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Registration No. 333-70749
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-6
Pre-Effective Amendment No. 1
to
Registration Statement
Under
SECURITIES ACT OF 1933
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SEPARATE ACCOUNT VL
(Exact Name of Trust)
FIRST VARIABLE LIFE INSURANCE COMPANY
(Name of Depositor)
2122 York Road, Suite 300
Oak Brook, IL 60523-1930
(Complete Address of Depositor's Principal Executive Offices)
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ARNOLD R. BERGMAN Copy To:
Vice President, General Counsel & Secretary THOMAS C. LAUERMAN, Esq.
First Variable Life Insurance Company Freedman, Levy, Kroll & Simonds
2122 York Road, Suite 300 1050 Connecticut Avenue, N.W.
Oak Brook, IL 60523-1930 Washington, D.C. 20036
(630) 684-9270 (202) 457-5106
(Name and Address of Agent for Service)
Title and Amount of Securities being Registered:
An indefinite amount of interests under flexible premium variable life
insurance policies.
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration
Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item No. in
Form N-8 B-2 Location
- ------------ --------
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1, 2 Caption in Prospectus Cover, First Variable
Life Insurance Company, The Separate Account
3 Inapplicable
4 Distribution and Other Agreements
5, 6 The Separate Account
7 Inapplicable
8 Financial Statements
9 Policy Benefits and Values, Death Benefit,
Optional Additional Benefit Riders, Legal
Proceedings
10 (a), (b), (c), (d), (e) Highlights, Surrender and Withdrawals,
Surrender Withdrawals, Transfers Among
Investment Options, Maturity Proceeds, Lapse
and Reinstatement, Determination of Account
Value, Other Provisions of the Policy, The
Policies, Your Investment Options
10 (f) Voting Rights, Other Provisions of the Policy
10 (g), (h) Transfers Among Investment Options
10 (i) Mixed and Shared Funding, Policy Benefits and
Values, Other Provisions of the Policy
11, 12 The Separate Account, Your Investment Options
The Available Options
13 Highlights, Other Charges and Deductions (not
currently charged), Elimination, Reduction, or
Refund of Charges and Deductions, Increases in
Bonuses
14, 15 Application and Issuance of a Policy, Free
Look Right, Delayed Investment Allocation Date
16 Premiums, Allocation of Premiums,
Determination of Account Value
17 Surrenders and Withdrawals, Payment of
Proceeds
18 Our Taxation, Income Tax Treatment of Policy
Benefits, Determination of Account Value, The
Separate Account, The Available Options, The
Policies, More About Charges and Deductions
19 Reports and Records, Advertising Practices,
Other Provisions of the Policy
20 See 10 (g) & 10 (h)
21 Regular Loans and Preferred Loans, The
Policies
22, 23, 24 Inapplicable
25 First Variable Life Insurance Company
26 Inapplicable
</TABLE>
<PAGE>
Prospectus [Date]
CAPITAL LEGACY VUL
JOINT SURVIVORSHIP FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
Issued by
FIRST VARIABLE LIFE INSURANCE COMPANY
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<CAPTION>
Our Marketing and Executive Office: Our Variable Service Center: Or, for express deliveries;
<S> <C> <C>
2122 York Road P.O. Box 1317 4200 University, Suite 200
Oak Brook, IL 60523 Des Moines, IA 50305-1317 Des Moines, IA 50309
Automated Information Line: (800) 845-0689
(800)-59-FUNDS
</TABLE>
The Policy described in this prospectus provides life insurance coverage that is
payable upon the death of a Surviving Insured. The Policy also permits you to
accumulate Account Value based on the premiums you pay, the charges and expenses
of the Policy, and the investment results of the underlying investment options.
You have the flexibility to adjust the amount and frequency of premium payments
and the level of life insurance provided under the Policy.
You choose the form of death benefit from one of two options. Generally, the
death benefit amount is either equal to the Face Amount shown in the Policy
(Death Benefit Option A), or an amount equal to the Face Amount plus the Account
Value (Death Benefit Option B).
You may allocate your premiums and your Policy's Account Value among nineteen
different investment options, or to our Fixed Account. The investment options
are available through our segregated asset account called Separate Account VL
(the "Separate Account"). The Separate Account invests in selected portfolios of
eight mutual funds. The portfolios currently available under the Policy are:
<TABLE>
<CAPTION>
- ------------------------------------------------------ -------------------------------------------------------------
Mutual Fund Portfolio Mutual Fund Portfolio
- ------------------------------------------------------ -------------------------------------------------------------
<S> <C> <C> <C>
AIM Variable . V.I. Capital Appreciation Lord Abbett Series . Growth & Income
Insurance Funds, . V.I. Growth Fund Inc. ("LA")
Inc. ("AIM")
- ------------------------------------------------------ -------------------------------------------------------------
American Century . V.P. Value MFS Variable . Growth Series
Variable Insurance Trust . Growth with Income Series
Portfolios, Inc. ("MFS") . New Discovery Series
("ACS") . Seeks capital appreciation
- ------------------------------------------------------
BT Insurance Funds . Equity 500 Index Variable Investors . Small Cap Growth
Trust ("BT") . Small Cap Index Series Trust ("VIST") . World Equity
. Growth
. Matrix Equity sector weighted
equities
. Growth & Income
. Multiple Strategies
Stocks, bonds & cash
. U.S. Gov't Bond
- ------------------------------------------------------ -------------------------------------------------------------
Federated . Prime Money Fund II
Insurance Series
("FIS")
- ------------------------------------------------------
Templeton Variable . International (class 2 shares)
Products Series
Fund ("FT")
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</TABLE>
<TABLE>
<CAPTION>
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SEPARATE ACCOUNT INVESTMENT OPTIONS
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Federated
Mutual Variable Investors Series Trust ("VIST") Insurance Series
Fund ("FIS")
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<S> <C> <C> <C> <C> <C>
Small Cap Growth Growth & Multiple Prime Money
Growth Income Strategies Fund II
Portfolios -----------------------------------------------------------------------------
Matrix World High U.S. Government
Equity Equity Income Bond
Bond
- -------------------------------------------------------------------------
</TABLE>
We guarantee to keep your Policy in force for a minimum period as long as you
pay certain Minimum Monthly Premium amounts. The guarantee period depends on the
Age of the insured persons when we issue the Policy, and will be 5 years or age
70 of the older insured, whichever occurs later.
Neither the Securities and Exchange Commission nor any state securities
commission approved or disapproved these securities or passed upon the accuracy
or adequacy of the prospectus. Any representation to the contrary is a criminal
offense. This prospectus is accompanied by the current prospectuses of the
Funds. All prospectuses should be read and retained for future reference.
We have not authorized any person to give any information not contained in this
prospectus (or in any sales literature we have approved.) We do not offer the
policies everywhere, and this prospectus does not constitute an offer anywhere
that it would be unlawful. In certain jurisdictions, various time periods and
other terms and conditions may vary from what is described in this prospectus.
Any such variations that apply to your policy will be included in the policy or
a related rider or endorsement.
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TABLE OF CONTENTS
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Page
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DEFINITIONS
HIGHLIGHTS
FIRST VARIABLE LIFE INSURANCE COMPANY
THE SEPARATE ACCOUNT
YOUR INVESTMENT OPTIONS
The Available Options
Transfers Among Investment Options
Mixed and Shared Funding
MORE ABOUT CHARGES AND DEDUCTIONS
Monthly Deductions
Daily Deductions
Surrender Charge
Fund Expenses
Other Charges and Deductions (Not Currently Charged)
Elimination, Reduction, or Refund of Charges and Deductions;
Increases in Bonuses
Purposes of Policy Charges
THE POLICIES
Application and Issuance of a Policy
Premiums
Allocation of Premiums
Telephone Transactions
POLICY BENEFITS AND VALUES
Death Benefit
Premium Value Bonuses and Cash Value Bonuses
Optional Additional Benefit Riders
Estate Protection Rider
Joint Accidental Death Benefit Rider
Additional Term Insurance on the Insured(s)
Other Insured Persons Rider
Determination of Account Value
Policy Loans
Surrender and Withdrawals
Maturity Proceeds
Lapse and Reinstatement
Payment of Proceeds
Tax Withholding
Payout Options
Right to Exchange for a Fixed Benefit Policy
Right to Exchange for Two Insurance Policies
OTHER PROVISIONS OF THE POLICY
Suicide Exclusion
Representations and Contestability
Misstatement of Age or Sex
Owner and Beneficiary
Assignments
Reports and Records
Voting Rights
Suspension of Payments and Transfers
Nonparticipation in Our Dividends
DISTRIBUTION AND OTHER AGREEMENTS
OUR MANAGEMENT
FEDERAL TAX MATTERS
General
Our Taxation
Income Tax Treatment of Policy Benefits
Life Insurance
Acceleration of Death Benefits
Modified Endowment Contracts
Exchange for Two Policies
Other Tax Effects of Policy Changes
Taxation of Pre-Death Distributions from a Policy that is not a
Modified Endowment Contract
Taxation of Pre-Death Distributions from a Policy that is a
Modified Endowment Contract
Diversification Requirements
ADVERTISING PRACTICES
LEGAL MATTERS
State Regulation
Legal Proceedings
Counsel
EXPERTS
REGISTRATION STATEMENT
YEAR 2000 ISSUES
APPENDICES
APPENDIX A: ANNUAL RATES OF RETURN FOR THE SEPARATE ACCOUNT
APPENDIX B: ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES,
CASH SURRENDER VALUES AND ACCUMULATED VALUE OF
PREMIUMS
APPENDIX C: FINANCIAL STATEMENTS
</TABLE>
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DEFINITIONS
Business Day - Each day the New York Stock Exchange is open for regular trading,
The New York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Martin Luther King Day, Jr., President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas
Day. Each Business Day ends at the close of regular trading for the day on the
exchange, which usually is 4:00 p.m. Eastern time.
Insureds - The two people whose lives are insured under the Policies. Death
benefits are payable upon the death of the second of the Insureds to die. We
call this person the "Surviving Insured."
Joint Age - The joint equivalent age of the Insureds that is used to calculate
the costs and benefits under the Policies. We determine the Joint Age on the
Policy Date and it increases by 1 on each Policy Anniversary. The Joint Age
will vary by the premium rate classes of the insured.
Policy Anniversary - An anniversary of the Policy Date.
Policy Date - The date the Policy takes effect, as shown on the Owner's Policy
data page. Policy Months and Policy Years are measured from this date.
Policy Month - Each one-month period beginning on the Policy Date and generally
on the same day of each month after that.
Policy Quarter - One quarter of a Policy Year. The first Policy Quarter begins
on the Policy Date and ends on the last Business Day of the third Policy Month.
Policy Year - Each 12-month period beginning on the Policy Date.
Premium Rate Class - An insurance underwriting risk category that is used to
determine certain benefits and charges under a Policy. For example, Monthly
Minimum Premiums, cost of insurance charges, and Premium Value Bonuses will vary
by the premium rate class assigned the Insureds. On the date of this
prospectus, we use Preferred, Smoker and Non-Smoker premium rate classes that
will differ based on the sex of the Insureds. These classes are further sub-
divided into "standard" and "substandard" insurance classes. Charges are
generally higher for substandard insurance classes.
HIGHLIGHTS
These highlights discuss certain important aspects of the Policy. The rest of
this prospectus explains these and other aspects in greater detail. You should
be sure to read the prospectus and the prospectuses of the Funds for more
complete information.
How do investment results affect a Policy?
You invest the Account Value under your Policy in one or more of the investment
options we offer. Your Account Value increases or decreases by the amount of
any positive or negative return it earns in those options. Your Account Value
also will decrease by the amount of all charges and deductions we make under
your Policy. The Death Benefit we pay under your Policy when the Surviving
Insured dies can also vary as a result of the investment results achieved for
your Account Value.
Account Value invested in our Separate Account investment options is not
guaranteed, and you bear the entire investment risk under those options.
Account Value allocated to our Fixed Account, however, is provided with our
guarantees of principal and a minimum 4% rate of interest on an annual basis.
(Similar guarantees apply to an amount of your Account Value that equals any
Policy loans that you take out.)
How much can I (or must I) invest in a Policy?
Payment of the Monthly Minimum Premium amounts specified in the Policy
guarantees that the Policy will remain in force for a guarantee period ranging
specified in your Policy. The period will be for the later of 5 Policy Years or
until the Policy Anniversary on or next following the older insured's age
70.
Planned and unplanned additional premiums may be paid, subject to certain
limitations. For example, we will not permit you to pay so much premiums that
your Policy would fail to meet the definitions of a life insurance contract
under the Internal Revenue Code ("Code").
We may accept a payment of an amount that would, however, cause your Policy to
be classified as a "modified endowment contract" for tax purposes.
Payment of large amounts of premium (relative to the amount of insurance
coverage) during certain periods of time may cause a Policy to be classified as
a "modified endowment contract" under section 7702A of the Code. Under current
federal income tax law, any pre-death distributions from a modified endowment
contract, or "MEC," including loans, assignments, partial withdrawals and
surrenders, will be included in your taxable income on an income first basis,
and a 10% penalty tax will be imposed on any such income distributed before you
attain age 59-1/2.
Will I have access to my Account Value?
You may borrow up to 90% of your Policy's Cash Surrender Value, subject to
certain limitations. (Cash Surrender Value is your Account Value less any loan,
less any accrued loan interest, and less any applicable Surrender Charges.) You
may surrender (i.e., cancel) your Policy at any time and we will pay you the
Cash Surrender Value. Subject to certain limits, you also may make a partial
withdrawal of your Cash Surrender Value after the first Policy Year.
Do I receive special advantages for holding a Policy over a long term?
Your Policy will be eligible for Premium Value Bonuses and Cash Value bonuses
after 8 Policy Years.
We have developed a Premium Value Bonus to provide special value to Policy
owners who have paid, and continue to pay, amounts equal to the Monthly Minimum
Premium times the number of elapsed Policy Months. We will pay the Premium Value
Bonuses starting in the 9th Policy Year, based on the amount of premiums you
paid that you are not deemed to have withdrawn or borrowed. The amount of a
Premium Value Bonus credited each month is based on the premium rate class of
the insured persons, the total Monthly Minimum Premium you have paid at that
time (and not deemed to have withdrawn or borrowed) and the Premium Value Bonus
percentages then in effect. The Premium Value Bonus percentage currently is
calculated at an annual rate of 5% of the Policy's Monthly Minimum Premium for
Preferred, Non-Smoker and Smoker premium rate classes. We may change the Premium
Value Bonus percentage rates at any time, but the annual rate will not be less
than 3% for Preferred, Non-Smoker and Smoker standard premium rate classes.
In addition to the Premium Value Bonus, a Cash Value Bonus is also scheduled to
be paid monthly starting in the 9th Policy Year, based on your then current
Account Value (net of Policy loans and interest thereon) and the Cash Value
Bonus percentage then in effect. The Cash Value Bonus annual percentage
currently ranges from .30% for a Policy with Account Value (net of Policy loans
and interest thereon) of more than $200,000 at the start of the applicable
Policy Year, to 0.20 % if such value is $100,000 up to $200,000, to 0.10% if
such value is $25,000 or more (but less than $100,000), to 0% if such value is
less than $25,000.
<PAGE>
The Cash Value bonus is currently scheduled to increase after the 20th Policy
Year to .75% for Policies with an Account Value (net of Policy loans and
interest thereon) at the start of the applicable year of more than $200,000, to
.50% if such value is more than $100,000 (up to $200,000), and to .25% if such
value is at least $25,000 (but less than $100,000 and 0% if such value is less
than $25,000).
Because we do not guarantee any minimum Cash Value percentage, we could
terminate or reduce Cash Value Bonuses at any time.
The Premium Value and Cash Value Bonuses will not be paid if your state does not
permit them. You should check with your sales representative or call our
Variable Service Center to confirm the availability of the bonuses.
What general income tax consequences will I have from owning a Policy?
Under current federal tax law, you generally do not pay income tax on increases
in your Account Value unless and until there is a total surrender or partial
withdrawal. A complete surrender of the Policy will, and a partial withdrawal
may, be included in your gross income to the extent that the distribution
exceeds your investment in the Policy. Additional amounts may be taxable if a
partial surrender during the first 15 Policy Years results in or is necessitated
by a reduction in benefits.
Under current federal tax, you will generally not pay current income tax on the
proceeds from any Policy loan. Interest you pay on the loan generally will not
be tax deductible, however.
Special rules are applicable to a surrender, withdrawal, loan or transfer of
ownership from a Policy classified as a "modified endowment contract" or "MEC".
Death Benefit Proceeds paid to the Beneficiary under the Policy are generally
not subject to federal income tax.
Please review the FEDERAL TAX MATTERS section of this prospectus for additional
information. We may make any change in a Policy or take any other action in
order to comply with applicable state and federal law, including all tax law
requirements for treatment as life insurance.
How much do we pay the Policy's Beneficiary when the Surviving Insured person
dies?
Upon the death of the Surviving Insured, we will pay the Death Benefit Proceeds
to the Beneficiary. The Death Benefit Proceeds are (1) the amount payable under
Death Benefit Option A or B (whichever is in effect), (2) minus any outstanding
Policy loans and interest thereon, (3) minus any due and unpaid monthly
deductions and charges under your Policy, and (4) plus any amounts we owe under
the terms of any optional additional benefit riders to your Policy. The
Beneficiary may receive the proceeds in a lump sum or in the form of one of our
annuity payout options.
What charges and deductions do you make?
The Policy is subject to the following charges and deductions:
Monthly Deductions - composed of the following:
. administrative charge - currently $10 each Policy Month (which we may
increase to not more than $13 per month);
. policy benefit charge - at an annualized rate of 0.30% of your Policy's
Account Value;
. policy fee - based on the Face Amount of the policy, the sex and premium rate
class of the Insureds and the Joint Age on the Policy Date;
. a cost of insurance charge - based on the sex and premium rate class of the
Insureds, the Joint Age, Policy Year and amount of coverage; and
. any charges for optional additional benefit riders.
Daily Deductions - the charge currently equals an annual rate of 0.90% (which we
may increase to not more than 1.20%) of the daily net assets in each Separate
Account Investment Option.
Surrender Charge - will be assessed upon termination of your Policy during the
first 10 Policy Years. The Surrender Charge varies for each Policy Year during
this period. The maximum Surrender Charge is 125% of 12 Monthly Minimum
Premiums up to a limit, for standard premium rate classes, of $33.75 per $1,000
of Face Amount. A new set of Surrender Charges is established for the 10-year
period following an increase in Face Amount.
Fund Expenses - we purchase shares of the Portfolios of the Funds at net asset
value, which reflects investment management fees, other operating expenses and
any expense reimbursement paid by an investment adviser to the applicable
Portfolio. Accordingly, these expenses reduce the return you earn in our related
variable investment options. The total annual expenses of the Portfolios as a
percentage of average net assets for the year ended December 31, 1998 were:
Annual Fund Expenses After Expense Reimbursements
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<CAPTION>
Management 12b-1 Other Operating Total
Mutual Fund Portfolio Fees Fees Expenses Expenses*
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AIM Capital Appreciation 0.62% - 0.05% 0.67%
AIM Growth 0.64% - 0.08% 0.72%
ACS Value 1.00% - 0.00% 1.00%
BT Small Cap Index 0.35% - 0.10% 0.45%
BT Equity 500 Index 0.20% - 0.10% 0.30%
FIS Prime Money Fund II 0.50% - 0.30% 0.80%
FT International (Class 2) 0.69% 0.25% 0.19% 1.13%
LA Growth & Income 0.50% - 0.01% 0.51%
MFS New Discovery Series 0.90% - 0.27% 1.17%
MFS Growth Series 0.75% - 0.25% 1.00%
MFS Growth with Income Series 0.75% - 0.20% 0.95%
VIST Small Cap Growth 0.85% - 0.50% 1.35%
VIST World Equity 0.70% - 0.50% 1.20%
VIST Growth 0.70% - 0.32% 1.02%
VIST Matrix Equity 0.65% - 0.50% 1.15%
VIST Growth & Income 0.75% - 0.50% 1.25%
VIST Multiple Strategies 0.70% - 0.45% 1.15%
VIST High Income Bond 0.70% - 0.50% 1.20%
VIST U.S. Government Bond 0.60% - 0.25% 0.85%
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</TABLE>
* "Total Expenses" for the Portfolios before reimbursement by the relevant
Fund's investment advisor, for the period ended December 31, 1998, were as
follows: 5.22% for the MFS New Discovery Series Portfolio; 1.84% for the VIST
Small Cap Growth Portfolio; 1.51% for the VIST World Equity Portfolio; 1.03% for
the VIST Growth Portfolio; 1.48% for the VIST Matrix Equity Portfolio; 1.33% for
the VIST Growth & Income Portfolio; 1.46% for the VIST High Income Bond
Portfolio; and 1.59% for the VIST U.S. Government Bond Portfolio.
Other Expenses - we also have the right to begin making the following additional
charges under the Policies (which we have decided not to impose for now):
Premium Charge and Premium Tax Charge - currently none, guaranteed not to exceed
5.00% of each Premium Payment you make.
Transaction Fees - currently none, guaranteed not to exceed $10 guaranteed for
each transfer among Investment Options that you make in excess of twelve
transfers per Policy Year; and guaranteed not to exceed $10 for any Policy loan.
Additional Transaction Charge - currently none, may be imposed for surrenders
you make for the benefit of a third party assignee of the Policy pursuant to
section 1035 of the Internal Revenue Code. (See "Surrender Charge.")
Tax Charge - currently none, but we reserve the right to impose charges for
other taxes that may be payable and are attributable to the Policies in the
future.
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FIRST VARIABLE LIFE INSURANCE COMPANY
We are a stock life insurance company that was organized under Arkansas law in
1968. We engage principally in the business of variable life insurance, variable
annuities, and fixed annuities. We hold licenses to sell insurance in 49 states,
the District of Columbia and the U.S. Virgin Islands. Irish Life of North
America, Inc. ("ILoNA") owns all of our outstanding stock, and Irish Life &
Permanent plc. ("Irish Life & Permanent"), in turn, owns all of ILoNA. Irish
Life & Permanent is a leading life and financial services group in Ireland with
total assets of over $25 billion at May 1, 1999.
We have an A (Excellent) rating from A.M. Best Company, an independent firm that
analyzes insurance carriers. We also have an A+ rating from Standard and Poor's
and an AA- rating from Duff & Phelps Credit Rating Co. on claims paying ability.
These ratings only reflect the opinion of the rating company on our relative
financial strength, and on our ability to satisfy our obligations under the
Policies. The ratings do not reflect the investment performance of the Separate
Account, or the degree of risk associated with an investment in the Separate
Account.
THE SEPARATE ACCOUNT
We authorized the establishment of Separate Account VL (the "Separate Account")
under Arkansas law on March 6, 1987; and we have registered the Separate Account
with the Securities and Exchange Commission ("SEC") as a unit investment trust-
type investment company.
The Separate Account's assets belong to us. However, our other creditors could
reach only the amount (if any) in the Separate Account that exceeds the current
value of our obligations to policyholders who have chosen a Separate Account
investment option.
The Separate Account has several different investment options within it. We
invest the assets allocated to each investment option in one Portfolio of Funds.
We may add other investment options to the Policies that, in turn, may be
invested in other Portfolios of the Funds or in portfolios of other mutual
funds. We may restrict these other investment options to customers of specified
distributors.
Performance Information
Appendix A to this prospectus sets out the performance record of each portfolio
that you can select as an investment option.
YOUR INVESTMENT OPTIONS
The Available Options
You may allocate your premium payments and existing Account Value to one or more
of our Separate Account investment options and/or to our Fixed Account. The
currently available Portfolios for our Separate Account Investment Options are
listed on the cover page of this prospectus. More information, including a
discussion of potential risks, appears in the current prospectuses for the
Funds, which accompany this prospectus. (The prospectuses for the funds may also
describe other portfolios that are not available under a Policy.) You should
read this prospectus and the prospectuses for the Funds carefully before
investing in any Separate Account investment option.
We do not guarantee that continued purchase of Portfolio shares will remain
appropriate in view of the purposes of the Separate Account. If shares of a
Portfolio are no longer available for investment by the Separate Account or if,
in our judgment, further investment in the shares should become inappropriate or
inadvisable in view of the purpose of the Policies, we may substitute shares of
another portfolio or investment vehicle for shares already purchased or to be
purchased in the future. We also may, in our discretion, remove Portfolios for
transfers or new investments. No substitution of securities may take place
without prior approval of the SEC, to the extent required, and in compliance
with requirements the SEC may impose.
We may also combine separate account investment options or operate them in any
form permitted by law, including a form that allows them to make direct
investments.
This prospectus generally describes only the Policy and Separate Account
investment options. Because of certain exemptions, interests in our Fixed
Account are not registered under the securities laws, nor have we registered the
Fixed Account as an investment company. Accordingly, the protections of the
federal securities laws do not apply to our Fixed Account. We will credit your
Account Values in the Fixed Account with at least a minimum effective rate of
interest per year. We may credit additional amounts of "current" interest in our
sole discretion. New premium payments and transfers from the Separate Account or
Loan Account to the Fixed Account may each receive different current interest
rate(s) than the current interest rate(s) credited to Account Value that has
been previously invested in the Fixed Account. We determine current interest
rates in advance, and credit interest daily to your Account Value in the Fixed
Account.
Transfers Among Investment Options
General Requirements. You may transfer Account Value among investment options by
written request or telephone. The minimum amount you may transfer is the lesser
of (a) $100 or (b) your entire interest in the applicable investment option. You
should mail, fax or express written transfer requests to our Variable Service
Center shown on the front cover of this prospectus. You can also request a
transfer by phoning 1-800-845-0689.
Transfer requests must clearly specify the amount to be transferred and the
investment options affected. All transfer requests made at the same time for
Separate Account investment options will be treated as a single request. The
transfer will be effective at the prices we next compute after we receive the
transfer request at our Variable Service Center.
Unless we consent, transfers from the Fixed Account to other investment options
during the first Policy Year cannot total more than 50% of the Fixed Account
Value on the Policy Date.
After the first Policy Year, your transfers from the Fixed Account during a
Policy Year may not exceed the greater of:
. 50% of your Fixed Account Value on the immediately preceding Policy
Anniversary; or
. 100% of your Fixed Account Value transferred to other investment options
during the immediately preceding Policy Year.
We can impose a transaction fee if you make more than 12 "free" transfers in a
Policy Year.
Automatic Transfer Programs - You can participate in automatic transfer
arrangements, including dollar cost averaging and asset rebalancing programs.
You initiate these programs by making a written or telephone request to our
Variable Service Center shown on the front cover of this prospectus. We make the
automatic transfers on the last business day of
<PAGE>
whichever of the following intervals you request: quarterly, semi-annually,
annually, monthly (for dollar cost averaging only), or at any other interval
that we approve. You may request us to cease automatic transfers at any time.
Automatic transfers from the Fixed Account are subject to the restrictions
described above in General Requirements (except that, for dollar cost averaging
only, you can transfer up to 100% of your Fixed Account Value within one Policy
Year if you have selected the monthly interval.) Automatic transfers are not
subject to any transaction fee and do not count toward the number of "free"
transfers. We currently do not charge you for an automatic transaction program,
although we reserve the right to do so in the future.
The dollar cost averaging program permits transfers from the FIS Prime Money
Fund II investment option or the Fixed Account to other Separate Account
investment options on a regularly scheduled basis. Such systematic transfers may
prevent investing too much when the price of securities is high or too little
when the price is low. There is no guarantee of this, however. Also, since
systematic transfers, such as dollar cost averaging, involve continuous
investment regardless of fluctuating price levels, you should consider your
ability to continue purchases through all phases of the market cycle.
The minimum amount, for each dollar cost averaging transfer, is $100. You must
have $1,200 of Account Value in the Prime Money Fund II investment option or
the Fixed Account, as applicable, before a "dollar cost averaging" program may
begin.
The asset rebalancing program enables you to select the percentage levels of
Account Value you wish to maintain in particular investment options. At the
intervals you select, we will automatically rebalance your Account Value to
maintain the indicated percentages by transfers among the investment options.
You must include all of your Account Value allocated to the Separate Account
investment options in any asset rebalancing program.
Other investment programs, such as systematic transfers and systematic
withdrawals, or other transfers or withdrawals may not work well in concert with
the asset rebalancing program. Therefore, you should monitor your use of these
programs while the asset rebalancing program is being used.
Restrictions on Transfers. Generally, you may make an unlimited number of
transfers in any Policy Year. Frequent requests to transfer, however, may have
a detrimental effect on the value of Portfolio shares values held in the
Separate Account. We may therefore limit the number of permitted transfers in
any Policy Year, or refuse to honor any transfer request for an owner or a group
of owners, if:
. the purchase or redemption of shares of one or more of the Portfolios is to
be restricted because of excessive trading; or
. a specific transfer or group of transfers is deemed to have a detrimental
effect on Policy Account Value or Portfolio share prices.
We may also at any time suspend or cancel acceptance of third party transfer
requests on behalf of a Policyowner; or restrict the Investment Options that
will be available for such transfers. Notice will be provided to the third
party in advance of the restrictions. We will not impose any restrictions,
however, if we have received satisfactory evidence that:
. you have appointed the third party to act on your behalf for all financial
affairs; or
. a court of competent jurisdiction has appointed the third party to act on
your behalf.
We also reserve the right at any time and without prior notice to otherwise
modify, suspend or terminate the transfer privileges.
Automatic Transfers of Small Accounts. We reserve the right, subject to any
applicable law, to transfer Account Value from any investment option if less
than $100, to the investment option with the greatest Account Value.
Mixed and Shared Funding
We buy shares of the Funds for the Separate Account in connection with the
Policies, and for allocation to separate accounts funding variable annuity
policies and other variable life insurance Policies issued by us. The Funds
offer shares to other insurance companies and to other separate accounts, either
affiliated or unaffiliated with us, for the same purpose. In the future, it may
conceivably become disadvantageous for variable life insurance separate accounts
and variable annuity separate accounts to invest in one or more of the Funds
Portfolios simultaneously, if the interests of variable life insurance and
variable annuity policy owners differ. The boards of trustees of Funds intend to
monitor events to identify any material irreconcilable conflicts which may arise
and to determine what action, if any, they or the insurance companies should
take in response.
MORE ABOUT CHARGES AND DEDUCTIONS
Monthly Deductions
On the first day of each Policy Month we make a Monthly Deduction from each
Policy's Account Value. We make the deduction from your Investment Options in
proportion to the amount of your Account Value in each (i.e., on a "pro-rata
basis") or by any other method you select and we approve.
For example, we will permit you to have deductions first taken from one or more
preselected investment options. You may also request deductions to first be
taken from the investment option that has the best investment performance over
the prior Policy Month.
The Monthly Deductions include the following charges:
Administrative Charge. This charge is currently $10.00 per Policy Month, we
guarantee this charge not to exceed $13 per Policy Month. This charge helps
compensate for our expenses in administering the Policies and the Separate
Account.
Policy Fee and Policy Benefit Charge. The monthly deduction includes a policy
fee and an additional monthly charge for the benefits we provide under the
Policies. The policy fee is based on the Face Amount of the Policy, the sex and
premium rate class of the Insureds. We compute the policy benefit charge as a
percentage of the Policy's Account Value on each monthly deduction day. We make
this charge at an effective annual rate of 0.30%, which reduces to .15% in years
21 and after if the face amount is greater than $500,000. This charge helps
compensate us for our expenses in administering the Policies and providing
Benefits under the Policies.
Cost of Insurance. This is a charge for the cost of providing life insurance
coverage for the insured person. First we subtract your then current Account
Value from your then current Death Benefit; under your Policy. This tells us
how many dollars we stand to lose if you were to die at that time. We determine
our cost of insurance charge by (a) dividing that dollar amount of risk by
1.003273739 and (b) multiplying the result by the applicable current cost of
insurance rate. The cost of insurance rate varies based on the length of time a
Policy has been in force and the sex and premium rate class of the Insureds and
the Joint Age. We guarantee this charge will not exceed the charge for the same
amount of risk based on the mortality table guaranteed in the Policy. For
standard risk Insureds, we guarantee the 1980 Commissioner's Standard Ordinary
Mortality Tables, Age Last Birthday ("1980 CSO"). These mortality tables differ
for male and female insured persons and separate mortality tables may be used
for different premium rate classes. The maximum cost of insurance charge for
substandard risk Insureds is based on multiples of or additions to the
guaranteed standard rates established by the 1980 CSO.
<PAGE>
We currently charge lower cost of insurance rates for most Joint Ages, although
we can at any time raise them to not more than the above-described guaranteed
maximums.
In general, the guaranteed cost of insurance rates increase with the Insureds
Age. Therefore, the longer you own a Policy, the higher your cost of insurance
rate will be. Similarly, non-smokers generally have lower current cost of
insurance rates than smokers do, and persons that have other highly favorable
health characteristics have lower rates than those that do not. On the other
hand, if one or both of the Insureds present particular health, occupational or
avocational risks you may pay higher cost of insurance rates and other
additional charges for the insurance coverage.
The monthly cost of insurance rates for an increase in Face Amount under your
Policy will be based on the amount of the increase of insurance and the sex, age
and premium rate class of the Insureds at the time of the increase.
Optional Additional Benefit Rider Charges: We intend to offer optional
additional benefit riders that you may add to the Policy. Your Policy will
specify any additional monthly charge for the riders you elect.
Daily Deductions
Each Business Day, we deduct a mortality and expense risk charge that we
calculate as a percentage of your Policy's net assets in each Separate Account
investment option. The charge is currently 0.90% (which we guarantee will not be
increased to more than 1.20%). This charge helps compensate us for assuming
mortality and expense risks under the Policies.
Surrender Charge
We may assess a surrender charge if you surrender your Policy during the first
10 Policy Years. This charge partially compensates us for our sales expenses and
insurance underwriting expenses.
Surrender Charge Percentage. For each Policy Year, we multiply one year's
Monthly Minimum Premium applicable to the initial Face Amount by the surrender
charge percentage shown below. We then deduct that amount if you make a full
surrender at any time during that Policy Year:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Surrender Surrender Charge %
Policy Year Charge % Policy
Year
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1 62.5% 7 80%
- ------------------------------------------------------------------------------
2 125% 8 60%
- ------------------------------------------------------------------------------
3 125% 9 40%
- ------------------------------------------------------------------------------
4 125% 10 20%
- ------------------------------------------------------------------------------
5 125% 11+ 0%
- ------------------------------------------------------------------------------
6 100%
- ------------------------------------
</TABLE>
Maximum Surrender Charge. The surrender charge will not exceed 125% of one
year's Monthly Minimum Premium. Nor will it exceed $33.75 per $1,000 of Face
Amount for standard premium rate classes. This per $1,000 limit will not apply
if either of the Insureds is in a substandard premium rate class. The Policy
states the dollar amount of the maximum surrender charge on the Policy Date. We
impose no surrender charge upon a partial decrease in Face Amount, but the full
surrender charge will remain in effect for a subsequent surrender.
Surrender Charge for Face Amount Increases: We will establish an additional
surrender charge for the 10 year period following any increase in Face Amount
that you request. The additional surrender charge will be computed as if the
Face Amount increase were being issued in the form of a new Policy, based on the
Joint Age and other risk characteristics of the Insureds at the time of the
increase.
Upon surrender within the 10-year period, the remaining amount of surrender
charges for the Face Amount increase will be deducted, together with any amount
of surrender charge that still remains from the initial policy or from any prior
Face Amount increases.
Fund Expenses
Our Separate Account purchases shares of the Portfolios of the Funds at net
asset value, which reflects investment management fees, other operating expenses
and any expense reimbursement paid by an investment adviser to the applicable
Portfolio. (See "Highlights -- Fund Expenses").
Other Charges and Deductions (Not Currently Charged)
We do not currently make the charges referred to after the captions "Premium
Charge and Premium Tax Charges" "Transaction Fees", "Additional Transaction
Charges" and "Tax Charge" in the "Highlights -- Other Expenses" segment of this
prospectus. We reserve the right to do so, however.
Special Service Fees. We do not charge you for special services, such as
additional reports, dollar cost averaging, and asset rebalancing. Although we
do not currently intend to do so, we reserve the right to charge you for these
special services.
Elimination, Reduction or Refund of Charges and Deductions; Increases in Bonuses
We may eliminate, reduce, or refund any charges and deductions on a Policy when
sales of Policies are made to certain individuals or to group and sponsored
arrangements. We will do this when we expect savings of sales, administration or
other expenses, or in a reduction in the level of risks we expect to assume
under the Policies. (This prospectus describes such groups under "Group and
Sponsored Arrangements" below.) We determine any such adjustment to charges and
deductions after examination of relevant factors such as:
. the size and type of group, because large numbers of Policies tend to lower
our per-Policy expenses;
. the total amount of premium payments to be received, because certain expenses
tend to be a smaller percentage of larger premium payments;
. any prior or existing relationship we have with the purchaser, because of the
likelihood of reduced marketing and implementation expenses;
. other circumstances, of which we are not presently aware, which could result
in reduced expenses; and
. after a Policy is issued, if we anticipate expenses for later Policy Years
that are lower than initially projected.
We also may eliminate, reduce or refund charges and deductions when we issue a
Policy to an officer, director, employee or agent of ours or any of our
affiliates. We do not, however, guarantee any adjustment in charges and
deductions, and any adjustment may vary by group. Based on the same
considerations as discussed above, we may also credit higher Policy bonuses than
would be otherwise be payable or accelerate the payment of Policy bonuses to
members of selected groups.
All adjustments will be made under our uniform administrative rules then in
effect. In no event will adjustments to charges, deductions or Policy bonuses
be permitted if the adjustment would be unfairly discriminatory to any person.
Group and Sponsored Arrangements. Group arrangements include those in which a
trustee, employer, association or similar entity purchases individual Policies
covering a group of individuals on a group basis. An example of such an
arrangement is a non-tax qualified deferred compensation plan. Sponsored
arrangements include those in which an employer, an association or similar
entity permits the Company to offer Policies to its employees or members on an
individual basis.
Gender-Neutral Policies. The United States Supreme Court has held that certain
insurance contracts may not be used to fund certain employee benefit programs
where the contracts provided values and benefits that varied with the
<PAGE>
gender of the insured person. We may therefor offer Policies that do not vary by
gender for use in connection with certain employee benefit programs. We
recommend that any employer proposing to offer the Policies to employees under a
group or sponsored arrangement consult its attorney before doing so.
We may also offer the Policy with provisions and charges that are gender neutral
in states where required, and where the "unisex" version of the Policy has been
approved. Currently this is required only in Montana.
Purposes of Policy Charges
We have designed the charges under the Policies to cover, on the whole, our
direct and indirect costs of selling, administering and providing benefits under
the Policies. These charges are also designed, on a whole to compensate us for
the risks we assume under the Policies. These include mortality risks (such as
the risk that insured persons will, on average, die before we expect, thereby
increasing the amount of claims we must pay); investment risks (such as the risk
that adverse investment performance will make it more costly for us to provide
the Guaranteed Death Benefit under the Policies or reduce the amount of our
asset-based fee revenues below what we anticipate); sales risks (such as the
risk that we sell fewer Policies and receive lower net revenue than we expect,
thereby depriving us of expected economies of scale); regulatory risks (such as
the risk that tax or other regulations may be changed in ways adverse to issuers
of variable life insurance policies); and expense risks (such as the risk that
the costs of administrative services that we must provide will exceed what we
currently project).
If, as expected, the charges that we collect from the Policies exceed our total
costs in connection with the Policies, we will earn a profit. Otherwise we will
incur a loss. We have set the current and maximum rates of certain of our
charges with reference to estimates of the amount of specific types of expenses
or risks that the Company will incur. In some cases, this prospectus identifies
such expenses or risks in the name of the charge: e.g., the administrative
charge, cost of insurance charge, and mortality and expense risk charge.
However, the fact that any charge bears the name of a particular expense or
risk does not mean that the amount we collect from that charge will never be
more than the amount of such expense or risk, or that we may not also be
compensated for such expense or risk out of any other charges we may deduct
under the terms of the Policies.
THE POLICIES
Application and Issuance of a Policy
If you wish to purchase a Policy, you must submit an application to our Variable
Service Center. You select:
. A Face Amount (minimum of $75,000 on proposed Insureds up to Age 85, and
Death Benefit Option A or B; (see "Death Benefit");
. The amount of planned premium that you intend to pay; and
. The investment options to which we will allocate your premium.
We will review an application under our underwriting rules, and we may request
additional information or reject the application. We generally will not issue
Policies to insure persons older than age 85; nor will we generally issue
Policies to employee benefit plans qualified under Section 401 of the Internal
Revenue Code. If we decline an application, we will refund any premium payment
made.
If we issue the Policy, Monthly Deductions will begin as of the Policy Date. If
you make a premium payment with the application, the Policy Date generally will
be the date we approve the application. If you instead pay the first premium
upon delivery of the Policy, the Policy Date generally will be five days after
we issue the Policy.
Under limited circumstances, we may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed. In
that case, even though Monthly Deductions begin earlier, backdating may be
advantageous, for example, to obtain a lower cost of insurance rate, based on a
lower Joint Age of the insured persons.
"Free Look Right." You have the right to review your Policy during an initial
inspection period specified in the Policy and, if dissatisfied, to return it to
us or to the agent through whom you purchased it. We will refund the Account
Value, any Monthly Deductions, and any other charge we assessed on a Policy that
is returned during the permitted period, unless a different amount is required
by state law. The "free look" period is typically 10 days, but may be greater
depending on state requirements.
Premiums
Planned Premiums. You may chose, within limits, to pay premiums on a pre-
determined schedule. We will provide periodic reminder notices. Failure to
make such a payment will not result in termination of your Policy, so long as
your Policy has enough Cash Surrender Value to cover the Monthly Deductions as
they fall due. Although making planned premium payments will not necessarily
assure that your Policy will remain in force, the amounts paid will generally
result in greater benefits than if you pay a lower amount of premium.
You may arrange to pay planned premiums by pre-authorized automatic deductions
from accounts you maintain at other financial institutions. You may also
request to change the amount of your planned premiums by submitting a written
request to our Variable Service Center.
Monthly Minimum Premium; Death Benefit Guarantee. Your Policy shows the Monthly
Minimum Premium, which varies by Joint Age on the Policy Date, Death Benefit
amount (including optional additional benefit riders), and premium rate classes
of the insured persons. The Monthly Minimum Premium increases if the Face Amount
increases, or if you add other benefits, during the Death Benefit Guarantee
Period.
Your Policy will stay in force during the Death Benefit Guarantee period if, as
of the first Business Day of each Policy Month, the cumulative amount of
premiums paid over the life of your Policy is at least equal to your Policy's
Monthly Minimum Premium times the number of elapsed Policy Months. For this
purpose, the amount of premium paid is reduced by the sum of any outstanding
Policy loans (including accrued interest) and cumulative withdrawals.
The length of the Death Benefit guarantee period begins on the Policy Date and
ends on the later of 5 Policy Years or the Policy Anniversary on or next
following the older insured's age 70.
We will accrue for later deduction any charges that were due but not taken
during the Guaranteed Death Benefit Period because of insufficient Account
Value. Any due and unpaid Monthly Deductions will be deducted from any Death
Benefit proceeds or from any Account Value that becomes available to pay the
deduction.
Additional Premiums. You may pay additional premiums at any time during the
lifetime of either of the insured persons, subject to three exceptions. First,
we will refuse any premium payment that may cause your Policy no longer to be
treated as life insurance for tax purposes. Second, we
<PAGE>
reserve the right to require satisfactory evidence that both of the insured
persons are still insurable before we accept any premium payment that would
increase the then current Death Benefit under your Policy. Third, we may require
that you pay off any Policy loans you have taken (and unpaid interest) prior to
accepting any premium payments from you.
If you pay premiums in excess of certain amounts your Policy may be classified
as a "modified endowment contract," or "MEC," for federal income tax purposes
and this could have adverse tax consequences for you. (See "Federal Tax Matters
Income Tax Treatment at Policy Benefits.")
Grace Period. After the end of your Policy's Death Benefit Guarantee Period,
your Policy will enter a grace period on the first Business Day of any Policy
Month on which your Policy Cash Surrender Value will not cover the current
Monthly Deduction and accrued interest on any Policy loans you have taken. This
also will happen during the Death Benefit Guarantee Period, if you have not paid
enough premiums to keep the guarantee in force.
The grace period runs for 61 days from the applicable Business Day. We will send
you a notice at your last known address which will show the amount necessary to
cover the Monthly Deduction(s) due plus an amount equal to three times the
current Monthly Deduction. If you do not pay at least this amount by the end of
the grace period, your Policy will end without value.
If a grace period occurs during the Death Benefit Guarantee period, our notice
will also show the amount of Monthly Minimum Premiums necessary to revive the
Death Benefit Guarantee.
Allocation of Premiums
General. We allocate the premium payments you make (after any deductions) to
the investment options you select. We use "Accumulation Units" to keep track of
your interest in any Separate Account investment option you select. We determine
the number of Accumulation Units credited to a Policy by dividing the amount
allocated a Separate Account investment option by the value of the applicable
Accumulation Unit next determined after receipt of your premium payment. We
calculate Accumulation Unit Values as of the end of each Business Day. Premium
payments allocated to the Fixed Account are credited in dollars. Premium
payments are generally allocated to the Separate Accounts or the Fixed Account
as of the later of the Policy Date or the date we receive your premium.
Delayed Investment Allocation Date. We reserve the right to allocate premium
payments to the FIS Prime Money Fund II investment option for an investment
delay period before they will be invested (together with any investment gain) in
any other investment option(s) you designate. In that case, we would reallocate
your Account Value to the investment options you have selected at the end of
your Policy's "free look" period. We would measure the investment delay period
from the date your Policy is issued from our Variable Service Center and would
include up to 5 extra days in addition to the applicable "free look" inspection
period to provide time for mail or other delivery of the Policy to you.
If we elect to delay your investment allocation date, your Policy will contain a
provision to that effect.
Telephone Transactions
You may initiate various transactions by calling 1-800-845-0689. These are:
transfers of Account Value, notification of a change in your address, change of
premium allocations among Investment Options, partial withdrawal requests,
Policy loans and systematic withdrawals. You may authorize your representative
to make these calls on your behalf.
You may also call 1-800-59-FUNDS for current Accumulation Unit values, current
Account Value, and for telephone transfers of Account Value.
If you own a Policy jointly with another owner, unless both owners have advised
us to the contrary, we will accept instructions from either one of the joint
owners.
We will use reasonable procedures (such as requiring identifying information
from the caller, tape recording the telephone instructions, and providing
written confirmation of the transaction) in order to authenticate instructions
communicated by telephone. You will be responsible for any telephone
instructions we reasonably believe to be genuine. Therefore, you will bear any
losses arising from any errors in the communication of instructions. If we do
not employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable to you for any losses due to dishonored
or fraudulent instructions. We may modify or terminate our procedures for
telephone transactions at any time.
POLICY BENEFITS AND VALUES
Death Benefit
If we receive proof that both of the Insureds have died while the Policy was in
force, we would pay the Death Benefit Proceeds to the Beneficiary. You may elect
for the Death Benefit Proceeds to be paid in a single sum or under one of our
other Payout Options before the death of the Surviving Insured. If no such
election is in effect at the death of the Surviving Insured, the Beneficiary may
make the election during a 60-day period following the Company's receipt of
proof of death. We will hold up payment of the Death Benefit Proceeds in the
meantime.
Death Benefit Options A and B
The amount of the Death Benefit depends on whether you have chosen Death Benefit
Option A or Death Benefit Option B.
Option A. Under this option, the Death Benefit is the greater of:
- --------
. the Face Amount or
. the Adjusted Face Amount.
Option B. Under this option, the Death Benefit is the greater of:
- --------
. the Face Amount plus the Account Value or
. the Adjusted Face Amount.
<PAGE>
The "Adjusted Face Amount" is:
. the Account Value as of the date of determination; multiplied by
. the applicable minimum death benefit percentage shown in the table below; and
the result reduced by
. the amount of death benefit under a Joint Second-to-Die Term Insurance Rider,
if any, attached to this Policy.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
MINIMUM DEATH BENEFIT
- ------------------------------------------------------------
Joint Percentage of Joint Percentage of
Age Account Value Age Account Value
- ------------------------------------------------------------
<S> <C> <C> <C>
40 or less 250
41 243 61 128
42 236 62 126
43 229 63 124
44 222 64 122
45 215 65 120
46 209 66 119
47 203 67 118
48 197 68 117
49 191 69 116
50 185 70 115
51 178 71 113
52 171 72 111
53 164 73 109
54 157 74 107
55 150 75-90 105
56 146 91 104
57 142 92 103
58 138 93 102
59 134 94 101
60 130 95+ 100
- ------------------------------------------------------------
</TABLE>
In computing the Death Benefit, we use the Joint Age as of the date of death of
the Surviving Insured and the Face Amount, the Account Value, and the death
benefit option that are in effect under the Policy as of that same date.
Change in Death Benefit Options and Face Amount. Beginning in the second Policy
Year, you may make a written request to our Variable Service Center not more
than once each Policy Year to change your Death Benefit option. If we approve
a change from Death Benefit Option B to Death Benefit Option A, we will
automatically increase the Face Amount of your Policy by an amount equal to the
Policy's Account Value. Upon a change from Death Benefit Option A to Death
Benefit Option B, we will automatically decrease the Face Amount of your Policy
by an amount equal to the Policy's Account Value.
After the first Policy Year, you may also make a written request to our Variable
Service Center to increase or decrease your Policy's Face Amount.
We may require evidence of the continued insurability of either or both of the
Insureds for a change from Death Benefit Option B to Death Benefit Option A, or
for any other change that would increase the Face Amount. We also may restrict
any requested increases in the Face Amount to minimums and maximums that vary
with the Joint Age and the premium rate class of the Insureds. If the Face
Amount increases during any Death Benefit Guarantee period, the Monthly Minimum
Premium also will usually increase for the remainder of the applicable Death
Benefit Guarantee Period. The increase in Monthly Minimum Premium would be based
on the Joint Age, additional Face Amount, and premium rate class of the
Insureds. The surrender charge and applicable surrender charge period will also
increase as a result of an increase in Face Amount, other than an increase due
solely to a change in Death Benefit Option. (See "Surrender Charge.")
Any reduction in Face Amount will take effect in the following order:
. against the most recent increase in Face Amount; then
. against the next most recent increases; then
. against the initial Face Amount.
We may deny any request to reduce the Face Amount (including reductions
resulting from a change of Death Benefit Option A to Death Benefit Option B):
. if the Death Benefit would be reduced below that required to qualify the
Policy as life insurance; or
. if the Death Benefit would be reduced below the minimum Face Amount shown in
the Policy.
A change in Death Benefit Option or Face Amount will take effect on the first
Business Day of the Policy Month coinciding with or next following the date we
approve the request. For a discussion of possible tax consequences of changing
insurance coverage under a Policy, see "Federal Tax Status."
Premium Value Bonuses and Cash Value Bonuses
Subject to approval by your local insurance regulatory authority, a Policy
continuously in force for 8 Policy Years will be eligible for monthly Premium
Value and Cash Value Bonuses. The bonuses will be allocated monthly to the same
investment options as then in effect for your premium payments.
The amounts of these bonuses are discussed above under "Highlights.
Our life insurance policies funded through the Separate Account have only been
available since January 1998, and we have not yet credited any bonuses.
Optional Additional Benefit Riders
We intend to offer optional additional benefit riders subject to regulatory
approval in your local area and to our underwriting and issuance standards. The
following descriptions are not complete. For more complete information about
the riders and their availability, you should consult your sales representative
or request a copy of the form of the rider in which you
<PAGE>
are interested. Coverage under these riders may increase the Monthly Deduction
under the Policy.
Acceleration of Death Benefit Rider - permits you to receive an advance of the
Death Benefit when the Surviving Insured person has a terminal illness with a
life expectancy of less than 12 months (all as defined in the rider).
We compute the maximum amount of advance under a formula set forth in the rider.
In no event will we advance more that $500,000, however and no advance will be
made if both Insureds are living. Amounts advanced under the rider generally
will be considered Death Benefits for federal income tax purposes. (See "Federal
Tax Matters - Income Tax Treatment of Policy Benefits.") We do not charge for
this rider.
Extension of Maturity Date Rider - permits you to request a later Maturity Date
beyond age 100 while either of the Insureds is living if the Account Value is at
least $2,000. It is included with a Policy at no additional cost. For attained
ages beyond Joint Age 95, the Death Benefit will be the Account Value.
Accidental Death Benefit Rider - provides an additional amount specified in the
Policy if a specified Insured dies from an accidental injury, as defined in the
rider, up to age 70.
Estate Protection Rider - provides additional fixed benefit term life insurance
during the first four policy years to protect against automatic inclusion of
Policy value in taxable gross estates where the Policy is owned by a trust.
Additional Term Insurance on a Single Insured - provides additional term life
insurance coverage on the life of the insured person, and for a designated
period, that you select. The term coverage cannot continue after that insured
person reaches his or her age 95. You may convert this term insurance to a
permanent plan of life insurance, subject to the conditions listed in the rider,
if the insured person has not yet reached his or her age 70. The charges
applicable to a single insured person rider will vary, depending on the amount
of coverage, age, sex and premium risk class of the insured person.
Additional Joint Term Insurance on the Insureds - provides additional term life
insurance for a preselected period, based on the Joint Age of the Insureds. One
form is payable upon the death of the second of the Insureds to die. The other
form is payable upon the death of the first of the Insureds to die.
Coverage under the second to die term rider may lower the Monthly Minimum
Premium requirement from what we would require if you purchased the same amount
of coverage under the base Policy. Coverage under the rider, as compared to
coverage under the base Policy, may also result in a lower Surrender Charge, a
smaller amount of premiums required initially to maintain your Policy's
Guaranteed Death Benefit, and lower amounts of those Policy charges that are
based on Minimum Premiums and Account Value. However, the amount of any Premium
Value Bonus also will be reduced if coverage on the insured persons is taken
under the rider instead of the base Policy, and the potential for Cash Value
Bonuses may also be reduced unless you pay more than the Monthly Minimum
Premiums.
Other Insured Persons Rider - provides fixed benefit term life insurance
coverage on the lives of other individuals that you select. The term insurance
maybe converted to a permanent plan of life insurance, subject to the conditions
listed in the rider. If the insured person under this rider is not a member of
your family, certain special tax rules will apply, which this prospectus briefly
describes in "Federal Tax Matters - Income Tax Treatment of Policy Benefits.
Disability Waiver Benefit Riders. You may elect to purchase either of our
disability benefit riders but not both. The riders provide benefits if the
insured person you select becomes totally disabled, as defined under the terms
of the applicable rider, before reaching his or her age 60. Our "Waiver of
Monthly Deduction" rider waives the Monthly Deductions incurred in connection
with the Policy. (The waiver does not, however, include daily deductions against
Separate Account assets for the mortality and expense risk charge, which will
continue to apply.) Our "Cash Deposit Benefit" rider provides that we will pay a
pre-selected monthly benefit amount into your Policy's Account Value. We also
will credit these payments toward the Monthly Minimum Premium requirements for
the Guaranteed Death Benefit. These riders are only available for a single
insured person, and will not provide coverage for both of the Insureds under a
Policy.
You may request that we cancel any rider benefits at any time. The cancelled
rider, and any charges therefor, will terminate at the end of the Policy Month
during which we receive your written request at our Variable Service Center.
Determination of Account Value
Your Account Value under a Policy includes its value in the Separate Account, in
the Fixed Account and, in the Loan Account. Your Account Value in a Separate
Account investment option at any time equals the number of Accumulation Units
you hold in that option multiplied by the then-current value of one such
Accumulation Unit. We compute this value in such a way that the investment
return on your Account Value in any Separate Account investment option will
differ from the total return achieved by the underlying Fund Portfolio only by
the amount of the charges and deductions we make under your Policy from that
investment option.
Your Account Value in the Fixed Account investment option or in the Loan Account
earns fixed rates of interest as described elsewhere in this prospectus. Your
Account Value in the Fixed Account will increase by the amount of such interest,
but will decrease by the amount of any charges or deductions that we take from
that account for your Policy.
Your Account Value in any investment option, or in the Loan Account will also
vary by the amount of transfers we make among those components of Account Value
in response to requests that you make, or that we make automatically in
connection with any Policy loans that you take and the payment of principal and
interest due thereon. Your Account Value in each investment option also will
increase by the amount that you direct to that option from your premium payments
and will decrease by the amount of any withdrawals that you take from that
option.
Policy Loans
We will lend you up to 90% of your Policy's Cash Surrender Value at any time
after the initial free-look period. You may request a Policy loan by submitting
a request in writing or by telephone to our Variable Service Center shown on the
front cover of this prospectus. (See "Telephone Transactions.")
Each loan must be at least $100. We will automatically transfer Account Value
equal to the amounts you borrow to your Policy's Loan Account from the other
investment options you are then using. We credit amounts in your Loan Account
with interest at a minimum annual rate of 4%.
The interest you must pay us on a Policy loan accrues daily and is payable at
the end of each Policy Month. If not paid when due, we will add it as an
additional Policy loan on the first Business Day of the next Policy Month.
Unless you request otherwise, loans and loan repayments are attributed to the
Separate Account Investment Options and the Fixed Account in proportion to the
Account Value in each. We may disapprove any such request, however.
You must designate any loan repayment as such. Otherwise, we will treat the
payment as a premium payment.
Regular Loan Interest. For a Regular Loan, we charge interest at a 6% effective
annual rate.
Preferred Loan Interest. We charge interest on a Preferred Loan at a 4%
effective annual rate. You may qualify for Preferred Loans if your Account
<PAGE>
Value, less any then outstanding loans and related interest, on any Policy
Anniversary is at least $25,000. If so, the maximum you can take as Preferred
Loan that year is 15% of your Account Value, less any then outstanding Policy
loans and related interest. If your Policy qualifies for a Preferred Loan on
any Policy Anniversary, we will automatically convert at least part of any
Regular Loan outstanding to a Preferred Loan. This automatic conversion,
however, will be subject to the above-mentioned 15% limit for that Policy year
and, therefore, will also reduce the amount of Preferred Loans that otherwise
would be available to you for that year. A Preferred Loan will also reduce the
amount available as a Regular Loan.
Immediate Loan Repayment. If, the loans and related interest under your Policy
on the first Business Day of a Policy Month exceed the Account Value less the
Surrender Charge, you must make a loan repayment within 61 days after such
Business Day. We will send a notice to you or your assignee, if any. The Policy
will terminate without value after 61 days, unless you make a sufficient
repayment to reduce the Policy loans and interest accrued thereon to not more
than the Policy's Account Value less (a) the Surrender Charge and (b) an amount
sufficient to continue the Policy in force for 3 months.
Surrender and Withdrawals
Surrender. You may surrender your Policy for its Cash Surrender Value at any
time while either of the Insureds is living, by a signed written request
conforming to our administrative procedures. We calculate the Cash Surrender
Value as of the close of the Business Day when your surrender request is
received at our Variable Service Center. The Cash Surrender Value equals your
Account Value reduced by any unpaid Policy loans and accrued interest and by any
applicable Surrender Charges. You may elect to have all or part of the Cash
Surrender Value applied to a payout option. (See "Payout Options.") The
election must be in writing, except that we will accept telephone requests that
apply to only part of the Cash Surrender Value. Our liability to pay the Death
Benefit proceeds ends when you surrender your Policy.
Withdrawals. After the first Policy Year, you may withdraw a portion of the
Policy's Cash Surrender Value (minimum $100). This will reduce the Account
Value and Death Benefit, generally by the amount withdrawn. If Death Benefit
Option A is in effect, a withdrawal also may reduce your Policy's Face Amount by
the amount of the withdrawal. We may refuse a requested withdrawal:
. if the Death Benefit would be reduced below that required to qualify the
Policy as life insurance contract or below the minimum Face Amount specified
in the Policy; or
. if the remaining Cash Surrender Value would not be at least (a) $1,000 or (b)
3 times the most recent Monthly Deduction, whichever is greater.
We will take any withdrawals from your Policy's investment options on a pro-rata
basis, unless you make a request in writing in advance for a different method.
We reserve the right to approve or disapprove any such request.
Maturity Proceeds
If either of the Insureds is living on the Policy's "Maturity Date" (the Policy
anniversary of the Policy Date on which the younger of the insureds Age is 100),
we will pay the Cash Surrender Value. In such case, the Policy will terminate
and we will have no further obligations under it. We will calculate the Cash
Surrender Value for this purpose as of the Maturity Date, although we may defer
paying such amount to you until you return your Policy to us.
Lapse and Reinstatement
If your Policy lapses following a 61-day grace period, you may still, within 3
years thereafter, request that we reinstate the Policy. You would need to
provide us with satisfactory evidence, however, that both of the Insureds are
still insurable and pay certain amounts specified in the Policy.
Any reinstatement will be effective on the first Business Day of the first
Policy Month that begins on or after we approve reinstatement. The values and
terms and conditions of the reinstated Policy will be in accordance with our
administrative procedures.
Payment of Proceeds
We ordinarily will pay any Cash Surrender Value, Death Benefit Proceeds, or loan
proceeds from the Separate Account Investment Options and begin Payout Options
funded through Separate Account investment options, within seven days after
receipt by our Variable Service Center of a request, or proof of death of the
insured persons, and all other required elections and documentation in a form
satisfactory to us. However, we may delay payment or transfers from a Separate
Account investment option in certain circumstances. (See "Suspension of
Payments and Transfers.") We may also delay payment if we contest the Policy.
We will pay interest on Death Benefit Proceeds from the date they become
payable to the date they are paid in one sum or, if an optional payment option
is selected, to the effective date of the option.
Tax Withholding
All distributions from your Policy, or portions thereof, which are included in
your gross income are subject to federal income tax withholding. We will
withhold federal taxes at the rate of 10% from each distribution. However, you
may elect not to have taxes withheld or to have taxes withheld at a different
rate.
Payout Options
Payout Options provide a series of payments in lieu of a single sum payment by
us. You may elect a Payout Option:
. for all or part of the Cash Surrender Value payable when you make a
withdrawal or surrender the Policy; or
. for all or part of the Death Benefit Proceeds payable upon death of the
Surviving Insured.
You may elect to change a previously elected Payout Option for Death Benefit
Proceeds. Any such election or change relating to Death Benefit Proceeds must
be made:
. while either of the Insureds is living; and
. by written request to our Variable Service Center.
You may select the following Payout Options or any other Payout Option
acceptable to us:
Option A - Life Annuity. Equal monthly payments during the life of the payee.
Option B - Life Annuity with Period Certain Of 120 Months. Equal monthly
payments during the lifetime of the payee, but for no less than 120 months.
Option C - Fixed Payments for A Period Certain. Equal monthly payments for any
specified period (at least five years but not exceeding thirty years), as
selected by you.
Option D - Death Benefit Proceeds Remaining With Us. The Death Benefit Proceeds
will remain in our Fixed Account and be credited with interest at an effective
annual rate of not less than 4%. The Payee may make full and partial
withdrawals at any time with no Surrender Charge.
Each payment under Payment Options A, B, or C will be at least equal the amounts
calculated based on the annuity tables contained in your Policy. If the payee
dies during a period certain (Payout Options B or C), any remaining payments
will be made to the estate of the Payee. The estate may elect to have the
commuted value of the remaining payments
<PAGE>
paid in a single sum instead. We will determine the commuted value by
discounting the remaining payments at its then current interest rate used for
commutation.
Tax Impact. Whether a Payout Option is chosen may have tax consequences for you
or your Beneficiary. Therefore, you should consult a qualified tax adviser
before deciding whether to elect one or more Payout Options.
Right to Exchange for a Fixed Benefit Policy
During the first 24 Policy Months, if your Policy has not lapsed, you have an
unconditional right to transfer all of your Account Value in the Separate
Account investment option to the Fixed Account without any transaction charge.
Right to Exchange for Two Insurance Policies
If your Policy is issued as a standard or preferred premium rate class, you will
be allowed to split your Policy and exchange it for two policies of individual
life insurance issued by us or by an affiliate of ours. The Policy's benefits
and values will generally be split between the two new policies, except that
additional optional benefit riders (other than certain extended death benefit
guarantee riders) will be deleted.
You may elect to split your Policy only within 180 days after any of the
following events:
. Divorce - starting at the end of a sixty-day waiting period after a divorce
between the Insureds is effective.
. Tax Law Change - the effective date of an amendment to the Code that
eliminates a marital deduction used for purposes of computing federal estate
and gift taxes.
. Dissolution or Bankruptcy of Partnership - a partnership in which the
Insureds are general partners is dissolved or ordered and adjudged to be
bankrupt.
. Dissolution or Bankruptcy of Closely Held Corporation - a closely held
corporation in which the Insureds are officers, directors or shareholders, is
dissolved or ordered and adjudged to be bankrupt. (A Corporation is not
considered "closely held" if it is publicly traded or listed on a regional or
national exchange).
Your right to exchange is not available, however, if:
. Either of the Insureds is not alive on the date of the exchange, however, no
other evidence of insurability is required, or
. Either of the Insureds is older than the maximum issue age permitted by the
Company (or its affiliate) for the new policies; or
. The Policy is in a Grace Period or receiving benefits from any disability
rider on the date of the exchange; or
. You fail to make the election in writing to our Variable Service Center
within the required 180-day period.
Each of the new policies to be issued will be on the life of one of the
Insureds. Unless otherwise permitted by us, the new policies will:
. Be for an initial death benefit amount that does not exceed 50% of the Death
Benefit of your Policy on the date of exchange, reduced by 50% of any
Indebtedness and by any optional rider benefits then in effect under this
Policy;
. Be a permanent life insurance policy form then available for such exchange,
and have an account value that does not exceed 50% of the Cash Surrender
Value under your Policy on the date of the exchange, less any amounts used to
repay any Indebtedness under your Policy on the date of exchange;
. Have provisions for suicide exclusion and incontestability that reflect the
Policy Date of your Policy;
. Have provisions for withdrawal and surrender charges that do not reflect the
Policy Date of your Policy; and
. Have provisions for withdrawal and surrender charge periods that may begin
as of the date of the exchange.
Unfavorable tax consequences, including recognition of taxable income, may
result from exchanging your Policy for two life insurance policies on individual
insureds. Therefore, you should consult with a qualified tax adviser before
doing so
OTHER PROVISIONS OF THE POLICY
Suicide Exclusion
If suicide of both the Insureds, or of the Surviving Insured, occurs within two
years from the Policy Date (or less if required by state law), we will limit the
Death Benefit to your Policy's Cash Surrender Value.
Representations and Contestability
Generally, we can challenge the validity of your Policy (or any rider that was
in force on the Policy Date) for two years from the Policy Date, based on any
misrepresentations made in your application to us. We can challenge an increase
in benefits requiring evidence of insurability for two years from the date of
the increase. We can challenge a reinstatement of the Policy until
reinstatement has been in force for two years from its effective date. However,
the two-year time limits on our right to challenge all or part of the Policy do
not apply if either of the insureds dies within the two-year period.
Misstatement of Age or Sex
If any application for benefits under your Policy misstates the age or sex of
either of the Insureds, the Death Benefit will be the amount provided by the
correct age and sex.
Owner and Beneficiary
The Policy application names the Policyowner, who in turn may name a new owner.
At the death of the owner, his or her estate will become the owner, unless he or
she has named a successor owner. Because the owner has the authority to
exercise most rights under a Policy, this prospectus generally refers to the
owner when it refers to "you" or "your". The owner's rights as such terminate
when the Surviving Insured dies. If two or more people are named as owners, we
will generally assume that one owner has the authority to act for all owners.
However, we may require the consent of all owners for certain transactions under
the Policy, such as an election to exchange the Policy for two policies.
Beneficiary. The Policy application also names the Beneficiary under the Policy
and any contingent Beneficiary. You may change the Beneficiary of the Policy
(other than an irrevocably named Beneficiary) at any time before the death of
the Surviving Insured. The Beneficiary has no rights under the Policy until the
death of the Surviving Insured and must survive that insured person in order to
receive the Death Benefit Proceeds. If no named Beneficiary is alive when the
Surviving Insured dies, we will pay the proceeds to the owner.
<PAGE>
Changes and Assignments. A change of owner or Beneficiary requires a written
request satisfactory to us that is dated and signed by all of the owners. The
change will take effect on the date it is signed, but is subject to all payments
made and actions taken by us under the Policy before we receive the request at
our Variable Service Center.
Assignments
The owner may assign (transfer) the owner's rights in a Policy to someone else.
An absolute assignment of the Policy designates the assignee as owner and
Beneficiary. A collateral assignment of the Policy does not change the owner or
Beneficiary, but their rights will be subject to the terms of the assignment.
All collateral assignees of record must consent to any full surrender or partial
withdrawals. An assignment requires a written request signed by all of the
Policy's owners. An assignment will take effect only when we record it at our
Variable Service Center. We have no responsibility for any assignment not
submitted for recording; nor for the sufficiency or validity of any assignment.
Unfavorable tax consequences, including recognition of taxable income and the
loss of income tax-free treatment for any death benefit payable to the
Beneficiary may result from transferring ownership or making an assignment.
Therefore, you should consult with a qualified tax adviser before doing so.
Reports and Records
We will mail to your last known address of record an annual statement showing
your Policy's current Account Values, transactions since the last statement,
Policy loan information, and any other information required by federal or state
laws or regulations.
We will also send you annual and semi-annual reports containing the financial
statements of the Portfolios you are using.
In addition, you will receive statements of significant transactions, such as
changes in the Death Benefit, transfers among investment options, premium
payments, Policy loans, Policy loan principal, Policy loan repayments, and
Policy reinstatement or termination.
Voting Rights
We will vote the shares of the Portfolios held by the Separate Account at
regular or special meetings of the Portfolio's shareholders in accordance with
instructions received from you and other owners having the voting interest in
the affected Portfolio(s). We compute the number of votes that an owner has the
right to instruct for a particular Portfolio by dividing the owner's Account
Value in that Portfolio by that Portfolio's net asset value per share. We will
vote a Portfolio's shares held in our Separate Account for which we do not
receive instructions, as well as shares held in our Separate Account that are
not attributable to owners in the same proportion as we vote that Portfolio's
shares held in the Separate Account for which we have received instructions.
We may disregard voting instructions under limited circumstances prescribed by
SEC rule. We will include a summary of any such action and the reasons for it in
the next semiannual report to owners.
Suspension of Payments and Transfers
Under certain circumstances, we may suspend or postpone transactions that
pertain to a Separate Account investment option under your Policy. These include
payment of Death Benefit Proceeds or Maturity Value, payment for surrenders,
withdrawals and Policy loans, or transfers for any period when:
. the New York Stock Exchange is closed for regular trading;
. regular trading on the New York Stock Exchange is restricted by the SEC;
. an emergency exists as a result of which disposition of securities held in
the applicable Separate Account investment options is not reasonably
practicable or it is not reasonably practicable to determine the value of
such option's net assets; or
. the SEC, by order, permits such suspension during any other period.
We also may defer payment for a surrender, withdrawal or Policy loan, or
transfer from the Fixed Account, for the period permitted by law but not for
more than six months after we receive your written request. We will pay interest
to the extent provided under state insurance law on payments that are delayed.
Also, we may defer payment of any amount attributable to a check you have given
us in order to allow a reasonable time (not to exceed 15 days) for the check to
clear the banking system.
Nonparticipation in Our Dividends
The Policies are "nonparticipating". This means that they do not participate in
(or receive) any dividend we pay or distribution of our surplus.
DISTRIBUTION AND OTHER AGREEMENTS
First Variable Capital Services, Inc. ("FVCS"), 2122 York Road, Oak Brook,
Illinois 60523, acts as distributor of the Policies. FVCS, our wholly owned
subsidiary was incorporated in Arkansas on July 26, 1991. It is registered with
the SEC as a broker/dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. FVCS offers the
Policies on a continuous basis.
FVCS and we have agreements with various broker/dealers under which their
registered representatives, who are also licensed insurance agents, will sell
the Policies. The commissions payable to a broker/dealer for sales of a Policy
may vary with the sales agreement. However, we do not expect that, on an
aggregate basis they will exceed 100% of the amount of paid in the first Policy
Year up to 12 Monthly Minimum Premiums, plus 4% of additional first year premium
payments, plus 3.5% of all premiums received in Policy Years 2 through 5.
Broker/Dealers may receive annual "trail commission" equivalent to 0.30% of a
Policy's Account Value beginning in Policy Year 6, as well as expense
allowances, wholesaler fees, bonuses and training fees.
FVCS and we may permit specific broker/dealers to sell versions of the Policies
that contain specific investment options that are not available through other
broker/dealers. FVCS and we may pay a different level of compensation for sales
of different versions of the Policies.
Under a Services Agreement with FVCS, we perform insurance underwriting,
issuance and other administrative services for our variable life insurance
policies, including the Policies.
The Company serves as the custodian of the assets of the Separate Account.
OUR MANAGEMENT
Here is a list of our directors and executive officers and their principal
business experience during the past five years. Unless otherwise noted, our
directors are located at 2211 York Road, Suite 202, Oak Brook, Illinois 60523
and all our executive officers are located at 2122 York Road, Suite 300, Oak
Brook, Illinois 60523.
<PAGE>
Directors
Ronald M. Butkiewicz, Chairman. He is also the President and Chief Executive
Officer, Irish Life of North America, Inc., and Chief Executive Officer,
Interstate Assurance Company.
Michael J. Corey - 401 East Host Drive, Lake Geneva, WI 53147. He is the Senior
Partner-Global Services Practice Leader, LAI World Wide - Prior to 1999 he was a
Managing Director, Insurance/Professional Services Practice Group and President,
CSG International Inc.
Norman A. Fair - He is also Vice President, Treasurer, & Asst. Sec., Irish Life
of North America, Inc. and prior to 1994, he was the Senior Vice President and
Chief Financial Officer of Interstate Assurance Company.
Michael R. Ferrari, Texas Christian University, P.O. Box 297080, Ft. Worth, TX
76129-2800 - He is the Chancellor, Texas Christian University; and prior to
July 1998, he was the President of Drake University.
Shane W. Gleeson - He is the Executive Vice President, Irish Life of North
America, Inc.; and prior to December 1997, he was the President, Interstate
Assurance Company. Prior to November 1994, he was the Senior Vice President and
Chief Operating Officer of Interstate Assurance Company.
Jeff S. Liebmann, Esq., 1301 Avenue of the Americas New York, NY 10019 - He is
a partner of Dewey, Ballantine.
Kenneth R. Meyer, 200 South Wacker Dr., Suite 2100, Chicago, IL 60606 - He is a
Managing Director, Lincoln Capital Management Co.
Philip R. O'Connor, 111 West Washington, Suite 1247 Chicago, IL 60602 He is the
President of NEV Midwest, LLC and prior to April 1998, he was a Principal of
Coopers & Lybrand LLP/Palmer Bellevue Corp.
Clark Ramsey - He is also Vice President and Corporate Actuary, Irish Life of
North America, Inc. Prior to March, 1998, he was the Vice President and
Actuarial Director, Allstate International, Inc.
Executive Officer & Director
John M. Soukup, President - Prior to July, 1997, he was the Market Development
Officer, Fortis Financial Group.
Other Executive Officers
Steve Horn, Senior Vice President and Chief Operations Officer - Prior to
January 1999, he was the Assistant Vice President of Irish Life of North
America, and prior to July 1998, he was the Sr. Vice President and General
Manager of United Casualty Insurance Company of America.
Arnold R. Bergman, Vice President, General Counsel and Secretary - Prior to
February 1995, he served as Counsel, Aetna Life Insurance and Annuity Company.
Thomas Gualdoni, Vice President, Sales - Prior to December 1997, he was the Vice
President, Sales, Fortis Benefits Insurance Company.
Christopher S. Harden, Vice President & Treasurer - Prior to April, 1998 he was
the First Vice President and Chief Accounting Officer, COVA Financial Services
Life Insurance Company.
Martin Sheerin, Vice President & Chief Actuary - Prior to October, 1994, he was
a Vice President, Irish Life of North America, Inc.
FEDERAL TAX MATTERS
General
BECAUSE OF THE COMPLEXITY OF THE LAW AND BECAUSE TAX RESULTS WILL VARY ACCORDING
TO YOUR IDENTITY AND STATUS, YOU SHOULD SEEK INDIVIDUALIZED LEGAL AND TAX ADVICE
BEFORE PURCHASING OR TAKING ANY ACTION UNDER A POLICY.
We cannot provide a comprehensive description of the federal income tax
consequences regarding the Policies in this prospectus, and special tax rules
may apply that we have not discussed herein. Nor does this discussion address
any applicable state, local, gift, inheritance, estate, and foreign or other tax
laws. This discussion assumes that you, the Policy's owner, are a natural
person and a U.S. citizen and resident. Finally, we would caution that the law
and the related regulations and interpretations on which we base our tax
analysis can change, and such changes can be retroactive.
Our Taxation
Under current federal income tax law, the operations of the Separate Account and
the Fixed Account do not require us to pay any tax. Thus, we currently impose
no charge for our federal income taxes. However, we may decide to charge the
Separate Account or Fixed Account for our federal income taxes, if there are
changes in federal tax law.
We may incur state and local taxes (in addition to premium taxes) in several
states. At present, these taxes are not significant and, accordingly, we do not
currently impose a charge for them. If they increase, however, we may impose a
charge for such taxes attributable to the Separate Account and/or Fixed Account.
Income Tax Treatment of Policy Benefits
Life Insurance. Section 7702 of the Internal Revenue Code provides that if
certain tests are met, your Policy will qualify as a life insurance contract for
federal tax purposes. The death benefit under a life insurance contract is
generally excluded from the gross income of the Beneficiary. Also, the owner of
a life insurance contract is generally not taxed on increases in the account
value until withdrawn or surrendered.
Section 7702 limits the amount of premiums that may be invested in a life
insurance contract and requires certain minimum amounts of life insurance
coverage, relative to the account value. We will monitor compliance with these
tests. Although we believe that the Policies are in compliance with the tests,
the manner in which the tests should be applied to certain features of a joint
survivorship life insurance contract is not directly addressed by section 7702.
In the absence of final regulations or other guidance issued under section 7702,
there is necessarily some uncertainty whether the Policies will meet the Code's
definition of a life insurance contract.
Acceleration of Death Benefits Rider. Similarly, we believe that accelerated
death benefit payments, if permitted under your Policies because of the terminal
illness of either of the Insureds, in most cases will not constitute taxable
income for you. Such payments may be taxable income to you, however, if:
. you are not an insured person; or
. you have an insurable interest in either of the insured persons' lives
because that insured person is a director, officer or employee of yours or is
otherwise financially interested in any trade or business carried on by you.
<PAGE>
Modified Endowment Contracts. The Code contains provisions affecting certain
life insurance policies that the Code refers to as "modified endowment
contracts."
Modified endowment contracts result when cumulative premiums paid under a Policy
at any time during the first seven Policy Years exceed the sum of the premiums
that would have been paid by then if the Policy provided for paid up future
benefits after the payment of seven level annual premiums ("seven-pay test").
The amount of premiums payable under the seven-pay test is calculated based upon
certain assumptions regarding the policy's earnings and the use of a reasonable
mortality charge. Riders to a Policy are considered part of the Policy for
purposes of applying the seven-pay test.
Whenever there is a "material change" under a Policy, the Policy generally will
be:
. treated as a new Policy for purposes of determining whether it is a modified
endowment; and
. subjected to a new seven-pay test.
The Policy would become a modified endowment contract if, at time of the
material change or at any time during the next seven years, it failed to satisfy
such new seven-pay test. A material change for these purposes could result from
a change in death benefit option, election of additional rider benefits, an
increase in a Policy's Face Amount, and certain other changes.
If a Policy's benefits are reduced during the first seven Policy years (or
within seven years after a material change), the seven-pay premium limit will be
redetermined based on the reduced level of benefits and applied retroactively
for purposes of the seven-pay test. (Such a reduction in benefits could
include, for example, any decrease in Face Amount that you request or, in some
cases, a partial withdrawal or termination or reduction of benefits under a
rider.) If you have already paid (or subsequently pay) more premiums than
permitted by the recalculated seven-pay limit, your Policy will become a
modified endowment contract.
Any Policy that you acquire in exchange for another life insurance policy that
is a modified endowment contract will also be a modified endowment contract.
However, an exchange under Section 1035 of the Code of a life insurance policy
entered into before June 21, 1988 will not make the new policy a modified
endowment contract if you pay no additional premiums and there is no benefit
increase as a result of the exchange.
Exchanges for Two Policies. An exchange of a Policy for two new policies
("Policy split") may have adverse tax consequences, including, but not limited
to, the recognition of taxable income for any gain in the Policy at that time.
Other Tax Effects of Policy Changes. Changes made to your Policy (for example,
a decrease in benefits under or a lapse or reinstatement of a Policy) may have
other tax effects. These include impacting the maximum amount of premiums you
can pay under the Policy, as well as the maximum amount of Account Value you can
maintain under the Policy.
Taxation of Pre-Death Distributions from a Policy that is not a Modified
Endowment Contract ("MEC"). As long as a Policy remains in force as a non-
modified endowment, you will not pay current income tax on the proceeds from any
Policy loan. Interest you pay on the loan generally will not be tax deductible,
however.
After the first 15 Policy Years, you will not pay current federal income tax on
any partial withdrawals you make, except to the extent such withdrawals exceed
your "investment" in the Policy. (The "investment" generally will equal the
premiums you have paid, less the amount of any previous distributions from your
Policy that were not taxable.) During the first 15 Policy Years, you could have
to pay federal income tax on certain withdrawals that reduce the Death Benefit,
to the extent that your Policy's Account Value exceeds your investment in the
Policy.
On the Maturity Date or upon full surrender, any excess of proceeds (including
amounts we use to discharge any Policy loan and accrued loan interest) over your
investment in the Policy, will constitute taxable income to you for federal
income tax purposes. In addition, if your Policy terminates after a grace
period while you have a Policy loan outstanding, the cancellation of such loan
and accrued loan interest will be treated as a distribution and could be subject
to tax under the above rules. Finally, if you assign or transfer rights or
benefits under your Policy, you may be deemed to have received a distribution
from the Policy, all or part of which may be taxable.
Taxation of Pre-Death Distributions from a Policy that is a Modified Endowment
Contract. If your Policy falls within the definition of a modified endowment
contract, the following rules will apply to pre-death distributions:
. You must include distributions, such as withdrawals, in your gross income
subject to federal tax, to the extent the Account Value of the Policy exceeds
your investment in the Policy. Any additional amounts you receive, other than
Policy loans, will not constitute currently taxable income, but will reduce
your investment in the Policy.
. Policy Loans, including any increase in the amount of the loan to pay
interest, also constitute distributions to you for these purposes. Your
investment in the Policy, however, will increase by the amount of any loan
included in your gross income.
. If your Policy terminates after a grace period while there is a Policy loan,
the cancellation of such loan and accrued loan interest will also constitute
a distribution to you for these purposes to the extent not previously treated
as such.
. On the Maturity Date or upon a full surrender, any excess of the proceeds
(including any amounts we use to discharge any loan and accrued loan
interest) over your investment in the Policy, will also constitute a
distribution to you for these purposes.
. A change of ownership or Policy assignment also can constitute a distribution
for these purposes. For example, a collateral assignment will subject any
gain in the Policy to taxation.
For purposes of determining the amount of any distribution that is included in
gross income, you must treat all modified endowment contracts that we or our
affiliates issue to you during any calendar as a single modified endowment
contract.
The taxable amount of any distribution from a Policy that is a modified
endowment also will incur an additional penalty tax equal to 10% of such taxable
amount unless the distribution:
. is made on or after you attain age 59 1/2;
. results from your becoming disabled (as defined in the Code); or
. forms part of a series of substantially equal periodic payments made no less
frequently than annually for your life (or life expectancy) or for the joint
lives (or life expectancies) of the owner or the Beneficiary.
The Monthly Deductions under a modified endowment contract attributable to any
Other Insured Person Rider for a person who is not a member of your family may
constitute distributions from your policy for tax purposes.
<PAGE>
However, the Beneficiary of this rider should not have to pay federal income tax
on any benefit received.
Distributions that occur during a Policy Year in which a Policy becomes a
modified endowment contract and during any subsequent Policy Years, will be
taxed as described in the preceding paragraphs. In addition, any distributions
from a Policy within two years before it becomes a modified endowment contract
also will be subject to tax in this manner. This means that a distribution made
from a Policy that is not a modified endowment contract could later become
taxable as a distribution from a modified endowment.
Diversification Requirements
The Internal Revenue Code provides that a variable life insurance policy will
not be treated as a life insurance contract under the Code for any period (and
any subsequent period) for which the related investments are not adequately
diversified. We intend that all Portfolios of the Funds in which your Policy may
invest will comply with the diversification requirements. If your Policy did not
qualify as life insurance, you would be subject to immediate taxation on the
increases in your Policy's Account Value, plus the cost of insurance protection
under your Policy and death benefit proceeds would lose their income tax free
status. This treatment would apply for the period of non-compliance and
subsequently, unless and until we are able to settle the matter with the
Internal Revenue Service. We have no legal obligation to seek or agree to any
such settlement, however.
The amount of investment control which you may exercise under a Policy differs
in some respects from the situation addressed in published rulings issued by the
Internal Revenue Service in which it held that variable life insurance policy
owners were not deemed, for federal income tax purposes, to own the related
assets held in a separate account by the issuing insurance company. It is
possible that these differences, such as your ability to transfer among
investment choices or the number and type of investment choices available, would
cause you to be taxed as if you were the owner of the Portfolio shares that are
attributable to your Policy. In that case, you would be liable for income tax on
an allocable portion of any current income and gains realized by the Separate
Account, even though you have received no distribution of those amounts.
In the event any forthcoming guidance or ruling by federal income tax
authorities sets forth a new position, such guidance or ruling will generally be
applied only prospectively. However, if such ruling or guidance was not
considered to set forth a new position, it may, result in your being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, we reserve the right to modify your Policy
in an attempt to maintain its intended tax treatment.
ADVERTISING PRACTICES
We may from time to time receive endorsements of the Policies from professional
organizations. We may use these in advertisements or sales material for the
Policies. We may also pay the professional organization for the use of its
customer or mailing lists in order to distribute promotional materials regarding
the Policies. An endorsement does not necessarily indicate the performance or
results that you may obtain.
From time to time, articles discussing the Separate Account's investment
experience, performance rankings and other characteristics may appear in
national publications. Some or all of these publishers or ranking services
(including, but not limited to, Lipper Analytical Services Inc. and Morningstar,
Inc.) may publish their own rankings or performance reviews of variable contract
separate accounts, including the Separate Account. We may use reprints or
references to such articles or rankings as sales literature or advertising
material. We may also use rankings that indicate the names of other variable
policy separate accounts and their investment experience.
We, the Funds, or other parties may develop articles and releases about the
following matters in relation to the Separate Account, the Funds or individual
Portfolios: asset levels, and sales volumes, statistics and analyses of industry
sales volume and asset levels, or other characteristics. Our promotional
material for the Policies and Separate Accounts can refer to, or be a reprint
of, such articles and releases. Such literature may refer to personnel of an
adviser or sub-advisers who have investment management responsibility, and their
investment style. The reference may allude to or include excerpts from articles
appearing in the media.
The advertising and sales literature for the Policies and the Separate Account
may refer to historical, current and prospective economic trends. In addition,
we may publish advertising and sales literature concerning topics of general
investor interest for the benefit of registered representatives and prospective
purchasers of Policies. These materials may include, but are not limited to,
discussions of college planning, retirement planning, and reasons for investing
and historical examples of the investment performance of various classes of
securities, securities markets and indices.
LEGAL MATTERS
State Regulation
We are subject to the insurance laws of Arkansas and to regulation by the
Arkansas Insurance Department. The National Association of Insurance
Commissioners periodically examines our operations. Such regulation does not,
however, involve any supervision of management or investment practices or
policies. In addition, we are subject to regulation under the insurance laws of
other jurisdictions in which we may operate. As a result, various time periods
and other terms and conditions described in this prospectus may vary depending
on where you reside. We will reflect any applicable variations in your Policy
and riders, or related endorsements.
Legal Proceedings
There are no material pending legal proceedings to which the Separate Account,
FVCS or we are a party.
Counsel
Our Legal Department has reviewed legal matters in connection with the Policies.
Freedman, Levy, Kroll & Simonds, of Washington, DC, has advised us on certain
matters relating to the federal securities and tax laws.
EXPERTS
The consolidated financial statements of First Variable Life Insurance Company
at December 31, 1998 and 1997 and for each of the three years in
the period ended December 31, 1998 and the financial statements of First
Variable Life Insurance Company--Separate Account VL at December 31, 1998 and
for the periods then ended as described in this report appearing in this
prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report appearing elsewhere herein,
and are included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
<PAGE>
REGISTRATION STATEMENT
We have filed a registration statement with the SEC under the Securities Act of
1933. This prospectus omits certain information contained in the Registration
Statement. You can obtain copies of such additional information from the SEC
upon payment of the prescribed fee.
YEAR 2000 ISSUES
Like other financial and business organizations around the world, we could be
adversely affected if our computer systems and those of our service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. We have completed an assessment of the Year 2000 impact
on our systems, procedures, customers and business processes. At June 30, 1999,
our management is satisfied that our main operating systems are Year 2000
compliant. We are currently reviewing our general office systems and contacting
our service providers.
We believe that we will complete our Year 2000 project prior to any anticipated
impact on our operating systems. The date on which we believe we will complete
the Year 2000 project is based on our management's best estimates. Although
there can be no guarantee that these estimates will be achieved, our management
does not at this time believe that actual results will differ materially from
those anticipated. Specific factors that might cause such material differences
would most likely result from our service providers.
<PAGE>
[LOGO OF FIRST VARIABLE LIFE INSURANCE COMPANY]
First Variable Service Center Capital Estate Builder VUL
P.O. Box 1317 Application
Des Moines, Iowa 50305-1317
800.228.1035 toll-free
515.280.7520 fax
1. Proposed Insured One (First person
proposed for life insurance coverage)
- ---------------------------------------------------
Name
- ---------------------------------------------------
Address
- ---------------------------------------------------
City State Zip
- ---------------------------------------------------
Social Security No. (Tax I.D.)
- ---------------------------------------------------
Driver's License No. State
( ) ( )
- ---------------------------------------------------
Telephone No. (day) (evening)
- --------------------- ---
Date of Birth Age Male [_] Female [_]
- ------------------
Birth Place U.S. Citizen [_] Permanent Resident [_]
- --------------------------------- --------------
Marital Status Weight
- --------------------------------- --------------
Occupation Height
- ---------------------------------------------------
Duties
- --------------------- --------------------------
Income Net Worth
- ---------------------------------------------------
Employer Name
- ---------------------------------------------------
Employer Address
2. Proposed Insured Two (Second person
proposed for life insurance coverage)
- ---------------------------------------------------
Name
- ---------------------------------------------------
Address
- ---------------------------------------------------
City State Zip
- ---------------------------------------------------
Social Security No. (Tax I.D.)
- ---------------------------------------------------
Driver's License No. State
( ) ( )
- ---------------------------------------------------
Telephone No. (day) (evening)
- --------------------- ---
Date of Birth Age Male [_] Female [_]
- ------------------
Birth Place U.S. Citizen [_] Permanent Resident [_]
- --------------------------------- --------------
Marital Status Weight
- --------------------------------- --------------
Occupation Height
- ---------------------------------------------------
Duties
- --------------------- --------------------------
Income Net Worth
- ---------------------------------------------------
Employer Name
- ---------------------------------------------------
Employer Address
3. Owner (Person or entity exercising
the policy's contractual rights)
Proposed insureds will own the policy jointly unless otherwise indicated here
- ---------------------------------------------------
Name
- ---------------------------------------------------
Address
- ---------------------------------------------------
City State Zip
- ---------------------------------------------------
Social Security No. (Tax I.D.)
- ---------------------------------------------------
Relationship to the Proposed Insured
- ---------------------------------------------------
Date of Birth
4. Beneficiary (Use Section 12 if needed)
PRIMARY BENEFICIARY: Person or entity who will receive the
proceeds of this policy when both the Proposed Insureds have died.
- ---------------------------------------------------
Name (If split, please indicate percentages)
- ---------------------------------------------------
Social Security No. (Tax I.D.)
- ---------------------------------------------------
Relationship to the Proposed Insured
- ---------------------------------------------------
Date of Birth
CONTINGENT BENEFICIARY: Person or entity who will receive the proceeds of this
policy should the Primary Beneficiary not survive the Proposed Insureds.
- ---------------------------------------------------
Name (If split, please indicate percentages)
- ---------------------------------------------------
Social Security No. (Tax I.D.)
- ---------------------------------------------------
Relationship to the Proposed Insured
- ---------------------------------------------------
Date of Birth
5. Insurance
(Life insurance amount requested)
- ---------------------------------------------------
Plan Name
- ---------------------------------------------------
Face Amount $
Check One:
Insured One: [_] Preferred [_] Non-smoker [_] Smoker
Insured Two: [_] Preferred [_] Non-smoker [_] Smoker
Death Benefit (Check One):
[_] Option A - Death benefit is the face amount (level)
[_] Option B - Death benefit is the face amount plus the value of
your investment (increasing)
(One of Five)
8990-APP 7/99
<PAGE>
6. Riders (Optional benefits you can add to your life insurance)
<TABLE>
<S> <C> <C>
[_] Joint First-To-Die Term Rider $ ________________ (maximum - 6 x base life insurance amount)
[_] Joint Second-to-Die Term Rider $ _______________ (maximum - 6 x base life insurance amount)
[_] Estate Protection Term Insurance Rider $ _______ (maximum - 125% x base life insurance amount)
(For use in trusts only for non-business policies issued to married couples (male/female))
[_] Covered Insured One Term Benefit $ _____________ (maximum - 6 x base life insurance amount)
[_] Covered Insured Two Term Benefit $ _____________ (maximum - 6 x base life insurance amount)
[_] Other Insured Term Rider $ _____________________ (maximum - 6 x base life insurance amount)
[_] Waiver of Monthly Deductions (Specify insured to be covered __________________________)
[_] Cash Deposit Benefit $ _________________________ (Specify insured to be covered _______________________)
[_] Accidental Death Benefit $ _____________________ (Specify insured to be covered _______________________)
[_] Other Riders____________________________________________________________________________________________.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Name of Birth Sex Height/ Smoker, Non-Smoker Social Security Relationship to Amount
Additional Insureds Date Weight or Preferred Number Proposed Insured Applied For
- ----------------------------------------------------------------------------------------------------------------------------
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</TABLE>
7. Payment
(How you will pay for the policy)
I/we want to make premium payments of $ __________________________
[_] Annually [_] Semi-Annually [_] Quarterly
[_] Monthly (only available with electronic fund transfer)
(Please complete "Electronic Fund Transfer Authorization"
below)
Initial Payment (Check one): A minimum of two months
premium is required as initial payment.
[_] My/our initial payment is enclosed. $ __________________
Make check payable to: First Variable Life Insurance Co.
[_] My/our initial payment will be transferred from another
insurance company.
Approx. amount $ ______________________________________
I/we have filled out a "Transfer of Life Insurance
Policy for 1035 Tax-Free Exchange" form and a
replacement form where required.
Send payment notices to (check one):
[_] Proposed Insured One [_] Owner
[_] Proposed Insured Two
[_] Other (Give name and address in Remarks)
Electronic Fund Transfer (EFT) Authorization
[_] I/we authorize First Variable Life Insurance Company
to apply monthly payments from my account on the
_________ day of each month beginning in the month
of _________________. This is a:
[_] Checking Account (include a voided check)
[_] Savings Account (include a deposit slip)
[_] Credit Union (include a voided check)
phone no. of Credit Union (_____)
8. Allocation
(How you want your payments allocated)
Use whole percentages to indicate to which investment
options or fixed account you would like your premium
allocated. Allocations must total 100%.
Investment Options:
_______ % Small Cap Growth - Pilgrim Baxter & Assoc. (09)
_______ % New Discovery - MFS/R/ (17)
_______ % Small Cap Index - Bankers Trust Co. (14)
_______ % International - Franklin/R/ Templeton/R/ (15)
_______ % World Equity - Evergreen Investment Mgmt Co. (07)
_______ % Capital Appreciation - A I M Advisors (10)
_______ % Value - American Century Investment Mgmt. (12)
_______ % Growth - MFS/R/ (18)
_______ % Growth - A I M Advisors (11)
_______ % Growth - Value Line, Inc. (04)
_______ % Growth with Income - MFS/R/ (19)
_______ % Matrix Equity - State Street Global Advisors (06)
_______ % Equity 500 Index - Bankers Trust Co. (13)
_______ % Growth & Income - Lord, Abbett & Co. (16)
_______ % Growth & Income - Warburg Pincus Asset Mgmt. (08)
_______ % Multiple Strategies - Value Line, Inc. (05)
_______ % High Income Bond - Federated Invst. Counseling (03)
_______ % U.S. Gov't Bond - Strong Capital Mgmt., Inc. (02)
_______ % Money Fund II - Federated Advisers, Inc. (01)
_______ % Other ________________________________________________
_______ % Other ________________________________________________
_______ % Fixed Account - First Variable Life Insurance Co.
(Two of Five)
8990-APP 7/99
<PAGE>
9. Service Options
Telephone Authorizations
[_] I/we authorize the Company, either directly or through its agents, to act on
instructions given by telephone from the Owner(s) of this contract or any other
person who can furnish proper identification. Neither the Company, nor any
person authorized by the Company, will be responsible for any claim, loss,
liability, or expense in connection with a telephone authorization if the
Company or such other person acted on telephone instructions in good faith in
reliance on this authorization.
Asset Rebalancing (Minimum accumulation value $5,000.)
[_] Please rebalance my policy value to the original percentage allocations.
Frequency of rebalancing:
[_] Quarterly [_] Semi-Annually [_] Annually
Dollar Cost Averaging
[_] I would like to enroll in the Dollar Cost Averaging Program. (Please
complete and attach the "Dollar Cost Averaging Authorization" form.)
Monthly Deduction
Monthly deductions will be taken proportionately from all investment options
unless indicated below.
Please make deductions from:
[_] Specific Investment Option(s) _____________________________________________
_______________________________________________________________________________
[_] Best Performing Investment Option. (Deducted from the investment choice that
performs best each policy month.)
10. Replacement of Other Contracts
How much other insurance does each proposed insured and any additional insured
have in force or have they applied for in the past six months?
Please specify insured and amount in force or applied for.
_______________________________________________________________________________
_______________________________________________________________________________
Will this proposed life insurance policy replace any existing annuity or life
insurance? [_] Yes [_] No
If "yes", please state company name, contract number and amount. (Attach any
required replacement forms.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
11. General
Suitability.
The applicant(s) should carefully read the following statement.
By signing this application, I/we acknowledge receipt of the prospectus and
understand that the death benefit under the policy may increase or decrease
depending on the investment results of the policy. I/we understand that
hypothetical illustrations are not indicative of future results. The policy's
cash surrender value may increase or decrease on any day depending on the
investment results. No minimum cash surrender value is guaranteed. The policy
represents a long-term commitment to meet insurance needs and financial goals.
<TABLE>
<CAPTION>
Yes No
<S> <C> <C>
a) Did you receive the prospectus for the
investment options? [_] [_]
b) Do you believe that the policy will meet
your financial needs? [_] [_]
c) Do you understand that the amount of the
death benefit and duration of the policy
may vary depending on the performance
of the separate account? [_] [_]
</TABLE>
12. Remarks / Special Requests
(Three of Five)
8990-APP 7/99
<PAGE>
13. Information About the Proposed Insureds
Complete the following for both proposed insureds and any additional insureds
seeking coverage (even if exam is ordered). Where a "yes" answer is given,
specify in the space provided below which insured the answer applies to and all
applicable details.
<TABLE>
<CAPTION>
Yes No
<S> <C> <C>
1) Within the last 10 years, has any person proposed for coverage been
diagnosed or treated by a member of the medical profession for high blood
pressure, lung, heart, kidney, or liver disease, diabetes, cancer or tumor,
colon problems, back or spinal disorder, nervous disorder, alcohol or drug
dependency? [_] [_]
2) Within the last 10 years, has any person proposed for coverage tested
positive for exposure to the HIV infection or been diagnosed as having AIDS
Related Complex (ARC) or Acquired Immune Deficiency Syndrome (AIDS) caused
by the HIV infection? [_] [_]
3) Within the past 5 years, has any person proposed for coverage:
a. Been hospitalized or treated by a member of the medical profession? [_] [_]
b. Been advised to have any diagnostic test or hospitalization or surgery which
has not been done? (Previous AIDS testing disclosure not included.) [_] [_]
c. Had a weight change of more than 10 pounds? [_] [_]
d. Applied for life, disability, or health insurance which was declined,
postponed, rated or modified? (Not applicable to Missouri residents.) [_] [_]
e. Had a driver's license restricted or revoked, been cited for driving under
the influence of alcohol or drugs or been cited for more than two moving
violations? [_] [_]
f. Been convicted of a felony? [_] [_]
g. Traveled or resided outside the U.S. or Canada, or made plans to do so
within the next year? [_] [_]
h. Engaged in or intended to engage in aviation activities or sports including
but not limited to stock or sports car, drag strip or motorcycle racing,
scuba or sky diving, rock or mountain climbing? (Please complete the
appropriate questionnaire.) [_] [_]
4) In the past 12 months, has any person proposed for coverage:
a. Smoked cigarettes? (Give details below.) [_] [_]
b. Used tobacco in any form? (Give details below.) [_] [_]
5) Have any immediate family members of the Proposed Insured(s) had a history of
diabetes, cancer or heart problems? [_] [_]
6) Is any person proposed for coverage currently on medication or under treatment
or therapy? [_] [_]
7) The date and reason for your last consultation with your personal physician
was
------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
Please give details if you answered "YES" to any of the above questions.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Question Name of Details (Name of condition, date of onset, Complete Names, Addresses & Phone
Number Insured duration, current treatment and conditions, etc.) Numbers of Physicians & Hospitals
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Important Notice: Any person who knowingly presents a false or fraudulent claim
for payment of a loss or benefit or knowingly presents false information in an
application for insurance is guilty of a crime and may be subject to fines and
confinement in prison.
- --------------------------------------------------------------------------------
(Four of Five)
8990-APP 7/99
<PAGE>
14. Agreements & Authorizations
I/We acknowledge receipt of current Prospectus(es) and understand that the death
benefit under the contract may increase or decrease depending on the investment
results of the contract. I/We understand that hypothetical illustrations are not
indicative of future results. The contract's cash surrender value may increase
or decrease on any day depending on the investment results. No minimum cash
surrender value is guaranteed. I/We understand that the contract represents a
long-term commitment to meet insurance needs and financial goals.
I/We represent to the best of my/our knowledge and belief that all statements
and answers contained in this application, and any supplements required by the
Company, are complete and true. I/We expressly agree that any insurance approved
by First Variable Life Insurance Company for issuance as a result of this
application shall be considered in force only when a policy has been issued by
First Variable Life Insurance Company and said policy delivered to and accepted
by the Owner and the first premium paid thereon, during the lifetimes and
continued insurability of the Proposed Insureds, as stated in the application.
I/We authorize any licensed physician, hospital, clinic or other medical or
medically related facility, insurance company or the Medical Information
Bureau, that has any records or knowledge of us or our family or of our health,
to give First Variable Life Insurance Company, or its reinsurers, any such
information and records for its use in the processing and evaluation of our
application for insurance. This agreement extends to and includes information
and records pertaining to psychiatric, drug use or alcohol use history. A copy
of this authorization shall be considered as valid as the original and either
shall be valid for a period of two years (30 months for residents of Virginia).
I/We acknowledge receipt of the Medical Information Bureau Pre-Notification and
Investigative Consumer Report Pre-Notification. If a premium payment is being
submitted with this application, I/We acknowledge receipt of the Conditional
Receipt. In return, I/We have read and agree to its terms.
The purpose of this form is to collect information in connection with this
application for life insurance. The Proposed Insureds, or their authorized
representative, is entitled to a copy of this notice.
Owner's Certification (in lieu of W-9)
[_] I am [_] I am not subject to backup withholding under Section
3406(a)(1)(c) of the Internal Revenue Code. Under penalties of perjury, I
certify that the information in this section is true, correct and complete.
(Please be sure that Social Security Number or Tax ID Number is provided in
Section 3 of this application.)
<TABLE>
<S> <C>
Signed at: ______________________________________________________________________ _______________________________________
City, State Date
_____________________________________________________________ ___________________________________________________________
Signature of Proposed Insured One Signature of Owner (if other than the Proposed Insured(s))
_____________________________________________________________ ___________________________________________________________
Signature of Proposed Insured Two Signature(s) of Additional Insured(s)
</TABLE>
15. Representative's Certification
(1) I am a Registered Representative of a Company approved NASD member and duly
licensed in the state in which this application was signed; (2) I have asked the
questions contained in this application of the Proposed and Joint Insureds and
Owner and duly recorded the answers; (3) To the best of my knowledge, there is
nothing adversely affecting the insurability of any persons proposed for
insurance except as stated in this application; (4) I have complied with the
state and federal laws on disclosure, cost comparison and replacement; (5) If
the initial premium was paid with the application, I have remitted it to the
Company and delivered a Conditional Receipt to the Owner; (6) Based on
information furnished by the Owner or Insureds in this application, I have
reasonable grounds for believing the purchase of the policy applied for is
suitable for the Owner; (7) The Prospectus(es) were delivered and no written
sales materials other than those furnished or approved by the Company were used.
(8) To the best of my knowledge, this application [_] does replace [_] does not
replace existing life insurance.
_________________________________________ _____________ (____) ______________
Signature of Representative Date Phone
_________________________________________ _____________ ______-______-_______
Name of Representative (Please Print) Agent Number Social Security Number
_______________________________________________
Name of Broker/Dealer
(Five of Five)
<TABLE>
<S> <C> <C> <C>
Mail completed application to: First Variable Service Center Overnight deliveries: First Variable Service Center
P.O. Box 1317 4200 University, Suite 200
Des Moines, IA 50305-1317 West Des Moines, Iowa 50266
Phone: (800) 228-1035
8990-APP 7/99
</TABLE>
<PAGE>
Conditional Receipt For Advanced Payment of Premium
(Please detach and leave with applicant.)
Prior to the delivery of the policy, coverage will be effective only when ALL
of the following conditions are met: a) The Company receives full payment from
the proposed owner with the application. Full payment must be in good funds in
an amount not less than the required initial premium; b) the Company receives,
within 90 days from the date of application, all medical requirements (such as
examinations, tests, x-rays and electrocardiograms) which the Company requests;
c) the Company determines that each person proposed for coverage is acceptable
to it, under its applicable underwriting standards, for the plan and amount
applied for without any modification of the premium rate paid; and d) there is
no material misrepresentation in the application or in any medical information
furnished to the Company.
Subject to satisfactory completion of the above conditions, coverage under
the receipt will begin ON THE LATER OF: a) the date the application is signed;
b) the date the last medical requirement is completed; or c) the effective date,
if any, requested on the application.
The maximum death benefit and all other supplemental benefits provided by
this receipt will be the lesser of: a) the total insurance amount, including any
Accidental Death Benefit, on all pending applications with the Company or b)
$250,000. If two or more persons are proposed for coverage, this maximum applies
to all persons proposed for coverage.
If any condition under this receipt is not met, the Company's only
liability will be to refund the premium payment. Either the Company or the
proposed owner may terminate coverage under this receipt by notice to the other.
In no event will coverage under this receipt be in force after 90 days from the
date of the application.
No broker, agent, or medical examiner may waive a complete answer to any
question in the application, pass on insurability, make or alter any contract,
or waive any of the Company's other rights or requirements.
Company policy does not permit the acceptance of money on applications from
California if the total insurance applied for exceeds $250,000.
If there is material misrepresentation in the application or in any medical
information furnished to the Company, the Company's only liability will be
limited to refunding the premium payment.
If any person proposed for coverage commits suicide, whether sane or
insane, the Company's only liability will be limited to refunding the premium
payment. (Suicide clause not applicable in Missouri.)
- -------------------------------------------------------------------------------
ALL PREMIUM CHECKS MUST BE MADE PAYABLE TO FIRST VARIABLE LIFE INSURANCE
COMPANY. DO NOT MAKE CHECKS PAYABLE TO ANY AGENT OR LEAVE THE PAYEE BLANK.
- -------------------------------------------------------------------------------
Received $________________ from _____________ for an application on ___________
dated __/____/____.
___________________________________________ _________________________________
Signature of Owner Signature of Representative
- --------------------------------------------------------------------------------
This Section MUST Be Detached And Given To Either of The Proposed Insureds
INVESTIGATIVE CONSUMER REPORT PRE-NOTIFICATION
Thank you for applying for life insurance with First Variable Life Insurance
Company. As a part of our procedure for processing your initial insurance
application, an investigative consumer report may be prepared whereby
information is obtained through personal interviews with neighbors, friends, or
others with whom you are acquainted. This inquiry includes information as to
your character, general reputation, personal characteristics and mode of living,
except as may be related directly or indirectly to your sexual orientation. You
have the right to make a written request within a reasonable period of time to
receive additional detailed information about the nature and scope of this
investigation. For this information, you may write our Underwriting Department,
First Variable Service Center, P. O. Box 1317, Des Moines, IA 50305-1317. You
may also obtain a written summary of your rights under the Fair Credit Reporting
Act (15 USC Section 1684 et seq.) from any consumer reporting agency we may use.
ELECTRONIC FUND TRANSFER
As a convenience to me/us, I/we request and authorize you, until revoked by
written notice, to initiate debit entries (charges), electronically, by paper
means or by any other commercially accepted method, to my/our account for
payment of premiums provided there are sufficient funds in my/our account to
pay the debits. I/we understand this authorization is applicable only if
requested on my application.
MEDICAL INFORMATION BUREAU PRE-NOTIFICATION
Information regarding your insurability will be treated as confidential. First
Variable Life Insurance Company or its reinsurers may, however, make a brief
report thereon to the Medical Information Bureau, a non-profit membership
organization of life insurance companies which operates an information exchange
on behalf of its members. If you apply to another Bureau member company for life
or health insurance coverage, or a claim for benefits is submitted to such a
company, the Bureau, upon request, will supply such company with information it
may have in its file.
Upon receipt of a request from you, the Bureau will arrange disclosure of any
information it may have in your file. If you question the accuracy of
information in the Bureau's file, you may contact the Bureau and seek a
correction in accordance with the procedures set forth in the Fair Credit
Reporting Act. The address of the Bureau's information office is: Post Office
Box 105, Essex Station, Boston, MA 02112 (Telephone (617) 426-3660). First
Variable Life Insurance Company or its reinsurers may also release information
in their files to other life insurance companies to whom you may apply for life
or health insurance, or to whom a claim for benefits may be submitted.
8990-APP 7/99
<PAGE>
APPENDIX: A
ANNUAL RATES OF RETURN FOR THE SEPARATE ACCOUNT INVESTMENT OPTIONS
The following tables show performance information for the Separate Account
investment options for periods ending May 31, 1999. Table A-1 assumes that each
option had been in operation for the same period as its corresponding Portfolio.
Both tables reflect the total of the income generated by the Portfolio shown,
less total Portfolio operating expenses, plus or minus realized or unrealized
capital gains and losses, and less the deductions for the Policies' current
mortality and expense risk charge (.90% per annum) and the policy benefit charge
(0.30% per annum).
The tables do not reflect three significant charges that will apply to your
Policy: an administrative charge (currently $10 per month), cost of insurance
and additional benefit rider charges, and the surrender charge. If these
charges were reflected, the total return figures shown would be lower. For an
example of the effect of the deduction of the surrender charge, compare the
"Cash Surrender Value" to the corresponding "Account Value" in the hypothetical
illustrations on pages ___ to ___.
<TABLE>
<CAPTION>
Table A-1 Average Annual Total Return from Portfolio Inception Date
- ----------------------------------------------------------------------------------------------------
Port. From Portfolio
Portfolio and Portfolio Incept. Inception Date
Inception Date Date 1 Yr. 3 Yr. 5 Yr. 10 Yr.
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AIM Capital Appreciation 5/5/93 11.72% 11.03% 17.24% N/A 16.94%
- ----------------------------------------------------------------------------------------------------
AIM Growth 5/5/93 23.89% 23.32% 22.99% N/A 19.43%
- ----------------------------------------------------------------------------------------------------
American VP Value 5/1/96 7.03% 16.77% N/A N/A 16.72%
- ----------------------------------------------------------------------------------------------------
BT Equity Index 10/1/97 19.42% N/A N/A N/A 21.05%
- ----------------------------------------------------------------------------------------------------
BT Small Cap 8/25/97 N/A N/A N/A N/A 2.88%
- ----------------------------------------------------------------------------------------------------
FIS Prime Money Fund II 11/21/94 3.75% 3.92% 3.93% N/A 3.58%
- ----------------------------------------------------------------------------------------------------
FT International 5/1/92 0.19% 12.72% 12.38% N/A 13.08%
- ----------------------------------------------------------------------------------------------------
LA Growth with Income 12/11/89 13.16% 18.63% 18.97% N/A 15.65%
- ----------------------------------------------------------------------------------------------------
MFS New Discovery 5/1/98 19.11% N/A N/A N/A 12.42%
- ----------------------------------------------------------------------------------------------------
MFS Growth 5/1/99 N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
MFS Growth with Income 10/9/95 8.87% 20.93% N/A N/A 22.36%
- ----------------------------------------------------------------------------------------------------
VIST Small Cap Growth 5/4/95 -9.6% -5.72% N/A N/A 9.41%
- ----------------------------------------------------------------------------------------------------
VIST World Equity 6/10/88 -6.53% 5.4% 11.13% 7.44% 6.99%
- ----------------------------------------------------------------------------------------------------
VIST Growth 5/1/87 27.19% 22.29% 24.15% 14.99% 14.98%
- ----------------------------------------------------------------------------------------------------
VIST Matrix Equity 6/6/88 9.8% 16.17% 14.67% 12.28% 12.92%
- ----------------------------------------------------------------------------------------------------
VIST Growth & Income 5/31/95 11.62% 12.27% N/A N/A 18.68%
- ----------------------------------------------------------------------------------------------------
VIST Multiple Strategies 5/5/87 24.14% 19.64% 20.06% 13.68% 12.13%
- ----------------------------------------------------------------------------------------------------
VIST High Income Bond 6/1/87 1.34% 9.08% 8.9% 9.06% 8.95%
- ----------------------------------------------------------------------------------------------------
VIST U.S. Gov't Bond 5/27/87 2.49% 6.3% 6.66% 7.09% 7.13%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Prior to May 1, 1997, the VIST Small Cap Growth Portfolio was named the
VIST "Small Cap Portfolio," and the VIST Growth Portfolio was named the
VIST "Common Stock Portfolio." The names of the corresponding Separate
Account investment options were, respectively, "Small Cap Sub-Account" and
"Common Stock Sub-Account".
(2) On April 1, 1994, First Variable Advisory Services Corp., an affiliate of
the ours, became the investment advisor. Prior to that date, results were
achieved by former investment advisers.
(3) Prior to May 1, 1997, the VIST Matrix Equity Portfolio was named the VIST
"Tilt Utility Portfolio" and had different investment policies. The name
and objective of the corresponding Separate Account investment option also
differed.
(4) Performance information reflects any fee waivers and expense reimbursements
with respect to the Portfolios. Absent such waivers or reimbursements, the
performance shown would have been lower.
<PAGE>
Performance information shown above for any Separate Account investment option
reflects only the performance of an assumed investment in the Separate Account
Investment Option for the Policies during the particular time period shown. You
should consider this performance information in light of the investment
objectives and policies, characteristics and quality of the Portfolio in which
the Separate Account investment option invests and the market conditions during
the given time period. You should not consider it representative of what the
Separate Account investment option will achieve in the future. Actual returns
will differ from those shown and will depend on a number of factors, including
the investment allocations you make and the different investment rates of return
for the Portfolios.
<PAGE>
APPENDIX: B
ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES,
CASH SURRENDER VALUES AND ACCUMULATED VALUE OF PREMIUMS
The tables in this Appendix B show how a Policy's Death Benefit, Cash Surrender
Value and Account Value could change over an extended period of time, assuming
constant gross annual rates of return for the Separate Account of 0%, 6% and 12%
("Gross return" for this purpose means the assumed rate of return the underlying
Portfolio has earned before deducting any of its expenses or any Policy Charges
and deductions); the payment of an annual premium of $6,000 under Death Benefit
Option A for a male insured person and a female insured person, who are both age
55 on the Policy Date under Death Benefit Option A and $7,000 for a male insured
person and a female insured person who are both age 55 on the Policy Date; and a
Face Amount of $500,000. The insured persons are assumed to be in the Preferred-
standard premium rate class. The first version of each of the tables assumes our
current (i.e., non-guaranteed) rates for the premium charge, premium tax charge,
monthly administrative charge, cost of Insurance charge, mortality and expense
risk charge, Policy benefit charge, and expected Premium Value Bonuses and Cash
Value Bonuses beginning in the 9th Policy Year. The next table is based on our
contractually guaranteed rates for those items.
The Death Benefits, Cash Surrender Values and Account Values shown in the tables
also reflect an unweighted average of the investment advisory fees and other
operating expenses incurred by the Portfolios, at an annual rate of 0.97% of the
average daily net assets of the Portfolios. This average reflects a voluntary
"caps" on the investment advisory fees. If the investment adviser discontinued
these caps, the values illustrated on the following pages could be less. (See
"Highlights")
Taking account of any daily charges for mortality and expense risks in the
Separate Account and the average investment advisory fee and operating expenses
of the Portfolios, the gross current annual rates of return of 0%, 6% and 12%
correspond to net investment experience at constant annual rates of (1.87%),
4.13% and 10.13%, respectively, for the "current" tables, and (2.17%), 3.93% and
9.93% respectively, for the "guaranteed" tables. The tables do not reflect any
tax charges attributable to the Separate Account since we currently make no such
charges. If we impose any such charges in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the Death Benefits, Cash Surrender Values and
Account Values illustrated.
The second column of each table shows the amount that would accumulate if you
instead invested your assumed premiums to earn interest, after taxes of 5% per
year, compounded annually.
<PAGE>
<TABLE>
<CAPTION>
JOINT AGE 55: $500,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION A
MALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS $6,000 ANNUAL PREMIUM
FEMALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS
CURRENT POLICY CHARGE AND BONUS RATES
Values Based on Assumed Hypothetical Gross Investment Returns of:
Premiums 0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
- ------ ----------- ------- ----------- ------- ------- ----------- ------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 6,300 4,950 2,672 500,000 5,279 3,000 500,000 5,608 3,330 500,000
2 12,915 9,789 5,233 500,000 10,735 6,199 500,000 11,762 7,205 500,000
3 19,861 14,517 9,961 500,000 16,434 11,878 500,000 18,512 13,956 500,000
4 27,154 19,135 14,579 500,000 22,322 17,766 500,000 25,915 21,359 500,000
5 34,811 23,641 19,085 500,000 28,423 23,867 500,000 34,033 29,476 500,000
6 42,852 28,037 24,392 500,000 34,744 31,099 500,000 42,932 39,287 500,000
7 51,295 32,319 29,403 500,000 41,286 38,370 500,000 52,684 49,768 500,000
8 60,159 36,483 34,296 500,000 48,055 45,868 500,000 63,369 61,182 500,000
9 69,467 40,750 39,292 500,000 55,294 53,836 500,000 75,338 73,880 500,000
10 79,241 44,893 44,164 500,000 62,782 62,053 500,000 88,461 87,732 500,000
15 135,945 63,453 63,453 500,000 103,954 103,954 500,000 176,192 176,192 500,000
20 208,316 76,233 76,233 500,000 150,841 150,841 500,000 316,184 316,184 500,000
25 300,681 78,248 78,248 500,000 203,919 203,919 500,000 560,180 560,180 588,189
30 418,565 49,635 49,635 500,000 254,614 254,614 500,000 966,109 966,109 1,104,415
- ---------------------------------------------------------------------------------------------------- -------------------------------
(1) Assumes annual premium payments are paid in full at the beginning of each Policy Year. Values would differ if the amount or
frequency of payment varied.
(2) Zero values in the Death Benefit column indicate Policy lapse in the absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited at the following rates for Policy Years 9 and after:
Premium Value Bonus Percentage: 5% Cash Value Bonus Percentage: (% of Account Value less loans and interest):
Cash Surrender Value less than $25,000: 0%
Cash Surrender Value $25,000 to $99,999: .10% (.25% after Policy Year 20)
Cash Surrender Value $100,000 to $200,000: .20% (.50% after Policy Year 20)
Cash Surrender Value more than $200,000: .30% (.75% after Policy Year 20)
YOU SHOULD CONSIDER THE ASSUMED INVESTMENT RATES OR RETURN SHOWN ABOVE AS ILLUSTRATIVE ONLY AND NOT NECESSARILY A REPRESENTATIVE OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN WILL DIFFER FROM THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING YOUR INVESTMENT ALLOCATIONS, PREVAILING ECONOMIC CONDITIONS, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND ACCOUNT VALUE WOULD DIFFER FROM THOSE SHOWN IF THE ACTUAL RATES AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS WE MAKE. NO REPRESENTATION THAT THESE ASSUMED RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JOINT AGE 55: $500,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION A
MALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS $6,000 ANNUAL PREMIUM
FEMALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS
GUARANTEED POLICY CHARGE AND BONUS RATES
Values Based on Assumed Hypothetical Gross Investment Returns of:
Premiums 0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
- ------ ----------- ------- ----------- ------- ------- ----------- ------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 6,300 4,596 2,318 500,000 4,905 2,627 500,000 5,215 2,936 500,000
2 12,915 9,035 4,478 500,000 9,937 5,381 500,000 10,878 6,322 500,000
3 19,861 13,307 8,750 500,000 15,089 10,533 500,000 17,023 12,467 500,000
4 27,154 17,403 12,846 500,000 20,353 15,796 500,000 23,682 19,126 500,000
5 34,811 21,310 16,754 500,000 25,715 21,159 500,000 30,891 26,335 500,000
6 42,852 25,012 21,367 500,000 31,160 27,515 500,000 38,684 35,039 500,000
7 51,295 28,487 25,571 500,000 36,666 33,750 500,000 47,094 44,178 500,000
8 60,159 31,705 29,518 500,000 42,200 40,013 500,000 56,151 53,964 500,000
9 69,467 34,735 33,277 500,000 47,833 46,375 500,000 65,994 64,536 500,000
10 79,241 37,421 36,692 500,000 53,410 52,681 500,000 76,546 75,817 500,000
15 135,945 43,854 43,854 500,000 78,398 78,398 500,000 141,160 141,160 500,000
20 208,316 29,257 29,257 500,000 88,465 88,465 500,000 229,187 229,187 500,000
25 300,681 0 0 0 51,014 51,014 500,000 354,476 354,476 500,000
30 418,565 0 0 0 0 0 0 573,300 573,300 601,965
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the
following guaranteed factors for Policy Years 9 and after:
Premium Value Bonus Percentage: 3% Cash Value Bonus Percentage: .00%
YOU SHOULD CONSIDER THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AS
ILLUSTRATIVE ONLY AND NOT NECESSARILY A REPRESENTATIVE OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN WILL DIFFER FROM THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING YOUR INVESTMENT ALLOCATIONS,
PREVAILING ECONOMIC CONDITIONS, PREVAILING RATES AND RATES OF INFLATION. THE
DEATH BENEFIT AND ACCOUNT VALUE WOULD DIFFER FROM THOSE SHOWN IF THE ACTUAL
RATES AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS WE MAKE. NO REPRESENTATION
THAT THESE ASSUMED RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
JOINT AGE 55: $500,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION B
MALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS $6,000 ANNUAL PREMIUM
FEMALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS
CURRENT POLICY CHARGE AND BONUS RATES
Values Based on Assumed Hypothetical Gross Investment Returns of:
Premiums 0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Vaue Value Benefit Vaue Value Benefit
- ----- ------------ ------- --------- ------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,350 5,928 3,650 505,928 6,317 4,039 506,317 6,706 4,428 506,706
2 15,068 11,724 7,168 511,724 12,871 8,315 512,871 14,065 9,509 514,065
3 23,171 17,389 12,833 517,389 19,669 15,113 519,669 22,139 17,583 522,139
4 31,679 22,922 18,366 522,922 26,717 22,161 526,717 30,995 26,438 530,995
5 40,613 28,323 23,767 528,323 34,022 29,466 534,022 40,705 36,149 540,705
6 49,994 33,594 29,949 533,594 41,592 37,947 541,592 51,353 47,708 551,353
7 59,844 38,729 35,813 538,729 49,428 46,512 549,428 63,021 60,105 563,021
8 70,186 43,726 41,539 543,726 57,537 55,350 557,537 75,804 73,617 575,804
9 81,045 48,812 47,354 548,812 66,173 64,715 566,173 90,086 88,628 590,086
10 92,448 53,752 53,023 553,752 75,105 74,376 575,105 105,739 105,010 605,739
15 158,602 75,913 75,913 575,913 124,380 124,380 624,380 210,261 210,261 710,261
20 243,035 91,178 91,178 591,178 179,375 179,375 679,375 374,478 374,478 874,478
25 350,794 93,448 93,448 593,448 238,777 238,777 738,777 642,740 642,740 1,142,740
30 488,326 60,823 60,823 560,823 274,902 274,902 774,902 1,045,073 1,045,073 1,545,073
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the
following nonguaranteed factors for Policy Years 9 and after:
<TABLE>
<S> <C> <C>
Premium Value Bonus Percentage: 5% Cash Value Bonus Percentage: (% of Account Value less loans and interest):
Cash Surrender Value less than $25,000: 0%
Cash Surrender Value $25,000 to $99,999: .10% (.25% after Policy Year 20)
Cash Surrender Value $100,000 to $200,000: .20% (.50% after Policy Year 20)
Cash Surrender Value more than $200,000: .30% (.75% after Policy Year 20)
</TABLE>
YOU SHOULD CONSIDER THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AS
ILLUSTRATIVE ONLY AND NOT NECESSARILY A REPRESENTATIVE OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN WILL DIFFER FROM THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING YOUR INVESTMENT ALLOCATIONS,
PREVAILING ECONOMIC CONDITIONS, PREVAILING RATES AND RATES OF INFLATION. THE
DEATH BENEFIT AND ACCOUNT VALUE WOULD DIFFER FROM THOSE SHOWN IF THE ACTUAL
RATES AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS WE MAKE. NO REPRESENTATION
THAT THESE ASSUMED RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
<TABLE>
<CAPTION>
JOINT AGE 55: $500,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION B
MALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS $7,000 ANNUAL PREMIUM
FEMALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS
GUARANTEED POLICY CHARGE AND BONUS RATES
Values Based on Assumed Hypothetical Gross Investment Returns of:
Premiums 0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
- ------ ----------- ------- ----------- ------- ------- ----------- ------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,350 5,525 3,247 505,525 5,891 3,613 505,891 6,257 3,979 506,257
2 15,068 10,871 6,315 510,871 11,945 7,389 511,945 13,064 8,508 513,064
3 23,171 16,029 11,472 516,029 18,155 13,599 518,155 20,461 15,904 520,461
4 31,679 20,986 16,430 520,986 24,511 19,955 524,511 28,488 23,932 528,488
5 40,613 25,730 21,174 525,730 31,000 26,444 531,000 37,188 32,632 537,188
6 49,994 30,241 26,596 530,241 37,602 33,957 537,602 46,603 42,958 546,603
7 59,844 34,494 31,578 534,494 44,291 41,375 544,291 56,770 53,854 556,770
8 70,186 38,456 36,269 538,456 51,030 48,843 551,030 67,721 65,534 567,721
9 81,045 42,190 40,732 542,190 57,878 56,420 557,878 79,593 78,135 579,593
10 92,448 45,535 44,806 545,535 64,670 63,941 564,670 92,301 91,572 592,301
15 158,602 54,352 54,352 554,352 95,117 95,117 595,117 168,714 168,714 668,714
20 243,035 40,198 40,198 540,198 106,729 106,729 606,729 262,119 262,119 762,119
25 350,794 0 0 0 63,196 63,196 563,196 347,543 347,543 847,543
30 488,326 0 0 0 0 0 0 357,088 357,088 857,088
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Assumes annual premium payments are paid in full at the beginning of each Policy Year. Values would differ if the amount or
frequency of payment varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the following guaranteed factors for Policy Years 9 and
after:
Premium Value Bonus Percentage: 3% Cash Value Bonus Percentage: .00%
YOU SHOULD CONSIDER THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AS ILLUSTRATIVE ONLY AND NOT NECESSARILY A REPRESENTATIVE OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN WILL DIFFER FROM THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING YOUR INVESTMENT ALLOCATIONS, PREVAILING ECONOMIC CONDITIONS, PREVAILING RATES AND RATES OF INFLATION. THE DEATH
BENEFIT AND ACCOUNT VALUE WOULD DIFFER FROM THOSE SHOWN IF THE ACTUAL RATES AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS WE MAKE. NO REPRESENTATION THAT THESE ASSUMED RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</TABLE>
<PAGE>
APPENDIX C: FINANCIAL STATEMENTS
The financial statements of First Variable Life Insurance Company contained in
this prospectus should be considered to bear only upon our ability to meet our
obligations under the Policies. They should not be considered as bearing upon
the investment experience of the Separate Account.
The following financial statements are included in this Appendix:
First Variable Life Insurance Company Separate Account VL
First Variable Life Insurance Company
<PAGE>
Financial Statements
First Variable Life Insurance Company --
Separate Account VL
5 month Period ended May 31, 1999 (unaudited)
Year ended December 31, 1998
<PAGE>
VARIABLE LIFE INSURANCE COMPANY -- Separate Account VL
Statement of Assets, Liabilities and
Contract Owners' Equity (Unaudited)
May 31, 1999
<TABLE>
<CAPTION>
Federated Multiple Matrix
Prime Money Growth High Income Strategies Equity US Government
Total Fund II Division Bond Division Division Division Bond Division
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments in Variable Investors Series $12,213,517 $ ---- $3,425,862 $819,234 $1,870,223 $882,267 $707,244
Trust, at value (cost $11,599,720)
Investments in Mutual Funds, at value 1,085,594 875,161 ---- ---- ---- ---- ----
(cost $1,086,354)
Receivable from First Variable Life 417 15 369 2 ---- ---- 4
Insurance Company
----------- -------- ---------- -------- ---------- -------- --------
Total assets $13,299,528 $875,176 $3,426,231 $819,236 $1,870,223 $882,267 $707,248
=========== ======== ========== ======== ========== ======== ========
Liabilities
Payable to First Variable Life Insurance 1,734 ---- ---- ---- 670 31 ----
Company
Contract owners' equity
Variable annuity contract owners' equity 13,297,794 875,176 3,426,231 819,236 1,869,553 882,236 707,248
----------- -------- ---------- -------- ---------- -------- --------
Total liabilities and contract owners'
equity $13,329,528 $875,176 $3,426,231 $819,236 $1,870,223 $882,267 $707,248
=========== ======== ========== ======== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
World Growth & Small Cap
Equity Income Growth
Division Division Division
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in Variable Investors Series $901,236 $2,465,650 $1,141,801
Trust, at value (cost $11,599,720)
Investments in Mutual Funds, at value ---- ---- ----
(cost $1,086,354)
Receivable from First Variable Life ---- ---- 27
Insurance Company
-------- ---------- ----------
Total assets $901,236 $2,465,650 $1,141,828
======== ========== ==========
Liabilities
Payable to First Variable Life Insurance 22 357 ----
Company
Contract owners' equity
Variable annuity contract owners' equity 901,214 2,465,293 1,141,828
-------- ---------- ----------
Total liabilities and contract owners'
equity $901,236 $2,465,650 $1,141,828
======== ========== ==========
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AIM V.I. American B.T. Small
Capital AIM Century B.T. Equity Capital Index
Appreciation V.I.Growth V.I. Growth 500 Value Index
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Investments in Variable ---- ---- ---- ---- ----
Investors Series Trust, at value
(cost $11,599,720)
Investments in Mutual Funds, at 35,613 26,218 11,220 6,363 16,185
value (cost $1,086,354)
Receivable from First Variable ---- ---- ---- ---- ----
Life Insurance Company
Total assets 35,613 26,218 11,220 6,363 16,185
====== ====== ====== ===== ======
Liabilities
Payable to First Variable Life 11 7 ---- 2 5
Insurance Company
Contract owners' equity
Variable annuity contract 35,602 26,211 11,220 6,361 16,180
------ ------ ------ ----- ------
owners' equity
Total liabilities and contract
owners' equity 35,613 26,218 11,220 6,363 16,185
====== ====== ====== ===== ======
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Lord Abbett MFS
Templeton Growth & MFS New MFS Growth Growth &
International Income Discovery Discovery Income
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Investments in Variable ---- ---- ---- ---- ----
Investors Series Trust, at value
(cost $11,599,720)
Investments in Mutual Funds, at $5,968 $30,387 $11,966 $43,776 $22,737
value (cost $1,086,354)
Receivable from First Variable ---- ---- ---- ---- ----
Life Insurance Company
Total assets $5,968 $30,387 $11,966 $43,776 $22,737
====== ======= ======= ======= =======
Liabilities
Payable to First Variable Life ---- 9 4 13 603
Insurance Company
Contract owners' equity
Variable annuity contract
owners' equity $5,968 $30,378 $11,962 $43,763 $22,134
------ ------- ------- ------- -------
Total liabilities and contract
owners' equity $5,968 $30,387 $11,966 $43,776 $22,737
====== ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FIRST VARIABLE LIFE INSURANCE COMPANY -- Separate Account VL
Statement of Operations (Unaudited)
5 month Period ended May 31, 1999
<TABLE>
<CAPTION>
Federated Multiple Matrix
Prime Money Growth High Income Strategies Equity
Total Fund II Division Bond Division Division Division
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 10,289 $10,289 $ -- $ -- $ -- $ --
Expenses:
Fees paid to First
Variable Life Insurance Company:
Risk and administrative
Charges 40,797 1,719 10,488 2,703 5,633 3,485
-------- ------- -------- ------- ------- --------
Net investment income (30,508) 8,570 (10,488) (2,703) (5,633) (3,485)
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) on Variable
Investors Series Trust shares redeemed 107,238 -- 22,659 (8,327) 8,117 73,398
Net unrealized appreciation (depreciation)
on investments during the period 113,911 -- 7,157 33,345 (7,675) (54,344)
-------- ------- -------- ------- ------- --------
Net realized and unrealized gains
(loss) on investments 221,149 -- 29,816 25,018 442 19,054
-------- ------- -------- ------- ------- --------
Net increase (decrease) in contract owners'
equity resulting from operations $190,641 $ 8,570 $ 19,328 $22,315 $(5,191) $ 15,569
======== ======= ======== ======= ======= ========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
World Matrix World
US Government Equity Equity Equity
Bond Division Division Division Division
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends -- -- -- --
Expenses:
Fees paid to First Variable
Life Insurance Company:
Risk and administrative
charges $ 1,913 $ 2,943 $ 7,320 $ 4,532
------- -------- -------- ---------
Net investment income (1,913) (2,943) (7,320) (4,532)
Realized and unrealized gain (loss) on
investments:
Realized gain (loss) on Variable
Investors Series Trust shares redeemed (775) (13,858) 8,936 17,088
Net unrealized appreciation (depreciation) on
investments during the period (5,760) 34,236 248,431 (140,715)
------- -------- -------- ---------
Net realized and unrealized gain
(loss) on investments (6,535) 20,378 257,367 (123,627)
------- -------- -------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations $(8,448) $ 17,435 $250,047 $(128,159)
======= ======== ======== ==========
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FIRST VARIABLE LIFE INSURANCE COMPANY -- Separate Account VL
Statement of Operations (Unaudited)
5 month Period ended May 31, 1999
<TABLE>
<CAPTION>
AIM V.I. Capital American B.T. Small Lord Abbett MFS Growth w/ Lord Abbett
Appreciation AIM V.I. Growth Century V.P. B.T. Equity 500 Capital Index Templeton
MFS Growth Income Growth & Income MFS New MFS Growth Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends -- -- -- -- -- --
Expenses:
Fees paid to First Variable
Life Insurance Company:
Risk and administrative
charges $ 11 $ 7 $ 3 $ 1 $ 5 $ 1
----- ----- ----- ---- ----- -----
Net investment income (11) (7) (3) (1) (5) (1)
Realized and unrealized gain
(loss) on investments:
Realized gain {loss) on
Variable Investors Series
Trust shares redeemed -- -- -- -- -- --
Net unrealized appreciation
(depreciation) on Investments
during the Period (831) (723) (188) (69) (259) (163)
----- ----- ----- ---- ----- -----
Net realized and unrealized
gain (loss) on investments (831) (723) (188) (69) (259) (163)
----- ----- ----- ---- ----- -----
Net increase (decrease) in
contract owners' equity resulting
from operations $(842) $(730) $(191) $(70) $(264) $(164)
===== ===== ===== ==== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Growth w/ MFS New MFS Growth w/ MFS New
Growth & Income International Growth & Income International
Value Index Value Index
- ------------------------------------------------------------------------------------------------------
Investment income:
Dividends -- -- -- --
Expenses:
Fees paid to First Variable
Life Insurance Company:
Risk and administrative
charges $ 9 $ 4 $ 13 $ 7
----- ---- ------ -----
Net investment income (9) (4) (13) (7)
Realized and unrealized gain
(loss) on investments:
Realized gain (loss) on
Variable Investors Series
Trust shares redeemed -- -- -- --
Net unrealized appreciation
(depreciation) on Investments
during the Period (974) 473 1,970 --
----- ---- ------ -----
Net realized and unrealized
gain (loss) on investments (974) 473 1,970 --
----- ---- ------ -----
Net increase (decrease) in
contract owners' equity resulting
from operations $(983) $469 $1,957 $ (7)
===== ==== ====== =====
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FIRST VARIABLE LIFE INSURANCE COMPANY - Separate Account VL
Statement of Changes in Contract Owners' Equity (Unaudited)
5 month Period ended May 31, 1999
<TABLE>
<CAPTION>
Federated Multiple Matrix
Prime Money Growth High Income Strategies Equity
Total Fund II Division Bond Division Division Division
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ $ 8,570 $ (10,488) $ (2,703) $ (5,633) $ (3,485)
Realized gain (loss) on Variable Investors
Series Trust shares redeemed 107,238 --- 22,659 (8,327) 8,117 73,398
Net unrealized appreciation (depreciation) on
investments during the period 113,911 --- 7,157 33,345 (7,675) (54,344)
----------- --------- ---------- ---------- ---------- ---------
Net increase (decrease) in contract
owners' equity resulting from
operations 190,641 8,570 19,328 22,315 (5,191) 15,569
----------- --------- ---------- ---------- ---------- ---------
From contract owner transactions
Net proceeds from sale of
accumulation units 3,547,286 687,142 991,659 122,663 577,144 182,576
Cost of accumulation units terminated
and exchanged (1,418,326) (227,607) (83,167) (63,586) (14,684) (522,262)
----------- --------- ---------- ---------- ---------- ---------
Increase (decrease) in contract owners' equity
from contract owner transactions 2,128,960 459,535 908,492 59,077 562,460 (339,686)
----------- --------- ---------- ---------- ---------- ---------
Increase (decrease) in contract owners' equity 2,319,601 468,105 927,820 81,392 557,269 (324,117)
Contract Owners' equity at beginning of period 10,978,193 407,071 2,498,411 737,844 1,312,844 1,206,353
----------- --------- ---------- ---------- ---------- ---------
Contract Owner's equity at end of period $13,297,794 $ 875,176 $3,426,231 $ 819,236 $1,869,553 $ 882,236
=========== ========= ========== ========== ========== =========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
World Growth & Small Cap
US Government Equity Income Growth
Bond Division Division Division Divison
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ (1,913) $ (2,943) $ (7,320) $ (4,532)
Realized gain (loss) on Variable Investors
Series Trust shares redeemed (775) (13,858) 8,936 17,088
Net unrealized appreciation (depreciation)
on investments during the period (5,760) 34,236 248,431 (140,715)
---------- -------- ---------- ----------
Net increase (decrease) in contract
owners' equity resulting from
operations (8,448) 17,435 250,047 (128,159)
---------- -------- ---------- ----------
From contract owner transactions
Net proceeds from sale of
accumulation units 268,207 108,086 290,544 108,606
Cost of accumulation units terminated
and exchanged (15,464) (46,984) (54,621) (389,896)
---------- -------- ---------- ----------
Increase in contract owners' equity
from contract owner transactions 252,743 61,102 235,923 (281,290)
---------- -------- ---------- ----------
Increase in contract owners' equity 244,295 78,537 485,970 (409,449)
Contract Owners' equity at beginning of period 462,953 822,677 1,979,323 1,551,277
---------- -------- ---------- ----------
Contract Owner's equity at end of period $ 707,248 $901,214 $2,465,293 $1,141,828
========== ======== ========== ==========
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FIRST VARIABLE LIFE INSURANCE COMPANY -- Separate Account VL
Statement of Changes in Contract Owners' Equity (Unaudited)
5 month Period ended May 31, 1999
<TABLE>
<CAPTION>
AIM V.I. Capital American
Lord Abbett MFS Growth w/ Appreciation AIM V.I. Growth Century V.P.
Growth & Income MFS New MFS Growth Income MFS Growth
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income
Realized gain (loss) on Variable
Investors Series Trust shares
redeemed $ (11) $ (7) $ (3) $ (1) $ (5)
-- -- -- -- --
Net unrealized appreciation
(depreciation) on investments
during the period (831) (723) (188) (69) (259)
------- ------- ------- ------ -------
Net increase (decrease) in
contract owners' equity resulting
from operations (842) (730) (191) (70) (264)
------- ------- ------- ------ -------
From contract owner
transactions
Net proceeds from sale of
accumulation units 36,446 26,952 11,414 6,446 16,448
Cost of accumulation units
terminated and exchanged (2) (11) (3) (15) (4)
------- ------- ------- ------ -------
Increase in contract owners'
equity from contract owner
transactions 36,444 26,941 11,411 6,431 16,444
------- ------- ------- ------ -------
Increase in contract owners' equity 35,602 26,211 11,220 6,361 16,180
Contract Owners' equity at
beginning of period -- -- -- -- --
------- ------- ------- ------ -------
Contract Owner's equity at end
of period $35,602 $26,211 $11,220 $6,361 $16,180
======= ======= ======= ====== =======
- ------------------------------------------------------------------------------------------------------------------------------------
B.T. Equity 500 B.T. Small Lord Abbett MFS Growth w/
Income Capital Index Templeton Growth & Income MFS New
- --------------------------------------------------------------------------------------------------------------------------------
Operations
Net investment income
Realized gain (loss) on Variable
Investors Series Trust shares
redeemed (1) (9) (4) (13) (7)
-- -- -- -- --
Net unrealized appreciation
(depreciation) on investments
during the period (163) (974) 473 1,970 ----
----- ------ ------ ------ ------
Net increase (decrease) in
contract owners' equity resulting
from operations (164) (983) 469 1,957 (7)
----- ------ ------ ------ ------
From contract owner
transactions
Net proceeds from sale of
accumulation units 6,141 31,368 11,497 41,806 22,141
Cost of accumulation units
terminated and exchanged (9) (7) (4) -- --
----- ------ ------ ------ ------
Increase in contract owners'
equity from contract owner
transactions 6,132 31,361 11,493 41,806 22,141
----- ------ ------ ------ ------
Increase in contract owners' equity 5,968 30,378 11,962 43,763 22,134
Contract Owners' equity at
beginning of period -- -- -- -- --
----- ------ ------ ------ ------
Contract Owner's equity at end
of period 5,968 30,378 11,962 43,763 22,134
===== ====== ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
First Variable Life Insurance Company --
Separate Account VL
Financial Statements
Year ended December 31, 1998
Contents
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors....................................... 1
Financial Statements
Statement of Assets, Liabilities, and Contract Owners' Equity........ 2
Statement of Operations.............................................. 3
Statements of Changes in Contract Owners' Equity..................... 4
Notes to Financial Statements........................................ 6
</TABLE>
<PAGE>
Report of Independent Auditors
To the Board of Directors of First Variable Life Insurance Company
and Contract Owners of Separate Account VL
We have audited the accompanying statement of assets, liabilities and contract
owners' equity of First Variable Life Insurance Company -- Separate Account VL
as of December 31, 1998, and the related statement of operations for the year
then ended and the statements of changes in contract owners' equity for the year
then ended and for the period from March 31, 1997 (commencement of operations)
through December 31, 1997. These financial statements are the responsibility of
First Variable Life Insurance Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
Our procedures included confirmation of the securities owned as of December 31,
1998, by correspondence with Variable Investors Series Trust and Federated
Insurance Series Trust. 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 financial position of First Variable Life Insurance
Company -- Separate Account VL at December 31, 1998, and the results of its
operations for the year then ended, and the changes in its contract owners'
equity for the year then ended and for the period from March 31, 1997 through
December 31, 1997, in conformity with generally accepted accounting principles.
March 18, 1999
/s/ Ernst & Young, LLP
----------------------
ERNST & YOUNG LLP
Chicago, Illinois
<PAGE>
First Variable Life Insurance Company--
Separate Account VL
Statement of Assets, Liabilities, and Contract Owners' Equity
December 31, 1998
<TABLE>
<CAPTION>
Federated High
Prime Income Multiple
Money Growth Bond Strategies
Total Fund II Division Division Division
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Investments in Variable Investors Series Trust at net asset value
(cost $9,947,602) $10,446,726 $ - $2,514,903 $753,150 $1,211,656
Investments in Federated Prime Money Fund II at net asset value
(cost $419,963) 419,963 419,963 - - -
Receivable from First Variable Life Insurance Company 181,983 - - - 100,628
----------------------------------------------------------------
Total assets $11,048,672 $419,963 $2,514,903 $753,150 $1,312,284
================================================================
Liabilities
Payable to First Variable Life Insurance Company $ 70,479 $ 12,892 $ 16,492 $ 15,306 $ -
Contract owners' equity
Variable annuity contract owners' equity 10,978,193 407,071 2,498,411 737,844 1,312,284
----------------------------------------------------------------
Total liabilities and contract owners' equity $11,048,672 $419,963 $2,514,903 $753,150 $1,312,284
================================================================
</TABLE>
<TABLE>
<CAPTION>
U.S. Small
Matrix Government World Growth & Cap
Equity Bond Equity Income Growth
Division Division Division Division Division
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Investments in Variable Investors Series Trust at net asset value
(cost $9,947,602) $1,205,416 $470,574 $789,583 $1,997,491 $1,503,953
Investments in Federated Prime Money Fund II at net asset value
(cost $419,963) - - - - -
Receivable from First Variable Life Insurance Company 937 - 33,094 - 47,324
----------------------------------------------------------------
Total assets $1,206,353 $470,574 $822,677 $1,997,491 $1,551,277
================================================================
Liabilities
Payable to First Variable Life Insurance Company $ - $ 7,621 $ - $ 18,168 $ -
Contract owners' equity
Variable annuity contract owners' equity 1,206,353 462,953 822,677 1,979,323 1,551,277
----------------------------------------------------------------
Total liabilities and contract owners' equity $1,206,353 $470,574 $822,677 $1,997,491 $1,551,277
================================================================
</TABLE>
See accompanying notes.
<PAGE>
First Variable Life Insurance Company--
Separate Account VL
Statement of Operations
Year ended December 31, 1998
<TABLE>
<CAPTION>
Federated High
Prime Income Multiple
Money Growth Bond Strategies
Total Fund II Division Division Division
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 623,593 $7,278 $279,822 $ 65,715 $ 74,553
Expenses:
Fees paid to First Variable Life Insurance Company - Risk and
administrative charges 92,618 1,678 20,578 10,849 10,684
-------------------------------------------------------------
Net investment income (loss) 530,975 5,600 259,244 54,866 63,869
Realized and unrealized gain (loss) on investments:
Realized gain (loss) on Variable Investors Series Trust shares
redeemed (150,817) - (6,830) (26,762) 24,546
Net unrealized appreciation (depreciation) on investments during the
year 812,459 - 299,094 4,432 186,414
-------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 661,642 - 292,264 (22,330) 210,960
-------------------------------------------------------------
Net increase in contract owners' equity resulting from operations $1,192,617 $5,600 $551,508 $ 32,536 $274,829
=============================================================
</TABLE>
<TABLE>
<CAPTION>
U.S. Small
Matrix Government World Growth & Cap
Equity Bond Equity Income Growth
Division Division Division Division Division
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 51,886 $ 26,915 $ 62,622 $ 54,802 $ -
Expenses:
Fees paid to First Variable Life Insurance Company - Risk and
administrative charges 8,453 2,724 7,724 18,507 11,421
-------------------------------------------------------------
Net investment income (loss) 43,433 24,191 54,898 36,295 (11,421)
Realized and unrealized gain (loss) on investments:
Realized gain (loss) on Variable Investors Series Trust shares
redeemed (33,571) 124 (31,647) 3,233 (79,910)
Net unrealized appreciation (depreciation) on investments during the
year 116,810 (8,920) (11,058) 108,532 117,155
-------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 83,239 (8,796) (42,705) 111,765 37,245
-------------------------------------------------------------
Net increase in contract owners' equity resulting from operations $126,672 $15,395 $ 12,193 $148,060 $ 25,824
=============================================================
</TABLE>
See accompanying notes.
<PAGE>
First Variable Life Insurance Company
Separate Account VL
Statements of Changes in Contract Owners' Equity
Periods ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Federated Prime Money
Total Fund II
1998 1997/(1)/ 1998 1997/(1)/
----------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 530,975 $ 293,541 $ 5,600 $ 660
Realized gain (loss) on Variable Investors Series Trust
shares redeemed (150,817) 30,991 -- --
Net unrealized appreciation (depreciation) on investments
during the period 812,459 (313,337) -- --
---------------------------------------------------------
Net increase (decrease) in contract owners' equity resulting
from operations 1,192,617 11,195 5,600 660
From contract owner transactions
Net proceeds from sale of accumulation units 6,635,155 4,204,473 358,835 225,761
Cost of accumulation units terminated and exchanged (999,210) 4,442 (2,727) (168,166)
----------- ---------- -------- ---------
Increase (decrease) in contract owners' equity from contract
owner transactions 5,635,945 4,208,915 356,108 57,595
----------- ---------- -------- ---------
Increase (decrease) in contract owners' equity 6,828,562 4,220,110 361,708 58,255
Contract owners' equity at beginning of period 4,220,110 -- 58,255 --
----------- ---------- -------- ---------
Contract owners' equity at end of period $11,048,672 $4,220,110 $419,963 $ 58,255
=========== ========== ======== =========
</TABLE>
<TABLE>
<CAPTION>
High Income
Growth Division Bond Division
1998 1997/(1)/ 1998 1997/(1)/
---------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 259,244 $ 50,022 $ 54,866 $ 43,302
Realized gain (loss) on Variable Investors Series Trust
shares redeemed (6,830) 6,149 (26,762) 4,237
Net unrealized appreciation (depreciation) on investments
during the period 299,094 (59,827) 4,432 (38,178)
----------- -------- --------- ---------
Net increase (decrease) in contract owners' equity resulting
from operations 551,508 (3,656) 32,536 9,361
From contract owner transactions
Net proceeds from sale of accumulation units 1,225,672 725,575 466,386 786,740
Cost of accumulation units terminated and exchanged (91,912) 107,716 (521,331) (20,542)
----------- -------- --------- ---------
Increase (decrease) in contract owners' equity from contract
owner transactions 1,133,760 833,291 (54,945) 766,198
----------- -------- --------- ---------
Increase (decrease) in contract owners' equity 1,685,268 829,635 (22,409) 775,559
Contract owners' equity at beginning of period 829,635 -- 775,559 --
----------- -------- --------- ---------
Contract owners' equity at end of period $ 2,514,903 $829,635 $753,150 $ 775,559
=========== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Multiple Strategies
Division
1998 1997/(1)/
------------------------
<S> <C> <C>
Operations
Net investment income $ 63,869 $ 27,256
Realized gain (loss) on Variable Investors Series Trust
shares redeemed 24,546 4,035
Net unrealized appreciation (depreciation) on investments
during the period 186,414 (27,549)
----------- --------
Net increase (decrease) in contract owners' equity resulting
from operations 274,829 3,742
From contract owner transactions
Net proceeds from sale of accumulation units 750,223 431,203
Cost of accumulation units terminated and exchanged (114,836) (32,877)
-------------------------
Increase (decrease) in contract owners' equity from contract
owner transactions 635,387 398,326
-------------------------
Increase (decrease) in contract owners' equity 910,216 402,068
Contract owners' equity at beginning of period 402,068 --
-------------------------
Contract owners' equity at end of period $1,312,284 $402,068
=========================
</TABLE>
(1) From commencement of operations, March 31, 1997.
<PAGE>
First Variable Life Insurance Company --
Separate Account VL
Statements of Changes in Contract Owners' Equity (continued)
Periods ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Matrix Equity U.S. Government Bond World Equity
Division Division Division
1998 1997(1) 1998 1997(1) 1998 1997(1)
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income (loss) $ 43,433 $ 50,132 $ 24,191 $ 5,471 $ 54,898 $ 45,728
Realized gain (loss) on Variable Investors Series Trust
shares redeemed (33,571) 1,214 124 115 (31,647) 1,148
Net unrealized appreciation (depreciation) on investments
during the period 116,810 (46,673) (8,920) (4,328) (11,058) (56,711)
------------------------------------------------------------------
Net increase (decrease) in contract owners' equity resulting
from operations 126,672 4,673 15,395 1,258 12,193 (9,835)
From contract owner transactions
Net proceeds from sale of accumulation units 853,105 237,690 352,694 86,790 480,470 414,940
Cost of accumulation units terminated and exchanged (21,299) 5,512 (3,780) 18,217 (49,317) (25,774)
------------------------------------------------------------------
Increase in contract owners' equity from contract owner
transactions 831,806 243,202 348,914 105,007 431,153 389,166
------------------------------------------------------------------
Increase in contract owners' equity 958,478 247,875 364,309 106,265 443,346 379,331
Contract owners' equity at beginning of period 247,875 -- 106,265 -- 379,331 --
------------------------------------------------------------------
Contract owners' equity at end of period $1,206,353 $247,875 $470,574 $106,265 $822,677 $379,331
====================================================================
Growth & Income Small Cap
Division Growth Division
1998 1997(1) 1998 1997(1)
---------------------------------------------
Operations
Net investment income (loss) $ 36,295 $ 56,731 $ (11,421) $ 14,239
Realized gain (loss) on Variable Investors Series Trust
shares redeemed 3,233 9,851 (79,910) 4,242
Net unrealized appreciation (depreciation) on investments
during the period 108,532 (38,508) 117,155 (41,563)
Net increase (decrease) in contract owners' equity resulting
from operations 148,060 28,074 25,824 (23,082)
From contract owner transactions
Net proceeds from sale of accumulation units 1,107,293 808,742 1,040,477 487,032
Cost of accumulation units terminated and exchanged (84,267) (10,411) (109,741) 130,767
---------------------------------------------
Increase in contract owners' equity from contract owner
transactions 1,023,026 798,331 930,736 617,799
---------------------------------------------
Increase in contract owners' equity 1,171,086 826,405 956,560 594,717
Contract owners' equity at beginning of period 826,405 -- 594,717 --
---------------------------------------------
Contract owners' equity at end of period $1,997,491 $826,405 $1,551,277 $594,717
=============================================
</TABLE>
(1) From commencement of operations, March 31, 1997.
See accompanying notes.
<PAGE>
First Variable Life Insurance Company
Separate Account VL
Notes to Financial Statements
Year ended December 31, 1998
1. Organization
Separate Account VL (the Fund), which began operations on March 31, 1997, is a
segregated account of First Variable Life Insurance Company (First Variable
Life) and is registered as a unit investment trust under the Investment Company
Act of 1940, as amended (the 1940 Act). Eight of the nine investment divisions
of the Fund are invested solely in the shares of the eight corresponding
portfolios of the Variable Investors Series Trust (the Trust), a no-load,
diversified, open-end, series management investment company registered under the
1940 Act. The remaining investment division is invested in the Federated Prime
Money Fund II (Federated), a portfolio of Federated Insurance Series Trust, an
open-end management investment company. Under applicable insurance law, the
assets and liabilities of the Fund are clearly identified and distinguished from
the other assets and liabilities of First Variable Life. The Fund cannot be
charged with liabilities arising out of any other business of First Variable
Life.
First Variable Life is a wholly owned subsidiary of Irish Life of North America,
Inc. (ILoNA), which is a wholly owned subsidiary of Irish Life, plc. (Irish
Life) of Dublin, Ireland. First Variable Life is domiciled in the State of
Arkansas.
The assets of the Fund are not available to meet the general obligations of
First Variable Life or ILoNA and are held for the exclusive benefit of the
contract owners participating in the Fund.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
Investments
The investments in shares of the Trust and Federated are stated at the net asset
value, which approximates fair value, per share of the respective portfolios of
the Trust and Federated. Investment transactions are accounted for on the date
the shares are purchased or sold. The cost of shares sold and redeemed is
determined on the first in, first out method. Dividends and capital gain
distributions received from the Trust and Federated are reinvested in additional
shares of the Trust and Federated and are recorded as income by the Fund on the
ex-dividend date.
<PAGE>
First Variable Life Insurance Company
Separate Account VL
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Federal Income Taxes
For federal income tax purposes, operations of the Fund are combined with those
of First Variable Life, which is taxed as a life insurance company. First
Variable Life anticipates no tax liability resulting from the operations of the
Fund. Therefore, no provision for income taxes has been charged against the
Fund.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
3. Investments
The following table presents selected data for investments in each of the
Portfolios of the Trust at December 31, 1998:
<TABLE>
<CAPTION>
Number of Net Asset
Shares Cost Value
----------------------------------------------
<S> <C> <C> <C>
Federated Prime Money Fund II 419,963 $ 419,963 $ 419,963
Growth Portfolio 61,333 2,275,635 2,514,903
High Income Bond Portfolio 82,173 786,896 753,150
Multiple Strategies Portfolio 70,678 1,052,791 1,211,656
Matrix Equity Portfolio 73,712 1,135,279 1,205,416
U.S. Government Bond 45,589 483,821 470,574
Portfolio
World Equity Portfolio 57,979 857,352 789,583
Growth & Income Portfolio 125,617 1,927,467 1,997,491
Small Cap Growth Portfolio 99,656 1,428,361 1,503,953
------------------------------
$10,367,565 $10,866,689
==============================
</TABLE>
<PAGE>
First Variable Life Insurance Company --
Separate Account VL
Notes to Financial Statements (continued)
4. Contract Owners' Equity
Variable life contract owners' equity at December 31, 1998, consists of the
following:
<TABLE>
<CAPTION>
Accumulation Accumulation
Units Unit Value Equity
-----------------------------------------
<S> <C> <C> <C>
Cap One Pay policies
Federated Prime Money Fund II 25,446 10.723661 $ 272,881
Growth Division 138,529 16.443178 2,277,856
High Income Bond Division 59,075 11.318272 668,623
Multiple Strategies Division 77,855 15.672874 1,220,214
Matrix Equity Division 74,736 14.743613 1,101,885
U.S. Government Bond Division 38,486 11.678249 449,454
World Equity Division 64,678 11.570225 748,336
Growth & Income Division 127,936 13.787358 1,763,899
Small Cap Growth Division 105,819 11.573322 1,224,672
-----------
9,727,820
Cap Solutions policies
Federated Prime Money Fund II 13,028 10.299996 134,190
Growth Division 15,930 13.845152 220,556
High Income Bond Division 6,870 10.076598 69,221
Multiple Strategies Division 6,925 13.295360 92,069
Matrix Equity Division 8,660 12.063998 104,469
U.S. Government Bond Division 1,266 10.661862 13,498
World Equity Division 7,119 10.443054 74,341
Growth & Income Division 19,280 11.173216 215,424
Small Cap Growth Division 33,107 9.865085 326,605
-----------
1,250,373
-----------
Totals $10,978,193
===========
</TABLE>
<PAGE>
First Variable Life Insurance Company--
Separate Account VL
Notes to Financial Statements (continued)
5. Purchases and Sales of Securities
Cost of purchases and proceeds from sales of Trust and Federated shares by the
Fund during the year ended December 31, 1998, are shown below:
<TABLE>
<CAPTION>
Purchases Sales
----------------------------
<S> <C> <C>
Federated Prime Money Fund II $ 592,794 $ 231,262
Growth Portfolio 1,823,208 413,375
High Income Bond Portfolio 1,263,919 1,264,017
Multiple Strategies Portfolio 910,661 314,595
Matrix Equity Portfolio 1,114,235 239,786
U.S. Government Bond Portfolio 381,483 8,401
World Equity Portfolio 618,419 170,082
Growth & Income Portfolio 1,499,904 405,629
Small Cap Growth Portfolio 1,324,493 442,119
----------------------------
Totals $9,529,116 $3,489,266
============================
</TABLE>
6. Expenses
As more fully disclosed in the prospectus, First Variable Life charges the Fund,
based on the value of the Fund, various charges. For Cap One Pay policies, First
Variable Life charges the Fund at an annual rate of .90% for mortality and
expense risks. For Cap Solutions policies, First Variable Life charges the Fund
at an annual rate of .50% for mortality and expense risks. Total charges to the
Fund for all the policy forms for the year ended December 31, 1998, were
$92,618.
7. Diversification Requirements
Under the provisions of section 817(h) of the Internal Revenue Code (the Code),
a variable life contract, other than a contract issued in connection with
certain types of employee benefits plans, will not be treated as a life contract
for federal tax purposes for any period for which the investments of the
segregated asset account on which the contract is based are not adequately
diversified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor test
or diversification requirements set forth in regulations issued by the Secretary
of Treasury.
The Internal Revenue Service has issued regulations under section 817(h) of the
Code. First Variable Life believes that the Fund satisfies the current
requirements of the regulations, and it intends that the Fund will continue to
meet such requirements.
<PAGE>
First Variable Life Insurance Company
Separate Account VL
Notes to Financial Statements (continued)
8. Principal Underwriter and General Distributor
First Variable Capital Services, Inc., a wholly owned subsidiary of First
Variable Life, is principal underwriter and general distributor of the contracts
issued through the Fund.
9. Year 2000 Issues (Unaudited)
Like other financial and business organizations around the world, First Variable
Life could be adversely affected if its computer systems and those of its
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. First Variable Life has completed an
assessment of the Year 2000 impact on its systems, procedures, customers, and
business processes and has begun converting critical data processing systems.
In addition, First Variable Life is gathering information about the Year 2000
compliance status of its significant service providers and will continue to
monitor their compliance. First Variable Life believes it has taken the
necessary steps to address the Year 2000 issue; however, there can be no
assurances that these steps will be sufficient to avoid any adverse impact on
the Fund.
<PAGE>
Consolidated Financial Statements
First Variable Life Insurance Company
5 month Period ended May 31, 1999 (unaudited)
Years ended December 31, 1998, 1997, and 1996
with Report of Independent Auditors
<PAGE>
Unaudited
First Variable Life Insurance Company
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
May 31, 1999 December 31, 1998
------------------------------------------
<S> <C> <C>
Assets
Investments (Note 3):
Fixed maturities--Available-for-sale, at fair value (amortized
cost: 1999-$175,694; 1998-$245,795) $180,883 $264,741
Option Contracts 2,451 2,279
Equity Securities -- Available-for-sale, at fair value (cost:
$684 at 1999; and $684 in 1998) 134 173
Policy Loans 741 606
------------------------------------------
Total Investments 184,209 267,799
Cash and Cash Equivalents 3,625 3,353
Accrued Investment Income 3,435 4,878
Deferred Policy Acquisition costs 12,708 10,481
Value of insurance in force acquired 13,902 15,089
Property and equipment, less allowances for depreciation of
$918 at 1999 and $836 in 1998 755 574
Goodwill, less accumulated amortization of $682 in 1999 and
$621 in 1998 2,241 2,302
Other Assets 361 659
Assets Held in Separate Accounts 237,792 266,257
------------------------------------------
Total Assets $459,028 $571,392
==========================================
Liabilities and Stockholder's Equity
Liabilities:
Future policy benefits for annuity and life products $127,613 $206,069
Unearned revenue reserve 252 278
Supplementary Contracts without life contingencies 22,603 22,955
Deferred income tax liability 3,882 5,850
Due to affiliates 139 139
Other liabilities 3,341 2,149
Liabilities related to Separate Accounts 237,792 266,257
------------------------------------------
Total Liabilities 395,622 503,697
Commitments and contingencies
Stockholder's equity:
Capital stock, par value $1.00 per share--Authorized
3,500,000 shares, issued and outstanding 2,500,000 shares 2,500 2,500
Additional paid-in capital 53,104 53,104
Accumulated other comprehensive income 1,945 8,195
Retained earnings 5,857 3,896
------------------------------------------
Total Stockholder's equity 63,406 67,695
------------------------------------------
Total liabilities and stockholder's equity $459,028 $571,392
==========================================
</TABLE>
See accompanying notes to financial statements
<PAGE>
Unaudited
First Variable Life Insurance Company
Consolidated Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
5 month
Period Ended
May 31, 1999 May 31, 1998
---------------------------------------
<S> <C> <C>
Operating Activities
Net Income $ 1,961 $ 744
Adjustments to reconcile net income to net cash provided by
operating activities:
Adjustments related to interest-sensitive products:
Annuity Benefits 4,855 6,455
Annuity Product Charges (1,761) (1,675)
Realized Gains on Investments (6,293) (1,518)
Policy Acquisition costs deferred (1,764) (1,378)
Amortization of deferral policy acquisition costs 678 345
Provision for depreciation and other amortization 4,512 350
Provision for income taxes 1,343 377
Other 2,505 (1,946)
---------------------------------------
Net Cash provided by operating activities 6,036 1,754
Investing Activities
Sales, maturity, or repayment of fixed maturity investments 89,615 32,676
Acquisition of fixed maturities (13,172) (22,651)
Acquisition of option contracts (171) (515)
Policy loans and other (135) (218)
---------------------------------------
Net cash provided by investing activities 76,137 9,292
Financing Activities
Receipts from interest-sensitive products credited to
policyholder account balances 23,556 25,378
Return of policyholder account balances on interest-sensitive
products (105,457) (39,235)
---------------------------------------
Net cash used in financing activities (81,901) (13,857)
---------------------------------------
Net increase (decrease) in cash and cash equivalents 272 (2,811)
Cash and cash equivalents at beginning of year 3,353 3,029
---------------------------------------
Cash and cash equivalents at end of period $ 3,625 $ 218
=======================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Unaudited
First Variable Life Insurance Company
Consolidated Statements of Changes in Stockholder's Equity
(In Thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Paid-In Comprehensive Retained Stockholder's
Capital Stock Capital Income Earnings Equity
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $2,500 $53,104 $ 8,195 $3,896 $67,695
Net Income 1,961 1,961
Net unrealized investment loss, net of
reclassification adjustment (6,250) (6,250)
-------------
Comprehensive Loss (4,289)
-----------------------------------------------------------------------------------
Balance at May 31, 1999 $2,500 $53,104 $ 1,945 $5,857 $63,406
===================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Unaudited
First Variable Life Insurance Company
Consolidated Statements of Income
(In Thousands)
<TABLE>
<CAPTION>
5 month period
--------------
31-May-99 31-May-98
---------------------------------
<S> <C> <C>
Revenues:
Annuity and life product charges $ 1,787 $ 1,701
Net Investment Income 7,217 9,479
Realized gains on investments 3,691 1,518
Other Income 5,567 647
---------------------------------
Total Revenues 18,262 13,345
Benefits and expenses:
Annuity and life benefits 4,855 6,455
Underwriting, acquisition, and insurance
expenses 4,243 4,052
Amortization of value of insurance in force
acquired and deferred policy acquisition costs 5,096 809
Management fee paid to parent 200 200
Other expenses 552 708
---------------------------------
Total benefits and expenses 14,946 12,224
Income (loss) before income tax 3,316 1,121
Income Tax 1,355 377
---------------------------------
Net Income $ 1,961 $ 744
=================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (Unaudited)
(In Thousands)
Investment Operations
- ---------------------
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in annual financial statements have been omitted pursuant to such rules
and regulations. The Company believes the disclosures are adequate to make the
information presented not misleading. The unaudited consolidated financial
statements included herein are, in the opinion of management, prepared on a
basis consistent with the audited consolidated financial statements for the year
ended December 31, 1998 and include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the information set
forth. The results of operations are not necessarily indicative of results of
operations for subsequent periods or the full year. These unaudited consolidated
financial statements should read in conjunction with the audited consolidated
financial statements and the notes thereto included herein.
2. Fixed Maturities and Equity Securities
The following tables contain amortized cost and fair value information on fixed
maturities (bonds) and equity securities (common stocks) at May 31, 1999.
<TABLE>
<CAPTION>
Gross Gross
Cost or Unrealized Unrealized
Amortized Cost Gains Losses Fair Value
---------------------------------------------------------
<S> <C> <C> <C> <C>
May 31, 1999
Fixed maturities - available for sale:
United States Government and Agencies:
Mortgage and asset backed securities $ 16,729 $1,081 $ (12) $ 17,798
Other 4,949 135 5,084
State, municipal, and other governments
Public Utilities 26,935 1,598 (120) 28,413
Industrial and miscellaneous 127,081 3,968 (1,461) 129,588
---------------------------------------------------------
Total fixed Maturities available for sale 175,694 $6,782 (1,593) 180,883
=========================================================
Equity Securities $ 684 --- $ 550 $ 134
=========================================================
</TABLE>
The amortized cost and fair value of the Company's portfolio of fixed-maturity
securities at May 31, 1999, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepare obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Market Value
-------------------------
<S> <C> <C>
Due in one year or less $ 12,659 $ 12,781
Due after one year through five years 53,254 54,797
Due after five years through ten years 44,565 43,542
Due after ten years 46,480 49,915
Mortgage and asset-back securities 18,736 19,848
-------------------------
$175,694 $180,883
=========================
</TABLE>
3. Subsequent Events
-----------------
On March 31, 1999, the Company sold its block of Arkansas Diversified Deferred
Compensation qualified business to Diversified Investment Advisors, Inc. The
Transaction resulted in the transfer of approximately $111.8 million in general
and separate account assets and reserves to Diversified and produced a net
after-tax gain to the company or approximately $2.0 million.
<PAGE>
First Variable Life Insurance Company
Consolidated Financial Statements
Years ended December 31, 1998, 1997, and 1996
Contents
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors.............................. 1
Consolidated Financial Statements
Consolidated Balance Sheets................................. 2
Consolidated Statements of Income........................... 3
Consolidated Statements of Changes in Stockholder's Equity.. 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated Financial Statements.................. 6
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholder
First Variable Life Insurance Company
We have audited the accompanying consolidated balance sheets of First Variable
Life Insurance Company (the Company) as of December 31, 1998 and 1997, and the
related consolidated statements of income, changes in stockholder's equity, and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of First
Variable Life Insurance Company at December 31, 1998 and 1997, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
Ernst & Young LLP
February 2, 1999
Chicago, Illinois
<PAGE>
First Variable Life Insurance Company
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1998 1997
----------------------------------------
<S> <C> <C>
Assets
Investments (Note 3):
Fixed maturities Available-for-sale, at fair value
(amortized cost: 1998 $245,795,000; 1997 $274,439,000) $264,741,000 $294,961,000
Option contracts 2,279,000 1,057,000
Equity securities Available-for-sale, at fair value
(cost: $684,000 in 1998 and 1997) 173,000 825,000
Policy loans 606,000 267,000
----------------------------------------
Total investments 267,799,000 297,110,000
Cash and cash equivalents 3,353,000 3,029,000
Accrued investment income 4,878,000 5,744,000
Deferred policy acquisition costs 10,481,000 7,520,000
Value of insurance in force acquired (Note 4) 15,089,000 16,939,000
Property and equipment, less allowances for depreciation of
$836,000 in 1998 and $773,000 in 1997 574,000 445,000
Goodwill, less accumulated amortization of $621,000
in 1998 and $475,000 in 1997 2,302,000 2,448,000
Other assets 659,000 732,000
Assets held in separate accounts 266,257,000 219,807,000
----------------------------------------
Total assets $571,392,000 $553,774,000
========================================
Liabilities and stockholder's equity
Liabilities:
Future policy benefits for annuity and life products $206,069,000 $233,988,000
Unearned revenue reserve 278,000 282,000
Supplementary contracts without life contingencies 22,955,000 21,711,000
Deferred income tax liability (Note 5) 5,850,000 6,692,000
Due to affiliates 139,000
Other liabilities 2,149,000 2,837,000
Liabilities related to separate accounts 266,257,000 219,807,000
----------------------------------------
Total liabilities 503,697,000 485,317,000
Commitments and contingencies (Note 8)
Stockholder's equity:
Capital stock, par value $1.00 per share Authorized
3,500,000 shares, issued and outstanding 2,500,000 shares 2,500,000 2,500,000
Additional paid-in capital 53,104,000 53,104,000
Accumulated other comprehensive income 8,195,000 9,066,000
Retained earnings 3,896,000 3,787,000
----------------------------------------
Total stockholder's equity 67,695,000 68,457,000
----------------------------------------
Total liabilities and stockholder's equity $571,392,000 $553,774,000
========================================
</TABLE>
See accompanying notes.
<PAGE>
First Variable Life Insurance Company
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Revenues:
Annuity and life product charges $ 4,026,000 $ 3,141,000 $ 2,408,000
Net investment income 22,295,000 22,597,000 23,458,000
Realized gains on investments 2,723,000 1,227,000 972,000
Other income 1,576,000 1,368,000 1,114,000
-----------------------------------------------
Total revenues 30,620,000 28,333,000 27,952,000
Benefits and expenses:
Annuity and life benefits 15,643,000 14,856,000 16,336,000
Underwriting, acquisition, and
insurance expenses 9,828,000 8,313,000 6,176,000
Amortization of value of insurance
in force acquired and deferred
policy acquisition costs 3,473,000 1,602,000 1,099,000
Management fee paid to parent 480,000 480,000 480,000
Other expenses 1,469,000 2,610,000 1,421,000
-----------------------------------------------
Total benefits and expenses 30,893,000 27,861,000 25,512,000
-----------------------------------------------
Income (loss) before income tax (273,000) 472,000 2,440,000
(benefit)
Income tax (benefit) (382,000) 153,000 836,000
-----------------------------------------------
Net income $ 109,000 $ 319,000 $ 1,604,000
===============================================
</TABLE>
See accompanying notes.
<PAGE>
First Variable Life Insurance Company
Consolidated Statements of Changes in Stockholder's Equity
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Capital Paid-in Comprehensive Retained Stockholder's
Stock Capital Income Earnings Equity
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $2,500,000 $53,104,000 $13,189,000 $1,864,000 $70,657,000
Net income -- -- -- 1,604,000 1,604,000
Net unrealized investment loss,
net of reclassification
adjustment -- -- (5,865,000) -- (5,865,000)
------------------
Comprehensive loss (4,261,000)
---------------------------------------------------------------------------------------
Balance at December 31, 1996 2,500,000 53,104,000 7,324,000 3,468,000 66,396,000
Net income -- -- -- 319,000 319,000
Net unrealized investment gain,
net of reclassification
adjustment -- -- 1,742,000 -- 1,742,000
------------------
Comprehensive income 2,061,000
---------------------------------------------------------------------------------------
Balance at December 31, 1997 2,500,000 53,104,000 9,066,000 3,787,000 68,457,000
Net income -- -- -- 109,000 109,000
Net unrealized investment loss,
net of reclassification
adjustment -- -- (871,000) -- (871,000)
------------------
Comprehensive loss (762,000)
---------------------------------------------------------------------------------------
Balance at December 31, 1998 $2,500,000 $53,104,000 $ 8,195,000 $3,896,000 $67,695,000
=======================================================================================
</TABLE>
See accompanying notes.
<PAGE>
First Variable Life Insurance Company
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
5 months period Year ended December 31
1998 1997 1996
-------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 109,000 $ 319,000 $ 1,604,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Adjustments related to
interest-sensitive products:
Annuity benefits 15,643,000 14,856,000 16,336,000
Annuity product charges (4,022,000) (3,141,000) (2,408,000)
Realized gains on investments (2,723,000) (1,227,000) (972,000)
Policy acquisition costs deferred (3,665,000) (3,208,000) (2,800,000)
Amortization of deferred policy
acquisition costs 912,000 594,000 360,000
Provision for depreciation and
other amortization 2,154,000 937,000 524,000
Provision for income taxes (382,000) 153,000 836,000
Other 478,000 3,560,000 (1,949,000)
-------------------------------------------------
Net cash provided by operating
activities 8,504,000 12,843,000 11,531,000
Investing activities
Sale, maturity, or repayment of
fixed maturity investments 61,253,000 24,657,000 21,770,000
Acquisition of fixed maturities (29,074,000) (19,142,000) (7,517,000)
Acquisition of option contracts (1,223,000) (963,000) (94,000)
Policy loans and other (840,000) (267,000) (193,000)
-------------------------------------------------
Net cash provided by investing 30,116,000 4,285,000 13,966,000
activities
Financing activities
Receipts from interest-sensitive
products credited to policyholder
account balances 58,317,000 64,181,000 58,175,000
Return of policyholder account
balances on interest-sensitive
products (96,613,000) (80,713,000) (86,824,000)
-------------------------------------------------
Net cash used in financing
activities (38,296,000) (16,532,000) (28,649,000)
-------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 324,000 596,000 (3,152,000)
Cash and cash equivalents at
beginning of year 3,029,000 2,433,000 5,585,000
-------------------------------------------------
Cash and cash equivalents at end of
year $ 3,353,000 $ 3,029,000 $ 2,433,000
=================================================
</TABLE>
See accompanying notes.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 1998
1. Significant Accounting Policies
Organization and Nature of Business
First Variable Life Insurance Company (the Company), a life insurance company
domiciled in the State of Arkansas, is a wholly-owned subsidiary of Irish Life
of North America, Inc. (ILoNA), which is owned by Irish Life, plc (Irish Life)
of Dublin, Ireland. The Company is licensed in 49 states and sells variable and
fixed annuity products and variable universal life products through regional
wholesalers and insurance brokers.
Consolidation
The consolidated financial statements include the Company and its wholly-owned
subsidiaries, First Variable Advisory Services Corp. and First Variable Capital
Services, Inc. All significant intercompany transactions have been eliminated.
Investments
Fixed Maturities and Equity Securities
Fixed-maturity securities (bonds) are categorized as "available-for-sale," and
as a result, are reported at fair value, with unrealized gains and losses on
these securities included directly in accumulated other comprehensive income in
stockholder's equity, net of certain adjustments (see Note 3).
Option contracts are carried at unamortized premium paid for the contract
adjusted for increases in their intrinsic value from increases in the S&P 500
index.
Policy loans are carried at unpaid principal balances.
Premiums and discounts on investments are amortized or accreted using methods
which result in a constant yield over the securities' expected lives.
Amortization or accretion of premiums and discounts on mortgage and asset-backed
securities incorporates a prepayment assumption to estimate the securities'
expected lives.
Equity securities (common stocks) are designated as available for sale and are
reported at fair value. The change in unrealized gain and loss of equity
securities (net of related deferred income taxes, if any) is included directly
in accumulated other comprehensive income in stockholder's equity.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Realized Gains and Losses on Investments
The carrying values of all the Company's investments are reviewed on an ongoing
basis for credit deterioration, and if this review indicates a decline in market
value that is other than temporary, the Company's carrying value in the
investment is reduced to its estimated realizable value (the sum of the
estimated nondiscounted cash flows) and a specific write-down is taken. Such
reductions in carrying value are recognized as realized losses and charged to
income. Realized gains and losses on sales are determined on the basis of
specific identification of investments.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Deferred Policy Acquisition Costs and Value of Insurance in Force Acquired
To the extent recoverable from future policy revenues and gross profits, certain
costs of acquiring new insurance business, principally commissions and other
expenses related to the production of new business, have been deferred. The
value of insurance in force acquired is an asset that arose at the date the
Company was acquired by ILoNA. The initial value was determined by an actuarial
study using expected future gross profits as a measurement of the net present
value of the insurance acquired. Interest accrues on the current unamortized
balance at 7%.
For variable universal life insurance and investment products, these costs are
being amortized generally in proportion to expected gross profits from surrender
charges and investment, mortality, and expense margins. That amortization is
adjusted retrospectively when estimates of current or future gross profits
(including the impact of investment gains and losses) to be realized from a
group of products are revised.
Property and Equipment
Property and equipment are reported at cost, less allowances for depreciation.
Depreciation expense is computed primarily using the straight-line method over
the estimated useful lives of the assets.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Goodwill
Goodwill represents the excess of the fair value of assets exchanged over the
net assets acquired. Goodwill is being amortized on a straight-line basis over
a period of twenty years.
The carrying value of goodwill is regularly reviewed for indications of
impairment in value which, in the view of management, are other than temporary.
If facts and circumstances suggest that goodwill is impaired, the Company will
assess the fair value of the underlying business and reduce goodwill to an
amount that results in the book value of the underlying business approximating
fair value. The Company has not recorded any such write-downs of goodwill.
Future Policy Benefits
Future policy benefit reserves for annuity and variable universal life products
are computed under a retrospective deposit method and represent policy account
balances before applicable surrender charges. Policy benefits and claims that
are charged to expense include benefit claims incurred in the period in excess
of related policy account balances. Interest crediting rates for annuity
products ranged from 3.0% to 7.0% in 1998, and 4.5% to 6.5% in 1997.
Deferred Income Taxes
Deferred income tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and liabilities
using the enacted marginal tax rate. Deferred income tax expenses or credits
are based on the changes in the related asset or liability from period to
period.
Separate Accounts
The separate account assets and liabilities reported in the accompanying
consolidated balance sheets represent funds that are separately administered,
principally for the benefit of certain policyholders who bear the investment
risk. The separate account assets and liabilities are carried at fair value.
Revenues and expenses related to the separate account assets and liabilities, to
the extent of benefits paid or provided to the separate account policyholders,
are excluded from the amounts reported in the accompanying consolidated
statements of income.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Recognition of Premium Revenues and Costs
Revenues for annuity and variable universal life products consist of policy
charges for the cost of insurance, administration charges, and surrender charges
assessed against policyholder account balances during the period. Expenses
related to these products include interest credited to policyholder account
balances and benefit claims incurred in excess of policyholder account balances.
Approximately 35%, 42%, and 68% of the direct business written (as measured by
premiums received) during the periods ended December 31, 1998, 1997, and 1996,
respectively, were written through three wholesalers. Direct premiums are not
concentrated in any geographical area.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities, at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Significant estimates and assumptions are utilized in the calculation of
deferred policy acquisition costs, policyholder liabilities and accruals,
postretirement benefits, guaranty fund assessment accruals, and valuation
allowances on investments. It is reasonably possible that actual experience
could differ from the estimates and assumptions utilized which could have a
material impact on the consolidated financial statements.
Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS), No. 130, Reporting Comprehensive Income. SFAS 130 establishes
new rules for the reporting and display of comprehensive income and its
components; however, the new standard had no impact on the Company's net income
or stockholder's equity. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale securities, which prior to the adoption were
reported separately in stockholder's equity, to be included in other
comprehensive income. Prior year financial statements have been reclassified to
conform to the requirements of SFAS 130.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Pending Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivatives Instruments and for Hedging Activities. SFAS No. 133
requires all derivatives to be recorded on the balance sheet at fair value and
establishes "special accounting" for the following three different types of
hedges; hedges of changes in the fair value of assets, liabilities, or firm
commitments; hedges of the variable cash flows of forecasted transactions; and
hedges of foreign currency exposures of net investments in foreign operations.
SFAS No. 133 is effective for years beginning after June 15, 1999, with earlier
adoption permitted. The Company has not determined the impact of adopting SFAS
No. 133.
Reclassification
Certain reclassifications have been made to the 1997 and 1996 financial
statements to conform to the presentations made in the current years.
2. Fair Values of Financial Instruments
SFAS 107, Disclosures About Fair Value of Financial Instruments, requires
disclosure of fair value information about financial instruments, whether or not
recognized in the consolidated balance sheets, for which it is practicable to
estimate that value. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. SFAS 107 also excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements
and allows companies to forego the disclosures when those estimates can only be
made at excessive cost. Accordingly, the aggregate fair value amounts presented
herein are limited by each of these factors and do not purport to represent the
underlying value of the Company.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. Fair Values of Financial Instruments (continued)
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Fixed-Maturity Securities: Fair values for fixed-maturity securities have been
determined by the Company's outside investment manager and are based on quoted
market prices, when available, or price matrices for securities which are not
actively traded, developed using yield data and other factors relating to
instruments or securities with similar characteristics.
Option Contracts: The fair values for option contracts are based on settlement
values, quoted market prices of comparable instruments, and fees currently
charged to enter into similar loans offered to borrowers with similar credit
ratings. Similar characteristics are aggregated for the purposes of the
calculations.
Equity Securities: The fair values for equity securities are based on quoted
market prices.
Policy Loans: The Company has not determined the fair values associated with
its policy loans, as management believes any differences between the Company's
carrying value and the fair values afforded these instruments are immaterial
to the Company's financial position and, accordingly, the cost to provide such
disclosure would exceed the benefit derived. At December 31, 1998 and 1997,
the interest rate related to the outstanding policy loans is 5%.
Cash and Cash Equivalents: The carrying amounts reported in the consolidated
balance sheets for these instruments approximate their fair values.
Assets and Liabilities of Separate Accounts: Separate account assets and
liabilities are reported at estimated fair value in the Company's consolidated
balance sheets.
Future Policy Benefits for Annuity and Life Products and Supplementary
Contracts Without Life Contingencies: Fair values of the Company's
liabilities under contracts not involving significant mortality or morbidity
risks (principally deferred annuities) are stated at the cost the Company
would incur to extinguish the liability; i.e., the cash surrender value. The
Company is not required to and has not estimated fair value of its liabilities
under other contracts.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. Fair Values of Financial Instruments (continued)
The following sets forth a comparison of the fair values and carrying values of
the Company's financial instruments subject to the provisions of SFAS 107 at
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------------------------------- ----------------------------------
Carrying Carrying
Value Fair Value Value Fair Value
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Assets
Fixed maturities--
Available-for-sale $264,741,000 $264,741,000 $294,961,000 $294,961,000
Option contracts 2,279,000 2,279,000 1,057,000 1,057,000
Equity securities 173,000 173,000 825,000 825,000
Policy loans 606,000 606,000 267,000 267,000
Cash and cash equivalents 3,353,000 3,353,000 3,029,000 3,029,000
Assets held in separate
accounts 266,257,000 266,257,000 219,807,000 219,807,000
Liabilities
Future policy benefits for
annuity and life products 206,069,000 206,069,000 233,988,000 233,988,000
Supplementary contracts
without life contingencies 22,955,000 22,955,000 21,711,000 21,711,000
Liabilities related to
separate accounts 266,257,000 266,257,000 219,807,000 219,807,000
</TABLE>
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements(continued)
3. Investment Operations
Fixed Maturities and Equity Securities
The following tables contain amortized cost and fair value information on fixed
maturities (bonds) and equity securities (common stocks) at December 31, 1998
and 1997:
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1998
Fixed maturities --
Available-for-sale:
United States Government and
agencies:
Mortgage and asset-backed
securities $ 996,000 $ 15,000 $ -- $ 1,011,000
Other 20,025,000 1,717,000 9,000 21,733,000
State, municipal, and other
governments 3,987,000 252,000 -- 4,239,000
Public utilities 59,463,000 7,622,000 7,000 67,078,000
Industrial and miscellaneous 161,324,000 10,041,000 685,000 170,680,000
--------------------------------------------------------------------
Total fixed maturities --
Available-for-sale $245,795,000 $19,647,000 $701,000 $264,741,000
====================================================================
Equity securities $ 684,000 $ -- $511,000 $ 173,000
====================================================================
December 31, 1997
Fixed maturities --
Available-for-sale:
United States Government and
agencies:
Mortgage and asset-backed
securities $ 24,133,000 $ 730,000 $283,000 $ 24,580,000
Other 23,546,000 1,391,000 138,000 24,799,000
State, municipal, and other
governments 3,991,000 250,000 -- 4,241,000
Public utilities 69,972,000 8,299,000 303,000 77,968,000
Industrial and miscellaneous 152,797,000 10,758,000 182,000 163,373,000
--------------------------------------------------------------------
Total fixed maturities --
Available-for-sale $274,439,000 $21,428,000 $906,000 $294,961,000
====================================================================
Equity securities $ 684,000 $ 141,000 $ -- $ 825,000
====================================================================
</TABLE>
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements
3. Investment Operations (continued)
The amortized cost and fair value of the Company's portfolio of fixed-maturity
securities at December 31, 1998, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
---------------------------
<S> <C> <C>
Due in one year or less $ 19,051,000 $ 19,307,000
Due after one year through five years 106,314,000 113,217,000
Due after five years through ten years 37,572,000 38,992,000
Due after ten years 81,862,000 92,214,000
Mortgage and asset-backed securities 996,000 1,011,000
---------------------------
$245,795,000 $264,741,000
===========================
</TABLE>
The unrealized gain or loss on fixed-maturity and equity securities available-
for-sale is reported as accumulated other comprehensive income, reduced by
adjustments to deferred policy acquisition costs and value of insurance in force
acquired that would have been required as a charge or credit to income had such
amounts been realized and a provision for deferred income taxes. Net unrealized
investment gains that are recorded as accumulated other comprehensive income
were comprised of the following:
<TABLE>
<CAPTION>
December 31
1998 1997
---------------------------
<S> <C> <C>
Unrealized gain on fixed-maturity and equity
securities available-for-sale $18,435,000 $20,663,000
Adjustments for assumed changes in
amortization pattern of:
Deferred policy acquisition costs (1,572,000) (1,780,000)
Value of insurance in force acquired (4,446,000) (5,157,000)
Deferred income tax liability (4,222,000) (4,660,000)
---------------------------
Net unrealized investment gains $ 8,195,000 $ 9,066,000
===========================
</TABLE>
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. Investment Operations (continued)
Net Investment Income
Components of net investment income are as follows:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Income from:
Fixed maturities $21,181,000 $22,183,000 $23,364,000
Cash and cash equivalents 155,000 225,000 288,000
Option contracts 1,118,000 408,000 --
Policy loans 37,000 -- --
--------------------------------------------
22,491,000 22,816,000 23,652,000
Less investment expenses (196,000) (219,000) (194,000)
--------------------------------------------
Net investment income $22,295,000 $22,597,000 $23,458,000
============================================
</TABLE>
Realized and Unrealized Gains and Losses
Realized gains (losses) and the change in unrealized gain (loss) on investments
are summarized below:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Realized
Fixed maturities $ 2,723,000 $1,227,000 $ 972,000
============================================
Unrealized
Fixed maturities $(1,576,000) $4,632,000 $(12,756,000)
Equity securities (652,000) 134,000 369,000
--------------------------------------------
Unrealized gain (loss) on
investments $(2,228,000) $4,766,000 $(12,387,000)
============================================
</TABLE>
<PAGE>
First Variable Life Insurance Company
Notes to Consolidatd Financial Statements (continued)
3. Investment Operations (continued)
A summary of the net unrealized gain (loss) recognized in other comprehensive
income is as follows:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Realized gain on securities included
in net income $ 2,723,000 $ 1,227,000 $ 972,000
============================================
Other comprehensive income:
Net unrealized gain (loss) arising
during the year, net of taxes of
$166,000, $2,020,000, and
($3,881,000), respectively $ 315,000 $ 3,970,000 $(7,534,000)
Reclassification adjustment, net of
taxes of $926,000, $416,000, and
$331,000, respectively (1,797,000) (811,000) (641,000)
--------------------------------------------
(1,482,000) 3,159,000 (8,175,000)
Adjustments:
Deferred policy acquisition costs,
net of taxes of $70,000 and
($195,000), respectively 138,000 (385,000) --
Value of insurance in force
acquired, net of taxes of
$238,000, ($525,000), and
$1,190,000, respectively 473,000 (1,032,000) 2,310,000
--------------------------------------------
611,000 (1,417,000) 2,310,000
--------------------------------------------
Net unrealized gain (loss)
recognized in other comprehensive
income $ (871,000) $ 1,742,000 $(5,865,000)
============================================
</TABLE>
An analysis of sales, maturities, and principal repayments of the Company's
fixed maturities portfolio for the years ended December 31, 1998, 1997, and 1996
is as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Realized Realized
Cost Gains Losses Proceeds
------------------------------------------------------
1998:
<S> <C> <C> <C> <C>
Scheduled principal
repayments and calls $29,801,000 $ 909,000 $ 1,000 $30,709,000
Sales 28,729,000 1,861,000 46,000 30,544,000
------------------------------------------------------
$58,530,000 $2,770,000 $47,000 $61,253,000
======================================================
1997:
Scheduled principal
repayments and calls $11,636,000 $ 447,000 $ -- $12,083,000
Sales 11,795,000 851,000 72,000 12,574,000
------------------------------------------------------
$23,431,000 $1,298,000 $72,000 $24,657,000
======================================================
</TABLE>
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. Investment Operations (continued)
<TABLE>
<CAPTION>
Gross Gross
Amortized Realized Realized
Cost Gains Losses Proceeds
------------------------------------------------------
<S> <C> <C> <C> <C>
1996:
Scheduled principal
repayments and calls $13,416,000 $ 329,000 $ 8,000 $13,737,000
Sales 7,382,000 715,000 64,000 8,033,000
------------------------------------------------------
$20,798,000 $1,044,000 $72,000 $21,770,000
======================================================
</TABLE>
Income taxes during the years ended December 31, 1998, 1997, and 1996 include a
provision of $926,000, $416,000, and $331,000, respectively, for the tax effect
of realized gains.
Other
At December 31, 1998, fixed maturities with a carrying value of $8,894,000 were
held on deposit with state agencies to meet regulatory requirements.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States Government) exceeded 10% of stockholder's equity
at December 31, 1998.
The Company has acquired call option contracts relating to its equity-indexed
annuity product to hedge increases in the S&P 500 index. The options are
purchased concurrently with the issuance of these annuity contracts and expire,
if not utilized, at the end of the annuities' term. The Company pays, at the
beginning of the option contract, a premium for transferring the risk of
unfavorable changes in the S&P 500 index. The carrying value of the option
contracts is based upon the unamortized premium paid for the contract adjusted
for increases in its intrinsic value from increases in the S&P 500 index. The
carrying value of these contracts was $2,279,000 and $1,057,000 at December 31,
1998 and 1997, respectively.
Concentrations of Credit Risk
The Company's investment in public utility bonds at December 31, 1998 represents
25% of total investments and 12% of total assets. The holdings of public utility
bonds are widely diversified and all issues met the Company's investment
policies and credit standards when purchased.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
4. Value of Insurance in Force Acquired
The value of insurance in force acquired is an asset that represents the present
value of future profits on business acquired. An analysis of the value of
insurance in force acquired for the years ended December 31, 1998, 1997, and
1996 is as follows:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Excluding impact on net
unrealized investment gains and
losses:
Balance at beginning of year $22,096,000 $23,094,000 $23,833,000
Accretion of interest during
the year 1,457,000 1,582,000 1,642,000
Amortization of asset (4,018,000) (2,580,000) (2,381,000)
-----------------------------------------------
Balance prior to impact of net
unrealized investment gains and
losses 19,535,000 22,096,000 23,094,000
Impact of net unrealized
investment gains and losses (4,446,000) (5,157,000) (3,600,000)
-----------------------------------------------
Balance at end of year $15,089,000 $16,939,000 $19,494,000
===============================================
</TABLE>
During the year ended December 31, 1998, the amortization of value of insurance
in force acquired was increased by $1,600,000 due to gains realized on
securities sold supporting the acquired block of business. Amortization of the
value of insurance in force acquired for the next five years ending December 31
is expected to be as follows: 1999 -- $1,242,000; 2000 -- $1,380,000; 2001 --
$1,329,000; 2002 -- $1,281,000; and 2003 -- $1,231,000.
5. Federal Income Taxes
The Company and its subsidiaries each file separate federal income tax returns.
Deferred income taxes have been established by the Company and its subsidiaries
based on the temporary differences, the reversal of which will result in taxable
or deductible amounts in future years when the related asset or liability is
recovered or settled, within each entity.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. Federal Income Taxes (continued)
Income tax expense (benefit) is included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
Income tax (benefit) expense in
consolidated statements of income
on income before income tax
(benefit) $(382,000) $ 153,000 $ 836,000
--------------------------------------
(382,000) 153,000 836,000
Tax (benefit) expense in
consolidated statements of changes
in stockholder's equity:
Amounts attributable to change in
accumulated other comprehensive
income during year -- Deferred (438,000) 887,000 (3,022,000)
--------------------------------------
$(820,000) $1,040,000 $(2,186,000)
======================================
</TABLE>
The effective tax rate on income (loss) before income tax (benefit) is different
from the prevailing federal income tax rate as follows:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
Income (loss) before income tax
(benefit) $(273,000) $472,000 $2,440,000
=======================================
Income tax (benefit) at federal
statutory rate (34%) $ (93,000) $160,000 $ 830,000
Tax effect (decrease) of:
Other (289,000) (7,000) 6,000
---------------------------------------
Income tax (benefit) expense $(382,000) $153,000 $ 836,000
=======================================
</TABLE>
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. Federal Income Taxes (continued)
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
December 31
1998 1997
----------------------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 2,342,000 $ 1,969,000
Operating loss carryforwards 2,406,000 2,590,000
Other 163,000 124,000
----------------------------
4,911,000 4,683,000
Deferred tax liabilities:
Investments (5,031,000) (5,946,000)
Deferred policy acquisition
costs (3,247,000) (2,523,000)
Value of insurance in force
acquired (2,090,000) (2,533,000)
Other (393,000) (373,000)
----------------------------
(10,761,000) (11,375,000)
----------------------------
Deferred income tax liability $ (5,850,000) $ (6,692,000)
============================
</TABLE>
The Company has federal net operating loss carryforwards reportable on its
federal tax return aggregating $7,076,000 at December 31, 1998 which expire from
2009 to 2012.
6. Retirement and Compensation Plans
Substantially all full-time employees of the Company are covered by a
noncontributory defined benefit pension plan sponsored by ILoNA. The benefits
are based on years of service and the employee's compensation. In addition,
effective January 1, 1996, ILoNA adopted a nonqualified supplemental plan to
provide benefits in excess of limitations established by the Internal Revenue
Code (the Code). The Company records its required contributions as pension
expense related to these plans. There were no material contributions to the plan
during the years ended December 31, 1998, 1997, or 1996.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
6. Retirement and Compensation Plans (continued)
Employees of the Company also are eligible to participate in a contributory
defined contribution plan sponsored by ILoNA which is qualified under section
401(k) of the Code. The plan covers substantially all full-time employees of the
Company. Employees can contribute up to 15% of their annual salary (with a
maximum contribution of $10,000 in 1998) to the plan. The Company contributes an
additional amount, subject to limitations, based on the voluntary contribution
of the employee. Further, the plan provides for additional employer
contributions based on the discretion of the Board of Directors of ILoNA.
Pension expense related to this plan was $77,000, $37,000, and $27,000 for the
years ended December 31, 1998, 1997, and 1996, respectively.
The Company also has certain other benefit and incentive plans. These plans are
considered immaterial to the consolidated financial statements.
7. Stockholder's Equity
Statutory Limitations on Dividends
The ability of the Company to pay dividends to ILoNA is restricted because prior
approval of insurance regulatory authorities is normally required for payment of
dividends to the stockholder which exceed an annual limitation. During 1999,
this annual limitation aggregates $3,045,000; however, pursuant to a directive
received from the Arkansas Insurance Department in 1991, any proposed payment of
a dividend currently requires its approval. Also, the amount ($37,000,000 at
December 31, 1998) by which stockholder's equity stated in conformity with
generally accepted accounting principles exceeds statutory capital and surplus
as reported is restricted and cannot be distributed.
Net loss for the Company, as determined in accordance with statutory accounting
practices, was $2,466,000, $1,240,000, and $1,507,000 for the years ended
December 31, 1998, 1997, and 1996, respectively. Total statutory capital and
surplus was $30,451,000 at December 31, 1998 and $33,556,000 at December 31,
1997.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. Commitments and Contingencies
The Company leases its home office space and certain other equipment under
operating leases which expire through 2001. During 1998, the Company moved to
its current location and subleased its previous office space. Rent received
under the sublease agreement is netted against rent expense in 1998. During the
years ended December 31, 1998, 1997, and 1996, rent expense totaled $361,000,
$228,000, and $206,000, respectively. At December 31, 1998, minimum rental
payments due under all noncancelable operating leases, including the lease
agreement on the Company's previous office space with initial terms of one year
or more are:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 673,000
2000 689,000
2001 328,000
2002 6,000
Thereafter 3,000
----------
$1,699,000
==========
</TABLE>
The Company is involved in litigation where amounts are alleged that are
substantially in excess of contractual policy benefits or certain other
agreements. Management and its legal counsel do not believe any of these claims
will result in a material loss to the Company.
Assessments are, from time to time, levied on the Company by life and health
guaranty associations in most states in which the Company is licensed to cover
losses of policyholders of insolvent or rehabilitated companies. In some states,
these assessments can be partially recovered through a reduction in future
premium taxes. Assessments have not been material to the Company's financial
statements in the past. However, the economy and other factors have caused a
number of failures of substantially larger companies since that time. At
December 31, 1998 and 1997, the Company has not accrued for guaranty fund
assessments based on its historical experience and information available from
those making guaranty fund assessments. During 1997, the American Institute of
Certified Public Accountants issued Statement of Position 97-3 (SOP 97-3),
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments," that will require, beginning in 1999, the accrual of guaranty fund
assessments. The Company has not determined the impact of adopting SOP 97-3.
<PAGE>
First Variable Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. Related Party Transactions
The Company has a management agreement with ILoNA to provide for certain
management services. Amounts paid by the Company pursuant to this agreement were
$480,000 in both 1998 and 1997. In addition, an expense allocation agreement was
entered into with Interstate Assurance Company, a subsidiary of ILoNA, to
provide for certain administrative functions. Amounts paid during 1998 and 1997
by the Company pursuant to this agreement were $506,000 and $504,000,
respectively.
10. Relocation of Company
In December 1997, management decided to relocate the operations of the Company
from Boston to Illinois. As a result, at December 31, 1997, the Company accrued
a liability of $1,200,000, which relates to benefits for involuntarily
terminated employees, and certain other costs, including office and other lease
cancellations and write-down of furniture and equipment. The relocation was
substantially completed in June 1998.
11. Year 2000 Issues (Unaudited)
Like other financial and business organizations around the world, the Company
could be adversely affected if its computer systems and those of its service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. The Company has completed an assessment of
the Year 2000 impact on its systems, procedures, customers, and business
processes and has begun converting critical data processing systems. In
addition, the Company is gathering information about the Year 2000 compliance
status of its significant service providers and will continue to monitor their
compliance.
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15 (d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING REGARDING INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities Act of
1933 ("Act") may be permitted to directors and officers and controlling persons
of the Registrant and the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF
1940
In accordance with section 26(e) of the Investment Company Act of 1940, First
Variable Life Insurance Company represents that the fees and charges deducted
under the Policies described in this Registration Statement on Form S-6, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by First Variable Life Insurance
Company. First Variable Life Insurance Company bases its representation on its
assessment of all the facts and circumstances, including such relevant factors
as: the nature and extent of such services, expenses and risks, the need for
First Variable Life Insurance Company to earn a profit, the degree to which the
Policies include innovative features, and regulatory standards for the grant of
exemptive relief under the Investment Company Act of 1940 used prior to October
1996, including the range of industry practice. This representation applies to
all Policies sold pursuant to this Registration Statement, including those sold
on the terms specifically described in the prospectus contained herein, or in
any variations thereof based on supplements, endorsements, or riders to any
Policies or prospectus, or otherwise.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-Reference Sheet.
The prospectus consisting of _________________ pages.
The undertaking to file reports.
The undertaking regarding indemnification.
The representation pursuant to section 26(e) under the Investment Company Act of
1940.
The signatures.
Written consents of the following persons:
Arnold R. Bergman (See Exhibit 2)
Martin Sheerin (See Exhibit 6)
The following exhibits:
1.A (1) Resolution of the Board of Directors of the Company authorizing
the establishment of the Separate Account.*
(2) Not Applicable.
(3) (a) Underwriting Agreement.* *
(b) Form of Sales Agreement.* *
(c) Commission Schedule for the Policies # # #
(4) Not Applicable.
(5) Specimen Variable Life Insurance Policy. # # #
(6) (a) Articles of Incorporation of First Variable Life Insurance
Company.# #
(b) By-Laws of First Variable Life Insurance Company.* *
(7) Not Applicable.
(8) Form of Participation Agreement.* * *
(9) Not Applicable.
(10) Specimen Flexible Premium Variable Life Insurance Application. # #
#
2. Opinion and consent of Arnold R. Bergman, Vice President, General
Counsel & Secretary, as to securities being registered. # # #
3. Not Applicable.
<PAGE>
4. Not Applicable
5. Not Applicable
6. Opinion and consent of Actuary.# # #
7. Consent of Ernst & Young LLP, Independent Auditors. # # #
8. Powers of Attorney. # # # # - of the following individuals
appointing John M. Soukup or Arnold R. Bergman their attorney-
in-fact to act for them in their capacities as Directors of the
Company or otherwise, to do all things necessary to comply with
the provisions and intent of the Securities Act of 1933 and the
Investment Company Act of 1940 with respect to variable life
insurance policies and variable annuity contracts:
Ronald M. Butkiewicz Shane W. Gleeson Kenneth R. Meyer
Michael J. Corey Philip R. O'Connor
Michael R. Ferrari Jeff S. Liebmann
_______________
* Incorporated herein by reference to the Form S-6 Registration
Statement of First Variable Life Insurance Company and Separate
Account VL, filed electronically with the Securities and Exchange
Commission on June 3, 1996 (File No. 333-05053).
* * Incorporated herein by reference to Pre-Effective Amendment No. 1
to the Form S-6 Registration Statement of First Variable Life
Insurance Company and Separate Account VL, filed electronically
with the Securities and Exchange Commission on November 15, 1996
(File No. 333-05053).
* * * Incorporated herein by reference to Post-Effective Amendment No.
22 to the Form N-4 Registration Statement of First Variable Life
Insurance Company and First Variable Annuity Fund E, filed
electronically with the Securities and Exchange Commission on
September 18, 1996 (File Nos. 333-12197, 811-04092).
* * * * Filed herewith.
# Incorporated herein by reference to the Pre-Effective Amendment
No. 1 to the Form S-6 Registration Statement of First Variable
Life Insurance Company and Separate Account VL, filed
electronically with the Securities and Exchange Commission on
January 3, 1997 (File No. 333-19193).
# # Incorporated herein by reference to Post-Effective Amendment No.
21 to the Form N-4 Registration Statement of First Variable Life
Insurance Company and First Variable Annuity Fund E, filed
electronically with the Securities and Exchange Commission on
April 29, 1996 (File Nos. 33-86738, 811-04092).
# # # Filed herewith.
# # # # Incorporated by reference to Post-Effective Amendment No. 1 to the
Form S-6 Registration Statement of First Variable Life Insurance
Company Separate Account VL, filed electronically with the
Securities and Exchange Commission on or about April 27, 1998
(File No. 333-19193).
<PAGE>
EXHIBIT INDEX
Filed herewith, as indicated on the Exhibit list.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the First Variable
Life Insurance Company has duly caused this Pre-effective Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, on the 20th day of August, 1999.
First Variable Life Insurance Company
By: /s/ John M. Soukup
---------------------
John M. Soukup
President
ATTEST:
/s/ Arnold R. Bergman
- ---------------------
Arnold R. Bergman
Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Separate Account VL of First Variable Life Insurance Company, has duly caused
this Pre-Effective Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, on the 20th day of
August, 1999.
Separate Account VL of
First Variable Life Insurance Company
(Registrant)
By: First Variable Life Insurance Company
(Depositor)
By: /s/ John M. Soukup
------------------
John M. Soukup
President
ATTEST:
/s/ Arnold R. Bergman
- ---------------------
Arnold R. Bergman
Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective
Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities indicated with First Variable Life Insurance
Company, on the 20th day of August.
PRINCIPAL EXECUTIVE OFFICER:
/s/ John M. Soukup
- ------------------
John M. Soukup
President
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Christopher S. Harden
- -------------------------
Christopher S. Harden
Vice President & Treasurer
DIRECTORS:
/s/ Ronald M. Butkiewicz /s/ Clark A. Ramsey
- ------------------------ -------------------
Ronald M. Butkiewicz Clark A. Ramsey
/s/ John M. Soukup /s/ Jeff S. Liebmann
- ------------------ --------------------
John M. Soukup Jeff S. Liebmann
/s/ Michael J. Corey /s/ Kenneth R. Meyer
- -------------------- --------------------
Michael J. Corey Kenneth R. Meyer
/s/ Michael R. Ferrari /s/ Philip R. O'Connor
- ---------------------- ----------------------
Michael R. Ferrari Philip R. O'Connor
/s/ Shane W. Gleeson /s/ Norman A. Fair
- -------------------- ------------------
Shane W. Gleeson Norman A. Fair
* By: /s/ Arnold R. Bergman
---------------------
Arnold R. Bergman
Attorney-in-Fact
<PAGE>
EXHIBIT 1.A(3)(C)
COMMISSION SCHEDULE
<PAGE>
[LOGO OF FIRST VARIABLE LIFE INSURANCE COMPANY APPEARS HERE]
First Variable Capital Services, Inc.
2122 York Road, Suite 300
Oak Brook, Illinois 605233-1930
Schedule of Variable Contract Commissions
Effective ________________, 1999
This Schedule of Commissions is attached to and made a part of the Selling
Broker-Dealer Agreement, as amended, between and among First Variable Capital
Services, Inc. ("FVCS"), First Variable Life Insurance Company ("First
Variable"), and the Selling Broker-Dealer. It replaces all prior schedules on
the Authorized Contracts shown below. Selling Broker-Dealer will be deemed to
have accepted this Schedule through the submission of new business after its
effective date, subject to any selection of commission options on page 5 of
this Schedule.
<TABLE>
<CAPTION>
Variable Life Insurance Products
- ---------------------------------------------------------------------------------------------------
Authorized
Contract Total Commission
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Solutions VUL
(single life)
Commission Option I: Target Excess Yrs 2-5 Yrs 6+
Commission Option Age at Issue: 0 - 85 --------- ------ --------- -----------
II: Age at Issue: 0 - 85 95% 4.0% 3.5% 0.30% trail
100% 4.0% 3.5% 0.30% trail
- ---------------------------------------------------------------------------------------------------
Capital Estate
Builder VUL
(survivorship joint Target Excess Yrs 2-5 Yrs 6+
life) Joint Age at Issue: 0 --------- ------ --------- -----------
Commission Option I: - 85 95% 4.0% 3.5% 0.30% trail
Joint Age at Issue: 0 100% 4.0% 3.5% 0.30% trail
Commission Option II: - 85
- ---------------------------------------------------------------------------------------------------
Capital One Pay VL
(single life)
Commission Option I:
Age at Issue: 0 - 80 7.00% of premium
Age at Issue: 81+ 4.50% of premium
Commission Option II:
Age at Issue: 0 - 80 5.00% of first year premium, 0.40% trail
commission thereafter, starting in the 2nd
Contract Year
- ---------------------------------------------------------------------------------------------------
</TABLE>
See page 3 for definitions and requirements.
See page 4 for commission charge-back rules.
See page 5 for selection of Commission Options.
<PAGE>
Schedule of Variable Contract Commissions - Continued
Effective _________________, 1999
<TABLE>
<CAPTION>
Variable Annuity Products
- --------------------------------------------------------------------------------------------------------------------
Authorized
Contract Total Commission
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Six VA
Commission Option I: Age at Issue: 0 - 70 3.00% of first year premium
Age at Issue: 71 - 75 2.50% of first year premium
Age at Issue: 76 - 85 1.50% of first year premium
Age at Issue: 0 - 85 Other Contract Years:
Choice A
--------
0.50% trail commission years 2 - 6,
1.00% trail commission years 7+
Choice B
--------
0.25% trail commission years 2-6,
1.25% trail commission years 7+
Age at Issue: 0 - 85 Annuitization Commission:
Additional payment equal to three (3) times
trail commission in year contract is settled
under an annuity payout option
Commission Option II:
Age at Issue: 0 - 70 6.75% of first year premium, 1% of premium
received in other Contract years
Age at Issue: 71 - 85 5.25% of first year premium, 1% of premium
received in other Contract years
- --------------------------------------------------------------------------------------------------------------------
Capital Five VA
Commission Option I: Age at Issue: 0 - 85 6.00% of first year premium; reducing 1.00% for
each year after Issue Age 80 (e.g., 5.00% of
first year premium for Issue Age 81)
Commission Option II: Age at Issue: 0 - 85 5.00% of first year premium with a 0.25% trail
commission; reducing 1.00% for each year after
Issue Age 80
- --------------------------------------------------------------------------------------------------------------------
Capital No Load Age at Issue: 0 - 85 1.00% of first year premium, 1.00% trail
commission starting in year 2
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See page 3 for definitions and requirements.
See page 4 for commission charge-back rules.
See page 5 for selection of Commission Options.
<PAGE>
Schedule of Variable Contract Commissions - Continued
Effective January 1, 1998
Definitions
- -----------
"Commission Option" - the payment method selected by the Selling Broker-Dealer
for the Authorized Contract shown. If a commission option is not selected as
required by First Variable, payment will be made under the default options
described in the "Selection of Commission Options" provisions on page 5 of this
Schedule.
"Excess" - first year premium received by First Variable on CAPITAL SOLUTIONS
VUL or CAPITAL ESTATE BUILDER VUL in excess of target premium.
"Age at Issue" - the attained age of the insured on the issue date for single
life variable life insurance products, and the highest attained age of the
annuitant and all contract owners on the issue date for variable annuity
products. For CAPITAL ESTATE BUILDER VUL, the "Joint" Age at Issue is the
equivalent joint age of the two insureds on the policy date, as determined by
First Variable.
"Target", "target premium" - a planned amount of first year premium that is
determined by First Variable based on the amount of insurance issued and the
sex, age and premium rate class of: (a) a single insured under CAPITAL
SOLUTIONS VUL; and (b) the two insureds under CAPITAL ESTATE BUILDER VUL.
"Trail", "trail commissions" - payments to the Selling Broker-Dealer based upon:
(a) the non-loaned Accumulation Values of both the Fixed and Separate Accounts
within an Authorized Contract; and (b) the rate for the applicable Authorized
Contract shown in the Schedule. All trail rates shown are on an annual basis,
and will be adjusted by First Variable to reflect quarterly calculations.
Commissionable Contracts
- ------------------------
Commission is payable on Authorized Contracts only if sold by sales
representatives associated with the Selling Broker-Dealer/General Agent (or its
affiliated insurance agency) at the time of sale.
Premium and Trail Commissions
- -----------------------------
Premium must be received in good order by First Variable at its Variable Service
Center; first year premium must be received during the first Policy/Contract
Year (12 months after the issue date) of an Authorized Contract.
Trail commissions starting in the 2nd Policy/Contract Year begin at the end of
the fifteenth (15th) Policy/Contract month after issue, and continue each
Contract quarter thereafter during the Accumulation Period. Trail commissions
starting in the 7th Contract Year begin at the end of the 25th Contract Quarter
(75th Contract month) after issue. Trail commissions are not vested and are
conditional upon remaining the broker-dealer of record of the contract at the
time of payment.
Transfers
- ---------
Commission on transfers to or from another annuity contract or life insurance
policy issued by First Variable or its affiliates will be payable only to the
extent permitted under the rules established by First Variable or the affected
affiliate.
<PAGE>
Schedule of Variable Contract Commissions - Continued
Effective __________, 1999
Commission Chargebacks
- ----------------------
Commissions paid by First Variable will be charged back to Selling Broker-Dealer
upon lapse, surrender, or death of a Contract Owner (or Annuitant if Contract
Owner is a non-natural person) as follows:
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------
CAPITAL SOLUTIONS VUL Lapse:
-----
and Commission Option I: 100% of the commission paid charged back upon lapse
CAPITAL ESTATE BUILDER during the first 6 policy months, and 50% of the commission paid charged back
VUL upon lapse during the 7th through 14th policy months.
Commission Option II: 100% of the commission paid charged back upon lapse
during the first 6 policy months, 75% of the commission paid charged back upon
lapse during the 7th through 12th policy months, 50% of the commission paid
charged back upon lapse during the 13th through 18th policy months, and 25%
of the commission paid charged back upon lapse during the 19th through 26th
policy months.
Surrender after Inspection Period: None
---------------------------------
Death: None
-----
- ----------------------------------------------------------------------------------------------------------
CAPITAL ONE PAY VUL Lapse: None
-----
Surrender after Inspection Period: None
---------------------------------
Death: None
-----
- ----------------------------------------------------------------------------------------------------------
CAPITAL SIX VA Surrender after Inspection Period: None
---------------------------------
Death: Commission Option II Only: The greater of: (a) 50% of the commission
-----
paid; or (b) 3.75% of first year premium charged back upon death within the
first Contract Year.
- ----------------------------------------------------------------------------------------------------------
CAPITAL FIVE VA Surrender after Inspection Period: 100% of the commission paid charged back
---------------------------------
upon surrender during the first 6 months after a contract payment is credited
to the contract, and 50% of the commission paid charged back upon surrender
during the 7th through 12th months after the issue date.
Death: None
-----
- ----------------------------------------------------------------------------------------------------------
CAPITAL NO LOAD VA Surrender after Inspection Period: 100% of the commission paid charged back
---------------------------------
upon surrender within the first Contract Year.
Death: 100% of the commission paid charged back upon death within the first
-----
Contract Year.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
ALL AUTHORIZED If a policy or contract is: (a) surrendered during the inspection period; or
CONTRACTS: (b) rescinded at any time as a result of a material misrepresentation made in
the application which resulted in the issuing of a contract which would not
otherwise have been issued, then 100% of the commission paid will be charged
back to the Selling Broker-Dealer. All amounts charged back will constitute
an indebtedness of the Selling Broker-Dealer to First Variable and, without
limitation, a lien on any further amounts due the Selling Broker-Dealer from
First Variable.
</TABLE>
<PAGE>
Schedule of Variable Contract Commissions - Continued
Effective _____________________, 1999
Selection of Commission Options
- -------------------------------
Commission Options vary by Authorized Product. The Commission Option for
CAPITAL SOLUTIONS VUL and CAPITAL ESTATE BUILDER VUL must be made by the Selling
Broker-Dealer for all sales of these products. For all other Authorized
Contracts, the selection of a Commission Option is made at the time of sale. If
no selection is in effect or is not clearly specified at the time of sale, First
Variable will pay commission under the applicable default option.
CAPITAL SOLUTIONS VUL and CAPITAL ESTATE BUILDER VUL: The following Commission
Option is selected for all sales of these products:
[_] Commission Option I _____ (Initial)
[_] Commission Option II _____ (Initial)
If no option is selected, the default option is the option in effect for Capital
Solutions VUL under the Schedule of Variable Contract Commissions dated January
1, 1998. For selling agreements effective on and after the date of this
Schedule of Variable Contract Commissions, the default option is Commission
Option I.
CAPITAL ONE PAY VUL: The default option is Commission Option I.
CAPITAL SIX VA: The default option is Commission Option II.
CAPITAL FIVE VA: The default option is Commission Option I.
ACCEPTANCE AND CONFIRMATION. The undersigned Selling Broker-Dealer hereby
accepts, on behalf of itself and its affiliated insurance agencies, the above
Schedule of Variable Contract Commission and confirms its selection of the
Commission Option as set forth above.
Name of Selling Broker-Dealer:___________________________________
By:________________________________
Print Name:________________________
Title:_____________________________
Date:______________________________
<PAGE>
EXHIBIT 1.A.(5)
SPECIMEN VARIABLE LIFE INSURANCE POLICY
<PAGE>
[LOGO OF FIRST VARIABLE LIFE INSURANCE COMPANY APPEARS HERE]
A stock life insurance company
FIRST VARIABLE LIFE INSURANCE COMPANY (the "Company") will pay the Death Benefit
Proceeds to the Beneficiary upon receipt at our Variable Service Center of due
proof of the death of the Surviving Insured while this Policy was in force. On
the Maturity Date, the Company will pay the Owner the Cash Surrender Value if
either of the Insureds is living and the Policy is in force.
This Policy is issued in return for the Application and payment of the initial
Premium Payment. A copy of the Application is attached and made a part of the
Policy.
TEN DAY FREE LOOK-- Within ten (10) days of the date of receipt of this Policy,
it may be returned by delivering or mailing it to the Company at its Variable
Service Center or to the agent through whom it was purchased. When the Company
receives this Policy, it will be voided as if it had never been in force. The
Company will refund the Account Value, Premium Charge, Premium Tax Charge and
any deductions for Monthly Charges computed at the end of the Valuation Period
during which this Policy is received by the Company at its Variable Service
Center.
Secretary President
This is a legal contract -- read it carefully.
THE ACCOUNT VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT PROVIDED BY THIS
POLICY, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE
VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT.
THE VARIABLE PROVISIONS OF THIS POLICY BEGIN ON PAGE 6
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE
SECOND TO DIE LIFE INSURANCE POLICY
NON-PARTICIPATING
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Begins on
Page
POLICY DATA PAGES PD - 1
<S> <C>
Section 1. Definitions 1
Section 2. Premium Payments 3
Section 3. Death Benefits 6
Section 4. Policy Options 8
Section 5. Transfers 9
Section 6. Account Value 10
Section 7. Charges and Deductions 12
Section 8. Surrender and Withdrawals 14
Section 9. Loans 15
Section 10. Ownership, Assignment and Beneficiary Provisions 17
Section 11. General Provisions 18
Section 12. Payout Options 14
PAYOUT OPTION TABLES 21
</TABLE>
i
<PAGE>
[CAPITAL ESTATE BUILDER]
POLICY DATA PAGES
<TABLE>
<S> <C> <C> <C>
POLICY NUMBER: [VUL12345] POLICY DATE: [May 15, 1999]
OWNER: [JOHN DOE] Maturity Date: [May 15, 2049]
INSURED LIFE: [JOHN DOE] SECOND INSURED LIFE: [JANE DOE]
Age and Sex: [45 Male] Age and Sex: [45 Female]
Rate Class: [Non-Smoker] Rate Class: [Non-Smoker]
Insurance Class: [Standard] Insurance Class: [Standard]
JOINT AGE: 45
FACE AMOUNT: [$100,000]
Death Benefit Option [Option A, unless changed as the Policy provides.]
Minimum Face Amount: [$ 75,000]
BENEFICIARY: [MARY DOE]
PREMIUM:
Minimum Initial Premium: [$70.50]
Monthly Minimum Premium: [$35.25]
Death Benefit Guarantee Period: [Later of 5 Policy Years or Age 70 of the older Insured
Life]
Planned Premium/Frequency: [$423.00/annually]
POLICY OPTIONS:
Separate Account: SEPARATE ACCOUNT VL
[VIST Small Cap Growth Portfolio] [VIST Multiple Strategies Portfolio]
[VIST World Equity Portfolio] [VIST High Income Bond Portfolio]
[VIST Growth Portfolio] [VIST Government Bond Portfolio]
[VIST Growth and Income Portfolio]
[VIST Matrix Equity]
**NEW FUNDS TO BE ADDED**
Fixed Account: [Guaranteed Interest Rate: 4.0%]
Delayed Investment Start Date: [Not Applicable]
Delayed Investment Start Policy Option: [Not Applicable]
CHARGES AND DEDUCTIONS:
Premium Charge: [Guaranteed not to exceed 2.5% of each Premium
Payment. On the Policy Date, the Premium Charge is 0%
of each Premium Payment.
Premium Tax Charge: [Guaranteed not to exceed 2.5% of each Premium
Payment. On the Policy Date, the Premium Tax Charge
is 0% of each Premium Payment.]
</TABLE>
[CAPITAL ESTATE BUILDER]
PD-1
<PAGE>
POLICY DATA PAGES
<TABLE>
<S> <C>
CHARGES AND DEDUCTIONS (Continued):
Daily Asset Charge: [The daily asset charge on net assets in each Sub-Account
is guaranteed not to exceed an annualized rate of 1.20%.
On the Policy Date, the daily asset charge is equal to an
annualized rate of 0.90% on the net assets in each
Sub-Account.]
Monthly Administrative Charge: [Guaranteed not to exceed $13.00 each Policy Month. On
the Policy Date, the charge is $10.00 each Policy Month.]
Monthly Policy Benefit Charge: [Guaranteed not to exceed an annualized rate of 0.30% of
the Policy's Account Value. ] On the Policy Date, if
Face Amount is $500,000 or greater, the policy benefit
charge reduces to 0.15% in Policy Year 21 and later.
Monthly Policy Fee: [On the Policy Date, the monthly fee is $9.08. The fee
will increase if the Face Amount is increased.]
Monthly Cost of Insurance Charge: [The maximum rate is based on TABLE OF GUARANTEED RATES
for the Joint Age and Net Amount at Risk.]
Additional Benefit Riders:
</TABLE>
PD-2
<PAGE>
[CAPITAL ESTATE BUILDER]
POLICY DATA PAGES
<TABLE>
<S> <C>
CHARGES AND DEDUCTIONS (continued):
Transaction Charges:
Withdrawals: [Guaranteed not to exceed the lesser of 2% of the
amount withdrawn or $25 per transaction. On the
Policy Date, the charge is $0 per transaction.]
Transfers: [Guaranteed not to exceed $10 per transaction for
each transfer in excess of 12 in any Policy Year.
On the Policy Date, there is no charge for
transfers, regardless of the number effected in
any Policy Year.]
Surrender: [The surrender charge applicable to the initial
Face Amount is the Surrender Charge Amount
multiplied by the applicable Surrender Charge
Percentage shown.]
Surrender Charge Amount: [$423.00, equal to 100% of 12 Monthly Minimum
Premiums up to a maximum of $60 per $1,000 of Face
Amount for standard rated policies.]
Surrender Charge Percentages:
- ---------------------------------------------------------------------------------------------------------------
Policy Year 1 2 3 4 5 6 7 8 9 10 11+
- ---------------------------------------------------------------------------------------------------------------
Percentage 62.5 125 125 125 125 100 80 60 40 20 0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
[An increase in Face Amount will result in a new Surrender Charge Amount and set
of surrender charges for 10 years after the effective date of the increase. No
surrender charge is imposed upon a partial decrease in Face Amount, but the full
surrender charge will remain in effect for a subsequent surrender. Additional
transaction charges, guaranteed not to exceed $250, may be imposed for
surrenders made for the benefit of a third party assignee of the Policy pursuant
to section 1035 of the Internal Revenue Code.]
TRANSFERS:
Free Transfers: [Guaranteed minimum of 12 per Policy Year. On the Policy Date,
an unlimited number of transfers are permitted.]
Minimum Account Value to be Transferred: [$100 or the Account Value in the
selected Policy Option, if less]
Restrictions on Transfers from the Fixed Account: [Unless otherwise permitted by
the Company, Account Value to be transferred from the Fixed Account in any
Policy Year may not exceed the greater of:
(1) 50% of Fixed Account Value on the Policy Date for transfers during the first
Policy Year, or,
(2) for transfers after the first Policy Year, the greater of (a) 50% of Fixed
Account Value on the
immediately preceding Policy Anniversary; or (b) 100% of the Fixed Account Value
transferred to other Policy Options during the immediately preceding Policy
Year. No transfers of Account Value are permitted from the Fixed Account to
other Policy Options after payments begin under a Payout Option.]
VARIABLE SERVICE CENTER: [The Variable Service Center on the Policy Date is
located at P.O. Box 1317, Des Moines, IA 50305-1317]
PD-3
<PAGE>
[CAPITAL ESTATE BUILDER]
POLICY DATA PAGES
<TABLE>
<S> <C>
LIMITATIONS ON WITHDRAWALS OF CASH SURRENDER VALUE:
Minimum Withdrawal: [$100.00]
Frequency: [No withdrawals are permitted in the first Policy Year.]
Impact on Death Benefit: [No withdrawal may be made if the Death Benefit would be reduced below the Minimum
Face Amount or below the amount required to qualify the Policy as a life insurance
contract.]
Impact on Remaining
Cash Surrender Value: [No withdrawal may be made if the remaining Cash Surrender Value would be less than
the greater of: (a) $1,000 or (b) 3 times the most recent Monthly Deduction.]
LIMITATIONS ON REDUCTIONS IN FACE AMOUNT OR CHANGES IN DEATH BENEFIT
OPTIONS:
Frequency: [No reductions in Face Amount or change in Death Benefit Options may be requested in
the first Policy Year. After the first Policy Year, the Death Benefit Option may be
changed no more frequently than once per Policy Year.]
Impact on Death Benefit: [No reductions in Face Amount or change in Death Benefit Options may be made if the
Death Benefit would be reduced below the Minimum Face Amount, or below the amount
required to qualify the Policy as a life insurance contract.]
LOANS:
Minimum Loan:
Loan Interest Rate: [$100]
Preferred Loan Interest Rate: [Equal to an annual rate of 4.0%]
Maximum Loan Interest Rate: [Equal to an annual rate of 6.0%]
Loan Account Credited Interest Rate: [4% per annum]
BONUSES:
Premium Value Bonus:
Premium Value Bonus Factors:
Rate/Insurance Class: [Joint Non-Smoker/Joint Smoker, Preferred,
or Standard]
Eligible Policy Years: [Year 9 and after]
Non - Guaranteed Premium Value Percentage [5%]
Guaranteed Premium Value Percentage: [3%]
Cash Value Bonus:
Non -Guaranteed Cash Value Bonus ---------------------------------------------------------------------------
Factors: Policy
[Cash Accumulation [Cash Value Bonus Percentage Years
Value] Policy Years 9 to 20] 21+
---------------------------------------------------------------------------
[Less than $25,000] [.00%] [0]
---------------------------------------------------------------------------
[$25,000 to $100,000] [.10%] [.25]
---------------------------------------------------------------------------
[More than $100,000 [.20] [.50]
200,000]
---------------------------------------------------------------------------
More than $200,000 and [.30] [.75]
more
---------------------------------------------------------------------------
</TABLE>
PD-4
<PAGE>
[CAPITAL ESTATE BUILDER]
POLICY DATA PAGES
<TABLE>
<S> <C>
POLICY EXCHANGES:
Alternative 1 Alternative 1A:
[Right to Exchange for Two Policies: [The Company will split the Death Benefit and Cash Accumulation Value
of this Policy on the basis stated in the Policy Exchange Endorsement.]
Alternative 1B:
[The Company will split the Death Benefit and Cash Accumulation Value
of this Policy on the basis stated in the attached application. The
Owner must make a request in the manner and during the period
described in the Policy Exchange Endorsement.]
Alternative 2 Alternative 2
[No Right to Exchange for Two [The Owner may not elect to split either the Death Benefit or the Cash
Policies:] Accumulation Value of this Policy.]
</TABLE>
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES:
(As a percent of Account Value)
<TABLE>
<CAPTION>
JOINT MINIMUM DEATH JOINT MINIMUM DEATH JOINT MINIMUM DEATH
AGE BENEFIT PERCENTAGE AGE BENEFIT PERCENTAGE AGE BENEFIT PERCENTAGE
<S> <C> <C> <C> <C> <C>
35 250 57 142 79 105
36 250 58 138 80 105
37 250 59 134 81 105
38 250 60 130 82 105
39 250 61 128 83 105
40 250 62 126 84 105
41 243 63 124 85 105
42 236 64 122 86 105
43 229 65 120 87 105
44 222 66 119 88 105
45 215 67 118 89 105
46 209 68 117 90 105
47 203 69 116 91 104
48 197 70 115 92 103
49 191 71 113 93 102
50 185 72 111 94 101
51 178 73 109 95 and older 100
52 171 74 107
53 164 75 105
54 157 76 105
55 150 77 105
56 146 78 105
</TABLE>
The Joint Age is determined by the Company based on the age, sex, Insurance
Class and Rate Class for both the First Insured Life and the Second Insured
Life. The Joint Age is not adjusted upon the first death.
THE MINIMUM BENEFIT PERCENTAGES ARE DETERMINED TO COMPLY WITH SECTION 7702 OF
THE INTERNAL REVENUE CODE BUT ARE NOT GUARANTEED.
PD-5
<PAGE>
[CAPITAL ESTATE BUILDER]
POLICY DATA PAGES
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES*
Joint Insured Lives
Rate/Insurance Classes: Male, Non-Smoker, Preferred
Female, Non-Smoker, Preferred
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Joint Joint Joint
Policy Insured Policy Insured Policy Insured
Year Lives Year Lives Year Lives
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 0.00089 21 0.39681 41 10.34460
- ----------------------------------------------------------------------
2 0.00292 22 0.47662 42 11.78759
- ----------------------------------------------------------------------
3 0.00539 23 0.56810 43 13.33558
- ----------------------------------------------------------------------
4 0.00837 24 0.67301 44 14.98646
- ----------------------------------------------------------------------
5 0.01196 25 0.79573 45 16.75457
- ----------------------------------------------------------------------
6 0.01632 26 0.94217 46 18.65848
- ----------------------------------------------------------------------
7 0.02162 27 1.12004 47 20.74477
- ----------------------------------------------------------------------
8 0.02812 28 1.33848 48 23.10012
- ----------------------------------------------------------------------
9 0.03609 29 1.60425 49 25.92728
- ----------------------------------------------------------------------
10 0.04564 30 1.92049 50 29.70219
- ----------------------------------------------------------------------
11 0.05713 31 2.28839 51 35.45428
- ----------------------------------------------------------------------
12 0.07066 32 2.70751 52 45.57225
- ----------------------------------------------------------------------
13 0.08629 33 3.17843 53 66.32791
- ----------------------------------------------------------------------
14 0.10449 34 3.70641 54 120.22284
- ----------------------------------------------------------------------
15 0.12612 35 4.30542 55 211.48253
- ----------------------------------------------------------------------
16 0.15201 36 4.99542
- -------------------------------------------
17 0.18340 37 5.79736
- -------------------------------------------
18 0.22221 38 6.73261
- -------------------------------------------
19 0.27022 39 7.80688
- -------------------------------------------
20 0.32815 40 9.01467
- -------------------------------------------
</TABLE>
* Per $1,000 of Net Amount at Risk. For cost of insurance rates which are not
a standard rate class, the Table will be increased by rating factors and/or
additional monthly charges.
PD-6
<PAGE>
SECTION 1 DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT VALUE The sum of the Owner's interest (i) in the Sub-
Account(s) of the Separate Account; (ii) in the Fixed
Account; and, if there is an outstanding Policy loan,
(iii) in the Loan Account.
ACCUMULATION UNIT A unit of measurement used to calculate the Account
Value of a Sub-Account of the Separate Account.
ACCUMULATION The value of an Accumulation Unit on a Business Day.
UNIT VALUE
BENEFICIARY The person, persons or entity who will receive the Death
Benefit upon the death of the Surviving Insured. The
Beneficiary is stated in the application for this
Policy, unless changed in accordance with the Policy
provisions.
BUSINESS DAY Each day the New York Stock Exchange is open for regular
trading, which is Monday through Friday, except for
normal business holidays or such other business days as
we shall designate.
COMPANY First Variable Life Insurance Company.
CASH Account Value minus any existing Indebtedness.
ACCUMULATION
VALUE
CASH SURRENDER VALUE The amount available upon surrender of the Policy which
is equal to the Account Value less all Indebtedness; and
reduced by any applicable Surrender Charges due upon
surrender.
DEATH BENEFIT The amount of insurance provided under a Policy on the
life of the second-to-die of the Insureds.
DEATH BENEFIT PROCEEDS The amount payable on the death of the second-to-die of
the Insureds. This amount is the Death Benefit less
Indebtedness and less any due and unpaid Monthly
Deduction(s).
FACE AMOUNT A dollar amount used to determine the Death Benefit
under a Policy. It is shown on the Policy Data Pages.
FIXED ACCOUNT The Fixed Account is the non-loaned portion of the
Account Value that is part of the Company's general
account. The Fixed Account provides guarantees of
principal and interest.
INDEBTEDNESS All amounts owed to the Company by the Owner. This
includes all outstanding loans on this Policy, including
any interest due or accrued.
INSUREDS The Insured Person and Second Insured Person as shown on
the Policy Data Pages.
<PAGE>
JOINT AGE The joint equivalent age of the Insureds that is used to
calculate the costs and benefits of this Policy. The
Joint Age is determined by the Company on the Policy
Date and increases by 1 on each Policy Anniversary.
LOAN ACCOUNT An account established in the Company's general account
for any amounts requested for loans.
MATURITY DATE The Policy Anniversary on or following the 100th
birthday of the younger of the Insureds. The date on
which the Policy will mature is shown on the Policy Data
Pages.
MONTHLY DEDUCTION The amount deducted from Account Value on the first
Business Day of each Policy Month to cover charges and
expenses incurred in connection with the Policy and any
additional benefit riders.
NET AMOUNT AT RISK The amount of insurance coverage determined under this
Policy for each Policy Month.
NET PREMIUM The amounts paid for a Policy, less the applicable
Premium Load, if any, shown on the Policy Data Pages.
OWNER The person, persons or entity entitled to all ownership
rights under the Policy. The Owner is stated on the
application for this Policy, unless changed in
accordance with Policy provisions.
POLICY ANNIVERSARY An anniversary of the Policy Date.
POLICY DATE The date on which the Policy became effective. The
Policy Date is shown on the Policy Data Pages. Policy
Months and Policy Years are measured from this date.
POLICY OPTION The Fixed Account or any of the Sub-Accounts of the
Separate Account which can be selected under the Policy.
POLICY MONTH A one month period starting from the Policy Date.
POLICY YEAR A one year period starting from the Policy Date and from
each Policy Anniversary.
PORTFOLIO The separate and distinct class of shares that is
available as an underlying investment of a Sub-Account.
On the Policy Date, each Sub-Account invests exclusively
in a Portfolio stated on the Policy Data Pages.
PREMIUM PAYMENT An amount paid to the Company to provide benefits under
this Policy.
SEPARATE A separate investment account of the Company, designated
ACCOUNT on the Policy Data Pages.
<PAGE>
SUB-ACCOUNT A segment of the Separate Account.
SURVIVING INSURED The insured person who remains alive after the first
death of the Insureds that occurs while the Policy is
in force.
VALUATION PERIOD The period of time between the close of one Business
Day and the close of business for the next succeeding
Business Day.
VARIABLE SERVICE CENTER The Company's administrative service center for this
Policy. The mailing address for the Variable Service
Center on the Policy Date is shown on the Policy Data
Pages, or such other location as we may designate.
Other terms are defined in the Policy.
Section 2 PREMIUM PAYMENTS
- --------------------------------------------------------------------------------
GENERAL The Minimum Initial Premium Payment shown on the Policy
Data Pages is due on or before the Policy Date. The
Owner may make additional Premium Payments at any time
during the lifetime of either of the Insureds, subject
to the Premium Limitations.
PLANNED PREMIUMS The Owner may elect, within limits specified by the
Company, to pay premium on a pre-determined schedule.
The Planned Premiums on the Policy Date, if any, are
shown on the Policy Data Pages.
PREMIUM LIMITATIONS The Company will refuse any premium payment that may
cause this Policy not to be treated as life insurance
for tax purposes. The Company reserves the right to
require satisfactory evidence of insurability before
accepting any additional Premium Payment that would
increase the then current Death Benefit. The Company
may require that any Indebtedness be repaid prior to
accepting any additional premium.
ALLOCATION OF PREMIUM Each Premium Payment is allocated to the Fixed Account
and/or one or more Sub-Accounts of the Separate Account
after deduction of the Premium Load, if any, shown on
the Policy Data Pages. The portion of a Net Premium
allocated to a Sub-Account of the Separate Account is
converted into Accumulation Units. The number of
Accumulation Units
<PAGE>
ALLOCATION OF PREMIUM in a Sub-Account credited to this Policy is determined
(continued) by dividing (a) by (b), where:
(a) is the amount of Net Premium Payment to be
allocated to that Sub-Account; and
(b) is the dollar value of the Accumulation Unit Value
for that Sub-Account.
It is generally calculated by the Company as of the
later of the end of the Valuation Period during which
the Company receives a Premium Payment at its Variable
Service Center or the Policy Date.
Except as described in the Delayed Investment Start
Date provisions, the initial Net Premium is allocated
in accordance with the selection made by the Owner in
the application. Unless otherwise changed by the Owner,
any additional Net Premium Payment is allocated in the
same manner as the initial Premium Payment. Allocation
of Premium Payments is subject to the terms and
conditions imposed by the Company.
DELAYED INVESTMENT If a Delayed Investment Start Date is shown on the
START DATE Policy Data Pages, the Premium Payment for this Policy,
less the Premium Load, will be allocated to the Delayed
Investment Start Policy Option shown on the Policy Data
Pages in lieu of allocation to any other Sub-Account
Policy Option. Account Value will be transferred from
the Delayed Investment Start Policy Option on the
Business Day immediately following the Delayed
Investment Start Date to any other Sub-Account Policy
Option in accordance with the initial instructions of
the Owner.
The allocation of a Premium Payment to the Fixed
Account is not affected by a Delayed Investment Start
Date. Any Premium Payment received after a Delayed
Investment Start Date will be allocated to any Policy
Option then available under this Policy in accordance
with the Owner's direction.
MONTHLY MINIMUM The Monthly Minimum Premium on the Policy Date is shown
PREMIUM on the Policy Data Pages. Payment of a sufficient
amount of Monthly Minimum Premiums guarantees that the
Policy will remain in force during the Death Benefit
Guarantee Period shown on the Policy Data Pages, as
long as there are no withdrawals or Policy loans taken
during that time. Payment of Monthly Minimum Premiums
is sufficient if, on the first Business Day of each
Policy Month during the Death Benefit Guarantee Period,
(a) is equal to or greater than (b) where:
(a) is the sum of Premium Payments, minus any
Indebtedness, minus any withdrawals and any applicable
transaction charges deducted; and (b) is the Monthly
Minimum Premium multiplied by the number of elapsed
Policy Months, plus the Monthly Minimum Premium for the
current Policy Month.
<PAGE>
MONTHLY MINIMUM The Monthly Minimum Premium amount will be increased if
PREMIUM the Face Amount is increased, or other benefits added,
(continued) during the Death Benefit Guarantee Period.
GRACE PERIOD If sufficient Monthly Minimum Premiums are not paid
during the Death Benefit Guarantee Period, the Policy
will enter a grace period on the first Business Day of
any Policy Month where the Cash Surrender Value is not
sufficient to cover the current Monthly Deduction and
accrued interest on any Policy loans. After the Death
Benefit Guarantee Period, the Policy will enter a grace
period on the first Business Day of any Policy Month
where the Cash Surrender Value is not sufficient to
cover the current Monthly Deduction and accrued
interest on Policy loans.
A grace period of 61 days from the applicable Business
Day will be allowed for the payment of a minimum
required premium. The Company will send a grace period
notice to the Owner's last known address that will show
the minimum required premium for the grace period. This
is the amount necessary to cover the Monthly
Deduction(s) due under the Policy plus an amount equal
to three times the current Monthly Deduction. If the
minimum required premium is not paid by the end of the
grace period, the Policy will lapse without value. If
the Surviving Insured dies during the grace period, the
Company will pay the Death Benefit Proceeds.
REINSTATEMENT If a grace period ends and the Owner has neither paid
the minimum required premium nor surrendered the Policy
for its Cash Surrender Value, the Owner may reinstate
the Policy by:
(a) submitting a written request at any time within 3
years after the end of the grace period and prior
to the Maturity Date;
(b) providing evidence of insurability satisfactory to
the Company on both Insureds;
(c) paying a sufficient Premium to cover all charges
that were due and unpaid during the grace period;
(d) paying an additional Premium sufficient the keep
the Policy in force for 3 Policy Months from the
date of reinstatement; and
(e) repaying any Indebtedness against the Policy that
existed at the end of the grace period.
No reinstatement is permitted if only the Surviving
Insured is alive at the time of the request.
A reinstatement will be effective on the first business
Day of the Policy Month beginning on or after the
Company's approval. The Account Value of the reinstated
Policy will be the Account Value at the time of lapse
plus the amount in (d) above. Other terms and
conditions of the reinstated policy will be subject to
the Company's administrative procedures. The Surrender
Charges set forth on the Policy Data pages will be
reinstated as of the Policy Year in which the Policy
lapsed.
<PAGE>
Section 3 DEATH BENEFITS
- --------------------------------------------------------------------------------
GENERAL This Policy is designed to provide a Dental Benefit
that is payable when the last of the Insureds dies.
As long as the Policy remains in force, a Death Benefit
is payable upon the death of the Surviving Insured.
Upon receipt of proof of death of both Insureds and
receipt of any applicable Payout Option election, the
Company will pay the Death Benefit Proceeds to the
Beneficiary. The Owner may elect for the Death Benefit
Proceeds to be paid in a single sum or under a Payout
Option by written request to the Company at its
Variable Service Center. The Company must receive the
election at its Variable Service Center before the
death of the Surviving Insured. If no Payout Option is
in effect upon the death of the Surviving Insured, the
Beneficiary may elect a Payout Option under the Payout
Option provisions of this Policy in lieu of a single
sum.
The Death Benefit is based on the Death Benefit Option
in effect, and Account Value, on the date of the
Surviving Insured's death; and any increases or
decreases to the Face Amount.
DEATH BENEFIT OPTIONS The amount of insurance provided under a Policy on the
life of the second-to-die of the Insureds.
DEATH BENEFIT PROCEEDS The amount payable on the death of the second-to-die of
the Insureds. This amount is the Death Benefit less
Indebtedness and less any due and unpaid Monthly
Deduction(s).
DEATH BENEFIT OPTIONS Death Benefit Option A. Under this option, the Death
Benefit is the greater of: (a) the Face Amount or (b)
the Adjusted Face Amount.
Death Benefit Option B. Under this option, the Death
Benefit is the greater of: (a) the Face Amount plus the
Account Value or (b) the Adjusted Face Amount.
The Face Amount and the Death Benefit Option in effect
on the Policy Date is shown on the Policy Data pages.
The "Adjusted Face Amount" is
. the Account Value as of the date of determination;
multiplied by
. the applicable minimum death benefit percentage
shown in the Table of Minimum Death Benefit
Percentages on the Policy Data Pages; and the result
reduced by
. the amount of death benefit under a Joint Second-To-
Die Term Insurance Rider, if any, attached to this
Policy.
<PAGE>
CHANGE IN DEATH Death Benefit Option. The Owner may make a written
BENEFIT OPTIONS AND request to the Variable Service Center to change the
FACE AMOUNT Death Benefit Option, subject to any limitations shown
on the Policy Data pages.
A change from Death Benefit Option A to Death Benefit
Option B will cause the Face Amount to decrease by the
amount of the Account Value.
The Company reserves the right to require satisfactory
evidence of insurability on both Insureds before
permitting a change from Death Benefit Option B to
Death Benefit Option A. If approved, the change will
cause the Face Amount to be increased by the amount of
the Account Value.
CHANGE IN DEATH Face Amount Increases. The Owner may make a written
BENEFIT OPTIONS AND request to the Variable Service Center to increase the
FACE AMOUNT Face Amount, subject to any limitations shown on the
(continued) Policy Data pages, only during the lifetime of both
insureds.
For a change that would increase the Face Amount, the
Company may require evidence of insurability on either
or both Insureds. The Company may restrict any
requested increases in Face Amount to minimums and
maximums that vary with the Insureds' ages, Insurance
Classes and Rate Classes. If the Face Amount is
increased during the Death Benefit Guarantee Period
shown on the Policy Data Pages, the Monthly Minimum
Premium will be increased. The increase in Monthly
Minimum Premium will begin on the first Business Day of
the Policy Month on which the increase in Face Amount
is effective. An increase in Monthly Minimum Premium
will remain in effect for the remainder of the Death
Benefit Guarantee Period. The Company will calculate
the increase in Monthly Minimum Premium based on the
Insureds' ages, sex, additional Face Amount, Insurance
Classes and Rate Classes.
Face Amount Decreases. The Owner may make a written
request to the Variable Service Center to decrease the
Face Amount, subject to any limitations shown on the
Policy Data pages.
Any reduction of Face Amount will be in the following
order:
. against the most recent increase in insurance; then
. against the next most recent increases; then
. against the initial Face Amount.
Effective Date of Change. A change will take effect on
the first Business Day of the Policy Month coinciding
with or next following the date the Company approves
the request.
<PAGE>
PAYMENT OF DEATH The amount of the Death Benefit is determined on the
BENEFIT date the Company receives proof of the death of both
PROCEEDS Insureds. The Death Benefit Proceeds actually paid to
the Beneficiary are equal to the Death Benefit reduced
by any Indebtedness and any due and unpaid Monthly
Deductions and increased by the amounts, if any,
payable under any optional additional benefit riders in
effect on the date of the Insured's death. The Death
Benefit Proceeds will be determined by the Company as
of the date of the Surviving Insured's death. All Death
Benefits will be paid in accordance with applicable law
or regulations governing death benefit payments.
PAYMENT OF DEATH The Company will require due proof of death before
BENEFIT payment of a Death Benefit. For these purposes, "due
PROCEEDS proof of death" means:
(a) certified death certificates for both insureds;
(b) a certified decree of a court of competent
jurisdiction as to the finding of death; or
(c) any other proof satisfactory to the Company.
BENEFICIARY OTHER Unless the Owner provides otherwise, the Death Benefit
THAN A SINGLE PERSON will be paid in equal shares to the survivor(s) as
follows:
(a) to the primary Beneficiary(ies) who survive the
death of the Surviving Insured; or if there are
none,
(b) to the contingent Beneficiary(ies) who survive the
death of the Surviving Insured; or if there are
none,
(c) to the Owner.
Section 4 POLICY OPTIONS
- --------------------------------------------------------------------------------
THE SEPARATE ACCOUNT The Separate Account is a separate investment account
AND THE SUB-ACCOUNTS of the Company. It is shown on the Policy Data Pages.
The Company has allocated a part of its assets for this
and certain other policies to the Separate Account. The
assets of the Separate Account are the property of the
Company. The Company guarantees that the portion of the
Separate Account assets equal to the Company's reserves
and other policy liabilities with respect to the
Separate Account shall not be chargeable with the
liabilities arising out of any other business the
Company may conduct.
Assets of the Separate Account are valued at their fair
market value in accordance with procedures of the
Company. The Separate Account is segmented into Sub-
Accounts. Each Sub-Account available under this Policy
on the Policy Date invests its assets exclusively in
shares of one of the Portfolios shown on the Policy
Data Pages.
The investment policy of the Separate Account shall not
be changed without approval of the Insurance
Commissioner of the Company's state of domicile. On the
Policy Date, the Company's state of domicile is
Arkansas. A statement of the approval process is on
file with that state's Insurance Department.
<PAGE>
SUB-ACCOUNT The Owner may allocate Net Premium to one or more of
INVESTMENT OPTIONS the Sub-Accounts that correspond to the Portfolios
shown on the Policy Data Pages. The Company may, from
time to time, invest Separate Account assets in
additional mutual funds, portfolios of mutual funds, or
other investments. The Owner may be permitted to
transfer Account Value or allocate Net Premium to these
additional Separate Account investments. However, the
right to make any transfer will be limited by the terms
and conditions imposed by the Company.
If the shares of any Portfolio, or of any other
Separate Account investment, become unavailable for
investment by the Separate Account,
SUB-ACCOUNT Or if the Company's Board of Directors deems further
INVESTMENT OPTIONS investment in these shares inappropriate or
inadvisable, the Company may limit further purchase of
these shares and may substitute shares of another
Portfolio or other investment vehicle for shares
already purchased under this Policy. The Company also
may, in its discretion, remove Portfolios for transfers
or new investments. In making these and any other
changes, the Company will comply with all applicable
legal requirements and, if required, it will seek Owner
approval.
FIXED ACCOUNT OPTION The Owner may allocate a Premium Payment to the Fixed
Account. Interest will be credited to amounts allocated
to the Fixed Account as described in the "Account
Value - Fixed Account Value" provision of this Policy.
Section 5 TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS AMONG In any Policy Year, the Owner may transfer Account
POLICY OPTIONS Value among Policy Options without the imposition of
any transaction fee if there have been no more than the
guaranteed minimum number of free transfers shown on
the Policy Data Pages. The Company may from time to
time: (a) increase the number of permitted free
transfers; or (b) decrease the number of permitted free
transfers, but not below the guaranteed minimum number
of free transfers. No transfers are permitted, however,
until the end of a Delayed Investment Start Date, if
any, shown on the Policy Data Pages. The amount of
Account Value which may be transferred from the Fixed
Account to other Policy Options will be subject,
without limitation, to the specific restrictions, if
any, shown on the Policy Data Page.
All amounts and Accumulation Unit Values will be
determined as of the and of the Valuation Period in
which the Company receives the transfer request.
If more than the permitted number of free transfers
have been made in the Policy Year, the Company will
deduct any applicable transaction fee described in
Section 7 of this Policy for each subsequent transfer.
<PAGE>
GENERAL REQUIREMENTS The minimum amount of Account Value that can be
FOR TRANSFERS transferred is shown on the Policy Data Pages.
Any transfer instruction must be in a form satisfactory
to the Company, and received by the Company at its
Variable Service Center. Without limitation, any such
instruction must clearly specify the amount to be
transferred and the Policy Options to be affected. The
Company will not be liable for transfers made in
accordance with instructions by, or on behalf of, the
Owner.
The Company reserves the right, at any time and without
prior notice to any party, to terminate, suspend or
modify the transfer privileges described above.
- --------------------------------------------------------------------------------
Section 6 ACCOUNT VALUE
- --------------------------------------------------------------------------------
GENERAL The Account Value on any Business Day is the sum of the
Owner's interest (a) in the Sub-Accounts of the
Separate Account; (b) in the Fixed Account; and (c) if
there is an outstanding Policy loan, in the Loan
Account. The value of the Owner's interest in a Sub-
Account is determined by multiplying the number of
Accumulation Units attributable to that Sub-Account by
the Accumulation Unit Value for that Sub-Account.
ACCUMULATION UNIT The number of Accumulation Units in a Sub-Account
VALUE credited to this Policy is determined by dividing the
amount to be allocated to that Sub-Account by the
Accumulation Unit Value for that Sub-Account as of the
end of the Valuation Period when that allocation is to
be effective. An amount to be allocated may be derived
from a Premium Payment, loan repayment, Premium Value
Bonus, or a transfer of Account Value into a Sub-
Account. The Accumulation Unit Value for each Sub-
Account will vary to reflect the investment experience
of the assets in that Sub-Account and will be
determined on each Valuation Date by multiplying the
Accumulation Unit Value of the Sub-account on preceding
Valuation Date by a Net Investment Factor for that Sub-
Account for the Valuation Period then ended. The Net
Investment Factor for each Sub-Account is generally
equal to the net asset value per share of the
applicable portfolio at the end of the Valuation Period
(plus the per share amount of any dividend or capital
gains distribution paid by that Portfolio in the
Valuation Period then ended) divided by the net asset
value per share of the corresponding Portfolio at the
beginning of the Valuation Period and reduced by the
daily equivalent rate of the mortality and expense risk
charge.
FIXED ACCOUNT VALUE The Company guarantees that it will credit interest to
the Account Value in the Fixed Account at a rate not
less than the minimum guaranteed interest rate shown on
the Policy Data Pages. The Company may credit
additional amounts of interest from time to time in its
sole discretion.
<PAGE>
The Company determines interest rates in advance, and
credits interest daily to Fixed Account Value in
dollars.
MINIMUM VALUE The Company reserves the right to transfer Account
REQUIRED IN ANY Value from any Policy Option if on any Business Day the
POLICY OPTION Account Value in the Policy Option is less than $100.
In such event, the Account Value will be transferred to
the Policy Option with the highest Account Value.
PREMIUM VALUE BONUS This Policy will be eligible for a Premium Value Bonus
credit at the start of the first Eligible Policy Year
shown on the Policy Data Pages. To be eligible, the
cumulative amount of premiums paid on the first
Business Day of the first Eligible Policy Year, less
the amount of Indebtedness and withdrawals taken by the
Owner, must be at least equal to the product of the
Monthly Minimum Premium times the number of elapsed
Policy Months.
If the eligibility requirement is met, a Premium Value
Bonus will be credited each Policy Month:
. starting on the first Business Day of the first
Eligible Policy Year;
. based on the guaranteed Premium Value Bonus factors
shown on the Policy Data Pages; but only if
. the cumulative amount of premiums paid on the last
Business Day of the immediately preceding Policy
Month, less the amount of Indebtedness and
withdrawals taken by the Owner, is at least equal to
the product of the current Monthly Minimum Premium
times the number of elapsed Policy Months.
Any Premium Value Bonus credited will be at least equal
to the product of the current Monthly Minimum Premium
times the guaranteed annual Premium Value Percentage
rate shown on the Policy Data Pages.
Additional Bonuses may be credited from time to time at
the Company's sole discretion based on "current"
Premium Value Bonus factors. The current Premium Value
Bonus factors (including an annual Premium Value
Percentage rate) on the Policy Date, which may be
changed by the Company at any time without notice, will
never be less than the Guaranteed Premium Value Bonus
factors shown on the Policy Data Pages.
CASH VALUE BONUS After a Policy has been continuously in force for the
first eight Policy Years, Cash Value Bonus amounts may
be credited monthly to Account Value. Cash Value
Bonuses, if any, are based on the Cash Accumulation
Value at the end of the last Business Day of the
immediately preceding Policy Month and the applicable
Cash Value Bonus Percentage rate then in effect. The
Cash Value Bonus annual percentage rate on the Policy
Date is shown on the Policy Data Pages. The rate is not
guaranteed and may be increased, decreased, or
eliminated by the Company in its sole discretion.
ALLOCATION OF BONUSES Any Premium Value Bonus and Cash Value Bonus will be
allocated among the Fixed Account and the Sub-Accounts
of the Separate Account on the basis then in effect for
Net Premiums or by any other method
<PAGE>
approved by the Company in advance. The Company will
credit amounts by adding values to the Fixed Account
and/or crediting additional Accumulation Units of the
applicable Sub-Accounts to the Account Value. Bonuses
are not allocated to the Loan Account.
<PAGE>
Section 7 CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Various charges and deductions are made from Premium Payments, Account Value and
the Separate Account. These are:
PREMIUM CHARGE and The Premium Charge and Premium Tax Charge, as shown on
PREMIUM TAX CHARGE the Policy Data Pages, is deducted from each Premium
Payment. The Company may, from time to time, reduce the
amount of either, or both, below the applicable
guaranteed amount shown on the Policy Data Pages.
MONTHLY DEDUCTIONS On the first Business Day of each Policy Month, the
Company will take a Monthly Deduction to cover charges
and expenses incurred in connection with the Policy.
This amount will be taken by subtracting values from the
Fixed Account and/or canceling Accumulation Units from
each applicable Sub-Account. The deductions will be in
the ratio that the value of each Policy Option bears to
the Cash Accumulation Value, or by any other method
selected by the Owner and acceptable to the Company. The
amount taken will vary from month to month.
The monthly deductions are comprised of the following
charges:
Administrative Charge: The Company deducts an
Administrative Charge for the amount shown on the Policy
Data Pages.
Monthly Policy Benefit Charge: The Company deducts a
Monthly Policy Benefit Charge for the amount shown on
the Policy Data Pages. Monthly Policy Fee: The Company
deducts a Monthly Policy Fee for the amount shown on the
Policy Data Pages based on the Face Amount on the Policy
Date. The Company may adjust this amount if the Face
Amount increases.
The Company may from time to time reduce the amount of
any guaranteed charge shown.
Cost of Insurance: The Company deducts a Cost of
Insurance Charge from the Cash Accumulation Value on the
first Business Day of each Policy Month.
The Cost of Insurance Charge for any Policy Month is
determined by: (a) subtracting the Account Value from
the Death Benefit; (b) dividing the net amount by
1.003273739; and (c) multiplying the results by the
current cost of insurance rate divided by 1,000. The
cost of insurance rate is based on Policy Year and the
Insureds' sex, ages, Insurance Classes and Rate Classes.
The Company will determine the rates, but they will
never be more than the guaranteed rates shown on the
Policy Data Pages.
The maximum cost of insurance charges do not exceed the
cost of insurance rates based on the 1980 Commissioner's
Standard Ordinary Mortality Table, age, Rate Class and
sex.
<PAGE>
MONTHLY DEDUCTIONS Additional Benefit Rider Charges: The charges for
(continued) optional additional benefit riders attached to the
Policy, will be deducted monthly as specified in the
rider.
DAILY DEDUCTIONS Each Business Day, the Company will deduct an asset
charge which is equal to a percentage of the net assets
in each Sub-Account of the Separate Account for this
class of Policy. The asset charge is guaranteed by the
Company not to exceed the guaranteed rate shown on the
Policy Data Pages.
The Company may from time to time, assess an asset
charge for this class of Policy that is less than the
guaranteed maximum rate. The asset charge on the Policy
Date is as shown on the Policy Data pages.
INCOME TAXES The Company reserves the right to reduce the Account
Value for federal income taxes of the Separate Account
if it determines, in its sole discretion, that it will
incur a tax as a result of the operation of the Separate
Account. The Company will deduct for any income taxes
incurred by it as a result of the operation of the
Separate Account whether or not there was a Company
reserve for taxes and whether or not it was sufficient.
TRANSACTION CHARGES The Company reserves the right to assess transaction
charges shown on the Policy Data Pages for:
. transfers of Account Value described in Section 5 -
TRANSFERS;
. surrender or withdrawals of Cash Surrender Value as
described in Section 8 - SURRENDER AND WITHDRAWALS;
and
. loans using the Policy as security as described in
Section 9 - LOANS.
The Company may from time to time, reduce the amount of
any guaranteed transaction charge shown on the Policy
Data pages.
ALLOCATION OF Transaction charges will be deducted pro-rata from
TRANSACTION CHARGES Account Value in each Policy Option prior to the
transaction, or by any other method approved by the
Company in advance of the transaction. If the entire
interest in a Sub-Account or the Fixed Account is being
transferred, the pro-rata portion of any applicable
transaction fee will be deducted from the amount that is
transferred.
<PAGE>
Section 8 SURRENDER AND WITHDRAWALS
- --------------------------------------------------------------------------------
SURRENDER The Owner may surrender this Policy for its Cash
Surrender Value at any time while either of the Insureds
is living by written request to the Company at its
Variable Service Center. The Cash Surrender Value of the
surrendered Policy will be determined as of the Business
Day when a surrender request is received at the
Company's Variable Service Center. The Owner may request
to have all or part of the Cash Surrender Value applied
to a Payout Option. The Company's liability for the
Death Benefit terminates upon a surrender of the Policy.
WITHDRAWALS After the first Policy Year, the Owner may request to
make a withdrawal of a portion of the Cash Surrender
Value. The amount requested must be not less than the
Minimum Withdrawal amount shown on the Policy Data
Pages. Any request is subject to any limitations on
withdrawals shown on the Policy Data pages. A permitted
withdrawal will cause a reduction in the Account Value
and Death Benefit by the sum of : (a) the amount of the
Cash Surrender Value withdrawn; and (b) any applicable
transaction charge shown on the Policy Data pages. The
Death Benefit will be further reduced if it is then
determined by the applicable percentage of Death Benefit
factors shown on the Policy Data Pages.
A permitted withdrawal will result in the cancellation
of Accumulation Units from each applicable Sub-Account
Policy Option or a reduction in Fixed Account Value in
the ratio that the Account Value in the Policy Option
bears to the Cash Accumulation Value. If Death Benefit
Option A is in effect, a withdrawal will reduce the Face
Amount by the withdrawal plus any applicable transaction
charges. The Owner may request in writing in advance if
a different method for canceling Accumulation Units or
reducing Fixed Account Value is desired. The Company
reserves the right to disapprove any such request.
SURRENDER The Surrender Charge is shown on the Policy Data Pages,
CHARGE and is based on the Face Amount on the Policy Date. The
charge may vary depending on the elapsed period during
which the Surrender Charge applies. An additional
Surrender Charge may apply if the Face Amount is
increased.
The Company will apply the Surrender Charge to a
surrender by subtracting values from the Fixed Account
and/or canceling Accumulation Units credited to this
Policy.
SUSPENSION OR The Company generally will pay amounts from the Separate
DEFERRAL OF PAYMENTS Account for a surrender, withdrawal, Policy loan or
transfer within seven (7) days of receipt of a request
in good order. The Company reserves the right, however,
to suspend or postpone such payments for any period
when:
. regular trading on the New York Stock Exchange is
closed; or
. regular trading on the New York Stock Exchange is
restricted; or
<PAGE>
SUSPENSION OR . an emergency exists as a result of which disposal of
DEFERRAL OF PAYMENTS securities held in the Separate Account is not
(continued) reasonably practicable or it is not reasonably
practicable to determine the value of the Separate
Account's net assets; or
. during any other period when the Securities and
Exchange Commission, by order, so permits for the
protection of Owner(s).
The Company reserves the right to defer payment for a
surrender, withdrawal, Policy loan or transfer from the
Fixed Account for the period permitted by law, but not
for more than six months after written election is
received by the Company.
Section 9 LOANS
- --------------------------------------------------------------------------------
GENERAL The Owner may borrow money and use the Policy as
security for the Indebtedness at any time after the Free
Look period. The Company will usually make the loan
within seven (7) days of the date a loan request is
received at the Variable Service Center.
The maximum amount available as a loan is equal to 90%
of the Account Value less the sum of Surrender Charges
and Indebtedness. The minimum Policy loan amount is
shown on the Policy Data Pages.
A Policy loan reduces the Account Value in the Sub-
Accounts and Fixed Account by the amount of the loan.
Account Value equal to the amounts loaned is transferred
from the Fixed Account and the Separate Account to the
Loan Account when the loans are made. The amounts
transferred will be taken in proportion to the Account
Value in each Sub-Account and the Fixed Account, unless
another method is requested in advance and agreed to by
the Company. Interest is credited monthly to the Loan
Account at the equivalent of the minimum guaranteed
annual interest rate shown on the Policy Data Pages.
The amount taken from the Policy's Sub-Accounts as a
result of a loan does not participate in the investment
experience of the Sub-Accounts. Therefore, the Death
Benefit and Account Value of the Policy can be
permanently affected by a Policy loan, even if it is
repaid. In addition, any proceeds payable under a Policy
are reduced by the amount of any Indebtedness.
<PAGE>
GENERAL (continued) Interest accrues daily and will be payable at the end of
each Policy Month. Any interest not paid when due will
be added to the Indebtedness and bear interest in the
same manner. An amount equal to the unpaid interest will
be deducted from the Account Value in the Policy Options
and transferred to the Loan Account on the first
Business Day of the next Policy Month.
A loan repayment increases the Account Value in the Sub-
Accounts and Fixed Account by the amount of the
repayment. Policy loan repayments are attributed to the
Sub-Accounts and Fixed Account in the same manner as an
additional Net Premium Payment, unless another method is
requested in advance and agreed to by the Company.
REGULAR LOANS Indebtedness as a result of a Regular Loan will be
charged interest at the maximum loan interest rate(s)
shown on the Policy Data Pages. Any money borrowed under
this Policy is treated as a Regular Loan until a
Preferred Loan Event occurs. When a Preferred Loan Event
occurs, Indebtedness that is then attributable to a
Regular Loan is automatically converted within seven (7)
Business Days to a Preferred Loan, up to the Preferred
Loan Limit described below.
After the first Policy Year, the Owner may qualify for a
Preferred Loan. To qualify, the Policy must have a Cash
Accumulation Value of at least $25,000 on the most
recent Policy Anniversary. This is called a "Preferred
Loan Event." During the Policy Year immediately
following a Preferred Loan Event, the Owner may request
a Preferred Loan at the Preferred Loan Rate shown on the
Policy Data Pages. If Cash Accumulation Value is less
than $25,000 on a Policy Anniversary, no new Preferred
Loans may be taken during the immediately following
Policy Year. Loans that do not qualify for Preferred
Loan status are treated as Regular Loans.
The maximum amount available for a Preferred Loan in any
qualifying Policy Year is the Preferred Loan Limit less
the amount of any Indebtedness converted from a Regular
Loan to a Preferred Loan for that Policy Year. The
"Preferred Loan Limit" in any Policy Year is 15% of the
Cash Accumulation Value on the immediately preceding
Policy Anniversary. A Preferred Loan will reduce the
amount available as a Regular Loan.
IMMEDIATE LOAN A loan repayment will be due on the first Business Day
REPAYMENT of a Policy Month if (a) exceeds (b), where:
(a) is the amount of Indebtedness; and
(b) the excess of the Policy's Account Value over any
Surrender Charge that would be due if the Policy
were surrendered.
A period of 61 days will be allowed from the first day
of such Policy Month for a loan repayment. The Company
will send a notice to the Owner or assignee, if any. The
Policy will terminate without value 61
<PAGE>
days after the mailing of the notice unless a sufficient
repayment is made during that period. A repayment is
sufficient if it is large enough to reduce the total
Indebtedness to an amount equal to:
. the Policy's Account Value less the Surrender Charge;
plus
. an amount sufficient to continue the Policy in force
for 3 months.
IMMEDIATE LOAN The Company will send such notice to the Owner's last
REPAYMENT (continued) known address. If the Insured dies during the loan
repayment period, the Death Benefit Proceeds will be
payable as stated in the Death Benefits section.
A loan repayment must be designated as such. Otherwise,
the Company will treat the payment as a Premium Payment.
Section 10 OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS
- --------------------------------------------------------------------------------
OWNERSHIP The Owner has all rights under this Policy. The Owner is
the person or persons designated in the Application,
unless changed during the lifetimes of either of the
Insureds. Upon the death of the Owner, his or her estate
will become the Owner unless a successor Owner has been
named. The Owner's rights under the Policy terminate when
the surviving Insured dies.
ASSIGNMENT The Owner may, at any time before the death of the
surviving Insured, assign his or her rights under this
Policy. The Company will not be bound by any assignment
until the Company receives written notice at its Variable
Service Center. The Company is not responsible for the
validity or tax consequences of any assignment. The
Company will not be liable as to any payment or other
settlement made by the Company before receipt of the
assignment.
BENEFICIARY The Beneficiary on the Policy Date is as named on the
Application.
CHANGE OF A request to change the designated Owner or Beneficiary
DESIGNATIONS must be made in writing and received by the Company at its
Variable Service Center. The change will become effective
as of the date the written request is signed. A new
designation will not apply to any payment made or action
taken by the Company prior to the time it records the
change, and the Company shall be released from any further
liability with respect to any such payment made or action
taken.
Owner: The Owner may change the Owner at any time while
the Surviving Insured is alive. A change of Owner will
automatically revoke any prior designation of Owner.
Beneficiary: Subject to the rights of any irrevocable
Beneficiary(ies), the Owner may change the primary
Beneficiary(ies) or contingent Beneficiary(ies). A
permitted change of Beneficiary will automatically revoke
any prior designation of Beneficiary.
<PAGE>
Section 11 GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE POLICY The entire contract consists of this Policy; the
Application which is attached to this Policy; and any
riders or endorsements attached to this Policy.
This Policy may be changed or altered only by the
President or Vice President and the Secretary of the
Company. A change or alteration must be made in writing.
INCONTESTABILITY Generally, the Company can challenge the validity of the
Policy or any rider to the Policy during the lifetime of
each of the Insureds for two years from the Policy Date,
based on misrepresentations made in the application. The
Company can challenge an increase in Death Benefit
requiring evidence of insurability for two years during
the lifetime of each of the Insureds from the date of
the increase. However, there is no time limit on the
Company's right to challenge all or part of the Policy
if either of the Insureds dies within the two-year
period.
Optional benefit riders to this Policy may have
different provisions for incontestability.
Any reinstatement will be incontestable after that
reinstatement has been in force for two years from its
effective date during the lifetime of each of the
Insureds. Any contest will then be based only on the
information provided on the application for
reinstatement.
SUICIDE Suicide of both the Insureds, or of the Surviving
Insured, while sane or insane, within two years from the
Policy Date is a risk not assumed under this Policy. The
Company's liability for such suicides is limited to the
Cash Surrender Value. When the laws of the state in
which this Policy is delivered require less than a two-
year period, the period will be as stated in such law.
MATURITY PROCEEDS If either of the Insureds is living on the Maturity
Date, the Company will pay the Owner the Cash Surrender
Value on the Maturity Date upon surrender of this
Policy. In such case, the Policy will terminate and the
Company will have no further obligations under the
Policy.
RIGHT TO During the first 24 months after the Policy Date, if the
EXCHANGE FOR A FIXED Policy has not lapsed, there is an unconditional right
BENEFIT POLICY to transfer all of the Account Value in the Sub-Accounts
to the Fixed Account without any transaction charge.
MISSTATEMENT OF AGE If the age or sex of either of the Insureds is misstated
OR SEX in any application for benefits under this Policy, the
Death Benefit will be the amount provided by the correct
age and sex.
<PAGE>
MODIFICATION This Policy may be modified and the Company may take any
other action in order to maintain compliance with
applicable state and federal law, including tax law
requirements for qualification as of life insurance. The
Company also has the right, at any time, to:
. combine two or more Policy Options, or withdraw
assets relating to the Policies from one Policy
Option and put them into another;
. operate the Separate Account under the direction of a
committee or discharge such a committee at any time;
. operate the Separate Account, or one or more Policy
Options, in any other form the law allows, including
a form that allows the Company to make direct
investments. The Separate Account may be charged
advisory fees and other operating expenses if its
investments are made directly rather than through
another investment company, so long as the overall
level of charges and expenses that can be imposed on
the Policies, directly or indirectly, is not
increased; and
. operate the Separate Account without registration as
an investment company.
CONFORMITY WITH LAWS This Policy is subject to the laws of the state where
the Policy was delivered. If any part of it does not
follow that law, it will be treated as if it does.
NON-PARTICIPATING This Policy is nonparticipating. It will not participate
in any dividend or distribution of the Company's
surplus.
PROTECTION OF PROCEEDS To the extent permitted by law, Death Benefits shall be
free from legal process and the claim of any creditor if
the person is entitled to them under this Policy. No
payment and no amount under this Policy can be taken or
assigned in advance of its payment date unless the
Company receives the Owner's written consent.
REPORTS At least once each calendar year, the Company will
furnish the Owner with a report showing the Account
Value and any other information as may be required by
law. Reports will be sent to the last known address of
the Owner.
Section 12 PAYOUT OPTIONS
- --------------------------------------------------------------------------------
GENERAL The Policy's Death Benefit Proceeds and Cash Surrender
Value can be paid in one sum, or all or part of the
Proceeds may be paid under a Payout Option. If a Payout
Option is selected for the payment of Cash Surrender
Value, any Withdrawal Charges and Indebtedness will be
deducted from the Account Value before the first payment
is made.
Prior to the death of the Surviving Insured, the Owner
may elect: (a) for Cash Surrender Value to be paid under
a Payout Option; (b) for Death
<PAGE>
Benefit Proceeds to be paid under a Payout Option; and (c)
to change a previously elected Payout Option for Death
Benefit Proceeds. Any election must be by written request
to the Variable Service Center.
If no election by the Owner is in effect at the death of
the Surviving Insured, the Beneficiary may elect that
Death Benefit Proceeds be paid as a single sum or under a
Payout Option. A Beneficiary may only elect payment under
a Payout Option during the sixty-day period beginning with
the date of receipt of proof of death.
PAYOUT OPTIONS The following Payout Options or any other Payout Option
acceptable to the Company may be selected:
Option A. LIFE ANNUITY: Monthly payments during the life
of the payee.
Option B. LIFE ANNUITY WITH PERIODS CERTAIN OF 120 MONTHS:
Monthly payments during the lifetime of the payee and in
any event for one hundred twenty (120) months.
Option C. FIXED PAYMENTS FOR A PERIOD CERTAIN: Fixed
monthly payments for any specified period (at least five
years but not exceeding thirty years), as selected.
Option D. DEATH BENEFIT PROCEEDS REMAINING WITH THE
COMPANY: Proceeds from the Death Benefit left with the
Company. The Death Benefit Proceeds will remain in the
Fixed Account and be credited with interest by the Company
at a rate of not less than 4%. Full and partial
withdrawals may be made at any time with no Withdrawal
Charge.
The minimum amount of each payment under these Payout
Options will be based on the applicable Payout Tables
shown. The dollar amount of a payment for Ages or
combination of Ages not shown in the Tables or for any
other form of Payout Option agreed to by the Company will
be provided by the Company upon request. If the payee dies
during a period certain (Payout Options B or C), the
remaining payments attributable to Death Proceeds will be
made to the estate of the Beneficiary. The Beneficiary may
elect to have the commuted value of the remaining payments
paid in a single sum instead. The Company will determine
the commuted value by discounting the remaining payments
at its then current interest rate used for commutation.
EVIDENCE OF PROOF The Company may require satisfactory evidence of the age
OF AGE OR SURVIVAL of any person or his or her continued survival for
payments under a lifetime payment option.
<PAGE>
Options A and B - LIFETIME PAYMENT OPTIONS
MINIMUM MONTHLY PAYMENT RATES FOR EACH $1,000 APPLIED
<TABLE>
<CAPTION>
Age of Payee Life 10 Year & Life Age of Payee Life 10 Year & Life
<S> <C> <C> <C> <C> <C>
50 4.68 4.64 70 7.27 6.80
51 4.75 4.70 71 7.51 6.96
52 4.82 4.77 72 7.77 7.14
53 4.89 4.84 73 8.06 7.31
54 4.97 4.92 74 8.36 7.49
55 5.06 4.99 75 8.69 7.67
56 5.15 5.08 76 9.04 7.86
57 5.24 5.16 77 9.42 8.04
58 5.34 5.25 78 9.84 8.22
59 5.45 5.35 79 10.28 8.40
60 5.56 5.45 80 10.76 8.57
61 5.69 5.56 81 11.28 8.74
62 5.82 5.67 82 11.83 8.90
63 5.96 5.79 83 12.43 9.05
64 6.11 5.92 84 13.07 9.18
65 6.27 6.05 85 13.76 9.31
66 6.44 6.19
67 6.63 6.33
68 6.83 6.48
69 7.04 6.63
</TABLE>
Option C - FIXED PAYMENTS FOR A PERIOD CERTAIN
MINIMUM MONTHLY PAYMENT RATES FOR EACH $1,000 APPLIED
<TABLE>
<CAPTION>
Years Monthly Payment Years Monthly Payment Years Monthly Payment
<S> <C> <C> <C> <C> <C>
1 Not available 11 9.31 21 5.81
2 Not available 12 8.69 22 5.64
3 Not available 13 8.17 23 5.49
4 Not available 14 7.72 24 5.35
5 18.32 15 7.34 25 5.22
6 15.56 16 7.00 26 5.10
7 13.59 17 6.71 27 5.00
8 12.12 18 6.44 28 4.90
9 10.97 19 6.21 29 4.80
10 10.06 20 6.00 30 4.72
</TABLE>
For quarterly payments, multiply the monthly payment rate by 3.01. For semi-
annual payments, multiply by 6.05. For annual payment, multiply by 12.22.
<PAGE>
[THE LOGO OF FIRST VARIABLE LIFE INSURANCE COMPANY APPEARS HERE]
A stock life insurance company
THE ACCOUNT VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT PROVIDED BY THIS
POLICY, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE
VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT.
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE
SECOND TO DIE LIFE INSURANCE POLICY
NON-PARTICIPATING
<PAGE>
First Variable Life Insurance Company
Little Rock, Arkansas
EXCHANGE RIGHT ENDORSEMENT
This Endorsement is made part of the Policy to which it is attached, and is
effective upon the Policy Date:
Section 11 GENERAL PROVISIONS of the Policy is amended to include the following:
<TABLE>
<S> <C>
RIGHT TO EXCHANGE FOR General. Subject to any limitations and requirements shown below, this
TWO POLICIES Policy may be exchanged for two policies of individual life insurance.
The Owner may elect this exchange only upon the occurrence of an
Exchange Event.
Exchange Events. An Exchange Event occurs if this Policy is in force
on the date of any of the following events:
. Divorce - The Business Day on or next following the sixtieth day
after a divorce between the Insureds is effective. The Insureds must,
however, have been married to each other on the Policy Date.
. Tax Law Change - The Business Day on or next following the effective
date of an amendment to the Code that eliminates a marital deduction
used for purposes of computing federal estate and gift taxes. The
Insureds must, however, have been married to each other on the Policy
Date.
. Dissolution or Bankruptcy of Partnership - If the Insureds are
general partners in an active partnership on the Policy Date, the
Business Day on or next following the date the partnership is
dissolved or ordered and adjudged to be bankrupt.
. Dissolution or Bankruptcy of Closely Held Corporation - If the
Insureds are officers, directors or shareholders in the same closely
held business corporation on the Policy Date, the Business Day on or
next following the date the corporation is dissolved or ordered and
adjudged to be bankrupt. Shares of a closely held corporation may not
be publicly traded or listed on a regional or national exchange.
Election limitations. The right to exchange for two policies is not
available if any of the following apply:
. Either of the Insureds is not alive on the date of the exchange;
. Either of the Insureds is older than the maximum issue age permitted
by the Company (or its affiliate) for the new policies; or
. The Policy is in a Grace Period or receiving benefits from any
disability rider on the date of the exchange.
</TABLE>
<PAGE>
EXCHANGE RIGHT ENDORSEMENT (continued)
<TABLE>
<S> <C>
RIGHT TO EXCHANGE FOR Election requirements. An exchange for two policies may be elected by
TWO POLICIES the Owner:
(continued) . For a period not to exceed 180 days following the occurrence of any
Exchange Event listed above (the election period for a divorce begins
60 days after the divorce is effective); and
. By submitting a written request that is received by the Company at
its Variable Service Center during the 180 day election period; and
. By returning this Policy for cancellation with the written request.
Exchanged Policies. Each of the new policies to be issued upon an
exchange will be issued by the Company, or an affiliate of the Company:
. On the life of one of the Insureds, and payable upon the death of
that insured if the exchanged policy is then in effect;
. As an individual permanent life insurance policy in a form then
available for such exchanges;
. For an initial death benefit amount that does not exceed 50% of the
Death Benefit of this Policy on the date of exchange, reduced by 50% of
any Indebtedness and by any optional rider benefits then in effect
under this Policy;
. For an account value that does not exceed 50% of the Cash Surrender
Value under this Policy on the date of the exchange;
. Without the transfer or revival of any Indebtedness under this
Policy on the date of exchange;
. Without the transfer of any amount in the Loan Account under this
Policy on the date of exchange, and any such amount will be used to
repay any Indebtedness under this Policy on the date of exchange;
. With an extended death benefit guarantee rider, if an extended death
benefit guarantee rider is in effect for this Policy on the date of
exchange;
. Without any other optional additional benefit riders, unless the
request for exchange includes evidence of insurability on the
applicable insured that is satisfactory to the Company;
. With provisions for suicide exclusion and incontestability that
reflect the Policy Date of this Policy;
. With provisions for withdrawal or surrender charges that do not
reflect the Policy Date of this Policy; and
. Without any additional transaction charges being imposed under this
Policy for the exchange.
</TABLE>
Signed on behalf of the Company on the Policy Date.
Secretary President
First Variable Life Insurance Company
Little Rock, Arkansas
<PAGE>
[THE LOGO OF FIRST VARIABLE LIFE INSURANCE COMPANY APPEARS HERE]
A stock life insurance company
Little Rock, Arkansas
JOINT SECOND-TO-DIE TERM INSURANCE RIDER
----------------------------------------
Unless stated otherwise below, all provisions of the Policy also apply to this
rider. This rider starts on the same date as the Policy unless a different
rider date is shown on the Policy Data Page.
JOINT INSUREDS
Joint Insureds means the two lives named in an application and shown on the
Policy Data Pages as the Insured Life and the Second Insured Life.
RIDER BENEFIT
The Company will pay the death benefit of this rider on the death of the second
of the Joint Insureds to die as soon as the Company receives proof of the death
of both Joint Insureds while this rider was in force.
The amount of death benefit provided by this rider on the Policy Date is shown
on the Policy Data pages. This rider is not convertible to another policy.
CHANGE OF BENEFIT
The Owner may change the death benefit of this rider after it has been in effect
for one year, by notice to the Company. Any change is subject to the following
conditions:
. a decrease will be effective on the first Business Day of the policy month
following the Company's receipt of the request. Any reduction will be in the
following order:
1. against the most recent increase in death benefit provided by this
rider;
2. against the next most recent increases;
3. against the initial death benefit provided by this rider.
. an increase will require evidence of insurability satisfactory to the Company
on the Joint Insureds. An approved increase will have an effective date as
shown on the supplemental Policy Data Pages.
COST OF INSURANCE
The cost of insurance for this Rider is deducted at the same time as the Cost of
Insurance for the Policy. The cost of insurance is calculated by multiplying
the amount of term insurance under this rider by the applicable cost of
insurance rates for this rider. The maximum cost of insurance rates for this
Rider are shown in the Table of Guaranteed Rates for Joint Insured Lives, which
is located in the Policy Data Pages.
<PAGE>
SUICIDE EXCLUSION
No benefits are payable under this Rider if either of the Joint Insureds commits
suicide within:
. Two years of the start date of the Rider; and
. Two years of the date of any change in the Rider benefit amount.
In either of the foregoing instances, the Company's sole liability is to refund
all deductions made for the cost of this Rider. However, should either of the
Joint Insureds also commit suicide within two years of the Effective Date of the
Policy, the Company's sole liability is to refund all premiums paid on the
policy.
CONTESTABILITY
The Company can challenge the validity of this rider during the lifetime of each
of the Insureds for two years from the rider's start date, based on
misrepresentations made in the application. However, there is no time limit on
the Company's right to challenge all or part of this rider if either of the
Insureds dies within the two-year period.
TERMINATION OF RIDER
This Rider will end on the earliest of:
. the date of death of the second of the Joint Insureds to die; or
. the rider termination date as shown in the Policy Data pages; or
. the Business Day following the Owner's request to terminate the Rider; or
. termination of the Contract.
A request to end this Rider must be received by the Company at its Variable
Service Center.
Signed for the Company.
Secretary President
First Variable Life Insurance Company
Little Rock, Arkansas
<PAGE>
[THE LOGO OF FIRST VARIABLE LIFE INSURANCE COMPANY APPEARS HERE]
Little Rock, Arkansas
ACCELERATED DEATH BENEFIT RIDER
(SURVIVING INSURED ONLY)
The Policy to which this rider is attached is amended to include the following:
OPTION TO ELECT AN ADVANCE
The Owner may elect to receive an advance of the Death Benefit of this Policy
when the Surviving Insured has been diagnosed as having a terminal illness with
a life expectancy of less than 12 months. For purposes of this rider, "Death
Benefit" means the amount payable at death of the Surviving Insured under the
Policy, including any death benefit proceeds under a term life insurance rider
on the life of that Insured. The maximum advance is $500,000, and no advance
will be made if both Insureds are living.
Calculation of Advance. The advance, up to a maximum of $500,000, is calculated
- ----------------------
as the product of (a) times (b), which is divided by (c), and reduced by (d),
where:
(a) is equal to the Death Benefit in effect when the advance is paid;
(b) is a percentage of Death Benefit (not to exceed 100%) as elected by the
Owner;
(c) is the sum of 1 plus "i", where "i" equals the Published Monthly Average
(Moody's Corporate Bond Yield Average - Monthly Average Corporates as
published by Moody's Investors Service, Inc., or its successor) for the
calendar month ending two months prior to the date the rate is determined;
and
(d) is the percentage of Death Benefit elected by the Owner times the
Indebtedness, if any, at the time the advance is paid.
If the Moody's Corporate Bond Yield Average - Monthly Average Corporates is no
longer published, the Insurance Commissioner of the state in which the Policy's
application is dated will substitute a similar average. The Company determines
the "i" rate on January 1 and July 1 of each calendar year. The rate may be
increased whenever such increase would be at least 1/2%. The rate will be
decreased whenever such decrease would be at least 1/2%.
Requirements for an Advance. The Company will pay an advance under this rider
- ---------------------------
upon its receipt of:
. a written election for an advance;
. a written designation of the Company as an irrevocable beneficiary for a
portion of the Policy's Death Benefit equal to the amount of the advance;
. proof acceptable to the Company of the death of one of the Insureds under
the Policy; and
. proof acceptable to the Company from a licensed physician other than the
Surviving Insured or a member of his immediate family that:
a) the Surviving Insured has been diagnosed as having a terminal illness
with a life expectancy of less than 12 months;
b) such terminal illness was first diagnosed while the Surviving Insured
was covered under this Policy; and
<PAGE>
c) such terminal illness could be expected in at least 80% of cases to
result in death within one year.
The Company may require a second opinion and examination of the Surviving
Insured at the Company's expense by a physician designated by the Company.
Form of Payment. The Company will make an approved advance payment in a lump sum
- ---------------
to the Owner or to any irrevocable beneficiary under the Policy. If no
irrevocable beneficiary is named, the Owner may designate any other payee for
the advance.
Policy Values After an Advance. Upon payment of an advance under this rider:
- ------------------------------
. the Policy's Face Amount, Account Value (including, without limitation, the
Cash Surrender Value) and any term life insurance rider benefit on the life
of the Surviving Insured will be reduced by the percentage of Death Benefit
elected by the Owner;
. any Indebtedness will be reduced by the portion of the Indebtedness deemed
repaid when calculating the advance; and
. the Policy will terminate if the percentage of Death Benefit elected by the
Owner is 100%.
GENERAL PROVISIONS
Payments under this rider may not be assigned unless otherwise provided in the
Owner's election for an advance. Proceeds under this Policy and any payment
under this rider will be exempt from the claims of creditors and from legal
process to the extent permitted by law.
The Effective Date for this rider is the Policy Date, unless another date is
shown on the Policy Data Page. There is no cost for this rider.
All other terms, provisions and conditions of the entire Policy remain unchanged
except as stated herein.
Signed for the Company.
/s/ Arnold R. Bergman /s/ John M. Soukup
------------------------ ----------------------
Secretary President
<PAGE>
[THE LOGO OF FIRST VARIABLE LIFE INSURANCE COMPANY APPEARS HERE]
Little Rock, Arkansas
EXTENSION OF MATURITY DATE RIDER
This Rider is made part of the Policy to which it is attached, and is effective
upon the Policy Date.
Section 11 GENERAL PROVISIONS of the Policy is amended to include the following:
OPTION TO EXTEND MATURITY DATE. The Owner may elect to extend the Maturity Date
by written request to the Variable Service Center no later than thirty (30) days
prior to the then current Maturity Date while either of the Insureds is living
if the Account Value is at least $2,000. For any period during which the
Maturity Date is extended:
. The Owner will not be permitted to make any further premium payments except
if necessary to prevent lapse of the Policy;
. no increase or decrease in Face Amount or change of Death Benefit Options
will be permitted;
. no partial withdrawal will be permitted if Account Value remaining after
withdrawal is $2,000 or less;
. all value in the Separate Account will be transferred to the Fixed Account;
. the Company will not credit Bonuses to Account Value, including but not
limited to, Premium Value Bonuses and Cash Value Bonuses;
. all supplemental riders except the Accelerated Death Benefit Rider will
terminate;
. Indebtedness will be charged interest at an annual rate of 4.0% per year;
and
. the Death Benefit will equal the applicable Minimum Death Benefit Percentage
of Account Value as shown in the Table of Minimum Death Benefit Percentages.
For attained ages beyond Joint Age 95, the applicable Minimum Death Benefit
Percentage is the Minimum Death Benefit Percentage at Joint Age 95.
Signed for the Company.
/s/ Arnold R. Bergman /s/ John M. Soukup
------------------------ ----------------------
Secretary President
<PAGE>
EXHIBIT 1.A.(10)
SPECIMEN FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE APPLICATION
<PAGE>
EXHIBIT 2
OPINION AND CONSENT
ARNOLD R. BERGMAN, VICE PRESIDENT, GENERAL COUNSEL & SECRETARY
OF FIRST VARIABLE LIFE INSURANCE COMPANY
<PAGE>
Exhibit 2
OPINION AND CONSENT
[LOGO] FIRST
VARIABLE
LIFE INSURANCE
COMPANY
August 18, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Registration of Contract Interests
Separate Account VL of First Variable Life Insurance Company
(File Nos. 333-70749; 811-7647)
Dear Sir/Madam:
In my capacity as Vice President and General Counsel of First Variable Life
Insurance Company ("First Variable"), I have acted as chief legal officer with
regard to variable life insurance contracts ("Contracts") described in the
captioned Registration and funded in Separate Account VL ("Separate Account") of
First Variable. I have examined the Articles of Incorporation and Bylaws of
First Variable, the Contracts and such other records as I have deemed necessary
in connection with the rendering of this opinion.
Based upon the foregoing and having regard for such legal consideration as I
have deemed relevant, I am of the opinion that:
1. First Variable is a duly organized and existing stock life insurance company
under the laws of the state of Arkansas authorized to issue life insurance
and annuity contracts.
2. The Board of Directors of First Variable has duly authorized the
establishment of the Separate Account.
3. The Contracts, when duly issued and delivered by First Variable for value,
are valid and enforceable obligations of the Company under Arkansas law,
except as limited by bankruptcy and other laws generally affecting the
rights of creditors.
This opinion speaks only as of the date hereof and I expressly disclaim any
obligation to update it for any change in the law or facts occurring subsequent
to the date hereof.
I consent to the use in Registration No. 333-70749 of this opinion letter.
Very truly yours,
/s/ Arnold R. Bergman
- ---------------------
Arnold R. Bergman
Vice President, General Counsel* & Secretary
*Admitted in NY
<PAGE>
EXHIBIT 6
OPINION AND CONSENT OF ACTUARY
<PAGE>
EXHIBIT 6.
[LOGO] FIRST
VARIABLE
LIFE INSURANCE
COMPANY
August 20, 1999
First Variable Life Insurance Company
2122 York Road, Suite 300
Oak Brook, IL 60523
Re: Registration of Contract Interests
Separate Account VL of First Variable Life Insurance Company
(File No. 333-70749)
Gentlemen:
In my capacity as Actuary of First Variable Life Insurance Company, I have
provided actuarial advice concerning:
. The preparation of the captioned registration statement ("Registration
Statement") on Form S-6 filed by First Variable Life Insurance Company and
its Separate Account VL with the Securities and Exchange Commission under
the Securities Act of 1933 with respect to the variable universal life
insurance contract ("Contract") described therein; and
. The preparation of the policy forms for the Contract described in the
Registration Statement.
It is my professional opinion that:
1. The illustration of death benefits, account values, cash surrender values
and total premiums paid plus interest at 5% shown in the prospectus, based
on the assumptions stated in the illustration, are consistent with the
provisions of the Contract. The rate structure of the Contract has not been
designed so as to make the relationship between premiums and benefits, as
shown in the illustrations included, appear more favorable to prospective
buyers than other illustrations which could have been provided at other
combinations of ages, sex of the insured, death benefit option and amount,
definition of life insurance test, premium class and premium amounts.
Insureds in other premium classes may have higher cost of insurance
charges.
2. All other numerical examples shown in the prospectus are consistent with
the Contract and our practices and have not been designed to appear more
favorable to prospective buyers than other examples which could have been
provided.
I hereby consent to the filing of this opinion as an Exhibit to the Registration
Statement.
Sincerely
Martin Sheerin FSA, MAAA
<PAGE>
EXHIBIT 7.
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
<PAGE>
EXHIBIT 7.
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 2, 1999 with respect to the consolidated
financial statements of First Variable Life Insurance Company and March 18, 1999
with respect to the financial statements of First Variable Life Insurance
Company - Separate Account VL in Registration Statement (Form S-6 No. 333-70749
and related Prospectus of First Variable Life Insurance Company.
ERNST & YOUNG LLP
Chicago, Illinois
August 20, 1999
