AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1997
REGISTRATION NO. 333-20443
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
COMPANION LIFE SEPARATE ACCOUNT B
(EXACT NAME OF TRUST)
COMPANION LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
Mutual of Omaha Plaza, Omaha, Nebraska 68175
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
NAME AND ADDRESS OF
AGENT FOR SERVICE:
Kenneth W. Reitz, Esquire
Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
(TITLE, AMOUNT, AND PROPOSED MAXIMUM OFFERING PRICE
OF SECURITIES BEING REGISTERED)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
declares that an indefinite amount of securities are being registered under the
Securities Act of 1933.
-------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
<PAGE>
COMPANION LIFE SEPARATE ACCOUNT B
Registration Statement on Form S-6
Cross-Reference Sheet
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
1 Cover Page
2 Cover Page
3 Inapplicable
4 Distribution of the Policies
5 About Us
6 The Variable Account
9 Inapplicable
10(a) Policy Application and Issuance
10(b) Distributions
10(c),(d),(e) Distributions; Lapse and Grace Period; Reinstatement
10(f),(g),(h) Voting Rights; Other Policy Owner Tax Matters
10(i) Other Policy Provisions
11 The Variable Account
12 The Variable Account; Distribution of the Policies
13 Charges and Fees; Tax Matters; Tax Treatment of Loans and
Other Distributions; Distribution of the Policies;
Appendix A
14 Premium Payments
15 Premium Payments
16 The Variable Account
17 Captions referenced under Items 10(c),(d),(e)and (i) above
18 The Variable Account
19 Reports to You; Voting Rights; Distribution of the Policies
20 Captions referenced under Items 6 and 10(g) above
21 Policy Loans
22 Inapplicable
23 Distribution of the Policies
24 Other Policy Provisions
25 About Us
26 Distribution of the Policies
27 About Us
28 Management
29 About Us
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Inapplicable
35 About Us
36 Inapplicable
37 Inapplicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Inapplicable
41(a) Distribution of the Policies
42 Inapplicable
43 Inapplicable
44(a) The Variable Account; Premium Payments
44(b) Charges and Fees; Distribution of the Policies
44(c) Mortality and Expense Risk Charge
45 Inapplicable
46 The Variable Account; Captions referenced under
Items 10(c), (d) and (e) above
47 Inapplicable
48 About Us
49 Inapplicable
50 The Variable Account
51 Cover Page, Definitions (Beneficiary), Summary, The Policy,
Payment of Proceeds, Payment Options, Tax Matter,
Distribution of the Policies
52 Other Policy Owner Tax Matters
53 Tax Matters
54 Inapplicable
55 Inapplicable
59 Financial Statements
<PAGE>
COMPANION
OF NEW YORK
[GRAPHIC OMITTED] PROSPECTUS: Dated June 20, 1997
A MUTUAL OF OMAHA COMPANY
ULTRA VARIABLE LIFE
Individual Modified Single Premium
Variable Universal Life Insurance Policy
This prospectus describes ULTRA VARIABLE LIFE, an individual modified single
premium variable universal life insurance policy ("Policy") offered by Companion
Life Insurance Company ("we, us, our, Companion") to applicants age 90 and
under.
The Policy provides for the payment of a Death Benefit upon the death of the
Insured, and for a Cash Surrender Value that can be obtained by surrendering the
Policy. The Policy is a variable policy because the Death Benefit may, and the
Accumulation Value will, vary up or down to reflect the investment experience of
amounts allocated to COMPANION LIFE SEPARATE ACCOUNT B (the "Variable
Account"). The Policy Owner ("you, your") bears the investment risk for all
amounts so allocated; there is no guaranteed minimum Accumulation Value. The
Policy continues in effect while the Accumulation Value is sufficient to pay the
Monthly Deduction Amount or until the end of the Death Benefit guarantee period
(assuming no Policy loans are taken), whichever is later.
The minimum initial premium is $20,000. Additional payments may be made once
each Policy Year, subject to certain restrictions
You may, within limits, allocate premiums (net of any charges) to one or more of
the twenty-four eligible investments, which are the twenty-three Subaccounts of
the Variable Account and the Fixed Account. Assets of each Subaccount of the
Variable Account are invested in a corresponding mutual fund Portfolio. The
Portfolios are described in separate prospectuses that accompany this
Prospectus. The Policy's available investment options are:
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FEDERATED PRIME MONEY FUND II("MONEY MARKET") PORTFOLIO
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES PORTFOLIO
FIDELITY ASSET MANAGER: GROWTH PORTFOLIO
FIDELITY EQUITY INCOME PORTFOLIO
FIDELITY CONTRAFUND PORTFOLIO
FIDELITY INDEX 500 PORTFOLIO
MFS EMERGING GROWTH PORTFOLIO
MFS HIGH INCOME FUND PORTFOLIO
MFS RESEARCH PORTFOLIO
MFS WORLD GOVERNMENT PORTFOLIO
MFS VALUE SERIES PORTFOLIO
PIONEER CAPITAL GROWTH PORTFOLIO
PIONEER REAL ESTATE PORTFOLIO
SCUDDER GLOBAL DISCOVERY PORTFOLIO
SCUDDER GROWTH & INCOME PORTFOLIO
SCUDDER INTERNATIONAL PORTFOLIO
T. ROWE PRICE EQUITY INCOME PORTFOLIO
T. ROWE PRICE INTERNATIONAL PORTFOLIO
T. ROWE PRICE LIMITED TERM BOND PORTFOLIO
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO
FIXED ACCOUNT
Partial withdrawals and Policy loans may be taken from time to time, subject to
certain restrictions. In almost all cases, the Policy will be a modified
endowment contract for federal income tax purposes. ANY POLICY LOAN, PARTIAL
WITHDRAWAL OR SURRENDER MAY RESULT IN ADVERSE TAX CONSEQUENCES AND/OR PENALTIES.
IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING LIFE INSURANCE WITH THE POLICY
DESCRIBED IN THIS PROSPECTUS.
AN INTEREST IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR EACH PORTFOLIO.
ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
COMPANION LIFE INSURANCE COMPANY, P. O. Box 3664, Omaha, Nebraska 68103-0664
(800) 494-0067
<PAGE>
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TABLE OF CONTENTS
PAGE
DEFINITIONS
SUMMARY
BASIC FEATURES OF YOUR POLICY
COMPARISON TO OTHER POLICIES AND OTHER INVESTMENTS
POLICY FLOW CHART
ABOUT US
ALLOCATION OF PREMIUMS
THE VARIABLE ACCOUNT
THE FIXED ACCOUNT
TRANSFERS
DOLLAR COST AVERAGING
ASSET ALLOCATION PROGRAM
THE POLICY
POLICY APPLICATION AND ISSUANCE
PREMIUM PAYMENTS
LAPSE AND GRACE PERIOD
REINSTATEMENT
MATURITY DATE
DISTRIBUTIONS
POLICY LOANS
SURRENDER
PARTIAL WITHDRAWALS
DEATH BENEFIT
GUARANTEED DEATH BENEFIT
PAYMENT OF PROCEEDS
PAYMENT OPTIONS
CHARGES AND FEES
CHARGES DEDUCTED FROM THE POLICY
DEDUCTIONS FROM INITIAL PREMIUM; MONTHLY DEDUCTIONS; CHARGES DEDUCTED ON
SURRENDER OR PARTIAL WITHDRAWAL
MORE INFORMATION ABOUT THE ABOVE CHARGES
SURRENDER CHARGE; EXPENSE CHARGE; COST OF INSURANCE CHARGE; TRANSFER CHARGES
SERIES FUND CHARGES
OTHER POLICY PROVISIONS
NOTICE TO US; ENTIRE CONTRACT; RIGHT TO EXAMINE; DELAY OF PAYMENTS; CHANGE
OF OWNERSHIP AND ASSIGNMENT; BENEFICIARY; BENEFICIARY CHANGE; MISSTATEMENT
OF AGE OR SEX; SUICIDE; INCONTESTABILITY; COVERAGE BEYOND MATURITY;
REINSTATEMENT; NONPARTICIPATING
TAX MATTERS
MANAGEMENT
OTHER INFORMATION
REPORTS TO YOU; VOTING RIGHTS;
DISTRIBUTION OF THE POLICIES; STATE REGULATION;
LEGAL MATTERS; INDEPENDENT AUDITORS; REGISTRATION STATEMENT
ILLUSTRATIONS
DEATH BENEFIT, CASH SURRENDER VALUE AND ACCUMULATED PREMIUMS
FINANCIAL STATEMENTS
THIS PROSPECTUS IS NOT AN OFFERING ANYWHERE WHERE SUCH AN OFFERING CANNOT BE
LAWFULLY MADE. NO ONE IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE
REPRESENTATIONS ABOUT THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF THEY DO, YOU SHOULD NOT RELY UPON SUCH REPRESENTATIONS.
<PAGE>
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DEFINITIONS
ACCUMULATION UNITS means an accounting unit of measure used to calculate the
accumulation value of the Variable Account.
ACCUMULATION VALUE means the dollar value as of any Valuation Date of all
amounts accumulated under the Policy.
ALLOCATION DATE means the first business day following the completion of the
RIGHT TO EXAMINE THIS POLICY period or our approval of an additional premium
payment.
BENEFICIARY refers to the person(s) or entity you name to receive the Death
Benefit of the Policy.
CASH SURRENDER VALUE means the Accumulation Value at the end of the applicable
Valuation Date, less any outstanding Policy loans and unpaid loan interest, and
less any applicable Surrender Charge.
FIXED ACCOUNT means the account which consists of general account assets of
Companion Life Insurance Company.
INSURED refers to the individual named on the application whose life is the
basis for the death benefit protection provided by the Policy.
LOAN ACCOUNT means an account established for any amounts transferred from the
Fixed Account and Subaccounts as a result of loans. The Loan Account is credited
with interest and is not based on the investment experience of the Variable
Account.
MONTHLY DEDUCTION DATE means the date of issue and the same date each month
thereafter.
MONTHLY DEDUCTION means the amount deducted from the Policy's Accumulation Value
on each Monthly Deduction Date.
PAYEE refers to the person who receives payments under the Policy.
POLICY means the modified single premium variable life insurance contract issued
to you pursuant to our acceptance of your application for it.
POLICY OWNER refers to you, the person that applied for the Policy.
POLICY YEAR/MONTH/ANNIVERSARY means respective anniversary dates from the Date
of Issue.
PORTFOLIO means a Series Fund's separate investment series that is available
under the Policy.
PREMIUM means an amount paid to us as consideration for the benefits provided by
the Policy.
PROCEEDS means the Death Benefit, Cash Surrender Value, or Proceeds payable upon
the Maturity Date.
SERIES FUNDS means those open-ended management companies in which the Variable
Account invests, which are listed in the ALLOCATION OF PREMIUMS section of this
Prospectus.
SPECIFIED AMOUNT means the amount of insurance selected, as shown on the
Policy's Data page.
SUBACCOUNT means that portion of the Variable Account which invests in shares of
mutual funds or any other investment portfolios that we determine to be suitable
for the Policy's purposes.
VALUATION DATE means each day that the New York Stock Exchange is open for
trading.
VARIABLE ACCOUNT means Companion Life Separate Account B, a separate account
maintained by us in which a portion of our assets has been allocated for the
Policy and certain other policies.
WE, US, OUR, UNITED OF OMAHA refers to Companion Life Insurance Company, Rye,
New York.
YOU, YOUR refers to the Policy Owner.
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SUMMARY
BASIC FEATURES OF YOUR POLICY
The individual modified single premium variable life insurance Policy
offered by this prospectus is designed to provide lifetime insurance coverage
for the Insured named in the Policy. It is not offered primarily as an
investment. This is a brief description of the basic features of the Policy.
Policy features are explained in more detail throughout the prospectus.
o Right to Examine. You have the right to return the Policy within 10 days
after you receive it or 45 days after you signed the application, whichever
is later. We will return to you the premiums paid. (SEE "OTHER POLICY
PROVISIONS: RIGHT TO EXAMINE.")
o Premium Payments. You must pay an initial premium at least equal to our
minimum single premium requirements. Once each Policy Year, you may make
additional payments, subject to certain restrictions and limitations. (SEE
"THE POLICY: PREMIUM PAYMENTS.")
o Investment of Premiums. Your initial premium and any additional payments
will be held in the Money Market Subaccount until the Allocation Date. On
the Allocation Date, your initial premium is invested according to your
instructions in one or more of the Subaccounts of the Variable Account
corresponding to mutual fund portfolios or the Fixed Account. Allocations
must be in whole percentages. (SEE "ALLOCATION OF PREMIUMS.")
o Transfers. Once we mail the confirmation for the initial premium payment,
and after the Right to Examine period, you may transfer portions of the
Policy's Accumulation Value without charge among the Subaccounts and Fixed
Account up to twelve times each Policy Year. Subsequent transfers may have
charges. (SEE "ALLOCATION OF PREMIUMS: TRANSFERS.")
o Fluctuating Accumulation Value. The Accumulation Value of the Policy will
vary daily based on, among other things, the net investment experience of
the Subaccounts to which amounts have been allocated. The Accumulation
Value is not guaranteed. You bear the investment risk with respect to the
Accumulation Value that is invested in the Subaccounts, and we bear the
investment risk with respect to the Accumulation Value that is invested in
the Fixed Account.
o Death Benefit. The Policy's Death Benefit equals the greater of (a) the
initial Specified Amount plus any later increase and less any later
decrease, less any loans and unpaid loan interest; or (b) the Policy's
Accumulation Value on the date of death multiplied by a corridor percentage
for the Insured's attained age, less any loans and unpaid loan interest.
(SEE "THE POLICY: DEATH BENEFIT.")
o Death Benefit Guarantee Period. If no Policy loans are taken, coverage is
guaranteed until the 5th policy anniversary or until the Policy anniversary
next following the Insured's 75th birthday, whichever is earlier. (SEE
"THE POLICY: DEATH BENEFIT.")
o Policy Loans and Partial Withdrawals. After the first Policy Year (from
Date of Issue in Indiana), a loan privilege is available under the Policy.
After the first Policy Year, partial withdrawals also are allowed; the
greater of earnings or 15% of the Accumulation Value may be withdrawn each
Policy year free of Surrender Charges. Other partial withdrawals may be
subject to a Surrender Charge. (SEE "DISTRIBUTIONS: POLICY LOANS, AND
SURRENDER AND PARTIAL WITHDRAWALS.")
o Surrenders. The Policy permits full surrender for the Cash Surrender Value.
The maximum Surrender Charge is 9.50%. As to each premium payment, the
Surrender Charge ends after the ninth Policy Year after the premium payment
was made. The Surrender Charge may be waived upon the occurrence of certain
events. (SEE "CHARGES AND FEES.")
o Federal Income Tax Consequences. Death benefits paid to the Beneficiary
under a life insurance policy generally are not subject to Federal income
tax. Under current law, undistributed increases in cash value of a life
insurance contract generally are not taxable. In almost all situations, the
Policies are expected to be treated as modified endowment contracts.
Pre-death distributions (including partial withdrawals and loans) from a
modified endowment contract are included in income on an income first
basis, and a 10% penalty tax may be imposed on income distributed before
the Policy Owner attains age 591/2. (SEE "TAX MATTERS.")
COMPARISON TO OTHER POLICIES AND OTHER INVESTMENTS
In many respects the Policy is similar to fixed-benefit life insurance. Like
fixed-benefit life insurance, the Policy offers a death benefit and provides a
cash value, loan privileges and surrender values. The Policy is different from
fixed-benefit life insurance in that the death benefit will in most cases, and
the cash value ("Accumulation Value") will always, vary to reflect the
investment experience of the selected Subaccounts of the Variable Account.
The Policy is designed to provide insurance protection. Although the
underlying mutual fund portfolios to which Accumulation Value may be allocated
invest in securities similar to those in which mutual funds available directly
to the public invest, in many ways the Policy differs from mutual fund
investments. The main differences are:
o The Policy provides a death benefit based on our assumption of an
actuarially calculated risk.
o If the Cash Surrender Value is not sufficient to pay a Monthly Deduction
Amount, the Policy will lapse with no value unless a payment is made,
subject to the Guaranteed Death Benefit. (SEE "THE POLICY: GUARANTEED DEATH
BENEFIT.") If the Policy lapses when Policy loans are outstanding, adverse
tax consequences may result. (SEE "TAX MATTERS: TAX TREATMENT OF LOANS AND
OTHER DISTRIBUTIONS.")
o In addition to sales charges, insurance-related charges not associated with
mutual fund investments are deducted from values of the Policy. These
charges include various insurance, risk, and expense charges. (SEE "CHARGES
AND FEES.")
o Companion, not the Policy Owner, owns the mutual fund shares. (SEE
"OTHER INFORMATION: VOTING RIGHTS.")
o Federal income tax liability on any earnings on the mutual fund investment
is deferred until you receive a distribution from the Policy. Transfers
from one underlying fund portfolio to another are accomplished without tax
liability under current law. (SEE "TAX MATTERS: LIFE INSURANCE
QUALIFICATION.")
o Dividends and capital gains distributed by the underlying mutual funds are
automatically reinvested.
o Premature withdrawals are subject to a 10% federal tax penalty. Also,
Policy earnings that would be treated as capital gains in a mutual fund are
treated as ordinary income, although taxation is deferred until earnings
are distributed from the Policy. (SEE "TAX MATTERS: TAX TREATMENT OF LOANS
AND OTHER DISTRIBUTIONS.")
HOW THE POLICY OPERATES
The following chart shows how the Policy operates. For more information,
refer to specific sections of this prospectus.
POLICY PREMIUM FLOW CHART
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PREMIUM PAYMENTS
o Minimum initial premium required is $20,000.
o Additional payments may be paid once each Policy
Year, within limits. (SEE "PREMIUM PAYMENTS.")
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DEDUCTIONS FROM PREMIUMS BEFORE ALLOCATION
o None
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INVESTMENT OF PREMIUMS
o You direct the allocation of initial premiums and any additional payments
among 23 Subaccounts of the Variable Account and the Fixed Account. The
Subaccounts invest in corresponding mutual funds. For information about
premium allocation options, rules and limits, SEE "ALLOCATION OF PREMIUMS."
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DEDUCTIONS FROM ASSETS
o Monthly Deduction on the Monthly Deduction Date from Accumulation Value
(annual rate calculated as a percentage of Accumulation Value) for:
o 0.50% to 0.70% for preferred rate class and 0.84% to 1.30% for
standard rate class for cost of insurance (depending on the rate
class of the Insured and Policy accumulation value and duration)
o 1.53% expense charge during Policy years 1 through 10; 1.14% after
Policy Year 10.
o $10 transfer fee (first 12 transfers per Policy free).
o Investment advisory fees and fund expenses are deducted from the assets
of each Fund.
(SEE "CHARGES AND FEES.")
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ACCUMULATION VALUE
o Accumulation Value is equal to the initial premium and any additional
premiums, as adjusted each day the New York Stock Exchange is open to
reflect Subaccounts' investment experience, charges deducted and other
Policy transactions (such as transfers and partial surrenders).
o Accumulation Value may vary from day to day. There is no minimum guaranteed
Accumulation Value. The Policy may lapse, even if there is no Policy loan.
(SEE "THE POLICY: LAPSE AND GRACE PERIOD," AND "DISTRIBUTIONS: POLICY
LOANS.")
o Accumulation Value can be transferred among the Subaccounts and the Fixed
Account. SEE "ALLOCATION OF PREMIUM" for rules and limits. Policy loans
reduce the amount available for allocations and transfers.
o Dollar cost averaging and asset rebalancing programs are available. (SEE
"ALLOCATION OF PREMIUM.")
o Accumulation Value is the starting point for calculating certain values
under a Policy, such as the Cash Surrender Value and the Death Benefit.
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<TABLE>
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<CAPTION>
ACCUMULATION VALUE BENEFITS DEATH BENEFITS
<S> <C> <C>
o After the first Policy year loans may o Received income tax free to
be taken for amounts up to 90% of Beneficiary. (SEE "TAX MATTERS:
Cash Surrender Value at a net LIFE INSURANCE QUALIFICATION.")
interest rate charge of 1.5%. Preferred
loans are currently available (with a o Available as lump sum or under a
net interest rate charge of 0%). SEE variety of payment options.
"DISTRIBUTIONS: POLICY LOANS" for rules
and limits. o Greater of:
o initial Specified Amount plus any
o The Policy may be surrendered in full at later increase and less any later
any time for its Cash Surrender Value, decrease; or
or part of the Accumulation Value may be
withdrawn. After the first Policy year, o Policy's Accumulation Value on the
up to 15% of the Accumulation Value as date of the Insured's death
of the first withdrawal that Policy Year multiplied by a corridor percentage
may be withdrawn each Policy year for the Insured's attained age.
without charge. (SEE "DISTRIBUTIONS;
SURRENDER AND PARTIAL WITHDRAWALS.") A PROCEEDS PAID WOULD BE REDUCED BY ANY
nine year declining surrender charge of POLICY LOAN BALANCE AND UNPAID LOAN
up to 9.5% of each premium paid will INTEREST. (SEE "DISTRIBUTIONS: DEATH
apply to a full surrender and all other BENEFIT.")
partial withdrawals. (SEE "CHARGES AND
FEES: SURRENDER CHARGE.") Federal taxes
and tax penalties may also apply. (SEE
"TAX MATTERS: TAX TREATMENT OF LOANS AND
OTHER DISTRIBUTIONS.")
o Fixed and variable payment options are
available. (SEE"DISTRIBUTIONS: PAYMENT
OPTIONS.")
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</TABLE>
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For more detailed information about the Policy, please read the rest of this
prospectus.
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ABOUT US
We are Companion Life Insurance Company, a stock life insurance company
organized under the laws of the State of New York in 1949. Companion is a
wholly owned subsidiary of United of Omaha Life Insurance Company, which is
itself a wholly owned subsidiary of Mutual of Omaha Insurance Company. We are
principally engaged in the business of issuing life insurance policies and
annuity contracts in the State of New York. As of December 31, 1996, Companion
had assets of over $345 million.
We may from time to time publish (in advertisements, sales literature and
reports to Owners) the ratings and other information assigned to us by one or
more independent rating organizations such as A.M. Best Company, Moody's,
Standard & Poor's, and Duff & Phelps. The purpose of the ratings is to reflect
our financial strength and/or claims-paying ability, and the ratings should not
be considered as bearing on the investment performance of assets held in the
Variable Account. Each year the A.M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect A.M. Best Company's current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health insurance industry. In addition, our claims-paying
ability, as measured by Moody's Insurance Credit Report, Standard and Poor's
Insurance Ratings Services, or Duff & Phelps may be referred to in such
advertisements, sales literature, or reports. These ratings are opinions
regarding an operating insurance company's financial capacity to meet the
obligations of its insurance and annuity policies in accordance with their
terms. Such ratings do not reflect the investment performance of the Variable
Account or the degree of risk associated with an investment in the Variable
Account.
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ALLOCATION OF PREMIUMS
You may allocate all or a part of your Policy premium to one of the
twenty-four Series Fund Portfolios currently available through the Variable
Account, to the Fixed Account, or to a combination of these. Allocations must be
in whole percentages and total 100%. The investment results of each Portfolio,
whose investment objectives are described below, are likely to differ
significantly. You should consider carefully, and on a continuing basis, which
Portfolio or combination of Portfolios and the Fixed Account is best suited to
your long-term investment objectives.
THE VARIABLE ACCOUNT
The Variable Account established for the purpose of providing variable
options to fund the Policy is Companion Life Separate Account B. Amounts
allocated to the Variable Account are invested exclusively in shares of a
Portfolio of one of the Series Funds. Each Series Fund is an open-end management
investment company whose shares are purchased by the Variable Account to fund
the benefits provided by the Policy. The Series Fund Portfolios currently
available under the Variable Account, including their investment objectives and
their investment advisers, are described briefly in this Prospectus. Complete
descriptions of each Portfolio's investment objectives and restrictions and
other material information relating to an investment in the Portfolio are
contained in the prospectuses for each of the Series Funds which accompany this
Prospectus.
Companion Life Separate Account B was established pursuant to an August 27,
1996, resolution of our Board of Directors. Under New York Insurance Law, the
income, gains or losses, realized or unrealized, from assets allocated to the
Variable Account are credited to or charged against the Variable Account,
without regard to other income, gains, or losses of Companion Life Insurance
Company. These assets are held by us for our variable life insurance policies.
Any and all distributions made by the Series Funds with respect to the shares
held by the Variable Account will be reinvested in additional shares at net
asset value. The assets maintained in the Variable Account will not be charged
with any liabilities arising out of any other business conducted by us. We are,
however, responsible for meeting the obligations of the Policy to you.
No stock certificates are issued to the Variable Account for shares of the
Series Funds held in the Variable Account. We own the Series Funds shares for
the Variable Account.
The Variable Account is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust under the Investment Company Act
of 1940 and meets the definition of separate account under federal securities
laws. However, the SEC does not supervise the management or the investment
practices or policies of the Variable Account. We do not guarantee the Variable
Account's investment performance.
VARIABLE ACCOUNT PORTFOLIOS
ALGER AMERICAN FUND - ALGER AMERICAN GROWTH PORTFOLIO -- seeks long-term
capital appreciation by investing in a diversified portfolio of equity
securities, primarily of companies with total market capitalization of $1
billion or greater. (1)
ALGER AMERICAN FUND - ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO --
seeks long-term capital appreciation by investing in a diversified portfolio
of equity securities, primarily of smaller, newer companies with total
market capitalization of less than $1 billion. The securities in such
companies may have limited marketability and may be subject to more abrupt
or erratic market movements than securities of larger, more established
companies or the market averages in general.(1) (*)
INSURANCE MANAGEMENT SERIES - FEDERATED PRIME MONEY FUND II PORTFOLIO --
invests in money market instruments maturing in thirteen months or less to
achieve current income consistent with stability of principal and liquidity.
The Portfolio attempts to maintain a stable net asset value of $1.00 per
share, but there can be no assurance the Portfolio will be able to do so.
(2)
INSURANCE MANAGEMENT SERIES - FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES
II PORTFOLIO -- seeks current income by investing in a diversified
portfolio limited to U.S. government securities. (2)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - FIDELITY VIP II ASSET
MANAGER: GROWTH PORTFOLIO -- seeks to obtain high total return with reduced
risk over the long-term by allocating its assets among stocks, bonds, and
short-term fixed-income instruments. Although the Portfolio seeks to reduce
its overall risk by diversifying among different types of investments, the
fund aggressively invests in a wide variety of security types, including
stocks and bonds issued in developing countries and derivative transactions.
The Portfolio spreads investment risk by limiting its holdings in any one
company or industry.(3, 4) (*)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND - FIDELITY VIP EQUITY-INCOME
PORTFOLIO -- seeks reasonable income by investing mainly in income-producing
equity securities. In selecting investments, the Portfolio also considers
the potential for capital appreciation. The Portfolio seeks to achieve a
return that surpasses that of the S&P 500. The Portfolio does not expect to
invest in debt securities of companies that do not have proven earnings or
credit.(3)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - FIDELITY CONTRAFUND
PORTFOLIO -- seeks to increase the value of the Portfolio over the long term
by investing in securities of companies that are undervalued or
out-of-favor. This strategy can lead to investments in domestic or foreign
companies, many of which may not be well known. The stocks of small
companies often involve more risk than those of larger companies. The
Portfolio may use various investment techniques to hedge the Portfolio's
risk, but there is no guarantee that these strategies will work as
intended.(3) (*)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - FIDELITY INDEX 500 PORTFOLIO
-- seeks to match the total return of the S&P 500 while keeping expenses
low. The Portfolio utilizes a "passive" or "indexing" approach and tries to
allocate its assets similarly to those of the index. Normally 80% (65% if
fund assets are below $20 million) of the fund's assets are invested in
equity securities of companies that compose the S&P 500. The Standard &
Poor's Corporation is neither an affiliate nor a sponsor of the fund.
MFS VARIABLE INSURANCE TRUST - MFS EMERGING GROWTH PORTFOLIO -- seeks to
provide long-term growth of capital through investing primarily in common
stocks of emerging growth companies, which involves greater risk than is
customarily associated with investments in more established companies. The
Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities.(5) (*)
MFS VARIABLE INSURANCE TRUST - MFS HIGH INCOME PORTFOLIO -- seeks high
current income by investing primarily in a diversified portfolio of fixed
income securities, some of which may involve equity features. The Portfolio
may invest in lower rated fixed income securities or comparable unrated
securities.(5) (*)
MFS VARIABLE INSURANCE TRUST - MFS RESEARCH PORTFOLIO -- seeks to provide
long-term growth of capital and future income by investing a substantial
proportion of its assets in the common stocks or securities convertible into
common stocks of companies believed to possess better than average prospects
for long-term growth. No more than 5% of the Portfolio's convertible
securities, if any, will consist of securities in lower rated categories or
securities believed to be of similar quality to lower rated securities. The
Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities.(5) (*)
MFS VARIABLE INSURANCE TRUST - MFS VALUE SERIES PORTFOLIO -- seeks capital
appreciation by investing primarily in common stocks, including to a limited
extent foreign securities which are not traded on a U.S. exchange. The
Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities. (5) (*)
MFS VARIABLE INSURANCE TRUST - MFS WORLD GOVERNMENT PORTFOLIO -- seeks
preservation and growth of capital, together with moderate current income by
investing its assets in an internationally diversified portfolio consisting
primarily of debt securities and, to a lesser extent, equity securities. The
Portfolio investments are expected to consist primarily of securities which
are of relatively high quality and minimal credit risk. However, an error of
judgment in selecting a currency or an interest rate environment could
result in a loss of capital, and a held security whose quality deteriorates
significantly will be sold only if the Portfolio investment adviser believes
it is advantageous to do so. (5)
PIONEER VARIABLE CONTRACTS TRUST - PIONEER CAPITAL GROWTH PORTFOLIO -- seeks
capital appreciation by investing in a diversified portfolio of securities
consisting primarily of common stocks.(6)
PIONEER VARIABLE CONTRACTS TRUST - PIONEER REAL ESTATE PORTFOLIO -- seeks
long-term growth of capital by investing primarily in securities of real
estate investment trusts (REITs) and other real estate industry companies.
Current income is the Portfolio's secondary investment objective.(6)
SCUDDER VARIABLE LIFE INVESTMENT FUND - SCUDDER GLOBAL DISCOVERY PORTFOLIO
-- seeks above-average capital appreciation over the long term by investing
primarily in the equity securities of small companies located throughout the
world, including to a limited extent in lower rated fixed income securities
or comparable unrated securities. Since the Portfolio normally will invest
in both U.S. and foreign securities markets, changes in the Portfolio's unit
value may have a low correlation with movements in the U.S. markets. (7)(*)
SCUDDER VARIABLE LIFE INVESTMENT FUND - SCUDDER GROWTH & INCOME PORTFOLIO --
seeks long term growth of capital, current income and growth of income by
investing primarily in common stocks, preferred stocks, and securities
convertible into common stocks of companies which offer the prospect for
growth of earnings while paying higher than average current dividends. (7)
SCUDDER VARIABLE LIFE INVESTMENT FUND - SCUDDER INTERNATIONAL PORTFOLIO --
seeks long-term growth of capital primarily through diversified holdings of
marketable foreign equity investments. The Portfolio invests in companies,
wherever organized, which do business primarily outside the United States.
The Portfolio intends to diversify investments among several countries, and
does not intend to concentrate investments in any particular industry.
(7)
T. ROWE PRICE EQUITY SERIES, INC. - T. ROWE PRICE EQUITY INCOME PORTFOLIO
-- Seeks to provide substantial dividend income and also capital
appreciation by investing primarily in dividend-paying common stocks of
established companies.(9)
T. ROWE PRICE INTERNATIONAL SERIES, INC. - T. ROWE PRICE INTERNATIONAL
STOCK PORTFOLIO -- seeks a total return on its assets from long-term growth
of capital and income, by investing substantially all of its assets in
common stocks of established non-U.S. companies. (8)
T. ROWE PRICE FIXED INCOME SERIES, INC. - T. ROWE PRICE LIMITED-TERM BOND
PORTFOLIO -- seeks a high level of income consistent with modest price
fluctuation by investing primarily in investment grade debt securities. (9)
T. ROWE PRICE EQUITY SERIES, INC. - T. ROWE PRICE NEW AMERICA GROWTH
PORTFOLIO -- seeks long-term growth of capital through investments
primarily in common stocks of U.S. growth companies which operate in
service industries believed to be above-average performers in their fields.
Total return will consist primarily of capital appreciation or
depreciation. (9)
T. ROWE PRICE EQUITY SERIES, INC. - T. ROWE PRICE PERSONAL STRATEGY
BALANCED PORTFOLIO -- seeks the highest total return over time consistent
with an emphasis on both capital appreciation and income. There are no
limitations on market capitalization or types of stock the Portfolio can
hold. While bond holdings are primarily investment grade, the Portfolio can
also invest in more volatile below-investment grade bonds.(9) (*)
INVESTMENT ADVISERS AND SUBADVISERS OF THE SERIES FUNDS:
(1) Fred Alger Management, Inc.
(2) Federated Advisors.
(3) Fidelity Management & Research Company.
(4) Fidelity Investment Management and Research (U.K.) Inc., and Fidelity
Management and Research Far East Inc., regarding research and
investment recommendations with respect to companies based outside the
United States.
(5) Massachusetts Financial Services Company.
(6) Pioneer Fund Group.
(7) Scudder, Stevens & Clark, Inc.
(8) Rowe Price-Fleming International, Inc., a joint venture between T. Rowe
Price Associates, Inc. and Robert Fleming Holdings Limited.
(9) T. Rowe Price Associates, Inc.
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(*) THESE PORTFOLIOS' INVESTMENT STRATEGIES MAY PROVIDE THE OPPORTUNITY FOR
HIGHER THAN AVERAGE RETURNS BY INVESTING IN SECURITIES WITH HIGHER THAN
AVERAGE RISK, SUCH AS LOWER AND UNRATED DEBT AND COMPARABLE EQUITY
INSTRUMENTS. PLEASE CONSULT EACH PORTFOLIO'S SERIES FUND PROSPECTUS
ACCOMPANYING THIS PROSPECTUS FOR MORE INFORMATION ABOUT THE RISK ASSOCIATED
WITH SUCH INVESTMENTS.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.
MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF EACH PORTFOLIO'S
INVESTMENT OBJECTIVE AND POLICIES AND A DESCRIPTION OF RISKS INVOLVED IN
INVESTING IN EACH OF THE PORTFOLIOS AND OF EACH PORTFOLIO'S FEES AND EXPENSES,
IS CONTAINED IN THE PROSPECTUSES FOR THE SERIES FUNDS, CURRENT COPIES OF WHICH
ACCOMPANY THIS PROSPECTUS. INFORMATION CONTAINED IN THE SERIES FUNDS'
PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE INVESTING IN A PORTFOLIO OF THE
VARIABLE ACCOUNT.
An investment in the Variable Account, or in any Portfolio, including the
Money Market Portfolio, is not insured or guaranteed by the U.S. Government, and
there is no assurance that the Money Market Portfolio will be able to maintain a
stable net asset value per share.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We do not control the Series Funds and cannot and do not guarantee that any
of the Portfolios will always be available for Premium allocations or
Accumulation Value transfers. We retain the right, subject to any applicable
law, to make certain changes in the Variable Account and its investments. We
reserve the right to eliminate the shares of any Portfolio held by a Subaccount
and to substitute shares of another Portfolio of a Series Fund, or of another
registered open-end management investment company for the shares of any
Portfolio, if the shares of the Portfolio are no longer available for investment
or if, in our judgment, investment in any Portfolio would be inappropriate in
view of the purposes of the Variable Account. To the extent required by the 1940
Act, substitutions of shares attributable to your interest in a Subaccount will
not be made without prior notice to you and the prior approval of the SEC. If
required, approval of or change of any investment policy will be filed with the
Insurance Department of any State in which the Policy is sold.
New Subaccounts may be established, or existing Subaccounts eliminated,
when, in our sole discretion, marketing, tax, investment or other conditions
warrant such a change. If a Subaccount is eliminated, we will notify you and
request a reallocation of the amounts invested in the eliminated Subaccount. If
you do not reallocate these amounts, we will reinvest them in the Subaccount
that invests in the Money Market Portfolio (or in a similar portfolio of money
market instruments).
In the event of any such substitution or change, we may make changes in the
Policy as may be necessary or appropriate to reflect such substitution or
change. Furthermore, the Variable Account may be (i) operated as a management
company under the 1940 Act or any other form permitted by law, (ii) deregistered
under the 1940 Act in the event such registration is no longer required or (iii)
combined with one or more other separate accounts. To the extent permitted by
applicable law, we also may transfer the assets of the Variable Account
associated with the Policies to another account or accounts.
THE FIXED ACCOUNT
This Prospectus is intended to serve as a disclosure document only for the
Policy and the Variable Account. For complete details regarding the Fixed
Account, see the Policy itself.
PREMIUM ALLOCATED AND AMOUNTS TRANSFERRED TO THE FIXED ACCOUNT BECOME PART
OF THE GENERAL ACCOUNT ASSETS OF COMPANION. INTERESTS IN THE GENERAL
ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933
ACT"), NOR IS THE GENERAL ACCOUNT REGISTERED AS AN INVESTMENT COMPANY UNDER THE
1940 ACT. ACCORDINGLY, NEITHER THE GENERAL ACCOUNT NOR ANY INTERESTS THEREIN IS
GENERALLY SUBJECT TO THE PROVISIONS OF THE 1933 OR 1940 ACTS, AND WE HAVE BEEN
ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO THE FIXED ACCOUNT.
The Fixed Account includes all our assets except those segregated in the
Variable Account or in any other separate investment account. You may allocate
Premium to the Fixed Account or transfer amounts from the Variable Account to
the Fixed Account. Instead of you bearing the investment risk, as is the case
for accumulation value in the Variable Account, we bear the full investment risk
for all accumulation value in the Fixed Account. We have sole discretion to
invest the assets of our general account, including the Fixed Account, subject
to applicable law.
We guarantee to credit interest to amounts in the Fixed Account at an
effective rate of at least 4.5% per year. (After the expense charge is applied,
the net effective rate is 2.97% for Policy years 1-10, and 3.36% for Policy
years 11 and subsequent. We may, IN OUR SOLE DISCRETION, credit amounts in the
Fixed Account with interest at a current interest rate in excess of 4.5%. ONE
TRANSFER OUT OF THE FIXED ACCOUNT IS ALLOWED EACH POLICY YEAR. (This limit does
not apply under the Dollar Cost Averaging or Asset Allocation programs).
Moreover, the maximum amount that can be transferred out of the Fixed Account
during any Policy Year is 10% of Fixed Account value on the date of the
transfer. No charge is imposed on such transfers. We reserve the right to modify
transfer privileges at any time. (SEE "ALLOCATION OF PREMIUM: TRANSFERS.")
Partial withdrawals from the Fixed Account are limited to a pro rata amount
(with withdrawals from the Variable Account). Withdrawals and transfers from the
Fixed Account may be delayed for up to six months, and withdrawals may be
subject to a Surrender Charge. (SEE "CHARGES AND FEES: SURRENDER CHARGES.")
For purposes of crediting interest, the oldest payment or transfer into the
Fixed Account, plus interest allocable to that payment or transfer, is
considered to be withdrawn or transferred out first; the next oldest payment
plus interest is considered to be transferred out next, and so on (this is a
"first-in, first-out" procedure).
We guarantee that, upon Death or the Policy Maturity Date, the amount in
your Fixed Account will be not be less than the amount of Premium allocated or
Accumulation Value transferred to the Fixed Account, plus interest at an
effective rate of 4.5% per year, plus any excess interest credited to amounts in
the Fixed Account, less any applicable premium or other taxes allocable to the
Fixed Account, less that part of the Monthly Deduction allocable to the Fixed
Account and less any amounts deducted from the Fixed Account in connection with
partial withdrawals (including any Surrender Charges) or transfers to the
Variable Account or to the Loan Account.
WE HAVE COMPLETE AND SOLE DISCRETION TO DETERMINE THE CURRENT INTEREST RATES
OF THE FIXED ACCOUNT. WE CANNOT PREDICT OR GUARANTEE THE LEVEL OF FUTURE CURRENT
INTEREST RATES OF THE FIXED ACCOUNT, EXCEPT TO GUARANTEE THAT FUTURE CURRENT
INTEREST RATES WILL NOT BE BELOW AN EFFECTIVE RATE OF 4.5% PER YEAR COMPOUNDED
ANNUALLY. YOU BEAR THE RISK THAT CURRENT INTEREST RATES OF THE FIXED ACCOUNT
WILL NOT EXCEED AN EFFECTIVE RATE OF 4.5% PER YEAR.
TRANSFERS
Subject to the limitations and restrictions described below, transfers out
of a Subaccount of the Variable Account may be made any time after the Right to
Examine period and prior to death or the Policy Maturity Date, by sending
written notice, signed by you, to us. We reserve the right, at any time and
without notice to any party, to modify the transfer privileges under the Policy.
Transfers are effective on the date we receive your request.
After the Right to Examine period, you can transfer Accumulation Value from
one Subaccount of the Variable Account to another, or from the Variable Account
to the Fixed Account or from the Fixed Account to any Subaccount of the Variable
Account within certain limits. The minimum amount which may be transferred is
the lesser of $500 or the entire Subaccount Value. If the Subaccount Value
remaining after a transfer is less than $500, we will include that amount as
part of the transfer. Transfers out of a Subaccount currently may be made as
often as you wish, subject to the minimum amount specified above (we reserve the
right to otherwise limit or restrict transfers in the future or to eliminate the
transfer privilege). We reserve the right to restrict transfers from the
Variable Account to the Fixed Account of amounts previously transferred from the
Fixed Account for up to six months.
A transfer fee of $10 may be imposed for any transfer in excess of 12 per
Policy Year. The transfer fee is deducted from the amount transferred. The first
12 transfers each Policy year are free.
Transfers from the Fixed Account currently may be made once each Policy
Year. Transfers from the Fixed Account do not count toward the 12 free transfer
limit described above, and no transfer charge will be imposed on transfers from
the Fixed Account. Moreover, the maximum amount that can be transferred out of
the Fixed Account during any Policy Year is 10% of the Fixed Account Value on
the date of the transfer.
The Policy is designed as a long-term investment to provide death benefit
protection, and may also be used as a part of your retirement or other financial
planning. The Policy is not intended for active trading or "market timing."
Excessive transfers could harm other Policy Owners by having a detrimental
effect on portfolio management (which could occur, for example, if it caused
excessive commission expense or caused the manager to keep higher cash reserves
than otherwise). Therefore, we reserve the right to limit the number of
transfers from the Subaccounts of the Variable Account and the Fixed Account if:
(a) we believe that excessive trading by the Policy Owner or a specific transfer
request would have a detrimental effect on Accumulation Value or the share
prices of the Portfolios; or (b) we are informed by one or more of the Series
Funds that the purchase or redemption of shares is to be restricted because of
excessive trading or a transfer or group of transfers is deemed to have a
detrimental effect on share prices of one or more Portfolios or the Variable
Account.
Where permitted by law, we may accept your authorization of third party
reallocation on your behalf, subject to our rules. We may suspend or cancel such
acceptance at any time. For example, third party reallocation by "market timers"
could be suspended if they cause harm to other Policy Owners. We will notify you
of any such suspension or cancellation. We may restrict the availability of
Subaccounts and the Fixed Account for Transfers during any period in which you
authorize such third party to act on your behalf. We will give you prior
notification of any such restrictions. However, we will not enforce such
restrictions if we are provided with satisfactory evidence that: (a) such third
party has been appointed by a court of competent jurisdiction to act on your
behalf; or (b) such third party has been appointed by you to act on your behalf
for all your financial affairs.
DOLLAR COST AVERAGING
Dollar cost averaging is a process whose objective is to shield investments
from short term price fluctuations. Since the same dollar amount is transferred
to selected Subaccounts each month, over time more purchases of Portfolio shares
are made when the value of those shares is low, and fewer shares are purchased
when the value is high. As a result, a lower than average cost of purchases may
be achieved over the long term. While this process allows you to take advantage
of investment price fluctuations, it does not assure a profit or protect against
a loss in declining markets.
Our dollar cost averaging program allows you to automatically transfer, on a
periodic basis, a predetermined amount or percentage specified by you from any
one Subaccount or the Fixed Account to any Subaccount(s) of the Variable
Account. The automatic transfers can occur monthly, quarterly, semi-annually, or
annually, and the amount transferred each time must be at least $100 and must be
$50 per Subaccount. At the time the program begins, there must be at least
$5,000 of Accumulation Value in the applicable Subaccount or the Fixed Account
being transferred from. If transfers are made from the Fixed Account, the
maximum periodic transfer amount is 10% of that account's value at the time of
election, or a sufficient amount to provide transfers for 10 months. There is no
maximum transfer amount requirement out of the Subaccounts of the Variable
Account.
You can request participation in the Dollar Cost Averaging program when
purchasing the Policy or at a later date. Transfers will begin on the first or
15th day (or, if not a Valuation Date, the next following Valuation Date) of the
month, as specified by you, during which the request is processed. You can
specify that only a certain number of transfers will be made, in which case the
program will terminate when that number of transfers has been made. Otherwise,
the program will terminate when the amount remaining in the applicable
Subaccount or, if applicable, the Fixed Account, is less than $500.
You can increase or decrease the amount or percentage of the transfers or
discontinue the program by notifying us of the change. There is no charge for
participation in this program.
ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program, you can instruct us to allocate premium
and Accumulation Value among the Subaccounts of the Variable Account and the
Fixed Account pursuant to allocation instructions you specify or recommended by
us and approved by you. We will rebalance your Policy's assets on a quarterly,
semi-annual or annual basis, as specified by you, to ensure conformity with your
allocation instructions. Such asset rebalancing is intended to transfer cash
value from Subaccounts that have increased in value to those that have declined,
or not increased as much, in value. Over time, this method of investing may help
you to "buy low and sell high," although there can be no assurance this
objective will be achieved.
Transfers of Accumulation Value made pursuant to this program will not be
counted in determining whether the Transfer Fee applies. At the time the program
begins, there must be at least $20,000 of Accumulation Value under the Policy.
You can request participation in the Asset Allocation Program when
purchasing the Policy or at a later date. You can change your allocation
percentage or discontinue the program by notifying us of the change. There is no
charge for participation in this program.
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THE POLICY
POLICY APPLICATION AND ISSUANCE
To purchase a Policy, you must submit an application and provide evidence of
insurability of the proposed Insured. The initial premium also must be paid
before we will issue the Policy. We will not issue a Policy if the Insured is
older than age 90. Before accepting an application, we conduct underwriting to
determine insurability. We reserve the right to reject an application or premium
for any reason. If a Policy is not issued, we will return any premium payment
you submitted. If a Policy is issued, it will be effective on the date of issue.
PREMIUM PAYMENTS
The minimum initial premium for a Policy is $20,000. Your initial premium
will be credited to the Policy on the date the Policy is issued. Premiums will
be allocated to the Money Market portfolio until the Allocation Date. You may
purchase a Policy with the proceeds of another life insurance policy, provided
that the following conditions are met. First, the applicable application forms
are completed. IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH A
POLICY.
Additional payments may be made until the Insured attains age 90, subject to
our underwriting requirements and the following rules. Except with respect to
additional payments required in a grace period, an additional payment must be at
least $5,000, and only one additional payment may be made each Policy Year. A
payment received after issuance of the Policy while a loan is outstanding
generally is treated first as repayment of Policy loan interest, second as
repayment of a Policy loan, and last as additional Premium, unless you designate
otherwise in writing when submitting the payment to us.
No additional Premium payments may be made on or after age 90 of the
Insured, except as may be required in a grace period. The tax consequences
associated with continuing a Policy beyond age 90 of the Insured are unclear. A
tax advisor should be consulted on this issue.
Because any additional premium payment will result in an increase in the
Policy's Specified Amount, we will require satisfactory evidence of insurability
before accepting additional premiums after the date of issue. However, we
reserve the right to reject an additional payment for any reason. If additional
Premium is accepted, we will credit it to your Policy's Accumulation Value
pursuant to your current accumulation instructions, unless you provide other
instructions as of the date underwriting was completed.
LAPSE AND GRACE PERIOD
If there is no outstanding Policy loan, the Policy will lapse if, on a
Monthly Deduction Date, the Accumulation Value is insufficient to cover the
Monthly Deduction due on that date (subject to the Guaranteed Death Benefit
provision; SEE "DISTRIBUTIONS: GUARANTEED DEATH BENEFIT"), and a grace period
expires without a sufficient premium payment. If there is an outstanding loan,
the Policy will lapse on any Monthly Deduction Date when the Cash Surrender
Value is insufficient to cover the Monthly Deduction and any loan interest due,
subject to the Grace Period provision. We allow you a 61 day grace period to
make a premium payment sufficient to cover the Monthly Deduction and any loan
interest due. The grace period begins the day we mail notice to you of the
insufficiency. The Policy will terminate as of the first day of the grace period
if necessary additional premium is not paid.
Payment received during the grace period is first applied to repay Policy
debt before the remaining amount of the payment is applied as additional Premium
to keep the Policy in force.
Insurance coverage continues during the grace period, but the Policy will be
deemed to have no Accumulation Value for purposes of Policy loans, surrender and
withdrawals. If the Insured dies during the grace period, the Death Benefit
proceeds payable during the grace period will equal the amount of the Death
Benefit in effect immediately prior to the commencement of the grace period less
any due and unpaid Monthly Deduction. A lapse of the Policy may result in
adverse tax consequences.
REINSTATEMENT
If the Policy is terminated during the Insured's life because a grace period
ended without a sufficient payment being made, the Policy may be reinstated.
Reinstatement must occur within five years of the expiration of the grace period
and prior to the Maturity Date. To reinstate, we must receive: (a) a written
application signed by you and the Insured; (b) satisfactory evidence that the
Insured is insurable; (c) payment of an amount sufficient to continue the Policy
in force for three months; and (d) repayment or reinstatement of any outstanding
Policy loan along with unpaid loan interest from the date of lapse. Upon
reinstatement, Surrender Charges, if any, will be re-established as of the
original date of issue.
MATURITY DATE
The Policy's maturity date is the Policy Anniversary next following the
Insured's 100th birthday. On the maturity date we will pay you the Policy's
Accumulation Value, less any loan and unpaid loan interest, if (a) the Insured
is then living; (b) this Policy is in force; and (c) coverage beyond maturity is
not elected. The Policy may terminate prior to the maturity date if the premiums
paid are insufficient to continue this Policy in force. If the Policy does
continue in force to the maturity date, it is possible there will be little or
no Cash Surrender Value at that time. Policy values will be affected by the
investment experience of the Variable Account and to the extent cost of
insurance charges are more favorable than guaranteed charges.
- -----------------------------------------------------------
DISTRIBUTIONS
POLICY LOANS
After the first Policy Year you may obtain a loan for up to 90% of the Cash
Surrender Value less loan interest to the end of the Policy Year, and less the
Monthly Deduction amount sufficient to continue this Policy in force for one
month. This Policy must be assigned to us as sole security for the loan. We will
transfer all loan amounts from the Fixed Account and the Subaccounts to the Loan
Account. The amounts will be transferred on a pro rata basis.
Loan interest is payable at a rate of 5.7% in advance (6.0% effective annual
rate). Interest is due on each Policy Anniversary. If the interest is not paid
when due, we will transfer an amount equal to the unpaid loan interest from the
Fixed Account and the Subaccounts, to the Loan Account on a pro rata basis. We
will credit 4.5% interest to any amounts in the Loan Account, except amounts
equal to a Preferred Loan as described below, for a net annual Loan interest
rate of 1.5%.
The death benefit will be reduced by the amount of any loan outstanding on
the date of the Insured's death. We may defer making a loan for six months
unless the loan is to pay premiums to us.
A Preferred Loan is available on any date when the sum of the Cash Surrender
Value plus any outstanding non-preferred loans exceeds the total of all premiums
paid since issue. The amount available for a Preferred Loan is the amount of
such excess. A Preferred Loan will be credited with 6% interest, for a net
annual Preferred Loan interest rate of 0%.
All or part of a loan may be repaid at any time while the Policy is in
force. The amount of a loan repayment will be deducted from the Loan Account and
will be allocated among the Fixed Account and the Subaccounts in the same
percentages as premiums are currently allocated.
SURRENDER
While the Insured is alive, you may terminate this Policy for its Cash
Surrender Value. If you request a cash surrender, the Policy must be returned to
us to receive the Cash Surrender Value
With regard to amounts allocated to the Fixed Account, the Cash Surrender
Value will be equal to or greater than the minimum Cash Surrender Values
required by the State in which this Policy was delivered. The value is based on
the Commissioners 1980 Standard Mortality Table, the insured's age at last
birthday, with interest at 4.5%. The maximum applicable Surrender Charge is
9.50% (SEE "CHARGES AND FEES.") Also, a 10% federal tax penalty may apply. (SEE
"TAX MATTERS.") We may defer payment of a cash surrender from the Fixed Account
for up to six months.
PARTIAL WITHDRAWALS
After the first Policy Year, you may withdraw part of the Accumulation
Value. Withdrawals are made first from earnings and then from Premiums paid,
beginning with the earliest Premium payment. The minimum partial withdrawal
amount is $500. The maximum partial withdrawal amount is an amount such that the
remaining Accumulation Value is not less than $20,000.
Each Policy year you may withdraw, without a surrender charge, the greater
of:
(a) 15% of the Accumulation Value as of the first withdrawal that
Policy year; or
(b) that portion of the Accumulation Value which is in excess of total
premiums paid.
Partial withdrawals in excess of this amount may be subject to a Surrender
Charge of up to 9.5%. The Surrender Charge is a percentage of the premiums
withdrawn. The applicable percentage varies according to the length of time
since the premium was paid. The percentages are shown on the data pages.
The amount of cash withdrawal requested and any Surrender Charge will be
deducted from the Accumulation Value on the date we receive your written
request. Partial withdrawals will result in cancellation of Accumulation Units
from each applicable Subaccount. In the absence of instructions from you,
amounts will be deducted from the Subaccounts and the Fixed Account on a pro
rata basis. No more than a pro rata amount may be withdrawn from the Fixed
Account for a partial withdrawal. We reserve the right to defer withdrawals from
the Fixed Account for up to six months from the date we receive your written
request.
The Specified Amount will be reduced in the same proportion as the
Accumulation Value is reduced as a result of any partial withdrawal.
DEATH BENEFIT
The death benefit equals the greater of:
(a) the initial Specified Amount plus any later increase and less any
later decrease; or
(b) the policy's Accumulation Value on the date of death multiplied by
the corridor percentage from the table shown below for the
Insured's attained age;
less any outstanding loans and unpaid loan interest. To determine the initial
specified amount, multiply the single premium amount by the corresponding issue
age premium factor; deposits after issue will increase the specified amount by
the amount of the additional deposit multiplied by the attained age premium
factor.
- ---------------------------------------------------------
Attained Corridor Attained Corridor Attained Corridor
Age Percentage Age Percentage Age Percentage
- ---------------------------------------------------------
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75-90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94 101%
52 171% 66 119% 95-100 100%
53 164% 67 118% 100+ 101%
- ---------------------------------------------------------
GUARANTEED DEATH BENEFIT
If no Policy loans are taken, we guarantee coverage will remain in force
until the 5th policy anniversary (or the maximum lesser duration your State
allows) or the policy anniversary next following the Insured's 75th birthday,
whichever is earlier.
PAYMENT OF PROCEEDS
While the Insured is alive, you may choose to have Proceeds that become
payable paid under any combination of the fixed and variable payout options
shown in this Policy. A Beneficiary may also have the Death Benefit applied to a
payout option. If another option is not chosen within 60 days of the date we
receive due proof of death, we will make payment in a lump sum.
We reserve the right to pay the Proceeds in one sum when it is less than
$2,000, or when the option of payment chosen would result in periodic payments
of less than $20. Payees must be individuals who receive payments in their own
behalf unless otherwise agreed to by us. Any option chosen will be effective
when we acknowledge it.
We may require proof of your age or survival or the age or survival of the
Payee.
The guaranteed minimum interest rate used in the fixed payout options is
3%. We may pay or credit additional interest annually.
When the last Payee dies, we will pay to the estate of that Payee any
amount on deposit, or the then present value of any remaining guaranteed
payments under a fixed option.
FIXED PAYMENTS
Fixed payments are available under all six Payout Options below. The
Proceeds will be transferred to our general account, and the Payments will be
fixed in amount by the provisions selected and the age and sex (if consideration
of sex is allowed) of the Payee. The guaranteed effective annual interest rate
used in the Payout Options is 3%. We may, AT OUR SOLE DISCRETION, declare
additional interest to be paid or credited annually for Payout Options 1, 2, 3,
or 6. The guaranteed amounts are based on the 1983a Mortality Table, and 3%
guaranteed interest rate.
Current amounts may be obtained from us.
VARIABLE PAYMENTS
Only Payout Options 2, 4, and 6 are available for variable payments. The
dollar amount of the first monthly payment will be determined by applying the
Proceeds allocated to variable Subaccounts to the Variable Payout Options table
shown in the Policy applicable to the Payout Option chosen. The tables are
determined from the 1983a Mortality Table with an assumed investment rate of 4%.
If more than one Subaccount has been selected, the accumulation value of each
Subaccount is applied separately to the applicable table to determine the amount
of the first payment attributable to that particular Subaccount.
All variable payments other than the first will vary in amount according to
the investment performance of the applicable Subaccounts. The amount of each
subsequent payment equals the number of Variable Payment Units for each
Subaccount as determined for the first payment, multiplied by the value of a
Variable Payment Unit for that Subaccount 10 days prior to the date the variable
payment is due. This amount may increase or decrease from month to month.
If the net investment return of a Subaccount for a payment period is equal
to the pro-rated portion of the 4% annual assumed investment rate, the variable
payment attributable to that Subaccount for that period will equal the payment
for the prior period. To the extent that such net investment return exceeds an
annualized rate of 4% for a payment period, the payment for that period will be
greater than the payment for the prior period and to the extent that such return
for a period falls short of an annualized rate of 4%, the payment for that
period will be less than the payment for the prior period. A charge equal on an
annual basis to 1.20% of the daily net asset value of the Variable Account is
applied in calculating variable payouts.
TRANSFERS BETWEEN FIXED AND VARIABLE SUBACCOUNTS
The Payee may exchange the value of a designated number of Variable Payment
Units of a particular Subaccount into other Variable Payment Units, the value of
which would be such that the dollar amount of a payment made on the date of the
exchange would be unaffected by the fact of the exchange. No more than four (4)
exchanges may be made within each Policy year.
Transfers may be made between Subaccounts and from a Subaccount to the Fixed
Account. No exchanges may be made from the Fixed Account to the variable
Subaccounts. Transfers will be made using the variable payment unit values for
the Valuation Period during which any request is received by us.
PAYMENT OPTIONS
OPTION 1 -- PROCEEDS HELD ON DEPOSIT AT INTEREST. While the Proceeds
are held by us, we will annually:
(a) pay interest to the Payee; or
(b) add interest to the Proceeds.
OPTION 2 -- INCOME OF A SPECIFIED AMOUNT. We will pay the Proceeds in
monthly installments of a specified amount until the Proceeds, with
interest, have been fully paid.
OPTION 3 -- INCOME FOR A SPECIFIED PERIOD. We will pay the Proceeds in
installments for the number of years you choose. The monthly incomes for
each $1,000 of Proceeds,shown in the table set forth in the Policy, include
interest.We will provide the income amounts for payments other than monthly
upon request.
OPTION 4 -- LIFETIME INCOME. We will pay the Proceeds as a monthly income
for as long as the Payee lives. The following guarantees are available:
GUARANTEED PERIOD - The monthly income will be paid for a certain
number of years and as long thereafter as the Payee lives; or
GUARANTEED AMOUNT (INSTALLMENT REFUND) - The monthly income will be
paid until the sum of all payments equals the Proceeds placed under this
option and as long thereafter as the Payee lives.
If a fixed Payment Option is chosen, the monthly income will be
the amount computed using either the Lifetime Monthly Income Table set
forth in the Policy (which is based on the 1983a Mortality Table and
interest at 3% or, if more favorable to the Payee, our then current
lifetime monthly income rates for payment of Proceeds. If a variable
Payout Option is chosen, all variable payments, other than the first
variable payment, will vary in amount according to the investment
performance of the applicable Subaccounts.
NOTE CAREFULLY. If no guarantee is elected, then IT WOULD BE
POSSIBLE FOR ONLY ONE PAYMENT TO BE MADE if the Payee(s) were to die
before the due date of the second payment; only two Payments if the
Payee(s) were to die before the due date of the third payment; and so
forth. When the last Payee dies, we will pay to the estate of that Payee
any remaining guaranteed Payments under a fixed payout option.
OPTION 5 -- LUMP SUM. The Proceeds will be paid in one sum.
OPTION 6 -- ALTERNATIVE SCHEDULE. Upon request and if available, we will
provide payments for other options, including joint and survivor periods.
Certain options may not be available in some States.
If variable payments are being made under Option 2 or 6 and do not involve life
contingencies, then you may surrender the Policy and receive the commuted value
of any unpaid payments.
Additional information about any Payout Option may be obtained by contacting
us.
- -----------------------------------------------------------
CHARGES AND FEES
CHARGES DEDUCTED UNDER THE POLICY
DEDUCTIONS FROM INITIAL PREMIUM
We deduct no charges from Premium before allocation to the Variable Account,
although the Monthly Deduction includes deductions for cost of insurance charges
and for expense charges, and a Surrender Charge based on Premium may apply to
surrenders or partial withdrawals during the Surrender Charge period.
MONTHLY DEDUCTION
We deduct a charge from the entire Accumulation Value on each Monthly
Deduction Date. This Monthly Deduction equals the cost of insurance charge* for
the current month, plus the expense charge (annualized charge is 1.53% for the
first ten Policy Years and 1.14% for Policy Years thereafter).
- -----------------
* No cost of insurance charge is deducted on or after the Policy Anniversary
when the age of the Insured is equal to 100.
Each charge is calculated as a percentage of Accumulation Value (including
amounts of Accumulation Value moved to the Loan Account as collateral for Policy
loans) in the following manner: first, all charges are calculated, based on the
Accumulation Value on the Monthly Deduction Date (before monthly charges are
deducted, but reflecting charges deducted from Subaccount assets), and then
deducted. The Monthly Deduction is deducted pro rata from the Accumulation Value
in the Subaccounts, the Fixed Account, and the Loan Account.
CHARGES DEDUCTED ON SURRENDER OR PARTIAL WITHDRAWAL
If the Policy is surrendered or lapses or a partial withdrawal is taken
during the Surrender Charge period (which is the first nine Years after each
premium payment), a Surrender Charge may be deducted. This charge declines over
the course of the Surrender Charge period. Any Surrender Charge deduction is
deducted pro rata from the Accumulation Value in the Subaccounts and the Fixed
Account.
MORE INFORMATION ABOUT THE ABOVE CHARGES
SURRENDER CHARGE
If a Policy is totally surrendered or lapses or a partial withdrawal is
made, we may deduct a Surrender Charge from the amount requested to be
surrendered. The percentage varies according to the length of time since each
premium was paid. Any applicable Surrender Charge will be deducted on a full
surrender or a partial withdrawal. The Surrender Charge period and the amount of
the Surrender Charge are shown in the following table:
YEARS SINCE
PREMIUM PAYMENT SURRENDER CHARGE
1 9.50%
2 9.50
3 9.50
4 9.00
5 7.50
6 6.00
7 4.50
8 3.00
9 1.50
10 & later 0
EXPENSE CHARGE
The expense charge consists of charges for administrative, tax (first ten
Policy Years only) and mortality and expense risk charges. This charge is no
longer deducted beginning on the Policy anniversary next following the insured's
100th birthday if coverage beyond maturity is elected.
ADMINISTRATIVE CHARGE. This charge is deducted from your Policy's
Accumulation Value on each Monthly Deduction Date, as part of the Monthly
Deduction. This charge is currently set at an annual rate of 0.24% of the
Accumulation Value on each Monthly Deduction Date. This charge is for the cost
of administering the Policies (such as the cost of processing Policy
transactions, issuing Policy Owner statements and reports, and record keeping),
as well as legal, actuarial, systems, mailing and other overhead costs connected
with our variable life insurance operations.
TAX EXPENSE CHARGE. We will deduct this charge as part of the Monthly
Deduction from your Accumulation Value on each Monthly Deduction Date for the
first ten Policy Years. The annual rate of this charge is 0.39% of the
Accumulation Value and is to reimburse us for State premium taxes, federal
deferred acquisition cost taxes, and related administrative expenses.
MORTALITY AND EXPENSE RISK CHARGE. We deduct a charge from your Accumulation
Value on each Monthly Deduction Date for the mortality and expense risks that we
assume. This charge is currently set at an annual rate of 0.90% of the
Accumulation Value on each Monthly Deduction Date. The mortality risk we assume
is that Insureds may live for shorter periods of time than we estimated. The
expense risk is that our costs of issuing and administering the Policies may be
more than we estimated.
If all the money we collect from this charge is not needed to cover death
benefits and expenses, the money is contributed to our general account.
Conversely, even if the money we collect is insufficient, we will provide for
all death benefits and expenses.
COST OF INSURANCE CHARGE
This charge is deducted from the Policy's Accumulation Value on each Monthly
Deduction Date, as part of the Monthly Deduction. This charge is no longer
deducted beginning on the Policy anniversary next following the Insured's 100th
birthday if coverage beyond maturity is elected.
The cost of insurance charge covers the cost of providing insurance
protection under your Policy. Currently, the amount of this charge is based on
the rate class of the Insured and Policy accumulation value and duration. We
assign Insureds to rate classes based on underwriting conducted when we receive
a Policy application. Currently, we assign Insureds to the following rate
classes: preferred and standard. Once a Policy is issued, an Insured's rate
class does not change except if an additional premium is submitted and the
underwriting review determines that the Insured qualifies for a better rate
class. If the Insured qualifies for a better rate class, the rate class for the
additional premium will be used for cost of insurance charges under the entire
Policy.
Currently, the cost of insurance charge for a Policy is calculated as a
percentage of the Accumulation Value on the Monthly Deduction Date. The charge
is based on the duration of the Policy, and the Insured's rate class. The
current monthly rates for these classes are equivalent to the annual percentage
rates shown in the following table:
POLICY YEAR(S) ACCUMULATION VALUE ACCUMULATION VALUE
OF $45,000 OR LESS. GREATER THAN $45,000.
-------------------- ---------------------- ---------------------
PREFERRED RATE CLASS
1-10 0.70% 0.60%
11 and later 0.60% 0.50%
STANDARD RATE CLASS
1-10 1.30% 1.20%
11 and later 0.94% 0.84%
We reserve the right to change the cost of insurance charges upon appropriate
regulatory approval.
For purposes of determining the current cost of insurance charge on a
Monthly Deduction Date, the applicable cost of insurance percentage is applied
to the remaining Accumulation Value.
The cost of insurance charge deducted on a Monthly Deduction Date is
guaranteed not to exceed the amount calculated using the guaranteed cost of
insurance rates set forth in the Policy for that date. The maximum cost of
insurance charge for a Monthly Deduction Date determined is equal to the "net
amount at risk" under the Policy, multiplied by the guaranteed cost of insurance
rate for that date. The net amount at risk is determined on the last day of the
Policy Month. The amount at risk at any point in time is just the death benefit
at that point in time, less the Accumulation Value at that point in time after
deducting the Expense Charge and the cost of any Policy riders.
The guaranteed cost of insurance rate for a Monthly Deduction Date under a
Policy depends on the Insured's sex and age on the first day of a Policy Year.
Current cost of insurance rates are more favorable for preferred rate class
than for standard rate class Insureds. Within a given class, guaranteed cost of
insurance rates are generally more favorable for Insureds of lower ages than for
Insureds of higher ages, and are generally more favorable for female Insureds
than for male Insureds.
If a Policy loan is outstanding, and the Cash Surrender Value on a Monthly
Deduction Date is not enough to cover the entire Monthly Deduction and any loan
interest due for the Policy Month, we will notify you that the Policy is going
to terminate unless a sufficient payment is made within the 61-day grace period.
(SEE "THE POLICY: LAPSE AND GRACE PERIOD.")
TRANSFER CHARGES
A transfer fee of $10 may be imposed for any transfer in excess of 12 per
Policy Year. The transfer fee is deducted from the amount transferred. The first
12 transfers each Policy Year are free.
SERIES FUND CHARGES
Each Portfolio of the Series Funds is responsible for all of its expenses.
The net assets of each Portfolio of the Series Funds will reflect deductions in
connection with the investment advisory fee and other expenses. Here is a table
of Series Fund annual expenses:
<TABLE>
<CAPTION>
-------------- -------------- ---------------
Series Fund Annual Expenses 1 Management Other Total Series
(as a percentage of average net assets) Fees Expenses Fund Annual
Expenses
- --------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C> <C>
Portfolio:
Alger American Growth 0.75% 0.10% 0.85%
Alger American Small Capitalization 0.85% 0.07% 0.92%
Federated Prime Money Fund II 0.50% 0.30% 0.80%
Federated Fund for U.S. Government Securities II 0.00% 0.80% 0.80%
Fidelity VIP II Asset Manager: Growth 0.71% 0.29% 1.00%
Fidelity VIP II Contrafund 0.61% 0.11% 0.72%
Fidelity VIP Equity Income 0.51% 0.10% 0.61%
Fidelity VIP II Index 500 0.09% 0.19% 0.28%
MFS Emerging Growth 0.75% 0.25% 1.00%
MFS High Income Fund 0.75% 0.25% 1.00%
MFS Research 0.75% 0.25% 1.00%
MFS Value Series 0.75% 0.25% 1.00%
MFS World Government 0.75% 0.25% 1.00%
Pioneer Capital Growth 0.65% 0.60% 1.25%
Pioneer Real Estate 1.00% 0.25% 1.25%
Scudder Global Discovery 0.16% 1.34% 1.50%
Scudder Growth & Income 0.48% 0.18% 0.66%
Scudder International 0.88% 0.21% 1.09%
T. Rowe Price Equity Income * 0.00% 0.85% 0.85%
T. Rowe Price International * 0.00% 1.05% 1.05%
T. Rowe Price Limited-Term Bond * 0.00% 0.70% 0.70%
T. Rowe Price New America Growth * 0.00% 0.85% 0.85%
T. Rowe Price Personal Strategy Balanced * 0.00% 0.90% 0.90%
- --------------------------------------------------- -------------- -------------- ---------------
===================================================================================================
*.T. Rowe Price Funds do not itemize management fees and other expenses.
===================================================================================================
</TABLE>
For more information concerning the investment advisory fee and other charges
against the Portfolios, see the prospectuses for the Series Funds, current
copies of which accompany this Prospectus.
================================================================================
- --------
1 The fee and expense data regarding each Series Fund, which are fees and
expenses for 1996, was provided to Companion by the Series Fund. The Series
Funds are not affiliated with Companion.
- -----------------------------------------------------------
OTHER POLICY PROVISIONS
NOTICE TO US
All notices or requests under the Policy must be sent to us by written
notice. Written notices to us are not effective until our receipt at this
address: Companion Life Insurance Company, Variable Product Services Department,
P.O. Box 3664, Omaha, Nebraska 68103-0664. Our toll-free telephone number is
800-494-0067.
ENTIRE CONTRACT
The entire contract is the Policy, any riders, endorsements and amendments,
and the signed application. All statements made in the application will, in the
absence of fraud, be deemed representations and not warranties. We will not use
any statement to contest the Policy or deny a claim unless it is in the
application. Any change of the Policy requires the written consent of an
executive officer. No agent has the authority to change this contract or waive
any of its terms.
RIGHT TO EXAMINE
If you are not satisfied with your Policy, you may return it to us or our
agent within 10 after you receive the Policy or 45 days after you signed the
application, whichever is later. We will cancel your Policy as of the date any
insurance became effective and refund the premiums paid within seven days after
we receive the returned policy.
DELAY OF PAYMENTS
We will usually pay any amounts payable from the Variable Account as a
Policy loan, partial withdrawal or Cash Surrender within 7 days after we receive
your written request in a form satisfactory to us. We can postpone such payments
or any transfers of amounts between Subaccounts or into the Fixed Account or the
Loan Account if: (i) the New York Stock Exchange ("NYSE") is closed for other
than customary weekend and holiday closings; (ii) trading on the NYSE is
restricted; (iii) an emergency exists as determined by the SEC, as a result of
which it is not reasonably practical to dispose of securities, or not reasonably
practical to determine the value of the Net Assets of the Variable Account; or
(iv) the SEC permits delay for the protection of security holders. The
applicable rules of the Securities and Exchange Commission will govern as to
whether the conditions in (iii) or (iv) exist. We may defer payment of Policy
loans, partial withdrawals or a Cash Surrender from the Fixed Account for up to
six months from the date we receive your written request.
CHANGE OF OWNERSHIP AND ASSIGNMENT
You may name a new owner of this Policy or pledge it as collateral by
assigning it. The assignment must be in writing. No assignment will be binding
on us until we record and acknowledge it. We are not responsible for the
validity or effect of an assignment of this Policy. The rights of any
Beneficiary will be subject to a collateral assignment. If the Beneficiary of
this Policy is irrevocable, a change of ownership or a collateral assignment may
be made only by joint written request from you and the irrevocable Beneficiary.
BENEFICIARY
The Beneficiary is named in the Policy application and may be changed,
unless the Beneficiary is irrevocable. (SEE "BENEFICIARY CHANGE.")
BENEFICIARY CHANGE
To change a Beneficiary, send us a written request. When recorded and
acknowledged by us, the change will be effective as of the date you signed the
request. The change will not apply to any payments made or other action taken by
us before recording. If the Beneficiary is irrevocable, you may change the
Beneficiary only by joint written request from you and the irrevocable
Beneficiary.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated, all payments and
benefits under the policy will be those which the premiums paid would have
purchased at the correct age and sex.
SUICIDE
We will not pay the Death Benefit if the Insured's death results from
suicide, while sane or insane, within two from the date of issue. Instead we
will pay the sum of the premiums paid since issue less any loans and unpaid loan
interest and less any partial withdrawals. ....We will not pay that portion of
the Death Benefit resulting from an increase in Specified Amount if the
Insured's death results from suicide, while sane or insane, within two years
from the effective date of the increase. Instead we will pay the sum of the
premiums paid for the increase.
INCONTESTABILITY
We will not contest the validity of the Policy after it has been in force
during the lifetime of the Insured for two years from the date of issue. ....We
will not contest the validity of an increase in Specified Amount after the
Policy has been in force during the lifetime of the Insured for two years from
the effective date of the increase. Any contest of an increase in Specified
Amount will be based on the application for that increase.
REINSTATEMENT
If this policy lapses, you may reinstate it within five years of the date of
lapse and prior to the maturity date, subject to the following: (i) we receive a
written application signed by you and the Insured; (ii) we receive evidence of
insurability satisfactory to us; (iii) we receive payment of an amount large
enough to continue this Policy in force for three months; (iv) re-establishment
of surrender charges, if any, measured from the original date of issue; and (iv)
repayment or reinstatement of any outstanding Policy loan along with unpaid loan
interest from the date of lapse. The effective date of reinstatement will be the
date we approve the application for reinstatement.
The Specified Amount of the reinstated Policy may not exceed the Specified
Amount at the time of lapse. The Accumulation Value on the effective date of
reinstatement will reflect (I) the Accumulation Value at the time of lapse,
except that the value in the Loan Account may be repaid prior to reinstatement;
less (ii) the Monthly Deduction for the current month.
NONPARTICIPATING
The Policy does not share in our surplus earnings or profits. No dividends
are paid by us on this Policy.
- -----------------------------------------------------------
TAX MATTERS
GENERAL
The following is a discussion of federal income tax considerations relating
to the Policy. It is based upon our understanding of laws as they now exist and
are currently interpreted by the Internal Revenue Service ("IRS"). These laws
are complex, and tax results may vary among individuals. If you contemplate the
purchase of or exercise of elections under the Policy, you are encouraged to
seek independent competent tax advice.
LIFE INSURANCE QUALIFICATION
Section 7702 of the Internal Revenue Code of 1986, as amended ("Code")
defines a life insurance contract for Federal income tax purposes. The Section
7702 definition can be met if a life insurance contract satisfies either one of
two tests set forth in that section. The manner in which these tests should be
applied to certain features of the Policy is not directly addressed by Section
7702 or proposed regulations issued under that section. The presence of these
Policy features, the absence of final regulations, and the lack of other
pertinent interpretations of Section 7702, thus creates some uncertainty about
the application of Section 7702 to the Policy.
Nevertheless, we believe it is reasonable to conclude that the Policy
qualifies as a life insurance contract for federal tax purposes, so that:
o the death benefit should be fully excludable from the gross income
of the Beneficiary under Section 101(a)(1) of the Code; and
o you should not be considered in constructive receipt of the cash surrender
value, including any increases, unless and until it is distributed from the
Policy.
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 contract. We thus reserve the right to
make changes in the Policy if such changes are deemed necessary to attempt to
assure its qualification as a life insurance contract for tax purposes.
TAX TREATMENT OF LOANS AND OTHER DISTRIBUTIONS
Federal tax law establishes a class of life insurance policies referred to
as modified endowment contracts. In almost all cases, this Policy will be a
modified endowment contract. (SEE, HOWEVER, THE DISCUSSION BELOW IN THIS SECTION
ON A POLICY ISSUED IN EXCHANGE FOR ANOTHER LIFE INSURANCE POLICY.) Except as
specifically noted, the remainder of this discussion assumes that this Policy
will be a modified endowment contract. Loans and partial withdrawals from, as
well as collateral assignments of, modified endowment contracts will be treated
as distributions to you. All pre-death distributions (including loans, partial
withdrawals and collateral assignments) from these Policies will be included in
gross income on an income-first basis to the extent of any income in the Policy
immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless
such amounts are distributed on or after the taxpayer attains age 59 1/2,
because the taxpayer is disabled, or as substantially equal periodic payments
over the taxpayer's life (or life expectancy) or over the joint lives (or joint
life expectancies) of the taxpayer and his or her Beneficiary. Furthermore, if
the loan interest is capitalized by adding the amount due to the balance of the
loan, the amount of the capitalized interest will be treated as an additional
distribution subject to income tax as well as the 10% penalty tax, if
applicable, to the extent of income in the Policy.
Any Policy issued in exchange for a modified endowment contract will be
subject to the tax treatment accorded to modified endowment contracts. However,
we believe that any Policy issued in exchange for a life insurance policy that
is not a modified endowment contract will generally not be treated as a modified
endowment contract if the death benefit of the Policy is greater than or equal
to the death benefit of the policy being exchanged. The payment of any premiums
at the time of or after the exchange may, however, cause the Policy to become a
modified endowment contract. You may, of course, choose not to exercise the
right to make additional payments in order to prevent a Policy from being
treated as a modified endowment Policy.
If a Policy that was not a modified endowment contract at issue subsequently
becomes a modified endowment contract, distributions made during the Policy year
in which it becomes a modified endowment contract, distributions in any
subsequent Policy year and distributions within two years before the Policy
becomes a modified endowment contract will be subject to the tax treatment
described above. This means that a distribution from a Policy that is not a
modified endowment contract could later become taxable as a distribution from a
modified endowment contract. In addition, regulations or other interpretations
may be issued which will apply similar tax treatment to other distributions made
in anticipation of a Policy becoming a modified endowment contract.
SPECIAL TREATMENT OF POLICY LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may
not be tax deductible.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial
withdrawal, collateral assignment or full surrender) from a Policy that is
treated as a modified endowment contract, a special aggregation requirement may
apply for purposes of determining the amount of the income on the Policy.
Specifically, if we or any of our affiliates issue to the same Policy Owner more
than one modified endowment contract within a calendar year, then for purposes
of measuring the income on the Policy with respect to a distribution from any of
those policies, the income for all those policies will be aggregated and
attributed to that distribution.
OTHER POLICY OWNER TAX MATTERS
Federal and state estate, inheritance and other tax consequences of
ownership or receipt of proceeds under the Policy depend upon you or the
beneficiary's individual circumstances.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in the Policy
not qualifying as life insurance under the Code, which may subject you to
immediate taxation on the incremental increases in Accumulation Value of the
Policy plus the cost of insurance protection for the year. Regulations
specifying the diversification requirements have been issued by the Department
of Treasury, and we believe the Policy complies fully with such requirements.
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of regulations or
rulings prescribing the circumstances in which your control of the investments
of the Variable Account may cause you, rather than us, to be treated as the
owner of the assets in the Variable Account. To date, no such regulations or
guidance has been issued. If you are considered the owner of the assets of the
Variable Account, income and gains from the Account would be included in your
gross income.
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
determined that the owners were not owners of separate account assets. For
example, you have additional flexibility in allocating Policy Premium and
Accumulation Values. These differences could result in you being treated as the
owner of a pro rata share of the assets of the Variable Account. In addition, we
do not know what standards will be set forth in the regulations or rulings which
the Treasury may issue. We therefore reserve the right to modify the Policy as
necessary to attempt to prevent you from being considered the owner of the
assets of the Variable Account.
The Policy may be used in various arrangements, including non-qualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, tax exempt and nonexempt welfare benefit 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 the 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 and the suitability of this product for the
arrangement.
- -----------------------------------------------------------
MANAGEMENT
Our Directors and senior officers are:
DIRECTORS
Thomas J. Skutt Chairman (Mutual of Omaha Companies Executive)
Ernest B. Johnston Vice-Chairman (Mutual of Omaha Companies Executive)
John W. Weekly Vice-Chairman (Mutual of Omaha Companies Executive)
William G. Campbell Director (Private Practice Attorney, Campbell Law Offices)
Samuel L. Foggie Director (Retired Banking and Finance Industry Executive)
M. Jane Huerter Director (Mutual of Omaha Companies Executive)
Charles T. Locke III Director (Private Practice Attorney, Locke & Herbert)
John L. Maginn Director (Mutual of Omaha Companies Executive)
Thomas T. Sawicz Director (Mutual of Omaha Companies Executive)
Oscar S. Straus Director (President, Daniel and Florence Guggenheim
Foundation)
John A. Sturgeon Director (Mutual of Omaha Companies Executive)
Daniel R. Varona Director (Private Practice Attorney)
OFFICERS
Ernest B. Johnston President & Chief Executive Officer
Fred C. Boddy Vice President, Treasurer & Assistant Secretary
Linda Goodwin, MD Vice President & Senior Medical Director
Bruce Henricks, MD Vice President & Senior Medical Director
Denise P. Power Vice President, Underwriting
M. Jane Huerter Vice President & Secretary
Burton D. Jay Vice President & Actuary
John L. Maginn Vice President & Assistant Treasurer
Russ Wiltgen Vice President & Actuary
James O'Connor Vice President & Compliance Officer
* Business address for all directors and officers is Mutual of Omaha Plaza,
Omaha, Nebraska 68175.
- -----------------------------------------------------------
OTHER INFORMATION
REPORTS TO YOU
We will send you a statement at least annually showing your Policy's death
benefit, Accumulation Value and any outstanding Policy loan balance. We will
also confirm Policy loans, Subaccount transfers, lapses, surrenders and other
Policy transactions as they occur. If you have Accumulation Value in the
Variable Account you will receive such additional periodic reports as may be
required by the SEC.
VOTING RIGHTS
We own the Series Fund shares held in the Variable Account and have the
right to vote those shares. However, to the extent required by applicable
Federal securities law, we will give you, as Policy Owner, the right to instruct
us how to vote the shares that are attributable to your Policy.
The Policy Owners who are entitled to give voting instructions and the
number of shares attributable to their Policies will be determined as of the
record date for the meeting. All Series Fund shares held in any Subaccount of
the Variable Account, or in any other separate account of ours or an affiliate,
the policyholders of which have rights of instruction with respect to the Series
Fund shares, and for which timely instructions are not received, will be voted
in the same proportion as (i) the aggregate cash value of policies giving
instructions, respectively, to vote, for, against, or withhold votes on a
proposition, bears to (ii) the total Accumulation Value in that Subaccount for
all policies for which voting instructions are received. No voting privileges
apply with respect to Accumulation Value removed from the Variable Account as a
result of a Policy loan.
If required by State insurance authorities, we may disregard voting
instructions if they would require that shares be voted to cause a change in the
investment objectives of the portfolios of the Series Funds or to approve or
disapprove an investment advisory or underwriting contract for a portfolio. In
addition, we may disregard voting instructions in favor of changes, initiated by
a Policy Owner or an Eligible Fund's Board of Trustees, in the investment
policy, investment adviser or principal underwriter of the Series Fund portfolio
if we (i) reasonably disapprove of the changes and (ii) in the case of a change
in investment policy or investment adviser, make a good faith determination that
the proposed change is contrary to State law or is prohibited by State
regulatory authorities or that the change would be inconsistent with a
Subaccount's investment objectives or would result in the purchase of securities
which vary from the general quality and nature of investments and investment
techniques utilized by other separate accounts of ours or of an affiliated life
insurance company, which separate accounts have investment objectives similar to
those of the Subaccount. If we do disregard voting instructions, a summary of
that action and the reasons for it will be included in the next semi-annual
report to Policy Owners.
DISTRIBUTION OF THE POLICIES
Mutual of Omaha Investor Services ("MOIS"), Mutual of Omaha Plaza, Omaha,
Nebraska 68175, is the principal underwriter of the Policy. Like us, MOIS is a
100% owned subsidiary of Mutual of Omaha Insurance Company. MOIS is registered
as a broker-dealer with the SEC and is a member of the National Association of
Securities Dealers, Inc. ("NASD"). MOIS contracts with one or more registered
broker-dealers ("Distributors") to offer and sell the Policy. All persons
selling the Policy will be registered representatives of the Distributors, and
will also be licensed as insurance agents to sell variable life insurance.
Commissions paid to Distributors may be up to 7% of the Premium paid.
STATE REGULATION
We are subject to regulation and supervision by the Insurance Department of
the State of New York, which periodically examines our affairs. We are also
subject to the insurance laws and regulations of all jurisdictions where we are
authorized to do business. The Policy has been approved by the Insurance
Department of the State of New York and other jurisdictions.
We submit annual statements of our operations, including financial
statements, to the insurance departments of the various jurisdictions in which
we do business, for the purpose of determining solvency and compliance with
local insurance laws and regulations.
LEGAL MATTERS
We know of no material legal proceedings pending to which the Variable
Account is a party or which would materially affect the Variable Account. We are
not involved in any litigation of material importance to our total assets or to
the Variable Account.
Legal matters in connection with the Policy have been passed upon by our Law
Staff.
INDEPENDENT AUDITORS
The financial statements of Companion Life Insurance Company as of and for
the year ended December 31, 1996, included in this Registration Statement have
been audited by independent auditors Deloitte & Touche LLP, New York, New York,
as stated in their report appearing herein. The financial statements of
Companion Life Insurance Company as of December 31, 1995, and for the two years
then ended were audited by independent auditors Coopers & Lybrand LLP, New York,
New York, as stated in their report appearing herein. The financial statements
of Companion Life Insurance Company should be considered only as bearing on the
ability of Companion 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.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement filed with the SEC. Copies of such additional information may be
obtained from the SEC upon payment of the prescribed fee.
- -----------------------------------------------------------
ILLUSTRATIONS
DEATH BENEFITS, CASH SURRENDER VALUE AND ACCUMULATED PREMIUMS
The tables in this Section illustrate how the Policy operates. They show how
the Death Benefit, Cash Surrender Value, and Accumulation Value could vary over
an extended period of time assuming hypothetical gross rates of return. (i.e.
investment income and capital gains and losses, realized or unrealized) for the
Variable Account equal to constant after tax annual rates of 0%, 6%, and 12%.
The tables are based on an initial premium of $20,000. A male age 55, 65 and 75
with specified amounts of $43,200, $36,867, and $29,134, respectively, are
illustrated for this Policy. The Insureds are assumed to be preferred rate
class. Values are given based on current and guaranteed Policy charges. These
tables may assist in comparison of Death Benefits, Cash Surrender Values and
Accumulation Values with those under other variable life insurance policies that
may be issued by Companion or other companies.
Death Benefits, Cash Surrender Values, and Accumulation Values for a Policy
would be different from the amounts shown if the actual gross rates of return
averaged 0%, 6% or 12%, but varied above and below that average for the period,
if the initial premium was paid in another amount, if additional payments were
made, or if any Policy loan or partial withdrawal was made during the period of
time illustrated. They would also be different depending on the allocation of
Accumulation Value among the Variable Account's Subaccounts, if the actual gross
rates of return averaged 0%, 6% or 12%, but varied above and below that average
for the period.
The amounts for the Death Benefit, Cash Surrender Value, and Accumulation
Value shown in the tables reflect the fact that an expense charge and a charge
for the cost of insurance are deducted from the Accumulation Value on each
Monthly Deduction Date. The Cash Surrender Values shown in the tables reflect
the fact that a Surrender Charge is deducted from the Accumulation Value upon
surrender or lapse during the first nine years following each premium payment.
The amounts shown in the tables take into account an average daily charge equal
to an annual charge 0.89% of the average daily net assets of the Series Funds
for the investment advisory fees and operating expenses incurred by the Series
Funds The gross annual investment return rates of 0%, 6%, and 12% on the Fund's
assets are equal to net annual investment return rates of -0.89%, 5.11%, 11.11%,
respectively.
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account, since no such charges are
currently made. If any such charges are imposed in the future, the gross annual
rate of return would have to exceed the rates shown by an amount sufficient to
cover the tax charges, in order to produce the Death Benefits, Cash Surrender
Values and Accumulation Values illustrated.
The second column of each table shows the amount which would accumulate if
the initial premium of $20,000 were invested to earn interest, after taxes, of
5% per year, compounded annually.
Upon request, we will provide a comparable illustration based upon the
proposed Insured's actual age, sex and underwriting classification, the
specified amount, the proposed amount and frequency of premium payments and any
available riders requested.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.11% NET)
Male issue age 55 Initial Premium $20,000
Preferred Class Face Amount $52,000
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 21,731 19,831 52,000 21,523 19,623 52,000
2 22,505 23,613 21,713 52,000 23,177 21,277 52,000
3 23,153 25,657 23,757 52,000 24,976 23,076 52,000
4 24,310 27,878 26,078 52,000 26,939 25,139 52,000
5 25,526 30,292 28,792 52,000 29,086 27,586 52,000
6 26,802 32,914 31,714 52,000 31,440 30,240 52,000
7 28,142 35,764 34,864 52,000 34,028 33,128 52,000
8 29,549 38,860 38,260 52,000 36,880 36,280 52,000
9 31,027 42,254 42,954 52,395 40,036 39,736 52,000
10 32,578 45,987 45,987 56,105 43,540 43,540 53,119
11 34,207 50,265 50,265 60,318 47,575 47,575 57,090
12 35,917 54,940 54,940 65,379 51,972 51,972 61,847
13 37,713 60,050 60,050 70,859 56,765 56,765 66,983
14 39,599 65,636 65,636 76,794 61,990 61,990 72,528
15 41,579 71,741 71,741 83,220 67,684 67,684 78,514
16 43,657 78,414 78,414 90,176 73,891 73,891 84,974
17 45,840 85,708 85,708 96,850 80,690 80,690 91,180
18 48,132 93,680 93,680 103,984 88,151 88,151 97,848
19 50,539 102,395 102,395 111,611 96,352 96,352 105,024
20 53,066 112,000 112,000 119,840 105,390 105,390 112,768
25 67,727 175,570 175,570 184,348 165,208 165,208 173,468
35 110,320 427,275 427,275 448,639 391,185 391,185 410,744
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.11% NET)
Male issue age 55 Initial Premium $20,000
Preferred Class Face Amount $52,000
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 20,558 18,658 52,000 20,347 18,447 52,000
2 22,505 21,132 19,232 52,000 20,677 18,777 52,000
3 23,153 21,721 19,821 52,000 20,988 19,088 52,000
4 24,310 22,327 20,527 52,000 21,279 19,479 52,000
5 25,526 22,950 21,450 52,000 21,545 20,045 52,000
6 26,802 23,590 22,390 52,000 21,782 20,582 52,000
7 28,142 24,248 23,348 52,000 21,982 21,082 52,000
8 29,549 24,925 24,325 52,000 22,140 21,540 52,000
9 31,027 25,620 25,320 52,000 22,246 21,946 52,000
10 32,578 26,335 26,335 52,000 22,291 22,291 52,000
11 34,207 27,203 27,203 52,000 22,357 22,357 52,000
12 35,917 28,099 28,099 52,000 22,350 22,350 52,000
13 37,713 29,025 29,025 52,000 22,261 22,261 52,000
14 39,599 29,982 29,982 52,000 22,077 22,077 52,000
15 41,579 30,970 30,970 52,000 21,781 21,781 52,000
16 43,657 31,991 31,991 52,000 21,348 21,348 52,000
17 45,840 33,045 33,045 52,000 20,749 20,749 52,000
18 48,132 34,134 34,134 52,000 19,944 19,944 52,000
19 50,539 35,259 35,259 52,000 18,885 18,885 52,000
20 53,066 36,421 36,421 52,000 17,519 17,519 52,000
25 67,727 42,831 42,831 52,000 3,303 3,303 52,000
35 110,320 59,736 59,736 62,723 *** *** ***
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
*** The Policy is lapsed.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.89% NET)
Male issue age 55 Initial Premium $20,000
Preferred Class Face Amount $52,000
CURRENT CHARGES * GUARANTEED CHARGES **
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 19,384 17,484 52,000 19,170 17,270 52,000
2 22,505 18,788 16,888 52,000 18,318 16,418 52,000
3 23,153 18,210 16,310 52,000 17,440 15,540 52,000
4 24,310 17,649 15,849 52,000 16,532 14,732 52,000
5 25,526 17,106 15,606 52,000 15,589 14,089 52,000
6 26,802 16,580 15,380 52,000 14,603 13,403 52,000
7 28,142 16,069 15,169 52,000 13,566 12,666 52,000
8 29,549 15,575 14,975 52,000 12,467 11,867 52,000
9 31,027 15,095 14,795 52,000 11,293 10,993 52,000
10 32,578 14,631 14,631 52,000 10,032 10,032 52,000
11 34,207 14,250 14,250 52,000 8,708 8,708 52,000
12 35,917 13,880 13,880 52,000 7,265 7,265 52,000
13 37,713 13,519 13,519 52,000 5,688 5,688 52,000
14 39,599 13,167 13,167 52,000 3,958 3,958 52,000
15 41,579 12,825 12,825 52,000 2,047 2,047 52,000
16 43,657 12,491 12,491 52,000 *** *** ***
17 45,840 12,166 12,166 52,000 *** *** ***
18 48,132 11,850 11,850 52,000 *** *** ***
19 50,539 11,542 11,542 52,000 *** *** ***
20 53,066 11,241 11,241 52,000 *** *** ***
25 67,727 9,854 9,854 52,000 *** *** ***
35 110,320 7,571 7,571 52,000 *** *** ***
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
*** The Policy is lapsed.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.11% NET)
Male issue age 65 Initial Premium $20,000
Preferred Class Face Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 21,731 19,831 36,867 21,430 19,530 36,867
2 22,505 23,613 21,713 36,867 22,997 21,097 36,867
3 23,153 25,657 23,757 36,867 24,726 22,826 36,867
4 24,310 27,878 26,078 36,867 26,644 24,844 36,867
5 25,526 30,292 28,792 36,867 28,785 27,285 36,867
6 26,802 32,924 31,724 37,863 31,192 29,992 36,867
7 28,142 35,814 34,914 40,470 33,904 33,004 38,311
8 29,549 38,973 38,373 43,260 36,894 36,294 40,953
9 31,027 42,432 42,132 46,251 40,170 39,870 43,785
10 32,578 46,232 46,232 49,468 43,766 43,766 46,830
11 34,207 50,615 50,615 53,146 47,916 47,916 50,312
12 35,917 55,396 55,396 58,166 52,442 52,442 55,064
13 37,713 60,608 60,608 63,638 57,376 57,376 60,245
14 39,599 66,287 66,287 69,602 62,752 62,752 65,890
15 41,579 72,472 72,472 76,096 68,607 68,607 72,038
16 43,657 79,213 79,213 83,174 74,978 74,978 78,727
17 45,840 86,581 86,581 90,910 81,902 81,902 85,997
18 48,132 94,634 94,634 99,366 89,420 89,420 93,891
19 50,539 103,437 103,437 108,609 97,572 97,572 102,450
20 53,066 113,058 113,058 118,711 106,401 106,401 111,721
25 67,727 176,372 176,372 185,191 162,450 162,450 170,573
35 110,320 440,945 440,945 440,945 400,215 400,215 400,215
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.11% NET)
Male issue age 65 Initial Premium $20,000
Preferred Class Face Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 20,558 18,658 36,867 20,248 18,348 36,867
2 22,505 21,132 19,232 36,867 20,468 18,568 36,867
3 23,153 21,721 19,821 36,867 20,658 18,758 36,867
4 24,310 22,327 20,527 36,867 20,813 19,013 36,867
5 25,526 22,950 21,450 36,867 20,927 19,427 36,867
6 26,802 23,590 22,390 36,867 20,990 19,790 36,867
7 28,142 24,248 23,348 36,867 20,992 20,092 36,867
8 29,549 24,925 24,325 36,867 20,917 20,317 36,867
9 31,027 25,620 25,320 36,867 20,747 20,447 36,867
10 32,578 26,335 26,335 36,867 20,463 20,463 36,867
11 34,207 27,203 27,203 36,867 20,127 20,127 36,867
12 35,917 28,099 28,099 36,867 19,368 19,368 36,867
13 37,713 29,025 29,025 36,867 18,967 18,967 36,867
14 39,599 29,982 29,982 36,867 18,078 18,078 36,867
15 41,579 30,970 30,970 36,867 16,915 16,915 36,867
16 43,657 31,991 31,991 36,867 15,410 15,410 36,867
17 45,840 33,045 33,045 36,867 13,456 13,456 36,867
18 48,132 34,134 34,134 36,867 10,914 10,914 36,867
19 50,539 35,259 35,259 37,022 7,591 7,591 36,867
20 53,066 36,421 36,421 38,242 3,229 3,229 36,867
25 67,727 42,831 42,831 44,973 *** *** ***
35 110,320 61,367 61,367 61,367 *** *** ***
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
*** The Policy is lapsed.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INV ESTMENT RETURN OF 0% (-.89% NET)
Male issue age 65 Initial Premium $20,000
Preferred Class Face Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 19,384 17,484 36,867 19,066 17,166 36,867
2 22,505 18,788 17,888 36,867 18,084 16,184 36,867
3 23,153 18,210 16,310 36,867 17,045 15,145 36,867
4 24,310 17,649 16,849 36,867 15,941 14,141 36,867
5 25,526 17,106 15,606 36,867 14,757 13,257 36,867
6 26,802 16,580 15,380 36,867 13,475 12,275 36,867
7 28,142 16,069 15,169 36,867 12,073 11,173 36,867
8 29,549 15,575 15,975 36,867 10,522 9,922 36,867
9 31,027 15,095 14,795 36,867 8,785 8,485 36,867
10 32,578 14,631 14,631 36,867 6,825 6,825 36,867
11 34,207 14,250 14,250 36,867 4,621 4,621 36,867
12 35,917 13,880 13,880 36,867 2,091 2,091 36,867
13 37,713 13,519 13,519 36,867 *** *** ***
14 39,599 13,167 13,167 36,867 *** *** ***
15 41,579 12,825 12,825 36,867 *** *** ***
16 43,657 12,491 12,491 36,867 *** *** ***
17 45,840 12,166 12,166 36,867 *** *** ***
18 48,132 11,850 11,850 36,867 *** *** ***
19 50,539 11,542 11,542 36,867 *** *** ***
20 53,066 11,241 11,241 36,867 *** *** ***
25 67,727 9,854 9,854 36,867 *** *** ***
35 110,320 7,571 7,571 36,867 *** *** ***
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
*** The Policy is lapsed.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.11% NET)
Male issue age 75 Initial Premium $20,000
Preferred Class Face Amount $29,134
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 21,731 19,831 29,134 21,278 19,378 29,134
2 22,505 23,613 21,713 29,134 22,723 20,823 29,134
3 23,153 25,657 23,757 29,134 24,383 22,483 29,134
4 24,310 27,892 26,092 29,287 26,322 24,522 29,134
5 25,526 30,376 28,876 31,895 28,609 27,109 30,040
6 26,802 33,067 31,867 34,720 31,144 29,944 32,701
7 28,142 35,980 35,080 37,779 33,888 32,988 35,582
8 29,549 39,129 38,529 41,086 36,854 36,254 38,696
9 31,027 42,530 42,230 44,656 40,057 39,757 42,060
10 32,578 46,223 46,223 48,535 43,511 43,511 45,687
11 34,207 50,523 50,523 53,049 47,418 47,418 49,789
12 35,917 55,222 55,222 57,983 51,642 51,642 54,224
13 37,713 60,359 60,359 63,377 56,203 56,203 59,013
14 39,599 65,973 65,973 69,271 61,126 61,126 64,182
15 41,579 72,109 72,109 75,715 66,432 66,432 69,753
16 43,657 78,816 78,816 82,757 72,145 72,145 75,753
17 45,840 86,147 86,147 89,593 78,480 78,480 81,620
18 48,132 94,160 94,160 96,985 85,536 85,536 88,102
19 50,539 102,919 102,919 104,977 93,432 93,432 95,301
20 53,066 112,706 112,706 113,833 102,317 102,317 103,341
25 67,727 180,279 180,279 180,279 163,662 163,662 163,662
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.11% NET)
Male issue age 75 Initial Premium $20,000
Preferred Class Face Amount $29,134
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 20,558 18,658 29,134 20,078 18,178 29,134
2 22,505 21,132 19,232 29,134 20,104 18,204 29,134
3 23,153 21,721 19,821 29,134 20,068 18,168 29,134
4 24,310 22,327 20,527 29,134 19,961 18,165 29,134
5 25,526 22,950 21,450 29,134 19,767 18,285 29,134
6 26,802 23,590 22,390 29,134 19,464 18,296 29,134
7 28,142 24,248 23,348 29,134 19,019 18,163 29,134
8 29,549 24,925 24,325 29,134 18,389 17,838 29,134
9 31,027 25,620 25,320 29,134 17,516 17,252 29,134
10 32,578 26,335 26,335 29,134 16,320 16,320 29,134
11 34,207 27,203 27,203 29,134 14,767 14,767 29,134
12 35,917 28,099 28,099 29,504 12,654 12,654 29,134
13 37,713 29,025 29,025 30,477 9,784 9,784 29,134
14 39,599 29,982 29,982 31,481 5873 5873 29,134
15 41,579 30,970 30,970 32,519 515 515 29,134
16 43,657 31,991 31,991 33,590 *** *** ***
17 45,840 33,045 33,045 34,367 *** *** ***
18 48,132 34,134 34,134 35,158 *** *** ***
19 50,539 35,272 35,272 35,977 *** *** ***
20 53,066 36,540 36,540 36,905 *** *** ***
25 67,727 44,281 44,281 44,281 *** *** ***
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
*** The Policy is lapsed.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.89% NET)
Male issue age 75 Initial Premium $20,000
Preferred Class Face Amount $29,134
CURRENT CHARGES * GUARANTEED CHARGES **
------------------------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
CONTRACT AT 5% ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21,000 19,384 17,484 29,134 18,880 17,980 29,134
2 22,505 18,788 16,888 29,134 17,639 15,739 29,134
3 23,153 18,210 16,310 29,134 16,254 14,354 29,134
4 24,310 17,649 15,849 29,134 14,691 13,891 29,134
5 25,526 17,106 15,606 29,134 12,911 11,411 29,134
6 26,802 16,480 15,380 29,134 10,857 10,657 29,134
7 28,142 16,069 15,169 29,134 8,451 8,551 29,134
8 29,549 15,575 14,975 29,134 5,590 5,990 29,134
9 31,027 15,095 14,795 29,134 2,136 2,836 29,134
10 32,578 14,631 14,631 29,134 *** *** ***
11 34,207 14,250 14,250 29,134 *** *** ***
12 35,917 13,880 13,880 29,134 *** *** ***
13 37,713 13,519 13,519 29,134 *** *** ***
14 39,599 13,167 13,167 29,134 *** *** ***
15 41,579 12,825 12,825 29,134 *** *** ***
16 43,657 12,491 12,491 29,134 *** *** ***
17 45,840 12,166 12,166 29,134 *** *** ***
18 48,132 11,850 11,850 29,134 *** *** ***
19 50,539 11,542 11,542 29,134 *** *** ***
20 53,066 11,241 11,241 29,134 *** *** ***
25 67,727 9,854 9,854 29,134 *** *** ***
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
*** The Policy is lapsed.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. Theses values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.11% NET)
Male issue age 65 Initial Premium $20,000
Standard Class Specified Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- ----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCUM. SURRENDER DEATH ACCUM. SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $21,000 $21,601 $19,701 $36,867 $21,430 $19,530 $36,867
2 22,505 23,331 21,431 36,867 22,997 21,097 36,867
3 23,153 25,198 23,298 36,867 24,726 22,826 36,867
4 24,310 27,217 25,417 36,867 26,644 24,844 36,867
5 25,526 29,438 27,938 36,867 28,785 27,285 36,867
6 26,802 31,936 30,736 36,867 31,192 29,992 36,867
7 28,142 34,732 33,832 39,248 33,904 33,004 38,311
8 29,549 37,796 37,196 41,953 36,894 36,294 40,953
9 31,027 41,151 40,851 44,855 40,170 39,870 43,785
10 32,578 44,836 44,836 47,974 43,766 43,766 46,830
11 34,207 49,086 49,086 51,541 47,916 47,916 50,312
12 35,917 53,723 53,723 56,409 52,442 52,442 55,064
13 37,713 58,778 58,778 61,717 57,376 57,376 60,245
14 39,599 64,286 64,286 67,500 62,752 62,752 65,890
15 41,579 70,284 70,284 73,798 68,607 68,607 72,038
16 43,657 76,810 76,810 80,650 74,978 74,978 78,727
17 45,840 83,903 83,903 88,098 81,902 81,902 85,997
18 48,132 91,605 91,605 96,185 89,420 89,420 93,891
19 50,539 99,956 99,956 104,953 97,572 97,572 102,450
20 53,066 109,001 109,001 114,451 106,401 106,401 111,721
25 67,727 167,248 167,248 175,610 162,450 162,450 170,573
35 110,320 413,849 413,849 413849 400,215 400,215 400,215
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.11% NET)
Male issue age 65 Initial Premium $20,000
Standard Class Specified Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
POLICY AT 5% ACCUM. SURRENDER DEATH ACCUM. SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $21,000 $20,435 $18,535 $36,867 $20,248 $18,348 $36,867
2 22,505 20,879 18,979 36,867 20,468 18,568 36,867
3 23,153 21,333 19,433 36,867 20,658 18,758 36,867
4 24,310 21,796 19,996 36,867 20,813 19,013 36,867
5 25,526 22,270 20,770 36,867 20,927 19,427 36,867
6 26,802 22,754 21,554 36,867 20,990 19,790 36,867
7 28,142 23,249 22,349 36,867 20,992 20,092 36,867
8 29,549 23,754 23,154 36,867 20,917 20,317 36,867
9 31,027 24,271 23,971 36,867 20,747 20,447 36,867
10 32,578 24,798 24,798 36,867 20,463 20,463 36,867
11 34,207 25,528 25,528 36,867 20,127 20,127 36,867
12 35,917 26,280 26,280 36,867 19,368 19,368 36,867
13 37,713 27,054 27,054 36,867 18,967 18,967 36,867
14 39,599 27,850 27,850 36,867 18,078 18,078 36,867
15 41,579 28,670 28,670 36,867 16,915 16,915 36,867
16 43,657 29,515 29,515 36,867 15,410 15,410 36,867
17 45,840 30,384 30,384 36,867 13,456 13,456 36,867
18 48,132 31,278 31,278 36,867 10,914 10,914 36,867
19 50,539 32,199 32,199 36,867 7,591 7,591 36,867
20 53,066 33,147 33,147 36,867 3,229 3,229 36,867
25 67,727 38,329 38,329 40,246 *** *** ***
35 110,320 54,331 54,331 54,331 *** *** ***
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
*** The Policy is lapsed.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
<TABLE>
<CAPTION>
COMPANION LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-.89% NET)
Male issue age 65 Initial Premium $20,000
Standard Class Specified Amount $36,867
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- -----------------------------------
PREMIUMS
END OF ACCUMULATED CASH CASH
POLICY AT 5% ACCUM. SURRENDER DEATH ACCUM. SURRENDER DEATH
YEAR INTEREST VALUE VALUE BENEFIT VALUE VALUE BENEFIT
PER YEAR
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $21,000 $19,268 $17,438 $36,867 $19,066 $17,255 $36,867
2 22,505 18,563 16,800 36,867 18,084 16,366 36,867
3 23,153 17,884 16,185 36,867 17,045 15,426 36,867
4 24,310 17,230 15,679 36,867 15,941 14,506 36,867
5 25,526 16,599 15,354 36,867 14,757 13,650 36,867
6 26,802 15,992 15,033 36,867 13,475 12,666 36,867
7 28,142 15,407 14,714 36,867 12,073 11,530 36,867
8 29,549 14,843 14,398 36,867 10,522 10,206 36,867
9 31,027 14,300 14,086 36,867 8,785 8,654 36,867
10 32,578 13,777 13,777 36,867 6,825 6,825 36,867
11 34,207 13,373 13,373 36,867 4,621 4,621 36,867
12 35,917 12,981 12,981 36,867 2,091 2,091 36,867
13 37,713 12,600 12,600 36,867 *** *** ***
14 39,599 12,231 12,231 36,867 *** *** ***
15 41,579 11,872 11,872 36,867 *** *** ***
16 43,657 11,524 11,524 36,867 *** *** ***
17 45,840 11,186 11,186 36,867 *** *** ***
18 48,132 10,858 10,858 36,867 *** *** ***
19 50,539 10,540 10,540 36,867 *** *** ***
20 53,066 10,231 10,231 36,867 *** *** ***
25 67,727 8,817 8,817 36,867 *** *** ***
35 110,320 6,547 6,547 36,867 *** *** ***
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
*** The Policy is lapsed.
The hypothetical investment results shown above and elsewhere in this prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the Portfolios. The Death Benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
<PAGE>
- -----------------------------------------------------------
FINANCIAL STATEMENTS
- ------------------------------------------------------------
COMPANION LIFE
INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF
UNITED OF OMAHA LIFE INSURANCE COMPANY)
STATUTORY FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 1996, 1995 AND 1994
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Companion Life Insurance Company
Rye, New York
We have audited the accompanying statutory statement of admitted assets,
liabilities, and surplus of Companion Life Insurance Company as of December 31,
1996, and the related statutory statements of income and changes in surplus, and
cash flows for the year then ended. Our responsibility is to express an opinion
on these financial statements based on our audit. The financial statements of
Companion Life Insurance Company for the years ended December 31, 1995 and 1994
were audited by other auditors whose report, dated April 9, 1997, expressed an
unqualified opinion on the presentation of those financial statements in
conformity with accounting practices prescribed or permitted by the Insurance
Department of the State of New York and also expressed an opinion that the
financial statements were not presented in conformity with generally accepted
accounting principles. The financial statements are the responsibility of the
Company's management.
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.
As more fully described in Note 1 to the financial statements, the Company has
prepared these financial statements in conformity with accounting practices
prescribed or permitted by the Insurance Department of the State of New York.
Those practices differ from generally accepted accounting principles. The
effects on the financial statements of the differences between the statutory
basis of accounting and generally accepted accounting principles are not
reasonably determinable, but are presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the 1996 financial statements referred to above do not present fairly
the financial position of Companion Life Insurance Company as of December 31,
1996, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
However, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the admitted assets, liabilities, and
surplus of Companion Life Insurance Company as of December 31, 1996, and the
results of its operations and its cash flows for the year then ended, on the
basis of accounting described in Note 1 to the financial statements.
DELOITTE & TOUCHE LLP
New York, New York
April 21, 1997
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholder of
Companion Life Insurance Company
We have audited the accompanying balance sheet of Companion Life Insurance
Company (a New York corporation and wholly-owned subsidiary of United of Omaha
Life Insurance Company), as of December 31, 1995, and the related statements of
operations, capital and surplus, and cash flows for each of the two years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to report 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 originally issued report dated February 23, 1996, we expressed an opinion
that the 1995 financial statements, prepared using accounting practices
prescribed or permitted by the Insurance Department of the State of New York,
presented fairly, in all material respects, the financial position of Companion
Life Insurance Company as of December 31, 1995, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
As described in Note 1 to the financial statements, pursuant to the provisions
of Statement of Financial Accounting Standards Board Interpretation 40,
Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises, as amended ("FIN 40"), financial statements of
mutual life insurance enterprises for periods ending on or before December 15,
1996, prepared using accounting practices prescribed or permitted by insurance
regulators (statutory financial statements) are no longer considered
presentations in conformity with generally accepted accounting principles.
Accordingly, our present opinion on the presentation of the 1995 financial
statements in accordance with generally accepted accounting principles, as
presented herein, is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Companion Life Insurance Company as of December 31, 1995, or the results of
its operations and its cash flows for each of the two years in the period ended
December 31, 1995.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Companion Life Insurance
Company as of December 31, 1995, and the results of its operations and its cash
flows for the each of the two years in the period ended December 31, 1995, in
conformity with accounting practices prescribed or permitted by the Insurance
Department of the State of New York.
Coopers & Lybrand L.L.P.
New York, New York
February 23, 1996 [except for the change in our opinion as required by FIN 40,
for which the date is April 9, 1997]
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS
AS OF DECEMBER 31, 1996 AND 1995
- -------------------------------------------------------------------------------------------
ADMITTED ASSETS 1996 1995
<S> <C> <C>
Cash and invested assets (Note 2):
Bonds $ 370,927,491 $ 299,274,340
Mortgage loans 16,489,046 21,596,144
Policy loans 11,586,845 12,096,063
Cash and short-term investments 3,662,460 3,661,177
Other invested assets 61,197 -
------------ -----------
Total cash and invested assets 402,727,039 336,627,724
Premiums deferred and uncollected 4,051,720 3,758,690
Investment income due and accrued 3,736,086 3,435,558
Other assets 475,433 777,328
Separate accounts assets 2,110,579 597,883
------------ ------------
Total admitted assets $ 413,100,857 $ 345,197,183
============= ===============
LIABILITIES
Policy reserves (Notes 5 and 7):
Aggregate reserve for policies and contracts $ 337,786,345 $ 274,395,967
Policy and contract claims 4,569,530 2,818,717
Other reserves 408,523 357,769
------------ ------------
Total policy reserves 342,764,398 277,572,453
Interest maintenance reserve 665,315 453,991
Asset valuation reserve 3,178,271 2,827,596
General expenses and taxes due or accrued (Note 4) 926,323 570,704
Funds held under reinsurance treaties 7,488,832 8,348,218
Reinsurance in unauthorized companies 34,128 47,177
Amounts due reinsurers 79,885 52,552
Federal income taxes due or accrued (Note 3) 700,000 389,000
Other liabilities 3,439,757 3,484,167
Separate accounts liabilities 2,098,801 584,527
------------ ------------
Total liabilities 361,375,710 294,330,385
------------ ------------
SURPLUS
Capital stock, $400 par value; 5,000 shares
authorized and outstanding 2,000,000 2,000,000
Gross paid-in and contributed surplus 45,650,000 45,650,000
Special surplus and contingency reserve 400,297 359,960
Unassigned surplus (Note 9) 3,674,850 2,856,838
------------ ------------
Total surplus 51,725,147 50,866,798
------------ ------------
Total liabilities and surplus $ 413,100,857 $ 345,197,183
============ ============
The accompanying notes are an integral part of these statutory financial
statements.
</TABLE>
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Income:
Net premiums and annuity considerations (Notes 5 and 6) $ 90,179,915 $ 72,097,554 $ 48,161,445
Other considerations and fund deposits 2,048,423 668,323 15,152
Net investment income (Note 2) 27,824,853 23,605,272 19,640,976
Other income 179,622 380,099 488,529
------------- ----------- -----------
Total income 120,232,813 96,751,248 68,306,102
------------- ----------- -----------
Benefits and expenses:
Policyholder and beneficiary benefits (Note 5) 32,338,175 22,458,731 19,514,839
Increase in reserves for policyholder and
beneficiary benefits 63,390,378 54,205,859 31,906,878
Commissions 4,839,995 3,978,746 2,558,764
Operating expenses (Notes 4 and 5) 14,298,328 13,378,018 11,475,056
Net transfers to separate accounts 1,219,275 545,430 -
------------- ----------- -----------
Total benefits and expenses 116,086,151 94,566,784 65,455,537
------------- ----------- -----------
Net gain from operations before federal income
taxes and net realized capital losses 4,146,662 2,184,464 2,850,565
Federal income taxes (Note 3) 2,544,690 1,445,927 2,052,319
------------- ----------- -----------
Net gain from operations before net
realized capital losses 1,601,972 738,537 798,246
Net realized capital losses (Note 2) - (691) -
------------- ----------- -----------
Net income $ 1,601,972 $ 737,846 $ 798,246
============== ============ ===========
The accompanying notes are an integral part of these statutory financial
statements.
</TABLE>
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF CHANGES IN SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Capital stock:
Balance at beginning and end of year $ 2,000,000 $ 2,000,000 $ 2,000,000
------------ ------------ ---------------
Gross paid-in and contributed:
Balance at beginning of year 45,650,000 45,650,000 25,650,000
Paid-in by United of Omaha Life Insurance Company - - 20,000,000
------------ ------------ ---------------
Balance at end of year 45,650,000 45,650,000 45,650,000
------------ ------------ ---------------
Special surplus and contingency reserve:
Balance at beginning of year 359,960 298,105 222,560
Increase in group contingency life reserve 40,337 61,855 75,545
------------ ------------ ---------------
Balance at end of year 400,297 359,960 298,105
------------ ------------ ---------------
Unassigned surplus:
Balance at beginning of year 2,856,838 2,761,491 2,338,424
Net income 1,601,972 737,846 798,246
Change in separate accounts surplus (1,578) 13,356 -
Change in net unrealized capital losses (Note 2) (217,103) (382,026) -
(Increase) decrease in:
Non-admitted assets (126,840) (78,228) 56,754
Liability for reinsurance in unauthorized companies 13,049 (221) (1,724)
Asset valuation reserve (350,675) (133,525) (354,664)
Contingency reserve (40,337) (61,855) (75,545)
Pension plan contribution (Note 4) (60,476) - -
------------ ------------ ---------------
Balance at end of year 3,674,850 2,856,838 2,761,491
------------ ------------ ---------------
Total surplus $ 51,725,147 $ 50,866,798 $ 50,709,596
============= ============ ===============
The accompanying notes are an integral part of these statutory financial
statements.
</TABLE>
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
STATUTORY STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ---------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Cash from operations:
Premiums, annuity considerations and fund deposits $ 92,070,411 $ 71,904,608 $ 47,200,645
Net investment income 27,379,305 23,188,680 18,742,752
Other income 249,692 426,796 309,949
Benefits (30,290,432) (21,974,648) (20,017,495)
Commissions and general expenses (18,543,667) (17,477,981) (12,807,114)
Federal income taxes paid (2,346,798) (1,665,994) (2,122,134)
Other operating expenses (1,670,344) (786,187) (217,918)
------------- ------------- -------------
Net cash from operations 66,848,167 53,615,274 31,088,685
------------- ------------- -------------
Cash from investments:
Proceeds from investments sold, redeemed or matured:
Bonds 32,351,850 16,456,527 15,047,578
Mortgage loans 5,134,099 6,273,360 7,946,922
Taxes on capital (gains) losses (48,286) 3,153 (67,353)
Cost of investments acquired:
Bonds (103,666,996) (78,529,680) (75,613,066)
Other invested assets (61,197) - (2,769)
Net (increase) decrease in policy loans 509,218 (436,744) 519,633
------------- ------------- -------------
Net cash from investments (65,781,312) (56,233,384) (52,169,055)
------------- ------------- -------------
Cash from financing and other sources:
Other cash provided 260,521 2,204,401 1,453,722
Other cash used (1,326,093) (139,002) (205,276)
Capital and surplus paid-in - - 20,000,000
------------- ------------- -------------
Net cash from financing and other sources (1,065,572) 2,065,399 21,248,446
------------- ------------- -------------
Net change in cash and short-term investments 1,283 (552,711) 168,076
Cash and short-term investments:
Beginning of year 3,661,177 4,213,888 4,045,812
------------- ------------- -------------
End of year $ 3,662,460 $ 3,661,177 $ 4,213,888
============= ============= =============
The accompanying notes are an integral part of these statutory financial
statements.
</TABLE>
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - Companion Life Insurance Company (the Company),
domiciled in the State of New York, is a wholly-owned subsidiary of United
of Omaha Life Insurance Company (United of Omaha), which is a wholly owned
subsidiary of Mutual of Omaha Insurance Company (Mutual of Omaha), a
mutual life and health and accident insurance company, domiciled in the
State of Nebraska. The Company has insurance licenses to operate in three
states, New York, New Jersey and Connecticut. Individual annuity and life
insurance products are sold primarily through a network of Mutual of Omaha
career agents, direct mail, stockbrokers, financial planners and banks.
Basis of Presentation - The accompanying financial statements have been
prepared in conformity with accounting practices prescribed or permitted
by the Insurance Department of the State of New York. Prescribed statutory
accounting practices are contained in a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as state
laws, regulations, and general administrative rules. Permitted statutory
accounting practices encompass all accounting practices which may not
necessarily be prescribed but are not prohibited.
The 1995 and 1994 financial statements, presented for comparative
purposes, were previously described as also being prepared in accordance
with generally accepted accounting principles (GAAP) for mutual life
insurance companies and their wholly-owned life insurance company
subsidiaries. Pursuant to Financial Accounting Standards Board
Interpretation 40, Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises ("FIN 40"), as
amended, which is effective for 1996 annual financial statements,
financial statements based on statutory accounting practices can no longer
be described as prepared in conformity with GAAP. Furthermore, financial
statements prepared in conformity with statutory accounting practices for
periods prior to the effective date of FIN 40 are no longer considered
GAAP presentations when presented in comparative form with financial
statements for periods subsequent to the effective date. Accordingly, the
prior independent auditors' reports have been reissued in accordance with
FIN 40.
The accompanying statutory financial statements vary in some respects from
those that would be presented in conformity with GAAP. The most
significant differences include: (a) bonds are generally carried at
amortized cost rather than being valued at either amortized cost or fair
value based on their classification according to the Company's ability and
intent to hold or trade the securities; (b) acquisition costs, such as
commissions and other costs related to acquiring new business, are charged
to operations as incurred and not deferred, whereas premiums are taken
into income on a pro rata basis over the respective term of the policies;
(c) deferred federal income taxes are not provided for temporary
differences between tax and financial reporting; (d) no provision has been
made for federal income taxes on unrealized appreciation of investments
which are carried at market value; (e) asset valuation reserves (AVR) and
interest maintenance reserves (IMR) are established; (f) different
actuarial assumptions are used for calculating certain policy reserves;
and (g) changes in certain assets designated as "non-admitted" assets have
been charged to unassigned surplus. The aggregate effect of the foregoing
differences on the accompanying statutory financial statements has not
been determined, but was presumed to be material.
Management is required to make estimates and assumptions that affect the
reported amounts in the statutory financial statements. Actual results
could differ significantly from those estimates.
Investments - Bonds are generally stated at amortized cost. Bonds not
backed by other loans are amortized using the scientific method.
Loan-backed bonds and structured securities are amortized using the
interest method based on anticipated prepayments at the date of purchase.
Changes in estimated cash flows from the original purchase assumptions are
accounted for using the retrospective method.
Mortgage loans and policy loans are stated at the aggregate unpaid
balance. In accordance with statutory accounting practices, the Company
records a general reserve for losses on mortgage loans as part of the
asset valuation reserve.
Short-term investments include all investments whose maturities, at the
time of acquisition, are one year or less, and are stated at cost, which
approximates market.
Investment income is recorded when earned. Realized gains and losses on
sale or maturity of investments are determined on the specific
identification basis. Any portion of invested assets designated as
"non-admitted" was excluded from the statutory statements of admitted
assets, liabilities and surplus and recorded as a change in unrealized
capital gains (losses).
Asset Valuation and Interest Maintenance Reserves - The Company
establishes certain reserves as promulgated by the NAIC. The AVR is
established for the specific risk characteristics of invested assets of
the Company. The IMR is established for the realized gains and losses on
the redemption of fixed income securities resulting from changes in
interest rates, net of tax. Gains and losses pertaining to the IMR are
subsequently amortized into investment income over the expected remaining
period to maturity of the investments sold or called.
Policy Reserves - Policy reserves provide amounts adequate to discharge
estimated future obligations in excess of estimated future premiums on
policies in force. Reserves for life policies are computed principally by
using the Commissioners' Reserve Valuation Method basis or the net level
premium basis with assumed interest rates (2.5% to 6.0%) and mortality
(1941, 1958 and 1980 CSO tables) as prescribed by regulatory authorities.
Annuity reserves are based primarily upon the 1937 Standardized Annuity
Table with interest rates ranging from 2.5% to 3.5%, the 1971 Individual
Annuity Mortality Table with interest rates ranging from 4.0% to 7.5%, or
the 1983a Individual Annuity Mortality Table with interest rates ranging
from 5.25% to 9.25%. Policy and contract claim liabilities include
provisions for reported claims and estimates for claims incurred but not
reported. To the extent the ultimate liability differs from the amounts
recorded, such differences are reflected in operations when additional
information becomes available.
Premiums and Related Commissions - Premiums are recognized as income over
the premium paying period. Commissions and other expenses related to the
acquisition of policies are charged to operations as incurred.
Federal Income Taxes - The Company files a consolidated federal income tax
return with Mutual of Omaha and other eligible subsidiaries. The method of
allocating taxes among the companies is subject to a written agreement
approved by the Board of Directors. Each company's provision for federal
income taxes is based on a separate return calculation with each company
recognizing tax benefits of net operating loss carryforwards and tax
credits on a separate return basis.
The provision for federal income taxes is based on income which is
currently taxable. Deferred federal income taxes are not provided for
temporary differences between income tax and statutory reporting. The
Company recognizes the benefits of investment tax carryforwards when
realized.
Non-Admitted Assets - Certain assets designated as "non-admitted" assets,
principally receivables and office furniture and equipment, are excluded
from the statutory statements of admitted assets, liabilities and surplus.
The net change in such assets is charged or credited directly to
unassigned surplus.
Fair Values of Financial Instruments - The following methods and
assumptions were used by the Company in estimating its fair value
disclosures for financial instruments:
Cash, Short-Term Investments and Other Invested Assets - The carrying
amounts reported in the statutory statements of admitted assets,
liabilities and surplus approximate their fair values.
Bonds - The fair values for bonds are based on quoted market prices,
where available. For bonds not actively traded, fair values are
estimated using values obtained from independent pricing services or
based on expected future cash flows using a current market rate
applicable to the yield, credit quality, and maturity of the
investments.
Mortgage Loans - The fair values for mortgage loans are estimated using
discounted cash flow analyses, using interest rates currently being
offered for similar loans to borrowers with similar credit ratings,
credit quality, and maturity of the investments.
Policy Loans - The Company does not believe an estimate of the fair
value of policy loans can be made without incurring excessive cost.
Policy loans have no stated maturities and are usually repaid by
reductions to benefits and surrenders. Because of the numerous
assumptions which would have to be made to estimate fair value, the
Company believes that such information would not be meaningful.
Separate Accounts - The assets of the separate accounts shown in the
statutory statements of admitted assets, liabilities and surplus are
carried at fair value and consist primarily of mutual funds held by the
Company for the benefit of policyholders under specific individual annuity
contracts. Benefits paid to separate account policyholders are reflected
in the statutory statements of income, but are offset by transfers from
the separate accounts. The payment of such benefits and the earning of
investment income constitute the only significant activities in the
separate accounts.
Reclassifications - Certain reclassifications have been made to prior
years amounts to conform with current year presentation with no changes to
unassigned surplus or net income.
2. INVESTMENTS
The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated fair value of the Company's investments in debt securities were
as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
At December 31, 1996:
<S> <C> <C> <C> <C>
Governments $ 883,638 $ 39,602 $ - $ 923,240
Special revenue 72,232,442 636,111 635,746 72,232,807
Political subdivisions 756,220 18,867 - 775,087
Public utilities 25,163,593 784,702 46,436 25,901,859
Industrials and miscellaneous 273,637,930 6,675,045 1,275,579 279,037,396
Credit-tenant loans 1,778,668 85,048 - 1,863,716
------------ ----------- ---------- ------------
$374,452,491 $ 8,239,375 $1,957,761 $ 380,734,105
============ =========== ========== ============
Bonds $370,927,491
Short-term investments 3,525,000
-----------
$374,452,491
=============
At December 31, 1995:
Governments $ 1,050,289$ 78,434$ - $ 1,128,723
States, territories
and possesssions 137,775 2,225 - 140,000
Special revenue 72,353,983 1,268,317 144,958 73,477,342
Political subdivisions 994,205 25,795 - 1,020,000
Public utilities 25,947,182 1,484,545 33,525 27,398,202
Industrials and miscellaneous 200,911,451 10,920,076 324,828 211,506,699
Credit-tenant loans 1,879,455 139,904 - 2,019,359
------------ ----------- ---------- ------------
$303,274,340 $13,919,296 $ 503,311 $316,690,325
============ =========== ========== ============
Bonds $299,274,340
Short-term investments 4,000,000
-----------
$303,274,340
</TABLE>
The amortized cost and estimated fair value of debt securities at December
31, 1996, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Amortized Estimated
Cost Fair Value
Due in one year or less $ 7,053,359 $ 7,078,695
Due after one year through five years 84,438,500 86,474,784
Due after five years through ten years 110,733,859 113,342,995
Due after ten years 172,226,773 173,837,631
----------- --------------
$374,452,491 $ 380,734,105
============ ==============
The sources of net investment income were as follows:
1996 1995 1994
Bonds $ 25,415,169 $ 20,708,759 $ 15,963,937
Mortgage loans 1,751,301 2,264,264 3,017,737
Policy loans 569,200 583,981 585,934
Short-term investments 442,382 406,836 316,928
Other 40,513 42,117 24,517
------------- -------------- -------------
28,218,565 24,005,957 19,909,053
Investment expense (542,595) (484,211) (341,989)
Amortization of IMR 148,883 83,526 73,912
------------- -------------- -------------
$ 27,824,853 $ 23,605,272 $ 19,640,976
================ ================ =============
Realized capital gains and losses on invested assets consist of the
following:
Net
Gross Gross Realized
Realized Realized Gains
Gains Losses (Losses)
Year ended December 31, 1996:
Bonds $ 527,165 $ 2 $ 527,163
Mortgage loans 27,001 - 27,001
---------- --------------- ----------
$ 554,166 $ 2 554,164
========== ===============
Less capital gains tax (193,958)
Transfer to IMR (360,206)
Net realized capital gains (losses) $ -
===========
Year ended December 31, 1995:
Bonds $ 83,705 $ 1,063 $ 82,642
Mortgage loans 54,256 - 54,256
---------- --------------- ----------
$ 137,961 $ 1,063 136,898
============= ==============
Less capital gains tax (47,914)
Transfer to IMR (89,675)
-----------
Net realized capital gains (losses) $ (691)
===========
Year ended December 31, 1994:
Bonds $ 96,149 $ 48,306 $ 47,843
Mortgage loans 9,781 - 9,781
---------- --------------- ----------
$ 105,930 $ 48,306 57,624
============= =============
Less capital gains tax (20,168)
Transfer to IMR (37,456)
Net realized capital gains (losses) $ -
===========
At December 31, 1996, securities with an amortized cost of $274,028 were
on deposit with the New York State Insurance Department.
The Company invests in mortgage loans collateralized principally by
commercial real estate. The maximum percentage of any one loan to the
value of the security at the time of the loan was 75%. The Company did not
invest in any new mortgage loans during 1996 or 1995. The estimated fair
value of the mortgage loan portfolio totaled $16,960,455 and $22,745,530
at December 31, 1996 and 1995.
3. FEDERAL INCOME TAXES
The provision for federal income taxes reflects an effective income tax
rate which differs from the prevailing federal income tax rate primarily
as a result of income and expense recognition differences between
statutory and income tax reporting. The major differences include
capitalization and amortization of certain acquisition amounts for tax
purposes, different methods for determining statutory and tax insurance
reserves, timing of the recognition of market discount on bonds and
certain accrued expenses, and the acceleration of depreciation for tax
purposes.
The Company's tax returns have been examined by the Internal Revenue
Service (IRS) through 1992. The tax returns for 1993 through 1995 are
currently under examination. Management believes the results of these
examinations will have no material impact on the Company's statutory
financial statements.
Under federal income tax law prior to 1984, the Company accumulated
approximately $2,623,000 of deferred taxable income which could become
subject to income taxes in the future under certain conditions. Management
believes the chance that those conditions will exist is remote.
4. RETIREMENT BENEFITS
The Company participates with affiliated companies in a noncontributory
defined benefit plan covering all United States employees meeting certain
minimum requirements. Mutual of Omaha and certain subsidiaries
(collectively referred to as the Companies) generally make annual
contributions to the plan in an amount between the minimum ERISA required
contribution and the maximum tax deductible contribution. Companion was
not required to make a contribution in 1996, 1995 and 1994. Funds for the
plan are held in the general and separate accounts of United of Omaha
under a group annuity contract.
Information regarding accrued benefits and net assets has not been
determined on an individual company basis. The Company's employees
comprise less than 1% of the total employee group in 1996, 1995 and 1994.
The Companies expensed contributions of $12,152,156, $9,114,637 and
$8,745,945 in 1996, 1995 and 1994, respectively. During 1996, the
Companies changed mortality tables from the 1971 GAM to the 1983 GAM. As a
result of the table change, the actuarial present value of accrued
benefits as of January 1, 1996, increased by $21,637,154. The Companies
made an additional contribution of $21,637,154 and recorded it as a direct
charge to surplus, net of federal income taxes of $7,573,004. A comparison
of accrued benefits and net assets for the entire plan as of January 1,
1996 and 1995 follows:
1996 1995
Actuarial present value of accrued benefits:
Vested $ 352,736,411 $ 280,516,363
Nonvested 4,036,059 1,263,379
---- ------------------- ---------
$ 356,772,470 $ 281,779,742
================= ==============
Net assets available for benefits $ 324,925,491 $ 301,773,000
================= ==============
Assumptions:
Annual investment return 9.00 % 9.16 %
Mortality table 1983 GAM 1971 GAM
Discount rate 7.62 % 7.93 %
The Companies also have the Mutual of Omaha 401(k) Long-Term Savings Plan
covering all United States employees who have completed one year of
service and have reached their 21st birthday. Participants may elect to
contribute 1% to 16% of their salary annually subject to plan and IRS
limitations. The Companies match at least 25% of the first 6% of the
contributions made by each participant. The Companies match up to an
additional 75% of the first 6% of the contributions made by each
participant if certain company-wide performance measures are met.
Contributions by the Companies were $5,600,402, $5,774,963 and $5,476,901
in 1996, 1995 and 1994, respectively.
The Companies provide certain postretirement medical and life insurance
benefits. The Companies subsidize these benefits with certain limitations
to retirees and eligible employee groups. Associates retiring on or before
December 31, 1997, are eligible for the full subsidy if they are at least
age 55 with at least 10 years of service and continuously covered by one
of the Companies' health plans for 10 years prior to retirement.
Associates retiring after December 31, 1997, must be at least age 60 with
at least 15 years of service and continuously covered for 15 years by one
of the Companies' health plans prior to retirement to be eligible for a
subsidy. Associates hired on or after January 1, 1995, are not eligible
for a Company subsidy. The cost of these postretirement benefits is
allocated to the Companies in accordance with an intercompany cost-sharing
arrangement. The Companies use the accrual method of accounting for
postretirement benefits and elected to amortize the original transition
obligation over 20 years.
The following table sets forth the Plan's funded status at December 31,
1996 and 1995:
1996 1995
Accumulated postretirement benefits obligation:
Fully eligible actives $ 8,008,428 $ 9,071,511
Retirees 76,135,759 72,687,982
----------- ----------
84,144,187 81,759,493
Unrecognized transition obligation (64,293,839) (69,716,631)
Unrecognized gain 7,928,001 9,951,187
----------- ----------
Total accrued $ 27,778,349 $ 21,994,049
============== =============
Assumptions:
Discount rate 7.50 % 7.25 %
Health care cost trend rate:
First year 8.50 % 8.50 %
Ultimate 5.00 % 5.00 %
Grading period 8 years 10 years
The Companies' net periodic postretirement benefit costs include the
following components at December 31, 1996, 1995 and 1994:
1996 1995 1994
Eligibility costs $ 1,384,687 $ 1,654,470 $ 1,839,420
Interest costs 5,908,779 5,567,144 5,760,689
Net amortization and deferral - (683,259) -
Amortization of transition obligation 4,018,365 4,100,979 4,100,979
------------ ---------- ---------
$11,311,831 $10,639,334 $ 11,701,088
=========== ============ ==========
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost
trend rate by one percentage point in each year would increase the
Companies' accumulated postretirement benefits obligation as of December
31, 1996 by approximately $6,130,000 and the estimated eligibility cost
and interest components of the net periodic postretirement benefit costs
for 1996 by approximately $799,000.
5. RELATED PARTY TRANSACTIONS
At December 31, 1996 and 1995, approximately $14,879,000 and $15,299,000
of the Company's investments in mortgage loans were held through joint
participants with United of Omaha. In 1995, United of Omaha purchased
approximately $3,287,000 of participating mortgage loans from the Company.
United of Omaha provides actuarial, data processing, consulting and
various other services to the Company. Charges for these services amounted
to approximately $7,164,000, $6,320,000 and $5,640,000 for 1996, 1995 and
1994, respectively. Included in other liabilities are unsettled balances
related to these services of approximately $555,000 and $885,000 as of
December 31, 1996 and 1995, respectively.
The Company also leases its principal office space from an affiliated
company under an operating lease. The lease, whose original term ran from
January 1, 1993 to December 1, 1995 has been renewed for an additional
five-year period commencing on January 1, 1996 and terminating December
31, 2000. The 1996, 1995 and 1994 rental expense under this lease was
approximately $420,000, $380,000 and $381,000, respectively.
In 1994, the Company received a $20,000,000 surplus contribution from
United of Omaha.
The Company also cedes group and individual life insurance to United of
Omaha. The amounts ceded by the Company and included in the statutory
statements of admitted assets, liabilities and surplus were as follows:
1996 1995
Amounts recoverable from reinsurance $ 28,945 $ 142,596
================ =============
Policy and contract claims $ 1,828,874 $ 2,272,546
=============== ============
Aggregate reserve for policies and contracts $ 3,749,310 $ 3,726,083
=============== ============
Funds held under reinsurance treaties $ 7,488,832 $ 7,848,218
=============== ============
The amounts ceded by the Company and included in the statutory statements
of income were as follows:
1996 1995 1994
Premium considerations $ 2,644,523 $ 4,369,203 $ 5,072,349
============= ============= ============
Policyholder and beneficiary benefits $ 1,306,703 $ 2,807,917 $ 2,747,245
============= ============= ============
The Company also ceded group and individual accident and health insurance
to Mutual of Omaha. The amounts ceded by the Company and included in the
statutory statements of admitted assets, liabilities and surplus were as
follows:
1996 1995
Amounts recoverable from reinsurance $ 2,556 $ 4,328
============ =========
Policy and contract claims $ 403 $ 1,560
============ ==========
Aggregate reserves for policies and contracts $ 127,823 $ 135,395
============= ==========
The amounts ceded by the Company and included in the statutory statements
of income were as follows:
1996 1995 1994
Premium considerations $ 19,029 $ 25,034 $33,657
========= ======== ========
Policyholder and beneficiary benefits $ 36,964 $ (3,386) $51,454
========= ======== ========
United World Life Insurance Company, an affiliate domiciled in the State
of Nebraska, had reinsurance funds withheld of $500,000 on deposit with
the Company at December 31, 1995.
6. REINSURANCE
In the normal course of business, the Company assumes and cedes
reinsurance. The ceding of reinsurance does not discharge an insurer from
its primary legal liability to a policyholder. The Company remains liable
to the extent that a reinsurer is unable to meet its obligations.
The reconciliation of total premiums to net premiums is as follows:
1996 1995 1994
Direct $ 93,379,787 $ 76,428,002 $ 53,458,412
Assumed 646,451 598,903 591,132
Ceded (3,846,323) (4,929,351) (5,888,099)
-------------- ----------- -----------
Net $ 90,179,915 $ 72,097,554 $ 48,161,445
============== ============ =============
7. DEPOSIT FUNDS
At December 31, 1996 and 1995, the Company held annuity reserves and
deposit fund liabilities of $92,914,171 and $93,259,277, respectively,
that were subject to discretionary withdrawal at book value with a
surrender charge of less than 5%.
8. CONTINGENT LIABILITIES
Various lawsuits have arisen in the ordinary course of the Company's
business. The Company believes that its defenses are meritorious and the
eventual outcome of those lawsuits will not have a material effect on the
Company's financial position.
9. STOCKHOLDER DIVIDENDS
Dividends to the Company's stockholder are subject to prior approval by
the Superintendent of Insurance of the State of New York.
10. BUSINESS RISKS
The Company is subject to regulation by state insurance departments and it
undergoes periodic examinations by those departments. The following is a
description of the most significant risks facing life and health insurers
and how the Company manages those risks:
Legal/Regulatory Risk is the risk that changes in the legal or
regulatory environment in which an insurer operates will occur and
create additional costs or expenses not anticipated by the insurer in
pricing its products. The Company mitigates this risk by diversifying
its line of products.
Credit Risk is the risk that issuers of securities owned by the Company
will default, or that other parties, including reinsurers which owe the
Company money, will not pay. The Company minimizes this risk by adhering
to a conservative investment strategy and by maintaining sound
reinsurance, credit and collection policies.
Interest-Rate Risk is the risk that interest rates will change and cause
a decrease in the value of an insurer's investments. The Company
mitigates this risk by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, the Company may
have to sell assets prior to maturity and recognize a gain or loss.
<PAGE>
PART II - OTHER INFORMATION
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
The Bylaws of Companion, adopted by Companion's Stockholder's on November
9, 1971 and amended on December 13, 1996, provides for indemnification of a
director, officer or employee to the full extent of the law. Generally, the New
York Business Corporation Act permits indemnification against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
if the indemnitee acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the corporation. However, no
indemnification shall be made in any type of action by or in the right of
Companion if the proposed indemnitee is adjudged to be liable for negligence or
misconduct in the performance of his or her duty to Companion, unless a court
determines otherwise.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Companion pursuant to the foregoing provisions, or otherwise, Companion has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification may be against public policy as expressed in the Act and may be,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by Companion of expenses incurred or paid
by a director, officer, or controlling person of Companion in the successful
defense of any action, suite or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Companion 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 and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO SECTION 26(E)
Companion Life Insurance Company represents that the fees and charges 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
Companion Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
The facing sheet.
A reconciliation and tie of the information shown in the prospectus with the
items of Form N-8B-2.
The prospectus.
The undertaking to file reports.
The Rule 484 Undertaking.
The Section 26(e) Representation.
The signatures.
Written consents of the following persons:
Independent Auditors (included in Exhibit 7) (to be filed by amendment)
Kenneth W. Reitz, Esquire (included in Exhibit 2) (to be filed by amendment)
Russell Wiltgen, F.S.A., M.A.A.A. (included in Exhibit 6) (to be filed by
amendment)
The following exhibits:
1.A. (1) Resolution of the Board of Directors of Companion Life Insurance
Company establishing the Variable Account. *
(2) None.
(3)(a) Principal Underwriter Agreement by and between Companion, on
its own behalf and on behalf of the Variable Account, and
Mutual of Omaha Investor Services. **
(b) Form of Broker/Dealer Supervision and Sales Agreement by and
between Mutual of Omaha Investor Services, Inc. and the
Broker/Dealer. **
(c) Commission Schedule for Policies.
(4) None.
(5)(a) Form of Policy for the ULTRA VARIABLE LIFE modified single
premium variable life insurance policy.
(b) None
(6)(a) Articles of Incorporation of Companion Life Insurance Company.**
(b) Bylaws of Companion Life Insurance Company.**
(7) None.
(8)(a) Participation Agreement by and between Companion Life Insurance
Company and the Alger American Fund. **
(b) Participation Agreement by and between Companion Life Insurance
Company and the Insurance Management Series. **
(c) Participation Agreement by and between Companion Life Insurance
Company and the Fidelity VIP Fund and Fidelity VIP Fund II. **
(d) Participation Agreement by and between Companion Life Insurance
Company and MFS Variable Insurance Trust. **
(e) Participation Agreement by and between Companion Life Insurance
Company and Pioneer Variable Contracts Trust.**
(f) Participation Agreement by and between Companion Life Insurance
Company and the Scudder Variable Life Investment Fund. **
(g) Participation Agreement by and between Companion Life Insurance
Company and T. Rowe Price International Series, T. Rowe Price
Fixed Income Series, and T. Rowe Price Equity Series. **
(9) None.
(10) Form of Application for the Companion Life Insurance Company
ULTRA VARIABLE LIFE Modified Single Premium Variable Life
Insurance Policy.*
(11) Issuance, Transfer and Redemption Memorandum
2. Opinion and Consent of Counsel.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Opinion and Consent of Actuary.
7. Independent Auditor's Consent.
8. None
9. Powers of Attorney. **
* Incorporated by Reference to the Registration Statement for Companion Separate
Account B filed on January 27, 1996 (File No. 333-20443).
** Incorporated by Reference to the Registration Statement for Companion
Separate Account C filed on April 24, 1997 (File No. 33-98062).
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Registrant has caused this
Registration Statement to be signed on its behalf, in the City of Omaha and
State of Nebraska, on June 20, 1997.
COMPANION LIFE SEPARATE ACCOUNT B
(Registrant)
COMPANION LIFE INSURANCE COMPANY
(Depositor)
/s/Kenneth W. Reitz
By: Kenneth W. Reitz
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated:
Signatures Title Date
_____*____________________ Chairman of the Board June 20, 1997
Thomas J. Skutt
_____*____________________ Vice-Chairman of the Board June 20, 1997
John W. Weekly
_____*____________________ Vice-Chairman of the Board, June 20, 1997
Ernest B. Johnston President and Chief Executive Officer
_____*____________________
Fred C. Boddy Vice President & Treasurer June 20, 1997
(Principal Financial Officer, and
Principal Accounting Officer)
_____*____________________
William C. Campbell Director June 20, 1997
_____*___________________
Samuel L. Foggie Director June 20, 1997
_____*___________________
Charles T. Locke Director June 20, 1997
_____*__________________
John Maginn Director June 20, 1997
- ------------------------
Thomas T. Sawicz Director June 20, 1997
_____*___________________
Oscar S. Straus Director June 20, 1997
_____*___________________
John A. Sturgeon Director June 20, 1997
- ------------------------
Daniel R. Varona Director June 20, 1997
By: /s/ Kenneth W. Reitz Date: June 20, 1997
Kenneth W. Reitz
* Signed by Kenneth W. Reitz under Powers of Attorney in July and August 1995,
filed as exhibits incorporated by reference in this registration statement.
<PAGE>
REGISTRATION NO. 333 - 20443
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
COMPANION LIFE SEPARATE ACCOUNT B
OF
COMPANION LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
EXHIBITS
- --------------------------------------------------------------------------------
TO
PRE-EFFECTIVE AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT ON FORM S-6
UNDER
THE SECURITIES ACT OF 1933
June 20, 1997
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.***\
1.A. (1) Resolution of the Board of Directors of Companion Life Insurance
Company establishing the Variable Account. *
(2) None.
(3)(a) Principal Underwriter Agreement by and between Companion, on
its own behalf and on behalf of the Variable Account, and
Mutual of Omaha Investor Services. **
(b) Form of Broker/Dealer Supervision and Sales Agreement by and
between Mutual of Omaha Investor Services, Inc. and the
Broker/Dealer. **
(c) Commission Schedule for Policies.
(4) None.
(5)(a) Form of Policy for the ULTRA VARIABLE LIFE modified single
premium variable life insurance policy.
(b) None
(6)(a) Articles of Incorporation of Companion Life Insurance Company.**
(b) Bylaws of Companion Life Insurance Company.**
(7) None.
(8)(a) Participation Agreement by and between Companion Life Insurance
Company and the Alger American Fund. **
(b) Participation Agreement by and between Companion Life Insurance
Company and the Insurance Management Series. **
(c) Participation Agreement by and between Companion Life Insurance
Company and the Fidelity VIP Fund and Fidelity VIP Fund II. **
(d) Participation Agreement by and between Companion Life Insurance
Company and MFS Variable Insurance Trust. **
(e) Participation Agreement by and between Companion Life Insurance
Company and Pioneer Variable Contracts Trust.**
(f) Participation Agreement by and between Companion Life Insurance
Company and the Scudder Variable Life Investment Fund. **
(g) Participation Agreement by and between Companion Life Insurance
Company and T. Rowe Price International Series, T. Rowe Price
Fixed Income Series, and T. Rowe Price Equity Series. **
(9) None.
(10) Form of Application for the Companion Life Insurance Company
ULTRA VARIABLE LIFE Modified Single Premium Variable Life
Insurance Policy.*
(11) Issuance, Transfer and Redemption Memorandum
2. Opinion and Consent of Counsel.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Opinion and Consent of Actuary.
7. Independent Auditor's Consent.
8. None
9. Powers of Attorney. **
* Incorporated by Reference to the Registration Statement for Companion Separate
Account B filed on January 27, 1996 (File No. 333-20443).
** Incorporated by Reference to the Registration Statement for Companion
Separate Account C filed on April 24, 1997 (File No. 33-98062).
*** Page numbers included only in manually executed original in compliance with
Rule 403(d) under the Securities Act of 1933.
SPVUL COMPENSATION - COMPANION
BROKER DEALER DISTRIBUTION
- --------------------------------------------------------------------------------
Maximum Commissions Renewal Commission on
Issue Age For Years 1&2 Premiums Premiums Policys Years 3-10
--------------------------------------------------------------
0-75 7.00% 0.50%
Total Commissions 76-80 6.00% 0.50%
81-90 3.00% 0.50%
- --------------------------------------------------------------------------------
A trailer compensation option is available to Broker-Dealers, the percent of
premium commissions are lowered .25% for each trailer compensation of .05% of
account value.
CAPTIVE AGENT DISTRIBUTION
AGENTS
- --------------------------------------------------------------------------------
Maximum Commissions Renewal Commission on
Issue Age For Years 1&2 Premiums Premiums Policys Years 3-10
-------------------------------------------------------------
Total Commissions 0-80 3.00% 0.50%
81-90 1.50% 0.50%
- --------------------------------------------------------------------------------
MANAGERS (GMS AND DSMS)
- --------------------------------------------------------------------------------
Maximum Commissions Renewal Commission on
Issue Age For Years 1&2 Premiums Premiums Policys Years 3-10
--------------------------------------------------------------
Total Commissions 0-80 0.18% 0.18%
81-90 0.09% 0.09%
- --------------------------------------------------------------------------------
Exhibit 1.A. (5)(a): Form of Policy.
COMPANION
LIFE INSURANCE
COMPANY
A STOCK COMPANY
Insured JOHN J. DOE Date of Issue JUNE 1, 1997
Policy Number 1234567 Initial Specified Amount $107,776
LIFE INSURANCE POLICY
- ----------------------------------------------------------------------------
THIS IS A MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY. THE
POLICY'S ACCUMULATION VALUE IN THE VARIABLE ACCOUNT IS BASED ON THE INVESTMENT
EXPERIENCE IN THAT ACCOUNT AND WILL INCREASE OR DECREASE DAILY. THE DOLLAR
AMOUNT IS NOT GUARANTEED. THE AMOUNT OF THE DEATH BENEFIT MAY BE FIXED OR
VARIABLE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT. PLEASE
SEE THE DEATH BENEFIT PROVISION ON PAGE 5. IF NO POLICY LOANS ARE TAKEN, WE
GUARANTEE COVERAGE TO THE EARLIER OF THE FIFTH POLICY ANNIVERSARY OR THE POLICY
ANNIVERSARY NEXT FOLLOWING THE INSURED'S 75TH BIRTHDAY. NO DIVIDENDS ARE
PAYABLE.
Companion Life Insurance Company will pay the death benefit of this policy to
the beneficiary within two months after we receive proof at the Home Office that
the Insured died while this policy was in force. On the maturity date we will
pay you the policy's Accumulation Value, less any loan and unpaid loan interest,
if the Insured is then living and this policy is in force.
READ YOUR POLICY CAREFULLY.
IT INCLUDES THE PROVISIONS ON THE FOLLOWING PAGES.
THIS POLICY IS A LEGAL CONTRACT BETWEEN THE OWNER AND
COMPANION LIFE INSURANCE COMPANY.
RIGHT TO EXAMINE THIS POLICY. IF YOU ARE NOT SATISFIED WITH YOUR POLICY, RETURN
IT TO US OR OUR AGENT WITHIN 10 DAYS AFTER YOU RECEIVE THE POLICY OR 45 DAYS
AFTER YOU SIGNED THE APPLICATION, WHICHEVER IS LATER. WE WILL CANCEL YOUR POLICY
AS OF THE DATE ANY INSURANCE BECAME EFFECTIVE. WE WILL REFUND THE PREMIUMS PAID
WITHIN SEVEN DAYS AFTER WE RECEIVE THE RETURNED POLICY.
For customer service or questions about your coverage, please call
1-800-494-0067.
/S/ Ernest B. Johnston
President and Chief Executive Officer
/s/ M Jane Huerter
Secretary
COMPANION OF NEW YORK
HOME OFFICE: 401 THEODORE FREMD AVENUE
RYE, NEW YORK 10580-1493
<PAGE>
================================================================================
PLAN OF INSURANCE
Modified Single Premium Variable Universal Life Insurance
================================================================================
POLICY DATA
Insured JOHN J. DOE
Policy Number 1234567 Initial Specified Amount $107,776
Age at Issue 35 Sex MALE
Rate Class PREFERRED
Date of Issue JUNE 1, 1997
Maturity Date* JUNE 1, 2062
Initial Premium $20,000.00
Policyowner See Application or Endorsement
Beneficiary See Application or Endorsement
- --------------------------------------------------------------------------------
SCHEDULE OF BENEFITS
MONTHLY COST
OF INSURANCE BENEFIT
FORM BENEFIT AND RIDERS YEARS
745Y 6/97 Life Insurance See Data Pages 65
* The maturity date is the policy anniversary next following the Insured's
100th birthday. If no policy loans are taken, coverage is guaranteed to the
earlier of the fifth policy anniversary or the policy anniversary next
following the Insured's 75th birthday. The policy may terminate prior to
the maturity date if the premiums paid are insufficient to continue this
policy in force, unless additional premium payments are made. If the policy
does continue in force to the maturity date, it is possible there will be
little or no cash surrender value at that time. Policy values will be
affected by the investment experience of the Variable Account, any interest
credited to the Fixed Account at a rate in excess of the guaranteed minimum
interest rate, and the extent to which cost of insurance charges are more
favorable than guaranteed charges.
<PAGE>
INVESTMENTS
VARIABLE ACCOUNT: Companion Life
Separate Account B
INVESTMENT OPTIONS: INITIAL ALLOCATION (%):
Companion Fixed Account 10
[Alger American Growth Portfolio] 0
[Alger American Small Capitalization Portfolio] 30
[Federated Prime Money Fund II ("Money Market") Portfolio] 30
[Federated Fund for US Government Securities II Portfolio] 0
[Fidelity VIP II Asset Manager: Growth Portfolio] 0
[Fidelity VIP Equity-Income Portfolio] 0
[Fidelity Contrafund Portfolio] 30
[MFS Emerging Growth Portfolio] 0
[MFS High Income Fund Portfolio] 0
[MFS Research Portfolio] 0
[MFS World Government Portfolio] 0
[Scudder International Portfolio] 0
[T. Rowe Price Equity Income Portfolio] 0
[T. Rowe Price International Stock Portfolio] 0
[T. Rowe Price Limited-Term Bond Portfolio] 0
[T. Rowe Price New American Growth Portfolio] 0
[T. Rowe Price Personal Strategy Balanced Portfolio] 0
The guaranteed minimum interest rate that will be credited to the Fixed Account
is 4.5%.
<PAGE>
POLICY CHARGES
EXPENSE CHARGE: 0.1275% of the Accumulation Value, deducted on each
Monthly Deduction Date during policy years 1 through
10. 0.0950% of the Accumulation Value, deducted on
each Monthly Deduction Date during policy years 11
and later.
TRANSFER CHARGE: After the 12th transfer each policy year, $10.
LOAN INTEREST RATE CHARGE: 5.7% in advance (6.0% effective annual rate)
Interested will be credited to the Loan Account at
4.5% for Nonpreferred loans and 6.0% for Preferred
loans. Please see the POLICY LOANS AND REPAYMENTS
section of your policy for more information.
SURRENDER CHARGE
The surrender charge equals a percentage of premiums withdrawn. The percentage
varies according to the length of time since the premium was paid. Any
applicable surrender charge will be deducted on a full surrender or a partial
withdrawal.
YEARS SINCE
PREMIUM PAYMENT SURRENDER CHARGE
1 9.50%
2 9.50%
3 9.50%
4 9.00%
5 7.50%
6 6.00%
7 4.50%
8 3.00%
9 1.50%
10 and later 0%
<PAGE>
<TABLE>
<CAPTION>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE CHARGES
PER $1,000 OF NET AMOUNT AT RISK
The Guaranteed Monthly Cost of Insurance Charges Reflect the Insured's Age and Sex
<S> <C> <C> <C> <C> <C> <C> <C>
Age Charge Age Charge Age Charge Age Charge
35 0.1808 51 0.6358 67 2.6492 83 11.1533
36 0.1933 52 0.6942 68 2.8875 84 12.1767
37 0.2075 53 0.7608 69 3.1508 85 13.2483
38 0.2233 54 0.8342 70 3.4475 86 14.3508
39 0.2417 55 0.9133 71 3.7858 87 15.4775
40 0.2625 56 0.9975 72 4.1733 88 16.6275
41 0.2850 57 1.0867 73 4.6117 89 17.8075
42 0.3092 58 1.1817 74 5.0917 90 19.0358
43 0.3358 59 1.2850 75 5.6042 91 20.3425
44 0.3642 60 1.4000 76 6.1417 92 21.7858
45 0.3942 61 1.5300 77 6.6975 93 23.5108
46 0.4267 62 1.6767 78 7.2767 94 25.8308
47 0.4608 63 1.8408 79 7.8967 95 29.3217
48 0.4975 64 2.0225 80 8.5783 96 35.0825
49 0.5383 65 2.2183 81 9.3408 97 45.0833
50 0.5833 66 2.4275 82 10.2008 98 62.0958
99 83.3333
</TABLE>
<PAGE>
================================================================================
TABLE OF CONTENTS
================================================================================
DEFINITIONS....................................................................1
GENERAL PROVISIONS.............................................................2
The Contract.................................................................2
Delay of Payments............................................................2
Incontestability.............................................................2
Misstatement of Age or Sex...................................................2
Nonparticipating.............................................................2
Periodic Reports.............................................................3
Policy Dates.................................................................3
Policy Exchange Option.......................................................3
EXCLUSION......................................................................3
Suicide......................................................................3
POLICYOWNER AND BENEFICIARY....................................................3
Ownership....................................................................3
Change of Ownership and Assignment ..........................................4
Beneficiary..................................................................4
Beneficiary Change...........................................................4
PREMIUMS AND REINSTATEMENT.....................................................4
Consideration................................................................4
Premium Payments After the Initial Premium...................................4
Allocation of Premiums......................................................5
Grace Period.................................................................5
Reinstatement................................................................5
DEATH BENEFIT..................................................................5
Death Benefit................................................................5
Death Benefit Guarantee......................................................6
THE VARIABLE ACCOUNT...........................................................6
General Description..........................................................6
Investment Allocations to the Variable Account...............................6
Valuation of Assets..........................................................6
Transfers Between Subaccounts................................................6
Dollar Cost Averaging........................................................7
Asset Allocation Program.....................................................7
THE FIXED ACCOUNT..............................................................8
General Description..........................................................8
Transfers from the Fixed Account.............................................8
POLICY VALUES..................................................................8
Accumulation Value...........................................................8
Accumulation Unit............................................................8
The Fixed Account............................................................9
Partial Withdrawals..........................................................9
POLICY CHARGES................................................................10
Monthly Deduction...........................................................10
Cost of Insurance...........................................................10
POLICY LOANS AND REPAYMENTS...................................................10
Policy Loans................................................................10
Preferred Loan..............................................................11
Loan Repayments.............................................................11
INSURANCE AND NONFORFEITURE OPTIONS...........................................11
Surrender for Cash..........................................................11
Continuation of Insurance...................................................11
Paid-Up Insurance Option....................................................12
PAYOUT OPTIONS FOR PAYMENT OF POLICY PROCEEDS.................................12
General Conditions..........................................................12
Payout Options..............................................................12
Variable Payout Options.....................................................15
First Variable Payment......................................................15
Second and Later Variable Payments..........................................15
Variable Payment Unit Value.................................................15
Number of Variable Payment Units............................................15
Exchange of Variable Payment Units..........................................16
<PAGE>
================================================================================
DEFINITIONS
================================================================================
ACCUMULATION UNIT means an accounting unit of measure used to calculate the
accumulation value of the Variable Account.
ACCUMULATION VALUE means the dollar value as of any Valuation Date of all
amounts accumulated under this policy.
AGE means age last birthday.
ALLOCATION DATE means the first business day following the completion of the
RIGHT TO EXAMINE THIS POLICY period or our approval of an additional premium
payment.
BENEFICIARY means the person, persons or entity you name to receive the death
benefit of this policy.
EXECUTIVE OFFICER means the president, vice president, the secretary or
assistant secretary of Companion Life Insurance Company.
FIXED ACCOUNT means the account which consists of general account assets of
Companion Life Insurance Company.
INVESTMENT OPTIONS means the Series Funds currently available under the policy,
plus the Fixed Account. Current Investment Options are shown on the data pages.
LOAN ACCOUNT means an account established for any amounts transferred from the
Fixed Account and Subaccounts as a result of loans. The Loan Account is credited
with interest and is not based on the experience of the Variable Account.
MONTHLY DEDUCTION DATE means the date of issue and the same date each month
thereafter.
NET ASSETS OF THE VARIABLE ACCOUNT means the market value of the investments
held by the Variable Account.
NET ASSET VALUE PER SHARE means the market value of a Series Fund's investment
Portfolio divided by the number of shares in the Portfolio.
OUR, US AND WE refer to Companion Life Insurance Company, 401 Theodore Fremd
Avenue, Rye, New York 10580-1498.
PAYEE means the person who receives payments under this policy.
PORTFOLIO means a Series Fund's separate investment series that is available
under the policy.
PROCEEDS means the death benefit, the cash surrender value or the amount payable
at maturity.
RIDER means a policy provision added to this policy to expand or limit the
benefits payable.
SERIES FUNDS means those open-ended management companies in which the Variable
Account invests.
SPECIFIED AMOUNT means the amount of insurance selected. The initial Specified
Amount is shown on the data pages.
SUBACCOUNT means that portion of the Variable Account which invests in shares of
mutual funds or any other investment Portfolios that we determine to be suitable
for this policy's purposes.
VALUATION DATE means each day that the New York Stock Exchange is open for
trading.
VALUATION PERIOD means the period commencing at the close of business of the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
VARIABLE ACCOUNT means a separate account maintained by us in which a portion of
our assets has been allocated for this and certain other policies. It has been
designated on the data pages.
YOU and YOUR refer to the owner of this policy.
GENERAL PROVISIONS
The Contract
The entire contract is this policy, any riders, endorsements and amendments, and
the signed application(s), a copy of which is attached. All statements made in
the application will, in the absence of fraud, be deemed representations and not
warranties. We will not use any statement to contest this policy or deny a claim
unless it is in the application.
Any change of this policy requires the written consent of an executive officer.
No agent has the authority to change this contract or waive any of its terms.
We may amend this policy to qualify it as life insurance under the Internal
Revenue Code of 1986, as amended. Any amendment may be effective as of the
policy's date of issue.
Delay of Payments
We will usually pay any amounts payable from the Variable Account as a policy
loan, partial withdrawal or cash surrender within seven days after we receive
your written request in a form satisfactory to us. We can postpone such payments
or any transfers of amounts between Subaccounts or into the Fixed Account or the
Loan Account if:
(a) the New York Stock Exchange is closed for other than customary weekend
and holiday closings;
(b) trading on the New York Stock Exchange is restricted;
(c) an emergency exists as determined by the Securities and Exchange
Commission, as a result of which it is not reasonably practical to
dispose of securities, or not reasonably practical to determine the
value of the Net Assets of the Variable Account;
(d) the Securities and Exchange Commission permits delay for the protection
of security holders.
The applicable rules of the Securities and Exchange Commission will govern as to
whether the conditions in (c) or (d) exist.
We may defer payment of policy loans, partial withdrawals or a cash surrender
from the Fixed Account for up to six months from the date we receive your
written request.
Incontestability
We will not contest the validity of this policy after it has been in force
during the lifetime of the Insured for two years from the date of issue.
We will not contest the validity of an increase in Specified Amount after this
policy has been in force during the lifetime of the Insured for two years from
the effective date of the increase. Any contest of an increase in Specified
Amount will be based on the application for that increase.
Misstatement of Age or Sex
If the age or sex of the Insured has been misstated, all payments and benefits
under the policy will be those which the premiums paid would have purchased at
the correct age and sex.
Nonparticipating
No dividends will be paid. This policy will not share in our surplus earnings or
profits.
Periodic Reports
At least once each calendar year we will send you a statement showing your
Accumulation Value and death benefit as of a date not more than two months prior
to the date of mailing. We will also send such statements as may be required by
applicable state and federal laws, rules and regulations.
Policy Dates
The following dates are measured from the date of issue:
(a) policy months;
(b) policy years;
(c) policy anniversaries; (d) Monthly Deduction Dates; (e) the maturity
date; and (f) the effective date of surrender.
Policy Exchange Option
Any time during the first 18 policy months, as long as this policy is in force,
you may exchange this policy for a general account universal life insurance
policy on the life of the Insured without evidence of insurability. The new
policy will be subject to the following:
(a) The specified amount of the new policy will equal the initial specified
amount of this policy.
(b) The date of issue of the new policy will be the same as the date of
issue of this policy.
(c) The Insured's issue age and rate class on the new policy will be the
same as those on this policy. The cost of insurance rates under the new
policy will be those in effect on the date of issue of this policy.
(d) The new policy will include any incidental insurance benefits that were
included in this policy, if such benefits were then available for issue
with the new policy.
(e) The accumulation value and cash surrender value of the new policy will
equal the Accumulation Value and cash surrender value of this policy on
the date of the exchange.
EXCLUSION
Suicide
We will not pay the death benefit if the Insured's death results from suicide,
while sane or insane, within two years from the date of issue. Instead we will
pay the sum of the premiums paid since issue less any loans and unpaid loan
interest and less any partial withdrawals.
We will not pay that portion of the death benefit resulting from an increase in
Specified Amount if the Insured's death results from suicide, while sane or
insane, within two years from the effective date of the increase. Instead we
will pay the sum of the premiums paid for the increase.
POLICYOWNER AND BENEFICIARY
Ownership
The owner is:
(a) the Insured;
(b) the applicant, if other than the Insured; or
(c) any assignee of record.
While the Insured is alive, only you may exercise the rights under this policy.
You may name a new owner as described in the CHANGE OF OWNERSHIP AND ASSIGNMENT
provision.
Change of Ownership and Assignment
You may name a new owner of this policy or pledge it as collateral by assigning
it. The assignment must be in writing. No assignment will be binding on us until
we record and acknowledge it. We are not responsible for the validity or effect
of an assignment of this policy. The rights of any Beneficiary will be subject
to a collateral assignment.
If the Beneficiary of this policy is irrevocable, a change of ownership or a
collateral assignment may be made only by joint written request from you and the
irrevocable Beneficiary.
Beneficiary
The Beneficiary is named in the application and may be changed as stated in the
BENEFICIARY CHANGE provision, unless the Beneficiary is irrevocable.
Beneficiary Change
To change a Beneficiary, send us a written request. When recorded and
acknowledged by us, the change will be effective as of the date you signed the
request. The change will not apply to any payments made or other action taken by
us before recording.
If the Beneficiary is irrevocable, you may change the Beneficiary only by joint
written request from you and the irrevocable Beneficiary.
PREMIUMS AND REINSTATEMENT
Consideration
The consideration for this policy is the application and the payment of the
initial premium.
Premium Payments After the Initial Premium
After the initial premium payment you may make no more than one additional
premium payment each policy year to our Home Office or to an authorized agent.
Any additional premium payment must be at least $5,000. No additional premium
payments may be made after the Insured's 90th birthday, except as may be
required in the grace period.
Since any additional premium payment will result in an increase in Specified
Amount, we will accept additional premiums only if you submit satisfactory
evidence of insurability.
If there is a policy loan outstanding at the time a payment is received, and in
the absence of other instructions from you, we will treat the payment first as
payment of loan interest, then as repayment of the loan, then as an additional
premium payment subject to evidence of insurability.
We will send you a receipt for any payment signed by an executive officer if you
request one.
We reserve the right to limit premiums or refund any values in order to qualify
this policy as life insurance under the Internal Revenue Code of 1986, as
amended.
Allocation of Premiums
We will allocate premiums to the Money Market Fund until the Allocation Date. On
the Allocation Date the premium will be allocated to one or more Investment
Options according to your instructions.
You may change your allocation instructions by written request. The change will
be effective on the date we receive your request. The change will apply to any
additional premiums paid after the date of the change.
Grace Period
If there is no outstanding policy loan, the grace period will begin on any
Monthly Deduction Date when the Accumulation Value is not enough to pay the
Monthly Deduction, unless the death benefit guarantee is in effect as described
in the DEATH BENEFIT GUARANTEE provision. If there is an outstanding policy
loan, the grace period will begin on any Monthly Deduction Date when the cash
surrender value is not enough to pay the Monthly Deduction and any loan interest
due.
Written notice will be sent to your last known address and that of any assignee
of record within 30 days after the start of the grace period. We will allow 61
days from the start of the grace period for the payment of an amount large
enough to pay all unpaid Monthly Deductions and unpaid loan interest. This
policy will remain in force during the grace period. If the payment is not
received by the end of the grace period, this policy will terminate as of the
first day of the grace period. If the death of the Insured occurs on the Monthly
Deduction Date or during the grace period, any past due Monthly Deductions and
unpaid loan interest will be deducted in figuring the death benefit.
Reinstatement
If this policy lapses, you may reinstate it within five years of the date of
lapse and prior to the maturity date, subject to the following:
(a) written application signed by you and the Insured;
(b) evidence of insurability satisfactory to us;
(c) payment of an amount large enough to continue this policy in force for
three months;
(d) re-establishment of surrender charges, if any, measured from the
original date of issue to the date of reinstatement; and
(e) repayment or reinstatement of any outstanding policy loan along with
unpaid loan interest from the date of lapse.
The effective date of reinstatement will be the date we approve the application
for reinstatement.
The Specified Amount of the reinstated policy may not exceed the Specified
Amount at the time of lapse. The Accumulation Value on the effective date of
reinstatement will reflect:
(a) the Accumulation Value at the time of lapse, except that the value in
the Loan Account may be repaid prior to reinstatement; less
(b) the Monthly Deduction for the current month.
DEATH BENEFIT
Death Benefit
The death benefit equals the greater of:
(a) the initial Specified Amount plus any later increase and less any later
decrease; or
(b) the policy's Accumulation Value on the date of death multiplied by
the corridor percentage from the table shown below for the Insured's
attained age;
less any outstanding loans and unpaid loan interest.
- ---------------------------------------------------------
Attained Corridor Attained Corridor Attained Corridor
Age Percentage Age Percentage Age Percentage
- ---------------------------------------------------------
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75-90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94 101%
52 171% 66 119% 95-100 100%
53 164% 67 118%
- ---------------------------------------------------------
DEATH BENEFIT GUARANTEE
If no policy loans are taken, we guarantee that coverage will remain in force
until the earlier of the fifth policy anniversary or the policy anniversary next
following the Insured's 75th birthday.
THE VARIABLE ACCOUNT
General Description
The name of the Variable Account is shown on the data pages. The assets of the
Variable Account are our property. These assets are not chargeable with the
liabilities arising out of any other business we may conduct, except to the
extent that they exceed the liabilities of the Variable Account arising under
the policies supported by the Variable Account.
Investment Allocations to the Variable Account
The assets of the Variable Account are divided by Portfolios. Where appropriate,
the Portfolios are divided by Funds within the Portfolio. This establishes a
series of Subaccounts within the Variable Account.
We may, from time to time, add other Investment Options. In such event you may
be permitted to select from these other Investment Options. Your selections may
be limited by the terms and conditions we may impose on such transactions.
We may also substitute other Investment Options. If required, approval of or
change of any investment policy will be filed with the Insurance Department of
the state in which this policy was delivered.
Valuation of Assets
Assets of shares of Portfolios within each Subaccount will be valued at their
Net Asset Value on each Valuation Date.
Transfers Between Subaccounts
After the end of the RIGHT TO EXAMINE THIS POLICY period, you may transfer all
or part of the accumulation value in a Subaccount to another Subaccount or to
the Fixed Account. Value is transferred out of a Subaccount by canceling
Accumulation Units and into a Subaccount by adding Accumulation Units. The
number of Accumulation Units canceled or added depends on the Accumulation Unit
value of the respective Subaccounts on the date of the transfer. (Please see the
ACCUMULATION UNIT provision on page 8 for additional information.)
You may make 12 transfers each policy year without charge. We reserve the right
to charge a $10 fee for additional transfers, to be deducted from the amount
transferred.
The minimum transfer amount is $500 or the entire amount in the Subaccount if it
is less than $1,000. The minimum amount that can remain in a Subaccount after a
transfer is $500.
We reserve the right at any time and without prior notice to any party to modify
the transfer privileges described above.
DOLLAR COST AVERAGING
Under the Dollar Cost Averaging program you may instruct us to automatically
transfer between Investment Options, on a periodic basis, a predetermined dollar
amount or percentage of accumulation value. The automatic transfers will be made
from any one Subaccount or the Fixed Account to any other Subaccount.
Automatic transfers can occur monthly, quarterly, semi-annually or annually. The
amount transferred each time must be at least $100 and at least $50 per
Subaccount. At the time the program begins there must be at least $5,000 of
accumulation value in the applicable Subaccount or the Fixed Account, or enough
to cover one year's transfers.
If transfers are made from the Fixed Account, the maximum periodic transfer
amount is 10% of that account's value at the time of election, or enough to
provided transfers for 10 months. There is no maximum transfer amount for the
Subaccounts.
You may request Dollar Cost Averaging at the time of application or at a later
date. Transfers will begin on the first or 15th day of the month, as you
request. If the first or 15th day of the month is not a Valuation Date, then the
transfer will be processed on the next following Valuation Date. The program
will end when:
(a) the number of transfers you have requested have been made; or
(b) when the value in the applicable Subaccount or the Fixed Account is less
than $500;
whichever occurs first.
You may increase or decrease the amount or percentage of the transfers or end
the program by sending us written notice. There is no charge for participation
in this program.
ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program you may instruct us to allocate premium
payments and the Accumulation Value among the Subaccounts and the Fixed Account
according to your instructions, or according to instructions recommended by us
and approved by you. We will allocate your premium payments and transfer
accumulation value among the Investment Options to maintain conformity with
current instructions. This will "rebalance" your investments.
At the time the program begins, there must be at least $20,000 of Accumulation
Value in the policy. Rebalancing will be done on a quarterly, semi-annual or
annual basis, as you request. Transfers made in accordance with this program
will not be counted toward the 12 free transfers allowed each policy year.
You may request participation in the Asset Allocation Program at the time of
application or at a later date. You may change your allocation percentages or
end the program by sending us written notice. There is no charge for
participation in this program.
THE FIXED ACCOUNT
General Description
Any part of the premium allocated to the Fixed Account or transferred to the
Fixed Account under the policy becomes part of the general account assets of
Companion Life Insurance Company. The Fixed Account includes our assets that are
not segregated in separate accounts. We maintain sole discretion to invest the
assets of the Fixed Account, subject to applicable law.
Transfers from the Fixed Account
Once each policy year you may transfer part of the accumulation value in the
Fixed Account to the Subaccounts. The maximum percentage that may be transferred
is 10% of the value in the Fixed Account on the date of the transfer. There is
no charge for this transfer.
We reserve the right to defer transfers from the Fixed Account to the
Subaccounts for up to six months from the date we receive your written request.
You may transfer amounts from the Subaccounts to the Fixed Account at any time.
However, we reserve the right to restrict transfers back to the Fixed Account
for up to six months immediately following a transfer to the Subaccounts.
POLICY VALUES
Accumulation Value
On the date of issue the Accumulation Value equals the initial premium less the
Monthly Deduction for the first month. On any Monthly Deduction Date after the
date of issue the Accumulation Value equals:
(a) the total of the values in each Subaccount; plus
(b) the accumulation value of the Fixed Account; plus
(c) the accumulation value of the Loan Account; less
(d) the Monthly Deduction for the current month.
The value for each Subaccount equals:
(a) the current number of Accumulation Units; multiplied by
(b) the current unit value.
Accumulation Unit
Each premium is converted into Accumulation Units. This is done by dividing the
premium by the Accumulation Unit value for the Valuation Period during which the
premium is allocated to the Variable Account. The initial Accumulation Unit
value for each Subaccount was set when the Subaccount was established. The unit
value may increase or decrease from one Valuation Date to the next.
The Accumulation Unit value for a Subaccount on any Valuation Date is calculated
as follows:
(a) the Net Asset Value Per Share of the Fund multiplied by the number of
shares held in the Subaccount, before the purchase or redemption of any
shares on that date; divided by
(b) the total number of Accumulation Units held in the Subaccount on the
Valuation Date, before the purchase or redemption of any shares on that
date.
The Fixed Account
The accumulation value of the Fixed Account on any Monthly Deduction Date
equals:
(a) the value as of the last Monthly Deduction Date; plus
(b) any premiums credited since the last Monthly Deduction Date; plus
(c) any transfers from the Subaccounts to the Fixed Account since the last
Monthly Deduction Date; plus
(d) any transfers from the Loan Account to the Fixed Account since the
last Monthly Deduction Date; less
(e) any transfers from the Fixed Account to the Subaccounts since the
last Monthly Deduction Date; less
(f) any transfers from the Fixed Account to the Loan Account since the
last Monthly Deduction Date; less
(g) any partial withdrawals and surrender charge taken from the Fixed
Account since the last Monthly Deduction Date; less
(h) that part of the Monthly Deduction taken from the Fixed Account; plus
(i) interest credited on the balance.
We guarantee that the accumulation value in the Fixed Account will be credited
with an effective annual interest rate of at least 4.5%. Using a procedure
approved by our Board of Directors, we may credit interest to the Fixed Account
at current rates in excess of the guaranteed minimum interest rate. Once
interest is declared, it will become nonforfeitable.
Current interest rates will be determined by class according to procedures on
file with the Insurance Department of the state in which this policy is
delivered. Any such current interest rate will be based on future expectations
of expenses as well as investment earnings of our general account assets. Each
current interest rate increase reflects a corresponding decrease in our holdback
margin for profit and expenses.
We will review the rates for new funds on a monthly basis. Funds added to the
Fixed Account on different dates may be credited at different interest rates.
Partial Withdrawals
After the first policy year you may withdraw part of the Accumulation Value.
Withdrawals are made first from earnings and then from premiums paid, beginning
with the earliest premium payment. The minimum partial withdrawal amount is
$500. The maximum partial withdrawal amount is an amount such that the remaining
Accumulation Value is not less than $20,000.
Each policy year you may withdraw, without a surrender charge, the greater of:
(a) 15% of the Accumulation Value as of the first withdrawal that policy
year; or
(b) that part of the Accumulation Value which is in excess of total premiums
paid.
Partial withdrawals in excess of this amount may be subject to a surrender
charge. The surrender charge is a percentage of the premiums withdrawn. The
applicable percentage varies according to the length of time since the premium
was paid. The percentages are shown on the data pages.
The amount of cash withdrawal requested and any surrender charge will be
deducted from the Accumulation Value on the date we receive your written
request. Partial withdrawals will result in cancellation of Accumulation Units
from each applicable Subaccount. In the absence of instructions from you,
amounts will be deducted from the Subaccounts and the Fixed Account on a pro
rata basis. No more than a pro rata amount may be withdrawn from the Fixed
Account for any partial withdrawal. We reserve the right to defer withdrawals
from the Fixed Account for up to six months from the date we receive your
written request.
The Specified Amount will be reduced in the same proportion as the Accumulation
Value is reduced as a result of any partial withdrawal.
POLICY CHARGES
Monthly Deduction
The Monthly Deduction equals:
(a) the cost of insurance for the current month; plus (b) the cost of any
riders for the current month; plus (c) the expense charge shown on the data
pages.
The Monthly Deduction will be deducted from the Subaccounts, the Fixed Account
and the Loan Account on a pro rata basis on each Monthly Deduction Date. That
portion of the Monthly Deduction applicable to the Subaccounts is deducted by
canceling Accumulation Units on a pro rata basis.
Cost of Insurance
The guaranteed cost of insurance each month used in calculating the Monthly
Deduction equals:
(a) the net amount at risk for the month; multiplied by
(b) the guaranteed cost of insurance charge per $1,000 of Specified Amount;
divided by
(c) 1,000.
The guaranteed monthly cost of insurance charge for each $1,000 is shown on the
data pages. The charge is based on the Insured's attained age and sex.
The net amount at risk in any month equals:
(a) the death benefit; less
(b) the Accumulation Value on the Monthly Deduction Date after deducting the
rider charge, if any, and the expense charge for the current month.
We may use current cost of insurance charges less than those shown. Current cost
of insurance charges are based on the Insured's rate class. We reserve the right
to change current cost of insurance charges. Changes in cost of insurance rates
will be by class and will be based on changes in future expectations of factors
such as:
(a) investment earnings;
(b) mortality;
(c) persistency;
(d) expenses; and
(e) taxes.
Any changes in current cost of insurance rates will be made according to
procedures on file with the Insurance Department of the state where this policy
is delivered.
POLICY LOANS AND REPAYMENTS
Policy Loans
After the first policy year you may obtain a loan for up to 90% of the cash
surrender value less:
(a) the loan interest to the end of the policy year; and
(b) the Monthly Deduction large enough to continue this policy in force for
one month.
This policy must be assigned to us as sole security for the loan.
We will transfer all loan amounts from the Subaccounts and the Fixed Account to
the Loan Account. The amounts will be transferred on a pro rata basis.
Loan interest is payable at the rate of 5.7% in advance (6% effective annual
rate). Interest is due on each policy anniversary. If the interest is not paid
when due, we will transfer an amount equal to the unpaid loan interest from the
Subaccounts and the Fixed Account to the Loan Account on a pro rata basis.
If at any time the remaining cash surrender value is not enough to pay the loan
interest and the monthly deduction amount, we will notify you of the payment
sufficient to continue this policy as described in the GRACE PERIOD provision.
We will credit 4.5% interest to any amounts in the Loan Account, except amounts
equal to a Preferred Loan as described below.
The death benefit will be reduced by the amount of any loan outstanding on the
date of the Insured's death.
Policy loans may have associated tax consequences. Please consult a qualified
tax advisor before obtaining a loan.
We may defer making a loan for six months unless the loan is to pay premiums to
us.
Preferred Loan
A Preferred Loan will be available on any date when the sum of the cash
surrender value plus any outstanding non-preferred loans exceeds the sum of
premiums paid since the date of issue. The amount available for a Preferred Loan
is the amount of such excess. A Preferred Loan will be credited with 6%
interest.
Loan Repayments
All or part of the loan may be repaid at any time while this policy is in force.
The amount of a loan repayment will be deducted from the Loan Account. It will
be allocated among the Fixed Account and the Subaccounts in the same percentages
as premiums are allocated.
INSURANCE AND NONFORFEITURE OPTIONS
Surrender for Cash
While the Insured is alive, you may terminate this policy for its cash surrender
value. The policy must be returned to us to receive the cash surrender value.
The cash surrender value equals:
(a) the Accumulation Value at the end of the Valuation Period in which we
receive your written request; less
(b) any outstanding policy loan and unpaid loan interest; and less
(c) any applicable surrender charge.
With regard to amounts allocated to the Fixed Account, the cash surrender value
will be equal to or greater than the minimum cash surrender value required by
the state in which this policy was delivered. The value is based on the
Commissioners 1980 Standard Mortality Table, age last birthday, with interest at
4.5%.
We may defer payment of a cash surrender from the Fixed Account for six months.
Continuation of Insurance
If no additional premiums are paid, this policy will continue as follows:
(a) if there are no outstanding policy loans, until the Accumulation Value
is not enough to pay the Monthly Deduction, subject to the DEATH BENEFIT
GUARANTEE provision and the GRACE PERIOD provision;
(b) if there are any outstanding policy loans, until the cash surrender
value is not enough to pay the Monthly Deduction and any loan interest
due, subject to the GRACE PERIOD provision; or
(c) until the maturity date,
whichever occurs first.
We will pay you any remaining Accumulation Value less any outstanding policy
loan and unpaid loan interest at maturity if the Insured is then living.
Paid-Up Insurance Option
On any policy anniversary you may transfer all of the accumulation value in the
Subaccounts to the Fixed Account, then apply the cash surrender value to
purchase guaranteed paid-up life insurance. The amount of life insurance
provided will be the lesser of:
(a) the amount provided by applying the cash surrender value as a net single
premium based on the Commissioners 1980 Standard Ordinary Mortality
Table, age last birthday, and 4.5% interest; or
(b) the death benefit at the time this option is elected.
Any cash surrender value in excess of what is needed to provide the paid-up life
insurance will be paid to you.
PAYOUT OPTIONS FOR PAYMENT OF POLICY PROCEEDS
GENERAL CONDITIONS
While the Insured is alive, you may choose to have the Proceeds paid under any
combination of the fixed and variable payout options shown in this policy. A
Beneficiary may also have the death benefit applied to a payout option. If
another option is not chosen within 60 days of the date we receive due proof of
death, we will make payment in a lump sum.
We reserve the right to pay the Proceeds in one sum:
(a) when the Proceeds are less than $2,000; or
(b) when the option of payment chosen would result in periodic payments of
less than $20.
Payees must be individuals who receive payments in their own behalf unless
otherwise agreed to by us. Any option chosen will be effective when we
acknowledge it.
We may require proof of your age or survival or the age or survival of the
Payee.
The guaranteed minimum interest rate used in the fixed payout options is 3%.
Using a procedure approved by our Board of Directors, we may pay or credit
additional interest annually.
When the last Payee dies, we will pay to the estate of that Payee:
(a) any amount on deposit; or
(b) the then present value of any remaining guaranteed payments under a
fixed option.
PAYOUT OPTIONS
1. PROCEEDS HELD ON DEPOSIT AT INTEREST
This option is available on a fixed basis. While the Proceeds are held by
us, we will annually:
(a)pay interest to any Payee; or
(b)add interest to the Proceeds.
2. INCOME OF A SPECIFIED AMOUNT
This option is available on either a fixed or variable basis. We will pay
the Proceeds in installments of a specified amount until the Proceeds with
interest have been fully paid.
3. INCOME FOR A SPECIFIED PERIOD
This option is available on a fixed basis. We will pay the Proceeds in
installments for the number of years you choose. The monthly incomes for
each $1,000 of Proceeds are shown in the following table. These amounts
include interest. We will provide the income amounts for payments other than
monthly upon request.
- ------------------------------------------------
Years Monthly Years Monthly Years Monthly
Chosen Income Chosen Income Chosen Income
- ------------------------------------------------
1 $84.47 8 $11.68 15 $6.87
2 42.86 9 10.53 16 6.53
3 28.99 10 9.61 17 6.23
4 22.06 11 8.86 18 5.96
5 17.91 12 8.24 19 5.73
6 15.14 13 7.71 20 5.51
7 13.16 14 7.26
- ------------------------------------------------
4. LIFETIME INCOME
This option is available on either a fixed or variable basis. We will pay
the Proceeds as a monthly income for as long as the Payee lives. The
following guarantees are available:
(a)GUARANTEED PERIOD - The monthly income will be paid for a certain
number of years and as long thereafter as the Payee lives; or
(b)GUARANTEED AMOUNT (INSTALLMENT REFUND) - The monthly income will be
paid until the sum of all payments equals the Proceeds placed under
this option and as long thereafter as the Payee lives.
The monthly income as a fixed payout will be the amount computed using one
of the following bases:
(a)the Lifetime Monthly Income Table for Fixed Payout Option 4 shown
in this policy; or
(b)if more favorable to the Payee, our then current lifetime monthly
income rates for payment of Proceeds. Payments will not be less than
payments made if the proceeds were used to purchase a single premium
immediate annuity available from us at that time to the same class of
payees.
The Lifetime Monthly Income Table for Fixed Payout Option 4 is based on the
1983a Mortality Table and interest at 3%.
5. LUMP SUM
The Proceeds will be paid in one sum.
6. OTHER OPTIONS
Upon request and if available, we will provide payments for other options,
including joint and survivor periods.
Additional information about any of the options may be obtained by contacting
us.
<PAGE>
<TABLE>
<CAPTION>
LIFETIME MONTHLY INCOME TABLE FOR FIXED PAYOUT OPTION 4
MONTHLY INCOME FOR EACH $1,000 OF PROCEEDS
- ----------------------------------------------------------------------------------------------
Age Last Guaranteed Guaranteed Age Last Guaranteed Guaranteed Age Last Guaranteed Guaranteed
Birthday Period Amount Birthday Period Amount Birthday Period Amount
of Payee Male Female Male Femal of Payee Male Female Male Female of Payee Male Female Male Female
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7 and
under $2.84 $2.77 $2.83$2.76
8 2.85 2.78 2.84 2.77 34 $3.40$3.23 $3.36$3.20 60 $5.14 $4.66 $4.86 $4.48
9 2.86 2.79 2.85 2.78 35 3.44 3.26 3.39 3.23 61 5.27 4.76 4.96 4.56
10 2.87 2.80 2.86 2.79 36 3.48 3.29 3.42 3.26 62 5.39 4.87 5.07 4.66
11 2.89 2.81 2.88 2.80 37 3.52 3.32 3.46 3.29 63 5.53 4.98 5.19 4.75
12 2.90 2.82 2.89 2.82 38 3.56 3.35 3.49 3.32 64 5.66 5.10 5.30 4.86
13 2.91 2.83 2.90 2.83 39 3.60 3.38 3.53 3.35 65 5.81 5.22 5.43 4.96
14 2.93 2.85 2.92 2.84 40 3.65 3.42 3.57 3.38 66 5.96 5.36 5.56 5.08
15 2.95 2.86 2.93 2.85 41 3.69 3.46 3.61 3.42 67 6.12 5.50 5.70 5.20
16 2.96 2.87 2.95 2.86 42 3.74 3.50 3.66 3.45 68 6.28 5.65 5.85 5.33
17 2.98 2.89 2.96 2.88 43 3.79 3.54 3.70 3.49 69 6.44 5.80 6.00 5.47
18 3.00 2.90 2.98 2.89 44 3.85 3.58 3.75 3.53 70 6.61 5.97 6.16 5.61
19 3.01 2.92 3.00 2.91 45 3.90 3.63 3.80 3.57 71 6.79 6.14 6.33 5.76
20 3.03 2.93 3.02 2.92 46 3.96 3.67 3.85 3.61 72 6.96 6.32 6.51 5.93
21 3.05 2.95 3.04 2.94 47 4.02 3.72 3.90 3.66 73 7.14 6.50 6.69 6.10
22 3.07 2.96 3.06 2.95 48 4.09 3.78 3.96 3.70 74 7.32 6.69 6.90 6.28
23 3.09 2.98 3.08 2.97 49 4.15 3.83 4.01 3.75 75 7.50 6.89 7.10 6.47
24 3.12 3.00 3.10 2.99 50 4.22 3.89 4.07 3.80 76 7.67 7.09 7.32 6.68
25 3.14 3.02 3.12 3.01 51 4.30 3.95 4.14 3.86 77 7.84 7.29 7.54 6.90
26 3.16 3.04 3.14 3.02 52 4.37 4.01 4.20 3.91 78 8.01 7.49 7.78 7.12
27 3.19 3.06 3.16 3.04 53 4.45 4.08 4.27 3.97 79 8.18 7.69 8.03 7.37
28 3.22 3.08 3.19 3.06 54 4.54 4.15 4.34 4.03 80 8.33 7.89 8.30 7.64
29 3.24 3.10 3.21 3.09 55 4.62 4.22 4.42 4.10 81 8.48 8.08 8.58 7.90
30 3.27 3.12 3.24 3.11 56 4.72 4.30 4.50 4.17 82 8.61 8.26 8.88 8.20
31 3.30 3.15 3.27 3.13 57 4.82 4.38 4.58 4.24 83 8.74 8.43 9.19 8.50
32 3.33 3.17 3.30 3.15 58 4.92 4.47 4.67 4.31 84 8.86 8.59 9.53 8.81
33 3.37 3.20 3.33 3.18 59 5.03 4.56 4.77 4.39 85 8.97 8.74 9.83 9.18
and over
- -----------------------------------------------------------------------------------------------
</TABLE>
Variable Payout Options
You may choose payout options 2, 4 or 6 to be paid as variable payments.
Variable payments vary according to the net investment return of the Subaccounts
chosen. The smallest annual rate of investment return that must be earned on the
assets of the Variable Account so that the dollar amount of the variable
payments will not decrease is 5.20%.
If variable payments are being made under Option 2 or 6 and do not involve life
contingencies, then you may surrender the policy and receive the commuted value
of any unpaid payments.
First Variable Payment
We will compute the dollar amount of the first monthly variable payment by
applying all or part of the Proceeds to the Variable Payout Options table shown
in this policy for the payout option you choose. The table shows the dollar
amount of monthly payment that you can buy with each $1,000 of Proceeds.
If you have chosen more than one Subaccount, we will apply the accumulation
value of each Subaccount separately to the Variable Payout Options table. The
total amount of the first variable payment equals the sum of the payment amounts
payable for each Subaccount.
SECOND AND LATER VARIABLE PAYMENTS
The dollar amount of the second and later variable payments is not set. It may
change from month to month. We will compute the payment on the 10th Valuation
Date before the payment is due.
The amount of each variable payment after the first equals:
(a) the sum of the number of variable payment units under each Subaccount;
multiplied by
(b) the current variable payment unit value for each Subaccount as of
the date we compute the payment.
A variable payment unit is a measuring unit used in computing the amount of the
variable payments. The value of a variable payment unit for each Subaccount will
vary with the net investment return of the Subaccount.
Variable Payment Unit Value
The current value of a variable payment unit for each Subaccount is:
(a) the value as of the date we computed the last payment; multiplied by
(b) the Net Investment Factor for the Subaccount as of the date on which we
are computing the current payment.
The Net Investment Factor is figured by dividing (a) by (b), then subtracting
(c) from the result, then multiplying by the offset factor described below. The
values of (a), (b) and (c) are defined as follows:
(a) is the net result of
(1)the Net Asset Value of a Fund share held in a Subaccount as of
the end of the current payment period; plus or minus
(2)a per share credit or charge for any taxes we incurred since the last
computation date that were charged to the operation of the
Subaccount.
(b) is the Net Asset Value of a Fund share held in the Subaccount as of the
beginning of the current payment period.
(c) is the asset charge factor that reflects the expense charges deducted
from the Variable Account. This factor is equal, on an annual basis, to
1.20% of the daily net asset value of the Variable Account.
The result of the calculation described above is then multiplied by a factor
that offsets the assumed investment rate upon which the Variable Payout Options
table is based. This allows the actual investment rate to be credited. For a
one-day Valuation Period the factor is 0.99989255, using an assumed investment
rate of 4% per year.
Number of Variable Payment Units
The number of variable payment units payable for each Subaccount equals:
(a) the amount of the first monthly variable payment payable for that
Subaccount; divided by
(b) the variable payment unit value for that Subaccount as of the 10th
Valuation Date before the first variable payment is made.
The number of variable payment units payable for each Subaccount is fixed when
we compute the first variable payment. The number remains fixed unless you
exchange variable payment units between Subaccounts. The number of variable
payment units will not change as a result of investment experience.
We guarantee that the dollar amount of each variable payment after the first
will not be affected by actual expenses or changes in mortality experience.
Exchange of Variable Payment Units
After the first variable payment is made, you may exchange the value of a
specified number of variable payment units of one Subaccount for variable
payment units of another Subaccount or the Fixed Account. You may not exchange
variable payment units of the Fixed Account for variable payment units of the
Subaccounts.
The value of the variable payment units being exchanged will be the value for
the Valuation Period during which we receive your request for the exchange. The
value of the new variable payment units will be such that the dollar amount of a
payment made on the date of the exchange would not change as a result of the
exchange.
No more than four exchanges may be made each policy year.
<TABLE>
<CAPTION>
VARIABLE PAYOUT OPTIONS TABLE
MONTHLY PAYOUTS PER $1,000 BASED ON 4.00% INTEREST AND
1983A MORTALITY TABLE ALB PROJECTED 20 YEARS WITH
PROJECTION SCALE 'G'
- -------------------------------------------------------------------------------------------------------
- ---------------------------------------------------- --------------------------------------------------
FEMALE RATES MALE RATES
- ---------------------------------------------------- --------------------------------------------------
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
Age 20 Year 10 Year Life Only Installmen20 Year 10 Year Life Only Installment Age
Certain Certain Refund Certain Certain Refund
& Life & Life & Life & Life
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 0
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
1 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 1
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
2 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 2
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
3 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 3
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
4 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 4
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
5 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 5
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
6 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 6
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
7 3.44 3.44 3.44 3.44 3.49 3.49 3.50 3.49 7
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
8 3.44 3.45 3.45 3.44 3.50 3.50 3.51 3.50 8
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
9 3.45 3.45 3.45 3.45 3.51 3.51 3.51 3.50 9
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
10 3.46 3.46 3.46 3.46 3.52 3.52 3.53 3.51 10
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
11 3.47 3.47 3.47 3.47 3.53 3.53 3.53 3.52 11
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
12 3.48 3.48 3.48 3.47 3.54 3.54 3.54 3.53 12
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
13 3.48 3.49 3.49 3.48 3.55 3.55 3.56 3.54 13
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
14 3.49 3.50 3.50 3.49 3.56 3.57 3.57 3.56 14
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
15 3.50 3.51 3.51 3.50 3.57 3.58 3.58 3.57 15
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
16 3.51 3.51 3.52 3.51 3.58 3.59 3.59 3.58 16
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
17 3.52 3.53 3.53 3.52 3.60 3.60 3.60 3.59 17
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
18 3.53 3.54 3.54 3.53 3.61 3.62 3.62 3.60 18
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
19 3.54 3.55 3.55 3.54 3.62 3.63 3.63 3.62 19
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
20 3.55 3.56 3.56 3.55 3.64 3.64 3.65 3.63 20
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
21 3.57 357 3.57 3.56 3.65 3.66 3.66 3.65 21
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
22 3.58 3.58 3.58 3.58 3.67 3.67 3.68 3.66 22
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
23 3.59 3.60 3.60 3.59 3.68 3.69 3.70 3.68 23
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
24 3.61 3.61 3.61 3.60 3.70 3.71 3.71 3.70 24
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
25 3.62 3.62 3.63 3.62 3.72 3.73 3.73 3.71 25
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
26 3.63 3.64 3.64 3.63 3.74 3.75 3.75 3.73 26
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
27 3.65 3.65 3.66 3.65 3.76 3.77 3.77 3.75 27
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
28 3.67 3.67 3.67 3.66 3.78 3.79 3.79 3.77 28
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
29 3.68 3.69 3.69 3.68 3.80 3.81 3.81 3.79 29
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
30 3.70 3.71 3.71 3.70 3.82 3.83 3.84 3.81 30
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
31 3.72 3.73 3.73 3.72 3.84 3.86 3.86 3.84 31
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
32 3.74 3.75 3.75 3.74 3.87 3.88 3.89 3.86 32
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
33 3.76 3.77 3.77 3.76 3.89 3.91 3.91 3.89 33
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
34 3.78 3.79 3.79 3.78 3.92 3.94 3.94 3.92 34
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
35 3.80 3.81 3.81 3.80 3.95 3.97 3.97 3.94 35
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
36 3.82 3.84 3.84 3.82 3.97 4.00 4.00 3.97 36
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
37 3.85 3.86 3.86 3.85 4.00 4.03 4.04 4.00 37
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
38 3.87 3.89 3.89 3.87 4.04 4.07 4.07 4.03 38
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
39 3.90 3.92 3.92 3.90 4.07 4.10 4.11 4.06 39
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
40 3.93 3.95 3.95 3.93 4.10 4.14 4.15 4.10 40
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
41 3.96 3.98 3.98 3.96 4.14 4.18 4.19 4.14 41
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
42 3.99 4.01 4.01 3.99 4.18 4.22 4.24 4.18 42
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
43 4.02 4.04 4.05 4.02 4.22 4.27 4.28 4.21 43
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
44 4.05 4.08 4.09 4.05 4.25 4.32 4.33 4.25 44
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
45 4.09 4.12 4.13 4.09 4.30 4.36 4.38 4.30 45
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
46 4.13 4.16 4.17 4.13 4.34 4.41 4.43 4.35 46
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
47 4.16 4.20 4.21 4.16 4.38 4.47 4.49 4.39 47
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
48 4.20 4.24 4.25 4.20 4.43 4.52 4.55 4.44 48
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
49 4.24 4.29 4.30 4.24 4.48 4.58 4.61 4.49 49
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
50 4.29 4.34 4.35 4.29 4.53 4.64 4.68 4.55 50
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
51 4.33 4.39 4.40 4.34 4.58 4.70 4.74 4.61 51
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
52 4.38 4.44 4.46 4.39 4.63 4.77 4.81 4.67 52
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
53 4.43 4.50 4.52 4.44 4.69 4.84 4.89 4.73 53
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
54 4.48 4.56 4.58 4.49 4.74 4.91 4.97 4.80 54
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
55 4.53 4.62 4.65 4.56 4.80 4.99 5.06 4.87 55
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
56 4.59 4.69 4.72 4.62 4.86 5.08 5.14 4.94 56
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
57 4.65 4.76 4.79 4.68 4.92 5.16 5.24 5.02 57
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
58 4.71 4.83 4.87 4.74 4.98 5.25 5.34 5.10 58
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
59 4.77 4.91 4.96 4.82 5.04 5.35 5.45 5.19 59
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
60 4.83 5.00 5.05 4.89 5.01 5.45 5.57 5.28 60
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
61 4.89 5.08 5.14 4.97 5.17 5.56 5.69 5.37 61
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
62 4.96 5.18 5.24 5.06 5.23 5.67 5.82 5.47 62
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
63 5.03 5.28 5.35 5.14 5.29 5.79 5.97 5.58 63
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
64 5.09 5.38 5.47 5.24 5.35 5.92 6.11 5.69 64
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
65 5.16 5.49 5.59 5.34 5.41 6.05 6.28 5.81 65
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
66 5.23 5.61 5.72 5.45 5.47 6.19 6.45 5.93 66
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
67 5.30 5.74 5.86 5.56 5.52 6.32 6.63 6.06 67
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
68 5.37 5.86 6.02 5.68 5.58 6.47 6.84 6.20 68
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
69 5.43 6.00 6.18 5.80 5.63 6.62 7.05 6.35 69
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
70 5.50 6.15 6.36 5.93 5.67 6.78 7.28 6.50 70
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
71 5.56 6.30 6.55 6.07 5.72 6.94 7.51 6.64 71
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
72 5.61 6.46 6.76 6.22 5.76 7.10 7.77 6.82 72
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
73 5.67 6.63 6.99 6.37 5.80 7.27 8.04 6.99 73
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
74 5.72 6.80 7.23 6.55 5.83 7.43 8.33 7.17 74
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
75 5.76 6.99 7.49 6.72 5.86 7.60 8.64 7.37 75
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
76 5.80 7.17 7.77 6.91 5.89 7.77 8.97 7.57 76
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
77 5.83 7.36 8.07 7.11 5.91 7.94 9.32 7.78 77
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
78 5.86 7.55 8.40 7.33 5.93 8.11 9.70 8.01 78
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
79 5.89 7.74 8.75 7.55 5.94 8.28 10.10 8.25 79
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
80 5.91 7.93 9.14 7.78 5.96 8.44 10.54 8.50 80
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
81 5.93 8.12 9.55 8.03 5.97 8.60 10.99 8.76 81
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
82 5.95 8.31 9.99 8.30 5.98 8.75 11.49 9.03 82
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
83 5.96 8.49 10.47 8.57 5.98 8.89 12.01 9.33 83
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
84 5.97 8.66 10.99 8.86 5.99 9.03 12.57 9.62 84
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
85 5.98 8.82 11.56 9.18 6.00 9.16 13.14 9.94 85
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
86 5.99 8.97 12.17 9.49 6.00 9.28 13.77 10.28 86
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
87 5.99 9.11 12.80 9.82 6.00 9.38 14.44 10.62 87
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
88 6.00 9.24 13.51 10.17 6.00 9.48 15.18 11.00 88
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
89 6.00 9.35 14.25 10.53 6.00 9.58 16.96 11.38 89
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
90 6.00 9.46 15.04 10.90 6.00 9.66 15.80 11.81 90
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
91 6.00 9.56 15.81 11.29 6.00 9.74 17.62 12.22 91
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
92 6.00 9.63 16.60 11.69 6.00 9.79 18.52 12.65 92
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
93 6.00 9.71 17.43 12.10 6.00 9.85 19.47 13.15 93
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
94 6.00 9.78 18.32 12.53 6.00 9.90 20.48 13.66 94
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
95 6.00 9.84 19.20 12.99 6.00 9.94 21.59 14.21 95
- ----------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
</TABLE>
THIS IS A MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY. THE
POLICY'S ACCUMULATION VALUE IN THE VARIABLE ACCOUNT IS BASED ON THE INVESTMENT
EXPERIENCE IN THAT ACCOUNT AND WILL INCREASE OR DECREASE DAILY. THE DOLLAR
AMOUNT IS NOT GUARANTEED. THE AMOUNT OF THE DEATH BENEFIT MAY BE FIXED OR
VARIABLE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT. IF NO
POLICY LOANS ARE TAKEN, WE GUARANTEE COVERAGE TO THE EARLIER OF THE FIFTH POLICY
ANNIVERSARY OR THE POLICY ANNIVERSARY NEXT FOLLOWING THE INSURED'S 75TH
BIRTHDAY. NO DIVIDENDS ARE PAYABLE.
June 1997
DESCRIPTION OF ISSUANCE,
TRANSFER, AND REDEMPTION PROCEDURES FOR CONTRACTS
PURSUANT TO RULE 6E-3(T)(B)(12)(III)
FOR MODIFIED SINGLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
COMPANION LIFE INSURANCE COMPANY
This document sets forth the current administrative procedures that will be
followed by Companion Life Insurance Company (the "Company", "we", "us", "our")
in connection with its issuance of individual modified single premium variable
life insurance policies (the "Policies"), the transfer of assets held
thereunder, and the redemption by Policyowners ("Owners") of their interests in
those Policies. Capitalized terms used herein have the same meaning as in the
prospectus for the Policy that is included in the current registration statement
on Form S-6 for the Policy as filed with the Securities and Exchange Commission
("Commission").
I. PROCEDURES RELATING TO PURCHASE AND ISSUANCE OF THE POLICIES AND ACCEPTANCE
OF PREMIUMS
A. OFFER OF THE POLICIES, APPLICATIONS, INITIAL PREMIUMS, UNDERWRITING
REQUIREMENTS, AND ISSUANCE OF THE POLICIES
1. OFFER OF THE POLICIES. The Policies will be offered and sold
for premiums pursuant to established premium schedules and
underwriting standards in accordance with state insurance laws.
Initial premium payments for the Policies and related insurance
charges will not be the same for all Owners whose Policies have
the same Specified Amount. Insurance is based on the principle of
pooling and distribution of mortality risks, which assumes that
each Owner pays a premium and related insurance charges
commensurate with the Insured's mortality risk as actuarially
determined utilizing factors such as age, sex, health and
occupation. A uniform premium and insurance charge for all
Insureds would discriminate unfairly in favor of those Insureds
representing greater risk. Although there will be no uniform
insurance charges for all Insureds, there will be a uniform
insurance rate for all Insureds of the same risk class. A
description of the Expense Charges under the Policy, which
includes a cost of insurance charge and Expense Charges. 2.
APPLICATION. To purchase a Policy, an individual must submit an
application and provide evidence of insurability of the Company.
The initial premium also must be paid before the Company will
issue the Policy. The Company will not issue a Policy if the
Insured is older than age 90. Before accepting an application,
the Company conducts underwriting to determine insurability. The
Company reserves the right to reject an application or premium
for any reason. If a Policy is not issued, the Company will
return any premium payment the Owner submitted. If a Policy is
issued, it will be effective on the date of issue.
3. PAYMENT OF INITIAL PREMIUM. The minimum initial premium for a
Policy is $20,000. The initial premium will be credited to the
Policy on the date the Policy is issued. Premiums will be
allocated to the Money Market portfolio until the Allocation
Date. The Policy Owner may purchase a Policy with the proceeds of
another life insurance policy, provided a new application is
completed. It may not be advantageous to replace existing
insurance with a Policy.
4. UNDERWRITING REQUIREMENTS. Under current underwriting rules,
which are subject to change, proposed insureds between the ages
of 45 - 80, with initial premiums of $100,000 or less, are
eligible for simplified underwriting without a medical
examination if their application responses meet simplified
underwriting standards. Full underwriting standards will apply to
all other proposed Insureds.
5. ISSUANCE OF THE POLICY AND DETERMINATION OF POLICY DATE. Once
the Company has received the initial premium and underwriting has
been approved, the Policy will be issued on the date the Company
has received the final requirement for issue. In the case of
simplified underwriting, the Policy will be issued or coverage
denied within 3 business days of receipt of premium. Since the
Policy Date will generally be the date the Company receives the
initial premium, coverage under a Policy may begin before it is
actually issued. In addition to determining when coverage begins,
the Policy Date determines Monthly Deduction Dates, Policy
years/months/anniversaries.
B. DETERMINATION OF OWNER OF THE POLICY. The Policy Owner possesses
the rights to benefits under the Policy during the lifetime of the
Insured; the Policy Owner may or may not be the Insured.
C. PAYMENT AND ACCEPTANCE OF ADDITIONAL PREMIUMS.
1. PROCEDURES FOR ACCEPTING ADDITIONAL PREMIUM PAYMENTS.
Additional payments may be made until the Insured attains age
90, subject to our underwriting requirements and the following
rules. Except with respect to additional payments required in a
grace period, an additional payment must be at least $5,000, and
only one additional payment may be made each Policy Year. A
payment received after issuance of the Policy while a loan is
outstanding generally is treated first as repayment of Policy
loan interest, second as repayment of a Policy loan, and last as
additional Premium, unless the Policy Owner designate otherwise
in writing when submitting the payment to us.
No additional Premium payments may be made on or after age 90 of
the Insured, except as may be required in a grace period. The tax
consequences associated with continuing a Policy beyond age 90 of
the Insured are unclear. A tax advisor should be consulted on
this issue.
Because any additional premium payment will result in an increase
in the Policy's Specified Amount, we will require satisfactory
evidence of insurability before accepting additional premiums
after the date of issue. However, we reserve the right to reject
an additional payment for any reason. If additional Premium is
accepted, we will credit it to the Policy's Accumulation Value
pursuant to the current accumulation instructions, unless the
Policy Owner provides other instructions as of the date
underwriting was completed.
2. GRACE PERIOD. LAPSE. AND REINSTATEMENT. If there is no
outstanding Policy loan, the Policy will lapse if, on a Monthly
Deduction Date, the Accumulation Value is insufficient to cover
the Monthly Deduction due on that date (subject to the Guaranteed
Death Benefit provision; and a grace period expires without a
sufficient premium payment. If there is an outstanding loan, the
Policy will lapse on any Monthly Deduction Date when the Cash
Surrender Value is insufficient to cover the Monthly Deduction
and any loan interest due, subject to the Grace Period provision.
The Company allows a 61 day grace period to make a premium
payment sufficient to cover the Monthly Deduction and any loan
interest due. The grace period begins the day the Company mails
notice to the Policy Owner of the insufficiency. The Policy will
terminate as of the first day of the grace period if necessary
additional premium is not paid. Payment received during the grace
period is first applied to repay Policy debt before the remaining
amount of the payment is applied as additional Premium to keep
the Policy in force.
Insurance coverage continues during the grace period, but the
Policy will be deemed to have no Accumulation Value for purposes
of Policy loans, surrender and withdrawals. If the Insured dies
during the grace period, the Death Benefit proceeds payable
during the grace period will equal the amount of the Death
Benefit in effect immediately prior to the commencement of the
grace period less any due and unpaid Monthly Deduction. A lapse
of the Policy may result in adverse tax consequences.
<PAGE>
D. ALLOCATION AND CREDITING OF INITIAL AND ADDITIONAL PREMIUMS
1. THE VARIABLE ACCOUNT. The variable benefits under the Policies
are supported by the Companion Life Insurance Company's Separate
Account B (the "Variable Account"). The Variable Account will
invest in shares of one or more managed investment companies
("Funds"), each of which will have multiple investment
portfolios.
2. ALLOCATIONS AMONG THE SUB-ACCOUNTS. The Variable Account
consists of sub-accounts (the "Sub-Accounts"), each of which
invests in a portfolio of a Fund. Premiums and Policy Value
are allocated to the Sub-Accounts in accordance with the
following procedures.
A. ALLOCATION OF INITIAL PREMIUM. Upon completion of
underwriting, the Company will either issue a Policy, or
deny coverage and return all premiums. If a Policy is
issued, the initial premium payment, plus an amount equal
to the interest that would have been earned during the
freelook period had the initial premium been invested in
the Money Market Sub-Account since the date of receipt of
the premium, will be allocated on the date the Policy is
issued according to the initial premium allocation
instructions specified on the application.
B. ALLOCATION OF ADDITIONAL PREMIUMS. The number of
Accumulation Units to be credited to a Policy with each
premium, other than the initial premium and additional
premiums requiring underwriting, will be determined on the
date the request or payment is received in good order by
the Company if such date is a Valuation Day; otherwise
such determination will be made on the next succeeding
date which is a Valuation Day.
C. CALCULATION OF ACCUMULATION UNIT VALUE. After the first
Policy year (Date of Issue in Indiana), loans may be taken
for amounts up to 90% of Cash Surrender Value (100% in
Florida) at a net interest rate charge of 1.5%. Preferred
loans are currently available (with a net interest rate
charge of 0%). The Policy may be surrendered in full at
any time for its Cash Surrender Value, or part of the
Accumulation Value may be withdrawn. After the first
Policy year, up to 15% of the Accumulation Value as of the
first withdrawal that Policy Year may be withdrawn each
Policy year without charge. A nine year declining
surrender charge of up to 9.5% of each premium paid will
apply to a full surrender and all other partial
withdrawals. Federal taxes and tax penalties may also
apply. Fixed and variable payment options are available.
<PAGE>
II. TRANSFERS AMONG ACCOUNTS
A. TRANSFER PRIVILEGE
Subject to the limitations and restrictions described below, transfers
out of a Subaccount of the Variable Account may be made any time after
the Right to Examine period and prior to death or the Policy Maturity
Date, by sending written notice, signed by the Policy Owner, to the
Company. The Policy Owner may make transfers, partial withdrawals,
and/or change the allocation of subsequent Premium payments, by
telephone if the Policy Owner previously authorized telephone
transactions in writing to us. We will not be liable for following
instructions communicated by telephone that we believe to be genuine.
However, we will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. If we fail to do so,
we may be liable for any losses due to unauthorized or fraudulent
instructions. All telephone requests will be recorded on voice recorder
equipment for the Policy Owner's protection. When making telephone
requests, the Policy Owner will be required to provide his/her social
security number and/or other information for identification purposes.
The Company reserves the right, at any time and without notice to any
party, to modify the transfer privileges under the Policy. Transfers are
effective on the date we receive the Policy Owner's request.
After the Right to Examine period, the Policy Owner can transfer
Accumulation Value from one Subaccount of the Variable Account to
another, or from the Variable Account to the Fixed Account or from the
Fixed Account to any Subaccount of the Variable Account within certain
limits. The minimum amount which may be transferred is the lesser of
$500 or the entire Subaccount Value. If the Subaccount Value remaining
after a transfer is less than $500, the Company will include that amount
as part of the transfer. Transfers out of a Subaccount currently may be
made as often as the Policy Owner wishes, subject to the minimum amount
specified above (the Company reserves the right to otherwise limit or
restrict transfers in the future or to eliminate the transfer
privilege). The Company reserves the right to restrict transfers from
the Variable Account to the Fixed Account of amounts previously
transferred from the Fixed Account for up to six months.
A transfer fee of $10 may be imposed for any transfer in excess of 12
per Policy Year. The transfer fee is deducted from the amount
transferred. The first 12 transfers each Policy year are free.
Transfers from the Fixed Account currently may be made once each Policy
Year. Transfers from the Fixed Account do not count toward the 12 free
transfer limit described above, and no transfer charge will be imposed
on transfers from the Fixed Account. Moreover, the maximum amount that
can be transferred out of the Fixed Account during any Policy Year is
10% of the Fixed Account Value on the date of the transfer.
The Policy is designed as a long-term investment to provide death
benefit protection, and may also be used as a part of the Policy Owner's
other financial planning. The Policy is not intended for active trading
or "market timing." Excessive transfers could harm other Policy Owners
by having a detrimental effect on portfolio management (which could
occur, for example, if it caused excessive commission expense or caused
the manager to keep higher cash reserves than otherwise). Therefore, the
Company reserves the right to limit the number of transfers from the
Subaccounts of the Variable Account and the Fixed Account if: (a) the
Company believes that excessive trading by the Policy Owner or a
specific transfer request would have a detrimental effect on
Accumulation Value or the share prices of the Portfolios; or (b) the
Company is informed by one or more of the Series Funds that the purchase
or redemption of shares is to be restricted because of excessive trading
or a transfer or group of transfers is deemed to have a detrimental
effect on share prices of one or more Portfolios or the Variable
Account.
Where permitted by law, the Company may accept the Policy Owners'
authorization of third party reallocation on the Policy Owner's behalf,
subject to the Company's rules. The Company may suspend or cancel such
acceptance at any time. For example, third party reallocation by "market
timers" could be suspended if they cause harm to other Policy Owners.
The Company will notify the Policy Owner of any such suspension or
cancellation. The Company may restrict the availability of Subaccounts
and the Fixed Account for Transfers during any period in which the
Policy Owner authorize such third party to act on the Policy Owner's
behalf. The Company will give the Policy Owner prior notification of any
such restrictions. However, the Company will not enforce such
restrictions if the Company is provided with satisfactory evidence that:
(a) such third party has been appointed by a court of competent
jurisdiction to act on the Policy Owner's behalf; or (b) such third
party has been appointed by the third-party to act on the third-party's
behalf for all the Policy Owner's financial affairs.
B. TRANSFER CHARGES
A transfer fee of $10 may be imposed for any transfer in excess of 12
per Policy Year. The transfer fee is deducted from the amount
transferred. The first 12 transfers each Policy Year are free.
C. DOLLAR COST AVERAGING PLAN
Dollar cost averaging is a process whose objective is to shield
investments from short term price fluctuations. Since the same dollar
amount is transferred to selected Subaccounts each month, over time more
purchases of Portfolio shares are made when the value of those shares is
low, and fewer shares are purchased when the value is high. As a result,
a lower than average cost of purchases may be achieved over the long
term. While this process allows the Policy Owner to take advantage of
investment price fluctuations, it does not assure a profit or protect
against a loss in declining markets.
The Company's dollar cost averaging program allows the Policy Owner to
automatically transfer, on a periodic basis, a predetermined amount or
percentage specified by the Policy Owner from any one Subaccount or the
Fixed Account to any Subaccount(s) of the Variable Account. The
automatic transfers can occur monthly, quarterly, semi-annually, or
annually, and the amount transferred each time must be at least $100 and
must be $50 per Subaccount. At the time the program begins, there must
be at least $5,000 of Accumulation Value in the applicable Subaccount or
the Fixed Account being transferred from. If transfers are made from the
Fixed Account, the maximum periodic transfer amount is 10% of that
account's value at the time of election, or a sufficient amount to
provide transfers for 10 months. There is no maximum transfer amount
requirement out of the Subaccounts of the Variable Account.
The Policy Owner can request participation in the Dollar Cost Averaging
program when purchasing the Policy or at a later date. Transfers will
begin on the first or 15th day (or, if not a Valuation Date, the next
following Valuation Date) of the month, as specified by the Policy
Owner, during which the request is processed. The Policy Owner can
specify that only a certain number of transfers will be made, in which
case the program will terminate when that number of transfers has been
made. Otherwise, the program will terminate when the amount remaining in
the applicable Subaccount or, if applicable, the Fixed Account, is less
than $500.
The Policy Owner can increase or decrease the amount or percentage of
the transfers or discontinue the program by notifying the Company of the
change. There is no charge for participation in this program.
D. ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program, the Policy Owner can instruct us to
allocate premium and Accumulation Value among the Subaccounts of the
Variable Account and the Fixed Account pursuant to allocation
instructions you specify or recommended by us and approved by the Policy
Owner. We will rebalance the Policy Owner's Policy's assets on a
quarterly, semi-annual or annual basis, as specified by the Policy
Owner, to ensure conformity with the Policy Owner's allocation
instructions. Such asset rebalancing is intended to transfer cash value
from Subaccounts that have increased in value to those that have
declined, or not increased as much, in value. Over time, this method of
investing may help the Policy Owner to "buy low and sell high," although
there can be no assurance this objective will be achieved.
Transfers of Accumulation Value made pursuant to this program will not
be counted in determining whether the Transfer Fee applies. At the time
the program begins, there must be at least $20,000 of Accumulation Value
under the Policy.
The Policy Owner can request participation in the Asset Allocation
Program when purchasing the Policy or at a later date. The Policy Owner
can change the Policy Owner's allocation percentage or discontinue the
program by notifying us of the change. There is no charge for
participation in this program.
III. "REDEMPTION" PROCEDURES: RIGHT TO EXAMINE. DEATH BENEFIT. GUARANTEED
DEATH BENEFIT. POLICY LOANS. SURRENDERS. PARTIAL WITHDRAWALS. SURRENDER
CHARGE. WAIVER OF SURRENDER CHARGE. REDEMPTION'S FOR CHARGES DEDUCTED
UNDER THE POLICY. PAYMENT OPTIONS. SUSPENSION OF VALUATION. PAYMENTS.
AND TRANSFERS. AND MATURITY DATE.
A. RIGHT TO EXAMINE
If the Policy Owner is not satisfied with the Policy, the Policy Owner
may return it to us or our agent within 10 days (or more where required
by applicable State insurance law) after the Policy Owner receives the
Policy or 45 days after the Policy Owner signed the application,
whichever is later. We will cancel the Policy as of the date any
insurance became effective and refund the premiums paid within seven
days after we receive the returned policy.
B. DEATH BENEFIT
The death benefit equals the greater of:
(a) the initial Specified Amount plus any later increase and
less any later decrease;
(b) the policies' Accumulation Value on the date of death
multiplied by the corridor percentage for the Insured's
attained age; or
(c) Proceeds paid would be reduced by any Policy loan balance
and unpaid loan interest.
C. GUARANTEED DEATH BENEFIT
If no Policy loans are taken, we guarantee coverage will remain in force
until the 15th policy anniversary (or the maximum lesser duration the
Policy Owner's State allows) or the policy anniversary next following
the Insured's 75th birthday, whichever is earlier.
D. POLICY LOANS
After the first Policy Year (from the Date of Issue in Indiana), the
Policy Owner may obtain a loan for up to 90% of the Cash Surrender Value
less loan interest to the end of the Policy Year, and less the Monthly
Deduction amount sufficient to continue this Policy in force for one
month. This Policy must be assigned to the Company as sole security for
the loan. The Company will transfer all loan amounts from the Fixed
Account and the Subaccounts to the Loan Account. The amounts will be
transferred on a pro rata basis.
Loan interest is payable at a rate of 5.7% in advance (6.0% effective
annual rate). Interest is due on each Policy Anniversary. If the
interest is not paid when due, the Company will transfer an amount equal
to the unpaid loan interest from the Fixed Account and the Subaccounts,
to the Loan Account on a pro rata basis. The Company will credit 4.5%
interest to any amounts in the Loan Account, except amounts equal to a
Preferred Loan as described below, for a net annual Loan interest rate
of 1.5%.
The death benefit will be reduced by the amount of any loan outstanding
on the date of the Insured's death. The Company may defer making a loan
for six months unless the loan is to pay premiums to the Company.
A Preferred Loan is available on any date when the sum of the Cash
Surrender Value plus any outstanding non-preferred loans exceeds the
total of all premiums paid since issue. The amount available for a
Preferred Loan is the amount of such excess. A Preferred Loan will be
credited with 6% interest, for a net annual Preferred Loan interest rate
of 0%.
All or part of a loan may be repaid at any time while the Policy is in
force. The amount of a loan repayment will be deducted from the Loan
Account and will be allocated among the Fixed Account and the
Subaccounts in the same percentages as premiums are currently allocated.
E. SURRENDERING THE POLICY FOR CASH SURRENDER VALUE
While the Insured is alive, the Policy Owner may terminate this Policy
for its Cash Surrender Value. If the Policy Owner requests a cash
surrender, the Policy must be returned to the Company to receive the
Cash Surrender Value
With regard to amounts allocated to the Fixed Account, the Cash
Surrender Value will be equal to or greater than the minimum Cash
Surrender Values required by the State in which this Policy was
delivered. The value is based on the Commissioners 1980 Standard
Mortality Table, the insured's age at last birthday, with interest at
4.5%. The maximum applicable Surrender Charge is 9.50%. Also, a 10%
federal tax penalty may apply. The Company may defer payment of a cash
surrender from the Fixed Account for up to six months.
F. PARTIAL WITHDRAWALS
After the first Policy Year, the Policy Owner may withdraw part of the
Accumulation Value. Withdrawals are made first from earnings and then
from Premiums paid, beginning with the earliest Premium payment. The
minimum partial withdrawal amount is $500. The maximum partial
withdrawal amount is an amount such that the remaining Accumulation
Value is not less than $20,000.
Each Policy year the Policy Owner may withdraw, without a surrender
charge, the greater of:
(a) 15% of the Accumulation Value as of the first withdrawal
that Policy year; or
(b) that portion of the Accumulation Value which is in excess
of total premiums paid.
Partial withdrawals in excess of this amount may be subject to a
Surrender Charge of up to 9.5%. The Surrender Charge is a percentage of
the premiums withdrawn. The applicable percentage varies according to
the length of time since the premium was paid. The percentages are shown
on the data pages.
The amount of cash withdrawal requested and any Surrender Charge will be
deducted from the Accumulation Value on the date we receive the Policy
Owner's written request. Partial withdrawals will result in cancellation
of Accumulation Units from each applicable Subaccount. In the absence of
instructions from the Policy Owner, amounts will be deducted from the
Subaccounts and the Fixed Account on a pro rata basis. No more than a
pro rata amount may be withdrawn from the Fixed Account for a partial
withdrawal. The Company reserves the right to defer withdrawals from the
Fixed Account for up to six months from the date the Company receives
the Policy Owner's written request.
The Specified Amount will be reduced in the same proportion as the
Accumulation Value is reduced as a result of any partial withdrawal.
G. SURRENDER CHARGE
If a Policy is totally surrendered or lapses or a partial withdrawal is
made, the Company may deduct a Surrender Charge from the amount
requested to be surrendered. The percentage varies according to the
length of time since each premium was paid. Any applicable Surrender
Charge will be deducted on a full surrender or a partial withdrawal. The
Surrender Charge period and the amount of the Surrender Charge are shown
in the following table:
YEARS SINCE
PREMIUM PAYMENT SURRENDER CHARGE
1 9.50%
2 9.50
3 9.50
4 9.00
5 7.50
6 6.00
7 4.50
8 3.00
9 1.50
10 & later 0
H. REDEMPTION CHARGES DEDUCTED UNDER THE POLICY
1. DEDUCTIONS FOR INITIAL AMOUNT. We deduct no charges from
Premium before allocation to the Variable Account, although the
Monthly Deduction includes deductions for cost of insurance
charges and for expense charges, and a Surrender Charge based on
Premium may apply to surrenders or partial withdrawals during the
Surrender Charge period.
2. MONTHLY DEDUCTION. We deduct a charge from the entire
Accumulation Value on each Monthly Deduction Date. This Monthly
Deduction equals the cost of insurance charge for the current
month, plus the expense charge (annualized charge is 1.53% for
the first ten Policy Years and 1.14% for Policy Years
thereafter).
Each charge is calculated as a percentage of Accumulation Value
(including amounts of Accumulation Value moved to the Loan
Account as collateral for Policy loans) in the following manner:
first, all charges, other than the cost of insurance charge, are
calculated, based on the Accumulation Value on the Monthly
Deduction Date (before monthly charges are deducted, but
reflecting charges deducted from Subaccount assets), and then
deducted. The cost of insurance charge is then calculated based
on the Accumulation Value for that date, as reduced by all other
charges deducted that day. The Monthly Deduction is deducted pro
rata from the Accumulation Value in the Subaccounts, the Fixed
Account, and the Loan Account.
3. CHARGES DEDUCTED ON SURRENDER OR PARTIAL WITHDRAWAL. If the
Policy is surrendered or lapses or a partial withdrawal is taken
during the Surrender Charge period (which is the first nine Years
after each premium payment), a Surrender Charge may be deducted.
This charge declines over the course of the Surrender Charge
period. Any Surrender Charge deduction is deducted pro rata from
the Accumulation Value in the Subaccounts and the Fixed Account.
4. COST OF INSURANCE CHARGE This charge is deducted from the
Policy's Accumulation Value on each Monthly Deduction Date, as
part of the Monthly Deduction.
The cost of insurance charge covers the cost of providing
insurance protection under the Policy. Currently, the amount of
this charge is based on the rate class of the Insured and Policy
accumulation value and duration. The Company assigns Insureds to
rate classes based on underwriting conducted when it receives a
Policy application. Currently, the Company assigns Insureds to
the following rate classes: preferred and standard. Once a Policy
is issued, an Insured's rate class does not change except if an
additional premium is submitted and the underwriting review
determines that the Insured qualifies for a better rate class. If
the Insured qualifies for a better rate class, the rate class for
the additional premium will be used for cost of insurance charges
under the entire Policy.
Currently, the cost of insurance charge for a Policy is
calculated as a percentage of the Accumulation Value on the
Monthly Deduction Date. The charge is based on the duration of
the Policy, and the Insured's rate class. The current monthly
rates for these classes are equivalent to the annual percentage
rates shown in the following table:
POLICY YEAR(S) ACCUMULATION VALUE ACCUMULATION
OF $45,000 OR VALUE
LESS. GREATER THAN
$45,000.
PREFERRED RATE CLASS
1-10 0.70% 0.60%
11 and later 0.60% 0.50%
STANDARD RATE CLASS
1-10 1.30% 1.20%
11 and later 0.94% 0.84%
The Company reserves the right to change the cost of insurance
charges upon appropriate regulatory approval.
For purposes of determining the current cost of insurance charge
on a Monthly Deduction Date, all other charges included in the
Monthly Deduction are calculated and deducted from the Policy's
Accumulation Value, and then the applicable cost of insurance
percentage is applied to the remaining Accumulation Value.
The cost of insurance charge deducted on a Monthly Deduction Date
is guaranteed not to exceed the amount calculated using the
guaranteed cost of insurance rates set forth in the Policy for
that date. The maximum cost of insurance charge for a Monthly
Deduction Date determined is equal to the "net amount at risk"
under the Policy, multiplied by the guaranteed cost of insurance
rate for that date. The net amount at risk is determined on the
last day of the Policy Month. The amount at risk at any point in
time is just the death benefit at that point in time, less the
Accumulation Value at that point in time after deducting the
Expense Charge and the cost of any Policy riders.
The guaranteed cost of insurance rate for a Monthly Deduction
Date under a Policy depends on the Insured's sex and age on the
first day of a Policy Year.
Current cost of insurance rates are more favorable for preferred
rate class than for standard rate class Insureds. Within a given
class, guaranteed cost of insurance rates are generally more
favorable for Insureds of lower ages than for Insureds of higher
ages, and are generally more favorable for female Insureds than
for male Insureds.
If a Policy loan is outstanding, and the Cash Surrender Value on
a Monthly Deduction Date is not enough to cover the entire
Monthly Deduction and any loan interest due for the Policy Month,
the Company will notify the Policy Owner that the Policy is going
to terminate unless a sufficient payment is made within the
61-day grace period.
5. TAX EXPENSE CHARGE. The Company will deduct this charge as
part of the Monthly Deduction from the Accumulation Value on each
Monthly Deduction Date for the first ten Policy Years. The annual
rate of this charge is 0.39% of the Accumulation Value and is to
reimburse the Company for State premium taxes, federal deferred
acquisition cost taxes, and related administrative expenses.
6. ADMINISTRATIVE EXPENSE CHARGE. This charge is deducted from
the Policy's Accumulation Value on each Monthly Deduction Date,
as part of the Monthly Deduction. This charge is currently set at
an annual rate of 0.24% of the Accumulation Value on each Monthly
Deduction Date. This charge is for the cost of administering the
Policies (such as the cost of processing Policy transactions,
issuing Policy Owner statements and reports, and record keeping),
as well as legal, actuarial, systems, mailing and other overhead
costs connected with our variable life insurance operations.
7. ANNUAL MAINTENANCE FEE. If the aggregate premiums paid on a
Policy are less than $50,000, the Company will deduct from the
Account Value an Annual Maintenance Fee of $35 on each Policy
Anniversary. This fee will help reimburse the Company for
administrative and maintenance costs of the Policies. The sum of
the monthly administrative charges and the annual maintenance fee
is designed not to exceed the anticipated cost the Company incurs
in providing administrative services under the Policies.
8. DUE AND UNPAID PREMIUM TAX CHARGE. During the first nine
Policy Years, a charge for due and unpaid premium tax will be
imposed on full or partial withdrawals in excess of the Free
Withdrawal Amount. This charge is shown below, as a percentage of
the Account Value withdrawn:
--------------------- --------------------------
YEAR PERCENTAGE OF ACCOUNT
VALUE WITHDRAWN
--------------------- --------------------------
1 2.25%
--------------------- --------------------------
2 2.00%
--------------------- --------------------------
3 1.75%
--------------------- --------------------------
4 1.50%
--------------------- --------------------------
5 1.25%
--------------------- --------------------------
6 1.00%
--------------------- --------------------------
7 0.75%
--------------------- --------------------------
8 0.50%
--------------------- --------------------------
9 0.25%
--------------------- --------------------------
10 0.00%
--------------------- --------------------------
After the ninth Policy Year, no due and unpaid premium tax charge
will be imposed.
I. PAYMENT OPTIONS
OPTION 1 -- PROCEEDS HELD ON DEPOSIT AT INTEREST. While the
Proceeds are held by the Company, the company will annually:
(a) pay interest to the Payee; or
(b) add interest to the Proceeds.
OPTION 2 -- INCOME OF A SPECIFIED AMOUNT. The Company will pay
the Proceeds in monthly installments of a specified amount until
the Proceeds, with interest, have been fully paid.
OPTION 3 -- INCOME FOR A SPECIFIED PERIOD. The Company will pay
the Proceeds in installments for the number of years the Policy
Owner chooses. The monthly incomes for each $1,000 of Proceeds,
shown in the table set forth in the Policy, include interest. The
Company will provide the income amounts for payments other than
monthly upon request.
OPTION 4 -- LIFETIME INCOME. The Company will pay the Proceeds
as a monthly income for as long as the Payee lives. The following
guarantees are available:
GUARANTEED PERIOD - The monthly income will be paid for a
certain number of years and as long thereafter as the
Payee lives; or
GUARANTEED AMOUNT (INSTALLMENT REFUND) - The monthly
income will be paid until the sum of all payments equals
the Proceeds placed under this option and as long
thereafter as the Payee lives.
If a fixed Payment Option is chosen, the monthly income will be
the amount computed using either the Lifetime Monthly Income
Table set forth in the Policy (which is based on the 1983a
Mortality Table and interest at 3% or, if more favorable to the
Payee, our then current lifetime monthly income rates for
payment of Proceeds. If a variable Payout Option is chosen, all
variable payments, other than the first variable payment, will
vary in amount according to the investment performance of the
applicable Subaccounts.
NOTE CAREFULLY. If no guarantee is elected, then IT WOULD BE
POSSIBLE FOR ONLY ONE PAYMENT TO BE MADE if the Payee(s) were to
die before the due date of the second payment; only two Payments
if the Payee(s) were to die before the due date of the third
payment; and so forth. When the last Payee dies, we will pay to
the estate of that Payee any remaining guaranteed Payments under
a fixed payout option.
OPTION 5 -- LUMP SUM. The Proceeds will be paid in one sum.
OPTION 6 -- ALTERNATIVE SCHEDULE. Upon request and if available,
the Company will provide payments for other options, including
joint and survivor periods. Certain options may not be available
in some States.
If variable payments are being made under Option 2 or 6 and do
not involve life contingencies, then the Policy Owner may
surrender the Policy and receive the commuted value of any unpaid
payments.
Additional information about any Payout Option may be obtained by
contacting us.
J. SUSPENSION OF VALUATION, PAYMENTS, AND TRANSFERS
The Company will suspend all procedures requiring valuation of the
Variable Account (including transfers, surrenders and loans) on any day
the New York Stock Exchange is closed or trading is restricted due to an
existing emergency as defined by the Securities and Exchange Commission,
or on any day the Commission has ordered that the right of surrender of
the Policies be suspended for the protection of Policy Owners, until
such condition has ended.
K. MATURITY DATE.
The Policy's maturity date is the Policy Anniversary next following the
Insured's 100th birthday. On the maturity date we will pay the Policy
Owner the Policy's Accumulation Value, less any loan and unpaid loan
interest, if (a) the Insured is then living; and (b) this Policy is in
force. The Policy may terminate prior to the maturity date if the
premiums paid are insufficient to continue this Policy in force. If the
Policy does continue in force to the maturity date, it is possible there
will be little or no Cash Surrender Value at that time. Policy values
will be affected by the investment experience of the Variable Account
and to the extent cost of insurance charges are more favorable than
guaranteed charges.
Exhibit 2: Opinion and Consent of Counsel
COMPANION LIFE INSURANCE COMPANY
Mutual of Omaha Plaza
Omaha, Nebraska 68175
June 20, 1997
Companion Life Insurance Company
Mutual of Omaha Plaza
Omaha, NE 68175-1008
Re: Registration Statement
To Whom It May Concern:
With reference to the Registration Statement on Form S-6 as amended, filed by
Companion Life Insurance Company and Companion Separate Account B with the
Securities and Exchange Commission covering modified single premium variable
life insurance contracts, I have examined such documents and such laws I
considered necessary and appropriate and on the basis of such examination, it is
my opinion that:
1. Companion Life Insurance Company is duly organized and validly existing
under the laws of the State of New York and has been duly authorized to
issue modified single premium variable life insurance contracts by the
Insurance Department of the State of New York.
2. United of Omaha Separate Account B is a duly authorized and existing
separate account established pursuant to the provision of New York law.
3. The modified single premium variable life insurance contracts, when
issued as contemplated by said Form S-6 Registration Statement, will
constitute legal, validly issued and binding obligations of Companion
Life Insurance Company.
I hereby consent to the filing of this opinion as an Exhibit to said Form S-6
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Registration Statement.
Sincerely,
/s/ Kenneth W. Reitz
Kenneth W. Reitz
Assistant Secretary
Companion Life Insurance Company
Exhibit 6: Opinion and Consent of Actuary
June 20, 1997
TO: COMPANION LIFE INSURANCE COMPANY
FROM: Russell J. Wiltgen, FSA, MAAA
Vice President and Actuary
RE: ACTUARIAL OPINION
This opinion is furnished in connection with the registration by Companion Life
Insurance Company of a Modified Single Premium Variable Universal Life Insurance
policy ("Policy") under the Securities Act of 1933. The prospectus included in
Pre-Effective Amendment No. 1 to Registration Statement No. 333-20443 on Form
S-6 describes the Policy. I have reviewed the Policy form and I have
participated in the preparation and review of the Registration Statement
Exhibits thereto.
In my opinion, the illustration of death benefit, surrender value, and premium
shown in the Illustration section of the Policy prospectus included in the
amended Registration Statement, based on the assumptions stated in the
illustrations, are consistent with the provisions of the Policy. Such
assumptions, including the current cost of insurance rates and other charges,
are reasonable. The ages selected in the illustrations are representative of the
manner in which the Policy operates. The Policy has not been designed so as to
make the relationship between premiums and benefits, as shown in the
illustrations, appear to be more favorable to prospective purchasers of Policies
at the ages and in the rate classes illustrated than to prospective purchasers
of Policies, for males or females, at other ages.
I hereby consent to the filing of this opinion as an exhibit to the amended
Registration Statement and to the use of my name under the heading Experts in
the prospectus as to actuarial matters.
/s/ Russell J. Wiltgen, FSA, MAAA
RUSSELL J. WILTGEN, FSA, MAAA
Vice President and Actuary
Exhibit 7: Independent Auditor's Consent
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-20443 of Companion Separate Account B of our report dated
February 14, 1997, on the financial statements of Companion Life Insurance
Company appearing in Registration, and to the related reference to us under the
heading "Independent Auditors."
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
June 20, 1997
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-6 (File No.
333-20443) of our report, which includes an explanatory paragraph regarding the
change in opinion as required by Financial Accounting Standards Board
Interpretation 40, APPLICABILITY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO
MUTUAL LIFE INSURANCE AND OTHER ENTERPRISES, as amended (FIN 40), dated February
23, 1996 [except for the change in our opinion as required by FIN 40, for which
the date is April 9, 1997], on our audits of the financial statements of
Companion Life Insurance Company (Companion) as of and for the two years in the
period ended December 31, 1995.
We also consent to the reference to our firm as independent auditors for
Companion.
/s/ Coopers & Lybrand L.L.P.
New York, New York
June 20, 1997
