<PAGE>
As filed with the Securities and Exchange Commission on September 28, 2000
1933 Act Registration No. 333-41172
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
==================================
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
COMPANION LIFE SEPARATE ACCOUNT B
---------------------------------
(Exact Name of Trust)
COMPANION LIFE INSURANCE COMPANY
--------------------------------
(Name of Depositor)
401 Theodore Fremd Avenue
Rye, New York 10580-1493
(Address of Depositor's Principal Executive Offices)
Name and Address of
Agent for Service:
Michael E. Huss, Esquire
Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
Internet: [email protected]
Flexible Premium Variable Life Insurance Policy
(Title of securities being registered)
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant to paragraph (b).
[_] On __________, 2000 pursuant to paragraph (b).
[_] 60 days after filing pursuant to paragraph (a)(1).
[_] On [date] pursuant to paragraph (a)(i) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
[_] Check box if it is proposed that this filing will become
effective on (date) at (time) pursuant to Rule 487.
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
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<CAPTION>
Form N-8B-2
Item No. Caption in Prospectus
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<S> <C>
1 Cover Page
2 Cover Page
3 Inapplicable
4 Policy Distributions
5 About Us
6 Variable Investment Options
9 Inapplicable
10(a) Policy Application and Issuance
10(b) Policy Distributions
10(c), (d), (e) Policy Distributions; Lapse and Grace Period; Reinstatement
10(f), (g), (h) Voting Rights; Tax Matters
10(i) Important Policy Provisions
11 Variable Investment Options
12 Variable Investment Options; Policy Distributions
13 Expenses; Tax Matters; Policy Distributions; Appendix A
14 Policy Application and Issuance
15 Policy Application and Issuance
16 Variable Investment Options
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 Variable Investment Options
19 Reports to You; Voting Rights; Policy Distributions
20 Captions referenced under Items 6 and 10(g) above
21 Policy Loans
22 Inapplicable
23 Policy Distributions
24 Important Policy Provisions
25 About Us
26 Policy Distributions
27 About Us
28 Our Management
29 About Us
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Inapplicable
35 About Us
36 Inapplicable
37 Inapplicable
38 Policy Distributions
39 Policy Distributions
40 Inapplicable
41(a) Policy Distributions
42 Inapplicable
43 Inapplicable
44(a) Variable Investment Options; Policy Application and Issuance
44(b) Expenses; Policy Distributions
44(c) Expenses
45 Inapplicable
46 Variable Investment Options; Captions referenced under Items 10(c), (d), and
(e)above
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2
Item No. Caption in Prospectus
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<S> <C>
47 Inapplicable
48 About Us
49 Inapplicable
50 Variable Investment Options
51 Cover Page, Introduction and Summary, Important Policy Provisions, Tax
Matters, Policy Distributions
52 Tax Matters
53 Tax Matters
54 Inapplicable
55 Inapplicable
59 Financial Statements
</TABLE>
<PAGE>
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[LOGO OF COMPANION OF NEW YORK] PROSPECTUS:
ULTRA VARIABLE LIFE
Individual Flexible Premium
Variable Universal Life Insurance
================================================================================
This Prospectus describes ULTRA VARIABLE LIFE, a variable universal life
insurance policy offered by Companion Life Insurance Company. The minimum
specified amount of insurance coverage is $100,000.
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<S> <C>
The investment portfolios offered through the The Policy includes 30 variable options (where you have the
Policy may have names that are nearly the same investment risk) with investment portfolios from:
or similar to the names of retail mutual funds.
However, these investment portfolios are not . The Alger American Fund
the same as those retail mutual funds, even . Deutsche Asset Management VIT Funds
though they have similar names and may have . Federated's Insurance Series
similar characteristics and the same managers. . Fidelity's Variable Insurance Products Funds and Variable
The investment performance of these investment Insurance Products Fund II
portfolios is not necessarily related to the . MFS Variable Insurance Trust
performance of the retail mutual funds. The . Morgan Stanley Dean Witter Universal Funds
investment portfolios are described in separate . Pioneer Variable Contracts Trust
prospectuses that accompany this Prospectus. . Scudder Variable Life Investment Fund
. T. Rowe Price Equity Series, Fixed Income Series and
International Series
and two fixed rate options (where we have the investment risk).
</TABLE>
The variable options are not direct investments in mutual fund shares, but are
offered through Subaccounts of Companion Life Separate Account B. The value of
your Policy will go up or down based on the investment performance of the
variable options that you choose. There is no minimum guaranteed Cash Surrender
Value for any amounts you allocate to the variable options. The amount of the
death benefit can also vary as a result of investment performance.
<TABLE>
<S> <C>
Please Read This Prospectus Carefully. It provides The Securities and Exchange Commission ("SEC") maintains an internet
-------------------------------------
information you should consider before investing web site (http://www.sec.gov) that contains more information about us
in a Policy. Keep this Prospectus and the and the Policy. You may also review and copy our SEC registration of
prospectuses for the investment portfolios for the Policy at the SEC's Public Reference Room in Washington, D.C.
future reference. (call the SEC at 1-800-SEC-0330 for details and public hours).
</TABLE>
The SEC does not pass upon the accuracy or adequacy of this Prospectus, and has
not approved or disapproved the Policy. Any representation to the contrary is a
criminal offense.
Remember that the Policy and the investment portfolios:
. are subject to risk, including possible loss of principal
---
. are not bank deposits
---
. are not government insured
---
. are not endorsed by any bank or government agency
---
. may not achieve their goals
---
COMPANION LIFE INSURANCE COMPANY, Variable Product Services, P O. Box 3664,
Omaha, Nebraska
68103-0664 1-800-494-0067
<PAGE>
___________________________________________________________
CONTENTS
<TABLE>
<CAPTION>
Page(s)
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DEFINITIONS 3
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INTRODUCTION AND SUMMARY 4-8
Comparison to Other Policies and Investments
How the Policy Operates
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ABOUT US 9
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INVESTMENT OPTIONS 9-17
Variable Investment Options
Fixed Rate Options
Transfers
Dollar Cost Averaging
STEP Program
Asset Allocation Program
Rebalancing Program
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IMPORTANT POLICY PROVISIONS 18-23
Policy Application and
Issuance Telephone Transactions
Accumulation Value Reinstatement
Lapse and Grace Period Maturity Date
Continuation of Insurance Delay of Payments
Paid-Up Life Insurance Minor Owner or
Misstatement of Age or Sex Beneficiary
Suicide
Incontestability
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EXPENSES 24-25
Deductions from Premium Surrender Charge
Monthly Deduction Series Fund Charges
Transfer Charge
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POLICY DISTRIBUTIONS 26-30
Policy Loans Death Benefit
Surrender Payment of Proceeds
Partial Withdrawals
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FEDERAL TAX MATTERS 31-33
Life Insurance Qualification Other Policy Owner Tax Matters
Tax Treatment of Loans and Other
Distributions
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MISCELLANEOUS 34-35
Our Management Legal Proceedings
Distribution of the Policies Independent Auditors
Voting Rights Reports to You
Distribution of Materials Do You Have Questions?
State Regulation
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ILLUSTRATIONS 36-48
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FINANCIAL STATEMENTS 49-76
</TABLE>
2
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___________________________________________________________
DEFINITIONS
Accumulation Value is the dollar value of all amounts accumulated under the
Policy (in both the variable investment options and the fixed investment
options).
Allocation Date is the first Business Day following the completion of your
"right to examine period".
Beneficiary is the person(s) or other legal entity who receives the death
benefits of the Policy, if any, upon the insured's death.
Business Day is each day that the New York Stock Exchange is open for trading.
Cash Surrender Value is the Accumulation Value, less any Policy loans, unpaid
loan interest, and any applicable surrender charge.
Loan Account is an account we maintain for your Policy if you have a Policy loan
outstanding. The Loan Account is credited with interest and is not affected by
the experience of the Variable Account. The Loan Account is part of our general
account.
Monthly Deduction is a monthly charge which includes a mortality and expense
risk charge, an administrative charge, a charge for the cost of any riders in
effect for that month and a cost of insurance charge.
Net Amount at Risk means the death benefit less the Accumulation Value on a
Monthly Deduction date after deducting the rider charges, if any, the risk
charge for the current month, and the administrative charge. If the Policy's
death benefit option is option 2, the Net Amount at Risk is the specified amount
of insurance coverage.
No Lapse Period is a period of time during which the Policy will not lapse as
long as specified premiums are paid and no withdrawals are taken or Policy loans
are outstanding.
Owner is you --- the person(s) who may exercise all rights and privileges under
the Policy.
Policy is the Ultra Variable Life Policy, a flexible premium variable universal
life policy offered by us through this Prospectus.
Policy Year/Month/Anniversary are measured from respective anniversary dates of
the date of issue of the Policy.
Series Funds are diversified, open-end investment management companies in which
the Variable Account invests.
Subaccount is a segregated account within the Variable Account investing in a
specified investment portfolio of one of the Series Funds.
Us, We, Our, Companion is Companion Life Insurance Company.
Valuation Period is the period commencing at the close of business of the New
York Stock Exchange on each Business Day and ending at the close of business on
the next succeeding Business Day.
Variable Account is Companion Separate Account B, a separate account maintained
by us.
Written Notice is written notice, signed by you, that gives us the information
we require and is received at Companion, Variable Product Services, P.O. Box
3664, Omaha, Nebraska 68103-0430.
___________________________________________________________
This Prospectus may only be used to offer the Policy where the Policy may
lawfully be sold. No one is authorized to give information or make
representations about the Policy that isn't in the Prospectus; if anyone does
so, you should not rely upon it as being accurate or adequate.
This Prospectus generally describes only the variable investment options,
except when the fixed rate options are specifically mentioned.
3
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___________________________________________________________
INTRODUCTION AND SUMMARY
This Introduction and Summary briefly notes some of the important things about
the Policy, but it is not a complete description of the Policy. The rest of
this Prospectus contains more complete information, and you should read the
entire Prospectus carefully.
The ULTRA VARIABLE LIFE Policy described in this Prospectus is a variable
universal life insurance policy issued by Companion Life Insurance Company. The
Policy pays a death benefit upon the insured's death, and a Cash Surrender Value
is available if you surrender the Policy. The insured person cannot be over 90
when we issue the Policy. You have flexibility under the Policy; within certain
limits, you can vary the amount and timing of premium payments, change the death
benefit, and transfer amounts among the investment options. The minimum initial
premium is the amount necessary to purchase $100,000 of insurance coverage.
The Policy is a variable universal life Policy, which means that you can
allocate your premium to up to 30 different variable investment options, where
you can gain or lose money on your investment. You may also allocate your
premiums to up to two fixed rate options, where we guarantee you will earn a
fixed rate of interest. The death benefit can also vary up or down as a result
of that investment experience. However, the death benefit will not be less than
the current specified amount of insurance coverage less any outstanding Policy
loans and unpaid loan interest.
There is no guaranteed minimum Accumulation Value. Regardless of whether you
pay the planned premiums, the Policy could lapse if the Accumulation Value is
not sufficient to pay the Monthly Deduction. However, the Policy will not lapse
during the No-Lapse Period, if you pay the required premium.
The variable investment options are not direct investments in mutual funds,
but are Subaccounts of the Variable Account. Each Subaccount in turn invests in
a particular investment portfolio. You may transfer your Accumulation Value
among the Subaccounts and between the Subaccounts and the fixed rate options,
subject to certain restrictions (in particular, restrictions on transfers out of
the fixed rate options).
You can surrender the Policy completely, make a partial cash withdrawal, and
take out a Policy loan, subject to certain restrictions. However, surrenders,
withdrawals and loans may be taxable and subject to a penalty tax.
Buying the Policy might not be a good way of replacing existing life
insurance, especially if you already own a flexible premium variable life
insurance policy.
[_] COMPARISON TO OTHER POLICIES AND INVESTMENTS
The Policy offered by this Prospectus is designed to provide life insurance
coverage for the insured. It is not offered primarily as an investment.
Compared to other life insurance policies. 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 loan privileges and surrender values.
The Policy gives you the flexibility to vary the amount and timing of premium
payments and, within limits, to change the death benefit payable under the
Policy. The Policy is different from fixed-benefit life insurance in that the
death benefit may vary as a result of the investment experience of the variable
investment options that you select. The Accumulation Value will always vary in
accordance with that investment experience.
Compared to mutual funds. The Policy is designed to provide life insurance
------------------------
protection. Although the underlying investment portfolios operate like mutual
funds and have the same investment risks, in many ways the Policy differs from
mutual fund investments. The main differences are:
________________________________________________________________________________
A significant advantage of the Policy is that it provides the ability to
accumulate capital on a tax-deferred basis. The purchase of a Policy to fund a
tax-qualified retirement account does not provide any additional tax deferred
treatment beyond the treatment provided by the tax-qualified retirement plan
itself. However, the Policy does provide benefits such as lifetime income
payments, family protection through death benefits, guaranteed fees and asset
allocation models.
________________________________________________________________________________
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<S> <C>
. The Policy provides a death benefit based on the life of . We, not you, own the shares of the underlying
the insured. investment portfolios. You have interests in our
. The Policy can lapse with no value, if your Subaccounts that invest in the investment portfolios
Accumulation Value is not enough to pay a Monthly that you select.
Deduction unless the Policy is in a No-Lapse Period. . Dividends and capital gains distributed by the
. Insurance-related charges not associated with mutual investment portfolios are automatically reinvested.
fund investments are deducted from the values of the . Premiums are held in the Federated Prime Money Fund
Policy. II portfolio until the end of the "right to examine
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
period" required by New York law plus five Business . The Policy might be a "modified endowment contract."
Days. If it is, then (a) there will be a 10% penalty tax on
. Federal income tax liability on any earnings is deferred withdrawals before age 59 1/2; (b) withdrawals would be
until you receive a distribution from the Policy. deemed to come from earnings first (taxable), then
. Transfers from one underlying investment portfolio to from your investment; and (c) loans will be treated as
another are accomplished without tax liability. withdrawals.
. Premature withdrawals may be subject to a 10% federal . New York insurance law grants you 10 days to review
tax penalty. Policy earnings that would be treated as your policy and cancel it for a return of premium paid.
capital gains in a mutual fund are treated as ordinary The terms of this "right to examine" period are stated
income, although (a) such earnings are exempt from on the cover of your Policy.
taxation if received as a death benefit, and (b) taxation is
deferred until such earnings are distributed.
</TABLE>
[_] HOW THE POLICY OPERATES
The following chart shows how the Policy operates and includes a summary of
expenses. For more information, refer to specific sections of this Prospectus.
________________________________________________________
POLICY FLOW CHART
________________________________________________________
PREMIUM
. The minimum initial premium required is based
on the initial specified amount of insurance
coverage (minimum amount of $100,000).
. Additional premium payments may be required
pursuant to a planned premium schedule.
Payments in addition to planned premiums may
be made, within limits.
. Additional premiums may be required to
prevent the Policy from lapsing. Payment of
the planned premiums may not be enough to
keep the Policy from lapsing, except in some
circumstances during the No-Lapse Period.
________________________________________________________
________________________________________________________
DEDUCTIONS BEFORE ALLOCATING PREMIUM
Premium Charges per premium payment:
. 3.75% of each premium for state and federal
tax expenses (which may be more or less than
the actual amount of federal and state tax
expense that we are required to pay).
. $2 from each premium for premium processing
expenses.
________________________________________________________
________________________________________________________
INVESTMENT OF PREMIUM
. You direct the allocation of all net premiums
among the 30 Subaccounts of the Variable Account,
the fixed account and the systematic transfer
account. Each Subaccount invests in a
corresponding investment portfolio of one of the
Series Funds.
________________________________________________________
5
<PAGE>
________________________________________________________________________________
CHARGES DEDUCTED FROM ASSETS
. We take a Monthly Deduction out of your Accumulation Value (the annual rates
set forth below are calculated as a percentage of Accumulation Value)
composed of:
- 0.70% for mortality and expense risk charge during Policy Years 1 - 10;
0.25% after Policy Year 10. The mortality and risk charge after Policy
Year 10 will never exceed the guaranteed maximum charge of 0.55%.
- $7 administrative charge.
- A cost of insurance charge (based on the Net Amount at Risk).
- Rider charges (if any).
. $10 fee for transfers among the Subaccounts and the fixed account (first 12
transfers per Policy Year are free).
. Investment advisory fees and operating expenses are deducted from the assets
of each investment portfolio as
described below.
________________________________________________________________________________
___________________________________________________________________________
ACCUMULATION VALUE
Your Accumulation Value is equal to your net premiums adjusted up or
down each Business Day to reflect your Subaccounts' investment
experience, earnings on amounts you have invested in the fixed account
and the systematic transfer accounts, charges deducted, and other
Policy transactions (such as loans and partial withdrawals).
. Accumulation Value may vary daily. There is no minimum guaranteed
Accumulation Value for the Subaccounts. The Policy may lapse, even if
there is no Policy loan.
. Accumulation Value can be transferred among the Subaccounts and the
fixed account. Policy loans reduce the amount available for
allocations and transfers.
. Dollar cost averaging and asset allocation and rebalancing programs
are available.
. Accumulation Value is the starting point for calculating certain
values under a Policy, such as the Cash Surrender Value and the death
benefit.
___________________________________________________________________________
<TABLE>
<CAPTION>
____________________________________________________________________________________________________________________________________
ACCUMULATION VALUE BENEFITS DEATH BENEFIT
<S> <C>
. After the first Policy Year you can take loans for amounts up to . Received income tax free to Beneficiary.
100% of Cash Surrender Value (less loan interest to the end of the . Available as lump sum or under a variety of
Policy Year and a sufficient Monthly Deduction to keep the Policy in payout options.
force for at least one month) at a net annual interest rate charge . Two death benefit options are available:
of 2%. (1) greater of (a) current specified amount; or
. Preferred loans are available beginning in the 10/th/ Policy Year (b) Accumulation Value on the date of death plus
and later with a net interest rate charge of 0%. All loans become a corridor amount; or
preferred loans beginning in the 10/th/ Policy Year. (2) Accumulation Value plus the greater of (a)
. You can surrender the Policy in full at any time for its Cash the current specified amount, or (b) a corridor
Surrender Value, or withdraw part of the Accumulation Value (after amount.
the first Policy Year). A surrender charge based upon issue age, . Flexibility to change death benefit option and
sex, risk class, and the amount of time you have had your Policy, specified amount of insurance coverage.
may apply to any surrender or reduction in the specified amount of . Rider benefits are available.
insurance coverage for the first 12 Policy Years. The highest
aggregate surrender charge is $53 for each $1,000 of specified Death benefit proceeds paid are reduced by any
amount of insurance coverage. Taxes and tax penalties may also Policy loan balance.
apply to withdrawals.
. If the Policy is a modified endowment contract, then Policy loans
will be treated as withdrawals for tax purposes.
. Fixed and variable payout options are available.
</TABLE>
________________________________________________________________________________
[_] SERIES FUND CHARGES
Each Series Fund investment portfolio is responsible for its own expenses. The
net assets of each portfolio reflects deductions for investment advisory fees
and other expenses. These charges are disclosed in each Series Fund's prospectus
which accompanies this Prospectus. Here is a table of portfolio annual expenses:
6
<PAGE>
<TABLE>
<CAPTION>
Series Fund Annual Expenses/1/ Total Portfolio
------------------------------ Management Other Expenses Annual Expenses
(as a percentage of average net assets) Fees (after expense (after fee waiver
(after fee reimbursement)/(a)/ and expense
Portfolio: waiver)/(a)/ reimbursement)/(a)/
----------
=========================================================================================================
<S> <C> <C> <C>
Alger American Growth 0.75% 0.04% 0.79%
Alger American Small Capitalization 0.85% 0.05% 0.90%
Deutsche VIT EAFE Equity Index Fund (a) 0.26% 0.39% 0.65%
Deutsche VIT Small Cap Index Fund (a) 0.13% 0.32% 0.45%
Federated Prime Money Fund II (a) 0.50% 0.23% 0.73%
Federated Fund for U.S. Government Securities II (a) 0.60% 0.18% 0.78%
Fidelity VIP II Asset Manager (a) 0.58% 0.12% 0.70%
Fidelity VIP II Contrafund (a) 0.58% 0.07% 0.65%
Fidelity VIP Equity Income (a) 0.48% 0.08% 0.56%
Fidelity VIP II Index 500 (a) 0.24% 0.04% 0.28%
MFS Capital Opportunities Series (a) 0.75% 0.16% 0.91%
MFS Emerging Growth Series 0.75% 0.09% 0.84%
MFS Global Governments Series (a) 0.75% 0.16% 0.91%
MFS High Income Series (a) 0.75% 0.16% 0.91%
MFS Research Series 0.75% 0.11% 0.86%
MSDW Emerging Markets Equity (a) 0.42% 1.37% 1.79%
MSDW Fixed Income (a) 0.14% 0.56% 0.70%
Pioneer Equity-Income 0.64% 0.06% 0.70%
Pioneer Growth Shares 0.65% 0.11% 0.76%
Pioneer Fund 0.63% 0.07% 0.70%
Pioneer Midcap Value Fund 0.65% 0.11% 0.76%
Pioneer Real Estate Growth (a) 1.00% 0.14% 1.14%
Scudder VLIF Global Discovery (b), (d) 0.98% 0.90% 1.88%
Scudder VLIF Growth and Income (b) 0.48% 0.32% 0.80%
Scudder VLIF International 0.85% 0.18% 1.03%
T. Rowe Price Equity Income (c) 0.00% 0.85% 0.85%
T. Rowe Price International Stock (c) 0.00% 1.05% 1.05%
T. Rowe Price Limited Term Bond (c) 0.00% 0.70% 0.70%
T. Rowe Price New America Growth (c) 0.00% 0.85% 0.85%
T. Rowe Price Personal Strategy Balanced (c) 0.00% 0.90% 0.90%
</TABLE>
________________________________________________________________________________
/(a)/ Without fee waiver or expense reimbursement limits, the following funds
would have had the charges set forth below:
<TABLE>
<CAPTION>
Total Portfolio
Portfolio Management Fees Other Expenses Annual Expenses
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deutsche VIT EAFE Equity Index Fund 0.45% 0.69% 1.l5%
Deutsche VIT Small Cap Index Fund 0.35% 0.83% 1.18%
Federated Prime Money Fund II 0.50% 0.48% 0.98%
Federated Fund for U.S. Government Securities II 0.60% 0.43% 1.03%
Fidelity VIP II Asset Manager 0.58% 0.13% 0.71%
Fidelity VIP II Contrafund 0.58% 0.09% 0.67%
Fidelity VIP Equity Income 0.48% 0.09% 0.57%
Fidelity VIP II Index 500 0.24% 0.10% 0.34%
MFS Capital Opportunities 0.75% 0.27% 1.02%
MFS Global Governments 0.75% 0.30% 1.05%
MFS High Income 0.75% 0.22% 0.97%
MSDW Emerging Markets Equity 1.25% 1.37% 2.62%
MSDW Fixed Income 0.40% 0.56% 0.96%
Pioneer Real Estate Growth 1.00% 0.30% 1.30%
-----------------------------------------------------------------------------------------------------------
</TABLE>
/(b)/ Other Expenses include a 0.25% 12b-1 fee assessed for payment of
distribution administration expenses.
/(c)/ T. Rowe Price Funds do not itemize management fees and other expenses.
/(d)/ Effective May 1, 2000, Scudder Kemper Investments has agreed to waive all
or a portion of its management fees to limit the expenses of the Global
Discovery Portfolio to 1.50% of the portfolio's average daily net assets.
These expenses will remain in effect until at least April 30, 2001.
________________________________________________________________________________
__________________________
/1/ The fee and expense data regarding each Series Fund, which are fees and
expenses for 1999, was provided to Companion by the respective Series Fund.
The Series Funds are not affiliated with Companion. We have not
independently verified these figures.
7
<PAGE>
The ILLUSTRATIONS section at the end of this Prospectus has tables demonstrating
how the Policy operates, given the Policy's expenses and several assumed rates
of return. These tables may assist you in comparing the Policy's death
benefits, Cash Surrender Values and Accumulation Values with those of other
variable life insurance policies. Please review these tables to better
understand the effect of expenses upon the Policy. You may also ask us to
provide a comparable illustration based upon your specific situation.
For more detailed information about the Policy,
please read the rest of this Prospectus and the Policy.
8
<PAGE>
___________________________________________________________
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. We are a wholly-owned
subsidiary of United of Omaha Life Insurance Company, which is a subsidiary of
Mutual of Omaha Insurance Company. The Mutual of Omaha family of companies
provides life, health, disability, home and auto insurance, trust services, and
investment sales and brokerage services. The Mutual of Omaha Companies have a
proud tradition of supporting environmental education, beginning with its long-
running Mutual of Omaha's Wild Kingdom television program, and continued through
its Wildlife Heritage Trust. Companion is principally engaged in the business of
issuing group and individual life insurance and annuity policies, and group
accident and health insurance in New York. As of December 31, 1999, Companion
had assets of over $500 million.
We may from time to time publish (in advertisements, sales literature and
reports to Policy Owners) the ratings and other information assigned to us by
one or more independent rating organizations such as A.M. Best Company, Moody's
Investors Service, Inc., Standard & Poor's Rating Services, and Duff & Phelps
Credit Rating Company. The purpose of the ratings is to reflect our financial
strength and/or claims-paying ability. The ratings do not bear on the investment
performance of assets held in the Variable Account or on the safety or the
degree of risk associated with an investment in the Variable Account.
___________________________________________________________
INVESTMENT OPTIONS
We recognize you have very personal goals and investment strategies. The
Policy allows you to choose from a wide array of investment options -- each
chosen for its potential to meet specific investment objectives. You may
allocate all or a part of your premiums to one or a combination of the variable
investment options or the fixed rate options (although allocations to the
systematic transfer account are limited to initial premium and rollovers only).
Allocations must be in whole percentages and total 100%.
The investment results of each investment portfolio, whose investment objectives
are described below, are likely to differ significantly. You should consider
carefully, and on a continuing basis, which investment portfolios or combination
of investment portfolios and fixed rate options best suits your long-term
investment objectives.
You can choose among 30 variable investment options and two-fixed rate
options.
[_] VARIABLE INVESTMENT OPTIONS
<TABLE>
<S> <C>
With the Policy's variable investment options, The investment portfolios are not available for purchase
you bear the investment risk, not us. You control the directly by the general public, and are not the same as other
amount of money you invest in each of the investment mutual fund portfolios with very similar or nearly identical names
portfolios, and you bear the risk those portfolios will that are sold directly to the public. However, the investment
perform worse than you expect. objectives and policies of certain investment portfolios available
under the Policy are very similar to the investment objectives and
The Variable Account, Companion Life policies of other portfolios that are or may be managed by the
Separate Account B, provides you with 30 variable same investment adviser or manager. Nevertheless, the
investment options in the form of Series Fund investment performance and results of the investment portfolios
investment portfolios. Each Series Fund is an open- available under the Policy may be lower, or higher, than the
end investment management company. When you investment results of such other (publicly available) portfolios.
allocate Policy funds to a Series Fund portfolio, those There can be no assurance, and no representation is made, that
funds are placed in a Subaccount of the Variable the investment results of any of the investment portfolios
Account corresponding to that portfolio, and the available under the Policy will be comparable to the investment
Subaccount in turn invests in the portfolio. The results of any other mutual fund portfolio, even if the other
Accumulation Value of your Policy depends directly portfolio has the same investment adviser or manager and the
on the investment performance of the portfolios that same investment objectives and policies, and a very similar
you select. name.
For detailed information about any investment portfolio,
including its performance history, refer to the prospectus for that
investment portfolio.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Asset Variable Investment Options
Category * Under Companion Life Separate Account B Objective
(Series Fund - Portfolio)
-----------------------------------------------------------------------------------------------------------------
Investments
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS Variable Insurance Trust - Long-term capital appreciation.
MFS Emerging Growth Series Portfolio /(5)/
-----------------------------------------------------------------------------------------------
Aggressive Common stock of emerging growth companies.
Growth -----------------------------------------------------------------------------------------------
Alger American Fund - Long-term capital appreciation.
Alger American Small Capitalization Portfolio /(1)/
-----------------------------------------------------------------------------------------------
Common stock of small capitalization companies.
-----------------------------------------------------------------------------------------------
Deutsche Asset Management VIT Funds - Long-term capital appreciation.
Deutsche VIT Small Cap Index Fund Portfolio/(12)/
-----------------------------------------------------------------------------------------------
Common stock of small capitalization companies.
-----------------------------------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust - Long-term capital appreciation
Pioneer Real Estate Growth Portfolio /(8)/ with current income.
Real Estate -----------------------------------------------------------------------------------------------
Real estate investment trusts (REITs) and other real estate industry companies.
-----------------------------------------------------------------------------------------------------------------
T. Rowe Price International Series, Inc. - Long-term capital appreciation.
T. Rowe Price International Stock Portfolio /(10)/
-----------------------------------------------------------------------------------------------
Common stock of non-U.S. companies.
-----------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund - Long-term capital appreciation.
Scudder VLIF International Portfolio /(9)/
-----------------------------------------------------------------------------------------------
Common stock of non-U.S. companies.
-----------------------------------------------------------------------------------------------
International Scudder Variable Life Investment Fund - Long-term capital appreciation.
Scudder VLIF Global Discovery Portfolio /(9)/
-----------------------------------------------------------------------------------------------
Common stock of small U.S. and non-U.S. companies.
-----------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. - Long-term capital appreciation.
MSDW Emerging Markets Equity Portfolio /(6)/
-----------------------------------------------------------------------------------------------
Equity securities of growth companies located in "emerging" foreign countries (countries
whose economies are less economically mature than those of developed nations).
-----------------------------------------------------------------------------------------------
Deutsche Asset Management VIT Funds - Long-term capital appreciation.
Deutsche VIT EAFE Equity Index Fund Portfolio/(12)/
-----------------------------------------------------------------------------------------------
Common stock of non-U.S. companies.
-----------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust - High current income.
MFS High Income Series Portfolio /5)/
Bond - -----------------------------------------------------------------------------------------------
High Yield High yield, lower-rated bonds or comparable unrated securities.
-----------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. - Long-term capital appreciation.
T. Rowe Price New America Growth Portfolio /(11)/
-----------------------------------------------------------------------------------------------
Common stock of U.S. growth companies.
-----------------------------------------------------------------------------------------------
MFS Variable Insurance Trust - Long-term capital appreciation
MFS Research Series Portfolio /(5)/ and future income.
-----------------------------------------------------------------------------------------------
Common stock or comparable securities of companies expected to possess better-than-
average prospects for long-term growth.
-----------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund II - Long-term capital appreciation.
Fidelity VIP II Contrafund Portfolio /3)/
-----------------------------------------------------------------------------------------------
Growth Common stock of companies, foreign and domestic, which the fund manager believes are
currently undervalued.
-----------------------------------------------------------------------------------------------
Alger American Fund - Long-term capital appreciation.
Alger American Growth Portfolio /1)/
-----------------------------------------------------------------------------------------------
Equity securities of companies with total market capitalization of $1 billion or more.
-----------------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust - Long-term capital appreciation.
Pioneer Midcap Value Fund Portfolio /8)/
-----------------------------------------------------------------------------------------------
Securities of mid-size companies, which the fund manager believes are currently
undervalued.
-----------------------------------------------------------------------------------------------
MFS Variable Insurance Trust - Capital appreciation.
MFS Capital Opportunities Series Portfolio /5)/
-----------------------------------------------------------------------------------------------
Common stock and related securities of foreign and domestic companies.
-----------------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust - Capital appreciation.
Pioneer Growth Shares Portfolio/8)/
-----------------------------------------------------------------------------------------------
Common stock and equity securities of U.S. companies.
-----------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Asset Variable Investment Options
Category * Under Companion Life Separate Account B Objective
(Series Fund - Portfolio)
---------------------------------------------------------------------------------------------------------------------------
Investments
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fidelity Variable Insurance Products Fund II - Capital appreciation
Growth & Fidelity VIP II Index 500 Portfolio /(3)/ with current income.
Income ---------------------------------------------------------------------------------------------------------
Common stock of companies that comprise the S&P 500 index.
-----------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund - Long-term capital appreciation
Scudder VLIF Growth and Income Portfolio /(9)/ with current income.
-----------------------------------------------------------------------------------------------------------------------------
Common and preferred stock, and securities convertible into common stock, of companies
that offer the prospect for growth while paying current dividends.
---------------------------------------------------------------------------------------------------------- -
Pioneer Variable Contracts Trust - Current income and capital
Pioneer Fund Portfolio/(8)/ appreciation.
---------------------------------------------------------------------------------------------------------
Equity securities, primarily of U.S. companies.
----------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. - Dividend income and long-term
T. Rowe Price Equity Income Portfolio /(11)/ capital appreciation
---------------------------------------------------------------------------------------------------------
Equity Common stock of established companies that pay dividends.
---------------------------------------------------------------------------------------------------------
Income Fidelity Variable Insurance Products Fund - Dividend income and capital
Fidelity VIP Equity Income Portfolio /(3)/ appreciation surpassing the S&P 500
average.
-----------------------------------------------------------------------------------------------------------
Securities of established companies that produce income and capital appreciation.
---------------------------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust - Current income and long-term capital
Pioneer Equity-Income Portfolio/(8)/ appreciation.
---------------------------------------------------------------------------------------------------------
Income producing equity securities of U.S. companies.
----------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. Capital appreciation and income.
T. Rowe Price Personal Strategy Balanced Portfolio/(11)/
----------------------------------------------------------------------------------------------------------
Balanced Diversified portfolio of stock, bonds and money market securities.
---------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund II - High total return.
Fidelity VIP II Asset Manager Portfolio /(3, 4)/
----------------------------------------------------------------------------------------------------------
Diversified portfolio of domestic and foreign stock, bonds, short-term and money market
securities.
---------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust - Income and capital appreciation.
MFS Global Governments Series Portfolio /(5)/
Bond - ---------------------------------------------------------------------------------------------------------
International Foreign and U.S. government bonds or other debt securities.
---------------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - Current income.
Federated Fund for U.S. Government Securities II
Portfolio/(2)/
----------------------------------------------------------------------------------------------------------
U.S. government securities.
----------------------------------------------------------------------------------------------------------
Bond- T. Rowe Price Fixed Income Series, Inc. - Current income.
Domestic T. Rowe Price Limited Term Bond Portfolio /(11)/
---------------------------------------------------------------------------------------------------------
Short- and intermediate-term investment grade debt securities.
---------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. - Current income.
MSDW Fixed Income Portfolio /(7)/
---------------------------------------------------------------------------------------------------------
Diversified portfolio of fixed income securities.
---------------------------------------------------------------------------------------------------------
Money Market Federated Insurance Series - Current income.
Federated Prime Money Fund II Portfolio /(2)/
---------------------------------------------------------------------------------------------------------
High quality fixed income securities maturing in 13 months or less.
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) Asset category designations are our own to help you gain insight into each
portfolio's intended objectives, but do not assure that any portfolio will
perform consistent with the categorization. Information contained in the Series
Funds' prospectuses should be read carefully before investing in any Subaccount.
11
<PAGE>
Investment advisers of the Series Funds:
/(1)/ Fred Alger Management, Inc.
/(2)/ Federated Investment Management Company.
/(3)/ Fidelity Management & Research Company.
/(4)/ Fidelity Management & 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)/ Morgan Stanley Dean Witter Investment Management Inc.
/(7)/ Miller Anderson & Sherrerd, LLP.
/(8)/ Pioneer Investment Management, Inc.
/(9)/ Scudder Kemper Investments, Inc.
/(10)/ Rowe Price-Fleming International, Inc., a joint venture between T.
Rowe Price Associates, Inc. and Robert Fleming Holdings Limited.
/(11)/ T. Rowe Price Associates, Inc.
/(12)/ Bankers Trust Company.
We do not assure that any portfolio will achieve its stated objective. Detailed
information, including a description of each portfolio's investment objective
and policies, a description of risks involved in investing in each of the
portfolios, and each portfolio's fees and expenses, is contained in the
prospectuses for the Series Funds, current copies of which accompany this
Prospectus. None of these portfolios are insured or guaranteed by the U.S.
government.
The investment advisers of the Series Funds and the investment portfolios are
described in greater detail in the prospectuses for the Series Funds.
Each investment portfolio is designed to provide an investment vehicle for
variable annuity and variable life insurance contracts issued by various
insurance companies. For more information about the risks associated with the
use of the same funding vehicle for both variable annuity and variable life
insurance contracts of various insurance companies, see the prospectuses of the
Series Funds which accompany this Prospectus.
We may receive revenues from the investment portfolios or their investment
advisers. These revenues may depend on the amount our Variable Account invests
in the Series Fund and/or any portfolio thereof.
The Variable Account is registered with the SEC as a unit investment trust.
However, the Variable Account is regulated under New York law and the SEC does
not supervise the management or the investment practices or policies of the
Variable Account or Companion. The Variable Account was established as a
separate investment account of Companion under New York law on August 27, 1996.
Under New York law, we own the Variable Account assets, but they are held
separately from our other assets and are not charged with any liability or
credited with any gain of business unrelated to the Variable Account. 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.
We are responsible to you for meeting the obligations of the Policy, but we do
not guarantee the investment performance of any of the investment portfolios.
We do not make any representations about their future performance. The
---
investment portfolios may fail to meet their objectives, and they could go down
-------------------------------------------------------------------------------
in value. Each portfolio operates as a separate investment fund, and the income
--------
or losses of one portfolio generally have no effect on the investment
performance of any other portfolio. Complete descriptions of each portfolio's
investment objectives and restrictions and other material information related to
an investment in the portfolio are contained in the prospectuses for each of the
Series Funds which accompany this Prospectus.
. Adding, Deleting, or Substituting Variable Options
We do not control the Series Funds, so we cannot guarantee that any of the
investment portfolios will always be available. We retain the right to change
the investments of the Variable Account. This means we may eliminate the shares
of any investment portfolio held in our Variable Account and to substitute
shares of another 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. We will first notify you and
receive any necessary SEC and state approval before making such a change.
New portfolios may be added, or existing portfolios eliminated, when, in our
sole discretion, conditions warrant such a change. If a portfolio is eliminated,
we will ask you to reallocate any amount in the eliminated portfolio. If you do
not reallocate these amounts, we will automatically reinvest them in the
Federated Prime Money Fund II portfolio.
If we make a portfolio substitution or change, we may change the Policy to
reflect the substitution or change. Our Variable Account may be (i) operated as
an investment management company or any other form permitted by law, (ii)
deregistered with the
12
<PAGE>
SEC if registration is no longer required or (iii) combined with one or more
other separate accounts. To the extent permitted by law, we also may transfer
assets of the Variable Account to other accounts.
[_] FIXED RATE OPTIONS
There are two fixed rate options: a systematic transfer account and a fixed
account. With fixed rate options, we bear the investment risk. This means we
guarantee that you will earn a minimum interest rate. This minimum interest
rate is guaranteed to yield 4.0% per year, compounded annually. We may declare
a higher current interest rate. Whatever interest rate we declare will be
guaranteed for at least one year. However, you bear the risk that we will not
-------------------------------------------
credit more interest than will yield 4.0% per year for the life of the Policy.
-----------------------------------------------------------------------------
We have full control over how assets allocated to fixed rate options are
invested, and we bear the risk that those assets will perform better or worse
than the amount of interest we have declared. The focus of this Prospectus is
to disclose the Variable Account aspects of the Policy. For additional details
regarding the fixed investment options, see the Policy.
The actual net effective minimum interest rate, after deduction of the mortality
--- -----
and expense risk charge, is guaranteed to yield 3.3% per year (compounded
annually) for the first 10 Policy Years and 3.45% per year thereafter.
. Systematic Transfer Account
The systematic transfer account is the fixed rate option used if you elect to
participate in the systematic transfer enrollment program ("STEP program") when
you buy the Policy. The STEP program is used to automatically transfer a
predetermined dollar amount on a monthly basis to any of the Subaccounts you
choose. You cannot transfer amounts from the STEP program to the fixed account.
The allocation and the predetermined dollar amount may not be changed once the
STEP program is elected. You must have a minimum of $5,000 in your systematic
transfer account in order to participate in the STEP program. The rate of
interest credited to each deposit into the systematic transfer account is fixed
on the date of the deposit and will not be changed. We guarantee that any such
interest rate will not be less than the guaranteed minimum interest rate
applicable to the fixed account. No additional funds may be allocated to a
systematic transfer account after you purchase the Policy (except for funds
designated to be transferred into the Policy pursuant to an Internal Revenue
Code Section 1035 exchange).
Funds allocated to the systematic transfer account must be completely
transferred to the Variable Account in 12 months. Transfers from the systematic
transfer accounts do not count toward the 12 free transfers allowed each Policy
Year. You may not transfer funds into any systematic transfer account. The
systematic transfer account may not be used to practice "market timing", and we
may disallow transactions involving this account on that basis.
All amounts allocated to the fixed rate options become part of the general
account assets of Companion. Interests in the general account have not been
registered with the SEC and are not subject to the SEC's regulation, nor is the
general account registered as an investment company with the SEC. Therefore, SEC
staff have not reviewed the fixed account disclosures in this Prospectus.
. Fixed Account and Systematic Transfer Account
The fixed account and the systematic transfer account are part of our general
account assets. Our general account includes all our assets except those
segregated in the Variable Account or in any other separate investment account.
You may allocate premiums to the fixed account or transfer amounts from the
Variable Account to the fixed account. Instead of you bearing the investment
risk, as you do with investments allocated to the Variable Account, we bear the
full investment risk for investments in the fixed rate options. We have sole
discretion to invest the assets of our general account, subject to applicable
law.
We have complete discretion to declare interest in excess of the guaranteed
---------------------------------------------------------------------------
minimum rate, or not to declare any excess interest. However, once declared, we
----------------------------------------------------
guarantee that any rate will last for at least one year. Different rates of
interest may be credited to the systematic transfer account and the fixed
account.
We guarantee that the Accumulation Value in the fixed account will be credited
with an effective annual interest rate which will yield at least 4%. Using a
procedure approved by our Board of Directors, the interest rate credited to the
fixed account may be in excess of the guaranteed minimum interest rate. Any
excess interest rate will be based on future expectations of investment
earnings. These rates will be determined by class according to procedures and
standards on file with the New York Insurance Department. We will review these
rates on a monthly basis.
We guarantee that, prior to the payment of the death benefit or at the Policy
maturity date, the amount in your fixed account or systematic transfer account
will be not be less than:
We have sole discretion to set current interest rates of fixed rate options. We
do not guarantee the level of future interest rates of fixed rate options,
except that they will not be less than the guaranteed minimum interest rate.
13
<PAGE>
(i) the amount of premiums allocated and Accumulation Value transferred
to the fixed account or systematic transfer account, plus
(ii) interest at the guaranteed minimum interest rate, plus
(iii) excess interest (if any) credited to amounts in the fixed account or
systematic transfer account, less
(iv) that part of the Monthly Deduction allocated to the fixed account or
systematic transfer account, less
(v) any premium taxes or other taxes allocable to the fixed account or
systematic transfer account, and less
(vi) any amounts deducted from the fixed account or systematic transfer
account in connection with partial withdrawals (including any
surrender charges) or transfers to the Variable Account or to a loan
account.
[_] TRANSFERS
The Policy is designed for long-term investment, not for active trading or
"market timing." Excessive transfers could harm other Policy Owners by having a
detrimental effect on portfolio management. Subject to restrictions during the
"right to examine" period, you may transfer Policy value from one Subaccount to
another, from the Variable Account to the fixed account, or from the fixed
account to any Subaccount, subject to these rules:
Transfer Rules:
. We must receive notice of the transfer --- either Written Notice or an
authorized telephone transaction.
. The transferred amount must be at least $500, or the entire Subaccount
value if it is less. (If the Subaccount value remaining after a transfer
will be less than $500, we will include that amount as part of the
transfer.)
. The first 12 transfers each Policy Year from Subaccounts are free. The rest
cost $10 each. We will allow no more than 24 transfers in any Policy Year.
This fee is deducted from the amount transferred.
. A transfer from the fixed account:
- may be made only once each Policy Year;
- is free;
- may be delayed up to six months;
- does not count toward the 12 free transfer limit; and
- is limited during any Policy Year to 10% of the fixed account value on
the date of the initial transfer during that year.
. We reserve the right to limit transfers, or to modify transfer privileges
and we reserve the right to change the transfer rules at any time.
. If the Accumulation Value in any Subaccount falls below $500, we may
transfer the remaining balance, without charge, to the Federated Prime
Money Fund II portfolio.
. Transfers made pursuant to participation in the dollar cost averaging,
asset allocation, STEP or rebalancing programs are not subject to the
amount or timing limitations of these rules, nor are they subject to a
transfer charge. See the sections of this Prospectus describing those
programs for the rules of each program.
. If you transfer amounts from the fixed account to the Variable Account, we
can restrict or limit any transfer of those amounts back to the fixed
account.
. Transfers result in the cancellation of accumulation units in the
Subaccount from which the transfer is made, and the purchase of
accumulation units in any Subaccount to which a transfer is made.
Third-party Transfers. Where permitted and subject to our rules, we may
accept your authorization to have a third party exercise transfers on your
behalf. All third-party transfers are subject to the same rules as all other
transfers.
[_] DOLLAR COST AVERAGING
Our dollar cost averaging program The dollar cost averaging and the
allows you to automatically transfer, on STEP program are intended to
a periodic basis, a set dollar amount or result in the purchase of more
percentage from one Subaccount or the accumulation units when the
fixed account to any Subaccount(s). You accumulation unit value is low,
can begin dollar cost averaging when you and fewer units when the
purchase the Policy or later. You can accumulation unit value is high.
increase or decrease the amount or However, there is no guarantee
percentage of transfers or discontinue that either program will result
the program at any time. Rules of the in higher Accumulation Value
dollar cost averaging program are: or otherwise be successful.
14
<PAGE>
Dollar Cost Averaging Rules:
. The dollar cost averaging program is free.
. We must receive notice of your election and any changed instruction ---
either Written Notice or an authorized telephone transaction.
. Automatic transfers can occur monthly, quarterly, semi-annually, or
annually.
. There must be at least $5,000 of Accumulation Value in the Subaccount or
fixed account from which transfers are being made to begin dollar cost
averaging.
. Amount of each transfer must be at least $100, and must be $50 per
Subaccount.
. If transfers are made from the fixed account, the maximum annual transfer
amount is 10% of that account's value at the time of the first dollar cost
averaging transfer during that Policy Year. There is no maximum transfer
amount limitation applicable to any of the Subaccounts.
. You may specify that transfers be made on the 1/st/ through the 28/th/ day
of the month. Transfers will be made on the date you specify (or if that is
not a Business Day, then on the next Business Day). If you do not select a
date, the program will begin on the next Policy Monthly Anniversary
following the date the Policy's "right to examine" period ends.
. You can limit the number of transfers to be made, in which case the program
will end when that number has been made. Otherwise, the program will
terminate when the amount remaining in the applicable Subaccount or the
fixed account is less than $500.
. Dollar cost averaging program transfers cannot begin before the end of a
Policy's "right to examine period".
[_] SYSTEMATIC TRANSFER ENROLLMENT
PROGRAM ("STEP program")
The STEP program allows you to automatically transfer funds on a monthly
basis from the systematic transfer account to any other Subaccount. It allows
you to use a dollar cost averaging concept to move your initial premium from a
fixed interest rate account into variable investment options within 13 months
of deposit. You cannot transfer funds from the STEP account into the fixed
account. If you want to move funds from a fixed interest rate account into
variable investment options over a longer time period using the same concept,
then you should use the dollar cost averaging program. We may credit different
interest rates to amounts in the systematic transfer account than to amounts in
the fixed account.)
--------------------------------------------------------------------------------
You cannot transfer amounts from the STEP account to the fixed account.
--------------------------------------------------------------------------------
STEP Program Rules:
. The STEP program is free.
. Can only be selected on the initial application.
. Must have at least $5,000 in the systematic transfer account to begin the
program.
. Amount transferred each month must be at least an amount sufficient to
transfer the entire amount out of the systematic transfer account in 12
equal monthly payments.
. Transfers must be at least $50 per Subaccount.
. No new premiums may be allocated to this account after you purchase the
Policy, except for funds designated in the application to be transferred
into the Policy pursuant to an Internal Revenue Code Section 1035 exchange.
. Upon receipt of funds by Section 1035 exchange, the 12 monthly payment
requirement is restarted and the minimum monthly transfer amount is
recalculated.
. Cannot begin before the end of the Policy's "right to examine" period.
. You may specify that transfers be made on the 1/st/ through the 28/th/ day
of the month. Transfers will be made on the date you specify (or if that is
not a Business Day, the transfer will be made on the next Business Day). If
you do not select a start date, the STEP program will begin on the next
Policy Monthly Anniversary following the date the Policy's "right to
examine" period ends.
. No transfers may be made into the systematic transfer account.
. No portion of any loan repayment will be allocated to the systematic
transfer account.
. All funds remaining in the systematic transfer account on the date of the
last monthly transfer will be transferred to the Subaccounts in a pro rata
amount consistent with your allocation instructions.
. The STEP program ends the earlier of the date when all amounts in the
systematic transfer account have been transferred or the date of the last
monthly STEP program transfer.
15
<PAGE>
[_] ASSET ALLOCATION PROGRAM
The asset allocation program allows you to allocate premiums and Policy
value among designated Subaccounts and the fixed account. You can specify your
own desired allocation instructions, or you can choose to use one of the five
asset allocation models outlined below. The fixed rate options are not included
in this program.
The asset allocation program does not protect against a loss, and otherwise is
not guaranteed to achieve your goal.
Asset Allocation Program Rules:
. The asset allocation program is free.
. You must request the asset allocation program in the Policy application or
by Written Notice or an authorized telephone transaction.
. Changed instructions, or a request to end this program, must also be by
Written Notice or an authorized telephone transaction.
. You must have at least $10,000 of Accumulation Value (other than amounts in
a Loan Account) to begin the asset allocation program.
. Transfers made pursuant to this program do not count in determining whether
a transfer fee applies.
. Asset allocation and STEP programs cannot run at the same time.
. The asset allocation program will automatically rebalance your Accumulation
Value in the Subaccounts to the model you select on an annual basis, unless
you designate semiannual or quarterly rebalancing. Your Accumulation Value
will be rebalanced to the then-current version of the model in effect.
. The Series Funds that are included in a model may change from period to
period. Your election to use a model will remain in effect, without regard
to changes in the funds in that model, unless you provide us with changed
instructions.
The asset allocation program does not protect against a loss, and otherwise is
not guaranteed to achieve your goal.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION MODELS
CURRENT ALLOCATIONS*
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Principal Portfolio Income Capital Equity
Conserver Protector Builder Accumulator Maximizer
(conservative) (moderately (moderate) (moderately (aggressive)
conservative) aggressive)
% % % % %
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MSDW Emerging Markets Equity 3 5
Alger American Small Capitalization 5 10
Deutsche VIT Small Cap Index Fund 3 4 6 7
Pioneer Real Estate Growth 4 5 6
T. Rowe Price International Stock 6 7 12
Scudder VLIF International 15
Deutsche VIT EAFE Equity Index Fund 5 7 9 9 10
MFS High Income Series 5 5 5
T. Rowe Price New America Growth 5 7 9
MFS Capital Opportunities Series 4 8 10 10 9
Fidelity VIP II Index 500 5 10 10 11 12
Fidelity VIP Equity Income 5 9 11
Pioneer Equity Income 7 10 10 8 6
MFS Global Governments Series 5 6 6
T. Rowe Price Limited Term Bond 43 32 20 15
MSDW Fixed Income 6
Federated Prime Money Fund II 20 13 5
------------------------------------------------------------------------------------------------------------------------------------
* We retain the right to change allocation model allocations or to substitute portfolio options therein
in future prospectuses. Amounts you allocate to a model portfolio will be invested
pursuant to the then current portfolio allocations for that model.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
We use Ibbotson Associates, Inc. to develop the asset allocation model
allocations. They are an investment consulting firm specializing in applying
investment theories and empirical findings (such as historical return data
collected on the investment portfolios) to quantify the benefits of
diversification for particular investment profiles.
16
<PAGE>
[_] REBALANCING PROGRAM
The rebalancing program allows you to rebalance your Accumulation Value
among designated Subaccounts and the fixed account pursuant to your instructions
on a quarterly, semi-annual, or annual basis. Rebalancing utilizes your
allocation instructions in effect at the end of the STEP program period (so it
never rebalances any assets to the systematic transfer account). You may change
your rebalancing allocation instructions at any time. Any change will be
effective when the next rebalancing occurs.
Rebalancing Program Rules:
. The rebalancing program is free.
. You must request the rebalancing program and give us your rebalancing
instructions by Written Notice. Changed instructions or a request to end
this program must also be by Written Notice.
. You must have at least $10,000 of Policy Accumulation Value (other than
amounts in a Loan Account) to begin the rebalancing program.
. You may have rebalancing occur quarterly, semi-annually or annually.
. Transfers made pursuant to this program do not count in determining whether
a transfer fee applies.
. If you elect the asset allocation program, your Accumulation Value in the
Subaccounts will automatically be rebalanced to the model you choose on an
annual basis, unless you elect semi-annual or quarterly rebalancing. Your
Accumulation Value will be rebalanced to the then-current version of the
model in effect.
The rebalancing program does not protect against a loss and may not achieve your
goal.
17
<PAGE>
___________________________
IMPORTANT POLICY PROVISIONS
The Ultra Variable Life Policy is a flexible premium variable universal
life insurance policy. The Policy provides a death benefit and, as a variable
insurance policy, allows you to invest your Accumulation Value in variable or
fixed investment options where any gain accumulates on a tax-deferred basis.
Some key rights and benefits under the Policy are summarized in this Prospectus;
however, you must refer to the Policy for the actual terms of the Policy. You
may obtain a copy of the Policy from us. The Policy remains in force until
surrendered for its Cash Surrender Value, or until all proceeds have been paid
as a death benefit, or until it lapses because premiums paid and its
Accumulation Value are insufficient to keep the Policy in force and the No-Lapse
Period is not in effect, or if a Policy loan exists, the Cash Surrender Value is
equal to or less than the amount of the loan.
[_] POLICY APPLICATION AND ISSUANCE
To purchase a Policy, you must submit an application with the minimum
initial premium and provide evidence of the proposed insured's insurability.
Before accepting an application, we conduct underwriting to determine
insurability. We reserve the right to reject any application or premium for any
reason. If your application is in good order upon receipt, we will credit your
initial premium on the date the Policy is issued. All premiums are allocated to
the Federated Prime Money Fund II portfolio until the end of the "right to
examine period", and only then to your selected investment allocations. If a
Policy is not issued, we will return your premium. If we issue a Policy, it will
be effective on the date of issue.
Replacing an existing life insurance policy is not always your best choice.
Evaluate any replacement carefully.
. Application in Good Order. All application questions must be answered, but
particularly note these requirements:
- Your full name, Social Security number, and date of birth must be
included.
- The Beneficiary's full name, Social Security number, and other
information must be included.
- Your premium allocations must be completed, be in whole percentages,
and total 100%.
- Initial premium must meet minimum initial premium requirements.
- Your signature and your agent's signature must be on the application.
- City, state, and date application was signed must be completed.
- You must provide all information required for us to underwrite your
application (including health and medical information about the
insured, and other information we deem relevant).
- Your agent must be both properly licensed and appointed with us.
. Premium Payments. Your premium checks should be made payable to "Companion
Life Insurance Company." We may postpone crediting to your Policy any payment
made by check until your bank has honored the check. Payment by certified
check, banker's draft, or cashier's check will be promptly applied. You may
change your premium allocation instructions by sending us Written Notice or
through an authorized telephone transaction. The change will be effective on
the date we receive your Written Notice or authorization. The change will apply
to any additional premiums received on or after the date we receive your Written
Notice or authorization.
Initial Premium Payment:
-----------------------
- Must be enough to purchase $100,000 of insurance coverage, or a
greater specified amount.
- The net premium is invested in the Federated Prime Money Fund II until
the end of the "right to examine" period.
Additional Premium Payments:
---------------------------
- Additional premiums can only be made until the insured's age 100
(except as may be required in a grace period).
- If a premium increases the specified amount of coverage, it is subject
to the insured's continued insurability and our underwriting
requirements, which may include evidence of continued insurability.
- Must be at least enough to maintain the specified amount of coverage
you purchased.
- Planned premiums may be paid annually, semiannually, or at other
intervals we offer. Beginning with the second Policy Year, you may
change the planned premium once each year, subject to our approval.
The planned premium is flexible. Because the Policy's Accumulation
Value can fluctuate depending upon the performance of your selected
variable investment options, payment of the planned premiums does not
-----------------------------------------
guarantee that your Policy will remain in force. Your Policy can lapse
----------------------------------------------------------------------
even if you pay all planned premiums on time. However, there may be a
--------------------------------------------
"no lapse" guaranty, described below.
18
<PAGE>
- If there is a Policy loan, you should identify any payment intended to
reduce a loan as a loan repayment, otherwise it will be treated as a
premium and added to the Accumulation Value.
- Additional premiums are applied pursuant to your current investment
allocation instructions, unless you give us different instructions by
Written Notice or authorized telephone transaction at the time you
make an additional premium payment.
- We reserve the right to limit premiums or refund any values so the
Policy qualifies as life insurance under the Internal Revenue Code.
[_] ACCUMULATION VALUE
On your Policy's date of issue the Accumulation Value equals the initial
net premium less the Monthly Deduction for the first month. The net premium is
the premium less the premium charge for taxes (3.75%) and premium processing
expenses ($2.00). On the date of each Monthly Deduction 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 any Loan Account; less
(d) the Monthly Deduction for the current month.
As explained in the EXPENSES section below, once each month certain charges are
deducted from your Accumulation Value. These charges are called the "Monthly
Deduction."
On any date other than the date of a Monthly Deduction the Accumulation Value
equals:
(a) the total of the values in each Subaccount on the date of calculation;
plus
(b) the accumulation value of the Loan Account on the date of calculation;
plus
(c) the accumulation value of the fixed account on the date of
calculation.
The value for each Subaccount equals:
(a) the current number of accumulation units for that Subaccount;
multiplied by
(b) the current unit value.
Each net premium, Monthly Deduction, transfer and partial withdrawal
allocated to a Subaccount is converted into accumulation units. This is done by
dividing the dollar amount by the accumulation unit value for the applicable
Subaccount for the Valuation Period during which it is allocated to the
Subaccount. The initial accumulation unit value for each Subaccount was set when
the Subaccount was established. The accumulation 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 applicable investment portfolio
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 Accumulation Value of the fixed account on the date of each Monthly
Deduction, before deducting the Monthly Deduction, equals:
(a) the Accumulation Value as of the date of the last Monthly Deduction;
plus
(b) any net premiums credited since the date of the last Monthly
Deduction; plus
(c) any transfers from the Subaccounts to the fixed account since the date
of the last Monthly Deduction ; plus
(d) any transfers from the Loan Account to the fixed account since the
date of the last Monthly Deduction ; less
(e) any transfers from the fixed account to the Subaccounts since the date
of the last Monthly Deduction ; less
(f) any transfers from the fixed account to the Loan Account since the
date of the last Monthly Deduction ; less
(g) any partial withdrawals and surrender charges taken from the fixed
account since the date of the last Monthly Deduction ; plus
(h) interest credited to the fixed account.
The Accumulation Value of the fixed account on any date other than a
Monthly Deduction date equals:
(a) the Accumulation Value as of the date of the last Monthly Deduction,
accumulated with interest from the date of the last Monthly Deduction
to the date of calculation; plus
19
<PAGE>
(b) any net premiums credited since the date of the last Monthly
Deduction, accumulated with interest from the date received to the
date of calculation; plus
(c) any transfers from the Subaccounts to the fixed account since the date
of the last Monthly Deduction, accumulated with interest from the date
of transfer to the date of calculation; plus
(d) any transfers from the Loan Account to the fixed account since the
date of the last Monthly Deduction, accumulated with interest from the
date of transfer to the date of calculation; less
(e) any transfers from the fixed account to the Subaccounts since the date
of the last Monthly Deduction, accumulated with interest from the date
of transfer to the date of calculation; less
(f) any transfers from the fixed account to the Loan Account since the
date of the last Monthly Deduction, accumulated with interest from the
date of transfer to the date of calculation; less
(g) any partial withdrawals and surrender charges taken from the fixed
account since the date of the last Monthly Deduction, accumulated with
interest from the date of withdrawal to the date of calculation.
The Accumulation Value of the systematic transfer account on the date of
each Monthly Deduction before deducting the Monthly Deduction equals:
(a) the Accumulation Value as of the last Monthly Deduction date; less
(b) any transfers from the systematic transfer account to the Subaccounts
since the date of the last Monthly Deduction; less
(c) any partial withdrawals and surrender changes taken from the
systematic transfer account since the date of the last Monthly
Deduction; less
(d) any transfers from the systematic transfer account to the Loan Account
since the date of the last Monthly Deduction; plus
(e) interest credited to the systematic transfer account.
The Accumulation Value of the systematic transfer account on any valuation
date other than the date of a Monthly Deduction equals:
(a) the Accumulation Value as of the date of the last Monthly Deduction,
accumulated with interest from the date of the last Monthly Deduction
to the date of calculation; less
(b) any partial withdrawals and surrender charges taken from the
systematic transfer account since the date of the last Monthly
Deduction, accumulated with interest from the date of withdrawal to
the date of calculation; less
(c) any transfer from the systematic transfer account to the Loan Account
since the date of the last Monthly Deduction, accumulated with
interest from the date of transfer to the date of calculation.
The Cash Surrender Value is the Accumulation Value less any outstanding
Policy loans and unpaid loan interest and less any applicable surrender charge.
[_] LAPSE AND GRACE PERIOD
. Lapse
Because the Policy's Accumulation Value can fluctuate depending upon the
performance of your selected variable investment options, your Policy can lapse,
even if you pay all planned premiums on time.
No Policy Loan exists: The Policy will lapse if, on the date of a Monthly
---------------------
Deduction, the Accumulation Value is not enough to cover the Monthly Deduction
(subject to the No-Lapse Period provision), and a grace period expires without a
sufficient premium payment.
A Policy Loan exists: The Policy will lapse on the date of a Monthly
--------------------
Deduction when the Cash Surrender Value is not enough to cover the Monthly
Deduction and any loan interest due, and a grace period expires without a
sufficient premium payment.
--------------------------------------------------------------------
A lapse of the Policy may result in adverse tax consequences.
--------------------------------------------------------------------
20
<PAGE>
. No-Lapse Period
If the minimum monthly premium is paid, the No-Lapse Period of the policy
is the lesser of five years or to age 65. The minimum monthly premium shall
equal (a) the minimum monthly premium for the base plan, plus (b) the minimum
monthly premium(s) for any rider(s). The minimum monthly premium for the base
plan and for any additional insured term rider is/are computed as set forth in
the rider data pages of the Policy.
If the target monthly premium is paid, the No-Lapse Period of the policy is
the lesser of 10 years or to age 65. The target monthly premium is equal to (a)
the target monthly premium for the base plan, plus (b) the target monthly
premium(s) for any rider(s). The target monthly premium for the base plan and
for any additional insured term rider is/are computed as set forth in the rider
data pages of the Policy.
All premiums reflect the Insured's age, sex, risk class and rate class.
The Policy will not lapse during a No-Lapse Period, even if the Cash
Surrender Value is insufficient to pay the Monthly Deduction, if you meet the
minimum monthly premium or the target monthly premium requirements and the
---
following rules:
- The Policy has never been reinstated;
- There is no additional insured term insurance rider covering the
insured attached to the Policy;
If you fail to meet the minimum or target monthly premium for the selected
No-Lapse Period on the date of any Monthly Deduction, you may still qualify for
the minimum No-Lapse Period by paying the difference between:
(a) the sum of the premiums paid since the Policy's date of issue less any
partial withdrawals, accumulated at 4% interest, less any outstanding
loans; and
(b) the sum of the minimum monthly premiums accumulated at 4% interest.
This amount must be received within 90 days of the date of the Monthly
Deduction on which the monthly premium requirement was not met. If payment is
not received within that 90-day period, payment of all subsequent monthly
premiums will not guarantee that the Policy will continue to the end of the
selected No-Lapse Period.
. Grace Period
Although the Policy can lapse, we allow you a 61-day grace period to make a
premium payment sufficient to cover the Monthly Deduction and any loan interest
due.
- We will mail notice to you of the insufficiency within 30 days of the
start of the grace period.
- If the necessary additional premium payment is not received, the
Policy terminates as of the first day of the grace period.
- Payment received during a grace period is first applied to repay
Policy loans and interest on those loans before the remaining amount
is applied as additional premium to keep the Policy in force.
- Insurance coverage continues during the grace period, but the Policy
is 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 equal the amount of death benefit in effect
immediately prior to the date the grace period began less any due and
unpaid Monthly Deduction and unpaid loan interest.
[_] 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 No-Lapse
Period provision, if applicable, 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 unpaid loan
interest, subject to the No-Lapse Period provision, if applicable, and
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.
21
<PAGE>
[_] PAID-UP LIFE INSURANCE (where a Policy loan exists)
Within 60 days after each Policy Anniversary you have the option to
transfer the Accumulation Value in the Variable Account to the fixed account and
apply the Cash Surrender Value to purchase a fixed paid-up life insurance
benefit. The amount of paid-up life insurance will be the amount provided by
applying the Cash Surrender Value as a net single premium based on the
Commissioners 1980 Standard Ordinary Mortality Table, Smoker or Nonsmoker and
Male or Female as applicable to the Insured, age last birthday, with interest at
4%.
[_] MISSTATEMENT OF AGE OR SEX
If the insured's age or sex is misstated, all Policy payments and benefits
will be those that 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 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 the specified amount of coverage if the insured's death results from
suicide within two years from the effective date of the increase. Instead, we
will pay the sum of the premiums paid for the increase.
If the Policy was converted from another life insurance coverage, then the
exclusion period for suicide will be measured from the date of issue of the
original coverage.
[_] 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 or for
two years from the date of reinstatement.
We will not contest the validity of an increase in the specified amount of
coverage 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 the specified amount of coverage will be based on the application
for that increase.
If the Policy was issued as a conversion from another life insurance
coverage, then the contestable period for the amount of insurance converted
without evidence of insurability will be measured from the date of issue of the
original coverage.
[_] TELEPHONE TRANSACTIONS
<TABLE>
<CAPTION>
Telephone Transactions Permitted: Telephone Transaction Rules:
<S> <C>
. Transfers. . Only you may elect. Do so on the Policy application or by prior
. Partial withdrawals or loans of $10,000 or less Written Notice authorization to us.
by you. . Must be received by close of the New York Stock Exchange ("NYSE")
. Change of premium allocations. (usually 3 p.m. Central Time); if later, the transaction will be
processed the next day the NYSE is open.
. Will be recorded for your protection.
. For security, you must provide your Social Security number and/or
other identification information.
. May be discontinued at any time as to some or all Owners.
</TABLE>
We are not liable for following authorized telephone transaction
instructions we reasonably believe to be genuine.
22
<PAGE>
[_] REINSTATEMENT
If the Policy lapses because a grace period ended without a sufficient
payment being made and has not been surrendered for cash, you may reinstate it
within five years of the date of lapse and prior to the maturity date. To
reinstate, we must receive:
- written application signed by you and the insured;
- evidence of the insured's insurability satisfactory to us;
- enough payment to continue this Policy in force for three months; and
- repayment or reinstatement of any outstanding Policy loan, together
with unpaid loan interest from the date of lapse.
On a reinstated Policy, there will be a re-establishment of surrender
charges, if any, measured from the original date of issue.
The effective date of reinstatement will be the date we approve the
application for reinstatement.
The specified amount of insurance coverage of the reinstated Policy may not
exceed the specified amount of insurance coverage at the time of lapse. The
Accumulation Value on the effective date of reinstatement will equal the amount
of reinstatement premium plus any applicable surrender charge measured from the
original date of issue to the date of reinstatement, and less the Monthly
Deduction for the current Policy Month.
[_] 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; and (b) this Policy is in force. The Policy may terminate prior
to the maturity date as described above under the Lapse and Grace Period
provision. 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.
[_] DELAY OF PAYMENTS
We will usually pay any amounts from the Variable Account requested as a
Policy loan, partial withdrawal or cash surrender within seven days after we
receive your Written Notice. We can postpone such payments or any transfers out
of a Subaccount if: (i) the 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 SEC 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 Notice.
[_] MINOR OWNER OR BENEFICIARY
A minor may not own the Policy solely in the minor's name and cannot
receive payments directly as a Policy Beneficiary. A minor can "own" a Policy
through the trustee of a trust established for the minor's benefit, or through
the minor's named and court appointed guardian who owns the Policy in his or her
capacity as trustee or guardian. Where a minor is a named Beneficiary, we are
able to pay the minor's Beneficiary share to a minor's trustee or guardian.
Parents seeking to have a minor's interest made payable to them for the minor's
benefit are encouraged to check with their local court to determine the process
to be appointed as the minor's guardian; it is often a very simple process. If
there is no adult representative able to give us an adequate release for payment
of the minor's Beneficiary interest, we will retain the minor's interest on
deposit until the minor attains the age of majority.
23
<PAGE>
___________________________________________
EXPENSES
The charges and fees described below compensate us for our expenses in
distributing the Policy, bearing mortality and expense risks under the Policy,
and administering the investment options and the Policy. Except where stated
otherwise, charges and fees shown are the maximum we will charge, and some
actual expenses may be less.
Each Series Fund also deducts expenses from each investment portfolio;
those expenses are described in each Series Fund prospectus.
[_] DEDUCTIONS FROM PREMIUM
. Tax Charge - 3.75% of each premium payment.
We incur a federal income tax liability under Internal Revenue Code Section
848 (a deferred acquisition cost tax) upon Policy premium collected. We may
also incur state and local taxes relating to the Policy. We deduct 3.75% of
each Policy premium payment we receive to cover these expenses. Please note
that the actual federal and state taxes that we will pay on a particular Policy
may be more or less than the amount we collect.
. Premium Processing Charge - $2 per payment
We deduct $2 from each Policy premium payment we receive to cover our
premium processing expenses.
[_] MONTHLY DEDUCTION
We deduct a Monthly Deduction from the Policy's Accumulation Value on each
monthly anniversary of the date of issue (the "Monthly Deduction Date"),
consisting of: (1) the cost of insurance charge; (2) the cost of riders charge;
(3) the risk charge; and (4) the administrative charge.
Charges based on the Accumulation Value are calculated before the Monthly
Deduction is deducted, but reflecting charges deducted from Subaccount assets.
The Monthly Deduction is deducted pro rata from the Accumulation Value in the
Subaccounts and the fixed account. The Monthly Deduction results in cancellation
of accumulation units in the Subaccounts and the fixed account.
. Cost of Insurance Charge
The cost of insurance charge is for providing insurance protection under
the Policy. The amount of the current charge is based on the issue age, sex,
risk and rate class of the insured, the current specified amount of insurance
coverage, and the length of time the Policy has been in force. We may use
current cost of insurance charges less than those shown in the Policy, and
reserve the right to change the current cost of insurance charges. Changes will
be by class and based on changes in future expectations of factors such as
investment earnings, mortality, persistency, and expenses. We expect a profit
from this charge.
The cost of insurance each month equals:
- The net amount at risk for the month; multiplied by
- The cost of insurance charge per $1,000 of specified amount of
insurance coverage (which is set forth in the Policy) multiplied by
the amount of insurance coverage; divided by
- $1,000.
The net amount at risk in any month equals:
- The death benefit; less
- The Accumulation Value after deducting the rider charge, if any, the
risk charge and the administrative charge for the current month.
. Risk Charge
The risk charge is for the mortality risks we assume -- that insureds may
live for shorter periods of time than we estimate, or the Accumulation Value is
not enough to keep the Policy in force during the No-Lapse Period. In Policy
Years 1 through 10, this risk charge is equivalent to an annual charge of 0.70%
of the Accumulation Value. In Policy Years 11 and later, this risk charge is
equivalent to an annual charge of 0.25% of the Accumulation Value. The risk
charge after Policy Year 10 will never exceed a maximum charge of 0.55% of the
Accumulation Value. The charge is deducted as 0.05833% of the Accumulation
Value, deducted on the date the Monthly Deduction is assessed, for the first 10
Policy Years, and 0.02083% (which we may increase to a maximum charge of
0.04583%) of the Accumulation Value, deducted on the date the Monthly Deduction
is assessed, for Policy Years 11 and thereafter. If this charge exceeds our
actual costs to cover death benefits and expenses, the
24
<PAGE>
excess goes to our general account. Conversely, if this charge is not enough, we
bear the additional expense, not you. We expect a profit from this charge.
. Administrative Charge - $7
The administrative charge partially compensates us for our costs in issuing
and administering the Policy and operating the Variable Account.
. Cost of Riders
The following Policy riders are available for the cost detailed below.
Additional Insured Rider. This rider provides term insurance for the
primary insured at a cost equal to the amount of insurance coverage provided by
the rider (not to exceed two times the base Policy's specified amount of
insurance coverage), multiplied by the rider's cost of insurance charge for each
$1,000 of benefit amount, divided by 1,000. This charge is based on the primary
insured's issue age, sex and rate class. The charge for this rider increases on
an annual basis.
Accidental Death Benefit Rider. This rider provides additional coverage in
the event of an accidental death, at a cost which is a fixed rate determined by
the insured's attained age and sex per each $1,000 of rider coverage elected,
multiplied by the rider benefit amount, divided by $1,000. The rider benefit
amount cannot exceed one-half of the base Policy's specified amount of insurance
coverage.
Disability Rider. This rider provides a benefit in the event of disability
of the Owner, at a cost which is a fixed rate determined by the insured's
attained age and sex per each $1.00 of rider monthly deduction elected,
multiplied by the amount of the monthly deduction.
Paid-Up Life Insurance Rider. This rider guarantees to keep your Policy in
force as paid-up life insurance if there is a Policy loan and certain conditions
are met. Its cost is 3% of your Accumulation Value on the date you exercise the
rider benefit. (This rider is described in the IMPORTANT POLICY PROVISIONS
section, above.)
[_] TRANSFER CHARGE - $10 (first 12 are free)
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. Transfers
from the systematic transfer account are free and do not count toward the 12
free transfers. Transfers made pursuant to participation in the dollar cost
averaging, asset allocation, STEP or rebalancing programs are not subject to the
transfer charge rules. See the sections of this Prospectus describing those
programs for the rules of each program.
[_] SURRENDER CHARGE (also applies to decreases in specified amount of
insurance coverage)
Upon a total surrender or partial withdrawal from your Policy, we may
deduct a surrender charge from the amount of the surrender or partial
withdrawal. If the Policy's current specified amount of insurance coverage is
decreased, we may deduct a surrender charge from the Accumulation Value based on
the amount of the decrease. The surrender charge varies by issue age, sex, risk
and rate class, the length of time your Policy has been in force and the
specified amount of coverage. For example, for a male age 35 at issue, in the
nontobacco risk class and the preferred rate class, the surrender charge is
$13.00 for each $1,000.00 of specified amount in the first five years, declining
to $1.00 per $1,000.00 in the 12th year and zero thereafter. Generally, the
surrender charge is higher the older you are when the Policy is issued, subject
to state nonforfeiture requirements (which generally limits surrender charges at
higher ages). The highest aggregate surrender charge is $50 for each $1,000 of
specified amount of insurance coverage in the first year, declining to $10 per
$1,000 in the ninth year and zero thereafter. The length of the surrender charge
period varies depending upon the Policy Owner's issue age: the period is 12
years through age 52, 11 years at age 53, 10 years at age 54, and 9 years at age
55 and thereafter.
The surrender charge will not cover our cost of distributing the Policies.
Any deficiency is met from our general funds, including amounts derived from the
risk charge and the administrative charge (each described above).
[_] SERIES FUND CHARGES
Each Series Fund investment portfolio is responsible for its own expenses.
The net assets of each portfolio reflects deductions for investment advisory
fees and other expenses. These charges are disclosed in each Series Fund's
prospectus which accompany this Prospectus. A table of portfolio annual
expenses is included in the INTRODUCTION AND SUMMARY section of this Prospectus.
25
<PAGE>
_________________________________
POLICY DISTRIBUTIONS
The principle purpose of the Policy is to provide a death benefit upon the
insured's death, but before then you may also borrow against the Policy's Cash
Surrender Value, take a partial withdrawal, or surrender it for its Cash
Surrender Value. Tax penalties and surrender charges may apply to amounts taken
out of your Policy. Depending on the circumstances, receipt of a Policy loan
may have federal income tax consequences. You may wish to consult your tax
advisor before requesting a Policy loan.
[_] POLICY LOANS
<TABLE>
<CAPTION>
Amount You Can Borrow Loan Interest Rate
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Standard Policy Loan. After the first Policy Year, you may Standard Policy Loan. Net annual loan interest rate of 2%:
-------------------- --------------------
borrow up to 100% of the Cash Surrender Value, less loan we charge an interest rate in advance with a 6% effective
interest to the end of the Policy Year, and less a Monthly annual yield, but we also credit an interest rate with an
Deduction that is sufficient to continue the Policy in force effective annual yield of 4% to any amounts in the Loan
for at least one month. Account.
--------------------------------------------------------------- ------------------------------------------------------------
Preferred Policy Loan. Available beginning in the 10/th/ Policy Preferred Policy Loan. Net annual loan interest rate of
--------------------- ---------------------
Year. Any loan outstanding at the beginning of the 10/th/ 0%: we charge an interest rate in advance with a 6%
Policy Year will become a preferred Policy loan from that effective annual yield, but we also credit an interest rate
point forward. with an effective annual yield of 6% to any amounts in the
Loan Account.
----------------------------------------------------------------------------------------------------------------------------
We believe a preferred Policy loan will not affect tax treatment of the Policy, but tax law is unclear on this point and we
do not warrant its tax effect.
You may wish to consult your tax advisor before taking a preferred Policy loan.
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Loan Rules
<S> <C>
. The Policy must be assigned to us as sole security of the . All or part of a loan may be repaid at any time
loan. while the Policy is in force. We will deduct the
. We will transfer all loan amounts from the Subaccounts and amount of a loan repayment from the Loan Account
the fixed account to a Loan Account. The amounts will be transferred and allocate that amount among the Subaccounts and
on a pro rata basis. Transfers from the Subaccounts will result in the fixed account in the same percentages as the
cancellation of accumulation units. Accumulation Value is allocated on the date of
. Loan interest is due on each Policy Anniversary. If the interest repayment. We will treat any amounts you pay us as
is not paid when due, we will transfer an amount equal to the a premium unless you specify that it is a loan
unpaid loan interest from the Subaccounts and the fixed account to repayment.
the Loan Account on a pro rata basis. . The death benefit will be reduced by the amount of
any loan outstanding and unpaid loan interest 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.
</TABLE>
[_] SURRENDER
While the insured is alive, you may terminate the Policy for its Cash
Surrender Value. Following a surrender, all your rights in the Policy end.
For amounts allocated to the fixed account and the systematic transfer
account, the Cash Surrender Value is equal to or greater than the minimum Cash
Surrender Values required by New York law. The value is based on the
Commissioners 1980 Standard Mortality Table, the insured's age at last birthday,
with interest which yields 4% on an annual basis.
Surrender Rules
. The Policy must be returned to us to receive the Cash Surrender Value.
. The maximum applicable Surrender Charge is described in your Policy and the
Expenses section of this Prospectus.
. Surrenders are taxable, and a 10% federal tax penalty may apply prior to
age 59 1/2.
. We may defer payment from the fixed account or the systematic transfer
account for up to six months.
26
<PAGE>
[_] PARTIAL WITHDRAWALS
After the first Policy Year, you may withdraw part of the Accumulation
Value. The amount requested and any surrender charge will be deducted from the
Accumulation Value on the date we receive your request (either by Written Notice
or, for amounts of $10,000 or less, by an authorized telephone transaction).
Amounts withdrawn may be subject to a surrender charge (as defined in the Policy
and the EXPENSES section of this Prospectus).
If Death Benefit Option 1 (described below) is in effect, then the current
specified amount of insurance coverage will be reduced by the amount of any
partial withdrawal and the Accumulation Value will be reduced by the amount of
the withdrawal and the surrender charge applicable to the decrease in the
current specified amount of insurance coverage. We will send you an amendment
showing the current specified amount of insurance coverage after the withdrawal.
If Death Benefit Option 2 (described below) is in effect, the Accumulation
Value will be reduced by the amount of the partial withdrawal (but the specified
amount will not change).
Partial Withdrawal Rules
<TABLE>
<S> <C>
. Partial withdrawals are made first from . Withdrawals from the systematic transfer account will not
premiums paid and then from earnings, beginning affect the minimum monthly transfer amount from that
with the most recent premium payment. account, so they will cause the total amount to be
. The minimum partial withdrawal amount is $250; transferred to be completed in less time than originally
the maximum is an amount such that the remaining anticipated.
Cash Surrender Value is not less than $500 . We reserve the right to defer withdrawals from the fixed
and the specified amount of insurance coverage account and the systematic transfer account for up to six
is at least $100,000 in Policy Years 1-5, and at months from the date we receive your request.
least $50,000 thereafter. . Partial withdrawals may change the minimum and target
. Partial withdrawals result in cancellation of monthly premium requirements applicable to the No-Lapse
Accumulation units from each applicable Subaccount. Period provision.
Unless you instruct us otherwise, we will deduct . Partial withdrawals may be taxable and subject to a 10%
withdrawal amounts from the Subaccounts, the fixed federal tax penalty.
account and the systematic transfer account on a
pro rata basis. No more than a pro rata amount may
be withdrawn from the fixed account and the systematic
transfer account.
</TABLE>
[_] DEATH BENEFIT
We will pay a death benefit after we receive necessary documentation of the
Insured's death, and we have sufficient information about the Beneficiary to
make the payment. Death benefits may be paid pursuant to a payment option
(including a lump-sum payment) selected by the Beneficiary to the extent allowed
by applicable law and any settlement agreement in effect at the insured's death.
(See the PAYMENT OF PROCEEDS section below.) If neither you nor the Beneficiary
makes a payment option election within 60 days of our receipt of documentation
of the insured's death, we will issue a lump-sum payment to the Beneficiary.
Death Benefit Options
You have a choice of one of two death benefit options. (Option 1 is in
effect unless you elect option 2.)
<TABLE>
<CAPTION>
Death Benefit Option 1: Death Benefit Option 2:
---------------------------------------- -------------------------------------
<S> <C>
The death benefit is the greater of: The death benefit is the Policy's
(a) the specified amount of insurance Accumulation Value on the date of
coverage on the date of death; or death plus the greater of:
(b) the Policy's Accumulation Value on (a) the specified amount of insurance
the date of death plus the corridor coverage on the date of death; or
amount. (b) the corridor amount.
The death benefit amount can be level The death benefit amount will always
at the specified amount of insurance vary as the Accumulation Value goes
coverage. up or down each day.
</TABLE>
27
<PAGE>
The corridor amount equals the Accumulation Value on the insured's date of
death multiplied by the corridor percentage from the table shown below for the
insured's attained age.
Attained Corridor Attained Corridor Attained Corridor
Age Percentage Age Percentage Age Percentage
0-40 150% 54 57% 68 17%
41 143% 55 50% 69 16%
42 136% 56 46% 70 15%
43 129% 57 42% 71 13%
44 122% 58 38% 72 11%
45 115% 59 34% 73 9%
46 109% 60 30% 74 7%
47 103% 61 28% 75-90 5%
48 97% 62 26% 91 4%
49 91% 63 24% 92 3%
50 85% 64 22% 93 2%
51 78% 65 20% 94 1%
52 71% 66 19% 95+ 0%
53 64% 67 18%
After the first Policy Year, you may change the death benefit option once each
year. Changes in the death benefit option may change the specified amount of
insurance coverage, because we will change the current specified amount to
maintain the level of death benefit in effect before the death benefit option
change. Any resulting decrease in specified amount is subject to a surrender
charge.
Rules for Changing the Death Benefit Option
. A change in death benefit option takes effect on the date the Monthly
Deduction is assessed after we receive your Written Notice to change.
. After each change in death benefit option, we will send you an amendment to
the Policy showing the option in effect and the current specified amount of
coverage.
. A change in the current specified amount of coverage resulting from a death
benefit option change will change the minimum monthly and target monthly
premium requirements applicable to the No-Lapse Period provision.
Change in Specified Amount of Insurance Coverage
After the first Policy Year, you may change the current specified amount of
insurance coverage once each year. Any change will take effect on the date the
Monthly Deduction is assessed following the date we approve the change. We will
send you an amendment to the Policy showing the current specified amount of
coverage after the change.
Rules for Changing Specified Amount
. An increase in the specified amount of coverage requires a new application
and evidence of insurability satisfactory to us.
. No increases after attaining age 90.
. A decrease in the specified amount is subject to a surrender charge on the
amount of the decrease.
. A decrease is only allowed to the extent the specified amount of coverage
remains at least $100,000 during Policy Years 1-5; $50,000 thereafter.
. A change in the current specified amount of coverage will change the
minimum monthly and target monthly premium requirements applicable to the
No-Lapse Period provision.
[_] PAYMENT OF PROCEEDS
You may elect to have proceeds paid as annuity payments under any combination of
the fixed and variable payout options shown in the Policy. If another option is
not chosen within 60 days of the date we receive satisfactory proof of death, we
will make payment in a lump sum.
Rules for Payment of Proceeds
. 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.
. We reserve the right to pay the proceeds in one sum when the amount is less
than $2,000, or when the option of payment chosen would result in periodic
payments of less than $20.
28
<PAGE>
. 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 Proceeds Payments: Fixed payments are available under all six payout
-----------------------
options described 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 of the payee. The interest rate used in the payout options is
guaranteed to yield 3% on an annual basis. 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 an interest rate that is guaranteed to yield 3% annually. Current interest
rates may be obtained from us.
Variable Proceeds 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 ALB.
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. We guarantee that the
dollar amount of each variable payment after the first will not be affected by
actual expenses (except changes in fund management expenses) or changes in
mortality experience. The amount of each subsequent payment equals the number
of variable payment units for each Subaccount, 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. The
number of units for each Subaccount is determined by dividing the amount of the
first payment attributable to that Subaccount by the value of a unit in that
Subaccount when the first payment is determined.
If the net investment return of a Subaccount for a payment period is equal
to the pro-rated portion of the 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 the assumed
investment rate 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 the assumed investment rate, 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
deducted to compensate us for the administrative and other costs and risks
associated with the variable payment options.
. Transfers between Fixed and Variable Payout Options
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 exchange.
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 we receive any request.
4 transfers are allowed each Policy Year that a payout option is in effect.
. Payout Options
NOTE: Unless you elect a payout option with a guaranteed period or option
1, (described below) it is possible only one payment would be made under the
payout option if the payee died before the due date of the second annuity
payment, only two annuity payments would be made if the payee died before the
due date of the third annuity payment, etc. If the continuation of variable
payments being made under option 2 or 6 does not depend upon the payee's
remaining alive; you may surrender your Policy and receive the commuted value of
any unpaid payments. However, if your payment under Option 2 or 6 depends upon
the payee's continued life, you cannot surrender your Policy for cash. In this
case, once option payments commence, payments will end upon the payee's death.
The longer the guaranteed or projected proceeds payment option period, the lower
the amount of each payment.
1) Proceeds Held on Deposit at Interest. While proceeds remain on
------------------------------------
deposit, we annually credit interest to the proceeds. The interest may
be paid to the payee or added to the amount on deposit.
2) Income of a Specified Amount. Proceeds are paid in monthly
----------------------------
installments of a specified amount over at least a five-year period
until proceeds, with interest, have been fully paid.
3) Income for a Specified Period. Periodic payments of proceeds are paid
-----------------------------
for the number of years chosen. If no other frequency is selected,
payments will be made monthly. Monthly incomes for each $1,000 of
proceeds which include interest, are illustrated by a table in the
Policy.
4) Lifetime Income. Proceeds are paid as monthly income for as long as
---------------
the payee lives. The amount of the monthly income annuity payment will
be an amount computed using either the Lifetime Monthly Income Table
set forth in the Policy (based on the 1983a mortality table) or, if
29
<PAGE>
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 proceeds payments, other than the first variable payment,
will vary in amount according to the investment performance of the
applicable variable investment options.
Guarantees Available for the Lifetime Income Option:
---------------------------------------------------
Guaranteed Period - An amount of monthly income is guaranteed for a
-----------------
specified number of years and thereafter as long as the payee lives.
Guaranteed Amount - An amount of monthly income is guaranteed until
-----------------
the sum of payments equals the proceeds placed under the option and as
long after that as the payee lives.
If any lifetime income option with a guaranteed period provides
installment payments of the same amount at some ages for different
guaranteed periods, then we will provide payments for the longest
guaranteed period that is available at that age and amount.
5) Lump Sum. Proceeds are paid in one sum.
--------
6) Other Options. We may be able to accommodate making proceeds payments
-------------
under other options, including joint and survivor periods. Contact us
for more information.
30
<PAGE>
------------------------
FEDERAL TAX MATTERS
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a tax advisor. No attempt is made
to consider any applicable state tax or other tax laws, or to address any
federal estate, or state and local estate, inheritance and other tax
consequences of ownership or receipt of distributions under a Policy. This
discussion of federal income tax considerations relating to the Policy is based
upon our understanding of laws as they now exist and are currently interpreted
by the Internal Revenue Service ("IRS").
[_] LIFE INSURANCE QUALIFICATION
The Internal Revenue Code of 1986, as amended (the "Code") defines a life
insurance contract for federal income tax purposes. This definition can be met
if an insurance contract satisfies either one of two tests set forth in that
section. The Code and related regulations do not directly address the manner in
which these tests should be applied to certain features of the Policy. Thus,
there is some uncertainty about the application of those tests to the Policy.
Tax laws affecting the Policy are complex. Tax results may vary among individual
uses of a Policy. You are encouraged to seek independent tax advice in
purchasing or making elections under the Policy.
Nevertheless, we believe the Policy qualifies as a life insurance contract
for federal tax purposes, so that:
. the death benefit should be fully excludable from the Beneficiary's
gross income; and
. 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.
We reserve the right to make such changes in the Policy as we deem
necessary to assure it qualifies as a life insurance contract under the Code and
continues to provide the tax benefits of such qualification.
Modified Endowment Contracts. The Code establishes a class of life
----------------------------
insurance contracts designated as modified endowment contracts. The Code rules
governing whether a Policy will be treated as a modified endowment contract are
extremely complex. In general, a Policy is a modified endowment contract if the
accumulated premium payments made at any time during the first seven Policy
Years exceed the sum of the net level premium payments which would have been
paid on or before such time if the Policy provided for paid-up future benefits
after the payment of seven level annual premiums. A Policy may also become a
modified endowment contract because of a material change. The determination of
whether a Policy is a modified endowment contract after a material change
generally depends upon the relationship of the Policy's death benefit and
Accumulation Value at the time of such change and the additional premium
payments made in the seven years following the material change. A Policy may
also become a modified endowment contract if the death benefit is reduced.
A Policy issued in exchange for a modified endowment contract is subject to
tax treatment as a modified endowment contract. However, we believe that a
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 to not make additional
payments in order to prevent a Policy from being treated as a modified endowment
contract.
This Policy's flexibility and how you tailor it to meet your needs could cause
it to be modified endowment contract. We recommend you consult with a tax
adviser to determine if desired Policy transactions may cause such treatment.
When a premium payment is credited which we believe causes the Policy to become
a modified endowment contract, we will notify you and offer you the opportunity
to request a refund of that premium in order to avoid such treatment. You have
30 days after receiving such a notice to request the refund.
[_] TAX TREATMENT OF LOANS AND OTHER DISTRIBUTIONS
Upon a surrender or lapse of the Policy or when benefits are paid at the
Policy's maturity date, if the amount received plus any loan amount exceeds the
total investment in the Policy, the excess will generally be treated as ordinary
income subject to tax, regardless of whether a Policy is or is not a modified
endowment contract. However, the tax consequences of distributions from, and
loans taken from or secured by, a Policy depend on whether the Policy is
classified as a modified endowment contract.
31
<PAGE>
"Investment in the Policy" means:
. the aggregate amount of any premium payments or other consideration paid
for the Policy, minus
. the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such
amount is excluded from gross income, will be disregarded), plus
. the amount of any loan from, or secured by, a Policy that is a modified
endowment contract to the extent that such amount is included in the
Owner's gross income.
Distributions from Policies Classified as Modified Endowment Contracts are
----------------------------------------------------------------------
subject to the following tax rules:
(1) All distributions, including surrenders and partial withdrawals, are
treated as ordinary income subject to tax up to the amount equal to the excess
(if any) of the Accumulation Value immediately before the distribution over the
investment in the Policy (see box below) at such time.
(2) Loans from or secured by the Policy are treated as distributions and
taxed accordingly.
(3) A 10% additional income tax is imposed on the portion of any
distribution from, or loan taken from or secured by, the Policy that is included
in income except where the distribution or loan is made on or after the Owner
attains age 59, is attributable to the Owner's becoming disabled, or is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's beneficiary.
Distributions from Policies Not Classified as Modified Endowment Contracts are
--------------------------------------------------------------------------
generally treated as first recovering the investment in the Policy and then,
only after the return of all such investment in the Policy, as distributing
taxable income. An exception to this general rule occurs in the case of a
decrease in the Policy's death benefit or any other change that reduces benefits
under the Policy in the first nine years after the Policy is issued and that
results in a cash distribution to the Owner in order for the Policy to continue
complying with the Code's definition of life insurance. Such a cash
distribution will be taxed in whole or in part as ordinary income (to the extent
of any gain in the Policy) under rules prescribed in Section 7702 of the Code.
Loans from, or secured by, a Policy that is not a modified endowment
contract are not treated as distributions. However, it is possible that
preferred loans could be treated as distributions rather than loans.
Neither distributions (including distributions upon surrender) nor loans
from, or secured by, a Policy that is not a modified endowment contract are
subject to the 10% additional income tax rule. If a Policy which is not a
modified endowment contract becomes a modified endowment contract, then any
distributions made from the Policy within two years prior to the change in such
status will become taxable in accordance with the modified endowment contract
rules discussed above.
[_] OTHER POLICY OWNER TAX MATTERS
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, a withdrawal, a surrender or
lapse, a change in Ownership, or an assignment of the Policy may have federal
income tax consequences. In addition, federal, state and local transfer, and
other tax consequences of Ownership or receipt of distributions from a Policy
depends on the circumstances of each Owner or Beneficiary.
Interest Paid on Policy loans generally is not tax deductible.
-----------------------------
Aggregation of modified endowment contracts. Pre-death distributions
-------------------------------------------
(including a loan, partial withdrawal, collateral assignment or full surrender)
from a Policy that is treated as a modified endowment contract may require a
special aggregation to determine the amount of income recognized on the Policy.
If we or any of our affiliates issue more than one modified endowment contract
to the same Policy Owner 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.
Federal and state estate, inheritance and other tax consequences of
----------------------------------------------------------------
ownership or receipt of proceeds under the Policy depend upon your or the
Beneficiary's individual circumstances.
The Policy may continue after the insured attains age 100. The tax
---------------------------------------------------------
consequences associated with continuing a Policy beyond age 100 are unclear. A
tax advisor should be consulted on this issue.
Diversification requirements. Code Section 817(h) requires 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 the
Code. Any failure to comply with the diversification requirements could subject
you to immediate taxation on the incremental increases in Accumulation Value of
the Policy plus the cost of insurance protection for the year. However, we
believe the Policy, through the underlying investment portfolios, complies fully
with such requirements.
Owner control. 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
32
<PAGE>
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 Variable 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.
Tax-advantaged arrangements. 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. Moreover, in recent
years, Congress has adopted new rules relating to corporate owned life
insurance. Any business contemplating the purchase of a new life insurance
contract or a change in an existing contract should consult a tax advisor.
Possible tax law changes. There is always a possibility that the tax
------------------------
treatment of the Policy could change, by legislation or otherwise. You should
consult a tax advisor with respect to possible tax law changes and their effect
on your intended use of the Policy.
No Guarantees Regarding Tax Treatment. We cannot guaranty the tax treatment
-------------------------------------
of the Policy or any transaction involving the Policy. You should consult with a
tax adviser if you have tax questions about the Policy.
33
<PAGE>
___________________________________________________________
MISCELLANEOUS
[_] OUR MANAGEMENT
Directors*
----------
Samuel L. Foggie, Sr. Retired Banking and Finance Industry Executive
William G. Campbell Attorney
M. Jane Huerter Secretary of our Company
Randall C. Horn President of our Company
Fred C. Boddy Vice President and Treasurer of our Company
Charles T. Locke III Attorney
James J. O'Neill Attorney
Oscar S. Straus II Chairman, The Daniel and Florence Guggenheim
Foundation
John A. Sturgeon President and COO, Mutual of Omaha Insurance
Company
John W. Weekly Chairman of the Board and CEO of our Company
Senior Officers*
----------------
John W. Weekly Chairman
Randall C. Horn President
M. Jane Huerter Secretary
Fred C. Boddy Vice President, Treasurer & Assistant Secretary
*Business address for all directors and officers is Companion Life
Insurance Company, Mutual of Omaha Plaza, Omaha, Nebraska 68175.
[_] DISTRIBUTION OF THE POLICIES
Mutual of Omaha Investor Services, Inc. ("MOIS"), Mutual of Omaha Plaza,
Omaha, Nebraska 68175, is the principal underwriter of the Policy. Like us, MOIS
is an affiliate 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. MOIS contracts with one or more registered broker-
dealers ("Distributors") to distribute Policies. 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 115% of target premium for the first Policy Year
and up to 5% of target premium thereafter. Distributors may receive additional
compensation for amounts received in excess of target premium. We may also pay
other distribution expenses such as production incentive bonuses, including non-
cash awards. These distribution expenses do not result in any charges under the
Policies that are not described under the EXPENSES section of this Prospectus.
[_] VOTING RIGHTS
As required by law, we will vote Series Fund shares held by the Variable
Account at regular and special shareholder meetings of the Series Funds pursuant
to instructions received from persons having voting interests in the Series
Funds. The Series Funds may not hold routine annual shareholder meetings.
As a Policy Owner, you may have a voting interest in the Series Fund
portfolios you are invested in. The number of votes that you may instruct for a
particular Subaccount is typically determined by your Accumulation Value in the
Subaccount. You will receive proxy material, reports, and other materials
relating to each Series Fund in which you have voting interests.
[_] DISTRIBUTION OF MATERIALS
We will distribute proxy statements, updated prospectuses and other
materials to you from time to time. In order to achieve cost savings, we may
send consolidated mailings to several owners with the same last name who share a
common address or post office box in accordance with the rules of the Securities
and Exchange Commission.
34
<PAGE>
[_] STATE REGULATION
We are subject to the insurance laws and regulations of all jurisdictions
where we are authorized to do business. The Policy has been approved by the
Department of Insurance of the State of New York and insurance departments of
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
insurance laws and regulations.
[_] LEGAL PROCEEDINGS
As of the date of this Prospectus, there are no legal proceedings affecting
the Variable Account, or that are material in relation to our total assets.
[_] INDEPENDENT AUDITORS
Our Financial Statements as of December 31, 1999 and 1998, and for the
years ended December 31, 1999, 1998 and 1997, included in the Registration
Statement which incorporates this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, Omaha, Nebraska, as stated in their reports
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 Companion Life Separate Account
B.
[_] 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. You will receive such additional periodic
reports as may be required by the SEC.
------------------------------------------------
DO YOU HAVE QUESTIONS?
If you have questions about your Policy or this
Prospectus, you may contact your agent or broker
who gave this Prospectus to you, or you may
contact us at: Companion, Variable Product
Services, P.O. Box 3664, Omaha, Nebraska 68103-
0664. Telephone 1-800-494-0067.
------------------------------------------------
35
<PAGE>
______________________________________________
ILLUSTRATIONS
DEATH BENEFITS, CASH SURRENDER VALUE AND ACCUMULATED PREMIUMS
The tables in this section illustrate how the Policy operates: 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 specified amount of life insurance coverage of $250,000
for a male age 45 and 55 and for a female age 45, each in a preferred nontobacco
rate class, and for a male age 45 in a non-preferred nontobacco rate class. The
tables reflect the 0.70% risk charge for Policy Years 1-10 (0.25% in years 11+)
deducted from Variable Account assets, the monthly $7 administrative charge, the
$2 premium processing charge, the deduction of 3.75% of premium payments for
state (where permitted) and federal taxes and the current cost of insurance
charge. The tables also include Accumulation Values, Cash Surrender Values and
death benefit amounts that reflect a 0.70% risk charge for Policy Years 1-10
(0.55% in Policy Years 11+), the maximum risk charge the company is
contractually entitled to assess under the Policy as well as a cost of insurance
charge based upon the guaranteed cost of insurance charge. 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 us or other companies. These tables assume no riders are attached to
the base policy illustrated.
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
differed from the 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, or 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 the maximum risk charge,
administrative charge, and a charge for the cost of insurance are deducted from
the Accumulation Value on each Monthly Deduction date. Companion reserves the
right to charge lower expense amounts than those set forth in the following
illustrations. 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 9-12 Policy Years, depending on issue age. The amounts
shown in the tables also take into account an average daily charge equal to an
annual charge 0.85% 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 -0.85%, 5.15%, 11.15%,
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
an amount equal to the annual premium required to keep the Policy in force 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 of insurance coverage, the proposed amount and frequency of
premium payments and any available riders requested.
36
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 0% (-0.85Net)
Male issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 3,120
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
--------------------------- ---------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,283 0 250,000 2,024 0 250,000
2 6,716 4,488 0 250,000 3,956 0 250,000
3 10,328 6,615 615 250,000 5,793 0 250,000
4 14,120 8,660 2,660 250,000 7,529 1,529 250,000
5 18,102 10,621 4,621 250,000 9,160 3,160 250,000
6 22,283 12,499 7,249 250,000 10,676 5,426 250,000
7 26,673 14,279 9,779 250,000 12,065 7,565 250,000
8 31,283 15,952 12,202 250,000 13,314 9,564 250,000
9 36,123 17,508 14,508 250,000 14,407 11,407 250,000
10 41,205 18,939 16,689 250,000 15,330 13,080 250,000
11 46,541 20,808 19,308 250,000 16,093 14,593 250,000
12 52,145 22,582 21,832 250,000 16,657 15,907 250,000
13 58,028 24,277 24,277 250,000 17,012 17,012 250,000
14 64,205 25,867 25,867 250,000 17,138 17,138 250,000
15 70,691 27,343 27,343 250,000 17,008 17,008 250,000
16 77,502 28,696 28,696 250,000 16,590 16,590 250,000
17 84,653 29,913 29,913 250,000 15,854 15,854 250,000
18 92,162 30,947 30,947 250,000 14,746 14,746 250,000
19 100,046 31,808 31,808 250,000 13,214 13,214 250,000
20 108,324 32,480 32,480 250,000 11,203 11,203 250,000
25 156,354 32,916 32,916 250,000 0 0 0
35 295,889 8,134 8,134 250,000 0 0 0
</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 for 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.
37
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 6% (5.15% Net)
Male issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 3,120
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,440 0 250,000 2,173 0 250,000
2 6,716 4,945 0 250,000 4,380 0 250,000
3 10,328 7,516 1,516 250,000 6,618 618 250,000
4 14,120 10,151 4,151 250,000 8,883 2,883 250,000
5 18,102 12,850 6,850 250,000 11,170 5,170 250,000
6 22,283 15,619 10,369 250,000 13,470 8,220 250,000
7 26,673 18,442 13,942 250,000 15,770 11,270 250,000
8 31,283 21,315 17,565 250,000 18,058 14,308 250,000
9 36,123 24,228 21,228 250,000 20,315 17,315 250,000
10 41,205 27,176 24,926 250,000 22,527 20,277 250,000
11 46,541 30,766 29,266 250,000 24,715 23,215 250,000
12 52,145 34,463 33,713 250,000 26,829 26,079 250,000
13 58,028 38,293 38,293 250,000 28,858 28,858 250,000
14 64,205 42,236 42,236 250,000 30,778 30,778 250,000
15 70,691 46,293 46,293 250,000 32,560 32,560 250,000
16 77,502 50,462 50,462 250,000 34,171 34,171 250,000
17 84,653 54,742 54,742 250,000 35,575 35,575 250,000
18 92,162 59,097 59,097 250,000 36,716 36,716 250,000
19 100,046 63,547 63,547 250,000 37,535 37,535 250,000
20 108,324 68,089 68,089 250,000 37,973 37,973 250,000
25 156,354 92,549 92,549 250,000 31,857 31,857 250,000
35 295,889 152,268 152,268 250,000 0 0 0
</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 for 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.
38
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 12% (11.15% Net)
Male issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 3,120
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,597 0 250,000 2,323 0 250,000
2 6,716 5,421 0 250,000 4,823 0 250,000
3 10,328 8,493 2,493 250,000 7,516 1,516 250,000
4 14,120 11,834 5,834 250,000 10,416 4,416 250,000
5 18,102 15,472 9,472 250,000 13,542 7,542 250,000
6 22,283 19,439 14,189 250,000 16,906 11,656 250,000
7 26,673 23,756 19,256 250,000 20,524 16,024 250,000
8 31,283 28,452 24,702 250,000 24,411 20,661 250,000
9 36,123 33,558 30,558 250,000 28,582 25,582 250,000
10 41,205 39,114 36,864 250,000 33,058 30,808 250,000
11 46,541 45,830 44,330 250,000 37,919 36,419 250,000
12 52,145 53,225 52,475 250,000 43,152 42,402 250,000
13 58,028 61,398 61,398 250,000 48,797 48,797 250,000
14 64,205 70,415 70,415 250,000 54,893 54,893 250,000
15 70,691 80,374 80,374 250,000 61,481 61,481 250,000
16 77,502 91,380 91,380 250,000 68,609 68,609 250,000
17 84,653 103,558 103,558 250,000 76,335 76,335 250,000
18 92,162 117,023 117,023 250,000 84,717 84,717 250,000
19 100,046 131,955 131,955 250,000 93,828 93,828 250,000
20 108,324 148,539 148,539 250,000 103,763 103,763 250,000
25 156,354 264,594 264,594 306,929 171,105 171,105 250,000
35 295,889 784,039 784,039 823,241 491,600 491,600 516,180
</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 for 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.
39
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 0% (-0.85% Net)
Male issue age 55 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 5,220
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 5,481 3,692 0 250,000 2,855 0 250,000
2 11,236 7,226 0 250,000 5,486 0 250,000
3 17,279 10,620 370 250,000 7,887 0 250,000
4 23,624 13,847 3,597 250,000 10,038 0 250,000
5 30,286 16,897 6,647 250,000 11,919 1,669 250,000
6 37,281 19,758 11,758 250,000 13,502 5,502 250,000
7 44,626 22,417 16,417 250,000 14,761 8,761 250,000
8 52,339 24,825 20,825 250,000 15,649 11,649 250,000
9 60,437 26,985 24,985 250,000 16,122 14,122 250,000
10 68,939 28,880 28,880 250,000 16,134 16,134 250,000
11 77,867 31,327 31,327 250,000 15,666 15,666 250,000
12 87,242 33,593 33,593 250,000 14,643 14,643 250,000
13 97,085 35,730 35,730 250,000 13,014 13,014 250,000
14 107,420 37,684 37,684 250,000 10,710 10,710 250,000
15 118,272 39,442 39,442 250,000 7,637 7,637 250,000
16 129,667 40,988 40,988 250,000 3,663 3,663 250,000
17 141,631 42,224 42,224 250,000 0 0 0
18 154,194 43,105 43,105 250,000 0 0 0
19 167,384 43,583 43,583 250,000 0 0 0
20 181,234 43,616 43,616 250,000 0 0 0
25 261,592 37,385 37,385 250,000 0 0 0
35 495,046 0 0 0 0 0 0
</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 for 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.
40
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 6% (5.15% Net)
Male issue age 55 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 5,220
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 5,481 3,951 0 250,000 3,088 0 250,000
2 11,236 7,975 0 250,000 6,129 0 250,000
3 17,279 12,091 1,841 250,000 9,114 0 250,000
4 23,624 16,277 6,027 250,000 12,020 1,770 250,000
5 30,286 20,526 10,276 250,000 14,821 4,571 250,000
6 37,281 24,828 16,828 250,000 17,485 9,485 250,000
7 44,626 29,174 23,174 250,000 19,980 13,980 250,000
8 52,339 33,518 29,518 250,000 22,252 18,252 250,000
9 60,437 37,868 35,868 250,000 24,247 22,247 250,000
10 68,939 42,209 42,209 250,000 25,908 25,908 250,000
11 77,867 47,412 47,412 250,000 27,224 27,224 250,000
12 87,242 52,756 52,756 250,000 28,092 28,092 250,000
13 97,085 58,300 58,300 250,000 28,445 28,445 250,000
14 107,420 64,012 64,012 250,000 28,198 28,198 250,000
15 118,272 69,902 69,902 250,000 27,233 27,233 250,000
16 129,667 75,972 75,972 250,000 25,395 25,395 250,000
17 141,631 82,163 82,163 250,000 22,484 22,484 250,000
18 154,194 88,463 88,463 250,000 18,234 18,234 250,000
19 167,384 94,865 94,865 250,000 12,336 12,336 250,000
20 181,234 101,371 101,371 250,000 4,433 4,433 250,000
25 261,592 137,369 137,369 250,000 0 0 0
35 495,046 244,596 244,596 250,000 0 0 0
</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 for 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.
41
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 12% (11.15% Net)
Male issue age 55 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 5,220
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 5,481 4,211 0 250,000 3,322 0 250,000
2 11,236 8,756 0 250,000 6,802 0 250,000
3 17,279 13,689 3,439 250,000 10,453 203 250,000
4 23,624 19,026 8,776 250,000 14,277 4,027 250,000
5 30,286 24,800 14,550 250,000 18,271 8,021 250,000
6 37,281 31,052 23,052 250,000 22,434 14,434 250,000
7 44,626 37,826 31,826 250,000 26,763 20,763 250,000
8 52,339 45,137 41,137 250,000 31,243 27,243 250,000
9 60,437 53,063 51,063 250,000 35,859 33,859 250,000
10 68,939 61,667 61,667 250,000 40,600 40,600 250,000
11 77,867 71,971 71,971 250,000 45,535 45,535 250,000
12 87,242 83,360 83,360 250,000 50,609 50,609 250,000
13 97,085 96,019 96,019 250,000 55,829 55,829 250,000
14 107,420 110,079 110,079 250,000 61,200 61,200 250,000
15 118,272 125,726 125,726 250,000 66,715 66,715 250,000
16 129,667 143,176 143,176 250,000 72,354 72,354 250,000
17 141,631 162,642 162,642 250,000 78,087 78,087 250,000
18 154,194 184,424 184,424 250,000 83,867 83,867 250,000
19 167,384 208,886 208,886 250,000 89,653 89,653 250,000
20 181,234 236,476 236,476 253,029 95,427 95,427 250,000
25 261,592 427,338 427,338 448,705 124,818 124,818 250,000
35 495,046 1,255,952 1,255,952 1,318,750 219,161 219,161 250,000
</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 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 for 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.
42
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 0% (-0.85% Net)
Female issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 2,500
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,750 0 250,000 1,523 0 250,000
2 5,381 3,440 0 250,000 2,977 0 250,000
3 8,275 5,069 69 250,000 4,356 0 250,000
4 11,314 6,636 1,636 250,000 5,661 661 250,000
5 14,505 8,137 3,137 250,000 6,885 1,885 250,000
6 17,855 9,576 5,326 250,000 8,024 3,774 250,000
7 21,373 10,941 7,191 250,000 9,071 5,321 250,000
8 25,066 12,224 9,224 250,000 10,016 7,016 250,000
9 28,945 13,424 10,924 250,000 10,852 8,352 250,000
10 33,017 14,533 12,783 250,000 11,578 9,828 250,000
11 37,293 16,025 14,775 250,000 12,209 10,959 250,000
12 41,782 17,450 16,950 250,000 12,726 12,226 250,000
13 46,497 18,809 18,809 250,000 13,134 13,134 250,000
14 51,446 20,098 20,098 250,000 13,434 13,434 250,000
15 56,644 21,312 21,312 250,000 13,612 13,612 250,000
16 62,101 22,445 22,445 250,000 13,648 13,648 250,000
17 67,831 23,478 23,478 250,000 13,511 13,511 250,000
18 73,848 24,398 24,398 250,000 13,159 13,159 250,000
19 80,165 25,193 25,193 250,000 12,542 12,542 250,000
20 86,798 25,853 25,853 250,000 11,626 11,626 250,000
25 125,284 27,190 27,190 250,000 1,853 1,853 250,000
35 237,091 12,433 12,433 250,000 0 0 0
</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 for 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.
43
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 6% (5.15% Net)
Female issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 2,500
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,874 0 250,000 1,640 0 250,000
2 5,381 3,796 0 250,000 3,304 0 250,000
3 8,275 5,768 768 250,000 4,989 0 250,000
4 11,314 7,790 2,790 250,000 6,696 1,696 250,000
5 14,505 9,860 4,860 250,000 8,418 3,418 250,000
6 17,855 11,984 7,734 250,000 10,149 5,899 250,000
7 21,373 14,150 10,400 250,000 11,884 8,134 250,000
8 25,066 16,354 13,354 250,000 13,613 10,613 250,000
9 28,945 18,594 16,094 250,000 15,325 12,825 250,000
10 33,017 20,865 19,115 250,000 17,021 15,271 250,000
11 37,293 23,676 22,426 250,000 18,722 17,472 250,000
12 41,782 26,579 26,079 250,000 20,404 19,904 250,000
13 46,497 29,579 29,579 250,000 22,070 22,070 250,000
14 51,446 32,677 32,677 250,000 23,720 23,720 250,000
15 56,644 35,874 35,874 250,000 25,341 25,341 250,000
16 62,101 39,171 39,171 250,000 26,913 26,913 250,000
17 67,831 42,556 42,556 250,000 28,403 28,403 250,000
18 73,848 46,023 46,023 250,000 29,768 29,768 250,000
19 80,165 49,566 49,566 250,000 30,956 30,956 250,000
20 86,798 53,184 53,184 250,000 31,928 31,928 250,000
25 125,284 72,726 72,726 250,000 32,547 32,547 250,000
35 237,091 118,322 118,322 250,000 0 0 0
</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 for 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.
44
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 12% (11.15% Net)
Female issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 2,500
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,997 0 250,000 1,756 0 250,000
2 5,381 4,168 0 250,000 3,646 0 250,000
3 8,275 6,527 1,527 250,000 5,679 679 250,000
4 11,314 9,094 4,094 250,000 7,869 2,869 250,000
5 14,505 11,887 6,887 250,000 10,228 5,228 250,000
6 17,855 14,935 10,685 250,000 12,766 8,516 250,000
7 21,373 18,249 14,499 250,000 15,498 11,748 250,000
8 25,066 21,854 18,854 250,000 18,434 15,434 250,000
9 28,945 25,777 23,277 250,000 21,590 19,090 250,000
10 33,017 30,046 28,296 250,000 24,989 23,239 250,000
11 37,293 35,255 34,005 250,000 28,700 27,450 250,000
12 41,782 40,995 40,495 250,000 32,721 32,221 250,000
13 46,497 47,326 47,326 250,000 37,095 37,095 250,000
14 51,446 54,312 54,312 250,000 41,865 41,865 250,000
15 56,644 62,027 62,027 250,000 47,068 47,068 250,000
16 62,101 70,553 70,553 250,000 52,740 52,740 250,000
17 67,831 79,968 79,968 250,000 58,913 58,913 250,000
18 73,848 90,371 90,371 250,000 65,621 65,621 250,000
19 80,165 101,876 101,876 250,000 72,897 72,897 250,000
20 86,798 114,615 114,615 250,000 80,803 80,803 250,000
25 125,284 203,155 203,155 250,000 133,279 133,279 250,000
35 237,091 606,342 606,342 636,659 377,657 377,657 396,540
</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 for 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.
45
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 0% (-0.85% Net)
Male issue age 45 Nonpreferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 3,120
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,205 0 250,000 2,024 0 250,000
2 6,716 4,328 0 250,000 3,956 0 250,000
3 10,328 6,367 367 250,000 5,793 0 250,000
4 14,120 8,319 2,319 250,000 7,529 1,529 250,000
5 18,102 10,180 4,180 250,000 9,160 3,160 250,000
6 22,283 11,942 6,692 250,000 10,676 5,426 250,000
7 26,673 13,596 9,096 250,000 12,065 7,565 250,000
8 31,283 15,132 11,382 250,000 13,314 9,564 250,000
9 36,123 16,541 13,541 250,000 14,407 11,407 250,000
10 41,205 17,806 15,556 250,000 15,330 13,080 250,000
11 46,541 19,402 17,902 250,000 16,093 14,593 250,000
12 52,145 20,882 20,132 250,000 16,657 15,907 250,000
13 58,028 22,244 22,244 250,000 17,012 17,012 250,000
14 64,205 23,477 23,477 250,000 17,138 17,138 250,000
15 70,691 24,570 24,570 250,000 17,008 17,008 250,000
16 77,502 25,511 25,511 250,000 16,590 16,590 250,000
17 84,653 26,257 26,257 250,000 15,854 15,854 250,000
18 92,162 26,780 26,780 250,000 14,746 14,746 250,000
19 100,046 27,050 27,050 250,000 13,214 13,214 250,000
20 108,324 27,039 27,039 250,000 11,203 11,203 250,000
25 156,354 22,993 22,993 250,000 0 0 0
35 295,889 0 0 250,000 0 0 0
</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 for 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.
46
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 6% (5.15% Net)
Male issue age 45 Nonpreferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 3,120
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,359 0 250,000 2,173 0 250,000
2 6,716 4,774 0 250,000 4,380 0 250,000
3 10,328 7,245 1,245 250,000 6,618 618 250,000
4 14,120 9,768 3,768 250,000 8,883 2,883 250,000
5 18,102 12,343 6,343 250,000 11,170 5,170 250,000
6 22,283 14,964 9,714 250,000 13,470 8,220 250,000
7 26,673 17,621 13,121 250,000 15,770 11,270 250,000
8 31,283 20,307 16,557 250,000 18,058 14,308 250,000
9 36,123 23,014 20,014 250,000 20,315 17,315 250,000
10 41,205 25,726 23,476 250,000 22,527 20,277 250,000
11 46,541 28,959 27,459 250,000 24,715 23,215 250,000
12 52,145 32,262 31,512 250,000 26,829 26,079 250,000
13 58,028 35,637 35,637 250,000 28,858 28,858 250,000
14 64,205 39,080 39,080 250,000 30,778 30,778 250,000
15 70,691 42,586 42,586 250,000 32,560 32,560 250,000
16 77,502 46,149 46,149 250,000 34,171 34,171 250,000
17 84,653 49,737 49,737 250,000 35,575 35,575 250,000
18 92,162 53,329 53,329 250,000 36,716 36,716 250,000
19 100,046 56,905 56,905 250,000 37,535 37,535 250,000
20 108,324 60,446 60,446 250,000 37,973 37,973 250,000
25 156,354 78,128 78,128 250,000 31,857 31,857 250,000
35 295,889 104,542 104,542 250,000 0 0 0
</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 for 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.
47
<PAGE>
Companion Life Insurance Company
Flexible Premium Variable Life Insurance
Hypothetical Illustration
Assuming Hypothetical Gross annual Investment Return of 12% (11.15% Net)
Male issue age 45 Nonpreferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $ 3,120
<TABLE>
<CAPTION>
Current Charges * Guaranteed Charges **
------------------------------- -------------------------------
Premiums
End of Accumulated Accumu- Cash Accumu- Cash
Contract at 5% Interest lation Surrender Death lation Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,514 0 250,000 2,323 0 250,000
2 6,716 5,240 0 250,000 4,823 0 250,000
3 10,328 8,198 2,198 250,000 7,516 1,516 250,000
4 14,120 11,406 5,406 250,000 10,416 4,416 250,000
5 18,102 14,889 8,889 250,000 13,542 7,542 250,000
6 22,283 18,669 13,419 250,000 16,906 11,656 250,000
7 26,673 22,766 18,266 250,000 20,524 16,024 250,000
8 31,283 27,206 23,456 250,000 24,411 20,661 250,000
9 36,123 32,020 29,020 250,000 28,582 25,582 250,000
10 41,205 37,236 34,986 250,000 33,058 30,808 250,000
11 46,541 43,468 41,968 250,000 37,919 36,419 250,000
12 52,145 50,311 49,561 250,000 43,152 42,402 250,000
13 58,028 57,838 57,838 250,000 48,797 48,797 250,000
14 64,205 66,124 66,124 250,000 54,893 54,893 250,000
15 70,691 75,255 75,255 250,000 61,481 61,481 250,000
16 77,502 85,330 85,330 250,000 68,609 68,609 250,000
17 84,653 96,440 96,440 250,000 76,335 76,335 250,000
18 92,162 108,707 108,707 250,000 84,717 84,717 250,000
19 100,046 122,274 122,274 250,000 93,828 93,828 250,000
20 108,324 137,313 137,313 250,000 103,763 103,763 250,000
25 156,354 243,335 243,335 282,269 171,105 171,105 250,000
35 295,889 721,067 721,067 757,120 491,600 491,600 516,180
</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 for 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.
48
<PAGE>
___________________________________________________________
FINANCIAL STATEMENTS
49
<PAGE>
COMPANION LIFE
INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF
UNITED OF OMAHA LIFE INSURANCE COMPANY)
STATUTORY BASIS FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 1999, 1998 AND 1997
50
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Companion Life Insurance Company
Rye, New York
We have audited the accompanying statutory basis statements of admitted assets,
liabilities, and surplus of Companion Life Insurance Company (the "Company") (a
wholly-owned subsidiary of United of Omaha Life Insurance Company) as of
December 31, 1999 and 1998, and the related statutory basis statements of
income, changes in surplus, and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
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,
which practices differ from generally accepted accounting principles. The
effects on such financial statements of the differences between the statutory
basis of accounting and generally accepted accounting principles are described
in Note 12.
In our opinion, because of the effects of the matters discussed in the preceding
paragraph, the financial statements do not present fairly, in accordance with
generally accepted accounting principles, the financial position of the Company
as of December 31, 1999 and 1998, or the results of its operations or its cash
flows for each of the three years in the period ended December 31, 1999.
In our opinion, the statutory basis 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, 1999 and 1998,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1999, on the basis of accounting described in
Note 1 to the financial statements.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule 1 - Selected Financial Data is
presented to comply with the National Association of Insurance Commissioners
Annual Statement Instructions and is not a required part of the basic financial
statements. This schedule is the responsibility of the Company's management.
This schedule has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
February 11, 2000
51
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADMITTED ASSETS 1999 1998
<S> <C> <C>
Cash and invested assets:
Bonds $459,013,552 $435,631,637
Mortgage loans 9,074,049 6,827,862
Policy loans 10,134,626 10,521,818
Cash and short-term investments 9,282,717 12,499,909
Other invested assets 0 214,292
Receivable for securities 232,468 0
-------------- -------------
Total cash and invested assets 487,737,412 465,695,518
Premiums deferred and uncollected 2,600,674 5,101,969
Investment income due and accrued 5,199,488 4,799,859
Other assets 3,481,994 497,050
Separate account assets 35,096,873 26,252,806
-------------- -------------
Total admitted assets $ 534,116,441 $ 502,347,202
============== =============
LIABILITIES
Policy reserves:
Aggregate reserve for policies and contracts $ 352,121,619 $ 345,518,702
Policy and contract claims 5,048,125 4,152,097
Other reserves 394,089 425,946
-------------- -------------
Total policy reserves 357,563,833 350,096,745
Interest maintenance reserve 442,266 563,032
Asset valuation reserve 3,402,760 2,967,253
General expenses and taxes due or accrued 1,283,289 1,103,741
Funds held under reinsurance treaties 69,445,931 51,303,292
Reinsurance in unauthorized companies 41,163 34,604
Amounts due reinsurers 19,785 5,821
Federal income taxes due or accrued 619,859 1,965,047
Other liabilities 2,908,021 6,934,207
Separate account liabilities 35,051,683 26,214,408
------------ ------------
Total liabilities 470,778,590 441,188,150
------------ ------------
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 500,089 474,502
Unassigned surplus 15,187,762 13,034,550
-------------- -------------
Total surplus 63,337,851 61,159,052
-------------- -------------
Total liabilities and surplus $ 534,116,441 $ 502,347,202
============== =============
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
52
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Income:
Net premiums and annuity considerations $38,288,441 $40,257,141 $45,556,708
Other considerations and fund deposits 5,668,080 14,493,777 8,684,292
Net investment income 34,166,037 32,813,466 31,122,199
Other income 3,276,552 1,859,531 2,768,489
---------- ---------- ----------
Total income 81,399,110 89,423,915 88,131,688
---------- ---------- ----------
Benefits and expenses:
Policyholder and beneficiary benefits 44,486,605 51,057,581 42,230,053
Increase (decrease) in reserves for policyholder
and beneficiary benefits 6,602,917 (6,022,852) 13,755,209
Commissions 5,113,960 4,817,705 5,608,866
Operating expenses 15,033,174 15,681,296 14,693,625
Net transfers to separate account 4,247,836 12,653,190 7,143,343
---------- ---------- ----------
Total benefits and expenses 75,484,492 78,186,920 83,431,096
---------- ---------- ----------
Net gain from operations before federal
income taxes and net realized capital losses 5,914,618 11,236,995 4,700,592
Federal income taxes 3,031,567 4,929,330 2,424,710
---------- ---------- ----------
Net gain from operations before net
realized capital losses 2,883,051 6,307,665 2,275,882
Net realized capital gains (losses) 0 0 (336,684)
----------- ----------- -----------
Net income $ 2,883,051 $ 6,307,665 $ 1,939,198
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
53
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF CHANGES IN SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<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 surplus:
Balance at beginning and end of year 45,650,000 45,650,000 45,650,000
Special surplus and contingency reserve:
Balance at beginning of year 474,502 428,417 400,297
Increase in group contingency life reserve 25,587 46,085 28,120
----------- ----------- ------
Balance at end of year 500,089 474,502 428,417
----------- ----------- -------
Unassigned surplus:
Balance at beginning of year 13,034,550 7,057,287 3,674,850
Net income 2,883,051 6,307,665 1,939,198
Change in separate account surplus 0 0 22,283
Increase (decrease) in net unrealized capital
gains and losses (192,674) 0 599,129
(Increase) decrease in:
Non-admitted assets (69,512) 83,597 271,491
Liability for reinsurance in unauthorized companies (6,559) (243) (233)
Asset valuation reserve (435,507) (367,671) 578,689
Contingency reserve (25,587) (46,085) (28,120)
----------- ---------- -------
Balance at end of year 15,187,762 13,034,550 7,057,287
----------- ----------- ---------
Total surplus $63,337,851 $61,159,052 $55,135,704
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
54
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cash from operations:
Premiums, annuity considerations and
fund deposits $ 47,008,353 $ 54,346,857 $ 53,672,663
Net investment income 33,184,111 31,767,402 30,446,317
Other income 2,536,480 1,824,882 2,715,619
Benefits (43,600,244) (49,517,053) (44,468,851)
Commissions and general expenses (16,905,217) (17,533,477) (19,297,511)
Federal income taxes (4,328,976) (3,472,953) (2,395,000)
Other operating expenses (8,059,925) (15,808,890) (8,693,487)
------------ ------------ ------------
Net cash from operations 9,834,582 1,606,768 11,979,750
------------ ------------ ------------
Cash from investments:
Proceeds from investments sold, redeemed
or matured:
Bonds 82,666,925 67,223,733 41,740,375
Mortgage loans 267,583 4,681,032 6,500,559
Other invested assets 230,957 0 0
Taxes on capital gains (86,212) 0 (193,958)
Cost of investments acquired:
Bonds (105,754,712) (86,578,763) (86,319,745)
Mortgage loans (2,515,000) (1,486,237) 0
Other invested assets (16,666) (88,543) (64,552)
Net decrease in policy loans 387,192 206,951 858,076
------------ ------------ ------------
Net cash from investments (24,819,933) (16,041,827) (37,479,245)
------------ ------------ ------------
Cash from financing and other sources:
Other cash provided 19,955,419 20,487,467 29,732,631
Other cash used (8,187,260) (1,021,255) (426,840)
------------ ------------ ------------
Net cash from financing and other sources 11,768,159 19,466,212 29,305,791
------------ ------------ ------------
Net change in cash and short-term investments (3,217,192) 5,031,153 3,806,296
Cash and short-term investments:
Beginning of year 12,499,909 7,468,756 3,662,460
------------ ------------ ------------
End of year $ 9,282,717 $ 12,499,909 $ 7,468,756
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
55
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND 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 health and accident and life 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 accompanying statutory financial statements vary in some respects from
those that would be presented in conformity with generally accepted
accounting principles. 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; (g) comprehensive income and its components are
not presented in the financial statements; and (h) changes in certain
assets designated as "non-admitted" assets have been charged or credited to
unassigned surplus.
Use of Estimates - The preparation of financial statements in accordance
with statutory accounting practices requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
Investments - Bonds are generally stated at amortized cost. Premiums and
discounts on bonds not backed by other loans are amortized using the
scientific method. Premiums and discounts on loan-backed bonds and
structured securities are amortized using the retrospective 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" are excluded from the statutory basis statements of admitted
assets, liabilities and surplus.
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
56
<PAGE>
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 ("CRVM") basis or the Net
Level Premium Method 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 known.
Special Surplus and Contingency Reserve - The Company is required by the
State of New York to maintain a group contingency life reserve. This
reserve is equal to an annual accumulation of 2% of the net group life
premiums less dividends thereon, up to a maximum accumulation of one-half
of the net aggregate group life premiums received. This reserve is held as
a portion of total surplus on the statutory basis statements of admitted
assets, liabilities and surplus.
Premiums and Related Commissions - Premiums are recognized as income over
the premium paying period of the policies. 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 prescribed by 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 losses 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.
Non-Admitted Assets - Certain assets designated as "non-admitted",
principally receivables greater than ninety days due and office furniture
and equipment, are excluded from the statutory basis statements of admitted
assets, liabilities and surplus. The net change in such assets is charged
or credited 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 for these instruments 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 and
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 calculations, which are based on 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 Account - The assets of the separate account shown in the
statutory basis statements of admitted assets, are carried at fair value
and consist primarily of mutual funds held by the Company for the benefit
of certificate holders under individual annuity contracts. Deposits
received from, and benefits paid to, separate account certificate holders
are reflected in the statutory basis statements of income, but are offset
by transfers to or from the separate account. Net investment income and
realized and unrealized capital gains and losses on the separate account
are not reflected in the statutory basis statements of income. Mortality,
policy administration and surrender charges are included in transfers from
the separate account.
57
<PAGE>
2. INVESTMENTS
The cost or amortized cost, gross unrealized gains, gross unrealized losses
and estimated fair value of the Company's investment securities were as
follows:
<TABLE>
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
At December 31, 1999:
U.S. Government $ 214,982 $ 0 $ 3,912 $ 211,070
Mortgage backed securities 54,802,186 62,251 2,042,963 52,821,474
Special revenue 1,914,925 109,482 28,877 1,995,530
Industrial and miscellaneous 329,842,781 1,793,602 11,513,700 320,122,683
Public utilities 27,864,396 156,541 770,329 27,250,608
Collateralized mortgage obligations 52,592,819 23,467 578,245 52,038,041
Credit-tenant loans 1,267,646 22,508 0 1,290,154
------------- ------------ ------------ -------------
$ 468,499,735 $ 2,167,851 $ 14,938,026 $ 455,729,560
============= ============ ============ =============
Bonds $ 459,013,552
Short-term investments 9,486,183
-------------
$ 468,499,735
=============
<CAPTION>
Cost or Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
At December 31, 1998:
U.S. Government $ 497,870 $ 7,440 $ 0 $ 505,310
Mortgage backed securities 40,568,422 1,876,477 10,254 42,434,645
Special revenue 610,045 117,953 0 727,998
Industrial and miscellaneous 311,542,595 9,573,684 1,319,204 319,797,075
Public utilities 25,740,286 1,012,547 325 26,752,508
Collateralized mortgage obligations 66,610,503 345,644 27,536 66,928,611
Credit-tenant loans 1,451,916 110,913 0 1,562,829
------------- ------------ ------------ -------------
$ 447,021,637 $ 13,044,658 $ 1,357,319 $ 458,708,976
============= ============ ============ =============
Bonds $ 435,631,637
Short-term investments 11,390,000
-------------
$ 447,021,637
=============
</TABLE>
58
<PAGE>
The amortized cost ad estimated fair value of debt securities at December 31,
1999, 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 penalities.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
<S> <C> <C>
Due in one year or less $ 31,286,725 $ 31,386,026
Due after one year through five years 98,215,111 97,306,041
Due after five years through ten years 134,392,063 127,121,860
Due after ten years 97,210,831 95,056,118
------------ ------------
361,104,730 350,870,045
Collateralized mortgage obligations and mortgage
backed securities 107,395,005 104,859,515
------------ ------------
$468,499,735 $455,729,560
============ ============
</TABLE>
The sources of net investment income were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Bonds $32,272,209 $31,323,770 $29,303,742
Mortgage loans 752,019 775,087 1,273,829
Policy loans 498,115 491,873 544,364
Short-term investments 577,703 457,330 389,780
Other 60,803 24,526 25,165
----------- ----------- -----------
34,160,849 33,072,586 31,536,880
Investment expense (186,954) (466,868) (595,604)
Amortization of interest maintenance reserve 192,142 207,748 180,923
----------- ----------- -----------
$34,166,037 $32,813,466 $31,122,199
=========== =========== ===========
</TABLE>
59
<PAGE>
Gross realized gains and losses on the sale or prepayment of investment
securities consist of the following:
<TABLE>
<CAPTION>
Net
Gross Gross Realized
Realized Realized Gains
Gains Losses (Losses)
<S> <C> <C> <C>
Year ended December 31, 1999:
Bonds $332,320 $222,512 $ 109,808
Mortgage loans 0 0 0
-------- -------- ---------
$332,320 $222,512 109,808
======== ========
Capital gains tax (38,433)
Transfers to IMR (71,375)
---------
Net realized capital gains (losses) $ 0
=========
Year ended December 31, 1998:
Bonds $147,062 $ 3,362 $ 143,700
Mortgage loans 101,073 0 101,073
-------- -------- ---------
$248,135 $ 3,362 244,773
======== ========
Capital gains tax (85,671)
Transfers to IMR (159,102)
---------
Net realized capital gains (losses) $ 0
=========
Year ended December 31, 1997:
Bonds $293,471 $548,904 $(255,433)
Mortgage loans 0 66,717 (66,717)
-------- -------- ---------
$293,471 $615,621 (322,150)
======== ========
Capital gains tax benefit 112,753
Transfers to IMR (127,287)
---------
Net realized capital gains (losses) $(336,684)
=========
</TABLE>
Proceeds from the sale of bonds were $8,438,798, $739,806 and $5,707,696 during
1999, 1998 and 1997, respectively.
At December 31, 1999 and 1998, securities with an amortized cost of $214,982 and
$274,747, respectively, were deposited with the Insurance Department of the
State of New York.
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 the loan was originated, exclusive of insured, guaranteed or
purchase money mortgages, was 75%. The estimated fair value of the mortgage loan
portfolio was $8,909,292 and $7,281,385 at December 31, 1999 and 1998,
respectively.
The Company has commitments to fund bond investments of approximately $2,000,000
as of December 31, 1999. These commitments are legally binding and have fixed
expiration dates or other termination clauses that may require a payment of a
fee. In the event that the financial condition of a borrower deteriorates
materially, the commitment may be terminated. Since some of the commitments may
expire or terminate, the total commitments do not necessarily represent future
liquidity requirements.
60
<PAGE>
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 policy 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 for 1993 through 1995 are currently under
examination by the Internal Revenue Service ("IRS"). Management believes
the result of this examination will have no material impact on the
Company's statutory basis financial statements.
Under federal income tax law in effect 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 not
likely.
4. RETIREMENT BENEFITS
The Company participates with Mutual of Omaha and certain subsidiaries (the
"Companies") in a noncontributory defined benefit plan covering all United
States employees meeting certain minimum requirements. Retirement benefits
are based upon years of credited service and final average earnings
history.
Information regarding accrued benefits and net assets has not been
determined on an individual company basis. The Company's allocation of
salary expense was less than 2% of the total Companies' salary expense in
1999, 1998 and 1997. The Companies expensed contributions of $12,971,440,
$10,254,308 and $7,972,335 in 1999, 1998 and 1997, respectively. Total
benefit costs were $26,101,000, $26,160,000 and $24,148,000 in 1999, 1998
and 1997, respectively. Plan assets include United of Omaha Life Insurance
Company guaranteed investment contracts of $291,281,000 and $267,183,000 at
December 31, 1999 and 1998, respectively. In 1998, the Companies changed
the plan's assumed annual investment return and, in order to improve the
funding status of the plan, increased the amount that was contributed for
1998. At December 31, 1998, the Companies recorded a direct charge to
surplus of $37,540,647, which represented an additional contribution of
$57,814,647, net of tax. The valuation date for the pension benefit amounts
in the table below is January 1, 1999.
61
<PAGE>
The Companies also provide certain postretirement medical and life
insurance benefits to employees hired before January 1, 1995. Benefits are
based on hire date, age and years of service. The cost of these
postretirement benefits is allocated to the Companies in accordance with an
intercompany cost-sharing agreement. Plan assets are invested in a United
of Omaha Life Insurance Company investment contract. The Companies use the
accrual method of accounting for postretirement benefits and elected to
amortize the original transition obligation over 20 years. Employer
contributions for these postretirement benefits were $3,684,000, $2,709,000
and $2,657,000 during the years ended December 31, 1999, 1998 and 1997,
respectively. Total benefit costs were $10,130,000, $9,853,000, and
$11,602,000 in 1999, 1998 and 1997, respectively.
<TABLE>
<CAPTION>
January 1, December 31,
--------------------------------- ------------------------------
Pension Benefits Other Benefits
--------------------------------- ------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Benefit obligation $ 475,851,413 $ 445,896,799 $ 90,913,152 $ 88,227,132
Fair value of plan assets 458,944,992 389,955,899 9,564,322 5,641,539
------------- ------------- ------------ ------------
Funded status $ (16,906,421) $ (55,940,900) $(81,348,830) $(82,585,593)
============= ============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
------------------------- --------------------------
Pension Benefits Other Benefits
------------------------- --------------------------
Weighted average assumptions 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Discount rate 6.55% 6.73% 7.75% 7.00%
Expected return on plan assets 9.00% 9.00% N/A N/A
Rate of compensation increase 5.00% 5.00% N/A N/A
Health care cost trend rate N/A N/A 5.00% 5.00%
</TABLE>
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 benefit obligation as of December
31, 1999 by approximately $6,200,000 and the estimated eligibility and
interest cost components of the net periodic postretirement benefit costs
for 1999 by approximately $800,000.
The Companies sponsor various savings and investment plans. The
Companies' expense for defined contribution plans was $10,526,000,
$6,472,000 and $14,817,000 in 1999, 1998 and 1997, respectively.
5. RELATED PARTY TRANSACTIONS
The Company's investments in mortgage loans are held through joint
participation with United of Omaha.
Mutual of Omaha and United of Omaha provide actuarial, data processing,
consulting and various other services to the Company. Charges for these
services amounted to approximately $5,785,000, $3,854,000 and $2,652,000
for 1999, 1998 and 1997, respectively. Included in other liabilities are
unsettled balances related to these services of approximately $1,554,000
and $1,606,000 as of December 31, 1999 and 1998, respectively.
62
<PAGE>
The Company cedes group and individual life insurance and individual
annuity business to United of Omaha. The Company entered into a
coinsurance treaty with United of Omaha relating to bank annuity business
in which the Company cedes 90% of the 1999 and 1998 related premiums to
United of Omaha and United of Omaha pays 90% of the related benefits in
1999 and 1998. The total amounts ceded by the Company relating to the
treaties with United of Omaha were as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Amounts recoverable from reinsurance $ 96,415 $ 136,059
=========== ===========
Policy and contract claims $ 2,644,493 $ 2,379,306
=========== ===========
Aggregate reserve for policies and contracts $67,290,793 $47,633,504
=========== ===========
Funds held under reinsurance treaties $69,445,931 $51,303,292
=========== ===========
Premium considerations $23,134,359 $19,789,981
=========== ===========
Policyholder and beneficiary benefits $ 7,951,294 $ 7,559,683
=========== ===========
</TABLE>
The Company also ceded group and individual accident and health insurance to
Mutual of Omaha. The amounts ceded by the Company were as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Amounts recoverable from reinsurance $ 0 $ 1,950
=========== ===========
Policy and contract claims $ 1,911,580 $ 797,861
=========== ===========
Aggregate reserves for policies and contracts $ 1,009,528 $ 703,126
=========== ===========
Premium considerations $ 4,042,011 $ 2,035,628
=========== ===========
Policyholder and beneficiary benefits $ 3,061,954 $ 2,775,801
=========== ===========
</TABLE>
6. REINSURANCE
In the normal course of business, the Company assumes and cedes
reinsurance. The ceding of insurance business 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.
63
<PAGE>
The reconciliation of total premiums to net premiums is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Direct $ 67,163,983 $ 62,316,801 $ 80,118,628
Assumed:
Nonaffiliates 613,615 607,058 612,149
Ceded:
Affiliates (27,176,370) (21,771,476) (33,925,141)
Nonaffiliates (2,312,787) (895,242) (1,248,928)
------------ ------------ ------------
Net $ 38,288,441 $ 40,257,141 $ 45,556,708
============ ============ ============
</TABLE>
7. DEPOSIT FUNDS
At December 31, 1999 and 1998, the Company held annuity reserves and
deposit fund liabilities of $136,517,604 and $99,439,484, 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 Department 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 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.
11. CONSOLIDATION OF ADMINISTRATIVE OPERATIONS
During 1997, the Company consolidated certain administrative operations
with those of Mutual of Omaha. The Company incurred and expensed
approximately $795,000 related to severance and other consolidation
expenses.
64
<PAGE>
12. RECONCILIATION OF STATUTORY NET INCOME AND SURPLUS TO GAAP NET INCOME AND
EQUITY
As described in Note 1, the Company has prepared these financial statements
in conformity with statutory accounting practices prescribed or permitted
by the Insurance Department of the State of New York. These practices
differ from generally accepted accounting principles (GAAP). The following
tables reconcile statutory net income to GAAP net income and statutory
surplus to GAAP equity.
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Statutory net income as reported $ 2,883,051 $ 6,307,665 $ 1,939,198
Deferred policy acquisition costs 1,039,789 3,474,968 2,523,000
Future policy benefits and policyholder account
balances 3,401,041 (2,717,628) (276,000)
Deferred income taxes (740,000) 758,000 (206,000)
Other 859,409 (211,343) 193,000
----------- ----------- -----------
Net income in conformity with generally
accepted accounting principles $ 7,443,290 $ 7,611,662 $ 4,173,198
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Statutory surplus $ 63,337,851 $ 61,159,052
Deferred policy acquisition costs 46,964,711 42,645,976
Future policy benefits and policyholder account
balances (18,203,257) (21,581,359)
Valuation of investments (12,792,684) 11,576,425
Statutory asset valuation reserve 3,402,760 2,967,253
Deferred income taxes 2,795,000 (3,914,000)
Other 2,812,971 1,854,374
------------ ------------
Equity in conformity with generally accepted accounting
principles $ 88,317,352 $ 94,707,721
============ ============
</TABLE>
The New York State Insurance Department ("Department") recognizes only
statutory accounting for determining and reporting the financial condition
of an insurance company, for determining its solvency under the New York
Insurance Law and for determining whether its financial condition warrants
the payment of a dividend to its policyholders. No consideration is given
by the Department to financial statements prepared in accordance with GAAP
in making such determinations.
65
<PAGE>
13. CODIFICATION OF STATUTORY ACCOUNTING PRINCIPLES
In March 1998, the National Association of Insurance Commissioners adopted
the Codification of Statutory Accounting Principles ("Codification").
Codification, which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be effective January
1, 2001. However, statutory accounting principles will continue to be
established by individual state laws and permitted practices. The
Company's domiciliary state intends to proceed with the implementation of
Codification, subject to a review of areas of conflict between
Codification and State statutes and regulations. The Company has not
finalized the quantification of the effects of Codification on its
statutory financial statements.
66
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income earned:
U.S. Government bonds $ 29,638
Other bonds (unaffiliated) 32,242,571
Bonds (affiliated) 0
Preferred stocks (unaffiliated) 0
Preferred stocks (affiliated) 0
Common stocks (unaffiliated) 0
Common stocks (affiliated) 0
Mortgage loans 752,019
Real estate 0
Premium notes, policy loans and liens 498,115
Cash on hand and on deposit 7,209
Short-term investments 577,703
Other invested assets 16,665
Derivative instruments 0
Aggregate write-ins for investment income 36,929
------------
Gross investment income $ 34,160,849
============
Real estate owned - book value less encumbrances $ 0
============
Mortgage loans - book value:
Farm mortgages $ 0
Residential mortgages 0
Commercial mortgages 9,074,049
------------
Total mortgage loans $ 9,074,049
============
Mortgage loans by standing - book value:
Good standing $ 9,074,049
============
Good standing with restructured terms $ 0
============
Interest overdue more than three months, not in foreclosure $ 0
============
Foreclosure in process $ 0
============
Other long-term assets - statement value $ 0
============
Collateral loans $ 0
============
</TABLE>
67
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE)
<TABLE>
<CAPTION>
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
Bonds and stocks of subsidiaries and affiliates - book value:
Bonds $ 0
=============
Preferred stocks $ 0
=============
Common stocks $ 0
=============
Bonds and short-term investments by class and expected maturity; Bonds by
expected maturity - statement value:
Due within one year or less $ 80,318,156
Over 1 year and through 5 years 216,499,268
Over 5 years through 10 years 149,794,714
Over 10 years through 20 years 19,645,677
Over 20 years 2,241,920
=============
Total by maturity $ 468,499,735
=============
Bonds by class - statement value:
Class 1 $ 236,928,789
Class 2 219,813,616
Class 3 9,842,795
Class 4 1,914,535
Class 5 0
Class 6 0
-------------
Total by class $ 468,499,735
=============
Total bonds publicly traded $ 242,264,331
=============
Total bonds privately placed $ 226,235,404
=============
Preferred stocks - statement value $ 0
=============
Common stocks - market value $ 0
=============
Short-term investments - book value $ 9,486,183
=============
Options, caps and floors owned - statement value $ 0
=============
Options, caps and floors written and in force - statement value $ 0
=============
Collar, swap and forward agreements open - statement value $ 0
=============
Futures contracts open - current value $ 0
=============
Cash on deposit $ (203,466)
=============
</TABLE>
68
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
----------------------------------------------------------------------------------------------------------------------
<S> <C>
Life insurance in force (in thousands):
Industrial $ 0
============
Ordinary $ 4,083,739
============
Credit life $ 0
============
Group life $ 1,045,951
============
Amount of accidental death insurance in force under ordinary policies (in thousands) $ 35,193
============
Supplementary contracts in force:
Ordinary - not involving life contingencies:
Amount on deposit $ 123,714
============
Income payable $ 76,475
============
Ordinary - involving life contingencies - income payable $ 29,978
============
Group - not involving life contingencies:
Amount on deposit $ 0
============
Income payable $ 0
============
Group - involving life contingencies - income payable $ 0
============
Annuities:
Ordinary:
Immediate - amount of income payable $ 1,601,981
============
Deferred - fully paid - account balance $227,963,050
============
Deferred - not fully paid - account balance $ 62,353,704
============
</TABLE>
69
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
-----------------------------------------------------------------------------------------------------------------------
<S> <C>
Group:
Amount of income payable $ 1,460
============
Fully paid - account balance $ 0
============
Not fully paid - account balance $ 576,409
============
Accident and health insurance - premiums in force:
Ordinary $ 34,260
============
Group $ 1,191,318
============
Credit $ 0
============
Deposit funds and dividend accumulations:
Deposit funds - account balance $ 35,708,564
============
Dividend accumulations - account balance $ 0
============
Claim payments 1999:
Group accident and health - year ended December 31, 1999:
1999 $ 141,322
============
1998 $ 55,684
============
1997 $ 13,807
============
1996 $ 2,732
============
1995 $ 6
============
Prior $ 25
============
</TABLE>
70
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
----------------------------------------------------------------------------------------------------------------------
<S> <C>
Claim payments 1999 (continued):
Other accident and health:
1999 $ 16,706
============
1998 $ 21,532
============
1997 $ 248
============
1996 $ 0
============
1995 $ 0
============
Prior $ 0
============
Other coverages that use developmental methods to calculate claim reserves:
1999 $ 0
============
1998 $ 0
============
1997 $ 0
============
1996 $ 0
============
1995 $ 0
============
Prior $ 0
============
</TABLE>
71
<PAGE>
COMPANION LIFE
INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF
UNITED OF OMAHA LIFE INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF
ADMITTED ASSETS, LIABILITIES AND SURPLUS
AS OF JUNE 30, 2000
(UNAUDITED)
72
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS
AS OF JUNE 30, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000
-------------------
<S> <C>
ADMITTED ASSETS
Cash and invested assets:
Bonds $ 476,874,107
Mortgage loans 7,391,830
Policy loans 10,333,096
Cash and short-term investments 14,237,294
Other invested assets -
Receivable for Securities 216,321
-------------------
Total cash and invested assets 509,052,648
Premiums deferred and uncollected 2,162,530
Investment income due and accrued 5,457,638
Other assets 13,067,089
Separate accounts assets 36,702,436
-------------------
Total admitted assets $ 566,442,341
===================
LIABILITIES
Policy reserves:
Aggregate reserve for policies and contracts $ 356,739,686
Policy and contract claims 4,146,974
Other reserves 466,958
-------------------
Total policy reserves 361,353,618
Interest maintenance reserve 437,399
Asset valuation reserve 3,946,702
General expenses and taxes due or accrued 1,490,315
Funds held under reinsurance treaties 83,493,411
Reinsurance in unauthorized companies 34,896
Amounts due reinsurers -
Federal income taxes due or accrued 1,575,859
Payable for securities -
Other liabilities 11,120,501
Separate accounts liabilities 36,657,603
-------------------
Total liabilities 500,110,304
-------------------
SURPLUS
Capital stock, $400 par value, 5,000 shares authorized and outstanding 2,000,000
Gross paid-in and contributed surplus 45,650,000
Special surplus and contingency reserve 554,069
Unassigned surplus 18,127,968
-------------------
Total surplus 66,332,037
-------------------
Total liabilities and surplus $ 566,442,341
===================
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
73
<PAGE>
COMPANION LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF UNITED OF OMAHA LIFE INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000
-----------------
<S> <C>
Income:
Net premiums and annuity considerations $ 22,830,330
Other considerations and fund deposits 3,136,568
Net investment income 17,995,132
Other income 2,568,115
-----------------
Total income 46,530,145
Benefits and expenses:
Policyholder and beneficiary benefits 21,811,880
Increase(decrease) in reserves for policyholder
and beneficiary benefits 4,618,067
Commissions 3,331,378
Operating expenses 9,259,618
Net transfers to separate accounts 1,750,445
-----------------
Total benefits and expenses 40,771,388
-----------------
Net gain from operations before federal
income taxes and net realized capital losses 5,758,757
Federal income taxes 2,041,865
-----------------
Net gain from operations before net
realized capital losses 3,716,892
Net realized capital gains (losses) -
-----------------
Net Income $ 3,716,892
=================
</TABLE>
The accompanying notes are an integral part of these statutory basis financial
statements.
74
<PAGE>
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30. 2000
(UNAUDITED)
1. GENERAL
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, which is a wholly-owned subsidiary of
Mutual of Omaha, a mutual health and accident and life 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 Insurance Company career agents, direct mail, stockbrokers,
financial planners and banks.
Basis of Presentation - The accompanying unaudited 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 accompanying unaudited statutory financial statements vary in some
respects from those that would be presented in conformity with generally
accepted accounting principles. 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; (g) comprehensive income and its
components are not presented in the financial statements; and (h) changes
in certain assets designed as non-admitted assets have been charged or
credited to unassigned surplus.
Use of Estimates - The preparation of financial statements in accordance
with statutory accounting practices requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
Financial information in this report reflects any adjustments (consisting
only of normal recurring adjustments) that are, in the opinion of
management necessary to a fair statement of results for the interim period
in accordance with the accounting procedures prescribed or permitted by the
Insurance Department of the State of New York.
2. SUBSEQUENT EVENTS
On May 26, 2000, the Company's Board of Directors declared a dividend of $6
million to its parent, United of Omaha Insurance Company, subject to the
approval of the Superintendent of Insurance Department of the State of New
York, whose approval was subsequently obtained. The dividend is payable in
two equal installments. The first $3 million was paid on July 5, 2000, and
the second on September 15, 2000.
75
<PAGE>
COMPANION LIFE
SEPARATE ACCOUNT B
A Separate Account for Variable Life (Companion Life Separate Account B) was
established on August 27, 1996, by Board of Directors Resolution for the purpose
of transacting variable life product transactions. Since that date, a variable
life product has been approved by the State of New York on June 30, 2000 for
purposes of sales in that state but there has been no sales activity, funding or
financial activity in the Separate Account. Consequently, no financial
statements for this entity exist or are available for purposes of this filing.
76
<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 Life, adopted by Companion Life Insurance Company
("Companion") provide 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
United 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 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.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises 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 consisting of 76 pages.
The undertaking to file reports.
The Rule 484 Undertaking.
The Section 26(e) Representation.
The signatures.
Written consents of the following persons:
Independent Auditors
Thomas J. McCusker, Esquire
Robert E. Hupf, F.S.A., M.A.A.A.
II-1
<PAGE>
The following exhibits:
EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit
----------- ----------------------
1.A. (1) Resolution of the Board of Directors of Companion Life Insurance
Company establishing the Variable Account. *
(2) None.
(3)(a) Principal Underwriting Agreement by and between Companion Life
Insurance Company, on its own behalf and on behalf of the
Variable Account, and Mutual of Omaha Investor Services, Inc.
(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 Flexible Premium Variable Universal Life
Insurance Policy. *****
(b) Disability Rider. *****
(c) Optional Paid-Up Life Insurance Rider. *****
(d) Accidental Death Benefit Rider. *****
(e) Systematic Transfer Enrollment Program Endorsement to the
Policy. *****
(f) Term Life Insurance Rider on Additional Insured. ****
(6)(a) Articles of Incorporation of Companion Life Insurance
Company.
(b) Bylaws of Companion Life Insurance Company.
(7) None.
(8)(a) Participation Agreement, as amended, by and among Companion Life
Insurance Company, Fred Alger Management, Inc. and The Alger
American Fund. *****
(b) Participation Agreement, as amended, by and among Companion Life
Insurance Company and Insurance Management Series and Federated
Securities Corp. *****
(c) Participation Agreement, as amended, by and among Companion Life
Insurance Company, Variable Insurance Products Fund, Variable
Insurance Products Fund II and Fidelity Distributors
Corporation. *****
(d) Participation Agreement, as amended, by and among Companion Life
Insurance Company and MFS Variable Insurance Trust, and
Massachusetts Financial Services Company. *****
(e) Participation Agreement by and among Companion Life Insurance
Company and Pioneer Variable Contracts Trust and Pioneer Funds
Distributor, Inc. *****
(f) Participation Agreement by and between Companion Life Insurance
Company and the Scudder Variable Life Investment Fund. ****
(g) Participation Agreement, as amended, by and among Companion Life
Insurance Company and T. Rowe Price International Series, Inc.,
T. Rowe Price Fixed Income *****
II-2
<PAGE>
Series, Inc., T. Rowe Price Equity Series, Inc. and T. Rowe Price
Investment Services, Inc. *****
(h) Participation Agreement by and among Companion Life Insurance
Company and Morgan Stanley Universal Funds, Morgan Stanley Asset
Management Inc. and Miller Anderson & Sherrerd, LLP. *****
(i) Participation Agreement by and between Companion Life Insurance
Company and BT Insurance Funds Trust.***
(j) First Amendment to the Participation Agreement by and among
United of Omaha Life Insurance Company, Companion Life Insurance
Company of New York and Scudder Variable Life Investment
Fund. *****
(9) None.
(10) Form of Application for the Companion Life Insurance Company
Flexible Premium Variable Universal 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. Consent of Independent Auditors.
8. Powers of Attorney.**
* Incorporated by reference to the Registration Statement for Companion Life
Separate Account C filed on April 23, 1997 (File No. 33-98062).
** Incorporated by reference to the Registration Statement for Companion Life
Separate Account C filed on April 26, 1999 and April 26, 2000 (File No. 33-
98062).
*** Incorporated by reference to the Registration Statement for Companion Life
Separate Account C filed on April 26, 2000 (File No. 33-98062).
**** Incorporated by reference to the Registration Statement for United of Omaha
Separate Account C filed on April 23, 1997 (File No. 33-89848).
***** Incorporated by reference to the Registration Statement for Companion Life
Separate B filed on July 11, 2000.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Omaha, and State of Nebraska, on the 28th day of
September, 2000.
COMPANION LIFE SEPARATE ACCOUNT B
(Registrant)
COMPANION LIFE INSURANCE COMPANY
(Depositor)
/s/ Thomas J. McCusker
------------------------------------
By: Thomas J. McCusker
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
---------- ----- ----
<S> <C> <C>
/s/ John W. Weekly* Chairman of the Board 9/28/00
----------------------------
John W. Weekly
/s/ John W. Weekly* Chief Executive Officer 9/28/00
----------------------------
John W. Weekly
/s/ Randall C. Horn* Director 9/28/00
----------------------------
Randall C. Horn
/s/ Fred C. Boddy* Director 9/28/00
----------------------------
Fred C. Boddy
/s/ Fred C. Boddy* Vice President and Treasurer 9/28/00
----------------------------
Fred C. Boddy
/s/ Fred C. Boddy* Principal Financial and Accounting 9/28/00
---------------------------- Officer
Fred C. Boddy
/s/ William G. Campbell* Director 9/28/00
----------------------------
William G. Campbell
/s/ Samuel L. Foggie, Sr.* Director 9/28/00
----------------------------
Samuel L. Foggie, Sr.
/s/ M. Jane Huerter* Director 9/28/00
----------------------------
M. Jane Huerter
/s/ Charles T. Locke III* Director 9/28/00
----------------------------
Charles T. Locke III
/s/ James J. O'Neill* Director 9/28/00
----------------------------
James J. O'Neill
/s/ Oscar S. Straus II* Director 9/28/00
----------------------------
Oscar S. Straus II
/s/ John A. Sturgeon* Director 9/28/00
----------------------------
John A. Sturgeon
By: /s/ Thomas J. McCusker
-----------------------
Thomas J. McCusker
</TABLE>
* These individuals have granted Powers of Attorney executed effective either
January 1, 1999 or April 26, 2000, whereby Thomas J. McCusker is authorized to
execute this registration statement on their behalf.
II-4
<PAGE>
________________________________________________________________________________
Registration No. 333-41172
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
COMPANION LIFE SEPARATE ACCOUNT B
=================================
OF
COMPANION LIFE INSURANCE COMPANY
EXHIBITS
TO
REGISTRATION STATEMENT ON FORM S-6
under
THE SECURITIES ACT OF 1933
________________________________________________________________________________
September 28, 2000
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit
----------- ----------------------
1A. 3(a) Principal Underwriting Agreement by and between Companion Life
Insurance Company, on its own behalf and on behalf of the
Variable Account, and Mutual of Omaha Investor Services, Inc.
3(c) Commission Schedule for Policies.
6(a) Articles of Incorporation of Companion Life Insurance Company.
6(b) Bylaws of Companion Life Insurance Company.
(11) Issuance, Transfer and Redemption Memorandum.
2. Opinion and Consent of Counsel.
6. Opinion and Consent of Actuary.
7. Consent of Independent Auditors.
