Unrealized       Unrealized             Fair
    Held to maturity                                   Cost            Gains           Losses              Value
    <S>                                            <C>               <C>           <C>               <C>    

    U.S. Government agency obligations             $      39,888     $    4,460    $         --      $      44,348
    State and municipal obligations                        9,683            491              --             10,173
    Corporate bonds and obligations                    6,305,476        447,752          27,087          6,726,141
    Mortgage-backed securities                         1,609,067         30,458             152          1,639,373
                                                     $ 7,964,114       $483,161         $27,239         $8,420,035
</TABLE>
<PAGE>
                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

2.   Investments (continued)
<TABLE>
<CAPTION>

                                                                       Gross            Gross
                                                    Amortized       Unrealized       Unrealized              Fair
    Available for sale                                 Cost            Gains           Losses                Value
    <S>                                           <C>                <C>           <C>               <C>   

    U.S. Government agency obligations            $       52,043     $   3,324     $         --      $       55,367
    State and municipal obligations                       11,060         1,231               --              12,291
    Corporate bonds and obligations                    7,332,344       271,174          155,181           7,448,337
    Mortgage-backed securities                         5,949,502       151,511            3,869           6,097,144
    Total fixed maturities                            13,344,949       427,240          159,050          13,613,139
    Equity securities                                                      158                  --  
                                                           3,000                                              3,158
                                                     $13,347,949      $427,398         $159,050         $13,616,297
</TABLE>

     The amortized cost, gross unrealized gains and losses and fair values of 
     investments in fixed maturities and equity securities at December 31, 1997 
     are as follows:
<TABLE>
<CAPTION>

                                                                       Gross            Gross
                                                    Amortized       Unrealized       Unrealized               Fair
    Held to maturity                                   Cost            Gains           Losses                 Value
    <S>                                            <C>               <C>            <C>                <C>   

    U.S. Government agency obligations             $     41,932      $    2,949     $        --       $      44,881
    State and municipal obligations                       9,684             568              --              10,252
    Corporate bonds and obligations                   7,280,646         415,700           9,322           7,687,024
    Mortgage-backed securities                        1,983,188          25,976           7,911           2,001,253
                                                     $9,315,450        $445,193         $17,233          $9,743,410

                                                                       Gross            Gross
                                                    Amortized       Unrealized       Unrealized          Fair
    Available for sale                                 Cost            Gains           Losses           Value

    U.S. Government agency obligations            $      65,291      $    4,154     $        --       $      69,445
    State and municipal obligations                      11,045           1,348              --              12,393
    Corporate bonds and obligations                   5,308,129         232,761          30,198           5,510,692
    Mortgage-backed securities                        7,130,565         160,478           6,879           7,284,164
    Total fixed maturities                           12,515,030         398,741          37,077          12,876,694
    Equity securities                                     3,000             361              --     
                                                                                                              3,361
                                                    $12,518,030        $399,102         $37,077         $12,880,055
</TABLE>
<PAGE>
                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)


2.   Investments (continued)

     The amortized cost and fair value of investments in fixed maturities at 
     December 31, 1998 by contractual maturity are shown below.  Expected 
     maturities will differ from contractual maturities because borrowers may
     have the right to call or prepay obligations with or without call or 
     prepayment penalties.
<TABLE>
<CAPTION>

                                                                                    Amortized           Fair
    Held to maturity                                                                   Cost             Value
    <S>                                                                           <C>                <C>   

    Due in one year or less                                                       $      354,296     $     359,020
    Due from one to five years                                                         2,111,369         2,249,847
    Due from five to ten years                                                         3,012,227         3,189,789
    Due in more than ten years                                                           877,155           982,006
    Mortgage-backed securities                                                         1,609,067         1,639,373
                                                                                   $   7,964,114      $  8,420,035

                                                                                    Amortized           Fair
    Available for sale                                                                 Cost             Value

    Due in one year or less                                                        $     102,463      $    104,475
    Due from one to five years                                                           682,336           725,859
    Due from five to ten years                                                         3,904,326         4,044,378
    Due in more than ten years                                                         2,718,659         2,654,382
    Mortgage-backed securities                                                         5,937,165         6,084,045
                                                                                     $13,344,949       $13,613,139
</TABLE>

     During the years ended December 31, 1998, 1997 and 1996, fixed maturities 
     classified as held to maturity were sold with amortized cost of $230,036, 
     $229,848 and $277,527, respectively.  Net gains and losses on these sales 
     were not significant.  The sale of these fixed maturities was due to 
     significant deterioration in the issuers' credit worthiness.

     Fixed maturities available for sale were sold during 1998 with proceeds of 
     $278,955 and gross realized gains and losses of $15,658 and $22,102, 
     respectively.  Fixed maturities available for sale were sold during 1997
     with proceeds of $457,585 and gross realized gains and losses of $6,639 
     and $7,518, respectively. Fixed maturities available for sale were sold 
     during 1996 with proceeds of $238,905 and gross realized gains and
     losses of $571 and $16,084, respectively.

     At December 31, 1998, bonds carried at $14,302 were on deposit with various
     states as required by law.

<PAGE>

                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

2.   Investments (continued)

     At December 31, 1998, investments in fixed maturities comprised 83 percent 
     of the Company's total invested assets.  These securities are rated by 
     Moody's and Standard & Poor's (S&P), except for securities carried at
     approximately $3.6 billion which are rated by AEFC's internal analysts 
     using criteria similar to Moody's and S&P.  A summary of investments in 
     fixed maturities, at amortized cost, by rating on December 31 is as
     follows:
<TABLE>
<CAPTION>

         Rating                                                                         1998            1997
    <S>                                                                             <C>               <C>

    Aaa/AAA                                                                         $  7,629,628      $  9,195,619
    Aaa/AA                                                                                 2,277                --
    Aa/AA                                                                                308,053           232,451
    Aa/A                                                                                 301,325           246,792
    A/A                                                                                2,525,283         2,787,936
    A/BBB                                                                              1,148,736         1,200,345
    Baa/BBB                                                                            6,237,014         5,226,616
    Baa/BB                                                                               492,696           475,084
    Below investment grade                                                             2,664,051         2,465,637
                                                                                     $21,309,063       $21,830,480
</TABLE>

     At December 31, 1998, 93 percent of the securities  rated Aaa/AAA are GNMA,
     FNMA and FHLMC mortgage-backed  securities. No holdings of any other issuer
     are greater than one percent of the Company's  total  investments  in fixed
     maturities.

     At December 31, 1998,  approximately  13 percent of the Company's  invested
     assets were mortgage  loans on real estate.  Summaries of mortgage loans by
     region of the United States and by type of real estate are as follows:
<TABLE>
<CAPTION>

                                                     December 31, 1998                 December 31, 1997   
                                              On Balance       Commitments        On Balance        Commitments
         Region                                  Sheet          to Purchase_         Sheet           to Purchase
    <S>                                         <C>               <C>               <C>                 <C>

    East North Central                          $  750,705        $  16,393         $  748,372          $  32,462
    West North Central                             491,006           81,648            456,934             14,340
    South Atlantic                                 839,233           21,020            922,172             14,619
    Middle Atlantic                                476,448            6,169            545,601             15,507
    New England                                    263,761            2,824            316,250              2,136
    Pacific                                        195,851           16,946            184,917              3,204
    West South Central                             136,841            1,412            125,227                 --
    East South Central                              46,029               --             60,274                 --
    Mountain                                       345,379            8,473            297,545             28,717
                                                 3,545,253          154,885          3,657,292            110,985
    Less allowance for losses                       39,795               --             38,645                 --
                                                $3,505,458         $154,885         $3,618,647           $110,985
</TABLE>
<PAGE>

                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)


2.   Investments (continued)
<TABLE>
<CAPTION>

                                                    December 31, 1998                   December 31, 1997   
                                              On Balance       Commitments        On Balance        Commitments
                Property type                    Sheet          to Purchase_         Sheet           to Purchase_
    <S>                                         <C>                <C>             <C>                <C>

    Department/retail stores                    $1,139,349         $ 59,305        $1,189,203         $  27,314
    Apartments                                     960,808            9,272         1,089,127            16,576
    Office buildings                               783,576           50,450           716,729            34,546
    Industrial buildings                           298,549           13,263           295,889            21,200
    Hotels/motels                                  109,185           14,122           101,052                --
    Medical buildings                              124,369               --            99,979             9,748
    Nursing/retirement homes                        46,696               --            72,359                --
    Mixed Use                                       65,151               --            71,007                --
    Other                                           17,570            8,473            21,947             1,601
                                                 3,545,253          154,885         3,657,292           110,985
    Less allowance for losses                       39,795               --            38,645                  --
                                                $3,505,458         $154,885        $3,618,647          $110,985
</TABLE>

     Mortgage  loan  fundings  are  restricted  by  state  insurance  regulatory
     authorities to 80 percent or less of the market value of the real estate at
     the time of  origination  of the  loan.  The  Company  holds  the  mortgage
     document,  which gives it the right to take  possession  of the property if
     the  borrower  fails to perform  according  to the terms of the  agreement.
     Commitments  to  purchase  mortgages  are made in the  ordinary  course  of
     business. The fair value of the mortgage commitments is $nil.

     At December 31, 1998 and 1997, the Company's recorded investment in 
     impaired loans was $24,941 and $45,714, respectively, with allowances of 
     $6,662 and $9,812, respectively.  During 1998 and 1997, the average
     recorded investment in impaired loans was $37,873 and $61,870, 
     respectively.

     The Company recognized $1,809, $2,981 and $4,889 of interest income related
     to impaired  loans for the years ended  December  31,  1998,  1997 and 1996
     respectively.

     The following table presents changes in the allowance for investment losses
     related to all loans:
<TABLE>
<CAPTION>

                                                                     1998              1997             1996
    <S>                                                               <C>              <C>               <C>

    Balance, January 1                                                $38,645          $37,495           $37,340
    Provision for investment losses                                     7,582            8,801            10,005
    Loan payoffs                                                         (800)          (3,851)           (4,700)
    Foreclosures and writeoffs                                         (5,632)          (3,800)           (5,150)

    Balance, December 31                                              $39,795          $38,645           $37,495
</TABLE>

     At December 31, 1998, the Company had commitments to purchase investments 
     other than mortgage loans for $223,011.  Commitments to purchase 
     investments are made in the ordinary course of business.  The fair value
     of these commitments is $nil.

<PAGE>

                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

2.   Investments (continued)

     Net investment income for the years ended December 31 is summarized as 
     follows:
<TABLE>
<CAPTION>

                                                                      1998             1997              1996
    <S>                                                             <C>              <C>               <C>


    Interest on fixed maturities                                    $1,676,984       $1,692,481        $1,666,929
    Interest on mortgage loans                                         301,253          305,742           283,830
    Other investment income                                             43,518           25,089            43,283
    Interest on cash equivalents                                         5,486            5,914             5,754
                                                                     2,027,241        2,029,226         1,999,796
    Less investment expenses                                            40,756           40,837            34,434
                                                                    $1,986,485       $1,988,389        $1,965,362
</TABLE>

     Net realized gain (loss) on investments for the years ended December 31 is 
     summarized as follows:
<TABLE>
<CAPTION>

                                                                      1998              1997            1996
    <S>                                                             <C>              <C>                <C>

    Fixed maturities                                                $  12,084        $  16,115          $  8,736
    Mortgage loans                                                     (5,933)          (6,424)           (8,745)
    Other investments                                                     751           (8,831)             (150)
                                                                   $    6,902      $       860         $    (159)
</TABLE>

     Changes in net unrealized appreciation (depreciation) of investments for 
     the years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>

                                                                      1998             1997             1996

    <S>                                                              <C>              <C>              <C>

    Fixed maturities available for sale                              $(93,474)        $223,441         $(231,853)
    Equity securities                                                    (203)              53               (52)
</TABLE>

3.   Income taxes

     The Company qualifies as a life insurance company for federal income tax 
     purposes.  As such, the Company is subject to the Internal Revenue Code
     provisions applicable to life insurance companies.

     The income tax expense (benefit) for the years ended December 31 consists 
     of the following:
<TABLE>
<CAPTION>

                                                                     1998              1997             1996
    <S>                                                              <C>              <C>               <C>

    Federal income taxes:
    Current                                                          $244,946         $176,879          $260,357
    Deferred                                                          (16,602)          19,982           (65,609)
                                                                      228,344          196,861           194,748
    State income taxes-current                                          7,337            9,803            12,390
    Income tax expense                                               $235,681         $206,664          $207,138
</TABLE>
<PAGE>
                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)


3.   Income taxes (continued)

     Increases (decreases) to the federal tax provision applicable to pretax 
     income based on the statutory rate are attributable to:
<TABLE>
<CAPTION>

                                               1998                       1997                      1996
                                     -------------------------- ------------------------- -------------------------
                                      Provision       Rate       Provision       Rate      Provision       Rate
    <S>                                 <C>           <C>           <C>          <C>          <C>          <C>

    Federal income taxes based on
    the statutory rate                  $271,527      35.0%         $238,319     35.0%        $217,600     35.0%

    (Decreases) increases
       are
       attributable to:

    Tax-excluded interest and
       dividend income                   (12,289)     (1.6)          (10,294)    (1.5)          (9,636)    (1.5)

    State taxes, net of federal
       benefit                             4,769        .6             6,372       .9            8,053      1.3

    Affordable housing credits           (19,688)     (2.5)          (20,705)    (3.0)          (5,090)     (.8)

    Other, net                            (8,638)     (1.1)           (7,028)    (1.0)          (3,789)     (.7)

    Federal income taxes                $235,681      30.4%         $206,664     30.4%        $207,138     33.3%
</TABLE>

     A portion of life insurance company income earned prior to 1984 was not 
     subject to current taxation but was accumulated, for tax purposes, in a 
     policyholders' surplus account.  At December 31, 1998, the Company had a
     policyholders' surplus account balance of $20,114.  The policyholders' 
     surplus account is only taxable if dividends to the stockholder exceed the 
     stockholder's surplus account or if the Company is liquidated. Deferred 
     income taxes of $7,040 have not been established because no distributions 
     of such amounts are contemplated.

     Significant components of the Company's deferred tax assets and liabilities
     as of December 31 are as follows:
<TABLE>
<CAPTION>

                                                                                        1998             1997
    <S>                                                                               <C>               <C>

    Deferred tax assets:
    Policy reserves                                                                   $756,769          $748,204
    Life insurance guaranty fund assessment reserve                                     15,289            20,101
    Other                                                                                4,253             9,589
    Total deferred tax assets                                                          776,311           777,894

    Deferred tax liabilities:
    Deferred policy acquisition costs                                                  698,471           700,032
    Unrealized gain on investments                                                      91,315           121,885
    Investments, other                                                                   3,455            17,559
    Total deferred tax liabilities                                                     793,241           839,476
    Net deferred tax liabilities                                                      $ 16,930          $ 61,582
</TABLE>
<PAGE>
                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

3.   Income taxes (continued)

     The Company is required to establish a valuation allowance for any portion 
     of the deferred tax assets that management believes will not be realized.  
     In the opinion of management, it is more likely than not that the Company 
     will realize the benefit of the deferred tax assets and, therefore, no 
     such valuation allowance has been established.

4.   Stockholder's equity

     Retained earnings available for distribution as dividends to the parent 
     are limited to the Company's surplus as determined in accordance with 
     accounting practices prescribed by state insurance regulatory authorities.
     Statutory unassigned surplus aggregated $1,598,203 as of December 31, 1998 
     and $1,468,677 as of December 31, 1997 (see Note 3 with respect to the 
     income tax effect of certain distributions).  In addition, any dividend
     distributions in 1999 in excess of approximately $353,933 would require 
     approval of the Department of Commerce of the State of Minnesota.

     Statutory net income for the years ended December 31 and capital and 
     surplus as of December 31 are summarized as follows:
<TABLE>
<CAPTION>

                                                                     1998              1997             1996
    <S>                                                             <C>              <C>               <C>

    Statutory net income                                            $  429,903       $  379,615        $  365,585
    Statutory capital and surplus                                    1,883,405        1,765,290         1,565,082
</TABLE>

5.   Related party transactions

     The Company  loans funds to AEFC under a  collateral  loan  agreement.  The
     balance of the loan was $nil at December  31, 1998 and 1997.  This loan can
     be increased  to a maximum of $75,000 and pays  interest at a rate equal to
     the preceding month's effective new money rate for the Company's  permanent
     investments.  Interest income on related party loans totaled $nil, $103 and
     $780 in 1998, 1997 and 1996, respectively.

     The Company participates in the American Express Company Retirement Plan 
     which covers all permanent employees age 21 and over who have met certain 
     employment requirements.  Employer contributions to the plan are based on 
     participants' age, years of service and total compensation for the year.  
     Funding of retirement costs for this plan complies with the applicable 
     minimum funding requirements specified by ERISA.  The Company's share of 
     the total net periodic pension cost was $211, $201 and $174 in 1998, 1997 
     and 1996, respectively.

     The Company also participates in defined contribution pension plans of 
     American Express Company which cover all employees who have met certain 
     employment requirements.  Company contributions to the plans are a percent 
     of either each employee's eligible compensation or basic contributions.  
     Costs of these plans charged to operations in 1998, 1997 and 1996 were 
     $1,503, $1,245 and $990, respectively.
<PAGE>


                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

5.   Related party transactions (continued)

     The Company participates in defined benefit health care plans of AEFC that 
     provide health care and life insurance benefits to retired employees and 
     retired financial advisors.  The plans include participant contributions 
     and service related eligibility requirements.  Upon retirement, such 
     employees are considered to have been employees of AEFC.  AEFC expenses 
     these benefits and allocates the expenses to its subsidiaries.  The 
     Company's share of postretirement benefits in 1998, 1997 and 1996 was 
     $1,352, $1,330 and $1,449, respectively.


     Charges by AEFC for use of joint facilities, technology support, marketing 
     services and other services aggregated $411,337, $414,155 and $397,362 for 
     1998, 1997 and 1996, respectively.  Certain of these costs are included in 
     deferred policy acquisition costs.

6.   Commitments and contingencies

     At  December  31,  1998,  1997 and 1996,  traditional  life  insurance  and
     universal life-type insurance in force aggregated $81,074,928,  $74,730,720
     and  $67,274,354   respectively,   of  which  $4,912,313,   $4,351,904  and
     $3,875,921  were  reinsured at the  respective  year ends. The Company also
     reinsures  a portion  of the risks  assumed  under  disability  income  and
     long-term care policies.  Under all reinsurance agreements,  premiums ceded
     to  reinsurers  amounted  to $66,378,  $60,495 and $48,250 and  reinsurance
     recovered from reinsurers amounted to $20,982, $19,042, and $15,612 for the
     years ended  December 31, 1998,  1997 and 1996,  respectively.  Reinsurance
     contracts  do not  relieve  the  Company  from its  primary  obligation  to
     policyholders.

          A number of lawsuits have been filed against life and health  insurers
          in jurisdictions in which the Company, its parent and its subsidiaries
          conduct business  involving  insurers' sales practices,  alleged agent
          misconduct,  failure to properly  supervise agents, and other matters.
          The Company  has been named as a defendant  in three of these types of
          actions.

          The plaintiffs  purport to represent a class consisting of all persons
          who  purchased   policies  or  contracts  from  the  Company  and  its
          subsidiaries.  The  complaints  put at  issue  various  alleged  sales
          practices and misrepresentations, alleged breaches of fiduciary duties
          and alleged violations of consumer fraud statutes. The Company and its
          subsidiaries  believe  they have  meritorious  defenses  to the claims
          raised in these lawsuits.

     The outcome of any litigation cannot be predicted with certainty.  In the 
     opinion of management, however, the ultimate resolution of these lawsuits, 
     taken in the aggregate, should not have a material adverse effect on the 
     Company's consolidated financial position.

          The IRS routinely  examines the Company's  federal income tax returns,
          and is currently  auditing the Company's  returns for the 1990 through
          1992 tax years.  Management  does not believe there will be a material
          adverse effect on the Company's  consolidated  financial position as a
          result of this audit.

7.   Lines of credit

          The Company has available lines of credit with its parent  aggregating
          $100,000.  The interest  rate for any  borrowings  is  established  by
          reference to various indices plus 20 to 45 basis points,  depending on
          the term.  Borrowings  outstanding  under this  agreement were $nil at
          December 31, 1998 and 1997.

<PAGE>

                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)


8.   Derivative financial instruments

     The Company enters into transactions involving derivative financial 
     instruments to manage its exposure to interest rate risk and equity market 
     risk, including hedging specific transactions.  The Company does not
     hold derivative instruments for trading purposes.  The Company manages 
     risks associated with these instruments as described below.

     Market risk is the possibility that the value of the derivative financial 
     instruments will change due to fluctuations in a factor from which the 
     instrument derives its value, primarily an interest rate or equity
     market index.  The Company is not impacted by market risk related to 
     derivatives held for non-trading purposes beyond that inherent in cash 
     market transactions.  Derivatives held for purposes other than trading
     are largely used to manage risk and, therefore, the cash flow and income 
     effects of the derivatives are inverse to the effects of the underlying 
     transactions.

     Credit risk is the possibility that the counterparty will not fulfill the 
     terms of the contract.  The Company monitors credit risk related to 
     derivative financial instruments through established approval procedures, 
     including setting concentration limits by counterparty, and requiring 
     collateral, where appropriate.  A vast majority of the Company's 
     counterparties are rated A or better by Moody's and Standard & Poor's.

     Credit risk related to interest rate caps and floors and index options is 
     measured by the replacement cost of the contracts.  The replacement cost 
     represents the fair value of the instruments.

     The notional or contract amount of a derivative financial instrument is 
     generally used to calculate the cash flows that are received or paid over 
     the life of the agreement.  Notional amounts are not recorded on the
     balance sheet.  Notional amounts far exceed the related credit risk.

<PAGE>

                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)


8.   Derivative financial instruments (continued)

     The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>

                                                  Notional         Carrying            Fair         Total Credit

    December 31, 1998                              Amount           Amount             Value          Exposure
    <S>                                          <C>                 <C>            <C>                 <C>    

    Assets:
    Interest rate caps                           $ 3,400,000         $ 15,985       $    4,256          $  4,256
    Interest rate floors                           1,000,000            1,082           13,971            13,971
    Options purchased                                110,912           24,094           29,453            29,453
    Liabilities:
    Options purchased/written                        265,454          (10,526)         (11,062)               --
    Off balance sheet:
    Interest rate swaps                            1,667,000               --          (73,477)               --
                                                                     $ 30,635         $(36,859)          $47,680
</TABLE>
<TABLE>
<CAPTION>

                                                  Notional         Carrying            Fair         Total Credit
    December 31, 1997                              Amount           Amount             Value          Exposure
    <S>                                          <C>                 <C>            <C>                <C>

    Assets:
    Interest rate caps                         $ 4,600,000           $ 24,963       $   15,665         $  15,665
    Interest rate floors                         1,000,000              1,561            4,551             4,551
    Options purchased/written                      279,737              9,808           10,449            10,449
    Liabilities:
    Options written                                 7,373                (89)              114                --
    Off balance sheet:
    Interest rate swaps                          1,267,000               --            (45,799)               --
                                                                      $36,243         $(15,020)          $30,665
</TABLE>

     The fair values of derivative financial instruments are based on market 
     values, dealer quotes or pricing models.  The interest rate caps, floors 
     and swaps expire on various dates from 1999 to 2003. The put and call 
     options expire on various dates from 1999 to 2005.

     Interest rate caps, swaps and floors are used principally to manage the 
     Company's interest rate risk.  These instruments are used to protect the 
     margin between interest rates earned on investments and the interest rates 
     credited to related annuity contract holders.

          The Company is also using interest rate swaps to manage  interest rate
          risk related to the level of fee income  earned on the  management  of
          fixed income securities in separate accounts and the underlying mutual
          funds.  The  amount of fee  income  received  is based  upon the daily
          market  value of the  separate  account and mutual fund  assets.  As a
          result,  changing  interest rate conditions could impact the Company's
          fee income significantly. The Company entered into interest rate swaps
          to hedge  anticipated fee income for 1999 related to separate accounts
          and mutual  funds which invest in fixed  income  securities.  Interest
          will be accrued and  reported in accrued  investment  income and other
          liabilities, as appropriate, and management and other fees.
<PAGE>

                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)


8.   Derivative financial instruments (continued)

          The Company offers a certain  annuity product that pays interest based
          upon the relative  change in a major stock  market  index  between the
          beginning  and end of the  product's  term.  As a means of hedging its
          obligation under the provisions of this product, the Company purchases
          and writes options on the major stock market index.

          Index options are used to manage the equity market risk related to the
          fee income that the Company  receives  from its separate  accounts and
          the underlying  mutual funds. The amount of the fee income received is
          based upon the daily market  value of the separate  account and mutual
          fund assets.  As a result,  the Company's fee income could be impacted
          significantly  by changing  economic  conditions in the equity market.
          The Company entered into index option collars (combination of puts and
          calls) to hedge  anticipated  fee income for 1998 and 1999  related to
          separate accounts and mutual funds which invest in equity  securities.
          Testing has demonstrated the impact of these instruments on the income
          statement closely correlates with the amount of fee income the Company
          realizes. In the event that testing demonstrates that this correlation
          no longer  exists,  or in the event the Company  disposes of the index
          options collars, the instruments will be marked-to-market  through the
          income  statement.  At December 31, 1998 deferred  losses on purchased
          put  and  written   call  index   options   were  $2,933  and  $7,435,
          respectively.  At December 31, 1997  deferred  losses on purchased put
          index  options  were $2,428 and  deferred  gains on written call index
          options were $5,275.

9.   Fair values of financial instruments

     The Company discloses fair value information for most on- and off-balance 
     sheet financial instruments for which it is practicable to estimate that 
     value.  Fair values of life insurance obligations and all non-financial 
     instruments, such as deferred acquisition costs are excluded.

     Off-balance sheet intangible assets, such as the value of the field force, 
     are also excluded.  Management believes the value of excluded assets and 
     liabilities is significant.  The fair value of the Company, therefore, 
     cannot be estimated by aggregating the amounts presented.
<TABLE>
<CAPTION>

                                                                    1998                               1997

                                                  Carrying           Fair            Carrying           Fair
    Financial Assets                               Value             Value            Value             Value
    <S>                                       <C>               <C>              <C>               <C>

    Investments:
    Fixed maturities (Note 2):
    Held to maturity                          $   7,964,114     $   8,420,035    $   9,315,450     $   9,743,410
    Available for sale                           13,613,139        13,613,139       12,876,694        12,876,694
    Mortgage loans on
    real estate (Note 2)                          3,505,458         3,745,617        3,618,647         3,808,570
    Other:
    Equity securities (Note 2)                       3,158              3,158            3,361             3,361
    Derivative financial
    Instruments (Note 8)                            41,161            47,680            36,332            30,665
    Other                                           28,872            28,872           82,347             85,383
    Cash and cash
    equivalents (Note 1)                            22,453            22,453           19,686            19,686
    Separate account assets (Note 1)            27,349,401        27,349,401       23,214,504        23,214,504
</TABLE>
<PAGE>
                           IDS LIFE INSURANCE COMPANY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                  ($ thousands)

9.   Fair values of financial instruments (continued)
<TABLE>
<CAPTION>

                                                                    1998                               1997

                                                  Carrying           Fair            Carrying           Fair
    Financial Liabilities                          Value             Value            Value             Value
    <S>                                       <C>               <C>              <C>               <C>    

    Future policy benefits for
    fixed annuities                           $19,855,203       $19,144,838      $20,731,052       $19,882,302
    Derivative financial
    instruments (Note 8)                           10,526            84,539               89            45,685
    Separate account liabilities               25,005,732        24,179,115       21,488,282        20,707,620
</TABLE>

          At December 31, 1998 and 1997,  the carrying  amount and fair value of
          future   policy   benefits   for   fixed   annuities    exclude   life
          insurance-related  contracts  carried at  $1,226,985  and  $1,185,155,
          respectively,  and policy loans of $90,115 and $93,540,  respectively.
          The fair  value  of these  benefits  is  based  on the  status  of the
          annuities  at December  31, 1998 and 1997.  The fair value of deferred
          annuities  is estimated  as the  carrying  amount less any  applicable
          surrender  charges and related loans.  The fair value for annuities in
          non-life contingent payout status is estimated as the present value of
          projected  benefit payments at rates  appropriate for contracts issued
          in 1998 and 1997.

     At December 31, 1998 and 1997, the fair value of liabilities related to 
     separate accounts is estimated as the carrying amount less any applicable 
     surrender charges and less variable insurance contracts carried at
     $2,343,669 and $1,726,222, respectively.