<PAGE>


                                  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, 1999

                                       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 contained  herein,  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, 1999 of $64.4 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  investments.  At December 31, 1999,
the Company  had $52.4  billion of fixed and  variable  annuities  in force,  an
increase of 13 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,  1999,  the  Company  had $71.4  billion of fixed and
variable universal life-type insurance in force, up 11 percent from December 31,
1998.

<PAGE>

Assets held in separate  accounts  which fund the variable  annuity and variable
life insurance products totaled $35.9 billion at December 31, 1999, a 32 percent
increase from December 31, 1998.

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  Thoreson 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 above actions seek damages in an unspecified amount and also seek to
establish a claims  resolution  facility  for the  determination  of  individual
issues.

The  Company is  included as a party to a  preliminary  settlement  of all three
class action  lawsuits.  The Company believes this approach will put these cases
behind it and provide a fair outcome for the  Company's  clients.  The Company's
decision to settle does not include any admission of wrongdoing.  The settlement
costs allocated to the Company are included in the  accompanying  1999 statement
of  income  and did not have a  material  impact on the  Company's  consolidated
financial  position or results from  operations.  Further,  the Company does not
anticipate that any other lawsuits in which the Company is a defendant will have
a material adverse effect on the Company's financial condition.

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

1999 Compared to 1998:

Consolidated net income  increased 18 percent to $636 million in 1999,  compared
to $540 million in 1998.  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 1999.

Consolidated  income before income taxes totaled $904 million in 1999,  compared
with $776 million in 1998.

Total  premiums and  investment  contract  deposits  received  increased to $5.0
billion in 1999,  compared with $4.4 billion in 1998. This increase is primarily
due to an increase in variable annuity deposits in 1999.

Total revenues increased to $3.1 billion in 1999,  compared with $3.0 billion in
1998. 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  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 7 percent to $412
million in 1999,  compared  with $384 million in 1998.  This  increase  reflects
increased total life insurance in force, which grew 10 percent to $89 billion at
December 31, 1999.

Net realized gain on investments  increased to $27 million in 1999,  compared to
$7 million in 1998.  The increase was primarily due to the sale of available for
sale fixed maturity investments at a gain as well as a decrease in the allowance
for mortgage loan losses based on management's  regular  evaluation of allowance
adequacy.

Management and other fees increased 18 percent to $473 million in 1999, compared
with $401  million in 1998.  This is  primarily  due to an  increase in separate
account assets, which grew 31 percent to $35.9 billion at December 31, 1999, due
to market  appreciation and sales. The Company  provides  investment  management
services for 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  decreased  slightly to $2.2 billion in 1999.  The
largest component of expenses,  interest  credited to policyholder  accounts for
universal  life-type  insurance  and  investment  contracts,  decreased  to $1.2
billion,  reflecting  a decrease in fixed  annuities in force.  Amortization  of
deferred policy  acquisition  costs decreased to $333 million,  compared to $383
million in 1998.  This  decrease  was due  primarily  to the impact of  changing
prospective separate account investment performance assumptions.

Other insurance and operating  expenses  increased 17 percent to $335 million in
1999,  compared to $287 million in 1998.  This increase is primarily a result of
business growth and technology costs related to growth initiatives.

<PAGE>

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>

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  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,
1999, would be approximately $11 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 a
portion  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  $45  million  based  on  assets  under
management and the index options as of December 31, 1999.

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  available  lines of credit  with its parent  aggregating  $200
million  ($100  million  committed  and $100 million  uncommitted).  The line of
credit is used strictly as a short-term source of funds.  Borrowings outstanding
were $50,000 uncommitted at December 31, 1999. At December 31, 1999, outstanding
reverse repurchase agreements totaled $130 million.

At December 31, 1999,  investments in fixed  maturities  comprised 81 percent of
the  Company's  total  invested  assets.   Of  the  fixed  maturity   portfolio,
approximately  31 percent is  invested in GNMA,  FNMA and FHLMC  mortgage-backed
securities which are considered AAA/Aaa quality.

At December 31, 1999,  approximately 14 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, 1999, net unrealized  depreciation  on fixed  maturities held to
maturity included $97 million of gross unrealized  appreciation and $147 million
of  gross  unrealized   depreciation.   Net  unrealized  depreciation  on  fixed
maturities   available  for  sale  included  $71  million  of  gross  unrealized
appreciation and $725 million of gross unrealized depreciation.

<PAGE>

At December 31, 1999, the Company had an allowance for losses for mortgage loans
totaling $28 million and for real estate investments totaling $nil.

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 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  did not have a  material  impact on the  Company's  results  of
operations or financial condition.

In the first  quarter of 2000,  the Company  paid a $70 million  dividend to its
parent. In 1999, dividends paid to its parent were $350 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, 1999, 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 coordinated the Year 2000 (Y2K) efforts on behalf of all
of its businesses and  subsidiaries.  Representatives  of AEFC  participated  in
these efforts.

The Company,  to date, has not experienced any material systems failures related
to the Y2K rollover.  American Express' and AEFC's  remediation plan for the Y2K
issue is  discussed  in detail in the  Company's  1998 10-K report and 1999 10-Q
reports.  American  Express  and AEFC will  continue  their Y2K  monitoring  and
address  any  issues  that may arise  from  internal  systems  or those of third
parties.  American  Express' and AEFC's  cumulative costs since inception of the
Y2K  initiative  were $505  million  and $67.7  million,  respectively,  through
December 31, 1999,  and are  expected to be  approximately  $10 million and $0.8
million,  respectively,  in 2000. The majority of these costs are managed by and
included in American Express'  Corporate and Other segment,  as most remediation
efforts are  related to systems  that are  maintained  by the  American  Express
Technologies organization.  Costs related to Y2K have not had a material adverse
effect on the Company's results of operations or financial condition.

<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                                       18

      Consolidated Balance Sheets at December 31, 1999 and 1998         19-20

      Consolidated Statements of Income for the years ended
              December 31, 1999, 1998 and 1997                             21

      Consolidated Statements of Stockholder's Equity for the years ended
          December 31, 1999, 1998 and 1997                              22-23

      Consolidated Statements of Cash Flows for the years ended
              December 31, 1999, 1998 and 1997                          24-25

      Notes to Consolidated Financial Statements                        26-43

     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 12.

           (2)  Financial Statement Schedules

               See  index  to  Financial   Statements  and  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  Non-tax  qualified  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 Non-tax  qualified 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 Statement No.
                    33-28976 is incorporated herein by reference.

               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.

<PAGE>

               4.5  Copy of Tax qualified Group Annuity  Contract,  Form 30369C,
                    filed   electronically  as  Exhibit  4.5  to  Post-Effective
                    Amendment No. 10 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 Group IRA Annuity  Certificate,  Form 30371C,  filed
                    electronically  as Exhibit 4.8 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.

               4.13 Copy  of  Endorsement  No.  33007  filed  electronically  as
                    Exhibit  4.13  to   Post-Effective   Amendment   No.  12  to
                    Registration  Statement No. 33-28976 is incorporated  herein
                    by reference.

               4.14 Copy  of  Group  Annuity   Contract,   Form  30363D,   filed
                    electronically  as Exhibit 4.1 to  Post-Effective  Amendment
                    No. 2 to Registration Statement No. 33-50968 is incorporated
                    herein by reference.

               4.15 Copy  of  Group  Annuity  Certificate,  Form  30360D,  filed
                    electronically  as Exhibit 4.2 to  Post-Effective  Amendment
                    No. 2 to Registration Statement No. 33-50968 is incorporated
                    herein by reference.

               4.16 Form  of  Deferred  Annuity  Contract,  Form  30365E,  filed
                    electronically  as Exhibit 4.3 to  Post-Effective  Amendment
                    No. 2 to Registration Statement No. 33-50968 is incorporated
                    herein by reference.

               4.17 Copy of  Group  Deferred  Variable  Annuity  Contract,  Form
                    34660, filed electronically as Exhibit 4.1 to Post-Effective
                    Amendment No. 2 to  Registration  Statement No.  33-48701 is
                    incorporated herein by reference.

<PAGE>

               4.18 Copy of  Non-tax  qualified  Group  Annuity  Contract,  Form
                    33111,  filed  electronically as Exhibit 4.1 to Registration
                    Statement No. 333-42793 is incorporated herein by reference.

               4.19 Copy of Non-tax  qualified Group Annuity  Certificate,  Form
                    33114,  filed  electronically as Exhibit 4.2 to Registration
                    Statement No. 333-42793 is incorporated herein by reference.

               4.20 Copy of Tax qualified  Group Annuity  Contract,  Form 33112,
                    filed   electronically   as  Exhibit  4.3  to   Registration
                    Statement No. 333-42793 is incorporated herein by reference.

               4.21 Copy of Tax qualified Group Annuity Certificate, Form 33115,
                    filed   electronically   as  Exhibit  4.4  to   Registration
                    Statement No. 333-42793 is incorporated herein by reference.

               4.22 Copy of  Group  IRA  Annuity  Contract,  Form  33113,  filed
                    electronically as Exhibit 4.5 to Registration  Statement No.
                    333-42793 is incorporated herein by reference.

               4.23 Copy of Group IRA Annuity  Certificate,  Form  33116,  filed
                    electronically as Exhibit 4.6 to Registration  Statement No.
                    333-42793 is incorporated herein by reference.

               4.24 Copy of Non-tax qualified Individual Annuity Contract,  Form
                    30484, filed electronically as Exhibit 4.7 to Post-Effective
                    Amendment No. 1 to Registration  Statement No.  333-42793 is
                    incorporated herein by reference.

               4.25 Copy of Tax  qualified  Individual  Annuity  Contract,  Form
                    30485, filed electronically as Exhibit 4.8 to Post-Effective
                    Amendment No. 1 to Registration  Statement No.  333-42793 is
                    incorporated herein by reference.

               4.26 Copy  of  Individual   IRA  Contract,   Form  30486,   filed
                    electronically  as Exhibit 4.9 to  Post-Effective  Amendment
                    No.  1  to   Registration   Statement   No.   333-42793   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 1999

No reports on Form 8-K were  required to be filed by the Company for the quarter
ended December 31, 1999.

<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


3/12/2000                    By       /s/ Richard W. Kling
Date                                  Richard W. Kling, President
                                      and Chief Executive Officer

3/12/2000                    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.

3/12/2000                    By       /s/ David R. Hubers
Date                                  David R. Hubers, Director

3/12/2000                    By       /s/ Richard W. Kling
Date                                  Richard W. Kling, President
                                      and Chief Executive Officer

3/12/2000                    By       /s/ Paul F. Kolkman
Date                                  Paul F. Kolkman, Executive Vice
                                      President

3/12/2000                    By       /s/ James A. Mitchell
Date                                  James A. Mitchell, Chairman of the
                                      Board

3/12/2000                    By       /s/ Paula R. Meyer
Date                                  Paula R. Meyer, Executive Vice
                                      President, Assured Assets

3/12/2000                    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, 1999 and 1998,  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, 1999. These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of IDS Life Insurance
Company at  December  31,  1999 and 1998,  and the  consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1999, in conformity with accounting  principles  generally accepted
in the United States.


/s/ KPMG LLP
    KPMG LLP
February 3, 2000
Minneapolis, Minnesota

<PAGE>

                           IDS LIFE INSURANCE COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                  December 31,
                                  ($ thousands)
<TABLE>
<CAPTION>
<S>                                                             <C>             <C>
ASSETS                                                              1999            1998
                                                                      -               -

Investments:
  Fixed maturities:
      Held to maturity, at amortized cost (fair value:
          1999, $7,105,743; 1998, $8,420,035)                   $  7,156,292     $  7,964,114
      Available for sale, at fair value (amortized cost:
          1999, $13,703,137; 1998, $13,344,949)                   13,049,549       13,613,139
                                                                ------------     ------------
                                                                  20,205,841       21,577,253

  Mortgage loans on real estate                                    3,606,377        3,505,458
  Policy loans                                                       561,834          525,431
  Other investments                                                  506,797          366,604
                                                               -------------     ------------

          Total investments                                       24,880,849       25,974,746

Cash and cash equivalents                                             32,333           22,453

Amounts recoverable from reinsurers                                  327,168          262,260

Amounts due from brokers                                                 145              327

Other accounts receivable                                             48,578           47,963

Accrued investment income                                            343,449          366,574

Deferred policy acquisition costs                                  2,665,175        2,496,352

Deferred income taxes, net                                           216,020               --

Other assets                                                          33,089           30,487

Separate account assets                                           35,894,732       27,349,401
                                                                  -----------     ------------

          Total assets                                           $64,441,538      $56,550,563
                                                                 ===========      ===========
</TABLE>

<PAGE>

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

LIABILITIES AND STOCKHOLDER'S EQUITY                                1999             1998
                                                                     --               --
Liabilities:
  Future policy benefits:
    Fixed annuities                                              $20,552,159      $21,172,303
    Universal life-type insurance                                  3,391,203        3,343,671
    Traditional life insurance                                       226,842          225,306
    Disability income and long-term care insurance                   811,941          660,320
  Policy claims and other policyholders' funds                        24,600           70,309
  Deferred income taxes, net                                              --           16,930
  Amounts due to brokers                                             148,112          195,406
  Other liabilities                                                  579,678          410,285
  Separate account liabilities                                    35,894,732       27,349,401
                                                                 ------------      ------------

          Total liabilities                                       61,629,267       53,443,931
                                                                 ------------      ------------

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          288,327
  Accumulated other comprehensive (loss) income, net of tax:
    Net unrealized securities (losses) gains                        (411,230)         169,584
  Retained earnings                                                2,932,174        2,645,721
                                                                 -------------      -------------

          Total stockholder's equity                               2,812,271        3,106,632
                                                                 -------------      -------------

Total liabilities and stockholder's equity                       $64,441,538      $56,550,563
                                                                 ===========      ===========
</TABLE>

<PAGE>

                             See accompanying notes.

                           IDS LIFE INSURANCE COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME
                            Years ended December 31,
                                  ($ thousands)
<TABLE>
<CAPTION>
<S>                                                   <C>               <C>              <C>
                                                          1999              1998              1997
                                                       -----------       -----------      ----------
Revenues:
  Premiums:
    Traditional life insurance                         $    53,790       $    53,132      $    52,473
    Disability income and long-term care insurance         201,637           176,298          154,021
                                                        ----------        ----------       ----------

           Total premiums                                  255,427           229,430          206,494

  Policyholder and contractholder charges                  411,994           383,965          341,726
  Management and other fees                                473,108           401,057          340,892
  Net investment income                                  1,919,573         1,986,485        1,988,389
  Net realized gain on investments                          26,608             6,902              860
                                                       -----------      ------------      ------------

           Total revenues                                3,086,710         3,007,839        2,878,361
                                                         ---------         ---------        ---------


Benefits and expenses:
  Death and other benefits:
    Traditional life insurance                              29,819            29,835           28,951
    Universal life-type insurance
      and investment contracts                             118,561           108,349           92,814
    Disability income and long-term care insurance          30,622            27,414           22,333
  Increase in liabilities for future policy benefits:
      Traditional life insurance                             7,311             6,052            3,946
      Disability income and long-term care insurance        87,620            73,305           63,631
  Interest credited on universal life-type
    insurance and investment contracts                   1,240,575         1,317,124        1,386,448
  Amortization of deferred policy
    acquisition costs                                      332,705           382,642          322,731
  Other insurance and operating expenses                   335,180           287,326          276,596
                                                        ----------        ----------       ----------

           Total benefits and expenses                   2,182,393         2,232,047        2,197,450
                                                         ---------         ---------        ---------


Income before income taxes                                 904,317           775,792          680,911

Income taxes                                               267,864           235,681          206,664
                                                        ----------        ----------       ----------

Net income                                              $  636,453        $  540,111       $  474,247
                                                        ==========        ==========       ==========
</TABLE>

<PAGE>

                             See accompanying notes.
                           IDS LIFE INSURANCE COMPANY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                       Three years ended December 31, 1999
                                  ($ thousands)
<TABLE>
<CAPTION>
<S>                                                    <C>             <C>        <C>            <C>                 <C>

                                                                                                 Accumulated Other
                                                       Total                        Additional   Comprehensive
                                                       Stockholder's    Capital     Paid-In      (Loss) Income,      Retained
                                                       Equity           Stock       Capital      Net of Tax          Earnings

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 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
Comprehensive income:
   Net income                                              540,111          --           --              --             540,111
   Unrealized holding losses arising during
      the year, net of 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

</TABLE>

<PAGE>

                           IDS LIFE INSURANCE COMPANY
           CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (continued)
                       Three years ended December 31, 1999
                                  ($ thousands)

<TABLE>
<CAPTION>
<S>                                                    <C>                <C>        <C>         <C>                  <C>

                                                                                                   Accumulated
                                                                                                      Other
                                                        Total                         Additional Comprehensive
                                                        Stockholder's     Capital      Paid-In   (Loss) Income,       Retained
                                                           Equity          Stock      Capital       Net of Tax        Earnings

Balance, December 31, 1998                                 $3,106,632      $3,000     $288,327        $169,584       $2,645,721
Comprehensive income:
   Net income                                                 636,453         --           --              --           636,453
   Unrealized holding losses arising during
      the year, net of deferred policy acquisition
     costs of $28,444 and taxes of $304,936                  (566,311)        --           --        (566,311)              --
   Reclassification adjustment for gains
      included in net income, net of tax
      of $7,810                                               (14,503)        --           --         (14,503)              --
                                                       -----------------                        ----------------
   Other comprehensive loss                                  (580,814)        --           --        (580,814)              --
Comprehensive income                                           55,639         --           --              --               --
Cash dividends to parent                                     (350,000)        --           --              --          (350,000)
                                                       ---------------------------------------------------------------------------

Balance, December 31, 1999                                 $2,812,271      $3,000     $288,327       $(411,230)       $2,932,174
                                                       ============================================================================

</TABLE>

<PAGE>

                             See accompanying notes.

                           IDS LIFE INSURANCE COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            Years ended December 31,
                                  ($ thousands)
<TABLE>
<CAPTION>
<S>                                                              <C>               <C>              <C>
                                                                     1999             1998              1997
                                                                 ------------      -----------       ---------
Cash flows from operating activities:
  Net income                                                        $ 636,453         $ 540,111       $ 474,247
  Adjustments to reconcile net income to net cash
    provided by operating activities:
       Policy loans, excluding universal
        life-type insurance:
          Issuance                                                    (56,153)          (53,883)       (54,665)
          Repayment                                                    54,105            57,902         46,015
      Change in amounts recoverable from reinsurers                   (64,908)          (56,544)       (47,994)
      Change in other accounts receivable                                (615)          (10,068)         6,194
      Change in accrued investment income                              23,125            (9,184)       (14,077)
      Change in deferred policy acquisition costs, net               (140,379)          (10,443)      (156,486)
      Change in liabilities for future policy benefits for
        traditional life, disability income and long-term
        care insurance                                                153,157           138,826        112,915
      Change in policy claims and other
        policyholders' funds                                          (45,709)            1,964        (15,289)
      Deferred income tax provision (benefit)                          79,796           (19,122)        19,982
      Change in other liabilities                                     169,395            64,902         13,305
       (Accretion of discount),
         amortization of premium, net                                 (17,907)            9,170         (5,649)
      Net realized gain on investments                                (26,608)           (6,902)          (860)
      Policyholder and contractholder charges, non-cash              (175,059)         (172,396)      (160,885)
      Other, net                                                       (5,324)           10,786          7,161
                                                                   -----------       -----------    -----------

          Net cash provided by operating
            activities                                              $ 583,369         $ 485,119      $ 223,914
                                                                    ---------         ---------      ---------
</TABLE>

<PAGE>

                           IDS LIFE INSURANCE COMPANY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                            Years ended December 31,
                                  ($ thousands)
<TABLE>
<CAPTION>
<S>                                                              <C>               <C>              <C>

                                                                        1999              1998             1997
                                                                  -------------     -------------      -----------
Cash flows from investing activities:
  Fixed maturities held to maturity:
        Purchases                                                 $      (3,030)    $      (1,020)  $       (1,996)
        Maturities, sinking fund payments and calls                     741,949         1,162,731          686,503
        Sales                                                            66,547           236,963          236,761
    Fixed maturities available for sale:
        Purchases                                                    (3,433,128)       (4,100,238)      (3,160,133)
        Maturities, sinking fund payments and calls                   1,442,507         2,967,311        1,206,213
        Sales                                                         1,691,389           278,955          457,585
    Other investments, excluding policy loans:
        Purchases                                                      (657,383)         (555,647)        (524,521)
        Sales                                                           406,684           579,038          335,765
  Change in amounts due from brokers                                        182             8,073            2,647
  Change in amounts due to brokers                                      (47,294)         (186,052)         119,471
                                                                   -------------      ------------     -----------
           Net cash provided by (used in)
               investing activities                                     208,423           390,114         (641,705)
                                                                    -----------       -----------      -----------

Cash flows from financing activities:
  Activity related to universal life-type insurance
     and investment contracts:
       Considerations received                                        2,031,630         1,873,624        2,785,758
       Surrenders and other benefits                                 (3,669,759)       (3,792,612)      (3,736,242)
       Interest credited to account balances                          1,240,575         1,317,124        1,386,448
  Universal life-type insurance policy loans:
    Issuance                                                           (102,239)          (97,602)         (84,835)
    Repayment                                                            67,881            67,000           54,513
  Capital transaction with parent                                            --                --            7,232
  Dividends paid                                                       (350,000)         (240,000)        (200,000)
                                                                    -----------       -----------      -----------
          Net cash (used in) provided by
            financing activities                                       (781,912)         (872,466)         212,874
                                                                    ------------      ------------     -----------

Net increase (decrease) in cash and cash equivalents                      9,880             2,767         (204,917)

Cash and cash equivalents at beginning of year                           22,453            19,686          224,603
                                                                   ------------      ------------     ------------

Cash and cash equivalents at end of year                           $     32,333      $     22,453     $     19,686
                                                                   ============      ============     ============
</TABLE>

<PAGE>

                            See accompanying notes


                           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 significant intercompany
     accounts and transactions have been eliminated in consolidation.

     The accompanying  consolidated  financial  statements have been prepared in
     conformity  with  accounting  principles  generally  accepted in the United
     States 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  accounting
     principles  generally accepted in the United States 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
     (loss) income,  net of the related deferred policy acquisition costs effect
     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>

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 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 may  purchase  and write 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.

     The  Company  also uses  index  options  to manage  the risks  related to a
     certain annuity product that pay 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>

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:

                                       1999             1998             1997
                                     ---------        ----------       ---------
    Cash paid during the year for:
    Income taxes                     $214,940         $215,003          $174,472
    Interest on borrowings              4,521           14,529             8,213

     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>

1.   Summary of significant accounting policies (continued)

     Amortization  of deferred  policy  acquisition  costs  requires  the use of
     assumptions  including  interest margins,  mortality  margins,  persistency
     rates,  maintenance  expense  levels and, for variable  products,  separate
     account  performance.   For  universal  life-type  insurance  and  deferred
     annuities,  actual  experience is reflected in the  Company's  amortization
     models monthly. As actual experience differs from the current  assumptions,
     management  considers  the need to change key  assumptions  underlying  the
     amortization  models  prospectively.  The  impact of  changing  prospective
     assumptions  is  reflected  in the period that such changes are made and is
     generally referred to as an unlocking  adjustment.  During 1999,  unlocking
     adjustments  resulted in a net decrease in  amortization  of $56.8 million.
     Net unlocking adjustments in 1998 and 1997 were not significant.

     Liabilities for future policy benefits

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

     Liabilities  for equity  indexed  deferred  annuities are determined as the
     present value of guaranteed benefits and the intrinsic value of index-based
     benefits.

     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 5% to 8%.

<PAGE>

1.   Summary of significant accounting policies (continued)

     Reinsurance

     The maximum  amount of life  insurance risk retained by the Company is $750
     on any policy  insuring a single  life and $1,500 on any policy  insuring a
     joint-life combination.  Beginning in 1999, the Company retains only 20% of
     the mortality risk on new variable universal life insurance policies.  Risk
     not retained is reinsured with other life insurance companies, primarily on
     a yearly  renewable  term basis.  Long-term  care  policies  are  primarily
     reinsured on a coinsurance basis. The Company retains all disability income
     and waiver of premium risk.  Beginning in 2000, the Company will retain all
     accidental death benefit 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,  1999 and 1998 are $852
     receivable  from and  $26,291  payable to,  respectively,  AEFC for federal
     income taxes.

     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.

<PAGE>

1.   Summary of significant accounting policies (continued)

Accounting changes

American Institute of Certified Public Accountants (AICPA) Statement of Position
(SOP) 98-1, "Accounting for Costs of Computer Software Developed or Obtained for
Internal  Use"  became   effective   January  1,  1999.  The  SOP  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  capitalized  by  AEFC.  As a  result,  the new rule did not have a
material impact on the Company's results of operations or financial condition.

Effective  January 1, 1999, the Company  adopted AICPA 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 had  historically  carried a liability  for  estimated
guaranty fund assessment  exposure.  Adoption of the SOP did not have a material
impact on the Company's results of operations or financial condition.

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, 2001.  This  Statement
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  It requires the  recognition of all  derivatives as either
assets or  liabilities  on the balance sheet 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.  The ultimate  financial  effect of
adoption of the new rule will depend on the derivatives in place at adoption and
cannot be estimated at this time.

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, 1999 are
as follows:

<PAGE>
<TABLE>
<CAPTION>
<S>                                               <C>              <C>             <C>             <C>

                                                                       Gross            Gross
                                                    Amortized       Unrealized       Unrealized          Fair
    Held to maturity                                   Cost            Gains           Losses           Value
    _________________                               __________      ___________      __________        __________

    U.S. Government agency obligations             $      37,613     $      236     $     2,158       $     35,691
    State and municipal obligations                        9,681            150              --              9,831
    Corporate bonds and obligations                    5,713,475         91,571         113,350          5,691,696
    Mortgage-backed securities                         1,395,523          4,953          31,951          1,368,525
                                                    ------------     ----------     -----------        -----------
                                                     $ 7,156,292       $ 96,910       $ 147,459         $7,105,743
                                                     ===========       ========       =========         ==========



2.   Investments (continued)
                                                                       Gross            Gross
                                                    Amortized       Unrealized       Unrealized           Fair
    Available for sale                                 Cost            Gains           Losses            Value
    __________________                            ______________   ____________    ______________      ____________

    U.S. Government agency obligations            $       46,325   $       612      $     2,231      $       44,706
    State and municipal obligations                       13,226           519              191              13,554
    Corporate bonds and obligations                    7,960,352        60,120          560,450           7,460,022
    Mortgage-backed securities                         5,683,234         9,692          161,659           5,531,267
                                                   -------------   -----------       ----------       -------------
    Total fixed maturities                            13,703,137        70,943          724,531          13,049,549
    Equity securities                                                       16               --             3,016
                                                     -----------      ---------       ----------      -------------
                                                           3,000
                                                     $13,706,137     $  70,959        $ 724,531         $13,052,565
                                                     ===========     =========        =========         ===========

</TABLE>

     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:

<PAGE>

<TABLE>
<CAPTION>
<S>                                               <C>             <C>           <C>                 <C>


                                                                       Gross            Gross
                                                    Amortized       Unrealized       Unrealized          Fair
    Held to maturity                                   Cost            Gains           Losses           Value

    U.S. Government agency obligations            $      39,888      $    4,460    $         --       $      44,348
    State and municipal obligations                       9,683             490              --              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        $483,160         $27,239          $8,420,035
                                                    ===========        ========         =======          ==========

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

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                                       3,000           158               --              3,158
                                                   -------------   ------------   --------------      ------------
                                                    $13,347,949      $427,398         $159,050         13,616,297
                                                    ===========      ========         ========         ===========

</TABLE>

<PAGE>

2.   Investments (continued)

     The amortized  cost and fair value of  investments  in fixed  maturities at
     December  31,  1999 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. Amortized Fair Held to maturity Cost Value

    Due in one year or less        $      238,740     $     239,747
    Due from one to five years          2,996,713         3,012,721
    Due from five to ten years          1,922,199         1,893,918
    Due in more than ten years            603,117           590,832
    Mortgage-backed securities          1,395,523         1,368,525
                                   --------------     -------------
                                    $   7,156,292      $  7,105,743
                                    =============      ============

                                     Amortized           Fair
    Available for sale                  Cost             Value

    Due in one year or less         $     271,381     $     274,415
    Due from one to five years            595,747           592,533
    Due from five to ten years          4,936,041         4,669,573
    Due in more than ten years          2,216,734         1,981,761
    Mortgage-backed securities          5,683,234         5,531,267
                                    -------------     -------------
                                      $13,703,137       $13,049,549

     During the years ended December 31, 1999, 1998 and 1997,  fixed  maturities
     classified  as held to maturity were sold with  amortized  cost of $68,470,
     $230,036 and  $229,848,  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 1999 with proceeds of
     $1,691,389  and gross  realized  gains and losses of $36,568  and  $14,255,
     respectively.  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.

     At December 31, 1999, bonds carried at $14,559 were on deposit with various
     states as required by law.

<PAGE>

2.   Investments (continued)

     At December 31, 1999,  investments in fixed maturities comprised 81 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  $3.7  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:

         Rating                                  1999            1998
    --------------------                       ----------        ------
    Aaa/AAA                                  $  7,144,280      $  7,629,628
    Aaa/AA                                          1,920             2,277
    Aa/AA                                         301,728           308,053
    Aa/A                                          314,168           301,325
    A/A                                         2,598,300         2,525,283
    A/BBB                                       1,014,566         1,148,736
    Baa/BBB                                     6,319,549         6,237,014
    Baa/BB                                        348,849           492,696
    Below investment grade                      2,816,069         2,664,051
                                             -------------     -------------
                                              $20,859,429       $21,309,063

At December 31, 1999, 90 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, 1999,  approximately 14 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>
<S>                          <C>             <C>                <C>              <C>

                                     December 31, 1999                 December 31, 1998
                               ------------------------               ---------------------


                              On Balance       Commitments        On Balance        Commitments
         Region                  Sheet          to Purchase          Sheet           to Purchase
______________________       _____________     _____________      _____________     _____________

    East North Central         $   715,998        $  10,380        $   750,705          $  16,393
    West North Central             555,635           42,961            491,006             81,648
    South Atlantic                 867,838           23,317            839,233             21,020
    Middle Atlantic                428,051            1,806            476,448              6,169
    New England                    259,243            4,415            263,761              2,824
    Pacific                        238,299            3,466            195,851             16,946
    West South Central             144,607            4,516            136,841              1,412
    East South Central              43,841               --             46,029                 --
    Mountain                       381,148            9,380            345,379              8,473
                              ------------      -----------       ------------        -----------
                                 3,634,660          100,241          3,545,253            154,885
    Less allowance for losses       28,283               --             39,795                 --
                             -------------   --------------      -------------      -------------
                                $3,606,377         $100,241         $3,505,458           $154,885
                                ==========         ========         ==========           ========
</TABLE>

<PAGE>

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

                                          December 31, 1999                   December 31, 1998
                                       ---------------------               -----------------------
                                    On Balance       Commitments        On Balance        Commitments
               Property type           Sheet          to Purchase          Sheet           to Purchase
              _______________       ___________      ____________       _____________     ____________

    Department/retail stores          $1,158,712        $  33,829        $1,139,349         $  59,305
    Apartments                           887,538           11,343           960,808             9,272
    Office buildings                     931,234           26,062           783,576            50,450
    Industrial buildings                 309,845            5,525           298,549            13,263
    Hotels/motels                        103,625               --           109,185            14,122
    Medical buildings                    114,045               --           124,369                --
    Nursing/retirement homes              45,935               --            46,696                --
    Mixed use                             66,893               --            65,151                --
    Other                                 16,833           23,482            17,570             8,473
                                   -------------       ----------     -------------       -----------
                                       3,634,660          100,241         3,545,253           154,885
    Less allowance for losses             28,283               --            39,795                --
                                   -------------   --------------     -------------     --------------
                                      $3,606,377         $100,241        $3,505,458          $154,885
                                      ==========         ========        ==========          ========
</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,  1999 and 1998,  the  Company's  recorded  investment  in
     impaired loans was $21,375 and $24,941,  respectively,  with  allowances of
     $5,750 and $6,662, respectively. During 1999 and 1998, the average recorded
     investment in impaired loans was $23,815 and $37,873, respectively.

     The Company recognized $1,190, $1,809 and $2,981 of interest income related
     to impaired  loans for the years ended  December  31,  1999,  1998 and 1997
     respectively.

The following table presents  changes in the allowance for losses related to all
loans:

                                      1999              1998             1997
                                   ----------      ------------     --------
    Balance, January 1             $39,795          $38,645           $37,495
    Provision (reduction) for
      investment losses             (9,512)           7,582             8,801
    Loan payoffs                      (500)            (800)           (3,851)
    Foreclosures and writeoffs      (1,500)          (5,632)           (3,800)
                                  --------         --------         ---------

    Balance, December 31           $28,283          $39,795           $38,645
                                   =======          =======           =======

At December 31, 1999, the Company had no  commitments to purchase  investments
     other than mortgage loans.

<PAGE>

2.   Investments (continued)

Net investment income for the years ended December 31 is summarized as follows:

                                        1999             1998              1997
                                   -------------    -------------     ---------

    Interest on fixed maturities   $1,598,059       $1,676,984        $1,692,481
    Interest on mortgage loans        285,921          301,253           305,742
    Other investment income            70,892           43,518            25,089
    Interest on cash equivalents        5,871            5,486             5,914
                                  -----------    -------------     -------------
                                    1,960,743        2,027,241         2,029,226
    Less investment expenses           41,170           40,756            40,837
                                  -----------    -------------     -------------
                                   $1,919,573       $1,986,485        $1,988,389
                                   ==========       ==========        ==========

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

                                    1999           1998            1997
                                ---------         ------        --------
    Fixed maturities        $   22,387        $  12,084         $  16,115
    Mortgage loans              10,211           (5,933)           (6,424)
    Other investments           (5,990)             751            (8,831)
                            ----------     ------------       -----------
                            $   26,608       $    6,902       $       860
                            ==========       ==========       ===========

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

                                        1999           1998               1997
                                     ________        _________          _______
    Fixed maturities available
      for sale                     $(921,778)        $(93,474)         $223,441
    Equity securities                   (142)            (203)               53

<PAGE>

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:

                                 1999              1998             1997
                               ----------        ----------       -----------
    Federal income taxes:
    Current                       $178,444         $244,946          $176,879
    Deferred                        79,796          (16,602)           19,982
                                ----------       ----------         ---------
                                   258,240          228,344           196,861
    State income taxes-current       9,624            7,337             9,803
                               -----------      -----------        ----------
    Income tax expense            $267,864         $235,681          $206,664
                                  ========         ========          ========

3.   Income taxes (continued)

Increases  (decreases)  to the income tax provision  applicable to pretax income
based on the statutory rate are attributable to:

<TABLE>
<CAPTION>
<S>                                  <C>             <C>         <C>            <C>        <C>            <C>

                                               1999                       1998                      1997
                                     --------------------------  ------------------------- -------------------------
                                      Provision       Rate       Provision       Rate      Provision       Rate
    Federal income taxes based on
    the statutory rate                  $316,511      35.0%         $271,527     35.0%        $238,319     35.0%

    Tax-excluded interest and
       dividend income                    (9,626)     (1.1)          (12,289)    (1.6)         (10,294)    (1.5)

    State taxes, net of federal
       benefit                             6,256       0.7             4,769      0.6            6,372      0.9

    Affordable housing credits           (31,000)     (3.4)          (19,688)    (2.5)         (20,705)    (3.0)

    Other, net                           (14,277)     (1.6)           (8,638)    (1.1)          (7,028)    (1.0)
                                       ---------      ----        ----------    -----       ----------    -----

    Total income taxes                  $267,864      29.6%         $235,681     30.4%        $206,664     30.4%
                                        ========      ====          ========     ====         ========     ====
</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, 1999, 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:

                                                            1999         1998
    Deferred tax assets:
    Policy reserves                                       $ 733,647     $756,769
    Unrealized loss on available for sale investments       221,431           --
    Investments, other                                        1,873           --
    Life insurance guaranty fund assessment reserve           4,789       15,289
    Other                                                        --        4,253
                                                       -------------  ----------
    Total deferred tax assets                               961,740      776,311
                                                          ---------    ---------

    Deferred tax liabilities:
    Deferred policy acquisition costs                       740,837      698,471
    Unrealized gain on available for sale investments            --       91,315
    Investments, other                                           --        3,455
    Other                                                     4,883           --
                                                       --------------  ---------
    Total deferred tax liabilities                          745,720      793,241
                                                         ----------     --------
    Net deferred tax assets (liabilities)                 $ 216,020    $(16,930)
                                                          =========    =========
<PAGE>

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  $1,693,356 as of December 31, 1999
     and  $1,598,203  as of December  31,  1998 (see Note 3 with  respect to the
     income tax effect of certain  distributions).  In  addition,  any  dividend
     distributions  in 2000 in excess of  approximately  $418,845  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:

                                        1999              1998             1997
                                    ------------      ------------     --------
    Statutory net income           $  478,173       $  429,903        $  379,615
    Statutory capital and surplus   1,978,406        1,883,405         1,765,290

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, 1999 and 1998.  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, $nil and
     $103 in 1999, 1998 and 1997, 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 $223,  $211 and $201 in 1999, 1998 and
     1997, 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 1999,  1998 and 1997 were
     $1,906, $1,503 and $1,245, respectively.

     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 1999,  1998 and 1997 was  $1,147,  $1,352  and
     $1,330, respectively.

5.   Related party transactions (continued)

     Charges by AEFC for use of joint facilities,  technology support, marketing
     services and other services aggregated $485,177,  $411,337 and $414,155 for
     1999, 1998 and 1997,  respectively.  Certain of these costs are included in
     deferred policy acquisition costs.

<PAGE>

6.   Commitments and contingencies

     At  December  31,  1999,  1998 and 1997,  traditional  life  insurance  and
     universal life-type insurance in force aggregated $89,271,957,  $81,074,928
     and  $74,730,720   respectively,   of  which  $8,281,576,   $4,912,313  and
     $4,351,904  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 $76,970,  $66,378 and $60,495 and  reinsurance
     recovered from reinsurers amounted to $27,816, $20,982, and $19,042 for the
     years ended  December 31, 1999,  1998 and 1997,  respectively.  Reinsurance
     contracts  do not  relieve  the  Company  from its  primary  obligation  to
     policyholders.

     In January  2000,  AEFC  reached an  agreement in principle to settle three
     class-action  lawsuits. The Company had been named as a co-defendant in all
     three lawsuits.  It is expected the settlement will provide $215 million of
     benefits  to more than 2  million  class  participants.  The  agreement  in
     principle  to settle  also  provides  for  release by class  members of all
     insurance  and annuity  market  conduct  claims  dating back to 1985 and is
     subject to a number of contingencies  including a definitive  agreement and
     court approval.  The settlement costs allocated to the Company are included
     in the  accompanying  1999  statement of income and did not have a material
     impact on the  Company's  consolidated  financial  position or results from
     operations.

     The Company is named as a defendant in various other 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
     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  completing  the  audit  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
     $200,000 ($100,000 committed and $100,000  uncommitted).  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 $50,000  uncommitted at December 31, 1999 and $nil at
     December 31, 1998.

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>

8.   Derivative financial instruments (continued)

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

                                                  Notional         Carrying            Fair         Total Credit

    December 31, 1999                              Amount           Amount             Value          Exposure
    Assets:
      Interest rate caps                         $ 2,500,000        $   9,685       $   12,773         $  12,773
      Interest rate floors                         1,000,000              602              319               319
      Options purchased                              180,897           49,789           61,745            61,745
    Liabilities:
      Options written                                 43,262           (1,677)          (2,402)               --
    Off balance sheet:
      Interest rate swaps                          1,267,000               --          (17,582)                --
                                                                  -----------        ---------     --------------
                                                                     $ 58,399        $  54,853         $  74,837
                                                                     ========        =========         =========

                                                  Notional         Carrying            Fair         Total Credit
    December 31, 1998                              Amount           Amount             Value          Exposure
    -----------------                            ----------         -------           -------        --------
    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>

     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 2000 to 2003.  The purchased and written
     options expire on various dates from 2000 to 2006.

     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  also uses  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 was reported in management and other fees.

<PAGE>

8.   Derivative financial instruments (continued)

     The Company  offers an 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.

     Indexoptions  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
     fluctuations in the equity  markets.  The Company entered into index option
     collars (combination of puts and calls) to hedge anticipated fee income for
     1999 and 1998 related to separate accounts and mutual funds which invest in
     equity securities.  Testing demonstrated the impact of these instruments on
     the income statement  closely  correlates with the amount of fee income the
     Company realizes. At December 31, 1999 deferred losses on purchased put and
     written call index options were $nil. At December 31, 1998 deferred  losses
     on purchased  put and written  call index  options were $2,933 and deferred
     gains on written call index options were $7,435, respectively.

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

                                                                    1999                               1998
                                                    ---------------------              --------------------

                                                  Carrying           Fair            Carrying           Fair
    Financial Assets                               Value             Value            Value             Value
    Investments:
      Fixed maturities (Note 2):
        Held to maturity                        $   7,156,292     $   7,105,743    $   7,964,114     $   8,420,035
        Available for sale                         13,049,549        13,049,549       13,613,139        13,613,139
      Mortgage loans on
        real estate (Note 2)                        3,606,377         3,541,958        3,505,458         3,745,617
      Other:
        Equity securities (Note 2)                      3,016             3,016            3,158             3,158
        Derivative financial
          Instruments (Note 8)                         60,076            74,837           41,161            47,680
        Other                                           2,258             2,258           28,872            28,872
    Cash and cash
      equivalents (Note 1)                             32,333            32,333           22,453            22,453
    Separate account assets (Note 1)               35,894,732        35,894,732       27,349,401        27,349,401

</TABLE>


<PAGE>


9.   Fair values of financial instruments (continued)

<TABLE>
<CAPTION>
<S>                                 <C>                 <C>              <C>               <C>
                                                 1999                          1998
                                      ---------------------              --------------------

                                      Carrying              Fair            Carrying           Fair
    Financial Liabilities              Value                Value            Value             Value
    Future policy benefits for
      fixed annuities               $19,189,170         $18,591,859      $19,855,203       $19,144,838
      Derivative financial
        instruments (Note 8)              1,677              19,984           10,526            84,539
    Separate account liabilities     31,869,184          31,016,081       25,005,732        24,179,115

</TABLE>

     At December 31, 1999 and 1998, the carrying amount and fair value of future
     policy  benefits  for  fixed  annuities   exclude  life   insurance-related
     contracts  carried at $1,270,094 and $1,226,985,  respectively,  and policy
     loans  of  $92,895  and  $90,115,  respectively.  The  fair  value of these
     benefits is based on the status of the  annuities  at December 31, 1999 and
     1998.  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 1999 and 1998.

     At December  31, 1999 and 1998,  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
     $4,025,548 and $2,343,669, respectively.

10.  Year 2000 (unaudited)

     The Year 2000 issue is the result of computer  programs having been written
     using two digits rather than four to define a year.  Any programs that have
     time-sensitive  software  may  recognize a date using "00" as the year 1900
     rather  than 2000.  This could  result in the  failure of major  systems or
     miscalculations,  which could have a material  impact on the  operations of
     the Company. All of the major systems used by the Company are maintained by
     AEFC and are utilized by multiple  subsidiaries and affiliates of AEFC. The
     Company's businesses are heavily dependent upon AEFC's computer systems and
     have significant interaction with systems of third parties.

     A comprehensive  review of AEFC's computer systems and business  processes,
     including  those  specific to the  Company,  was  conducted to identify the
     major  systems  that could be affected  by the Year 2000 issue.  Steps were
     taken to resolve  potential  problems  including  modification  to existing
     software and the purchase of new  software.  As of December 31, 1999,  AEFC
     had completed its program of  corrective  measures on its internal  systems
     and applications,  including Year 2000 compliance  testing.  As of December
     31, 1999,  AEFC had also completed an evaluation of the Year 2000 readiness
     of other third  parties whose system  failures  could have an impact on the
     Company's operations.

     AEFC's Year 2000 project also included  establishing  Year 2000 contingency
     plans  for all key  business  units.  Business  continuation  plans,  which
     address business  continuation in the event of a system disruption,  are in
     place for all key business  units.  At December  31, 1999,  these plans had
     been amended to include specific Year 2000 considerations.

     In assessing its Year 2000 initiatives and the results of actual production
     since January 1, 2000, management believes no material adverse consequences
     were  experienced,  and  there  was no  material  effect  on the  Company's
     business,  results of operations, or financial condition as a result of the
     Year 2000 issue.