As filed with the Securities and Exchange Commission on May 15, 1998.
Registration No. 333-28227
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
PRE-EFFECTIVE AMENDMENT NUMBER ONE TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT B
(Exact Name of Trust)
GLENBROOK LIFE AND ANNUITY COMPANY
(Name of Depositor)
3100 SANDERS ROAD
NORTHBROOK, IL 60062
(Complete Address of Depositor's Principal Executive Offices)
MICHAEL J. VELOTTA, ESQUIRE
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, IL 60062
(Name and Complete Address of Agent for Service)
Copy to:
JOAN E. BOROS, ESQUIRE
JORDEN, BURT, BOROS, CICCHETTI, BERENSON & JOHNSON, LLP 1025
THOMAS JEFFERSON STREET, N.W.
WASHINGTON, D.C. 20007-5201
Securities being offered -- flexible premium variable universal life insurance
contracts.
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Approximate date of proposed public offering: as soon as practicable after the
effective date of this registration statement.
The registrant hereby declares that it is registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
registrant hereby amends this registration statement on such 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 Section 8(a), may determine.
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<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM
VARIABLE UNIVERSAL LIFE INSURANCE CONTRACTS
3100 SANDERS ROAD
NORTHBROOK, IL 60062
TELEPHONE (800) 755-5275
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This prospectus describes the Glenbrook Contour, a flexible premium
variable universal life insurance contract (the "Contract") offered by Glenbrook
Life and Annuity Company ("we" or "us" or the "Company") for prospective insured
persons age 18-85. The Contract is designed to provide both life insurance
protection and flexibility in connection with premium payments and death
benefits. The Contract Owner may, subject to certain restrictions, vary the
frequency and amount of the premium payments and increase or decrease the level
of life insurance benefits payable under the Contract. This flexibility allows
the Contract Owner to provide for changing insurance needs within the confines
of a single insurance contract.
The Company will not accept any premium which would cause the Contract not
to qualify as a life insurance contract under the Internal Revenue Code (the
"Code"). In addition, we will not initially accept any premium which would cause
the Contract to become a modified endowment contract under the Internal Revenue
Code. For the Company to accept a premium that would cause the Contract to
become a modified endowment contract, we must first receive from the Contract
Owner written acknowledgment of his or her understanding that, upon acceptance
of the premium, the Contract will become a modified endowment contract. The
Contract provides for a Death Benefit payable upon the Insured's death. The
Proceeds payable to the beneficiary equal the Death Benefit less any
Indebtedness and less any unpaid Monthly Deduction Amounts occurring during a
Grace Period (if applicable). The Contract Owner may choose one of two Death
Benefit options: (1) a level amount which generally equals the Specified Amount
of the Contract; or (2) a variable amount which generally equals the Specified
Amount plus the Account Value. While the Contract remains in force, the Death
Benefit will not be less than the maximum of the current Specified Amount of the
Contract or the Account Value multiplied by the Death Benefit Ratio. The minimum
Specified Amount of the Contract is $50,000. The Contract is guaranteed to stay
in force for the first three Contract Years regardless of the level of the cash
surrender value as long as the Contract Owner pays a specified minimum premium
(see page x). In addition, the Contract can be guaranteed to stay in force and
provide a Guaranteed Minimum Death Benefit for a specified period through the
payment of a Guarantee Period Premium (see page X).
There is no guaranteed minimum Account Value for the Contract. The Account
Value of the Contract will vary up or down to reflect the investment experience
of the Funds to which premiums have been allocated. The Contract Owner bears the
investment risk for all amounts so allocated. The Account Value will also
reflect the amount of premium payments, partial withdrawals, and charges
imposed. The Contract continues in effect while the Cash Surrender Value is
sufficient to pay the monthly charges under the Contract ("Monthly Deduction
Amount").
Premiums are allocated to the Glenbrook Life Variable Life Separate Account
B (the "Variable Account"). The Variable Account will invest in shares of one or
more managed investment companies (the "Funds") each of which will have multiple
investment portfolios (the "Portfolios"). All of the Portfolios of the Funds
which are described in this prospectus may not be available as underlying
investments with your Contract. Presently, the Variable Account will invest in
shares of the following Funds:
- AIM Variable Insurance Funds, Inc.("AIM Fund")
- American Century Variable Portfolios (VP), Inc., ("American Century
Funds")
- Dreyfus Variable Investment Fund (VIF), The Dreyfus Socially
Responsible Growth Fund, Inc. and Dreyfus Stock Index Fund
(collectively, the "Dreyfus Funds")
- Fidelity Variable Insurance Products Fund (VIP) and Fidelity Variable
Insurance Products Fund II (VIP II)(collectively, the "Fidelity
Funds")
- MFS(R) Variable Insurance Trust ("MFS Fund")
Under the Contracts, the AIM Fund will offer eight Portfolios: (1) AIM V.I.
Capital Appreciation Fund (2) AIM V.I. Diversified Income Fund (3) AIM V.I.
Global Utilities Fund (4) AIM V.I. Growth and Income Fund (5) AIM V.I. Growth
Fund (6) AIM V.I. Government Securities Fund (7) AIM V.I. International Equity
Fund and (8) AIM V.I. Value Fund. The American Century Funds will offer two
Portfolios: (1) American Century VP Balanced and (2) American Century VP
International. The Dreyfus Funds will offer five Portfolios: (1) the VIF Growth
and Income Portfolio (2) the VIF Money Market Portfolio (3) the Dreyfus Socially
Responsible Growth Fund, Inc. (4) the VIF Small Company Stock Portfolio and (5)
the Dreyfus Stock Index Fund. The Fidelity Funds will offer four Portfolios: (1)
the VIP II Contrafund (2) the VIP Growth (3) the VIP High Income and (4) the VIP
Equity-Income. The MFS Fund will offer two Portfolios: (1) the MFS Emerging
Growth Series and (2) the MFS Limited Maturity Series.
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE VARIABLE LIFE INSURANCE AS A
REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A VARIABLE
LIFE INSURANCE CONTRACT.
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS, EACH OF WHICH CONTAINS A FULL DESCRIPTION OF THE APPLICABLE FUND AND
ITS PORTFOLIOS. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE CONTRACTS AND THE INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS OF, OR
GUARANTEED BY, ANY BANK. THE CONTRACTS AND THE INVESTMENTS IN THE FUNDS ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY. THE CONTRACTS ARE SUBJECT TO INVESTMENT RISKS, INCLUDING
THE POSSIBLE LOSS OF THE PRINCIPLE AMOUNT INVESTED.
The Contracts may not be available in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THE DATE OF THIS PROSPECTUS IS JUNE ____, 1998.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY...................................................................
SPECIAL TERMS.............................................................
THE COMPANY...............................................................
THE VARIABLE ACCOUNT......................................................
General................................................................
Funds..................................................................
THE CONTRACT..............................................................
Application for a Contract.............................................
Premiums...............................................................
Allocation of Premiums.................................................
Accumulation Unit Values...............................................
DEDUCTIONS AND CHARGES....................................................
Monthly Deductions.....................................................
Cost of Insurance Charge............................................
Monthly Administrative Expense Charge...............................
Other Deductions.......................................................
Mortality and Expense Risk Charge...................................
Taxes Charged Against the Variable Account..........................
Charges Against the Funds...........................................
Premium Expense Charge..............................................
Surrender Charge....................................................
CONTRACT BENEFITS AND RIGHTS..............................................
Death Benefit..........................................................
Three Year Continuation Period.........................................
Guarantee Period.......................................................
Accelerated Death Benefit..............................................
Other Benefits.........................................................
Account Value..........................................................
Transfer of Account Value..............................................
Dollar Cost Averaging..................................................
Automatic Rebalancing..................................................
Contract Loans.........................................................
Amount Payable on Surrender of the Contract............................
Partial Withdrawals....................................................
Maturity...............................................................
and Reinstatement................................................
Cancellation and Exchange Rights.......................................
Suspension of Valuation, Payments and Transfers........................
THE FIXED ACCOUNT.........................................................
Introduction..........................................................
General Description...................................................
OTHER MATTERS.............................................................
Voting Rights..........................................................
Statements to Contract Owners..........................................
Limit on Right to Contest..............................................
Misstatement as to Age and Sex.........................................
Payment Options........................................................
Beneficiary............................................................
Assignment.............................................................
Dividends..............................................................
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY...........................
DISTRIBUTION OF THE CONTRACTS.............................................
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS..............................
FEDERAL TAX CONSIDERATIONS................................................
Introduction...........................................................
Taxation of the Company and the Variable Account......................
Taxation of Contract Benefits..........................................
Modified Endowment Contracts...........................................
Diversification Requirements...........................................
Ownership Treatment....................................................
Policy Loan Interest...................................................
ADDITIONAL INFORMATION ABOUT THE COMPANY..................................
LEGAL PROCEEDINGS.........................................................
LEGAL MATTERS.............................................................
REGISTRATION STATEMENT....................................................
EXPERTS...................................................................
FINANCIAL INFORMATION.....................................................
FINANCIAL STATEMENTS......................................................F-1
APPENDIX A................................................................A-1
<PAGE>
SUMMARY
The following summary should be read in conjunction with the detailed
information in this prospectus. You should refer to the heading "Special Terms"
for the meaning of certain terms. Variations from the information appearing in
this prospectus due to individual state requirements are described in
supplements which are attached to this prospectus, or in endorsements to the
Contract, as appropriate. Unless otherwise indicated, the description of the
Contract contained in this prospectus assumes that the Contract is in force,
that there is no indebtedness, and that current Federal tax laws apply.
THE CONTRACT
The Contracts are life insurance contracts with death benefits, cash values, and
other traditional life insurance features. The Contracts are "variable." This
means that unlike the fixed benefits of ordinary universal life insurance, the
Account Value will increase or decrease based on the investment experience of
the investment Portfolios of the Funds to which premiums have been allocated.
Similarly, the Death Benefit may increase or decrease under some circumstances,
but so long as the Contract remains in effect, the Death Benefit will be at
least equal to the greater of the Specified Amount or the Account Value
multiplied by the Death Benefit ratio under your Contract if no withdrawals are
made. The Contracts are credited with units ("Accumulation Units") to calculate
cash values. The Contract Owner may transfer the Account Value among the
multiple sub-accounts ("Variable Sub-Accounts") of the Variable Account.
The Contracts are issued on a single life basis and provide a death benefit
payable to the beneficiary if the insured dies while the Contract is In Force.
THE VARIABLE ACCOUNT AND THE FUNDS
The Variable Account is organized as a unit investment trust and registered as
such with the Securities and Exchange Commission under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Variable Account meets the
definition of a "separate account" under the federal securities laws. Under
Illinois law, the assets of the Variable Account are held exclusively for the
benefit of Contract Owners and persons entitled to payments under the Contracts.
The assets of the Variable Account are not chargeable with liabilities arising
out of any other business which the Company may conduct. The Variable Account
consists of multiple sub-accounts (the "Variable Sub-Accounts"), each of which
invests in a corresponding Portfolio of one of the Funds.
Applicants should read the prospectuses for the Funds which accompany this
prospectus in connection with the purchase of a Contract. The investment
objectives of the portfolios are briefly summarized below under "Funds", page__.
Presently, the Variable Account invests in shares of the following Funds:
- AIM Variable Insurance Funds, Inc.;
- American Century Variable Portfolios (VP), Inc;
- Dreyfus Variable Investment Fund (VIF), The Dreyfus Socially
Responsible Growth Fund, Inc. and Dreyfus Stock Index Fund;
- Fidelity Variable Insurance Products Fund (VIP) and Fidelity Variable
Insurance Products Fund II (VIP II); and the
- MFS(R) Variable Insurance Trust.
The assets of each Portfolio are accounted for separately from the other
Portfolios and each has distinct investment objectives and policies which are
briefly summarized under "Funds," Page ___ and described more fully in the
accompanying prospectuses for the Funds. Not all of the Funds may be available
for investment under your Contract.
<PAGE>
PREMIUMS
The Contract requires the Contract Owner to pay an initial premium due by the
Contract Date which must be paid in advance. The Contract Owner may make premium
payments at any time and in any amount while the Contract is In Force, subject
to certain conditions:
- Premium payments may be made at any time and in any amount necessary
to avoid termination of the Contract;
- The Company will not accept any premium which would cause the Contract
not to qualify as a life insurance contract under the Code, unless the
Contract Owner submits a written request to increase the specified
amount to an amount able to sustain the additional premium. The
request to increase the specified amount will require evidence of
insurability and approval by the Company;
- The Company will not accept any premium which would cause the Contract
to become a modified endowment contract (see , page ) under the Code,
unless the Contract Owner provides written acknowledgment of the
Contract Owner's understanding that the Contract will become a
modified endowment contract upon acceptance of the premium.
DEDUCTIONS AND CHARGES
On each Monthly Activity Date, the Company will deduct a Monthly Deduction
Amount from the Account Value. The Monthly Deduction Amount will be taken
proportionately from the Variable Sub-Accounts and the Fixed Account to which
you have allocated Account Value. The Monthly Deduction Amount includes a cost
of insurance charge, monthly administrative expense charge, and the monthly
charges for any additional benefits selected. The monthly cost of insurance
charge is to cover the Company's anticipated mortality costs. In addition, the
Company will deduct from the Account Value a monthly administrative charge
(currently $20.00 for the first Contract Year and $7.50 per month thereafter).
This charge compensates the Company for administrative expenses incurred in the
administration of the Variable Account and the Contracts. The Company will also
deduct from the Variable Account a daily charge equal to an annual rate of 0.60%
for the mortality and expense risks the Company assumes in relation to the
Contracts. If the Cash Surrender Value is not sufficient to cover a Monthly
Deduction Amount due on any Monthly Activity Date, the Contract may lapse. See
"Deductions and Charges -- Monthly Deductions," page __, and "Contract Benefits
and Rights -- Lapse and Reinstatement," page __. When a partial withdrawal is
made, a partial withdrawal fee will be deducted from the Account Value
(currently, the lesser of $25 or 2% of the amount withdrawn).
A premium expense charge (currently 4%) will be deducted from each premium
received prior to the allocation of the premium to the Variable Sub-accounts or
the Fixed Account in accordance with your instructions. This charge compensates
the Company for premium taxes imposed by various states and for federal taxes
resulting from the application of Section 848 of the Code. Premium taxes vary by
state and currently range from 0-3.5%. Because this charge does not vary, it may
not correspond to the premium tax of your state.
Prospective owners of the Contract should review the prospectuses for the Funds
which accompany this prospectus for a description of the charges and expenses
borne by the Funds in connection with each Fund's respective operations.
<PAGE>
A full surrender of the Contract will be subject to a surrender charge as set
forth below:
Schedule of Surrender Charges
CONTRACT YEAR SURRENDER CHARGE**
1-7 .................................................. 30%
8 .................................................. 27%
9 .................................................. 24%
10 .................................................. 20%
11 .................................................. 16%
12 .................................................. 12%
13 .................................................. 8%
14 .................................................. 4%
15 .................................................. 0%
** Surrender Charge as a Percentage of the lesser of the premium paid or the
Target Premium.
The Surrender Charge is imposed to cover a portion of the sales expense incurred
by the Company in distributing the Contracts. This expense includes agents'
commissions, advertising and the printing of prospectuses. See "Deductions and
Charges -- Other Deductions -- Surrender Charge," page 14.
For a discussion of the tax consequences of a full or a partial withdrawal, see
"Federal Tax Considerations," page 23.
DEATH BENEFIT
If the Insured dies while the Contract is In Force, we will pay the Death
Benefit (less any Indebtedness and certain unpaid Monthly Deduction Amounts) to
the beneficiary. The Contract Owner may choose one of two Death Benefit options:
a level amount which generally equals the Specified Amount of the Contract; or a
variable amount which generally equals the Specified Amount plus the Account
Value. As long as the Contract remains In Force, the Death Benefit under either
option will be at least equal to the greater of the current Specified Amount of
the Contract; or the Account Value multiplied by the applicable Death Benefit
ratio set forth in the Contract. See "Contract Benefits and Rights -- Death
Benefit," page 15.
ACCOUNT VALUE
The Account Value of the Contract will increase or decrease to reflect: (1) the
investment experience of the Portfolios underlying the Variable Sub-accounts to
which Account Value is allocated; and (2) deductions for the mortality and
expense risk charge and the Monthly Deduction Amount. The Account Value also
includes the value of the Fixed Account and the value of the Loan Account, if
any. There is no minimum guaranteed Account Value. The Contract Owner therefore
bears the entire risk of the investment in the Portfolios. See "Contract
Benefits and Rights -- Account Value," page 15.
THREE YEAR CONTINUATION PERIOD
The Contract is guaranteed to stay In Force for the first three Contract Years
if total premiums paid less the amount of any partial withdrawals and
indebtedness equals or exceeds the Cumulative Minimum Premium. See "Contract
Benefits and Rights -- Three Year Continuation Period," page 15.
<PAGE>
GUARANTEE PERIOD
The Contract will not be terminated during the guarantee period even if the cash
surrender value is zero as long as the amount of the cumulative premiums paid
less partial withdrawals and Contract loans is less than the Cumulative
Guarantee Period Premium. The Contract Owner can select one of three options for
the Guarantee Period: (1) no guarantee period; (2) the maximum of 10 years or
the Insured's attained age 65; or (3) a lifetime Guarantee Period. See "Contract
Benefits and Rights -- Guarantee Period," page 15.
CONTRACT LOANS
A Contract Owner may obtain a cash loan from the Company. Loans are secured by
the Contract. The maximum amount available for such loans is 90% of the
Contract's Cash Value, less 100% of any loans existing on the date of the loan
request.
LAPSE
Under certain circumstances a Contract may terminate if the Cash Surrender Value
on any Monthly Activity Date is less than the required Monthly Deduction Amount.
The Company will give written notice to the Contract Owner and a 61 day grace
period during which additional amounts may be paid to continue the Contract and
avoid lapse of the Contract. See "Contract Benefits and Rights -- Contract
Loans," page __ and "Lapse and Reinstatement," page __.
CANCELLATION AND EXCHANGE RIGHTS
A Contract Owner has a limited right to return the Contract for cancellation.
This right to return exists during the free-look period. The free-look period is
a number of days following delivery of the Contract to the Contract Owner (which
varies by state) as specified in your Contract. Within the free-look period, the
Contract Owner may return the Contract for cancellation, by mail or hand
delivery to the Company or to the agent who sold the Contract. If the Contract
is returned within the free-look period, the Company will return to the Contract
Owner within 7 days thereafter the premiums paid for the Contract adjusted to
reflect any investment gain or loss resulting from allocation to the Variable
Account prior to the date of cancellation. Certain states may require a return
of premium without such adjustments. In those states where the Company is
required to return the premiums paid upon a free-look of the Contract, and where
the procedure has been approved by the appropriate state, the Company reserves
the right to allocate all premium payments made prior to the expiration of the
free-look period to the Dreyfus VIF Money Market Portfolio.
Once the Contract is in effect, it may be exchanged during the first 24 months
after issuance for a contract on the life of the Insured without requiring proof
of insurability. The new contract value will not vary with the investment
experience of the Variable Account. See "Contract Benefits and Rights
- -Cancellation and Exchange Rights," page 18.
TAX CONSEQUENCES
The current federal tax law generally excludes all death benefit payments from
the gross income of the Contract beneficiary. Some of these Contracts may be
classified as modified endowment contracts. This status does not affect the
Contracts' classification as life insurance, nor does it affect the exclusion of
death benefit payments from gross income. However, loans, distributions or other
amounts received under a modified endowment contract may be subject to a 10% tax
penalty and are taxed to the extent of accumulated earnings in the Contract
(generally, the excess of Account Value over premiums paid). See "Federal Tax
Considerations," page 23.
<PAGE>
PERSONALIZED ILLUSTRATIONS
The Company will furnish, upon request and at no charge, a personalized
illustration reflecting the proposed Insured's age, sex, and underwriting
classification. Where applicable, the Company will also furnish upon request an
illustration for a Contract that is not affected by the sex of the Insured.
Personalized illustrations provided by the Company upon request will be based,
as appropriate, on the methodology and format of the hypothetical illustrations
that the Company has included in its registration statement for the Contracts.
See "Registration Statement," page 25, for further information.
FEES AND EXPENSES
The following tables are designed to help you understand the various fees and
expenses that you will bear, directly or indirectly, as a Contract Owner. The
first table describes the Contract charges and deductions you will directly bear
under the Contracts. The second table describes the fees and expenses of the
Funds that you will bear indirectly when you purchase a Contract(s). For further
information, see "Deductions and Charges," page 12.
STATE EXCEPTIONS
Where required by state law, certain features of your Contract may differ in
certain respects from those described above. For example, certain states may
require that the Accelerated Death Benefit be available on or after the Issue
Date of the Contract while in other states the Accelerated Death Benefit is not
available unless the illness occurred at least 30 days after the Issue Date of
the Contract. Please refer to your Contract for specific information regarding
the benefits available to you.
<PAGE>
CONTRACT DEDUCTIONS AND CHARGES
Monthly Cost of Insurance Charge(1)
Current - Current COI charges range from
$.0368 per $1,000 of net amount
at risk to $83.33 per $1,000 of
net amount at risk. The current
COI charge will depend on the
issue age, sex, rating class,
face amount, and duration of the
policy.
Guaranteed - Guaranteed COI charges range from
$.08 per $1,000 of net amount at risk
to $83.33 per $1,000 of net amount at
risk. The guaranteed COI charge will
depend on attained age, sex, and
rating class.
Administrative Charge - $20 per month in the first year
$7.50 per month in the second and later years
Premium Expense Charge - 4% of all premium(s) paid
Annual Separate Account Charges
Mortality and Expense
Risk Charge - 0.60%
Federal Income Tax Charge - Currently none(2)
Transfer Charges - $25(3)
Partial Withdrawal Charges - Minimum of $25 or 2% of the amount withdrawn
Maximum Surrender Charge - 30% of target premium
(1) The current cost of insurance charge under the Contracts will never exceed
the guaranteed cost of insurance shown in your Contract. The net amount at
risk is the difference between the Death Benefit and the Account Value. See
"Deductions and Charges - Monthly Deductions - Cost of Insurance Charge,"
page __.
(2) The Company does not currently assess a charge for federal income taxes
that may be attributable to the operations of the Variable Account, though
it reserves the right to do so in the future. See "Deductions and Charges
Monthly Deductions - Taxes Charged Against the Variable Account," page __.
(3) No charges will be imposed on the first 12 transfers in any Contract Year.
The Company reserves the right to assess a $10 charge for each transfer in
excess of 12 in any Contract Year, excluding transfers due to dollar cost
averaging or automatic portfolio rebalancing.
<PAGE>
FUND EXPENSES
(AS A PERCENTAGE OF PORTFOLIO ASSETS)
TOTAL FUND
MANAGEMENT OTHER ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- --------- ---------- -------- ----------
AIM V.I. Capital Appreciation Fund(1) 0.63% 0.05% 0.68%
AIM V.I. Diversified Income Fund(1) 0.60% 0.20% 0.80%
AIM V.I. Global Utilities Fund(1) 0.65% 0.63% 1.28%
AIM V.I. Government Securities Fund(1) 0.50% 0.37% 0.87%
AIM V.I. Growth Fund(1) 0.65% 0.08% 0.73%
AIM V.I. Growth and Income Fund(1) 0.63% 0.06% 0.69%
AIM V.I. International Equity Fund(1) 0.75% 0.18% 0.93%
AIM V.I. Value Fund(1) 0.62% 0.08% 0.70%
American Century VP Balanced 1.00% 0.00% 1.00%
American Century VP International 1.50% 0.00% 1.50%
VIP II Contrafund(2) 0.60% 0.11% 0.71%
VIP Equity-Income(2) 0.50% 0.08% 0.58%
VIP Growth(2) 0.60% 0.09% 0.69%
VIP High Income(2) 0.59% 0.12% 0.71%
Dreyfus Socially Responsible Growth 0.75% 0.07% 0.82%
Dreyfus Stock Index 0.25% 0.03% 0.28%
VIF Growth and Income 0.75% 0.05% 0.80%
VIF Money Market 0.50% 0.11% 0.61%
VIF Small Company Stock 0.75% 0.37% 1.12%
MFS Emerging Growth Series 0.75% 0.12% 0.87%
MFS Limited Maturity Series(3) 0.55% 0.45% 1.00%
(1)AIM Advisors, Inc., ("AIM") may from time to time voluntarily waive or reduce
its respective fees. Effective May 1, 1998, the Funds reimburse AIM in an amount
up to 0.25% of the average net asset value of each Fund, for expenses incurred
in providing, or assuring that participating insurance companies provide,
certain administrative services. Currently, the fee only applies to the average
net asset value of each Portfolio in excess of the net asset value of each
Portfolio as calculated on April 30, 1998.
(2)A portion of the brokerage commissions that certain funds pay was used to
reduce the fund expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized as a result of
uninvested cash balances were used to reduce custodian expenses. Including these
reductions, the total operating expenses presented in the table would have been:
.78% for the VIP II Contrafund Portfolio; .65% for the VIP Equity-Income
Portfolio; .77% for the VIP Growth Portfolio; and .80% for the VIP High Income
Portfolio.
(3)The adviser to the MFS Limited Maturity Series has agreed to bear expenses
for the Portfolio, subject to reimbursement by the Portfolio, such that the
Portfolio's "Other Expenses" shall not exceed 0.45% of its average daily net
assets. See "Information Concerning Shares of Each Portfolio -- Expenses".
Otherwise, "Other Expenses" and "Total Operating Expenses" for the for the
Limited Maturity Portfolio would be 5.65% and 6.20% respectively.
<PAGE>
SPECIAL TERMS
As used in this Prospectus, the following terms have the indicated meanings:
Account Value: The aggregate value under a Contract of the Variable
Sub-Accounts, the Fixed Account and the Loan Account.
Accumulation Unit: An accounting unit of measure used to calculate the
value of a Variable Sub-Account.
Age: The Insured's age at the Insured's last birthday. Cash Value: The
Account Value less any applicable surrender charges. Cash Surrender Value: The
Cash Value less all Indebtedness, if applicable.
Contract: The Glenbrook Life and Annuity Company Flexible Premium Variable
Universal Life Insurance Contract described in this prospectus and known as the
Glenbrook Contour. In some states, the Contracts may be issued in the form of a
group Contract. In those states, certificates will be issued evidencing a
purchaser's rights under the group Contract. Certificates are issued under group
Contracts issued to the Financial Services Group Insurance Trust, an Illinois
Trust. The terms "Contract" and "Contract Owner," as used in this prospectus,
refer to and include such a certificate and certificate owner, respectively.
Contract Anniversary: The same day and month as the Contract Date for each
subsequent year the Contract remains in force.
Contract Date: The date on or as of which coverage under a Contract becomes
effective and the date from which Contract Anniversaries, Contract Years and
Contract months are determined.
Contract Owner: The person having rights to benefits under the Contract
during the lifetime of the Insured. The Contract Owner may or may not be the
Insured.
Contract Years: Annual periods computed from the Contract Date.
Cumulative Minimum Premium: An amount calculated by dividing the guarantee
period premium shown on page 3 of your Contract by 12, and multiplying the
result by the number of Contract months since issue. See your Contract for
further information.
Death Benefit: The greater of the Death Benefit option under the Contract
or the Account Value on the date of death multiplied by the death benefit ratio
as specified in the Contract.
Fixed Account: The portion of the Account Value invested in the general
account of the company.
Funds: The registered management investment companies in which assets of
the Variable Account may be invested.
Indebtedness: All Contract loans, if any, and accrued loan interest.
In Force: A term used to describe when the Insured's life is covered under
the terms of the Contract.
Initial Death Benefit: The Initial Death Benefit under a Contract is shown
on the Contract Data page. The Contract Owner may choose one of two Death
Benefit options: a level amount which generally equals the Specified Amount of
the Contract; or, a variable amount which generally equals the Specified Amount
plus the Account Value.
Insured: The person whose life is insured under a Contract.
Loan Account: An account in the Company's General Account, established for
any amounts transferred from the Variable Sub-Accounts or Fixed Account for
requested loans. The Loan Account credits a fixed rate of interest that is not
based on the investment experience of the Variable Account.
Monthly Activity Date: The day of each month on which the Monthly Deduction
Amount is deducted from the Account Value of the Contract. Monthly Activity
Dates occur on the same day of the month as the Contract Date. If there is no
date equal to the Monthly Activity Date in a particular month, the Monthly
Activity Date will be the last day of that month.
<PAGE>
Monthly Deduction Amount: A deduction on each Monthly Activity Date for the
cost of insurance charge, and an administrative expense charge.
Specified Amount: The minimum death benefit under a Contract, equal to the
Initial Death Benefit on the Contract Date. Thereafter it may change in
accordance with the terms of the partial withdrawal and the subsequent premium
provisions of the Contract.
Target Premium: The premium which determines the amount of any surrender
charges applied to the Contract.
Valuation Day: Every day the New York Stock Exchange is open for trading.
The value of the Variable Account is determined at the close of regular trading
on the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on such days.
Valuation Period: The period between the close of regular trading on the
New York Stock Exchange on successive Valuation Days.
Variable Account: Glenbrook Life Variable Life Separate Account B, an
account established by the Company to separate the assets funding the Contracts
from other assets of the Company.
Variable Sub-Accounts: The subaccounts of the Variable Account used to
allocate a Contract Owner's Account Value, less Indebtedness, among the
Portfolios of the Funds.
<PAGE>
THE COMPANY
The Company is the issuer of the Contract. The Company is a stock life insurance
company organized under the laws of Illinois in 1992. The Company was originally
organized under the laws of the State of Indiana in 1965. From 1965 to 1983, the
Company was known as "United Standard Life Assurance Company" and from 1983 to
1992, the Company was known as "William Penn Life Assurance Company of America."
The Company is licensed to operate in the District of Columbia, Puerto Rico, and
all states except New York. The Company intends to market the Contract in those
jurisdictions in which it is licensed to operate. The Company's home office is
located at 3100 Sanders Road, Northbrook, Illinois 60062.
The Company is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance
Company ("Allstate"), a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate is
owned by The Allstate Corporation ("the Corporation").
THE VARIABLE ACCOUNT
GENERAL
Glenbrook Life Variable Life Separate Account B is a separate account of the
Company established on May 1, 1997 pursuant to the insurance laws of Illinois.
The Variable Account is organized as a unit investment trust and registered as
such with the Securities and Exchange Commission under the 1940 Act. The
Variable Account meets the definition of "separate account" under federal
securities law. Under Illinois law, the assets of the Variable Account are held
exclusively for the benefit of Contract Owners and persons entitled to payments
under the Contracts. The assets of the Variable Account are not chargeable with
liabilities arising out of any other business which the Company may conduct.
<PAGE>
THE FUNDS
The Variable Account will invest in shares of one or more Funds. The Funds are
registered with the Securities and Exchange Commission as open-end, series,
management investment companies. Registration of the Funds does not involve
supervision of the Funds' management, investment practices or policies by the
Securities and Exchange Commission. The Funds' Portfolios are designed to
provide investment vehicles for variable insurance contracts of various
insurance companies, in addition to the Variable Account. The Funds currently
available for investment by the Variable Account are listed below. All of the
Portfolios listed may not be available under your Contract. Check with your
representative for further information.
I. AIM VARIABLE INSURANCE FUNDS, INC. (the "AIM FUNDS")
- AIM V.I. Capital Appreciation Fund -- is a diversified portfolio which
seeks to provide capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller emerging growth
companies.
- AIM V.I. Diversified Income Fund -- is a diversified portfolio which
seeks to achieve a high level of current income primarily by investing
in a diversified portfolio of foreign and U.S. government and
corporate debt securities, including lower rated high yield debt
securities (commonly known as "junk bonds"). The risks of investing in
junk bonds are described in the accompanying prospectus for the
AIM Funds, which should be read carefully before investing.
- AIM V.I. Global Utilities Fund -- is a non-diversified portfolio which
seeks to achieve a high level of current income and, as a secondary
objective, to achieve capital appreciation, by investing primarily in
common and preferred stocks of public utility companies (either
domestic or foreign).
- AIM V.I. Government Securities Fund -- is a diversified portfolio
which seeks to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt
securities issued, guaranteed or otherwise backed by the U.S.
Government.
- AIM V.I. Growth Fund -- is a diversified portfolio which seeks to
provide growth of capital through investments primarily in common
stocks of leading U.S. companies considered by the advisor to the
Portfolio to have strong earnings momentum.
- AIM V.I. Growth and Income Fund -- is a diversified portfolio which
seeks to provide growth of capital, with current income as a secondary
objective by investing primarily in dividend paying common stocks
which have prospects for both growth of capital and dividend income.
- AIM V.I. International Equity Fund -- is a diversified portfolio which
seeks to provide long-term growth of capital by investing in
international equity securities, the issuers of which are considered
by the advisor to the Portfolio to have strong earnings momentum.
- AIM V.I. Value Fund -- is a diversified portfolio which seeks to
achieve long-term growth of capital by investing primarily in equity
securities judged by the advisor to the Portfolio to be undervalued
relative to the current or projected earnings of the companies issuing
the securities, or relative to current market values of assets owned
by the companies issuing the securities or relative to the equity
markets generally. Income is a secondary objective.
AIM Advisors, Inc. serves as the investment advisor to the AIM Fund. AIM was
organized in 1976 and, together with its domestic subsidiaries, manages or
advises over 50 investment company portfolios (including the Portfolios listed
above) encompassing a broad range of investment objectives. AIM is a wholly
owned subsidiary of A I M Management Group, Inc. Its principal place of business
is 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173.
II. AMERICAN CENTURY FUNDS
- American Century VP Balanced -- the investment objective of American
Century VP Balanced is capital growth and current income. It will seek
to achieve its investment objective by maintaining approximately 60%
of the assets of American Century VP Balanced in common stocks that
are considered by management to have better-than-average prospects for
appreciation and the remaining assets are maintained in bonds and
other fixed income securities.
<PAGE>
- American Century VP International -- the investment objective of
American Century VP International is capital growth. It will seek to
achieve its investment objective by investing primarily in an
internationally diversified portfolio of common stocks that are
considered by management to have prospects for appreciation. The
Portfolio will invest primarily in securities of issuers located in
developed markets.
American Century Investment Management, Inc. serves as the investment manager of
American Century Variable Portfolios, Inc. Its principal place of business is
American Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
III. DREYFUS FUNDS
- VIF Growth and Income Portfolio -- seeks to provide long-term capital
growth, current income and growth of income, consistent with
reasonable investment risk.
- VIF Money Market Portfolio -- seeks to provide as high a level of
current income as is consistent with the preservation of capital and
the maintenance of liquidity.
- The Dreyfus Socially Responsible Growth Fund, Inc. -- seeks to provide
capital growth. Current income is a secondary goal. Invests
principally in common stocks, or securities convertible into common
stock, of companies which, in the opinion of the fund's management,
not only meet traditional investment standards, but also show evidence
that they conduct their business in a manner that contributes to the
enhancement of the quality of life in America.
- VIF Small Company Stock Portfolio -- seeks to provide investment
results that are greater than the toal return performance of
publicly-traded common stocks in the aggregate, as represented by the
Russell 2500(TM) Index. Invests primarily in a portfolio of equity
securities of small-to medium-sized domestic issuers, while attempting
to maintain volatility and diversification similar to that of the
Russell 2500(TM) Index.
- Dreyfus Stock Index Fund -- seeks to provide investment results that
correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard &
Poor's 500 Composite Stock Price Index.
An investment in the Dreyfus VIF Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that the Dreyfus
VIF Money Market Portfolio will be able to maintain a stable net asset value of
$1.00 per share.
The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166, was formed
in 1947 and serves as the investment manager to the Dreyfus funds listed in this
prospectus. The Dreyfus Corporation is a wholly owned subsidiary of Mellon Bank,
N.A., which is a wholly owned subsidiary of Mellon Bank Corporation. NCM Capital
Management Group, Inc., 105 West Main Street, Durham, North Carolina 27701,
serves as sub-investment adviser to The Dreyfus Socially Responsible Growth
Fund, Inc. Mellon Equity Associates, an affiliate of Dreyfus, located at 500
Grant Street, Pittsburgh, PA 15258, serves as the index fund manager to Dreyfus
Stock Index Fund.
<PAGE>
IV. FIDELITY FUNDS
- VIP II Contrafund -- seeks capital appreciation by investing in
securities of companies whose value Fidelity Management & Research
Company ("FMR") believes is not fully recognized by the public.
- VIP Growth -- seeks capital appreciation by investing primarily in
common stocks. The Portfolio may also pursue capital appreciation
through the purchase of bonds and preferred stocks.
- VIP High Income -- seeks high current income by investing primarily in
all types of income-producing debt securities, preferred stocks, and
convertible securities.
- VIP Equity-Income -- seeks reasonable income by investing primarily in
income-producing equity securities. When choosing the Portfolio's
investments, Fidelity Management & Research Company, the investment
advisor to the Portfolio, also considers the potential for capital
appreciation. The Portfolio seeks to achieve a yield that exceeds the
yield on the securities comprising that of the Standard & Poors 500.
Fidelity Management & Research Company, 82 Devonshire Street, Boston,
Massachusetts, is the investment manager of the Fidelity funds listed in this
prospectus.
<PAGE>
V. MFS FUND
- MFS Emerging Growth Series -- seeks to provide long-term growth of
capital. Dividend and interest income from portfolio securities, if
any, is incidental to the Portfolio's investment objective of
long-term growth of capital.
- MFS Limited Maturity Series -- the primary investment objective is to
provide as high a level of current income as is believed to be
consistent with prudent investment risk. The Portfolio's secondary
objective is to protect shareholders' capital.
MFS manages each series pursuant to an Investment Advisory Agreement with the
MFS Fund on behalf of each Portfolio. MFS provides each Portfolio with overall
investment advisory and administrative services, as well as general office
facilities. Its principal place of business is 500 Boylston Street, Boston,
Massachusetts 02116.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
All dividends and capital gains distributions from the Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset value.
The assets of each Portfolio are held separate from the assets of the other
Portfolios, and each Portfolio has its own distinct investment objective and
policies. Each Portfolio operates as a separate investment fund, and the income,
gains, and losses of one Portfolio generally have no effect on the investment
performance of any other Portfolio.
There is no assurance that the Portfolios will attain their respective stated
objectives. Additional information concerning the investment objectives and
policies of the Portfolios can be found in the current prospectuses for the
Funds which accompany this prospectus. You will also find more complete
information about the risks associated with each Portfolio in the accompanying
prospectuses. You should read the prospectuses for the Funds in conjunction with
this prospectus.
THE FUND PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE
SUB-ACCOUNT.
It is conceivable that in the future it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
a Fund simultaneously. Although neither the Company nor any such Fund currently
foresees any such disadvantages either to variable life insurance or variable
annuity contract owners, each Fund's Board of Directors intends to monitor
events in order to identify any material conflicts between variable life and
variable annuity contract owners and to determine what action, if any, should be
taken in response thereto. If the Board of Directors were to conclude that
separate funds should be established for variable life and variable annuity
separate accounts, the Company would bear the attendant expenses.
<PAGE>
All investment income of and other distributions to each Variable Sub-Account
arising from the corresponding Portfolio are reinvested in shares of that
Portfolio at net asset value. The income and realized and unrealized gains or
losses on the assets of each Variable Sub-Account are separate and are credited
to or charged against the particular Variable Sub-Account without regard to
income, gains or losses from any other Variable Sub-Account or from any other
business of the Company. The Company will purchase shares in the Funds in
connection with premiums allocated to the corresponding Variable Sub-Account in
accordance with Contract Owners' directions and will redeem shares in the Funds
to meet Contract obligations or to make adjustments in reserves. The Funds are
required to redeem Fund shares at net asset value and to make payment within
seven days.
The Company reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from, or substitutions for the Fund
shares underlying the Variable Sub-Accounts. If shares of any of the Funds
should no longer be available for investment, or if, in the judgment of the
Company's management, further investment in shares of any Portfolio of any Fund
should become inappropriate in view of the purposes of the Contracts, the
Company may substitute shares of another Portfolio for shares already purchased,
or to be purchased in the future, under the Contracts. No substitution of
securities will take place without notice to Contract Owners and without prior
approval of the Securities and Exchange Commission to the extent required by the
1940 Act. The Company reserves the right to establish additional Variable
Sub-accounts, each of which would invest in shares of another Portfolio. Subject
to Contract Owner approval, the Company also reserves the right to end the
registration under the 1940 Act of the Variable Account or any other separate
accounts of which it is the depositor or to operate the Variable Account as a
management company under the 1940 Act.
Each Portfolio is subject to certain investment restrictions and policies which
may not be changed without the approval of a majority of the shareholders of the
Portfolio. See the accompanying prospectuses of the Funds for further
information.
THE CONTRACT
APPLICATION FOR A CONTRACT
Individuals wishing to purchase a Contract must submit an application to the
Company. A Contract will be issued only on the lives of Insureds age 18-85 who
supply evidence of insurability satisfactory to the Company. Acceptance is
subject to the Company's underwriting rules and the Company reserves the right
to reject an application for any reason. If a Contract is not issued, the
premium will be returned to you. No change in the terms or conditions of a
Contract will be made without the consent of the Contract Owner except where
necessary to comply with tax laws or maintain the status of the Contract under
then applicable law.
Once the Company has received the initial premium and underwriting has been
approved, the Contract will be issued on the date the Company has received the
final requirement for issue. In the case of simplified underwriting, the
Contract will be issued or coverage denied within 3 business days of receipt of
premium. The Insured will be covered under the Contract, however, as of the
Contract Date. Since the Contract Date will generally be the date the Company
receives the initial premium, coverage under a Contract may begin before it is
actually issued. In addition to determining when coverage begins, the Contract
Date determines Monthly Activity Dates, Contract months, and Contract Years.
Under current underwriting rules, a proposed Insured is eligible for simplified
underwriting without a medical examination if his or her application responses,
initial death benefit, and issue age meet simplified underwriting standards.
Customary underwriting standards will apply to all other proposed Insureds.
If the initial premium payment is over the limits established from time to time
by the Company (currently $2,000,000), the initial payment will not be accepted
with the application. In other cases where we receive the initial payment with
the application, we will provide fixed conditional insurance during underwriting
according to the terms of a conditional receipt. The fixed conditional insurance
will be the amount applied for, up to a maximum that varies by age.
<PAGE>
PREMIUMS
The Contract requires the Contract Owner to pay an initial premium by the
Contract Date. Additional premium payments may be made at any time, and in any
amount necessary to avoid termination of the Contract, subject to the following
conditions:
- The Company will not accept any premium which would cause the Contract
not to qualify as a life insurance contract under the Code. If this
occurs, for us to accept this premium, we must receive a written
request from you to increase the specified amount to an amount able to
sustain the additional premium. The request to increase the specified
amount will require evidence of insurability and approval by the
Company.
- The Company will not accept any premium which would cause the Contract
to become a modified endowment contract (see , page ) under the Code.
For the Company to accept this premium, the Company must first receive
from the Contract Owner written acknowledgment of the Contract Owner's
understanding that the Contract will become a modified endowment
contract upon acceptance of the premium payment.
Unless you request otherwise in writing, any additional premium payment received
while a Contract loan exists will be applied first, as a repayment of
Indebtedness, and second, as an additional premium payment.
ALLOCATION OF PREMIUMS
Upon completion of underwriting, the Company will either issue a Contract, or
deny coverage and return all premiums. If a Contract is issued, the initial
premium payment less the premium expense charge, plus an amount equal to the
interest that would have been earned had the initial premium been allocated to
the Money Market Sub-account since the date of receipt of the premium, will be
allocated on the date the Contract is issued. The allocation will be according
to the initial premium allocation instructions specified on your application. In
the future, the Company may allocate the initial premium to the Fixed Account
during the free look period in those states where state law requires premiums to
be returned upon exercise of the free-look right.
ACCUMULATION UNIT VALUES
The Accumulation Unit Value for each Variable Sub-Account will vary to reflect
the investment experience of the corresponding Portfolio and will be determined
on each Valuation Day by multiplying the Accumulation Unit Value of the
particular Variable Sub-Account on the preceding Valuation Day by a "Net
Investment Factor" for that Sub-Account for the Valuation Period then ended. The
Net Investment Factor for each Variable Sub-Account is determined by first
dividing (A) the net asset value per share of the corresponding Portfolio at the
end of the current Valuation Period (plus the per share dividends or capital
gains distributions by that Portfolio if the ex-dividend date occurs in the
Valuation Period then ended), by (B) the net asset value per share of the
corresponding Portfolio at the end of the immediately preceding Valuation
Period; and then subtracting from the result an amount equal to the daily
deductions for mortality and expense risk charges imposed during the Valuation
Period. Applicants should refer to the prospectuses for the Funds which
accompany this Prospectus for a description of how the assets of each Fund are
valued since the determination has a direct bearing on the Accumulation Unit
Value of the corresponding Sub-Account, and, therefore the Account Value of a
Contract. See "Contract Benefits and Rights -- Account Value," page 15.
<PAGE>
All valuations in connection with a Contract, e.g., with respect to determining
Account Value and Cash Surrender Value and in connection with Contract loans, or
calculation of Death Benefits, or with respect to determining the number of
Accumulation Units to be credited to a Contract with each premium, other than
the initial premium and additional premiums requiring underwriting, will be made
on the date the request or payment is received in good order by the Company at
its Home Office if such date is a Valuation Day; otherwise such determination
will be made on the next succeeding date which is a Valuation Day.
Specialized Uses of the Contract: Because the Contract provides for an
accumulation of Cash Value as well as a Death Benefit, the Contract can be used
for various individual and business financial planning purposes. Purchasing the
Contract in part for such purposes entails certain risks. For example, if the
investment performance of the Variable Sub-Accounts to which Account Value is
allocated is poorer than expected or if sufficient premiums are not paid, the
Contract may lapse or may not accumulate sufficient Account Value to fund the
purpose for which the Contract was purchased. Withdrawals and Contract loans may
significantly affect current and future Account Value, Cash Surrender Value, or
Death Benefit proceeds. Depending upon the investment performance of the
underlying Portfolios of the Variable Account and the amount of a Contract loan,
the loan may cause a Contract to lapse. Contractual fees and charges, such as
the cost of insurance, will apply. The Contract is designed to provide benefits
on a long-term basis. Before purchasing a Contract for a specialized purpose, a
purchaser should consider whether the long-term nature of the Contract is
consistent with the purpose for which it is being considered. Using a Contract
for a specialized purpose may have tax consequences. (See "Federal Tax
considerations," page __.)
DEDUCTIONS AND CHARGES
MONTHLY DEDUCTIONS
On each Monthly Activity Date including the Contract Date, the Company will
deduct from the Account Value attributable to the Variable Account an amount
(the "Monthly Deduction Amount") to cover charges and expenses incurred in
connection with a Contract. Each Monthly Deduction Amount will be deducted pro
rata from each Variable Sub-Account and the Fixed Account attributable to the
Contract. The deduction will be such that the proportion of Account Value of the
Contract attributable to each Sub-Account and to the Fixed Account remains the
same before and after the deduction. The Monthly Deduction Amount will vary
monthly. If the Cash Surrender Value is not sufficient to cover a Monthly
Deduction Amount due on any Monthly Activity Date, the Contract may lapse. See
"Contract Benefits and Rights -- Lapse and Reinstatement," page 17. The
following is a summary of the monthly deductions and charges which constitute
the Monthly Deduction Amount. See also "Contract Charges and Deductions," page
__, for a discussion of the monthly deductions and charges.
Cost of Insurance Charge: The cost of insurance charge covers the Company's
anticipated mortality costs for standard and substandard risks. The current cost
of insurance charge will not exceed the guaranteed cost of insurance charge.
This charge is the maximum annual cost of insurance per $1,000 as indicated in
the Contract, multiplied by the difference between the Death Benefit and the
Account Value (both as determined on the Monthly Activity Date), divided by
$1,000, and divided by 12. For standard risks, the guaranteed cost of insurance
rate is based on the 1980 Commissioners' Standard Ordinary Mortality Table, age
last birthday. (Unisex rates may be required in some states). A table of
guaranteed cost of insurance charges per $1,000 will be included in each
Contract; however, the Company reserves the right to use rates less than those
shown in the table. Special risks will be charged at a higher cost of insurance
rate that will not exceed rates based on a multiple of the 1980 Commissioners'
Standard Ordinary Mortality Table, age last birthday. The multiple will be based
on the Insured's special rating.
The cost of insurance charge rates are applied to the difference between the
Death Benefit determined on the Monthly Activity Date and the Account Value on
that same date prior to assessing the Monthly Deduction Amount. The difference
between the two amounts is the amount for which the Company is at risk should
the Death Benefit be then payable. (For an explanation of the Death Benefit, see
"Contract Benefits and Rights" on page 15.)
<PAGE>
EXAMPLE:
Specified Amount = $100,000
Death Benefit Option = 1
Account Value on the Monthly
Activity Date = $ 30,000
Insured's Attained Age = 45
Death Benefit Ratio for Age 45 = 2.15
On the Monthly Activity Date in this example, the Death Benefit as then computed
would be $100,000, because the Specified Amount ($100,000) is greater than the
Account Value multiplied by the applicable Death Benefit ratio ($30,000 x 2.15 =
$64,500). Since the Account Value on that date is $30,000, the cost of insurance
charges per $1000 are applied to the difference between the Death Benefit and
the Account Value($100,000 - $30,000 = $70,000).
Assume that the Account Value in the above example was $50,000. The Death
Benefit would then be $107,500 (2.15 x $50,000), since this is greater than the
Specified Amount ($100,000). The cost of insurance rates in this case would be
applied to $57,500 (the result of the $107,500 Death Benefit less the $50,000
Account Value). Because the Account Value and, as a result, the amount for which
the Company is at risk under a Contract, may vary monthly, the cost of insurance
charge may also vary on each Monthly Activity Date. Once the risk rating class
has been assigned to an Insured when a Contract is issued, that rating class
will not change if additional premium payments or partial withdrawals increase
or decrease the Specified Amount.
Monthly Administrative Expense Charge: The Company will deduct monthly from the
Account Value an administrative expense charge of $20.00 during the first year
and $7.50 in later years. This charge compensates the Company for administrative
expenses incurred in the administration of the Variable Account and the
Contracts.
All monthly deductions are taken proportionately from the Variable Sub-accounts
and the Fixed Account under your Contract. Deductions from the Variable
Subaccounts are taken by canceling Accumulation Units under your Contract.
OTHER DEDUCTIONS
Mortality and Expense Risk Charge: The Company will deduct from the Variable
Account a daily charge equivalent to an annual rate of 0.60% of average daily
net assets of the Variable Account for the mortality and expense risks the
Company assumes in relation to the Contracts. The mortality risk assumed
includes the risk that the cost of insurance charges specified in the Contract
will be insufficient to meet claims. The Company also assumes a risk that, on
the Monthly Activity Date preceding the death of an Insured, the Death Benefit
will exceed the amount on which the cost of insurance charges were based. The
expense risk assumed is that expenses incurred in issuing and administering the
Contracts will exceed the administrative charges set in the Contract.
Taxes Charged Against the Variable Account: Currently, no charge is made to the
Variable Account for federal income taxes that may be attributable to its
operations. The Company may, however, make such a charge in the future. Charges
for other taxes, if any, attributable to the Variable Account or to this class
of Contracts may also be made.
Charges Against the Funds: The Variable Account purchases shares of the Funds at
net asset value. The net asset value of the Funds' shares reflects investment
advisory fees and administrative expenses already deducted from the assets of
the Funds. Funds' investment management fees are a percentage of the average
daily value of the net assets of the Portfolios.
For a complete description of the charges against the Funds, see "Contract
Charges and Deductions," page __.
<PAGE>
Premium Expense Charge: The premium expense charge is currently equal to an
annual rate of 4.0%. This charge compensates the Company for premium taxes
imposed by various states and local jurisdictions and for federal taxes related
to the receipt of premiums under the Contract and that results from the
application of section 848 of the Code. The premium tax deduction will be
imposed on all Contracts. You may therefore pay the premium expense charge even
if your state does not impose a premium tax. The premium expense charge is
deducted from each premium received prior to being allocated to the Variable
Sub-accounts or to the Fixed Account in accordance with your allocation
instructions.
Surrender Charge: Upon surrender of the Contract, a Surrender Charge may be
assessed. After the fifteenth Contract Year, no surrender charges will be
assessed. Full surrenders will be subject to a surrender charge as set forth in
the table below:
SCHEDULE OF SURRENDER CHARGES
CONTRACT YEAR SURRENDER CHARGE**
1-7 .................................................. 30%
8 .................................................. 27%
9 .................................................. 24%
10 .................................................. 20%
11 .................................................. 16%
12 .................................................. 12%
13 .................................................. 8%
14 .................................................. 4%
15 .................................................. 0%
** Surrender Charge as a Percentage of the lesser of the
premium paid or the Target Premium.
CONTRACT BENEFITS AND RIGHTS
DEATH BENEFIT
The Contracts provide for the payment of Death Benefit Proceeds to the named
beneficiary when the Insured dies. The Proceeds payable to the beneficiary equal
the Death Benefit less any Indebtedness and less any unpaid Monthly Deduction
Amounts occurring during a Grace Period (if applicable). The Death Benefit is
determined by the Death Benefit option that exists under the Contract. The
Contract Owner may choose one of two Death Benefit options: a level amount which
generally equals the Specified Amount of the Contract; or a variable amount
which generally equals the Specified Amount plus the Account Value. As long as
the Contract remains In Force, the Death Benefit will not be less than the
greater of the current Specified Amount of the Contract or the Account Value
multiplied by the Death Benefit ratio under the Contract. The ratios are
specified in the Contract and vary according to the attained age of the Insured.
An increase in Account Value due to favorable investment experience may
therefore increase the Death Benefit above the Specified Amount, and a decrease
in Account Value due to unfavorable investment experience may decrease the Death
Benefit (but not below the Specified Amount).
EXAMPLES:
A B
Specified Amount: $100,000 $100,000
Death Benefit Option: 1 1
Insured's Age: 45 45
Account Value on Date of Death: $ 48,000 $ 34,000
Death Benefit Ratio: 2.15 2.15
<PAGE>
In Example A, the Death Benefit equals $103,200, i.e., the greater of $100,000
(the Specified Amount) and $103,200 (the Account Value at the Date of Death of
$48,000, multiplied by the Death Benefit Ratio of 2.15). This amount, less any
Indebtedness and unpaid Monthly Deduction Amounts, constitutes the Proceeds
which the Company would pay to the beneficiary.
In Example B, the Death Benefit is $100,000, i.e., the greater of $100,000 (the
Specified Amount) or $73,100 (the Account Value of $34,000 multiplied by the
Death Benefit Ratio of 2.15).
All or part of the proceeds may be paid in cash or applied under an Income Plan.
See "Other Matters -- Payment Options," page 20.
THREE YEAR CONTINUATION PERIOD
All Contracts provide for a three year continuation period which is in effect
until the end of the third Contract Year. On any Monthly Activity Date during
the continuation period, the Company will guarantee that, regardless of Account
Value, the Contract will remain In Force if the amount of cumulative premiums
paid less partial withdrawals and any Indebtedness is greater than or equal to
the Cumulative Minimum Premium.
GUARANTEE PERIOD
The Contract will not be terminated during the guarantee period even if the cash
surrender value is zero. The Contract Owner can select one of three options: (1)
no guarantee period; (2) the greater of 10 years or until the Insured's attained
age 65; or (3) a lifetime guarantee period. The guarantee period will be
terminated prior to the expiration date if the cumulative premiums paid less
partial withdrawals and any Indebtedness is less than the cumulative guarantee
period premium. The cumulative guarantee period premium will be calculated by
dividing the Guarantee Period premium shown on page three of your Contract by,
and multiplying the result by the number of Contract months since issue.
ACCELERATED DEATH BENEFIT
If the Insured becomes terminally ill, the Contract Owner may request an
Accelerated Death Benefit in an amount up to the lesser of: (1) 50% of the
Specified Amount on the day we receive the request; or (2) $250,000 for all
policies issued by the Company which cover the Insured. "Terminally ill" means
an illness or physical condition of the Insured that, notwithstanding
appropriate medical care, will result in a life expectancy of 12 months or less.
If the Insured is terminally ill as the result of an illness, the Accelerated
Death Benefit is not available unless the illness occurred at least 30 days
after the Issue Date. If the Insured is terminally ill as the result of an
accident, the Accelerated Death Benefit is available if the accident occurred
after the Issue Date.
<PAGE>
We will pay benefits due under the Accelerated Death Benefit provision upon
receipt of a written request from the Contract Owner and due proof that the
Insured has been diagnosed as terminally ill. The Company reserves the right to
require supporting documentation of the diagnosis and to require (at the
Company's expense) an examination of the Insured by a physician of the Company's
choice to confirm the diagnosis. The amount of the payment will be the amount
requested by the Contract Owner, reduced by the sum of: (1) a 12 month interest
discount to reflect the early payment; (2) an administrative fee not to exceed
$250; and (3) a pro rata amount of any outstanding Contract loan and accrued
loan interest. After the payment has been made, the Specified Amount, the
Account Value and any outstanding Contract loan will be reduced on a prorata
basis. Although the Company reserves the right to charge an administrative fee
not to exceed $250, the Company does not currently impose this fee.
Only one request for an Accelerated Death Benefit per Insured is allowed. The
Accelerated Death Benefit may not be available in all states.
OTHER BENEFITS
In addition to the Accelerated Death Benefit, several additional benefits are
available to a Contract Owner through amendatory endorsements. The options
available are summarized below. For further information on these endorsements,
please refer to the full text of the endorsements which are provided with and
made a part of the Contract.
WAIVER OF MONTHLY DEDUCTIONS RIDER:
Under this endorsement, all monthly deduction amounts which become due are
waived if the Insured becomes disabled before age 60. The waiver will be made
upon the Company's receipt of due proof of disability in a timely manner. Under
the waiver, all benefits under the Contract are available as if the waived
payments had been made when due.
CHILDREN'S LEVEL TERM RIDER:
As shown on page 3 of your Contract, the Company will pay the amount of benefit
in force to the payee (as defined in the endorsement) for each child insured
under this rider. The benefit will be paid upon receipt by the Company of due
proof that the child died on or prior to the earlier of: (a) the Contract
Anniversary on which the child's age is 25; or (b) the coverage expiration date
of this rider.
ACCIDENTAL DEATH BENEFIT RIDER:
As shown on page 3 of your Contract, the Company will pay the amount of benefit
in force to the beneficiary upon receipt by the Company of due proof that: (a)
the Insured died solely from accidental injury; (b) death occurred within 90
days of the date of the accidental injury; (c) death took place prior to the
Contract Anniversary on which the Insured's age is 65; and, (d) the cause of
death is not described in the "Risks Not Covered" provision of this rider.
ADDITIONAL INSURED RIDER:
As shown on page 3 of your Contract, the Company will pay the amount of benefit
in force to the beneficiary upon receipt by the Company of due proof that the
insured died on or prior to the coverage expiration date of this rider.
ACCOUNT VALUE
The Account Value of a Contract will be computed on each Valuation Day. On the
Contract Date, the Account Value is equal to the initial premium less the
premium expense charge and less the Monthly Deduction Amount for the first
Contract month. Thereafter, the Account Value will vary to reflect the
investment experience of the underlying Portfolios of the Variable Subaccounts
to which you have allocated premium(s), the value of the Loan Account and the
Monthly Deduction Amounts. There is no minimum guaranteed Account Value.
<PAGE>
The Account Value of a particular Contract is related to the net asset value of
the Portfolios that correspond to the Variable Sub-Accounts to which premiums on
the Contract have been allocated. The Account Value on any Valuation Day is
calculated by multiplying the number of Accumulation Units credited to the
Contract in each Variable Sub-Account as of the Valuation Day by the current
Accumulation Unit Value of that Variable Sub-Account and then summing the result
for all the Sub-Accounts under the Contract and the value of the Fixed Account,
plus the value of the Loan Account. See "The Contract -- Accumulation Unit
Values," page 11.
TRANSFER OF ACCOUNT VALUE
While the Contract remains In Force and subject to the Company's transfer rules
then in effect, the Contract Owner may request that part or all of the Account
Value of a particular Variable Sub-Account be transferred to other Variable
Sub-Accounts or to the Fixed Account. The Company reserves the right to impose a
$10 charge on each such transfer in excess of 12 per Contract Year. Currently,
the Company does not charge for transfers. The minimum amount that can be
transferred is shown on your Contract Data page of your Contract (currently,
there is no minimum).
Transfers from the Fixed Account may be made once each year within 60 days
following the Contract Anniversary. There is no minimum amount which must be
transferred from the Fixed Account. The maximum amount which may be transferred
from the Fixed Account is the greatest of:
(1) 25% of the Account Value allocated to the Fixed Account at the time
of transfer; or
(2) the amount transferred from the Fixed Account in the prior Contract
Year; or
(3) $500.
Telephone transfer requests will be accepted by the Company if received at
1(800)755-5275 by 4:00 p.m., Eastern Time. Telephone transfer requests received
at any other telephone number or after 4:00 p.m., Eastern Time, will not be
accepted by the Company. Telephone transfer requests received before 4:00 p.m.,
Eastern Time, are effected at the next computed value. Transfers by telephone
may be made by the Contract Owner's agent of record or attorney-in-fact pursuant
to a power of attorney. Telephone transfers may not be permitted in some states.
The Company and its agents and affiliates will not be responsible for losses
resulting from acting upon telephone requests reasonably believed to be genuine.
The Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine; otherwise, the Company may be liable for
any losses due to unauthorized or fraudulent instructions. The procedures the
Company follows for transactions initiated by telephone include requirements
that callers must identify themselves and the Contract Owner by name and social
security number or other identifying information. All transfer instructions by
telephone are tape recorded. As a result of a transfer, the number of
Accumulation Units credited to the Variable Sub-Account from which the transfer
is made will be reduced by the number obtained by dividing the amount
transferred by the Accumulation Unit Value of the Variable Sub-Account from
which the transfer is made on the Valuation Day the Company receives the
transfer request. The number of Accumulation Units credited to the Sub-Account
to which the transfer is made will be increased by the number obtained by
dividing the amount transferred by the Accumulation Unit Value of that
Sub-Account on the Valuation Day the Company receives the transfer request.
DOLLAR COST AVERAGING
Transfers may be made automatically through Dollar Cost Averaging while the
Contract is In Force. Dollar Cost Averaging permits the Owner to transfer a
specified amount every month (or some other frequency as may be determined by
the Company) from the Money Market Sub-Account to any other Variable
Sub-Account. The theory of Dollar Cost Averaging is that, if purchases of equal
dollar amounts are made at fluctuating prices, the aggregate average cost per
unit will be less than the average of the unit prices on the same purchase
dates. However, participation in the Dollar Cost Averaging program does not
assure you of a greater profit from your purchases under the program; nor will
it prevent or alleviate losses in a declining market. Transfers made through
Dollar Cost Averaging are not assessed a charge and are not included in the
twelve free transfers permitted each Contract Year.
AUTOMATIC REBALANCING
Transfers may be made automatically through Automatic Rebalancing while the
Contract is In Force. By electing Automatic Rebalancing, the Account Value in
the Variable Sub-Accounts will be rebalanced to the desired allocation on a
quarterly basis, determined from the first date that you decide to rebalance.
Each quarter, Account Value will be transferred among Variable Sub-Accounts to
achieve the desired allocation. The desired allocation will be the allocation
initially selected, unless subsequently changed. You may change the allocation
at any time by giving us written notice.
Transfers made through Automatic Rebalancing are not assessed a charge and are
not included in the twelve free transfers permitted each Contract Year.
Any money allocated to the Fixed Account will not be included in the
rebalancing.
CONTRACT LOANS
While the Contract is In Force, a Contract Owner may obtain, without the consent
of the beneficiary (provided the designation of beneficiary is not irrevocable),
a cash loan from the Company. Loans are secured by the Contract. The maximum
amount available for a loan is 90% of the Contract's Cash Value, less the amount
of all Contract loans existing on the date of the loan.
The loan amounts will be transferred proportionately from the Variable
Subaccounts and the Fixed Account to the Loan Account unless the Contract Owner
specifies otherwise. However, the Company will not withdraw amounts from the
Fixed Account equaling more than the total loan multiplied by the ratio of the
Fixed Account to the Account Value immediately preceding the loan. The amounts
allocated to the Loan Account will be credited with interest at the loan
credited rate set forth in the Contract. Loans will bear interest at rates
determined by the Company from time to time, but which will not exceed the
maximum rate indicated in the Contract (currently, 4% per year). The difference
between the value of the Loan Account and the Indebtedness will be transferred
on a pro-rata basis from the Variable Sub-Accounts and the Fixed Account to the
Loan Account on each Contract Anniversary. If the aggregate outstanding loan(s)
and loan interest secured by the Contract exceeds the Cash Value of the
Contract, we will give written notice to the Contract Owner that unless we
receive an additional payment within 61 days to reduce the aggregate outstanding
loan(s) secured by the Contract, the Contract may lapse.
All or any part of any loan secured by a Contract may be repaid while the
Contract is still in effect. When loan repayments or interest payments are made,
the repayment will be allocated among the Variable Sub-Accounts and the Fixed
Account in the same percentage as subsequent payments are allocated (unless the
Contract Owner requests a different allocation), and an amount equal to the
payment will be deducted from the Loan Account. Any outstanding loan at the end
of a Grace Period must be repaid before the Contract will be reinstated. See
"Contract Benefits and Rights -- Lapse and Reinstatement," page 17. A loan,
whether or not repaid, will have a permanent effect on the Account Value because
the investment results of each Variable Sub-Account and the Fixed Account will
apply only to the amount remaining in that account. The longer a loan is
outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the Variable Sub-Accounts and/or Fixed Account earn
more than the annual interest rate for amounts held in the Loan Account, a
Contract Owner's Account Value will not increase as rapidly as it would have had
no loan been made. If the Variable Sub-Accounts and/or Fixed Account earn less
than that rate, the Contract Owner's Account Value will be greater than it would
have been had no loan been made. Also, if not repaid, the aggregate outstanding
loan(s) will reduce the Death Benefit Proceeds and Cash Surrender Value
otherwise payable.
AMOUNT PAYABLE ON SURRENDER OF THE CONTRACT
While the Contract is In Force, a Contract Owner may elect, without the consent
of the beneficiary (provided the designation of beneficiary is not irrevocable),
to surrender the Contract. Upon surrender, the Contract Owner will receive the
Cash Surrender Value determined as of the day the Company receives the Contract
Owner's written request or the date requested by the Contract Owner, whichever
is later. The Cash Surrender Value equals the Cash Value less any Indebtedness.
We will pay the Cash Surrender Value of the Contract within seven days of
receipt by the Company of the written request or on the effective surrender date
requested by the Contract Owner, whichever is later. The Contract will terminate
on the date of receipt of the written request, or the date the Contract Owner
requests the surrender to be effective, whichever is later. For a discussion of
the tax consequences of surrendering the Contract, see "Federal Tax
Considerations," page 23.
The Contract Owner may elect to apply the surrender proceeds to an Income Plan
(see "Other Matters -- Payment Options," page 20).
PARTIAL WITHDRAWALS
While the Contract is In Force after the first Contract Year, a Contract Owner
may elect once per year, by written request, to make a partial withdrawal from
the Cash Surrender Value. The minimum partial withdrawal is shown in the
Contract (currently there is no minimum) and the maximum partial withdrawal
amount may not reduce the net Account Value to less than $500; otherwise, the
request will be treated as a request for a surrender of the entire Account
Value. The partial withdrawal and the partial withdrawal fee (currently the
lesser of $25 or 2% of the amount withdrawn) will be deducted pro rata from each
Variable Sub-Account and Fixed Account, unless the Contract Owner instructs
otherwise. However, the Contract Owner may not withdraw from the Fixed Account
more than the total partial withdrawal multiplied by the ratio of the Fixed
Account to the Account Value immediately preceding the partial withdrawal.
Any Contract with Death Benefit option 1 will also have a reduction in Specified
Amount, in addition to a reduction in Account Value. The Specified Amount after
the partial withdrawal will be reduced by the amount of the partial withdrawal.
For a discussion of the tax consequences of partial withdrawals, see "Federal
Tax Considerations," page 23.
MATURITY
The Contracts have no maturity date.
LAPSE AND REINSTATEMENT
If the Cash Surrender Value is insufficient to cover a Monthly Deduction Amount
due on a Monthly Activity Date, the Contract may lapse. The Company will give
written notice to the Contract Owner that if an amount shown in the notice
(which will be sufficient to cover the Monthly Deduction Amount(s) due) is not
paid within 61 days ("Grace Period"), the Contract will lapse at the end of the
Grace Period. The Contract will not lapse regardless of the cash surrender value
if the three year continuation period or the guarantee period is in effect. The
Contract will continue through the Grace Period. If, before the end of the Grace
Period, the Contract Owner does not pay the amount shown in the notice, the
Contract will terminate at the end of the Grace Period. If the Insured dies
during the Grace Period, the Proceeds payable under the Contract will be reduced
by the Monthly Deduction Amount(s) due and unpaid. See "Contract Benefits and
Rights -- Death Benefit," page 15.
If the Contract lapses, the Contract Owner may apply for reinstatement of the
Contract by payment of the reinstatement premium (and any applicable charges)
required under the Contract. A request for reinstatement must be made within
five years of the date the Contract entered a Grace Period. If a loan was
outstanding at the time of lapse, the Company will require repayment of the loan
before permitting reinstatement. In addition, the Company reserves the right to
require evidence of insurability satisfactory to the Company. The reinstatement
premium is equal to an amount sufficient to: (1) cover all Monthly Deduction
Amounts due and unpaid during the Grace Period, and (2) keep the Contract in
force for three months after the date of reinstatement. The Specified Amount
upon reinstatement cannot exceed the Specified Amount of the Contract at its
lapse. The Account Value on the reinstatement date will reflect the Account
Value at the time of termination of the Contract plus the premiums paid at the
time of reinstatement. Surrender charges, cost of insurance, mortality and
expense risk charges, administrative expense monthly charges, and premium
expense charges will continue to be based on the original Contract Date.
CANCELLATION AND EXCHANGE RIGHTS
A Contract Owner has a limited right to return a Contract for cancellation. The
right to return exists during the free-look period. The free-look period is a
number of days (which varies by state) as specified in your Contract. If the
Contract is returned for cancellation by mail or personal delivery to the
Company or to the agent who sold the Contract within the free-look period
following delivery of the Contract to the Contract Owner, the Company will
return to the Contract Owner, within 7 days, the premiums paid adjusted to
reflect any investment gain or loss resulting from allocation to the Variable
Account prior to the date of cancellation, unless state law requires a return of
premium without adjustment. If, upon exercise of the free look right, the
Company is required to return the premiums paid, and where approved by the
applicable state, the Company reserves the right to allocate all premium
payments made prior to the expiration of the free-look period to the Dreyfus VIF
Money Market Portfolio.
Once the Contract is in effect, it may be exchanged during the first 24 months
after its issuance for a nonvariable life insurance contract on the life of the
Insured without evidence of insurability. This exchange will be implemented by
transferring the Account Value to the Fixed Account and removing your future
right to allocate funds to the Variable Account. The amount at risk to the
Company (i.e., the difference between the Death Benefit and the Account Value)
under the new contract will be equal to or less than the amount at risk to the
Company under the exchanged Contract on the date of exchange. Premiums and
charges under the new contract will be based on the same risk classification as
the exchanged Contract. For new contracts, the Company reserves the right to
make a contract available that is offered by the Company's parent or by any
affiliate of the Company.
<PAGE>
SUSPENSION OF VALUATION, PAYMENTS AND TRANSFERS
The Company will suspend all procedures requiring valuation of the Variable
Account (including transfers, surrenders and loans) on any day the New York
Stock Exchange is closed or trading is restricted due to an existing emergency
as defined by the Securities and Exchange Commission, or on any day the
Commission has ordered that the right of surrender of the Contracts be suspended
for the protection of Contract Owners, until such condition has ended.
THE FIXED ACCOUNT
INTRODUCTION
Contributions under the fixed portion of the Contract and transfers to the fixed
portion of the Contract become part of the general account of the Company, which
supports insurance and annuity obligations. Because of exemptive and
exclusionary provisions, interests in the general account are not registered
under the Securities Act of 1933 ("1933 Act"), nor is the general account
registered as an investment company under the 1940 Act. Accordingly, neither the
general account nor any interests therein are generally subject to the
provisions of the 1933 or 1940 Acts and the Company has been advised that the
staff of the Securities and Exchange Commission has not reviewed the disclosures
in this prospectus which relates to the fixed account. Disclosures regarding the
fixed portion of the Contract and the general account, however, may be subject
to certain generally applicable provisions of the federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
GENERAL DESCRIPTION
Contributions made to the Fixed Account are invested in the general account of
the Company. The general account is made up of all of the general assets of the
Company, other than those in the Variable Account and in any other segregated
asset account of the Company. Instead of the Contract Owner bearing the
investment risk as is the case for amounts in the Variable Account, the Company
bears the full investment risk for all amounts contributed to the general
account. The Company has sole discretion to invest the assets of the general
account, subject to applicable law. The Company guarantees that the amounts
allocated to the Fixed Account will be credited interest at a net effective
interest rate of at least the minimum guaranteed rate found in the Contract.
Currently, the amount of interest credited in excess of the guaranteed rate will
vary periodically in the sole discretion of the Company. Any interest held in
the general account does not entitle a Contract Owner to share in the investment
experience of the general account.
Money deposited in the Fixed Account earns interest for the Guarantee Period at
the current rate in effect at the time of allocation or transfer. After the
Guarantee Period, a renewal rate will be declared by the Company. Subsequent
renewal dates will be on anniversaries of the first renewal date. On or about
each renewal date, the Company will notify the Owner of the interest rate(s).
The interest rate will be guaranteed by the Company for a full year and will not
be less than the guaranteed rate found in the Contract. The Company may declare
more than one interest rate for different monies based upon the date of
allocation or transfer to the Fixed Account and based upon the Guarantee Period.
The Company will offer a one year Guarantee Period. Additional Guarantee Periods
may be offered at the sole discretion of the Company.
<PAGE>
OTHER MATTERS
VOTING RIGHTS
In accordance with its view of presently applicable law, the Company will vote
the shares of the Portfolios at regular and special meetings of the shareholders
of the Funds in accordance with instructions from Contract Owners (or the
assignee of the Contract, as the case may be) having a voting interest in the
Variable Account. The number of shares of a Portfolio held in a Variable
Sub-Account which are attributable to each Contract Owner is determined by
dividing the Contract Owner's interest in that Variable Sub-Account by the per
share net asset value of the corresponding Portfolio. The Company will vote
shares for which no instructions have been given and shares which are not
attributable to Contract Owners (i.e., shares owned by the Company) in the same
proportion as it votes shares for which it has received instructions. If the
1940 Act or any rule promulgated thereunder should be amended, however, or if
the Company's present interpretation should change and, as a result, the Company
determines it is permitted to vote the shares of the Funds in its own right, it
may elect to do so.
The voting interests of the Contract Owner (or the assignee) in the Funds will
be determined as follows: Contract Owners are entitled to give voting
instructions to the Company with respect to Portfolio shares attributable to
them as described above, determined on the record date for the shareholder
meeting for that Portfolio. Therefore, if a Contract Owner has taken a loan
secured by the Contract, amounts transferred from the Variable Sub-Account(s) to
the Loan Account in connection with the loan (see "Contract Benefits and Rights
- -- Contract Loans," page 16) will not be considered in determining the voting
interests of the Contract Owner. Contract Owners should review the prospectuses
for the Funds which accompany this prospectus to determine matters on which Fund
shareholders may vote.
The Company may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the sub-classification or investment objective
of one or more of the Portfolios or to approve or disapprove an investment
advisory contract for one or more of the Portfolios.
In addition, the Company itself may disregard voting instructions in favor of
changes initiated by Contract Owners in the investment objectives or the
investment adviser of the Funds if the Company reasonably disapproves of such
changes. A change would be disapproved only if the proposed change is contrary
to state law or prohibited by state regulatory authorities. If the Company does
disregard voting instructions, a summary of that action and the reasons for such
action will be included in the next periodic report to Contract Owners.
<PAGE>
STATEMENTS TO CONTRACT OWNERS
The Company will maintain all records relating to the Variable Account and the
Variable Sub-Accounts. At least once each Contract Year, the Company will send
to each Contract Owner a statement showing the Coverage Amount and the Account
Value of the Contract (indicating the number of Accumulation Units credited to
the Contract in each Variable Sub-Account and the corresponding Accumulation
Unit Value), the Fixed Account and any outstanding loan secured by the Contract
as of the date of the statement. The statement will also show premium paid, and
Monthly Deduction Amounts under the Contract since the last statement, and any
other information required by any applicable law or regulation.
LIMIT ON RIGHT TO CONTEST
The Company may not contest the validity of the Contract after it has been in
effect during the Insured's lifetime for two years from the Contract Date. If
the Contract is reinstated, the two-year period is measured from the date of
reinstatement. Any increase in the Specified Amount for which evidence of
insurability was obtained is contestable for 2 years from its effective date. In
addition, if the Insured dies by suicide while sane or self destruction while
insane in the two-year period after the Contract Date, or such period as
specified by state law, the benefit payable will be limited to the Account Value
less any Indebtedness. If the Insured dies by suicide while sane or
self-destruction while insane in the two-year period following an increase in
the Specified Amount, the benefit payable with respect to the increase will be
limited to the cost of insurance paid for such increase.
MISSTATEMENT AS TO AGE AND SEX
If the age or sex of the Insured is incorrectly stated, the Death Benefit will
be appropriately adjusted as specified in the Contract.
PAYMENT OPTIONS
The surrender proceeds or Death Benefit Proceeds under the Contracts may be paid
in a lump sum or may be applied to one of the Company's Income Plans. If the
amount to be applied to an Income Plan is less than $3,000 or if it would result
in an initial income payment of less than $20, the Company may require that the
frequency of income payments be decreased such that the income payments are
greater than $20 each, or it may elect to pay the amount in a lump sum. No
surrender or partial withdrawals are permitted after payments under an Income
Plan commence.
We will pay interest on the Proceeds from the date of the Insured's death to the
date payment is made or a payment option is elected. At such times, the Proceeds
are not subject to the investment experience of the Variable Account. The Income
Plans are fixed annuities payable from the Company's general account. They do
not reflect the investment experience of the Variable Account. Fixed annuity
payments are determined by multiplying the amount applied to the annuity by a
rate to be determined by the Company which is no less than the rate specified in
the fixed payment annuity tables in the Contract. The annuity payment will
remain level for the duration of the annuity. The Company may require proof of
age and gender of the payee (and joint payee, if applicable) before payments
begin. The Company may also require proof that such person(s) are living before
it makes each payment.
The following options are available under the Contracts (the Company may offer
other payment options):
INCOME PLAN 1 -- Life Income With Guaranteed Payments
The Company will make payments for as long as the payee lives. If the payee dies
before the selected number of guaranteed payments have been made, the Company
will continue to pay the remainder of the guaranteed payments.
INCOME PLAN 2 -- Joint and Survivor Life Income With Guaranteed Payments
The Company will make payments for as long as either the payee or Joint payee,
named at the time of Income Plan selection, is living. If both the payee and the
Joint payee die before the selected number of guaranteed payments have been
made, the Company will continue to pay the remainder of the guaranteed payments.
The Company will make any other arrangements for income payments as may be
agreed on.
BENEFICIARY
The applicant names the beneficiary in the application for the Contract. The
Contract Owner may change the beneficiary (unless irrevocably named) during the
Insured's lifetime by written request to the Company. If no beneficiary is
living when the Insured dies, the Proceeds will be paid to the Contract Owner if
living; otherwise to the Contract Owner's estate.
<PAGE>
ASSIGNMENT
Unless required by state law, the Contract may not be assigned as collateral for
a loan or other obligation.
DIVIDENDS
No dividends will be paid under the Contracts.
GLENBROOK LIFE AND ANNUITY COMPANY
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers are listed below, together with information
as to their ages, dates of election and principal business occupations during
the last five years (if other than their present occupation).
LOUIS G. LOWER, II, 52, Chief Executive Officer and Chairman of the Board
(1995)*
Also Director (1986-Present) and Senior Vice President (1995-Present) of
Allstate Insurance Company; Director (1991-Present) of Allstate Life Financial
Services, Inc.; Director (1986-Present) and President (1990-Present) Allstate
Life Insurance Company; Director (1983-Present) and Chairman of the Board
(1990-Present) of Allstate Life Insurance Company of New York; Director
(1990-Present), Chairman of the Board of Directors and Chief Executive Officer
(1995-Present), Chairman of the Board of Directors and President (1990-1995) of
Glenbrook Life Insurance Company; Director and Chairman of the Board
(1995-Present) of Laughlin Group Holdings, Inc.; Director and Chairman of the
Board of Directors and Chief Executive Officer (1989-Present) Lincoln Benefit
Life Company; Director (1986-Present), Chairman of the Board of Directors and
Chief Executive Officer (1995-Present) of Northbrook Life Insurance Company; and
Chairman of the Board of Directors and Chief Executive Officer (1995-Present)
Surety Life Insurance Company.
PETER H. HECKMAN, 52, President, Chief Operating Officer and Director (1996)*
Also Director and Vice President (1988-Present) of Allstate Life Insurance
Company; Director (1990-1996), Vice President (1989-Present), Allstate Life
Insurance Company of New York; Director (1991-1993) of Allstate Life Financial
Services, Inc.; Director (1990-Present), President and Chief Operating Officer
(1996-Present), and Vice President (1990-1996), Glenbrook Life Insurance
Company; Director (1995-Present) and Vice Chairman of the Board (1996-Present)
Laughlin Group Holdings, Inc.; Director (1990-Present) and Vice Chairman of the
Board (1996-Present) Lincoln Benefit Life Company; Director (1988-Present)
President and Chief Operating Officer (1996-Present), and was Vice President
(1989-1996), Northbrook Life Insurance Company; and Director (1995-Present) and
Vice Chairman of the Board (1996-Present) Surety Life Insurance Company.
MICHAEL J. VELOTTA, 52, Vice President, Secretary, General Counsel, and Director
(1992)*
Also Director and Secretary (1993-Present) of Allstate Life Financial
Services, Inc.; Director (1992-Present) Vice President, Secretary and General
Counsel (1993-Present) Allstate Life Insurance Company; Director (1992-Present)
Vice President, Secretary and General Counsel (1993-Present) Allstate Life
Insurance Company of New York; Director (1992-Present) Vice President, Secretary
and General Counsel (1993-Present) Glenbrook Life Insurance Company; Director
and Secretary (1995-Present) Laughlin Group Holdings, Inc.; Director
(1992-Present) and Assistant Secretary (1995-Present) Lincoln Benefit Life
Company; Director (1992-Present) Vice President, Secretary and General Counsel
(1993-Present) Northbrook Life Insurance Company; and Director and Assistant
Secretary (1995-Present) Surety Life Insurance Company.
JOHN R. HUNTER, 43, Director (1996)*
Also Assistant Vice President (1990-Present) Allstate Life Insurance
Company; Assistant Vice President (1996-Present) Allstate Life Insurance Company
of New York; Director (1996-Present) Glenbrook Life Insurance Company; and
Director (1994-Present) and Assistant Vice President (1990-Present) Northbrook
Life Insurance Company.
G. CRAIG WHITEHEAD, 51, Senior Vice President and Director (1995)*
Also Assistant Vice President (1991-Present) Allstate Life Insurance
Company; Director (1994-Present) Assistant Vice President (1991-Present)
Glenbrook Life Insurance Company; Assistant Vice President (1992-Present)
Secretary (1995) Glenbrook Life and Annuity Company; Director (1995-Present)
Laughlin Group Holdings, Inc.
MARLA G. FRIEDMAN, 44, Vice President (1996)*
Also Director (1991-Present) and Vice President (1988-Present) Allstate
Life Insurance Company; Director (1993-1996) Allstate Life Financial Services,
Inc.; Assistant Vice President (1996-Present) Allstate Life Insurance Company of
New York; Director (1991-1996), President and Chief Operating Officer
(1995-1996) and Vice President (1990-1995) and (1996-Present) Glenbrook Life
Insurance Company; Director and Vice Chairman of the Board (1995-1996) Laughlin
Group Holdings, Inc.; and Director (1989-1996), President and Chief Operating
Officer (1995-1996) and Vice President (1996-Present) Northbrook Life Insurance
Company.
KEVIN R. SLAWIN, 40, Vice President (1996)*
Also Assistant Vice President and Assistant Treasurer (1995-1996) Allstate
Insurance Company; Director (1996-Present) and Assistant Treasurer (1995-1996)
Allstate Financial Services, Inc.; Director and Vice President (1996-Present)
and Assistant Treasurer (1995-1996) Allstate Life Insurance Company; Director
and Vice President (1996-Present) and Assistant Treasurer (1995-1996) Allstate
Life Insurance Company of New York; Director and Vice President (1996-Present)
and Assistant Treasurer (1995-1996) Glenbrook Life Insurance Company; Director
(1996-Present) and Assistant Treasurer (1995-1996) Laughlin Group Holdings,
Inc.; Director (1996-Present) Lincoln Benefit Life Company; Director and Vice
President (1996-Present) and Assistant Treasurer (1995-1996) Northbrook Life
Insurance Company; Director (1996-Present) Surety Life Insurance Company; and
Assistant Treasurer and Director (1994-1995) Sears Roebuck and Co.; and
Treasurer and First Vice President (1986-1994) Sears Mortgage Corporation.
CASEY J. SYLLA, 54, Chief Investment Officer (1995)*
Also Director (1995-Present) Senior Vice President and Chief Investment
Officer (1995-Present) Allstate Insurance Company; Director (1995-Present) Chief
Investment Officer (1995-Present) Allstate Life Insurance Company; Chief
Investment Officer (1995-Present) Allstate Life Insurance Company of New York;
Chief Investment Officer (1995-Present) Glenbrook Life Insurance Company; and
Director and Chief Investment Officer (1995-Present) Northbrook Life Insurance
Company. Prior to 1995 he was Senior Vice President and Executive Officer
Investments (1992-1995) of Northwestern Mutual Life Insurance Company.
JAMES P. ZILS, 47, Treasurer (1995)*
Also Vice President and Treasurer (1995-Present) Allstate Insurance
Company; Treasurer (1995-Present) Allstate Life Financial Services, Inc.;
Treasurer (1995-Present) Allstate Life Insurance Company; Treasurer
(1995-Present) Allstate Life Insurance Company of New York; Treasurer
(1995-Present) Glenbrook Life Insurance Company; Treasurer (1995-Present)
Laughlin Group Holdings, Inc.; and Treasurer (1995-Present) Northbrook Life
Insurance Company. Prior to 1995 he was Vice President of Allstate Life
Insurance Company. Prior to 1993 he held various management positions.
*Date elected/appointed to current office.
DISTRIBUTION OF THE CONTRACTS
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road, Northbrook
Illinois, a wholly owned subsidiary of Allstate Life Insurance Company, acts as
the principal underwriter of the Contracts. ALFS is registered as a
broker-dealer under the Securities Exchange Act of 1934 and became a member of
the National Association of Securities Dealers, Inc. on June 30, 1993. Contracts
are sold by unaffiliated registered representatives of broker-dealers or bank
employees who are licensed insurance agents appointed by the Company, either
individually or through an incorporated insurance agency and who have entered
into a selling agreement with ALFS and the Company to sell the Contracts. In
some states, Contracts may be sold by representatives or employees of banks
which may be acting as broker-dealers without separate registration under the
Securities Exchange Act of 1934, pursuant to legal and regulatory exceptions.
The maximum sales commission payable to Company agents, independent registered
insurance brokers, and other registered broker-dealers is 90% of initial
premium. The Company may pay or permit other promotional incentives, in cash or
credit or other compensation.
The underwriting agreement with ALFS provides for indemnification of ALFS by the
Company for liability to owners arising out of services rendered or contracts
issued.
<PAGE>
SAFEKEEPING OF THE VARIABLE
ACCOUNT'S ASSETS
The assets of the Variable Account are held by the Company. The assets of the
Variable Account are kept physically segregated and held separate and apart from
the General Account of the Company. The Company maintains records of all
purchases and redemptions of shares of the Funds.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or purchase of a life insurance contract depend upon
the individual circumstances of each person. If you are concerned about any tax
consequences with regard to your individual circumstances, you should consult a
qualified tax advisor.
TAXATION OF THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under Part I of Subchapter L of
the Code. Since the Variable Account is not an entity separate from the Company
and its operations form a part of the Company, it will not be taxed separately
as a "Regulated Investment Company" under Subchapter M of the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Variable Account investment income and realized net capital gains will
not be taxed to the extent that such income and gains are applied to increase
the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Variable Account, and therefore the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Variable Account, then the
Company may impose a charge against the Variable Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
TAXATION OF CONTRACT BENEFITS
In order to qualify as a life insurance contract for federal income tax
purposes, the Contract must meet the definition of a life insurance contract set
forth in Section 7702 of the Code. Section 7702 limits the amount of premiums
that may be invested in a contract that is treated as life insurance. The manner
in which Section 7702 should be applied to certain features of the Contract
offered in this prospectus is not directly addressed in Section 7702.
Nevertheless, the Company believes that the Contract will meet the Section 7702
definition of a life insurance contract. This means that:
- the death benefit should be fully excludable from the gross
income of the beneficiary under Section 101(a)(1) of the Code; and
- the Contract Owner should not be considered in constructive
receipt of the Cash Value of the Contract, including any increases, until actual
cancellation of the Contract.
In addition, in the absence of final regulations or other pertinent
interpretations of Section 7702, there is necessarily some uncertainty as to
whether a substandard risk Contract will meet the statutory life insurance
contract definition. If a Contract were determined not to be a life insurance
contract for purposes of Section 7702, such Contract would not provide most of
the tax advantages normally provided by a life insurance contract. The Company
reserves the right to amend the Contracts to comply with any future changes in
the Code, any regulations or rulings under the Code and any other requirements
imposed by the Internal Revenue Service.
<PAGE>
If you own and are the Insured under the Contract, the Death Benefit will be
included in your gross estate for federal estate tax purposes if the proceeds
are payable to your estate. If the beneficiary is other than your estate but you
retained incidents of ownership in the Contract, the Death Benefit will also be
included in your gross estate. Examples of incidents of ownership include, but
are not limited to, the right to change beneficiaries, to assign the Contract or
revoke an assignment, to pledge the Contract or to obtain a Contract loan. If
you own and are the Insured under the Contract and you transfer all incidents of
ownership in the Contract, the Death Benefit will be included in your gross
estate if you die within three years from the date of the ownership transfer.
State and local estate and inheritance tax consequences may also apply. In
addition, certain transfers of the Contract or Death Benefit, either during life
or at death, to individuals (or trusts for the benefit of such individuals) two
or more generations below that of the transferor may be subject to the federal
generation skipping transfer tax.
In addition, the Contract may be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Contract 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.
MODIFIED ENDOWMENT CONTRACTS
A life insurance contract is treated as a "modified endowment contract" under
Section 7702A of the Code if it meets the definition of life insurance in
Section 7702 but fails the "seven-pay" test of Section 7702A. The seven-pay test
provides that premiums cannot be paid at a rate more rapidly than that allowed
by the payment of seven annual premiums using specified computational rules
provided in Section 7702A(c). The Company will not accept any premiums that
cause the Contract to become a modified endowment contract unless the Company
first receives from the Contract Owner written acknowledgment of the Contract
Owner's understanding that the Contract will become a modified endowment
contract. An exchange under Section 1035 of the Code of a life insurance
contract that is not a modified endowment contract will not cause the new
contract to be a modified endowment contract if no additional premiums are paid.
An exchange under Section 1035 of the Code of a life insurance contract that is
a modified endowment contract for a new life insurance contract will always
cause the new contract to be a modified endowment contract. A contract that is
classified as a modified endowment contract is generally eligible for the
beneficial tax treatment accorded to life insurance. Accordingly, the death
benefit is excluded from income and increments in value are not subject to
current taxation. If a person receives any amount as a Contract loan from a
modified endowment contract, or assigns or pledges any part of the value of the
contract, such amount is treated as a distribution. Unlike other life insurance
contracts, distributions received before the insured's death are treated first
as income (to the extent of gain) and then as recovery of investment in the
contract. Any amounts that are taxable withdrawals will be subject to a 10%
additional tax, with certain exceptions: (1) distributions made on or after the
date on which the taxpayer attains age 59 1/2; (2) distributions attributable to
the taxpayer's becoming disabled (within the meaning of Section 72(m)(7) of the
Code); or (3) any distribution that is part of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life expectancies) of
such taxpayer and his or her beneficiary.
All modified endowment contracts that are issued within any calendar year to the
same Contract Owner by one company or its affiliates shall be treated as one
modified endowment contract in determining the taxable portion of any loan or
distributions.
DIVERSIFICATION REQUIREMENTS
For a Contract to be treated as a variable life insurance contract for federal
tax purposes, the investments in the Variable Account must be "adequately
diversified" in accordance with the standards provided in the Treasury
regulations. If the investments in the Variable Account are not adequately
diversified, then the Contract will not be treated as a variable life insurance
contract for federal income tax purposes and the Owner will be taxed on the
excess of the Contract Value over the investment in the Contract. Although the
Company does not have control over the Portfolios or their investments, the
Company expects the Portfolios to meet the diversification requirements.
<PAGE>
OWNERSHIP TREATMENT
In connection with the issuance of the regulations on the adequate
diversification standards, the Department of the Treasury announced that the
regulations do not provide guidance concerning the extent to which contract
owners may direct their investments among sub-accounts of a Variable Account.
The Internal Revenue Service has previously stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the owner possesses incidents of ownership in those assets such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, the Treasury Department announced that
guidance would be issued in the future regarding the extent that owners could
direct their investments among sub-accounts without being treated as owners of
the underlying assets of the Variable Account. As of the date of this
prospectus, no such guidance has been issued.
The ownership rights under this contract are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it was determined that contract owners were not owners of
separate account assets. For example, the Owner of this Contract has the choice
of more investment options to which to allocate premiums and contract values,
and may be able to transfer among investment options more frequently than in
such rulings. These differences could result in the Contract Owner being treated
as the owner of the Variable Account. In those circumstances, income and gain
from the Variable Account assets would be includable in the Contract Owner's
gross income. In addition, the Company does not know what standards will be set
forth in the regulations or rulings which the Treasury Department has stated it
expects to issue. It is possible that the Treasury Department's position, when
announced, may adversely affect the tax treatment of existing contracts. The
Company, therefore, reserves the right to modify the Contract as necessary to
attempt to prevent the Contract Owner from being considered the federal tax
owner of the assets of the Variable Account. However, the Company makes no
guarantee that such modification to the Contract will be successful.
<PAGE>
POLICY LOAN INTEREST
Interest paid on loans against a Contract is generally not deductible.
ADDITIONAL INFORMATION ABOUT THE COMPANY
The Company also acts as the sponsor for four other of its separate accounts
that are registered investment companies: Glenbrook Life and Annuity Company
Variable Annuity Account, Glenbrook Life and Annuity Company Separate Account A,
Glenbrook Life Variable Life Separate Account A, and Glenbrook Life
Multi-Manager Variable Account. The officers and employees of the Company are
covered by a fidelity bond in the amount of $5,000,000. No person beneficially
owns more than 5% of the outstanding voting stock of The Allstate Corporation,
of which the Company is an indirect wholly owned subsidiary.
LEGAL PROCEEDINGS
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. Management, after consultation with legal counsel, does not anticipate
the ultimate liability arising from such pending or threatened litigation to
have a material effect on the financial condition of the Company or the Variable
Account.
LEGAL MATTERS
Jorden, Burt, Boros, Cicchetti, Berenson & Johnson LLP, Washington, D.C., has
provided advice on certain legal matters relating to the federal securities laws
applicable to the issue and sale of the Contracts. All matters of Illinois law
pertaining to the Contracts, including the validity of the Contracts and the
Company's right to issue such Contracts under Illinois insurance law, have been
passed upon by Michael J. Velotta, General Counsel of the Company.
REGISTRATION STATEMENT
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. This prospectus does
not contain all information set forth in that registration statement, its
amendments and exhibits, to all of which reference is made for further
information concerning the Variable Account, the Funds, the Company, and the
Contracts.
EXPERTS
The financial statements of the Company as of December 31, 1997 and 1996 and for
each of the three years in the period ended December 31, 1997 and the related
financial statement schedule included in this prospectus have been audited by
Deloitte & Touche LLP, Two Prudential Plaza, 180 North Stetson Avenue, Chicago,
IL 60601-6779, independent auditors, as stated in their report appearing herein,
and are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The hypothetical Contract illustrations included in this prospectus have been
approved by Paul Engeriser, F.S.A., and are included in reliance upon his
opinion as to their reasonableness.
FINANCIAL INFORMATION
Financial statements for the Variable Account are not included herein because,
as of the date of this Prospectus, sales of the Contracts had not commenced and
the Variable Account therefore had no assets. The financial statements for the
Company appearing immediately below should be considered as bearing only on the
ability of the Company to fulfill its obligations under the Contracts. They do
not relate to the investment performance of the Variable Account.
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
GLENBROOK LIFE AND ANNUITY COMPANY:
We have audited the accompanying Statements of Financial Position of Glenbrook
Life and Annuity Company (the "Company") as of December 31, 1997 and 1996, and
the related Statements of Operations, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1997. Our audits also
included Schedule IV - Reinsurance. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997 and
1996, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 1998
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
------------
($ in thousands) 1997 1996
---------- ---------
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $81,369 and $46,925) $ 86,243 $ 49,389
Short-term 4,231 1,287
--------------- ---------------
Total investments 90,474 50,676
Reinsurance recoverable from Allstate Life Insurance
Company 2,637,983 2,060,419
Net receivable from affiliates - 18,963
Other assets 2,549 2,049
Separate Accounts 620,535 272,420
--------------- ---------------
Total assets $ 3,351,541 $ 2,404,527
=============== ===============
LIABILITIES
Contractholder funds $ 2,637,983 $ 2,060,419
Income taxes payable 609 410
Deferred income taxes 1,772 1,528
Net payable to affiliates 2,698 -
Separate Accounts 620,535 260,290
--------------- ---------------
Total liabilities 3,263,597 2,322,647
=============== ===============
SHAREHOLDER'S EQUITY
Common stock, $500 par value, 4,200 shares
authorized, issued, and outstanding 2,100 2,100
Additional capital paid-in 69,641 69,641
Unrealized net capital gains 3,168 2,790
Retained income 13,035 7,349
--------------- ---------------
Total shareholder's equity 87,944 81,880
--------------- ---------------
Total liabilities and shareholder's equity $ 3,351,541 $ 2,404,527
=============== ===============
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
($ in thousands) 1997 1996 1995
---------------- --------------- ----------------
<S> <C> <C> <C>
REVENUES
Net investment income $ 5,304 $ 3,774 $ 3,996
Realized capital gains and losses 3,460 - 459
---------------- --------------- ----------------
INCOME BEFORE INCOME TAX EXPENSE 8,764 3,774 4,455
INCOME TAX EXPENSE 3,078 1,339 1,576
---------------- --------------- ----------------
NET INCOME $ 5,686 $ 2,435 $ 2,879
================ =============== ================
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
($ in thousands) 1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
COMMON STOCK $ 2,100 $ 2,100 $ 2,100
--------------- --------------- ---------------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year 69,641 49,641 49,641
Capital contributions - 20,000 -
--------------- --------------- ---------------
Balance, end of year 69,641 69,641 49,641
--------------- --------------- ---------------
UNREALIZED NET CAPITAL GAINS
Balance, beginning of year 2,790 3,357 (1,118)
Net change 378 (567) 4,475
--------------- --------------- ---------------
Balance, end of year 3,168 2,790 3,357
--------------- --------------- ---------------
RETAINED INCOME
Balance, beginning of year 7,349 4,914 2,035
Net income 5,686 2,435 2,879
--------------- --------------- ---------------
Balance, end of year 13,035 7,349 4,914
--------------- --------------- ---------------
Total shareholder's equity $ 87,944 $ 81,880 $ 60,012
=============== =============== ===============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
($ in thousands) 1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,686 $ 2,435 $ 2,879
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, amortization and other non-cash
items 29 - -
Realized capital gains and losses (3,460) - (459)
Change in deferred income taxes 41 4 (39)
Changes in other operating assets and liabilities 1,160 (510) 1,217
------------ ------------ ------------
Net cash provided by operating activities 3,456 1,929 3,598
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales 1,405 - 7,836
Investment collections 14,217 2,891 1,568
Investment purchases (50,115) (5,667) (1,491)
Participation in Separate Accounts 13,981 (232) (10,069)
Change in short-term investments, net (2,944) 815 (1,178)
------------ ------------ ------------
Net cash used in investing activities (23,456) (2,193) (3,334)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution 20,000 - -
------------ ------------ ------------
Net cash provided by financing activities 20,000 - -
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH - (264) 264
CASH AT BEGINNING OF YEAR - 264 -
------------ ------------ ------------
CASH AT END OF YEAR $ - $ - $ 264
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION Noncash financing activity:
Capital contribution receivable from
Allstate Life Insurance Company $ - $ 20,000 $ -
============ ============ ============
</TABLE>
See notes to financial statements.
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. General
Basis of presentation
The accompanying financial statements include the accounts of Glenbrook Life and
Annuity Company (the "Company"), a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company
("AIC"), a wholly owned subsidiary of The Allstate Corporation (the
"Corporation"). On June 30, 1995, Sears, Roebuck and Co. ("Sears") distributed
its 80.3% ownership in the Corporation to Sears common shareholders through a
tax-free dividend (the "Distribution"). These financial statements have been
prepared in conformity with generally accepted accounting principles.
To conform with the 1997 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
Nature of operations
The Company markets life insurance and annuity products in the United States
through banks and broker-dealers. Life insurance includes both
interest-sensitive and variable life insurance products. Annuities include
deferred annuities, such as variable annuities and fixed rate flexible premium
annuities. The Company has entered into exclusive distribution arrangements with
management investment companies to market its variable annuity contracts.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary withdrawal or surrender by customers, subject to applicable
surrender charges. These policies and contracts are reinsured with ALIC (see
Note 3), which invests premiums and deposits to provide cash flows that will be
used to fund future benefits and expenses. In order to support competitive
crediting rates and limit interest rate risk, ALIC , as the Company's reinsurer,
adheres to a basic philosophy of matching assets with related liabilities while
maintaining adequate liquidity and a prudent and diversified level of credit
risk.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be new and proposed federal
and state regulation and legislation that would allow banks greater
participation in the securities and insurance businesses, which will present an
increased level of competition for sales of the Company's life and annuity
products. Furthermore, the market for deferred annuities and interest-sensitive
life insurance is enhanced by the tax incentives available under current law.
Any legislative changes which lessen these incentives are likely to negatively
impact the demand for these products.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, consolidation within that
industry and specifically, a change in control of those entities with which the
Company partners, could affect the Company's sales.
Enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; (2) increasing competition in capital
markets; and (3) reopening stock/mutual company disagreements related to such
issues as taxation disparity between mutual and stock insurance companies.
The Company is authorized to sell life and annuity products in all states except
New York, as well as in the District of Columbia. The Company is also authorized
to sell variable annuities in Puerto Rico. The top geographic locations for
statutory premiums and deposits earned by the Company are Florida, Pennsylvania,
California, Texas and Michigan for the year ended December 31, 1997. No other
jurisdiction accounted for more than 5% of statutory premiums and deposits. All
premiums and contract charges are ceded to ALIC under reinsurance agreements.
2. Summary of Significant Accounting Policies
Investments
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ( "available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses. Short-term investments are
carried at cost which approximates fair value.
F-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method, based on the estimated principal repayments. Accrual
of income is suspended for fixed income securities that are in default or when
the receipt of interest payments is in doubt. Realized capital gains and losses
are determined on a specific identification basis.
Reinsurance
The Company and ALIC entered into a reinsurance agreement effective June 5,
1992. All business issued subsequent to that date is ceded to ALIC. Life
insurance in force prior to that date is ceded to non-affiliated reinsurers.
Contract charges, credited interest, policy benefits and certain expenses are
ceded to ALIC and reflected net of such cessions in the statements of
operations. The amounts shown in the Company's statements of operations relate
to the investment of those assets of the Company that are not transferred to
ALIC under the reinsurance agreements. Reinsurance recoverable and
contractholder funds are reported separately in the statements of financial
position. The Company continues to have primary liability as the direct insurer
for risks reinsured.
Recognition of premium revenue and contract charges
Revenues on interest-sensitive life insurance policies are comprised of contract
charges and fees, and are recognized when assessed against the policyholder
account balance. Revenues on annuities, which are considered investment
contracts, include contract charges and fees for contract administration and
surrenders. These revenues are recognized when levied against the contract
balance.
Income taxes
The income tax provision is calculated under the liability method. Deferred tax
assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities at the enacted tax
rates, and reflect the impact of reinsurance agreements. Deferred income taxes
arise primarily from unrealized capital gains and losses on fixed income
securities carried at fair value.
Separate Accounts
The Company issues flexible premium deferred variable annuity contracts and
single premium variable life policies, the assets and liabilities of which are
legally segregated and reflected in the accompanying statements of financial
position as assets and liabilities of the Separate Accounts (Glenbrook Life and
Annuity Company Variable Annuity Account, Glenbrook Life and Annuity Company
Separate Account A, Glenbrook Life Multi-Manager Variable Account and Glenbrook
Life Variable Life Separate Account A, unit investment trusts registered with
the Securities and Exchange Commission).
Assets of the Separate Accounts, including the Company's ownership interest
("Participation"), are carried at fair value. Unrealized gains and losses on the
Company's Participation, net of deferred income taxes, are shown as a component
of shareholder's equity. Investment income and realized capital gains and losses
arising from the Participation are included in the Company's statements of
operations. The Company liquidated its Participation during 1997, resulting in a
realized capital gain of $3,515. At December 31, 1996, the Participation
amounted to $12,130.
Investment income and realized capital gains and losses of the Separate
Accounts, other than the portion related to the Participation, accrue directly
to the contractholders and, therefore, are not included in the Company's
statements of operations. Revenues to the Company from the Separate Accounts
consist of contract maintenance fees, administrative fees, mortality and expense
risk charges, cost of insurance charges and tax expense charges, all of which
are ceded to ALIC.
Contractholder funds
Contractholder funds arise from the issuance of individual or group policies and
contracts that include an investment component, including most annuities and
universal life policies. Payments received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received and interest
credited to the benefit of the customer less withdrawals, mortality charges and
administrative expenses. During 1997, credited interest rates on contractholder
funds ranged from 3.55% to 7.45% for those contracts with fixed interest rates
and from 3.70% to 7.85% for those with flexible rates.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-7
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
3. Related Party Transactions
Reinsurance
Contract charges ceded to ALIC were $11,641, $4,254 and $1,523 in 1997, 1996 and
1995, respectively. Credited interest, policy benefits and expenses ceded to
ALIC amounted to $179,954, $113,703 and $71,905 in 1997, 1996 and 1995,
respectively. Investment income earned on the assets which support
contractholder funds is not included in the Company's financial statements as
those assets are owned and managed by ALIC under the terms of reinsurance
agreements.
Business operations
The Company utilizes services and business facilities owned or leased, and
operated by AIC in conducting its business activities. The Company reimburses
AIC for the operating expenses incurred by AIC on behalf of the Company. The
cost to the Company is determined by various allocation methods and is primarily
related to the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $5,959, $759 and $348 in 1997, 1996 and 1995, respectively. Of these costs,
the Company retains investment related expenses. All other costs are ceded to
ALIC under reinsurance agreements.
Laughlin Group
Laughlin Group, Inc. ("Laughlin") is an indirect wholly owned subsidiary of
ALIC. Laughlin markets certain of the Company's flexible premium deferred
variable annuity contracts and flexible premium deferred fixed annuity
contracts. Sales commissions paid to Laughlin, for which the related cost was
ceded to ALIC, were $945 and $8,623 during 1997 and 1996, respectively. The
Company had a receivable of $850 from Laughlin at December 31, 1996, which is
included in net receivable from affiliates in the statements of financial
position.
4. Investments
Fair values
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
Gross Unrealized
----------------
Amortized Fair
Cost Gains Losses Value
--------- ----- ------ -----
<S> <C> <C> <C> <C>
At December 31, 1997
U.S. government and agencies $ 24,419 $ 2,961 $ - $ 27,380
Municipal 656 17 - 673
Corporate 25,476 840 - 26,316
Mortgage-backed securities 30,818 1,056 - 31,874
-------- ------- --------- --------
Total fixed income securities $ 81,369 $ 4,874 $ - $ 86,243
======== ======= ========= ========
At December 31, 1996
U.S. government and agencies $ 24,265 $ 1,722 $ (3) $ 25,984
Corporate 6,970 96 (15) 7,051
Mortgage-backed securities 15,690 664 - 16,354
-------- ------- --------- --------
Total fixed income securities $ 46,925 $ 2,482 $ (18) $ 49,389
======== ======= ========= ========
</TABLE>
F-8
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Scheduled maturities
The scheduled maturities for fixed income securities are as follows at December
31, 1997:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- -----
<S> <C> <C>
Due in one year or less $ 400 $ 400
Due after one year through five years 3,838 3,877
Due after five years through ten years 33,245 35,102
Due after ten years 13,068 14,990
----------- ------------
50,551 54,369
Mortgage-backed securities 30,818 31,874
----------- ------------
Total $ 81,369 $ 86,243
=========== ============
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
<TABLE>
<CAPTION>
Net investment income
Year Ended December 31, 1997 1996 1995
----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 5,014 $ 3,478 $ 3,850
Short-term investments 231 126 113
Participation in Separate Accounts 161 232 69
-------------- -------------- --------------
Investment income, before expense 5,406 3,836 4,032
Investment expense 102 62 36
-------------- -------------- --------------
Net investment income $ 5,304 $ 3,774 $ 3,996
============== ============== ==============
</TABLE>
Realized capital gains and losses
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ (61) $ - $ 459
Short-term investments 6 - -
Participation in Separate Accounts 3,515 - -
------------- ------------- -------------
Realized capital gains and losses 3,460 - 459
Income taxes (1,211) - (161)
------------- ------------- -------------
Realized capital gains and losses,
after tax $ 2,249 $ - $ 298
============= ============= =============
</TABLE>
Excluding calls and prepayments, gross losses of $61 and gross gains of $459
were realized on sales of fixed income securities during 1997 and 1995,
respectively.
F-9
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Unrealized net capital gains
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Cost/ Unrealized
Amortized Fair Net
Cost Value Gains
--------- ----- -----------
<S> <C> <C> <C>
Fixed income securities $ 81,369 $ 86,243 $ 4,874
Deferred income taxes ======== ======== (1,706)
-------
Unrealized net capital gains $ 3,168
=======
</TABLE>
Change in unrealized net capital gains
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
- ----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 2,410 $ (2,239) $ 6,423
Participation in Separate Accounts (1,829) 1,368 461
Deferred income taxes (203) 304 (2,409)
------------- ------------- -------------
Increase (decrease) in unrealized net capital gains $ 378 $ (567) $ 4,475
============= ============== =============
</TABLE>
Securities on deposit
At December 31, 1997, fixed income securities with a carrying value of $10,108
were on deposit with regulatory authorities as required by law.
5. Financial Instruments
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented below are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Potential taxes and other transaction costs have not been considered in
estimating fair value. The disclosures that follow do not reflect the fair value
of the Company as a whole since a number of the Company's significant assets
(including reinsurance recoverable) and liabilities (including deferred income
taxes) are not considered financial instruments and are not carried at fair
value. Other assets and liabilities considered financial instruments, such as
accrued investment income, are generally of a short-term nature. It is assumed
that their carrying value approximates fair value.
F-10
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Financial assets
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 86,243 $ 86,243 $ 49,389 $ 49,389
Short-term investments 4,231 4,231 1,287 1,287
Separate Accounts 620,535 620,535 272,420 272,420
</TABLE>
Fair values for fixed income securities are based on quoted market prices.
Short-term investments are highly liquid investments with maturities of less
than one year whose carrying value approximates fair value.
Separate Accounts assets are carried in the statements of financial position at
fair value.
Financial liabilities
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $ 2,636,331 $ 2,492,095 $ 2,059,642 $ 1,949,329
Separate Accounts 620,535 620,535 260,290 260,290
</TABLE>
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
F-11
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
6. Income Taxes
For 1996 and 1995, the Company filed a separate federal income tax return. The
Company will join the Corporation and its other eligible domestic subsidiaries
in the filing of a consolidated federal income tax return (the "Allstate Group")
for 1997 and is party to a federal income tax allocation agreement (the "Tax
Sharing Agreement"). Under the Tax Sharing Agreement, the Company paid to or
received from the Corporation the amount, if any, by which the Allstate Group's
federal income tax liability was affected by virtue of inclusion of the Company
in the consolidated federal income tax return. Effectively, this results in the
Company's annual income tax provision being computed, with adjustments, as if
the Company filed a separate return.
Prior to the Distribution, the Corporation and all of its eligible domestic
subsidiaries, including the Company, joined with Sears and its domestic business
units (the "Sears Group") in the filing of a consolidated federal income tax
return (the "Sears Tax Group") and were parties to a federal income tax
allocation agreement (the "Sears Tax Sharing Agreement"). Under the Sears Tax
Sharing Agreement, the Company, through the Corporation, paid to or received
from the Sears Group the amount, if any, by which the Sears Tax Group's federal
income tax liability was affected by virtue of inclusion of the Company in the
consolidated federal income tax return. Effectively, this resulted in the
Company's annual income tax provision being computed as if the Allstate Group
filed a separate consolidated return, except that items such as net operating
losses, capital losses or similar items, which might not be recognized in a
separate return, were allocated according to the Sears Tax Sharing Agreement.
The Allstate Group and Sears Group have entered into an agreement which governs
their respective rights and obligations with respect to federal income taxes for
all periods prior to the Distribution ("Consolidated Tax Years"). The agreement
provides that all Consolidated Tax Years will continue to be governed by the
Sears Tax Sharing Agreement with respect to the Allstate Group's federal income
tax liability.
The components of the deferred income tax liability at December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Unrealized net capital gains on fixed income securities $ 1,706 $ 1,503
Difference in tax bases of investments 66 25
------------- -------------
Total deferred liability $ 1,772 $ 1,528
============= =============
</TABLE>
F-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current $ 3,037 $ 1,335 $ 1,615
Deferred 41 4 (39)
------- ------- -------
Total income tax expense $ 3,078 $ 1,339 $ 1,576
======= ======= =======
</TABLE>
The Company paid income taxes of $2,839, $2,446 and $866 in 1997, 1996 and 1995,
respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows: <TABLE> <CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Other .1 .5 .4
---- ---- ----
Effective federal income tax rate 35.1% 35.5% 35.4%
==== ==== ====
</TABLE>
F-13
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ in thousands)
7. Statutory Financial Information
The following tables reconcile net income for the year ended December 31, and
shareholder's equity at December 31, as reported herein in conformity with
generally accepted accounting principles with statutory net income and capital
and surplus, determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities:
<TABLE>
<CAPTION>
Net Income
----------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance per generally accepted accounting principles $ 5,686 $ 2,435 $ 2,879
Deferred income taxes 41 4 (39)
Unrealized gain on participation in
Separate Accounts (1,829) 1,368 -
Statutory investment reserves 93 35 (279)
Other (354) (85) 108
----------- ------------ ------------
Balance per statutory accounting practices $ 3,637 $ 3,757 $ 2,669
=========== ============ ============
Shareholder's Equity
--------------------
1997 1996
---- ----
Balance per generally accepted accounting principles $ 87,944 $ 81,880
Deferred income taxes 1,772 1,528
Unrealized gain/loss on fixed income securities (4,874) (2,464)
Non-admitted assets (86) (850)
Statutory investment reserves 958 (2,282)
Other (3,114) (2,118)
---------- ------------
Balance per statutory accounting practices $ 82,600 $ 75,694
========== ============
</TABLE>
Permitted statutory accounting practices
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the Illinois
Department of Insurance. Prescribed statutory accounting practices include 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 not
so prescribed. The Company does not follow any permitted statutory accounting
practices that have a material effect on statutory surplus, statutory net income
or risk-based capital.
Final approval of the NAIC's proposed "Comprehensive Guide" on statutory
accounting principles is expected in early 1998. The requirements may be
effective as early as January 1, 1999, and are not expected to have a material
impact on statutory surplus of the Company.
Dividends
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by insurance companies without the prior approval of
the state insurance regulator is limited to formula amounts based on net income
and capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 1998 without prior approval of the Illinois Department of Insurance is
$8,050.
F-14
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
($ in thousands)
<TABLE>
<CAPTION>
Gross Net
Year Ended December 31, 1997 amount Ceded amount
- ---------------------------- --------- ------------ --------
<S> <C> <C> <C>
Life insurance in force $ 4,095 $ 4,095 $ -
================== ================== ==================
Premiums and contract charges:
Life and annuities $ 11,641 $ 11,641 $ -
================== ================== ==================
Gross Net
Year Ended December 31, 1996 amount Ceded amount
- ---------------------------- --------- ------------ --------
Life insurance in force $ 2,436 $ 2,436 $ -
================== ================== ==================
Premiums and contract charges:
Life and annuities $ 4,254 $ 4,254 $ -
================== =================== ==================
Gross Net
Year Ended December 31, 1995 amount Ceded amount
- ---------------------------- --------- ------------ --------
Life insurance in force $ 1,250 $ 1,250 $ -
================== ================== ==================
Premiums and contract charges:
Life and annuities $ 6,571 $ 6,571 $ -
================== ================== ==================
</TABLE>
F-15
<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.
REPRESENTATION AS TO FEES AND CHARGES
Glenbrook Life and Annuity Company represents that the fees and charges
deducted under the Flexible Premium Variable Universal Life Insurance Contract
hereby registered by this Registration Statement, in the aggregate are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Glenbrook Life and Annuity Company.
REPRESENTATION PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the
Investment Company Act of 1940 ("Investment Company Act").
RULE 484 UNDERTAKING
The By-Laws of Glenbrook Life and Annuity Company ("Depositor") which
are incorporated herein by reference as Exhibit 1.(6)(b), provide that it will
indemnify its officers and directors for certain damages and expenses that may
be incurred in the performance of their duty to Depositor. No indemnification is
provided, however, when such person is adjudged to be liable for negligence or
misconduct in the performance of his or her duty, unless indemnification is
deemed appropriate by the court upon application. Insofar as indemnification for
liability arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The Facing Sheet.
The Prospectus consisting of ___ pages.
The Undertaking to File Reports.
Rule 484 Undertaking.
Representation As To Fees and Charges.
Representation Pursuant to Rule 6e-3(T).
The Signatures.
Written Consents of the following persons:
(a) Messrs. Jorden, Burt, Boros, Cicchetti, Berenson & Johnson**
(b) Deloitte & Touche LLP**
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
(1) Form of Resolution of the Board of Directors of Glenbrook Life and
Annuity Company authorizing establishment of the Glenbrook Life
Variable Life Separate Account B.*
(2) Not Applicable.
(3) (a) Form of Principal Underwriting Agreement.****** (b) Form of
Selling Agreement.****** (c) See Exhibit 1(3)(b).
(4) Not Applicable.
(5) Specimen Contract.*
(6) (a) Certificate of Incorporation of Glenbrook Life
and Annuity Company.***
(b) By-laws of Glenbrook Life and Annuity Company.***
(7) Not Applicable.
(8) Form of Participation Agreements.*****
(9) Not Applicable.
(10) Form of Application for Contract.******
2. Opinion of Counsel.**
3. Financial Statements omitted from the prospectus pursuant to instruction
1(b) or 1(c) (1) Not Applicable. (2) Financial Statements pursuant to
1(c).**
4. Not Applicable.
5. Financial Data Schedule. ****
6. Not Applicable.
7. Powers of Attorney.*
8. Consents.** (1) Messrs. Jorden, Burt, Boros, Cicchetti, Berenson & Johnson
(2) Deloitte & Touche LLP
9. Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii)**
10. Actuarial Opinion and Consent**
* Previously filed in Form S-6 Registration Statement No. 333-28227 filed May
30, 1997 and incorporated by reference.
** Filed herewith.
*** Previously filed in Form S-1 Registration Statement No. 333-07275 dated
June 28, 1996, and incorporated herein by reference.
**** Previously filed in Depositor's Form 10-K filed March 31, 1998.
*****Previously filed in Form S-6 Registration Statement No. 333-25057 on May 1,
1998 and incorporated herein by reference.
******Previously filed in Form S-6 Registration Statement No. 333-25045 dated
April 11, 1997 and incorporated herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Glenbrook Life Variable Life Separate Account B, 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 Township of Northfield, State of Illinois, on the 15th day of May 1998.
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT B
(Registrant)
GLENBROOK LIFE AND ANNUITY COMPANY
(Depositor)
(SEAL)
Attest:/s/ BRENDA D. SNEED By: /s/ MICHAEL J. VELOTTA
------------------- -----------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary Vice President, Secretary and
and Assistant General Counsel General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following Directors and
Officers of Glenbrook Life and Annuity Company on the 15th day of May 1998.
*/LOUIS G. LOWER, II Chairman of the Board of Directors and
- -------------------- Chief Executive Officer
Louis G. Lower, II (Principal Executive Officer)
/s/ MICHAEL J. VELOTTA Vice President, Secretary, General
- ---------------------- Counsel and Director
Michael J. Velotta
*/PETER H. HECKMAN President, Chief Operating Officer
- -------------------- and Director
Peter H. Heckman
*/JOHN R. HUNTER Director
- --------------------
John R. Hunter
*/MARLA G. FRIEDMAN Vice President
- --------------------
Marla G. Friedman
*/KEVIN R. SLAWIN Vice President
- ------------------- (Principal Financial Officer)
Kevin R. Slawin
*/G. CRAIG WHITEHEAD Senior Vice President and Director
- ---------------------
G. Craig Whitehead
*/CASEY J. SYLLA Chief Investment Officer
- ---------------------
Casey J. Sylla
*/JAMES P. ZILS Treasurer
- ---------------------
James P. Zils
*/KEITH A. HAUSCHILDT Assistant Vice President and Controller
- --------------------- (Principal Accounting Officer)
Keith A. Hauschildt
*/ By Michael J. Velotta, pursuant to Power of Attorney previously filed.
Exhibit 8A - Consent of Counsel
[FIRM LETTERHEAD]
May 15, 1998
Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, IL 60062
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus filed as part of the Registration Statement on Form
S-6 (File No. 333-28227) filed by Glenbrook Life Variable Life Separate Account
B of Glenbrook Life and Annuity Company for certain flexible premium variable
universal life insurance contracts. In giving this consent, we do not admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933.
Very truly yours,
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
By: /s/ JOAN E. BOROS
------------------
Joan E. Boros
Exhibit 8B - Independent Auditors' Consent
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-effective Amendment No. 1 to Registration
Statement No. 333-28227 of Glenbrook Life Variable Life Separate Account B of
Glenbrook Life and Annuity Company on Form S-6 of our report dated February 20,
1998 relating to the financial statements and financial statement schedule of
Glenbrook Life and Annuity Company, appearing in the Prospectus, which is part
of such Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
May 11, 1998
August 1997
DESCRIPTION OF ISSUANCE,
TRANSFER, AND REDEMPTION PROCEDURES FOR CONTRACTS
PURSUANT TO RULE 6e-3(T)(b)(12)(iii)
FOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE CONTRACTS
ISSUED BY
GLENBROOK LIFE AND ANNUITY COMPANY
This document sets forth the current administrative procedures that will be
followed by Glenbrook Life and Annuity Company (the "Company") in connection
with its issuance of individual and group flexible premium variable life
insurance contracts (the "Contracts"), the transfer of assets held thereunder,
and the redemption by Contract owners ("Owners") of their interests in those
Contracts. Capitalized terms used herein have the same meaning as in the
prospectus for the Contract that is included in the current registration
statement on Form S-6 for the Contract as filed with the Securities and Exchange
Commission ("Commission").
I. Procedures Relating to Purchase and Issuance of the Contracts and
Acceptance of Premiums
A. Offer of the Contracts, Applications, Initial Premiums,
Underwriting Requirements, and Issuance of the Contracts
1. Offer of the Contracts. The Contracts will be offered and
sold for premiums pursuant to established premium schedules
and underwriting standards in accordance with state
insurance laws. Initial premium payments for the Contracts
and related insurance charges will not be the same for all
Owners whose Contracts have the same Specified Amount.
Insurance is based on the principle of pooling and
distribution of mortality risks, which assumes that each
Owner pays a premium and related insurance charges
commensurate with the Insured's mortality risk as
actuarially determined utilizing factors such as age, sex,
health and occupation. A uniform premium and insurance
charge for all Insureds would discriminate unfairly in favor
of those Insureds representing greater risk. Although there
will be no uniform insurance charges for all Insureds, there
will be a uniform insurance rate for all Insureds of the
same risk class. A description of the Policy Loads under the
Contract, which includes a cost of insurance charge, premium
expense charge, and a monthly administrative expense charge,
is at Appendix A to this memorandum.
2. Application. Individuals wishing to purchase a Contract must
submit an application to the Company. An application will
not be deemed to be complete unless all required
information, including without limitation age, sex, medical
and other background information, has been provided in the
application.
<PAGE>
.
A Contract will be issued only on the lives of Insureds age
18-85 who supply evidence of insurability satisfactory to
the Company. Acceptance is subject to the Company's
underwriting rules and the Company reserves the right to
reject an application for any lawful reason. If a Contract
is not issued, the premium will be returned.
3. Payment of Initial Premium. The Contract is designed to
provide both life insurance protection and flexibility in
connection with premium payments and death benefits. The
Contract Owner may, subject to certain restrictions, vary
the frequency and amount of the premium payments and
increase or decrease the level of life insurance benefits
payable under the Contract. The minimum Specified Amount is
$50,000.
If the Specified Amount is over the limits established from
time to time by the Company ($2,000,000 as of the date of
this memorandum), the initial payment will not be accepted
with the application. In other cases in which the Company
receives the initial payment with the application, the
Company will provide fixed conditional insurance during
underwriting according to the terms of a conditional
receipt. The fixed conditional insurance will be the
insurance applied for, up to a maximum that varies by age.
4. Underwriting Requirements. Under current underwriting rules,
which are subject to change, proposed Insureds are eligible
for simplified underwriting without a medical examination if
their application responses and initial death benefit meet
simplified underwriting standards. Full underwriting
standards will apply to all other proposed Insureds. The
maximum initial death benefit currently permitted on a
simplified underwriting basis varies with the issue age of
the insured according to the following table:
Simplified Underwriting
Issue Age Maximum Initial Death Benefit
18-50 $100,000
Over age 50 Not Available
5. Issuance of the Contract and Determination of Contract Date.
Once the Company has received the initial premium and
underwriting has been approved, the Contract will be issued
on the date the Company has received the final requirement
for issue. In the case of simplified underwriting, the
Contract will be issued or coverage denied within 3 business
days of receipt of premium. The Insured will be covered
under the Contract, however, as of the Contract Date. Since
the Contract Date will generally be the date the Company
receives the initial premium, coverage under a Contract may
begin before it is actually issued. In addition to
determining when coverage begins, the Contract Date
determines Monthly Activity Dates, Contract Months, Contract
Years, and Contract Anniversaries.
B. Determination of Owner of the Contract. The Contract Owner possesses
the rights to benefits under the Contract during the lifetime of the
Insured; the Contract Owner may or may not be the Insured. In some
states, the Contracts may be issued in the form of a group Contract.
In those states, certificates will be issued evidencing a purchaser's
rights under the group Contract. The terms "Contract" and "Contract
Owner," as used in this memorandum, refer to and include such a
certificate and certificate owner, respectively.
C. Payment and Acceptance of Additional Premiums
1. The Contract requires the Contract Owner to pay an initial
premium due by the Contract Date which must be paid in advance.
The Contract Owner may make premium payments at any time and in
any amount while the Contract is in force, subject to certain
conditions:
a. Premium payments may be made at any time and in any amount
necessary to avoid termination of the Contract.
b. The Company will not accept any premium which would cause
the Contract not to qualify as a life insurance contract
under the Code, unless the Contract Owner submits a written
request to increase the specified amount to an amount able
to sustain the additional premium. The request to increase
the specified amount will require evidence of insurability
and approval by the Company.
c. The Company will not accept any premium which would cause
the Contract to become a modified endowment contract under
the Code, unless the Contract Owner provides written
acknowledgment of the Contract Owner's understanding that
the Contract will become a modified endowment contract.
Unless the Owner requests otherwise in writing, any
additional premium payment received while a Contract loan
exists will be applied: first, as a repayment of
Indebtedness, and second, as an additional premium payment,
subject to the conditions described above.
2. Procedures for Accepting Additional Premium Payments. Premium payments
may be made by any method that the Company deems acceptable. The
Company may specify the form in which a premium payment must be made
in order for the premium to be in "good order." Ordinarily, a check
will be deemed to be in good order upon receipt, although the Company
may require that the check first be converted into federal funds. In
addition, for a premium to be received in "good order," it must be
accompanied by all required supporting documentation, in whatever form
required.
3. Grace Period, Lapse, and Reinstatement. If the Cash Surrender Value is
insufficient to cover a Monthly Deduction Amount due on a Monthly
Activity Date, the Contract may lapse. The Company will give written
notice to the Contract Owner that if an amount shown in the notice
(which will be sufficient to cover the Monthly Deduction Amount (s)
due) is not paid within 61 days ("Grace Period"), the Contract will
lapse at the end of the Grace Period. The Contract will not lapse
regardless of the cash surrender value if the three year continuation
period or the guarantee period is in effect.
The Contract will continue through the Grace Period. If, before the
end of the Grace Period, the Contract Owner does not pay the amount
shown in the notice, the Contract will terminate at the end of the
Grace Period. If the Insured dies during the Grace Period, the
Proceeds payable under the Contract will be reduced by the Monthly
Deduction Amount(s) due and unpaid.
If the Contract lapses, the Contract Owner may apply for reinstatement
of the Contract by payment of the reinstatement premium (and any
applicable charges) required under the Contract. A request for
reinstatement must be made within five years of the date the Contract
entered a Grace Period. If a loan was outstanding at the time of
lapse, the Company will require repayment of the loan before
permitting reinstatement. In addition, the Company reserves the right
to require evidence of insurability satisfactory to the Company. The
reinstatement premium is equal to an amount sufficient to (1) cover
all Monthly Deduction Amounts due and unpaid during the Grace Period,
and (2) keep the Contract in force for three months after the date of
reinstatement. The Specified Amount upon reinstatement cannot exceed
the Specified Amount of the Contract at its lapse. The Account Value
on the reinstatement date will reflect the Account Value at the time
of termination of the Contract plus the premiums paid at the time of
reinstatement. Surrender charges, Cost of Insurance, mortality and
expense risk charges, administrative expense monthly charges, and
Premium Expense Charges will continue to be based on the original
Contract Date.
D. Allocation and Crediting of Initial and Additional Premiums
1. The Variable Account. The variable benefits under the Contracts
are supported by the Glenbrook Life Variable Life Separate
Account B (the "Variable Account"). Presently, the Variable
Account will invest in shares of the following funds:
Dean Witter Variable Investment Series ("Dean Witter Fund")
Dreyfus Variable Investment Fund and the Dreyfus Socially
Responsible Growth Fund, Inc. (collectively, the "Dreyfus Funds")
Fidelity Variable Insurance Products Fund ("VIP") and Fidelity
Variable Insurance Products Fund II ("VIP II") (collectively, the
"Fidelity Funds") MFS-Registered Trademark- Variable Insurance
Trust (the MFS Fund") American Century Variable Portfolios, Inc.,
(theAmerican Century Funds")
The Dean Witter Fund has four available Portfolios: (1) VIS
Dividend Growth (2) VIS European Growth (3) VIS Quality Income
Plus and (4) VIS Utilities. The Dreyfus Funds have four available
Portfolios: (1) VIF Growth and Income (2) VIF Money Market (3)
The Dreyfus Socially Responsible Growth Fund, Inc. and (4) VIF
Small Company Stock. The Fidelity Funds have three available
Portfolios: (1) VIP II Contrafund (2) VIP Growth and (3) VIP High
Income. Th MFS Fund has two available Portfolios: (1) MFS
Emerging Growth Series and (2) MFS Limited Maturity Series. The
American Century Funds have two available Portfolios: (1)
American Century VP Balanced and (2) American Century VP
International.
2. Fixed Account. Contributions under the fixed portion of the Contract
and transfers to the fixed portion of the Contract become part of the
general account of the Company, which supports the insurance and
annuity obligations.
3. Allocations Among the Sub-Accounts and Fixed Account. The Variable
Account consists of sub-accounts (the "Sub-Accounts"), each of which
invests in a portfolio of a Fund. Premiums and Contract Value are
allocated to the Sub-Accounts and the Fixed Account in accordance with
the following procedures.
a. Allocation of Initial Premium. Upon completion of underwriting,
the Company will either issue a Contract, or deny coverage and
return all premiums. If a Contract is issued, the initial premium
payment, less the premium expense charge, plus an amount equal to
the interest that would have been earned had the initial premium
been allocated to the Money Market Sub-account since the date of
receipt of the premium, will be allocated on the date the
Contract is issued. The allocation will be according to the
initial premium instructions specified on the application. In the
future, the Company may allocate the initial premium to the Fixed
Account during the free look period in those states where state
law requires premiums to be returned upon exercise of the free
look right.
b. Allocation of Additional Premiums. The number of Accumulation
Units to be credited to a Contract with each premium, other than
the initial premium and additional premiums requiring
underwriting, will be determined on the date the request or
payment is received in good order by the Company if such date is
a Valuation Day; otherwise such determination will be made on the
next succeeding date which is a Valuation Day.
c. Calculation of Accumulation Unit Value. The Accumulation Unit
Value for each Variable Sub-Account will vary to reflect the
investment experience of the corresponding Portfolio and will be
determined on each Valuation Day by multiplying the Accumulation
Unit Value of the particular Variable Sub-Account on the
preceding Valuation Day by a "Net Investment Factor" for that
Sub-Account for the Valuation Period then ended. The Net
Investment Factor for each Variable Sub-Account is determined by
first dividing (A) the net asset value per share for the
corresponding Portfolio at the end of the current Valuation
Period (plus the per share dividends or capital gains by that
portfolio if the ex-dividend date occurs in the Valuation Period
then ending), by (B) the net asset value per share of the
corresponding Portfolio at the end of the immediately preceding
Valuation Period; and then subtracting from the result an amount
equal to the daily deductions for mortality and expense risk
charges imposed during the Valuation Period.
II. Transfers Among Accounts
A. Transfer Privilege
1. General. While the Contract remains in force and subject to the
Company's transfer rules then in effect, the Contract Owner may
request that part or all of the Account Value of a particular
Variable Sub-Account be transferred to other Variable
Sub-Accounts or to the Fixed Account.
2. Restrictions on Transfer Privilege. The Company reserves the
right to impose a $10 charge on each such transfer in excess of
12 per Contract Year. As of the date of this memorandum, however,
there are no charges on transfers. Currently, we do not charge
for transfers. The minimum amount that can be transferred is
shown on the Contract Data page of the Contract (currently, there
is no minimum).
Transfers from the Fixed Account may be made once each year
within 60 days following Contract Anniversary. There is no
minimum amount which may be transferred from the Fixed Account.
The maximum amount which may be transferred from the Fixed
Account is the greatest of:
(1) 25% of the Account Value allocated to the Fixed Account at
the time of transfer; or
(2) the amount transferred from the Fixed Account in the prior
Contract Year; or (3) $500.
Telephone transfer requests will be accepted by the Company if
received at 1-800-755-5275 by 4:00 pm, Eastern Time. Telephone
transfer requests received at any other telephone number or after
4:00 pm, Eastern Time will not be accepted by the Company.
Telephone transfer requests received before 4:00 pm , Eastern
Time are effected at the next computed value. Transfers by
telephone may be made by the Contract Owner's agent of record or
attorney-of-fact pursuant to a power of attorney. Telephone
transfers may not be permitted in some states. The Company and
its agents and affiliates will not be responsible for losses
resulting from acting upon telephone requests reasonably believed
to be genuine. The Company will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine;
otherwise, the Company may be liable for any losses due to
unauthorized or fraudulent instructions. The procedures the
Company follows for transactions initiated by telephone include
requirements that callers must identify themselves and the
Contract Owner by name and social security number or other
identifying information. All transfer instructions by telephone
are tape recorded.
As a result of a transfer, the number of Accumulation Units
credited to the Variable Sub-Account from which the transfer is
made will reduced by the number obtained by dividing the amount
transferred by the Accumulation Unit Value of the Sub-Account
from which the Transfer is made on the Valuation Day the Company
receives the transfer request. The number of Accumulation Units
credited to the Sub-Account to which the transfer is made will be
increased by the number obtained by dividing the amount
transferred by the Accumulation Unit Value of that Sub-Account on
the Valuation Day the Company receives the transfer request.
B. Dollar Cost Averaging Plan
Transfers may be made automatically through Dollar Cost Averaging
while the Contract is in force. Dollar Cost Averaging permits the
Owner to transfer a specified amount every month (or some other
frequency as may be determined by the Company) from the Money Market
Sub-Account to any other Variable Sub-Account.
C. Automatic Rebalancing
Transfers may be made automatically through Automatic Rebalancing
while the Contract is in force. By electing Automatic Rebalancing, the
Account Value in the Variable Sub-Accounts will be rebalanced to the
desired allocation on a quarterly basis, determined from the first
date you decide to rebalance. Each quarter, Account Value will be
transferred among Variable Sub-Accounts to achieve the desired
allocation.
The desired allocation will be the allocation initally selected,
unless subsequently changed. You may change the allocation at any time
by giving the Company written notice. The new allocation will be
effective with the first rebalancing that occurs after the Company
receives the written request. The Company is not responsible for
rebalancing that occurs prior to receipt of the written request.
III. "Redemption" Procedures: Cancellation and Exchange Rights, Death Benefits,
Three Year Continuation Period, Guarantee Period, Contract Loans,
Surrenders, Partial Withdrawals, Redemptions for Certain Charges,
Confinement Waiver Benefit, Payment Options, Suspension of Valuation,
Payments, and Transfers, and Maturity Benefit
A. Cancellation and Exchange Rights
A Contract Owner has a limited right to return a Contract for
cancellation. If the Contract is returned for cancellation, by mail or
hand delivery, to the Company, or to the agent who sold the Contract,
within 45 days of the date of the execution of the application for the
Contract, or within 10 days after receipt of the Contract by the
Contract Owner (a longer free-look period is provided in certain
states), the Company will return to the Contract Owner, within 7 days,
the premiums paid adjusted to reflect any investment gain or loss
resulting from allocation to the Variable Account prior to the date of
cancellation, unless state law requires a return of premium without
adjustment. If, upon cancellation of the Contract at the end of the
free-look period, the Company is required to return the premiums paid,
and where approved by the applicable state, the Company, reserves the
right to allocate all premium payments made prior to the expiration of
the free-look period to the Fixed Account. Once the Contract is in
effect, it may be exchanged during the first 24 months after its
issuance for a nonvariable life insurance contract on the life of the
Insured without evidence of insurability. This exchange will be
implemented by transferring the Account Value to the Fixed Account and
removing your future right to allocate funds to the Variable Account.
The amount at risk to the Company (i.e., the difference between the
Death Benefit and the Account Value) under the new contract will be
equal to or less than the amount at risk to the Company under the
exchanged Contract on the date of the exchange. Premiums and charges
under the new contract will be based on the same risk classification
as the exchanged Contract. For new contracts, the Company reserves the
right to make a contract available that is offered by the Company's
parent or by any affiliate of the Company.
B. Death Benefit
The Contracts provide for the payment of Death Benefit Proceeds to the
named beneficiary when the Insured under the Contract dies. The
Proceeds payable to the beneficiary equal the Death Benefit less any
Indebtedness and less any unpaid Monthly Deduction Amounts occurring
during a Grace Period (if applicable). The Death Benefit is determined
by the Death Benefit option that exists under the Contract. The
Contract Owner may choose one of two Death Benefit options: a level
amount which generally equals the Specified Amount of the Contract; or
a variable amount which generally equals the Specified Amount plus the
Account Value. As long as the Contract remains in force, the Death
Benefit will not be less than the greater of the current Specified
Amount of the Contract or the Account Value multiplied by the Death
Benefit ratio under the Contract. The ratios are specified in the
Contract and vary according to the attained age of the Insured. An
increase in Account Value due to favorable investment experience may
increase the Death Benefit above the Specified Amount; and a decrease
in Account Value due to unfavorable investment experience may decrease
the Death Benefit (but not below the Specified Amount).
All or part of the proceeds may be paid in cash or applied under an
Income Plan.
C. Three Year Continuation Period
All contracts provide for a three year continuation period which is in
effect until the end of the third Contract Year. On any Monthly
Activity Date during the continuation period, the Company will
guarantee that , regardless of Account Value, the Contract will remain
in force if the amount of cumulative premiums paid less partial
withdrawals and any indebtedness is greater than or equal to the
Cumulative Minimum Premium.
D. Guarantee Period
The Contract will not be terminated during the guarantee period even
if the cash surrender value is zero. The Contract Owner can select one
of three options: (1) no guarantee period; (2) the greater of 10 years
or until the Insured's attained age 65; or (3) a lifetime guarantee
period. The guarantee period will be terminated prior to the
expiration date if the cumulative premiums paid less partial
withdrawals and any indebtedness is less than the cumulative guarantee
period premium. The cumulative guarantee period premium will be
calculated by dividing the Guarantee Period premium shown in the
Contract by 12, and multiplying the result by the number of Contract
months since issue.
E. Accelerated Death Benefit
If the Insured becomes terminally ill, the Contract Owner may request
an accelerated Death Benefit in an amount up to the lesser of (1) 50%
of the Specified Amount on the day the Company receives the request,
and (2) $250,000 for all policies issued by the Company which cover
the Insured. "Terminally ill" means an illness or physical condition
of the Insured that, notwithstanding appropriate medical care, will
result in a life expectancy of 12 months or less. If the Insured is
terminally ill as the result of an illness, the accelerated Death
Benefit is not available unless the illness occurred at least 30 days
after the Issue Date. If the Insured is terminally ill as the result
of an accident, the accelerated Death Benefit is available if the
accident occurred after the Issue Date.
We will pay benefits due under the accelerated Death Benefit provision
upon receipt of a written request from the Contract Owner and due
proof that the Insured has been diagnosed as terminally ill. The
Company also reserves the right to require supporting documentation of
the diagnosis and to require (at the Company's expense) an examination
of the Insured by a physician of the Company's choice to confirm the
diagnosis. The amount of the payment will be the amount requested by
the Contract Owner, reduced by the sum of (1) a 12 month interest
discount to reflect the early payment; (2) an administrative fee (not
to exceed $250); and (3) a pro rata amount of any outstanding Contract
loan and accrued loan interest. After the payment has been made, the
Specified Amount, the Account Value and any outstanding Contract loan
will be reduced on a pro rata basis. Although the Company reserves the
right to charge an administrative fee not to exceed $250, we currently
do not impose this fee. Only one request for an accelerated Death
Benefit per Insured is allowed. The accelerated Death Benefit may not
be available in all states.
D. Contract Loans
While the Contract is in force, a Contract Owner may obtain, without
the consent of the beneficiary (provided the designation of
beneficiary is not irrevocable), a cash loan from the Company. Loans
are secured by the Contract. The maximum amount available for a loan
is 90% of the Contract's Cash Value, less the amount of all Contract
loans existing on the date of the loan.
The loan amount will be transferred proportionately from the Variable
Sub-Accounts and the Fixed Account to the Loan Account unless the
Contract Owner specifies otherwise. However, the Company will not
withdraw amounts from the Fixed Account equaling more than the total
loan multiplied by the ratio of the Fixed Account to the Account Value
immediately preceding the loan. The amounts allocated to the Loan
Account will be credited with interest at the loan credited rate set
forth in the Contract (currently, 4% per year). The difference between
the value of the Loan Account and the Indebtedness will be transferred
on a pro-rata basis from the Variable Sub-Accounts and the Fixed
Account to the Loan Account on each Contract Anniversary. If the
aggregate outstanding loan(s) and loan interest secured by the
Contract exceeds the Cash Value of the Contract, the Company will give
written notice to the Contract Owner that unless the Company receives
an additional payment within 61 days to reduce the aggregate
outstanding loan(s) secured by the Contract, the Contract may lapse.
All or any part of any loan secured by a Contract may be repaid while
the Contract is still in effect. When loan repayments or interest
payments are made, the repayment will be allocated among the Variable
Sub-Accounts and the Fixed Account in the same percentage as
subsequent payments are allocated (unless the Contract Owner requests
a different allocation), and an amount equal to the payment will be
deducted from the Loan Account. Any outstanding loan at the end of a
Grace Period must be repaid before the Contract will be reinstated.
E. Surrendering the Contract for Cash Surrender Value
While the Contract is in force, a Contract Owner may elect, without
the consent of the beneficiary (provided the designation of
beneficiary is not irrevocable), to fully surrender the Contract. Upon
surrender, the Contract Owner will receive the Cash Surrender Value
determined as of the day the Company receives the Contract Owner's
written request or the date requested by the Contract Owner, whichever
is later. The Cash Surrender Value equals the Cash Value less any
Indebtedness. The Company will pay the Cash Surrender Value of the
Contract within seven days of receipt by the Company of the written
request or on the effective surrender date requested by the Contract
Owner, whichever is later. The Contract will terminate on the date of
receipt of the written request, or the date the Contract Owner
requests the surrender to be effective, whichever is later.
The Contract Owner may elect to apply the surrender proceeds to an
Income Plan.
F. Partial Withdrawals
While the Contract is in force after the first Contract Year, a
Contract Owner may elect once per year, by written request, to make a
partial withdrawal from the Cash Surrender Value. The minimum partial
withdrawal is shown in the Contract (currently there is no minimum)
and the maximum partial withdrawal amount may not reduce the the net
Account Value to less than $500; otherwise, the request will be
treated as a request for a full surrender. The partial withdrawal and
the partial withdrawal fee (currently the lesser of $25 or 2% of the
amount withdrawn) will be deducted pro-rata from each Variable
Sub-Account and Fixed Account, unless the Contract Owner instructs
otherwise. However, the Contract Owner may not withdraw from the Fixed
Account more than the total partial withdrawal multiplied by the ratio
of the Fixed Account to the Account Value immediately preceding the
partial withdrawal.
Any Contract with Death Benefit option 1 will also have a reduction in
Specified Amount, in addition to a reduction in Account Value. The
Specified Amount after the partial withdrawal will be reduced by the
amount of the partial withdrawal.
G. Surrender Charge
Upon surrender of the Contract, a Surrender Charge may be assessed.
After the fifteenth Contract Year, no surrender charges will be
assessed. Full surrenders will be subject to a surrender charge as set
forth in the table below:
Contract Year Surrender Charge*
1-7 30%
8 27%
9 24%
10 20%
11 16%
12 12%
13 8%
14 4%
15 0%
* Surrender Charge as a percentage of the lesser of the premiums paid
or the Target Premium.
The Surrender Charge is imposed to cover a portion of the sales
expense incurred by the Company in distributing the Contracts. This
expense includes agents' commissions, advertising and the printing of
prospectuses.
H. Redemptions for Monthly Deduction Amount and Other Fees
1. Monthly Deduction Amount. On each Monthly Activity Date including
the Contract Date, the Company will deduct from the Account Value
an amount ("Monthly Deduction Amount") to cover charges and
expenses incurred in connection with a Contract. Each Monthly
Deduction Amount will be deducted pro rata from each Variable
Sub-Account and the Fixed Account attributable to the Contract.
The deduction will be such that the proportion of Account Value
of the Contract attributable to each Sub-Account and to the Fixed
Account remains the same before and after the deduction. The
Monthly Deduction Amount will vary from month to month. If the
Cash Surrender Value is not sufficient to cover a Monthly
Deduction Amount due on any Monthly Activity Date, the Contract
may lapse. A summary of the monthly deductions and charges which
constitute the Monthly Deduction Amount is set forth in Appendix
A.
2. Mortality and Expense Risk Charge. The Company will deduct from
the Variable Account a daily charge equivalent to an annual rate
of 0.60% of the assets of each Variable Sub-Account for the
mortality and expense risks the Company assumes in relation to
the Contracts. The mortality risk assumed includes the risk that
the cost of insurance charges specified in the Contract will be
insufficient to meet claims. The Company also assumes a risk
that, on the Monthly Activity Date preceding the death of an
Insured, the Death Benefit will exceed the amount on which the
cost of insurance charges were based. The expense risk assumed is
that expenses incurred in issuing and administering the Contracts
will exceed the administrative charges set in the Contract.
3. Premium Expense Charge. The premium expense charge is currently
equal to an annual rate of 4.0%. This charge compensates the
Company for premium taxes imposed by various states and local
jurisdictions and for federal taxes related to the receipt of
premiums under the Contract and that results from the application
of section 848 of the Code. The premium tax deduction will be
imposed regardless of a Contract Owner's state of residence and,
therefore, is made whether any premium tax applies. The premium
expense charge is deducted from each premium received prior to
being allocated to the Variable or Fixed Account.
I. Other Benefits
1. Waiver of Monthly Deductions Rider. Under this endorsement, all
monthly deduction amounts which become due are waived if the
insured becomes disabled before age 60. The waiver will be made
upon the Company's receipt of due proof of disability in a timely
manner. Under the waiver, all benefits under the Contract are
available as if waived payments had been made when due.
2. Children's Level Term Rider. The Company will pay the amount of
benefit in force to the payee (as defined in the endorsement) for
each child insured under this rider. The benefit will be paid
upon receipt by the Company of due proof that the child died on
or prior to the earlier of: (a) the Contract Anniversary on which
the child's age is 25; or (b) the coverage expiration date of
this rider.
3. Accidental Death Benefit. The Company will pay the amount of the
benefit in force to the beneficiary upon receipt by the Company
of due proof that: (a) the insured died solely from accidental
injury; (b) death occurred within 90 days of the date of the
accidental injury; (c) death took place prior to the Contract
Anniversary on which the insured's age is 65; and, (d) the cause
of death is not described in the "Risks Not Covered" provision of
this rider.
4. Additional Insured Rider. The Company will pay the amount of the
benefit in force to the beneficiary upon receipt by the Company
of due proof that the insured died on or prior to the coverage
expiration date of this rider.
J. Payment Options
The surrender proceeds or Death Benefit Proceeds under the Contracts
may be paid in a lump sum or may be applied to one of the Company's
Income Plans. If the amount to be applied to an Income Plan is less
than $3,000 or if it would result in an initial income payment of less
than $20, the Company may require that the frequency of income
payments be decreased such that the income payments are greater than
$20 each, or it may elect to pay the amount in a lump sum. No
surrender or partial withdrawals are permitted after payments under an
Income Plan commence.
We will pay interest on the Proceeds from the date of the Insured's
death to the date payment is made or a payment option is elected. At
such times, the Proceeds are not subject to the investment experience
of the Variable Account.
The Income Plans are fixed annuities payable from the Company's
general account. They do not reflect the investment experience of the
Variable Account. Fixed annuity payments are determined by multiplying
the amount applied to the annuity by a rate to be determined by the
Company that is no less than the rate specified in the fixed payment
annuity tables in the Contract. The annuity payment will remain level
for the duration of the annuity. The Company may require proof of age
and gender of the payee (and joint payee, if applicable) before
payments begin. The Company may also require proof that such person(s)
are living before it makes each payment.
The following options are available under the Contracts. The Company
may also offer other payment options.
Income Plan 1 - Life Income With Guaranteed Payments. The Company will
make payments for as long as the payee lives. If the payee dies before
the selected number of guaranteed payments have been made, the Company
will continue to pay the remainder of the guaranteed payments.
Income Plan 2 - Joint and Survivor Life Income With Guaranteed
Payments. The Company will make payments for as long as either the
payee or Joint payee, named at the time of Income Plan selection, is
living. If both the payee and the Joint payee die before the selected
number of guaranteed payments have been made, the Company will
continue to pay the remainder of the guaranteed payments.
The Company will make any other arrangements for income payments as
may be agreed on.
K. Suspension of Valuation, Payments, and Transfers
The Company will suspend all procedures requiring valuation of the
Variable Account (including transfers, surrenders and loans) on any
day the New York Stock Exchange is closed or trading is restricted due
to an existing emergency as defined by the Securities and Exchange
Commission, or on any day the Commission has ordered that the right of
surrender of the Contracts be suspended for the protection of Contract
Owners, until such condition has ended.
L. Maturity Benefit
The Contracts have no maturity date.
GLENBROOK LIFE & ANNUITY COMPANY
3100 Sanders Road--J4B
Northbrook, IL 60062
Telephone: (847) 402-9127 Paul Engeriser, F.S.A., M.A.A.A.
Fax: (847) 326-7231 Actuary
February 23, 1998
In my capacity as Actuary of Glenbrook Life & Annuity Company (the "Company"), I
have provided actuarial advice concerning:
The preparation of the Registration Statement on Form S-6 filed by
Glenbrook Life Variable Life Separate Account B and the Company with the
Securities and Exchange Commission under the Securities Act of 1933 with
respect to variable life insurance policies (the "Registration Statement");
and
The preparation of policy forms for the variable life policies described in
the Registration Statement (the "Policies").
It is my professional opinion that:
1. The illustrations of death benefits, net cash values, accumulated premium,
internal rates of return on net cash values and internal rates of return on
death benefits shown as Exhibit 11 to the Prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions
of the Policies and with the Company's administrative procedures.
2. The rate structure of the Policies has not been designed so as to make the
relationship between the initial premiums and policy benefits, as shown in
the illustrations, appear to be correspondingly more favorable to
prospective purchasers of Policies for male and female insureds, aged 45,
55, and 65 in the underwriting class illustrated than to prospective
purchasers of Policies for insureds of other sexes or ages. Insureds in
other underwriting classes may have higher cost of insurance charges.
3. The illustrations shown in Appendix A are for commonly used rating
classifications and for premium amounts and ages appropriate to the markets
in which this Policy is sold.
I hereby consent to the filing of this opinion as an Exhibit to this
Registration Statement and to the use of my name under the heading "Experts" in
the Prospectus.
By: /s/ PAUL ENGERISER
----------------------
Paul Engeriser
Actuary
EXHIBIT 11
Monthly Deduction Amount
On each Monthly Activity Date including the Contract Date, the Company will
deduct from the Account Value attributable to the Variable Account an amount
("Monthly Deduction Amount") to cover certain charges and expenses incurred in
connection with a Contract. Each Monthly Deduction Amount will be deducted pro
rata from each Variable Sub-Account and the Fixed Account attributable to the
Contract. The deduction will be such that the proportion of Account Value of the
Contract attributable to each Sub-Account and to the Fixed Account remains the
same before and after the deduction. The Monthly Deduction Amount will vary
monthly. If the Cash Surrender Value is not sufficient to cover a Monthly
Deduction Amount due on any Monthly Activity Date, the Contract may lapse. The
following is a summary of the monthly deductions and charges which constitute
the Monthly Deduction Amount.
Cost of Insurance Charge: The cost of insurance charge covers the Company's
anticipated mortality costs for standard and substandard risks. The current cost
of insurance charge will not exceed the guaranteed cost of insurance charge.
This charge is the maximum annual cost of insurance per $1,000 as indicated in
the Contract; multiplied by the difference between the Death Benefit and the
Account Value (both as determined on the Monthly Activity Date); divided by
$1,000; and divided by 12. For standard risks, the guaranteed cost of insurance
rate is based on the 1980 Commissioners Standard Ordinary Mortality Table, age
last birthday. (Unisex rates may be required in some states). A table of
guaranteed cost of insurance charges per $1,000 will be included in each
Contract; however, the Company reserves the right to use rates less than those
shown in the table. Substandard risks will be charged at a higher cost of
insurance rate that will not exceed rates based on a multiple of the 1980
Commissioners Standard Ordinary Mortality Table, age last birthday. The multiple
will be based on the Insured's substandard rating.
The cost of insurance charge rates is applied to the difference between the
Death Benefit determined on the Monthly Activity Date and the Account Value on
that same date prior to assessing the Monthly Deduction Amount. The difference
is the amount for which the Company is at risk should the Death Benefit be then
payable.
Because the Account Value and, as a result, the amount for which the Company is
at risk under a Contract may vary from month to month, the cost of insurance
charge may also vary on each Monthly Activity Date
Monthly Administrative Expense Charge: The Company will deduct monthly from the
Account Value an administrative expense charge of $20.00 during the first year
and $7.50 in later years. This charge compensates the Company for administrative
expenses incurred in the administration of the Variable Account and the
Contracts.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE 45
$250,000 INITIAL FACE AMOUNT
DEATH BENEFIT OPTION 1
STANDARD NON-SMOKER CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1) GUARANTEED CHARGES(2)
------------------------------------------ -------------------------------------------
Premiums Premiums
End of Paid During Accumulated Cash Cash
Contract Contract at 5% Interest Surrender Account Death Surrender Account Death
Year Year Per Year Value Value Benefit Value Value Benefit
- ---------- ---------- ----------- ------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,728 3,914 2,006 3,124 250,000 1,684 2,802 250,000
2 3,728 8,025 5,392 6,510 250,000 4,877 5,995 250,000
3 3,728 12,340 8,942 10,060 250,000 8,341 9,460 250,000
4 3,728 16,872 12,769 13,887 250,000 12,102 13,220 250,000
5 3,728 21,630 16,927 18,045 250,000 16,187 17,305 250,000
6 3,728 26,625 21,463 22,582 250,000 20,621 21,740 250,000
7 3,728 31,871 26,458 27,576 250,000 25,435 26,553 250,000
8 3,728 37,379 32,086 33,093 250,000 30,770 31,776 250,000
9 3,728 43,162 38,296 39,191 250,000 36,548 37,442 250,000
10 3,728 49,235 45,165 45,910 250,000 42,847 43,592 250,000
11 3,728 55,611 52,709 53,305 250,000 49,678 50,274 250,000
12 3,728 62,306 61,008 61,455 250,000 57,097 57,545 250,000
13 3,728 69,336 70,158 70,456 250,000 65,176 65,474 250,000
14 3,728 76,717 80,278 80,427 250,000 73,985 74,134 250,000
15 3,728 84,467 91,477 91,477 250,000 83,608 83,608 250,000
16 3,728 92,605 103,497 103,497 250,000 93,992 93,992 250,000
17 3,728 101,150 116,757 116,757 250,000 105,400 105,400 250,000
18 3,728 110,121 131,416 131,416 250,000 117,958 117,958 250,000
19 3,728 119,542 147,660 147,660 250,000 131,824 131,824 250,000
20 3,728 129,433 165,705 165,705 250,000 147,189 147,189 250,000
25 3,728 186,823 290,828 290,828 337,361 255,602 255,602 296,499
35 3,728 353,550 829,565 829,565 871,043 725,065 725,065 761,318
</TABLE>
(1) Values reflect investment results using current cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
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 RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATES ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATION MADE TO THE SEPARATE ACCOUNT AND
THE FIXED ACCOUNT AND ALSO THE RATES OF RETURN OF THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE 45
$250,000 INITIAL FACE AMOUNT
DEATH BENEFIT OPTION 1
STANDARD NON-SMOKER CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1) GUARANTEED CHARGES(2)
------------------------------------------ -------------------------------------------
Premiums Premiums
End of Paid During Accumulated Cash Cash
Contract Contract at 5% Interest Surrender Account Death Surrender Account Death
Year Year Per Year Value Value Benefit Value Value Benefit
- ---------- ---------- ----------- ------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,728 3,914 1,817 2,935 250,000 1,504 2,623 250,000
2 3,728 8,025 4,820 5,939 250,000 4,339 5,457 250,000
3 3,728 12,340 7,772 8,890 250,000 7,238 8,356 250,000
4 3,728 16,872 10,761 11,879 250,000 10,200 11,318 250,000
5 3,728 21,630 13,811 14,929 250,000 13,223 14,341 250,000
6 3,728 26,625 16,937 18,055 250,000 16,299 17,417 250,000
7 3,728 31,871 20,178 21,296 250,000 19,420 20,538 250,000
8 3,728 37,379 23,664 24,670 250,000 22,687 23,694 250,000
9 3,728 43,162 27,291 28,186 250,000 25,976 26,870 250,000
10 3,728 49,235 31,079 31,824 250,000 29,311 30,057 250,000
11 3,728 55,611 34,977 35,574 250,000 32,645 33,241 250,000
12 3,728 62,306 38,994 39,441 250,000 35,966 36,413 250,000
13 3,728 69,336 43,144 43,442 250,000 39,267 39,566 250,000
14 3,728 76,717 47,457 47,606 250,000 42,534 42,683 250,000
15 3,728 84,467 51,936 51,936 250,000 45,744 45,744 250,000
16 3,728 92,605 56,150 56,150 250,000 48,725 48,725 250,000
17 3,728 101,150 60,408 60,408 250,000 51,602 51,602 250,000
18 3,728 110,121 64,704 64,704 250,000 54,332 54,332 250,000
19 3,728 119,542 69,035 69,035 250,000 56,876 56,876 250,000
20 3,728 129,433 73,392 73,392 250,000 59,190 59,190 250,000
25 3,728 186,823 95,230 95,230 250,000 65,695 65,695 250,000
35 3,728 353,550 133,920 133,920 250,000 0* 0* 0*
</TABLE>
* When the Account Value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
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 RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATES ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATION MADE TO THE SEPARATE ACCOUNT AND
THE FIXED ACCOUNT AND ALSO THE RATES OF RETURN OF THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE 45
$250,000 INITIAL FACE AMOUNT
DEATH BENEFIT OPTION 1
STANDARD NON-SMOKER CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1) GUARANTEED CHARGES(2)
------------------------------------------ -------------------------------------------
Premiums Premiums
End of Paid During Accumulated Cash Cash
Contract Contract at 5% Interest Surrender Account Death Surrender Account Death
Year Year Per Year Value Value Benefit Value Value Benefit
- ---------- ---------- ----------- ------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,728 3,914 1,629 2,747 250,000 1,326 2,444 250,000
2 3,728 8,025 4,272 5,390 250,000 3,823 4,942 250,000
3 3,728 12,340 6,694 7,812 250,000 6,222 7,341 250,000
4 3,728 16,872 8,984 10,103 250,000 8,517 9,636 250,000
5 3,728 21,630 11,167 12,285 250,000 10,704 11,823 250,000
6 3,728 26,625 13,252 14,370 250,000 12,774 13,892 250,000
7 3,728 31,871 15,274 16,393 250,000 14,715 15,834 250,000
8 3,728 37,379 17,359 18,366 250,000 16,627 17,633 250,000
9 3,728 43,162 19,396 20,291 250,000 18,382 19,276 250,000
10 3,728 49,235 21,397 22,142 250,000 20,004 20,750 250,000
11 3,728 55,611 23,304 23,901 250,000 21,443 22,039 250,000
12 3,728 62,306 25,119 25,567 250,000 22,684 23,132 250,000
13 3,728 69,336 26,851 27,149 250,000 23,721 24,019 250,000
14 3,728 76,717 28,522 28,671 250,000 24,533 24,682 250,000
15 3,728 84,467 30,124 30,124 250,000 25,095 25,095 250,000
16 3,728 92,605 31,195 31,195 250,000 25,231 25,231 250,000
17 3,728 101,150 32,052 32,052 250,000 25,061 25,061 250,000
18 3,728 110,121 32,683 32,683 250,000 24,535 24,535 250,000
19 3,728 119,542 33,071 33,071 250,000 23,606 23,606 250,000
20 3,728 129,433 33,194 33,194 250,000 22,223 22,223 250,000
25 3,728 186,823 28,805 28,805 250,000 6,533 6,533 250,000
35 3,728 353,550 0* 0* 0* 0* 0* 0*
</TABLE>
* When the Account Value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
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 RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN.
THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO THE
CONTRACT AVERAGES 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATES ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT VALUE,
AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE SHOWN,
DEPENDING ON THE INVESTMENT ALLOCATION MADE TO THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT AND ALSO THE RATES OF RETURN OF THE SEPARATE ACCOUNT AND THE FIXED
ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN
BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
FEMALE ISSUE AGE 55
$250,000 INITIAL FACE AMOUNT
DEATH BENEFIT OPTION 1
STANDARD NON-SMOKER CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1) GUARANTEED CHARGES(2)
------------------------------------------ -------------------------------------------
Premiums Premiums
End of Paid During Accumulated Cash Cash
Contract Contract at 5% Interest Surrender Account Death Surrender Account Death
Year Year Per Year Value Value Benefit Value Value Benefit
- ---------- ---------- ----------- ------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,560 4,788 2,547 3,915 250,000 1,562 2,930 250,000
2 4,560 9,815 6,816 8,184 250,000 4,860 6,228 250,000
3 4,560 15,094 11,357 12,725 250,000 8,414 9,782 250,000
4 4,560 20,637 16,214 17,582 250,000 12,258 13,626 250,000
5 4,560 26,457 21,426 22,794 250,000 16,412 17,780 250,000
6 4,560 32,568 27,049 28,417 250,000 20,894 22,262 250,000
7 4,560 38,984 33,161 34,529 250,000 25,715 27,083 250,000
8 4,560 45,721 39,972 41,203 250,000 31,018 32,249 250,000
9 4,560 52,795 47,496 48,590 250,000 36,666 37,761 250,000
10 4,560 60,223 55,853 56,765 250,000 42,730 43,642 250,000
11 4,560 68,022 65,103 65,833 250,000 49,202 49,932 250,000
12 4,560 76,211 75,355 75,902 250,000 56,140 56,687 250,000
13 4,560 84,810 86,751 87,116 250,000 63,615 63,980 250,000
14 4,560 93,838 99,362 99,544 250,000 71,706 71,888 250,000
15 4,560 103,318 113,384 113,384 250,000 80,485 80,485 250,000
16 4,560 113,272 128,338 128,338 250,000 89,837 89,837 250,000
17 4,560 123,724 144,921 144,921 250,000 100,011 100,011 250,000
18 4,560 134,698 163,352 163,352 250,000 111,086 111,086 250,000
19 4,560 146,221 183,894 183,894 250,000 123,172 123,172 250,000
20 4,560 158,320 206,865 206,865 250,000 136,433 136,433 250,000
25 4,560 228,517 366,797 366,797 385,137 231,759 231,759 250,000
35 4,560 432,454 1,039,243 1,039,243 1,091,205 665,978 665,978 699,277
</TABLE>
(1) Values reflect investment results using current cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
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 RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATES ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATION MADE TO THE SEPARATE ACCOUNT AND
THE FIXED ACCOUNT AND ALSO THE RATES OF RETURN OF THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
FEMALE ISSUE AGE 55
$250,000 INITIAL FACE AMOUNT
DEATH BENEFIT OPTION 1
STANDARD NON-SMOKER CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1) GUARANTEED CHARGES(2)
------------------------------------------ -------------------------------------------
Premiums Premiums
End of Paid During Accumulated Cash Cash
Contract Contract at 5% Interest Surrender Account Death Surrender Account Death
Year Year Per Year Value Value Benefit Value Value Benefit
- ---------- ---------- ----------- ------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,560 4,788 2,313 3,681 250,000 1,357 2,725 250,000
2 4,560 9,815 6,104 7,472 250,000 4,262 5,630 250,000
3 4,560 15,094 9,894 11,262 250,000 7,208 8,576 250,000
4 4,560 20,637 13,694 15,062 250,000 10,200 11,568 250,000
5 4,560 26,457 17,508 18,876 250,000 13,228 14,596 250,000
6 4,560 32,568 21,350 22,718 250,000 16,277 17,645 250,000
7 4,560 38,984 25,251 26,619 250,000 19,317 20,685 250,000
8 4,560 45,721 29,365 30,596 250,000 22,449 23,681 250,000
9 4,560 52,795 33,648 34,742 250,000 25,491 26,585 250,000
10 4,560 60,223 38,144 39,056 250,000 28,457 29,369 250,000
11 4,560 68,022 42,831 43,561 250,000 31,281 32,011 250,000
12 4,560 76,211 47,726 48,273 250,000 33,950 34,497 250,000
13 4,560 84,810 52,869 53,234 250,000 36,455 36,820 250,000
14 4,560 93,838 58,201 58,383 250,000 38,782 38,965 250,000
15 4,560 103,318 63,796 63,796 250,000 40,890 40,890 250,000
16 4,560 113,272 68,848 68,848 250,000 42,527 42,527 250,000
17 4,560 123,724 73,972 73,972 250,000 43,770 43,770 250,000
18 4,560 134,698 79,152 79,152 250,000 44,484 44,484 250,000
19 4,560 146,221 84,367 84,367 250,000 44,511 44,511 250,000
20 4,560 158,320 89,591 89,591 250,000 43,687 43,687 250,000
25 4,560 228,517 114,815 114,815 250,000 19,673 19,673 250,000
35 4,560 432,454 148,935 148,935 250,000 0* 0* 0*
</TABLE>
* When the Account Value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
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 RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATES ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATION MADE TO THE SEPARATE ACCOUNT AND
THE FIXED ACCOUNT AND ALSO THE RATES OF RETURN OF THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
FEMALE ISSUE AGE 55
$250,000 INITIAL FACE AMOUNT
DEATH BENEFIT OPTION 1
STANDARD NON-SMOKER CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1) GUARANTEED CHARGES(2)
------------------------------------------ -------------------------------------------
Premiums Premiums
End of Paid During Accumulated Cash Cash
Contract Contract at 5% Interest Surrender Account Death Surrender Account Death
Year Year Per Year Value Value Benefit Value Value Benefit
- ---------- ---------- ----------- ------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,560 4,788 2,080 3,448 250,000 1,153 2,521 250,000
2 4,560 9,815 5,422 6,790 250,000 3,691 5,059 250,000
3 4,560 15,094 8,545 9,913 250,000 6,101 7,469 250,000
4 4,560 20,637 11,464 12,832 250,000 8,387 9,755 250,000
5 4,560 26,457 14,180 15,548 250,000 10,537 11,905 250,000
6 4,560 32,568 16,707 18,075 250,000 12,533 13,901 250,000
7 4,560 38,984 19,075 20,443 250,000 14,346 15,714 250,000
8 4,560 45,721 21,433 22,664 250,000 16,075 17,306 250,000
9 4,560 52,795 23,732 24,827 250,000 17,539 18,633 250,000
10 4,560 60,223 26,009 26,921 250,000 18,755 19,667 250,000
11 4,560 68,022 28,229 28,959 250,000 19,657 20,387 250,000
12 4,560 76,211 30,400 30,947 250,000 20,238 20,785 250,000
13 4,560 84,810 32,553 32,918 250,000 20,491 20,855 250,000
14 4,560 93,838 34,607 34,790 250,000 20,403 20,585 250,000
15 4,560 103,318 36,632 36,632 250,000 19,934 19,934 250,000
16 4,560 113,272 37,727 37,727 250,000 18,831 18,831 250,000
17 4,560 123,724 38,564 38,564 250,000 17,170 17,170 250,000
18 4,560 134,698 39,105 39,105 250,000 14,812 14,812 250,000
19 4,560 146,221 39,304 39,304 250,000 11,596 11,596 250,000
20 4,560 158,320 39,105 39,105 250,000 7,359 7,359 250,000
25 4,560 228,517 29,395 29,395 250,000 0* 0* 0*
35 4,560 432,454 0* 0* 0* 0* 0* 0
</TABLE>
* When the Account Value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
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 RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATES ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATION MADE TO THE SEPARATE ACCOUNT AND
THE FIXED ACCOUNT AND ALSO THE RATES OF RETURN OF THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE 65
$250,000 INITIAL FACE AMOUNT
DEATH BENEFIT OPTION 1
STANDARD NON-SMOKER CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1) GUARANTEED CHARGES(2)
------------------------------------------ -------------------------------------------
Premiums Premiums
End of Paid During Accumulated Cash Cash
Contract Contract at 5% Interest Surrender Account Death Surrender Account Death
Year Year Per Year Value Value Benefit Value Value Benefit
- ---------- ---------- ----------- ------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,843 10,335 4,905 7,858 250,000 1,533 4,485 250,000
2 9,843 21,187 12,824 15,777 250,000 6,157 9,110 250,000
3 9,843 32,582 20,550 23,502 250,000 10,760 13,713 250,000
4 9,843 44,546 28,404 31,356 250,000 15,311 18,264 250,000
5 9,843 57,108 36,714 39,667 250,000 19,756 22,709 250,000
6 9,843 70,299 45,797 48,750 250,000 24,014 26,967 250,000
7 9,843 84,149 55,721 58,674 250,000 27,978 30,930 250,000
8 9,843 98,691 66,979 69,637 250,000 31,792 34,449 250,000
9 9,843 113,961 79,522 81,884 250,000 34,991 37,353 250,000
10 9,843 129,994 93,640 95,608 250,000 37,491 39,459 250,000
11 9,843 146,829 109,395 110,970 250,000 39,003 40,578 250,000
12 9,843 164,506 127,287 128,468 250,000 39,291 40,472 250,000
13 9,843 183,066 147,493 148,281 250,000 38,067 38,855 250,000
14 9,843 202,555 170,382 170,775 250,000 34,942 35,335 250,000
15 9,843 223,018 196,454 196,454 250,000 29,360 29,360 250,000
16 9,843 244,504 225,175 225,175 250,000 20,125 20,125 250,000
17 9,843 267,064 258,264 258,264 271,177 6,493 6,493 250,000
18 9,843 290,752 294,652 294,652 309,384 0* 0* 0*
19 9,843 315,625 334,611 334,611 351,341 0* 0* 0*
20 9,843 341,742 378,462 378,462 397,385 0* 0* 0*
25 9,843 493,267 669,162 669,162 702,620 0* 0* 0*
35 9,843 933,474 1,920,755 1,920,755 1,939,963 0* 0* 0*
</TABLE>
* When the Account Value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
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 RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATES ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATION MADE TO THE SEPARATE ACCOUNT AND
THE FIXED ACCOUNT AND ALSO THE RATES OF RETURN OF THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE 65
$250,000 INITIAL FACE AMOUNT
DEATH BENEFIT OPTION 1
STANDARD NON-SMOKER CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1) GUARANTEED CHARGES(2)
------------------------------------------ -------------------------------------------
Premiums Premiums
End of Paid During Accumulated Cash Cash
Contract Contract at 5% Interest Surrender Account Death Surrender Account Death
Year Year Per Year Value Value Benefit Value Value Benefit
- ---------- ---------- ----------- ------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,843 10,335 4,416 7,369 250,000 1,141 4,094 250,000
2 9,843 21,187 11,368 14,321 250,000 5,086 8,038 250,000
3 9,843 32,582 17,614 20,567 250,000 8,693 11,645 250,000
4 9,843 44,546 23,435 26,387 250,000 11,903 14,856 250,000
5 9,843 57,108 29,096 32,049 250,000 14,634 17,587 250,000
6 9,843 70,299 34,831 37,784 250,000 16,769 19,722 250,000
7 9,843 84,149 40,596 43,549 250,000 18,161 21,114 250,000
8 9,843 98,691 46,759 49,417 250,000 18,908 21,565 250,000
9 9,843 113,961 53,125 55,487 250,000 18,491 20,853 250,000
10 9,843 129,994 59,803 61,772 250,000 16,765 18,733 250,000
11 9,843 146,829 66,624 68,199 250,000 13,367 14,941 250,000
12 9,843 164,506 73,898 75,079 250,000 7,978 9,159 250,000
13 9,843 183,066 81,456 82,243 250,000 211 999 250,000
14 9,843 202,555 89,286 89,680 250,000 0* 0* 0*
15 9,843 223,018 97,474 97,474 250,000 0* 0* 0*
16 9,843 244,504 102,893 102,893 250,000 0* 0* 0*
17 9,843 267,064 108,109 108,109 250,000 0* 0* 0*
18 9,843 290,752 113,110 113,110 250,000 0* 0* 0*
19 9,843 315,625 117,872 117,872 250,000 0* 0* 0*
20 9,843 341,742 122,344 122,344 250,000 0* 0* 0*
25 9,843 493,267 138,279 138,279 250,000 0* 0* 0*
35 9,843 933,474 56,132 56,132 250,000 0* 0* 0*
</TABLE>
* When the Account Value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
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 RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATES ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATION MADE TO THE SEPARATE ACCOUNT AND
THE FIXED ACCOUNT AND ALSO THE RATES OF RETURN OF THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
MALE ISSUE AGE 65
$250,000 INITIAL FACE AMOUNT
DEATH BENEFIT OPTION 1
STANDARD NON-SMOKER CLASS
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES(1) GUARANTEED CHARGES(2)
------------------------------------------ -------------------------------------------
Premiums Premiums
End of Paid During Accumulated Cash Cash
Contract Contract at 5% Interest Surrender Account Death Surrender Account Death
Year Year Per Year Value Value Benefit Value Value Benefit
- ---------- ---------- ----------- ------------- ------------ ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,843 10,335 3,929 6,882 250,000 753 3,706 250,000
2 9,843 21,187 9,975 12,927 250,000 4,069 7,022 250,000
3 9,843 32,582 14,920 17,873 250,000 6,815 9,768 250,000
4 9,843 44,546 19,070 22,023 250,000 8,947 11,900 250,000
5 9,843 57,108 22,699 25,652 250,000 10,397 13,350 250,000
6 9,843 70,299 26,036 28,988 250,000 11,068 14,021 250,000
7 9,843 84,149 29,018 31,970 250,000 10,834 13,787 250,000
8 9,843 98,691 31,998 34,655 250,000 9,821 12,478 250,000
9 9,843 113,961 34,762 37,124 250,000 7,547 9,909 250,000
10 9,843 129,994 37,391 39,360 250,000 3,917 5,885 250,000
11 9,843 146,829 39,672 41,247 250,000 0* 0* 0*
12 9,843 164,506 41,913 43,095 250,000 0* 0* 0*
13 9,843 183,066 43,872 44,659 250,000 0* 0* 0*
14 9,843 202,555 45,475 45,869 250,000 0* 0* 0*
15 9,843 223,018 46,759 46,759 250,000 0* 0* 0*
16 9,843 244,504 43,603 43,603 250,000 0* 0* 0*
17 9,843 267,064 39,184 39,184 250,000 0* 0* 0*
18 9,843 290,752 33,323 33,323 250,000 0* 0* 0*
19 9,843 315,625 25,767 25,767 250,000 0* 0* 0*
20 9,843 341,742 16,175 16,175 250,000 0* 0* 0*
25 9,843 493,267 0* 0* 0* 0* 0* 0*
35 9,843 933,474 0* 0* 0* 0* 0* 0*
</TABLE>
* When the Account Value is $0 or less, the Death Benefit is only payable if
subsequent premiums are paid to keep the policy in force.
(1) Values reflect investment results using current cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
(2) Values reflect investment results using guaranteed cost of insurance rates,
policy fees, and Mortality and Expense Risk Rates.
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 RESULTS MAY BE MORE OR LESS THAN THOSE
SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT
WILL BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RETURN APPLICABLE TO
THE CONTRACT AVERAGES 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATES ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CONTRACT YEARS. THE DEATH BENEFIT, ACCOUNT
VALUE, AND CASH SURRENDER VALUE FOR A CONTRACT WILL ALSO BE DIFFERENT FROM THOSE
SHOWN, DEPENDING ON THE INVESTMENT ALLOCATION MADE TO THE SEPARATE ACCOUNT AND
THE FIXED ACCOUNT AND ALSO THE RATES OF RETURN OF THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
