Ameritas Life Insurance Company Logo
PROSPECTUS
AMERITAS NO LOAD VARIABLE ANNUITY: 5900 "O" Street, P.O. Box 81889
A FLEXIBLE PREMIUM VARIABLE ANNUITY Lincoln, NE 68501
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This Prospectus describes a no sales load/no surrender charge flexible premium
variable annuity policy contract ("Policy") offered by Ameritas Life Insurance
Corp. ("Ameritas"). The Policy provides a vehicle for investing on a
tax-deferred basis for retirement savings or other long-term purposes.
You may purchase a Policy for $2,000 or more. Minimum additional subsequent
premiums may be $250 or more; smaller amounts may be accepted by automatic bank
draft or at the discretion of Ameritas.
You may direct that premiums accumulate on a variable basis in one or more of
the ten Subaccounts of the Ameritas Life Insurance Corp. Separate Account LLVA
("Separate Account") or on a fixed basis in the Fixed Account, or on a
combination variable and fixed basis. Assets of each Subaccount are invested in
a corresponding Portfolio of Strong Variable Insurance Funds, Inc., ("Strong
VIF") Strong Special Fund II, Inc., (Strong VIF and Strong Special Fund II, Inc.
are referred to collectively as "Strong"), Berger Institutional Products Trust
("Berger IPT") or Neuberger & Berman Advisers Management Trust ("Neuberger &
Berman AMT") (collectively, the "Funds"). In this Separate Account, Strong VIF
offers two Portfolios: Strong International Stock Fund II, and Strong Growth
Fund II; Strong Special Fund II, Inc. is also offered; Berger IPT offers two
Portfolios: Berger IPT-100 Fund and Berger IPT-Small Company Growth Fund;
Neuberger & Berman AMT offers five Portfolios: Liquid Asset, Limited Maturity
Bond, Growth, Partners, and Balanced.
The Accumulation Value is allocated to the Liquid Asset Portfolio for 13 days
after the Issue Date; the accumulation value is then reallocated as you direct.
There is a free-look period in which you may return the Policy for a refund.
The Accumulation Value will vary with the performance of the Portfolios you
select. You bear all investment risk. Results for the Portfolios are not
guaranteed. Values in the Fixed Account are guaranteed by Ameritas.
You may select a date on which Annuity Payments are to commence. Prior to that
date, a surrender may be made at any time, and withdrawals are allowed, although
in most instances withdrawals made prior to age 59 1/2 are subject to a 10%
federal penalty tax. The Policy offers a number of ways of withdrawing monies
after the Annuity Date, including a lump sum payment and several Annuity Income
Options.
This prospectus contains information you should know before investing; it must
be accompanied by current prospectuses for Strong, Berger IPT, and Neuberger &
Berman AMT. Read the prospectuses carefully and retain them for future
reference. A Statement of Additional Information, which has the same date as
this prospectus, has been filed with the Securities and Exchange Commission; it
is incorporated herein by reference and is available free by writing Ameritas at
the address above. The table of contents of the Statement of Additional
Information appears at the end of this prospectus.
These securities are not deposits with, or obligations of, or guaranteed or
endorsed by, any financial institution; and the securities are not insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency. These securities involve investment risk, including the possible
loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES REGULATORY AUTHORITY, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES REGULATORY AUTHORITY PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is May 1, 1997.
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<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS............................................................... 3
HIGHLIGHTS................................................................ 4
FEE TABLE................................................................. 6
CONDENSED FINANCIAL INFORMATION........................................... 8
PERFORMANCE DATA.......................................................... 9
AMERITAS, THE SEPARATE ACCOUNT AND THE FUNDS.............................. 9
Ameritas Life Insurance Corp....................................... 9
The Separate Account............................................... 10
The Funds.......................................................... 10
Investment Objectives and Policies................................. 11
THE FIXED ACCOUNT......................................................... 12
POLICY FEATURES........................................................... 12
Control of the Policy.............................................. 12
Policy Purchase and Premium Payment................................ 12
Allocation of Premium.............................................. 13
Accumulation Value................................................. 13
Transfers Among the Portfolios and the Fixed Accout................ 14
Systematic Programs................................................ 14
Withdrawals and Surrenders......................................... 14
Free Look Privilege................................................ 15
CHARGES AND DEDUCTIONS.................................................... 15
Administrative Charges............................................. 15
Mortality and Expense Risk Charge.................................. 16
Tax Charges........................................................ 16
Fund Investment Advisory Fees and Expenses......................... 17
ANNUITY PERIOD............................................................ 17
Annuity Date....................................................... 17
Annuity Income Options............................................. 17
FEDERAL TAX MATTERS....................................................... 18
Taxation of Annuities in General................................... 18
Nonqualified Policies.............................................. 18
Qualified Policies................................................. 19
GENERAL PROVISIONS........................................................ 19
Annuitant's Beneficiary............................................ 19
Death of Annuitant................................................. 20
Death of Owner..................................................... 20
Addition, Deletion or Substitution of Investments.................. 21
Deferment of Payment............................................... 21
Owner Inquiries.................................................... 21
Contestability..................................................... 21
Misstatement of Age or Sex......................................... 21
Reports and Records................................................ 22
DISTRIBUTION OF THE POLICIES.............................................. 22
SAFEKEEPING OF THE ACCOUNT'S ASSETS....................................... 22
THIRD PARTY SERVICES...................................................... 22
VOTING RIGHTS............................................................. 22
LEGAL PROCEEDINGS......................................................... 23
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.................. 23
The Policy, certain provisions, and certain Portfolios are not available in all
states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESPERSON, OR OTHER PERSON
MAY MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON.
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DEFINITIONS
ACCUMULATION UNIT. A unit used to measure the value of the Policy prior to the
Annuity Date. Analogous, though not identical, to a share owned in a mutual fund
account.
ACCUMULATION UNIT PRICE. The value of each Accumulation Unit is calculated each
Valuation Period. Analogous, though not identical, to the share price (net asset
value) of a mutual fund.
ACCUMULATION VALUE. The value of all amounts accumulated under the Policy prior
to the Annuity Date. On the Issue Date, the Accumulation Value is equal to the
initial premium, less any premium tax, plus any interest credited based on the
Liquid Asset Portfolio value as of the Policy Date.
AMERITAS. ("We, Us, Our") Ameritas Life Insurance Corp., a mutual life insurance
company domiciled in Nebraska since 1887.
ANNUITANT. The person upon whose life expectancy the Policy is written. The
Annuitant may also be the Owner of the Policy.
ANNUITANT'S BENEFICIARY. The person to whom any benefits are paid upon the
Annuitant's death.
ANNUITY DATE. The date on which Annuity Payments begin.
ANNUITY INCOME OPTION. A method of receiving Annuity Payments after the Annuity
Date.
ANNUITY PAYMENT. One of a series of payments paid to the Annuitant under an
Annuity Income Option.
EFFECTIVE DATE. The Valuation Date on which premiums are applied to purchase a
Policy.
FIXED ACCOUNT. A part of Ameritas' general account to which all or a portion of
premiums may be allocated for accumulation at fixed rates of interest.
FUNDS. Strong, Berger IPT and Neuberger & Berman AMT are the Funds available for
investment as of the date of this prospectus. The Funds have one or more
Portfolios; each Portfolio corresponds to one of the Subaccounts of the Separate
Account.
ISSUE DATE. The date all financial, contractual and administrative requirements
have been met to issue the Policy. The free look period begins on this date.
NET PREMIUM. The Premium Payment less the premium tax (if imposed by the state
in which the Policy is delivered).
NONQUALIFIED POLICIES. Policies that do not qualify for special federal income
tax treatment.
OWNER. ("You") The person or entity in whose name the Policy is issued (or as
subsequently changed) who has the privileges stated in the Policy, including the
right to make allocations or change beneficiaries. If a Policy has been
absolutely assigned, the assignee is the Owner. A collateral assignee is not the
Owner.
OWNER'S DESIGNATED BENEFICIARY. The person designated by the Owner to whom
Policy ownership passes upon the Owner's death.
POLICY. The no sales load/no surrender charge variable annuity contract offered
by Ameritas and described in this prospectus.
POLICY DATE. The date used to determine Policy anniversary dates and Policy
Years. On the Issue Date, the Policy Date will be the date two days after
Ameritas received the application and initial premium. If the Policy Date would
fall on the 29th, 30th or 31st of a month, the Policy Date will be set at the
28th day of that month.
POLICY YEAR. The period from one Policy anniversary date until the next Policy
anniversary date.
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PORTFOLIO. One of the separate investment Portfolios of the Funds in which the
Separate Account invests. Each Portfolio is a Subaccount of the Separate
Account. In this Separate Account, Strong VIF offers two Portfolios: Strong
International Stock Fund II, and Strong Growth Fund II; Strong Special Fund II,
Inc. is also offered; Berger IPT offers two Portfolios: Berger IPT-100 Fund and
Berger IPT-Small Company Growth Fund; Neuberger & Berman AMT offers five
Portfolios: Liquid Asset, Limited Maturity Bond, Growth, Partners, and Balanced.
In this prospectus, Portfolio will also be used to refer to the Subaccount that
invests in the corresponding Portfolio.
PREMIUM PAYMENT. An amount paid to purchase a Policy or to increase the
investment in the Policy.
QUALIFIED POLICIES. Policies owned inside certain qualified plans as defined
under the Internal Revenue Code of 1986, as amended, such as IRA's and Pension
Trusts.
SATISFACTORY PROOF OF DEATH. All of the following must be submitted: (1) A
certified copy of the death certificate; (2) A Claimant Statement; (3) The
Policy; and (4) Any other information that Ameritas may require to establish the
validity of the claim.
SEPARATE ACCOUNT. Ameritas Life Insurance Corp. Separate Account LLVA, an
account established by Ameritas to receive and invest premiums paid under the
Policy. Assets in the Separate Account are segregated from the general assets of
Ameritas.
SUBACCOUNT. A subdivision of the Separate Account which invests in shares of a
specified Portfolio of the Funds.
VALUATION DATE. Each day that the New York Stock Exchange (NYSE) is open for
trading.
VALUATION PERIOD. The period between two successive Valuation Dates, commencing
at the close of trading on the NYSE on one Valuation Date and ending at the
close of trading on the next Valuation Date.
HIGHLIGHTS
For an explanation of capitalized terms, refer to "Definitions", Page 3.
THE POLICY
The purpose of the Policy is to allow you, the Owner, to accumulate funds on a
tax-deferred basis by investing in one or more investment Portfolios managed by
Strong, Berger IPT or Neuberger & Berman AMT for retirement or other purposes.
The tax-deferral feature is most attractive to investors who have exhausted
other avenues for tax-deferred investing.
PURCHASING A POLICY
You may purchase a Policy with a complete application and a minimum initial
premium of $2,000 or more. Subsequent premiums must be at least $250. Smaller
premiums may be accepted on automatic bank draft or at the discretion of
Ameritas. Page 12.
INVESTMENT CHOICES
In this Separate Account, Strong VIF offers two Portfolios: Strong International
Stock Fund II, and Strong Growth Fund II; and Strong Special Fund II, Inc. is
also offered; Berger IPT offers two Portfolios: Berger IPT-100 Fund and Berger
IPT-Small Company Growth Fund; Neuberger & Berman AMT offers five Portfolios:
Liquid Asset, Limited Maturity Bond, Growth, Partners, and Balanced. The assets
of each Portfolio are held separately from the other Portfolios; each has
distinct investment objectives and policies which are described in the
accompanying prospectuses for the Funds. The investment performance of the
Portfolios is not guaranteed. Page 10.
Premiums allocated to the Fixed Account are placed in the general account of
Ameritas and receive a guaranteed interest rate. Page 12.
4 NLVA
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ALLOCATION OF PREMIUM
Your Accumulation Value is allocated to the Liquid Asset Portfolio. At the end
of the free look period, the Accumulation Value is allocated among the
Portfolios or Fixed Account according to your instructions on the application.
Allocations may be changed at any time with no charge. Page 13.
CHARGES AND DEDUCTIONS
There are no sales loads or surrender charges. The costs in the Policy include
mortality and expense risk ("M&E") charges; an annual policy fee to cover the
cost to administer the Policy; and investment advisory and other fees imposed by
the Funds. State premium taxes, if any, are deducted upon receipt of premium,
upon annuitization, or upon withdrawal, according to the laws of the state of
jurisdiction. A $10 transfer fee may be charged for each transfer over the 15
free transfers allowed each Policy Year. Page 15.
TRANSFERS AMONG PORTFOLIOS
You may transfer funds among the Portfolios up to 15 times per year free of
charge. Additional transfers may be subject to a transfer charge (maximum $10
per additional transfer). Minimum transfer amount is $250, or if less, the
entire value of the Portfolio from which the transfer is made. The minimum
amount which can remain in a Portfolio as a result of a transfer is $100.
Certain restrictions apply to transfers from the Fixed Account. Systematic
programs, which provide for the automatic transfer of funds, such as Portfolio
Rebalancing, Dollar Cost Averaging, and Earnings Sweep may be offered. Page 14.
WITHDRAWALS
You may withdraw all or part of the Accumulation Value before the earlier of the
Annuity Date or the Annuitant's death. Withdrawals must be at least $250.
Systematic withdrawals may be scheduled at 12 per year. Withdrawals made prior
to age 59 1/2 may be subject to a 10% federal tax penalty. There is no
withdrawal charge. Page 14.
ANNUITY INCOME OPTIONS
Beginning on the Annuity Date, the Policy provides for lump sum payment, or for
periodic annuity payments to be paid to the Annuitant, based on the Accumulation
Value on that date. You may select from a number of Annuity Income Options. You
also have some flexibility in choosing an Annuity Date. Page 17.
DEATH BENEFIT
If the Annuitant dies before the Annuity Date, the death benefit becomes payable
to the Annuitant's Beneficiary upon proof of death. Ameritas guarantees that the
death benefit payable upon death of the Annuitant prior to the Annuity Date will
be the greater of the Accumulation Value or the premium payments made. The death
benefit may be paid in a lump sum or under an Annuity Income Option. Page 17.
If the Owner dies prior to the Annuity Date, the Owner's entire interest in the
Policy must generally be distributed to the Owner's Designated Beneficiary
within five years after the date of death. Under special rules, if the Owner's
interest is payable to the surviving spouse of the Owner, the Policy may be
continued with the surviving spouse treated as the Owner. Page 20.
FREE LOOK PERIOD
You may cancel the Policy within 10 days after you receive it (except in some
states which may require a longer period). To cancel, you must return the
Policy. When the Policy is received by Ameritas, you will be reimbursed all
premiums paid or the premiums adjusted by investment gains or losses, whichever
is more. Page 15.
NLVA 5
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FEE TABLE
The following illustrates the expenses you will bear as Owner, excluding
possible state premium taxes. For a complete discussion of expenses, see
"Charges and Deductions" and the Funds' prospectuses.
OWNER TRANSACTION EXPENSES
Sales Load Imposed.................................................None
Surrender Charge...................................................None
Withdrawal Charge..................................................None
Transfer Fee (after 15 free transfers per Policy year). ...........$10
ANNUAL POLICY FEE (maximum of $40, currently $25).........................$25
SEPARATE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
Mortality and Expense Risk Fees (M&E). . . . . . . . . . 0.75% current
0.95% guaranteed
FUND MANAGEMENT FEES
Fee information relating to the underlying Funds was provided to Ameritas by the
underlying Funds. Ameritas has not independently verified the information
received from the underlying Funds.
STRONG ANNUAL EXPENSES
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
PORTFOLIO & MANAGEMENT OTHER EXPENSES TOTAL
<S> <C> <C> <C>
Growth Fund II 1.00% .24%(1) 1.24%(1)
International Stock Fund II 1.00% .90% 1.90%
Special Fund II 1.00% .17% 1.17%
</TABLE>
(1) "Other" expenses for Growth Fund II are estimated on an annualized basis.
Date of inception for Growth Fund II was December 31, 1996.
BERGER IPT ANNUAL EXPENSES
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
PORTFOLIO & MANAGEMENT OTHER EXPENSES TOTAL
(REFLECT REIMBURSEMENT) (REFLECT REIMBURSEMENT)
<S> <C> <C> <C>
100 Fund .00% 1.00%(2) 1.00%(2)
Small Company Growth .00% 1.15%(3) 1.15%(3)
</TABLE>
(2) Expenses reflect fee waiver and expense reimbursement. Absent such waiver
and reimbrusement, "Other" Expenses would have been 6.94%; and "Total" Expenses
would have been 7.69%.
(3) Expenses reflect fee waiver and expense reimbursement. Absent such waiver
and reimbrusement, "Other" Expenses would have been 7.67%; and "Total" Expenses
would have been 8.57%.
6 NLVA
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NEUBERGER & BERMAN AMT ANNUAL EXPENSES(4)
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
PORTFOLIO & MANAGEMENT OTHER EXPENSES TOTAL
(MAY REFLECT REIMBURSEMENT)
<S> <C> <C> <C>
Liquid Asset (5) .44% .56% 1.00%
Limited Maturity .65% .13% .78%
Growth .83% .09% .92%
Partners .84% .11% .95%
Balanced .85% .24% 1.09%
</TABLE>
(4) 12/31/96 fiscal year end.
(5) Expenses reflect expense reimbursement. (See below). Absent such
reimbursement, the total annual expenses would have been 1.21%.
Strong Capital Management, Inc. is the investment advisor for the Strong Funds.
From time to time, Strong Capital Management, Inc., may voluntarily waive all or
a portion of its management fee and/or absorb certain expenses for the Fund
without further notification of the commencement or termination of any such
waiver or absorption. Any such waiver or absorption will have the effect of
lowering the overall expense ratio of the Fund and increasing the Fund's return
to investors at the time such amounts were waived and/or absorbed.
Berger Associates provides investment advisory services to the Berger IPT Funds
available in the Separate Account. Berger Associates has agreed to waive its
advisory fee to the extent that normal operating expenses in any fiscal year,
including the management fee but excluding brokerage commissions, interest,
taxes and extraordinary expenses, of Berger IPT-100 Fund exceed 1.00%, and the
normal operating expenses in any fiscal year of the Berger IPT-Small Company
Growth Fund exceed 1.15%, of the respective Fund's average daily net assets.
Neuberger & Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investable
assets in a corresponding series ("Series") of Advisers Managers Trust. The
figures reported under "Investment Management and Administration Fees" include
the aggregate of the administration fees paid by the Portfolio and the
management fees paid by its corresponding Series. Similarily, "Other Expenses"
includes all other expenses of the Portfolio and its corresponding Series.
NBMI provides investment management services to each Series that include, among
other things, making and implementing investment decisions and providing
facilities and personnel necessary to operate the Series. NBMI provides
administrative services to each Portfolio that include furnishing similar
facilities and personnel to the Portfolio. With the Portfolio's consent, NBMI is
authorized to subcontract some of its responsibilities under its administration
agreement with the Portfolio to third parties.
Each Portfolio bears all expenses of its operations other than those borne by
NBMI as administrator of the Portfolio and as distributor of its shares. Each
Series bears all expenses of its operations other than those borne by NBMI as
investment manager of the Series. These expenses include, but are not limited
to, for the Portfolios and the Series, legal and accounting fees and
compensation for trustees who are not affiliated with NBMI; for the Portfolios,
transfer agent fees and the cost of printing and sending reports and proxy
materials to shareholders; and for the Series, custodial fees for securities.
Any expenses which are not directly attributable to a specific Series are
allocated on the basis of the net assets of the respective Series.
NBMI has voluntarily undertaken to limit the above listed Portfolio's expenses
by reimbursing each Portfolio for its operating expenses and its pro rata share
of its corresponding Series' operating expenses, excluding the compensation of
NBMI (with respect to all Portfolios but the Liquid Asset
NLVA 7
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Portfolio), taxes, interest, extraordinary expenses, brokerage commissions and
transaction costs, that exceed, in the aggregate, 1% per annum, of the
Portfolio's average daily net asset value. This undertaking is subject to
termination on 60 days' prior written notice to the Portfolio.
The effect of any expense limitation by NBMI is to reduce operating expenses of
a Portfolio and its corresponding Series and thereby increase total return.
EXAMPLE: The following example illustrates expenses you would incur at the end
of a one, three, five or ten-year period on a hypothetical $1,000 allocation to
each Portfolio assuming a 5% annual return. The example reflects expenses of the
Separate Account and the Portfolio, but does not reflect premium taxes which may
apply. The information presented applies whether or not the Policy is (1)
surrendered; (2) annuitized; or (3) not surrendered or annuitized.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
STRONG
<S> <C> <C> <C> <C>
Growth Fund II $21 $64 N/A N/A
International Stock Fund II $27 $84 $143 $302
Special Fund II $20 $62 $106 $228
BERGER IPT
100 Fund $18 $57 $97 $211
Small Company Growth $20 $61 $105 $226
NEUBERGER & BERMAN AMT
Liquid Asset $18 $57 $97 $211
Limited Maturity $16 $50 $86 $187
Growth $19 $59 $102 $220
Partners $18 $55 $95 $205
Balanced $18 $54 $93 $202
</TABLE>
The examples assume an average $30,000 annuity investment. These examples should
not be considered a representation of past or future expenses, performance or
return. Actual expenses and/or returns may be greater or less than those shown.
CONDENSED FINANCIAL INFORMATION
The financial statement for Ameritas (as well as auditors' report thereon) is in
the Statement of Additional Information.
No financial statements are included for the Separate Account because the
Separate Account had not yet commenced operations, had no assets or liabilities,
and had received no income nor incurred any expenses as of December 31, 1996.
ACCUMULATION UNIT VALUES
Following are the accumulation unit values for the Subaccounts as of January 22,
1997, when contracts offered by this prospectus were first sold. The number of
outstanding accumulation units in each Subaccount as of January 22, 1997 is also
shown.
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<TABLE>
<CAPTION>
ACCUMULATION UNIT NUMBER OF UNITS
VALUE AS OF: OUTSTANDING AS OF:
January 22, 1997 January 22, 1997
---------------- ----------------
STRONG
<S> <C>
Growth Fund II 10.69 0
International Stock Fund II 11.52 0
Special Fund II 19.62 0
BERGER IPT
100 Fund 10.97 0
Small Company Growth 10.38 0
NEUBERGER & BERMAN AMT
Liquid Asset 1.00 24,330.31
Limited Maturity 14.08 0
Growth 27.51 0
Partners 17.31 0
Balanced 16.57 0
</TABLE>
PERFORMANCE DATA
Separate Account LLVA may advertise certain information regarding the
performance of the Subaccounts. Performance data may be advertised as average
annual total return and/or cumulative total return. The Liquid Asset Subaccount
may advertise yield and/or effective yield. The yield figures are based on
historical earnings and are not intended to indicate future performance. Other
Subaccounts may advertise current yield. Details on how performance measures are
calculated for the Subaccounts are found in the Statement of Additional
Information. Performance advertising will reflect the mortality and expense risk
charge and the annual policy fee.
AMERITAS, THE SEPARATE ACCOUNT AND THE FUNDS
AMERITAS LIFE INSURANCE CORP.
Ameritas Life Insurance Corp. ("Ameritas") is a mutual life insurance company
domiciled in Nebraska since 1887. Ameritas and its subsidiaries are currently
licensed to sell life insurance and annuities in 50 states and the District of
Columbia. The Home Office of Ameritas is at 5900 "O" Street, P.O. Box 81889,
Lincoln, Nebraska 68501.
Ameritas and subsidiaries had total assets at December 31, 1996 of over $2.9
billion. Ameritas enjoys a long standing A+ ("Superior") rating from A.M. Best,
an independent firm that analyzes insurance carriers. Ameritas also has been
rated A ("Excellent") by Weiss Research, Inc., and an AA ("Excellent") rating
from Standard & Poor's for claims-paying ability.
Ameritas Investment Corp., the principal underwriter of the policies, may
publish in advertisements and reports to Policyowners, the ratings and other
information assigned to Ameritas by one or more independent rating services and
charts and other information concerning dollar cost averaging, portfolio
rebalancing, earnings sweep, tax-deference, diversification, asset allocation,
and other investment methods. Ameritas may also publish information about
Veritas, Ameritas' wholly-ownerd, dirct-to-the-consumer subsidiary, and may
advertise the no load nature of this policy. The purpose of
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the ratings is to reflect the financial strength and/or claims-paying ability of
Ameritas. The ratings do not relate to the performance of the separate account.
THE SEPARATE ACCOUNT
Ameritas Life Insurance Corp. Separate Account LLVA ("Separate Account") was
established under Nebraska law on October 26, 1995 to receive and invest
premiums paid under the Policy. Assets of the Separate Account are held
separately from all other assets of Ameritas and are not chargeable with
liabilities from any other business Ameritas may conduct. Income, gains, or
losses of the Separate Account are credited without regard to other income,
gains, or losses of Ameritas.
The Separate Account purchases and redeems shares from the Funds at net asset
value. Shares are redeemed for Ameritas to pay withdrawals and surrenders,
collect charges, and transfer assets from one Portfolio to another, or to the
Fixed Account, as requested by the Owner. Any dividend or capital gain
distribution received from a Portfolio is immediately invested at net asset
value in shares of that Portfolio and held as assets of the corresponding
Subaccount.
All obligations arising under the Policies are liabilities of Ameritas. Ameritas
will always keep assets in the Separate Account of a total market value at least
equal to the reserve and other contract liabilities of the Separate Account. To
the extent that assets in the Separate Account exceed Ameritas' liabilities in
the Separate Account, Ameritas may withdraw excess assets to cover general
account obligations.
The Separate Account is a unit investment trust registered with the Securities
and Exchange Commission ("SEC") under the Investment Company Act of 1940 ("1940
Act"). Such registration does not signify that the SEC supervises the
management, investment practices or policies of the Separate Account.
THE FUNDS
The Funds currently available are: Strong, Berger IPT and Neuberger & Berman
AMT. Each Fund is registered with the SEC under the 1940 Act as an open-ended
diversified management investment company or a series thereof. There are
currently ten Subaccounts within the Account, each investing only in a
corresponding Portfolio of the Funds. Three Portfolios of Strong, two Portfolios
of Berger IPT, and five Portfolios of Neuberger & Berman AMT are offered for
investment in the Policy.
The assets of each Portfolio of the Funds are held separate from the assets of
the other Portfolios. Thus, each Portfolio operates as a separate investment,
and the income or losses of one Portfolio generally do not affect the investment
of any other Portfolio.
The investment objectives and policies of each Portfolio are summarized below.
There is no assurance that any Portfolio will achieve stated objectives. More
detailed information, including a description of investment risks, investment
advisory services, total expenses and charges is in the prospectuses of the
Funds, which accompany this Prospectus. These prospectuses should be read in
conjunction with this Prospectus and retained. All underlying Fund information,
including Fund prospectuses, has been provided to Ameritas by the Funds.
Ameritas has not independently verified this information.
You should periodically reconsider your allocation among the Portfolios in light
of current market conditions and the investment risks attendant to investing in
the Portfolios.
Strong, Berger IPT and Neuberger & Berman AMT may be made available for variable
annuity or variable life insurance contracts of various insurance companies.
Though unlikely, there is a possibility that a material conflict could arise
between the interests of the Separate Account and one or more of the separate
accounts of another participating insurance company. In the event of a material
conflict, the affected insurance companies agree to take any necessary steps,
including
10 NLVA
<PAGE>
removing separate accounts from the Funds, to resolve the matter. See the
prospectuses of the Funds for more information.
Investment Objectives and Policies of the Funds' Portfolios
There is no assurance that a Portfolio will achieve its stated objective.
Strong
STRONG GROWTH FUND II seeks capital growth. It invests primarily in equity
securities that its advisor believes have above-average growth prospects.
STRONG INTERNATIONAL STOCK FUND II seeks capital growth. It invests primarily in
the equity securities of issuers located outside the United States.
STRONG SPECIAL FUND II seeks capital growth. It invests primarily in equity
securities and currently emphasizes investments in medium-sized companies that
its advisor believes are under-researched and attractively valued.
Berger IPT
BERGER IPT-100 FUND seeks long-term capital appreciation. Current income is not
an investment objective. The Fund places primary emphasis on established
companies which it believes to have favorable growth prospects, regardless of
the company's size. Common stock usually constitutes all or most of the Fund's
investment portfolio, but the Fund remains free to invest in securities other
than common stocks.
BERGER IPT-SMALL COMPANY GROWTH FUND seeks capital appreciation. It invests
principally in a diversified group of equity securities of small growth
companies with market capitalization of less than $1 billion at the time of
initial purchase.
Neuberger & Berman Advisers Management Trust
LIQUID ASSET seeks the highest current income consistent with safety and
liquidity. Principal series investments are high-quality Money Market
instruments of government and non-government issuers.
LIMITED MATURITY BOND PORTFOLIO seeks the highest current income consistent with
low risk to principal and liquidity; and secondarily, total return. Principal
series investments are short-to-intermediate term debt securities, primarily
investment grade.
GROWTH PORTFOLIO seeks capital appreciation, without regard to income. Principal
series investments are common stocks.
PARTNERS PORTFOLIO seeks capital growth. Principal series investments are common
stocks and other equity securities of established companies.
BALANCED PORTFOLIO seeks long-term capital growth and reasonable current income
without undue risk to principal. Principal series investments are common stocks
and short-to-intermediate term debt securities, primarily investment grade.
NLVA 11
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THE FIXED ACCOUNT
You may allocate all or a portion of your Premium Payments and make transfers to
the Fixed Account. Amounts in the Fixed Account earn a fixed rate of interest
guaranteed by Ameritas never to be less than 3.0%.
Amounts allocated to the Fixed Account receive an interest rate declared
effective for the month of issue. The declared interest rate is guaranteed for
the remainder of the Policy Year. During subsequent Policy Years, all amounts in
the Fixed Account will earn the interest rate that was declared in the month of
the last Policy anniversary. Declared interest rates may be lower or higher than
the previous period.
Amounts allocated to the Fixed Account or transferred from the Separate Account
to the Fixed Account are placed in the General Account of Ameritas, which
supports insurance and annuity obligations. The General Account includes all of
Ameritas' assets, except those assets segregated in the separate accounts.
Ameritas has the sole discretion to invest the assets of the General Account,
subject to applicable law.
Because of exemptive and exclusionary provisions, interests in the General
Account have not been registered under the Securities Act of 1933 nor is the
General Account registered as an investment company under the Investment Company
Act of 1940. Accordingly neither the General Account nor any interest therein is
generally subject to the provisions of the 1933 or 1940 Act. We understand that
the SEC has not reviewed the disclosures in this Prospectus relating to the
Fixed Account portion of the Contract; however, disclosures regarding the Fixed
Account portion of the Contract may be subject to generally applicable
provisions of the Federal Securities Laws regarding the accuracy and
completeness of statements made.
POLICY FEATURES
The Policy is a variable annuity contract issued by Ameritas. The rights and
benefits of the Policy are described below and in the Policy. The Policy
controls the rights and benefits you have. Ameritas reserves the right to make
any modification to conform the Policy to, or to give you the benefit of, any
changes in the law.
CONTROL OF THE POLICY
The Owner is the person or entity named as such in the application or in
subsequent written changes shown in Ameritas records. While living, the Owner
has the sole right to receive all benefits and exercise all rights granted by
the Policy or Ameritas. The Owner may name both primary and contingent
beneficiaries. Subject to the rights of any irrevocable beneficiary and any
assignee of record, all rights, options, and privileges belong to the Owner, if
living; otherwise to any successor-owner or Owners, if living; otherwise to the
estate of the last Owner to die.
POLICY PURCHASE AND PREMIUM PAYMENT
Individuals wishing to purchase a Policy should send a complete application and
an initial premium to Ameritas' Home Office (5900 "O" Street, P.O. Box 81889,
Lincoln, NE 68501). Your initial premium must be equal to or greater than the
minimum $2,000 requirement. The named Annuitant must be 85 years of age or less.
Acceptance is subject to Ameritas' underwriting rules and complete application.
Ameritas reserves the right to reject any application.
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If the application and initial Premium Payment can be accepted in the form
received, the initial premium will be applied to purchase the Policy within two
business days from the date the premium was received. The date the initial
premium is applied to purchase the Policy is the Effective Date.
If an incomplete application is received, we will request the necessary
information to complete the application. If after five business days from
receipt of the initial premium, the application remains incomplete, we will
return the initial premium unless we obtain your permission to retain the
premium pending completion of the application. Once the application is complete
and we have received the initial premium, the premium will be applied within two
business days.
Additional Premium Payments may be made at any time prior to the Annuity Date,
as long as the Annuitant is living. Additional payments must be made for at
least $250, however, smaller amounts may be accepted if made by automatic bank
draft or at Ameritas' discretion. Any additional premium is credited to the
Accumulation Value as of the date of receipt or the next Valuation Date if
received on a day when the NYSE is not open for trading.
Total premiums may not exceed $1,000,000 for either a single Policy or for
multiple Ameritas annuity Policies having the same Annuitant without prior
approval from Ameritas.
ALLOCATION OF PREMIUM
You may allocate premium to one or more of the Portfolios and to the Fixed
Account. Allocated portions must be a whole number percentage. The allocations
must total 100%.
On the Issue Date, the policy's Accumulation Value will be based on the Liquid
Asset Portfolio value as if the Policy had been issued and the initial Net
Premium invested within two Valudation Dates of receipt by Ameritas of the
application and initial premium ("the two day date"). On the Effective Date, the
Accumulation Value is allocated to the Liquid Asset Portfolio. Thirteen days
after the Issue Date, the Accumulation Value of the Policy will be allocated
among the Portfolios, or to the Fixed Account as selected by the Owner in the
application.
The Owner bears the entire investment risk for the portion of the Accumulation
Value allocated to the Portfolios. You should periodically review your
allocation in light of market conditions and your financial objectives.
ACCUMULATION VALUE
On the Effective Date, the Accumulation Value of the Policy is equal to the
initial premium received, less any applicable premium taxes, plus any interest
credited based on the Liquid Asset Portfolio value as of the Policy Date.
Thereafter, the Accumulation Value is determined on each Valuation Date by
multiplying the number of Accumulation Units of each Subaccount by the current
Accumulation Unit Price for that Subaccount and by adding each together with the
amount in the Fixed Account. The number of Accumulation Units credited to the
Policy is decreased by any annual policy fee, any withdrawals, and, upon
annuitization, any applicable premium taxes.
When a portion of the Accumulation Value is allocated to a Portfolio, a certain
number of Accumulation Units are credited to your Policy. The number of
Accumulation Units is determined by dividing the dollar amount allocated to the
Portfolio by the Accumulation Unit Price for that Portfolio as of the end of the
Valuation Period in which the allocation is made.
The Accumulation Units of each Portfolio are valued separately. The Accumulation
Unit Price may vary each Valuation Period according to the net investment
performance of the Portfolio, the daily charges under the Policy, and, any
applicable tax charges.
Therefore, the Accumulation Value of your Policy will vary from Valuation Period
to Valuation Period, reflecting the investment experience of the selected
Portfolios of the Funds, the interest earned in the Fixed Account, additional
Premium Payments, withdrawals and the deduction of any charges.
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TRANSFERS AMONG PORTFOLIOS AND THE FIXED ACCOUNT
You may make transfers among the Portfolios and/or the Fixed Account 15 times
each Policy Year without charge. A transfer charge of $10 may be imposed for
each additional transfer. This charge will be deducted pro rata from each
Subaccount (and, if applicable, the Fixed Account) in which the Policyowner is
invested. Each transfer must be at least $250, or the balance of the Portfolio,
if less. You may make unlimited transfers from the Portfolios to the Fixed
Account. You may also transfer from the Fixed Account amounts up to the greater
of: 25% of the Accumulation Value of the Fixed Account; the amount of any
transfer from the Fixed Account during the prior thirteen months; or $1,000 to
the various Portfolios during the 30 day period following the Policy anniversary
date. This provision is not available while dollar cost averaging from the Fixed
Account. The minimum amount that may remain in a Portfolio or the Fixed Account
after a transfer is $100.
You may initiate transactions by telephone. Ameritas will employ reasonable
procedures to confirm that telephone instructions are genuine. Ameritas
procedures for transactions initiated by telephone include, but are not limited
to, requiring the Owner to provide the policy number at the time of giving
transfer instructions; tape recording of all telephone transfer instructions;
and the provision, by Ameritas, of written confirmation of the telephone
transactions. Ameritas will effect transfers and determine all values in
connection with transfers at the end of the Valuation Period during which the
transfer request is received at the Home Office.
Transfers may be subject to additional limitations by the Funds.
SYSTEMATIC PROGRAMS
Ameritas may offer systematic programs as discussed below. Transfers of
Accumulation Value made within programs will be counted in determining whether
the transfer fee applies. Lower minimum amounts may be allowed to transfer as
part of a systematic program. There is no separate charge for participation in
these programs at this time. All other normal transfer restrictions, as
described above, may apply.
PORTFOLIO REBALANCING. Portfolio rebalancing is a method to maintain your
original allocation proportions among Portfolios. Under this program, the Owner
can instruct Ameritas to reallocate Accumulation Value among the Portfolios, on
a systematic basis, in accordance with allocation instructions specified by
the Owner. The Fixed Account can not be used in this program.
DOLLAR COST AVERAGING. Under the Dollar Cost Averaging program, the Owner can
instruct Ameritas to automatically transfer, on a systematic basis, a
predetermined amount or percentage specified by the Owner from the Fixed Account
or the Liquid Asset Subaccount to any other Subaccount(s). Dollar cost averaging
is permitted from the Fixed Account, if no more than 1/36th of the value of the
Fixed Account at the time dollar cost averaging is established is transferred
each month.
EARNINGS SWEEP. Permits systematic redistribution of earnings among Portfolios.
The Owner can request participation in the available systematic programs when
purchasing the Policy or at a later date. The Owner can change the allocation
percentage or discontinue any program by sending written notice or calling the
Home Office. Other scheduled programs may be made available. Ameritas reserves
the right to modify, suspend or terminate such programs at any time. Use of
Systematic Programs may not be advantageous, and does not guarantee success.
WITHDRAWALS AND SURRENDERS
Any time prior to the Annuity Date and while the Annuitant is still living, you
may make withdrawals or surrender the Policy to receive part or all of the
Accumulation Value. No withdrawal or surrender may be made after the Annuity
Date except as permitted under a particular Annuity Income Option.
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The amount available for withdrawal is the Accumulation Value at the end of the
Valuation Period during which the written request for withdrawal is received,
less any applicable premium taxes and in the case of a surrender, also less the
annual policy fee that would be due on the last Valuation Date of the Policy
Year.
In the absence of specific direction from the Owner, amounts will be withdrawn
from the Subaccounts and the Fixed Account on a pro rata basis. The minimum
withdrawal amount is $250. Any withdrawal request that would reduce the
Accumulation Value to less than $1,000 will be considered a request for policy
surrender.
Since the Owner assumes the investment risk with respect to amounts allocated to
the Separate Account, the total amount paid upon withdrawal under the Policy
(taking into account any prior withdrawals) may be more or less than the total
Premium Payments made. The surrender value may be paid in a lump sum to the
Owner, or, if elected, all or any part may be paid out under an Annuity Income
Option. (See "Annuity Income Options".)
Your proceeds will be paid within seven days of receipt of written request for
withdrawal or surrender, subject to postponement in certain circumstances. (See
"Deferment of Payment".) Payments under the Policy of any amounts derived from a
premium paid by check may be delayed until the check has cleared the payor's
bank.
If, at the time the Owner makes a withdrawal request, he or she has not provided
Ameritas with a written election not to have federal income taxes withheld,
Ameritas must by law withhold such taxes from the taxable portion of the
withdrawal and remit that amount to the federal government. Moreover, the
Internal Revenue Code provides that a 10% penalty tax may be imposed on certain
early withdrawals. (See "Federal Tax Matters.")
SYSTEMATIC WITHDRAWALS. A systematic withdrawal option is available. Automatic
withdrawals may be taken on a monthly, quarterly, semi-annual or annual mode.
FREE LOOK PRIVILEGE
A free look period is given to examine a Policy and return it for a refund. The
Owner may cancel the Policy within 10 days after receipt of the Policy, unless
state law requires a longer period of time. The refund is equal to the greater
of the premiums paid or the premiums adjusted by investment gains or losses. To
cancel the Policy, the Owner should return it to Ameritas at the Home Office. A
refund, if the premium was paid by check, may be delayed until the check has
cleared the Owner's bank.
CHARGES AND DEDUCTIONS
There is no sales load, no withdrawal charge, and no surrender charge.
Charges will be deducted periodically from the Accumulation Value of the Policy
to compensate Ameritas for, among other things: (1) issuing and administering
the Policy; and (2) assuming certain risks in connection with the Policy. The
nature and amount of these charges are described more fully below.
No deductions are made from the Premium Payments before they are allocated to
the Account or Fixed Account, unless taxes are imposed by state law upon the
receipt of a Premium Payment. In that case Ameritas will deduct the premium tax
due when the premiums are received.
ADMINISTRATIVE CHARGES
ANNUAL POLICY FEE. An annual policy fee of up to $40.00 (currently $25.00) is
deducted from the Accumulation Value on the last Valuation Date of each Policy
Year or upon a surrender. This charge
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reimburses Ameritas for the administrative costs of maintaining the Policy on
Ameritas' system and the cost of reporting to Owners.
Ameritas does not expect to make a profit on the charges for the annual policy
fee.
TRANSFER CHARGE. Transfer charges may be levied. (See "Transfers Among
Portfolios and the Fixed Account.")
MORTALITY AND EXPENSE RISK CHARGE
Ameritas imposes a charge as compensation for bearing certain mortality and
expense (M&E) risks under the Policies. The charge is assessed daily and is
equal to an annual rate of .75% of the value of the average daily net assets of
the Account. Ameritas guarantees that this charge will never exceed .95%. If
this charge is insufficient to cover assumed risks, the loss will fall on
Ameritas. Conversely, if the charge proves more than sufficient, any excess will
be added to Ameritas' surplus. No M&E charge is imposed on the Fixed Account.
The mortality risk borne by Ameritas, assuming the selection of one of the forms
of life annuities, is to make monthly Annuity Payments (determined in accordance
with the annuity tables and other provisions contained in the Policies)
regardless of how long all annuitants may live. This undertaking assures that
neither an Annuitant's own longevity, nor an improvement in life expectancy
greater than expected, will have any adverse affect on the monthly annuity
payments the Annuitant will receive. It therefore relieves the Annuitant from
the risk of outliving the funds accumulated for retirement.
In addition, Ameritas bears a mortality risk under the Policies, regardless of
the Annuity Income Option selected, in that it guarantees the purchase rates for
the Annuity Income Options available under the Policy and it guarantees that the
death benefit payable upon death of the Annuitant prior to the Annuity Date will
be the greater of the Accumulation Value or the Premium Payments made.
The expense risk undertaken by Ameritas, with respect to the Account, is that
the deductions for administrative costs under the Policies may be insufficient
to cover the actual future costs incurred by Ameritas for providing
administration services.
If the annual policy fee is insufficient to cover the administration expenses,
the deficiency will be met from Ameritas' General Account funds, including the
amount derived from the charge levied for mortality and expense risks.
TAX CHARGES
The Owner will pay premium taxes that currently range from 0% to 3.5% of the
premium paid, where such taxes are imposed by the state law of the Owner's
residence. States impose premium taxes either upon receipt, by the company, of a
premium payment, or upon annuitization or withdrawals. Ameritas will charge and
deduct premium taxes as required by state law and in accordance with any
applicable company election. Applicable premium tax rates are subject to change.
The Owner will be notified of any applicable premium taxes. You are responsible
for informing Ameritas in writing of changes of residence.
Under present laws, Ameritas will incur state or local taxes (in addition to the
premium taxes described above) in several states. At present, these taxes are
not significant; thus, Ameritas does not currently make a charge for these other
taxes. If they increase, however, Ameritas may charge for such taxes. Such
charges would be deducted from the Accumulation Value.
Ameritas does not expect to incur any federal income tax liability attributable
to investment income or capital gains retained as part of the reserves under the
Policies. Based upon these expectations, no charge is being made currently to
the Account for corporate federal income taxes which may be attributable to the
Account. Ameritas will periodically review the question of a charge to the
Account for corporate federal income taxes related to the Account. Such a charge
may be made in future years
16 NLVA
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for any federal income taxes incurred by Ameritas. This might become necessary
if the tax treatment of Ameritas is ultimately determined to be other than what
we currently believe it to be, if there are changes made in the federal income
tax treatment of annuities at the corporate level, or if there is a change in
Ameritas' tax status. In the event that Ameritas should incur federal income
taxes attributable to investment income or capital gains retained as part of the
reserves under the Policy, the Accumulation Unit Price would be correspondingly
adjusted. See "Federal Tax Matters".
FUND INVESTMENT ADVISORY FEES AND EXPENSES
The value of the assets on the Separate Account will reflect investment advisory
fees and other expenses incurred by the Funds. Fund expenses are found in the
Funds' prospectuses, the Statement of Additional Information, and the Fee Table
of this prospectus.
ANNUITY PERIOD
ANNUITY DATE
The Annuity Date is the date that Annuity Payments are scheduled to begin,
unless the Policy has been surrendered or the Annuitant is deceased and an
amount has been paid as proceeds prior to that date. The Annuity Date will be
the later of the fifth Policy anniversary date or the Policy anniversary which
is nearest the Annuitant's 85th birthday.
However, the Owner may specify an Annuity Date at the time of purchase which may
be extended up to the Policy anniversary nearest the Annuitant's 95th birthday.
The 29th, 30th, or 31st day of any month may not be selected as the Annuity
Date.
An Annuity Date may only be changed by written request during the Annuitant's
lifetime. Written request to change the Annuity Date must be received at the
Ameritas Home Office at least 30 days before the currently scheduled Annuity
Date. The Annuity Date and Annuity Income Options available for Qualified
contracts may also be controlled by endorsements, the plan, or applicable law.
ANNUITY INCOME OPTIONS
If the Annuitant is living on the Annuity Date and the Policy is in force,
Annuity Payments will be made to the Annuitant according to the terms of the
Policy and the Annuity Income Option selected.
The amounts of any Annuity Payments payable will be based on the Accumulation
Value as of the Annuity Date less any premium taxes, if applicable. Thereafter,
the monthly Annuity Payment will not change, except in the event the Interest
Payment Option is elected, in which case the payment will vary based on the rate
of interest determined by Ameritas. All or part of the Accumulation Value may be
placed under one or more Annuity Income Options. If annuity payments are to be
paid under more than one option, Ameritas must be told what part of the
Accumulation Value is to be paid under each option.
The Annuity Income Options are shown below. Election of an Annuity Income Option
must be made by written request to Ameritas at least thirty (30) days in advance
of the Annuity Date. If no election is made, payments will be made as a Life
Annuity as shown below. Subject to Ameritas' approval, the Owner (or after the
Annuitant's death, the Annuitant's Beneficiary) may select any other Annuity
Income Option Ameritas then offers. Annuity Income Options are not available to:
(1) an assignee; or (2) any other than a natural person except with Ameritas'
consent.
If an Annuity Income Option selected does not generate monthly payments of at
least $100, Ameritas reserves the right to pay the Accumulation Value as a lump
sum payment or to change the frequency. If an Annuity Income Option is chosen
which depends on the continuation of life of the Annuitant, proof of birth date
may be required before Annuity Payments begin. For Annuity Income Options
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involving life income, the actual age of the Annuitant or joint Annuitant will
affect the amount of each payment. Since payments to older Annuitants are
expected to be fewer in number, the amount of each Annuity Payment may be
greater. For Annuity Income Options that do not involve life income, the length
of the payment period may affect the amount of each payment: the shorter the
period, the greater the amount of each Annuity Payment.
The following Annuity Income Options are currently available:
INTEREST PAYMENT. Ameritas will hold any amount applied under this option and
pay or credit interest on the unpaid balance each month at a rate determined by
Ameritas.
DESIGNATED AMOUNT ANNUITY. Monthly annuity payments will be for a fixed amount.
Payments continue until the amount Ameritas holds runs out.
DESIGNATED PERIOD ANNUITY. Monthly annuity payments are paid for a period
certain, as the Owner elects, up to 20 years.
LIFE ANNUITY. Monthly annuity payments are paid for the life of an Annuitant,
ceasing with the last Annuity Payment due prior to his or her death. Variations
provide for guaranteed payments for a period of time.
JOINT AND LAST SURVIVOR ANNUITY. Monthly annuity payments are paid based on the
lives of the two annuitants and thereafter on the life of the survivor, ceasing
with the last Annuity Payment due prior to the survivor's death.
The rate of interest payable under the Interest Payment, Designated Amount
Annuity or Designated Period Annuity Options will be guaranteed to be no less
than 3% compounded yearly. Payments under the Life Annuity and Joint and Last
Survivor Annuity Options will be based on the 1983 Table "a" Individual Annuity
Table, projected for seventeen years, at 3 1/2% interest. Ameritas may, at any
time of election of an Annuity Income Option, offer more favorable rates in lieu
of the guaranteed rates specified in the Annuity Tables. These rates may be
based on Annuity Tables which distinguish between males and females.
Under current administrative practice, Ameritas allows the beneficiary to
transfer amounts applied under the Interest Payment, Designated Amount Annuity,
and Designated Period Annuity Options to either the Life Annuity or Joint and
Last Survivor Annuity Option after the Annuity Date. However, there is no
guarantee that Ameritas will continue this practice which can be changed at any
time at Ameritas' discretion.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion is general in nature and is not intended as tax advice.
It is not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under a contract. You should consult a competent tax adviser before purchasing a
policy. This discussion is based upon Ameritas' understanding of the present
federal income tax laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws, other than premium
taxes. (See "Tax Charges".)
TAXATION OF ANNUITIES IN GENERAL
NONQUALIFIED POLICIES. Section 72 of the Internal Revenue Code (the Code)
governs taxation of annuities. In general, the Owner is not taxed on increases
in the value of a Policy until some form of distribution is made under the
Policy. The exception to this rule is the treatment afforded to Owners
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that are not natural persons. Generally, an Owner that is not a natural person
must include in income any increase in excess of the Owner's cash value over the
Owner's "investment in the policy" during the taxable year, even if no
distribution occurs. There are, however, exceptions to this rule which you may
wish to discuss with your tax counsel. The following discussion applies to
Policies owned by natural persons.
The taxable portion of a distribution (in the form of an annuity or lump sum
payment) is taxed as ordinary income, subject to any income averaging rules
applicable to taxpayers generally. For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the Accumulation Value generally
will be treated as a distribution. Generally, in the case of a withdrawal under
a Nonqualified Policy, amounts received are first treated as taxable income to
the extent that the Accumulation Value immediately before the withdrawal exceeds
the "investment in the policy" at that time. Any additional amount is not
taxable.
Although the tax consequences may vary depending on the Annuity Income Option
elected under the Policy, in general, only the portion of the Annuity Payment
that represents the amount by which the Accumulation Value exceeds the
"investment in the policy" will be taxed. For fixed annuity payments, in
general, there is no tax on the amount of each payment which represents the same
ratio that the "investment in the policy" bears to the total expected value of
the Annuity Payment for the term of the payment; however, the remainder of each
Annuity Payment is taxable. Any distribution received subsequent to the
investment in the Policy being recovered will be fully taxable.
In the case of a distribution from a Nonqualified Policy, there may be imposed a
federal penalty tax equal to 10% of the amount treated as taxable income. In
general, however, there is no penalty tax on distributions: (1) made on or after
the date on which the Owner is actual age 59 1/2, (2) made as a result of death
or disability of the Owner, or (3) received in substantially equal payments as a
life annuity subject to Internal Revenue Service requirements, including special
"recapture" rules.
QUALIFIED POLICIES. The rules governing the tax treatment of distributions under
qualified plans vary according to the type of plan and the terms and conditions
of the plan itself. Generally, in the case of a distribution to a participant or
beneficiary under a Policy purchased in connection with these plans, only the
portion of the payment in excess of the "investment in the policy" allocated to
that payment is subject to tax. The "investment in the policy" equals the
portion of plan contributions invested in the Policy that was not excluded from
the participant's gross income, and may be zero. In general, for allowed
withdrawals, a ratable portion of the amount received is taxable, based on the
ratio of the investment in the Policy to the total Policy value. The amount
excluded from a taxpayer's income will be limited to an aggregate cap equal to
the investment in the Policy. The taxable portion of annuity payments is
generally determined under the same rules applicable to Nonqualified Policies.
However, special favorable tax treatment may be available for certain
distributions (including lump sum distributions). Adverse tax consequences may
result from distributions prior to age 59 1/2 (subject to certain exceptions),
distributions that do not conform to specified commencement and minimum
distribution rules, aggregate distributions in excess of a specified annual
amount, and in other certain circumstances.
Distributions from qualified plans are subject to specific tax withholding
rules. Eligible rollover distributions from a qualified plan are subject to
income tax withholding at a rate of 20% unless the Policyowner elects to have
the distribution paid directly by Ameritas to an eligible retirement plan in a
direct rollover. If the distribution is not an eligible rollover distribution,
it is generally subject to the same withholding rules as distributions from
Nonqualified Policies.
GENERAL PROVISIONS
ANNUITANT'S BENEFICIARY
The Annuitant's Beneficiary(ies) receives the death benefit proceeds upon death
of the Annuitant. The Owner may name both primary and contingent Annuitant's
Beneficiaries. The Annuitant's Beneficiary(ies) is named in the application or
as subsequently changed and recorded in Ameritas' records.
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Multiple beneficiaries may be named; however, unless otherwise indicated,
payments are made equally to those primary beneficiaries who are alive upon the
death of the Annuitant. Contingent beneficiaries are only eligible if no primary
beneficiary is alive at the time proceeds are payable. If none survive, the
final beneficiary will be the Owner or the Owner's estate.
The Owner may change the Annuitant's Beneficiary by written request on a Change
of Beneficiary form at any time during the Annuitant's lifetime. Ameritas, at
its option, may require that the Policy be returned to the Home Office for
endorsement of any change, or that other forms be completed. The change will
take effect as of the date the change is recorded at the Home Office. Ameritas
will not be liable for any payment made or action taken before the change is
recorded. No limit is placed on the number of changes that may be made.
DEATH OF ANNUITANT
If the Annuitant dies prior to the Annuity Date, an amount will be paid as
proceeds to the Annuitant's Beneficiary. The death benefit is payable upon
receipt of Satisfactory Proof of Death of the Annuitant as well as proof that
the Annuitant died prior to the Annuity Date. Ameritas guarantees the Death
Benefit will equal the greater of the Accumulation Value or total premiums paid
less withdrawals, on the date Satisfactory Proof of Death is received by
Ameritas at its Home Office. The death benefit is payable as a lump sum or under
one of the Annuity Income Options.
The Owner may elect an Annuity Income Option for the Annuitant's Beneficiary, or
if no such election was made by the Owner and a cash benefit has not been paid,
the Annuitant's Beneficiary may make this election after the Annuitant's Death.
Since Satisfactory Proof of Death includes a "Claimant's Statement", which
specifies how the beneficiary wishes to receive the benefit (unless the Owner
previously selected an option), the amount of the death benefit will continue to
reflect the investment performance of the Separate Account until that
information is supplied to Ameritas. Upon receipt of this proof, the death
benefit will be paid to the Annuitant's Beneficiary within seven days, or as
soon thereafter as Ameritas has sufficient information about the Annuitant's
Beneficiary to make the payment. In order to take advantage of the favorable tax
treatment accorded to receiving the death benefit as an annuity, the Annuitant's
Beneficiary must elect to receive the benefits under an Annuity Option within 60
days "after the day on which such lump sum became payable," as defined in the
Internal Revenue Code.
DEATH OF OWNER
If the Owner dies on or after the Annuity Date, annuity benefits continue to be
paid to the Annuitant under the Annuity Income Option in effect on the Owner's
date of death.
If the Owner dies before the Annuity Date and before the entire interest in the
Policy is distributed, the Accumulation Value of the Policy must be distributed
to the Owner's Designated Beneficiary so that the Policy qualifies as an annuity
under the Internal Revenue Code. The entire interest must be distributed within
five years of the Owner's death. However, a distribution period exceeding five
years will be allowed if the Owner's Designated Beneficiary purchases an
immediate annuity under which payments will begin within one year of the Owner's
death and will be paid out over the lifetime of the Owner's Designated
Beneficiary or over a period not extending beyond his or her life expectancy.
If the Owner's interest is payable to (or for the benefit of) the surviving
spouse of the Owner, the Policy may be continued with the surviving spouse
treated as the Owner for purposes of applying the rules described above.
Finally, in situations where the Owner is not an individual, these distribution
rules are applicable upon the death or change of the Annuitant.
20 NLVA
<PAGE>
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Ameritas reserves the right, subject to applicable law, and if necessary, after
notice to and prior approval from the SEC and or state insurance authorities, to
make additional Portfolios available to you. We may also eliminate, combine or
substitute Subaccounts if, in our judgment, marketing needs, tax considerations,
or investment conditions warrant. This may happen due to a change in law or a
change in a Portfolio's investment objectives or restrictions, or for some other
reason. Ameritas may operate the Separate Account as a management company under
the 1940 Act, it may be deregistered under that Act if registration is no longer
required, or it may be combined with other Ameritas separate accounts. Ameritas
may also transfer the assets of the Separate Account to another Separate
Account.
If any of these substitutions or changes are made, Ameritas may by appropriate
endorsement change the policy to reflect the substitution or change. In
addition, Ameritas may, when permitted by law, restrict or eliminate any voting
rights of Owners or other persons who have voting rights as to the Account.
You will be notified of any material change in the investment Policy of any
Portfolio in which you have an interest.
DEFERMENT OF PAYMENT
Payment of any withdrawal, surrender or lump sum death benefit due from the
Separate Account will occur within seven days from the date the amount becomes
payable, except that Ameritas may be permitted to defer such payment if:
a) the New York Stock Exchange is closed other than customary weekends or
holidays or trading on the New York Stock Exchange is otherwise restricted;
or
b) the SEC permits the delay for the protection of Owners; or
c) an emergency exists as determined by the SEC.
In addition, surrenders or withdrawals from the Fixed Account may be deferred by
Ameritas for up to 6 months from the date of written request.
OWNER INQUIRIES
Inquiries should be addressed to Ameritas Life Insurance Corp., 5900 "O" Street,
P.O. Box 81889, Lincoln, Nebraska 68501 or made by calling 1-800-745-6665. All
inquiries should include the Policy number and the Owner's name.
CONTESTABILITY
Ameritas cannot contest the validity of this Policy after the Policy Date,
subject to "Misstatement of Age or Sex" provision.
MISSTATEMENT OF AGE OR SEX
Ameritas may require proof of age and sex before making annuity payments. If the
age or sex of the Annuitant has been misstated, we will adjust the benefits and
amounts payable under this Policy.
If Ameritas made any overpayments, interest at the rate of 6% per year
compounded yearly will be charged against future payments. If we made
underpayments, the balance due plus interest at the rate of 6% per year
compounded yearly will be paid in a lump sum.
NLVA 21
<PAGE>
REPORTS AND RECORDS
Ameritas will maintain all records relating to the Account and will mail the
Owner, at the last known address of record, within 30 days after each Policy
anniversary, an annual report which shows the current Accumulation Value as
allocated among the Subaccounts or the Fixed Account, and charges made during
the Policy Year. Quarterly reports are also currently provided but except for
the annual report, Ameritas reserves the right to charge a report fee. The Owner
will also be sent confirmations of transactions, such as purchase payments,
transfers and withdrawals under the Policy. A periodic report for the Fund and a
list of the securities held in each Portfolio of the Fund and any other
information required by the 1940 Act will also be provided.
DISTRIBUTION OF THE POLICIES
Ameritas Investment Corp. ("AIC"), a wholly-owned subsidiary of AMAL
Corporation, and an affiliate of Ameritas, will act as the principal underwriter
of the Policies. AIC was organized under the laws of the State of Nebraska on
December 29, 1983, and is a broker/dealer registered according to the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. There is no premium load to cover sales and distribution expenses.
All compensation or expense reimbursement received by AIC for serving as the
principal underwriter of the Policies will be paid by Ameritas from its other
assets or surplus in its general account, which may include profits derived from
amounts derived from mortality and expense risk charges and other charges made
under the Policies. Policies can be purchased directly from Ameritas through
Veritas, Ameritas' wholly-owned direct-to-consumer subsidiary, with salaried
employees who are registered representatives of AIC and who will not receive
compensation related to the purchase. The Policies are also sold by individuals
who are registered representatives of AIC, and who are licensed as life
insurance agents for Ameritas. AIC and Ameritas may authorize registered
representatives of other registered broker/dealers to sell the Policies subject
to applicable law. In these situations, AIC or the other broker/dealer may
receive compensation. AIC will be paid by Ameritas at a rate of .05% of all
premium received. Other broker/dealers will receive from Ameritas up to .5% of
premium, and an asset based administrative compensation of .10% (annualized),
which fee shall be paid by Ameritas.
The gross variable annuity compensation received by AIC on ALIC's variable
annuities was $0 for 1996 and all prior years.
SAFEKEEPING OF THE ACCOUNT'S ASSETS
Ameritas hold the assets of the Account. The assets are held separate and apart
from General Account assets. Ameritas maintains records of all purchases and
redemptions of the Funds' shares by each of the Subaccounts.
THIRD PARTY SERVICES
Ameritas is aware that certain third parties are offering money management
services in connection with the contracts. Ameritas does not engage any such
third parties to offer such services of any type. In certain cases, Ameritas has
agreed to honor transfer instructions from such services where it has received
powers of attorney, in a form acceptable to it, from the contract owners
participating in the service. Firms or persons offering such services do so
independently from any agency relationship they may have with Ameritas for the
sale of contracts. Ameritas takes no responsibility for the investment
allocations and transfers transacted on a contract owner's behalf by such third
parties or any investment allocation recommendations made by such parties.
Contract owners should be aware that fees paid for such services are separate
and in addition to fees paid under the contracts.
VOTING RIGHTS
To the extent required by law, Ameritas will vote the Portfolio shares held in
the Account at shareholder meetings in accordance with instructions received
from persons having voting interests in
22 NLVA
<PAGE>
the corresponding Subaccount. The 1940 Act currently requires shareholder voting
on matters such as the election of the Board of Trustees of the Funds, the
approval of the investment advisory contract, changes in the fundamental
investment Policies of the Funds, and approval of the independent accountants.
If, however, the 1940 Act or any regulation thereunder should be amended, or if
the present interpretation thereof should change, and, as a result, Ameritas
determines that it is allowed to vote the Portfolio shares in its own right,
Ameritas may elect to do so.
Prior to the Annuity Date, the Owner holds a voting interest in each Subaccount
to which the Accumulation Value is allocated. The number of votes available to
an Owner will be calculated separately for each Subaccount of the Account. The
number of votes available to an Owner will be determined by dividing the
Accumulation Value attributable to a Subaccount by the net value per share of
the applicable Portfolio. In determining the number of votes, fractional shares
will be recognized.
The number of votes of the Portfolio which are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the Funds. Voting
instructions will be solicited by written communication prior to such meeting in
accordance with procedures established by the Funds.
Shares of Funds as to which no timely instructions are received, or shares held
by Ameritas as to which Owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
Policies participating in that Subaccount.
Each person having a voting interest in a Subaccount will receive proxy
material, reports and other materials relating to the appropriate Portfolio.
On and after the Annuity Date, there are no voting rights because amounts are no
longer held in the Account.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Account is a party or to which the
assets of the Account are subject. Ameritas and AIC are not involved in any
litigation that is of material importance in relation to their total assets or
that relates to the Account.
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available that contains more details
concerning the subjects discussed in this Prospectus. This can be obtained by
writing to the address on the front page or by calling 1-800-745-6665.
The following is a Table of Contents for that Statement:
Page
GENERAL INFORMATION AND HISTORY...................................... 2
THE POLICY........................................................... 2
GENERAL MATTERS...................................................... 5
FEDERAL TAX MATTERS.................................................. 5
DISTRIBUTION OF THE POLICY........................................... 6
SAFEKEEPING OF ACCOUNT ASSETS........................................ 6
STATE REGULATION..................................................... 6
LEGAL MATTERS........................................................ 7
EXPERTS.............................................................. 7
OTHER INFORMATION.................................................... 7
FINANCIAL STATEMENTS................................................. 7
NLVA 23
<PAGE>
APPENDIX A
LONG TERM MARKET TRENDS
The information below covering the period of 1926-1996 is an examination of the
basic relationship between risk and return among the different asset classes,
and between nominal and real (inflation adjusted) returns. The information is
provided because the Policyowners have varied investment portfolios available
which have different investment objectives and policies. The chart generally
demonstrates how different classes of investments have performed during the
period. The study of asset returns provides a period long enough to include most
of the major types of events that investors have experienced in the past. This
is a historical record and is not intended as a projection of future
performance.
The graph depicts the growth of a dollar invested in common stocks, small
company stocks, long-term government bonds, Treasury bills, and a hypothetical
asset returning the inflation rate over the period from the end of 1925 to the
end of 1996. All results assume reinvestment of dividends on stocks or coupons
on bonds and no taxes. Transaction costs are not included, except in the small
stock index starting in 1982. Charges associated with a variable insurance
policy are not reflected in the chart.
Each of the cumulative index values is initiated at $1.00 at year-end 1925. The
graph illustrates that common stocks and small stocks gained the most over the
entire 71-year period: investments of one dollar would have grown to $1,370.96
and $4,495.99 respectively, by year-end 1996. This growth, however, was earned
by taking substantial risk. In contrast, long-term government bonds (with an
approximate 20-year maturity), which exposed the holder to less risk, grew to
only $33.73. Note that the return and principal value of an investment in stocks
will fluctuate with changes in market conditions. Prices of small company stocks
are generally more volatile than those of large company stocks. Government bonds
and Treasury Bills are guaranteed by the U.S. Government and, if held to
maturity, offer a fixed rate of return and a fixed principal value.
The lowest risk strategy over the past 71 years was to buy U.S. Treasury bills.
Since Treasury bills tended to track inflation, the resulting real
(inflation-adjusted) returns were near zero for the entire 1926-1996 period.
(Omitted graph illustrates long term market trends as described in the narrative
above.)
Year End 1925 = $1.00
Source: Stocks, Bonds, Bills, and Inflation 1997 Yearbook
(C)Ibbotson Associates, Chicago. All Rights Reserved
24 NLVA
<PAGE>
APPENDIX B
STANDARD & POOR'S 500
The Standard and Poor's (S & P 500) is a weighted index of 500 widely held
stocks: 400 Industrials, 40 Financial Company Stocks, 40 Public Utilities, and
20 Transportation stocks, most of which are traded on the New York Stock
Exchange. This information is provided because the Policyowners have varied
investment options available. The investment options, except the Fixed Account
and the Liquid Asset Account, involve investments in the stock market. The S & P
500 is generally regarded as an accurate composite of the overall stock market.
<TABLE>
<CAPTION>
PERCENT CHANGE OF TOTAL RETURN
STANDARD & POOR'S 500 INDEX
%
YEAR CHANGE
- -------------------------------------
<S> <C> <C>
1 1972 18.90
2 1973 -14.77 (Omitted graph depicts the
3 1974 -26.39 activity of the S&P 500 Index
4 1975 37.16 for the years 1970-1996.)
5 1976 23.57
6 1977 -7.42
7 1978 6.38
8 1979 18.20
9 1980 32.27
10 1981 -5.01
11 1982 21.44
12 1983 22.38
13 1984 6.10
14 1985 31.57
15 1986 18.56
16 1987 5.10
17 1988 16.61
18 1989 31.69
19 1990 -3.14
20 1991 30.45
21 1992 7.61
22 1993 10.08
23 1994 1.32
24 1995 37.58
25 1996 22.96
</TABLE>
THE CHART ASSUMES THE RETURN EXPERIENCED BY THE STANDARD & POOR'S 500 INDEX FOR
THE LAST 25 YEARS. THE CHART ASSUMES THAT DIVIDENDS ARE REINVESTED INTO THE
INDEX. FUTURE RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER. THE INFORMATION IN THE CHART IS NOT NECESSARILY INDICATIVE OF FUTURE
PERFORMANCE.
INDEX PERFORMANCE IS NOT ILLUSTRATIVE OF POLICY SUBACCOUNT PERFORMANCE, AND
INVESTMENTS ARE NOT MADE IN THE INDEX. THE POLICY IS NOT SPONSORED, ENDORSED,
SOLD, OR PROMOTED BY STANDARD & POOR'S.
NLVA 25
<PAGE>
APPENDIX C
QUALIFIED DISCLOSURES
* Information Statement For:
408(b) IRA Plans
408(k) SEP Plans
408(p) SIMPLE Plans (if available)
* Information Statement For:
401(a) Pension/Profit Sharing Plans
Ameritas Life Insurance Corp. Logo
<PAGE>
If this annuity is being purchased as a qualified plan as defined under
specified sections of the Internal Revenue Code, as purchaser (owner) or
fiduciary of an Employee Benefit Plan purchasing the annuity, you should
carefully review the Information Statement for your specific plan.
Depending on the type of plan, we are required to provide this disclosure to you
to meet the requirements of the Internal Revenue Service (IRS) and/or the
Employee Retirement Income Security Act of 1974 (ERISA).
Acknowledgment of your receipt of the required disclosure is included within the
application language above your signature.
Table of Contents
Information Statement
408(b) Individual Retirement Annuity (IRA) Plans
408(k) Simplified Employee Pension (SEP) Plans
408(p) Savings Incentive Match (SIMPLE) Plans (if available)...... QD-1
Information Statement
401(a) Pension/Profit Sharing Plans............................... QD-6
<PAGE>
Ameritas Life Insurance
Corp. Logo
INFORMATION STATEMENT
408(B) INDIVIDUAL RETIREMENT ANNUITY (IRA) PLANS
408(K) SIMPLIFIED EMPLOYEE PENSION (SEP) PLANS
408(P) SAVINGS INCENTIVE MATCH (SIMPLE) PLANS (IF AVAILABLE)
- --------------------------------------------------------------------------------
For purchasers of a 408(b) Individual Retirement Annuity (IRA) Plan, 408(k)
Simplified Employee Pension (SEP) Plan, or 408(p) Savings Incentive Match
(SIMPLE) Plan (if available), please review the following:
PART 1. PROCEDURE FOR REVOKING THE IRA PLAN:
After you establish an IRA Plan with Ameritas Life Insurance Corp. (Ameritas),
you are able to revoke your IRA within a limited time and receive a full refund
of the initial premium paid, if any. The period for revocation will not be less
than the legal minimum of seven (7) days following the date your IRA is
established with Ameritas.
To revoke your IRA, you should send a signed and dated written notice to:
Ameritas Life Insurance Corp., Policyholder Service Department, P.O. Box 81889,
Lincoln, NE 68501.
If your IRA contract was delivered to you, the contract should accompany your
notice of revocation. Your notice of revocation will be considered mailed on the
date of the postmark (or certification or registration, if applicable), if sent
by United States mail, properly addressed and by first class postage prepaid.
To obtain further information about the revocation procedure, contact your
Ameritas Representative or call 1-800-745-6665.
PART II. PROVISIONS OF THE IRA LAW:
Ameritas' No Load Variable Annuity (Form 4080), can be used for a Regular IRA, a
Rollover IRA, a Spousal IRA Arrangement, a Simplified Employee Pension Plan
(SEP) or for a salary reduction Simplified Employee Pension Plan (SARSEP)
established prior to January 1, 1997. A separate policy must be purchased for
each individual under each plan. In addition, Ameritas' No Load Variable Annuity
at some point after December 31, 1996, may be made available for use as a SIMPLE
IRA, if Ameritas determines such use is appropriate under applicable law.
While provisions of the IRA law are similar for all such plans, any major
differences are set forth under the appropriate topics below.
ELIGIBILITY:
REGULAR IRA PLAN: Any employee under age 70 1/2 and earning income from
personal services, is eligible to establish an IRA Plan although deductibility
of the contributions is determined by adjusted gross income and whether the
employee (or employee's spouse) participates in a qualified employer-sponsored
retirement plan.
ROLLOVER IRA: This is an IRA plan purchased with your distributions from
another IRA (including a SEP, SARSEP or SIMPLE IRA), a Section 401(a)
Qualified Retirement Plan, or a Section 403(b) Tax Sheltered Annuity (TSA).
Amounts transferred as Rollover Contributions are not taxable in the year of
distribution provided the rules for Rollover treatment are satisfied and may
or may not be subject to withholding. Rollover Contributions are not
deductible.
SPOUSAL IRA ARRANGEMENT: A Spousal IRA, consisting of a contract for each
spouse, may be set up provided a joint return is filed, the "nonworking
spouse" has less taxable compensation, if any for the tax year than the
working spouse, and is under age 70 1/2 at the end of the tax year.
Divorced spouses can continue a spousal IRA or start a Regular IRA based on
the standard IRA eligibility rules. All taxable alimony received by the
divorced spouse under a decree of divorce or separate maintenance is treated
as compensation for purposes of the IRA deduction limit.
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP): An employee is eligible to participate
in a SEP Plan based on eligibility requirements set forth in form 5305-SEP or
the plan document provided by the employer.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN (SARSEP): An employee is
eligible to participate in a SARSEP plan based on eligibility requirements set
forth in form 5305A-SEP or the plan document provided by the employer. New
SARSEP plans may not be established after December 31, 1996. SARSEP's
established prior to January 1, 1997, may continue to receive contributions
after 1996, and new employees hired after 1996 are also permitted to
participate in such plan if it was established prior to 1997.
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES OF SMALL EMPLOYERS (SIMPLE PLAN)
(IF AVAILABLE): An employee is eligible to participate in a SIMPLE Plan based
on eligibility requirements set forth in Form 5305-SIMPLE or the plan document
provided by the employer.
NONTRANSFERABILITY: You may not transfer, assign or sell your IRA Plan to
anyone (except in the case of transfer incident to divorce).
NONFORFEITABILITY: The value of your IRA Plan belongs to you at all times,
without risk of forfeiture.
PREMIUM: The annual premium (if applicable) of your IRA Plan may not exceed
the lesser of $2,000, or 100% of compensation for the year (or for Spousal
IRA's, the combined compensation of the spouses reduced by any deductible IRA
contribution made by the working spouse). Any premium in excess of or in
addition to $2,000 will be permitted only as a "Rollover Contribution." Your
contribution must be made in cash. For IRA's established under Simplified
Employee Pension Plans (SEP's), premiums are limited to the lesser of $30,000
or 15% of the first $150,000 of compensation (adjusted for cost of living
increases). In addition, if the IRA is under a salary reduction Simplified
Employee Pension (SARSEP) established prior to January 1, 1997, premiums made
by salary reduction are limited to $7,000 (adjusted for cost of living
increases). Also, if the Company determines that the contract can be used as a
SIMPLE IRA under applicable law, premiums under such plan will be limited to
permissible levels of annual employee elective contributions ($6,000 adjusted
for cost of living increases) plus the applicable percentage of employer
matching contributions (up to 3% of compensation) or employer non-elective
contributions (2% of compensation for each eligible employee subject to the
cap under Section 401(a)(17) as adjusted for cost of living increases).
QD-1 IRA/SEP
No Load Variable Annuity; 11/96
<PAGE>
MAXIMUM CONTRIBUTIONS:
REGULAR IRA PLAN: In any year that your annuity is maintained under the rules
for a Regular IRA Plan, your maximum contribution is limited to 100% of your
compensation or $2,000, whichever is less. The amount of permissible
contributions to your IRA may or may not be deductible. Whether IRA
contributions (other than Rollovers) are deductible depends on whether you (or
your spouse, if married) are an active participant in an employer-sponsored
plan and whether your adjusted gross income is above the "phase-out level."
SEE DEDUCTIBLE CONTRIBUTIONS, PART III.
ROLLOVER IRA: A Plan to Plan Rollover is a method for accomplishing continued
tax deferral on otherwise taxable distributions from certain plans. Rollover
contributions are not subject to the contribution limits on regular IRA
contributions, but also are not tax deductible.
There are two ways to make a rollover to an IRA:
(1) PARTICIPANT ROLLOVERS are available to participants, surviving spouses
or former spouses who receive eligible rollover distributions from
401(a) Qualified Retirement Plans, TSAs or IRAs (including SEP's,
SARSEP's, and SIMPLE IRA's). Participant Rollovers are accomplished by
contributing part or all of the eligible amounts (which includes amounts
withheld for federal income tax purposes) to your new IRA within 60 days
following receipt of the distribution. IRA to IRA Rollovers are limited
to one per distributing plan per 12 month period, while direct IRA to
IRA Transfers are not subject to this limitation. Distributions from a
SIMPLE IRA may not be rolled over to an IRA (which isn't a SIMPLE IRA)
during the 2 year period following the date you first participate in any
qualified salary reduction arrangement under a SIMPLE Plan maintained by
your employer.
(2) DIRECT ROLLOVERS are available to participants, surviving spouses and
former spouses who receive eligible rollover distributions from 401(a)
Qualified Retirement Plans or TSAs. Direct Rollovers are made by
instructing the plan trustee, custodian or issuer to pay the eligible
portion of your distribution directly to the trustee, custodian or
issuer of the receiving IRA. Direct Rollover amounts are not subject to
mandatory federal income tax withholding.
Certain distributions are NOT considered to be eligible for Rollover and
include: (1) distributions which are part of a series of substantially equal
periodic payments (made at least annually) for 10 years or more; (2)
distributions attributable to after-tax employee contributions to a 401(a)
Qualified Retirement Plan or TSA, or attributable to non-deductible IRA
contributions; (3) required minimum distributions made during or after the year
you reach age 70 1/2 or, if later and applicable, the year in which you retire;
(4) amounts in excess of the cash (except for certain loan offset amounts) or in
excess of the proceeds from the sale of property distributed.
At the time of a Rollover, you must irrevocably designate in writing that the
transfer is to be treated as a Rollover Contribution. Eligible amounts which are
not rolled over are normally taxed as ordinary income in the year of
distribution. If a Rollover Contribution is made to an IRA from a Qualified
Retirement Plan, you may later be able to roll the value of the IRA into a new
employer's plan provided you made no contributions to the IRA from other than
the first employer's plan. This is known as "Conduit IRA," and you should
designate your annuity as such when you complete your application.
SPOUSAL IRA ARRANGEMENT: In any year that your annuity is maintained under the
rules for a Spousal IRA, the maximum contribution to the Spousal IRA for tax
years after 1996, is the lesser of 100% of the combined compensation of both
spouses which is includable in gross income, reduced by the amount allowed as a
deduction to the "working" spouse for contribution to his or her own IRA or
$2,000. No more than $2,000 may be contributed to either spouse's IRA. Whether
the contribution is deductible or non-deductible depends on whether either
spouse is an active participant in an employer-sponsored plan for the year, and
whether the adjusted gross income of the couple is above the phase out level.
The contribution limit for divorced spouses is the lesser of $2,000 or the total
of the taxpayer's taxable compensation and alimony received for the year.
SEP PLAN: In any year that your annuity is maintained under the rules for a
Simplified Employee Pension Plan, the employer's maximum contribution is the
lesser of $30,000 or 15% of your first $150,000 of compensation (adjusted for
cost-of-living increases) or as changed under Section 415 of the Code. You may
also be able to make contributions to your SEP-IRA the same as you do to a
Regular IRA, however, you will be considered an active participant for purposes
of determining your deduction limit. In addition to the above limits, if your
annuity is maintained under the rules for a salary reduction Simplified Employee
Pension Plan (SARSEP), the maximum amount of employee pre-tax contributions
which can be made is $7,000, adjusted for cost of living increases. After
December 31, 1996, new SARSEP plans may not be established. Employees may,
however, continue to make salary reductions to a SARSEP plan established prior
to January 1, 1997. In addition, employees hired after December 31, 1996 may
participate in SARSEP plans established by their employers prior to 1997.
SIMPLE IRA: Contributions to a SIMPLE IRA may not exceed the permissible amounts
of employee elective contributions and required employer matching contributions
or non-elective contributions. Annual employee elective contributions expressed
as a percentage of compensation may not exceed $6,000 (adjusted for cost of
living increases). If an employer elects a matching contribution formula,
employers are generally required to match employee contributions dollar for
dollar up to 3% of the employee's compensation for the year. An employer may
elect a lower percentage match (not below 1%) for a year, provided certain
notice requirements are satisfied and the employer's election will not result in
the matching percentage being lower than 3% in more than 2 of the 5 years in the
5-year period ending with that calendar year. Alternatively, an employer may
elect to make non-elective contributions of 2% of compensation for all employees
eligible to participate in the plan and who have at least $5,000 in compensation
for the year. The employer must notify employees of this election within
specified timeframes. "Compensation" for purposes of the 2% non-elective
contribution option may not exceed the limit on compensation under Code Section
401(a)(17) ($150,000, adjusted for cost of living increases).
DISTRIBUTIONS: Payment to you from your IRA Plan must begin no later than the
April 1 following the close of the calendar year in which you attain age 70 1/2,
the Required Beginning Date (RBD). If you have not already withdrawn your entire
balance by this date, you may elect to receive the entire value of your IRA Plan
on or before the RBD in one lump sum; arrange for an income to be paid over your
lifetime, your expected lifetime, or over the lifetimes or expected lifetimes of
you and your beneficiary.
RATE OF DISTRIBUTION: If you arrange for the value of your IRA Plan to be paid
to you as retirement income rather than as one lump sum, then you must abide by
IRS rules governing how quickly the value of your IRA plan must be paid out to
you. Generally, it is acceptable to have an insurance company annuity pay income
to you for as long as you live, or for as long as you and your beneficiary live.
IRA/SEP QD-2
No Load Variable Annuity; 11/96
<PAGE>
MINIMUM DISTRIBUTION REQUIREMENTS: Once you reach your RBD, you must withdraw a
minimum amount each year or be subject to a 50% non-deductible excise tax on the
difference between the minimum required distribution and the amount distributed.
To determine the required minimum distribution, divide your entire interest in
your IRA (as of December 31 of your age 70 1/2 year) by your life expectancy or
the joint life expectancies of you and your beneficiary. Your single or joint
life expectancy is determined by using IRS life expectancy tables. See IRS
Publications 575 and 590.
Your life expectancy (and that of your spousal beneficiary, if applicable) will
be recalculated annually, unless you irrevocably elect otherwise by the time
distributions are required to begin. With the recalculation method, if a person
whose life expectancy is recalculated dies, his or her life expectancy will be
zero in all subsequent years. The life expectancy of a non-spouse beneficiary
cannot be recalculated. Where life expectancy is not recalculated, it is reduced
by one year for each year after your 70 1/2 year to determine the applicable
remaining life expectancy. Also, if your benefit is payable in the form of a
joint and survivor annuity, a larger minimum distribution amount may be required
under IRS regulations, unless your spouse is the designated beneficiary.
If you die after the RBD, amounts undistributed at your death must be
distributed at least as rapidly as under the method being used at the time of
your death. If you die before the RBD, your entire interest must be distributed
within 5 years of your death if no beneficiary is designated; or if a
beneficiary is designated, over the life expectancy of the beneficiary if the
beneficiary so elects by December 31 of the year following the year of your
death. If the beneficiary fails to make an election, the entire benefit will be
paid to the beneficiary no later than December 31, of the calendar year
containing the fifth anniversary of the Annuitant's death. Also, if a designated
beneficiary is the spouse, the life annuity distribution must begin by the later
of December 31 of the calendar year following the calendar year of the
Annuitant's death or December 31 of the year in which you would have attained
age 70 1/2.If your designated beneficiary is not your spouse, life annuity
distributions must begin by December 31 of the year following your death.
PART III. RESTRICTIONS AND TAX CONSIDERATIONS:
TIMING OF CONTRIBUTIONS: Once you establish an IRA, contributions (deductible or
non-deductible) must be made by the due date, not including extensions, for
filing your tax return. (Participant Rollovers must be made within 60 days of
your receipt of the distribution.) A CONTRIBUTION MADE BETWEEN JANUARY 1 AND THE
FILING DUE DATE FOR YOUR RETURN, MUST BE SUBMITTED WITH WRITTEN DIRECTION THAT
IT IS BEING MADE FOR THE PRIOR PLAN YEAR OR IT WILL BE TREATED AS MADE FOR THE
CURRENT YEAR. SEP contributions must be made by the due date of the Employer's
tax return (including extensions). SIMPLE IRA contributions, if permitted, must
be made by the tax return due date for the employer (including extensions) for
the year for which the contribution is made. Note, an employer is required to
make SIMPLE plan contributions attributable to employee elective contributions
as soon as it is administratively feasible to segregate these contributions from
the employer's general assets, but in no event later than the 30th day of the
month following the month in which the amounts would have otherwise been payable
to the employee in cash.
DEDUCTIBLE IRA CONTRIBUTIONS: The amount of permissible contributions to your
IRA may or may not be deductible. If you or your spouse are not active
participants in an employer sponsored retirement plan, any permissible
contribution you make to your IRA will be deductible. If you or your spouse are
an active participant in an employer-sponsored retirement plan, the size of your
deduction if any, will depend on your combined adjusted gross income (AGI). If
your combined AGI is less than $40,000, you can deduct your entire contribution.
If you are single and your AGI is less than $25,000, you may also take a full
deduction. For married couples filing joint returns, the deduction is phased out
between $40,000 and $50,000. For single individuals, the deduction is phased out
between $25,000 and $35,000. If you are married and covered by an employer plan,
but file a separate tax return from your spouse, your deduction is phased out
between $0 and $10,000 of AGI. If your AGI is not above the applicable phase out
level, a minimum contribution of $200 is permitted regardless of whether the
phase out rules provide for a lesser amount. You can elect to treat deductible
contributions as non-deductible. SEP, SARSEP and SIMPLE plan contributions are
not deductible by you.
NON-DEDUCTIBLE IRA CONTRIBUTIONS: It is possible for you to make non-deductible
contributions to your IRA (not including SIMPLE IRA's) even if you are not
eligible to make deductible contributions for the year. The amount of
non-deductible contributions you can make depends on the amount of deductible
contributions you make. The sum of your non-deductible and deductible
contributions for a year may not exceed the lesser of (1) $2,000 ($4,000
combined when a spousal IRA is also involved), or (2) 100% of your compensation
(or, if a Spousal IRA is involved, 100% of you and your spouse's combined
compensation, reduced by the amount of any deductible IRA contribution made by
the "working" spouse). IF YOU WISH TO MAKE A NON-DEDUCTIBLE CONTRIBUTION, YOU
MUST REPORT THIS ON YOUR TAX RETURN BY FILING FORM 8606 (NON-DEDUCTIBLE IRA ).
REMEMBER, YOU ARE REQUIRED TO KEEP TRACK OF YOUR NON-DEDUCTIBLE CONTRIBUTIONS AS
AMERITAS DOES NOT KEEP A RECORD OF THESE FOR YOU. THIS INFORMATION WILL BE
NECESSARY TO DOCUMENT THAT THE CONTRIBUTIONS WERE MADE ON A NON-DEDUCTIBLE BASIS
AND THEREFORE, ARE NOT TAXABLE UPON DISTRIBUTION.
EXCESS CONTRIBUTIONS: There is a 6% IRS penalty tax on IRA contributions in
excess of permissible contributions. However, excess contributions made in one
year may be applied against the contribution limits in a later year if the
contributions in the later year are less than the limit. This penalty tax can be
avoided if the excess amount, together with any earnings on it, is returned to
you before the due date of your tax return for the year for which the excess
amount was contributed. The penalty tax will apply to each year the excess
amount remains in the IRA Plan, until it is removed either by having it returned
to you or by making a reduced contribution in a subsequent year. To the extent
an excess contribution is absorbed in a subsequent year by contributing less
than the maximum deduction allowable for that year, the amount absorbed will be
deductible in the year applied (provided you are eligible to take a deduction).
LOANS AND PROHIBITED TRANSACTIONS: You may not borrow from your IRA Plan or
pledge it as security for a loan. This would disqualify your entire IRA Plan,
and its full value would be includable in your taxable income in the year of
violation. This amount would also be subject to the 10% penalty tax on premature
distributions. Your IRA Plan will similarly be disqualified if you or your
beneficiary engage in any transaction prohibited by Section 4975 of the Internal
Revenue Code.
TAXABILITY OF DISTRIBUTIONS: Any cash distribution from your IRA Plan is
normally taxable as ordinary income. All IRAs of an individual are treated as
one contract. All distributions during a taxable year are treated as one
distribution; and the value of the contract, income on the contract, and
investment on the contract is computed as of the close of the calendar year with
or within which the taxable year ends. If an individual withdraws an amount from
an IRA during a taxable year and the individual has previously made both
deductible and non-deductible IRA contributions, the amount excludable from
income for the taxable year is the portion of the amount withdrawn which bears
the same ratio to the amount withdrawn for the taxable year as the individual's
aggregate non-deductible IRA contributions bear to the balance of all IRAs of
the individual.
LUMP SUM DISTRIBUTION: If you decide to receive the entire value of your IRA
Plan in one lump sum, the full amount is taxable when received (except as to
non-deductible contributions), and is not eligible for the special tax rules on
lump sum distributions which are used with other types of Qualified Retirement
Plans.
QD-3 IRA/SEP
No Load Variable Annuity; 11/96
<PAGE>
PREMATURE IRA DISTRIBUTIONS: There is a 10% penalty tax on amounts distributed
prior to the attainment of age 59 1/2, except for: (1) distributions made to a
beneficiary on or after the owner's death; (2) distributions attributable to the
owner's being disabled: (3) distributions that are part of a series of
substantially equal periodic payments (made at least annually) for the life of
the annuitant or the joint lives of the annuitant and his beneficiary; (4)
distributions made on or after January 1, 1997 for medical expenses which exceed
7.5% of the annuitant's adjusted gross income; or (5) distributions made on or
after January 1, 1997, to purchase health insurance for the individual and/or
his or her spouse and dependents if he or she: has received unemployment
compensation for 12 consecutive weeks or more; the distributions are made during
the tax year that the unemployment compensation is paid or the following tax
year; and the individual has not been re-employed for 60 days or more. The part
of a distribution attributable to non-deductible contributions is not includable
in income and is not subject to the 10% penalty. In addition, distributions from
a SIMPLE Plan during the two-year period beginning on the date the employee
first participated in the employer's SIMPLE Plan will be subject to a 25%
(rather than 10%) premature distribution penalty tax, unless the distribution is
otherwise eligible for an exception to the penalty tax.
MINIMUM REQUIRED DISTRIBUTION: SEE PART II, MINIMUM DISTRIBUTION REQUIREMENTS.
An IRA Plan which is not totally distributed to you by April 1 of the year
following the year in which you attain age 70 1/2, must be distributed over one
of the following periods: 1) the entire life of the annuitant; 2) the lives of
the annuitant and his beneficiary; or 3) a period certain not extending beyond
the life expectancy of the annuitant or the joint life and last survivor
expectancy of the annuitant and his beneficiary. Payments must be made in
intervals which do not exceed one year. Payments must be non-increasing or may
increase only as provided in Q & A F-3 of Section 1.401(a)(9)-1 of the Proposed
Income Tax Regulations. If the minimum distribution is not made, the excess, in
any taxable year, of the amount that should have been distributed over the
amount that was actually distributed is subject to an excise tax of 50%.
MAXIMUM DISTRIBUTION: Generally, an excess distribution is an annual
distribution in excess of the annual ceiling ($160,000 in 1997 ). If you made a
grandfather election pursuant to IRC 4980A, your annual ceiling is $150,000, as
indexed annually. Excess distributions are subject to a 15% excise tax. The tax
is reduced by any payment of the 10% excise tax on early withdrawals. Among the
items excluded from the excise tax are distributions after the death of the
participant, distributions payable (and taxable) to an alternate payee under a
qualified domestic relations order (if taxable to the alternate payee),
distributions attributable to after-tax employee contributions, and
distributions not includable in income by reason of a Rollover Contribution.
Also, a 15% excise tax is imposed on your excess retirement accumulation at the
time of your death. This amount is the excess of the value of all accrued
benefits under all your IRAs, Qualified Retirement Plans, and TSAs, over the
present value of a single life annuity with payments equal to the annual ceiling
($160,000 in 1997 ), payable over your life expectancy prior to death.
UNDER FEDERAL LEGISLATION SIGNED INTO LAW IN 1996, THE EXCESS DISTRIBUTION
PENALTY TAX DESCRIBED ABOVE IS SUSPENDED FOR DISTRIBUTIONS MADE IN 1997, 1998
AND 1999. DISTRIBUTIONS DURING THIS 3-YEAR "HOLIDAY" WILL BE TREATED AS MADE
FIRST FROM "NON-GRANDFATHERED" AMOUNTS. THIS SUSPENSION DOES NOT APPLY TO THE
EXCESS ACCUMULATION PENALTY TAX WHICH MAY APPLY AT YOUR DEATH.
TAX FILING: You are not required to file a special IRA tax form for any taxable
year (1) for which no penalty tax is imposed with respect to the IRA Plan, and
(2) in which the only activities engaged in, with respect to the IRA Plan, are
making deductible contributions and receiving permissible distributions.
Information regarding such contributions or distributions will be included on
the regular Form 1040. For further information, consult the instructions for
Form 5329 (Additional Taxes Attributable to Qualified Retirement Plans
(including IRA's), Annuities, and Modified Endowment Contracts ), Form 8606 and
IRS Publication 590.
TAX ADVICE: Ameritas is providing this general information as required by
regulations issued under the Internal Revenue Code and assumes no responsibility
for its application to your particular tax situation. Please consult your
personal tax advisor regarding specific questions you may have.
ADDITIONAL INFORMATION: You may obtain more information about IRA Plans from any
district office of the IRS and IRS Publication 590.
PART IV. STATUS OF AMERITAS IRA PLAN:
INTERNAL REVENUE SERVICE APPROVAL LETTER: Ameritas will apply for approval from
the Internal Revenue Service as to the form of No Load Variable Annuity (Form
4080), for use in funding IRA plans. Such approval, when received, is a
determination only as to the form of the Annuity Contract, and does not
represent a determination of the merits of the annuity.
PART V. FINANCIAL DISCLOSURE:
The following is a general description and required financial disclosure
information for the variable annuity product, No Load Variable Annuity (Form
4080) offered by Ameritas, hereafter referred to as the policy.
In order for you to achieve your retirement objectives, you should be prepared
to make your IRA Plan a long term savings program. An IRA is not suited to
short-term savings, nor was it intended to be by Congress, as indicated by the
penalties on withdrawal before age 59 1/2 (except for death or disability).
However, you should be aware of the values in your IRA Plan during the early
years as well as at retirement.
Prior to the annuity date, the policy allows you to accumulate funds based on
the investment experience of the assets underlying the policy in the Separate
Account or the Fixed Account. Currently, the assets which underlie the Separate
Account are invested exclusively in shares of mutual funds, the "Funds", managed
or administered by fund managers. Each of the Subaccounts of the Separate
Account invest solely in the corresponding portfolio of the Funds. The assets of
each portfolio are held separately from the other portfolios and each has
distinct investment objectives which are described in the accompanying
prospectus for the Funds which you would have received when making an
application for your annuity. The accumulation value of your IRA Plan allocated
to the Separate Account will vary in accordance with the investment performance
of the Subaccounts you selected. Therefore, for assets in the Separate Account,
you bear the entire investment risk prior to the annuity date.
Premium payments and subsequent allocations to the Fixed Account are placed in
the general account of Ameritas which supports insurance and annuity
obligations. Policyowners are paid interest on the amounts placed in the Fixed
Account at guaranteed rates (3.0%) or at higher rates declared by Ameritas.
IRA/SEP QD-4
No Load Variable Annuity; 11/96
<PAGE>
ACCUMULATION VALUE: On the effective date, the accumulation value of the policy
is equal to the premium received, reduced by any applicable premium taxes.
Thereafter, the accumulation value of the policy is determined as of the close
of trading on the New York Stock Exchange on each valuation date by multiplying
the number of accumulation units for each Subaccount credited to the policy by
the current value of an accumulation unit for each Subaccount, and by adding the
amount deposited in the Fixed Account, plus interest. The current value of an
accumulation unit reflects the increase or decrease in value due to investment
results of the Subaccount and certain charges, as described below. The number of
accumulation units credited to the policy is decreased by any annual policy fee,
any withdrawals and, upon annuitization, any applicable premium taxes and
charges.
A valuation period is the period between successive valuation dates. It begins
at the close of trading on the New York Stock Exchange on each valuation date
and ends at the close of trading on the next succeeding valuation date. A
valuation date is each day that the New York Stock Exchange is open for
business.
The accumulation value is expected to change from valuation period to valuation
period, reflecting the net investment experience of the selected portfolios of
the Funds, interest earned in the Fixed Account, additional premium payments,
withdrawals, as well as the deduction of any applicable charges under the
policy. GROWTH IN THE ACCUMULATION VALUE BASED ON INVESTMENTS IN THE ACCOUNT IS
NEITHER GUARANTEED NOR PROJECTED.
VALUE OF ACCUMULATION UNITS: The accumulation units of each Subaccount are
valued separately. The value of an accumulation unit may change each valuation
period according to the net investment performance of the shares purchased by
each Subaccount and the daily charge under the policy for mortality and expense
risks, and if applicable, any federal and state income tax charges.
CASH SURRENDER VALUE: The amount available for withdrawal, which is the
accumulation value less any applicable premium taxes, and, in the case of a full
withdrawal, the annual policy fee.
ANNUAL POLICY FEE: An annual policy fee of $25, is deducted from the
accumulation value on the last valuation date of each policy year and on a full
withdrawal if between policy anniversaries. This charge reimburses Ameritas for
the administrative costs of maintaining the policy on Ameritas' system. This
charge may be increased to a maximum of $40.
MORTALITY AND EXPENSE RISK CHARGE: Ameritas imposes a charge to compensate it
for bearing certain mortality and expense risks under the policies. For assuming
these risks, Ameritas makes a daily charge equal to an annual rate of 0.75 %
(current; 0.95% guaranteed) of the value of the average daily net assets of the
Account. This charge is subtracted when determining the daily accumulation unit
value. If this charge is insufficient to cover assumed risks, the loss will fall
on Ameritas. Conversely, if the charge proves more than sufficient, any excess
will be added to Ameritas' surplus. No mortality and expense risk charge is
imposed on the Fixed Account.
TAXES: Ameritas will charge and deduct premium taxes as required by state law
and in accordance with any applicable company election. Applicable premium tax
rates depend upon such factors as the policyowner's current state of residency,
and the insurance laws and the status of Ameritas in states where premium taxes
are incurred. Currently, premium taxes range from 0% to 3.5% of the premium
paid. Applicable premium tax rates are subject to change by legislation,
administrative interpretations, or judicial acts. The owner will be notified of
any applicable premium taxes.
WITHDRAWALS: The owner may make a withdrawal of the policy to receive part or
all of the accumulation value (less any applicable charges), at any time before
the annuity date and while the annuitant is living, by sending a written request
to Ameritas. Withdrawals may be either systematic or elective. Systematic
withdrawals provide for an automatic withdrawal, whereas, each elective
withdrawal must be elected by the owner. Systematic withdrawals are available on
a monthly, quarterly, semi-annual or annual mode. This withdrawal right may be
restricted by Section 403(b)(11) of the Internal Revenue Code if the annuity is
used in connection with a Section 403(b) retirement plan. No withdrawals may be
made after the annuity date except as permitted under the particular annuity
option. The amount available for a withdrawal is the accumulation value at the
end of the valuation period during which the written request for withdrawal is
received, less any applicable premium taxes, and in the case of a full
withdrawal, less the annual policy fee that would be due on the last valuation
date of the policy year. The accumulation value may be paid in a lump sum to the
owner, or, if elected, all or any part may be paid out under an annuity income
option.
SALES COMMISSIONS: No deductions are made from the premium payments for sales
charges. Compensation to the sales force is a maximum .5% based on premiums paid
for broker/dealers other than AIC, and an asset-based administrative
compensation of .10% (annualized).
QD-5 IRA/SEP
No Load Variable Annuity; 11/96
<PAGE>
Ameritas Life Insurance
Corp. Logo
EMPLOYEE BENEFIT PLAN
INFORMATION STATEMENT
401(A) PENSION/PROFIT SHARING PLANS
- --------------------------------------------------------------------------------
For purchasers of a 401(a) Pension/Profit Sharing Plan, the purpose of this
statement is to inform you as an independent Fiduciary of the Employee Benefit
Plan, of the Sales Representative's relationship to and compensation from
Ameritas Life Insurance Corp. (Ameritas), as well as to describe certain fees
and charges under the No Load Variable Annuity Policy being purchased from the
Sales Representative.
The Sales Representative is appointed with Ameritas as its Sales Representative
and is a Securities Registered Representative. In this position, the Sales
Representative is employed to procure and submit to Ameritas applications for
contracts, including applications for No Load Variable Annuity.
COMMISSIONS, FEES AND CHARGES
The following commissions, fees and charges apply to No Load Variable Annuity
(policy):
SALES COMMISSION: No deductions are made from the premium payments for sales
charges. Compensation to the Sales Representative's Broker/Dealer is a maximum
of up to .5% based on premiums paid for broker/dealers other than AIC, and an
asset-based administrative compensation of .10 (annualized).
ANNUAL POLICY FEE: An annual policy fee of $25 is deducted from the accumulation
value in the policy on the last valuation date of each policy year or on a full
withdrawal if between policy anniversaries. This charge reimburses Ameritas for
the administrative costs of maintaining the policy on Ameritas system. This
charge may be increased to a maximum of $40.
MORTALITY AND EXPENSE RISK CHARGE: Ameritas imposes a charge to compensate it
for bearing certain mortality and expense risks under the policies. Ameritas
makes a daily charge equal to an annual rate of 0.75% (current; 0.95%
guaranteed) of the value of the average daily net assets of the Account under
the policies. This charge is subtracted when determining the daily accumulation
unit value. If this charge is insufficient to cover assumed risks, the loss will
fall on Ameritas. Conversely, if the charge proves more than sufficient, any
excess will be added to Ameritas' surplus. No mortality and expense risk charge
is imposed on the Fixed Account.
WITHDRAWALS: The policyowner may make a withdrawal of the policy to receive part
or all of the accumulation value (less any applicable charges), at any time
before the annuity date and while the annuitant is living by sending a written
request to Ameritas. Withdrawals may be either systematic or elective.
Systematic withdrawals provide for an automatic withdrawal, whereas, each
elective withdrawal must be elected by the owner. Systematic withdrawals are
available on a monthly, quarterly, semi-annual or annual mode. No withdrawals
may be made after the annuity date except as permitted under the particular
annuity option. The amount available for withdrawal is the accumulation value at
the end of the valuation period during which the written request for withdrawal
is received, less any applicable premium taxes, and in the case of a full
withdrawal, the annual policy fee that would be due on the last valuation date
of the policy year. The accumulation value may be paid in a lump sum to the
owner, or if elected, all or any part may be paid out under an annuity income
option.
TAXES: Ameritas will deduct premium taxes upon receipt of a premium payment or
upon annuitization depending upon the requirements of the law of the state of
the policyowner's residence. Currently, premium taxes range from 0% to 3.5% of
the premium paid, but are subject to change by legislation, administrative
interpretations, or judicial act.
FUND INVESTMENT ADVISORY FEES AND EXPENSES: At the direction of the policyowner,
the Separate Account LLVA purchases shares of Funds which are available for
investment under this policy. The net assets of the Separate Account LLVA will
reflect the value of the Fund shares and therefore, investment advisory fees and
other expenses of the Funds. A complete description of these fees and expenses
is contained in the Funds' Prospectuses.
Pension Trust QD-6
<PAGE>
Part B Registration No. 333-5529
--------
AMERITAS LIFE INSURANCE CORP.
SEPARATE ACCOUNT LLVA
STATEMENT OF ADDITIONAL INFORMATION
FOR
FLEXIBLE PREMIUM VARIABLE ANNUITY POLICY
Offered by
Ameritas Life Insurance Corp.
(A Nebraska Mutual Company)
5900 "O" Street
Lincoln, Nebraska 68510
---------------------
This Statement of Additional Information expands upon subjects
discussed in the current Prospectus for the Flexible Premium Variable Annuity
Policy ("Policy") offered by Ameritas Life Insurance Corp. ("Ameritas"). You may
obtain a copy of the Prospectus dated May 1, 1997 by writing Ameritas Life
Insurance Corp., 5900 "O" Street, Lincoln, Nebraska 68510, or calling,
1-800-745-6665. Terms used in the current Prospectus for the Policy are
incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD
BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY.
Dated: May 1, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION AND HISTORY .......................................... 2
- -------------------------------
THE POLICY ............................................................... 2
- ----------
Accumulation Value.............................................. 2
------------------
Value of Accumulation Units .................................... 2
---------------------------
Calculation of Performance Data ................................ 2
-------------------------------
Total Return.................................................... 3
------------
Yields.......................................................... 4
------
GENERAL MATTERS........................................................... 5
- ---------------
The Policy ..................................................... 5
----------
Non-Participating............................................... 5
-----------------
Assignment...................................................... 5
----------
Annuity Data.................................................... 5
------------
Ownership ...................................................... 5
---------
IRS Required Distributions ..................................... 5
--------------------------
FEDERAL TAX MATTERS....................................................... 5
- -------------------
Taxation of Ameritas............................................ 5
--------------------
Tax Status of the Policies ..................................... 6
--------------------------
Qualified Policies.............................................. 6
------------------
DISTRIBUTION OF THE POLICY ............................................... 6
- --------------------------
SAFEKEEPING OF ACCOUNT ASSETS ............................................ 6
- -----------------------------
STATE REGULATION.......................................................... 6
- ----------------
LEGAL MATTERS............................................................. 7
- -------------
EXPERTS................................................................... 7
- -------
OTHER INFORMATION......................................................... 7
- -----------------
FINANCIAL STATEMENTS...................................................... 7
- --------------------
1
<PAGE>
GENERAL INFORMATION AND HISTORY:
- --------------------------------
In order to supplement the description in the Prospectus, the following
provides additional information concerning the company and its history.
Ameritas Life Insurance Corp. Separate Account LLVA ("the Account") is a
separate investment account of Ameritas Life Insurance Corp. established under
Nebraska Law on October 26, 1995. Ameritas Life Insurance Corp. ("Ameritas") is
a mutual life insurance company domiciled in Nebraska since 1887. The Home
Office of Ameritas is at 5900 "O" Street, Lincoln, Nebraska 68501.
Currently, ten Subaccounts of the Account are available under the contracts.
Each Subaccount invests in a corresponding investment portfolio of Strong
Variable Insurance Funds, Inc., Strong Special Fund II, Inc., (collectively
"Strong"). Berger Institutional Products Trust ("Berger IPT")or the Neuberger &
Berman Advisers Management Trust ("Neuberger & Berman AMT").
THE POLICY
- ----------
In order to supplement the description in the Prospectus, the following
provides additional information about the Policy which may be of interest to the
owners.
Accumulation Value
- ------------------
The Accumulation Value of a Policy on each valuation date is equal to:
(1) the aggregate of the values attributable to the Policy in each
Subaccount on the valuation date, determined for each Subaccount by
multiplying the Subaccount's accumulation unit price by the number
of the Subaccount accumulation units allocated to the Policy and/or
the net allocation plus interest in the Fixed Account; plus;
(2) the amount deposited in the Fixed Account, plus interest; less
(3) any withdrawal made on the valuation date; less
(4) any annual policy fee deducted on that valuation date. In computing
the accumulation value, the number of Subaccount accumulation units
allocated to the Policy is determined after any transfer among the
Subaccounts.
Value of Accumulation Units
- ----------------------------
The value of each Subaccount's accumulation units reflects the investment
performance of that Subaccount. The accumulation unit price of each Subaccount
shall be calculated by:
(1) multiplying the per share net asset value of the corresponding Fund
portfolio on the valuation date by the number of shares held by the
Subaccount, before the purchase or redemption of any shares on that
date; minus
(2) a daily charge, currently 0.002049% (equivalent to an annual rate of
.75%), not to exceed 0.002595% (equivalent to an annual rate of .95%
of the average daily net assets), for mortality and expense risks;
minus
(3) any applicable charge for federal and state income taxes, if any;
and
(4) dividing the result by the total number of accumulation units held
in the Subaccount on the valuation date, before the purchase or
redemption of any units on that date.
Calculation of Performance Data
- -------------------------------
As disclosed in the prospectus, premium payments will be allocated to the
Separate Account LLVA which has ten Subaccounts, with the assets of each
invested in corresponding portfolios of Strong, Berger IPT or Neuberger & Berman
AMT ("the Funds"), or to the Fixed Account. From time to time Ameritas will
advertise the performance data of the portfolios of the Funds.
Performance information for any subaccount may be compared, in reports and
advertising to: (1) the Standard & Poor's 500 Stock Index ("S & P 500"), Dow
Jones Industrial Average ("DJIA"), Donahue Money Market Institutional Averages;
(2) other variable annuity separate accounts or other investment products
tracked by Lipper Analytical Services or the Variable Annuity Research and Data
Service, widely used independent research firms which rank mutual funds and
other investment companies by overall performance, investment objectives, and
assets; and (3) the Consumer Price Index (measure for inflation) to assess the
real rate of return from an investment in a contract. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
annuity charges and investment management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including (i) the ranking of any
subaccount derived from rankings of variable annuity separate accounts or other
investment products tracked by Lipper Analytical Series or by rating services,
companies, publications or other persons who rank separate accounts or other
investment products on overall performance or other criteria, and (ii) the
effect of tax deferred compounding on a subaccount's
2
<PAGE>
investment returns, or returns in general, which may be illustrated by graphs,
charts, or otherwise, and which may include a comparison, at various points in
time, of the return from an investment in a contract (or returns in general) on
a tax-deferred basis (assuming one or more tax rates) with the return on a
taxable basis.
The tables below are established to demonstrate performance results for
each underlying portfolio with charges deducted at the Separate Account level as
if the policy had been in force from the commencement of the portfolio. The
performance information is based on the historical investment experience of the
underlying portfolios and does not indicate or represent future performance.
Total Return
- ------------
Total returns quoted in advertising reflect all aspects of a subaccount's
return, including the automatic reinvestment by the separate account of all
distributions and any change in the subaccount's value over the period. Average
annual returns are calculated by determining the growth or decline in value of a
hypothetical historical investment in the subaccount over a stated period, and
then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18% which is the steady rate
that would equal 100% grown on a compounded basis in ten years. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that the subaccount's performance is not constant over
time, but changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance of a
subaccount.
Table 1: The subaccounts, other than the Liquid Asset subaccount, will
quote average annual returns for the period since the underlying portfolios
commenced operation after deducting charges at the Separate Account level. Table
1 shows the average annual total return on a hypothetical investment in the
subaccounts for the last year, five years, and ten years if applicable, and/or
from the date that the portfolios began operations for the period ending
December 31, 1996. The average annual total returns to be shown in Table 1 were
computed by finding the average annual compounded rates of return over the
periods shown that would equate the initial amount invested to the withdrawal
value, in accordance with the following formula: P(1 + T)n = ERV where P is a
hypothetical investment payment of $1,000, T is the average annual total return,
n is the number of years, and ERV is the withdrawal value at the end of the
periods shown. The returns reflect the mortality and expense risk charge
(guaranteed not to exceed .95% on an annual basis), and the annual policy fee.
Because there is no surrender charge, the average annual total return would be
the same for the relevant time periods if the contract is continued.
<TABLE>
<CAPTION>
Table 1: Hypothetical Historical Average Annual Total Return for Period Ending
on 12/31/96
Strong 10 Years or
Portfolios One Year Five Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund II N/A N/A N/A
International Stock Fund II 7.03% N/A 8.03%
Special Fund II 14.76% N/A 16.27%
Inception of Funds: Growth Fund II, 12/31/96; International Stock Fund II,
10/20/95; Special Fund II, 5/8/92.
</TABLE>
<TABLE>
<CAPTION>
Berger IPT 10 Years or
Portfolios One Year Five Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
100 Fund N/A N/A 5.07%
Small Company Growth N/A N/A -1.67%
Inception of Funds: 100 Fund, 5/1/96; Small Company Growth, 5/1/96.
</TABLE>
<TABLE>
<CAPTION>
Neuberger &
Berman AMT 10 Years or
Portfolios One Year Five Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited Maturity Bond 1.02% 2.07% 3.72%*
Growth 5.82% 6.70% 8.77%*
Partners 26.09% N/A 18.95%
Balanced 3.58% 4.86% 7.59%
* 10 Year Figure
Inception of Funds: Limited Maturity Bond, 9/10/84; Growth, 9/10/84; Partners,
3/22/94; Balanced, 2/28/89.
</TABLE>
In addition to average annual returns, the subaccounts, other than the
Liquid Asset subaccount, may quote unaveraged or cumulative total returns
reflecting the simple change in value of an investment over a stated period.
Table 2 shows the cumulative total return on a hypothetical investment in the
subaccounts for the last year, 5 years, 10 years if applicable, and/or from the
date the portfolios began operations for the period ending December 31, 1996.
The returns reflect the mortality and expense risk charge (guaranteed not to
exceed .95% on an annual basis), and the policy fee. Because there
3
<PAGE>
is no surrender charge, the cumulative total return would be the same for the
relevant time periods if the contract is continued.
<TABLE>
<CAPTION>
Table 2: Hypothetical Historical Cumulative Total Return for Period Ending on
12/31/96
Strong 10 Years or
Portfolios One Year Five Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund II N/A N/A N/A
International Stock Fund II 7.03% N/A 9.71%
Special Fund II 14.76% N/A 101.63%
</TABLE>
<TABLE>
<CAPTION>
Berger IPT 10 Years or
Portfolios One Year Five Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
100 Fund N/A N/A 3.36%
Small Company Growth N/A N/A -1.12%
</TABLE>
<TABLE>
<CAPTION>
Neuberger &
Berman AMT 10 Years or
Portfolios One Year Five Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited Maturity Bond 1.02% 10.78% 44.12%*
Growth 5.82% 38.27% 131.71%*
Partners 26.09% N/A 62.04%
Balanced 3.58% 26.78% 77.45%
* 10 Year Figure
</TABLE>
Yields
- ------
Some subaccounts may also advertise yields. Yields quoted in advertising
reflect the change in value of a hypothetical investment in the subaccount over
a stated period of time, not taking into account capital gains or losses. Yields
are annualized and stated as a percentage.
Current yield for Liquid Asset subaccount reflects the income generated by a
subaccount over a 7-day period. Current yield is calculated by determining the
net change, exclusive of capital changes, in the value of a hypothetical account
having one Accumulation Unit at the beginning of the period adjusting for the
annual policy fee, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and
multiplying the base period return by (365/7). The resulting yield figure is
carried to the nearest hundredth of a percent. Effective yield for the Liquid
Asset subaccount is calculated in a similar manner to current yield except that
investment income is assumed to be reinvested throughout the year at the 7-day
rate. Effective yield is obtained by taking the base period returns as computed
above, and then compounding the base period return by adding 1, raising the sum
to a power equal to (365/7) and subtracting one from the result, according to
the formula:
Effective Yield = [(Base Period Return + 1) 365/7] - 1.
Since the reinvestment of income is assumed in the calculation of effective
yield, it will generally be higher than current yield.
The hypothetical historical net average yield for the 7-day period ended
December 31, 1996 for the Liquid Asset Portfolio was 3.65% and the hypothetical
historical effective yield for the 7-day period ended December 31, 1996 for the
Liquid Asset Portfolio was 3.72%.
Current yield for subaccounts other than the Liquid Asset subaccount
reflects the income generated by a subaccount over a 30-day period. Current
yield is calculated by dividing the net investment income per accumulation unit
earned during the period by the maximum offering price per unit on the last day
of the period, according to the formula:
YIELD =2[( FUNC{a-b}OVER cd; +1) SUP 6 -1]
Where a = net investment income earned during the period by the portfolio
company attributable to shares owned by the subaccount, b = expenses
accrued for the period (net of reimbursements), c = the average daily number of
accumulation units outstanding during the period, and d = the maximum offering
price per accumulation unit on the last day of the period. The yield reflects
the mortality and expense risk charge and the annual policy fee.
4
<PAGE>
GENERAL MATTERS
- ---------------
The Policy
- ----------
The Policy, the application, any supplemental applications, and any
amendments or endorsements make up the entire contract. All statements made in
the application, in the absence of fraud, are considered representations and not
warranties. Only statements in the application that is attached to the Policy
and any supplemental applications made a part of the Policy when a change went
into effect can be used to contest a claim or the validity of the Policy. Only
the President, Vice President, Secretary or Assistant Secretary of Ameritas can
modify the Policy. Any changes must be made in writing, and approved by
Ameritas. No agent has the authority to alter or modify any of the terms,
conditions or agreements of the Policy or to waive any of its provisions.
Non-Participating
- -----------------
The Policies are non-participating. No dividends are payable and the Policies
will not share in the profits or surplus earnings of Ameritas.
Assignment
- ----------
Any non-qualified policy and any qualified policy, if permitted by the plan
or by law relevant to the plan applicable to the qualified policy, may be
assigned by the owner prior to the annuity date and during the annuitant's
lifetime. Ameritas is not responsible for the validity of any assignment. No
assignment will be recognized until Ameritas receives written notice thereof.
The interest of any beneficiary which the assignor has the right to change shall
be subordinate to the interest of an assignee. Any amount paid to the assignee
shall be paid in one sum, not withstanding any settlement agreement in effect at
the time the assignment was executed. Ameritas shall not be liable as to any
payment or other settlement made by Ameritas before receipt of written notice.
Annuity Data
- ------------
Ameritas will not be liable for obligations which depend on receiving
information from a payee until such information is received in a form
satisfactory to Ameritas.
Ownership
- ---------
The owner of the Policy on the policy date is the annuitant, unless otherwise
specified in the application. During the annuitant's lifetime, all rights and
privileges under this Policy may be exercised solely by the owner. Ownership
passes to the Owner's Designated Beneficiary upon the death of the owner(s). If
there is no Owner's Designated Beneficiary, or if no Owner's Designated
Beneficiary is living, ownership will pass to the owner's estate. From time to
time Ameritas may require proof that the owner is still living.
In order to change the owner of the Policy or assign Policy rights, an
assignment of the Policy must be made in writing and filed with Ameritas at its
Home Office. The change will take effect as of the date the change is recorded
at the Home Office, and Ameritas will not be liable for any payment made or
action taken before the change is recorded. The payment of proceeds is subject
to the rights of any assignee of record. A change in the owner will be valid
only upon absolute and complete assignment of the Policy. A collateral
assignment is not a change of ownership.
IRS Required Distributions
- --------------------------
If the owner dies before the entire interest in the Policy is distributed,
the value of the Policy must be distributed to the Owner's Designated
Beneficiary as described in this section so that the Policy qualifies as an
annuity under the Code. If the owner is not an individual, death of the
annuitant will be treated as death of the owner.
If the death occurs on or after the annuity date, the remaining portion of
such interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
If the death occurs before the annuity date, the entire interest in the
Policy will be distributed within five years after date of death or be used to
purchase an immediate annuity under which payments will begin within one year of
the owner's death and will be made for the life of the owner's designated
beneficiary or for a period not extending beyond the life expectancy of that
beneficiary.
The owner's designated beneficiary is the person to whom ownership of the
Policy passes by reason of death of the owner and must be a natural person.
Ameritas reserves the right to require proof of death.
If any portion of the owner's interest is payable to (or for the benefit of)
the surviving spouse of the owner, the Policy may be continued with the
surviving spouse as the new owner.
FEDERAL TAX MATTERS
- -------------------
Taxation of Ameritas
- --------------------
Ameritas is taxed as a life insurance company under Part I of Subchapter L of
the Code. Since the Account is not an entity separate from Ameritas and its
operations form a part of Ameritas, it will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized net capital gains on the assets of the Account are reinvested and
are taken into account in determining the Policy values. As a result, such
investment income and realized net capital gains are automatically retained as
part of the reserves under the Policy. Under existing federal income tax law,
Ameritas believes that Account investment income and realized net capital gains
should not be taxed to the extent that such income and gains are retained as
part of the reserves under the Policy.
5
<PAGE>
Tax Status of the Policies
- --------------------------
Section 817(h) of the Code provides in substance that Section 72 of the Code
will not apply and Ameritas will not be treated as the owner of the assets of
the Account unless the investments made by the Account are "adequately
diversified" in accordance with regulations prescribed by the Secretary of
Treasury (the "Treasury"). If the segregated account is not "adequately
diversified" any increase in the value of a variable annuity contract will be
taxed to the owner currently. The Account, through the fund, intends to comply
with the diversification requirements prescribed by Treasury regulations which
affect how the Fund's assets may be invested. Although Ameritas does not control
the Fund, it has entered into an agreement regarding participation in the Fund,
which requires the Fund to be operated in compliance with the requirements
prescribed by the Treasury.
Qualified Policies
- ------------------
The Policies are designed for use with several types of qualified plans. The
following are brief descriptions of qualified plans with which the policies may
be used:
a. H.R. 10 Plans - Section 401 of the Code permits self-employed
individuals to establish qualified plans for themselves and their
employees. Such plans commonly are referred to as "H.R. 10" or "Keogh"
plans. Taxation of plan participants depends on the specified plan.
The Code governs such plans with respect to maximum contributions,
distribution dates, non- forfeitability of interests, and tax rates
applicable to distributions. In order to establish such a plan, a plan
document, usually in prototype form preapproved by the Internal Revenue
Service, is adopted and implemented by the employer. When issued in
connection with H.R. 10 plans, a Policy may be subject to special
requirements to conform to the requirements under such plans.
b. Individual Retirement Annuities - Section 408 of the Code permits
certain individuals to contribute to an individual retirement program
known as an "Individual Retirement Annuity" or an "IRA." IRA's
are subject to limitations on eligibility, maximum contributions, and
time of distribution. Distributions from certain other types of
qualified plans may be "rolled over" on a tax-deferred basis into an
IRA. Sales of a Policy for use with an IRA may be subject to special
requirements of the Internal Revenue Service. Purchasers of a Policy
for such purposes will be provided with supplemental information
required by the Internal Revenue Service or other appropriate agency.
c. Corporation Pension and Profit Sharing Plans -- Sections 401(a) and
403(a) of the Code permit corporate employers to establish various
types of retirement plans for employees. Such retirement plans may
permit the purchase of Policies in order to provide benefits under the
plans.
DISTRIBUTION OF THE POLICY
- --------------------------
Ameritas Investment Corp., the principal underwriter of the Policies, is
registered with the Securities and Exchange Commission under the Securities and
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. Ameritas Investment Corp. is
wholly-owned by AMAL Corporation. Ameritas owns a majority interest in AMAL
Corporation.
The Policies are offered to the public directly from Ameritas through
Veritas, a direct-to-consumer Division of Ameritas, with salaried employees who
are registered representatives of AIC and who will not receive compensation
related to the purchase. The Policies may also be purchased through brokers,
licensed under the federal securities laws and state insurance laws, and
properly licensed banking institutions that have entered into agreements with
Ameritas Investment Corp. The offering of the Policies is continuous and
Ameritas Investment Corp. may discontinue the offering of this policy in certain
states and continue to offer it in other states.
SAFEKEEPING OF ACCOUNT ASSETS
- -----------------------------
Title to assets of the Account is held by Ameritas. The assets are kept
physically segregated and held separate and apart from Ameritas' general account
assets. Accumulation values deposited or transferred to the Fixed Account are
held in the General Account of Ameritas. Records are maintained of all purchases
and redemptions of eligible portfolio shares held by each of the Subaccounts.
STATE REGULATION
- ----------------
Ameritas is a mutual life insurance company organized under the laws of
Nebraska, and is subject to regulation by the Nebraska State Department of
Insurance. An annual statement is filed with the Nebraska Commissioner of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of Ameritas as of December 31 of the
preceding calendar year. Periodically, the Nebraska Commissioner of Insurance
examines the financial condition of Ameritas, including the liabilities and
reserves of the Account and certifies their adequacy.
In addition, Ameritas is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain policy
rights and provisions depends on state approval and/or filing and review
process. Where required by state law or regulation, the Policy will be modified
accordingly.
6
<PAGE>
LEGAL MATTERS
- -------------
All matters of Nebraska law pertaining to the validity of the Policy and
Ameritas' right to issue such Policies under Nebraska law have been passed upon
by Norman M. Krivosha, Executive Vice President, Secretary and Corporate General
Counsel of Ameritas.
EXPERTS
- -------
The consolidated financial statements of Ameritas as of December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996
(which report expresses an unqualified opinion and includes an explanatory
paragraph referring to a change in method of accounting for securities effective
January 1, 1994), included in this Statement of Additional Information have been
audited by Deloitte & Touche LLP, 1040 NBC Center, Lincoln, Nebraska 68508,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
Prior to December 31, 1996, the Account has had no business activities, has
no assets or liabilities and has no financial statement.
OTHER INFORMATION
- -----------------
A registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policy discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information or in the
Prospectus. Statements contained in this Statement of Additional Information and
the Prospectus concerning the content of the policies and other legal
instruments are intended to be summaries. For a complete statement of the terms
of these documents, reference should be made to the instruments filed with the
Securities and Exchange Commission.
FINANCIAL STATEMENTS
- --------------------
The financial statements of Ameritas, which are included in this Statement of
Additional Information, should be considered only as bearing on the ability of
Ameritas to meet its obligations under the Policies. They should not be
considered as bearing on the investment performance of the assets held in the
Accounts.
7
<PAGE>
Independent Auditors' Report
Board of Directors
Ameritas Life Insurance Corp.
Lincoln, Nebraska
We have audited the accompanying consolidated balance sheets of Ameritas
Life Insurance Corp. and subsidiaries as of December 31, 1996 and 1995, and the
related statements of operations, policyowners' contingency reserves, and cash
flows for each of the three years in the period ended December 31, 1996. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Ameritas Life Insurance Corp.
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, effective January 1,
1994, the Company changed its method of accounting for securities.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
February 1, 1997
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
-----------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(in thousands)
DECEMBER 31,
-----------------------------------
ASSETS 1996 1995
---------------- ----------------
<S> <C> <C>
Investments:
Fixed maturity securities held to maturity (fair value $798,991 - 1996, $ 775,875 $ 724,851
$777,068 - 1995)
Fixed maturity securities available for sale (amortized cost $408,467 -
1996, $406,955 - 1995) 415,705 428,387
Equity securities available for sale (cost $43,079 - 1996, $30,580 - 1995) 75,215 60,761
Mortgage loans on real estate 226,776 205,131
Real estate, less accumulated depreciation ($11,589 - 1996, $10,198 - 33,636 34,599
1995)
Other investments 45,499 45,331
Short-term investments 2,337 12,917
---------------- ----------------
1,575,043 1,511,977
Loans on insurance policies 68,017 69,268
---------------- ----------------
Total investments 1,643,060 1,581,245
Cash and cash equivalents 77,142 81,764
Accrued investment income 25,176 24,105
Deferred policy acquisition costs 146,405 130,420
Other current accounts receivable 2,772 3,260
Property and equipment, less accumulated depreciation ($29,910 - 1996,
$28,287 - 1995) 17,532 16,300
Other assets 10,681 8,952
Separate Accounts 1,037,359 733,156
---------------- ----------------
$ 2,960,127 $ 2,579,202
================ ================
LIABILITIES AND POLICYOWNERS' CONTINGENCY RESERVES
Policy and contract reserves $ 367,614 $ 365,348
Policy and contract claims 21,420 18,882
Accumulated contract values 1,007,734 989,426
Unearned policy charges 13,492 15,633
Unearned reinsurance ceded allowance 1,252 879
Federal income taxes--
Current 9,351 7,625
Deferred 36,083 41,717
Dividends payable 10,317 10,428
Other 35,532 27,650
Separate Accounts 1,037,359 733,156
---------------- ----------------
2,540,154 2,210,744
---------------- ----------------
Commitments and contingencies
Minority interest in subsidiary 20,809 -
Policyowners' contingency reserves 373,923 336,798
Net unrealized investment gain 25,241 31,660
---------------- ----------------
399,164 368,458
---------------- ----------------
$ 2,960,127 $ 2,579,202
================ ================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
DECEMBER 31,
------------------------------------------------------
1996 1995 1994
--------------- ---------------- ----------------
<S> <C> <C> <C>
INCOME:
Insurance revenues:
Premiums:
Life insurance $ 26,855 $ 30,857 $ 27,900
Accident and health insurance 163,557 163,659 158,855
Contract charges 49,667 38,629 34,220
Reinsurance, net (6,205) (5,559) (3,829)
Reinsurance ceded allowance 1,746 1,446 1,283
Investment revenues:
Investment income, net 126,862 124,549 119,687
Realized gains, net 13,103 4,471 3,877
Other 8,961 6,936 4,975
--------------- ---------------- ----------------
384,546 364,988 346,968
--------------- ---------------- ----------------
BENEFITS AND EXPENSES:
Policy benefits:
Death benefits 18,402 17,072 16,536
Surrender benefits 10,708 9,401 10,999
Accident and health benefits 112,005 112,935 113,988
Interest credited 65,494 64,598 65,547
Increase (decrease) in policy and contract reserves (5,060) 959 (1,815)
Other 12,849 13,265 13,050
Sales and operating expenses 77,086 70,414 67,345
Amortization of deferred policy acquisition costs 16,790 9,405 11,755
--------------- ---------------- ----------------
308,274 298,049 297,405
--------------- ---------------- ----------------
INCOME BEFORE DIVIDENDS, FEDERAL INCOME TAXES AND MINORITY
INTEREST IN EARNINGS OF SUBSIDIARY 76,272 66,939 49,563
Dividends appropriated for policyowners 10,367 10,543 10,215
--------------- ---------------- ----------------
INCOME BEFORE FEDERAL INCOME TAXES AND MINORITY INTEREST IN
EARNINGS OF SUBSIDIARY 65,905 56,396 39,348
Income taxes - current 29,081 16,954 21,497
Income taxes - deferred (1,560) 694 1,668
--------------- ---------------- ----------------
Total federal income taxes 27,521 17,648 23,165
--------------- ---------------- ----------------
INCOME BEFORE MINORITY INTEREST IN EARNINGS OF SUBSIDIARY 38,384 38,748 16,183
Minority interest in earnings of subsidiary (1,259) - -
--------------- ---------------- ----------------
NET INCOME $ 37,125 $ 38,748 $ 16,183
=============== ================ ================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENTS OF POLICYOWNERS' CONTINGENCY RESERVES
(IN THOUSANDS)
TOTAL
POLICYOWNERS' NET UNREALIZED POLICYOWNERS'
CONTINGENCY INVESTMENT CONTINGENCY
RESERVES GAIN/(LOSS) RESERVES
------------------- ------------------- --------------------
<S> <C> <C> <C>
BALANCE, January 1, 1994 $ 281,867 $ 15,180 $ 297,047
Cumulative effect of adoption of SFAS No. 115 - 10,831 10,831
Net unrealized investment losses, net - (25,034) (25,034)
Net income 16,183 - 16,183
------------------- ------------------- --------------------
BALANCE, December 31, 1994 298,050 977 299,027
Net unrealized investment gains, net - 30,683 30,683
Net income 38,748 - 38,748
------------------- ------------------- --------------------
BALANCE, December 31, 1995 336,798 31,660 368,458
Net unrealized investment losses, net - (6,446) (6,446)
Minority interest in net unrealized investment
losses, net 27 27
Net income 37,125 - 37,125
------------------- ------------------- --------------------
BALANCE, December 31, 1996 $ 373,923 $ 25,241 $ 399,164
=================== =================== ====================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------ ------------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 37,124 $ 38,748 $ 16,183
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 4,232 4,346 3,670
Amortization of deferred policy acquisition costs 16,790 9,405 11,755
Policy acquisition costs deferred (30,611) (20,954) (22,852)
Interest credited to contract values 65,494 64,598 65,547
Amortization of discounts or premiums (1,513) (1,630) (2,522)
Net realized gains on investment transactions (13,103) (4,471) (3,877)
Deferred income taxes (1,560) 694 1,668
Minority interest in earnings of subs 1,259 - -
Other - 4 (63)
Change in assets and liabilities:
Accrued investment income (1,071) 1,088 (1,020)
Other current accounts receivable 488 (1,493) 566
Other assets (1,860) (94) (1,068)
Policy and contract reserves 2,266 1,001 (1,652)
Policy and contract claims 2,538 (506) (173)
Unearned policy charges (2,141) (657) (1,563)
Unearned reinsurance ceded allowance 373 103 121
Federal income taxes payable - current 1,300 (1,698) 2,989
Dividends payable (111) 100 (620)
Other liabilities 5,445 (911) (1,085)
------------ ------------- ------------
Net cash from operating activities 85,339 87,673 66,004
------------ ------------- ------------
INVESTING ACTIVITIES
Purchase of investments:
Fixed maturity securities held to maturity (122,182) (105,019) (148,413)
Fixed maturity securities available for sale (40,572) (40,468) (54,762)
Equity securities (19,925) (13,017) (14,055)
Mortgage loans (57,248) (28,841) (37,135)
Real estate (642) (589) (8,543)
Short-term investments (5,844) (14,884) (4,789)
Other investments (23,073) (12,569) (12,281)
Proceeds from sale of investments:
Fixed maturity securities available for sale 4,774 2,919 -
Equity securities - unaffiliated 18,676 13,167 13,488
Equity securites - affiliated 190 - -
Real estate 951 737 500
Other investments 7,949 7,828 4,942
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
December 31,
----------------------------------------------
1996 1995 1994
-------------- ------------- --------------
<S> <C> <C> <C>
INVESTING ACTIVITIES (CONTINUED)
Proceeds from maturities or repayment of investments:
Fixed maturity securities held to maturity $ 71,317 $ 102,794 $ 111,649
Fixed maturity securities available for sale 36,519 15,868 17,541
Mortgage loans 34,594 25,120 28,863
Real estate - 219 209
Other investments 15,106 4,955 4,806
Short-term investments 16,571 4,022 5,834
Distributions from limited partnerships - - 11
Purchase of furniture and equipment (3,711) (1,803) (2,053)
Proceeds from sale of furniture and equipment 78 99 528
Net change in loans on insurance policies 1,252 310 2,516
------------ ------------- ------------
Net cash from investing activities (65,220) (39,152) (91,144)
------------ ------------- ------------
FINANCING ACTIVITIES
Contribution for minority interest in subsidiary 22,445 - -
Net change in accumulated contract values (47,186) (17,286) (48,285)
------------ ------------- ------------
Net cash from financing activities (24,741) (17,286) (48,285)
------------ ------------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,622) 31,235 (73,425)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 81,764 50,529 123,954
============ ============= ============
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 77,142 $ 81,764 $ 50,529
============ ============= ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes $ 27,748 $ 18,652 $ 19,250
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
NATURE OF OPERATIONS
Ameritas Life Insurance Corp. is a mutual life insurance company chartered by
the State of Nebraska. Its operations consist of life and health insurance and
annuity and pension contracts. The Company operates in the United States and,
including its subsidiaries, is authorized to do business in all 50 states and
the District of Columbia. Wholly-owned insurance subsidiaries include First
Ameritas Life Insurance Corp. of New York, Pathmark Assurance Company, and
Bankers Life Nebraska Company, a holding company, which owns 100% of Ameritas
Bankers Assurance Company. The Company is also a 66% owner of AMAL Corp.
(incorporated March 8, 1996), which owns 100% of Ameritas Variable Life
Insurance Company and Ameritas Investment Corp. In addition to the insurance
subsidiaries, the Company conducts other diversified financial service-related
operations through the following wholly-owned subsidiaries: Veritas Corp. (a
marketing organization for low-load insurance products); Ameritas Investment
Advisors, Inc. (an advisor providing investment management services to the
Company and other insurance companies); and Ameritas Managed Dental Plan, Inc.
(a prepaid dental organization).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ameritas Life
Insurance Corp. (Ameritas or the Company) and its majority owned subsidiaries.
References to the Company relate to Ameritas and all subsidiaries. These
consolidated financial statements exclude the effects of all material
intercompany transactions.
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.
The principal accounting and reporting practices followed are:
INVESTMENTS
The Company classifies its securities into categories based upon the Company's
intent relative to the eventual disposition of the securities. The first
category, held to maturity securities, is comprised of fixed maturity securities
which the Company has the positive intent and ability to hold to maturity. These
securities are carried at amortized cost. The second category, available for
sale securities, may be sold to address the liquidity and other needs of the
Company. Securities classified as available for sale are carried at fair value
on the balance sheet with unrealized gains and losses excluded from income and
reported as a separate component of policyowners' contingency reserves net of
related deferred acquisition costs and income tax effects. The third category,
trading securities, is for debt and equity securities acquired for the purpose
of selling them in the near term. The Company has not classified any of its
securities as trading securities.
The cumulative impact of adopting Statement of Financial Accounting Standards
(SFAS) No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" and designating certain securities as available for sale resulted in
an increase to policyowners' contingency reserves at January 1, 1994 of $10,831
(comprised of an increase in the carrying value of securities of $24,592,
reduced by $7,929 of related adjustments to deferred acquisition costs and
$5,832 in deferred income taxes).
Equity securities (common stock and nonredeemable preferred stocks) are valued
at fair value.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
(CONTINUED)
-----------
Mortgage loans on real estate are carried at amortized cost less an allowance
for estimated uncollectible amounts. SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which was amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures," requires
that an impaired loan be measured at the present value of expected future cash
flows, or alternatively, the observable market price or the fair value of the
collateral. The Company adopted these standards as of January 1, 1995, with no
material impact on its financial position or results of operations.
Investment real estate owned directly by the Company is carried at cost less
accumulated depreciation and allowances for estimated losses. Real estate
acquired through foreclosure is carried at the lower of cost or fair value minus
estimated costs to sell.
Other investments includes investments in real estate joint ventures accounted
for using the equity method.
Short-term investments are carried at amortized cost, which approximates fair
value.
Realized investment gains and losses on sales of securities are determined on
the specific identification method. Write-offs of investments that decline in
value below cost on other than a temporary basis and the change in the
allowances for mortgage loans and wholly owned real estate are included with
realized investment gains and losses in the consolidated statements of
operations.
The Company records write-offs or allowances for its investments based upon a
evaluation of specific problem investments. The Company reviews, on a continual
basis, all invested assets to identify investments where the Company may have
credit concerns. Investments with credit concerns include those the Company has
identified as experiencing a deterioration in financial condition.
CASH EQUIVALENTS
The Company considers all highly liquid debt securities purchased with remaining
maturity of less than three months to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation. The
Company provides for depreciation of property and equipment using straight-line
and accelerated methods over the estimated useful lives of the assets.
SEPARATE ACCOUNTS
The Company operates separate accounts on which the earnings or losses accrue
exclusively to contractholders. The assets (principally investments) and
liabilities of each account are clearly identifiable and distinguishable from
other assets and liabilities of the Company. The separate accounts are an
investment option for pension, variable life, and variable annuity products
which the Company markets. Amounts are reported at fair value.
PREMIUM REVENUE AND BENEFITS TO POLICYOWNERS
RECOGNITION OF PARTICIPATING AND TERM LIFE, ACCIDENT AND HEALTH AND ANNUITY
PREMIUM REVENUE AND BENEFITS TO POLICYOWNERS
Participating life insurance products include those products with fixed and
guaranteed premiums and benefits on which dividends are paid by the Company.
Premiums on participating and term life products and certain annuities with life
contingencies (immediate annuities) are recognized as premium revenue when due.
Accident and health insurance premiums are recognized as premium revenue over
the time period to which the premiums relate. Benefits and expenses are
associated with earned premiums so as to result in recognition of profits over
the premium paying period of the contracts. This association is accomplished by
means of the provision for liabilities for future policy benefits and the
amortization of deferred policy acquisition costs.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
(CONTINUED)
-----------
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACTS REVENUE AND BENEFITS TO
POLICYOWNERS
Universal life-type policies are insurance contracts with terms that are not
fixed and guaranteed. The terms that may be changed could include one or more of
the amounts assessed the policyowner, premiums paid by the policyowner or
interest accrued to policyowners balances. Amounts received as payments for such
contracts are reflected as deposits and are not reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed against
policy account values for deferred policy loading, mortality risk expense, the
cost of insurance and policy administration. Policy benefits and claims that are
charged to expense include interest credited to contracts and benefit claims
incurred in the period in excess of related policy account balances.
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYOWNERS
Contracts that do not subject the Company to risks arising from policyowner
mortality or morbidity are referred to as investment contracts. Deposit
administration plans and certain deferred annuities are considered investment
contracts. Amounts received as payments for such contracts are reflected as
deposits and are not reported as premium revenues.
Revenues for investment products consist of investment income and policy
administration charges. Contract benefits that are charged to expense include
benefit claims incurred in the period in excess of related contract balances,
and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are directly related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable from future premiums. Such costs include
commissions, certain costs of policy issuance and underwriting, and certain
agency expenses.
Costs deferred related to term life insurance are amortized over the premium
paying period of the related policies, in proportion to the ratio of annual
premium revenues to total anticipated premium revenues. Such anticipated premium
revenues are estimated using the same assumptions used for computing liabilities
for future policy benefits.
Costs deferred related to participating life, universal life-type policies and
investment-type contracts are amortized generally over the lives of the
policies, in relation to the present value of estimated gross profits from
mortality, investment and expense margins. The estimated gross profits are
reviewed periodically based on actual experience and changes in assumptions.
A roll-forward of the amounts reflected in the consolidated balance sheets as
deferred acquisition costs is as follows:
<TABLE>
<CAPTION>
December 31
----------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance $ 130,420 $ 126,619 $ 110,316
Acquisition costs deferred 30,611 20,954 22,852
Amortization of deferred policy acquisition costs (16,790) (9,405) (11,755)
Adjustment for unrealized investment (gain)/loss 2,164 (7,748) 5,206
- ---------------------------------------------------------------------------------------------------------------------------------
Ending balance $ 146,405 $ 130,420 $ 126,619
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
To the extent that unrealized gains or losses on available for sale securities
would result in an adjustment of deferred policy acquisition costs had those
gains or losses actually been realized, the related unamortized deferred policy
acquisition costs are recorded as an adjustment of the unrealized investment
gains or losses included in policyowners' contingency reserves.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
(CONTINUED)
-----------
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for participating and term life contracts
and additional coverages offered under policy riders are calculated using the
net level premium method and assumptions as to investment yields, mortality,
withdrawals and dividends. The assumptions are based on projections of past
experience and include provisions for possible unfavorable deviation. These
assumptions are made at the time the contract is issued. These liabilities are
shown as policy and contract reserves.
Liabilities for future policy and contract benefits on universal life-type and
investment-type contracts are based on the policy account balance, and are shown
as accumulated contract values.
The liabilities for future policy and contract benefits for group disabled life
reserves and long-term disability reserves are based upon interest rate
assumptions and morbidity and termination rates from published tables, modified
for Company experience.
DIVIDENDS TO POLICYOWNERS
A portion of the Company's business has been issued on a participating basis.
The amount of policyowners' dividends to be paid is determined annually by the
Board of Directors.
INCOME TAXES
The Company, with the exception of AMAL and its subsidiaries, files a
consolidated life/non-life tax return. An agreement among the members of the
consolidated group provides for distribution of consolidated tax results as if
filed on a separate return basis. The provision for income taxes includes
amounts currently payable and deferred income taxes resulting from the
cumulative differences in assets and liabilities determined on a tax return and
financial statement basis at the current enacted tax rates.
RECLASSIFICATIONS
Certain items on the prior year financial statements have been restated to
conform to current year presentation.
2. INVESTMENTS
- ---------------
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 89,405 $ 89,097 $ 87,187
Equity securities 1,571 1,508 1,554
Mortgage loans on real estate 19,376 17,948 18,327
Real estate 9,699 9,644 8,177
Policy loans 4,265 4,290 4,315
Other invested assets 8,424 6,826 5,220
Short-term investments and cash and cash equivalents 5,217 5,163 3,887
- ------------------------------------------------------------------------------------------------------------------------------------
Gross investment income 137,957 134,476 128,667
Investment expenses 11,095 9,927 8,980
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 126,862 $ 124,549 $ 119,687
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- --------------------------
Net pretax realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net gains (losses) on disposals, including calls, of investments
Fixed maturity securities $ 1,039 $ 3,119 $ 1,519
Equity securities 11,439 1,131 2,920
Mortgage loans 66 138 (361)
Real estate 136 224 (103)
Other 503 (91) (98)
- ------------------------------------------------------------------------------------------------------------------------------------
13,183 4,521 3,877
- ------------------------------------------------------------------------------------------------------------------------------------
Provisions for losses on investments
Mortgage loans (80) (50) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net pretax realized investment gains $ 13,103 $ 4,471 $ 3,877
- ------------------------------------------------------------------------------------------------------------------------------------
Proceeds from sales of securities and gross gains and losses realized on those
sales were as follows:
Year Ended December 31, 1996
-------------------------------------------------------
Proceeds Gains Losses
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities $ 4,774 $ 30 $ 247
Equity securities 18,676 11,796 357
- ------------------------------------------------------------------------------------------------------------------------------------
$ 23,450 $ 11,826 $ 604
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1995
-------------------------------------------------------
Proceeds Gains Losses
-------------------------------------------------------
Fixed maturity securities $ 2,919 $ -- $ 66
Equity securities 13,167 2,601 1,470
- ------------------------------------------------------------------------------------------------------------------------------------
$ 16,086 $ 2,601 $ 1,536
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994
-------------------------------------------------------
Proceeds Gains Losses
- ------------------------------------------------------------------------------------------------------------------------------------
Equity securities $ 13,488 $ 3,588 $ 668
There were no sales of fixed maturity securities during 1994.
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- ----------------------------
The amortized cost and fair value of investments in securities by type of
investment were as follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------------------------------------------------------------
Amortized Gross Unrealized Fair
---------------------------
Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed maturity securities held to maturity
U. S. Corporate $ 457,030 $ 17,953 $ 3,001 $ 471,982
Mortgage-backed 165,847 5,087 847 170,087
U.S. Treasury securities and obligations of
U.S. government agencies 84,418 3,611 249 87,780
Foreign 68,580 1,380 818 69,142
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities held to maturity 775,875 28,031 4,915 798,991
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities available for sale
U.S. Corporate 241,022 7,944 2,780 246,186
Mortgage-backed 77,964 969 875 78,058
U.S. Treasury securities and obligations of
U.S. government agencies 70,627 2,765 1,023 72,369
Foreign 18,854 410 172 19,092
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities available for sale 408,467 12,088 4,850 415,705
- ------------------------------------------------------------------------------------------------------------------------------------
Equity securities 43,079 33,236 1,100 75,215
Short-term investment 2,337 -- -- 2,337
- ------------------------------------------------------------------------------------------------------------------------------------
Total available for sale securities 453,883 45,324 5,950 493,257
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,229,758 $ 73,355 $ 10,865 $ 1,292,248
- ------------------------------------------------------------------------------------------------------------------------------------
The December 31, 1996 balance of policyowners' contingency reserves was
decreased by $6,446 (comprised of a decrease in the carrying value of the
securities of $12,246, increased by $2,164 of related adjustments to deferred
acquisition costs and $3,636 in deferred income taxes) to reflect the net 1996
unrealized gain on securities classified as available for sale previously
carried at amortized cost.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- ---------------------------
December 31, 1995
--------------------------------------------------------------------------
Amortized Gross Unrealized Fair
-----------------------------
Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed maturity securities held to maturity
U. S. Corporate $ 406,202 $ 32,621 $ 290 $ 438,533
Mortgage-backed 175,512 9,088 23 184,577
U.S. Treasury securities and obligations of
U.S. government agencies 90,753 7,834 -- 98,587
Foreign 52,384 3,022 35 55,371
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities held to maturity 724,851 52,565 348 777,068
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed maturity securities available for sale
U.S. Corporate 235,243 15,323 1,446 249,120
Mortgage-backed 72,158 1,946 212 73,892
U.S. Treasury securities and obligations of
U.S. government agencies 77,704 4,798 100 82,402
Foreign 21,850 1,123 -- 22,973
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities available for sale 406,955 23,190 1,758 428,387
- ------------------------------------------------------------------------------------------------------------------------------------
Equity securities 30,580 30,633 452 60,761
Short-term investment 12,917 -- -- 12,917
- ------------------------------------------------------------------------------------------------------------------------------------
Total available for sale securities 450,452 53,823 2,210 502,065
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,175,303 $ 106,388 $ 2,558 $1,279,133
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The December 31, 1995 balance of policyowners' contingency reserves was
increased by $30,683 (comprised of an increase in the carrying value of the
securities of $55,283, reduced by $7,750 of related adjustments to deferred
acquisition costs and $16,850 in deferred income taxes) to reflect the net 1995
unrealized gain on securities classified as available for sale previously
carried at amortized cost.
The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 1996 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>
Available for Sale Held to Maturity Total
------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Due in one year or less $ 16,002 $ 16,203 $ 17,077 $ 17,297 $ 33,079 $ 33,500
Due after one year through five years 109,115 111,763 77,972 80,454 187,087 192,217
Due after five years through ten years 168,694 169,702 356,025 365,229 524,719 534,931
Due after ten years 36,692 39,979 158,954 165,924 195,646 205,903
Mortgage-backed securities 77,964 78,058 165,847 170,087 243,811 248,145
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 408,467 $ 415,705 $ 775,875 $ 798,991 $ 1,184,342 $ 1,214,696
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
2. INVESTMENTS (CONTINUED)
- --------------------------
Invested assets which were nonincome producing (no income received for the 12
months preceding the balance sheet date) were as follows:
<TABLE>
<CAPTION>
December 31
---------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans on real estate $ -- $ 1,000
Real estate 791 791
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 791 $ 1,791
- ------------------------------------------------------------------------------------------ ------------------ ---------------
</TABLE>
Allowances for losses on investments are reflected in the consolidated balance
sheets as a reduction of the related assets and were as follows:
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage loans on real estate $ 680 $ 600 $ 550
Real estate 600 600 600
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Changes in the allowance for losses relate entirely to additional provisions for
losses.
3. INCOME TAXES
- ----------------
The items that give rise to deferred tax assets and liabilities relate to the
following:
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net unrealized investment gains $ 20,116 $ 24,715
Equity in subsidiaries 7,905 7,078
Deferred policy acquisition costs 43,247 38,992
Prepaid expenses 2,373 1,701
Other 2,234 2,522
- ---------------------------------------------------------------------------------------------------------------------------------
Gross deferred tax liability 75,875 75,008
- ---------------------------------------------------------------------------------------------------------------------------------
Future policy and contract benefits 24,386 15,799
Deferred future revenues 6,126 6,997
Policyowner dividends 3,610 3,640
Pension and postretirement benefits 2,643 2,499
Other 3,027 4,356
- ---------------------------------------------------------------------------------------------------------------------------------
Gross deferred tax asset 39,792 33,291
- ---------------------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 36,083 $ 41,717
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
3. INCOME TAXES (CONTINUED)
- -----------------------------
The difference between the U.S. federal income tax rate and the consolidated tax
provision rate is summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
Equity in subsidiaries 1.2 1.0 3.6
Surplus tax 7.1 (5.2) 21.1
Other (1.5) 0.5 (0.8)
- ---------------------------------------------------------------------------------------------------------------------------------
Effective tax rate 41.8 % 31.3 % 58.9 %
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The "surplus tax," IRC Section 809, is an imputation of income to mutual life
insurance companies according to a formula based on a comparison of the returns
of equity of the mutual and stock segments of the life insurance industry. The
Company's provision for its surplus tax is based on the Company's best estimate
of what its final surplus tax will be.
4. EMPLOYEE AND AGENT BENEFIT PLANS
- ------------------------------------
PENSION PLANS
The Company has a noncontributory defined benefit retirement plan covering
substantially all employees. Plan benefits are based on years of credited
service and the employee's compensation during the last five years of
employment. The Company's funding policy is to make contributions each year at
least equal to the minimum funding requirements for tax-qualified retirement
plans. Pension costs include current service costs, which are accrued and funded
on a current year basis, and past service costs, which are amortized over the
average remaining service life of all employees on the adoption date. The assets
of this plan are not segregated.
Periodic pension expense for the Company included the following components:
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 1,223 $ 1,349 $ 1,212
Interest cost on projected benefit obligation 1,866 1,894 1,745
Actual return on plan assets (2,817) (2,844) (892)
Net amortization and deferral 932 1,148 (777)
- ----------------------------------------------------------------------------------------------------------------------------------
Net periodic pension expense $ 1,204 $ 1,547 $ 1,288
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
4. EMPLOYEE AND AGENT BENEFIT PLANS (CONTINUED)
- ------------------------------------------------
The following table sets forth the funded status of the Company's plans:
<TABLE>
<CAPTION>
December 31
----------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation
Vested $ 13,173 $ 18,371
Nonvested 323 320
Effect of projected future compensation increases 5,761 8,057
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 19,257 26,748
Plan assets at fair value 20,153 25,462
- ------------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than) projected benefit obligation 896 (1,286)
Unrecognized net loss (1,159) 456
Unrecognized transition obligation 1,331 1,414
- ------------------------------------------------------------------------------------------------------------------------------------
Net pension asset $ 1,068 $ 584
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The projected benefit obligation was determined using an assumed discount rate
of 7.5% and a weighted-average assumed long-term rate of compensation increase
of 4.5% for 1996 and 1995. The assumed long-term rate of return on plan assets
was 8.0% for 1996 and 1995.
The Company has generally funded annually the maximum allowed under IRS
regulations. The Company made contributions totaling $1,600 in 1996 and $1,500
in both 1995 and 1994.
The Company's employees and agents also participate in defined contribution
plans that cover substantially all full-time employees and agents. Company
contributions were $800 in 1996, 1995 and 1994.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits to retired
employees. These benefits are a specified percentage of premium until age 65 and
a flat dollar amount thereafter. Employees become eligible for these benefits
upon the attainment of age 55, 15 years of service and participation in the
Company medical plan for the immediately preceding five years.
The Company has adopted a 401(h) plan to fund its postretirement benefit
obligation. Funding of $440, $300 and $400 was made in 1996, 1995 and 1994,
respectively. The accumulated postretirement benefit obligation and the accrued
postretirement benefit liability were as follows:
<TABLE>
<CAPTION>
December 31
-----------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ 2,451 $ 2,634
Fully eligible active plan participants 396 312
Other active plan participants 1,899 1,740
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 4,746 4,686
Plan assets (1,252) (755)
Unrecognized gain 1,040 757
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefit liability $ 4,534 $ 4,688
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
4. EMPLOYEE AND AGENT BENEFIT PLANS (CONTINUED)
- ------------------------------------------------
Net periodic postretirement benefit costs consisted of the following components:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs $ 177 $ 200 $ 184
Interest cost on accumulated postretirement benefit plan 315 310 321
Net amortization and deferral (35) (10) 4
Expected return on assets (57) (34) (7)
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit costs $ 400 $ 466 $ 502
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The assumed health care cost trend line rate used in measuring the accumulated
postretirement benefit obligation, for pre-65 employees, was 10.5% in 1994
decreasing linearly each successive year until it reaches 5.5% after 1999, after
which it remains constant. A one-percentage point increase in the assumed health
care cost trend rate for each year would increase the accumulated postretirement
health care cost by approximately .5%. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 7.5%.
5. POLICYOWNERS' CONTINGENCY RESERVES
- --------------------------------------
STATUTORY SURPLUS AND NET INCOME
Net income of Ameritas and its insurance subsidiaries, as determined in
accordance with statutory accounting practices, was $44,100, $29,700 and $11,400
for 1996, 1995 and 1994, respectively. The Company's statutory surplus was
$257,300, $204,700 and $170,900 at December 31, 1996, 1995 and 1994,
respectively.
6. REINSURANCE
- ---------------
In the ordinary course of business, the Company assumes and cedes reinsurance
with other insurers and reinsurers. These arrangements provide greater
diversification of business and limit the maximum net loss potential on large
risks.
The effect of reinsurance on premiums earned is as follows:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assumed $ 6,344 $ 2,725 $ 1,877
Ceded (12,549) (8,284) (5,706)
- ------------------------------------------------------------------------------------------------------------------------------------
$ (6,205) $ (5,559) $ (3,829)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company remains contingently liable in the event that a reinsurer is unable
to meet the obligations ceded under the reinsurance agreement.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
7. RESERVE FOR UNPAID CLAIMS
- -----------------------------
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 14,925 $ 15,383 $ 15,775
Reinsurance reserves (net) 121 (86) (10)
- ------------------------------------------------------------------------------------------------------------------------------------
15,046 15,297 15,765
- ------------------------------------------------------------------------------------------------------------------------------------
Incurred related to:
Current year 117,610 119,116 119,703
Prior year (2,051) (2,030) (848)
- ------------------------------------------------------------------------------------------------------------------------------------
Total incurred 115,559 117,086 118,855
- ------------------------------------------------------------------------------------------------------------------------------------
Paid related to:
Current year 99,742 104,492 104,785
Prior year 12,995 12,845 14,538
- ------------------------------------------------------------------------------------------------------------------------------------
Total paid 112,737 117,337 119,323
- ------------------------------------------------------------------------------------------------------------------------------------
17,868 15,046 15,297
Reinsurance reserves (net) 89 (121) 86
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31 $ 17,957 $ 14,925 $ 15,383
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The liability for unpaid accident and health claims and claim adjustment
expenses is included in policy and contract claims on the consolidated balance
sheets.
8. COMMITMENTS AND CONTINGENCIES
- ---------------------------------
INVESTMENTS
Commitments were outstanding for investments to be purchased in subsequent years
totaling $31,182 and $11,000 as of December 31, 1996 and 1995, respectively.
Securities commitments represented $16,935 and $1,000, and mortgage loan and
real estate commitments represented $14,247 and $10,000. These commitments have
been made in the normal course of investment operations and are not reflected in
the accompanying financial statements. The Company's exposure to credit loss is
represented by the contractual notional amount of those instruments. The Company
uses the same credit policies and collateral requirements in making commitments
and conditional obligations as it does for on-balance sheet instruments.
STATE LIFE AND HEALTH GUARANTY FUNDS
As a condition of doing business, all states and jurisdictions have adopted laws
requiring membership in life and health insurance guaranty funds. Member
companies are subject to assessments each year based on life, health or annuity
premiums collected in the state. In some states these assessments may be applied
against premium taxes. The Company has estimated its costs related to past
insolvencies and has provided a reserve included in other liabilities of $2,250
as of December 31, 1996 and 1995.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made regarding fair value information about
certain financial instruments 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, in many cases, could not be realized in immediate
settlement of the instrument. All nonfinancial instruments are excluded from
disclosure requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
- ---------------------------------------------------
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996 and 1995. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date; therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for each class of financial instrument for which it is
practicable to estimate a value:
FIXED MATURITY SECURITIES -- For publicly traded securities, fair value
is determined using an independent pricing source. For securities
without a readily ascertainable fair value, the value has been
determined using an interest rate spread matrix based upon quality,
weighted average maturity and Treasury yields.
EQUITY SECURITIES -- For publicly traded securities, fair value is
determined using prices from an independent pricing source.
MORTGAGE LOANS ON REAL ESTATE -- Mortgage loans in good standing are
valued on the basis of discounted cash flow. The interest rate that is
assumed is based upon the weighted average term of the mortgage and
appropriate spread over Treasuries. Mortgage loans in default totaling
$1,000 at December 31, 1995 are not included in the fair value
calculation or carrying amount as it is not practicable to reasonably
assess the credit adjustment that would be applied in the marketplace
for such loans. There were no mortgage loans in default as of December
31, 1996.
OTHER INVESTMENTS -- Fair values for venture capital partnerships are
estimated based on values as last reported by the partnership and
discounted for their lack of marketability. Real estate partnerships
are carried on the equity method and are excluded from the fair value
disclosure.
SHORT-TERM INVESTMENTS -- The carrying amount approximates fair value
because of the short maturity of these instruments.
LOANS ON INSURANCE POLICIES -- Fair values for loans on insurance
policies are estimated using a discounted cash flow analysis at
interest rates currently offered for similar loans. Loans on insurance
policies with similar characteristics are aggregated for purposes of
the calculations.
CASH AND CASH EQUIVALENTS -- The carrying amounts equal fair value.
ACCRUED INVESTMENT INCOME AND OTHER CURRENT ACCOUNTS RECEIVABLE -- Fair
value equals book value.
ACCUMULATED CONTRACT VALUES -- Funds on deposit with a fixed maturity
are valued at discounted present value using market interest rates.
Funds on deposit which do not have fixed maturities are carried at the
amount payable on demand at the reporting date, which approximates fair
value.
COMMITMENTS -- The estimated fair value of commitments approximate
carrying value because the fees currently charged for these
arrangements and the underlying interest rates approximate market.
<PAGE>
AMERITAS LIFE INSURANCE CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
---------------------------------------------------
Estimated fair values are as follows:
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------------------------
1996 1995
------------------------------- -------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturity securities
Held to maturity $ 775,875 $ 798,991 $ 724,851 $ 777,068
Available for sale 415,705 415,705 428,387 428,387
Equity securities 75,215 75,215 60,761 60,761
Mortgage loans on real estate 226,776 234,750 204,131 221,813
Other investments 23,347 32,505 22,381 28,149
Short-term investments 2,337 2,337 12,917 12,917
Loans on insurance policies 68,017 60,743 69,268 61,373
Cash and cash equivalents 77,142 77,142 81,764 81,764
Accrued investment income 25,176 25,176 24,105 24,105
Other current accounts receivable 2,772 2,772 3,260 3,260
Financial liabilities:
Accumulated contract values excluding amounts
held under insurance contracts 756,029 756,194 757,417 760,487
</TABLE>
