<PAGE>
As Filed with the Securities and Exchange Commission on April 29, 1998
Registration No. 333-26505
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
-
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
(Exact Name of Trust)
UNITED INVESTORS LIFE INSURANCE COMPANY
(Name of Depositor)
2001 Third Avenue South
Birmingham, Alabama 35233
(Complete address of depositor's principal executive offices)
(Name and complete address
of Agent for service) Copy to:
James L. Sedgwick, Esquire Frederick R. Bellamy, Esq.
United Investors Life Insurance Company Sutherland, Asbill & Brennan, LLP
2001 Third Avenue South 1275 Pennsylvania Avenue, N.W.
Birmingham, Alabama 35233 Washington, DC 20004-2404
________________________________
It is proposed that this filing will become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[x] on May 1, 1998 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a) (i)
[_] on _________ pursuant to paragraph (a) (i) of Rule 485
If appropriate, check the following box:
[_] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
<PAGE>
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
UNITED INVESTORS LIFE INSURANCE COMPANY
Cross Referenced to Items Required by form N-8B2
<TABLE>
<CAPTION>
Form N-8B-2 Item Caption in Prospectus
---------------- ---------------------
<S> <C>
1 Cover Page
2 Cover Page
3 Not Applicable
4 Sale of the Policies
5 The Variable Account
6 The Variable Account
7 Not Applicable
8 The Variable Account
9 Litigation
10 Summary and Diagram of the Policy; Premiums; Net Premium
Allocations: Death Benefits; Other Policy Provisions;
Surrender of Policy; Loan Benefits; The Variable Account
and TMK/United; Voting of Portfolio Shares
11 The Variable Account and TMK/United; Net Premium Allocations
12 The Variable Account and TMK/United: Net Premium Allocations
13 Charges and Deductions; Assignment and Change of Owner, Other
Policy Provisions
14 Facts About the Policy
15 Premiums; Planned Premiums; Net Premium Allocations
16 Net Premium Allocations
17 Free Look Right to Cancel Policy; Surrender of the Policy;
Partial Surrenders; Loan Benefits; Requesting Payments;
Other Policy Provisions
18 The Variable Account and TMK/United; Other Policy
19 Provisions Reports to Owners
20 Not applicable
21 Loan Benefits
22 Other Policy Provisions
23 Not applicable
24 Not applicable
25 United Investors
26 Not applicable
27 United Investors
28 Directors and Officers of United Investors
29 United Investors
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C>
34 Not applicable
35 United Investors
36 Not applicable
37 Not applicable
38 Sale of the Policies
39 Sale of the Policies
40 Not applicable
41 Sale of the Policies
42 Not applicable
43 Not applicable
44 Policy Account Values
45 Not applicable
46 Policy Account Values
47 Net Premium Allocation
48 United Investors
49 Not applicable
50 The Variable Account and TMK/United
51 Premiums; Net Premium Allocations; Charges and Deductions;
Surrender of the Policy
52 The Variable Account and TMK/United
53 Tax Considerations
54 Not applicable
55 Hypothetical Illustrations
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
U N I T E D I N V E S T O R S
A D V A N T A G E P L U S
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
PROSPECTUS
- --------------------------------------------------------------------------------
This prospectus describes a flexible premium variable life
insurance policy ("Policy") offered by United Investors Life
Insurance Company ("United Investors," "we," "us," or "our").
The Policy provides life insurance protection on the insured
(the "Insured") up to the Maturity Date. It also provides
flexibility to vary the amount and timing of premiums and to
change the amount of Death Benefits payable under the Policy.
This flexibility allows the purchaser of a Policy ("you,"
"your," or the "Owner,") to provide for changing insurance
needs under a single insurance policy.
You may allocate net premiums and Policy Value to the United
Investors Universal Life Variable Account (the "Variable
Account"), to United Investors' general account (the "Fixed
Account"), or to a combination of both within certain limits.
The Variable Account is divided into 11 investment divisions
(each, an "Investment Division"). Assets of each Investment
Division are invested in a corresponding investment portfolio
(each, a "Portfolio") of TMK/United Funds, Inc. ("TMK/United").
The Portfolios currently available include:
ASSET STRATEGY PORTFOLIO HIGH INCOME PORTFOLIO MONEY MARKET PORTFOLIO
BALANCED PORTFOLIO INCOME PORTFOLIO SCIENCE AND TECHNOLOGY
BOND PORTFOLIO INTERNATIONAL PORTFOLIO PORTFOLIO
GROWTH PORTFOLIO LIMITED-TERM BOND SMALL CAP PORTFOLIO
PORTFOLIO
The accompanying prospectus for TMK/United describes each of
the Portfolios, including the risks of investing in each
Portfolio, and provides other information about TMK/United. You
bear the entire investment risk for all amounts allocated or
transferred to the Investment Divisions because the Policy
Value will vary with the investment performance of the
Investment Divisions you select. United Investors guarantees
that amounts allocated to the Fixed Account will earn a
guaranteed minimum interest rate of at least 4% per year.
You can select from two Death Benefit Options available under
the Policy: Option A (greater of Face Amount or a multiple of
Policy Value); and Option B (greater of Face Amount plus Policy
Value, or a multiple of Policy Value).
THE POLICY PROVIDES FOR A CASH SURRENDER VALUE. BECAUSE THIS
VALUE IS BASED ON THE PERFORMANCE OF THE INVESTMENT DIVISIONS,
THERE IS NO GUARANTEED MINIMUM CASH SURRENDER VALUE FOR AMOUNTS
ALLOCATED TO THE VARIABLE ACCOUNT. The Net Cash Surrender Value
is the Cash Surrender Value reduced by any Loan Balance. If the
Net Cash Surrender Value is insufficient to cover the charges
due under the Policy, the Policy will terminate without value.
However, the Policy will not terminate during the Death Benefit
Guarantee Period, regardless of the sufficiency of the Net Cash
Surrender Value, as long as the minimum premiums for the Death
Benefit Guarantee have been paid. The Policy also provides for
transfers among Investment Divisions, Policy Loans and permits
Partial Surrenders (withdrawals) within limits.
- --------------------------------------------------------------------------------
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE. A PROSPECTUS FOR TMK/UNITED FUNDS, INC. MUST
ACCOMPANY THIS PROSPECTUS AND SHOULD BE READ IN CONJUNCTION
WITH THIS PROSPECTUS.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION 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, 1998. U-1165, ED. 5-98
ISSUED BY: United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
SUPPLEMENT TO THE ADVANTAGE PLUS PROSPECTUS
APPENDIX A
SURRENDER CHARGES PER $1,000 OF FACE AMOUNT
<TABLE>
<CAPTION>
ISSUE YEAR
AGE 1-6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11 YEAR 12 YEAR 13 YEAR 14 YEAR 15 YEAR 16 YEAR 17+
- ----- ------ ------ ------ ------ ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-25 $ 6.00 5.45 4.91 4.35 3.82 3.27 2.73 2.18 1.64 1.09 0.55 0.00
26-30 $ 6.50 5.91 5.32 4.73 4.14 3.55 2.95 2.38 1.77 1.18 0.59 0.00
31-35 $ 7.00 6.36 5.73 5.09 4.45 3.82 3.18 2.55 1.91 1.27 0.64 0.00
36-40 $ 7.75 7.05 6.34 5.84 4.93 4.23 3.52 2.82 2.11 1.41 0.70 0.00
41-45 $ 8.75 7.95 7.16 6.36 5.57 4.77 3.98 3.18 2.39 1.59 0.80 0.00
46-50 $10.00 9.09 8.18 7.27 6.36 5.45 4.55 3.64 2.73 1.82 0.91 0.00
51-55 $11.50 10.45 9.41 8.36 7.32 6.27 5.23 4.18 3.14 2.09 1.06 0.00
56-60 $13.75 12.50 11.25 10.00 8.75 7.50 6.25 5.00 3.75 2.50 1.25 0.00
61-65 $16.75 15.23 13.70 12.18 10.66 9.14 7.61 6.09 4.57 3.05 1.52 0.00
66-70 $20.75 18.86 16.98 15.09 13.20 11.32 9.43 7.55 5.66 3.77 1.89 0.00
71-75 $26.00 23.64 21.27 18.91 16.55 14.18 11.62 9.45 7.09 4.73 2.36 0.00
</TABLE>
NOTE: These rates are interpolated during each year. The charge shown is for
the beginning of each year. For example, for a 35-year old at issue, during
year 6 the charge declines from $7.00 per $1,000 of Face Amount at the
beginning of the year to $6.36 per $1,000 of Face Amount at the end of the
year.
To accompany the Prospectus dated May 1, 1998.
This supplement is dated May 1, 1998.
Form U-1187
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY AND DIAGRAM OF THE POLICY.......................................... 3
DEFINITIONS................................................................ 7
UNITED INVESTORS........................................................... 8
THE VARIABLE ACCOUNT AND TMK/UNITED........................................ 8
FACTS ABOUT THE POLICY..................................................... 10
Applying for a Policy.................................................... 10
Free Look Right to Cancel Policy......................................... 10
Premiums................................................................. 10
Planned Premiums......................................................... 10
Premiums to Prevent Termination.......................................... 11
Death Benefit Guarantee.................................................. 11
Crediting Premiums to the Policy......................................... 11
Net Premium Allocations.................................................. 11
Fixed Account Option..................................................... 12
Transfers................................................................ 12
Dollar-Cost Averaging.................................................... 12
Surrender of the Policy.................................................. 13
Partial Surrenders....................................................... 13
Loan Benefits............................................................ 13
Requesting Payments...................................................... 14
Other Changes............................................................ 14
Reports to Owners........................................................ 15
Other Policy Provisions.................................................. 15
Assignment and Change of Owner........................................... 15
Supplemental Benefits.................................................... 15
CHARGES AND DEDUCTIONS..................................................... 16
POLICY VALUES.............................................................. 18
Policy Value............................................................. 18
Cash Surrender Value..................................................... 19
Net Cash Surrender Value................................................. 19
Variable Account Value................................................... 19
Fixed Account Value...................................................... 20
DEATH BENEFITS............................................................. 20
Amount of Death Benefit Payable.......................................... 20
Death Benefit Options.................................................... 21
Changing the Death Benefit Option........................................ 21
Changing the Face Amount................................................. 22
Effect of Partial Surrenders on the Death Benefit........................ 22
Changing the Beneficiary................................................. 22
HYPOTHETICAL ILLUSTRATIONS................................................. 23
TAX CONSIDERATIONS......................................................... 32
ADDITIONAL INFORMATION..................................................... 36
Directors and Officers of United Investors............................... 36
Sale of the Policies..................................................... 37
Voting of Portfolio Shares............................................... 37
Other Information........................................................ 37
Litigation............................................................... 37
Legal Matters............................................................ 38
Preparing For Year 2000.................................................. 38
Experts.................................................................. 38
Financial Statements..................................................... 38
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE.
<PAGE>
SUMMARY AND DIAGRAM OF THE POLICY
The following summary of prospectus information and diagram of the important
features of the Policy should be read in conjunction with the more detailed
information appearing elsewhere in this prospectus. Unless otherwise
indicated, the description of the Policy in this prospectus assumes that the
Policy is in force and there is no outstanding Loan Balance. Definitions of
certain terms used in this prospectus may be found by referring to the
"Definitions" section immediately following the diagram.
THE POLICY. The Policy is designed to provide life insurance coverage on a
named Insured up to the Maturity Date, cash values, surrender rights, loan
privileges, and other features associated with conventional life insurance.
You should consider the Policy in conjunction with other insurance you own. It
may not be advantageous to replace existing insurance with the Policy.
The Cash Surrender Value (the Policy Value less any applicable surrender
charges) may be substantially lower than the premiums paid. The Policy Value
may decrease if the investment performance of the Investment Divisions to
which Policy Value is allocated is sufficiently adverse or not sufficiently
positive to cover the charges under the Policy. IF THE NET CASH SURRENDER
VALUE BECOMES INSUFFICIENT TO COVER CHARGES WHEN DUE AND THE DEATH BENEFIT
GUARANTEE IS NOT IN EFFECT, THE POLICY WILL TERMINATE WITHOUT VALUE AFTER A
GRACE PERIOD, EVEN IF ALL PLANNED PREMIUMS ARE PAID IN FULL AND ON SCHEDULE.
SEE "PREMIUMS TO PREVENT TERMINATION."
TAX CONSIDERATIONS. United Investors intends for the Policy to satisfy the
definition of a life insurance contract under Section 7702 of the Internal
Revenue Code of 1986, as amended (the "Code"). Under certain circumstances, a
Policy could be treated as a "modified endowment contract." We will monitor
Policies and will attempt to notify you on a timely basis if your Policy is in
jeopardy of becoming a modified endowment contract. For further discussion of
the tax status of a Policy and the tax consequences of being treated as a life
insurance contract or a modified endowment contract, see "Tax Considerations."
Withdrawals and loans could be taxable and subject to a penalty tax.
FREE LOOK RIGHT TO CANCEL. For a limited time after the Policy is issued,
you have the right to cancel your Policy and receive a full refund of all
premiums paid. See "Free Look Right to Cancel Policy."
OWNER INQUIRIES. If you have any questions, you may write or call our
Administrative Office at 2323 Bryan Street--Suite 1100, P.O. Box 219065,
Dallas, TX 75221-9065, (800) 451-6923.
3
<PAGE>
- -------------------------------------------------------------------------------
DIAGRAM OF POLICY
- -------------------------------------------------------------------------------
PREMIUMS
* You select a payment plan but are not required to pay premiums according to
the plan. You can vary the frequency and amount, within limits, and can skip
planned premiums. See "Planned Premiums." UNDER CERTAIN CIRCUMSTANCES, EXTRA
PREMIUMS MAY BE REQUIRED TO PREVENT TERMINATION. SEE "PREMIUMS TO PREVENT
TERMINATION."
* Minimum initial premium and planned premium depend on the Insured's age,
sex, risk class, Face Amount selected, and any supplemental benefit riders.
See "Premiums."
* Unplanned premiums may be made, within limits. See "Premiums."
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ALLOCATIONS OF NET PREMIUMS
* A 3.5% premium expense charge is deducted from each premium before
allocation resulting in a Net Premium.
* No sales load is deducted from premiums.
* You direct the allocation of Net Premiums among the Investment Divisions and
the Fixed Account. See "Net Premium Allocations" for rules and limits.
* Interest is credited on amounts allocated to the Fixed Account at a rate
determined by United Investors, but not less than an annual effective rate of
4%. See "Transfers" for rules and limits on Fixed Account allocations.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PORTFOLIOS AVAILABLE THROUGH INVESTMENT DIVISIONS
* The Investment Divisions invest in corresponding Portfolios of TMK/United
Funds, Inc.
* THE POLICY VALUE IN THE INVESTMENT DIVISIONS IS NOT GUARANTEED AND MAY
DECREASE OR INCREASE. PRINCIPAL IS NOT GUARANTEED.
* The Portfolios currently available and their management fees and other
expenses for the year ended December 31, 1997 (expressed as a percentage of
net assets of each Portfolio) are as follows. Future fees and expenses may be
higher or lower.
TMK/UNITED ANNUAL EXPENSES
<TABLE>
<CAPTION>
ASSET
STRATEGY BALANCED BOND GROWTH HIGH INCOME
-------- -------- ---- ------ -----------
<S> <C> <C> <C> <C> <C>
Management Fees....................... .80% .60% .53% .70% .65%
Other Expenses........................ .13% .07% .05% .02% .05%
--- --- --- --- ---
Total Annual Expenses................. .93% .67% .58% .72% .70%
</TABLE>
<TABLE>
<CAPTION>
LIMITED-
TERM MONEY SCIENCE AND
INCOME INTERNATIONAL BOND MARKET TECHNOLOGY SMALL CAP
------ ------------- -------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Management Fees......... .70% .80% .55% .50% .69% .85%
Other Expenses.......... .02% .18% .18% .08% .25% .05%
--- --- --- --- --- ---
Total Annual Expenses... .72% .98% .73% .58% .94% .90%
</TABLE>
- -------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------
DEDUCTIONS FROM ASSETS
* A monthly deduction is made for: (1) cost of insurance; (2) a monthly
administrative charge (currently $5.00; maximum is $7.50); (3) a Guaranteed
Death Benefit Charge of $0.01 per $1,000 of Face Amount as long as the Death
Benefit Guarantee remains in effect; and (4) any supplemental benefit charges.
See "Charges and Deductions--Monthly Deduction."
* A daily charge for mortality and expense risks at a current effective annual
rate of 0.90% during the first 10 years of the Policy (0.70% thereafter) is
deducted from assets in the Investment Divisions. The maximum mortality and
expense risk charge is 0.90% for all Policy Years. See "Charges Deducted From
the Investment Divisions." This charge is not deducted from Fixed Account
Value.
* Management fees and other expenses are deducted from the assets of each
Portfolio. See "Portfolios Available Through Investment Divisions."
* See "Allocations of Net Premiums" and "Cash Benefits" for other charges and
deductions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
POLICY VALUE
* The Policy Value is the sum of the amounts in the Investment Divisions and
in the Fixed Account credited to your Policy. See "Policy Value," "Fixed
Account Value," and "Variable Account Value."
* Policy Value varies from day to day to reflect Investment Division
investment experience, interest credited on Fixed Account allocations, charges
deducted and other Policy transactions (such as Policy Loans, transfers and
Partial Surrenders.)
* Policy Value can be transferred ($100 minimum) among the Investment
Divisions and the Fixed Account up to 12 times in a Policy Year. See
"Transfers" for rules and limits. Policy Loans reduce the amount available for
allocations and transfers.
* Policy Value serves as the starting point for calculating certain values
under a Policy, such as the Cash Surrender Value and the Death Benefit (under
Option B).
* THERE IS NO MINIMUM GUARANTEED POLICY VALUE. IF THE NET CASH SURRENDER VALUE
ON A MONTHLY ANNIVERSARY IS INSUFFICIENT TO COVER THE MONTHLY DEDUCTION THEN
DUE AND THE DEATH BENEFIT GUARANTEE IS NOT IN EFFECT, THE POLICY WILL
TERMINATE (REGARDLESS OF WHETHER PLANNED PREMIUMS ARE PAID) UNLESS YOU MAKE A
PREMIUM PAYMENT DURING THE 61-DAY GRACE PERIOD THAT IS SUFFICIENT TO KEEP THE
POLICY IN FORCE. SEE "PREMIUMS TO PREVENT TERMINATION."
- -------------------------------------------------------------------------------
5
<PAGE>
- -------------------------------------------------------------------------------
CASH BENEFITS
* The Cash Surrender Value is the Policy Value less any applicable surrender
charge.
* Loans may be taken for amounts up to 90% of Cash Surrender Value. See
"Policy Loans" and "Tax Considerations."
* Partial Surrenders generally can be made at any time during the Insured's
life before the Policy is terminated provided there is sufficient remaining
Net Cash Surrender Value. A Partial Surrender charge equal to the lesser of
$25 or 2% of the Partial Surrender amount requested, plus a portion of the
surrender charge, will be charged for each Partial Surrender. See "Partial
Surrenders" for rules and limits.
* The Policy can be surrendered at any time for its Net Cash Surrender Value
(Policy Value minus any applicable surrender charge minus any Loan Balance).
See "Full Surrenders."
* A surrender charge will be deducted from the Policy Value upon a full
surrender of the Policy prior to the end of the 16th Policy Year or the end of
the 16th year after an increase in Face Amount. The surrender charge varies
based on the Insured's age on the Policy Date or Attained Age at the time of
an increase and is a stated amount per $1,000 of Face Amount. For each age,
the surrender charge is imposed on full surrenders during the first five
Policy Years (or first five years after an increase in Face Amount). For each
age, the surrender charge then decreases annually beginning in the sixth
Policy Year until it reaches zero at the end of the 16th Policy Year. See
"Surrender Charge."
* Loans and surrenders may be taxable and subject to a penalty tax. See "Tax
Considerations."
* A variety of payment options are available.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DEATH BENEFITS
* Death Benefits are available as lump sum or under a variety of payment
options.
* The minimum Face Amount available varies based on the age and risk class of
the Insured.
* Death Benefits are available in two Death Benefit Options: Option A (greater
of Face Amount or a multiple of Policy Value); or Option B (greater of Face
Amount plus the Policy Value, or a multiple of Policy Value). See "Death
Benefits."
* There is flexibility to change the Face Amount and to change the Death
Benefit Option. See "Changing the Face Amount" and "Changing the Death Benefit
Option" for rules and limits.
* The Death Benefit Guarantee can keep the Policy in force (but only during
the Death Benefit Guarantee Period) regardless of sufficiency of Net Cash
Surrender Value as long as cumulative premiums paid on the Policy, less any
Partial Surrenders and any Loan Balance, are at least equal to (a) the Minimum
Monthly Premium multiplied by (b) the number of months the Policy has been in
force. The Death Benefit Guarantee Period generally ends at age 65 under
Option A and at age 62 under Option B. See the definition of Death Benefit
Guarantee Period and "Death Benefit Guarantee."
* The Death Benefit generally should be excludable from the gross income of
the Beneficiary. See "Tax Considerations."
- -------------------------------------------------------------------------------
6
<PAGE>
- -------------------------------------------------------------------------------
DEFINITIONS
- -------------------------------------------------------------------------------
Administrative Office... 2323 Bryan Street--Suite 1100, P.O. Box 219065,
Dallas, TX 75221-9065, (800) 451-6923.
Attained Age............ The age of the Insured on his or her last birthday at
the beginning of each Policy Year.
Cash Surrender Value.... Policy Value less any applicable surrender charges.
Death Benefit........... The amount of insurance payable to the Beneficiary on
the death of the insured.
Death Benefit Guarantee
Period.................. The period in which the Death Benefit is guaranteed
to remain in effect as long as the sum of the
premiums paid minus any Partial Surrenders and any
Loan Balance equals or exceeds the Minimum Monthly
Premium multiplied by the number of months the Policy
is in force. For Death Benefit Option A, the period
is the later of age 65 or five years. For Death
Benefit Option B, the period is the later of age 62
or three years. However, for policies sold in
Massachusetts the Death Benefit Guarantee Period is
limited to five years.
Death Benefit Option.... One of two options under the Policy that is used to
determine the amount of the Death Benefit.
Fixed Account........... A part of the general account of United Investors
Life Insurance Company. The general account consists
of all assets of United Investors Life Insurance
Company other than those in any separate account.
Fixed Account Value..... The Policy Value in the Fixed Account.
Loan Balance............ The sum of all outstanding loans including principal
and interest.
Maturity Date........... Policy Anniversary on or next following the Insured's
100th Birthday.
Minimum Monthly
Premium................. For any Policy Month during the Death Benefit
Guarantee Period, the minimum amount of premium
required to keep the Death Benefit Guarantee in
effect.
Monthly Anniversary..... The same day each month as the Policy Date. If the
Monthly Anniversary falls on a date other than a
Valuation Date, the next following Valuation Date
will be deemed the Monthly Anniversary.
Net Cash Surrender
Value................... Cash Surrender Value less any Loan Balance.
Net Premium............. The premium received less the premium expense charge.
Partial Surrender....... A request to withdraw a portion of the Net Cash
Surrender Value. A Partial Surrender will be subject
to a surrender charge.
Policy Anniversary...... The same day and month as the Policy Date each year
that the Policy remains in force. If the Policy
Anniversary falls on a date other than a Valuation
Date, the next following Valuation Date will be
deemed the Policy Anniversary.
Policy Date............. The date from which Policy Anniversaries and Policy
Years are determined. Your Policy Date is shown in
your Policy.
7
<PAGE>
Policy Loan............. A request to borrow a portion of the Net Cash
Surrender Value.
Policy Month............ The first Policy Month starts on the Policy Date.
Subsequent Policy Months start on the Monthly
Anniversary.
Policy Value............ The sum of the Variable Account Value and the Fixed
Account Value.
Valuation Date.......... Each day that the New York Stock Exchange is open for
trading.
Valuation Period........ The period of time beginning at the close of the New
York Stock Exchange on one Valuation Date and ending
at the close of the New York Stock Exchange on the
next Valuation Date.
Variable Account Value.. The sum of the values of the Investment Divisions
under the Policy.
We, Us, or United
Investors............... United Investors Life Insurance Company.
You and Your............ The Owner of the Policy.
UNITED INVESTORS
UNITED INVESTORS LIFE INSURANCE COMPANY. United Investors is a Missouri
Stock life insurance company that was incorporated on August 17, 1981 as the
successor to a company of the same name established in Missouri on September
27, 1961. United Investors is indirectly owned by Torchmark Corporation.
United Investors is principally engaged in offering life insurance and annuity
contracts and is authorized to do business in the District of Columbia and all
states except New York. United Investors also serves as the depositor to
United Investors Life Variable Account, an investment company supporting other
variable life insurance policies issued by United Investors. United Investors'
address is 2001 Third Avenue South, Birmingham, Alabama 35233. See "Directors
and Officers of United Investors" for information on the directors and
officers of United Investors.
THE VARIABLE ACCOUNT AND TMK/UNITED
THE VARIABLE ACCOUNT. United Investors established United Investors
Universal Life Variable Account (the "Variable Account") as a separate
investment account under Missouri law on April 18, 1997. United Investors owns
the assets in the Variable Account and is obligated to pay benefits under the
Policies. The Variable Account is used to support the Policies as well as for
other purposes permitted by law. The Variable Account is registered with the
Securities and Exchange Commission ("SEC") as a unit investment trust under
the Investment Company Act of 1940, as amended (the "1940 Act") and qualifies
as a "separate account" within the meaning of the federal securities laws.
Such registration does not involve any supervision by the SEC of the
management of the Variable Account or United Investors.
The Variable Account is divided into Investment Divisions, each of which
currently invests in shares of a specific Portfolio of TMK/United Funds, Inc.
See "TMK/United." These Investment Divisions buy and redeem Portfolio shares
at net asset value. Any dividends and distributions from security transactions
of a Portfolio are reinvested at net asset value in shares of the same
Portfolio. Income, gains and losses, realized or unrealized, of an Investment
Division are credited to or charged against that Investment Division without
regard to any other income, gains or losses of United Investors. Assets equal
to the reserves and other contract liabilities with respect to each Investment
Division are not chargeable with liabilities arising out of any other business
or account of United Investors. If the assets exceed the required reserves and
other liabilities, United Investors may transfer the excess to its general
account.
8
<PAGE>
The Variable Account may include other Investment Divisions that are not
available under the Policy and are not otherwise discussed in this prospectus.
United Investors may substitute another Investment Division or insurance
company separate account under the Policy if, in United Investors' judgment,
investment in an Investment Division should no longer be possible or becomes
inappropriate to the purposes of the Policies, or if investment in another
Investment Division or insurance company separate account is in the best
interest of Owners. No substitution may take place without notice to Owners
and prior approval of the SEC and insurance regulatory authorities, to the
extent required by the 1940 Act and applicable law.
United Investors may make changes to the Variable Account to the extent
permitted by applicable law and regulations. These changes may include: (1)
operating the Variable Account as a management company under the 1940 Act, or
in any other form permitted by law, if we deem it to be in the best interest
of Owners; (2) deregistering the Variable Account under the 1940 Act if such
registration is no longer required; or (3) combining the Variable Account with
other separate investment accounts.
TMK/UNITED. The Variable Account has eleven Investment Divisions, each
investing in a specific Portfolio of TMK/United. TMK/United is a series-type
fund registered with the SEC as a diversified open-end management investment
company under the 1940 Act. Waddell & Reed Investment Management Company
("Waddell & Reed"), an affiliate of United Investors, is the manager of
TMK/United and provides investment advisory services to TMK/United. Waddell &
Reed maintains a large staff of experienced investment personnel and provides
investment advice to and supervises investments of a number of mutual funds.
Each Portfolio pays Waddell & Reed a management fee for managing that
Portfolio's investments. See "Summary and Diagram of the Policy" and the
accompanying prospectus for TMK/United. The investment objective(s) of each of
the Portfolios in which Investment Divisions invest are summarized below.
There is no assurance that these objectives will be met. Further information
about the Portfolios is contained in the accompanying prospectus for
TMK/United, which you should read in conjunction with this prospectus.
ASSET STRATEGY PORTFOLIO seeks high total return over the long term. It
diversifies among stocks, bonds, and short-term instruments, both in the
United States and abroad.
BALANCED PORTFOLIO primarily seeks current income with a secondary goal
of long-term appreciation of capital by investing in a variety of
securities, including debt securities, common stocks and preferred stocks.
BOND PORTFOLIO seeks to provide current income with an emphasis on
preservation of capital. It invests primarily in debt securities of varying
yields, quality and maturities.
GROWTH PORTFOLIO primarily seeks capital growth. As a secondary goal it
seeks current income. It invests primarily in common stocks or securities
convertible into common stocks.
HIGH INCOME PORTFOLIO primarily seeks high current income. As a secondary
goal it seeks capital growth when consistent with the primary goal. It
invests primarily in high-yield, high-risk fixed-income securities,
commonly known as "junk bonds," but may have up to 20% of its assets in
common stocks. High-yield fixed-income securities may have an increased
risk of default and greater market price volatility than higher rated
securities due to various circumstances. See "Debt Securities" in the
TMK/United Funds, Inc. prospectus for a further description of the risk
factors.
INCOME PORTFOLIO primarily seeks to maintain current income, subject to
market conditions, with a secondary goal of capital growth. It invests
primarily in common stocks or securities convertible into common stocks
that have a record of paying regular dividends on common stock or have the
potential for capital growth or that may be expected to resist market
decline.
INTERNATIONAL PORTFOLIO primarily seeks long-term appreciation of capital
with a secondary goal of current income by investing primarily in
securities issued by companies or governments of any nation.
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LIMITED-TERM BOND PORTFOLIO seeks a high level of current income
consistent with preservation of capital by investing primarily in debt
securities of investment grade, including debt securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. The
Portfolio seeks to maintain a dollar-weighted average maturity of its
portfolio of two to five years.
MONEY MARKET PORTFOLIO seeks to maximize current income consistent with
stability of principal. It may invest in money market securities such as
bank obligations and instruments secured by bank obligations, commercial
paper and corporate debt obligations and obligations of the U.S. and
Canadian Governments or their respective agencies and instrumentalities.
Investments in the Money Market Portfolio are neither insured nor
guaranteed by the U.S. Government and there is no assurance that the
portfolio will be able to maintain a net asset value of $1.00 per share.
SCIENCE AND TECHNOLOGY PORTFOLIO seeks long-term capital growth through
investments primarily in science and technology securities.
SMALL CAP PORTFOLIO seeks capital growth through a diversified holding of
securities, primarily in the common stocks of, or securities convertible
into the common stocks of, relatively new or unseasoned companies,
companies which are in their early stages of development or smaller
companies positioned in new and emerging industries where the opportunity
for rapid growth is above average.
FACTS ABOUT THE POLICY
APPLYING FOR A POLICY. To purchase a Policy, you must complete an
application and submit it to United Investors' Administrative Office at the
address listed on the front of this prospectus. You also must pay an initial
premium which varies by age, sex and risk class. See "Premiums," below. Your
initial premium can be submitted with your application, subject to our
underwriting rules, or at a later date. Coverage becomes effective as of the
Policy Date. If an individual dies before the Policy Date, United Investors'
sole liability will be to return the premiums paid plus any interest earned on
it unless a Temporary Insurance Agreement is in effect.
Generally, United Investors will issue a Policy covering an Insured up to
age 75 if evidence of insurability satisfies our underwriting rules. Evidence
of insurability may include, among other things, a medical examination of the
Insured. United Investors may, in its sole discretion, issue a Policy covering
an Insured over age 75. We reserve the right not to accept an application for
any lawful reason.
FREE LOOK RIGHT TO CANCEL POLICY. During your "free look" period, you may
cancel your Policy and receive a refund of all premiums paid. The free look
period expires the later of: (a) 20 days after you receive your Policy; or (b)
45 days after you sign the application for the Policy. Some states may require
a longer period. If you decide to cancel the Policy, you must return it by
mail or other delivery to United Investors or to the agent who sold it to you
prior to the end of the free look period.
PREMIUMS. The premium amounts sufficient to fund a Policy depend on a number
of factors, such as the age, sex and risk class of the proposed Insured, the
desired Face Amount, and any supplemental benefits. The initial premium must
be at least equal to the Minimum Monthly Premium. After the initial premium is
paid, additional premiums may be paid in any amount (of at least $25) and at
any time. We may increase the minimum amount of additional premiums upon 90
days advance written notice to you. However, total premiums paid in a Policy
Year may not exceed guideline premium limitations for life insurance set forth
in the Code. We reserve the right to reject any premium that would result in
the Policy being disqualified as life insurance under the Code and will refund
any rejected premium. In addition, we will monitor Policies and will attempt
to notify the Owner on a timely basis if his or her Policy is in jeopardy of
becoming a modified endowment contract under the Code. See "Tax
Considerations."
PLANNED PREMIUMS. When you apply for a Policy, you select a quarterly, semi-
annual or annual premium payment plan. You may also arrange for premiums to be
paid monthly via automatic
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deduction from your checking account. You are not required to pay premiums in
accordance with this premium plan; rather, you can pay more or less than
planned (subject to the $25 minimum), or skip a planned premium entirely. You
can change the amount of planned premiums and payment arrangements, or switch
payment frequencies, whenever you want by providing satisfactory written
instructions to the Administrative Office. Such changes will be effective upon
our receipt of the instructions. Depending on the Policy Value at the time of
any increase in the Face Amount and the amount of the increase requested, a
change in the amount of planned premiums may be advisable. See "Changing the
Face Amount."
PREMIUMS TO PREVENT TERMINATION. IF YOU DO NOT PAY PLANNED PREMIUMS OR IF
THE INVESTMENT PERFORMANCE OF THE POLICY IS NOT SUFFICIENT, YOUR POLICY MAY
TERMINATE WITHOUT VALUE; HOWEVER IT WILL NOT NECESSARILY TERMINATE. A Policy
terminates depending on whether: (a) its Net Cash Surrender Value is
sufficient to cover the Monthly Deduction when due; and (b) the Death Benefit
Guarantee is in effect. If the Death Benefit Guarantee is not in effect on a
Monthly Anniversary and either: (a) the Net Cash Surrender Value is less than
the Monthly Deduction; or (b) the Loan Balance exceeds the Cash Surrender
Value less surrender charges, the Policy will terminate without value unless
additional premiums are paid. See "Monthly Deduction," and "Death Benefit
Guarantee."
You will have a 61-day grace period to pay a premium sufficient to cover the
Monthly Deductions. United Investors will send notice of the amount required
to be paid during the grace period to your last known address and to any
assignee of record. The grace period will begin when the notice is sent and
your Policy will remain in effect during the grace period. See "Amount of
Death Benefit Payable" and "Effect of Policy Loan." The grace period premium
required to be paid will be sufficient to keep the Policy in force for three
months regardless of investment performance. The payment required will not
exceed: (a) the amount by which the Loan Balance exceeds the Cash Surrender
Value; plus (b) any accrued and unpaid Monthly Deductions as of the date of
the notice; plus (c) an amount sufficient to cover the next two Monthly
Deductions. If the grace period premium has not been paid before the grace
period ends, your Policy will terminate. It will have no value and no benefits
will be payable. See "Other Policy Provisions" for a discussion of your
reinstatement rights. If the Insured should die during the grace period before
the grace period premium is paid, the Death Benefit will still be payable to
the Beneficiary, although the amount paid will reflect a reduction for the
Monthly Deduction(s) due on or before the date of the Insured's death and any
Loan Balance.
DEATH BENEFIT GUARANTEE. During the Death Benefit Guarantee Period (see
"Definitions"), your Death Benefit is guaranteed to remain in effect as long
as cumulative premiums paid, less any Partial Surrenders and any Loan Balance,
are at least equal to (a) the Minimum Monthly Premium, multiplied by (b) the
number of months the Policy has been in force. If this requirement is met, the
Policy will remain in force, regardless of the sufficiency of Net Cash
Surrender Value to cover Monthly Deductions. If the Minimum Monthly Premium
has changed since the Policy Date, the total premium amount required will be
based on the different Minimum Monthly Premiums required and the number of
months for which each applied. If the Death Benefit Guarantee ends due to
insufficient premium payments, it may not be restored by payment of additional
premiums.
CREDITING PREMIUMS TO THE POLICY. Between the date your initial premium is
received and the Policy Date, we will credit interest on the initial premium
as if it had been invested in the Investment Division investing in the Money
Market Portfolio. On the Policy Date, the initial Net Premium, plus any
accrued interest on that amount will be credited to the Policy. Any additional
premium received (see "Net Premium Allocations," below) will be credited to
the Policy on the date we receive it, or the next Valuation Date thereafter.
NET PREMIUM ALLOCATIONS. When you apply for a Policy, you specify the
percentage (from 0% to 100%) of Net Premium to be allocated to each Investment
Division and the Fixed Account. You can change the allocation percentages at
any time by sending satisfactory written instructions to our Administrative
Office. The change will apply to all premiums received after we receive your
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instructions, unless you instruct otherwise. Net Premium allocations must be
in percentages totaling 100%, and each allocation percentage must be a whole
number. See "TMK/United" for a description of the Portfolios in which the
Investment Divisions invest.
FIXED ACCOUNT OPTION. The Fixed Account is part of United Investors' general
account assets. It is not a separate account. Amounts allocated to the Fixed
Account are credited with interest at rates determined IN OUR SOLE DISCRETION,
but in no event will interest credited on these amounts be less than an
effective annual rate of 4%. The current interest rate is the guaranteed
minimum interest rate plus any excess interest rate. The current interest rate
is determined periodically. The current interest rate will be guaranteed for
at least a one year period. You assume the risk that interest credited may not
exceed the guaranteed minimum rate of 4% per year. United Investors's general
account assets are used to support our insurance and annuity obligations other
than those funded by separate accounts. Subject to applicable law, United
Investors has sole discretion over the investment of the assets of the Fixed
Account. There are significant limits on your right to transfer Policy Value
from the Fixed Account. See "Transfers," below.
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED
ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR HAS THE
FIXED ACCOUNT BEEN REGISTERED AS AN INVESTMENT COMPANY UNDER THE 1940 ACT.
ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN ARE SUBJECT
TO THE PROVISIONS OF THESE ACTS AND, AS A RESULT, THE STAFF OF THE SECURITIES
AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN THIS PROSPECTUS
RELATING TO THE FIXED ACCOUNT.
TRANSFERS. At any time after the end of the free-look period, you may
transfer all or part of the Variable Account Value to one or more of the
variable Investment Divisions or to the Fixed Account up to 12 times in a
Policy Year. There is no charge for making transfers. You may transfer all or
part of the Fixed Account Value to a variable Investment Division or
Investment Divisions only once each Policy Year and the maximum amount you can
transfer out of the Fixed Account is the greater of: (1) 25% of the prior
Policy Anniversary's unloaned Fixed Account Value; or (2) the amount of the
prior Policy Year's transfer. If a transfer is made from the Fixed Account to
a variable Investment Division, no transfer from that variable Investment
Division to the Fixed Account may be made for six months after the transfer
date. The minimum amount that may be transferred out of a variable Investment
Division or the Fixed Account is $100, or, if less, the Policy Value held in
the Investment Division or in the Fixed Account. The amount remaining must be
at least $100, or we will transfer the total value.
Transfer requests may be made by satisfactory written or telephone request
(if we have your written authorization for telephone requests on file). A
transfer will take effect on the date we receive the request at the
Administrative Office if it is received by 4:00 p.m. Eastern time; otherwise
it will take effect on the following business day. United Investors may,
however, defer transfers under the same conditions that we may delay paying
proceeds. See "Requesting Payments." United Investors reserves the right to
modify, restrict, suspend or eliminate the transfer privileges, including
telephone transfer privileges, at any time, for any reason.
DOLLAR-COST AVERAGING. Prior to the Maturity Date, the dollar-cost averaging
program permits you to systematically transfer on a monthly basis a set dollar
amount from the Money Market Investment Division to the other Investment
Divisions. The minimum automatic transfer amount from the Money Market
Investment Division is $100. If the transfer is to be made to more than one
Investment Division, a minimum of $25 must be transferred to each Investment
Division selected. The dollar-cost averaging method of investment is designed
to reduce the risk of making purchases only when the price of units is high,
but you should carefully consider your financial ability to continue the
program over a long enough period of time to purchase units when their value
is low as well as when it is high. Dollar-cost averaging does not assure a
profit or protect against a loss.
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You may elect to participate in the dollar-cost averaging program at any
time by sending us a written request. Once elected, dollar-cost averaging
remains in effect from the date we receive your request until the value of the
Money Market Investment Division is depleted, or until you cancel the program
by written request or by telephone. There is no additional charge for dollar-
cost averaging. A transfer under this program is not considered a transfer for
purposes of calculating the number of transfers. We reserve the right to
discontinue offering the dollar-cost averaging program at any time and for any
reason. A second method of dollar-cost averaging is to directly allocate
monthly premiums to the Investment Divisions you desire.
SURRENDER OF THE POLICY. You may surrender your Policy at any time for its
Net Cash Surrender Value. See "Requesting Payments." The Net Cash Surrender
Value is the Policy Value minus any surrender charge and minus any Loan
Balance. A surrender charge may apply. See "Surrender Charge." Your Policy
will terminate and cease to be in force if it is surrendered. It cannot later
be reinstated. Surrendering the Policy may have tax consequences. See "Tax
Considerations."
PARTIAL SURRENDERS. You may make Partial Surrenders under your Policy at any
time during the Insured's life and before the Policy has terminated. See
"Requesting Payments." Requests for Partial Surrenders must be made in
writing. The minimum Partial Surrender amount is $100. A Partial Surrender may
not exceed the Net Cash Surrender Value minus $300. A Partial Surrender charge
equal to the lesser of $25 or 2% of the Partial Surrender amount plus a
portion of the surrender charge equal to: (1) the percentage of the Net Cash
Surrender Value requested; multiplied by (2) the surrender charge then in
effect. This charge will be deducted from your Policy Value along with the
Partial Surrender amount requested. When you request a Partial Surrender, you
can direct how the amount will be deducted from your Policy Value. If you
provide no directions, the Partial Surrender will be deducted from your Policy
Value in the Investment Divisions and Fixed Account on a pro-rata basis. If
Death Benefit Option A is in effect, a Partial Surrender may reduce the Face
Amount. See "Effect of Partial Surrenders on the Death Benefit." Partial
Surrenders may have tax consequences.
LOAN BENEFITS. You may borrow up to 90% of your Cash Surrender Value at any
time by submitting a written request to us. Outstanding loans, including
accrued interest, reduce the amount available for new loans. A loan must be
for at least $200. Your Policy may terminate if the Loan Balance is greater
than the Cash Surrender Value. See "Premiums to Prevent Termination." Policy
Loans may have Federal income tax consequences. See "Tax Considerations."
When a loan is made, an amount equal to the loan and any loan interest is
transferred from the Variable Account Value to the Fixed Account. We will
allocate the amount transferred in the proportion that the value of each
Investment Division bears to the Variable Account Value unless you specify an
Investment Division(s) from which the loan is to be made. Your loan will be
divided into two parts: the Preferred Loan Amount; and the Non-Preferred Loan
Amount. The Preferred Loan Amount is equal to the amount of the Loan Balance
that does not exceed the Policy Value minus the total premiums paid, excluding
any premiums paid during a grace period. The Non-Preferred Loan Amount is
equal to any portion of the Loan Balance that exceeds the Preferred Loan
Amount.
INTEREST. We will charge interest daily on any outstanding loan at an
effective annual rate of 6.0%. Interest is due and payable at the end of each
Policy Year while a loan is outstanding. Interest paid on a Policy Loan
generally is not tax deductible. If, on any Policy Anniversary, interest
accrued since the last Policy Anniversary has not been paid, the amount of the
interest is added to the loan and becomes part of the outstanding Loan
Balance. Interest will be taken from the Investment Divisions in the
proportion that the value of each Investment Division bears to the Variable
Account Value. On each Monthly Anniversary, the loaned amount will be credited
with interest at a minimum guaranteed annual effective rate of 4.0%. We may
also credit additional interest (currently up to an effective annual rate 2%)
on the Preferred Loan Amount.
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LOAN REPAYMENT. You may repay all or part of your Loan Balance at any time
while the Insured is living and the Policy is in force. Loan repayments must
be at least $200 each (or the outstanding Loan Balance if less). Upon
repayment of the Loan Balance, the portion of the repayment allocated to an
Investment Division will be transferred from the Fixed Account and increase
the value in the Investment Division. The repayment will be allocated among
the Investment Divisions and the Fixed Account based on the instructions for
Net Premium allocations then in effect unless you instruct us otherwise. Any
payment received when a loan is outstanding will be treated as a premium
unless you instruct otherwise.
EFFECT OF POLICY LOAN. A Policy Loan, whether or not repaid, will affect
Policy Values over time because the investment results of the Investment
Divisions may be less than or greater than the net interest rate credited on
the amount transferred to the Fixed Account securing the loan. By comparison
to a Policy under which no loan was made, the Policy Value will be lower if
the net interest rate credited to the amount in the Fixed Account securing a
loan is less than the investment return of the Investment Divisions and
greater if the Fixed Account net interest rate is higher than the investment
return of the Investment Divisions. If the Death Benefit becomes payable while
a Policy Loan is outstanding, the Loan Balance will be deducted in calculating
the Death Benefit. If the Loan Balance exceeds the Cash Surrender Value on any
Monthly Anniversary and the Death Benefit Guarantee is not in effect, the
Policy will terminate. We will send you, and any assignee of record, notice of
the termination. You will have a 61-day grace period to submit a sufficient
payment to avoid termination.
REQUESTING PAYMENTS. Written requests for payment (except where telephone
requests are authorized by us) must be sent to our Administrative Office or
given to an authorized United Investors agent for forwarding to our office. We
will ordinarily pay any Death Benefit, loan amount, Net Cash Surrender Value
or Partial Surrender amounts within seven days after receipt at our
Administrative Office of all the documents required for such a payment. Other
than the Death Benefit, which is determined as of the date of the Insured's
death, the amount will be determined as of the date our Administrative Office
receives all required documents.
We may delay making a payment of any amount from the Investment Divisions or
processing a transfer request if: (1) the disposal or valuation of the
Variable Account's assets is not reasonably practicable because the New York
Stock Exchange is closed for other than a regular holiday or weekend, trading
is restricted by the SEC, or the SEC declares that an emergency exists; or (2)
the SEC by order permits postponement of payment to protect United Investors'
Policy Owners. We also may defer making payments attributable to a check that
has not cleared, and we may defer payment of proceeds from the Fixed Account
for up to six months from the date we receive the request. If we defer payment
for more than 30 days, we will pay interest on the amount deferred at an
annual rate of at least 4%. However, we will not defer payment of a withdrawal
or Policy Loan requested to pay a premium due on a United Investors policy.
The Policy offers a wide variety of optional ways of receiving proceeds
payable under the Policy other than in a lump sum. An authorized United
Investors agent can explain these options upon request. None of these options
vary with the investment performance of a Variable Account because they are
all forms of fixed-benefit annuities.
OTHER CHANGES. At any time we may make such changes in the Policy as are
necessary: to assure compliance at all times with the definition of life
insurance prescribed by the Code; to make the Policy, our operations, or the
operation of the Variable Account conform with any law or regulation issued by
any government agency to which they are subject; or to reflect a change in the
operation of the Variable Account, if allowed by the Policy. Only an officer
of United Investors has the right to change the Policy. No agent has the
authority to change the Policy or waive any of its terms. All endorsements,
amendments, or riders must be signed by an officer to be valid.
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REPORTS TO OWNERS. United Investors maintains records and accounts of all
transactions involving the Policy, the Variable Account, the Fixed Account and
Policy Loans. Each year, or more often if required by law, you will be sent a
report showing information about your Policy for the period covered by the
report. You will also be sent an annual and a semi-annual report for each
Portfolio underlying an Investment Division to which you have allocated Net
Premiums, as required by the 1940 Act. In addition you will receive a written
confirmation of each transaction when you pay premiums, make a Partial
Surrender, make transfers, or take out a Policy Loan.
OTHER POLICY PROVISIONS. The Policy contains provisions addressing the
following matters:
. DIVIDENDS. The Policy is non-participating. This means that no dividends
will be paid on the Policy. The Policy will not share in our profits or
surplus earnings.
. INCONTESTABILITY. The Policy limits our right to contest the Policy as
issued, as reinstated or as increased, except for material misstatements
contained in the application (including any application upon
reinstatement), after it has been in force during the Insured's lifetime
for a period of two years from the Policy Date, the reinstatement date
or effective date of the increase.
. SUICIDE EXCLUSION. The Policy limits the Death Benefit if the Insured
dies by suicide generally within two years after the Policy Date or
effective date of the increase. In this instance, our liability will be
limited to the total premiums paid less any Partial Surrenders and any
Loan Balance.
. REINSTATEMENT. The Policy may be reinstated at any time within five
years after the Policy has terminated at the end of the grace period. To
reinstate the Policy, the Owner must: (1) submit an application for
reinstatement; (2) provide evidence of insurability satisfactory to us;
(3) pay or agree to reinstatement of any Loan Balance; and (4) pay the
premium required to reinstate the Policy. The reinstatement date for the
Policy will be the Monthly Anniversary on or following the day we
approve the application for reinstatement. See the Policy for additional
information.
. MISSTATEMENT OF AGE OR SEX. The Death Benefit will be adjusted if the
Insured's age or sex has been misstated in the application. The benefits
paid will be those which the last monthly cost of insurance charge would
have provided at the correct age and sex.
. PAID-UP INSURANCE OPTION. If premium payments cease, insurance under the
Policy and any supplemental benefits provided by Rider will continue as
provided under the grace period provisions described under "Premiums to
Prevent Termination." The Policy will not continue beyond the Maturity
Date. Any supplemental benefits added by Rider will not continue beyond
the termination date described in the Rider.
ASSIGNMENT AND CHANGE OF OWNER. You may assign the Policy subject to its
terms. We will not be deemed to know of an assignment unless we receive a
written copy of it at our Administrative Office. We assume no responsibility
for the validity or effect of any assignment. In certain circumstances, an
assignment may be a taxable event. See "Tax Considerations" below. You may
change the Owner of the Policy by sending a written request to us while the
Insured is alive and the Policy is in force. The change will take effect the
date you sign the request, but the change will not affect any action we have
taken before we receive the request. A change of Owner may have tax
consequences. See "Tax Considerations." A change of Owner does not change the
Beneficiary designation. See "Changing the Beneficiary." Any such assignment
or change must be in a written form acceptable to us.
SUPPLEMENTAL BENEFITS. Your Policy may have supplemental benefits which are
attached to your Policy by Rider. A charge will be deducted monthly from your
Policy Value for certain supplemental benefits. Each supplemental benefit is
subject to its own requirements as to eligibility and
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cost. You may cancel supplemental benefits at any time. More details will be
included in your Policy if you choose any of these benefits. From time to
time, we may make available supplemental benefits other than those listed
below. Contact your agent or the Administrative Office for a complete list of
the supplemental benefits available.
. ACCELERATED DEATH BENEFIT RIDER. This benefit allows acceleration of up
to 75% of the Death Benefit (in a lump sum only) if the Insured is
diagnosed as having a terminal illness expected to cause death within 12
months (unless a shorter period is required by state law). There is no
charge for this Rider prior to the time the accelerated benefits are
paid.
. ACCIDENTAL DEATH BENEFIT RIDER. This benefit will be paid if the Insured
dies as a result of an accident before age 70.
. CHILDREN'S TERM INSURANCE RIDER. This benefit allows you to add Death
Benefit coverage for your children.
. ADDITIONAL INSURED TERM INSURANCE RIDER. This benefit allows you to
provide for Death Benefits on up to 5 family members (spouse and/or
children).
. DISABILITY WAIVER OF MONTHLY DEDUCTION RIDER. The benefit provides for
waiver of Monthly Deductions after the Insured has been totally disabled
for six months if disability commences prior to age 60, and continuing
as long as total disability continues.
CHARGES AND DEDUCTIONS
United Investors deducts the charges described below. Certain of the charges
depend on a number of variables, and are illustrated in the hypothetical
illustrations depicted in this prospectus. The charges are for the services
and benefits provided, costs and expenses incurred and risks assumed by United
Investors under or in connection with the Policies. United Investors intends
to make a profit from these charges. Services and benefits provided by United
Investors include:
(1) the death benefits, cash and loan benefits provided by the Policy;
(2) investment options, including Net Premium allocations, dollar-cost
averaging programs;
(3) administration of various elective options under the Policy; and
(4) the distribution of various reports to Owners.
Costs and expenses incurred by United Investors include:
(1) those associated with underwriting applications and changes in Face
Amount and Riders;
(2) various overhead and other expenses associated with providing the
services and benefits provided by the Policy;
(3) sales and marketing expenses; and
(4) other costs of doing business, such as federal, state and local
premium and other taxes and fees.
Risks assumed by United Investors include the risks that Insureds may live
for a shorter period of time than estimated resulting in the payment of
greater Death Benefits than expected, and that the costs of providing the
services and benefits under the Policies will exceed the charges deducted.
PREMIUM EXPENSE CHARGE. United Investors deducts a 3.5% charge from each
premium before allocating the resulting Net Premium to the Policy Value. This
charge is deducted for state premium taxes and federal income tax treatment of
deferred acquisition costs.
MORTALITY AND EXPENSE RISK CHARGE. United Investors currently deducts a
daily charge from assets in the Investment Divisions attributable to the
Policies at an effective annual rate of 0.90% of
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Variable Account assets during the first 10 Policy Years, and at an effective
annual rate of 0.70% thereafter. The maximum mortality and expense risk charge
is 0.90% of Variable Account assets for all Policy Years. The mortality and
expense risk charge does not apply to Fixed Account assets. Profit from this
charge may be used for any purpose, including distribution expenses.
MONTHLY DEDUCTION. United Investors deducts the Monthly Deduction on the
Policy Date and on each Monthly Anniversary from Policy Value in the Variable
Account and the Fixed Account on a pro rata basis. The Monthly Deduction for
each Policy consists of:
(1) the cost of insurance charge discussed below;
(2) a current monthly administrative charge of $5.00 (which may increase to
a maximum charge of $7.50 per month);
(3) the Guaranteed Death Benefit Charge ($0.01 per $1,000 of Face Amount)
as long as the Death Benefit Guarantee remains in effect; and
(4) charges for any supplemental benefits added by Riders to the Policy
(see "Supplemental Benefits").
SURRENDER CHARGE. If the Policy is surrendered prior to the end of the 16th
Policy Year or the end of the 16th year following an increase in Face Amount,
United Investors will deduct a surrender charge based on the Face Amount at
issue, or increase, as applicable. The surrender charge will be deducted
before any surrender proceeds are paid. A pro rata portion of the Surrender
Charge will also be deducted for any Face Amount decreases. The surrender
charge varies based on the Insured's age on the Policy Date, or Attained Age
at the time of an increase, and is calculated as an amount per $1,000 of the
Face Amount. For each age the surrender charge remains level for the first
five Policy Years (or the first five years after a Face Amount increase) and
declines each year thereafter until it reaches zero at the end of the 16th
Policy Year (or at the end of the 16th year after an increase in Face Amount).
During the first five Policy Years (or first five years after a Face Amount
increase) the surrender charge per $1,000 of Face Amount is as follows for the
selected ages below:
<TABLE>
<CAPTION>
ISSUE AGE CHARGE PER $1,000 OF FACE AMOUNT
--------- --------------------------------
<S> <C>
25.......................................... $ 6.00
35.......................................... $ 7.00
45.......................................... $ 8.75
50.......................................... $10.00
55.......................................... $11.50
65.......................................... $16.75
75.......................................... $26.00
</TABLE>
For example, if a 50-year old purchases a Policy with a $100,000 Face Amount
and completely surrenders it within five years, the surrender charge would be
$1,000. See Appendix A for a complete list of applicable surrender charges.
Although the surrender charges increase with the Insured's issue age, the
surrender charge as a percentage of premiums could actually decrease as the
Insured's issue age increases. This occurs because the premiums required for a
specified Face Amount are higher for Insureds with older issue ages than for
Insureds with younger issue ages, so for the same premium an older Insured is
likely to have a lower Face Amount. Therefore the surrender charge for
Insureds with older issue ages could actually represent a lower portion of the
premiums than it does for Insureds with younger issue ages.
PARTIAL SURRENDER CHARGE. A Partial Surrender charge equal to the lesser of
$25 or 2% of the Partial Surrender amount, plus a portion of the surrender
charge will apply to each Partial Surrender. This charge will be deducted from
your Policy Value along with the Partial Surrender amount (see "Partial
Surrenders").
17
<PAGE>
OTHER CHARGES. For a description of the investment advisory fees and other
expenses incurred by the Portfolios, see the Diagram of Policy on page 4 and
the accompanying prospectus for TMK/United.
COST OF INSURANCE. The cost of insurance is the primary charge for the Death
Benefit provided by your Policy. The cost of insurance charge depends on a
number of variables that cause the charge to vary from Policy to Policy and
from Monthly Anniversary to Monthly Anniversary. The cost of insurance charge
is equal to (a) multiplied by the result of (b) minus (c) where:
(a) is the cost of insurance rate divided by 1,000;
(b) is the Death Benefit at the beginning of the Policy Month divided by
1.0032737; and
(c) is the Policy Value at the beginning of the Policy Month.
The Policy Value used in this calculation is the Policy Value before
deduction of the Monthly Cost of Insurance Charge and Cost of Insurance for
any Disability Waiver of Monthly Deductions Rider, but after deductions for
any other riders and charges.
The cost of insurance rate is the rate applied to the insurance under the
Policy to determine the monthly cost of insurance charge. The cost of
insurance rate is based on the Insured's Attained Age, sex and applicable risk
class. We currently place Insureds in the following risk classes (available
for male or female) when we issue the Policy, based on our underwriting:
Preferred, Standard Non-tobacco, Standard Tobacco, Substandard Non-tobacco,
and Substandard Tobacco. The original risk class applies to the initial Face
Amount. If an increase in Face Amount is approved, a different risk class may
apply to the increase, based on the Insured's circumstances at the time of the
increase. If you have selected Death Benefit Option A, and if there have been
any increases in the Face Amount, the Policy Value will be considered a part
of the initial Face Amount. If the Policy Value exceeds the initial Face
Amount, the excess will be considered part of the increases in Face Amount in
the order of the increases.
We guarantee that the cost of insurance rates used to calculate the monthly
cost of insurance charge will not exceed the maximum cost of insurance rates
set forth in the Policy. The maximum cost of insurance rates are based on the
1980 Commissioners Standard Ordinary Mortality Tables, Male or Female, Smoker
or Non-Smoker, Age Last Birthday, or a multiple thereof for substandard
classes. See "Hypothetical Illustrations" for examples showing the effects of
the cost of insurance charge.
REDUCTION IN CHARGES FOR CERTAIN GROUPS. United Investors may waive or
reduce the Current Administrative Charge, the Guaranteed Death Benefit Charge,
the Premium Expense Charge, and the Surrender Charges on Policies that have
been sold to: (a) employees or sales representatives of United Investors or
its affiliates; or (b) individuals or groups of individuals where the sale of
the Policy results in savings of administrative or commission expenses.
POLICY VALUES
POLICY VALUE. The Policy Value serves as a starting point for calculating
certain values under a Policy. It is the sum of the Variable Account Value and
the Fixed Account Value credited to the Policy. The Policy Value is determined
first on the Policy Date and thereafter on each Valuation Date. On the
Maturity Date, the proceeds payable under a Policy are equal to the Policy
Value less any Loan Balance. The Policy Value will vary to reflect the
performance of the Investment Divisions to which amounts have been allocated,
interest credited on amounts allocated to the Fixed Account and Loan Balance,
charges, transfers, Partial Surrenders, and Policy Loans (including loan
repayments). It may be more or less than premiums paid.
18
<PAGE>
CASH SURRENDER VALUE. The Cash Surrender Value is the Policy Value reduced
by any surrender charge.
NET CASH SURRENDER VALUE. The Net Cash Surrender Value is the Cash Surrender
Value reduced by any Loan Balance. You will receive only the Net Cash
Surrender Value if you surrender your Policy.
VARIABLE ACCOUNT VALUE. The Variable Account Value is the sum of the values
of the Investment Divisions under the Policy. On the Policy Date, the value of
the Investment Divisions is equal to the initial Net Premium allocated to the
Investment Divisions of the Variable Account plus any accrued interest from
the date of receipt of the payment to the Policy Date minus the portion of the
first month's Monthly Deduction allocated to the Investment Division.
On any Valuation Date thereafter, the value of each Investment Division is
equal to:
1.The value of the Investment Division on the preceding Valuation Date,
multiplied by the appropriate Net Investment Factor (described
below) since the previous Valuation Date; plus
2.The sum of all Net Premiums allocated to the Investment Division
since the previous Valuation Date; plus
3.The sum of all loan repayments allocated to the Investment Division
since the previous Valuation Date; plus
4.The amount of any transfers from other Investment Divisions or from
the Fixed Account to the Investment Division since the previous
Valuation Date; minus
5.The amount of any transfers to other Investment Divisions or to the
Fixed Account, including amounts transferred to secure a Policy
Loan, from the Investment Division since the previous Valuation
Date; minus
6.The portion of any Partial Surrenders (including surrender charges)
or charges for any Face Amount decreases allocated to the Investment
Division since the previous Valuation Date; minus
7.The portion of the Monthly Deduction allocated to the Investment
Division since the previous Valuation Date.
UNIT VALUES. When you allocate an amount to an Investment Division, either
by Net Premium allocation, transfer of Policy Value or repayment of a Policy
Loan, your Policy is credited with units in that Investment Division. The
number of units is determined by dividing the amount allocated, transferred or
repaid to the Investment Division by the Investment Division's unit value for
the Valuation Date when the allocation, transfer or repayment is effected. The
number of Investment Division units credited to a Policy will decrease when
the allocated portion of the Monthly Deduction is taken from the Investment
Division, a Policy Loan is taken from the Investment Division or an amount is
transferred from the Investment Division. The number of Investment Division
units may also decrease when a partial or full surrender occurs or if the Face
Amount is decreased. An Investment Division's unit value is an index United
Investors uses to measure the changes in investment results. The unit value
for each Investment Division varies to reflect the investment experience of
the underlying Portfolio, and may increase or decrease from one Valuation Date
to the next. The unit value for each Investment Division was arbitrarily set
at $1.00 when the Investment Division was established. For each Valuation
Period after the date of establishment, the unit value is determined by
multiplying the unit value for an Investment Division for the prior Valuation
Period by the net investment factor for the Investment Division for the
current valuation period.
NET INVESTMENT FACTOR. The net investment factor is an index used to measure
the investment performance of an Investment Division from one Valuation Period
to the next. The net investment
19
<PAGE>
factor for any Investment Division for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result, where:
(a) is the result of:
(1) the net asset value per share of the Portfolio shares held in
the Investment Division determined at the end of the current
Valuation Period; plus
(2) the per share amount of any dividend or capital gain
distributions on the Portfolio shares held in the Investment
Division, if the "ex-dividend" date occurs during the current
Valuation Period; plus or minus
(3) a charge or credit for any taxes reserved for the current
Valuation Period which we determine to have resulted from the
investment operations of the Investment Division;
(b) is the result of:
(1) the net asset value per share of the Portfolio shares held in
the Investment Division, determined at the end of the last prior
Valuation Period; plus or minus
(2) the charge or credit for any taxes reserved for the last prior
Valuation Period; and
(c) is a deduction for the current mortality and expense risk charge.
FIXED ACCOUNT VALUE. On the Policy Date, the Fixed Account Value is equal to
the initial Net Premium allocated to the Fixed Account plus any accrued
interest from the date of receipt of the payment to the Policy Date minus the
portion of the first month's Monthly Deduction allocated to the Fixed Account.
On any Monthly Anniversary thereafter, the Fixed Account Value is equal to:
1. The Fixed Account Value on the preceding Monthly Anniversary; plus
2. The sum of all Net Premiums allocated to the Fixed Account since the
previous Monthly Anniversary; plus
3. The sum of all Policy Loan repayments allocated to the Fixed Account
since the previous Monthly Anniversary; plus
4. Total interest credited to the Fixed Account since the previous
Monthly Anniversary; plus
5. The amount of any transfers from the Variable Account to the Fixed
Account, including amounts transferred to secure Policy Loans, since
the previous Monthly Anniversary; minus
6. The amount of any transfers from the Fixed Account to the Variable
Account since the previous Monthly Anniversary; minus
7. The portion of any Partial Surrenders (including surrender charges)
or charges for any Face Amount decreases allocated to the Fixed
Account since the previous Monthly Anniversary; minus
8. The portion of the Monthly Deduction allocated to the Fixed Account
since the previous Monthly Anniversary.
DEATH BENEFITS
If the Insured dies while the Policy is in force and prior to the Maturity
Date, we will pay the Death Benefit upon receipt at our Administrative Office
of satisfactory proof of the Insured's death. See "Requesting Payment." The
Death Benefit will be paid to the Beneficiary.
AMOUNT OF DEATH BENEFIT PAYABLE. The amount of Death Benefit payable is the
amount of insurance determined under the Death Benefit Option in effect on the
date of the Insured's death, plus any supplemental benefits provided by
Riders, minus any Loan Balance on that date and, if the date
20
<PAGE>
of death occurred during a grace period, minus the past due Monthly
Deductions. Under certain circumstances, the amount of the Death Benefit may
be further adjusted. See "Incontestability" and "Misstatement of Age or Sex."
DEATH BENEFIT OPTIONS. Under Option A, the Death Benefit is the greater of
(1) the Face Amount at the beginning of the Policy Month when the death
occurs, or (2) the Policy Value on the date of death multiplied by the
applicable factor from the table of Death Benefit Factors below. Under Option
B, the Death Benefit is the greater of (1) the Face Amount at the beginning of
the Policy Month when the death occurs plus the Policy Value on the date of
death, or (2) the Policy Value on the date of death multiplied by the
applicable factor from the table of Death Benefit Factors below. The factor is
2.50 up to Attained Age 40 and declines thereafter as the Insured's Attained
Age increases. The Death Benefit Factors are based on current requirements
under the Internal Revenue Code. We reserve the right to change the table if
the Death Benefit Factors currently in effect become inconsistent with any
federal income tax laws and/or regulations.
<TABLE>
<CAPTION>
DEATH BENEFIT FACTORS
- ---------------------------------------------------------------------------------------
ATTAINED AGE FACTOR ATTAINED AGE FACTOR ATTAINED AGE FACTOR
- ------------ ------ ------------ ------ ------------ ------
<S> <C> <C> <C> <C> <C>
0-40 2.50 54 1.57 68 1.17
41 2.43 55 1.50 69 1.16
42 2.36 56 1.46 70 1.15
43 2.29 57 1.42 71 1.13
44 2.22 58 1.38 72 1.11
45 2.15 59 1.34 73 1.09
46 2.09 60 1.30 74 1.07
47 2.03 61 1.28 75-90 1.05
48 1.97 62 1.26 91 1.04
49 1.91 63 1.24 92 1.03
50 1.85 64 1.22 93 1.02
51 1.78 65 1.20 94 1.01
52 1.71 66 1.19 95+ 1.00
53 1.64 67 1.18
</TABLE>
Under Option A, the Death Benefit ordinarily will not change. Under Option
B, the Death Benefit will vary directly with the investment performance of the
Policy Value. To see how and when investment performance may begin to affect
the Death Benefit, please see the hypothetical illustrations.
CHANGING THE DEATH BENEFIT OPTION. You select the Death Benefit Option when
you apply for the Policy. After the Policy has been in force at least one
year, you may change the Death Benefit Option on your Policy subject to the
following rules:
(1) each change must be submitted by written request received by our
Administrative Office;
(2) once the Death Benefit Option has been changed, it cannot be changed
again for one year;
(3) if Death Benefit Option A is changed to Option B, the total Death
Benefit will remain the same, and the Face Amount will be decreased by
an amount equal to the Policy Value on the date of the change;
(4) if Death Benefit Option B is changed to Option A, the total Death
Benefit will remain the same, and the Face Amount will be increased by
an amount equal to the Policy Value on the date of the change. The risk
class for the last Face Amount portion to go into effect which is still
in force will apply to the Face Amount increase.
The effective date of the change will be the Monthly Anniversary on or
following the date when we approve the request for the change. We will send
you revised Policy Data pages reflecting the new Death Benefit Option and the
effective date of the change. Changing the Death Benefit Option may have tax
consequences. See "Tax Considerations."
21
<PAGE>
CHANGING THE FACE AMOUNT. You select the Face Amount when you apply for the
Policy. The minimum Face Amount for the Policy is $50,000. You may change the
Face Amount on any Monthly Anniversary after the Policy has been in force at
least one year, subject to the following requirements. Once the Face Amount
has been changed, it cannot be changed again for the next 12 months. No change
will be permitted that may result in your Policy being disqualified as a life
insurance contract under Section 7702 of the Code. Changing the Face Amount of
the Policy may have tax consequences. See "Tax Considerations" below.
To increase the Face Amount, you must: submit an application for the
increase; submit proof satisfactory to us that the insured is an insurable
risk; and pay any additional premium that is required. The Face Amount cannot
be increased after the Insured reaches age 75. Each Face Amount increase must
be at least $25,000. A Face Amount increase will take effect on the Monthly
Anniversary on or following the day we approve the application for the
increase.
The risk class that applies for any Face Amount increase may be different
from the risk class that applies for the initial Face Amount. Upon an increase
in Face Amount, the minimum monthly premium will be increased, and additional
surrender charges equal to the Face Amount increase (in $1,000s) multiplied by
the surrender charge factors listed above under "Surrender Charge" will apply
through the end of the 16th year following the increase. If the Face Amount is
increased, the cost of insurance will also increase due to the increased Death
Benefit.
You may decrease the Face Amount by submitting a written request. The Face
Amount may not be decreased below the Policy's minimum Face Amount. The
Minimum Monthly Premium for your Policy will be reduced to reflect the
decrease. Any decrease will take effect on the later of: (1) the Monthly
Anniversary on or following the day we receive the request; or (2) the Monthly
Anniversary one year after the date of the last change in Face Amount. A Face
Amount decrease will be used to reduce any previous Face Amount increases then
in effect starting with the latest increase and continuing in the reverse
order in which the increases were made. If any portion of the decrease is left
after all Face Amount increases have been reduced, it will be used to reduce
the initial Face Amount.
We will deduct a charge from the Policy Value each time the Face Amount is
decreased. The amount of this charge is the lesser of: (1) the Reduction
Percentage multiplied by the surrender charge for each Face Amount portion
reduced; or (2) the Policy Value when the decrease is made. The Reduction
Percentage for each Face Amount portion reduced is the amount of the Face
Amount decrease divided by the Face Amount in effect before the decrease. The
charge will be deducted for each Face Amount portion reduced.
After the Face Amount is decreased, future surrender charges for each Face
Amount portion for which a charge is deducted will be reduced by the surrender
charges shown for that Face Amount portion, multiplied by the Reduction
Percentage.
EFFECT OF PARTIAL SURRENDERS ON THE DEATH BENEFIT. A Partial Surrender will
affect your Death Benefit in the following respects. If Death Benefit Option A
is in effect, the Face Amount will be reduced by the Partial Surrender amount.
If the Face Amount reflects increases in the initial Face Amount, any Partial
Surrender will reduce first the most recent increase, and then the next most
recent increase, if any, in reverse order, and finally the initial Face
Amount. If Death Benefit Option B is in effect, the total Death Benefit is
also reduced by the Partial Surrender amount, but the Face Amount is not
affected.
CHANGING THE BENEFICIARY. You designate the Beneficiary(ies) when you apply
for the Policy. You may change the designated Beneficiary by submitting a
satisfactory written request to us. The change will take effect on the date
the request was signed, but it will not apply to payments we make before we
accept the written request. If the Insured dies and there is no surviving
Beneficiary, the Insured's estate will be the Beneficiary.
22
<PAGE>
HYPOTHETICAL ILLUSTRATIONS
The following illustrations show how certain values under a sample Policy
change with assumed investment performance over an extended period of time. In
particular, they illustrate how Policy Values, Net Cash Surrender Values and
Death Benefits under a Policy covering an Insured of a given Attained Age on
the Policy Date, would vary over time if planned premiums were paid annually
and the return on the assets in the Investment Divisions were a uniform gross
annual rate of 0%, 6% or 12%, before deduction of any fees and charges,
including Portfolio fees and charges. The tables also show planned premiums
accumulated at 5% interest. The values under a Policy would be different from
those shown if the returns averaged 0%, 6% or 12% but fluctuated over and
under those averages throughout the years shown. The hypothetical investment
rates of return are illustrative only and should not be deemed a
representation of past or future investment rates of return. Actual rates of
return for a particular Policy may be more or less than the hypothetical
investment rates of return used in the illustrations.
The illustrations assume an average annual expense ratio of 0.77% of the
average daily net assets of the Portfolios available under the Policies, based
on the expense ratios of each of the Portfolios for the last fiscal year of
operations. For information on Portfolio expenses, see the prospectus for the
Portfolios accompanying this prospectus. The current illustrations also
reflect the 0.90% mortality and expense risk charge to the Variable Account
during the first 10 Policy Years, and 0.70% thereafter. The guaranteed
illustrations reflect the 0.90% maximum mortality and expense risk charge and
the $7.50 maximum monthly administrative charge for all Policy Years. After
deduction of estimated Portfolio expenses and the current mortality and
expense risk charge, the illustrated gross annual investment rates of return
of 0%, 6% and 12% would correspond to approximate net annual rates of return
for the Investment Divisions of -1.67%, 4.33% and 10.33%, respectively in
Policy Years 1 through 10 and -1.47%, 4.53%, and 10.53%, respectively
thereafter.
The illustrations also reflect the deduction of the 3.5% premium expense
charge and the Monthly Deduction for the hypothetical Insured. Our current
charges and the higher guaranteed charges we have the contractual right to
charge are reflected in separate illustrations on each of the following pages.
All the illustrations reflect the fact that no charges for Federal or state
income taxes are currently made against the Variable Account and assume no
Loan Balance or charges for supplemental benefits.
Upon request, we will furnish a comparable illustration based upon the
proposed Insured's individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated in the following
tables.
23
<PAGE>
MALE ISSUE AGE 35, STANDARD NON-TOBACCO
$1,000 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION A
CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFITS POLICY VALUES SURRENDER VALUES
YR+INT ----------------------- --------------------- ---------------------
@ 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ----------- ------- ------- ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 100,000 100,000 100,000 708 758 808 8 58 108
2 2,153 100,000 100,000 100,000 1,397 1,541 1,692 697 841 992
3 3,310 100,000 100,000 100,000 2,063 2,348 2,657 1,363 1,648 1,957
4 4,526 100,000 100,000 100,000 2,708 3,179 3,711 2,008 2,479 3,011
5 5,802 100,000 100,000 100,000 3,331 4,034 4,863 2,631 3,334 4,163
6 7,142 100,000 100,000 100,000 3,928 4,912 6,119 3,292 4,276 5,483
7 8,549 100,000 100,000 100,000 4,505 5,818 7,496 3,932 5,245 6,923
8 10,027 100,000 100,000 100,000 5,063 6,755 9,009 4,554 6,246 8,500
9 11,578 100,000 100,000 100,000 5,609 7,730 10,677 5,164 7,285 10,232
10 13,207 100,000 100,000 100,000 6,142 8,746 12,518 5,760 8,364 12,136
11 14,917 100,000 100,000 100,000 6,669 9,815 14,569 6,351 9,497 14,251
12 16,713 100,000 100,000 100,000 7,176 10,921 16,829 6,921 10,666 16,574
13 18,599 100,000 100,000 100,000 7,662 12,067 19,320 7,471 11,876 19,129
14 20,579 100,000 100,000 100,000 8,130 13,256 22,071 8,003 13,129 21,944
15 22,657 100,000 100,000 100,000 8,587 14,498 25,117 8,523 14,434 25,053
16 24,840 100,000 100,000 100,000 9,024 15,786 28,483 9,024 15,786 28,483
17 27,132 100,000 100,000 100,000 9,423 17,106 32,189 9,423 17,106 32,189
18 29,539 100,000 100,000 100,000 9,787 18,461 36,276 9,787 18,461 36,276
19 32,066 100,000 100,000 100,000 10,108 19,848 40,786 10,108 19,848 40,786
20 34,719 100,000 100,000 100,000 10,384 21,267 45,765 10,384 21,267 45,765
21 37,505 100,000 100,000 100,000 10,611 22,716 51,269 10,611 22,716 51,269
22 40,430 100,000 100,000 100,000 10,786 24,195 57,360 10,786 24,195 57,360
23 43,502 100,000 100,000 100,000 10,895 25,695 64,105 10,895 25,695 64,105
24 46,727 100,000 100,000 100,000 10,941 27,220 71,588 10,941 27,220 71,588
25 50,113 100,000 100,000 107,039 10,905 28,759 79,880 10,905 28,759 79,880
26 53,669 100,000 100,000 115,739 10,788 30,316 89,030 10,788 30,316 89,030
27 57,403 100,000 100,000 126,852 10,571 31,878 99,103 10,571 31,878 99,103
28 61,323 100,000 100,000 138,846 10,256 33,452 110,196 10,256 33,452 110,196
29 65,439 100,000 100,000 151,787 9,820 35,026 122,409 9,820 35,026 122,409
30 69,761 100,000 100,000 165,745 9,250 36,594 135,857 9,250 36,594 135,857
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate 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 and the investment experience of the Portfolios. The Death
Benefit, Policy Value and Surrender Value for a Policy would be different from
those shown if the actual gross annual rates of return averaged 0%, 6% or 12%
over a period of years, but also fluctuated above or below those averages for
individual Policy Years. They would also be different if any Policy Loans or
Partial Surrenders were made. No representations can be made by United
Investors Life Insurance Company or the Variable Account or the Portfolios
that these hypothetical rates of return can be achieved for any one year or
sustained over a period of time.
24
<PAGE>
MALE ISSUE AGE 50, STANDARD NON-TOBACCO
$2,500 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION A
CURRENT CHARGES
<TABLE>
<CAPTION>
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
PREMIUMS ----------------------- ---------------------- ----------------------
YR+INT @ 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------- ------- ------- ------- ------ ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 100,000 100,000 100,000 1,844 1,971 2,100 844 971 1,100
2 5,381 100,000 100,000 100,000 3,620 3,992 4,380 2,620 2,992 3,380
3 8,275 100,000 100,000 100,000 5,358 6,091 6,888 4,358 5,091 5,883
4 11,314 100,000 100,000 100,000 7,041 8,259 9,636 6,041 7,259 8,636
5 14,505 100,000 100,000 100,000 8,652 10,479 12,630 7,652 9,479 11,630
6 17,855 100,000 100,000 100,000 10,209 12,771 15,915 9,300 11,862 15,006
7 21,373 100,000 100,000 100,000 11,694 15,124 19,510 10,876 14,306 18,692
8 25,066 100,000 100,000 100,000 13,098 17,530 23,442 12,371 16,803 22,715
9 28,945 100,000 100,000 100,000 14,421 19,995 27,753 13,785 19,359 27,117
10 33,017 100,000 100,000 100,000 15,658 22,517 32,485 15,113 21,972 31,940
11 37,293 100,000 100,000 100,000 16,818 25,126 37,744 16,363 24,671 37,289
12 41,782 100,000 100,000 100,000 17,886 27,804 43,554 17,522 27,440 43,190
13 46,497 100,000 100,000 100,000 18,909 30,600 50,026 18,636 30,327 49,753
14 51,446 100,000 100,000 100,000 19,911 33,543 57,261 19,729 33,361 57,079
15 56,644 100,000 100,000 100,000 20,878 36,633 65,346 20,787 36,542 65,255
16 62,101 100,000 100,000 100,000 21,651 39,753 74,333 21,651 39,753 74,333
17 67,831 100,000 100,000 100,425 22,284 42,959 84,391 22,284 42,959 84,391
18 73,848 100,000 100,000 112,744 22,780 46,270 95,546 22,780 46,270 95,546
19 80,165 100,000 100,000 126,146 23,127 49,694 107,817 23,127 49,694 107,817
20 86,798 100,000 100,000 140,721 23,289 53,232 121,311 23,289 53,232 121,311
21 93,763 100,000 100,000 156,577 23,269 56,911 136,154 23,269 56,911 136,154
22 101,076 100,000 100,000 172,343 23,013 60,733 152,516 23,013 60,733 152,516
23 108,755 100,000 100,000 189,343 22,518 64,734 170,580 22,518 64,734 170,580
24 116,818 100,000 100,000 207,694 21,756 68,945 190,545 21,756 68,945 190,545
25 125,284 100,000 100,000 227,523 20,652 73,390 212,638 20,652 73,390 212,638
26 134,173 100,000 100,000 248,994 19,186 78,128 237,137 19,186 78,128 237,137
27 143,506 100,000 100,000 277,300 17,253 83,209 264,096 17,253 83,209 264,096
28 153,307 100,000 100,000 308,439 14,815 88,722 293,752 14,815 88,722 293,752
29 163,597 100,000 100,000 342,667 11,722 94,764 326,349 11,722 94,764 326,349
30 174,402 100,000 106,257 380,277 7,910 101,197 362,169 7,910 101,197 362,169
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate 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 and the investment experience of the Portfolios. The Death
Benefit, Policy Value and Surrender Value for a Policy would be different from
those shown if the actual gross annual rates of return averaged 0%, 6% or 12%
over a period of years, but also fluctuated above or below those averages for
individual Policy Years. They would also be different if any Policy Loans or
Partial Surrenders were made. No representations can be made by United
Investors Life Insurance Company or the Variable Account or the Portfolios
that these hypothetical rates of return can be achieved for any one year or
sustained over a period of time.
25
<PAGE>
MALE ISSUE AGE 35, STANDARD NON-TOBACCO
$1,000 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION A
GUARANTEED CHARGES
<TABLE>
<CAPTION>
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
PREMIUMS ----------------------- -------------------- --------------------
YR+INT @ 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------ ------- ------- ------- ----- ------ ------- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 100,000 100,000 100,000 678 727 777 0 27 77
2 2,153 100,000 100,000 100,000 1,337 1,478 1,626 637 778 926
3 3,310 100,000 100,000 100,000 1,975 2,251 2,552 1,275 1,551 1,852
4 4,526 100,000 100,000 100,000 2,591 3,047 3,562 1,891 2,347 2,862
5 5,802 100,000 100,000 100,000 3,185 3,864 4,665 2,485 3,164 3,965
6 7,142 100,000 100,000 100,000 3,753 4,703 5,868 3,117 4,067 5,232
7 8,549 100,000 100,000 100,000 4,297 5,562 7,180 3,724 4,989 6,607
8 10,027 100,000 100,000 100,000 4,815 6,443 8,614 4,306 5,934 8,105
9 11,578 100,000 100,000 100,000 5,306 7,344 10,180 4,861 6,899 9,735
10 13,207 100,000 100,000 100,000 5,768 8,266 11,891 5,386 7,884 11,509
11 14,917 100,000 100,000 100,000 6,201 9,206 13,761 5,883 8,888 13,443
12 16,713 100,000 100,000 100,000 6,601 10,165 15,807 6,346 9,910 15,552
13 18,599 100,000 100,000 100,000 6,969 11,142 18,046 6,778 10,951 17,855
14 20,579 100,000 100,000 100,000 7,302 12,135 20,499 7,175 12,008 20,372
15 22,657 100,000 100,000 100,000 7,598 13,144 23,187 7,534 13,080 23,123
16 24,840 100,000 100,000 100,000 7,853 14,165 26,134 7,853 14,165 26,134
17 27,132 100,000 100,000 100,000 8,062 15,195 29,366 8,062 15,195 29,366
18 29,539 100,000 100,000 100,000 8,220 16,230 32,914 8,220 16,230 32,914
19 32,066 100,000 100,000 100,000 8,320 17,263 36,809 8,320 17,263 36,809
20 34,719 100,000 100,000 100,000 8,356 18,290 41,092 8,356 18,290 41,092
21 37,505 100,000 100,000 100,000 8,322 19,305 45,807 8,322 19,305 45,807
22 40,430 100,000 100,000 100,000 8,211 20,304 51,006 8,211 20,304 51,006
23 43,502 100,000 100,000 100,000 8,020 21,284 56,751 8,020 21,284 56,751
24 46,727 100,000 100,000 100,000 7,740 22,236 63,111 7,740 22,236 63,111
25 50,113 100,000 100,000 100,000 7,358 23,153 70,166 7,358 23,153 70,166
26 53,669 100,000 100,000 101,414 6,864 24,024 78,011 6,864 24,024 78,011
27 57,403 100,000 100,000 110,941 6,242 24,836 86,672 6,242 24,836 86,672
28 61,323 100,000 100,000 121,185 5,471 25,574 96,179 5,471 25,574 96,179
29 65,439 100,000 100,000 132,198 4,529 26,218 106,611 4,529 26,218 106,611
30 69,761 100,000 100,000 144,038 3,392 26,749 118,064 3,392 26,749 118,064
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate 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 and the investment experience of the Portfolios. The Death
Benefit, Policy Value and Surrender Value for a Policy would be different from
those shown if the actual gross annual rates of return averaged 0%, 6% or 12%
over a period of years, but also fluctuated above or below those averages for
individual Policy Years. They would also be different if any Policy Loans or
Partial Surrenders were made. No representations can be made by United
Investors Life Insurance Company or the Variable Account or the Portfolios
that these hypothetical rates of return can be achieved for any one year or
sustained over a period of time.
26
<PAGE>
MALE ISSUE AGE 50, STANDARD NON-TOBACCO
$2,500 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION A
GUARANTEED CHARGES
<TABLE>
<CAPTION>
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
PREMIUMS ----------------------- --------------------- ---------------------
YR+INT @ 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------- ------- ------- ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 100,000 100,000 100,000 1,774 1,900 2,025 774 900 1,025
2 5,381 100,000 100,000 100,000 3,482 3,845 4,224 2,482 2,845 3,224
3 8,275 100,000 100,000 100,000 5,121 5,834 6,610 4,121 4,834 5,610
4 11,314 100,000 100,000 100,000 6,685 7,864 9,199 5,685 6,864 8,199
5 14,505 100,000 100,000 100,000 8,170 9,932 12,010 7,170 8,932 11,010
6 17,855 100,000 100,000 100,000 9,573 12,036 15,065 8,664 11,127 14,156
7 21,373 100,000 100,000 100,000 10,889 14,175 18,390 10,071 13,357 17,572
8 25,066 100,000 100,000 100,000 12,117 16,350 22,017 11,390 15,623 21,290
9 28,945 100,000 100,000 100,000 13,251 18,560 25,980 12,615 17,924 25,344
10 33,017 100,000 100,000 100,000 14,285 20,799 30,318 13,740 20,254 29,773
11 37,293 100,000 100,000 100,000 15,209 23,065 35,074 14,754 22,610 34,619
12 41,782 100,000 100,000 100,000 16,014 25,354 40,301 15,650 24,990 39,937
13 46,497 100,000 100,000 100,000 16,686 27,658 46,059 16,413 27,385 45,786
14 51,446 100,000 100,000 100,000 17,208 29,970 52,420 17,026 29,788 52,238
15 56,644 100,000 100,000 100,000 17,567 32,285 59,475 17,476 32,194 59,384
16 62,101 100,000 100,000 100,000 17,757 34,611 67,345 17,757 34,611 67,345
17 67,831 100,000 100,000 100,000 17,754 36,937 76,156 17,754 36,937 76,156
18 73,848 100,000 100,000 101,564 17,541 39,262 86,071 17,541 39,262 86,071
19 80,165 100,000 100,000 113,535 17,095 41,584 97,038 17,095 41,584 97,038
20 86,798 100,000 100,000 126,506 16,384 43,900 109,057 16,384 43,900 109,057
21 93,763 100,000 100,000 140,558 15,365 46,200 122,224 15,365 46,200 122,224
22 101,076 100,000 100,000 154,475 13,980 48,472 136,704 13,980 48,472 136,704
23 108,755 100,000 100,000 169,435 12,153 50,699 152,644 12,153 50,699 152,644
24 116,818 100,000 100,000 185,542 9,796 52,869 170,222 9,796 52,869 170,222
25 125,284 100,000 100,000 202,925 6,812 54,974 189,649 6,812 54,974 189,649
26 134,173 100,000 100,000 221,738 3,099 57,012 211,180 3,099 57,012 211,180
27 143,506 *** 100,000 246,528 *** 58,989 234,789 *** 58,989 234,789
28 153,307 *** 100,000 273,698 *** 60,910 260,665 *** 60,910 260,665
29 163,597 *** 100,000 303,459 *** 62,781 289,009 *** 62,781 289,009
30 174,402 *** 100,000 336,036 *** 64,602 320,034 *** 64,602 320,034
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate 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 and the investment experience of the Portfolios. The Death
Benefit, Policy Value and Surrender Value for a Policy would be different from
those shown if the actual gross annual rates of return averaged 0%, 6% or 12%
over a period of years, but also fluctuated above or below those averages for
individual Policy Years. They would also be different if any Policy Loans or
Partial Surrenders were made. No representations can be made by United
Investors Life Insurance Company or the Variable Account or the Portfolios
that these hypothetical rates of return can be achieved for any one year or
sustained over a period of time. As indicated by the asterisks, at certain
rates of return additional premium payments will be required to prevent Policy
termination.
27
<PAGE>
MALE ISSUE AGE 35, STANDARD NON-TOBACCO
$1,000 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION B
CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFITS POLICY VALUES SURRENDER VALUES
YR+INT ----------------------- --------------------- ---------------------
@ 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ----------- ------- ------- ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 100,707 100,757 100,807 707 757 807 7 57 107
2 2,153 101,393 101,537 101,687 1,393 1,537 1,687 693 837 987
3 3,310 102,055 102,338 102,646 2,055 2,338 2,646 1,355 1,638 1,946
4 4,526 102,694 103,162 103,691 2,694 3,162 3,691 1,994 2,462 2,991
5 5,802 103,309 104,008 104,829 3,309 4,008 4,829 2,609 3,308 4,129
6 7,142 103,897 104,872 106,068 3,897 4,872 6,068 3,261 4,236 5,432
7 8,549 104,463 105,761 107,420 4,463 5,761 7,420 3,890 5,188 6,847
8 10,027 105,008 106,678 108,901 5,008 6,678 8,901 4,499 6,169 8,392
9 11,578 105,540 107,629 110,530 5,540 7,629 10,530 5,095 7,184 10,085
10 13,207 106,057 108,616 112,321 6,057 8,616 12,321 5,675 8,234 11,939
11 14,917 106,566 109,651 114,310 6,566 9,651 14,310 6,248 9,333 13,992
12 16,713 107,052 110,716 116,491 7,052 10,716 16,491 6,797 10,461 16,236
13 18,599 107,515 111,814 118,885 7,515 11,814 18,885 7,324 11,623 18,694
14 20,579 107,958 112,948 121,518 7,958 12,948 21,518 7,831 12,821 21,391
15 22,657 108,388 114,126 124,421 8,388 14,126 24,421 8,324 14,062 24,357
16 24,840 108,796 115,341 127,612 8,796 15,341 27,612 8,796 15,341 27,612
17 27,132 109,161 116,574 131,101 9,161 16,574 31,101 9,161 16,574 31,101
18 29,539 109,486 117,826 134,919 9,486 17,826 34,919 9,486 17,826 34,919
19 32,066 109,763 119,091 139,094 9,763 19,091 39,094 9,763 19,091 39,094
20 34,719 109,989 120,365 143,660 9,989 20,365 43,660 9,989 20,365 43,660
21 37,505 110,161 121,643 148,651 10,161 21,643 48,651 10,161 21,643 48,651
22 40,430 110,273 122,920 154,108 10,273 22,920 54,108 10,273 22,920 54,108
23 43,502 110,312 124,182 160,063 10,312 24,182 60,063 10,312 24,182 60,063
24 46,727 110,278 125,426 166,569 10,278 25,426 66,569 10,278 25,426 66,569
25 50,113 110,155 126,634 173,664 10,155 26,634 73,664 10,155 26,634 73,664
26 53,669 109,942 127,803 181,410 9,942 27,803 81,410 9,942 27,803 81,410
27 57,403 109,619 128,907 189,851 9,619 28,907 89,851 9,619 28,907 89,851
28 61,323 109,201 129,958 199,075 9,201 29,958 99,075 9,201 29,958 99,075
29 65,439 108,655 130,919 209,129 8,655 30,919 109,129 8,655 30,919 109,129
30 69,761 107,967 131,769 220,084 7,967 31,769 120,084 7,967 31,769 120,084
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate 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 and the investment experience of the Portfolios. The Death
Benefit, Policy Value and Surrender Value for a Policy would be different from
those shown if the actual gross annual rates of return averaged 0%, 6% or 12%
over a period of years, but also fluctuated above or below those averages for
individual Policy Years. They would also be different if any Policy Loans or
Partial Surrenders were made. No representations can be made by United
Investors Life Insurance Company or the Variable Account or the Portfolios
that these hypothetical rates of return can be achieved for any one year or
sustained over a period of time.
28
<PAGE>
MALE ISSUE AGE 50, STANDARD NON-TOBACCO
$2,500 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION B
CURRENT CHARGES
<TABLE>
<CAPTION>
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
PREMIUMS ----------------------- --------------------- ---------------------
YR+INT @ 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------- ------- ------- ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 101,834 101,961 102,088 1,834 1,961 2,088 834 961 1,088
2 5,381 103,590 103,959 104,343 3,590 3,959 4,343 2,590 2,959 3,343
3 8,275 105,297 106,022 106,809 5,297 6,022 6,809 4,297 5,022 5,809
4 11,314 106,940 108,138 109,491 6,940 8,138 9,491 5,940 7,138 8,491
5 14,505 108,495 110,283 112,387 8,495 10,283 12,387 7,495 9,283 11,387
6 17,855 109,983 112,478 115,537 9,983 12,478 15,537 9,074 11,569 14,628
7 21,373 111,382 114,703 118,946 11,382 14,703 18,946 10,564 13,885 18,128
8 25,066 112,680 116,944 122,623 12,680 16,944 22,623 11,953 16,217 21,896
9 28,945 113,877 119,199 126,596 13,877 19,199 26,596 13,241 18,563 25,960
10 33,017 114,962 121,458 130,882 14,962 21,458 30,882 14,417 20,913 30,337
11 37,293 115,938 123,733 135,544 15,938 23,733 35,544 15,483 23,278 35,089
12 41,782 116,793 126,000 140,583 16,793 26,000 40,583 16,429 25,636 40,219
13 46,497 117,593 128,326 146,108 17,593 28,326 46,108 17,320 28,053 45,835
14 51,446 118,358 130,735 152,191 18,358 30,735 52,191 18,176 30,553 52,009
15 56,644 119,072 133,210 158,870 19,072 33,210 58,870 18,981 33,119 58,779
16 62,101 119,511 135,526 165,974 19,511 35,526 65,974 19,511 35,526 65,974
17 67,831 119,762 137,758 173,632 19,762 37,758 73,632 19,762 37,758 73,632
18 73,848 119,828 139,905 181,904 19,828 39,905 81,904 19,828 39,905 81,904
19 80,165 119,693 141,944 190,837 19,693 41,944 90,837 19,693 41,944 90,837
20 86,798 119,316 143,822 200,450 19,316 43,822 100,450 19,316 43,822 100,450
21 93,763 118,703 145,538 210,822 18,703 45,538 110,822 18,703 45,538 110,822
22 101,076 117,790 147,012 221,958 17,790 47,012 121,958 17,790 47,012 121,958
23 108,755 116,586 148,239 233,945 16,586 48,239 133,945 16,586 48,239 133,945
24 116,818 115,067 149,178 246,843 15,067 49,178 146,843 15,067 49,178 146,843
25 125,284 113,156 149,733 260,662 13,156 49,733 160,662 13,156 49,733 160,662
26 134,173 110,857 149,885 275,498 10,857 49,885 175,498 10,857 49,885 175,498
27 143,506 108,076 149,512 291,353 8,076 49,512 191,353 8,076 49,512 191,353
28 153,307 104,819 148,589 308,333 4,819 48,589 208,333 4,819 48,589 208,333
29 163,597 100,975 146,970 326,434 975 46,970 226,434 975 46,970 226,434
30 174,402 *** 144,631 345,783 *** 44,631 245,783 *** 44,631 245,783
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate 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 and the investment experience of the Portfolios. The Death
Benefit, Policy Value and Surrender Value for a Policy would be different from
those shown if the actual gross annual rates of return averaged 0%, 6% or 12%
over a period of years, but also fluctuated above or below those averages for
individual Policy Years. They would also be different if any Policy Loans or
Partial Surrenders were made. No representations can be made by United
Investors Life Insurance Company or the Variable Account or the Portfolios
that these hypothetical rates of return can be achieved for any one year or
sustained over a period of time. As indicated by the asterisks, at certain
rates of return additional premium payments will be required to prevent Policy
termination.
29
<PAGE>
MALE ISSUE AGE 35, STANDARD NON-TOBACCO
$1,000 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION B
GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS DEATH BENEFITS POLICY VALUES SURRENDER VALUES
YR+INT ----------------------- ------------------- -------------------
@ 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ----------- ------- ------- ------- ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,050 100,677 100,726 100,775 677 726 775 0 26 75
2 2,153 101,333 101,474 101,621 1,333 1,474 1,621 633 774 921
3 3,310 101,967 102,242 102,541 1,967 2,242 2,541 1,267 1,542 1,841
4 4,526 102,577 103,030 103,542 2,577 3,030 3,542 1,877 2,330 2,842
5 5,802 103,164 103,838 104,633 3,164 3,838 4,633 2,464 3,138 3,933
6 7,142 103,723 104,664 105,818 3,723 4,664 5,818 3,087 4,028 5,182
7 8,549 104,256 105,507 107,107 4,256 5,507 7,107 3,683 4,934 6,534
8 10,027 104,761 106,367 108,508 4,761 6,367 8,508 4,252 5,858 7,999
9 11,578 105,236 107,243 110,033 5,236 7,243 10,033 4,791 6,798 9,588
10 13,207 105,681 108,133 111,690 5,681 8,133 11,690 5,299 7,751 11,308
11 14,917 106,093 109,035 113,492 6,093 9,035 13,492 5,775 8,717 13,174
12 16,713 106,470 109,948 115,450 6,470 9,948 15,450 6,215 9,693 15,195
13 18,599 106,811 110,869 117,578 6,811 10,869 17,578 6,620 10,678 17,387
14 20,579 107,114 111,797 119,892 7,114 11,797 19,892 6,987 11,670 19,765
15 22,657 107,376 112,728 122,407 7,376 12,728 22,407 7,312 12,664 22,343
16 24,840 107,592 113,657 125,138 7,592 13,657 25,138 7,592 13,657 25,138
17 27,132 107,759 114,579 128,102 7,759 14,579 28,102 7,759 14,579 28,102
18 29,539 107,869 115,485 131,315 7,869 15,485 31,315 7,869 15,485 31,315
19 32,066 107,916 116,366 134,795 7,916 16,366 34,795 7,916 16,366 34,795
20 34,719 107,894 117,215 138,561 7,894 17,215 38,561 7,894 17,215 38,561
21 37,505 107,795 118,022 142,634 7,795 18,022 42,634 7,795 18,022 42,634
22 40,430 107,614 118,778 147,040 7,614 18,778 47,040 7,614 18,778 47,040
23 43,502 107,348 119,474 151,807 7,348 19,474 51,807 7,348 19,474 51,807
24 46,727 106,987 120,099 156,962 6,987 20,099 56,962 6,987 20,099 56,962
25 50,113 106,522 120,637 162,531 6,522 20,637 62,531 6,522 20,637 62,531
26 53,669 105,940 121,070 168,544 5,940 21,070 68,544 5,940 21,070 68,544
27 57,403 105,230 121,379 175,032 5,230 21,379 75,032 5,230 21,379 75,032
28 61,323 104,384 121,549 182,033 4,384 21,549 82,033 4,384 21,549 82,033
29 65,439 103,372 121,540 189,567 3,372 21,540 89,567 3,372 21,540 89,567
30 69,761 102,176 121,324 197,666 2,176 21,324 97,666 2,176 21,324 97,666
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate 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 and the investment experience of the Portfolios. The Death
Benefit, Policy Value and Surrender Value for a Policy would be different from
those shown if the actual gross annual rates of return averaged 0%, 6% or 12%
over a period of years, but also fluctuated above or below those averages for
individual Policy Years. They would also be different if any Policy Loans or
Partial Surrenders were made. No representations can be made by United
Investors Life Insurance Company or the Variable Account or the Portfolios
that these hypothetical rates of return can be achieved for any one year or
sustained over a period of time.
30
<PAGE>
MALE ISSUE AGE 50, STANDARD NON-TOBACCO
$2,500 ANNUAL PREMIUM
$100,000 FACE AMOUNT, OPTION B
GUARANTEED CHARGES
<TABLE>
<CAPTION>
DEATH BENEFITS POLICY VALUES SURRENDER VALUES
PREMIUMS ----------------------- --------------------- ---------------------
YR+INT @ 5% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------------- ------- ------- ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,625 101,763 101,888 102,013 1,763 1,888 2,013 763 888 1,013
2 5,381 103,450 103,810 104,185 3,450 3,810 4,185 2,450 2,810 3,185
3 8,275 105,056 105,760 106,524 5,056 5,760 6,524 4,056 4,760 5,524
4 11,314 106,573 107,730 109,039 6,573 7,730 9,039 5,573 6,730 8,039
5 14,505 107,996 109,715 111,741 7,996 9,715 11,741 6,996 8,715 10,741
6 17,855 109,319 111,707 114,641 9,319 11,707 14,641 8,410 10,798 13,732
7 21,373 110,536 113,699 117,751 10,536 13,699 17,751 9,718 12,881 16,933
8 25,066 111,645 115,686 121,088 11,645 15,686 21,088 10,918 14,959 20,361
9 28,945 112,636 117,657 124,665 12,636 17,657 24,665 12,000 17,021 24,029
10 33,017 113,500 119,599 128,494 13,500 19,599 28,494 12,955 19,054 27,949
11 37,293 114,225 121,497 132,587 14,225 21,497 32,587 13,770 21,042 32,132
12 41,782 114,801 123,335 136,956 14,801 23,335 36,956 14,437 22,971 36,592
13 46,497 115,219 125,100 141,618 15,219 25,100 41,618 14,946 24,827 41,345
14 51,446 115,450 126,756 146,572 15,450 26,756 46,572 15,268 26,574 46,390
15 56,644 115,476 128,276 151,823 15,476 28,276 51,823 15,385 28,185 51,732
16 62,101 115,282 129,635 157,384 15,282 29,635 57,384 15,282 29,635 57,384
17 67,831 114,851 130,806 163,264 14,851 30,806 63,264 14,851 30,806 63,264
18 73,848 114,171 131,762 169,480 14,171 31,762 69,480 14,171 31,762 69,480
19 80,165 113,222 132,471 176,041 13,222 32,471 76,041 13,222 32,471 76,041
20 86,798 111,978 132,890 182,950 11,978 32,890 82,950 11,978 32,890 82,950
21 93,763 110,402 132,963 190,199 10,402 32,963 90,199 10,402 32,963 90,199
22 101,076 108,448 132,622 197,769 8,448 32,622 97,769 8,448 32,622 97,769
23 108,755 106,057 131,782 205,624 6,057 31,782 105,624 6,057 31,782 105,624
24 116,818 103,173 130,357 213,726 3,173 30,357 113,726 3,173 30,357 113,726
25 125,284 ** 128,262 222,042 ** 28,262 122,042 ** 28,262 122,042
26 134,173 ** 125,423 230,548 ** 25,423 130,548 ** 25,423 130,548
27 143,506 ** 121,766 239,222 ** 21,766 130,222 ** 21,766 139,222
28 153,307 ** 117,221 248,045 ** 17,221 148,045 ** 17,221 148,045
29 163,597 ** 111,706 256,989 ** 11,706 156,989 ** 11,706 156,989
30 174,402 ** 105,112 266,001 ** 5,112 166,001 ** 5,112 166,001
</TABLE>
The hypothetical investment rates of return shown above are illustrative
only and should not be deemed a representation of past or future investment
rates of return. Actual rate 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 and the investment experience of the Portfolios. The Death
Benefit, Policy Value and Surrender Value for a Policy would be different from
those shown if the actual gross annual rates of return averaged 0%, 6% or 12%
over a period of years, but also fluctuated above or below those averages for
individual Policy Years. They would also be different if any Policy Loans or
Partial Surrenders were made. No representations can be made by United
Investors Life Insurance Company or the Variable Account or the Portfolios
that these hypothetical rates of return can be achieved for any one year or
sustained over a period of time. As indicated by the asterisks, at certain
rates of return additional premium payments will be required to prevent Policy
termination.
31
<PAGE>
TAX CONSIDERATIONS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE
Introduction. The following summary provides a general description of the
federal income tax considerations relating to the Policy. This summary is
based upon United Investors' understanding of the present federal income tax
laws as they are currently interpreted by the Internal Revenue Service
("IRS"). Because of the complexity of such laws and the fact that tax results
will vary according to the factual status of the specific policy involved, tax
advice from a qualified tax advisor may be needed by a person contemplating
the purchase of a Policy or the exercise of elections under the Policy. It
should therefore be understood that these comments concerning federal income
tax consequences are not an exhaustive discussion of all tax questions that
might arise under the Policy. Further, these comments do not take into account
any federal estate tax and gift, state, or local tax considerations which may
be involved in the purchase of a Policy or the exercise of elections under the
Policy. For complete information on such federal and state tax considerations,
a qualified tax advisor should be consulted. United Investors does not make
any guarantee regarding the tax status of any policy and the following summary
is not intended as tax advice.
TAX STATUS OF THE POLICY
Section 7702 of the Code sets forth a definition of a life insurance
contract for federal tax purposes. In addition, the Technical and
Miscellaneous Revenue Act of 1988 ("TAMRA") established certain new
requirements with respect to the mortality (i.e., cost of insurance) and other
expense charges that are to be used in determining compliance with Section
7702. The Secretary of the Treasury has issued proposed regulations that would
specify what will be considered reasonable mortality charges for Policies
subject to TAMRA. However, these proposed regulations do not address other
expense charges. If a Policy were determined not to be a life insurance
contract for purposes of Section 7702, such Policy would not provide most of
the tax advantages normally provided by a life insurance policy. (See "Tax
Treatment of Policy Benefits.")
With respect to a Policy that is issued on the basis of a standard risk
class or a risk class involving a lower mortality risk (i.e., a preferred
basis), while there is some uncertainty due to the lack of guidance on other
expense charges, United Investors nonetheless believes that such a Policy
should meet the Section 7702 definition of a life insurance contract. However,
with respect to a Policy that is issued on a substandard basis (i.e., a risk
class involving higher than standard mortality risk), it remains unclear
whether or not such a Policy would satisfy Section 7702, particularly if the
Owner pays the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section
7702, United Investors will take all steps possible in order to attempt to
cause such a Policy to comply with Section 7702, including possibly refunding
any premiums paid that exceed the limitations allowable under Section 7702
(together with interest or other earnings on any such premiums refunded as
required by law). For these reasons, United Investors reserves the right to
modify the Policy as necessary to qualify it as a life insurance contract
under Section 7702.
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Variable Account to be
"adequately diversified" in order for the Policy to be treated as a life
insurance contract for federal tax purposes. The Variable Account, through the
Fund, intends to comply with the diversification requirements prescribed by
the Treasury in Treas. Reg. Section 1.817-5, which affect how the Fund's
assets may be invested. Although the Fund's investment adviser and United
Investors are both indirectly owned by Torchmark Corporation, United Investors
does not control the Fund or its investments. United Investors, however,
believes that the Fund will be operated in compliance with the requirements
prescribed by the Treasury.
32
<PAGE>
In certain circumstances, owners of variable contracts may be considered the
owners, for federal income tax purposes, of the assets of the separate account
used to support their contracts. In those circumstances, income and gains from
the separate account assets would be includible in the variable contract
owner's gross income. The IRS has stated in published rulings that a variable
contract owner will be considered the owner of separate account assets if the
contract owner possesses incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
concerning diversifications, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Owner), rather than
the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way
of regulations or rulings on the "extent to which policyowners may direct
their investments to particular subaccounts without being treated as owners of
the underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets.
For example, the Owner has additional flexibility in allocating premium
payments and Policy values. These differences could result in an Owner being
treated as the owner of a pro rata portion of the assets of the Variable
Account. In addition, United Investors does not know what standards will be
set forth, if any, in the regulations or rulings which the Treasury Department
has stated it expects to issue. United Investors therefore reserves the right
to modify the Policy as necessary to attempt to prevent an Owner from being
considered the owner of a pro rata share of the assets of the Variable
Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
1. In general. United Investors believes that the proceeds and cash value
increases of a Policy should be treated in a manner consistent with a fixed-
benefit life insurance policy for federal income tax purposes. Thus, the death
benefit under the Policy should be excludable from the gross income of the
Beneficiary under Section 101 (a)(1) of the Code.
The exchange of the Policy, a change of the Policy's Minimum Death Benefit,
a Policy loan, an additional premium payment, a Policy lapse with an
outstanding loan, a change of Owners, or a surrender may have tax consequences
depending on the circumstances. In addition, federal estate and state and
local estate, inheritance, and other tax consequences of ownership or receipt
of Policy proceeds depend upon the circumstances of each Owner or Beneficiary.
A competent tax adviser should be consulted for further information.
Generally, the Owner will not be deemed to be in constructive receipt of the
cash value, including increments thereof, under the Policy until there is a
distribution. The tax consequences of distributions from, and loans taken
from, or secured by, a Policy depend on whether the Policy is classified as a
"modified endowment contract" under Section 7702A. Whether a Policy is or is
not a Modified Endowment Contract, upon a complete surrender or lapse of a
Policy or when benefits are paid at the Maturity Date, if the amount receives
plus the amount of any indebtedness exceeds the total investment in the
Policy, the excess will generally be treated as ordinary income subject to
tax.
2. Modified endowment contracts. A Policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether such a Policy is a modified endowment
33
<PAGE>
contract are extremely complex. In general, however, a Policy will be a
modified endowment contract if the accumulated premiums paid at any time
during the first seven Policy Years exceed the sum of the net level premiums
which would have been paid on or before such time if the Policy provided for
paid-up future benefits after the payment of seven level annual premiums. In
addition, if a Policy is "materially changed," it may cause such Policy to be
treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination whether a Policy
will be a modified endowment contract after a material change depends upon the
relationship of the death benefit at the time of change to the Cash Value at
the time of such change and the additional premiums paid in the seven Policy
Years starting with the date on which the material change occurs.
The manner in which the premium limitation and material change rules should
be applied to certain features of the Policy and its riders is unclear.
Nonetheless, under our current procedures, the Owner will be notified at the
time a Policy is issued whether, according to our calculations, the Policy is
or is not classified as a modified endowment contract based on the premium
then received. The Owner will also be notified of the amount of the maximum
annual premium which, according to our calculations, can be paid without
causing a Policy to be classified as a modified endowment contract.
Due to the Policy's flexibility, classification of a Policy as a modified
endowment contract will depend upon the circumstances of each Policy.
Accordingly, a prospective Owner should contact a qualified tax adviser before
purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before making any change to, including an exchange of or
reduction in benefits of, a Policy to determine whether such change would
cause the Policy (or the new policy in the case of an exchange) to be treated
as a modified endowment contract.
If a Policy becomes a modified endowment contract, distributions such as
Partial Surrenders and Policy Loans that occur during the Policy Year it
becomes a modified endowment contract and any subsequent Policy Year will be
taxed as distributions from a modified endowment contract. In addition,
distributions from a Policy within two years before it becomes a modified
endowment contract will be taxed in this manner. This means that a
distribution made from a Policy that is not a modified endowment contract
could later become taxable as a distribution from a modified endowment
contract.
Whether a Policy is or is not a Modified Endowment Contract, upon a complete
surrender or lapse of a Policy or when benefits are paid at the Maturity Date,
if the amount received plus the amount of any indebtedness exceeds the total
investment in the Policy, the excess will generally be treated as ordinary
income subject to tax.
3. Distributions from Policies Classified as Modified Endowment
Contracts. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender and benefits paid at maturity, from such a Policy are treated
as ordinary income subject to tax up to the amount equal to the excess (if
any) of the cash value immediately before the distribution over the investment
in the Policy (described below) at such time. Second, loans taken from, or
secured by, such a Policy (including unpaid loan interest that is added to the
principal of a loan) are treated as distributions from such a Policy and taxed
accordingly. Third, a 10 percent additional tax is imposed on the portion of
any distribution from, or loan taken from or secured by, such a Policy that is
included in income except where the distribution or loan is made on or after
the Owner attains age 59 1/2, is attributable to the Owner's becoming
disabled, or is part of a series of substantially equal periodic payments for
the life (or life expectancy) of the Owner or the joint lives (or joint life
expectancies) of the Owner and the Owner's Beneficiary.
4. Distributions from Policies not Classified as Modified Endowment
Contracts. Distributions (such as Partial Surrenders) from a Policy that is
not classified as a modified endowment contract are
34
<PAGE>
generally treated as first recovering the investment in the Policy (described
below) and then, only after the return of all such investment in the Policy,
as distributing taxable income. An exception to this general rule occurs in
the case of a decrease in the Policy's death benefit or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in a cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such a
cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a modified endowment contract
may be treated as indebtedness of the Owner, not as a distribution. Finally,
neither distributions (including distributions upon surrender or lapse) nor
loans from, or secured by, a Policy that is not a modified endowment contract
are subject to the 10% additional income tax.
5. Policy Loan Interest. Interest paid on a Policy Loan generally is not tax
deductible. The Owner should consult a competent tax adviser if the
deductibility of interest paid on a policy loan is an important issue.
6. Investment in the Policy. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy,
minus (ii) the aggregate amount received under the Policy which is excluded
from the gross income of the Owner (except that the amount of any loan from,
or secured by, a Policy that is a modified endowment contract, to the extent
such amount is excluded from gross income, will be disregarded), plus (iii)
the amount of any loan from, or secured by, a Policy that is a modified
endowment contract to the extent that such amount is included in the gross
income of the Owner.
7. Multiple Policies. All modified endowment contracts that are issued by
United Investors (or its affiliates) to the same Owner during any calendar
year are treated as one modified endowment contract for purposes of
determining the amount includable in gross income under Section 72(e) of the
Code.
8. Other Tax Consequences. The Policy may be used in various arrangements,
including nonqualified deferred compensation or salary continuance plans,
split dollar insurance plans, executive bonus plans, retiree medical benefit
plans and others. The tax consequences of such plans may vary depending on the
particular facts and circumstances of each individual arrangement. Therefore,
if you are contemplating the use of a Policy in any arrangement the value of
which depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement.
In recent years, Congress has adopted new rules relating to life insurance
owned by business. Any business considering buying a Policy or changing an
existing policy, should consult a tax advisor.
9. Possible Changes in Taxation. In recent years, proposals have been made
that would adversely change the Federal taxation of the Policies described in
this prospectus. For example, certain proposals would (1) tax transfers
between investment divisions and tax exchanges between variable annuity
contracts, and (2) reduce the "investment in the contract," thereby increasing
the amount of income for purposes of computing gain.
TAXATION OF UNITED INVESTORS
United Investors incurs state and local premium taxes, and federal income
taxes resulting from the treatment of deferred acquisition costs. The amount
of the charge for such taxes is discussed above under "Charges and
Deductions." At the present time, the United Investors makes no charge to the
Variable Account for any other federal, state or local taxes that it incurs
which may be attributable to such Account or to the Policies. United
Investors, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax
laws that it determines to be properly attributable to the Variable Account or
to the Policies.
35
<PAGE>
EMPLOYMENT-RELATED BENEFIT PLANS
On July 6, 1983, the Supreme Court held in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. The Policies described in this
Prospectus contain guaranteed purchase rates for certain payment options that
generally distinguish between men and women. Accordingly, employers and
employee organizations should consider, in consultation with their legal
counsel, the impact of Norris, and Title VII generally, on any employment-
related insurance or benefit program for which a Policy may be purchased.
ADDITIONAL INFORMATION
DIRECTORS AND OFFICERS OF UNITED INVESTORS. United Investors is managed by a
board of directors. The following table sets forth the name and principal
occupations during the past five years of each of United Investors's directors
and senior officers. Unless otherwise noted, the address for each person is
United Investors Life Insurance Company, 2001 Third Avenue South, Birmingham,
Alabama 35233.
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
NAME AND POSITION WITH PRINCIPAL OCCUPATION
UNITED INVESTORS DURING THE PAST FIVE YEARS
- -------------------------------------------------------------------------------
<S> <C>
W. Thomas Aycock Vice President and Chief Actuary of United
Vice President and Chief Investors since November, 1992.
Actuary, Director
- -------------------------------------------------------------------------------
Tony G. Brill* Senior Vice President of United Investors and
Senior Vice President and Torchmark Corporation since January, 1997.
Director Managing Partner of KPMG Peat Marwick LLP,
Birmingham, Alabama Office, 1984--January,
1997.
- -------------------------------------------------------------------------------
C.B. Hudson* Chairman of United Investors and Torchmark
Chairman of the Board and Corporation since March, 1998. Chairman of
Chief Executive Officer Insurance Operations of Torchmark Corporation,
January, 1993--March, 1998. Chairman of
Liberty National Life Insurance Company,
United American Insurance Company, and Globe
Life Insurance Company since, 1991.
- -------------------------------------------------------------------------------
Larry M. Hutchison* Vice President and General Counsel of
Director Torchmark since February, 1997. Vice President
and General Counsel of United American
Insurance Company since 1992.
- -------------------------------------------------------------------------------
Michael J. Klyce Vice President of Torchmark Corporation since
Vice President and Treasurer January, 1984.
- -------------------------------------------------------------------------------
John H. Livingston Secretary and Counsel of United Investors
Director, Secretary and Counsel since May, 1995. Secretary and Associate
Counsel of United Investors, December 1994--
May, 1995. Associate Counsel of United
Investors, July, 1990--December, 1994.
- -------------------------------------------------------------------------------
James L. Mayton, Jr. Vice President & Controller of Liberty
Vice President and Controller National Life Insurance Company since January,
1985.
- -------------------------------------------------------------------------------
Carol A. McCoy Secretary of Torchmark Corporation since
Director February, 1994. Associate Counsel of Torchmark
Corporation since January, 1985.
- -------------------------------------------------------------------------------
Anthony L. McWhorter President of Liberty National Life Insurance
Director Company since December 1994. Executive Vice
President and Chief Actuary of Liberty
National, November 1993-December 1994. Senior
Vice President & Chief Actuary of Liberty
National, September, 1991-November, 1993.
- -------------------------------------------------------------------------------
</TABLE>
* Principal business address: Torchmark Corporation, 3700 South Stonebridge,
McKinney, Texas 75050
36
<PAGE>
<TABLE>
- --------------------------------------------------------------------------
<CAPTION>
NAME AND POSITION WITH PRINCIPAL OCCUPATION
UNITED INVESTORS DURING THE PAST FIVE YEARS
- --------------------------------------------------------------------------
<S> <C>
James L. Sedgwick President of United Investors since September
President and Director 1991. General Counsel, Vice President and
Secretary of United Investors, July 1979--
September, 1991.
- --------------------------------------------------------------------------
Ross W. Stagner Vice President of United Investors since
Vice President and Director January, 1992.
- --------------------------------------------------------------------------
William L. Surber Vice President of United Investors since
Vice President and Director April, 1992.
- --------------------------------------------------------------------------
</TABLE>
SALE OF THE POLICIES. Waddell & Reed, Inc., an affiliate of United
Investors, acts as the principal underwriter of the Policies. Waddell & Reed,
Inc. also acts as principal underwriter for United Investors Life Variable
Account, a separate account also established by United Investors, and may act
as principal underwriter for other separate accounts established by affiliates
of United Investors. Waddell & Reed, Inc. is the principal underwriter of the
funds in the United Group of Mutual Funds and Waddell & Reed Funds, Inc.
Waddell & Reed, Inc. is a corporation organized under the laws of the state of
Delaware in 1981, is registered as a broker-dealer under the Securities
Exchange Act of 1934, and is a member of the National Association of
Securities Dealers, Inc. (the "NASD"). The Policies may not be available in
all states. Waddell & Reed, Inc. may enter into written sales agreements with
various broker-dealers to aid in the sale of the Policies. A commission plus
bonus compensation may be paid to broker-dealers or agents in connection with
sales of the Policies.
VOTING OF PORTFOLIO SHARES. United Investors is the legal owner of shares
held by the Investment Divisions and as such has the right to vote on all
matters submitted to shareholders of the Portfolios. However, as required by
law, United Investors will vote shares held in the Investment Divisions at
meetings of the shareholders of the Portfolios in accordance with instructions
received from Owners with Policy Value in the Investment Divisions. TMK/United
does not hold regular annual shareholder meetings. To obtain voting
instructions from Owners, before a meeting of shareholders of the Portfolios,
United Investors will send Owners voting instruction material, a voting
instruction form and any other related material. Shares held by an Investment
Division for which no timely instructions are received will be voted by United
Investors in the same proportion as those shares for which voting instructions
are received. Should the applicable federal securities laws, regulations or
interpretations thereof change so as to permit United Investors to vote shares
of the Portfolios in its own right, United Investors may elect to do so.
United Investors may, if required by state insurance officials, disregard
Owner voting instructions if such instructions would require shares to be
voted so as to cause a change in sub-classification or investment objectives
of one or more of the Portfolios, or to approve or disapprove an investment
advisory agreement. In addition, United Investors may under certain
circumstances disregard voting instructions that would require changes in the
investment policy or investment adviser of one or more of the Portfolios,
provided that United Investors reasonably disapproves of such changes in
accordance with applicable federal regulations. If United Investors ever
disregards voting instructions, Owners will be advised of that action and of
the reasons for such action in the next report to Owners.
OTHER INFORMATION. A registration statement under the Securities Act of 1933
has been filed with the SEC relating to the offering described in this
prospectus. This prospectus does not include all the information set forth in
the registration statement. The omitted information may be obtained at the
SEC's principal office in Washington, D.C. by paying the SEC's prescribed
fees.
LITIGATION. No legal or administrative proceeding is pending that would have
a material effect upon the Variable Account.
37
<PAGE>
LEGAL MATTERS. All matters of Missouri law pertaining to the Policy,
including the validity of the Policy and United Investors' right to issue the
Policy under Missouri insurance law and any other applicable state insurance
or securities laws, have been passed upon by James L. Sedgwick, Esq.,
President of United Investors. Legal advice regarding certain matters relating
to federal securities laws applicable to the issuance of the Policy described
in this prospectus has been provided by Sutherland, Asbill & Brennan LLP of
Washington, D.C.
PREPARING FOR YEAR 2000. Existing computer programs of many businesses were
developed with a two-digit identification without consideration of the
upcoming change in century or millenium in the year 2000. Without addressing
this issue, many computer programs could fail or produce erroneous results,
creating considerable uncertainty and potentially adversely affecting the
operations or business.
United Investors has been in the process of modifying its computer system
and applications for the year 2000. It is expected that the project will be
substantially completed during 1998 and that final testing will be conducted
in 1999. United Investors is utilizing primarily internal staff for this
conversion but is also using outside consultants where necessary. The cost of
this project, which is immaterial to United Investors is expensed as incurred.
As a part of its activities, United Investors is engaged electronically with
third-party financial institutions and other various organizations which may
have computer systems which are not year 2000 compliant. To the degree
possible, United Investors is verifying that these third party business
systems are currently compliant or are in the process of becoming compliant.
To the extent these systems are not compliant there is no assurance that the
potential interruptions or cost to United Investors may not be significant.
EXPERTS. The balance sheets of United Investors Life Insurance Company as of
December 31, 1997 and 1996, and the related statements of operations,
shareholder's equity, and cash flows for each of the years in the three-year
period ended December 31, 1997 and the balance sheet of United Investors
Universal Life Variable Account as of December 31, 1997 and the related
statement of operations and changes in net assets for the period then ended
have been included herein in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by W.
Thomas Aycock, Vice President and Chief Actuary of United Investors, whose
opinion is filed as an exhibit to the registration statement.
FINANCIAL STATEMENTS. The financial statements of United Investors which are
included in this prospectus should be considered only as bearing on the
ability of United Investors to meet its obligations under the Policies. They
should not be considered as bearing on the investment performance of the
assets held in the Variable Account.
38
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
United Investors Life Insurance Company
Birmingham, Alabama
We have audited the accompanying balance sheets of United Investors Life
Insurance Company as of December 31, 1997 and 1996 and the related statements
of operations, shareholder's equity and cash flow for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Investors Life
Insurance Company at December 31, 1997 and 1996 and the results of its
operations and its cash flow for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Birmingham, Alabama
February 2, 1998 except
for Note 1 which is as of
March 3, 1998
F-1
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities--available for sale, at fair value
(cost: 1997--$612,600; 1996--$621,177)................. $ 635,643 $ 624,880
Policy loans............................................ 15,817 14,332
Other long-term invested assets......................... 22,488 21,411
Short-term investments.................................. 13,423 1,834
---------- ----------
Total investments..................................... 687,371 662,457
Cash..................................................... 5,288 2,404
Accrued investment income (includes amounts from
affiliates:
1997--$473; 1996--$473)................................. 11,270 10,781
Receivables ............................................. 2,826 2,635
Due from affiliates (includes funds withheld on reinsur-
ance: 1997--$190,235; 1996--$0)......................... 225,235 35,423
Deferred acquisition costs............................... 176,897 169,986
Value of insurance purchased............................. 33,754 16,160
Goodwill................................................. 6,771 7,055
Property and equipment................................... 141 156
Other assets............................................. 1,149 1,534
Separate account assets.................................. 1,876,439 1,420,025
---------- ----------
Total assets.......................................... $3,027,141 $2,328,616
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits.................................. $ 736,975 $ 531,297
Unearned and advance premiums........................... 2,975 2,804
Other policy liabilities................................ 8,713 8,135
---------- ----------
Total policy liabilities............................... 748,663 542,236
Accrued income taxes.................................... 58,270 43,063
Other liabilities....................................... 2,825 2,265
Due to affiliates....................................... 9,374 8,965
Separate account liabilities............................ 1,876,439 1,420,025
---------- ----------
Total liabilities..................................... 2,695,571 2,016,554
Shareholder's equity:
Common stock, par value $6 per share-authorized,
issued and outstanding:
500,000 shares......................................... 3,000 3,000
Additional paid-in capital.............................. 138,469 137,950
Unrealized investment gains, net of applicable taxes.... 14,700 4,460
Retained earnings....................................... 175,401 166,652
---------- ----------
Total shareholder's equity............................ 331,570 312,062
---------- ----------
Total liabilities and shareholder's equity............ $3,027,141 $2,328,616
========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
F-2
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Premium income.................................... $ 68,723 $ 65,114 $ 61,792
Policy charges and fees........................... 36,582 29,403 23,109
Net investment income (includes amounts from af-
filiates: 1997--$2,863; 1996--$2,847; 1995--
$3,058; ......................................... 51,514 51,128 49,356
Realized investment gains (losses)................ (5,365) 925 1,441
Other income (includes amounts from affiliates:
1997--$11,876; 1996--$0; 1995--$0) .............. 11,876 0 4
-------- -------- --------
Total revenue................................... 163,330 146,570 135,702
Benefits and expenses:
Policy benefits:
Individual life.................................. 57,954 47,355 42,943
Annuity.......................................... 15,165 15,807 16,540
-------- -------- --------
Total policy benefits........................... 73,119 63,162 59,483
Amortization of deferred acquisition costs........ 24,898 19,850 16,602
Commissions and premium taxes (includes amounts to
affiliates: 1997--$4,928; 1996--$4,723; 1995--
$4,000; ......................................... 6,251 5,248 4,691
Other operating expense (includes amounts to af-
filiates: 1997--$3,217; 1996--$2,181; 1995--
$1,862;.......................................... 5,470 3,966 3,679
-------- -------- --------
Total benefits and expenses..................... 109,738 92,226 84,455
-------- -------- --------
Net operating income before income taxes........... 53,592 54,344 51,247
Income taxes....................................... 18,843 19,078 18,037
-------- -------- --------
Net income...................................... $ 34,749 $ 35,266 $ 33,210
======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-3
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL INVESTMENT TOTAL
COMMON PAID-IN GAINS RETAINED SHAREHOLDER'S
STOCK CAPITAL (LOSSES) EARNINGS EQUITY
------ ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995
Balance at January 1,
1995................... $3,000 $137,915 $(12,378) $134,176 $262,713
Net income.............. 33,210 33,210
Dividends............... (7,500) (7,500)
Exercise of stock op-
tions.................. 35 35
Net change in unrealized
investment gains (loss-
es).................... 24,670 24,670
------ -------- -------- -------- --------
Balance at December 31,
1995................... 3,000 137,950 12,292 159,886 313,128
YEAR ENDED DECEMBER 31,
1996
Net income.............. 35,266 35,266
Dividends............... (28,500) (28,500)
Net change in unrealized
investment gains (loss-
es).................... (7,832) (7,832)
------ -------- -------- -------- --------
Balance at December 31,
1996................... 3,000 137,950 4,460 166,652 312,062
YEAR ENDED DECEMBER 31,
1997
Net Income.............. 34,749 34,749
Dividends............... (26,000) (26,000)
Exercise of stock op-
tions.................. 519 519
Net Change in unrealized
investment gains (loss-
es).................... 10,240 10,240
------ -------- -------- -------- --------
Balance at December 31,
1997................... $3,000 $138,469 $ 14,700 $175,401 $331,570
====== ======== ======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-4
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Net income.................................... $ 34,749 $ 35,266 $ 33,210
Adjustments to reconcile net income to cash
provided from operations:
Increase in future policy benefits........... 17,878 20,692 22,011
Increase (decrease) in other policy benefits. 749 2,154 (614)
Deferral of policy acquisition costs......... (33,485) (33,744) (28,870)
Value of business acquired................... (10,000) 0 0
Amortization of deferred acquisition costs... 24,898 19,850 16,602
Change in accrued income taxes............... 10,212 (3,033) 2,644
Depreciation................................. 42 44 52
Realized (gains) losses on sale of
investments and properties.................. 5,365 (925) (1,441)
Other accruals and adjustments............... 1,817 (997) (3,525)
--------- -------- ---------
Cash provided from operations................. 52,225 39,307 40,069
Cash used for investment activities:
Investments sold or matured:
Fixed maturities available for sale--sold... 113,035 15,246 149,076
Fixed maturities available for sale--
matured, called and repaid................. 66,469 44,523 50,659
Equity securities........................... 0 0 3,341
Other long-term investments................. 2,199 482 9,316
--------- -------- ---------
Total investments sold or matured.......... 181,703 60,251 212,392
Acquisition of investments:
Fixed maturities--available for sale........ (176,905) (68,214) (244,162)
Net increase in policy loans................ (1,485) (2,033) (2,121)
Other long-term investments................. (1,517) (1,183) (1,587)
--------- -------- ---------
Total acquisition of investments........... (179,907) (71,430) (247,870)
Net (increase) decrease in short-term invest-
ments....................................... (11,589) 2,389 (1,901)
Funds loaned to affiliates................... (24,080) (3,500) (21,000)
Funds repaid from affiliates................. 24,080 3,500 21,000
Disposition of properties.................... 0 34 6
Additions to properties...................... (27) (117) (33)
--------- -------- ---------
Cash used for investment activities........... (9,820) (8,873) (37,406)
Cash used for financing activities:
Cash dividends paid to shareholder........... (27,000) (27,500) (7,500)
Net receipts from deposit product operations. (12,521) (6,572) 3,343
--------- -------- ---------
Cash used for financing activities............ (39,521) (34,072) (4,157)
Increase (decrease) in cash................... 2,884 (3,638) (1,494)
Cash at beginning of year..................... 2,404 6,042 7,536
--------- -------- ---------
Cash at end of year........................... $ 5,288 $ 2,404 $ 6,042
========= ======== =========
</TABLE>
See accompanying Notes to Financial Statements.
F-5
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: United Investors Life Insurance Company (the "Company") is a
wholly-owned subsidiary of United Investors Management Company ("United
Management"), which is a wholly-owned subsidiary of Torchmark Corporation
("Torchmark"), the ultimate parent. On March 3, 1998, United Management
distributed the Company to Torchmark and Liberty National Life Insurance
Company, a wholly owned subsidiary of Torchmark.
Description of Business: The Company is a life insurer licensed in 49
states. The Company offers a full range of life, annuity and variable products
through its agents and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by the
insurance department of states in which it is licensed, and undergoes periodic
examinations by those departments.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and revenues and expenses for the reporting
period. Actual results could differ significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for policy reserves, losses and claims. Although
some variability is inherent in these estimates, management believes the
amounts provided are adequate.
Existing computer programs of many businesses were developed with a two-
digit identification without consideration of the upcoming change in century
or millennium in the year 2000. Without addressing this issue, many computer
programs could fail or produce erroneous results, creating considerable
uncertainty and potentially adversely affecting the operations or business.
UILIC has been in the process of modifying its computer system and
applications for the year 2000. It is expected that the project will be
substantially completed during 1998 and that final testing will be conducted
in 1999. UILIC is utilizing primarily internal staff for this conversion but
is also using outside consultants where necessary. The cost of this project,
which is immaterial to UILIC is expensed as incurred.
As a part of its activities, UILIC is engaged electronically with third-
party financial institutions and other various organizations which may have
computer systems which are not year 2000 compliant. To the degree possible,
UILIC is verifying that these third party business systems are currently
compliant or are in the process of becoming compliant. To the extent these
systems are not compliant there is no assurance that the potential
interruptions or cost to UILIC may not be significant.
Basis of Presentation: The accompanying financial statements include the
accounts of United Investors Life Insurance Company ("United Investors") which
is a wholly-owned subsidiary of United Investors Management Company ("United
Management"). The financial statements have been prepared on the basis of
generally accepted accounting principles ("GAAP").
F-6
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investments: United Investors classifies all of its fixed maturity
investments, which includes bonds and redeemable preferred stocks, as
available for sale. Investments classified as available for sale are carried
at fair value with unrealized gains and losses, net of deferred taxes,
reflected directly in shareholder's equity. Investments in equity securities,
which include common and nonredeemable preferred stocks, are reported at fair
value with unrealized gains and losses, net of deferred taxes, reflected
directly in shareholder's equity. Policy loans are carried at unpaid principal
balances. Short-term investments include investments in certificates of
deposit and other interest-bearing time deposits with original maturities
within three months. Other long-term investments consist of investments in
mutual funds which are carried at fair value. If an investment becomes
permanently impaired, such impairment is treated as a realized loss and the
investment is adjusted to net realizable value.
Gains and losses realized on the disposition of investments are recognized
as revenues and are determined on a specific identification basis.
Realized investment gains and losses and investment income attributable to
separate accounts are credited to the separate accounts and have no effect on
United Investor's net income. Investment income attributable to policyholders
is included in United Investor's net investment income. Net investment income
for the years ended December 31, 1997, 1996 and 1995 included approximately
$37,800, $37,600, and $38,000, respectively, which was allocable to
policyholder reserves or accounts. Realized investment gains and losses are
not allocable to policyholders.
Determination of Fair Values of Financial Instruments: Fair value for cash,
short-term investments, receivables and payables approximates carrying value.
Fair values for investment securities are based on quoted market prices, where
available. Otherwise, fair values are based on quoted market prices of
comparable instruments. Fair value of future benefits for universal life and
current interest products and annuity products are based on the fund value.
Cash: Cash consists of balances on hand and on deposit in banks and
financial institutions.
Recognition of Revenue and Related Expenses: Premiums for insurance
contracts which are not defined as universal life-type according to the
Financial Accounting Standards Board's Statement of Accounting Standards
(SFAS) 97 are recognized as revenue over the premium-paying period of the
policy. Premiums for limited-payment life insurance contracts as defined by
SFAS 97 are recognized over the contract period. Premiums for universal life-
type and annuity contracts are added to the policy account value, and revenues
from such products are recognized as charges to the policy account value for
mortality, administration, and surrenders (retrospective deposit method). The
related benefits and expenses are matched with revenues by means of the
provision for future policy benefits and the amortization of deferred
acquisition costs in a manner which recognizes profits as they are earned over
the same period.
Future Policy Benefits: The liability for future policy benefits for
universal life-type products according to SFAS 97 is represented by policy
account value. Annuity Contracts are accounted for as deposit contracts. The
liability for future policy benefits for other products is provided on the net
level premium method based on estimated investment yields, mortality,
persistency and other assumptions which were appropriate at the time the
policies were issued. Assumptions used are based on United Investor's
experience as adjusted to provide for possible adverse deviation. These
estimates are periodically reviewed and compared with actual experience. If it
is determined that future expected experience differs significantly from that
assumed, the estimates are revised.
F-7
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Deferred acquisition costs: The costs of acquiring new insurance business
are deferred. Such costs consist of sales commissions, underwriting expenses,
and certain other selling expenses. The costs of acquiring new business
through the purchase of other companies and blocks of insurance business are
also deferred.
Deferred acquisition costs, including the value of insurance purchased, for
policies other than universal life-type policies according to SFAS 97, are
amortized with interest over an estimate of the premium-paying period of the
policies in a manner which charges each year's operations in proportion to the
receipt of premium income. For limited-payment contracts, acquisition costs
are amortized over the contract period. For universal life-type policies,
acquisition costs are amortized with interest in proportion to estimated gross
profits. The assumptions used as to interest, withdrawals and mortality are
consistent with those used in computing the liability for future policy
benefits and expenses. If it is determined that future experience differs
significantly from that previously assumed, the estimates are revised.
Deferred acquisition costs are adjusted to reflect the amounts associated with
unrealized investment gains and losses pertaining to universal life-type
products.
Income Taxes: Income taxes are accounted for under the asset and liability
method in accordance with SFAS 109. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement book
values and tax bases of assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Interest Expense: Interest expense includes interest on borrowed funds not
used in the production of investment income. Interest expense relating to the
production of investment income is deducted from investment income.
Property and Equipment: Property and equipment is reported at cost less
allowances for depreciation. Depreciation is provided on the straight-line
method over the estimated useful lives of these assets which range from three
to ten years.
Goodwill: Goodwill represents the excess cost over the fair value of the net
assets acquired when United Investors was purchased by Torchmark Corporation
(Torchmark) in 1981 and is being amortized on a straight-line basis over forty
years.
Reclassification: Certain amounts in the financial statements presented have
been reclassified from amounts previously reported in order to be comparable
between years. These reclassifications have no effect on previously reported
shareholders' equity or net income during the periods involved.
F-8
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Reporting Comprehensive Income (FASB Statement No. 130) is effective for
fiscal years beginning after December 15, 1997. Reclassification of prior
periods for comparative financial statements is required.
This document establishes standards for presentation of comprehensive
income, a concept of income which, in addition to net income, includes all
changes in the equity of a company other than contributions from or
distributions to shareholders. Comprehensive income is to be categorized into
certain components, each of which is to be displayed prominently in United
Investors basic financial statements.
The most significant aspect of this Statement on United Investors is the
separate disclosure of the change in unrealized gain or loss on its fixed
investments as a component of comprehensive income, rather than as a direct
adjustment of shareholders' equity.
NOTE 2--STATUTORY ACCOUNTING
United Investors is required to file statutory financial statements with
state insurance regulatory authorities. Accounting principles used to prepare
these statutory financial statements differ from GAAP. Net income and
shareholder's equity on a statutory basis for United Investors were as
follows:
<TABLE>
<CAPTION>
NET INCOME SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, AT DECEMBER 31,
----------------------- ---------------------
1997 1996 1995 1997 1996
------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Life insurance................. $34,537 $26,640 $29,636 $156,676 $ 154,222
</TABLE>
The excess of shareholder's equity on a GAAP basis over that determined on a
statutory basis is not available for distribution to the shareholder without
regulatory approval.
A reconciliation of United Investors' statutory net income to GAAP net
income is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Statutory net income............................. $34,537 $26,640 $ 29,636
Deferral of acquisition costs.................... 33,485 33,744 28,870
Amortization of acquisition costs................ (24,898) (19,850) (16,602)
Differences in policy liabilities................ (2,113) (4,361) (6,774)
Deferred income taxes............................ (6,053) (773) (1,389)
Other............................................ (209) (134) (531)
------- ------- --------
GAAP net income.................................. $34,749 $35,266 $ 33,210
======= ======= ========
</TABLE>
A reconciliation of United Investors' statutory shareholder's equity to GAAP
shareholder's equity is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Statutory shareholder's equity.................... $156,676 $154,222
Differences in policy liabilities................. 9,540 20,834
Deferred acquisition costs and value of insurance
purchased........................................ 210,651 186,146
Deferred income taxes ............................ (52,639) (41,074)
Asset valuation reserve........................... 9,513 10,762
Nonadmitted assets................................ 1,850 1,856
Fair value adjustment on fixed maturities
available for sale............................... 23,043 3,703
Goodwill.......................................... 6,771 7,055
Due and deferred premiums......................... (30,334) (29,324)
Other............................................. (3,501) (2,118)
----------- -----------
GAAP shareholder's equity......................... $331,570 $ 312,062
=========== ===========
</TABLE>
F-9
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The NAIC requires that a risk based capital formula be applied to all life
and health insurers. The risk based capital formula is a threshold formula
rather than a target capital formula. It is designed only to identify
companies that require regulatory attention and is not to be used to rate or
rank companies that are adequately capitalized. United Investors is adequately
capitalized under the risk based capital formula.
NOTE 3--INVESTMENT OPERATIONS
Investment income is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Fixed maturities................................... $46,000 $46,366 $43,482
Equity securities.................................. 0 0 76
Policy loans....................................... 1,107 1,001 851
Other long-term investments........................ 1,614 1,211 1,681
Short-term investments............................. 436 287 717
Interest and dividends from affiliates............. 2,863 2,847 3,058
------- ------- -------
52,020 51,712 49,865
Less investment expense............................ (506) (584) (509)
------- ------- -------
Net investment income.............................. $51,514 $51,128 $49,356
======= ======= =======
Analysis of gains (losses) from investments:
Realized investment gains (losses)
Fixed maturities................................. $(5,235) $ 925 $ 319
Equity securities................................ 0 0 1,276
Mutual funds..................................... (130) 0 (154)
------- ------- -------
Net realized gains (losses)....................... $(5,365) $ 925 $ 1,441
======= ======= =======
Analysis of change in unrealized investment gains
(losses):
Net change in unrealized investment gains (losses)
on equity securities before tax................... $ 0 $ 0 $ (438)
Net change in unrealized investment gains on fixed
maturities available for sale before tax.......... 19,340 (21,767) 58,321
Other.............................................. 1,799 861 3,602
Adjustment to deferred acquisition costs........... (5,387) 8,857 (23,532)
Applicable tax..................................... (5,512) 4,217 (13,283)
------- ------- -------
Net change in unrealized gains (losses) on equity
and fixed maturity securities available for sale.. $10,240 $(7,832) $24,670
======= ======= =======
</TABLE>
F-10
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 3--INVESTMENT OPERATIONS (CONTINUED)
A summary of fixed maturities available for sale by amortized cost and
estimated market value at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
GROSS GROSS AMOUNT PER
AMORTIZED UNREALIZED UNREALIZED MARKET THE BALANCE
1997: COST GAINS LOSSES VALUE SHEET
- ----- --------- ---------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
Fixed maturities available
for sale:
Bonds:
U.S. Government direct
obligations and agen-
cies.................... $22,035 $ 857 $ 0 $22,892 $22,892
GNMA's................... 124,549 5,992 (146) 130,395 130,395
Mortgage-backed
securities, GNMA
collateral.............. 23,125 591 (3) 23,713 23,713
Other mortgage-backed se-
curities................ 20,980 916 0 21,896 21,896
States, municipalities
and political
subdivisions............ 28,603 517 0 29,120 29,120
Foreign governments...... 3,298 135 0 3,433 3,433
Public utilities......... 37,189 1,504 (39) 38,654 38,654
Industrial and miscella-
neous................... 352,821 12,986 (267) 365,540 365,540
------- ------ ------ ------- -------
Total fixed maturities... 612,600 23,498 (455) 635,643 635,643
======= ====== ====== ======= =======
<CAPTION>
1996:
- -----
<S> <C> <C> <C> <C> <C>
Fixed maturities available
for sale:
Bonds:
U.S. Government direct
obligations and agen-
cies.................... $21,832 $ 79 $ (270) $21,641 $21,641
GNMA's................... 150,505 6,297 (812) 155,990 155,990
Mortgage-backed
securities, GNMA
collateral.............. 34,904 785 (6) 35,683 35,683
Other mortgage-backed se-
curities................ 4,060 -0- -0- 4,060 4,060
States, municipalities
and political
subdivisions............ 45,544 383 (894) 45,033 45,033
Foreign governments...... 3,272 158 0 3,430 3,430
Public utilities......... 22,543 483 (345) 22,681 22,681
Industrial and miscella-
neous................... 338,517 3,737 (5,892) 336,362 336,362
------- ------ ------ ------- -------
Total fixed maturities... 621,177 11,922 (8,219) 624,880 624,880
======= ====== ====== ======= =======
</TABLE>
F-11
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 3--INVESTMENT OPERATIONS (CONTINUED)
A schedule of fixed maturities by contractual maturity at December 31, 1997
is shown below on an amortized cost basis and on a market value basis. Actual
maturities could differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
--------- --------
<S> <C> <C>
Fixed maturities available for sale;
Due in one year or less................................. $ 4,751 $ 4,824
Due after one year through five years................... 99,621 102,200
Due after five years through ten years.................. 202,692 209,387
Due after ten years..................................... 131,058 137,232
-------- --------
438,122 453,643
Mortgage- and asset-backed securities.................... 174,478 182,000
-------- --------
$612,600 $635,643
======== ========
</TABLE>
Proceeds from sales of fixed maturities available for sale were $113,035 in
1997, $15,246 in 1996, and $149,076 in 1995. Gross gains realized on these
sales were $112 in 1997, $749 in 1996, and $3,157 in 1995. Gross losses on
these sales were $5,716 in 1997, $0 in 1996, and $2,126 in 1995.
F-12
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 4--DEFERRED ACQUISITION COSTS
An analysis of deferred acquisition costs and the value of insurance
purchased is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ---------------------
DEFERRED VALUE OF DEFERRED VALUE OF DEFERRED VALUE OF
ACQUISITION INSURANCE ACQUISITION INSURANCE ACQUISITION INSURANCE
COSTS PURCHASED COSTS PURCHASED COSTS PURCHASED
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of
year................... $169,986 $16,160 $144,716 $18,679 $153,677 $20,983
Additions:
Deferred during peri-
od:
Commissions........... 27,664 0 28,492 0 24,258 0
Other expenses........ 5,821 0 5,252 0 4,611 0
-------- ------- -------- ------- -------- -------
Total deferred....... 33,485 0 33,744 0 28,869 0
Value of insurance
purchased............ 0 21,305 0 0 0 0
Adjustment attributable
to unrealized invest-
ment loss (1)......... 0 0 8,857 0 0 0
-------- ------- -------- ------- -------- -------
Total additions...... 33,485 21,305 42,601 0 28,869 0
Deductions:
Amortized during peri-
od................... (21,019) (3,711) (16,894) (2,519) (14,062) (2,304)
Adjustment attribut-
able to unrealized
investment gains (1). (5,387) 0 0 0 (23,532) 0
Adjustment attribut-
able to realized
investment gains (1). (168) 0 (437) 0 (236) 0
-------- ------- -------- ------- -------- -------
Total deductions..... (26,574) (3,711) (17,331) (2,519) (37,830) (2,304)
-------- ------- -------- ------- -------- -------
Balance at end of year.. $176,897 $33,754 $169,986 $16,160 $144,716 $18,679
======== ======= ======== ======= ======== =======
</TABLE>
- --------
(1) Represents amounts pertaining to investments relating to universal life-
type products.
The amount of interest accrued on the unamortized balance of value of
insurance purchased was approximately $938, $1,100, and $1,300 for the years
ended December 31, 1997, 1996 and 1995, respectively. The average interest
accrual rates used were 6.29%, 6.44% and 6.59%, respectively. The estimated
amount of the unamortized value of business purchased balance at December 31,
1997 to be amortized during each of the next five years is: 1998, $1,640;
1999, $1,443; 2000, $1,270; 2001, $1,118; 2002, $984.
In the event of lapses or early withdrawals in excess of those assumed,
deferred acquisition costs and the value of insurance purchased may not be
recoverable.
NOTE 5--PROPERTY AND EQUIPMENT
A summary of property and equipment used in the business is as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31,
1997 1996
------------------- -------------------
ACCUMULATED ACCUMULATED
COST DEPRECIATION COST DEPRECIATION
------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Data processing equipment............... $ 216 $ 161 $ 192 $ 147
Transportation equipment................ 132 55 132 37
Furniture and office equipment ......... 922 913 919 903
------ ------ ------ ------
Total................................. $1,270 $1,129 $1,243 $1,087
====== ====== ====== ======
</TABLE>
Depreciation expense on property and equipment used in the business was $42,
$44 and $52 in each of the years 1997, 1996, and 1995, respectively.
F-13
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 6--FUTURE POLICY BENEFIT RESERVES
A summary of the assumptions used in determining the liability for future
policy benefits at December 31, 1997 is as follows:
INDIVIDUAL LIFE INSURANCE
Interest Assumptions:
<TABLE>
<CAPTION>
PERCENT OF
YEARS OF ISSUE INTEREST RATES LIABILITY
-------------- --------------------- ----------
<S> <C> <C>
1962-1997 3% level to 6% level 10%
1986-1992 7.00% graded to 6.00% 21%
1962-1985 8.50% graded to 6.00% 5%
1981-1985 8.50% graded to 7.00% 4%
1984-1997 Interest sensitive 60%
----
100%
====
</TABLE>
Mortality assumptions:
The mortality tables used are various statutory mortality tables and
modifications of:
1965-70 Select and Ultimate Table
1975-80 Select and Ultimate Table
Withdrawal assumptions:
Withdrawal assumptions are based on United Investors' experience.
NOTE 7--INCOME TAXES
United Investors is included in the life-nonlife consolidated federal income
tax return filed by Torchmark. Under the tax allocation agreement with
Torchmark, a company with taxable income pays tax equal to the amount it would
pay if it filed a separate tax return. A company with a loss is paid a tax
benefit currently to the extent that affiliated companies with taxable income
utilize that loss.
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net operating income before income taxes......... $18,843 $19,078 $18,037
Shareholder's equity:
Unrealized gains (losses)....................... 5,512 (4,217) 13,283
Tax basis compensation expense in excess of
amounts recognized for financial reporting
purposes from the exercise of stock options.... (519) 0 (35)
Other........................................... 1 (152) 1
------- ------- -------
$23,837 $14,709 $31,286
======= ======= =======
</TABLE>
F-14
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 7--INCOME TAXES (CONTINUED)
Income tax expense before the adjustments to shareholder's equity is
summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current income tax expense............................. $12,790 $18,305 $16,648
Deferred income tax expense............................ 6,053 773 1,389
------- ------- -------
$18,843 $19,078 $18,037
======= ======= =======
</TABLE>
In 1997, 1996, and 1995, deferred income tax expense was incurred because of
the difference between net operating income before income taxes as reported on
the statements of operations and taxable income as reported on United
Investor's income tax returns. As explained in Note 1, this difference caused
the financial statement book values of some assets and liabilities to be
different from their respective tax bases.
The effective income tax rate differed from the expected 35% rate in 1997,
1996 and 1995 as shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 % 1996 % 1995 %
------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Expected income taxes.................. $18,757 35% $19,020 35% $17,936 35%
Increase (reduction) in income taxes
resulting from:
Tax-exempt investment income.......... (18) 0 (38) 0 (102) 0
Purchase accounting differences....... 99 0 99 0 99 0
Other................................. 5 0 (3) 0 104 0
------- --- ------- --- ------- ---
Income taxes........................... $18,843 35% $19,078 35% $18,037 35%
======= === ======= === ======= ===
</TABLE>
F-15
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 7--INCOME TAXES (CONTINUED)
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits and unearned and advance
premiums.......................................... $ 4,777 $ 5,936
Present value of future policy surrender charges... 13,925 9,636
Other liabilities, principally due to the current
nondeductibilty for tax purposes of certain
accrued expenses.................................. 203 147
----------- -----------
Total gross deferred tax assets.................... 18,905 15,719
----------- -----------
Net deferred tax assets............................ 18,905 15,719
----------- -----------
Deferred tax liabilities:
Deferred acquisition costs......................... 62,863 53,625
Unrealized investment gains........................ 7,914 2,402
Other.............................................. 767 766
----------- -----------
Total gross deferred tax liabilities............... 71,544 56,793
----------- -----------
Net deferred tax liability......................... 52,639 41,074
=========== ===========
</TABLE>
In United Investor's opinion, all deferred tax assets will be recoverable.
United Investors has not recognized a deferred tax liability of
approximately $2,200 that arose prior to 1984 on temporary differences related
to its policyholders' surplus account. A current tax expense will be
recognized in the future if and when this tax becomes payable.
NOTE 8--POSTRETIREMENT BENEFITS
Pension Plans: The full-time exempt employees of United Investors are
covered under a defined benefit pension plan and a defined contribution
savings plan. These plans cover primarily employees of other Torchmark and
United Management affiliates. The total costs of these retirement plans
charged to operations were as follows:
<TABLE>
<CAPTION>
DEFINED DEFINED
YEAR ENDED CONTRIBUTION BENEFIT
DECEMBER 31, PLANS PLAN
------------ ------------ -------
<S> <C> <C>
1997.................................................. $44 $118
1996.................................................. 41 115
1995.................................................. 39 75
</TABLE>
Net periodic pension cost for the defined benefit plan which covers United
Investors' full-time exempt employees has been calculated on the projected
unit credit actuarial cost method in accordance with SFAS 87,which was adopted
effective January 1, 1986. Contributions are made to the plan equal to pension
expense subject to minimums required by regulation and maximums allowed for
F-16
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 8--POSTRETIREMENT BENEFITS (CONTINUED)
tax purposes. United Investors records the difference between the SFAS 87
expense and the actual cash contribution to the plan to a liability account.
The liability recorded was $55 at December 31, 1997, and $55 at December 31,
1996. United Investors is one of several sponsors of the defined benefit plan.
The total unfunded plan liability recorded at December 31, 1997 was $459. The
plan is organized as a trust fund whose assets consist primarily of
investments in long-term fixed maturities and equity securities. Such assets
are valued at market.
United Investors accrues expense for the defined contribution plans based on
a percentage of the employees' contributions. The plans are funded by the
employee contributions and a company contribution.
Postretirement Benefit Plans Other Than Pensions: United Investors provides
certain health care benefits ("postretirement benefits") for its retired
employees. Substantially all employees may become eligible for these benefits
if they reach retirement age while working for the Company. Coverage under
this plan of health benefits ceases when the covered retiree and/or covered
spouse are eligible for Medicare benefits.
Postretirement benefit cost for the years ending December 31, 1997, 1996 and
1995 was $1, $5 and $3, respectively; this expense includes the expected cost
of post- retirement benefits for newly eligible or vested employees, the
interest cost, and gains and losses arising from differences between actuarial
assumptions and actual experience.
The unfunded postretirement benefit obligation for retirees and other fully
eligible or vested plan participants was $109 and $122 as of December 31, 1997
and 1996, respectively. The discount rate used in determining the accumulated
postretirement benefit obligation was 7.50% and the health care cost trend
rate was 9%, graded to 4.5% over 10 years.
NOTE 9--RELATED PARTY TRANSACTIONS
The primary distributor of United Investors' Insurance products is Waddell &
Reed, Inc. ("W&R"), a United Management affiliate. W&R receives a commission
for marketing these products which was approximately $29,600, $30,200, and
$25,700 for the years ended December 31, 1997, 1996, and 1995, respectively.
United Investors was charged for space, equipment, and services provided by
an affiliate amounting to $1,852 in 1997, $1,797 in 1996 and $1,706 in 1995.
Torchmark performed certain administrative services for United Investors for
which it charged $468 in 1997, $384 in 1996 and $156 in 1995.
In November 1994, United Investors loaned Torchmark $35,000 at an interest
rate of 8.11%. Interest income related to the Torchmark loans totaling $2,838
and $2,838 at December 31, 1997 and 1996, respectively, is included in the
accompanying financial statements. In January 1996, United Investors loaned
Liberty National $3,500 at an interest rate of 5.75%. This loan was paid in
full in February 1996. Interest income related to this loan totaling $9 at
December 31, 1996 is included in the accompanying financial statements. In
1997, United Investors loaned Torchmark, Liberty National and United American
$8,060, $10,520 and $5,500 respectively at an interest rate of 5.5% all of
which were repaid prior to December 31, 1997. Interest income related to these
loans totaling $1, $2, and $22 respectively are included in the accompanying
financial statements.
F-17
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 9--RELATED PARTY TRANSACTIONS (CONTINUED)
Effective January 1, 1997 United Investors assumed a block of annuity
products totaling $200,321 from United American Insurance Company (United
American), an affiliated company, on a 100% funds withheld coinsurance basis.
In connection with this transaction United Investors paid a ceding fee to
United American totaling $21,305, $10,000 of which was paid in cash, and
recorded a due from affiliates totaling $189, 016. As of December 31, 1997,
the funds withheld balance totaled $190, 235 and is included in due from
affiliates. Interest income on funds withheld at December 31, 1997 totaled
$11,876 and is included in other income. The reserve for annuity balances
assumed in connection with this transaction totaled $210,276 as of December
31, 1997.
United Investors serves as sponsor to four separate accounts and depositor
to two separate accounts of the underlying investment fund in connection with
its variable product business. At December 31, 1997 and 1996 United Investors
had investments of $16,542 and $14,000, in the separate accounts which were
included in other long-term invested assets and carried at market.
Other long-term invested assets also includes investments, carried at
market, in the United Group of Mutual Funds and certain other funds for which
W&R is the sole advisor. These investments approximated $5,946 and $5,159 at
December 31, 1997 and 1996. Investment income derived from these investments
is included in net investment income.
NOTE 10--COMMITMENTS AND CONTINGENCIES
Reinsurance: United Investors reinsures that portion of insurance risk which
is in excess of its retention limit. The maximum net retention limit for
ordinary life insurance is $500 per life. Life insurance ceded represented 2%
of total life insurance in force at December 31, 1997 and 4% of premium income
for 1997. United Investors would be liable for the reinsured risks ceded to
other companies to the extent that such reinsuring companies are unable to
meet their obligation. Except as disclosed in Note 9, United Investors does
not assume insurance risks of other companies.
Restrictions on the transfer of funds: Regulatory restrictions exist on the
transfer of funds from insurance companies. These restrictions generally limit
the payment of dividends to the statutory net gain from operations of the
prior year in the absence of special approval. Additionally, insurance
companies are not permitted to distribute the excess of shareholder's equity
as determined on a GAAP basis over that determined on a statutory basis.
Restricted net assets at December 31, 1997 in compliance with all regulations
were $177,894.
Litigation: United Investors is engaged in routine litigation arising from
the normal course of business. In management's opinion, this litigation will
not materially affect United Investors' financial position or results of
operations.
Concentrations of credit risk: United Investors maintains a highly
diversified investment portfolio with limited concentration in any given
region, industry, or economic characteristic. The investment portfolio
consists of securities of the U.S. government or U.S. government-backed
securities (26%); securities of state and municipal governments (4%)
investment-grade corporate bonds (53%), non government guaranteed mortgaged
backed securities (3%), United Funds (3%); and policy loans (3%) which are
secured by the underlying insurance policy value. The balance of the portfolio
is invested in short-term investments (2%), and non investment grade
securities (6%).
F-18
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 10--COMMITMENTS AND CONTINGENCIES (CONTINUED)
Investments in municipal governments and corporations are made throughout the
U.S. with no concentration in any given state. Corporate debt investments are
made in a wide range of industries. At December 31, 1997, 1% or more of the
portfolio was invested in the following industries: financial services (21%);
public utilities (6%); chemicals and allied products (5%); transportation
(5%); manufacturing (4%); consumer goods (4%); media and communications (3%);
services (3%); machinery and equipment (2%); petroleum (2%); paper and allied
products (1%); and assets-backed securities (1%). At the end of 1997, 6% of
the carrying value of securities was rated below investment grade. Par value
of these investments was $42,275, amortized cost was $43,075, and market value
was $44,076. While these investments could be subject to additional credit
risk, such risk should generally be reflected in market value.
Collateral requirements: United Investors requires collateral for
investments in instruments where collateral is available and typically
required because of the nature of the investment. Since the majority of United
Investor's investments are in government, government-secured, or corporate
securities, the requirement for collateral is rare.
NOTE 11--SUPPLEMENTAL DISCLOSURES FOR CASH FLOW STATEMENT
The following table summarizes United Investors' noncash transactions, which
are not reflected on the statement of cash flow as required by GAAP:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Due from affiliates.............................. 189,016 0 0
Value of business acquired....................... 11,305 0 0
Future policy benefits........................... 200,321 0 0
The following table summarizes certain amounts paid during the period:
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Taxes paid....................................... $8,631 $22,111 $15,393
</TABLE>
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
United Investors Life Insurance Company
And the Contract Owners of the
United Investors Universal Life Variable Account
Birmingham, Alabama
We have audited the accompanying balance sheet of United Investors Universal
Life Variable Account as of December 31, 1997 and the related statement of
operations and changes in net assets for the period ended December 31, 1997.
These financial statements are the responsibility of the United Investors Life
Insurance Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Investors Universal
Life Variable Account at December 31, 1997 and the results of its operations
and changes in its net assets for the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Birmingham, Alabama
April 9, 1998
F-20
<PAGE>
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY HIGH SMALL LIMITED ASSET
MARKET BOND INCOME GROWTH INCOME INTERNATIONAL CAP BALANCED TERM BOND STRATEGY
--------- --------- --------- --------- --------- ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in
Mutual Funds
(Note B)........ $ 384 $ 1,925 $ 4,535 $ 33,442 $ 56,261 $ 16,648 $ 24,184 $ 4,966 $ 0 $ 590
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total assets.... 384 1,925 4,535 33,442 56,261 16,648 24,184 4,966 0 590
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Liabilities:
Mortality and
expense risk
charge payable
to Sponsor
(Note D)........ 0 0 1 3 5 2 4 1 0 0
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total liabili-
ties........... 0 0 1 3 5 2 4 1 0 0
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Net assets (Note
C)............. $ 384 $ 1,925 $ 4,534 $ 33,439 $ 56,256 $ 16,646 $ 24,180 $ 4,965 $ 0 $ 590
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Equity:
Equity of
contract
owners......... $ 384 $ 1,925 $ 4,534 $ 33,439 $ 56,256 $ 16,646 $ 24,180 $ 4,965 $ 0 $ 590
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total equity.... $ 384 $ 1,925 $ 4,534 $ 33,439 $ 56,256 $ 16,646 $ 24,180 $ 4,965 $ 0 $ 590
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Accumulation
units outstand-
ing............ 382 1,900 4,466 32,238 54,638 15,796 23,404 4,842 0 576
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Net asset value
per unit....... $1.005593 $1.012926 $1.015105 $1.037254 $1.029610 $1.053795 $1.033180 $1.025294 $0.000000 $1.024810
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
<CAPTION>
SCIENCE AND
TECHNOLOGY TOTAL
----------- --------
<S> <C> <C>
Assets:
Investments in
Mutual Funds
(Note B)........ $ 11,916 $154,851
----------- --------
Total assets.... 11,916 154,851
----------- --------
Liabilities:
Mortality and
expense risk
charge payable
to Sponsor
(Note D)........ 1 17
----------- --------
Total liabili-
ties........... 1 17
----------- --------
Net assets (Note
C)............. $ 11,915 $154,834
=========== ========
Equity:
Equity of
contract
owners......... $ 11,915 $154,834
----------- --------
Total equity.... $ 11,915 $154,834
=========== ========
Accumulation
units outstand-
ing............ 11,677 149,919
=========== ========
Net asset value
per unit....... $1.020345
===========
</TABLE>
See Notes to Financial Statements.
F-21
<PAGE>
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MONEY HIGH SMALL LIMITED ASSET
MARKET BOND INCOME GROWTH INCOME INTERNATIONAL CAP BALANCED TERM BOND STRATEGY
------ ------- ------- -------- -------- ------------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend income
(Note B, D)....... $ 0 $ 111 $ 363 $ 1,670 $ 2,354 $ 530 $ 4,089 $ 203 $ 0 $ 23
Expenses paid to
Sponsor (Note D):
Mortality and ex-
pense risk
charge........... 0 0 1 3 5 2 4 1 0 0
Contract maintenance charges:
Administrative
expense......... 1 6 12 125 178 39 73 27 0 4
Guaranteed death
benefit......... 0 1 5 37 51 16 26 7 0 1
Costs of insur-
ance............ 15 75 176 998 1,331 374 537 201 0 14
Waiver monthly
deduction....... 0 1 1 10 14 3 4 7 0 1
Accidental death
rider........... 0 0 0 0 3 0 0 2 0 0
Child term rider. 0 0 2 11 21 1 3 9 0 0
Additional insur-
ance rider...... 0 0 0 15 17 7 7 6 0 0
----- ------- ------- -------- -------- -------- -------- ------- --- -----
Total........... 16 83 197 1,199 1,620 442 654 260 0 20
Net investment in-
come (loss)....... (16) 28 166 471 734 88 3,435 (57) 0 3
Realized investment
gains (losses)
distributed to ac-
counts............ 0 0 0 0 0 0 0 0 0 0
Unrealized invest-
ment gains (loss-
es)............... 0 (109) (347) (1,327) (1,721) (473) (3,458) (167) 0 (23)
----- ------- ------- -------- -------- -------- -------- ------- --- -----
Net gain (loss) on
investments....... 0 (109) (347) (1,327) (1,721) (473) (3,458) (167) 0 (23)
----- ------- ------- -------- -------- -------- -------- ------- --- -----
Net decrease in net
assets from
operations........ (16) (81) (181) (856) (987) (385) (23) (224) 0 (20)
Premium deposits &
net transfers*.... 400 2,006 4,715 34,295 57,243 17,031 24,203 5,189 0 610
Investment by spon-
sor (Note E)...... 0 0 0 0 0 0 0 0 0 0
Transfer to sponsor
for benefits and
terminations...... 0 0 0 0 0 0 0 0 0
----- ------- ------- -------- -------- -------- -------- ------- --- -----
Total increase..... 384 1,925 4,534 33,439 56,256 16,646 24,180 4,965 0 590
Net assets at be-
ginning of peri-
od................ 0 0 0 0 0 0 0 0 0 0
----- ------- ------- -------- -------- -------- -------- ------- --- -----
Net assets at end
of period (Note
C)................ $ 384 $ 1,925 $ 4,534 $ 33,439 $ 56,256 $ 16,646 $ 24,180 $ 4,965 $ 0 $ 590
===== ======= ======= ======== ======== ======== ======== ======= === =====
<CAPTION>
SCIENCE AND
TECHNOLOGY TOTAL
----------- ----------
<S> <C> <C>
Dividend income
(Note B, D)....... $ 44 $ 9,387
Expenses paid to
Sponsor (Note D):
Mortality and ex-
pense risk
charge........... 1 17
Contract maintenance charges:
Administrative
expense......... 45 510
Guaranteed death
benefit......... 15 159
Costs of insur-
ance............ 337 4,058
Waiver monthly
deduction....... 6 47
Accidental death
rider........... 0 5
Child term rider. 4 51
Additional insur-
ance rider...... 7 59
----------- ----------
Total........... 415 4,906
Net investment in-
come (loss)....... (371) 4,481
Realized investment
gains (losses)
distributed to ac-
counts............ 0 0
Unrealized invest-
ment gains (loss-
es)............... 162 (7,463)
----------- ----------
Net gain (loss) on
investments....... 162 (7,463)
----------- ----------
Net decrease in net
assets from
operations........ (209) (2,982)
Premium deposits &
net transfers*.... 12,124 157,816
Investment by spon-
sor (Note E)...... 0 0
Transfer to sponsor
for benefits and
terminations...... 0 0
----------- ----------
Total increase..... 11,915 154,834
Net assets at be-
ginning of peri-
od................ 0 0
----------- ----------
Net assets at end
of period (Note
C)................ $ 11,915 $ 154,834
=========== ==========
</TABLE>
*Includes transfer activity from (to) other portfolios.
See Notes to Financial Statements.
F-22
<PAGE>
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization--The United Investors Universal Life Variable Account ("the
Universal Life Variable Account") was established on August 15, 1997 as a
segregated account of United Investors Life Insurance Company ("the Sponsor")
and has been registered as a unit investment trust under the Investment
Company Act of 1940. The Universal Life Variable Account invests in shares of
TMK/United Funds, Inc. ("the Fund"), a mutual fund with eleven separate
investment portfolios including a money market portfolio, a bond portfolio, a
high income portfolio, a growth portfolio, an income portfolio, an
international portfolio, a small cap portfolio, a balanced portfolio, a
limited term bond portfolio, an asset strategy portfolio and a science and
technology portfolio (established during 1997). The assets of each portfolio
of the Fund are held separate from the assets of the other portfolios. Thus,
each portfolio operates as a separate investment portfolio, and the investment
performance of one portfolio has no effect on any other portfolio.
Basis of Presentation--The financial statements of the Universal Life
Variable Account have been prepared on an accrual basis in accordance with
generally accepted accounting principles.
Federal Taxes --Currently no charge is made to the Universal Life Variable
Account for federal income taxes because no federal income tax is imposed on
the Sponsor for the Universal Life Variable Account investment income under
current tax law.
NOTE B--INVESTMENTS
Stocks and convertible bonds of the Fund are valued at the latest sale price
on the last business day of the fiscal period as reported by the principal
securities exchange on which the issue is traded or, if no sale is reported
for a stock, the average of the latest bid and asked prices. Bonds, other than
convertible bonds, are valued using a matrix pricing system provided by a
major dealer in bonds. Convertible bonds are valued using this pricing system
only on days when there is no sale reported. Stocks which are traded over the
counter are priced using NASDAQ (National Association of Securities Dealers
Automated Quotations) which provides information on bid and asked prices
quoted by major dealers in such stocks. Short term debt securities are valued
at amortized cost which approximates market.
Security transactions are accounted for by the Fund on the trade date (date
the order to buy or sell is executed). Securities gains and losses are
calculated on the specific identification method. Dividend income is recorded
on the ex-dividend date. Interest income is recorded on the accrual basis.
Investments in shares of the separate investment portfolios are stated at
market value which is the net asset value per share as determined by the
respective portfolios (see Note C-Net Assets). Dividends received by the
portfolios are reinvested daily in additional shares of the portfolios and are
recorded as dividend income on the record date.
F-23
<PAGE>
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of reinvested dividends by portfolio:
<TABLE>
<CAPTION>
1997
----
INVESTMENT PORTFOLIO SHARES REINVESTED DIVIDEND INCOME
-------------------- ----------------- ---------------
<S> <C> <C>
Money Market.................................. 0 $ 0
Bond.......................................... 21 111
High Income................................... 77 363
Growth........................................ 221 1,670
Income........................................ 197 2,354
International................................. 83 530
Small Cap..................................... 491 4,089
Balanced...................................... 30 203
Limited Term Bond............................. 0 0
Asset Strategy................................ 4 23
Science and Technology........................ 8 44
</TABLE>
F-24
<PAGE>
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE C--NET ASSETS
The following table illustrates by component parts the net asset value for
each portfolio.
<TABLE>
<CAPTION>
MONEY HIGH SMALL LIMITED ASSET SCIENCE AND
1997 MARKET BOND INCOME GROWTH INCOME INTERNATIONAL CAP BALANCED TERM BOND STRATEGY TECHNOLOGY
- ---- ------ ------ ------ ------- ------- ------------- ------- -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cost to:
Contract Owners... $400 $2,006 $4,715 $34,295 $57,243 $17,031 $24,203 $5,189 $ 0 $610 $12,124
Adjustment for
market appreciation
and reinvested
dividends.......... 0 2 16 343 633 57 631 36 0 0 206
Deductions:
Mortality and
expense risk
charge............ 0 0 (1) (3) (5) (2) (4) (1) 0 0 (1)
Contract
maintenance
charges:
Administrative
expense........... (1) (6) (12) (125) (178) (39) (73) (27) 0 (4) (45)
Guaranteed death
benefit........... 0 (1) (5) (37) (51) (16) (26) (7) 0 (1) (15)
Cost of insurance. (15) (75) (176) (998) (1,331) (374) (537) (201) 0 (14) (337)
Waiver monthly
deduction......... 0 (1) (1) (10) (14) (3) (4) (7) 0 (1) (6)
Accidental death
rider............. 0 0 0 0 (3) 0 0 (2) 0 0 0
Child term rider.. 0 0 (2) (11) (21) (1) (3) (9) 0 0 (4)
Additional
insurance rider... 0 0 0 (15) (17) (7) (7) (6) 0 0 (7)
Benefits &
terminations...... 0 0 0 0 0 0 0 0 0 0 0
---- ------ ------ ------- ------- ------- ------- ------ --- ---- -------
Net assets......... $384 $1,925 $4,534 $33,439 $56,256 $16,646 $24,180 $4,965 $ 0 $590 $11,915
==== ====== ====== ======= ======= ======= ======= ====== === ==== =======
</TABLE>
F-25
<PAGE>
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE D--CHARGES AND DEDUCTIONS
Fund Management and Fees
Waddell & Reed Investment Management Company ("the Manager"), is the manager
of the Fund and provides investment advisory services to the Fund. Each
portfolio will pay the manager a fee for managing its investments consisting
of two elements: (i) a specific fee computed on each portfolio's net asset
value at the close of business each day at the following annual Rates; Money
Market Portfolio none; Bond Portfolio .03% of net assets; High Income
Portfolio .15% of net assets; Growth Portfolio .20% of net assets; Income
Portfolio .20% of net assets; International Portfolio .30% of net assets;
Small Cap Portfolio .35% of net assets; Balanced Portfolio .10% of net assets;
Limited Term Bond Portfolio .05% of net assets; Asset Strategy Portfolio .30%
of net assets; Science and Technology .20% of net assets, and (ii) a pro rata
participation based on the relative net asset size of each portfolio in a
"Group" fee computed each day on the combined net asset values of all of the
portfolios at the following annual rates: Group Net Asset Level from $0 to
$750 million--Annual Group Fee Rate--.51%; from $750 to $1,500 million--.49%;
from $1,500 to $2,250 million--.47%; over $2,250 million--.45%. Fees for these
services are deducted from dividend income. The amount of these fees have
been:
<TABLE>
<CAPTION>
1997
----
<S> <C>
Money Market............................................................ $ 1
Bond.................................................................... 0
High Income............................................................. 1
Growth.................................................................. 10
Income.................................................................. 17
International........................................................... 5
Small Cap............................................................... 8
Balanced................................................................ 1
Limited Term Bond....................................................... 0
Asset Strategy.......................................................... 0
Science and Technology.................................................. 3
</TABLE>
Mortality and Expense Risk Charges
United Investors currently deducts a daily charge from assets in the
Investment Divisions attributable to the Policies at an effective annual rate
of 0.90% of Variable Account assets during the first 10 Policy Years, and at
an effective annual rate of 0.70% thereafter. The maximum mortality and
expense risk charge is 0.90% of Variable Account assets for all Policy Years.
The mortality and expense risk charge does not apply to Fixed Account assets.
Profit from this charge may be used for any purpose, including distribution
expenses.
Premium Deposit Charges
United Investors deducts a 3.5% charge from each premium before allocating
the resulting Net Premium to the Policy Value. This charge is deducted for
state premium taxes and federal income tax treatment of deferred acquisition
costs.
F-26
<PAGE>
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Monthly Deduction
United Investors deducts the Monthly Deduction on the Policy Date and on
each Monthly Anniversary from Policy Value in the Variable Account and the
Fixed Account on a pro rata basis. The Monthly Deduction for each Policy
consists of:
(1) the cost of insurance charge discussed below;
(2) a current monthly administrative charge of $5.00 (which may increase to
a maximum charge of $7.50 per month);
(3) the Guaranteed Death Benefit Charge ($0.01 per $1,000 of Face Amount)
as long as the Death Benefit Guarantee remains in effect; and
(4) charges for any supplemental benefits added by Riders to the Policy.
Surrender Charges
If the Policy is surrendered prior to the end of the 16th Policy Year or the
end of the 16th year following an increase in Face Amount, United Investors
will deduct a surrender charge based on the Face Amount at issue, or increase,
as applicable. The surrender charge will be deducted before any surrender
proceeds are paid. A pro rata portion of the Surrender Charge will also be
deducted for any Face Amount decreases. The surrender charge varies based on
the Insured's age on the Policy Date, or Attained Age at the time of an
increase, and is calculated as an amount per $1,000 of the Face Amount. For
each age the surrender charge remains level for the first five Policy Years
(or the first five years after a Face Amount increase) and declines each year
thereafter until it reaches zero at the end of the 16th Policy Year (or at the
end of the 16th year after an increase in Face Amount).
During the first five Policy Years (or first five years after a Face Amount
increase) the surrender charge per $1,000 of Face Amount is as follows for the
selected ages below:
<TABLE>
<CAPTION>
ISSUE AGE CHARGE PER $1,000 OF FACE AMOUNT
--------- --------------------------------
<S> <C>
25.......................................... $ 6.00
35.......................................... $ 7.00
45.......................................... $ 8.75
50.......................................... $10.00
55.......................................... $11.50
65.......................................... $16.75
75.......................................... $26.00
</TABLE>
Partial Surrender Charge
A Partial Surrender charge equal to the lesser of $25 or 2% of the Partial
Surrender amount, plus a portion of the surrender charge will apply to each
Partial Surrender. This charge will be deducted from the Policy Value along
with the Partial Surrender amount.
Cost of Insurance
A mortality charge will be deducted monthly to compensate the Sponsor for
the cost of insurance for the preceding policy year. The mortality charge is
based on a policy's net amount at risk and on the attained age, sex and risk
class of the insured, and is determined by the Sponsor based upon its
expectation as to future mortality experience.
F-27
<PAGE>
UNITED INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE E--SELECTED UNIT DATA
Selected data for a weighted average unit of the Life Variable Separate
Account outstanding throughout 1997 follows.
<TABLE>
<CAPTION>
MONEY HIGH SMALL LIMITED ASSET SCIENCE AND
MARKET BOND INCOME GROWTH INCOME INTERNATIONAL CAP BALANCED TERM BOND STRATEGY TECHNOLOGY
------ ------ ------ ------ ------ ------------- ------ -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend income. $0.00 $ 0.06 $ 0.08 $ 0.05 $ 0.04 $ 0.03 $ 0.17 $ 0.04 $0.00 $ 0.04 $0.00
Expenses........ 0.04 0.04 0.04 0.04 0.03 0.03 0.03 0.05 0.00 0.03 0.04
----- ------ ------ ------ ------ ------ ------ ------ ----- ------ -----
Investment
income (loss)-
net............ (0.04) 0.02 0.04 0.01 0.01 0.00 0.14 (0.01) 0.00 0.01 (0.04)
Net realized and
unrealized
investments
gains (losses). 0.00 (0.06) (0.08) (0.04) (0.03) (0.03) (0.15) (0.03) 0.00 (0.04) 0.01
Premium deposits
& net
transfers...... 1.05 1.06 1.06 1.06 1.05 1.08 0.91 1.07 0.00 1.06 1.04
Transfer to
sponsor for
benefits and
terminations... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
----- ------ ------ ------ ------ ------ ------ ------ ----- ------ -----
Total increase
in net value... 1.01 1.02 1.02 1.03 1.03 1.05 0.90 1.03 0.00 1.03 1.01
Net asset value,
beginning of
the period..... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
----- ------ ------ ------ ------ ------ ------ ------ ----- ------ -----
Net asset value,
end of the
period......... $1.01 $ 1.02 $ 1.02 $ 1.03 $ 1.03 $ 1.05 $ 0.90 $ 1.03 $0.00 $ 1.03 $1.01
===== ====== ====== ====== ====== ====== ====== ====== ===== ====== =====
</TABLE>
F-28
<PAGE>
PART II
-------
UNDERTAKING TO FILE REPORTS
---------------------------
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
--------------------
In-so-far as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act will be
governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
----------------------------------------------
United Investors Life Insurance Company hereby represents that the
fees and charges deducted under the Policy, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by United Investors Life Insurance Company.
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 67 pages.
Undertaking to file reports.
Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written consents of the following persons: James L. Sedgwick; W. Thomas
Aycock; KPMG Peat Marwick LLP; and Sutherland, Asbill & Brennan LLP
The following exhibits, corresponding to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
1. A.
(1) Resolution of the Board of Directors of United Investors Life
Insurance Company establishing United Investors Universal Life
Variable Account.\1\
(2) Not Applicable
(3) (a) Form of Underwriting Agreement\3\
(4) Not applicable
(5) (a) Specimen Flexible Premium Variable Life Insurance Policy\1\
(b) Accelerated Death Benefit Rider \1\
(c) Disability Waiver of Monthly Deduction Rider \1\
(d) Additional Insured Term Insurance Rider \1\
(e) Children's Term Insurance Rider \1\
(f) Accidental Death Benefit Rider \1\
(6) (a) Articles of Incorporation of United Investors Life
Insurance Company. \2\
(b) By-laws of United Investors Life Insurance Company.\2\
(7) Not applicable
(8) Form of Participation Agreement\3\
(9) Not applicable
(10) Application form\3\
(11) Description of issuance, transfer and redemption procedures.\3\
-2-
<PAGE>
2. Opinion and consent of James L. Sedgwick as to the legality of
the securities being registered./3/
3. Not applicable
4. Not applicable
5. Not applicable
6. Opinion and consent of W. Thomas Aycock as to actuarial matters
pertaining to the securities being registered./4/
7. (a) Consent of independent accountants/4/
(b) Consent of Sutherland, Asbill & Brennan LLP/4/
(c) Consent of James L. Sedgwick/4/
27. Financial Data Exhibit/4/
- -----------------------------
/1/ Incorporated herein by reference to the initial registration statement on
Form S-6 (File No. 333-26505) filed on behalf of the Registrant on May 5,
1997.
/2/ Incorporated herein by reference to Post-Effective Amendment No. 14 to the
registration statement No. 33-11465.
/3/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to
registration statement No. 333-26505.
/4/ Filed herewith
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, United Investors
Life Insurance Company certifies that it meets all the requirements for
effectiveness of this Post-Effective Amendment No. 1 pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Birmingham and the State of Alabama, on this 29th
day of April, 1998.
(Seal) United Investors Life Insurance Company
Attest: /s/ John H. Livingston By: /s/ James L. Sedgwick
__________________________ ----------------------------------------
John H. Livingston James L. Sedgwick
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 1 to the Registration Statement has been signed below by the
following Directors and Officers of United Investors Life Insurance Company in
the capacities and on the Dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ C. B. Hudson
- ------------------------- Director, Chairman of the Board of ----------
C. B. Hudson Directors, and Chief Executive Officer
/s/ James L. Sedgwick
- ------------------------- Director and President ----------
James L. Sedgwick
/s/ W. Thomas Aycock
- ------------------------- Vice President and Chief Actuary, ----------
W. Thomas Aycock Director
/s/ Tony G. Brill
- ------------------------- Senior Vice President and Director ----------
Tony G. Brill
/s/ Larry M. Hutchison
- ------------------------- Director ----------
Larry M. Hutchison
/s/ Michael J. Klyce
- ------------------------- Vice President and Treasurer ----------
Michael J. Klyce
/s/ James L. Mayton, Jr.
- ------------------------- Vice President and Controller ----------
James L. Mayton, Jr.
/s/ John H. Livingston
- ------------------------- Director, Secretary and Counsel ----------
John H. Livingston
/s/ Anthony L. McWhorter
- ------------------------- Director ----------
Anthony L. McWhorter
/s/ Carol A. McCoy
- ------------------------- Director and Assistant Secretary ----------
Carol A. McCoy
<PAGE>
/s/ Ross W. Stagner
- ------------------------- Vice President and Director ----------
Ross W. Stagner
/s/ William L. Surber
- ------------------------- Vice President and Director ----------
William L. Surber
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, United Investors Universal Life Variable Account, certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
No. 1 pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in Birmingham, Alabama on the 29th day
of April, 1998.
United Investors Universal Life Variable Account
(Registrant)
United Investors Life Insurance Company
(Depositor)
Attest: /s/ John H. Livingston By: /s/ James L. Sedgwick
-------------------------- -------------------------------
John H. Livingston James L. Sedgwick
<PAGE>
Exhibit Index
6. Opinion and consent of W. Thomas Aycock as to actuarial matters
pertaining to the securities being registered
7.(a) Consent of KPMG Peat Marwick LLP
7.(b) Consent of Sutherland, Asbill & Brennan LLP
7.(c) Consent of James L. Sedgwick, Esq.
27. Financial Data Schedule
<PAGE>
Exhibit 6
[LETTERHEAD OF UNITED INVESTORS LIFE APPEARS HERE]
April 29, 1998
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, AL 35233
Gentlemen:
In my capacity as Vice President and Chief Actuary of United Investors
Life Insurance Company, I have provided advice concerning the illustration of
death benefits and policy values set forth in the prospectus contained in the
Registration Statement for the United Investors Universal Life Variable
Account filed on Form S-6 (File No. 333-26505) with the Securities and
Exchange Commission under the Securities Act of 1933 (the "Registration
Statement") regarding the offer and sale of flexible premium variable life
insurance policies (the "Policies").
It is my professional opinion that the illustration of death benefits
and policy values included in of the prospectus, based on the assumptions
stated in the illustrations, are consistent with the provisions of the Policy.
The rate structure of the Policy has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear more favorable to a purchaser of a Policy for male age 35 standard non-
tobacco or male age 50 standard non-tobacco than to prospective purchasers of
Policies at other ages or underwriting classes.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Sincerely,
/s/ W. Thomas Aycock
----------------------------------
W. Thomas Aycock
Vice President and Chief Actuary
<PAGE>
Exhibit 7(a)
April 29, 1998
The Board of Directors of
United Investors Life Insurance Company
and the Contract Owners of the United
Investors Universal Life Variable Account
We consent to the use of our report dated February 2, 1998 except for Note 1
which is as of March 3, 1998, relating to the balance sheets of United Investors
Life Insurance Company as of December 31, 1997 and 1996, and the related
statements of operations, shareholder's equity, and cash flow for each of the
years in the three-year period ended December 31, 1997, and also to the use of
our report dated April 9, 1998, relating to the balance sheet of United
Investors Universal Life Variable Account as of December 31, 1997, and the
related statements of operations and changes in net assets for the period then
ended, as contained in Post-Effective Amendment No. 1 to Form S-6 for United
Investors Universal Life Variable Account. We also consent to the reference to
our firm under the heading "Experts" in the Prospectus.
KPMG PEAT MARWICK LLP
Birmingham, Alabama
April 29, 1998
<PAGE>
Exhibit 7(b)
[Letterhead of Sutherland, Asbill & Brennan LLP]
April 29, 1998
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus filed as part of Post-Effective Amendment No. 1 to
the Form S-6 registration statement for United Investors Universal Life Variable
Account (File No. 333-26505). In giving this consent, we do not admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Sincerely,
SUTHERLAND, ASBILL & BRENNAN LLP
By: /s/ Frederick R. Bellamy, Esq.
---------------------------------
Frederick R. Bellamy, Esq.
<PAGE>
Exhibit 7(c)
April 29, 1998
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, AL 35233
Gentlemen:
I hereby consent to the continued use of my opinion dated August 1, 1997 as
an Exhibit to the Form S-6 Registration Statement for United Investors Universal
Life Variable Account (No. 333-26505) and my name under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement.
Very truly yours,
/s/ James L. Sedgwick, Esq.
-----------------------------------
James L. Sedgwick, Esq.
President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED
INVESTORS UNIVERSAL LIFE VARIABLE ACCOUNT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 157,816
<INVESTMENTS-AT-VALUE> 154,851
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,851
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17
<TOTAL-LIABILITIES> 17
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 154,834
<DIVIDEND-INCOME> 9,387
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,906
<NET-INVESTMENT-INCOME> 4,481
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (7,463)
<NET-CHANGE-FROM-OPS> (2,982)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 154,384
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,906
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
