UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549


                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)

                     of the Securities Exchange Act of 1934

                   For the fiscal year ended December 31, 1999

                            Commission file numbers:

          33-77213, 33-62953, 33-88360, 33-89676, 33-91400, 333-00995,
            333-02867, 333-24989, 333-25733, 333-25761 and 333-26695


                   AMERICAN SKANDIA LIFE ASSURANCE CORPORATION

                    Incorporated in the State of Connecticut

                 Connecticut                     06-1241288
       --------------------------------      -------------------
       (State or other jurisdiction of          IRS Employer
        incorporation or organization)       Identification No.)


                 One Corporate Drive, Shelton, Connecticut 06484
               --------------------------------------------------
               (Address of Principal Executive Offices, Zip Code)


       Registrant's telephone number, including area code: (203) 926-1888



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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No ____

As of March 29, 2000, there were 25,000 shares of outstanding  common stock, par
value $100 per share, of the registrant,  consisting of 100 shares of voting and
24,900 shares of non-voting all of which were owned by American Skandia, Inc., a
wholly-owned   subsidiary   of  Skandia   Insurance   Company  Ltd.,  a  Swedish
corporation.

<PAGE>

PART I

Item 1.        BUSINESS

General

American Skandia Life Assurance Corporation ("the Company"),  with its principal
offices in  Shelton,  Connecticut,  is a wholly  owned  subsidiary  of  American
Skandia, Inc. ("ASI"),  whose ultimate parent is Skandia Insurance Company Ltd.,
a Swedish corporation.  The Company has 99.9% ownership in Skandia Vida, S.A. de
C.V. ("Skandia Vida") which is a life insurance company domiciled in Mexico. The
Company was the third  largest  provider of variable  annuity  contracts for the
individual  market in the United States  during 1999,  according to The Variable
Annuity  Research  & Data  Service  ("VARDS")  and  also  offers  variable  life
insurance  and  fixed  annuity  products.  The  Company's  products  are sold to
individuals,  businesses and pension plans to provide for long-term  savings and
retirement  purposes  and to address the  economic  impact of  premature  death,
estate and business  planning  concerns and supplemental  retirement  needs. The
investment  performance of the equity funds  supporting the variable annuity and
variable life  insurance  contracts  directly  impacts the ability to sell these
products.  The Company  has formed  alliances  with many of the world's  leading
investment  companies and in a recent VARDS survey was the only variable annuity
company  to have five  variable  annuity  contracts  finish in the top 25 in the
United States for three year investment performance.  Over 7,000 individual fund
choices in more than 100 VA products were reviewed by VARDS for this survey.

Distribution

The  Company  sells its wide  array of  products  though  multiple  distribution
channels including,  (a) independent financial planners; (b) broker-dealers that
generally are members of the New York Stock Exchange,  including "wirehouse" and
regional  broker-dealer  firms; and (c) broker-dealers  affiliated with banks or
which specialize in marketing to customers of banks. The Company continues to be
successful   in  expanding   the  number  of  selling   agreements   to  include
relationships with over 1,200 broker/dealer firms and financial institutions.

The Company believes its continued  success is reliant on the ability to enhance
its   relationships   with  both  the   selling   firms  and  their   registered
representatives.  The Company  utilizes  focused  marketing and customer service
teams providing  specialized support to the primary  distribution  channels.  In
addition, the Company also offers a number of private label products distributed
by select large  distributors.  In 1999, the DALBAR Survey of  Broker/Dealers of
Variable Annuities named the Company number one in 17 out of 18 categories.

Products

Since its business  inception  in 1988,  the Company has offered a wide array of
annuities, including: a) certain deferred annuities that are registered with the
Securities  and Exchange  Commission,  including  variable  annuities  and fixed
interest  rate  annuities  that include a market value  adjustment  feature;  b)
certain  other  fixed  deferred  annuities  that  are not  registered  with  the
Securities and Exchange  Commission;  c) non-registered group variable annuities
designed as funding  vehicles for various types of qualified  retirement  plans;
and d) fixed and adjustable immediate annuities.

Annuity  contracts  represent a  contractual  obligation to make payments over a
given period of time (often measured by the life of the  recipient),  undertaken
by the insurer in return for the payment of either a single purchase  payment or
a series of scheduled or flexible purchase payments. The insurer's obligation to
pay may commence immediately or be deferred.  If the payments are deferred,  the
insurer  generally  incurs an  obligation  to make a surrender  value  available
during the  deferral  period  based on an account  value  established  using the
purchase payments.  The account value may be credited interest, or may vary with
the  performance  of  investments  made by the insurer.  Gains in the  contracts
before  distribution  generally  are tax  deferred.  Distributions  are taxed as
ordinary income.  During the deferral period,  distributions are assumed to come
first  from  any  gain  in   contract   and  loans  are  deemed   distributions.
Distributions  may be subject to a tax  penalty.  For  immediate  annuities  and
annuitized deferred annuities,  a portion of each distribution may be treated as
the return of the taxpayer's investment in the contract.

In April  1998,  the Company  began  offering a term life  insurance  product in
support  of an  affiliate's  mutual  fund  products.  In May 1998,  the  Company
launched a single premium variable life insurance product.  In January 1999, the
Company  launched  its second  variable  life  product,  which was designed as a
flexible premium product.

Life insurance policies represent a contractual  obligation to pay proceeds to a
beneficiary upon the death of the insured.  This obligation is undertaken by the
insurer in return  for  either a single  premium,  or a series of  scheduled  or
flexible premiums. Cash value life insurance represents an additional obligation
to  make  amounts  available  upon  surrender  or,  in  many  cases,  for  loans
collateralized by policy values. Distributions upon the death of the insured are
tax free in most  circumstances.  Gains in the contracts before distribution are
tax  deferred.  Distributions  subject  to tax are  subject to  ordinary  income
treatment. Distributions before the death of the insured from policies deemed to
be modified endowment  contracts ("MEC") are generally taxed in a manner similar
to deferred annuities.  Distributions from non-MEC policies before the insured's
death are assumed to come first from the taxpayer's investment in the policy and
loans are not deemed distributions.

Segments

Segment  reporting  is  aligned  based on the  three  major  product  offerings:
variable annuity, variable life and qualified plans. Over the past two years, in
order  to  complete  the  array  of  products  offered  by the  Company  and its
affiliates to meet a wide variety of financial  planning,  the Company developed
the variable life and qualified plan products. The marketing and distribution of
the variable life and  qualified  plan products are in the early stages and have
not yet generated significant sales.

Reserves

The Company is  obligated to carry in its  statutory  financial  statements,  as
liabilities,  actuarial reserves to meet its obligations on outstanding  annuity
or life  insurance  contracts.  This is required by the life  insurance laws and
regulations  in the  jurisdictions  in which the  Company  does  business.  Such
reserves are based on mortality  and/or  morbidity  tables in general use in the
United States.  In general,  reserves are computed  amounts that, with additions
from premiums to be received,  and with interest on such reserves  compounded at
certain  assumed  rates,  are  expected  to be  sufficient  to meet  contractual
obligations.  In the  accompanying  financial  statements,  these  reserves  for
contractual  obligations  are determined in accordance  with generally  accepted
accounting  principles  and are  included in the separate  account  liabilities,
reserve for future contractowner benefits and policy reserves.

Employees

As of December 31, 1999, the Company had 1,013 direct salaried employees.

Item 2.        PROPERTIES

The Company  occupies  office space leased from an affiliate,  American  Skandia
Information Services and Technology  Corporation,  and believes that the current
facilities are satisfactory for its near term needs.

Item 3.        LEGAL PROCEEDINGS

As of the date of this  filing,  the Company is not  involved in any  litigation
outside of the ordinary  course of business,  and does not expect such claims to
materially impact the Company's financial statements.

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

None

<PAGE>

PART II

Item 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
MATTERS

All of the Company's  outstanding shares are owned by American Skandia,  Inc., a
wholly-owned  subsidiary of Skandia  Insurance  Company Ltd. The Company did not
pay any dividends to ASI in 1999, 1998 or 1997.

Item 6.  SELECTED FINANCIAL DATA

The following table summarizes information with respect to the operations of the
Company:

<TABLE>
<CAPTION>

(in thousands)                                                     For the Year Ended December 31,

                                                 1999              1998           1997           1996            1995
                                                 ----              ----           ----           ----            ----
STATEMENT OF OPERATIONS DATA

Revenues:
Annuity and life insurance
<S>                                        <C>             <C>              <C>              <C>           <C>
   charges and fees*                       $     289,989   $      186,211   $    121,158     $    69,780   $    38,837
Fee income                                        83,243           50,839         27,593          16,420         6,206
Net investment income                             10,441           11,130          8,181           1,586         1,601
Premium income and
    other revenues                                 3,688            1,360          1,082             265            45
                                           -------------    -------------   ------------     -----------   -----------
Total revenues                             $     387,361    $     249,540   $    158,014     $    88,051   $    46,689
                                           =============    =============   ============     ===========   ===========

Benefits and Expenses:
Annuity and life insurance benefits        $         612    $         558   $      2,033     $       613   $       555
Change in annuity policy reserves                  3,078            1,053             37             635        (6,779)
Cost of minimum death benefit
    reinsurance                                    2,945            5,144          4,545           2,867         2,057
Return credited to contractowners                 (1,639)          (8,930)        (2,018)            673        10,613
Underwriting, acquisition and

    other insurance expenses                     206,350          167,790         90,496          49,887        35,914
Interest expense                                  69,502           41,004         24,895          10,791         6,500
                                           -------------    -------------  -------------    ------------  ------------

Total benefits and expenses                $     280,848    $     206,619  $     119,988    $     65,466  $     48,860
                                           =============    =============  =============    ============  ============
Income tax expense (benefit)               $      30,344    $       8,154  $      10,478    $     (4,038) $        397
                                           =============    =============  =============    ============  ============

Net income (loss)                          $      76,169    $      34,767  $      27,548    $     26,623  $     (2,568)
                                           =============    =============  =============    ============  =============

STATEMENT OF FINANCIAL CONDITION

Total Assets                               $  30,849,414    $  18,848,273  $  12,894,290    $  8,268,696  $  4,956,018
                                           =============    =============  =============    ============  ============

Future fees payable to parent              $     576,034    $     368,978  $     233,034    $     47,112  $          -
                                           =============    =============  =============    ============  ============

Surplus Notes                              $     179,000    $     193,000  $     213,000    $    213,000  $    103,000
                                           =============    =============  =============    ============  ============
Shareholder's  Equity                      $     359,434    $     250,417  $     184,421     $   126,345  $     59,713
                                           =============    =============  =============     ===========  ============
</TABLE>

* On annuity and life  insurance  sales of $6,862,968,  $4,159,662,  $3,697,990,
$2,795,114, and $1,628,486 during the years ended December 31, 1999, 1998, 1997,
1996, and 1995,  respectively,  with  contractowner  assets under  management of
$29,396,693, $17,854,761, $12,119,191, $7,764,891, and $4,704,044 as of December
31, 1999, 1998, 1997, 1996 and 1995, respectively.

Item 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  should be read in conjunction with the financial  statements and the
notes thereto and Item 6, Selected Financial Data.

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations contains certain  forward-looking  statements pursuant to the Private
Securities Litigation Reform Act of 1995. These  forward-looking  statements are
based on estimates and assumptions that involve certain risks and uncertainties,
therefore  actual  results could differ  materially due to factors not currently
known. These factors include  significant changes in financial markets and other
economic and business conditions,  state and federal legislation and regulation,
ownership and competition.

 Results of Operations

 Annuity and life insurance  sales increased 65%, 12%, and 32% in 1999, 1998 and
1997,  respectively.  The Company continues to show significant  growth in sales
volume as a result of innovative product development activities, the recruitment
and  retention of top  producers,  and the success of its highly rated  customer
service teams. The sales growth was also attributable to the strong  performance
of the underlying mutual funds,  which support the Separate Account assets.  All
three major distribution channels achieved significant sales growth in 1999.

 As a result of the  significant  growth in sales and assets  under  management,
contractowner fees and charges and fees generated from transfer  agency-type and
investment support activities increased considerably over the past three years:

     (annual percentage growth)   1999              1998              1997

   Annuity and life insurance
     charges and fees              56%               54%              74%
   Fee income                      64%               84%              68%

Net investment  income decreased 6% in 1999,  increased 36% and 416% in 1998 and
1997,  respectively.  The  decrease  in 1999 was the  result  of  $1,036,000  of
amortization  of the premium paid on a derivative  instrument  purchased  during
1999. As noted in Note 2C of Notes to  Consolidated  Financial  Statements,  the
derivative  instrument,  an equity put option,  was purchased as a hedge against
potential GMDB reserves increases.  Excluding the derivative amortization,  1999
net  investment  income  increased 3% as a result of increased  bond holdings in
support of the Company's risk-based capital  initiatives.  The increases in 1998
and 1997 were generated from the bond holdings, which were increased in 1998 and
1997 to meet risk based capital goals, which in turn, have increased as a result
of the growth in business.

 Premium  income  represents  premiums  earned on sale of  ancillary  contracts;
immediate annuities with life contingencies,  supplementary  contracts with life
contingencies  and  certain  life  insurance  products.  Sales of  supplementary
contracts  increased in 1999 and  decreased in slightly in 1998 and 1997.  There
were no immediate annuities sold in 1999 and sales in 1998 and 1997 were modest.

 Annuity benefits, which represent immediate annuities,  supplementary contracts
and death  benefits  paid on annuity  contracts  with  mortality  risks were not
significant  in each of the past  three  years due  primarily  to the age of the
policies in force.

 The change in annuity policy reserves  includes  changes in reserves related to
annuity  contracts  with  mortality  risks as well as the  Company's  guaranteed
minimum death benefit ("GMDB") liability. During the second quarter of 1999, the
Company's  agreement to reinsure  substantially  all of its exposure on the GMDB
was terminated and the business was  recaptured,  as the reinsurer had announced
its intention to exit this market.  The increase in reserves resulting from this
change  was  offset by a  decrease  in  reserves  associated  with the change to
reserve methodology on the GMDB. The new reserve  methodology  complies with the
National  Association of Insurance  Commissioners  Actuarial Guideline XXXIV. In
the later half of 1999,  the Company  instituted  a hedge  program to manage the
market risk and reserve  fluctuations  associated with the GMDB policies through
the use of equity put options.  The Company is currently continuing this program
while evaluating alternative hedging strategies.

<PAGE>

 The reinsurance premium associated with the GMDB exposure is based on levels of
assets under  management.  Due to increased sales and account growth,  this cost
had  increased  in 1997 and 1998 and through May 1999.  The  termination  of the
reinsurance  treaty as of May 31, 1999  resulted in the year to year decrease in
this benefit for the twelve months ended December 31, 1999.

 Return  credited to  contractowners  consists of revenues on the  variable  and
market value  adjusted  annuities  and variable  life  insurance,  offset by the
benefit payments and change in reserves required on this business.  Market value
adjusted annuity  activity has the largest impact on this benefit.  In 1999, the
Separate Account investment returns on these contracts did not meet the expected
returns  calculated in the reserves.  In 1998, the actual returns  significantly
outperformed the expected returns and in 1997, these expectations were met.

 Underwriting,  acquisition and other insurance expenses for 1999, 1998 and 1997
were as follows:

<TABLE>
<CAPTION>

                       (in thousands)                     1999                 1998               1997
                                                          ----                 ----               ----

<S>                                                      <C>                  <C>                <C>
   Commissions and general expenses                    $ 576,649            $ 342,594          $ 281,560
   Net capitalization of deferred
      acquisition costs                                 (370,299)            (174,804)          (191,064)
                                                       ---------            ---------           ---------

   Underwriting, acquisition and other
      insurance expenses                               $ 206,350             $167,790            $90,496
                                                       =========             ========            =======
</TABLE>

Commissions,  general  operating  expenses and the net  deferral of  acquisition
costs have all  increased in 1999,  due largely to record  sales.  Current sales
trends  have  resulted  in a shift to asset based  commission  agreements.  This
coupled with  increased  asset  levels from  increased  sales and equity  market
appreciation  have led to the increase in commissions and general  expenses.  In
1998, commissions and general expenses increased as a result of strong sales and
start up costs  associated with the Company's entry into variable life insurance
and qualified plans. The net  capitalization  of acquisition  costs decreased in
1998 as a result of increased  amortization.  In 1997,  expense  increases  were
driven primarily from strong sales.

Interest  expense  increased  $28,498,000,  $16,109,000 and $14,104,000 in 1999,
1998 and 1997,  respectively,  as a result of additional financing transactions,
which  consisted  of the  sale of  future  fees to the  Parent  ("securitization
transactions").  In addition,  the Company retired surplus notes on December 10,
1999 and December 31, 1998 of $14,000,000 and $20,000,000 respectively.  Surplus
notes  outstanding  as of December  31, 1999 and 1998 totaled  $179,000,000  and
$193,000,000, respectively.

The effective  income tax rates for the years ended December 31, 1999,  1998 and
1997 were 28%, 19% and 28%,  respectively.  The effective rate is lower than the
corporate rate of 35% due to permanent  differences,  with the most  significant
item being the dividend received  deduction.  Management  believes that based on
the  taxable  income  produced in the past two years,  as well as the  continued
growth in annuity sales, the Company will produce  sufficient  taxable income in
future years to realize its deferred tax assets.

The Company  generated  net income  after tax of  $76,169,000,  $34,767,000  and
$27,548,000 in 1999, 1998 and 1997, respectively.  The Company benefited in each
of  the  past  three  years  from  strong  sales  growth  and  favorable  market
conditions.  The Company considers Mexico an emerging market and has invested in
the Skandia Vida  operations  with the  expectation  of generating  profits from
long-term savings products in future years. As such,  Skandia Vida has generated
net losses of $2,523,000, $2,514,000 and $1,438,000 for the years ended December
31, 1999, 1998 and 1997, respectively.

Total assets grew 64%, 46%, and 56% in 1999, 1998 and 1997, respectively.  These
increases were a direct result of the substantial sales volume and market growth
of the separate account assets. The sales and market growth also drove increases
in deferred  acquisition  costs, as well as fixed maturity  investments  held in
support of the Company's risk based capital requirements.  Liabilities grew 64%,
46%, and 56% in 1999, 1998 and 1997,  respectively,  as a result of the reserves
required for the increased sales activity along with the sale of future fees and
charges  during  these  periods.  These  sales of future fees and charges to the
Parent  are  needed  to fund the  acquisition  costs of the  Company's  variable
annuity and life insurance business.

Liquidity and Capital Resources

The Company's liquidity  requirement was met by cash from insurance  operations,
investment  activities,  borrowings  from its  Parent  and the sale of rights to
future fees and  charges to its  Parent.

The majority of the  operating  cash outflow  resulted from the sale of variable
annuity and  variable  life  products  which carry a contingent  deferred  sales
charge.  This type of product causes a temporary cash strain in that 100% of the
proceeds are invested in separate accounts supporting the product leaving a cash
(but not capital)  strain caused by the  acquisition  cost for the new business.
This cash strain  required the Company to look beyond the cash made available by
insurance  operations and investments of the Company to financing in the form of
surplus notes, capital contributions,  the sale of certain rights to future fees
and charges as well as modified coinsurance reinsurance  arrangements:

     o During 1999 and 1998, the Company  received  $34,800,000 and $22,600,000,
     respectively,  from ASI to support the capital needs of its U.S. operations
     during the current year along with the following year's  anticipated growth
     in business.  In addition,  the Company received  $1,690,000 and $5,762,000
     from ASI in 1999 and 1998 to support  its  investment  in Skandia  Vida.

     o  Funds  received  from  new  securitization   transactions   amounted  to
     $265,710,000,  $169,881,000,  and  $194,512,000  for  1999,  1998 and 1997,
     respectively  (see Note 8 of the Notes to  Audited  Consolidated  Financial
     Statements).  In addition,  $71,000,000 was received from ASI in the fourth
     quarter of 1999 in advance of a securitization transaction completed in the
     first quarter of 2000.

     o  During  1999,  1998 and  1997,  the  Company  extended  its  reinsurance
     agreements.   The   reinsurance   agreements   are   modified   coinsurance
     arrangements  where the  reinsurer  shares in the  experience of a specific
     book of business.

The  Company  expects  the  continued  use  of  reinsurance  and  securitization
transactions to fund the cash strain  anticipated from the acquisition  costs on
the coming years' sales volume.

As of December  31, 1999 and 1998,  shareholder's  equity was  $359,434,000  and
$250,417,000,   respectively.  The  increases  were  driven  by  the  previously
mentioned  capital   contributions   received  from  ASI  and  net  income  from
operations.

The Company has long-term  surplus notes and short-term  borrowings with ASI. No
dividends  have  been  paid  to  ASI.

The National Association of Insurance  Commissioners ("NAIC") requires insurance
companies to report  information  regarding  minimum Risk Based Capital  ("RBC")
requirements.  These requirements are intended to allow insurance  regulators to
identify  companies  which  may need  regulatory  attention.  The RBC  model law
requires that insurance  companies apply various  factors to asset,  premium and
reserve items, all of which have inherent risks. The formula includes components
for asset risk, insurance risk, interest risk and business risk. The Company has
complied  with the  NAIC's RBC  reporting  requirements  and has total  adjusted
capital well above required capital.

Effects of Inflation

The  rate of  inflation  has  not  had a  significant  effect  on the  Company's
financial statements.

<PAGE>

Year 2000 Compliance

The Company's  computer  support is provided by its affiliate,  American Skandia
Information  Services  and  Technology  Corporation,  which also  provides  such
support for the Company's affiliated broker-dealer,  American Skandia Marketing,
Incorporated and the Company's  affiliated  investment  advisory firm,  American
Skandia  Investment  Services,  Incorporated.  Because  of  the  nature  of  the
Company's  business,  any  assessment of the  potential  impact of the Year 2000
issues on the Company must be an  assessment  of the  potential  impact of these
issues  on all  these  companies,  which  are  referred  to below  as  "American
Skandia".

The  Company  experienced  no  significant  errors or  disruptions  in  computer
service, interfaces with computer systems of investment managers,  sub-advisors,
third  party  administrators,  vendors and other  business  partners on or after
January  1, 2000.

American Skandia engaged external information  technology  specialists to review
its operating systems and internally  developed  software.  The costs associated
with these assessments and Year 2000 related  remediation was $1,400,000 in 1999
and $750,000 in 1998 and prior.  The Company was allocated the majority of these
costs.

American  Skandia   continues  to  review  new  and  existing  systems  and  has
contingency  plans in place as part of its Business  Continuity  Plan. This plan
involves  virtually  all aspects of the business and will continue to be a focus
of management beyond the Year 2000 event.

Outlook

The  Company  believes  that it is well  positioned  to retain and  enhance  its
position as a leading provider of financial  products for long-term  savings and
retirement  purposes  as well as to address  the  economic  impact of  premature
death, estate and business planning concerns and supplemental  retirement needs.
Strength in the areas of investment options offered, innovative and leading edge
product  offerings  and  superior  customer  service  are  expected to allow the
Company to continue to grow market  share in a  marketplace  which  continues to
grow.

Certain regulatory and legislative initiatives or proposed accounting standards,
if adopted,  could  adversely  impact the Company,  despite  it's strong  market
position.  Of particular  importance is President  Clinton's proposed budget for
2001, which includes proposed  revenue-raising tax changes such as the "DAC tax"
on annuity and life  products that could  further  increase the  Company's  cash
strain. In addition,  the recently enacted Financial Services Modernization Act,
which allows banks and insurance  companies to affiliate  under a common holding
company,  may create previously unseen  competitive  pressures that could impact
the  Company's  ability to do  business  in the same  manner it has  previously.
Additionally,  discussions  on  regulation of the Internet may impact on the way
the Company does business in the future.

Item  7A.  QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK

The Company is subject to potential  fluctuations in earnings and the fair value
of certain of its assets and liabilities, as well as variations in expected cash
flows due to changes in market  interest rates and equity prices.  The following
discussion  focuses on specific  exposures  the Company has to interest rate and
equity price risk and  describes  strategies  used to manage  these  risks.  The
discussion  is limited to financial  instruments  subject to market risks and is
not  intended  to be a complete  discussion  of all of the risks the  Company is
exposed to.

Interest Rate Risk

Fluctuations   in  interest   rates  can   potentially   impact  the   Company's
profitability  and  cash  flows.  The  Company  has  97% of  assets  held  under
management that are in non-guaranteed  Separate Accounts for which the Company's
exposure is not significant as the contractowner  assumes  substantially all the
investment  risk.  On the  remaining  3% of assets the  interest  rate risk from
contracts   that  carry   interest  rate   exposure,   is  managed   through  an
asset/liability  matching program which takes into account the risk variables of
the insurance liabilities supported by the assets.

At December 31, 1999, the Company held in its general  account  $201,509,000  of
fixed  maturity  investments  that are  sensitive to changes in interest  rates.
These securities are held in support of the Company's fixed immediate  annuities
and supplementary  contracts  ($29,912,000 in reserves at December 31, 1999) and
in  support  of  the  Company's  target  solvency  capital.  The  Company  has a
conservative  investment  philosophy  with  regard  to  these  investments.  All
investments are investment grade corporate securities, government agency or U.S.
government  securities.

The Company's  deferred annuity products offer a fixed option which subjects the
Company to  interest  rate risk.  The fixed  option  guarantees  a fixed rate of
interest for a period of time selected by the  contractowner.  Guarantee  period
options  available range from 1 to 10 years.  Withdrawal of funds before the end
of  the  guarantee  period  subjects  the  contract  holder  to a  market  value
adjustment  ("MVA"). In the event of rising interest rates, which make the fixed
maturity  securities  underlying the guarantee  less valuable,  the MVA could be
negative.  In the  event of  declining  interest  rates,  which  make the  fixed
maturity  securities underlying  the guarantee  more  valuable, the MVA could be
positive.  The resulting  increase or decrease in the value of the fixed option,
from  calculation  of the MVA,  should  substantially  offset  the  increase  or
decrease in the market value of the securities  underlying  the  guarantee.  The
Company  maintains  strict  asset/liability  matching  to  enable  this  offset.
However,  the  Company  still  takes  on the  default  risk  for the  underlying
securities,  the interest rate risk of reinvestment of interest payments and the
risk of failing to maintain the asset/liability matching program with respect to
duration and  convexity.  At December 31, 1999 the Company had  $939,585,000  in
fixed  investment  options  subject to these risks.

Equity Market Exposure

The  primary  equity  market  risk to the  Company  comes from the nature of the
variable  annuity and variable life  products sold by the Company.  Various fees
and charges earned are substantially derived as a percentage of the market value
of assets under management.  In a market decline,  this income would be reduced.
This could be further  compounded  by customer  withdrawals,  net of  applicable
surrender  charge  revenues,  partially  offset by transfers to the fixed option
discussed  above.  A 10%  decline  in  the  market  value  of the  assets  under
management at December 31, 1999,  sustained  throughout 2000, would result in an
approximate  drop in related annual fee income of  $48,178,000.

As discussed in Note 2 of the  Consolidated  Financial  Statements,  in 1999 the
Company utilized derivative instruments to hedge against the risk of significant
decreases  in equity  markets  which would  expose the Company to  increases  in
guaranteed  minimum death benefits  liabilities.  Prior to the implementation of
this program the Company utilized reinsurance to transfer this risk.

The Company has a small portfolio of equity investments;  mutual funds which are
held in support of a deferred compensation program. In the event of a decline in
market  values  of  underlying  securities,  the  value of the  portfolio  would
decline,  however  the  accrued  benefits  payable  under the  related  deferred
compensation program would decline by a corresponding amount.

In  addition,  it is not clear what the impact of a  prolonged  downturn  in the
equity markets would have on ongoing sales. Customer's perceptions of a downturn
in equity  markets  coupled  with  rising  interest  rates  could move them into
financial products other than variable annuities or variable life; however,  the
Company's  products  might remain  attractive to purchasers in relation to other
long-term savings vehicles even after such a decline.

Item 8. FINANCIAL  STATEMENTS AND SUPPLEMENTARY DATA

See index to Consolidated  Financial  Statements and Supplementary  Data on page
13.

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

None.

PART III

Item 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information  contained in the "Executive  Officers and Directors" section of the
prospectus of the Company's registration statement on Form S-2, (Reg. 333-91400)
is incorporated herein by reference.

<PAGE>

Item 11.  EXECUTIVE COMPENSATION

Summary  Compensation Table: The summary table below summarizes the compensation
payable to the Chief Executive Officer and to the most highly compensated of our
executive officers whose compensation exceeded $100,000 in 1999.

<TABLE>
<CAPTION>

                                                                        (in thousands)
<S>                                              <C>                        <C>                       <C>
    Name and                                      Annual                                                 LTIP
Principal Position                                 Year                      Salary                     Payouts

Jan R. Carendi                                     1999                       $908                        $497
Chief Executive Officer                            1998                        784                         302
                                                   1997                        609                         172

Gordon C. Boronow                                  1999                       $414                        $343
President & Deputy Chief                           1998                        325                         278
Executive Officer                                  1997                        261                         175

Lincoln R. Collins                                 1999                       $400                        $176
Executive Vice President &                         1998                        285                          99
Chief Operating Officer                            1997                        254                          58

Nancy F. Brunetti                                  1999                       $435                        $108
Executive Vice President &                         1998                        287                          46
Chief Logistics Officer                            1997                        204                           8

Yat Kan Chan                                       1999                       $502                          $0
Senior Vice President &                            1998                          0                           0
Chief Information Officer                          1997                          0                           0
</TABLE>

Long Term Incentive Plans (LTIP) - Awards in the last fiscal year: The following
table provides  information  regarding our long-term  incentive plan.  Units are
awarded to executive officers and other personnel. The table shows units awarded
to the Chief Executive Officer and the most highly  compensated of our executive
officers whose  compensation  exceeded  $100,000 in the fiscal year  immediately
preceding  the date of this  submission.  This  program  is  designed  to induce
participants  to remain with the Company  over long periods of time and to tie a
portion of their compensation to the fortunes of the Company.

Currently,  the program consists of multiple plans. A new plan may be instituted
each year. Participants are awarded units at the beginning of a plan. Generally,
participants  must remain  employed by the Company or its affiliates at the time
such units are payable in order to receive any  payments  under the plan.  There
are certain exceptions, such as in cases of retirement or death.

Changes in the value of units  reflect  changes in the  "embedded  value" of the
Company.  "Embedded  value" is the net asset  value of the  Company  (valued  at
market value and not including the present  value of future  profits),  plus the
present  value of the  anticipated  future  profits  (valued  pursuant  to state
insurance  law) on its  existing  contracts.  Units  will not have any value for
participants  if  the  embedded  value  does  not  increase  by  certain  target
percentages  during the first four years of a plan. The target  percentages  may
differ between each plan. Any amounts available under a plan are paid out in the
fifth  through  eighth  years  of a plan.  A  portion  of the  payments  under a
particular  year's  plan  may  be  postponed  if  total  payments  due  eligible
participants  for that year would exceed 20% of any pretax profit (as determined
under state  insurance law) earned by the Company and certain  affiliates in the
prior fiscal year.

<PAGE>

The amount to be received by a  participant  at the time any payment is due will
be the then current number of units payable multiplied by the then current value
of such units.

<TABLE>
<CAPTION>

<S>                                          <C>         <C>                <C>            <C>          <C>
                                                                                       (in thousands)
                                               Number     Period until               Estimated Future Payouts
          Name                                of Units      Payout           Threshold      Target       Maximum
          ----                                --------      ------           ---------      ------       -------

Jan R. Carendi                                305,000       Various                         $4,344
Gordon C. Boronow                             285,000       Various                          4,161
Lincoln R. Collins                            130,382       Various                          1,787
Nancy F. Brunetti                             121,208       Various                          1,710
Yat Kan Chan                                   20,000       Various                            125
</TABLE>

The following directors' compensation is shown below in 1999:

Jan R. Carendi               0
Gordon C. Boronow            0
Nancy F. Brunetti            0
Malcolm M. Campbell          0
Lincoln R. Collins           0
C. Henrik G. Danckwardt      0
Wade A. Dokken               0
Thomas M. Mazzaferro         0
Gunnar J. Moberg             0
Anders O. Soderstrom         0
Amanda C. Sutyak             0
C. Ake Svensson              0
Bayard F. Tracy              0


Item 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

None

Item 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None

<PAGE>

PART IV

<TABLE>
<CAPTION>

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

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

(a)  Financial Information

     (1)  Financial Statements                         See Index to
                                                       Consolidated Financial
                                                       Statements on Page 13

     (2)  Financial Statement Schedules                None

(b)  Exhibits

     (2)  Plans of acquisition, reorganization,
          Arrangement, liquidation or succession       None

     (3)  Articles of Incorporation and By-Laws        Incorporated by reference to
                                                       the Company's Form N-4
                                                       (Reg. 33-19363)

     (4)  Instruments defining the right of            Incorporated by reference to
          security holders including indentures        the Company's Reg. 333-08853,
                                                       33-59993, 33-86866, 33-87010,
                                                       33-62793, 33-62933, 333-26685,
                                                       33-88362

     (9)  Voting Trust Agreement                       None

     (10) Material Contracts                           Incorporated by reference to
                                                       the Company's Form S-2
                                                       (Reg. 33-26122 and 33-86918)

     (11) Statement of Computation of per share
          earnings                                     Not required to be filed

     (12) Statements of Computation of Ratios          Not required to be filed

     (13) Annual Report to security holders            None

     (18) Letter re change in accounting principles    None

     (19) Previously unfiled documents                 None

     (21) Subsidiaries of the registrant               Incorporated by reference to
                                                       Part II of Reg 333-26695

     (22) Published report regarding matters
          submitted to vote of security holders        None

     (23) Consents of experts and counsel              Not required to be filed

     (24) Powers of Attorney                           Incorporated by reference to
                                                       the Company's Forms S-2
                                                       (Reg. 333-25733)

     (99) Additional exhibits                          None

</TABLE>

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION (a wholly-owned
          subsidiary of Skandia Insurance Company Ltd.)

                        Consolidated Financial Statements

                                December 31, 1999

                                      Index

                                                                          Page

Independent Auditors' Report                                               14

Consolidated Statements of Financial Condition

  as of December 31, 1999 and 1998                                         15

Consolidated Statements of Operations for the

  Years ended December 31, 1999, 1998 and 1997                             16

Consolidated Statements of Shareholder's Equity for the

  Years ended December 31, 1999, 1998 and 1997                             17

Consolidated Statements of Cash Flows for the

  Years ended December 31, 1999, 1998 and 1997                             18

Notes to Consolidated Financial Statements                                 19


Schedules  are omitted  because  they are either not  applicable  or because the
information required therein is included in the Notes to Consolidated  Financial
Statements.

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholder of
    American Skandia Life Assurance Corporation
Shelton, Connecticut

We have audited the consolidated  statements of financial  condition of American
Skandia  Life  Assurance  Corporation  (the  "Company"  which is a  wholly-owned
subsidiary of Skandia  Insurance Company Ltd.) as of December 31, 1999 and 1998,
and the related  consolidated  statements of income,  shareholder's  equity, and
cash flows for each of the three years in the period  ended  December  31, 1999.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  financial position of American Skandia
Life Assurance  Corporation at December 31, 1999 and 1998, and the  consolidated
results of their  operations  and 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/Ernst & Young LLP


February  11,  2000,
except for Note 18 as to which the date is March 22, 2000

Hartford, Connecticut
<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

                 Consolidated Statements of Financial Condition
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                 As of December 31,
                                                                          1999                        1998
                                                                     ---------------            ----------------

ASSETS

Investments:
<S>                                                                  <C>                        <C>
  Fixed maturities - at amortized cost                               $        3,360             $         8,289
  Fixed maturities - at fair value                                          198,165                     141,195
  Investment in mutual funds - at fair value                                 16,404                       8,210
  Derivative instruments                                                        189                           -
  Policy loans                                                                1,270                         569
                                                                      --------------              --------------

    Total investments                                                       219,388                     158,263

Cash and cash equivalents                                                    89,212                      77,525
Accrued investment income                                                     4,054                       2,880
Deferred acquisition costs                                                1,087,705                     721,507
Reinsurance receivable                                                        4,062                       4,191
Receivable from affiliates                                                        -                       1,161
Income tax receivable - deferred                                             51,726                      38,861
State insurance licenses                                                      4,263                       4,413
Fixed assets                                                                  3,305                         328
Other assets                                                                  4,533                       3,744
Separate account assets                                                  29,381,166                  17,835,400
                                                                     ---------------            ----------------

  Total assets                                                       $   30,849,414             $    18,848,273
                                                                     ===============            ================
</TABLE>

LIABILITIES AND SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>

<S>                                                                   <C>                       <C>
Liabilities:
Reserve for future contractowner benefits                            $       11,215             $        37,508
Policy reserves                                                              29,912                      25,545
Drafts outstanding                                                           51,059                      28,941
Accounts payable and accrued expenses                                       158,590                      91,827
Income tax payable                                                           24,268                       6,657
Payable to affiliates                                                        68,736                           -
Future fees payable to parent                                               576,034                     368,978
Short-term borrowing                                                         10,000                      10,000
Surplus notes                                                               179,000                     193,000
Separate account liabilities                                             29,381,166                  17,835,400
                                                                     ---------------            ----------------

  Total Liabilities                                                      30,489,980                  18,597,856
                                                                     ---------------            ----------------

Shareholder's equity:
  Common stock, $100 and $80 par value, 25,000 shares authorized,
    issued and outstanding                                                    2,500                       2,000
  Additional paid-in capital                                                215,879                     179,889
  Retained earnings                                                         141,162                      64,993
  Accumulated other comprehensive income                                       (107)                      3,535
                                                                     ---------------            ----------------

    Total Shareholder's equity                                              359,434                     250,417
                                                                     ---------------            ----------------

    Total liabilities and shareholder's equity                       $   30,849,414             $    18,848,273
                                                                     ===============            ================
</TABLE>

                See notes to consolidated financial statements.

<PAGE>
                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

                      Consolidated Statements of Operations
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                     For the Year Ended December 31,
                                                              1999                1998                1997
                                                         --------------       -------------       -------------

REVENUES

<S>                                                      <C>                  <C>                 <C>
Annuity and life insurance charges and fees              $     289,989        $    186,211        $    121,158
Fee income                                                      83,243              50,839              27,593
Net investment income                                           10,441              11,130               8,181
Premium income                                                   1,278                 874                 920
Net realized capital gains                                         578                  99                  87
Other                                                            1,832                 387                  75
                                                         --------------       -------------       -------------

  Total revenues                                               387,361             249,540             158,014
                                                         --------------       -------------       -------------


EXPENSES

Benefits:
  Annuity and life insurance benefits                              612                 558               2,033
  Change in annuity and life insurance policy reserves           3,078               1,053                  37
  Cost of minimum death benefit reinsurance                      2,945               5,144               4,545
  Return credited to contractowners                             (1,639)             (8,930)             (2,018)
                                                         --------------       -------------       -------------

                                                                 4,996              (2,175)              4,597

Expenses:
  Underwriting, acquisition and other insurance
    expenses                                                   206,350             167,790              90,496
  Interest expense                                              69,502              41,004              24,895
                                                         --------------       -------------       -------------

                                                               275,852             208,794             115,391
                                                         --------------       -------------       -------------

  Total benefits and expenses                                  280,848             206,619             119,988
                                                         --------------       -------------       -------------

    Income from operations before income tax                   106,513              42,921              38,026

      Income tax expense                                        30,344               8,154              10,478
                                                         --------------       -------------       -------------

        Net income                                       $      76,169        $     34,767        $     27,548
                                                         ==============       =============       =============
</TABLE>
                See notes to consolidated financial statements.

<PAGE>
                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

                 Consolidated Statements of Shareholder's Equity
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                     For the Year Ended December 31,
                                                              1999                1998                1997
                                                         --------------      --------------      --------------

Common stock:
<S>                                                      <C>                 <C>                 <C>
  Beginning balance                                      $       2,000       $       2,000       $       2,000
  Increase in par value                                            500                   -                   -
                                                         --------------      --------------      --------------

    Ending balance                                               2,500               2,000               2,000
                                                         --------------      --------------      --------------

Additional paid in capital:
  Beginning balance                                            179,889             151,527             122,250
  Transferred to common stock                                     (500)                  -                   -
  Additional contributions                                      36,490              28,362              29,277
                                                         --------------      --------------      --------------

    Ending balance                                             215,879             179,889             151,527
                                                         --------------      --------------      --------------

Retained earnings:
  Beginning balance                                             64,993              30,226               2,678
  Net income                                                    76,169              34,767              27,548
                                                         --------------      --------------      --------------

    Ending balance                                             141,162              64,993              30,226
                                                         --------------      --------------      --------------

Accumulated other comprehensive income:

  Beginning balance                                              3,535                 668                (584)
  Other comprehensive income                                    (3,642)              2,867               1,252
                                                         --------------      --------------      --------------

    Ending Balance                                                (107)              3,535                 668
                                                         --------------      --------------      --------------

      Total shareholder's equity                         $     359,434       $     250,417       $     184,421
                                                         ==============      ==============      ==============
</TABLE>
                See notes to consolidated financial statements.

<PAGE>
                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

                      Consolidated Statements of Cash Flows
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                     For the Year Ended December 31,
                                                              1999                1998                1997
                                                         --------------       -------------      --------------

Cash flow from operating activities:

<S>                                                      <C>                        <C>          <C>
  Net income                                             $      76,169              34,767       $       27,548
  Adjustments to reconcile net income to net
    cash used in operating activities:
      Amortization and depreciation                              1,495                 251                  223
      Deferred tax expense                                     (10,903)            (14,242)              (9,631)
      Change in unrealized losses on derivatives                 3,749                   -                    -
      Increase in policy reserves                                4,367               1,130                3,176
      Change in receivable from/payable to affiliates           69,897                 166               (1,321)
      Change in income tax payable                              17,611               7,704               (2,172)
      Increase in other assets                                    (789)             (1,173)                (415)
      Increase in accrued investment income                     (1,174)               (438)                (483)
      Decrease/(increase) in reinsurance receivable                129               2,152                 (268)
      Increase in deferred acquisition costs                  (366,198)           (174,804)            (190,969)
      Increase in accounts payable and accrued expenses         66,763              20,637                5,719
      Increase in drafts outstanding                            22,118               9,663                6,245
      Change in foreign currency translation, net                  701                 (22)                (34)
      Realized capital gain                                       (578)                (99)                (87)
                                                         --------------       -------------      --------------

        Net cash used in operating activities                 (116,643)            (114,308)           (162,469)
                                                         --------------       -------------      --------------

Cash flow from investing activites:

      Purchase of fixed maturity investments                   (99,250)            (31,828)            (28,905)
      Proceeds from sale and maturity of fixed
        maturity investments                                    36,226               4,049              10,755
      Purchase of derivatives                                   (4,974)                  -                   -
      Purchase of shares in mutual funds                       (17,703)             (7,158)             (5,595)
      Proceeds from sale of shares in mutual funds              14,657               6,086               1,415
      Purchase of fixed assets                                  (3,178)                (18)               (189)
      Increase in policy loans                                    (701)                118                (528)
                                                         --------------       -------------      --------------

        Net cash used in investing activities                  (74,923)            (28,751)            (23,047)
                                                         --------------       -------------      --------------

Cash flow from financing activities:

      Capital contribution from parent                          22,490               8,362              29,277
      Increase in future fees payable to parent                207,056             135,944             185,922
      Net withdrawals from contractowner accounts              (26,293)             (5,696)              6,959
                                                         --------------       -------------      --------------

        Net cash provided by financing activities               203,253             138,610             222,158
                                                         --------------       -------------      --------------

          Net increase/(decrease) in cash and cash
            equivalents                                         11,687              (4,449)             36,642

          Cash and cash equivalents at beginning of year        77,525              81,974              45,332
                                                         --------------       -------------      --------------

            Cash and cash equivalent at end of year      $      89,212              77,525       $      81,974
                                                         ==============       =============      ==============

     Income taxes paid                                   $      23,637              14,651       $      22,308
                                                         ==============       =============      ==============

      Interest paid                                      $      69,697              35,588       $      16,916
                                                         ==============       =============      ==============
</TABLE>
                See notes to consolidated financial statements.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

                   Notes to Consolidated Financial Statements

                                December 31, 1999

1.  ORGANIZATION AND OPERATION

    American   Skandia  Life  Assurance   Corporation   (the  "Company")  is  a
    wholly-owned subsidiary of American Skandia, Inc. ("ASI", formerly known as
    American Skandia Investment Holding Corporation) whose  ultimate  parent is
    Skandia Insurance Company Ltd., a Swedish Corporation.

    The Company  develops  long-term  savings and retirement  products which are
    distributed through its affiliated  broker/dealer company,  American Skandia
    Marketing,  Incorporated ("ASM"). The Company currently issues variable life
    insurance and variable, fixed, market value adjusted and immediate annuities
    for individuals, groups and qualified pension plans.

    The Company has 99.9%  ownership  in Skandia  Vida,  S.A. de C.V.  ("Skandia
    Vida") which is a life insurance company  domiciled in Mexico.  Skandia Vida
    had total  shareholder's  equity of $4,592,000 and $4,724,000 as of December
    31, 1999, and 1998,  respectively.  The Company considers Mexico an emerging
    market and has invested in the Skandia Vida  operations with the expectation
    of generating  profits from long-term  savings  products in future years. As
    such,  Skandia Vida has generated net losses of  $2,523,000,  $2,514,000 and
    $1,438,000  for  the  years  ended   December  31,  1999,   1998  and  1997,
    respectively.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    A.  Basis of Reporting

        The accompanying consolidated financial statements have been prepared in
        conformity with generally accepted accounting  principles.  Intercompany
        transactions and balances have been eliminated in consolidation.

        Certain  reclassifications  have  been  made to prior  year  amounts  to
        conform with the current year presentation.

    B.  New Accounting Pronouncements

        In March 1998, the American  Institute of Certified  Public  Accountants
        issued Statement of Position ("SOP") 98-1,  "Accounting for the Costs of
        Software Developed or Obtained for Internal Use. The SOP, which has been
        adopted prospectively as of January 1, 1999, requires the capitalization
        of certain  costs  incurred in connection  with  developing or obtaining
        internal use  software.  Prior to the adoption of SOP 98-1,  the Company
        expensed  all  internal use  software  related  costs as  incurred.  The
        Company has identified and  capitalized  $3,035,000 of costs  associated
        with internal use software  during 1999 and is amortizing the applicable
        costs on a straight-line basis over a three year period. At December 31,
        1999,  the  unamortized  balance was $2,920,000 and is included in fixed
        assets.

        In June 1998, the Financial  Accounting  Standards Board ("FASB") issued
        Statement  of  Financial   Accounting  Standards  133,  "Accounting  for
        Derivative Instruments and Hedging Activities" (FAS 133).  Subsequently,
        in July 1999,  FASB issued FAS 137  "Deferral of the  Effective  Date of
        FASB  Statement  133".  The  adoption  date was delayed to fiscal  years
        beginning  after June 15, 2000. The Company is currently  evaluating the
        potential impact on its financial position.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    C.  Investments

        The Company has  classified  its fixed  maturity  investments  as either
        held-to-maturity  or   available-for-sale.   Investments  classified  as
        held-to-maturity  are  investments  that the Company has the ability and
        intent to hold to maturity.  Such  investments  are carried at amortized
        cost. Those investments which are classified as  available-for-sale  are
        carried at fair value and  changes  in  unrealized  gains and losses are
        reported as a component of other comprehensive income.

        The Company has classified its mutual fund  investments  held in support
        of a deferred compensation plan are available-for-sale. Such investments
        are carried at fair value and changes in unrealized gains and losses are
        reported as a component of other comprehensive income.

        Derivative  instruments are recorded  consistent with hedged items.  The
        Company hedges the market value  fluctuations of the guaranteed  minimum
        death benefit ("GMDB")  exposure  embedded in its policy reserves and as
        such,  the portion of the  derivative  instrument  which  constitutes an
        effective hedge is carried at market value. The cost associated with the
        portion of the instrument  which is not considered an effective hedge is
        amortized to investment income over the life of the instrument.

        Policy loans are carried at their unpaid principal balances.

        Realized gains and losses on disposal of  investments  are determined by
        the specific identification method and are included in revenues.

    D.  Derivative Instruments

        During the second quarter of 1999,  the Company's  agreement to reinsure
        substantially  all of its exposure on its GMDB  liability was terminated
        and the business was recaptured, as the reinsurer had recently announced
        its intention to exit this market. In response, the Company instituted a
        hedge program to effectively manage the market risk associated with GMDB
        reserve  fluctuations  using put options.  The cash  invested in the put
        options is at risk to the extent that the value of the underlying  index
        is less than the strike price at the exercise date. This would be offset
        by a corresponding decrease in the hedged GMDB exposure.

    E.  Cash Equivalents

        The Company considers all highly liquid time deposits,  commercial paper
        and money market mutual funds  purchased with a maturity of three months
        or less to be cash equivalents.

    F.  Fair Values of Financial Instruments

        The  methods  and  assumptions  used to  determine  the  fair  value  of
        financial instruments are as follows:

        Fair values of fixed  maturities with active markets are based on quoted
        market prices.  For fixed  maturities that trade in less active markets,
        fair values are obtained from an independent pricing service.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    F.  Fair Values of Financial Instruments (continued)

        Fair values of  investments  in mutual funds are based on quoted  market
        prices.

        The  fair  value  of the  portion  of the  derivative  instrument  which
        constitutes an effective  hedge is determined  based on current value of
        the underlying index.

        The carrying value of cash and cash equivalents  approximates fair value
        due to the short-term nature of these investments.

        The carrying value of short-term  borrowing  approximates fair value due
        to the short-term nature of these liabilities.

        Fair  values of  certain  financial  instruments,  such as  future  fees
        payable to parent and surplus notes are not readily determinable and are
        excluded from fair value disclosure requirements.

    G.  State Insurance Licenses

        Licenses  to do  business  in  all  states  have  been  capitalized  and
        reflected  at  the  purchase  price  of  $6,000,000   less   accumulated
        amortization.  The cost of the licenses is being amortized on a straight
        line basis over 40 years.

    H.  Income Taxes

        The Company is included in the  consolidated  federal  income tax return
        and combined state income tax return of an upstream company, Skandia AFS
        Development  Holding  Corporation  and certain of its  subsidiaries.  In
        accordance with the tax sharing agreement,  the federal and state income
        tax provisions  are computed on a separate  return basis as adjusted for
        consolidated items such as net operating loss carryforwards.

        Deferred   income  taxes  reflect  the  net  tax  effects  of  temporary
        differences  between the carrying  amounts of assets and liabilities for
        financial  reporting  purposes  and the  amounts  used  for  income  tax
        purposes.

    I.  Recognition of Revenue and Contract Benefits

        Revenues  for  variable  annuity  contracts  consist of charges  against
        contractowner   account   values  for  mortality   and  expense   risks,
        administration fees, surrender charges and an annual maintenance fee per
        contract.  Benefit reserves for variable annuity contracts represent the
        account value of the contracts and are included in the separate  account
        liabilities.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    I.  Recognition of Revenue and Contract Benefits (continued)

        Revenues for market value  adjusted fixed annuity  contracts  consist of
        separate  account  investment  income  reduced by benefit  payments  and
        changes in  reserves  in support of  contractowner  obligations,  all of
        which  are  included  in  return  credited  to  contractowners.  Benefit
        reserves  for  these  contracts  represent  the  account  value  of  the
        contracts,  and are included in the general  account  reserve for future
        contractowner  benefits to the extent in excess of the separate  account
        liabilities.

        Revenues for  immediate  annuity  contracts  without life  contingencies
        consist  of  net  investment  income.  Revenues  for  immediate  annuity
        contracts with life  contingencies  consist of single  premium  payments
        recognized as annuity considerations when received. Benefit reserves for
        these  contracts are based on the Society of Actuaries 1983 Table-a with
        assumed  interest rates that vary by issue year.  Assumed interest rates
        ranged from 6.25% to 8.25% at December 31, 1999 and 1998.

        Revenues  for  variable  life  insurance  contracts  consist  of charges
        against  contractowner  account  values for  mortality  and expense risk
        fees,  cost of insurance  fees,  taxes and  surrender  charges.  Certain
        contracts  also include  charges  against  premium to pay state  premium
        taxes.  Benefit reserves for variable life insurance contracts represent
        the account  value of the  contracts  and are  included in the  separate
        account liabilities.

    J.  Deferred Acquisition Costs

        The costs of acquiring new  business,  which vary with and are primarily
        related to the  production  of new business,  are being  deferred net of
        reinsurance.   These  costs  include  commissions,   costs  of  contract
        issuance, and certain selling expenses that vary with production.  These
        costs are being  amortized  generally in  proportion  to expected  gross
        profits  from  surrender  charges,  policy  and  asset  based  fees  and
        mortality   and  expense   margins.   This   amortization   is  adjusted
        retrospectively  and prospectively  when estimates of current and future
        gross profits to be realized from a group of products are revised.

        Details of the deferred  acquisition costs and related  amortization for
        the years ended December 31, are as follows:

<TABLE>
<CAPTION>

                           (in thousands)                        1999                    1998                  1997
                                                                 ----                    ----                  ----

<S>                                                              <C>                  <C>                    <C>
                  Balance at beginning of year                   $721,507              $546,703              $355,734
                                                                 --------              --------              --------

                  Acquisition costs deferred

                     during the year                              450,059               261,432               243,476

                  Acquisition costs amortized

                     during the year                              (83,861)              (86,628)              (52,507)
                                                                 ---------             --------              --------

                                                                  366,198               174,804               190,969
                                                                  -------               -------               -------

                  Balance at end of year                       $1,087,705              $721,507              $546,703
                                                               ==========              ========              ========
</TABLE>

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    K.  Reinsurance

        The Company cedes reinsurance under modified co-insurance  arrangements.
        These reinsurance arrangements provide additional capacity for growth in
        supporting the cash flow strain from the Company's  variable annuity and
        variable life  insurance  business.  The  reinsurance  is effected under
        quota share contracts.

        As noted in Note 2D,  the  Company  reinsured  its  exposure  to  market
        fluctuations  associated  with its GMDB liability in 1999,  1998 and the
        beginning of 1997. Under this reinsurance  agreement,  the Company ceded
        premiums  of  $2,945,000,  $5,144,000  and  $4,545,000;  received  claim
        reimbursements   of  $242,000,   $9,000  and  $46,000;   and,   recorded
        increases/(decreases)  in  reserves  of  ($2,763,000),   ($323,000)  and
        $918,000 in each of the three years, respectively.

        At December 31, 1999 and 1998,  in accordance  with the  provisions of a
        modified  coinsurance   agreement,   the  Company  accrued  $41,000  and
        $1,976,000,   respectively,   for  amounts   receivable  from  favorable
        reinsurance experience on a block of variable annuity business.

    L.  Translation of Foreign Currency

        The  financial  position  and  results of  operations  of the  Company's
        Mexican  subsidiary  are measured using local currency as the functional
        currency. Assets and liabilities of the subsidiary are translated at the
        exchange  rate in  effect at each  year-end.  Statements  of income  and
        shareholder's  equity  accounts  are  translated  at  the  average  rate
        prevailing during the year. Translation adjustments arising from the use
        of  differing  exchange  rates from  period to period are  reported as a
        component of other comprehensive income.

    M.  Separate Accounts

        Assets and  liabilities  in Separate  Accounts  are included as separate
        captions in the consolidated statements of financial condition. Separate
        Account  assets consist  principally of long term bonds,  investments in
        mutual funds,  short-term securities and cash and cash equivalents,  all
        of  which  are  carried  at fair  value.  The  investments  are  managed
        predominately  through  the  Company's  investment  advisory  affiliate,
        American Skandia Investment Services, Inc. ("ASISI"),  utilizing various
        fund managers as sub-advisors.  The remaining investments are managed by
        independent  investment  firms.  The  contractowner  has the  option  of
        directing  funds to a wide variety of mutual funds.  The investment risk
        on the variable portion of a contract is borne by the  contractowner.  A
        fixed option with a minimum guaranteed  interest rate is also available.
        The Company is  responsible  for the credit risk  associated  with these
        investments.

        Included  in  Separate   Account   liabilities  are   $896,205,000   and
        $771,195,000  at December 31, 1999 and 1998,  respectively,  relating to
        annuity contracts for which the contractowner is guaranteed a fixed rate
        of return.  Separate  Account assets of $896,205,000 and $771,195,000 at
        December 31, 1999 and 1998, respectively, consisting of long term bonds,
        short term  securities,  transfers due from the general account and cash
        and  cash  equivalents  which  are  held in  support  of  these  annuity
        contracts, pursuant to state regulation.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    N.  Estimates

        The  preparation  of financial  statements in conformity  with generally
        accepted  accounting  principles requires that management make estimates
        and   assumptions   that  affect  the  reported  amount  of  assets  and
        liabilities  at the date of the  financial  statements  and the reported
        amounts of revenues and expenses during the reporting  period.  The more
        significant   estimates   and   assumptions   are  related  to  deferred
        acquisition  costs and  involve  policy  lapses,  investment  return and
        maintenance expenses. Actual results could differ from those estimates.

3.  COMPREHENSIVE INCOME

    The  components  of  comprehensive  income,  net of tax, for the years ended
    December 31, 1998, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>

                  (in thousands)                                           1999              1998           1997
                                                                           ----              ----           ----

<S>                                                                       <C>              <C>             <C>
         Net income                                                       $76,169          $34,767         $27,548
         Other comprehensive income:
            Unrealized investment gains/(losses) on
               available for sale securities                               (3,082)           2,751           1,288
            Reclassification adjustment for realized
               losses/(gains) included in investment income                (1,016)             138             (14)
                                                                           -------       ---------       ---------
            Net unrealized gains/(losses) on securities                    (4,098)           2,889           1,274

            Foreign currency translation                                      456              (22)            (22)
                                                                        ---------       ----------      ----------

         Other comprehensive income                                        (3,642)           2,867           1,252
                                                                         ---------        --------        --------

         Comprehensive income                                             $72,527          $37,634         $28,800
                                                                          =======          =======         =======
</TABLE>

    The components of accumulated other comprehensive  income, net of tax, as of
    December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>

                  (in thousands)                                         1999                  1998
                                                                         ----                  ----

<S>                                                                      <C>                   <C>
         Unrealized investment gains                                     ($255)                $3,843
         Foreign currency translation                                      148                   (308)
                                                                        ------                -------

         Accumulated other comprehensive income                          ($107)                $3,535
                                                                         ======                ======
</TABLE>

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

4.  INVESTMENTS

    The amortized cost, gross  unrealized  gains/losses and estimated fair value
    of available-for-sale  and held-to-maturity fixed maturities and investments
    in  mutual  funds as of  December  31,  1999 and 1998 are shown  below.  All
    securities held at December 31, 1999 and 1998 were publicly traded.

    Investments  in fixed  maturities  as of December 31, 1999  consisted of the
    following:

<TABLE>
<CAPTION>

                  (in thousands)                                     Held-to-Maturity

                                                                 Gross               Gross
                                           Amortized          Unrealized          Unrealized             Fair
                                             Cost                Gains              Losses               Value

<S>                                      <C>                   <C>               <C>                   <C>
         U.S. Government

            obligations                      $1,105                $  -             $ (1)                $1,104

         Corporate securities                 2,255                   -              (15)                 2,240
                                              -----                ----             -----               -------

            Totals                           $3,360                $  -             $(16)                $3,344
                                             ======                ====             =====                ======



                  (in thousands)                                     Available-for-Sale

                                                                 Gross               Gross
                                           Amortized          Unrealized          Unrealized             Fair
                                             Cost                Gains              Losses               Value

         U.S. Government

            obligations                   $  81,183                $  -           $ (678)             $  80,505

         Obligations of
            state and political
            subdivisions                        253                                   (3)                   250

         Corporate securities               121,859                   -           (4,449)               117,410
                                          ---------                ----            ------             ---------

            Totals                         $203,295                $  -         $ (5,130)              $198,165
                                           ========                ====         =========              ========


         The amortized cost and fair value of fixed  maturities,  by contractual
         maturity, at December 31, 1999 are shown below.

                  (in thousands)                        Held-to-Maturity                  Available-for-Sale
                                                        ----------------                  ------------------

                                                    Amortized          Fair             Amortized           Fair
                                                      Cost             Value              Cost              Value

         Due in one year or less                      $3,107          $3,097       $           -  $           -

         Due after one through five years                253             247             130,284            128,250

         Due after five through ten years                  -               -              73,011             69,915
                                                  ----------      ----------          ----------         ----------

               Total                                  $3,360          $3,344            $203,295           $198,165
                                                      ======          ======            ========           ========

</TABLE>

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

4.  INVESTMENTS (continued)

    Investments  in fixed  maturities  as of December 31, 1998  consisted of the
    following:

<TABLE>
<CAPTION>

                  (in thousands)                       Held-to-Maturity

                                                                    Gross               Gross
                                            Amortized            Unrealized          Unrealized             Fair
                                              Cost                  Gains              Losses               Value
                                              ----                  -----              ------               -----

<S>                                           <C>                    <C>                   <C>               <C>
         U.S. Government

            obligations                       $3,774                 $57                   $-                $3,831

         Obligations of
            state and political
            subdivisions                           -                   -                    -                     -

         Corporate

            securities                         4,515                  34                    -                 4,549
                                             -------                ----                  ---               -------

               Totals                         $8,289                 $91                  $ -                $8,380
                                              ======                 ===                  ===                ======


                  (in thousands)                       Available for Sale

                                                                    Gross               Gross
                                            Amortized            Unrealized          Unrealized             Fair
                                              Cost                  Gains              Losses               Value
                                              ----                  -----              ------               -----

         U.S. Government

            obligations                     $ 17,399              $  678                 $  -             $  18,077

         Obligations of
            state and political

            subdivisions                         253                   7                    -                   260

         Corporate

            securities                       117,774               5,160                 (76)               122,858
                                           ---------             -------              -------            ----------

               Totals                       $135,426              $5,845               $ (76)              $141,195
                                            ========              ======               ======              ========


         Proceeds from sales of fixed maturities during 1999, 1998 and 1997 were
         $32,196,000,  $999,000,  and  $5,056,000,  respectively.  Proceeds from
         maturities during 1999, 1998 and 1997 were $4,030,000,  $3,050,000, and
         $5,700,000, respectively.

</TABLE>
<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

4.  INVESTMENTS (continued)

    The cost,  gross  unrealized  gains/losses  and fair value of investments in
    mutual funds at December 31, 1999 and 1998 are shown below:

<TABLE>
<CAPTION>

                  (in thousands)                                 Gross             Gross
                                                              Unrealized        Unrealized              Fair
                                             Cost                Gains            Losses                Value

<S>      <C>                               <C>                  <C>              <C>                  <C>
         1999                              $11,667              $4,763           $ (26)               $16,404
                                           =======              ======           ======               =======

         1998                               $8,068                $416          $ (274)                $8,210
                                            ======                ====          =======                ======


     Net realized  investment gains (losses) were as follows for the years ended
     December 31:

                  (in thousands)                                  1999                  1998                1997
                                                                ------                  ----                ----

         Fixed maturities:
           Gross gains                                        $    253                 $    -              $  10
           Gross losses                                           (228)                    (1)                -
         Investment in mutual funds:
           Gross gains                                             990                    281                116
           Gross losses                                           (437)                  (181)               (39)
                                                               -------                 ------             ------

         Totals                                                 $  578                  $  99              $  87
                                                                ======                  =====              =====
</TABLE>
<TABLE>
<CAPTION>

5.  NET INVESTMENT INCOME

    The sources of net investment  income for the years ended December 31, 1999,
    1998 and 1997 were as follows:

                  (in thousands)                                1999                   1998                1997
                                                                ----                   ----                ----

<S>                                                            <C>                   <C>                  <C>
         Fixed maturities                                      $ 9,461               $  8,534             $6,617
         Cash and cash equivalents                               2,159                  1,717              1,153
         Investment in mutual funds                                 32                  1,013                554
         Policy loans                                               31                     45                 28
         Derivative Instruments                                 (1,036)                     -                  -
                                                             ---------             ----------          ---------

         Total investment income                                10,647                 11,309              8,352
         Investment expenses                                       206                    179                171
                                                            ----------             ----------           --------

         Net investment income                                 $10,441                $11,130             $8,181
                                                               =======                =======             ======
</TABLE>

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

6.  INCOME TAXES

    The  significant  components  of income  tax  expense  for the  years  ended
    December 31 were as follows:

<TABLE>
<CAPTION>

                (in thousands)                                 1999                  1998                  1997
                                                               ----                  ----                  ----

<S>                                                           <C>                   <C>                   <C>
         Current tax expense                                  $41,248               $22,384               $20,108

         Deferred tax benefit                                 (10,904)              (14,230)               (9,630)
                                                              --------             --------             ---------

         Total income tax expense                             $30,344              $  8,154               $10,478
                                                              =======              ========               =======
</TABLE>

         The tax effects of significant items comprising the Company's  deferred
         tax balance as of December 31, 1999 and 1998, are as follows:

<TABLE>
<CAPTION>

                  (in thousands)                                         1999                         1998
                                                                         ----                         ----

         Deferred tax liabilities:
<S>                                                                    <C>                         <C>
             Deferred acquisition costs                                ($321,873)                  ($210,731)
             Payable to reinsurers                                       (26,733)                    (25,585)
             Policy fees                                                  (1,146)                       (859)
             Net unrealized gains                                            (80)                     (2,069)
                                                                    ------------                 -----------

             Total                                                      (349,832)                   (239,244)
                                                                        --------                   ---------

         Deferred tax assets:
             Net separate account liabilities                            333,521                     225,600
             Future contractowner benefits                                 3,925                      13,128
             Other reserve differences                                    39,645                      25,335
             Deferred compensation                                        18,844                       9,619
             Surplus notes interest                                        5,030                       3,375
             Foreign exchange translation                                    137                         166
             Other                                                           456                         882
                                                                     -----------                ------------
             Total                                                       401,558                     278,105
                                                                        --------                   ---------

             Income tax receivable - deferred                          $  51,726                   $  38,861
                                                                       =========                   =========
</TABLE>

         Management  believes that based on the taxable  income  produced in the
         current year and the continued growth in annuity products,  the Company
         will  produce  sufficient  taxable  income in the future to realize its
         deferred tax asset.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

6.  INCOME TAXES (continued)

    The income tax expense was  different  from the amount  computed by applying
    the federal  statutory  tax rate of 35% to pre-tax  income  from  continuing
    operations as follows:

<TABLE>
<CAPTION>

                  (in thousands)                                    1999               1998                 1997
                                                                    ----               ----                 ----

<S>                                                             <C>                 <C>                <C>
         Income (loss) before taxes
             Domestic                                             $109,036             $45,435             $39,464
             Foreign                                                (2,523)             (2,514)             (1,438)
                                                                 ----------          ---------           ---------
             Total                                                 106,513              42,921              38,026

             Income tax rate                                            35%                 35%                 35%
                                                                 ---------           ---------           ---------

         Tax expense at federal
             statutory income tax rate                              37,280              15,022              13,309

         Tax effect of:
             Dividend received deduction                            (9,572)             (9,085)             (4,585)
             Losses of foreign subsidiary                              883                 880                 503
             Meals and entertainment                                   664                 487                 340
             State income taxes                                      1,071                 673                 577
             Other                                                      18                 177                 334
                                                                 ---------            --------             -------

         Income tax expense                                      $  30,344            $  8,154             $10,478
                                                                 =========            ========             =======
</TABLE>

7.  RECEIVABLE FROM/PAYABLE TO AFFILIATES

    Certain  operating  costs  (including  personnel,  rental of  office  space,
    furniture,  and  equipment)  have been  charged  to the  Company  at cost by
    American Skandia Information Services and Technology  Corporation ("ASIST"),
    an affiliated company; and likewise, the Company has charged operating costs
    to ASISI.  The total cost to the Company  for these  items was  $11,136,000,
    $7,722,000,  and $5,572,000 for the years ended December 31, 1999,  1998 and
    1997,  respectively.   Income  received  for  these  items  was  $3,919,000,
    $1,355,000 and  $3,225,000  for the years ended December 31, 1999,  1998 and
    1997, respectively.

    The Company had a $10 million short-term loan payable to ASI at December 31,
    1999 and  1998.  The total  interest  expense  thereon  to the  Company  was
    $585,000,  $622,000 and $642,000 for the years ended December 31, 1999, 1998
    and 1997 respectively, of which $182,000 was payable as of December 31, 1999
    and 1998.

    Beginning  in  1999,   the  Company  was   reimbursed  by  ASM  for  certain
    distribution  related costs associated with the sales of business through an
    investment firm where ASM serves as an introducing broker dealer. Under this
    agreement,  the expenses reimbursed in 1999 were $1,441,000.  As of December
    31,1999, amounts receivable under this agreement were $245,000.

    As of December  31,1999,  the Company had received  $71,000,000  from ASI in
    advance of the sale of certain  rights to receive  future fees and  contract
    charges. This sale is expected to be completed in the first quarter of 2000.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

8.  FUTURE FEES PAYABLE TO PARENT

    In a series of  transactions  with ASI, the Company  sold certain  rights to
    receive future fees and contract charges expected to be realized on variable
    portions of designated blocks of deferred annuity  contracts.  The effective
    dates and issue periods these transactions cover are as follows:

<TABLE>
<CAPTION>

                                   Closing           Effective           Contract Issue
               Transaction           Date              Date                  Period

<S>                <C>             <C>                <C>             <C>          <C>
                   1996-1           12/16/96            9/1/96         1/1/94   -   6/30/96
                   1997-1            7/23/97            6/1/97         3/1/96   -   4/30/97
                   1997-2           12/30/97           12/1/97         5/1/95   -  12/31/96
                   1997-3           12/30/97           12/1/97         5/1/96   -  10/31/97
                   1998-1            6/30/98            6/1/98         1/1/97   -   5/31/98
                   1998-2           11/10/98           10/1/98         5/1/97   -   8/31/98
                   1998-3           12/30/98           12/1/98         7/1/96   -  10/31/98
                   1999-1            6/23/99            6/1/99         4/1/94   -   4/30/99
                   1999-2           12/14/99           10/1/99        11/1/98   -   7/31/99
</TABLE>

    In connection with these transactions,  ASI issued collateralized notes in a
    private placement which are secured by the rights to receive future fees and
    charges purchased from the Company.

    Under the terms of the Purchase Agreements,  the rights sold provide for ASI
    to receive a percentage (80% or 100% depending on the underlying  commission
    option) of future  mortality  and expense  charges and  contingent  deferred
    sales charges, after reinsurance, expected to be realized over the remaining
    surrender charge period of the designated contracts (6 to 8 years).

    The Company did not sell the right to receive  future fees and charges after
    the expiration of the surrender charge period.

    The proceeds  from the sales have been recorded as a liability and are being
    amortized  over the  remaining  surrender  charge  period of the  designated
    contracts using the interest method.  The present values of the transactions
    as of the respective effective date were as follows:

<TABLE>
<CAPTION>

                                                                                       Present
         (in thousands)           Transaction             Discount Rate                 Value
                                  -----------             -------------                 -----

<S>                                 <C>                      <C>                      <C>
                                    1996-1                    7.5%                     $50,221
                                    1997-1                    7.5%                      58,767
                                    1997-2                    7.5%                      77,552
                                    1997-3                    7.5%                      58,193
                                    1998-1                    7.5%                      61,180
                                    1998-2                    7.0%                      68,573
                                    1998-3                    7.0%                      40,128
                                    1999-1                    7.5%                     120,632
                                    1999-2                    7.5%                     145,078
</TABLE>

         Payments  representing  fees and  charges  in the  aggregate  amount of
         $131,420,000,  $69,226,000 and $22,250,000  were made by the Company to
         the  Parent  for the years  ended  December  31,  1999,  1998 and 1997,
         respectively. Related interest expense of $52,840,000,  $22,978,000 and
         $6,842,000  has been  included in the statement of income for the years
         ended December 31, 1999, 1998 and 1997, respectively.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

8.  FUTURE FEES PAYABLE TO PARENT (continued)

    Expected  payments of future fees payable to ASI as of December 31, 1999 are
    as follows:

<TABLE>
<CAPTION>

                                            Year Ended

          (in thousands)                    December 31,                     Amount
                                            -----------                      ------

<S>                                            <C>                          <C>
                                               2000                         $103,975
                                               2001                          107,262
                                               2002                          106,491
                                               2003                           97,550
                                               2004                           78,512
                                               2005                           51,839
                                               2006                           25,712
                                               2007                            4,693
                                                                           ---------
                                              Total                         $576,034
</TABLE>

         The  Commissioner  of the State of Connecticut has approved the sale of
         future fees and charges; however, in the event that the Company becomes
         subject to an order of liquidation or rehabilitation,  the Commissioner
         has the  ability  to stop the  payments  due to the  Parent  under  the
         Purchase Agreement subject to certain terms and conditions.

9.       LEASES

         The Company leases office space under a lease agreement  established in
         1989  with  ASIST.  The  lease  expense  for  1999,  1998  and 1997 was
         $5,003,000,  $3,588,000  and  $2,428,000  respectively.  Future minimum
         lease payments per year and in aggregate as of December 31, 1999 are as
         follows:

         (in thousands)             2000                               $  7,004
                                    2001                                  7,004
                                    2002                                  6,854
                                    2003                                  6,756
                                    2004                                  6,929
                                    2005 and thereafter                  51,865
                                                                       --------

                                    Total                               $86,412
                                                                        =======


10.      RESTRICTED ASSETS

         To comply with certain state insurance departments'  requirements,  the
         Company maintains cash, bonds and notes on deposit with various states.
         The  carrying  value of  these  deposits  amounted  to  $4,868,000  and
         $3,747,000  as of December  31,  1999,  and 1998,  respectively.  These
         deposits  are  required  to  be  maintained   for  the   protection  of
         contractowners within the individual states.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

11.      RETAINED EARNINGS AND DIVIDEND RESTRICTIONS

         On November 8, 1999,  the Board of Directors  authorized the Company to
         increase the par value of its capital  stock from $80 per share to $100
         per share in order to comply with minimum capital levels as required by
         the California Department of Insurance.  This transaction resulted in a
         corresponding  decrease in paid in and contributed  surplus of $500,000
         and had no effect on capital and surplus.

         Statutory basis shareholder's  equity was $286,385,000 and $285,553,000
         at December 31, 1999 and 1998, respectively.

         The  statutory  basis  net  loss  was   $17,672,000,   $13,152,000  and
         $8,970,000  for the  years  ended  December  31,  1999,  1998 and 1997,
         respectively.

         Under various state  insurance  laws,  the maximum  amount of dividends
         that can be paid to  shareholders  without prior  approval of the state
         insurance  department is subject to restrictions  relating to statutory
         surplus and net gain from operations.  At December 31, 1999, no amounts
         may be distributed without prior approval.

12.      EMPLOYEE BENEFITS

         The Company has a 401(k) plan for which substantially all employees are
         eligible. Under this plan, the Company contributes 3% of salary for all
         participating  employees and matches  employee  contributions  at a 50%
         level  up  to  an   additional   3%   Company   contribution.   Company
         contributions  to  this  plan  on  behalf  of  the  participants   were
         $3,164,000,  $2,115,000 and $1,220,000 for the years ended December 31,
         1999, 1998 and 1997, respectively.

         The Company has a deferred compensation plan, which is available to the
         internal  field   marketing   staff  and  certain   officers.   Company
         contributions to this plan on behalf of the participants were $193,000,
         $342,000 and $270,000 for the years ended  December 31, 1999,  1998 and
         1997, respectively.

         The Company and an affiliate  cooperatively have a long-term  incentive
         program  under which units are awarded to executive  officers and other
         personnel. The Company also has a profit sharing program which benefits
         all  employees  below the  officer  level.  These  programs  consist of
         multiple  plans  with  new  plans  instituted  each  year.   Generally,
         participants  must remain  employed by the Company or its affiliates at
         the time such units are payable in order to receive any payments  under
         the  program.  The accrued  liability  representing  the value of these
         units was $42,619,000 and $21,372,000 as of December 31, 1999 and 1998,
         respectively.  Payments under this plan were $4,079,000, $2,407,000 and
         $1,119,000  for the years ended  December  31,  1999,  1998,  and 1997,
         respectively.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

13.      REINSURANCE

         The effect of reinsurance  for the years ended December 31, 1999,  1998
         and 1997 is as follows:

         (in thousands)                                   1999
                                                          ----
<TABLE>
<CAPTION>
                             Annuity and Life        Annuity and Life
                                 Insurance               Insurance             Return Credited
                             Charges and Fees         Policy Reserves         to Contractowners

         <S>                     <C>                         <C>                  <C>
         Gross                   $326,670                    $315                 ($1,397)
         Ceded                    (36,681)                  2,763                    (242)
                                 --------                  ------                 --------
         Net                     $289,989                  $3,078                 ($1,639)
                                 ========                  ======                 ========


                                                          1998
                                                          ----

                             Annuity and Life        Annuity and Life
                                 Insurance               Insurance             Return Credited
                             Charges and Fees         Policy Reserves         to Contractowners

         Gross                   $215,425                 $   691                 ($8,921)
         Ceded                    (29,214)                    362                      (9)
                                 --------                  ------                 --------
         Net                     $186,211                  $1,053                 ($8,930)
                                 ========                  ======                 ========


                                                          1997
                                                          ----

                             Annuity and life        Annuity and Life
                                 Insurance               Insurance             Return Credited
                             Charges and Fees         Policy Reserves         to Contractowners

         Gross                   $144,417                    $955                 ($1,972)
         Ceded                    (23,259)                   (918)                    (46)
                                 --------                   -----                 --------
         Net                     $121,158                   $  37                 ($2,018)
                                 ========                   =====                 ========
</TABLE>

         Such ceded  reinsurance does not relieve the Company of its obligations
         to  policyholders.  The Company remains liable to its policyholders for
         the portion  reinsured to the extent that any  reinsurer  does not meet
         its obligations assumed under the reinsurance agreements.

<PAGE>

                   AMERICAN  SKANDIA LIFE ASSURANCE  CORPORATION
         (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

14.      SURPLUS NOTES

The      Company has issued  surplus  notes to its Parent in exchange  for cash.
         Surplus  notes  outstanding  as of  December  31, 1999 and 1998 were as
         follows:

<TABLE>
<CAPTION>

              (in thousands)
                                                                                            Interest for the
                                        Interest          1999          1998           Years Ended December 31,
              Issue Date                  Rate          Amount         Amount        1999         1998        1997
              ----------                  ----          ------         ------        ----         ----        ----

         <S>                              <C>           <C>           <C>             <C>         <C>         <C>
         December 29, 1993                6.84%                -             -             -        1,387       1,387
         February 18, 1994                7.28%           10,000        10,000           738          738         738
         March 28, 1994                   7.90%           10,000        10,000           801          801         801
         September 30, 1994               9.13%           15,000        15,000         1,389        1,389       1,389
         December 28, 1994                9.78%                -        14,000         1,308        1,388       1,388
         December 19, 1995                7.52%           10,000        10,000           762          762         762
         December 20, 1995                7.49%           15,000        15,000         1,139        1,139       1,139
         December 22, 1995                7.47%            9,000         9,000           682          682         682
         June 28, 1996                    8.41%           40,000        40,000         3,411        3,411       3,411
         December 30, 1996                8.03%           70,000        70,000         5,698        5,699       5,699

         Total                                          $179,000      $193,000       $15,928      $17,396     $17,396
                                                        ========      ========       =======      =======     =======
</TABLE>

         The surplus note for $14,000,000  dated December 28, 1994 was converted
         to additional  paid-in capital on December 10, 1999. A surplus note for
         $20,000,000 dated December 29, 1993 was converted to additional paid-in
         capital on December 31, 1998. All surplus notes mature seven years from
         the issue date.

         Payment of  interest  and  repayment  of  principal  for these notes is
         subject to certain  conditions  and require  approval by the  Insurance
         Commissioner  of the State of  Connecticut.  At  December  31, 1999 and
         1998, $14,372,000 and $9,644,000,  respectively, of accrued interest on
         surplus notes was not approved for payment under these criteria.

15.      SHORT-TERM BORROWING

         The Company had a $10 million  short-term loan payable to the Parent at
         December 31, 1999 and 1998. The total  interest  expense to the Company
         was  $585,000,  $622,000 and $642,000 and for the years ended  December
         31, 1999, 1998 and 1997,  respectively,  of which $197,000 and $182,000
         was payable as of December 31, 1999 and 1998, respectively.

16.      CONTRACT WITHDRAWAL PROVISIONS

         Approximately  99% of the Company's  separate  account  liabilities are
         subject to discretionary  withdrawal by  contractowners at market value
         or with market  value  adjustment.  Separate  account  assets which are
         carried at fair value are  adequate to pay such  withdrawals  which are
         generally  subject  to  surrender  charges  ranging  from 10% to 1% for
         contracts held less than 10 years.

<PAGE>

                   AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
          (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

17.      SEGMENT REPORTING

         During 1998, to complement its annuity  products,  the Company launched
         specific  marketing and operational  activities  towards the release of
         variable life insurance and qualified retirement plan annuity products.
         Assets under  management and sales for the products other than variable
         annuities  have not been  significant  enough to warrant  full  segment
         disclosures as required by SFAS 131,  "Disclosures about Segments of an
         Enterprise and Related Information."

18.      SUBSEQUENT EVENT

         On March 22, 2000,  the Company sold certain  rights to receive  future
         fees and contract charges expected to be received on variable  portions
         of deferred annuity contracts issued between August 1, 1999 and January
         31, 2000. This transaction is the latest in a series of agreements with
         ASI, as described in Note 8.

         This  transaction  has an effective date of March 22, 2000. The present
         value as of this date, discounted at 7.5%, was $171,781,000.

<PAGE>

                   AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
          (a wholly-owned subsidiary of Skandia Insurance Company Ltd.)

             Notes to Consolidated Financial Statements (continued)

19.      QUARTERLY FINANCIAL DATA (UNAUDITED)

         The  following  table  summarizes  information  with  respect  to  the
         operations of the Company on a quarterly basis:

<TABLE>
<CAPTION>

                   (in thousands)                                            Three months Ended
                                                                             ------------------
                                                     March 31          June 30      September 30       December 31
                                                     --------          -------      ------------       -----------
                       1999
         Premiums and other insurance
         <S>                                          <C>               <C>              <C>              <C>
            revenues                                   $78,412           $88,435          $97,955          $111,540
         Net investment income                           2,654             2,842            2,735             2,210
         Net realized capital gains                        295                25              206                52
                                                    ----------       -----------       ----------       -----------
         Total revenues                                 81,361            91,302          100,896           113,802

         Benefits and expenses                          64,107            67,803           71,597            77,341
                                                      --------          --------         --------          --------

         Pre-tax net income                             17,254            23,499           29,299            36,461

         Income taxes                                    3,844             7,142            7,898            11,460
                                                     ---------         ---------        ---------           -------

         Net income                                   $ 13,410          $ 16,357         $ 21,401           $25,001
                                                      ========          ========         ========           =======


                                  1998

         Premiums and other insurance
            revenues                                   $50,593           $57,946          $62,445           $67,327
         Net investment income                           3,262             2,410            2,469             2,989
         Net realized capital gains (losses)               156                13              (46)              (24)
                                                    ----------       -----------      -----------       -----------
         Total revenues                                 54,011            60,369           64,868            70,292

         Benefits and expenses                          46,764            42,220           48,471            69,164
                                                      --------          --------         --------          --------

         Pre-tax net income                              7,247            18,149           16,397             1,128

         Income taxes                                    1,175             4,174            2,223               582
                                                     ---------         ---------         --------         ---------

         Net income                                   $  6,072           $13,975          $14,174          $    546
                                                      ========           =======          =======          ========


                       1997
         Premiums and other insurance
            revenues                                   $30,186           $34,056          $41,102           $44,402
         Net investment income                           1,369             2,627            2,031             2,154
         Net realized capital gains                         20                43               21                 3
                                                   -----------       -----------      -----------      ------------
         Total revenues                                 31,575            36,726           43,154            46,559

         Benefits and expenses                          18,319            30,465           31,179            40,025
                                                      --------          --------         --------          --------

         Pre-tax net income                             13,256             6,261           11,975             6,534

         Income taxes                                    4,260             2,614            3,354               250
                                                     ---------         ---------        ---------        ----------

         Net income                                   $  8,996          $  3,647         $  8,621          $  6,284
                                                      ========          ========         ========          ========


</TABLE>

<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 on March 30, 2000.

                   AMERICAN SKANDIA LIFE ASSURANCE CORPORATION

                           By: /s/Thomas M. Mazzaferro

                              Thomas M. Mazzaferro
                          Executive Vice President and
                             Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated on March 30, 2000.

         *Jan R. Carendi

         Jan R. Carendi
         Chief Executive Officer,
         Chairman of the Board and Director

<TABLE>
<CAPTION>

Board of Directors

          <S>                                 <C>                         <C>
             *Gordon C. Boronow               T. Richard Kennedy              *Jan R. Carendi
              -----------------               -------------------               --------------

            *Malcolm M. Campbell              *Lincoln R. Collins         *C. Henrik G. Danckwardt
             -------------------              -------------------          -----------------------

               *Wade A. Dokken               *Thomas M. Mazzaferro            *Gunnar J. Moberg
                --------------                --------------------             ----------------

            *Anders O. Soderstrom              *Amanda C. Sutyak              *C. Ake Svensson
             --------------------               ----------------               ---------------

              *Bayard F. Tracy

         By: /s/M. Priscilla Pannell
                M. Priscilla Pannell
                Corporate Secretary

         *Pursuant to Powers of Attorney filed with the Registration Statement.

</TABLE>

<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 on March 30, 2000.

                   AMERICAN SKANDIA LIFE ASSURANCE CORPORATION

                         By: ___________________________

                              Thomas M. Mazzaferro
                          Executive Vice President and
                             Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated on March 30, 2000.

         *Jan R. Carendi

         Jan R. Carendi
         Chief Executive Officer,
         Chairman of the Board and Director

Board of Directors

<TABLE>
<CAPTION>

<S>         <C>                              <C>                          <C>
             *Gordon C. Boronow               T. Richard Kennedy              *Jan R. Carendi
              -----------------               -------------------               --------------

            *Malcolm M. Campbell              *Lincoln R. Collins         *C. Henrik G. Danckwardt
             -------------------              -------------------          -----------------------

               *Wade A. Dokken               *Thomas M. Mazzaferro           *Gunnar J. Moberg
                --------------                --------------------            ----------------

            *Anders O. Soderstrom              *Amanda C. Sutyak              *C. Ake Svensson
             --------------------               ----------------               ---------------

              *Bayard F. Tracy

               ---------------
</TABLE>

         By: ___________________________________
                  M. Priscilla Pannell
                  Corporate Secretary

         *Pursuant to Powers of Attorney filed with the Registration Statement.