Columbus Life Flexible Premium
Variable Universal Life Insurance Policy
Columbus Life Insurance Company
Separate Account 1
Prospectus
May 1, 2000
This Prospectus describes the Columbus Life Flexible Premium Variable Universal
Life Insurance Policy (Policy) and the investment options available to Policy
owners. It contains information you should know before purchasing a Policy and
selecting your investment options. Please read this Prospectus carefully and
keep it for future reference.
The Policy is issued by Columbus Life Insurance Company (Columbus Life). The
Policy is an investment alternative that offers you:
o Life insurance protection
o Flexible premium payments
o Flexible benefits
o Optional coverages
o Tax-deferred earnings
o Access to your funds through withdrawals and loans
o 19 investment options
The description of the Policy in this Prospectus is subject to the specific
terms of your Policy as it contains specific contractual provisions and
conditions. If the terms of your Policy differ from the description of the
Policy in the Prospectus, you should rely on the terms in your Policy.
You tell us how to invest your premium payments among the investment options.
Your investment options include the following Sub-Accounts of Separate Account
1:
o AIM V.I. Growth
o AIM V.I. Government Securities
o Alger American Small Capitalization
o Alger American Growth
o Deutsche VIT Equity 500 Index
o MFS VIT Emerging Growth
o MFS VIT Growth with Income
o PIMCO Long-Term U.S. Government
o Touchstone Small Cap Value
o Touchstone Emerging Growth
o Touchstone International Equity
o Touchstone High Yield
o Touchstone Value Plus
o Touchstone Growth & Income
o Touchstone Enhanced 30
o Touchstone Balanced
o Touchstone Bond
o Touchstone Standby Income
The Fixed Account is an additional investment option. It is a fixed-rate option,
backed by the general assets of Columbus Life.
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The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains certain other material that is legally part of the registration
statement for Columbus Life Insurance Company Separate Account 1 (Separate
Account 1) and other information about Separate Account 1. You can also view
these documents at the Public Reference Room of the Securities and Exchange
Commission or obtain copies, for a fee, by writing to the Public Reference Room
of the Securities and Exchange Commission, 450 Fifth Street N.W., Washington,
D.C. 20549. You can also call the Securities and Exchange Commission at
800.SEC.0330.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Policies or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
The Policy is not a deposit or obligation of any bank. No bank has guaranteed or
endorsed the Policy. The Policy is not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, the National Credit Union
Share Insurance Fund or any other agency.
Each Sub-Account invests in a corresponding Fund that may have a name and/or
investment objective that is very similar to the name of a publicly available
mutual fund managed by the same advisor and sub-advisor. The Funds in which the
Sub-Accounts invest are not publicly available and will not have the same
performance as those publicly available mutual funds. Different performance will
result from differences in various factors that affect the operation of a Fund,
such as implementation of the Fund's investment policies, Fund expenses and size
of the Fund. In addition, your investment return from your Policy will be less
than the investment return of a shareholder in the publicly available mutual
funds because you will pay additional charges related to your Policy, such as
premium tax charges and mortality and expense risk charges.
Investments in variable life insurance policies involve investment risk,
including possible loss of principal and interest.
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TABLE OF CONTENTS
POLICY AT A GLANCE ........................................................ 4
SUMMARY ................................................................... 7
PURCHASING YOUR POLICY .................................................... 11
PREMIUM PAYMENTS .......................................................... 13
ALLOCATION OF NET PREMIUMS ................................................ 16
TRANSFERRING YOUR MONEY ................................................... 19
BORROWING YOUR MONEY ...................................................... 22
WITHDRAWING YOUR MONEY .................................................... 24
DEATH BENEFITS ............................................................ 26
PAYMENT OF POLICY PROCEEDS ................................................ 30
CHARGES ................................................................... 34
CONTINUATION OF YOUR POLICY ............................................... 40
RIDERS .................................................................... 43
OTHER INFORMATION ABOUT YOUR POLICY ....................................... 50
INFORMATION ABOUT THE INVESTMENT OPTIONS .................................. 55
VALUATION OF YOUR INVESTMENT .............................................. 66
PERFORMANCE INFORMATION ................................................... 68
VOTING RIGHTS ............................................................. 69
COLUMBUS LIFE INSURANCE COMPANY AND SEPARATE ACCOUNT 1 .................... 70
SERVICE PROVIDERS ......................................................... 75
TAX MATTERS ............................................................... 77
OTHER GENERAL INFORMATION ................................................. 86
SUPPLEMENT A - POLICY ILLUSTRATION ........................................ A-1
SUPPLEMENT B - TABLE OF APPLICABLE DEATH BENEFIT FACTORS .................. B-1
SUPPLEMENT C - TABLE OF COST OF INSURANCE CHARGES ......................... C-1
SUPPLEMENT D - TABLE OF SURRENDER CHARGES ................................. D-1
SUPPLEMENT E - CONTINUATION PROVISIONS .................................... E-1
SUPPLEMENT F - VALUATION PROCEDURES ....................................... F-1
COLUMBUS LIFE INSURANCE COMPANY FINANCIAL STATEMENTS ...................... i
GLOSSARY .................................................................. G-1
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POLICY AT A GLANCE
The following is a snapshot of the Policy. Please refer to the Policy and the
remainder of the Prospectus for further details and other information. See
Supplement A for Illustrations of how various aspects of the Policy and
investment performance can affect your Policy.
PREMIUM PAYMENTS AND WITHDRAWALS
- --------------------------------
Minimum Amounts
Premiums Depends on the Insured's Attained Age, gender
and underwriting class and the Specified
Amount of insurance coverage
Withdrawals $500
INSURANCE BENEFITS
- ------------------
Death Benefits
Option 1 Greater of Specified Amount or the applicable
multiple of your Account Value
Option 2 Greater of Specified Amount plus Account Value
or the applicable multiple of your Account
Value
Minimum Issue Limit
Preferred $100,000
Standard $25,000
Minimum Increase or $25,000, subject to Minimum Issue Limit
Decrease in Coverage restrictions
Riders
Included Rider* Accelerated Death Benefit
Optional Riders Accidental Death
Insured Insurability
Disability Credit
Children's Term
Other Insured
TRANSFERS
- ---------
Number of Free Transfers 12 times between Sub-Accounts per Policy Year;
1 time from the Fixed Account per Policy Year
(25% limitation in the first 4 years) or 1
time to the Fixed Account per Policy Year
(restrictions do not apply to transfers made
under the Dollar Cost Averaging Program)
Minimum Amount of Transfer $250 or the total amount in the Sub-Accounts,
whichever is less
LOANS
- -----
Loan Amount
Minimum None
Maximum 90% of the Cash Surrender Value, less any
Indebtedness and less the next 2 Monthly
Deductions and Monthly Expense Charges
Interest Rate 6.50% (maximum of 8.00%)
* Where permitted by state law.
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POLICY CHARGES AND DEDUCTIONS
- -----------------------------
Percent of Premium Charges
Premium Expense Charges 4.75% (maximum of 5.50%) of premium payments
Tax Charges Varies by state of residence (maximum of 3.50%
of premium payments)
Monthly Deductions from Account Value
Cost of Insurance Charges Depends on the Insured's Attained Age, gender
and underwriting class, and your Specified
Amount, Account Value and death benefit option
Monthly Expense Charges $6.00 (maximum of $7.00)
Rider Charges
Accelerated Death Benefit No charge until advance of funds (and then the
only charge is interest on the advance)
Accidental Death Depends on the Insured's Attained Age and
selected Accidental Death Benefit Amount
Insured Insurability Depends on the Insured's Attained Age and
selected Insured Insurability Option Amount
Disability Credit Depends on the Insured's Attained Age and
selected Credit Amount
Children's Term Depends on selected Children's Term Benefit
Amounts
Other Insured Depends on each Other Insured's Attained Age,
gender and underwriting class and selected
Other Insured Benefit Amounts
Separate Account Charges
Mortality and Expense 0.90% effective annual rate (maximum of 1.00%)
Risk Charge deducted daily from the Accumulation Unit
Value of each Sub-Account
Transaction Charges
Transfer Charges $0 for first 12 transfers among Sub-Accounts
each Policy Year; $10 for each additional
transfer in a Policy Year--deducted from
Account Value at time of transfer
Surrender Charges
Full Surrender Applies during the first 14 years since your
Policy Date or since the date of any increase
in Specified Amount if you surrender your
Policy, or if it terminates at the end of a
Grace Period because no continuation provision
applies and we did not receive sufficient
premium to keep it in effect - the full
surrender charge shown in your most recent
Policy Schedule and in Supplement D to this
prospectus is deducted from Account Value at
time of surrender (maximum of $44.90 per
$1,000 decrease in Specified Amount)
Other Decrease in Applies during the first 14 years since your
Specified Amount (Upon Policy Date or since the date of any increase
Your Request or as a in Specified Amount if you request a decrease
Result of Partial in Specified Amount, or the Specified Amount
Surrender or Withdrawal) decreases as a result of partial surrender or
withdrawal - a pro rata portion of the full
surrender charge shown in your most recent
Policy schedule and in Supplement D to this
prospectus is deducted from Account Value at
time of surrender or withdrawal (maximum of
$44.90 per $1,000 decrease in Specified
Amount), plus a $50 withdrawal fee for your
second and each additional withdrawal in a
Policy Year.
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FUND EXPENSES
- -------------
<TABLE>
<CAPTION>
Total Expenses Total Expenses
Other After Expense Before Expense
Advisor Fees Expenses Reimbursement Reimbursement
------------ -------- ------------- -------------
<S> <C> <C> <C> <C>
AIM Variable Insurance Funds, Inc.
(Advisor--AIM Advisors, Inc.)
AIM V.I. Growth Fund* 0.63% 0.10% 0.73% 0.73%
AIM V.I. Government Securities Fund* 0.50% 0.40% 0.90% 0.90%
The Alger American Fund
(Advisor--Fred Alger Management, Inc.)
Alger American Small Capitalization Portfolio* 0.85% 0.05% 0.90% 0.90%
Alger American Growth Portfolio* 0.75% 0.04% 0.79% 0.79%
Deutsche Asset Management VIT Funds
(Advisor--Bankers Trust Company)
Deutsche VIT Equity 500 Index Fund+ 0.20% 0.10% 0.30% 0.43%(a)
MFS Variable Insurance Trust
(Advisor--Massachusetts Financial Services Company)
MFS VIT Emerging Growth Series* 0.75% 0.09% 0.84% 0.84%(b)
MFS VIT Growth with Income Series* 0.75% 0.13% 0.88% 0.88%(b)
PIMCO Variable Insurance Trust
(Advisor--Pacific Investment Management Company)
PIMCO Long-Term U.S. Government Portfolio* 0.40% 0.25% 0.65% 0.71%(c)
Touchstone Variable Series Trust
(Advisor--Touchstone Advisors, Inc.)
Touchstone Small Cap Value Fund+ 0.80% 0.20% 1.00% 2.03%(d)
Touchstone Emerging Growth Fund* 0.80% 0.35% 1.15% 1.42%(d)
Touchstone International Equity Fund* 0.95% 0.30% 1.25% 1.84%(d)
Touchstone High Yield Fund+ 0.60% 0.20% 0.80% 1.53%(d)
Touchstone Value Plus Fund* 0.75% 0.40% 1.15% 2.37%(d)
Touchstone Growth & Income Fund+ 0.80% 0.05% 0.85% 1.28%(d)
Touchstone Enhanced 30 Fund+ 0.65% 0.10% 0.75% 1.77%(d)
Touchstone Balanced Fund* 0.80% 0.10% 0.90% 1.35%(d)
Touchstone Bond Fund+ 0.55% 0.20% 0.75% 1.07%(d)
Touchstone Standby Income Fund* 0.25% 0.25% 0.50% 0.87%(d)
</TABLE>
* The fee and expense figures shown for the Fund are based on amounts
incurred during the fiscal year ended December 31, 1999.
+ Since the Touchstone Growth & Income Fund, the Touchstone Bond Fund, the
Touchstone Small Cap Value Fund, the Touchstone High Yield Fund and the
Touchstone Enhanced 30 Fund commenced operations in 1999, expenses for
these funds are based on estimates.
(a) Bankers Trust Company has agreed to waive its advisory fee and to
reimburse the Deutsche VIT Equity 500 Index Fund so that the Fund's total
operating expenses will not exceed 0.30%.
(b) The custodian for each of the MFS Funds has agreed to an expense offset
arrangement if expenses reach a certain level. The MFS Funds may also have
other agreements that reduce the expenses actually paid by the MFS Funds.
For example, prior to October 2, 1998, Massachusetts Financial Services
Company had agreed to waive certain fees or reimburse the MFS Growth with
Income Series so that its expenses did not exceed a specified level.
(c) Pacific Investment Management Company has agreed to reduce its
administrative fee, subject to potential future reimbursement, to the
extent that the total expenses of the PIMCO Long-Term U.S. Government
Portfolio would exceed 0.65%.
(d) During 1999, fee waiver and expense reimbursement arrangements had the
effect of reducing expenses actually paid by each Touchstone Fund.
Touchstone Advisors, Inc. has agreed to waive certain fees or reimburse
each Touchstone Fund so that the Fund's total expenses do not exceed the
percentage set forth in the "Total Expenses After Expense Reimbursement"
column for the Fund. These agreements will remain in place until at least
December 31, 2000.
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SUMMARY
This summary answers some basic questions about the Policy. Because this is a
summary, please read the Policy and the remainder of the Prospectus for more
details and other information. If the terms of your Policy differ from the
description of the Policy in this Prospectus, you should rely on the terms of
your Policy.
What Kind of Life Insurance is the Policy?
The Policy is a flexible premium, variable universal life insurance policy. The
Policy is called "flexible premium" because you can change the amount and
frequency of your premium payments, within certain limits. The Policy is called
"variable" life insurance because your Cash Surrender Value and your Death
Benefit can vary because your Account Value will vary.
Can I Obtain Personalized Illustrations Demonstrating How the Policy Might Work?
Yes, we will furnish, upon request and free of charge, a personalized
illustration reflecting the proposed Insured's Attained Age, gender and
underwriting class. We may charge a reasonable fee for additional illustrations.
How Do I Purchase a Policy?
You can apply for a Policy by contacting your insurance agent. We will not issue
a Policy that insures a person who does not meet our underwriting standards. We
will also not issue a Policy that insures a person who will be over 85 years of
age on the date the Policy is issued. Insurance coverage under your Policy
begins on the effective date of your Policy.
How Much Life Insurance Can I Purchase?
The minimum amount of life insurance you must purchase depends on which premium
classification applies to your application. If you qualify for our "preferred"
premium classification, the minimum amount of insurance you must purchase is
$100,000; otherwise it is $25,000. We call this minimum amount of insurance the
"Minimum Issue Limit."
We call the amount of insurance that you request the "Specified Amount."
You can request a change to your Specified Amount at any time after the first
Policy Year. We must approve each request. You cannot decrease your Specified
Amount below your Minimum Issue Limit. Surrender charges may apply to decreases
in your Specified Amount.
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What Insurance Protection Does the Policy Offer?
The Policy provides life insurance on the Insured. We will pay the Beneficiary
the Death Proceeds when the Insured dies. The Death Proceeds include the Death
Benefit under the Policy plus any insurance provided by riders to the Policy.
The Death Benefit will never be lower than your Specified Amount less any
Indebtedness. Depending on the Insured's age and your Account Value, the Death
Benefit could be higher than your Specified Amount. The amount of the Death
Benefit also depends on the death benefit option you selected. We offer 2 death
benefit options--Option 1 and Option 2.
Option 1 emphasizes the potential growth of your Account Value. If you select
Option 1, any increase in your Account Value will decrease the risk to us
relative to the death benefit we must pay when the Insured dies and will
decrease your cost of insurance.
Option 2 emphasizes the potential growth of your Death Benefit. If you select
Option 2, any increase in your Account Value will increase the amount of your
Death Benefit. Your cost of insurance will be higher under Option 2.
How Much are the Premium Payments?
When you purchase your Policy, you tell us how much you plan to pay and how
often you plan to pay. This is called your Planned Premium. The amount and
frequency of your Planned Premium is shown in your Policy Schedule. Generally,
you would continue to make Planned Premium payments until the Insured reaches
100 years of age or dies.
You are not required to make premium payments in set amounts or on a set
schedule. You may skip a Planned Premium payment and you may change the amount
and frequency of your Planned Premium. You must use this flexibility responsibly
to ensure that your insurance coverage continues. You may need to increase your
Planned Premium or make additional premium payments to keep your Policy in
force.
What Charges Will I Pay Under the Policy?
We assess charges to support the operation of your Policy and Separate Account
1, such as cost of insurance charges, rider charges, Monthly Expense Charges,
premium expense charges, tax charges and mortality and expense risk charges. In
addition, we assess administrative fees for processing withdrawals and certain
transfers among the Sub-Accounts and surrender charges on withdrawals made in
the first 14 years of the Policy or within 14 years following an increase in
your Specified Amount. Some charges are subtracted from your premium payments,
others reduce your Account Value or the Accumulation Unit Value.
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What Factors Affect My Cost of Insurance Charges?
Your cost of insurance charges will depend on the Insured's age, gender and
underwriting class, your Account Value, your Indebtedness and the death benefit
option you select. The underwriting class depends on Insured's health, whether
the Insured uses tobacco and other factors that we use to determine the
insurability of the Insured. The maximum monthly cost of insurance charges will
never exceed the guaranteed monthly cost of insurance rates as shown in your
Policy Schedule.
What are My Investment Options?
You have 19 investment options for your Net Premiums. You may allocate your Net
Premiums among the 18 available Sub-Accounts of Separate Account 1 and the Fixed
Account. Each Sub-Account invests exclusively in a corresponding Fund of AIM
Variable Insurance Funds, Inc. (AIM), The Alger American Fund (Alger), Deutsche
Asset Management VIT Funds (Deutsche), MFS Variable Insurance Trust (MFS), PIMCO
Variable Insurance Trust (PIMCO) or Touchstone Variable Series Trust
(Touchstone). The Sub-Accounts provide an opportunity for a higher rate of
return than the Fixed Account but also expose you to a higher risk of losing
money. The Fixed Account provides a guaranteed minimum rate of return.
How Do I Allocate My Net Premiums Among Investment Options?
You allocate your Net Premiums by specifying on your application the percentage
of your Net Premiums you would like us to allocate to each investment option.
You may change your allocation instructions at any time by notifying us either
by telephone or in writing. When we receive a premium payment from you, we
allocate the Net Premiums based on the most recent allocation instructions we
have received from you.
How Will My Account Value Vary?
Your Account Value will vary on a daily basis to reflect the investment
experience of the Sub-Accounts. Your Account Value will also reflect the amount
and frequency of premium payments, any withdrawals, any Indebtedness and charges
and deductions connected with your Policy. There is no guaranteed minimum
Account Value, which means that you bear the entire investment risk that your
Account Value could fall to zero.
Can I Transfer My Account Value Among Investment Options?
Yes, you can transfer your Account Value among the Sub-Accounts up to 12 times
per Policy Year without charge. We will charge you $10 for each additional
transfer you make among the Sub-Accounts in a Policy Year. You are also
permitted to make 1 transfer to the Fixed Account or 1 transfer from the Fixed
Account per Policy Year without charge. In the first 4 Policy Years, you cannot
transfer more than 25% of your money from the Fixed Account in a Policy Year.
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How Do I Access My Account Value?
Generally, you can withdraw from your Policy part or all of your Account Value,
less any applicable withdrawal fees and surrender charges, and less any
Indebtedness. We generally assess a surrender charge for each partial or full
withdrawal. Partial withdrawals and related withdrawal fees and surrender
charges will reduce your Account Value. Depending upon your Account Value and
death benefit option, partial withdrawals and surrender charges may also reduce
your Specified Amount. A full surrender will terminate your Policy. A partial
withdrawal or surrender may also have tax consequences.
Can I Borrow Against My Policy?
Yes, you can borrow money from us by using your Policy as the sole collateral
for the loan. The most you can borrow against your Policy is 90% of your Cash
Surrender Value, less any Indebtedness and less an amount sufficient to cover
the next 2 Monthly Deductions and Monthly Expense Charges. The maximum interest
rate we charge on loans is 8.00%. A loan, whether repaid or not, will have a
permanent negative effect on the Death Benefit and Account Value of your Policy.
What Will Cause the Policy to Lapse Without Value?
You Policy will lapse if your Net Cash Surrender Value is insufficient to pay
the Monthly Expense Charge and Monthly Deduction and none of the continuation
provisions applies and we do not receive sufficient premium payment during the
Grace Period. If your Policy lapses, you will not receive any money from us
because Net Cash Surrender Value will have been reduced to zero.
Will My Death Benefit and Account Value be Taxed?
The Policy is intended to meet the definition of a "life insurance contract"
under federal tax law. Therefore, the Death Proceeds should be fully excludable
from the Beneficiary's gross income. In addition, any earnings on your
investment in the Sub-Accounts should not be taxable to you while the Policy is
in effect unless you withdraw some or all of your Account Value. Under certain
circumstances, a loan may be treated as taxable income. We do not intend this
discussion to be tax advice. You should consult with your own tax advisor before
purchasing a Policy.
Do I Have a "Free Look" Right to Examine the Policy?
Yes, you may cancel the Policy within 10 days after receiving it, or such longer
period as state law may require. If you cancel the Policy during the free look
period, we generally will refund to you (1) the amount of your Net Premiums
allocated to the Fixed Account, plus (2) the value of your investments in the
Sub-Accounts as calculated on the date your notice of cancellation is received
by us or your insurance agent, plus (3) any charges.
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PURCHASING YOUR POLICY
To obtain an application to purchase a Policy, please contact your insurance
agent.
Eligible Purchasers
You can apply for a Policy if:
o You live in a state where we can issue a Policy.
o You are of legal age.
Your application will be processed through our underwriting process, which may
require the proposed Insured to have a medical exam. Any premium payment
received by us from you before we have completed the underwriting process will
be held by us in escrow. After we complete the underwriting process, we will
notify you of our decision regarding your application. If we approve your
application, the insurance coverage provided by your Policy will begin on the
effective date of your Policy. The effective date of your Policy will be the
later of
o The date we complete the underwriting process and approve your
application; or
o The date we receive the required minimum initial premium payment.
We will allocate your initial Net Premiums to your selected investment options
on the effective date of your Policy. We will send you a confirmation statement
indicating that your initial Net Premiums have been allocated and your Policy is
effective.
Even if you live in a state where we can issue a Policy, we will not issue a
Policy that insures a person who will be over 85 years of age on the date the
Policy is issued. We will also not issue a Policy that insures a person who does
not meet our underwriting standards. If we do not issue a Policy to you, we will
return any premium payments made by you and received by us.
Specified Amount and Minimum Issue Limit
If you meet our underwriting standards, you may purchase a Policy with a
Specified Amount as low as the Minimum Issue Limit. The Minimum Issue Limit
depends on the premium classification used and is shown on your Policy Schedule.
If you purchase a Policy with a Specified Amount equal to or near the Minimum
Issue Limit, you might not be able to
o Make partial withdrawals
o Reduce your Specified Amount
o Change your Death Benefit option
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You should consider these limitations before you purchase a Policy with a
Specified Amount at or near the Minimum Issue Limit. You should discuss the
Specified Amount for your Policy with your insurance agent before purchasing a
Policy.
10-Day Review Period
You have 10 days to review your Policy after you receive it. This 10-day review
period is called the free look period. The state where you live may require us
to give you a longer free look period.
If you are not satisfied with the Policy, you can cancel it during the free look
period. To cancel your Policy, you must return it either to us at Columbus Life
Variable Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850, or to the
insurance agent who sold you the Policy within 10 days after you receive it. If
you cancel the Policy during the free look period, we will refund to you:
o The amount of your Net Premiums allocated to the Fixed Account, plus
o The value of your investments in the Sub-Accounts as calculated on
the date your notice of cancellation is received by us or your
insurance agent, plus
o Any charges.
However, some state laws may require us to refund your total premium payments.
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PREMIUM PAYMENTS
Premium payments are payments that you make to purchase and maintain your
Policy. You can vary the amount and frequency of your premium payments. The
amount and frequency of your premium payments will affect your Account Value and
the duration of insurance coverage under your Policy. We reserve the right to
reject any premium payment if, in our opinion, accepting the payment would mean
the Policy would not qualify as life insurance under federal tax laws.
Your initial premium payment must equal at least 1/12th of the applicable
minimum annual premium. Your initial premium payment may be given to your
insurance agent. You should send your subsequent premium payments to the
Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati, Ohio
45201-2850.
Generally each premium payment must be at least $50.
You can make premium payments through automatic or scheduled installment
payments, such as pre-authorized checking account deductions. If you use one of
these methods to make premium payments, we will accept premium payments in
amounts less than $50.
Federal tax law may limit your ability to make certain large premium payments.
We will monitor your premium payments to be sure that you do not exceed the
permitted amounts or inadvertently incur any tax penalties due to excess premium
payments.
Planned Premium
When you purchase your Policy, you tell us how much you plan to pay and how
often you plan to pay. This is called your Planned Premium. The amount and
frequency of your Planned Premium is shown in your Policy Schedule. Generally,
you would continue to make Planned Premium payments until the Policy Anniversary
after the Insured reaches 100 years of age or dies. You are not required to make
a Planned Premium payment, but making Planned Premium payments increases the
likelihood that your insurance coverage under the Policy will continue.
You are not required to make premium payments in set amounts or on a set
schedule. You may find this flexibility attractive, but you are responsible for
making sufficient premium payments to ensure that your Policy continues.
Generally, your Policy continues so long as your Net Cash Surrender Value is
equal to or more than the Monthly Deduction plus the Monthly Expense Charge.
Your Net Cash Surrender Value will fluctuate depending on various factors
including the amount of your premium payments. Making Planned Premium payments
increases the likelihood that your Net Cash Surrender Value will be sufficient
to continue your Policy. If you skip a Planned Premium payment or you stop
making Planned Premium payments, it is more likely that your Net Cash Surrender
Value will be insufficient to continue your Policy.
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Making Planned Premium payments does not guarantee that your Policy will
continue. Because your Net Cash Surrender Value is affected by other factors,
such as the investment return of your Policy, the charges related to your
Policy, and the amount of loans and withdrawals you have made, your Planned
Premium payments may not be enough to keep your Policy in force. You may need to
increase your Planned Premium or make additional premium payments to keep your
Policy in force. We will monitor your Policy and notify you if your Net Cash
Surrender Value is no longer sufficient to maintain your Policy. Also, each year
we will send you a report that includes a projection, which is based upon
certain assumptions, that will indicate whether or not your Planned Premium is
likely to be sufficient to keep your Policy in force for the upcoming year.
An illustration is a useful tool for estimating, by assuming one or more
hypothetical investment returns, whether a given Planned Premium is likely to
achieve the goals you have set for your Policy. An illustration is available
upon request and free of charge.
More information about the continuation of your Policy, including certain
provisions of your Policy that guarantee continued coverage for a specific
period of time, is located on page 40 of this Prospectus.
Changing Your Planned Premium
Planned Premium Changes by Phone. You can change the amount or frequency of your
Planned Premium over the phone by following these steps:
Step 1: Fill out either the telephone authorization part of the application or a
Telephone Access Authorization Form. You can get a copy of this form by
contacting the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850. You must complete and return one of these telephone
authorizations before you call to change your Planned Premium.
Step 2: Call the Columbus Life Variable Service Center at 800.677.9595 between
8:00 a.m. and 4:00 p.m. Eastern Time.
Give the representative the following information:
o Your Social Security number
o Your Policy number or other precise information that identifies your
Policy
o Your new Planned Premium information
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Planned Premium Changes in Writing. You can also change the amount or frequency
of your Planned Premium by writing to the Columbus Life Variable Service Center,
P.O. Box 2850, Cincinnati, Ohio 45201-2850. Your written instructions must
include the following information:
o Your Policy number or other precise information that identifies your
Policy
o Your new Planned Premium information
o Your signature
Skipping Planned Premium Payments
You can skip Planned Premium payments and your Policy will continue to be
effective if the Net Cash Surrender Value of your Policy is sufficient to pay
the Monthly Deduction and the Monthly Expense Charge on the next Monthly
Anniversary Day or one of the continuation provisions described on page 40 is
applicable. If not, your Policy may terminate.
Investor Alert
o Your Net Cash Surrender Value is affected by various factors,
including the investment performance of the investment options you
select. Therefore, it is possible that, due to poor investment
performance, your Net Cash Surrender Value will not be sufficient to
continue coverage under your Policy even if you have paid your
Planned Premiums.
o Skipped premium payments, withdrawals and loans will reduce your Net
Cash Surrender Value and may prevent you from meeting the conditions
required to continue coverage under your Policy.
o Because of the relative size of the minimum annual premium for the
Term No-Lapse Guarantee and the surrender charge, your Net Cash
Surrender Value will likely be zero for at least 10 years if you pay
only that minimum annual premium. In addition, you may have to make
an additional premium payment at the end of the first 10 years in
order to continue coverage under your Policy. If you can only make
the minimum annual premium payments, this type of policy may not be
appropriate for you.
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ALLOCATION OF NET PREMIUMS
Investment Options
You decide how to allocate your Net Premiums by selecting from the following
investment options:
Sub-Accounts
o AIM V.I. Growth
o AIM V.I. Government Securities
o Alger American Small Capitalization
o Alger American Growth
o Deutsche VIT Equity 500 Index
o MFS VIT Emerging Growth
o MFS VIT Growth with Income
o PIMCO Long-Term U.S. Government
o Touchstone Small Cap Value
o Touchstone Emerging Growth
o Touchstone International Equity
o Touchstone High Yield
o Touchstone Value Plus
o Touchstone Growth & Income
o Touchstone Enhanced 30
o Touchstone Balanced
o Touchstone Bond
o Touchstone Standby Income
Fixed Account
- --------------------------------------------------------------------------------
You should review your selected investment options and allocations
periodically to determine if they are appropriate considering market
conditions and your financial objectives.
- --------------------------------------------------------------------------------
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<PAGE>
Allocation of Net Premiums
Your initial allocation instructions are included in your application and are
shown in your Policy Schedule. You can change your allocation instructions by
contacting us either by phone or in writing. After we receive a premium payment
from you, we allocate your Net Premiums based on the most recent allocation
instructions we have received from you.
The following guidelines apply to the allocation of your Net Premiums:
o Allocate at least 1% of your Net Premiums to each investment option
you choose.
o Use whole percentages. For example, you can allocate 33% or 34% to
an investment option, not 33 1/3%.
o Make sure your percentages total 100%.
Allocation Changes by Phone. You can change the allocation of your future Net
Premiums over the phone by following these steps:
Step 1: Fill out either the telephone authorization part of the application or a
Telephone Access Authorization Form. You can get a copy of this form by
contacting the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850. You must complete and return one of these telephone
authorizations before you call to change your allocations over the phone.
Step 2: Call the Columbus Life Variable Service Center at 800.677.9595 between
8:00 a.m. and 4:00 p.m. Eastern Time.
Give the representative the following information:
o Your Social Security number
o Your Policy number or other precise information that identifies your
Policy
o Your allocation instructions
Allocation Changes in Writing. You can also change the allocation of your future
Net Premiums by writing to the Columbus Life Variable Service Center, P.O. Box
2850, Cincinnati, Ohio 45201-2850. Your written instructions must include the
following information:
o Your Policy number or other precise information that identifies your
Policy
o Your allocation instructions
o Your signature
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<PAGE>
Third Party Authorization. You can authorize a third party to allocate your Net
Premiums. To do so, you must complete the appropriate authorization forms.
Contact the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850 at 800.677.9595 for additional information.
Investor Alert
o There is no guaranteed minimum value for amounts allocated to the
Sub-Accounts. This means that you bear the entire investment risk
that your investment in a Sub-Account could fall to zero.
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<PAGE>
TRANSFERRING YOUR MONEY
After your free look period, you can transfer money from one investment option
to another. You can make transfers by phone or in writing.
The following guidelines apply to transfers other than dollar cost averaging
transfers:
o Each transfer must be at least $250 or the total value of the
Sub-Accounts, if less than $250.
o The allocation to each investment option must be at least 1% of the
total transfer amount.
o You can transfer money among the Sub-Accounts up to 12 times in a
Policy Year without a charge. You will be charged $10 per transfer
for each additional transfer in a Policy Year.
o You can transfer from the Fixed Account or to the Fixed Account only
once each Policy Year.
o During the first 4 Policy Years, you can transfer up to 25% of
your money from the Fixed Account in a Policy Year. After your
4th Policy Year, you can transfer all of your money from the
Fixed Account at any time.
o You can transfer an unlimited amount to the Fixed Account.
All transfers requested on the same day will be considered a single transfer for
purposes of these guidelines and charges.
Transfers by Phone. You can transfer your money by calling us and following
these steps:
Step 1: Fill out either the telephone authorization part of the application or a
Telephone Access Authorization Form. You can get a copy of this form by
contacting the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850. You must complete and return one of these telephone
authorizations before you call to transfer your money.
Step 2: Call the Columbus Life Variable Service Center at 800.677.9595 between
8:00 a.m. and 4:00 p.m. Eastern Time.
Give the representative the following information:
o Your Social Security number
o Your Policy number or other precise information that identifies your
Policy
o Your transfer instructions
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<PAGE>
Transfers in Writing. You can also transfer your money by writing to the
Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati, Ohio
45201-2850. Your written instructions must include the following information:
o Your Policy number or other precise information that identifies your
Policy
o Your transfer instructions
o Your signature
Third Party Authorization. You can authorize a third party to transfer your
money for you. To do so, you must complete the appropriate authorization forms.
Contact the Columbus Life Variable Service Center, P.O. Box 2850, Cincinnati,
Ohio 45201-2850 at 800.677.9595 for additional information.
Dollar Cost Averaging Program
Dollar cost averaging is a method of investing equal amounts of money at regular
intervals. Dollar cost averaging allows you to purchase more when prices are low
and less when prices are high. For dollar cost averaging to be effective, you
should continue to invest during both market ups and downs. You should also
consider your financial ability to maintain a consistent level of investment
over time.
The Dollar Cost Averaging Program allows you to transfer amounts at regular
intervals from the Touchstone Standby Income Sub-Account or the Fixed Account to
the other Sub-Accounts. You can make the following transfers:
o A specific dollar amount
o A specific percentage of your money in the Touchstone Standby Income
Sub-Account or the Fixed Account
o Earnings in the Touchstone Standby Income Sub-Account or the Fixed
Account
You select the number and frequency of your transfers in the Dollar Cost
Averaging Program. We will transfer the money on your Monthly Anniversary Day.
The following guidelines apply to dollar cost averaging transfers:
o Dollar cost averaging transfers must continue for at least 12
months.
o Each transfer must be at least $100.
o The allocation to each Sub-Account must be at least 1% of the
transfer amount.
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<PAGE>
To set up dollar cost averaging transfers, contact the Columbus Life Variable
Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850 at 800.677.9595. We
currently do not charge a fee for this service. However, we may charge a fee in
the future for your transfers in the Dollar Cost Averaging Program.
Dollar cost averaging transfers will stop if we complete the number of transfers
you requested, you ask us to stop after using the program for 12 months, you do
not have enough money in your accounts to complete the transfer, or we
discontinue the program. If we discontinue the program, you will be allowed to
complete the number of transfers you previously requested.
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<PAGE>
BORROWING YOUR MONEY
Your Policy is designed to provide insurance coverage and to help you achieve
your long-term financial goals. However, there may be times when you need to
borrow money against your Policy.
Loans
You can borrow money against your Policy. We calculate the maximum loan amount
using the following procedure:
o We determine 90% of your Cash Surrender Value.
o We subtract any outstanding Indebtedness.
o We determine and subtract the next 2 Monthly Deductions and Monthly
Expense Charges.
Collateral for Loans
If you borrow money against your Policy, we will transfer the same amount of
money to your Loan Account. The money in your Loan Account is collateral for
your loan. We transfer money on a pro-rata basis from each of your investment
options. For example, if you have 25% of your money in the Touchstone High Yield
Sub-Account and 75% of your money in the Touchstone Balanced Sub-Account and you
borrow $2,000, we will transfer $500 from the Touchstone High Yield Sub-Account
(25% of $2,000) and $1,500 from the Touchstone Balanced Sub-Account (75% of
$2,000) to your Loan Account.
We pay interest on your Loan Account. The minimum interest we currently pay is
3.00% annually. Each month we transfer the interest on your Loan Account back to
your investment options on a pro-rata basis according to your current allocation
instructions at that time.
Interest on Borrowed Amounts
We charge interest on the amounts you borrow at the current rate shown in your
Policy Schedule. We may change the interest rate at any time, but the interest
rate will never be greater than the maximum interest rate that is listed in your
Policy Schedule.
Interest is due on each Policy Anniversary and on the date the loan is repaid.
If you do not pay the interest when it is due, we will treat it as an additional
loan and transfer it on a pro-rata basis from each of your investment options to
the Loan Account.
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<PAGE>
Investor Alert
Any loan, even if you repay the loan, will generally have a permanent negative
effect on the Death Benefit and Account Value because:
o Loan amounts will not be available for investment in the
Sub-Accounts or Fixed Account.
o Interest charged on borrowed amounts may be treated as an additional
loan.
o Outstanding Indebtedness is subtracted to determine your Death
Benefit.
Loan Repayments
You can repay all or part of your loan at any time while the Insured is living.
When you make a payment towards the principal amount of your loan, we transfer
the amount of the loan payment from your Loan Account back to your investment
options on a pro-rata basis according to your allocation instructions at that
time.
If you do not repay the loan before the Insured dies, we will deduct the
Indebtedness when determining your Death Benefit. If you do not repay the loan
before you surrender your Policy, we will deduct the Indebtedness to determine
the Net Cash Surrender Value proceeds.
Cancellation Based on Indebtedness
If the Indebtedness exceeds the Cash Surrender Value less the Monthly Deduction
and Monthly Expense Charge for the current month, we can terminate your Policy.
We will tell you that we intend to terminate your Policy by mailing a notice to
you at least 31 days before we terminate your Policy. This notice will tell you
the minimum amount that you must pay to keep your Policy in effect. We will mail
the notice to your address as shown on our records. If our records indicate that
someone holds your Policy as collateral, we will also mail a copy of the notice
to that person's address as shown on our records.
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<PAGE>
WITHDRAWING YOUR MONEY
There may be times when you need to withdraw money from your Policy. If you
withdraw money from your Policy or cancel your Policy, you may have to pay a
surrender charge. Surrender charges are explained on page 36.
Partial Withdrawals
After you have owned your Policy for one year, you may withdraw a portion of
your money from your Policy by sending written instructions to the Columbus Life
Variable Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850. For help
with a partial withdrawal, please call the Columbus Life Variable Service Center
at 800.677.9595.
The following guidelines apply to partial withdrawals:
o You must include your Policy number or other information that
identifies your Policy and the amount to be withdrawn in your
instructions.
o Each withdrawal must be at least $500.
o No partial withdrawal may be made that would reduce your Net Cash
Surrender Value below $250.
o You will generally pay a surrender charge for each partial
withdrawal you make.
o You can make one withdrawal in a Policy Year without paying a
withdrawal fee. You will be charged a fee of $50 per withdrawal for
each additional withdrawal in that Policy Year.
o If you have death benefit Option 1, each partial withdrawal will
generally reduce your Specified Amount by the amount withdrawn plus
any withdrawal fees and surrender charges.
o The amount of your partial withdrawal may be limited because your
Specified Amount cannot be reduced to less than the Minimum Issue
Limit by a partial withdrawal. As a result, if your Specified Amount
is equal to the Minimum Issue Limit for your Policy, you will not be
able to make partial withdrawals.
Processing Withdrawals
When we process your partial withdrawal, we will deduct the amount withdrawn
plus any withdrawal fees and surrender charges from your Account Value. We
withdraw money from each of your investment options on a pro-rata basis.
Canceling Your Policy
You can cancel your Policy at any time. When you cancel your Policy, we pay you
the Net Cash Surrender Value. This payment terminates your Policy and our
obligations under the Policy.
24
<PAGE>
The Net Cash Surrender Value will equal your Account Value, less any
Indebtedness and any applicable surrender charge. Because investment
performance, Monthly Deductions and Monthly Expense Charges affect your Account
Value, loan activity affects your Indebtedness and surrender charges may apply,
the Net Cash Surrender Value may be much less than the total of your premium
payments.
To cancel your Policy, send written instructions to the Columbus Life Variable
Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850. Include your Policy
number or other information that identifies your Policy and your signature in
your instructions. For assistance, please call the Columbus Life Variable
Service Center at 800.677.9595.
Payment of Withdrawals
We will generally send payments to you within 7 days of the date that we process
your request. We may delay calculating the amount of the payment from a
Sub-Account or sending a payment from a Sub-Account for any of the following
reasons:
o You have made a premium payment by a check that has not cleared the
banking system.
o The New York Stock Exchange is closed on a day that it normally
would be open.
o Trading on the New York Stock Exchange is restricted.
o Because of an emergency, it is not reasonably practicable for the
Sub-Accounts to sell securities or to fairly determine the value of
their investments.
o The Securities and Exchange Commission permits us to postpone
payments from the Sub-Accounts for your protection.
As required by most states, we reserve the right to delay payments from the
Fixed Account for up to 6 months. We do not expect to delay payments from the
Fixed Account and we will notify you if there will be a delay.
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<PAGE>
DEATH BENEFITS
Death Benefit Options
Your Death Benefit depends on the death benefit option you select. When you
complete your application, you select one of 2 death benefit options (Option 1
or Option 2).
Option 1
What Your Beneficiary Receives
The Death Benefit will equal the greater of the following amounts:
o The Specified Amount, less any Indebtedness
o The Account Value multiplied by the Applicable Death Benefit Factor
(see Supplement B), less any Indebtedness
We calculate these amounts as of the date of the Insured's death.
Why Select This Option
Option 1 emphasizes the potential growth of your Account Value. Under
Option 1, any increase in your Account Value will decrease the risk to us
relative to the Death Benefit we must pay when the Insured dies. As a
result, all other things being equal, you will pay less in cost of
insurance charges under Option 1 for the same Specified Amount. These
lower charges may allow your Account Value to grow faster.
Example
Facts:
o The Insured is less than 40 years old (Applicable Death Benefit
Factor = 2.50).
o Your Policy's Specified Amount is $100,000.
o You have never borrowed money from your Policy.
o Your Account Value is $25,000.
Under Option 1, your Death Benefit would be the greater of $100,000 and
$62,500 ($25,000 multiplied by 2.50). Therefore, your Death Benefit would
be $100,000.
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<PAGE>
Option 2
What Your Beneficiary Receives
The Death Benefit will equal the greater of the following amounts:
o The Specified Amount plus the Account Value, less any Indebtedness
o The Account Value multiplied by the Applicable Death Benefit Factor
(see Supplement B), less any Indebtedness
We calculate these amounts as of the date of the Insured's death.
Why Select This Option
Option 2 emphasizes the potential growth of your Death Benefit. Under
Option 2, any increase in your Account Value will increase the amount of
your Death Benefit. As a result, your Death Benefit under Option 2 will
generally be greater than that under Option 1 for the same Specified
Amount. However, you will pay more in cost of insurance charges under
Option 2 for the same Specified Amount than you would under Option 1.
Example
Facts:
o The Insured is less than 40 years old (Applicable Death Benefit
Factor = 2.50).
o Your Policy's Specified Amount is $100,000.
o You have never borrowed money from your Policy.
o Your Account Value is $25,000.
Under Option 2, your Death Benefit would be the greater of $125,000
($100,000 plus $25,000) and $62,500 ($25,000 multiplied by 2.50).
Therefore, your Death Benefit would be $125,000.
Changing Your Death Benefit Option
After you have owned your Policy for one year, you may change your death benefit
option by sending written notice to the Columbus Life Variable Service Center,
P.O. Box 2850, Cincinnati, Ohio 45201-2850. If you change your death benefit
option, your Specified Amount will also change unless you elect to keep the same
Specified Amount. The change in your Specified Amount insures that your Death
Benefit immediately after you change your death benefit option is the same as
your Death Benefit immediately before you change your death benefit option.
Also, a change in death benefit option will generally affect your cost of
insurance charges. However, you will not pay any surrender charges solely
because of a change
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<PAGE>
in your death benefit option. If you change your death benefit option, we will
automatically make any other changes necessary to preserve the status of the
Policy as life insurance under the federal tax laws.
We must approve any changes in your death benefit option. Changes in your death
benefit option are effective on the first Monthly Anniversary Day after we
approve your request. We will send you an amended Policy Schedule showing both
new minimum annual premiums and schedule of surrender charges applicable to your
Policy.
Changing from Option 1 to Option 2
If you change from Option 1 to Option 2, your previous Specified Amount
will be reduced by your Account Value at the time of the change. We will
not allow this change if it causes the new Specified Amount to fall below
the Minimum Issue Limit shown on your Policy Schedule.
If you elect to keep the same Specified Amount as before, you must provide
us with proof of insurability satisfactory to us.
Changing from Option 2 to Option 1
If you change from Option 2 to Option 1, your previous Specified Amount
will be increased by your Account Value at the time of the change.
Changing Your Specified Amount
After you have owned your Policy for one year, you may change your Specified
Amount by sending a written request to the Columbus Life Variable Service
Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850. You may change the Specified
Amount of your Policy without changing your death benefit option. The Specified
Amount must be increased or decreased by at least $25,000.
We must approve any changes in your Specified Amount. Changes in your Specified
Amount are effective on the first Monthly Anniversary Day after we approve your
request. We will send you an amended Policy Schedule showing both new minimum
annual premiums and schedule of surrender charges applicable to your Policy.
Increasing the Specified Amount
If the Insured's Attained Age is 75 or less, you may apply for any
increase in your Specified Amount on a supplemental application. Before
the increase is effective, we will require proof of insurability
satisfactory to us. Any approved increase will be effective as of the date
shown on the amended Policy Schedule.
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<PAGE>
Decreasing the Specified Amount
Only your written request is needed to decrease your Specified Amount.
However, you may not decrease your Specified Amount below the Minimum
Issue Limit shown on your Policy Schedule. We may also limit the amount of
the decrease in order to preserve the tax status of your Policy as life
insurance.
A decrease in your Specified Amount will be applied in the following
order:
(1) We will reduce the most recent increase in your Specified Amount, if
any.
(2) We will then reduce the next most recent increase in your Specified
Amount, if any.
(3) We will continue reducing any increases in your Specified Amount
until it has been reduced to your initial Specified Amount.
(4) Finally, any remaining decreases will reduce your initial Specified
Amount.
Charges for Changing Specified Amount
You will generally be charged a surrender charge any time you decrease your
Specified Amount. However, even though it may cause a decrease in your Specified
Amount, you will not be charged a surrender charge solely for changing your
death benefit option from Option 1 to Option 2.
The amount of your surrender charge will depend on the amount of the decrease in
Specified Amount, the number of years since the issuance of your Policy, whether
or not your Specified Amount has previously changed and when previous changes in
your Specified Amount occurred. If you are charged a surrender charge, the
applicable surrender charge will be deducted from your Account Value on the
effective date of the decrease.
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<PAGE>
PAYMENT OF POLICY PROCEEDS
Policy Proceeds
We will pay the proceeds of this Policy in a lump sum or under one of the
Income Plans. We will generally pay one of 2 types of proceeds--Death Proceeds
or Net Cash Surrender Value proceeds. Proceeds applied under one of the Income
Plans no longer vary with the investment experience of the Sub-Accounts.
Net Cash
Proceeds Death Proceeds Surrender Value
--------------- ---------------
When Paid? o Upon the death of the Insured. o Upon any cancellation
of the Policy during the
lifetime of the Insured.
Who Receives o The Beneficiaries receive the o You receive the payments.
Payments or payments.
Who are o If there are no surviving
the Payees? Beneficiaries, the Contingent
Beneficiaries who are still
alive receive the payments.
o If there are no surviving
Beneficiaries or Contingent
Beneficiaries, you or your
estate receive the payments.
Amount of o The proceeds equal your Death o The proceeds equal your
Proceeds? Benefit plus any insurance on Account Value less any
the life of the Insured applicable Surrender
provided by riders. Charges and less any
o We will also pay you interest Indebtedness on the date
on the proceeds at not less of cancellation.
than the rate required by law o We will also pay you
for the time between the date interest on the proceeds
of the Insured's death to the at not less than the rate
date of the lump-sum payment required by law for the
or the date on which we apply time between the date of
the proceeds to the selected the Policy is cancelled
Income Plan. to the date of the lump-
o If the Insured dies during a sum payment or the date
Grace Period, we will reduce on which we apply the
the proceeds by the amount of proceeds to the selected
any unpaid charges, but not by Income Plan.
more than 3 times the sum of
the Monthly Deduction and the
Monthly Expense Charge.
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<PAGE>
Net Cash
Death Proceeds Surrender Value
--------------- ---------------
How to Claim o The Beneficiary must contact o You must write to us and
us for instructions and provide tell us that you want to
proof of the Insured's death. cancel your Policy.
o We may request other o We may request other
information before we pay the information before we pay
proceeds. the proceeds.
Selecting an Income Plan
While the Insured is alive, you may select an Income Plan under which we will
pay the proceeds of your Policy. If the Insured dies and you have not selected
an Income Plan, the Beneficiary may select an Income Plan. If you have selected
an Income Plan before the Insured's death, the Beneficiary may not change the
Income Plan after the Insured's death.
We will send you a separate written agreement putting the selected Income Plan
into effect. One of the following Income Plans may be selected:
Income Plan 1 o Payments for Fixed Period - we make monthly payments
for a fixed number of years.
Income Plan 2 o Payments for Life--Guaranteed Period - we make
monthly payments for a guaranteed period or the life
of the Payee, whichever is longer.
Income Plan 3 o Payments of a Fixed Amount - we make monthly payments
of a fixed amount until an amount equal to the
proceeds plus accrued interest has been paid.
Income Plan 4 o Life Annuity--No Guaranteed Period - we make monthly
payments for the life of the Payee.
Income Plan 5 o Joint and Survivor - we make monthly payments as long
as one of the two designated Payees is alive.
In addition to these Income Plans, other Income Plans may be available in the
future or upon request.
If you or the Beneficiary do not select an Income Plan, we will make a lump-sum
payment of the proceeds. We generally make this lump-sum payment to a special
account retained by us. We will provide the Beneficiary with a checkbook to
access these funds from that special account.
The Income Plan selected and the time when the Income Plan is selected can
affect the tax consequences to you or the Beneficiary. You should consult your
tax advisor before selecting an Income Plan.
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<PAGE>
Summary of Income Plans
In the following summaries of the Income Plans, we use Payee to mean the person
who actually receives the payment of proceeds from us. Depending upon the
circumstances, the Payee might mean you, the Beneficiary, the Contingent
Beneficiary, your estate or another designated person.
The total amount to be applied under an Income Plan includes both the proceeds
and any interest we have paid on the proceeds.
Income Plan 1
(Payments for Fixed Period)
We will pay the proceeds in equal monthly installments for a fixed period
of time, up to a maximum of 30 years. The installment payments will remain
the same throughout the period of years selected.
The amount of the monthly installment payment will depend on the
following:
o The total amount to be applied under this Income Plan
o The number of years selected for installment payments
Income Plan 2
(Payments for Life--Guaranteed Period)
You select a guaranteed payment period of 10 or 20 years. We will make
equal monthly payments for the selected guaranteed period or the life of
the Payee, whichever is longer. Before we make a payment, we may require
proof that the Payee is alive at the time a payment is due.
The amount of the monthly installment payment will depend on the
following:
o The total amount to be applied under this Income Plan
o The gender of the Payee
o The age of the Payee on the effective date of this Income Plan
o The selected guaranteed period
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Income Plan 3
(Payments of a Fixed Amount)
We will pay the proceeds in equal monthly installment payments. You select
the amount of the monthly installment payment, which must be at least $5
for every $1,000 of proceeds. For example, if the proceeds are $60,000,
the minimum monthly installment payment is $300 ($5 x 60). The monthly
installment payment will remain the same until the total amount to be
applied under this Income Plan is paid. The last payment will be for the
balance only. All monthly installment payments must be made in 30 years or
less.
Income Plan 4
(Life Annuity--No Guaranteed Period)
We will make equal monthly payments as long as the Payee is alive. When
the Payee dies, we will stop making payments, even if we have only made
one payment. Before we make a payment, we may require proof that the Payee
is alive at the time a payment is due.
The amount of the monthly installment payment will depend on the
following:
o The total amount to be applied under this Income Plan
o The gender of the Payee
o The age of the Payee on the effective date of this Income Plan
Income Plan 5
(Joint and Survivor)
You can select this Income Plan only if 2 persons are named as Payees. We
will make monthly payments to the Payee or Payees as long as at least one
Payee is alive. Before we make a payment, we may require proof that at
least one of the Payees is alive at the time a payment is due.
The amount of the monthly installment payment will depend on the
following:
o The total amount to be applied under this Income Plan
o The gender of each of the Payees
o The age of each of the Payees on the effective date of this Income
Plan
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<PAGE>
CHARGES
Premium Expense Charges
The premium expense charge compensates us for distribution expenses associated
with the Policies. The maximum premium expense charge is 5.50% of a premium
payment. The current premium expense charge is 4.75% of a premium payment.
We will deduct the premium expense charge from each premium payment that we
receive from you before we allocate the Net Premiums to your investment options.
Tax Charges
The tax charge covers state taxes on insurance premiums and certain federal
taxes associated with distribution of the Policies. The maximum tax charge is
3.50% of a premium payment. The tax charge you pay will reflect certain federal
taxes plus the actual state premium tax charged by the state in which you
reside.
We will deduct the tax charge from each premium payment that we receive from you
before we allocate the payment to your investment options.
Cost of Insurance Charges
You pay us a monthly cost of insurance charge for providing you with life
insurance protection.
The cost of insurance charge that you pay to us depends on the your Specified
Amount and the age, gender and underwriting class of the Insured. Various risk
factors determine the underwriting class of the Insured. The cost of insurance
charge is also affected by your Account Value, Indebtedness and your death
benefit option.
Some examples showing how the cost of insurance charge varies are set forth
below:
o If all other relevant factors are the same, the cost of insurance on
a 50-year old male is generally more than the cost of insurance on a
35-year old female. The differences in age and gender between the 2
persons affects the cost of insurance charge. The monthly cost of
insurance charge for the 50-year old man is higher because he is
more likely to die than the 35-year old woman.
o A person who does not smoke is in a different underwriting class
than a person who does smoke because smoking affects life
expectancy. If all other relevant factors are the same, the monthly
cost of insurance charge for the smoker is generally higher.
o If your Account Value grows because of additional premium payments
or a positive return from your selected investment options, and all
other relevant factors are the same, the cost of insurance charge
will decrease if your death benefit option is Option 1.
34
<PAGE>
If your Account Value declines because of partial withdrawals or a
negative return from your investment options and all other factors
are the same, the cost of insurance charge will increase if your
death benefit option is Option 1. The fluctuations in cost of
insurance charge are related to the risk that we take in providing a
death benefit equal to at least the Specified Amount. You pay us to
assume this insurance risk. The less "at risk" we are, the lower the
cost of insurance charge. Therefore, as your Account Value increases
and our risk decreases, the cost of insurance charge decreases.
If all other relevant factors are the same, the monthly cost of insurance charge
is the same for all insured persons of the same Attained Age, gender and
underwriting classification whose policies have been in effect for the same
amount of time.
The table in Supplement C shows the maximum monthly cost of insurance charge if
the Insured under your Policy is in either a standard or preferred underwriting
class. Your monthly cost of insurance charge may be higher than that shown in
Supplement C if the Insured under your Policy is in a special or substandard
underwriting class.
The maximum monthly cost of insurance charge under your Policy is shown in your
Policy Schedule. At our option, we may charge less than the maximum shown in
your Policy Schedule.
Monthly Deduction and Monthly Expense Charge
The Monthly Deduction includes the cost of insurance charge described above plus
the cost of any additional benefits provided under your Policy by rider.
The Monthly Expense Charge covers the cost of record keeping and administering
your Policy. The maximum Monthly Expense Charge is $7.00. The current Monthly
Expense Charge is $6.00.
We deduct the Monthly Deduction and the Monthly Expense Charge on each Monthly
Anniversary Day. We normally deduct the these charges from each of your
investment options on a pro-rata basis. You may elect to have these charges
deducted entirely from the Fixed Account or from a single Sub-Account that you
select. Please contact the Columbus Life Variable Service Center, P.O. Box 2850,
Cincinnati, Ohio 45201-2850, or call us at 800.677.9595 for assistance in making
this election.
Mortality and Expense Risk Charge
In addition to our insurance risk, we assume 2 other risks: a mortality risk and
an expense risk. We take a mortality risk that the Insureds will not live as
long as we expect and therefore the amount of the death benefits we pay under
the Policies will be greater than we expect. We take an expense risk that the
costs of issuing and administering the Policies will be greater than we expect.
35
<PAGE>
You pay us to assume these risks by paying the mortality and expense risk
charge. The maximum mortality and expense risk charge is 1.00% annually. The
current effective annual rate of these charges is 0.90%. We can use any profit
we derive from the mortality and expense risk charge to pay for general
corporate expenses, including distribution and sales expenses.
On each Valuation Date, we deduct the mortality and expense risk charge from the
Accumulation Unit Value of each Sub-Account. We do not impose this charge on
your money in the Fixed Account.
Surrender Charges
A surrender charge will generally apply if:
o Your Policy is cancelled for any reason.
o The Specified Amount of your Policy decreases because
o You reduce the Specified Amount of your Policy.
o You withdraw money from your Policy and you have selected
death benefit Option 1.
o During the first 14 years after the issuance of your
Policy.
o During the first 14 years after an increase in the
Specified Amount.
The maximum surrender charge under your Policy depends upon the Insured's age,
gender and underwriting class. The maximum surrender charge for each month in
the 14-year period is shown in your Policy Schedule and in Supplement D. At our
option, we may charge less than the maximum shown. The surrender charge will be
deducted from your Account Value. For example, if you are a 35-year old male
tobacco abstainer, you purchase a Policy with a Specified Amount of $100,000
with you as the Insured and you cancel your Policy three years after we issue
it, we would deduct a surrender charge of $2,400 from your Account Value.
A separate 14-year period applies to the initial Specified Amount and each
increase in the Specified Amount. In this discussion, we will refer to the
initial Specified Amount and each increase as a layer of insurance. If your
Policy has more than one layer of insurance and your Specified Amount is
decreased, we will cancel layers of insurance (or a part of a layer) in order,
starting with the last layer of insurance that you purchased, until the amount
cancelled equals the amount of the decrease. We will apply the appropriate
surrender charge to each cancelled layer.
36
<PAGE>
The following example should help you understand the surrender charges.
o You purchase a Policy with an initial Specified Amount of $200,000
on October 1, 2000. This is the first layer of insurance.
o You have selected death benefit Option 1.
o You increase the Specified Amount by $100,000 on October 1, 2012.
This is the second layer of insurance.
o Your total Specified Amount would then be $300,000.
o You withdraw $150,000 from your Policy on October 15, 2015. Since
the withdrawal amount is more than the amount of the second layer of
insurance, we would cancel that layer. In addition, we would cancel
a portion of the first layer of insurance.
o We would deduct the maximum applicable surrender charge on the
second layer from your Account Value. We would not apply a surrender
charge to the cancelled portion of the first layer because the
applicable 14-year period would have expired.
o If the maximum surrender charge were $2,400, your Account Value
would be reduced by $152,400.
Transfer Charges
We do not charge you for the first 12 transfers among Sub-Accounts in a Policy
Year. If you make more than 12 transfers among Sub-Accounts in a Policy Year, we
will charge you $10 per transfer for each additional transfer. We do not charge
you for transfers made in connection with the Dollar Cost Averaging Program and
we do not count these transfers when we determine the number of transfers you
have made in a Policy Year. We deduct the $10 transfer charge from your Account
Value.
All transfers requested on the same day will be considered a single transfer for
purposes of determining transfer charges.
Withdrawal Fees
We do not charge you for the first withdrawal in a Policy Year. If you make more
than one withdrawal in a Policy Year, we will charge you $50 per withdrawal for
each withdrawal. We deduct the $50 transfer charge from your Account Value.
37
<PAGE>
Summary of Charges
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Premium Monthly Monthly
Expense Charge Tax Charge Deduction Expense Charge
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
When Charged? When you make a When you make a On each Monthly On each Monthly
premium payment. premium payment. Anniversary Day. Anniversary Day.
- -----------------------------------------------------------------------------------------------------------------
How Much Charged? The maximum The maximum tax This charge is The maximum
premium expense charge is 3.50% of generally based on monthly expense
charge is 5.50% of each premium the cost of insurance charge is $7.00
each premium payment. The tax and cost of benefits each month. The
payment. The current charge you pay will provided by riders. current monthly
premium expense reflect certain federal See your Policy expense charge
charge is 4.75% of taxes plus the actual Schedule for the is $6.00 per
each premium state premium tax maximum cost of month.
payment. charged by the state insurance charge
in which you reside. applicable to your
Policy and the
maximum cost of
benefits to be
provided by rider.
- -----------------------------------------------------------------------------------------------------------------
How Charged? We deduct this charge We deduct this charge We reduce your We reduce your
from each premium from each premium Account Value. Account Value.
payment before we payment before we
allocate the Net allocate the Net
Premiums to your Premiums to your
investment options. investment options.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Mortality
and Expense
Risk Charge Surrender Charges Transfer Charges Withdrawal Fees
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
When Charged? On each day the New When the Policy On transfers among On withdrawals
York Stock Exchange is surrendered or Sub-Accounts after after the first
is open. otherwise terminates, the first 12 transfers withdrawal in a
or the Specified in a Policy Year. Policy Year.
Amount decreases
for any reason.
- -----------------------------------------------------------------------------------------------------------------
How Much Charged? The maximum charge This charge is based $10 per transfer. $50 per withdrawal.
is 1.00% annually. on a specific dollar
The current effective amount, which is
annual rate of the applied to each
charge is 0.90%. $1,000 decrease in
the portion of the
Specified Amount
subject to the charge.
The charge decreases
on a monthly basis
after the first 10
years in the
applicable 14-year
period. See your
Policy Schedule for
the maximum
surrender charges
applicable to your
Policy.
- -----------------------------------------------------------------------------------------------------------------
How Charged? We deduct this We reduce your We reduce your We reduce your
charge from the Account Value. Account Value. Account Value.
Accumulation Unit
Value of each
Sub-Account. We do
not impose this
charge on your
money in the Fixed
Account.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
CONTINUATION OF YOUR POLICY
Continuation of Insurance Coverage
On each Monthly Anniversary Day, we determine whether your insurance coverage
will continue. If your Net Cash Surrender Value is equal to or more than the
monthly charges to be charged on that Monthly Anniversary Day, your Policy will
continue.
If your Net Cash Surrender Value is less than the monthly charges, then a Grace
Period related to the continuation of your Policy will start unless one of the
no-lapse guarantees described below applies. If neither of the no-lapse
guarantees applies, and you do not make the required additional premium payment
during the Grace Period, your Policy will lapse without value.
o Monthly charges include the Monthly Deduction and the Monthly
Expense Charge. The Monthly Deduction includes the amount deducted
for the cost of insurance plus the cost of any additional benefits
provided under your Policy by rider.
o Grace Periods, which are designed to give you time to make an
additional premium payment, are explained below.
Continuation Under the Term No-Lapse Guarantee Provision
Even if your Net Cash Surrender Value on a Monthly Anniversary Day is not
sufficient to continue your Policy, your Policy may continue under the Term
No-Lapse Guarantee.
If the Term No-Lapse Guarantee applies, we guarantee that, for a specific period
of time, we will not terminate your Policy or start a Grace Period related to
continuation of your Policy. In this discussion, we call this specific period of
time the guaranteed minimum continuation period. The guaranteed minimum
continuation period applicable to your Policy is shown in your Policy Schedule.
On each Monthly Anniversary Day, we determine if your Policy meets the
conditions for the Term No-Lapse Guarantee as described in Supplement E. If your
Policy does not meet these conditions, then a Grace Period related to the Term
No-Lapse Guarantee will start. If you do not make the required additional
premium payment during this Grace Period, you will lose the Term No-Lapse
Guarantee. It cannot be reinstated. In addition, you will no longer be eligible
for the Lifetime No-Lapse Guarantee described below.
Continuation Under the Lifetime No-Lapse Guarantee Provision
Even if your Net Cash Surrender Value on a Monthly Anniversary Day is not
sufficient to continue your Policy and the guaranteed minimum continuation
period has expired, your Policy may continue under the Lifetime No-Lapse
Guarantee.
40
<PAGE>
As long as the Lifetime No-Lapse Guarantee applies, we guarantee that we will
never terminate your Policy or start a Grace Period related to continuation of
your Policy.
The Lifetime No-Lapse Guarantee will apply only if:
o You met the conditions for maintaining the Term No-Lapse Guarantee
throughout the guaranteed minimum continuation period.
o The guaranteed minimum continuation period has expired.
On each Monthly Anniversary Day after the expiration of the guaranteed minimum
continuation period, we determine if your Policy meets the conditions for
Lifetime No-Lapse Guarantee as described in Supplement E. If your Policy does
not meet these conditions, then a Grace Period related to the Lifetime No-Lapse
Guarantee will start. If you do not make the required additional premium payment
during this Grace Period, you will lose the Lifetime No-Lapse Guarantee. It
cannot be reinstated.
Additional Information About No-Lapse Guarantees
o Supplement E to this Prospectus contains a description of the
procedures we use to determine if your Policy meets the conditions
for the Term No-Lapse Guarantee or the Lifetime No-Lapse Guarantee.
o Grace Periods, which are designed to give you time to make an
additional premium payment, are explained below.
Minimum Annual Premiums
Your minimum annual premiums for the Term No-Lapse Guarantee and the Lifetime
No-Lapse Guarantee are shown in your Policy Schedule. We use the minimum annual
premiums to determine if you have met the conditions for continuing your
insurance coverage under these provisions.
If you make any changes in your Policy that result in a change in the Monthly
Deduction, we will determine new minimum annual premiums. We will send you a new
Policy Schedule showing the new minimum annual premiums.
Grace Periods
A Grace Period is a 61-day period that starts on the day after we mail you the
applicable notice. Under certain circumstances, the Grace Periods related to the
continuation of your Policy and the continuation of the no-lapse guarantees may
overlap or start at the same time. The chart below shows how Grace Periods work.
41
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Maintenance of Term Maintenance of Lifetime
Continuation of Your Policy No-Lapse Guarantee No-Lapse Guarantee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
o A Grace Period related to the o A Grace Period related to the o A Grace Period related to the
continuation of your Policy Term No-Lapse Guarantee will Lifetime No-Lapse Guarantee
will start if: start if Your Policy does not will start if:
meet the conditions for this
o Your Net Cash Surrender guarantee. o You maintained your Term
Value is not sufficient on a No-Lapse Guarantee throughout
Monthly Anniversary Day. the guaranteed minimum
o Neither No-Lapse Guarantee continuation period.
applies. o The guaranteed minimum
continuation period has
expired.
o Your Policy does not meet the
conditions for this guarantee.
- --------------------------------------------------------------------------------------------------------------
o The notice will tell you the o The notice will tell you the o The notice will tell you the
amount of the minimum amount of the minimum amount of the minimum
additional premium you must additional premium you additional premium you must
pay to keep your Policy in effect. must pay to maintain the pay to maintain the
Term No-Lapse Guarantee. Lifetime No-Lapse Guarantee.
- --------------------------------------------------------------------------------------------------------------
o If you make the required o If you make the required o If you make the required
additional premium payment additional premium payment additional premium payment
during the Grace Period, your during the Grace Period, during the Grace Period,
Policy will continue to be the Term No-Lapse the Lifetime No-Lapse
effective. Guarantee will continue to Guarantee will continue
be effective. to be effective.
- --------------------------------------------------------------------------------------------------------------
o If you do not make the required o If you do not make the o If you do not make the required
additional premium payment required additional premium additional premium payment
during the Grace Period, your payment during the Grace during the Grace Period,
Policy will terminate at the end Period, you will lose the you will lose the Lifetime
of the Grace Period without Term No-Lapse Guarantee. No-Lapse Guarantee.
value.
- --------------------------------------------------------------------------------------------------------------
o If the Insured dies during the o In addition, if you do not o This no-lapse guarantee
Grace Period, we will reduce the make the required additional cannot be reinstated.
death proceeds by the amount premium payment during
of any unpaid charges up to 3 the Grace Period, you will
times the sum of the Monthly lose the Lifetime No-Lapse
Deduction and the Monthly Guarantee.
Expense Charge.
- --------------------------------------------------------------------------------------------------------------
o These no-lapse guarantees
cannot be reinstated.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
We will mail Grace Period notices to you at your address as shown on our
records. We will also mail these notices to anyone holding your Policy as
collateral as shown on our records at the collateral holder's address as shown
on our records.
42
<PAGE>
Policy Lapse
If a Grace Period related to the continuation of your Policy ends, you have not
paid the minimum additional premium needed to continue your Policy and neither
no-lapse guarantee applies, your Policy will lapse and you will not receive any
money from us because Net Cash Surrender Value of your Policy will have been
reduced to zero.
Reinstatement
If your Policy was terminated but the Insured is still living, you can ask us to
reinstate your Policy at any time during the 5-year period after the Grace
Period ended. We will reinstate your Policy if:
o We receive satisfactory evidence of insurability.
o You pay a premium that increases your Net Cash Surrender Value to an
amount equal to or greater than:
o All costs and charges that we would have deducted from your
Account Value on each Monthly Anniversary Day from the date of
termination to the date of reinstatement and
o The Monthly Deductions and Monthly Expense Charges for the
next 3 months
o You repay or reinstate any Indebtedness that was outstanding on the
date of termination.
If you do not maintain the Term No-Lapse Guarantee, we will not reinstate this
guarantee and you will not be eligible for the Lifetime No-Lapse Guarantee. If
you do not maintain the Lifetime No-Lapse Guarantee, we will not reinstate this
guarantee.
RIDERS
Each rider's description in this Prospectus is subject to the specific terms of
the rider as each contains definitions, contractual limitations and conditions.
You should review any rider before purchasing it.
Included Rider
The insurance benefit (or rider) summarized below is automatically included with
every Policy issued in a state where such an insurance benefit is permitted. You
should ask your insurance agent if this insurance benefit is available in your
state.
43
<PAGE>
Accelerated Death Benefit Rider
Benefit Summary:
Enables you to obtain an advance against the Death Benefit upon diagnosis of
fatal illness
Benefit Description:
When the Insured is diagnosed with a fatal illness, we will make you special
loans secured by your Death Benefits payable under the Policy. The maximum
amount of these special loans is the lesser of
o $250,000
o 60% of the difference between your Death Benefit and the maximum amount
you are able to borrow from your Policy
o Multiple special loan advances are permitted during the 12-month period
from the date of the first advance until you reach the maximum amount. The
minimum special loan is $5,000. We charge you interest at an annual rate
of 8% on all special loans we make to you.
Some or all of the special loan advances may be considered taxable by the
Internal Revenue Service. You should consult your tax adviser before requesting
an advance under this rider.
The Death Proceeds will be reduced by the amount of all special loan advances,
including interest, upon the death of the Insured.
Excluded Coverage:
This advance must be voluntarily elected. It is not available if:
o You are required to elect this benefit by law to meet the claims of
creditors
o You are required to elect this benefit by a government agency in order to
apply, keep or maintain a government benefit
Cost of Benefits:
No charge until elected (and then the only charge is interest on the advance)
Termination of Benefits:
The benefits terminate on the earlier of
o When your Policy ends
o When the cumulative maximum amount has been advanced
44
<PAGE>
Optional Riders
Subject to certain underwriting and other requirements, you may add one or more
of the following optional insurance benefits to your Policy by rider. We will
deduct the cost of any rider as part of the Monthly Deduction. Each available
optional insurance benefit (or rider) is summarized below.
Accidental Death Rider
Benefit Summary:
Pays an additional death benefit if the Insured's death is caused by accidental
bodily injury
Benefit Description:
You select the Accidental Death Benefit Amount. The Accidental Death Benefit
Amount will be added to the Death Proceeds and paid under the same Income Plan.
Under certain circumstances, we will pay 2 times your Accidental Death Benefit
Amount.
Excluded Coverage:
We will not pay an Accidental Death Benefit if the Insured's injury or death
resulted from certain risks, such as suicide, certain travel in aircraft,
certain use of drugs and participation in an activity while intoxicated.
Cost of Benefits:
Depends on the Insured's Attained Age and selected Accidental Death Benefit
Amount
Termination of Benefits:
The benefits terminate at the earliest of
o When your Policy ends
o Upon cancellation of the rider
o The day before the Policy Anniversary on which the Insured is 70 years old
45
<PAGE>
Insured Insurability Rider
Benefit Summary:
Provides an option to purchase additional insurance on the life of the Insured
without evidence of insurability
Benefit
Description: We provide you an option to purchase additional insurance on the
life of the Insured without evidence of insurability. The Insured Insurability
Option Amount you select is the amount of additional insurance you have the
option to purchase.
Under most circumstances, the options may be exercised on each regular option
date. The regular option dates are the Policy Anniversaries that occur after the
Insured is ages 25, 28, 31, 34, 37 and 40.
The options may also be exercised on alternate option dates. An alternate option
date occurs on the 90th day following each of the following:
o Insured's marriage
o Birth of a living child of Insured
o Adoption of a child by Insured
The exercise of an option on an alternate option date cancels the next regular
option date still available.
Excluded Coverage:
N/A
Cost of Benefits:
Depends on the Insured's Attained Age and selected Insured Insurability Option
Amount
Termination of Benefits:
The benefits terminate on the earliest of
o When your Policy ends
o Upon cancellation of the rider
o The Policy Anniversary on which the Insured is 40 years old
46
<PAGE>
Disability Credit Rider
Benefit Summary:
Makes premium payments equal to the "Credit Amount" while you are disabled, as
"disabled" is defined in the rider
Benefit Description:
You select the Credit Amount. The Credit Amount is the annual amount of premium
payments we will pay under this optional policy benefit. The Credit Amount must
always be
o Greater than or equal to your minimum annual premium for the Term No-Lapse
Guarantee
o Less than or equal to your minimum annual premium for the Lifetime
No-Lapse Guarantee
Your Credit Amount may be adjusted if either minimum annual premium changes.
We make a premium payment of 1/12 of the Credit Amount for each month you are
disabled. This amount may or may not be sufficient to keep your Policy in
effect.
Excluded Coverage:
Disabilities that result from the following are not covered:
o Self-inflicted injuries
o A declared or undeclared war
o Injuries or diseases that first manifest while this optional insurance
benefit is not in force
Cost of Benefits:
Depends on the Insured's Attained Age and selected Credit Amount
Termination of Benefits:
The benefits terminate on the earliest of
o When your Policy ends
o Upon cancellation of the rider
o The day before the Policy Anniversary on which the Insured is 60 years
old, unless such benefits are being paid at that time
47
<PAGE>
Children's Term Rider
Benefit Summary:
Pays a death benefit if an Insured Child dies
Benefit Description:
For each Insured Child that you name in your application, you select the
Children's Term Benefit Amount that will be applicable to each Insured Child.
The Children's Term Benefit Amount will be paid upon the death of an Insured
Child and can be paid under an Income Plan.
Under most circumstances, if the Insured dies, the insurance on each Insured
Child provided by this rider will become fully paid-up nonparticipating term
insurance and will continue until each Insured Child's 23rd birthday. After an
Insured Child is age 18, that Insured Child may convert the term insurance
policy to a whole life plan.
Excluded Coverage:
This rider provides coverage only for Insured Children of the Insured. An
Insured Child includes any child of the Insured who was at least 15 days old and
less than 18 years old when named in the application. An Insured Child also
includes any child at least 15 days old, who after the date of application for
this rider, was born of any marriage of the Insured or was adopted by the
Insured when less than 18 years of age.
Cost of Benefits:
Depends only on selected Children's Term Benefit Amounts
Termination of Benefits:
The benefits terminate on the earliest of
o When your Policy ends
o When you cancel the rider
o The day before the Policy Anniversary on which the Insured is 65 years old
o On an Insured Child's 23rd birthday, for that Insured Child
o The day an Insured Child exercises the conversion option, for that Insured
Child
48
<PAGE>
Other Insured Rider
Benefit Summary:
Pays a death benefit if an Other Insured dies
Benefit Description:
For each Other Insured that you name in your application, you select an Other
Insured Benefit Amount. The Other Insured Benefit Amount will be paid to the
designated beneficiary upon the death of an Other Insured and can be paid under
an Income Plan.
Under most circumstances, if the Insured dies, each Other Insured has the right
to convert the coverage to a new life insurance policy.
Until the Policy Anniversary on which an Other Insured is age 85, that Other
Insured may convert the coverage to any life insurance policy (other than term
insurance) that we regularly issue.
Excluded Coverage:
N/A
Cost of Benefits:
Depends on each Other Insured's Attained Age, gender and underwriting class and
selected Other Insured Benefit Amounts
Termination of Benefits:
The benefits terminate on the earliest of
o When your Policy ends
o When you cancel the rider
o The day before the Policy Anniversary on which the Insured is 100 years
old
o The day before the Policy Anniversary on which the Other Insured is 95
years old, for that Other Insured
o The day an Other Insured exercises the conversion options, for that Other
Insured
49
<PAGE>
OTHER INFORMATION ABOUT YOUR POLICY
Policy is a Contract
The Policy is a legal contract between you and us to insure the life of the
person named in the application as the Insured. We provide the insurance
coverage and other benefits described in the Policy in exchange for your
completed application and your premium payments.
When we refer to the Policy, we mean the entire contract, which consists of:
o The basic policy
o The application
o Any supplemental applications
o Any optional policy benefits, riders or endorsements that add
provisions or change the terms of the basic policy
The description of the Policy in this Prospectus is subject to the specific
terms of your Policy as it contains specific contractual provisions and
conditions. If the terms of your Policy differ from the description of the
Policy in the Prospectus, you should rely on the terms in your Policy.
The Policy is subject to the laws in the state in which it is issued. To the
extent that the Policy may not comply with the applicable state law, we will
interpret it so that it complies.
Modification of Policy
Upon notice to you, we may modify your Policy:
o If such modification is necessary to make the Policy comply with any
law or regulation issued by a governmental agency applicable to the
Policy
o If such modification is necessary to assure continued qualification
of the Policy under the Internal Revenue Code or other federal or
state laws as a life insurance policy
o If such modification is necessary to reflect a change in the
operation of the Company, Separate Account 1 or the Sub-Accounts
o If such modification adds, deletes or otherwise changes Sub-Account
options
We also reserve the right to modify certain provisions of the Policy as stated
in those provisions. In the event of a modification, we may make appropriate
endorsement to the Policy to reflect the modification.
Your insurance agent cannot change any of the terms of your Policy, extend the
time for making premium payments or make any other agreement that would be
binding on us.
50
<PAGE>
Extended Maturity Benefit
On the Policy Anniversary after the Insured turns age 100, the total of the then
current value of your Sub-Accounts and the then current value of your Loan
Account, plus interest due and unpaid, will be automatically transferred to the
Fixed Account. Your total value in the Fixed Account will then be reduced by the
amount of any outstanding Indebtedness. After that time, we will not accept any
further premium payments, we will not deduct further charges, we will not permit
you to transfer your money from the Fixed Account, we will not permit any
additional loans and your death benefit option will be changed to Option 2.
Unless you were older than age 75 on the Policy Date, we will not decrease your
Specified Amount by your Account Value when we change your death benefit option
to Option 2. Your Policy will continue in effect until the Insured's death or
until the Policy is surrendered for its Net Cash Surrender Value.
Conversion to a Fixed Policy
You may elect to convert your Policy to a fixed policy at any time:
o Within 24 months of your Policy Date or
o Within 60 days of the later of
o notification of a change in the investment policy of Separate
Account 1, or
o the effective date of the change
If you elect to convert your Policy, we will transfer the entire value of your
investment in the Sub-Accounts to the Fixed Account. We will not charge you for
this transfer. After the date of your election to convert your Policy, Net
Premiums may not be allocated and transfers may not be made to any of the
Sub-Accounts. All other terms and charges of your Policy will continue to apply.
Confirmations and Statements
We will send you a confirmation of each premium payment and other financial
transactions, such as transfers and partial withdrawals. We will also send you a
statement each year showing the value of your investment in the Sub-Accounts and
the Fixed Account.
If you have invested money in a Sub-Account, you will also receive semi-annual
reports for the Fund in which the Sub-Account invests. These semi-annual reports
will include a list of portfolio securities held by the underlying Fund.
Processing Guidelines
We use certain guidelines to determine when we will process your Policy
application and other instructions. These processing guidelines determine your
Policy Date and the effective date of
51
<PAGE>
instructions that you send to us. The effective date depends upon
o Whether we receive your application or instructions before or after
the close of regular trading on the New York Stock Exchange
(typically 4:00 p.m. Eastern Time),
o Whether the New York Stock Exchange is open at that time, and
o Whether your application and instructions are in good order.
Also, we cannot determine your Policy Date or the effective date of your Policy
until we have received the initial minimum premium payment required to issue
your Policy.
If you are the sole owner of the Policy, you must sign the Policy application
and other instructions. If you and another person are joint owners of your
Policy, you and your joint owner must both sign your Policy application and
instructions.
Required Note on Computations
Calculations are based on the mortality table shown in your Policy Schedule.
We have filed a detailed statement of our computations with the applicable state
insurance departments. The values under this Policy are not less than those
required by the law of your state. Any benefit provided by an attached rider
will not increase these values unless stated in the rider.
The method used in calculating Policy values will be based on the actuarial
procedures that recognize the variable nature of this Policy.
Projection of Benefits and Values
In addition to any examples and illustrations provided to you by your insurance
agent, you may request that we send you a hypothetical illustration of Policy
benefits and values. We may charge a reasonable fee to provide this information
to you.
Incontestability
We issue the Policy in reliance on the answers you provided in the application
and any supplemental applications. These answers are considered representations,
and not warranties. We have assumed that all these answers are true and
complete. If they are not, we may have the right to contest and void the Policy
as if it had not been issued. Except for cases involving termination of the
Policy or fraud, we will not contest:
o The Policy after the Policy has been in effect for 2 years during
the Insured's lifetime
o Any increase in Specified Amount after the increase has been in
effect for 2 years during the Insured's lifetime
o Any rider attached to the Policy after the rider has been in effect
for 2 years
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During these 2-year periods, we may contest the validity of your Policy, any
increase in Specified Amount or the validity of any riders based on material
misstatements made in the application or any supplemental application. No
statement will be used in contesting a claim unless it is in an application or
supplemental application and a copy of the application is attached to the
Policy.
If your Policy is reinstated after termination, the 2-year period of
contestability begins on the reinstatement date. If the Policy has been in
effect for 2 years during the lifetime of the Insured, it will be contestable
only as to statements made in the reinstatement application. If the Policy has
been in force for less than 2 years, it will be contestable as to statements
made in the reinstatement application as well as the initial application and
supplemental applications.
Defending Against Claims
We will not use any statement you made to defend against a claim under your
Policy unless it is in an application or supplemental application and a copy of
the application is attached to the Policy.
Suicide Exclusion
Your Policy does not cover suicide by the Insured, whether sane or insane,
during the 2-year period beginning with the Policy Date. If the Policy is in
effect and the Insured commits suicide during this 2-year period, we will pay
you the greater of the following amounts:
o Your premium payments, less any Indebtedness, less any previous
withdrawals, and less all monthly costs of insurance on all persons
other than the Insured ever covered by rider
o The Net Cash Surrender Value
We will not pay any Death Benefit in these circumstances.
With respect to any increase in Specified Amount, we will not pay death benefits
if the Insured, whether sane or insane, commits suicide within 2 years from the
effective date of the increase. If the Policy has been in effect for more than 2
years after the Policy Date but less than 2 years from an increase in Specified
Amount, we will return the monthly costs of insurance charged for the increase
and pay death benefits based on the previous Specified Amount (on which the
2-year suicide exclusion has expired).
This provision also applies to any rider attached to the Policy. The 2-year
period begins on the rider's date of issue.
If your Policy terminates and is later reinstated, we will measure the 2-year
time period from the effective date of reinstatement. Any premium payment refund
will be limited to premiums paid on or after the effective date of
reinstatement.
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Termination of Your Policy
Your Policy will terminate and all insurance coverage under the Policy will stop
in the following instances:
o As of the date on which we receive notice from you requesting that
the Policy be cancelled
o As of the date the Insured dies (although some riders may provide
benefits for other covered persons beyond the Insured's death)
o As of the date a Grace Period related to the continuation of your
Policy expires
o As of 31 days after we mail you a notice that your Indebtedness
exceeds your Cash Surrender Value less the Monthly Deduction and the
Monthly Expense Charge for the current month unless you make the
necessary premium payment to continue the Policy
No Dividends
The Policies are "non-participating," which means that they do not pay
dividends.
Misstatement of Age or Gender
If the age or gender of the Insured is misstated in information sent to us, we
will change any benefits under the Policy to those benefits that your cost of
insurance charge for the month of death would provide if the correct age and
gender had been stated. If we do not discover the misstatement until after the
payment of the Policy proceeds under one of the Income Plans has started, we
will deduct any overpayments, plus compound interest, from subsequent payments
and we will pay any underpayments, plus compound interest, in a lump sum.
Telephone Security Procedures
We have established security procedures for telephone transactions, such as
recording telephone calls. We may also require a personal identification number
(PIN) or other identifying information. We will not be liable for losses due to
unauthorized or fraudulent telephone instructions if we follow reasonable
security procedures and reasonably believe the instructions are genuine.
Assignment
Generally, you may assign your Policy. We will not be bound by an assignment
until we receive and record written notice of the assignment at Columbus Life
Variable Service Center, P.O. Box 2850, Cincinnati, Ohio 45201-2850. Your rights
and the rights of your Beneficiary will be affected by an assignment. We are not
responsible for the validity or tax consequences of any assignment.
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INFORMATION ABOUT THE INVESTMENT OPTIONS
The Sub-Accounts and the Funds
You can allocate your Net Premiums to one or more Sub-Accounts. You may also
transfer amounts among the Fixed Account and the Sub-Accounts. Each Sub-Account
invests in a corresponding Fund of the AIM Variable Insurance Funds, Inc. (AIM),
The Alger American Fund (Alger), Deutsche Asset Management VIT Funds (Deutsche),
MFS Variable Insurance Trust (MFS), PIMCO Variable Insurance Trust (PIMCO) or
Touchstone Variable Series Trust (Touchstone).
Each Sub-Account buys shares of the corresponding Fund at net asset value
without a sales charge. Dividends and capital gains distributions from a Fund
are reinvested at net asset value without a sales charge and held by the
Sub-Account as an asset. Each Sub-Account redeems Fund shares at net asset value
to the extent necessary to make payment of Death Proceeds or other payments
under the Policy.
The following table contains general information about the investment advisor,
investment objective and principal investment strategies of each Fund in which a
corresponding Sub-Account invests. The fund advisors and sub-advisors cannot
guarantee that the Funds will meet their investment objectives nor is there any
guarantee that your Account Value will equal or exceed the total of your Net
Premiums. More complete information about each Fund, including information about
its risks, performance and other investment strategies, is included in the
prospectus of each Fund. Please read each prospectus carefully before you
purchase a Policy or make other decisions about your investment options.
A Fund may have a name and/or investment objective that is very similar to the
name of a publicly available mutual fund managed by the same advisor or
sub-advisor. The Funds in which the Sub-Accounts invest are not publicly
available and will not have the same performance as those publicly available
mutual funds. Different performance will result from differences in various
factors that affect the operation of a Fund, such as implementation of
investment policies, Fund expenses and size of the Fund. In addition, your
investment return from your Policy will be less than the investment return of a
shareholder in the publicly available funds because you will pay additional
charges related to your Policy, such as the mortality and expense risk charge.
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AIM V.I. Growth Fund
(AIM V.I. Growth Sub-Account)
Fund Family:
AIM Variable Insurance Funds, Inc.
Fund Advisor:
AIM Advisors, Inc.
Investment Objective:
The Fund seeks to achieve growth of capital principally through investment in
common stocks of seasoned and better capitalized companies considered to have
strong earnings momentum. The Fund may invest up to 25% of its assets in foreign
securities.
Principal Investment Strategies:
The portfolio manager focuses on companies that have experienced above-average
growth in earnings and have excellent prospects for future growth. The Fund may
engage in active and frequent trading.
AIM V.I. Government Securities Fund
(AIM V.I. Government Securities Sub-Account)
Fund Family:
AIM Variable Insurance Funds, Inc.
Fund Advisor:
AIM Advisors, Inc.
Investment Objective:
The Fund 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. The Fund intends
to maintain a dollar-weighted average portfolio maturity between 3 and 10 years.
Principal Investment Strategies:
The Fund invests primarily in U.S. Treasury obligations and obligations issued
or guaranteed by U.S. Government agencies and instrumentalities.
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Alger American Small Capitalization Portfolio
(Alger American Small Capitalization Sub-Account)
Fund Family:
The Alger American Fund
Fund Advisor:
Fred Alger Management, Inc.
Investment Objective:
The Fund seeks long-term capital appreciation.
Principal Investment Strategies:
The Fund invests primarily in equity securities. The Fund invests primarily in
"growth" stocks. It focuses on small, fast-growing companies that offer
innovative products, services or technologies to a rapidly expanding
marketplace. Under normal circumstances, the Fund invests primarily in small
capitalization companies, companies that have a market capitalization within the
range of companies included in the Russell 2000 Growth Index or the S&P SmallCap
600 Index.
Alger American Growth Portfolio
(Alger American Growth Sub-Account)
Fund Family:
The Alger American Fund
Fund Advisor:
Fred Alger Management, Inc.
Investment Objective:
The Fund seeks long-term capital appreciation.
Principal Investment Strategies:
The Fund invests primarily in equity securities. The Fund invests primarily in
"growth" stocks. It focuses on growing companies that generally have broad
product lines, markets, financial resources and depth of management. Under
normal circumstances, the Fund invests primarily in the equity securities of
large companies, companies that have a market capitalization of $1 billion or
greater.
Deutsche VIT Equity 500 Index Fund
(Deutsche VIT Equity 500 Index Sub-Account)
Fund Family:
Deutsche Asset Management VIT Funds
Fund Advisor:
Bankers Trust Company
Investment Objective:
The Fund seeks to match the performance of the S&P 500.
Principal Investment Strategies:
Under normal circumstances, the Fund will invest at least 80% of its assets in
stocks of companies included in the S&P 500 Index and in derivative instruments,
such as future contracts and options, that provide exposure to the stocks of
companies in the S&P 500 Index. The Fund's securities are weighted to attempt to
make the Fund's total investment characteristics similar to those of the S&P 500
Index as a whole.
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MFS VIT Emerging Growth Series
(MFS VIT Emerging Growth Sub-Account)
Fund Family:
MFS Variable Insurance Trust
Fund Advisor:
Massachusetts Financial Services Company
Investment Objective:
The Fund seeks to provide long-term growth of capital.
Principal Investment Strategies:
The Fund invests primarily (at least 65% of total assets) in the common stocks
of companies believed to be early in their life cycle but have the potential to
become major enterprises (emerging growth companies) or major enterprises whose
rates of earnings growth are expected to accelerate. The portfolio manager
selects securities based upon fundamental analysis. The Fund may invest in
foreign securities through which it may have exposure to foreign currencies. It
has and may engage in active and frequent trading.
MFS VIT Growth with Income Series
(MFS VIT Growth with Income Sub-Account)
Fund Family:
MFS Variable Insurance Trust
Fund Advisor:
Massachusetts Financial Services Company
Investment Objective:
The Fund seeks to provide reasonable current income and long-term growth of
capital and income.
Principal Investment Strategies:
The Fund invests primarily (at least 65% of total assets) in equity securities.
The Fund generally focuses on companies with larger market capitalizations that
the portfolio manager believes have sustainable growth prospects and attractive
valuation based on current and expected earnings or cash flow. The Fund also
seeks to generate gross income equal to approximately 90% of the dividend yield
on the Standard & Poor's 500 Composite Index. The Fund may invest in foreign
securities through which it may have exposure to foreign currencies. It has and
may engage in active and frequent trading.
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PIMCO Long-Term U.S. Government Portfolio
(PIMCO Long-Term U.S. Government Sub-Account)
Fund Family:
PIMCO Variable Insurance Trust
Fund Advisor:
Pacific Investment Management Company
Investment Objective:
The Fund seeks to maximize total return, consistent with the preservation of
capital and prudent investment management.
Principal Investment Strategies:
The Fund invests primarily (up to 65% of assets) in U.S. Government securities.
The U.S. Government securities may be represented by options and futures
contracts. The Fund may invest in other fixed income instruments and may invest
all of its assets in derivative instruments or in mortgage-backed securities.
Touchstone Small Cap Value Fund
(Touchstone Small Cap Value Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisor:
Todd Investment Advisors, Inc.
Investment Objective:
The Fund seeks long-term growth of capital.
Principal Investment Strategies:
The Fund invests primarily (at least 75% of total assets) in the common stocks
of small to medium capitalization companies that the portfolio manager believes
are undervalued. The portfolio manager looks for stocks that are priced lower
than they should be, and also contain a catalyst for growth. The Fund may also
invest up to 5% of its assets (at the time of purchase) in any one company. The
Fund will limit its investments so that the percentage of the Fund's assets
invested in a particular industry will not be more than double the percentage of
the industry in the Russell 2000 Index.
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Touchstone Emerging Growth Fund
(Touchstone Emerging Growth Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisors:
David L. Babson & Company, Inc.
Westfield Capital Management Company, Inc.
Investment Objective:
The Fund seeks to increase the value of its shares as a primary goal and to earn
income as a secondary goal.
Principal Investment Strategies:
The Fund invests primarily (at least 65% of total assets) in the common stocks
of smaller, rapidly growing (emerging growth) companies. In selecting its
investments, the portfolio managers focus on those companies they believe will
grow faster than the U.S. economy in general. They also choose companies they
believe are priced lower in the market than their true value.
Touchstone International Equity Fund
(Touchstone International Equity Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisor:
Credit Suisse Asset Management
Investment Objective:
The Fund seeks to increase the value of its shares over the long-term.
Principal Investment Strategies:
The Fund invests primarily (at least 80% of total assets) in equity securities
of foreign companies and will invest in at least 3 countries outside the United
States. A large portion of those non-U.S. equity securities may be issued by
companies active in emerging market countries (up to 40% of total assets).
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Touchstone High Yield Fund
(Touchstone High Yield Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisor:
Fort Washington Investment Advisors, Inc.
Investment Objective:
The Fund seeks to achieve a high level of current income as its main goal.
Capital appreciation is a secondary consideration in achieving its goal.
Principal Investment Strategies:
The Fund invests primarily (at least 65% of total assets)in non-investment grade
debt securities of domestic corporations. Non-investment grade debt securities
are often referred to as "junk bonds" and are considered speculative. The fund
expects to have an average maturity between 6 and 10 years, but may vary
between 4 and 12 years.
Touchstone Value Plus Fund
(Touchstone Value Plus Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisor:
Fort Washington Investment Advisors, Inc.
Investment Objective:
The Fund seeks to increase the value of its shares over the long-term.
Principal Investment Strategies:
The Fund invests primarily (at least 65% of total assets) in common stock of
larger companies that the portfolio manager believes are undervalued. In
choosing undervalued stocks, the portfolio manager looks for companies that have
proven management and unique features or advantages and are believed to be
priced lower than their true value. These companies may not pay dividends. The
Fund may also invest in common stocks of rapidly growing companies to enhance
the Fund's return and vary its investments to avoid having too much of the
Fund's assets subject to risks specific to undervalued stocks. Also, up to 70%
of total assets may be invested in large cap companies and up to 30% may be
invested in mid cap companies.
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Touchstone Growth & Income Fund
(Touchstone Growth & Income Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisor:
Scudder Kemper Investments, Inc.
Investment Objective:
The Fund seeks to increase the value of its shares over the long-term, while
receiving dividend income.
Principal Investment Strategies:
The Fund generally invests (at least 50% of total assets) in dividend-paying
common stocks, preferred stocks and convertible securities in a variety of
industries. The portfolio manager may purchase securities that do not pay
dividends (up to 50%) but which are expected to increase in value or produce
high income payments in the future.
The Fund invests in stocks with lower valuations than the broad market that, in
the portfolio manager's view, have improving fundamentals. The portfolio manager
focuses on investing in the largest 1000 U.S. companies and the largest 100
American Depository Receipts (ADRs).
Touchstone Enhanced 30 Fund
(Touchstone Enhanced 30 Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisor:
Todd Investment Advisors, Inc.
Investment Objective:
The Fund seeks to achieve a total return which is higher than the total return
of the Dow Jones Industrial Average (DJIA).
Principal Investment Strategies:
The Fund's portfolio is based on the 30 stocks which comprise the DJIA. The
portfolio manager seeks to surpass the total return of the DJIA by substituting
stocks that offer above average growth potential for these stocks in the DJIA
that appear to have less growth potential. The portfolio manager uses a database
of 4,000 stocks from which to choose the companies that will be substituted in
the enhanced portion of the portfolio.
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Touchstone Balanced Fund
(Touchstone Balanced Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisor:
OpCap Advisors, Inc.
Investment Objective:
The Fund seeks to achieve an increase in value and current income.
Principal Investment Strategies:
The Fund invests in both equity securities (generally about 60% of total assets)
and debt securities (generally about 40%, but at least 25%). The debt securities
will be rated investment grade or at the highest levels of non-investment grade.
Touchstone Bond Fund
(Touchstone Bond Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisor:
Fort Washington Investment Advisors, Inc.
Investment Objective:
The Fund seeks to provide a high level of dividends and distributions.
Principal Investment Strategies:
The Fund invests primarily in higher quality investment grade debt securities
(at least 65% of total assets). The Fund's investment in debt securities may be
determined by the direction in which interest rates are expected to move because
the value of these securities generally moves in the opposite direction from
interest rates. The Fund expects to have an average maturity between 5 and 15
years.
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Touchstone Standby Income Fund
(Touchstone Standby Income Sub-Account)
Fund Family:
Touchstone Variable Series Trust
Fund Advisor:
Touchstone Advisors, Inc.
Fund Sub-Advisor:
Fort Washington Investment Advisors, Inc.
Investment Objective:
The Fund seeks to provide a higher level of current income than a money market
fund, while also seeking to prevent large fluctuations in the value of the
Sub-Account's initial investment. The Fund does not try to keep a constant $1.00
per share net asset value.
Principal Investment Strategies:
The Fund invests mostly in various types of money market instruments. All
investments will be rated at least investment grade. On average, the securities
held by the Fund will mature in less than one year.
Neither AIM Advisors, Inc., Fred Alger Management, Inc., Bankers Trust Company,
Massachusetts Financial Services Company nor Pacific Investment Management
Company is an affiliate of Columbus Life.
Special Considerations
AIM, Alger, Deutsche, MFS and PIMCO offer shares to Separate Account 1 and other
separate accounts of unaffiliated life insurance companies to fund benefits
under variable annuity contracts and variable life insurance policies.
Touchstone offers its shares to the separate accounts of Columbus Life and
Western-Southern Life Assurance Company to fund benefits under the Policies,
other variable life insurance policies and variable annuity contracts. We do not
foresee any disadvantage to you arising out of these arrangements. Nevertheless,
differences in treatment under tax and other laws, as well as other
considerations, could cause the interests of various purchasers of contracts and
policies to conflict. For example, violation of the federal tax laws by one
separate account investing in a Fund could cause the contracts or policies
funded through another separate account to lose their tax-deferred status,
unless remedial action were taken.
If a material irreconcilable conflict arises between separate accounts, a
separate account may be required to withdraw its investment in a Fund. If it
becomes necessary for a separate account to replace its shares of a Fund with
another investment, the Fund may have to liquidate portfolio securities on a
disadvantageous basis. At the same time, AIM, Alger, Deutsche, MFS, PIMCO and
Columbus Life are subject to conditions imposed by the SEC that are designed to
prevent or remedy any conflict of interest. Touchstone, which is not subject to
such conditions, has adopted certain procedures that substantially reflect and
implement the substance of these conditions. These conditions and procedures
require the Board of Trustees of each Fund has the obligation to monitor events
in order to identify any material irreconcilable conflict that may possibly
arise and to determine what action, if any, should be taken to remedy or
eliminate the conflict.
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Changes in the Sub-Accounts and the Funds
We may add, delete or combine Sub-Accounts. New Sub-Accounts will invest in
Funds we consider suitable. We may also substitute a new Fund or similar
investment option for the Fund in which a Sub-Account invests. We would make a
substitution to ensure the underlying Fund continues to be a suitable
investment. A substitution may be triggered by unsatisfactory investment
performance, a change in laws or regulations, a change in the Fund's investment
objectives or restrictions, a change in the availability of the Fund for
investment, or any other reason. Before any substitution, we will obtain any
required approvals, including approval from the SEC or from Policy holders.
Fixed Account
The Net Premiums that you allocate to the Fixed Account will earn interest. We
guarantee that this interest rate will never be less than an effective annual
rate of at least 3%. We may, but are not required to, credit interest in excess
of this rate. Different interest rates may apply to Net Premiums allocated, or
amounts transferred, to the Fixed Account on different dates. The current
interest rate of the Fixed Account at the time we issue your Policy is shown in
your Policy Schedule.
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VALUATION OF YOUR INVESTMENT
Sub-Accounts
- --------------------------------------------------------------------------------
Accumulation Unit
A unit of measure used to calculate a Policy owner's share of a Sub-Account.
Although it is not the same as a mutual fund share, it is similar.
- --------------------------------------------------------------------------------
Accumulation Unit Value
The dollar value of an Accumulation Unit in a Sub-Account.
- --------------------------------------------------------------------------------
The value of your interest in a Sub-Account is measured in Accumulation Units.
An Accumulation Unit is an accounting unit of measure. It is similar to a share
of a mutual fund. The value of an Accumulation Unit varies from day to day
depending on the investment performance of the Fund in which the Sub-Account is
invested and the expenses of the Sub-Account.
The Accumulation Unit Value of each Sub-Account is calculated on each day that
the New York Stock Exchange is open for business (Valuation Date). The
Accumulation Unit Value of a Sub-Account on any Valuation Date is calculated by
dividing the value of the Sub-Account's net assets by the number of Accumulation
Units credited to the Sub-Account on the Valuation Date.
When you allocate Net Premiums or transfer amounts to a Sub-Account, your
Account Value is credited with Accumulation Units. Other transactions, such as
withdrawals and payments of the Monthly Deduction and Monthly Expense Charge,
will decrease the number of Accumulation Units. The number of Accumulation Units
added to or subtracted from your Account Value is calculated by dividing the
dollar amount of the transaction by the Accumulation Unit Value for the
Sub-Account at the close of trading on the Valuation Date when we process the
transaction. We use the following guidelines to determine the Valuation Date
when we process the transaction:
o If we receive your premium payment or transfer instructions in good
order on a Valuation Date before the close of regular trading on the
New York Stock Exchange (typically 4:00 p.m. Eastern Time), we will
process the transaction on that Valuation Date.
o If not, we will process the transaction on the next Valuation Date.
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To calculate the Accumulation Unit Value of a Sub-Account on any Valuation Date,
we start with the Accumulation Unit Value from the preceding Valuation Date and
adjust it to reflect the following items:
o The investment performance of the Sub-Account, which is based on the
investment performance of the corresponding Fund
o Any dividend or distributions paid by the corresponding Fund
o Any charges or credits for taxes that we determined were the result
of the investment operations of the Sub-Account
o The mortality and expense risk charge
Supplement F to this Prospectus contains a description of the procedures we use
to calculate the Accumulation Unit Value of a Sub-Account.
Fixed Account
The value of the Fixed Account is calculated daily and reflects the following
transactions:
o Net Premiums allocated to the Fixed Account
o Withdrawals from the Fixed Account
o Transfers to and from the Fixed Account
o Interest credited to the Fixed Account
o Charges assessed against the Fixed Account, such as the Monthly
Deduction and Monthly Expense Charges and any surrender charges
Supplement F to this Prospectus contains a description of the procedures we use
to calculate the value in the Fixed Account.
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PERFORMANCE INFORMATION
We may include performance information in advertisements, sales literature and
reports to Policy owners or prospective investors.
We may report performance information in any manner permitted under applicable
law. For example, we may report total returns and average annual total returns
for the Funds and the Sub-Accounts or present performance information as a
change in a hypothetical Policy owner's Account Value or Death Benefit. The
performance information may cover various periods of time, including periods
beginning with the start of operations of a Sub-Account or the Fund in which it
invests. Performance information may not reflect the deduction of all charges
applicable to a particular Policy. For example, performance information may not
reflect the deduction of the cost of insurance charge because of the individual
nature of this charge. If all charges applicable to a particular Policy were
included, performance would be reduced.
You can request a personalized illustration that shows the performance of a
hypothetical Policy. The illustration will be based either on actual historical
Fund performance or on the hypothetical investment return that you request. The
Net Cash Surrender Value provided in the illustration will assume all Fund
charges and expenses, all Separate Account 1 charges and all Policy charges are
deducted. The Account Value provided in the illustration will assume all charges
except the surrender charge are deducted. Your Policy's actual investment
performance may not be the same as the performance of the hypothetical Policy
shown in the illustration. You should not consider any performance information
to be an estimate or guarantee of future performance.
We may also compare the performance of a Sub-Account to the performance of other
separate accounts or investments as listed in rankings prepared by independent
organizations that monitor the performance of separate accounts and other
investments. We may also include evaluations of the Sub-Account published by
nationally recognized ranking services or nationally recognized financial
publications.
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VOTING RIGHTS
Because each Sub-Account invests in a corresponding Fund, Columbus Life is
entitled to vote at any meeting of the Fund's shareholders. Columbus Life, on
behalf of Separate Account 1, votes the shares of a Fund that are held by a
Sub-Account according to the instructions of the holders of the Policies who
have invested in that Sub-Account.
If you have money in a Sub-Account on the record date for a meeting of the
shareholders of the corresponding Fund, we will ask you for voting instructions.
Your voting instructions will apply to a specific number of Fund shares. We will
calculate this number by determining the percentage of the Sub-Account that you
own and applying this percentage to the total number of Fund shares that the
Sub-Account owns.
We will mail materials to you at least 14 days before the shareholder meeting so
you can provide your voting instructions to us. If we do not receive voting
instructions from you, we will still vote the shares for which you are entitled
to provide instructions. We will vote these shares in the same proportion as the
voting instructions received from Policy holders who provide instructions. If
Columbus Life itself is entitled to vote at the shareholders meeting, it will
vote its shares in the same manner.
We may not ask the Policy holders for voting instructions if the applicable
rules and regulations change and permit us to vote the shares of the Fund. We
may also change the manner in which we calculate the number of shares for which
you can provide voting instructions if the applicable rules and regulations
change.
We may disregard the voting instructions of Policy holders under certain
circumstances and state insurance regulators may require us to disregard these
instructions under certain circumstances. If we disregard the voting
instructions we receive, we will include a summary of our actions in our next
report to you.
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COLUMBUS LIFE INSURANCE COMPANY AND SEPARATE ACCOUNT 1
Columbus Life Insurance Company
Columbus Life Insurance Company (Columbus Life) is a stock life insurance
company organized under the laws of the State of Ohio on September 8, 1986. It
is a wholly-owned subsidiary of The Western and Southern Life Insurance Company
(WSLIC), a mutual life insurance company organized under the laws of the State
of Ohio on February 23, 1888. Columbus Life issues insurance and annuity
contracts and is located at 400 East Fourth Street, Cincinnati, Ohio 45202.
Columbus Life is subject to supervision by the department of insurance of the
various states in which it is licensed to transact business.
Investments allocated to the Fixed Account are held in Columbus Life's general
account along with Columbus Life's other assets. The interests of the Fixed
Account have not been registered under the Securities Act of 1933 and Columbus
Life's general account has not been registered as an investment company under
the Investment Company Act of 1940. As a result, the staff of the SEC has not
reviewed the information in this Prospectus about the Fixed Account. Disclosures
regarding the Fixed Account may, however, be subject to certain general
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in a prospectus.
Because of state insurance law requirements, Columbus Life maintains reserves to
cover its obligations under the Policies. The assets in Separate Account 1
attributable to the Policies make up a part of these reserves. Although these
reserves support the Policies, Policy owners have no ownership interest in these
reserves and any excess reserves will be for the benefit of Columbus Life and
not the Policy owners. The general account of Columbus Life is available to
satisfy Columbus Life's obligations under the Policies.
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Directors of Columbus Life. Columbus Life is managed by its Board of Directors,
4 of whom are also officers of Columbus Life or WSLIC. Each Director's principal
business address is 400 East Fourth Street, Cincinnati, Ohio 45202, unless
otherwise noted. The following persons serve as Directors of Columbus Life:
Name Principal Occupation (Past 5 years)
- ---- -----------------------------------
William J. Williams Chairman of the Board of Columbus Life since 1989;
Chairman of the Board of WSLIC and Western-Southern
Life Assurance Company (WSLAC) since 1989; Chief
Executive Officer of WSLIC and WSLAC 1989-1994.
John F. Barrett Vice-Chairman of the Board of Columbus Life since 1987;
Chief Executive Officer of WSLIC and WSLAC since 1994;
President of WSLIC and WSLAC since 1989; Chief
Operating Officer of WSLIC and WSLAC 1989-1994.
Lawrence L. Grypp President and Chief Executive Officer of Columbus Life
since 1999; President and Chief Executive Officer of
Summit Financial Resources, Inc. 1998-1999; Executive
Vice President of Massachusetts Mutual Life Insurance
Company 1976-1996.
James N. Clark Executive Vice President and Secretary of WSLIC and
WSLAC since 1997; Executive Vice President, Secretary
and Treasurer of WSLIC and WSLAC 1996-1997; Executive
Vice President and Treasurer of WSLIC and WSLAC
1994-1996.
Paul H. Amato Retired President and Chief Executive Officer of
Columbus Life. 6216 Whileaway Drive, Loveland, Ohio
45140.
Robert C. Savage General Agent, Savage and Associates, 4427 Talmadge
Road, Building 2, Toledo, Ohio 43623.
Ralph E. Waldo Retired President and Chief Executive Officer of
Columbus Life. 3974 Patricia Drive, Columbus, Ohio
43220.
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Officers of Columbus Life (other than directors). The senior officers of
Columbus Life, other than the Directors named above, and the officers
responsible for the variable life operations are described below. Each officer's
principal business address is 400 East Fourth Street, Cincinnati, Ohio 45202,
unless otherwise noted.
Name Principal Occupation (Past 5 years)
- ---- -----------------------------------
Dale P. Hennie Senior Vice President and Chief Information Officer of
Columbus Life, WSLIC and WSLAC since 1999; Senior Vice
President of Insurance Operations of Columbus Life,
WSLIC and WSLAC 1997-1999; Vice President of WSLIC and
WSLAC 1990-1997.
Nora E. Moushey Senior Vice President and Chief Actuary of Columbus
Life, WSLIC and WSLAC since 1998; Senior Vice President
of Products and Financial Management of Columbus Life
from 1993-1998.
James M. Teeters Senior Vice President of Insurance Operations of
Columbus Life, WSLIC and WSLAC since 1999; Senior Vice
President of Administration of Columbus Life 1991-1999;
Senior Vice President of Administration of WSLIC and
WSLAC 1998-1999.
Robert L. Walker Senior Vice President and Chief Financial Officer of
Columbus Life, WSLIC and WSLAC since 1998; Chief
Financial Officer of National Data Corporation
1997-1998; Senior Vice President and Chief Financial
Officer of Providian Corporation 1993-1997.
Mark A. Wilkerson Senior Vice President and Chief Marketing Officer of
Columbus Life since 1990.
William F. Ledwin Vice President and Chief Investment Officer of Columbus
Life since 1987; Senior Vice President and Chief
Investment Officer of WSLIC and WSLAC since 1989;
President of Fort Washington Investment Advisors, Inc.
since 1990.
Thomas D. Holdridge Vice President of Underwriting of Columbus Life since
1980.
Donald J. Wuebbling Vice President and Secretary of Columbus Life since
1987; Senior Vice President and General Counsel of
WSLIC and WSLAC since 1999; Vice President and General
Counsel of WSLIC and WSLAC 1988-1999.
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Name Principal Occupation (Past 5 years)
- ---- -----------------------------------
Edward S. Heenan Vice President and Comptroller of Columbus Life, WSLIC
and WSLAC since 1987.
James J. Vance Vice President and Treasurer of Columbus Life, WSLIC
and WSLAC since 1999; Treasurer of Columbus Life, WSLIC
and WSLAC 1997-1999; Assistant Treasurer of WSLIC and
WSLAC 1995-1997; Director of Financial Research of
WSLIC and WSLAC 1994-1995.
Charles W. Wood, Jr. Vice President of Sales and Marketing of Columbus Life
since 1999; Vice President of Marketing Support of
Columbus Life 1998-1999; Regional Vice President of
Sales of Ameritas Life Insurance Company 1996-1998;
Senior Vice President and Chief Marketing Officer of
Covenant Life Insurance Company 1988-1995.
Mario J. San Marco Vice President of Columbus Life since 1992; Vice
President of WSLIC and WSLAC since 1988.
The directors, officers and employees of Columbus Life and Touchstone Securities
are bonded in the amount of $12,500,000 by a Financial Institutions Blanket
Bond, for dishonest, fraudulent, or criminal acts, wherever committed, and
whether committed alone or in collusion with others.
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<PAGE>
Separate Account 1
Columbus Life established Columbus Life Separate Account 1 (Separate Account 1)
under Ohio law on September 10, 1998. Separate Account 1 is registered with the
SEC as a unit investment trust. We may operate Separate Account 1 as a
management investment company or any other form permitted by law. We may also
deregister Separate Account 1 if registration with the SEC is no longer
required.
Separate Account 1 currently offers 18 Sub-Account options to purchasers of the
Policies. Separate Account 1 holds the investments allocated to the Sub-Accounts
by the owners of the Policies. It may also hold assets for the benefit of owners
of certain other variable universal life insurance policies that it issues.
Separate Account 1 invests the assets of each Sub-Account in an underlying Fund.
The investment objective of a Sub-Account and the underlying Fund in which it
invests are identical.
We own Separate Account 1's assets but we separate Separate Account 1's assets
from our general account assets and the assets of our other separate accounts.
Liabilities from other businesses we conduct will not be charged to Separate
Account 1's assets. We hold Separate Account 1's assets exclusively for the
benefit of owners and beneficiaries of the Policies and any other variable
universal life policies supported by Separate Account 1. We are obligated to pay
all benefits provided under the Policies.
The income, capital gains and capital losses of each Sub-Account are credited to
or charged against the assets of that Sub-Account without regard to the income,
capital gains or capital losses of any other Sub-Account or Columbus Life.
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SERVICE PROVIDERS
Distribution of the Policies
Touchstone Securities, Inc. is the sole underwriter of the Policy. Touchstone
Securities is a wholly-owned subsidiary of IFS Financial Services, a
wholly-owned subsidiary of WSLAC, a wholly-owned subsidiary of WSLIC. Touchstone
Securities is a broker-dealer registered under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc.
(NASD) and Securities Investor Protection Corporation (SIPC). The Policy will be
sold by agents who have entered into distribution agreements with Touchstone
Securities. The agents will be licensed insurance agents in those states where
the Policy may be lawfully sold. The agents will also be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of NASD.
Columbus Life pays Touchstone Securities, or agents of Touchstone Securities, a
commission of up to 105% of the target annual premium (annualized) in the first
year when the Policy is sold, plus up to 3% of all premiums in excess of the
target annual premium. Each year thereafter, Columbus Life pays a commission of
3% or less on all premiums paid on a Policy. Each year Columbus Life also pays a
service fee of 0.25% or less of the Account Value, less any Indebtedness.
Touchstone Securities is generally responsible for paying its agents and
representatives for distribution of the Policies.
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<PAGE>
Service Providers to the Funds
The key service providers for each family of Funds in which the Sub-Accounts
invest are indicated below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc. (AIM)
Advisor Custodian Underwriter/Distributor
------- --------- -----------------------
<S> <C> <C>
AIM Advisors, Inc. State Street Bank AIM Distributors, Inc.
11 Greenway Plaza, Suite 100 and Trust Company 11 Greenway Plaza, Suite 100
Houston, Texas 77046 225 Franklin Street Houston, Texas 77046
Boston, Massachusetts 02110
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
The Alger American Fund (Alger)
Advisor Custodian Underwriter/Distributor
------- --------- -----------------------
<S> <C> <C>
Fred Alger Management, Inc. Custodial Trust Company Alger Inc.
75 Maiden Lane 101 Carnegie Center 30 Montgomery Street
New York, New York 10038 Princeton, New Jersey 08540 Jersey City, New Jersey 07302
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Deutsche Asset Management VIT Funds (Deutsche)
Advisor Custodian Underwriter/Distributor
------- --------- -----------------------
<S> <C> <C>
Bankers Trust Company Bankers Trust Company Provident Distributors, Inc.
130 Liberty Street 130 Liberty Street Four Falls Corporate Center
New York, New York 10006 New York, New York 10006 West Conshohocken,
Pennsylvania 19428
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
MFS Variable Insurance Trust (MFS)
Advisor Custodian Underwriter/Distributor
------- --------- -----------------------
<S> <C> <C>
Massachusetts Financial State Street Bank and Trust MFS Fund Distributors, Inc
Services Company Company 500 Boyleston Street
500 Boyleston Street 225 Franklin Street Boston, Massachusetts 02116
Boston, Massachusetts 02116 Boston, Massachusetts 02110
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
PIMCO Variable Insurance Trust (PIMCO)
Advisor Custodian Underwriter/Distributor
------- --------- -----------------------
<S> <C> <C>
Pacific Investment Management Investors Fiduciary Trust PIMCO Funds Distributors, Inc.
Company Company 2187 Atlantic Street
840 Newport Center Drive 801 Pennsylvania Stamford, Connecticut 06902
Newport Beach, California 92660 Kansas City, Missouri 64105
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Touchstone Variable Series Trust (Touchstone)
Advisor Custodian Underwriter/Distributor
------- --------- -----------------------
<S> <C> <C>
Touchstone Advisors, Inc. Investors Bank & Trust Touchstone Securities, Inc.
311 Pike Street Company 311 Pike Street
Cincinnati, Ohio 45202 200 Clarendon Street Cincinnati, Ohio 45202
Boston, Massachusetts 02116
- ----------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
TAX MATTERS
The following is a summary discussion of certain federal income tax matters that
apply to your Policy. The following discussion does not purport to be complete
or to cover all situations. The discussion is general in nature, and it should
not be considered tax advice. You should consult your own tax advisor for more
complete information.
The individual situation of each Policy owner or beneficiary will determine how
ownership or receipt of the Policy's proceeds will be treated for purposes of
federal estate tax, state inheritance tax and other taxes. Other than the very
general overview of the effect of federal estate taxes on the Policy that is
contained in the following discussion, the effect of federal estate tax, state
inheritance tax and other taxes is generally not discussed herein.
The following discussion is also based on federal income tax law and
interpretations in effect as of the date of this Prospectus and is subject to
later changes in such tax law or interpretations.
Except as is otherwise expressly noted below, this discussion assumes that you
are the Policy owner and that you are a natural person who is a U.S. citizen and
resident. The tax effects on an owner who is not a natural person, U.S. citizen
or U.S. resident may be different than the effects discussed herein.
General
Your Policy will be treated as "life insurance" for federal income tax purposes
(a) if it meets the definition of life insurance under Section 7702 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (b) for as long as
the investments made by the mutual funds available for investment under the
Policy satisfy certain investment diversification requirements under Section
817(h) of the Code. We believe that the Policy will meet these requirements.
Accordingly, provided that your Policy meets such requirements, the following
federal income tax consequences should apply:
o The death benefit received by the beneficiary under the Policy will
not be subject to federal income tax; and
o Increases in the Policy's cash value as a result of investment
experience will not be subject to federal income tax unless and
until there is a distribution from the Policy, such as a surrender
or a partial withdrawal.
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<PAGE>
Payment of Death Benefit
In general, as long as your Policy is considered "life insurance," the death
benefit payable under the Policy will not be included in the income of the
beneficiary receiving such benefit for federal income tax purposes.
However, if such death benefit is paid in the form of an Income Plan (over a
period of years) and not in a lump sum, then, in general, a portion of each
payment will be tax-free but the remaining portion of each payment will be
treated as interest on the death benefit and will be included in the
beneficiary's income for federal income tax purposes. The portion of each such
payment that will be treated as tax-free and the portion that will be treated as
interest are determined under the provisions of Section 101 of the Code and U.S.
Treasury Department regulations issued thereunder. The tax-free portion
generally will be determined by spreading on a pro rata basis the single sum
death benefit under the Policy over the anticipated number of payments under the
applicable Income Plan.
Pre-Death Distributions -- Testing for Modified Endowment Contract Status
The federal income tax consequences of a distribution from your Policy that does
not reflect the payment of a death benefit under the Policy can be affected by
whether the Policy is determined to be a "modified endowment contract." In all
cases, however, the character of the income that is described in this and the
following parts of this tax discussion as taxable to the recipient will be
ordinary income (as opposed to capital gain).
Your Policy will generally be considered under the Code to be a "modified
endowment contract" if, at any time during the first 7 Policy Years of the
Policy, you have paid a cumulative amount of premiums that exceeds the premiums
that would have been paid by that time under a fixed-benefit insurance policy
that provided a death benefit equal to the Policy's first-year death benefit and
that was designed (based on certain assumptions mandated under the Code) to
provide for paid-up future benefits after the payment of 7 level annual
premiums. This determination is called the "7-pay test."
Further, whenever there is a "material change" in your Policy, it will generally
be (a) treated as a new contract for purposes of determining whether the Policy
is a modified endowment contract and (b) thereby subjected to a new 7-pay test
over a new 7-year period. The new 7-pay test will be adjusted to take into
account, under a prescribed formula, the accumulated cash value of the Policy at
the time of the material change. Thus, a materially changed Policy will be
considered a modified endowment contract if it fails to satisfy the new 7-pay
test.
A material change in your Policy for these purposes could occur as a result of a
change in the Policy's death benefit option, the selection of additional rider
benefits under the Policy, an increase in the Policy's Specified Amount of
coverage, or certain other changes.
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<PAGE>
If your Policy's benefits are reduced during the first 7 Policy Years of the
Policy (or within 7 years after a material change in the Policy), the initial
7-pay test that applied to the Policy at the time of its issue (or, if
applicable, at the time of the material change in the Policy) will be
recalculated based on the reduced level of benefits and applied retroactively
for purposes of such 7-pay test. (Such a reduction in benefits could include,
for example, a decrease in the Policy's Specified Amount that you request or, in
some cases, a partial surrender or termination of additional benefits under a
rider to the Policy.) If the premiums previously paid are greater than the
recalculated 7-pay test limit, the Policy will become a modified endowment
contract.
If your Policy is received in exchange for a modified endowment contract, it
will also be considered a modified endowment contract.
Changes made in your Policy (for example, a decrease in the Policy's benefits or
a lapse or reinstatement of the Policy) may also impact the maximum amount of
premiums that can be paid under the Policy as well as the maximum amount of cash
value that may be maintained under the Policy.
Taxation of Pre-Death Distributions If Your Policy is Not a Modified Endowment
Contract
This part of the tax discussion summarizes the federal income tax purposes of a
distribution to you from your Policy (that does not reflect the payment of a
death benefit under the Policy) when the Policy is not considered a modified
endowment contract.
Loans. As long as your Policy remains in force during the Insured's lifetime
(and is not a modified endowment contract), no part of the proceeds of a loan
from the Policy will be subject to current federal income tax. Interest on the
loan generally will not be tax deductible.
If a loan is still outstanding when the Policy is surrendered or lapses,
however, the then outstanding loan amount will be included in your income for
federal income tax purposes at that time to the extent the cash value of the
Policy exceeds your "basis" in the Policy. Generally your "basis" in the Policy
will equal the premiums you have paid on the Policy less the amount of any
previous distributions from the Policy that were taxable.
Partial Withdrawals. After the first 15 Policy Years of your Policy, the
proceeds from a partial withdrawal will be subject to federal income tax to the
extent such proceeds exceed your "basis" in the Policy. Your "basis" in the
Policy generally will equal the premiums you have paid on the Policy, less the
amount of any previous distributions from the Policy that were not taxable.
During the first 15 Policy Years of your Policy, the proceeds from a partial
withdrawal or a reduction in insurance coverage generally will be subject to
federal income tax to the extent that the then cash surrender value under the
Policy exceeds your "basis" in the Policy, up to certain limits that are set
forth in Section 7702 of the Code.
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<PAGE>
These limits generally are based on the amount by which your premiums on the
Policy or the Policy's cash surrender value immediately before the withdrawal or
reduction in coverage exceeds the amount of premiums or cash surrender value
that was needed for the Policy to be considered a life insurance policy under
the Code immediately before the withdrawal or reduction in coverage. These
limits also depend in part on whether the withdrawal or reduction in coverage
occurs in the first 5 Policy Years of the Policy.
Surrender or Termination. Upon full surrender of your Policy, any excess in the
amount of the proceeds we pay (including for this purpose amounts we use to
discharge any Policy loan) over your "basis" in the Policy will be subject to
federal income tax. You will generally not be taxed on the portion of the
proceeds that does not exceed your "basis" in the Policy. Your "basis" in the
Policy generally will equal the premiums you have paid on the Policy less the
amount of any previous distributions from the Policy that were taxable.
In addition, if your Policy terminates while there is a Policy loan outstanding,
the cancellation of the loan and accrued loan interest will be treated as a
distribution and could be subject to tax under the above rules.
Assignment. Finally, if you make an assignment of rights or benefits under your
Policy, you may be deemed to have received a distribution from the Policy, all
or part of which may be taxable.
Taxation of Pre-Death Distributions If Your Policy Is a Modified Endowment
Contract
This part of the tax discussion summarizes the federal income tax purposes of a
distribution to you from your Policy (that does not reflect the payment of a
death benefit under the Policy) when the Policy is considered a modified
endowment contract.
If your Policy is considered a modified endowment contract, any distribution
from the Policy during the Insured's lifetime will generally be taxed on an
"income-first" basis and hence will be included in your income for federal
income tax purposes to the extent the then cash surrender value of the Policy
exceeds your then "basis" in the Policy. For modified endowment contracts, your
"basis" in the Policy is similar to the basis described above that would apply
if the Policy were not a modified endowment contract, except that your "basis"
would be increased by the amount of any prior loan under the Policy that was
considered taxable income to you.
Distributions for this purpose generally include a loan received under the
Policy (including any increase in the loan amount to pay interest on an existing
loan or an assignment or a pledge to secure a loan) or a partial withdrawal from
the Policy. Thus, any such distributions will be considered taxable income to
you to the extent the cash surrender value exceeds your "basis" in the Policy.
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For purposes of determining the taxable portion of any distribution, all
modified endowment contracts issued by the same insurer (or its affiliate) to
the same owner (excluding certain tax-qualified plans) during any calendar year
are aggregated and treated as if they were a single modified endowment contract.
Thus, if your Policy is considered a modified endowment contract and other
modified endowment contracts issued by us (or an affiliate of ours) were issued
to you in addition to the Policy during any calendar year, the Policy and such
other contracts are considered one contract in determining the tax on any
distribution under the Policy or one of such other contracts.
The U.S. Treasury Department has authority to prescribe additional rules to
prevent avoidance of "income-first" taxation on distributions from modified
endowment contracts.
Further, a 10% penalty tax will also generally apply under the federal income
tax provisions of the Code to the taxable portion of a distribution to you from
your Policy if it is a modified endowment contract. The penalty tax will not,
however, apply to a distribution that is made:
o To you after you have attained age 59 1/2
o In the case of your disability (as defined in the Code and generally
limited to a disability that is expected to result in your death or
be of indefinite duration and that prevents you from working in any
job) or
o Received as part of a series of substantially equal periodic
payments for your life (or life expectancy) or the joint lives (or
joint life expectances) of you and a beneficiary under the Policy.
Surrender or Termination. In addition, upon a full surrender of the Policy, any
excess of the proceeds we pay (including any amounts we use to discharge any
loan) over your "basis" in the Policy will be subject to federal income tax and,
unless an exception applies, the 10% penalty tax.
If your Policy terminates after a Grace Period while there is a Policy loan
outstanding, the cancellation of the loan will be treated as a distribution (to
the extent not previously treated as a distribution) and could be subject to
federal income tax, including the 10% penalty tax, as described above.
Applicable Time Periods. Distributions that occur during a Policy Year in which
your Policy becomes a modified endowment contract, and during any subsequent
Policy Years, will be taxed as described in this part of the discussion as
distributions from a modified endowment contract. In addition, distributions
from your Policy within two years before it becomes a modified endowment
contract also will be subject to federal income tax in this manner. This means
that a distribution made from the Policy when it was not a modified endowment
contract could later become taxable as a distribution from a modified endowment
contract if the Policy, subsequently, becomes a modified endowment contract (by
reason of later failing the 7-pay test).
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<PAGE>
The U.S. Treasury Department has been authorized to prescribe rules that would
treat other distributions from the Policy made in anticipation of the Policy
becoming a modified endowment contract in a similar fashion.
Policy Lapses and Reinstatements
The lapse of your Policy may have the tax consequences described above for
surrenders and terminations, even if you may be able to reinstate the Policy.
For federal income tax purposes, some reinstatements may be treated as the
purchase of a new insurance contract.
Diversification
As has been noted before, your Policy will be treated as "life insurance" for
federal income tax purposes only if, among other things, the investments made by
the mutual funds available for investment under the Policy satisfy certain
investment diversification requirements under Section 817(h) of the Code.
The U.S. Treasury Department has issued regulations that implement the
investment diversification requirements of Code Section 817(h). If we fail to
comply with these regulations, your Policy will be disqualified as a life
insurance policy under Section 7702 of the Code and you will be subject to
federal income tax on the income under the Policy for the period of the
disqualification and for subsequent periods. Separate Account 1, through the
Funds, therefore intends to comply with these requirements.
In connection with the issuance of then temporary diversification regulations,
the U.S. Treasury Department stated that it anticipated the issuance of
guidelines that could describe certain circumstances in which your ability as
the owner of your Policy to direct your investments under the Policy to
particular sub-accounts within Separate Account 1 would cause you, rather than
Columbus Life, to be treated as the owner of the assets of Separate Account 1.
If you were considered the owner of the assets of Separate Account 1, income and
gains from Separate Account 1 would be included in your income for federal
income tax purposes. Columbus Life thus reserves the right to amend the Policy
in any way necessary to avoid any such result.
As of the date of this Prospectus, however, no such guidelines have been issued,
although the U.S. Treasury Department has informally indicated that any such
guidelines could limit the number of investment funds or the frequency of
transfers among such funds. If issued, these guidelines may be applied by us
retroactively.
Estate and Generation Skipping Taxes
As noted before, this tax discussion generally addresses only federal income tax
matters. We do, however, want to note as a general matter that, if you are the
Insured under your Policy, the death benefit under the Policy will generally be
includable in your estate for purposes of federal estate tax. If you are not the
Insured, then, under certain conditions, only the replacement value,
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an amount approximately equal to the cash surrender value of the Policy, will be
includable in your estate for purposes of federal estate tax.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. In general, under the law in effect as of the date of this Prospectus,
estates of less than $650,000 (with such amount increasing incrementally to $1
million by 2006) will not incur a federal estate tax liability. In addition, an
unlimited marital deduction may be available for federal estate tax purposes to
the extent your estate is to be distributed to your surviving spouse.
If you are not the Insured under the Policy, and you die before the Insured, the
value of your Policy, as determined under U.S. Treasury Department regulations,
is includable in your estate for federal estate tax purposes. Whether a federal
estate tax is payable depends on a variety of factors, including those listed in
the preceding paragraph.
As a general rule, if a "transfer" under the Policy is made to a person who is
two or more generations younger than you, a generation skipping transfer tax may
be payable at rates similar to the maximum estate tax rate in effect at the
time. The generation skipping transfer tax provisions generally apply to
"transfers" that would be subject to the gift and estate tax rules. As of the
date of this prospectus, individuals are allowed an aggregate generation
skipping transfer tax exemption of $1,030,000. This amount is indexed for
inflation annually.
Because these rules are complex, you should consult with a qualified tax advisor
for specific information, especially when benefits under the Policy are passing
to younger generations.
The particular situation of the Policy's owner, Insured and/or beneficiary will
determine how ownership or receipt of the Policy's proceeds will be treated for
purposes of federal estate and generation skipping taxes, as well as state and
local estate, inheritance and other taxes.
Pension and Profit-Sharing Plans
If the Policy is purchased by a trust or other entity that forms part of a
pension or profit-sharing plan that is qualified as a tax-favored plan under
Section 401(a) of the Code for the benefit of a participant covered under the
plan, the federal income tax treatment of the Policy will be somewhat different
from that described in the foregoing parts of this tax discussion.
If the Policy is purchased as part of a pension or profit sharing plan for the
benefit of a plan participant, the reasonable net premium cost for the amount of
insurance under the Policy is generally required to be included annually in the
applicable plan participant's income for federal income tax purposes. This cost
is generally determined by tables issued by the Internal Revenue Service or, if
less, the insurance company's rates as to the cost of individual one-year term
insurance for standard risks. This cost (generally referred to as the "P.S.-58"
cost) is reported to the participant annually.
If the plan participant dies while covered by the plan and the Policy proceeds
are paid to the
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participant's beneficiary, then the excess of the Policy's death benefit over
the Policy's cash surrender value generally will not be subject to federal
income tax. However, the Policy's cash surrender value will generally still be
taxable in this situation to the extent it exceeds the participant's cost basis
in the Policy. The participant's cost basis will generally include the costs of
insurance previously reported as income to the participant.
Special rules may apply if the participant borrowed from the Policy or was
considered an owner-employee under the plan (such as the sole proprietor, a 10%
partner, or 5% Subchapter S corporation owner of the employer of the plan).
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased by
a tax-qualified plan. You should consult with the plan administrator and a
qualified tax advisor in such situation.
Other Employee Benefit Programs
Complex rules may also apply when the Policy is held by an employee or a trust,
or acquired by an employee, in connection with the provision of other employee
benefits. In particular, such a Policy owner must consider whether the Policy
was applied for by (or issued to) a person having an insurable interest under
applicable state law and with the insured person's consent. The lack of an
insurable interest or consent may, among other things, affect the qualification
of the Policy as life insurance for federal income tax purposes and the right of
the named beneficiary under the Policy to receive a death benefit.
ERISA
Employers and employer-created trusts may be subject to reporting, disclosure
and fiduciary obligations under the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). An employer or trust should consult a qualified
legal advisor as to the effect of ERISA in any case when the Policy is purchased
in connection with an employee benefit plan.
Withholding
Payments received by you from your Policy (other than the payment of a tax-free
death benefit under the Policy) are generally subject to federal income tax
withholding to the extent it is reasonable to believe that they will be
includable in income for federal income tax purposes, except that you generally
are permitted to elect not to have federal income taxes withheld from such
payments if you notify us on a timely basis that you are making this election
(and meet certain reporting requirements as to such election).
If federal income tax withholding applies to the payment, the withholding is
generally taken at the same rate as is taken on wages; except that, if the
payments are not payable over a period of more than a year, the withholding is
generally taken at a 10% rate. In some cases, when
84
<PAGE>
generation skipping taxes may apply, we may also be required to withhold for
such taxes unless we receive satisfactory written notification that no such
taxes are due.
Changes in Tax Laws
Your Policy may be affected by changes that occur in the federal income tax laws
and by other tax laws, such as state or local income tax laws, federal estate
and gift tax laws and local estate and other similar laws (which other laws are
generally not discussed in this Prospectus). We have also not discussed the
effect of possible tax law changes on the Policy in this tax discussion. We
suggest that you consult a tax advisor if you have questions about the effects
of such other tax laws or of possible changes in the tax laws.
Taxation of Columbus Life
Columbus Life is taxed as a life insurance company under federal income tax
laws. Columbus Life does not initially expect to incur any income tax on the
earnings or the realized capital gains attributable to Separate Account 1. If,
in the future, Columbus Life determines that Separate Account 1 may incur
federal income taxes, then it may assess a charge against the Sub-Accounts for
those taxes. Any charge will reduce your Policy's Account Value.
We may have to pay state, local or other taxes in addition to premium taxes. At
present, these taxes are not substantial. If they increase, charges may be made
for such taxes when they are attributable to Separate Account 1 or allocable to
your Policy.
Finally, certain Funds in which the Sub-Accounts are invested may elect to pass
through to Columbus Life taxes withheld by foreign taxing jurisdictions of
foreign source income. Such an election may result in additional taxable income
and income tax to Columbus Life, which could result in charges being made for
such taxes. The amount of the additional income tax, however, may be more than
offset by credits for the foreign taxes withheld that are also passed through.
These credits may provide a benefit to Columbus Life.
85
<PAGE>
OTHER GENERAL INFORMATION
Legal Matters
Frost & Jacobs LLP has advised Columbus Life on certain federal securities law
matters. All matters of Ohio law pertaining to the Policy, including the
validity of the Policy and Columbus Life's right to issue the Policy under Ohio
insurance law, have been passed upon by Donald J. Wuebbling, Esq., Senior Vice
President and General Counsel of WSLIC.
Experts
Ernst & Young LLP, independent auditors, have audited the financial statements
of Columbus Life Insurance Company Separate Account 1 and Columbus Life
Insurance Company at December 31, 1999 and for the period then ended, as set
forth in their reports. We have included our financial statements in the
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's reports, given on their authority as experts in accounting and
auditing.
The financial statements as of December 31, 1998 and for the year then ended for
Columbus Life Insurance Company included in this Registration Statement have
been so included in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Actuarial matters in the Prospectus have been examined by David M. Burridge,
FSA, MAAA, as stated in his opinion filed as an exhibit to the registration
statement.
Financial Statements
This Prospectus contains financial statements for Separate Account 1 and
financial statements of Columbus Life. The consolidated financial statements of
Columbus Life included in this Prospectus are relevant only for the purpose of
showing the ability of Columbus Life to meet its contractual obligations under
the Policies. The financial statements of Columbus Life do not show or contain
any information about the investment performance of Separate Account 1.
86
<PAGE>
SUPPLEMENT A - POLICY ILLUSTRATION
The following tables illustrate how the Death Benefits, Account Values and Net
Cash Surrender Values of a Policy may vary over an extended period of time at
certain ages, assuming hypothetical gross rates of investment return for the
investment options equivalent to constant gross annual rates of 0%, 5% and 10%.
The hypothetical rates of investment return are for purposes of illustration
only and should not be deemed a representation of past or future rates of
investment return. Actual rates of return for a particular Policy may be more or
less than the hypothetical investment rates of return and will depend on a
number of factors including the investment allocations made by a Policy owner.
Also, values would be different from those shown if the gross annual investment
returns averaged 0%, 5% and 10% over a period of years but fluctuated above and
below those averages for individual Policy Years.
The tables assume that the Sub-Accounts are subject to a daily charge for Fund
advisory fees and operating expenses equivalent to an annual rate of 0.83% of
the average daily net assets. This annual expense ratio is based on the average
of the expense ratios of each available Fund underlying the Sub-Accounts for the
last fiscal year (estimated for Funds beginning operations in 1999) and takes
into account current expense caps or expense reimbursement arrangements. The
fees and expenses of each underlying Fund vary, and the total fees and expenses
used in the above calculation ranged from an annual rate of 0.30% to an annual
rate of 1.25% of average daily net assets. For more information on the
investment option expenses, see the "Policy at a Glance" at the beginning of the
Prospectus.
The tables also assume that the Sub-Accounts are subject to a daily charge for
the Company's mortality and expense risks on a current basis at an annual rate
of 0.90% for the first 20 Policy Years and 0.35% thereafter. On a guaranteed
basis, the annual rate is 1.00% for all Policy Years.
The hypothetical gross annual rates of investment return of 0%, 5% and 10%, when
adjusted for the above daily charges, result in the following net effective
annual rates of return:
o -1.71%, 3.2% and 8.12%, respectively, during the first 20 Policy
Years and -1.17%, 3.71% and 8.65%, respectively, thereafter, with
the mortality and expense risk charge on a current basis.
o -1.81%, 3.1% and 8.01%, respectively, for all Policy Years with the
mortality and expense risk charge on a guaranteed basis.
The tables reflect deduction of all applicable charges described in the
Prospectus for the hypothetical Insured. The Net Cash Surrender Values
illustrated in the tables also reflect deduction of applicable surrender
charges. The current charges and the higher guaranteed maximum charges Columbus
Life may charge are reflected in separate tables on each of the following pages.
The amounts shown are as of the end of each Policy Year.
A-1
<PAGE>
The hypothetical values shown in the tables do not reflect any charges for
federal income taxes against Separate Account 1 since Columbus Life is not
currently making such charges. However, such charges may be made in the future
and, in that event, the gross annual investment rate of return would have to
exceed 0%, 5% or 10% by an amount sufficient to cover tax charges in order to
produce the Death Benefits, Account Values and Net Cash Surrender Values
illustrated.
The tables illustrate the Policy values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated, if
all Net Premiums are allocated to the Sub-Accounts, if no Policy Loans have been
made and if death benefit Option 1 has been selected. The tables are also based
on the assumptions that the Policy owner has not requested an increase or
decrease in Specified Amount, and that no partial withdrawals or transfers have
been made.
For comparative purposes, the second column of each table on the Summary Pages
of the illustrations shows the amount to which the premiums would accumulate if
an amount equal to those premiums were invested to earn interest at 5%
compounded annually.
Upon request, Columbus Life will provide you with a comparable illustration
based upon the proposed Insured's age, sex and premium class, the Specified
Amount or premium requested, and the proposed frequency of premium payments.
A-2
<PAGE>
Columbus Life Insurance Company--Illustration #1
- --------------------------------------------------------------------------------
Designed for John Doe $100,000.00 Specified Amount
Male Issue Age 35 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Preferred-TNU $900.00 Annual Premium
- --------------------------------------------------------------------------------
Flexible Premium Variable Universal Life Insurance
The Policy is a flexible premium, variable universal life policy. The Policy is
called "flexible premium" because you can change the amount and frequency of
your premium payments, within certain limits. The Policy is called"variable"
life insurance because your Cash Surrender Value and your Death Benefit may vary
with the performance of the sub-accounts.
Underwriting Class: Male Preferred- TNU
The cost of insurance for this illustration is based on the assumption the
policy is issued with the underwriting class listed at the left. Actual cost of
insurance will depend on the outcome of the underwriting process, and may vary
from what is shown on the illustration.
Death Benefit Option
You may select from two options. Option 1 provides an initial Death Benefit
equal to the Specified Amount. Option 2 provides an initial Death Benefit equal
to the Specified Amount plus the Account Value.
Initial Specified Amount $100,000
The Specified Amount assumed at issue is shown on the left. The actual amount
payable at death will depend on the Death Benefit Option and may be decreased by
loans or withdrawals, or increased by additional insurance benefits. The
insurance contract will specify how to determine the benefit. The Death Benefits
are illustrated as of the end of each policy year.
Initial Planned Premium Outlay $900.00 Annual
The planned premiums, including lump-sum premiums are shown in the yearly detail
of this illustration (Mode A). Values would be different if premiums are paid
with a different frequency or in different amounts. This illustration assumes
that 100% of the premiums are allocated to the Variable Account.
Minimum Annual Premium for Lifetime Guarantee $1,254.29
By paying the Lifetime No-Lapse Guarantee premium, you are receiving a Benefit
that will keep the policy in force for the lifetime of the insured even if your
policy Net Cash Surrender Value is less than the next Monthly Deduction and
Monthly Expense Charge, and regardless of investment performance.
A-3
<PAGE>
Minimum Annual Premium for Term Guarantee $324.96
By paying the Term No-Lapse Guarantee premium, you are receiving a Benefit that
will keep the policy in force for ten years even if your policy Net Cash
Surrender Value is less than the next Monthly Deduction and Monthly Expense
Charge, and regardless of investment performance. At least 1/12 of this minimum
premium must be paid in order for the policy to take effect.
Non-Guaranteed Elements of the Policy
The cost of Insurance and the policy charges are guaranteed to be no higher than
the maximums stated in the policy and prospectus. The current cost of insurance
and current policy charges are not guaranteed. The Account Value will depend on
the allocation to and the performance of the various sub-accounts as well as the
non-guaranteed elements of the policy. No minimum Account Value is guaranteed
for amounts allocated to the sub-accounts.
A-4
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Summary Page
John Doe Current Charges
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum $0 Initial Premium $900.00
- --------------------------------------------------------------------------------
Summary Page
Assuming Current Charges
Assuming Hypothetical Gross Investment Return of:
<TABLE>
<CAPTION>
0.00% 5.00% 10.00%
------------------ ------------------ ------------------
Net Cash Net Cash Net Cash
Premium Premiums Account Surrender Account Surrender Account Surrender
Year Outlay at 5% Value Value Value Value Value Value
- ------ ------- -------- ------- -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 900 945 618 0 654 0 690 0
2 900 1,937 1,227 0 1,330 0 1,436 0
3 900 2,979 1,826 0 2,028 0 2,245 0
4 900 4,073 2,416 16 2,750 350 3,120 720
5 900 5,222 2,984 584 3,484 1,084 4,055 1,655
6 900 6,428 3,544 1,144 4,242 1,842 5,068 2,668
7 900 7,694 4,084 1,684 5,015 2,615 6,153 3,753
8 900 9,024 4,615 2,215 5,813 3,413 7,328 4,928
9 900 10,420 5,127 2,727 6,627 4,227 8,589 6,189
10 900 11,886 5,620 3,220 7,457 5,057 9,943 7,543
15 900 20,392 7,757 7,757 11,820 11,820 18,367 18,367
20 900 31,247 9,298 9,298 16,521 16,521 30,495 30,495
25 900 45,102 10,284 10,284 21,996 21,996 49,465 49,465
30 900 62,785 9,549 9,549 27,175 27,175 78,157 78,157
35 900 85,353 5,746 5,746 31,047 31,047 122,015 122,015
40 900 114,156 0## 0## 31,949 31,949 187,745 187,745
45 900 150,917 0## 0## 26,086 26,086 287,106 287,106
Age 70 900 85,353 5,746 5,746 31,047 31,047 122,015 122,015
</TABLE>
## Additional premium is required to keep the policy in force.
The current cost of insurance rates and charges are subject to change. Account
Values will vary from those illustrated if actual rates and charges differ from
those assumed.
The hypothetical gross rates of return are illustrative only and do not
represent past or future investment results. Actual investment results may be
more or less than those shown and will depend on investment allocations and the
investment experience of the sub-accounts. No representation is being made that
these hypothetical returns can be achieved over any time period. No minimum
account value is guaranteed for amounts allocated to the sub-accounts.
If actual variable account earnings over an extended period average out to one
of the hypothetical gross investment returns shown here, and if all other
assumptions continue
A-5
<PAGE>
unchanged, it does not mean the policy will perform exactly as in these
illustrations. This is because actual earnings will likely be sometimes higher
and sometimes lower than the average, which will not give the same accumulated
result as a constant rate every year.
A-6
<PAGE>
Columbus Life Insurance Company--Illustration #1
- --------------------------------------------------------------------------------
Designed for: Summary Page
John Doe Maximum Charges
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
Summary Page
Assuming Maximum Charges
Assuming Hypothetical Gross Investment Return of:
<TABLE>
<CAPTION>
0.00% 5.00% 10.00%
------------------ ------------------ ------------------
Net Cash Net Cash Net Cash
Premium Premiums Account Surrender Account Surrender Account Surrender
Year Outlay at 5% Value Value Value Value Value Value
- ------ ------- -------- ------- -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 900 945 556 0 590 0 624 0
2 900 1,937 1,092 0 1,187 0 1,286 0
3 900 2,979 1,607 0 1,792 0 1,990 0
4 900 4,073 2,102 0 2,405 5 2,740 340
5 900 5,222 2,577 177 3,026 626 3,540 1,140
6 900 6,428 3,022 622 3,644 1,244 4,382 1,982
7 900 7,694 3,449 1,049 4,272 1,872 5,281 2,881
8 900 9,024 3,846 1,446 4,897 2,497 6,232 3,832
9 900 10,420 4,214 1,814 5,521 3,121 7,238 4,838
10 900 11,886 4,554 2,154 6,143 3,743 8,306 5,906
15 900 20,392 5,807 5,807 9,193 9,193 14,726 14,726
20 900 31,247 5,988 5,988 11,769 11,769 23,292 23,292
25 900 45,102 4,391 4,391 13,035 13,035 34,611 34,611
30 900 62,785 0## 0## 11,466 11,466 49,798 49,798
35 900 85,353 0## 0## 3,764 3,764 71,256 71,256
40 900 114,156 0## 0## 0## 0## 105,347 105,347
45 900 150,917 0## 0## 0## 0## 156,619 156,619
Age 70 900 85,353 0## 0## 3,764 3,764 71,256 71,256
</TABLE>
## Additional premium is required to keep the policy in force.
Maximum cost of insurance rates and charges have been used to calculate the
above values. These maximums are shown in the policy and prospectus.
The hypothetical gross rates of return are illustrative only and do not
represent past or future investment results. Actual investment results may be
more or less than those shown and will depend on investment allocations and the
investment experience of the sub-accounts. No representation is being made that
these hypothetical returns can be achieved over any time period. No minimum
account value is guaranteed for amounts allocated to the sub-accounts.
A-7
<PAGE>
If actual variable account earnings over an extended period average out to one
of the hypothetical gross investment returns shown here, and if all other
assumptions continue unchanged, it does not mean the policy will perform exactly
as in these illustrations. This is because actual earnings will likely be
sometimes higher and sometimes lower than the average, which will not give the
same accumulated result as a constant rate every year.
A-8
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
Values Projected at 10%
--------------------------------------------------------
8.12% Net 8.01% Net
--------------------------- ---------------------------
Current Charges Maximum Charges
--------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- --------------------------------------------------------------------------------
36 1 900 A 690 0 100,000 624 0 100,000
37 2 900 A 1,436 0 100,000 1,286 0 100,000
38 3 900 A 2,245 0 100,000 1,990 0 100,000
39 4 900 A 3,120 720 100,000 2,740 340 100,000
40 5 900 A 4,055 1,655 100,000 3,540 1140 100,000
41 6 900 A 5,068 2,668 100,000 4,382 1982 100,000
42 7 900 A 6,153 3,753 100,000 5,281 2881 100,000
43 8 900 A 7,328 4,928 100,000 6,232 3832 100,000
44 9 900 A 8,589 6,189 100,000 7,238 4838 100,000
45 10 900 A 9,943 7,543 100,000 8,306 5906 100,000
------
9,000
46 11 900 A 11,399 9,599 100,000 9,439 7639 100,000
47 12 900 A 12,954 11,754 100,000 10,646 9446 100,000
48 13 900 A 14,629 14,028 100,000 11,921 11321 100,000
49 14 900 A 16,432 16,432 100,000 13,282 13282 100,000
50 15 900 A 18,367 18,367 100,000 14,726 14,726 100,000
51 16 900 A 20,454 20,454 100,000 16,251 16,251 100,000
52 17 900 A 22,697 22,697 100,000 17,865 17,865 100,000
53 18 900 A 25,111 25,111 100,000 19,578 19,578 100,000
54 19 900 A 27,701 27,701 100,000 21,381 21,381 100,000
55 20 900 A 30,495 30,495 100,000 23,292 23,292 100,000
------
18,000
56 21 900 A 33,705 33,705 100,000 25,306 25,306 100,000
57 22 900 A 37,186 37,186 100,000 27,435 27,435 100,000
58 23 900 A 40,956 40,956 100,000 29,694 29,694 100,000
59 24 900 A 45,040 45,040 100,000 32,080 32,080 100,000
60 25 900 A 49,465 49,465 100,000 34,611 34,611 100,000
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-9
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
Values Projected at 10%
--------------------------------------------------------
8.12% Net 8.01% Net
--------------------------- ---------------------------
Current Charges Maximum Charges
--------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- --------------------------------------------------------------------------------
61 26 900 A 54,271 54,271 100,000 37,291 37,291 100,000
62 27 900 A 59,494 59,494 100,000 40,140 40,140 100,000
63 28 900 A 65,180 65,180 100,000 43,160 43,160 100,000
64 29 900 A 71,380 71,380 100,000 46,374 46,374 100,000
65 30 900 A 78,157 78,157 100,000 49,798 49,798 100,000
------
27,000
66 31 900 A 85,578 85,578 102,693 53,457 53,457 100,000
67 32 900 A 93,635 93,635 111,426 57,388 57,388 100,000
68 33 900 A 102,358 102,358 120,783 61,629 61,629 100,000
69 34 900 A 111,798 111,798 130,804 66,234 66,234 100,000
70 35 900 A 122,015 122,015 141,537 71,256 71,256 100,000
71 36 900 A 133,071 133,071 153,032 76,767 76,767 100,000
72 37 900 A 145,070 145,070 163,929 82,859 82,859 100,000
73 38 900 A 158,109 158,109 175,501 89,647 89,647 100,000
74 39 900 A 172,293 172,293 187,800 97,175 97,175 105,921
75 40 900 A 187,745 187,745 200,887 105,347 105,347 112,721
------
36,000
76 41 900 A 204,605 204,605 214,835 114,235 114,235 119,947
77 42 900 A 222,861 222,861 234,004 123,765 123,765 129,953
78 43 900 A 242,620 242,620 254,751 133,978 133,978 140,644
79 44 900 A 263,995 263,995 277,195 144,916 144,916 152,162
80 45 900 A 287,106 287,106 301,462 156,619 156,619 164,450
81 46 900 A 312,081 312,081 327,685 169,130 169,130 177,586
82 47 900 A 339,055 339,055 356,007 182,484 182,484 191,608
83 48 900 A 368,169 368,169 386,577 196,719 196,719 206,555
84 49 900 A 399,569 399,569 419,547 211,866 211,866 222,459
85 50 900 A 433,407 433,407 455,077 227,958 227,958 239,356
------
45,000
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-10
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Values Projected at 10%
-----------------------------------------------------------
8.12% Net 8.01% Net
------------------------------ ---------------------------
Current Charges Maximum Charges
------------------------------ ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
86 51 900 A 469,836 469,836 493,327 245,029 245,029 257,280
87 52 900 A 509,015 509,015 534,465 263,110 263,110 276,266
88 53 900 A 551,105 551,105 578,660 282,237 282,237 296,349
89 54 900 A 596,269 596,269 626,082 302,441 302,441 317,593
90 55 900 A 644,676 644,676 646,910 323,749 323,749 339,936
91 56 900 A 696,497 696,497 731,321 346,176 346,176 363,485
92 57 900 A 753,182 753,182 783,310 370,766 370,766 385,597
93 58 900 A 815,457 815,457 839,921 397,902 397,902 409,839
94 59 900 A 884,198 884,198 901,882 428,050 428,050 436,611
95 60 900 A 960,473 960,473 970,078 461,825 461,825 466,443
------
54,000
96 61 900 A 1,044,980 1,044,980 1,044,980 499,614 499,614 499,614
97 62 900 A 1,136,848 1,136,848 1,136,848 540,431 540,431 540,431
98 63 900 A 1,236,717 1,236,717 1,236,717 584,516 584,516 584,516
99 64 900 A 1,345,285 1,345,285 1,345,285 632,133 632,133 632,133
100 65 900 A 1,463,309 1,463,309 1,463,309 683,564 683,564 683,564
------
58,500
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-11
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
Values Projected at 5%
--------------------------------------------------------
3.2% Net 3.1% Net
--------------------------- ---------------------------
Current Charges Maximum Charges
--------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- --------------------------------------------------------------------------------
36 1 900 A 654 0 100,000 590 0 100,000
37 2 900 A 1,330 0 100,000 1,187 0 100,000
38 3 900 A 2,028 0 100,000 1,792 0 100,000
39 4 900 A 2,750 350 100,000 2,405 5 100,000
40 5 900 A 3,484 1,084 100,000 3,026 626 100,000
41 6 900 A 4,242 1,842 100,000 3,644 1,244 100,000
42 7 900 A 5,015 2,615 100,000 4,272 1,872 100,000
43 8 900 A 5,813 3,413 100,000 4,897 2,497 100,000
44 9 900 A 6,627 4,227 100,000 5,521 3,121 100,000
45 10 900 A 7,457 5,057 100,000 6,143 3,743 100,000
------
9,000
46 11 900 A 8,304 6,504 100,000 6,764 4,964 100,000
47 12 900 A 9,157 7,957 100,000 7,384 6,184 100,000
48 13 900 A 10,029 9,429 100,000 7,991 7,391 100,000
49 14 900 A 10,920 10,920 100,000 8,598 8,598 100,000
50 15 900 A 11,820 11,820 100,000 9,193 9,193 100,000
51 16 900 A 12,741 12,741 100,000 9,766 9,766 100,000
52 17 900 A 13,672 13,672 100,000 10,316 10,316 100,000
53 18 900 A 14,616 14,616 100,000 10,842 10,842 100,000
54 19 900 A 15,562 15,562 100,000 11,323 11,323 100,000
55 20 900 A 16,521 16,521 100,000 11,769 11,769 100,000
------
18,000
56 21 900 A 17,602 17,602 100,000 12,158 12,158 100,000
57 22 900 A 18,698 18,698 100,000 12,487 12,487 100,000
58 23 900 A 19,801 19,801 100,000 12,755 12,755 100,000
59 24 900 A 20,903 20,903 100,000 12,938 12,938 100,000
60 25 900 A 21,996 21,996 100,000 13,035 13,035 100,000
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-12
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
Values Projected at 5%
--------------------------------------------------------
3.2% Net 3.1% Net
--------------------------- ---------------------------
Current Charges Maximum Charges
--------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- --------------------------------------------------------------------------------
61 26 900 A 23080 23080 100,000 13,019 13,019 100,000
62 27 900 A 24148 24148 100,000 12,885 12,885 100,000
63 28 900 A 25192 25192 100,000 12,597 12,597 100,000
64 29 900 A 26204 26204 100,000 12,135 12,135 100,000
65 30 900 A 27175 27175 100,000 11,466 11,466 100,000
------
27,000
66 31 900 A 28096 28096 100,000 10,556 10,556 100,000
67 32 900 A 28951 28951 100,000 9,376 9,376 100,000
68 33 900 A 29739 29739 100,000 7,884 7,884 100,000
69 34 900 A 30441 30441 100,000 6,039 6,039 100,000
70 35 900 A 31047 31047 100,000 3,764 3,764 100,000
71 36 900 A 31537 31537 100,000 978 978 100,000
72 37 900 A 31889 31889 100,000 0 0 100,000
73 38 900 A 32097 32097 100,000
74 39 900 A 32126 32126 100,000
75 40 900 A 31949 31949 100,000
------
36,000
76 41 900 A 31533 31533 100,000
77 42 900 A 30806 30806 100,000
78 43 900 A 29712 29712 100,000
79 44 900 A 28167 28167 100,000
80 45 900 A 26086 26086 100,000
81 46 900 A 23360 23360 100,000
82 47 900 A 19852 19852 100,000
83 48 900 A 15388 15388 100,000
84 49 900 A 9732 9732 100,000
85 50 900 A 2574 2574 100,000
------
45,000
86 51 900 A 0 0 0
------
45,900
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-13
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNUFlexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
Values Projected at 0%
---------------------------------------------------------
-1.71% Net -1.81% Net
---------------------------- ---------------------------
Current Charges Maximum Charges
---------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- --------------------------------------------------------------------------------
36 1 900 A 618 0 100,000 556 0 100,000
37 2 900 A 1,227 0 100,000 1,092 0 100,000
38 3 900 A 1,826 0 100,000 1,607 0 100,000
39 4 900 A 2,416 16 100,000 2,102 0 100,000
40 5 900 A 2,984 584 100,000 2,577 177 100,000
41 6 900 A 3,544 1,144 100,000 3,022 622 100,000
42 7 900 A 4,084 1,684 100,000 3,449 1,049 100,000
43 8 900 A 4,615 2,215 100,000 3,846 1,446 100,000
44 9 900 A 5,127 2,727 100,000 4,214 1,814 100,000
45 10 900 A 5,620 3,220 100,000 4,554 2,154 100,000
------
9,000
46 11 900 A 6,094 4,294 100,000 4,867 3,067 100,000
47 12 900 A 6,538 5,338 100,000 5,152 3,952 100,000
48 13 900 A 6,965 6,365 100,000 5,400 4,800 100,000
49 14 900 A 7,375 7,375 100,000 5,622 5,622 100,000
50 15 900 A 7,757 7,757 100,000 5,807 5,807 100,000
51 16 900 A 8,122 8,122 100,000 5,946 5,946 100,000
52 17 900 A 8,461 8,461 100,000 6,038 6,038 100,000
53 18 900 A 8,773 8,773 100,000 6,084 6,084 100,000
54 19 900 A 9,048 9,048 100,000 6,064 6,064 100,000
55 20 900 A 9,298 9,298 100,000 5,988 5,988 100,000
------
18,000
56 21 900 A 9,585 9,585 100,000 5,835 5,835 100,000
57 22 900 A 9,836 9,836 100,000 5,605 5,605 100,000
58 23 900 A 10,044 10,044 100,000 5,299 5,299 100,000
59 24 900 A 10,196 10,196 100,000 4,894 4,894 100,000
60 25 900 A 10,284 10,284 100,000 4,391 4,391 100,000
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-14
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
Values Projected at 0%
---------------------------------------------------------
-1.71% Net -1.81% Net
---------------------------- ---------------------------
Current Charges Maximum Charges
---------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- --------------------------------------------------------------------------------
61 26 900 A 10,308 10,308 100,000 3,765 3,765 100,000
62 27 900 A 10,257 10,257 100,000 3,016 3,016 100,000
63 28 900 A 10,120 10,120 100,000 2,108 2,108 100,000
64 29 900 A 9,888 9,888 100,000 1,026 1,026 100,000
65 30 900 A 9,549 9,549 100,000 0 0 100,000
------
27,000
66 31 900 A 9,092 9,092 100,000
67 32 900 A 8,493 8,493 100,000
68 33 900 A 7,751 7,751 100,000
69 34 900 A 6,840 6,840 100,000
70 35 900 A 5,746 5,746 100,000
71 36 900 A 4,439 4,439 100,000
72 37 900 A 2,889 2,889 100,000
73 38 900 A 1,086 1,086 100,000
74 39 900 A 0 0 100,000
------
35,100
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-15
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Premium Information
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
Premium Information
Term No Lapse $324.96 Guideline $1,393.65
Seven Pay Premium $3,813.30
Guarantee Level
Premium Premium
Lifetime No Lapse $1,254.29 Guideline $15,735.32
Guarantee Single
Premium Premium
If the policy is in force on the policy anniversary when the insured is age 100,
the Death Benefit will continue and the Death Benefit Option will be Option 2.
If the Death Benefit Option was previously Option 1, the Specified Amount will
not be automatically decreased by the Account Value unless the Insured's issue
age was greater than 75. Any riders will terminate. The variable Account Value
and any loan Account Value will be transferred to the fixed account, which will
thereafter earn the then-current interest rate. The fixed account will be
reduced by the amount of any indebtedness and no further loans will be
permitted. No further premiums may be paid and no costs or charges will be
deducted. The policy will continue beyond the Insured's age 100 in this manner
until the Insured's death. However, the owner may discontinue this Extended
Maturity Benefit at any time by surrendering the policy.
A-16
<PAGE>
Columbus Life Insurance Company - Illustration #1
- --------------------------------------------------------------------------------
Designed for: Important Notes
John Doe
Male Age: 35 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $900.00
- --------------------------------------------------------------------------------
Important Notes
Current and maximum values assume that premiums are paid as indicated, that the
first payment is received by the policy issue date, and that each subsequent
periodic payment is received by the planned date.
The current per policy expense charge is $6.00 per month. The maximum per policy
expense charge is $7.00 per month. The current premium expense charge is 4.75%
for policy years 1-20 and 2.75% thereafter. The maximum premium expense charge
is 5.50%. The premium tax charge will vary by state. On a current basis it will
be equal to the state premium tax rate plus .55% for the federal DAC (Deferred
Acquisition Cost) tax. The maximum tax charge is guaranteed to be no greater
than 3.50%. The Account Values, Net Cash Surrender Values and Death Benefits
shown in this illustration reflect the deduction of these charges. The Net Cash
Surrender Values also reflect the deductions of applicable surrender charges.
Current interest credited on the Fixed Account is 5%.
Guaranteed interest credited on the Fixed Account is 3%.
This illustration does include the Term No Lapse Guarantee. The Term No Lapse
Guarantee is available only if the required premium is paid. If the required
premium is not paid the benefit is terminated.
This illustration does not include the Lifetime No Lapse Guarantee. The Lifetime
No Lapse Guarantee is available only if the required premium is paid. If the
required premium is not paid the benefit is terminated.
If premiums are paid as illustrated this policy is not a modified endowment
contract.
This is an illustration and not a contract or offer of insurance. Although the
information in this illustration is based on certain tax and legal assumptions,
it is not intended to be tax or legal advice. Such advice should be obtained
from a professional tax or legal adviser.
A-17
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for John Doe $100,000.00 Specified Amount
Male Issue Age 55 Death Benefit Option: 1
Preferred-TNU $2,280.00 Annual Premium
- --------------------------------------------------------------------------------
Flexible Premium Variable Universal Life Insurance
The Policy is a flexible premium, variable universal life policy. The Policy is
called "flexible premium" because you can change the amount and frequency of
your premium payments, within certain limits. The Policy is called "variable"
life insurance because your Cash Surrender Value and your Death Benefit may vary
with the performance of the sub-accounts.
Underwriting Class: Male Preferred-TNU
The cost of insurance for this illustration is based on the assumption the
policy is issued with the underwriting class listed at the left. Actual cost of
insurance will depend on the outcome of the underwriting process, and may vary
from what is shown on the illustration.
Death Benefit Option
You may select from two options. Option 1 provides an initial Death Benefit
equal to the Specified Amount. Option 2 provides an initial Death Benefit equal
to the Specified Amount plus the Account Value.
Initial Specified Amount $100,000
The Specified Amount assumed at issue is shown on the left. The actual amount
payable at death will depend on the Death Benefit Option and may be decreased by
loans or withdrawals, or increased by additional insurance benefits. The
insurance contract will specify how to determine the benefit. The Death Benefits
are illustrated as of the end of each policy year.
Initial Planned Premium Outlay $2,280.00 Annual
The planned premiums, including lump-sum premiums are shown in the yearly detail
of this illustration (Mode A). Values would be different if premiums are paid
with a different frequency or in different amounts. This illustration assumes
that 100% of the premiums are allocated to the Variable Account.
Minimum Annual Premium for Lifetime Guarantee $3,168.07
By paying the Lifetime No-Lapse Guarantee premium, you are receiving a Benefit
that will keep the policy in force for the lifetime of the insured even if your
policy Net Cash Surrender
A-18
<PAGE>
Value is less than the next Monthly Deduction and Monthly Expense Charge, and
regardless of investment performance.
Minimum Annual Premium for Term Guarantee $1,414.44
By paying the Term No-Lapse Guarantee premium, you are receiving a Benefit that
will keep the policy in force for ten years even if your policy Net Cash
Surrender Value is less than the next Monthly Deduction and Monthly Expense
Charge, and regardless of investment performance. At least 1/12 of this minimum
premium must be paid in order for the policy to take effect.
Non-Guaranteed Elements of the Policy
The cost of Insurance and the policy charges are guaranteed to be no higher than
the maximums stated in the policy and prospectus. The current cost of insurance
and current policy charges are not guaranteed. The Account Value will depend on
the allocation to and the performance of the various sub-accounts as well as the
non-guaranteed elements of the policy. No minimum Account Value is guaranteed
for amounts allocated to the sub-accounts.
A-19
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Summary Page
John Doe Current Charges
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
- --------------------------------------------------------------------------------
Summary Page
Assuming Current Charges
Assuming Hypothetical Gross Investment Return of:
<TABLE>
<CAPTION>
0.00% 5.00% 10.00%
----------------- ------------------ -------------------
Net Cash Net Cash Net Cash
Premium Premiums Account Surrender Account Surrender Account Surrender
Year Outlay at 5% Value Value Value Value Value Value
- ------ ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,280 2,394 1,597 0 168 0 1,779 0
2 2,280 4,908 3,138 0 3,402 0 3,675 0
3 2,280 7,547 4,615 705 5,132 1,222 5,687 1,777
4 2,280 10,318 6,019 2,109 6,871 2,961 7,815 3,905
5 2,280 13,228 7,340 3,430 8,608 4,698 10,062 6,152
6 2,280 16,284 8,583 4,673 10,347 6,437 12,440 8,530
7 2,280 19,492 9,738 5,828 12,079 8,169 14,956 11,046
8 2,280 22,861 10,798 6,888 13,797 9,887 17,614 13,704
9 2,280 26,398 11,755 7,845 15,492 11,582 20,424 16,514
10 2,280 30,111 12,602 8,692 17,159 13,249 23,395 19,485
15 2,280 51,659 14,841 14,841 24,741 24,741 41,204 41,204
20 2,280 79,160 12,515 12,515 30,050 30,050 66,550 66,550
25 2,280 114,259 2,459 2,459 31,691 31,691 110,620 110,620
30 2,280 159,055 0## 0## 21,597 21,597 178,410 178,410
35 2,280 216,227 0## 0## 0## 0## 276,587 276,587
40 2,280 289,195 0## 0## 0## 0## 423,267 423,267
45 2,280 382,322 0## 0## 0## 0## 656,134 656,134
Age 70 2,280 51,659 14,841 14,841 24,610 24,610 41,204 41,204
</TABLE>
## Additional premium is required to keep the policy in force.
The current cost of insurance rates and charges are subject to change. Account
Values will vary from those illustrated if actual rates and charges differ from
those assumed.
The hypothetical gross rates of return are illustrative only and do not
represent past or future investment results. Actual investment results may be
more or less than those shown and will depend on investment allocations and the
investment experience of the sub-accounts. No representation is being made that
these hypothetical returns can be achieved over any time period. No minimum
account value is guaranteed for amounts allocated to the sub-accounts.
A-20
<PAGE>
If actual variable account earnings over an extended period average out to one
of the hypothetical gross investment returns shown here, and if all other
assumptions continue unchanged, it does not mean the policy will perform exactly
as in these illustrations. This is because actual earnings will likely be
sometimes higher and sometimes lower than the average, which will not give the
same accumulated result as a constant rate every year.
A-21
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Summary Page
John Doe Maximum Charges
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
- --------------------------------------------------------------------------------
Summary Page
Assuming Maximum Charges
Assuming Hypothetical Gross Investment Return of:
<TABLE>
<CAPTION>
0.00% 5.00% 10.00%
------------------ ------------------ ------------------
Net Cash Net Cash Net Cash
Premium Premiums Account Surrender Account Surrender Account Surrender
Year Outlay at 5% Value Value Value Value Value Value
- ----- ------- -------- ------- --------- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,280 2,394 1,150 0 1,228 0 1,307 0
2 2,280 4,908 2,207 0 2,422 0 2,645 0
3 2,280 7,547 3,174 0 3,582 0 4,020 110
4 2,280 10,318 4,032 122 4,685 775 5,414 1,504
5 2,280 13,228 4,782 872 5,732 1,822 6,831 2,921
6 2,280 16,284 5,404 1,494 6,701 2,791 8,254 4,344
7 2,280 19,492 5,901 1,991 7,589 3,679 9,687 5,777
8 2,280 22,861 6,241 2,331 8,362 4,452 11,103 7,193
9 2,280 26,398 6,415 2,505 9,006 5,096 12,493 8,583
10 2,280 30,111 6,401 2,491 9,496 5,586 13,838 9,928
15 2,280 51,659 2,781 2,781 8,672 8,672 19,256 19,256
20 2,280 79,160 0 0 0 0 18,811 18,811
25 2,280 114,259 0 0 0 0 0 0
30 2,280 159,055 0 0 0 0 0 0
35 2,280 216,227 0 0 0 0 0 0
40 2,280 289,195 0 0 0 0 0 0
45 2,280 382,322 0 0 0 0 0 0
Age 70 2,280 51,659 2,781 2,781 8,672 8,672 19,256 19,256
</TABLE>
## Additional premium is required to keep the policy in force.
Maximum cost of insurance rates and charges have been used to calculate the
above values. These maximums are shown in the policy and prospectus.
The hypothetical gross rates of return are illustrative only and do not
represent past or future investment results. Actual investment results may be
more or less than those shown and will depend on investment allocations and the
investment experience of the sub-accounts. No representation is being made that
these hypothetical returns can be achieved over any time period. No minimum
account value is guaranteed for amounts allocated to the sub-accounts.
A-22
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Values Projected at 10%
--------------------------------------------------------------------
8.12% Net 8.01% Net
--------------------------------------------------------------------
Current Charges Maximum Charges
--------------------------------------------------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 1 2,280 A 1,779 0 100,000 1,307 0 100,000
57 2 2,280 A 3,675 0 100,000 2,645 0 100,000
58 3 2,280 A 5,687 1,777 100,000 4,020 110 100,000
59 4 2,280 A 7,815 3,905 100,000 5,414 1,504 100,000
60 5 2,280 A 10,162 6,152 100,000 6,831 2,921 100,000
61 6 2,280 A 12,440 8,530 100,000 8,254 4,344 100,000
62 7 2,280 A 14,956 11,046 100,000 9,687 5,777 100,000
63 8 2,280 A 17,614 13,704 100,000 11,103 7,193 100,000
64 9 2,280 A 20,424 16,514 100,000 12,493 8,583 100,000
65 10 2,280 A 23,395 19,485 100,000 13,838 9,928 100,000
------
22,800
66 11 2,280 A 26,542 23,609 100,000 15,119 12,186 100,000
67 12 2,280 A 29,871 27,916 100,000 16,324 14,369 100,000
68 13 2,280 A 33,411 32,434 100,000 17,431 16,453 100,000
69 14 2,280 A 37,179 37,179 100,000 18,424 18,424 100,000
70 15 2,280 A 41,204 41,204 100,000 19,256 19,256 100,000
71 16 2,280 A 45,514 45,514 100,000 19,885 19,885 100,000
72 17 2,280 A 50,147 50,147 100,000 20,249 20,249 100,000
73 18 2,280 A 55,159 55,159 100,000 20,259 20,259 100,000
74 19 2,280 A 60,603 60,603 100,000 19,819 19,819 100,000
75 20 2,280 A 66,550 66,550 100,000 18,811 18,811 100,000
------
45,600
76 21 2,280 A 73,549 73,549 100,000 17,098 17,098 100,000
77 22 2,280 A 81,339 81,339 100,000 14,509 14,509 100,000
78 23 2,280 A 90,084 90,084 100,000 10,843 10,843 100,000
79 24 2,280 A 99,929 99,929 104,926 5,815 5,815 100,000
80 25 2,280 A 110,620 110,620 116,151 0 0 0
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-23
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Values Projected at 10%
---------------------------------------------------------
8.12% Net 8.01% Net
---------------------------- ---------------------------
Current Charges Maximum Charges
---------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
81 26 2,280 A 122,179 122,179 128,288
82 27 2,280 A 134,670 134,670 141,404
83 28 2,280 A 148,159 148,159 155,567
84 29 2,280 A 162,715 162,715 170,851
85 30 2,280 A 178,410 178,410 187,331
-------
68,400
86 31 2,280 A 195,317 195,317 205,083
87 32 2,280 A 213,511 213,511 224,186
88 33 2,280 A 233,068 233,068 244,721
89 34 2,280 A 254,066 254,066 266,770
90 35 2,280 A 276,587 276,587 290,416
91 36 2,280 A 300,710 300,710 315,746
92 37 2,280 A 327,074 327,074 340,157
93 38 2,280 A 356,008 356,008 366,688
94 39 2,280 A 387,910 387,910 395,668
95 40 2,280 A 423,267 423,267 427,499
-------
91,200
96 41 2,280 A 462,403 462,403 462,403
97 42 2,280 A 504,947 504,947 504,947
98 43 2,280 A 551,198 551,198 551,198
99 44 2,280 A 601,476 601,476 601,476
100 45 2,280 A 656,134 656,134 656,134
-------
102,600
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-24
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $2,280.00
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Values Projected at 5%
-------------------------------------------------------
3.2% Net 3.1% Net
--------------------------- ---------------------------
Current Charges Maximum Charges
--------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 1 2,280 A 1,688 0 100,000 1,228 0 100,000
57 2 2,280 A 3,402 0 100,000 2,422 0 100,000
58 3 2,280 A 5,132 1,222 100,000 3,582 0 100,000
59 4 2,280 A 6,871 2,961 100,000 4,685 775 100,000
60 5 2,280 A 8,608 4,698 100,000 5,732 1,822 100,000
61 6 2,280 A 10,347 6,437 100,000 6,701 2,791 100,000
62 7 2,280 A 12,079 8,169 100,000 7,589 3,679 100,000
63 8 2,280 A 13,797 9,887 100,000 8,362 4,452 100,000
64 9 2,280 A 15,492 11,582 100,000 9,006 5,096 100,000
65 10 2,280 A 17,159 13,249 100,000 9,496 5,586 100,000
------
22,800
66 11 2,280 A 18,789 15,857 100,000 9,803 6,870 100,000
67 12 2,280 A 20,367 18,412 100,000 9,907 7,952 100,000
68 13 2,280 A 21,894 20,916 100,000 9,777 8,800 100,000
69 14 2,280 A 23,354 23,354 100,000 9,386 9,386 100,000
70 15 2,280 A 24,741 24,741 100,000 8,672 8,672 100,000
71 16 2,280 A 26,037 26,037 100,000 7,573 7,573 100,000
72 17 2,280 A 27,227 27,227 100,000 6,011 6,011 100,000
73 18 2,280 A 28,309 28,309 100,000 3,867 3,867 100,000
74 19 2,280 A 29,256 29,256 100,000 1,015 1,015 100,000
75 20 2,280 A 30,050 30,050 100,000 0 0 0
------
45,600
76 21 2,280 A 30,895 30,895 100,000
77 22 2,280 A 31,527 31,527 100,000
78 23 2,280 A 31,908 31,908 100,000
79 24 2,280 A 31,980 31,980 100,000
80 25 2,280 A 31,691 31,691 100,000
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-25
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $2,280.00
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Values Projected at 5%
-------------------------------------------------------
3.2% Net 3.1% Net
--------------------------- ---------------------------
Current Charges Maximum Charges
--------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
81 26 2,280 A 30,970 30,970 100,000
82 27 2,280 A 29,730 29,730 100,000
83 28 2,280 A 27,863 27,863 100,000
84 29 2,280 A 25,218 25,218 100,000
85 30 2,280 A 21,597 21,597 100,000
------
68,400
86 31 2,280 A 16,729 16,729 100,000
87 32 2,280 A 10,264 10,264 100,000
88 33 2,280 A 1,724 1,724 100,000
89 34 2,280 A 0 0 0
------
77,520
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-26
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Policy Illustration
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
Lump Sum: $0 Initial Premium: $2,280.00
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Values Projected at 0%
--------------------------------------------------------
-1.71% Net -1.81% Net
--------------------------- ---------------------------
Current Charges Maximum Charges
--------------------------- ---------------------------
End Net Cash Net Cash
of Premium Account Surrender Death Account Surrender Death
Age Year Outlay Mode Value Value Benefit Value Value Benefit
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 1 2,280 A 1,597 0 100,000 1150 0 100,000
57 2 2,280 A 3,138 0 100,000 2207 0 100,000
58 3 2,280 A 4,615 705 100,000 3174 0 100,000
59 4 2,280 A 6,019 2,109 100,000 4032 122 100,000
60 5 2,280 A 7,340 3,430 100,000 4782 872 100,000
61 6 2,280 A 8,583 4,673 100,000 5404 1,494 100,000
62 7 2,280 A 9,738 5,828 100,000 5901 1,991 100,000
63 8 2,280 A 10,798 6,888 100,000 6241 2,331 100,000
64 9 2,280 A 11,755 7,845 100,000 6415 2,505 100,000
65 10 2,280 A 12,602 8,692 100,000 6401 2,491 100,000
------
22,800
66 11 2,280 A 13,331 10,398 100,000 6176 3,244 100,000
67 12 2,280 A 13,924 11,969 100,000 5728 3,773 100,000
68 13 2,280 A 14,385 13,407 100,000 5031 4,053 100,000
69 14 2,280 A 14,693 14,693 100,000 4,066 4,066 100,000
70 15 2,280 A 14,841 14,841 100,000 2,781 2,781 100,000
71 16 2,280 A 14,808 14,808 100,000 1,126 1,126 100,000
72 17 2,280 A 14,574 14,574 100,000 0 0 0
73 18 2,280 A 14,135 14,135 100,000
74 19 2,280 A 13,458 13,458 100,000
75 20 2,280 A 12,515 12,515 100,000
------
45,600
76 21 2,280 A 11,939 11,939 100,000
77 22 2,280 A 9,894 9,894 100,000
78 23 2,280 A 7,961 7,961 100,000
79 24 2,280 A 5,509 5,509 100,000
80 25 2,280 A 2,459 2,459 100,000
81 26 2,280 A 0 0 0
------
59,280
</TABLE>
Net investment return percentages shown at the top of the page are calculated as
the hypothetical gross investment return less all asset-based charges shown in
the Prospectus. The amounts shown in the columns labeled under Account Values,
Net Cash Surrender Values and Death Benefits reflect these net investment
returns as well as other applicable types of insurance costs, deductions and
charges shown in the Prospectus. This illustration does not project performance
of any fund selected.
A-27
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Premium Information
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $2,280.00
- --------------------------------------------------------------------------------
Premium Information
Term No Lapse $1,414.44 Guideline $3,520.08
Seven Pay Premium $7,440.98
Guarantee Level
Premium Premium
Lifetime No Lapse $3,168.07 Guideline $36,648.25
Guarantee Single
Premium Premium
If the policy is in force on the policy anniversary when the insured is age 100,
the Death Benefit will continue and the Death Benefit Option will be Option 2.
If the Death Benefit Option was previously Option 1, the Specified Amount will
not be automatically decreased by the Account Value unless the Insured's issue
age was greater than 75. Any riders will terminate. The variable Account Value
and any loan Account Value will be transferred to the fixed account, which will
thereafter earn the then-current interest rate. The fixed account will be
reduced by the amount of any indebtedness and no further loans will be
permitted. No further premiums may be paid and no costs or charges will be
deducted. The policy will continue beyond the Insured's age 100 in this manner
until the Insured's death. However, the owner may discontinue this Extended
Maturity Benefit at any time by surrendering the policy.
A-28
<PAGE>
Columbus Life Insurance Company - Illustration #2
- --------------------------------------------------------------------------------
Designed for: Important Notes
John Doe
Male Age: 55 Preferred-TNU Flexible Premium Variable Universal Life
- --------------------------------------------------------------------------------
Initial Death Benefit: $100,000.00 Death Benefit Option: 1
- --------------------------------------------------------------------------------
Lump Sum: $0 Initial Premium: $2,280.00
- --------------------------------------------------------------------------------
Important Notes
Current and maximum values assume that premiums are paid as indicated, that the
first payment is received by the policy issue date, and that each subsequent
periodic payment is received by the planned date.
The current per policy expense charge is $6.00 per month. The maximum per policy
expense charge is $7.00 per month. The current premium expense charge is 4.75%
for policy years 1-20 and 2.75% thereafter. The maximum premium expense charge
is 5.50%. The premium tax charge will vary by state. On a current basis it will
be equal to the state premium tax rate plus .55% for the federal DAC (Deferred
Acquisition Cost) tax. The maximum tax charge is guaranteed to be no greater
than 3.50%. The Account Values, Net Cash Surrender Values and Death Benefits
shown in this illustration reflect the deduction of these charges. The Net Cash
Surrender Values also reflect the deductions of applicable surrender charges.
Current interest credited on the Fixed Account is 5%.
Guaranteed interest credited on the Fixed Account is 3%.
This illustration does include the Term No Lapse Guarantee. The Term No Lapse
Guarantee is available only if the required premium is paid. If the required
premium is not paid the benefit is terminated.
This illustration does not include the Lifetime No Lapse Guarantee. The Lifetime
No Lapse Guarantee is available only if the required premium is paid. If the
required premium is not paid the benefit is terminated.
If premiums are paid as illustrated this policy is not a modified endowment
contract.
This is an illustration and not a contract or offer of insurance. Although the
information in this illustration is based on certain tax and legal assumptions,
it is not intended to be tax or legal advice. Such advice should be obtained
from a professional tax or legal adviser.
A-29
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
A-30
<PAGE>
SUPPLEMENT B -
TABLE OF APPLICABLE DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
Insured's Age Applicable Insured's Age Applicable Insured's Age Applicable
Last Policy Death Benefit Last Policy Death Benefit Last Policy Death Benefit
Anniversary Factor Anniversary Factor Anniversary Factor
- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1 through 40 2.50 54 1.57 68 1.17
41 2.43 55 1.50 69 1.16
42 2.36 56 1.46 70 1.15
43 2.29 57 1.42 71 1.13
44 2.22 58 1.38 72 1.11
45 2.15 59 1.34 73 1.09
46 2.09 60 1.30 74 1.07
47 2.03 61 1.28 75 through 90 1.05
48 1.97 62 1.26 91 1.04
49 1.91 63 1.24 92 1.03
50 1.85 64 1.22 93 1.02
51 1.78 65 1.20 94 1.01
52 1.71 66 1.19 95 or higher 1.00
53 1.64 67 1.18
</TABLE>
B-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
B-2
<PAGE>
SUPPLEMENT C - TABLE OF COST OF INSURANCE CHARGES
The Guaranteed Maximum Monthly Cost of Insurance Charges per $1,000 of Specified
Amount for an Insured in the standard or preferred underwriting class are listed
in the table below (Based on 1980 CSO Mortality Table, Age Last Birthday). For
any insured in a special or substandard rate class, the rate above must be
multiplied by the appropriate rating factor, as shown in an amendment added to
the policy.
- -------------------------- ---------------------------------------------------
Juvenile Ages Adult Ages
- -------------------------- ---------------------------------------------------
Male Male Female Female
Attained Attained Tobacco Tobacco Tobacco Tobacco
Age Male Female Age Abstainer* User** Abstainer* User**
- -------- ---- -------- -------- --------- ------- ---------- --------
0 0.09 0.07 20 0.14 0.19 0.08 0.10
1 0.09 0.07 21 0.14 0.19 0.09 0.10
2 0.08 0.07 22 0.14 0.19 0.09 0.10
3 0.08 0.07 23 0.13 0.19 0.09 0.10
4 0.08 0.06 24 0.13 0.18 0.09 0.11
5 0.07 0.06 25 0.13 0.18 0.09 0.11
6 0.07 0.06 26 0.12 0.17 0.09 0.11
7 0.07 0.06 27 0.12 0.17 0.10 0.12
8 0.06 0.06 28 0.12 0.17 0.10 0.12
9 0.06 0.06 29 0.12 0.17 0.10 0.13
10 0.06 0.06 30 0.12 0.18 0.10 0.13
11 0.07 0.06 31 0.12 0.18 0.11 0.14
12 0.08 0.06 32 0.13 0.19 0.11 0.14
13 0.09 0.06 33 0.13 0.20 0.12 0.15
14 0.10 0.07 34 0.14 0.21 0.12 0.16
15 0.12 0.07 35 0.14 0.23 0.13 0.17
16 0.13 0.08 36 0.15 0.24 0.13 0.18
17 0.14 0.08 37 0.16 0.26 0.14 0.20
18 0.15 0.08 38 0.17 0.29 0.16 0.22
19 0.16 0.09 39 0.18 0.31 0.17 0.24
- -------------------------- 40 0.20 0.35 0.18 0.26
41 0.21 0.38 0.20 0.29
42 0.23 0.42 0.21 0.32
* Abstainer generally 43 0.25 0.46 0.23 0.34
means the Insured does not 44 0.27 0.50 0.24 0.37
use tobacco products. 45 0.29 0.55 0.26 0.40
46 0.31 0.60 0.28 0.43
47 0.34 0.65 0.29 0.46
** User generally means 48 0.36 0.71 0.31 0.49
the Insured uses tobacco 49 0.39 0.77 0.34 0.53
products. 50 0.43 0.84 0.36 0.57
51 0.47 0.92 0.39 0.61
52 0.51 1.00 0.42 0.65
53 0.57 1.11 0.46 0.71
54 0.62 1.22 0.49 0.76
- -------------------------- ---------------------------------------------------
C-1
<PAGE>
---------------------------------------------------
Adult Ages
---------------------------------------------------
Male Male Female Female
Attained Tobacco Tobacco Tobacco Tobacco
Age Abstainer* User** Abstainer* User**
-------- --------- ------- ---------- --------
55 0.69 1.33 0.53 0.81
56 0.76 1.46 0.57 0.87
57 0.83 1.59 0.61 0.92
58 0.92 1.73 0.65 0.97
59 1.01 1.88 0.69 1.02
60 1.12 2.04 0.74 1.09
61 1.23 2.23 0.80 1.16
62 1.37 2.45 0.88 1.27
63 1.52 2.68 0.97 1.39
64 1.69 2.95 1.08 1.53
65 1.88 3.22 1.20 1.68
66 2.08 3.52 1.32 1.83
67 2.30 3.82 1.44 1.97
68 2.53 4.14 1.57 2.12
69 2.80 4.49 1.71 2.28
70 3.10 4.88 1.88 2.47
71 3.44 5.31 2.08 2.71
72 3.84 5.81 2.33 3.01
73 4.29 6.37 2.64 3.36
74 4.79 6.98 2.98 3.77
75 5.33 7.64 3.38 4.21
76 5.91 8.32 3.80 4.69
77 6.51 9.01 4.26 5.19
78 7.15 9.71 4.76 5.73
79 7.85 10.45 5.32 6.31
80 8.62 11.26 5.96 6.97
81 9.50 12.15 6.70 7.73
* Abstainer generally 82 10.50 13.16 7.56 8.60
means the Insured does not 83 11.63 14.26 8.55 9.61
use tobacco products. 84 12.86 15.43 9.65 10.73
85 14.18 16.62 10.86 11.93
86 15.57 17.80 12.17 13.21
** User generally means 87 17.00 19.04 13.59 14.57
the Insured uses tobacco 88 18.49 20.35 15.13 16.01
products. 89 20.04 21.67 16.79 17.53
90 21.69 23.03 18.61 19.26
91 23.49 24.47 20.64 21.16
92 25.50 26.17 22.97 23.32
93 27.96 28.41 25.80 25.94
94 31.38 31.56 29.59 29.59
95 36.80 36.80 35.37 35.37
96 46.59 46.59 45.53 45.53
97 67.04 67.04 66.32 66.32
98 120.67 120.67 120.23 120.23
99 120.67 120.67 120.23 120.23
---------------------------------------------------
C-2
<PAGE>
SUPPLEMENT D - TABLE OF SURRENDER CHARGES
The Maximum Surrender Charges per $1,000 of decrease in Specified Amount (except
for decreases caused by a change of death benefit options) for Policy Years 1-10
are listed in the table below. Surrender charge decreases linearly to zero
between the end of year 10 and the end of year 14.
- ---------------------- --------------------------------------------------
Juvenile Ages Adult Ages
- ---------------------- --------------------------------------------------
Issue Issue Male Male Female Female
Age Male Female Age Abstainer* User** Abstainer* User**
- ----- ---- ------ ------ ---------- ------- ---------- --------
0 15.40 14.60 20 18.80 20.70 17.80 18.70
1 15.50 14.60 21 19.10 21.00 18.00 19.00
2 15.60 14.80 22 19.30 21.30 18.30 19.30
3 15.80 14.90 23 19.60 21.60 18.50 19.60
4 15.90 15.00 24 19.80 22.00 18.80 19.90
5 16.10 15.20 25 20.10 22.30 19.10 20.20
6 16.30 15.30 26 20.40 22.70 19.30 20.50
7 16.40 15.50 27 20.80 23.10 19.60 20.80
8 16.60 15.60 28 21.10 23.50 19.90 21.20
9 16.90 15.80 29 21.50 24.00 20.30 21.60
10 17.10 16.00 30 21.80 24.40 20.60 21.90
11 17.30 16.10 31 22.20 24.90 20.90 22.30
12 17.60 16.30 32 22.60 25.40 21.30 22.80
13 17.80 16.50 33 23.00 26.00 21.70 23.20
14 18.10 16.70 34 23.50 26.60 22.10 23.70
15 18.30 16.90 35 24.00 27.20 22.50 24.20
16 18.50 17.10 36 24.40 27.80 22.90 24.70
17 18.80 17.40 37 24.90 28.50 23.40 25.20
18 19.00 17.60 38 25.50 29.20 23.80 25.70
19 19.30 17.80 39 26.00 29.90 24.30 26.30
- ---------------------- 40 26.60 30.60 24.80 26.90
41 27.20 31.40 25.30 27.50
42 27.80 32.20 25.80 28.10
43 28.40 33.10 26.40 28.80
44 29.10 34.00 27.00 29.40
45 29.80 34.90 27.60 30.10
* Abstainer generally 46 30.60 35.90 28.20 30.80
means the Insured does not 47 31.30 36.90 28.80 31.60
use tobacco products. 48 32.10 38.00 29.50 32.30
49 33.00 39.10 30.20 33.10
50 33.90 40.30 30.90 33.90
** User generally means 51 34.80 41.60 31.70 34.80
the Insured uses tobacco 52 35.80 42.90 32.40 35.70
products. 53 36.80 44.30 33.20 36.50
54 37.90 44.90 34.10 37.50
55 39.10 44.60 34.90 38.40
56 40.30 44.20 35.80 39.40
- ---------------------- --------------------------------------------------
D-1
<PAGE>
--------------------------------------------------
Adult Ages
--------------------------------------------------
Issue Male Male Female Female
Age Abstainer* User** Abstainer* User**
------ ---------- ------- ---------- --------
57 41.60 43.90 36.80 40.50
58 42.90 43.60 37.80 41.60
59 43.50 43.30 38.90 42.80
60 43.00 42.90 40.00 44.00
61 42.60 42.60 41.20 44.00
62 42.10 42.30 42.50 43.50
* Abstainer generally 63 41.60 42.00 42.80 42.90
means the Insured does not 64 41.20 41.60 42.20 42.30
use tobacco products. 65 40.80 41.30 41.60 41.80
66 40.30 41.10 41.00 41.20
67 40.00 40.90 40.40 40.70
** User generally means the 68 39.60 40.70 39.80 40.20
the Insured uses tobacco 69 39.30 40.50 39.30 39.70
products. 70 38.90 40.40 38.70 39.20
71 38.60 40.30 38.10 38.70
72 38.30 40.20 37.60 38.30
73 38.00 40.00 37.10 37.80
74 37.70 39.90 36.50 37.40
75 37.40 39.90 36.00 37.00
76 37.10 39.80 35.60 36.60
77 36.90 39.80 35.10 36.20
78 36.80 39.70 34.70 35.90
79 36.60 39.60 34.30 35.60
80 36.50 39.50 34.00 35.20
81 36.30 39.30 33.50 34.80
82 35.90 38.90 33.00 34.30
83 35.30 38.10 32.30 33.50
84 34.40 36.90 31.40 32.50
85 32.90 35.10 30.00 31.00
--------------------------------------------------
D-2
<PAGE>
SUPPLEMENT E - CONTINUATION PROVISIONS
Continuation Under the Term No-Lapse Guarantee Provision
To determine if your adjusted total premium payments are sufficient to maintain
the Term No-Lapse Guarantee for continuation of your Policy when the Term
No-Lapse Guarantee applies, we use the following procedure:
o We determine your adjusted total premium payments (the total amount
of your premium payments less the amount of any withdrawals and the
amount of your Loan Account).
o We determine if you have made any changes in your Policy that
resulted in a change in the Monthly Deduction. In this discussion,
we call this type of change a policy change.
o We determine the total required amount for this guarantee provision.
o If you have not made any policy changes, the total required
amount is 1/12th of the applicable minimum annual premium for
the Term No-Lapse Guarantee multiplied by the number of months
from the Policy Date to the next Monthly Anniversary Day. The
minimum annual premium for the Term No-Lapse Guarantee under
your Policy is shown in your Policy Schedule.
For example, if the minimum annual premium for the Term
No-Lapse Guarantee is $1,200, your Policy Date is June 15,
2000, the next Monthly Anniversary Day is March 15, 2001, and
you have not made any policy change, the required amount is
$900 ($100 ($1,200 divided by 12) x 9 (number of months in the
period)).
o If you have made a policy change, we calculate a required
amount for the period from the Policy Date to the date on
which the policy change was effective and a required amount
for the period from the date on which the policy change was
effective to the next Monthly Anniversary Day. Each
calculation is based on the minimum annual premium for the
Term No-Lapse Guarantee applicable for the period. We then add
the 2 required amounts to determine the total required amount.
o If you have made more than one policy change, we calculate a
required amount for each period. We then add the required
amounts to determine the total required amount.
o We then compare your adjusted total premium payments to the
total required amount.
o If your adjusted total premium payments are equal to or
greater than the total required amount, your Policy will
continue to be effective, your Term No-Lapse Guarantee will
remain in effect and your Policy will not lapse.
o If your adjusted total premium payments are less than the
total required amount, a Grace Period will start.
E-1
<PAGE>
o We will send you notice if you are in jeopardy of losing your
Term No-Lapse Guarantee. If your Term No-Lapse Guarantee is
lost, it will not be reinstated.
Continuation Under the Lifetime No-Lapse Guarantee Provision
To determine if your adjusted total premium payments are sufficient for
continuation when the Lifetime No-Lapse Guarantee applies, we use the procedure
described above, but we base our calculation of the total required amount on the
minimum annual premium for the Lifetime No-Lapse Guarantee under your Policy as
shown on your Policy Schedule.
E-2
<PAGE>
SUPPLEMENT F - VALUATION PROCEDURES
Sub-Accounts Accumulation Unit Value
In this discussion, the term Valuation Period means the period of time
beginning at the close of trading on the NYSE on one Valuation Date, as defined
below, and ending at the close of trading on the NYSE on the next succeeding
Valuation Date. A Valuation Date is each day valuation of the Sub-Accounts is
required by law including every day that the NYSE is open.
The value of an Accumulation Unit at the close of any Valuation Period is
determined for each Sub-Account by multiplying the Accumulation Unit Value of
the Sub-Account at the close of the immediately preceding Valuation Period by
the "Net Investment Factor" (described below). Depending upon investment
performance of the underlying Fund in which the Sub-Account is invested, the
Accumulation Unit Value may increase or decrease.
The Net Investment Factor for each Sub-Account for any Valuation Period is
determined by dividing (a) by (b) and subtracting (c) from the result, where:
(a) equals: (1) the net asset value per share of the underlying Fund at
the end of the current Valuation Period, plus
(2) the per share amount of any dividend or capital gain
distribution made by the underlying Fund on shares held in the
Sub-Account if the "ex-dividend" date occurs during the
current Valuation Period, plus or minus
(3) a per share charge or credit for any taxes reserved, which
are determined by Columbus Life to have resulted from the
investment operations of the Sub-Account during the current
Valuation Period;
(b) is the net asset value per share of the corresponding underlying
Fund determined at the end of the immediately preceding Valuation
Period; and
(c) is a factor representing the charges deducted from the Sub-Account
on a daily basis for the daily portion of the annual mortality and
expense risk charge.
F-1
<PAGE>
Fixed Account Value
The value of the Fixed Account is calculated on a daily basis by the
following formula:
NP + XFT + I - XFF - WD = value of the Fixed Account where
NP = the sum of all Net Premiums allocated to the Fixed Account
XFT = any amount transferred to the Fixed Account from a Sub-Account
I = interest credited by Columbus Life to the Fixed Account
XFF = any amounts transferred from the Fixed Account to a
Sub-Account
WD = any amounts withdrawn for charges or deductions, or in
connection with any surrenders or partial withdrawals
F-2
<PAGE>
SEPARATE ACCOUNT 1 FINANCIAL STATEMENTS
Financial Statements
Columbus Life Insurance Company
Separate Account 1
Period ended December 31, 1999
with Report of Independent Auditors
i
<PAGE>
Columbus Life Insurance Company
Separate Account 1
Financial Statements
Period ended December 31, 1999
Contents
Report of Independent Auditors..............................................iii
Audited Financial Statements
Statement of Net Assets......................................................iv
Statement of Operations and Changes in Net Assets for the Period
ended December 31, 1999.....................................................v
Notes to Financial Statements................................................ix
Supplementary Information-Selected Per Unit Data and Ratios................xiii
ii
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Contractholders of Columbus Life Insurance Company Separate Account 1
and
Board of Directors of Columbus Life Insurance Company
We have audited the accompanying statement of net assets of Columbus Life
Insurance Company Separate Account 1 (comprising, respectively, the AIM V.I.
Growth Fund, AIM V.I. Government Securities Fund, Alger American Small
Capitalization Portfolio, Alger American Growth Portfolio, MFS Emerging Growth
Series, MFS Growth with Income Series, PIMCO Long-Term U.S. Government Bond
Portfolio, Touchstone Small Cap Value Fund, Touchstone Emerging Growth Fund,
Touchstone International Equity Fund, Touchstone Income Opportunity Fund,
Touchstone High Yield Bond Fund, Touchstone Value Plus Fund, Touchstone Growth &
Income Fund, Touchstone Enhanced 30 Fund, Touchstone Balanced Fund, Touchstone
Bond Fund, and Touchstone Standby Income Fund) as of December 31, 1999, and the
related statement of operations and changes in net assets and selected per unit
data and ratios for the period indicated therein. These financial statements and
per unit data and ratios are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and per
unit data and ratios based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and per
unit data and ratios are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and selected per unit data and ratios
referred to above present fairly, in all material respects, the financial
position of each of the respective sub-accounts constituting the Columbus Life
Insurance Company Separate Account 1 at December 31, 1999, and the results of
their operations and changes in their net assets and the per unit data and
ratios for the period indicated therein, in conformity with accounting
principles generally accepted in the United States.
/s/Ernst & Young LLP
Cincinnati, Ohio
April 18, 2000
iii
<PAGE>
Columbus Life Insurance Company Separate Account 1
Statement of Net Assets
December 31, 1999
Assets
Investments at current market value:
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth Fund (317 shares, cost $10,047) $ 10,230
AIM V.I. Government Securities Fund (9 shares, cost $104) 101
The Alger American Fund
Alger American Small Capitalization Portfolio
(6 shares, cost $273) 316
Alger American Growth Portfolio (444 shares, cost $28,353) 28,614
MFS Variable Insurance Trust
MFS Emerging Growth Series (578 shares, cost $21,498) 21,937
MFS Growth with Income Series (149 shares, cost $3,116) 3,181
PIMCO Variable Insurance Trust PIMCO Long-Term
U.S. Government Bond Portfolio (11 shares, cost $102) 99
Touchstone Variable Series Trust
Touchstone Small Cap Value Fund (33 shares, cost $376) 394
Touchstone Emerging Growth Fund (7 shares, cost $118) 130
Touchstone International Equity Fund (36 shares, cost $602) 623
Touchstone Income Opportunity Fund (13 shares, cost $113) 103
Touchstone High Yield Bond Fund (11 shares, cost $106) 97
Touchstone Value Plus Fund (10 shares, cost $104) 109
Touchstone Growth & Income Fund (52 shares, cost $561) 562
Touchstone Enhanced 30 Fund (123 shares, cost $1,271) 1,297
Touchstone Balanced Fund (8 shares, cost $110) 107
Touchstone Bond Fund (10 shares, cost $100) 100
Touchstone Standby Income Fund (6,056 shares, cost $60,072) 60,072
--------
Total invested assets 128,072
Liabilities
Accounts payable 9
--------
Total net assets $128,063
========
Net Assets
Variable universal life insurance contracts $126,027
Retained in the variable account by Columbus Life Insurance Company 2,036
--------
Total net assets $128,063
========
See accompanying notes
iv
<PAGE>
Columbus Life Insurance Company Separate Account 1
Statement of Operations and Changes in Net Assets
Period Ended December 31, 1999*
<TABLE>
<CAPTION>
AIM V.I. Alger American
AIM V.I. Government Small
Growth Securities Capitalization
Total Sub-Account Sub-Account Sub-Account
-------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Income:
Dividends and capital gains $ 103 $ 7 $ 4 $ --
Miscellaneous income 10 1 (1) 1
Expenses:
Mortality and expense risk charge 8 1 -- --
-------- -------- -------- --------
Net investment income 105 7 3 1
Net change in unrealized appreciation
(depreciation) on investments 1,044 182 (3) 43
Realized gain on investments 25 1 -- 4
-------- -------- -------- --------
Net realized and unrealized gain (loss)
on investments 1,069 183 (3) 47
-------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations 1,174 190 -- 48
-------- -------- -------- --------
Contract owners activity:
Payments received from contract owners 128,195 10,251 100 314
Cost of insurance and benefits provided by riders (1,036) (153) -- (30)
Monthly expense charge (270) (58) -- (16)
-------- -------- -------- --------
Net increase from contract activity 126,889 10,040 100 268
-------- -------- -------- --------
Net increase in net assets 128,063 10,230 100 316
-------- -------- -------- --------
Net assets, at beginning of period -- -- -- --
-------- -------- -------- --------
Net assets, at end of period $128,063 $ 10,230 $ 100 $ 316
======== ======== ======== ========
</TABLE>
See accompanying notes
* For the period beginning August 30, 1999 (commencement of operations) to
December 31, 1999.
v
<PAGE>
Columbus Life Insurance Company Separate Account 1
Statement of Operations and Changes in Net Assets (continued)
Period Ended December 31, 1999*
<TABLE>
<CAPTION>
MFS VIT PIMCO
Alger MFS VIT Growth Long-term U.S. Touchstone
American Emerging with Government Small Cap
Growth Growth Income Bond Value
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ -- $ -- $ -- $ 2 $ --
Miscellaneous income 2 1 1 (1) --
Expenses:
Mortality and expense risk charge 2 -- 1 -- --
-------- -------- -------- -------- --------
Net investment income -- 1 -- 1 --
Net change in unrealized appreciation
(depreciation) on investments 261 439 65 (2) 18
Realized gain on investments 9 6 -- -- 1
-------- -------- -------- -------- --------
Net realized and unrealized gain (loss)
on investments 270 445 65 (2) 19
-------- -------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations 270 446 65 (1) 19
-------- -------- -------- -------- --------
Contract owners activity:
Payments received from
contract owners 28,625 21,636 3,197 100 421
Cost of insurance and benefits
provided by riders (224) (108) (66) -- (31)
Monthly expense charge (59) (38) (15) -- (15)
Net increase from contract activity 28,342 21,490 3,116 100 375
-------- -------- -------- -------- --------
Net increase in net assets 28,612 21,936 3,181 99 394
-------- -------- -------- -------- --------
Net assets, at beginning of period -- -- -- -- --
-------- -------- -------- -------- --------
Net assets, at end of period $ 28,612 $ 21,936 $ 3,181 $ 99 $ 394
======== ======== ======== ======== ========
</TABLE>
See accompanying notes
* For the period beginning August 30, 1999 (commencement of operations) to
December 31, 1999.
vi
<PAGE>
Columbus Life Insurance Company Separate Account 1
Statement of Operations and Changes in Net Assets (continued)
Period Ended December 31, 1999*
<TABLE>
<CAPTION>
Touchstone Touchstone Touchstone Touchstone
Emerging International Income High Touchstone
Growth Equity Opportunity Yield Value Plus
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ 18 $ $20 $ 12 $ 6 $ 4
Miscellaneous income -- 1 -- -- --
Expenses:
Mortality and expense risk, and
administrative charge -- 1 -- -- --
-------- -------- -------- -------- --------
Net investment income 18 20 12 6 4
Net change in unrealized appreciation
(depreciation) on investments 11 21 (9) (9) 5
Realized gain on investments -- 4 -- -- --
-------- -------- -------- -------- --------
Net realized and unrealized gain (loss)
on investments 11 25 (9) (9) 5
-------- -------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations 29 45 3 (3) 9
-------- -------- -------- -------- --------
Contract owners activity:
Payments received from
contract owners 100 634 100 100 100
Cost of insurance and benefits
provided by riders -- (39) -- -- --
Monthly expense charge -- (18) -- -- --
-------- -------- -------- -------- --------
Net increase from contract activity 100 577 100 100 100
-------- -------- -------- -------- --------
Net increase in net assets 129 622 103 97 109
-------- -------- -------- -------- --------
Net assets, at beginning of period -- -- -- -- --
-------- -------- -------- -------- --------
Net assets, at end of period $ 129 $ 622 $ 103 $ 97 $ 109
======== ======== ======== ======== ========
</TABLE>
See accompanying notes
* For the period beginning August 30, 1999 (commencement of operations) to
December 31, 1999.
vii
<PAGE>
Columbus Life Insurance Company Separate Account 1
Statement of Operations and Changes in Net Assets (continued)
Period Ended December 31, 1999*
<TABLE>
<CAPTION>
Touchstone Touchstone
Growth and Touchstone Touchstone Touchstone Standby
Income Enhanced 30 Balanced Bond Income
Sub-Account Sub-Account Sub-Account Sub-Account Sub-Account
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income:
Dividends and capital gains $ -- $ 6 $ 10 $ -- $ 14
Miscellaneous income -- 3 -- -- 2
Expenses:
Mortality and expense risk, and
administrative charge -- 1 -- -- 2
-------- -------- -------- -------- --------
Net investment income -- 8 10 -- 14
Net change in unrealized appreciation
(depreciation) on investments 1 26 (3) -- (2)
Realized gain on investments -- -- -- -- --
-------- -------- -------- -------- --------
Net realized and unrealized gain (loss)
on investments 1 26 (3) -- (2)
-------- -------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations 1 34 7 -- 12
-------- -------- -------- -------- --------
Contract owners activity:
Payments received from
contract owners 611 1,317 100 100 60,389
Cost of insurance and benefits
provided by riders (35) (43) -- -- (307)
Monthly expense charge (16) (11) -- -- (24)
-------- -------- -------- -------- --------
Net increase from contract activity 560 1,263 100 100 60,058
-------- -------- -------- -------- --------
Net increase in net assets 561 1,297 107 100 60,070
-------- -------- -------- -------- --------
Net assets, at beginning of period -- -- -- -- --
-------- -------- -------- -------- --------
Net assets, at end of period $ 561 $ 1,297 $ 107 $ 100 $ 60,070
======== ======== ======== ======== ========
</TABLE>
See accompanying notes
* For the period beginning August 30, 1999 (commencement of operations) to
December 31, 1999.
viii
<PAGE>
Columbus Life Insurance Company Separate Account 1
Notes to Financial Statements
December 31, 1999
1. Organization and Nature of Business
Columbus Life Insurance Company Separate Account 1 (the "Account") is a unit
investment trust registered under the Investment Company Act of 1940 (the "1940
Act"), established by the Columbus Life Insurance Company (the "Company"), a
life insurance company which is a wholly owned subsidiary of The Western and
Southern Life Insurance Company. The Account is a funding vehicle for individual
variable universal life policies, and commenced operations on August 30, 1999
with the issuance of the first Columbus Life variable universal life insurance
policy.
2. Significant Accounting Policies
The Account has eighteen investment sub-accounts, each of which invests in the
corresponding portfolio (a "Portfolio") of AIM Variable Insurance Funds, Inc.,
The Alger American Fund, MFS Variable Insurance Trust, PIMCO Variable Insurance
Trust or Touchstone Variable Series Trust, each of which is an open-ended
diversified management investment company. Each sub-account's value fluctuates
on a day to day basis depending on the investment performance of the Portfolio
in which the sub-account is invested. A policyholder may also allocate funds to
the fixed account, which is part of the general account of the Company. Due to
exemptive and exclusionary provisions, interests in the fixed account have not
been registered under the Securities Act of 1933 (the "1933 Act") and the
Company's general account has not been registered as an investment company under
the 1940 Act. Sub-account transactions are recorded on the trade date and income
from dividends are recorded on the ex-dividend date. Realized gains and losses
on the sales of investments are computed on the basis of specific
identification.
3. Policy Charges
The Company deducts a premium expense charge to cover the cost of distributing
the policies. The maximum premium expense charge is 5.5% of a premium payment.
The current premium expense charge is 4.75% of a premium payment. The premium
expense charge is deducted from each premium payment before the net premiums are
allocated to the investment options.
A tax charge is deducted to cover state taxes on insurance premiums and certain
federal taxes. The tax charge is equal to the state premium tax rate for the
state of residence plus .55% for certain federal taxes. The maximum tax charge
is 3.50% of a premium payment. The tax charge is deducted from each premium
payment before the net premiums are allocated to the investment options.
ix
<PAGE>
The Company also deducts a monthly cost of insurance charge for providing
policyholders with life insurance protection. The amount of the cost of
insurance depends on the amount of insurance requested, and the age, gender and
underwriting class of the insured. The cost of insurance is also affected by the
account value, indebtedness and death benefit option. The maximum monthly cost
of insurance charge for a policy is shown in the policy schedule. The Company
may charge less than the maximum shown in the policy schedule.
The Company also deducts an amount monthly to cover the cost of any additional
benefits provided under the policy by rider. Both the cost of insurance charge
and the charge for riders are deducted on each monthly anniversary day.
The monthly expense charge covers the cost of record keeping and administering
the policy. The maximum monthly expense charge is $7.00. The current monthly
expense charge is $6.00. This charge is also deducted on each monthly
anniversary day.
The Company also makes certain deductions on a pro rata basis from accumulation
unit values of each sub-account in order to compensate the Company for its
assumption of mortality and expense risks. The charges are made daily at an
annual effective rate not to exceed 1.00%. As of December 31, 1999 the effective
annual rate of these charges is 0.90%.
A surrender charge is imposed if the policy is cancelled or, under certain
circumstances, if the specified amount decreases during the first 14 years after
the policy is issued, or during the first 14 years after any increase in the
specified amount. The amount of the charge depends upon the insured's age,
gender and underwriting class.
There is no charge for the first 12 transfers among sub-accounts each policy
year. Additional transfers are $10.00 for each transfer in a policy year. The
charge is deducted from the account value at the time of the transfer. There are
no charges for transfers made in connection with the dollar cost averaging
program and these transfers are not counted when determining the number of
transfers made in a policy year.
There is no charge for the first withdrawal in a policy year. There is a
withdrawal charge of $50 per withdrawal for each additional withdrawal. The
amount of the charge is deducted from the account value.
4. Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
x
<PAGE>
5. Taxes
The Account is not taxed separately because the operations of the Account are
part of the total operations of the Company. The Company is taxed as a life
insurance company under the Internal Revenue Code. Under existing federal income
tax law, no taxes are payable on the investment income or on the capital gains
of the Account.
6. Purchases and Sales of Investments
The following table shows aggregate cost of shares of the portfolios purchased
and proceeds from shares of the portfolios sold by the corresponding
sub-accounts for the period August 30, 1999 to December 31, 1999.
Purchases Sales
--------- -------
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth Fund $ 10,053 $ 7
AIM V.I. Government Securities Fund 104 --
The Alger American Fund
Alger American Small Capitalization Portfolio 289 20
Alger American Growth Portfolio 28,414 70
The MFS Variable Insurance Trust
MFS VIT Emerging Growth Series 21,515 24
MFS VIT Growth with Income Series 3,117 1
PIMCO Variable Insurance Trust
PIMCO Long-Term U.S. Government Bond Portfolio 102 --
Touchstone Variable Series Trust
Touchstone Small Cap Value Fund 385 10
Touchstone Emerging Growth Fund 118 --
Touchstone International Equity Fund 625 28
Touchstone Income Opportunity Fund 113 --
Touchstone High Yield Bond Fund 106 --
Touchstone Value Plus Fund 105 --
Touchstone Growth & Income Fund 585 24
Touchstone Enhanced 30 Fund 1,289 18
Touchstone Balanced Fund 110 --
Touchstone Bond Fund 100 --
Touchstone Standby Income Fund 60,073 --
-------- --------
Total $127,204 $ 202
======== ========
xi
<PAGE>
7. Unit Values
The following table shows a summary of units outstanding for variable universal
life insurance contracts for the period August 30 to December 31, 1999.
Columbus Life Variable Universal Life
<TABLE>
<CAPTION>
Beginning Units Units Ending Unit Ending
Units Purchased Redeemed Units Value Value
--------- --------- --------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Growth* -- 849 (18) 831 12.315782 $ 10,230
AIM V.I. Government Securities* -- 10 -- 10 10.063623 100
Alger American Small Capitalization* -- 27 (4) 23 13.556275 316
Alger American Growth * -- 2,394 (24) 2,370 12.071872 28,612
MFS VIT Emerging Growth * -- 1,390 (10) 1,380 15.900034 21,936
MFS VIT Growth with Income * -- 310 (8) 302 10.549026 3,181
PIMCO Long-Term U.S.
Government Bond* -- 10 -- 10 9.83429 99
Touchstone Small Cap Value Fund* -- 38 (4) 34 11.626635 394
Touchstone Emerging Growth Fund -- 10 -- 10 12.920008 129
Touchstone International Equity Fund* -- 54 (5) 49 12.808245 622
Touchstone Income Opportunity Fund* -- 10 -- 10 10.301586 103
Touchstone High Yield Bond Fund* -- 10 -- 10 9.674330 97
Touchstone Value Plus Fund* -- 10 -- 10 10.899576 109
Touchstone Growth & Income Fund* -- 62 (5) 57 9.877579 561
Touchstone Enhanced 30 Fund* -- 129 (5) 124 10.441745 1,297
Touchstone Balanced Fund* -- 10 -- 10 10.706296 107
Touchstone Bond Fund* -- 10 -- 10 10.020051 100
Touchstone Standby Income Fund* -- 5,952 (33) 5,919 10.148098 60,070
---------
Total - Columbus Life Variable
Universal Life $ 128,063
=========
</TABLE>
* Calculation of all variable universal life sub-account unit values began
August 30, 1999 when those sub-accounts commenced operations.
xii
<PAGE>
Columbus Life Insurance Company Separate Account 1
Supplementary Information-Selected Per Unit Data and Ratios
(Selected data for an accumulation unit outstanding throughout each year)
Period Ended December 31, 1999*
<TABLE>
<CAPTION>
AIM V.I. Alger Alger MFS VIT
AIM V.I. Government American Small American Emerging
Growth Securities Capitalization Growth Growth
Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account*
------------ ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Per unit data
Investment income $ 0.437032 $ 0.369312 $ -- $ -- $ --
Expenses 0.032538 0.030453 0.033753 0.032400 0.035248
--------- --------- --------- --------- ---------
Net investment income (loss) 0.404494 0.338859 (0.033753) (0.032400) (0.035248)
Net realized and
unrealized gain (loss)
on investments 1.911288 (0.275236) 3.590028 2.104272 5.935282
--------- --------- --------- --------- ---------
Net increase (decrease)
in net asset value 2.315782 0.063623 3.556275 2.071872 5.900034
Beginning of period 10.000000 10.000000 10.000000 10.000000 10.000000
--------- --------- --------- --------- ---------
End of period $12.315782 $10.063623 $13.556275 $12.071872 $15.900034
========== ========== ========== ========== ==========
Ratios
Ratio of operating
expense to average
net assets (%) 0.02% 0.00% 0.00% 0.01% 0.00%
Ratio of net investment
income (loss) to
average net assets (%) 0.14% 6.00% 0.63% 0.00% 0.01%
</TABLE>
* Calculation began August 30, 1999, when variable universal life
sub-accounts commenced operations.
xiii
<PAGE>
Columbus Life Insurance Company Separate Account 1
Supplementary Information-Selected Per Unit Data and Ratios
(Selected data for an accumulation unit outstanding throughout each year)
Period Ended December 31, 1999*
<TABLE>
<CAPTION>
PIMCO
MFS VIT Long-term Touchstone Touchstone
Growth U.S.Government Small Emerging
with Income Bond Cap Value Growth
Sub-Account* Sub-Account* Sub-Account* Sub-Account*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per unit data
Investment income $ -- $ 0.192604 $ -- $ 1.827504
Expenses 0.030134 0.030145 0.031902 0.033162
---------- ---------- ---------- ----------
Net investment income (loss) (0.030134) 0.162459 (0.031902) 1.794342
Net realized and
unrealized gain (loss)
on investments 0.579160 (0.328169) 1.658537 1.125666
---------- ---------- ---------- ----------
Net increase (decrease)
in net asset value 0.549026 (0.165710) 1.626635 2.920008
Beginning of period 10.000000 10.000000 10.000000 10.000000
---------- ---------- ---------- ----------
End of period $10.549026 $ 9.834290 $11.626635 $12.920008
========== ========== ========== ==========
Ratios
Ratio of operating
expense to average
net assets (%) 0.06% 0.00% 0.00% 0.00%
Ratio of net investment
income (loss) to
average net assets (%) 0.00% 2.02% 0.00% 27.91%
</TABLE>
* Calculation began August 30, 1999, when variable universal life
sub-accounts commenced operations.
xiv
<PAGE>
Columbus Life Insurance Company Separate Account 1
Supplementary Information-Selected Per Unit Data and Ratios (continued)
(Selected data for an accumulation unit outstanding throughout each year)
Period Ended December 31, 1999*
<TABLE>
<CAPTION>
Touchstone Touchstone Touchstone
International Income Touchstone Touchstone Growth
Equity Opportunity High Yield Value Plus and Income
Sub-Account* Sub-Account* Sub-Account* Sub-Account* Sub-Account*
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per unit data
Investment income $ 0.995074 $ 1.256279 $ -- $ 0.450131 $ --
Expenses 0.032738 0.030547 0.029169 0.030815 0.029677
---------- ---------- ---------- ---------- ----------
Net investment income (loss) 0.962336 1.225732 (0.029169) 0.419316 (0.029677)
Net realized and
unrealized gain (loss)
on investments 1.845909 (0.924146) (0.296501) 0.480260 (0.092744)
---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in net asset value 2.808245 0.301586 (0.325670) 0.899576 (0.122421)
Beginning of period 10.000000 10.000000 10.000000 10.000000 10.000000
---------- ---------- ---------- ---------- ----------
End of period $12.808245 $10.301586 $ 9.674330 $10.899576 $ 9.877579
========== ========== ========== ========== ==========
Ratios
Ratio of operating
expense to average
net assets (%) 0.32% 0.00% 0.00% 0.00% 0.00%
Ratio of net investment
income (loss) to
average net assets (%) 6.43% 23.30% 12.37% 7.34% 0.00%
</TABLE>
* Calculation began August 30, 1999, when variable universal life
sub-accounts commenced operations.
xv
<PAGE>
Columbus Life Insurance Company Separate Account 1
Supplementary Information-Selected Per Unit Data and Ratios (continued)
(Selected data for an accumulation unit outstanding throughout each year)
Period Ended December 31, 1999*
<TABLE>
<CAPTION>
Touchstone Touchstone Touchstone Touchstone
Enhanced 30 Balanced Bond Standby Income
Sub-Account* Sub-Account* Sub-Account* Sub-Account*
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Per unit data
Investment income $ 0.048376 $ 1.037666 $ -- $ 0.198701
Expenses 0.030013 0.031080 0.030413 0.030415
---------- ---------- ---------- ----------
Net investment income (loss) 0.018363 1.006586 (0.030413) 0.168286
Net realized and
unrealized gain (loss)
on investments 0.423382 (0.300290) 0.050464 (0.020188)
---------- ---------- ---------- ----------
Net increase (decrease)
in net asset value 0.441745 0.706296 0.020051 0.148098
Beginning of period 10.000000 10.000000 10.000000 10.000000
---------- ---------- ---------- ----------
End of period $10.441745 $10.706296 $10.020051 $10.148098
========== ========== ========== ==========
Ratios
Ratio of operating
expense to average
net assets (%) 0.00% 0.15% 0.00% 0.01%
Ratio of net investment
income (loss) to
average net assets (%) 18.69% 1.23% 0.00% 0.05%
</TABLE>
* Calculation began August 30, 1999, when variable universal life
sub-accounts commenced operations.
xvi
<PAGE>
COLUMBUS LIFE INSURANCE COMPANY FINANCIAL STATEMENTS
Statutory-Basis Financial Statements
and Supplemental Schedule
Columbus Life Insurance Company
Years ended December 31, 1999 and 1998
with Reports of Independent Auditors
xvii
<PAGE>
Columbus Life Insurance Company
Statutory-Basis Financial Statements
Years ended December 31, 1999 and 1998
Contents
Report of Ernst & Young LLP..................................................xix
Report of PricewaterhouseCoopers LLP..........................................xx
Financial Statements
Balance Sheets - Statutory-Basis.............................................xxi
Statements of Income - Statutory-Basis......................................xxii
Statements of Changes in Capital and Surplus - Statutory-Basis.............xxiii
Statements of Cash Flows - Statutory-Basis .................................xxiv
Notes to Statutory-Basis Financial Statements................................xxv
Supplemental Data:
Report on Supplemental Schedule of Selected Statutory-Basis
Financial Data..........................................................xxvii
Supplemental Schedule of Selected Statutory-Basis Financial Data..........xxviii
xviii
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Columbus Life Insurance Company
We have audited the accompanying statutory-basis balance sheet of Columbus Life
Insurance Company as of December 31, 1999, and the related statutory-basis
statements of income, changes in capital and surplus, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As described in Note 2 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Ohio Insurance Department, which practices differ from
generally accepted accounting principles. The variances between such practices
and generally accepted accounting principles and the effects on the accompanying
financial statements are described in Note 2.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Columbus Life Insurance Company at December 31, 1999, or the results of its
operations or its cash flows for the year then ended.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Columbus Life
Insurance Company at December 31, 1999, and the results of its operations and
its cash flows for the year then ended in conformity with accounting practices
prescribed or permitted by the Ohio Insurance Department.
/s/ ERNST & YOUNG LLP
April 18, 2000
xix
<PAGE>
Report of Independent Accountants
To the Board of Directors
Columbus Life Insurance Company
We have audited the accompanying statutory statements of admitted assets,
liabilities and surplus of Columbus Life Insurance Company (the "Company") as of
December 31, 1998, and the related statutory statements of income and changes in
surplus, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 2 to the financial statements, the Company prepared these
financial statements using accounting practices prescribed or permitted by the
Insurance Department of the State of Ohio, which practices differ from
accounting principles generally accepted in the United States. The effects on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles are determined to be
material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of the Company as of December 31, 1998, or the results of its operations or its
cash flows for the year then ended.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and surplus of the
Company as of December 31, 1998, and the results of its operations and its cash
flows for the year then ended, on the basis of accounting described in Note 2.
We have not audited the financial statements of Columbus Life Insurance Company
for any period subsequent to December 31, 1998.
/s/ PricewaterhouseCoopers LLP
March 5, 1999
Cincinnati, Ohio
xx
<PAGE>
Columbus Life Insurance Company
Balance Sheets - Statutory-Basis
as of December 31, 1999 and 1998
1999 1998
-----------------------
(in thousands)
Admitted Assets
Bonds $1,494,340 $1,459,357
Preferred and common stocks 311,100 240,218
Mortgage loans 151,098 148,623
Policy loans 75,808 77,236
Real estate 3,364 1,992
Cash, cash equivalents and short-term investments 55,574 42,064
Other invested assets 27,611 11,194
---------- ----------
Total cash and invested assets 2,118,895 1,980,684
Premiums deferred and uncollected 6,825 7,343
Investment income due and accrued 25,204 23,284
Other assets 4,825 5,073
Separate account assets 128 --
Total admitted assets $2,155,877 $2,016,384
---------- ----------
Liabilities and Capital and Surplus
Policy reserves $1,623,288 $1,574,309
Policy claims in process of settlement 5,043 4,107
Dividends payable to policyholders 15,140 14,578
Other liabilities 84,182 77,023
Interest maintenance reserve 17,346 21,705
Asset valuation reserve 80,302 61,165
Separate account liabilities 128 --
---------- ----------
Total liabilities 1,825,429 1,752,887
Capital and Surplus
Common stock, $1 par value, authorized 10,000
shares, issued and outstanding 10,000 shares 10,000 10,000
Paid-in surplus 41,600 41,600
Unassigned surplus 278,848 211,897
---------- ----------
Total capital and surplus 330,448 263,497
---------- ----------
Total liabilities and capital and surplus $2,155,877 $2,016,384
========== ==========
See accompanying notes.
xxi
<PAGE>
Columbus Life Insurance Company
Statements of Income - Statutory-Basis
for the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------------------
(in thousands)
<S> <C> <C>
Revenue:
Premiums $170,517 $167,538
Net investment income 146,741 138,724
Considerations for supplementary contracts and dividend accumulations 6,162 6,250
Other 5,421 5,624
-------- --------
328,841 318,136
Policy benefits and expenses:
Death benefits 36,905 30,314
Annuity benefits 7,790 8,165
Disability and accident and health benefits 3,422 2,875
Surrender benefits 108,048 121,444
Other benefits 9,929 10,716
Increase in policy reserve and other policyholders' funds 49,297 36,588
Net transfers to separate account 127 --
Commissions on premiums 31,380 27,800
General expenses 38,186 36,583
-------- --------
Total liabilities 285,084 274,485
-------- --------
Gain from operations before dividends to policyholders,
federal income tax expense and net realized capital gains 43,757 43,651
Dividends to policyholders 15,324 14,610
-------- --------
Gain from operations before federal income tax expense
and net realized capital gains 28,433 29,041
Federal income taxes 10,945 6,238
-------- --------
Net gain from operations before net realized capital gains 17,488 22,803
Net realized capital gains, less federal income tax expense of $8,085 in
1999 and $5,345 in 1998 and transfers to (from) the Interest
Maintenance Reserve of $(82) in 1999 and $8,237 in 1998 15,752 11,114
-------- --------
Net income $ 33,240 $ 33,917
======== ========
</TABLE>
See accompanying notes.
xxii
<PAGE>
Columbus Life Insurance Company
Statements of Changes in Capital and Surplus - Statutory-Basis
for the years ended December 31, 1999 and 1998
1999 1998
----------------------
(in thousands)
Capital and surplus equity at beginning of year $ 263,497 $ 226,949
Net income 33,240 33,917
Change in net unrealized gains 53,563 10,630
Decrease (increase) in nonadmitted assets (727) 1,457
Increase in asset valuation reserve (19,137) (9,173)
Other 12 (283)
--------- ---------
Capital and surplus at end of year $ 330,448 $ 263,497
========= =========
See accompanying notes.
xxiii
<PAGE>
Columbus Life Insurance Company
Statements of Cash Flows - Statutory-Basis
for the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------------------
(in thousands)
<S> <C> <C>
Operating Activities:
Premium and annuity considerations $ 182,611 $ 179,372
Net investment income received 139,311 132,144
Surrender and annuity benefits paid (108,048) (121,444)
Death and other benefits to policyholders (57,710) (52,606)
Commissions, other expenses and taxes paid (67,617) (59,937)
Net transfers to separate accounts (126) --
Dividends paid to policyholders (14,762) (15,236)
Federal income taxes paid to parent (8,465) 1,761
Other, net 4,960 3,420
--------- ---------
Net cash provided by operations 70,154 67,474
Investment activities:
Proceeds from investments sold, matured or repaid:
Bonds 637,660 709,881
Stocks 135,502 119,711
Mortgage loans 24,969 24,695
Other invested assets 7,074 4,684
--------- ---------
Total investment proceeds 805,205 858,971
Taxes paid on capital gains 8,041 9,781
--------- ---------
Net proceeds from investments sold, matured or repaid 797,164 849,190
Cost of investments acquired:
Bonds (672,730) (754,891)
Stocks (135,311) (140,492)
Mortgage loans (28,881) (13,127)
Other invested assets (18,314) (6,656)
--------- ---------
Total investments acquired (855,236) (915,166)
--------- ---------
Net (increase) decrease in policy loans 1,428 (1,968)
--------- ---------
Net cash used by investment activities (56,644) (67,944)
Net change in cash, cash equivalents and short-term investments 13,510 (470)
Cash, cash equivalents and short-term investments
Beginning of year 42,064 42,534
--------- ---------
End of year $ 55,574 $ 42,064
========= =========
</TABLE>
See accompanying notes.
xxiv
<PAGE>
Columbus Life Insurance Company
Notes to Statutory-Basis Financial Statements
December 31, 1999 and 1998
1. Organization and Nature of Business
Columbus Life Insurance Company (the Company), a stock life insurance company,
is a wholly owned subsidiary of The Western and Southern Life Insurance Company
(Western and Southern), a mutual life insurance company. The Company is
domiciled in Ohio.
The Company offers individual life, universal life and annuity contracts through
general and independent agents and affiliated broker-dealers. The Company is
licensed in 45 states and the District of Columbia. Approximately 54% of the
gross premiums and annuity considerations for the Company were derived from
Ohio, California, Michigan, Florida, Indiana and New Jersey.
2. Significant Accounting Policies
The Company is subject to regulation by the Department of Insurance of the State
of Ohio (the Department) and other states in which the Company operates. The
Company files financial statements with these departments using statutory
accounting practices (SAP) prescribed or permitted by the Department and used in
the preparation of the accompanying statutory-basis financial statements.
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; such
practices differ from state-to-state, may differ from company-to-company within
a state and may change in the future. These practices differ in some respects
from generally accepted accounting principles (GAAP). The more significant
differences are:
o Certain assets are excluded from the statements of admitted assets,
liabilities and capital and surplus as "nonadmitted assets"
(principally furniture and equipment) for statutory reporting
purposes.
o Debt securities classified as available for sale are carried at
amortized cost instead of fair value.
o Deferred federal income taxes are not provided for statutory
reporting purposes.
o The accounts and operations of the Company's subsidiaries are not
consolidated with accounts and operations of the Company as would be
required by GAAP.
o The costs of acquiring new business, such as commissions, certain
costs of policy underwriting and issuance and certain variable
agency expenses, have not been deferred for statutory reporting
purposes.
xxv
<PAGE>
o For statutory reporting purposes, the Company defers the portion of
realized capital gains and losses (using a formula prescribed by the
NAIC) on sales of fixed income investments, principally bonds and
mortgage loans, attributable to changes in the general level of
interest rates. Those deferrals are amortized over the remaining
period to maturity. The deferral, net of federal income taxes, is
reported in the accompanying Balance Sheets as the "Interest
Maintenance Reserve".
o For statutory reporting purposes, the "Asset Valuation Reserve" is
determined by a NAIC prescribed formula and is reported as a
liability.
o For statutory reporting purposes, revenues for universal life
policies and annuity contracts, consist of the entire premium
received and benefits represents the death benefits paid and the
change in policy reserves. For GAAP, premiums received in excess of
policy charges would not be recognized as premium revenue and
benefits would represent the excess of benefits paid over the policy
account value and interest credited to the account values.
At December 31, 1999 and 1998, the Company's unaudited GAAP equity was
$556,657,000 and $496,585,000, respectively. Unaudited GAAP net income was
$53,705,000 and $34,708,000, for 1999 and 1998, respectively.
The Company received written approval from the Department to record guaranty
fund assessments as billed and defer the amount on the balance sheet to the
extent that they are recoverable through premium tax credits. When the tax
credits are realized, the assessment is removed from the balance sheet as a
credit to premium tax expense. The Company also received approval to record all
taxes, including interest, assessments, settlements and corrections through the
Summary of Operations, rather than as a direct charge to surplus. There is no
prescribed accounting treatment for these transactions.
In March 1998, the NAIC finalized the Codification of Statutory Accounting
Principles guidance ("Codification") which will replace the current Accounting
Practices and Procedures manual as the NAIC's primary guidance on statutory
accounting. Codification provides guidance for areas where statutory accounting
has been silent and changes current statutory accounting in some areas. The
principal change expected to impact the Company is the recording of deferred
taxes.
The Department has adopted Codification, effective January 1, 2001. The Company
has not estimated the potential impact of Codification to its statutory-basis
financial statements.
xxvi
<PAGE>
Significant accounting practices are as follows:
Revenues and Expenses
Annuity and universal life premiums are recognized as revenue when received.
Other life insurance premiums are recognized at the beginning of each policy
year. Accident and health insurance premiums are recognized as revenue when due.
Policy acquisition costs are expensed as incurred.
Valuation of Investments
o Debt securities and stock values are as prescribed by the NAIC; debt
securities at amortized cost or NAIC value, preferred stocks in good
standing at cost and all other stocks at market.
o Single class and multi-class mortgage-backed/asset-backed securities
are valued at amortized cost using the interest method, including
anticipated prepayments. Prepayment assumptions are obtained from an
external source and are based on the current interest rate and
economic environment. The retrospective adjustment method is used to
value all such securities.
o The Company's subsidiaries are reported at the GAAP-basis of their
net assets. Dividends from subsidiaries are included in net
investment income. The remaining change in the subsidiaries' equity
is included in the change in net unrealized capital gains or losses.
o Mortgage loans not in default are carried at outstanding
indebtedness less unamortized premium or discount. Mortgage loans in
default are recorded at the lower of the related indebtedness or
fair market value. Property acquired in satisfaction of debt is
recorded at the lower of cost less accumulated depreciation or fair
market value.
o Real estate is carried at the lower of depreciated cost or fair
market value. Depreciation is computed by the straight-line method
over the estimated useful life of the asset.
o Policy loan values are carried at outstanding indebtedness not in
excess of policy cash surrender value.
o Real estate joint ventures and partnerships are accounted for under
the equity method. The equity in earnings for real estate joint
ventures and general partnerships are recorded through net
investment income. The equity in earnings for limited partnership
interests is recorded to surplus.
o The asset valuation reserve serves to provide a reserve, recorded
through unassigned surplus, against fluctuations in the market
values of bonds, stocks, mortgage loans, real estate, and other
invested assets. The interest maintenance reserve defers the
recognition of realized capital gains and losses resulting from
changes in interest rates on fixed income investments sold and
amortizes the gains and losses into investment income over the
remaining life of the investments sold. The net gain (loss) deferred
as a result of recording the interest maintenance reserve was
$(81,956) and $8,237,000,
xxvii
<PAGE>
which is net of federal income tax expense (benefit) of $(44,130)
and $4,436,000 in 1999 and 1998, respectively.
o Realized gains and losses from sales of securities are determined on
the basis of specific identification and recognized on the trade
date. Realized gains and losses, adjusted for the interest
maintenance reserve, are included in the determination of net
income. Adjustments to fair market value for permanent declines in
value of mortgage loans, property acquired in satisfaction of debt
and real estate are treated as realized losses and are included in
net income. Adjustments for declines, which are not permanent, are
treated as unrealized losses. Unrealized gains and losses on all
investments are reported as adjustments to unassigned surplus.
Policy Reserves
Policy reserves for life insurance, annuity contracts and supplemental benefits
are developed by using accepted actuarial methods and are computed principally
on the Commissioner's Annuity Reserve Valuation Method. The following mortality
tables and interest rates are used:
Percentage of Reserves
------------------------
1999 1998
------------------------
Life insurance:
1941 Commissioners Standard Ordinary, 2-1/2% - 3% 3.5% 3.7%
1958 Commissioners Standard Ordinary, 2-1/2% - 4-1/2% 22.8 23.6
1980 Commissioners Standard Ordinary, 4% - 5% 38.0 33.7
Annuities:
Various, 2-1/2% - 7-1/2% 33.5 36.9
Supplemental benefits:
Various, 2-1/2% - 7-1/2% 1.2 1.1
Other, 2% - 5-1/2% 1.0 1.0
----- -----
100.0% 100.0%
===== =====
Surrender values on policies do not exceed the corresponding benefit reserves.
Additional reserves are established when the results of cash flow testing under
various interests rate scenarios indicate the need for such reserves or the net
premiums exceed the gross premiums on any insurance in force.
For substandard table ratings, mean reserves are based on 125% to 500% of
standard mortality rates. For flat extra ratings, mean reserves are based on the
standard or substandard mortality rates increased by the cost of the additional
mortality indicated by the rating period.
As of December 31, 1999, reserves of $4,198,975 are recorded on inforce amounts
of $303,750,152 for which gross premiums are less than the net premiums
according to the standard of valuation required by the Department.
xxviii
<PAGE>
Tabular interest, tabular less actual reserves released, and tabular cost have
been determined by formula. Tabular interest on funds not involving life
contingencies is calculated as one-hundredth of the product of such valuation
rate of interest times the mean of the amount of funds subject to such valuation
rate of interest held at the beginning and end of the year of valuation.
The liabilities related to policyholder funds left on deposit with the Company
generally are equal to fund balances less applicable surrender charges.
Policy and Contract Claims
Policy claim reserves represent the estimated ultimate net cost of all reported
and unreported claims incurred through December 31, 1999 and 1998. The reserves
for unpaid claims are estimated using individual case-basis valuations and
statistical analyses. These estimates are subject to the effects of trends in
claim severity and frequency. Although considerable variability is inherent in
such estimates, management believes that the reserves for claims are adequate.
The estimates are continually reviewed and adjusted as necessary as experience
develops or new information becomes known; such adjustments are included in
current operations.
Separate Account
The Company maintains a separate account, which holds assets related to the
Company's variable universal life product. The assets of the separate account
consist primarily of mutual funds, which are recorded at market value.
The activity within the separate account, including realized and unrealized
gains or losses on its investments, has no effect on net income or
policyholders' surplus of the Company.
Reinsurance
The Company reports related premiums and expenses gross in the Statements of
Income for its reinsurance policies with unrelated entities. The net effect of
premiums related to reinsurance contracts with related parties less experience
refunds, benefits incurred and adjustments to reserves specified in the
agreement and related expenses have been included in general expenses.
Dividends
Dividends to policyholders are determined annually by the Board of Directors.
The dividends to policyholders were determined using factors based on approved
dividend scales. Dividends to policyholders are reserved one year in advance
through charges to operations.
xxix
<PAGE>
Cash and Cash Equivalents
The Company considers short-term investments with an original maturity of three
months or less to be cash equivalents.
Federal Income Taxes
Western and Southern files a consolidated tax return with its eligible
subsidiaries, including the Company. The provision for federal income taxes is
allocated to the Company using a separate return method based upon a written
agreement. Under the agreement, the benefits from losses of subsidiaries are not
retained by the subsidiary companies but are allocated among those companies in
the consolidated group having taxable income.
Use of Estimates
The preparation of financial statements in conformity with accounting practices
prescribed or permitted by insurance regulatory authorities requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Reclassification
Previously reported amounts for 1998 have in some instances been reclassified to
conform to the 1999 presentation.
3. Debt and Equity Securities
Fair values for debt securities are based on quoted market prices. The amortized
cost and estimated fair values of debt securities at December 31, 1999 and 1998
are as follows:
<TABLE>
<CAPTION>
1999
-------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gain Losses Fair Value
-------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 46,352 $ 129 $ 2,282 $ 44,199
Debt securities issued by states of the U.S. and
political subdivisions of the states 5,924 234 -- 6,158
Corporate securities 1,090,067 10,274 34,372 1,065,969
Mortgage-backed securities 351,747 1,228 10,594 342,381
Foreign government securities 250 -- 15 235
-------------------------------------------------
Total $1,494,340 $ 11,865 $ 47,263 $1,458,942
=================================================
</TABLE>
xxx
<PAGE>
<TABLE>
<CAPTION>
1998
-------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gain Losses Fair Value
-------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 64,996 $ 1,273 $ 565 $ 65,704
Debt securities issued by states of the U.S. and
political subdivisions of the states 6,004 1,012 -- 7,016
Corporate securities 1,074,857 59,379 7,816 1,126,420
Mortgage-backed securities 313,250 8,836 260 321,826
Foreign government securities 250 -- 7 243
-------------------------------------------------
Total $1,459,357 $ 70,500 $ 8,648 $1,521,209
=================================================
</TABLE>
The amortized cost and estimated fair value of bonds at December 31, 1999, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Amortized Estimated
Cost Fair Value
--------------------------
(in thousands)
Due in one year or less $ 25,182 $ 25,235
Due after one year through five years 549,514 544,889
Due after five years through ten years 414,803 400,209
Due after ten years 153,094 146,228
Mortgage-backed securities 351,747 342,381
---------- ----------
Total $1,494,340 $1,458,942
========== ==========
Proceeds from sales of investments in bonds during 1999 and 1998 were
$637,660,294 and $709,881,000, respectively. Gross gains of $6,404,113 and
$13,801,000 and gross losses of $6,528,357 and $2,004,000 were realized on these
sales in 1999 and 1998, respectively.
Unrealized gains and losses on investments in common stocks and on investments
in subsidiaries are reported directly in equity and do not affect net income.
The gross unrealized gains and gross unrealized losses on, and the cost and fair
value of those investments and preferred stocks are as follows:
1999
------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gain Losses Fair Value
------------------------------------------------
(in thousands)
Preferred stocks $ 24,765 $ 271 $ 1,379 $ 23,657
======== ======== ======== ========
Common stock $162,917 $ 51,883 $ 18,019 $196,781
Subsidiaries 37,698 64,308 12,452 89,554
-------- -------- -------- --------
Total common stock $200,615 $116,191 $ 30,471 $286,335
======== ======== ======== ========
xxxi
<PAGE>
1998
------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gain Losses Fair Value
------------------------------------------------
(in thousands)
Preferred stocks $ 24,858 $ 929 $ 990 $ 24,797
======== ======== ======== ========
Common stock $138,817 $ 41,775 $ 10,629 $169,963
Subsidiaries 37,573 21,240 12,572 46,241
-------- -------- -------- --------
Total common stock $176,390 $ 63,015 $ 23,201 $216,204
======== ======== ======== ========
Proceeds from sales of investments in equity securities during 1999 and 1998
were $135,502,304 and $119,711,000, respectively. Gross gains of $37,926,375 and
$22,175,000 and gross losses of $11,814,570 and $6,390,000 were realized on
these sales in 1999 and 1998, respectively.
4. Fair Value of Financial Instruments
The following sets forth the fair values of the Company's financial instruments.
Fair values for debt, equity and short-term investment securities are based on
quoted market prices. See footnote 3 for fair value disclosure.
The fair values of mortgage loans, consisting principally of commercial real
estate loans, are estimated using discounted cash flow analyses, using interest
rates currently being offered for similar loans collateralized by properties
with similar investment risk. The fair values for mortgage loans in default are
established at the lower of the fair market value of the related underlying
collateral or carrying value of the loan. Carrying and fair values of mortgage
loans were $151,098,000 and $149,689,000, and $148,623,000 and $158,136,000 at
December 31, 1999 and 1998, respectively.
The Company believes it is not practicable to estimate the fair value of policy
loans. These assets, totaling $75,808,084 at December 31, 1999, are carried at
their aggregate unpaid principal balances. Estimation of the fair value is not
practicable as the loans have no stated maturity and are an integral part of the
related insurance contracts.
The fair values for the Company's liabilities under investment-type insurance
contracts are estimated using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued. Carrying and
fair values of investment-type contract reserves are $1,210,379,000 and
$1,124,658,000, and $1,172,654,000 and $1,111,851,000 for 1999 and 1998,
respectively.
Certain reserves for investment-type insurance contracts do not include
mortality or morbidity risk. Fair values for insurance reserves are not required
to be disclosed. However the estimated fair values of all insurance reserves and
investment contracts are taken into consideration in the Company's overall
management of interest rate risk.
xxxii
<PAGE>
5. Concentrations of Credit Risk
At December 31, 1999, the Company held unrated or less-than-investment grade
corporate bonds of $103,079,671, with an aggregate fair value of $94,682,867.
Those holdings amounted to 6.9% of the Company's investments in bonds and less
than 4.8% of the Company's total admitted assets. The Company performs periodic
evaluations of the relative credit standing of the issuers of these bonds. These
evaluations are considered by the Company in their overall investment strategy.
The Company's investments in mortgage loans principally involve commercial real
estate. At December 31, 1999, 39.4% of such mortgages ($61,984,578) involved
properties located in Florida and Ohio. Such investments consist of first
mortgage liens on completed income-producing properties; the mortgage
outstanding on any individual property does not exceed $5,981,250.
During 1999, the respective maximum and minimum lending rates for new commercial
mortgage loans issued were 8.2% and 7.4%. At the issuance of a loan, the
percentage of loan to value on any one loan does not exceed 80%. At December 31,
1999, the Company held no mortgages with interest overdue beyond one year.
During 1999, the Company did not reduce interest rates on any outstanding
mortgages. At December 31, 1999 the Company held no mortgage loans that require
payments of principal or interest be made based upon cash flows generated by the
property serving as collateral for the loans or that have a diminutive payment
required. At December 31, 1999, the Company's investments in mortgage loans were
not subject to prior liens. All properties covered by mortgage loans have fire
insurance at least equal to the excess of the loan over the maximum loan that
would be allowed on the land without the building.
Interest changes may have temporary effects on the sale and profitability of
annuity products offered by the Company. Although the rates offered by the
Company are adjustable in the long-term, in the short-term they may be subject
to contractual and competitive restrictions which may prevent timely adjustment.
The Company's management constantly monitors interest rates with respect to a
spectrum of durations and sells annuities that permit flexible responses to
interest rate changes as part of the Company's management of interest spreads.
However, adverse changes in investment yields on invested assets will affect the
earnings on those products with a guaranteed return.
6. Related Party Transactions
The Company is party to a service agreement with Western and Southern for the
performance of certain legal services, investment advisory and data processing
functions. The Company paid $8,627,000 and $8,537,000 in 1999 and 1998,
respectively, for these services.
xxxiii
<PAGE>
The Company has entered into an agreement with Western and Southern where the
Company reinsured the liabilities of, and began servicing and administering the
former business of Columbus Mutual Life Insurance Company (Columbus Mutual), a
former affiliate of Western and Southern which merged with Western and Southern.
The agreement is anticipated to last until all obligations for policies issued
by Columbus Mutual are settled. Reserves reflected on the Company's balance
sheets for policies and contracts included under the Agreement are:
December 31
1999 1998
----------------------
(in thousands)
Life and annuity reserves $874,572 $903,045
Accident and health reserves 12,744 13,507
7. Federal Income Taxes
Following is a reconciliation between the amount of tax computed at the federal
statutory rate of 35% and the federal income tax provision (exclusive of taxes
related to capital gains or losses) reflected in the statements of income.
December 31
1999 1998
--------------------
(in thousands)
Income tax computed at statutory rate $ 9,952 $ 10,164
Increase (decrease) in taxes resulting from:
Adjustments to statutory reserves for tax purposes 4,768 1,835
Deferred acquisition costs recorded for tax purposes 1,490 1,495
Amortization of IMR (1,497) (1,505)
Bond discount accrual (1,083) (1,011)
Dividend received deduction (3,916) --
Changes in prior period estimates -- (7,815)
Other 1,231 3,075
-------- --------
Federal income taxes $ 10,945 $ 6,238
======== ========
The Company made tax payments in the amount of $16,504,886 and $8,020,065 in
1999 and 1998, respectively
8. Dividend Restrictions
Ohio insurance law limits the amount of dividends that can be paid to a parent
in a holding company structure, without prior approval of the regulators, to the
greater of ten percent of statutory surplus or the prior year statutory net gain
from operations. As of December 31, 1999, the Company has proximately
$33,240,000 available for payment of dividends to Western and Southern without
further approval of the regulators. No dividends were paid to Western and
Southern in 1999 and 1998.
xxxiv
<PAGE>
9. Contingencies
Various lawsuits have arisen in the ordinary course of the Company's business.
In each of the matters, the Company believes its defenses are meritorious and
that the eventual outcome will not have a material effect on the Company's
financial position.
At December 31, 1999 the Company does not have any material lease agreements for
office space or equipment.
10. Regulatory Restrictions
The Company is required by statutory regulations to meet minimum risked-based
capital standards. Risk-based capital is a method of measuring the minimum
amount of capital appropriate for an insurance company to support its overall
business operations in consideration of its size and risk profile. At December
31, 1999 and 1998, the Company exceeded the minimum risk-based capital
standards.
State regulatory authorities have powers relating to granting and revoking
licenses to transact business, the licensing of agents, the regulation of
premium rates and trade practices, the form and content of insurance policies,
the content of advertising material, financial statements and the nature of
permitted practices.
11. Annuity Reserves
At December 31, 1999, the Company's annuity reserves and deposit fund
liabilities that are subject to discretionary withdrawal (with adjustment),
subject to discretionary withdrawal (without adjustment), and not subject to
discretionary withdrawal provisions are summarized as follows:
Amount Percent
-------- -------
(in thousands)
Subject to discretionary withdrawal:
At book value less current surrender
charge of 5% or more $ 75,955 14.0%
Subject to discretionary withdrawal (without
adjustment) at book value with minimal or
no charge or adjustment 447,914 82.0%
Not subject to discretionary withdrawal 22,084 4.0%
-------- ----
Total annuity reserves and deposit fund
liabilities before reinsurance $545,953 100%
======== ====
The annuity reserves and deposit fund liabilities are included in "Policy
reserves" in the balance sheets.
xxxv
<PAGE>
12. Reinsurance
Certain premiums and benefits are assumed from and ceded to other insurance
companies under various reinsurance agreements. The ceded reinsurance agreements
provide the Company with increased capacity to write larger risks and maintain
its exposure to loss within its capital resources.
The Company's ceded reinsurance arrangements reduced certain items in the
accompanying financial statements by the following amounts:
1999 1998
--------------------
(in thousands)
Premiums $13,509 $12,324
Benefits paid or provided 3,311 3,675
Policy and contract liabilities, at year end 3,348 3,559
At December 31, 1999 the Company has no reserves ceded to unauthorized
reinsurers. Amounts payable or recoverable for reinsurance on policy and
contract liabilities are not subject to periodic or maximum limits. At December
31, 1999, the Company's reinsurance recoverables are not material and no
individual reinsurer owed the Company an amount that was equal to or greater
than 3% of the Company's surplus.
In 1999 and 1998, the Company did not commute any ceded reinsurance nor did it
enter into or engage in any agreement that reinsures policies or contracts that
were in-force or had existing reserves as of the effective date of such
agreements.
The Company remains obligated for amounts ceded in the event that the reinsurers
do not meet their obligations.
No policies issued by the Company have been reinsured with a foreign company,
which is controlled, either directly or indirectly, by a party not primarily
engaged in the business of insurance.
13. Subsequent Event
On April 18, 2000, Western and Southern's Board of Directors adopted a plan of
reorganization under Ohio's law. This plan of reorganization provides for the
reorganization of Western and Southern as a stock life insurance company that is
initially a wholly owned subsidiary, and at all times must be at least a
majority-controlled subsidiary, of a mutual insurance holding company in
accordance with the requirements of Sections 3913.25 to 3913.38 of the Ohio
Revised Code. To become effective, the plan of reorganization must be approved
by policyholders, and thereafter by the Superintendent of Insurance of the State
of Ohio.
xxxvi
<PAGE>
Report of Independent Auditors
on Other Financial Information
To the Board of Directors of
Columbus Life Insurance Company
Our audit was conducted for the purpose of forming an opinion on the
statutory-basis financial statements taken as a whole. The accompanying
supplemental schedule of selected statutory-basis financial data is presented to
comply with the National Association of Insurance Commissioners' Annual
Statement Instructions and is not a required part of the statutory-basis
financial statements. Such information has been subjected to the auditing
procedures applied in our audit of the statutory-basis financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the statutory-basis financial statements taken as a whole.
This report is intended solely for the information and use of the Company and
state insurance regulatory authorities and is not intended to be and should not
be used for anyone other than these specified parties.
/s/ ERNST & YOUNG LLP
April 18, 2000
xxxvii
<PAGE>
Columbus Life Insurance Company
Supplemental Schedule of Selected Statutory-Basis Financial Data
for the year ended December 31, 1999
<TABLE>
<S> <C>
Investment income earned:
Government bonds $ 7,747,918
Other bonds (unaffiliated) 101,337,794
Bonds of affiliates --
Preferred stocks (unaffiliated) 1,934,876
Preferred stocks of affiliates --
Common stocks (unaffiliated) 2,734,128
Common stocks of affiliates 8,865,968
Mortgage loans 12,331,158
Real estate 606,868
Premium notes, policy loans and liens 4,856,048
Collateral loans --
Cash on hand and on deposit --
Short-term investments 3,530,095
Other invested assets 21,890
Derivative instruments --
Aggregate write-ins for investment income 124,628
------------
Gross investment income $144,091,371
============
Real estate owned - book value less encumbrances 3,364,531
============
Mortgage loans - book value:
Farm mortgages --
Residential mortgages 184,428
Commercial mortgages 150,913,692
------------
Total mortgage loans $151,098,120
============
Mortgage loans by standing - book value:
Good standing $150,767,143
Good standing with restructured terms --
Interest overdue more than three months, not in foreclosure 330,977
Foreclosure in process --
$151,098,120
============
Other long-term assets - statement value 27,611,260
Collateral loans
Bonds and stocks of parents, subsidiaries and affiliates - book value:
Bonds --
Preferred stocks --
Common stocks 89,554,462
</TABLE>
xxxviii
<PAGE>
Columbus Life Insurance Company
Supplemental Schedule of Selected Statutory-Basis Financial Data
for the year ended December 31, 1999
<TABLE>
<S> <C>
Bonds and short-term investments by class and maturity:
Bonds by maturity - statement value due within one year or less $ 102,772,503
Over 1 year through 5 years 618,163,801
Over 5 years through 10 years 540,266,631
Over 10 years through 20 years 126,014,274
Over 20 years 163,958,949
---------------
Total by maturity $ 1,551,176,158
===============
Bonds by class - statement value:
Class 1 $ 1,121,741,122
Class 2 326,355,366
Class 3 46,724,375
Class 4 49,497,024
Class 5 6,858,271
Class 6
---------------
Total by class $ 1,551,176,158
===============
Total bonds publicly traded $ 1,366,300,423
===============
Total bonds privately placed $ 184,875,736
===============
Preferred stocks - statement value $ 24,764,456
===============
Common stocks - market value $ 286,335,290
===============
Short-term investments - book value $ 56,836,189
===============
Financial options owned - statement value 1,131,203
Financials options written and in force - statement value --
Financial futures contracts open - current price --
Cash on deposit $ (2,518,078)
===============
Life insurance in force:
Industrial $ 12,965,918
Ordinary --
Credit life --
Group life --
Amount of accidental death insurance in force under ordinary policies 223,967
</TABLE>
xxxix
<PAGE>
Columbus Life Insurance Company
Supplemental Schedule of Selected Statutory-Basis Financial Data
for the year ended December 31, 1999
Life insurance policies with disability provisions in force:
Industrial $ --
Ordinary 4,671,786
Credit life --
Group life --
Supplemental contract in force:
Ordinary - not involving life contingencies:
Amount on deposit 6,259,529
Income payable 2,709,386
Ordinary - involving life contingencies:
Income payable 1,215,456
Group - not involving life contingencies:
Amount on deposit --
Income payable --
Group - involving life contingencies:
Income payable --
Annuities:
Ordinary:
Immediate - amount of income payable 386,892
Deferred - fully paid account balance 157,284,241
Deferred - not fully paid - account balance 356,550,764
Group:
Amount of income payable 1,080,681
Fully paid account balance --
Not fully paid account balance --
Accident and health insurance - premiums in force:
Ordinary 794,264
Group --
Credit --
Deposit funds and dividend accumulations:
Deposit funds - account balance 1,181,872
Dividend accumulations - account balance 34,542,884
xl
<PAGE>
Columbus Life Insurance Company
Supplemental Schedule of Selected Statutory-Basis Financial Data
for the year ended December 31, 1999
Claim payments 1996:
Group accident and health year ended December 31, 1996:
1999 $ --
1998 --
1997 --
Other accident and health:
1999 163,289
1998 232,280
1997 226,023
Other coverages that use developmental methods to calculate:
1999 --
1998 --
1997 --
xli
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
xlii
<PAGE>
GLOSSARY
Account Value The sum of the value of your investments in the
Sub-Accounts, the value of your investments in the
Fixed Account and the value of your Loan Account.
Accumulation Unit A unit of measure used to calculate a
Policyholder's share of a Sub-Account.
Accumulation Unit Value The dollar value of an Accumulation Unit in a
Sub-Account.
Attained Age We determine the Attained Age of the Insured at
various times for various reasons.
o At the time we issue your Policy, the Insured's
Attained Age is the Insured's age on the Policy
Date.
o After we issue your Policy, the Insured's
Attained Age generally is the Insured's age on
the last Policy Anniversary on or before the
Monthly Anniversary Date.
o If you increase the Specified Amount after we
issue your Policy, the Insured's Attained Age,
for purposes of determining cost of insurance
charges applicable to the increase, is the
Insured's age on the last anniversary of the
increase on or before that Monthly Anniversary
Day.
Beneficiary The person or persons you have named to receive the
Death Proceeds when the Insured dies.
Cash Surrender Value The Account Value minus any surrender charge.
Columbus Life, we, Columbus Life Insurance Company.
us and our
Contingent Beneficiary The person or persons you have named to receive the
Death Proceeds when no Beneficiaries remain alive and
the Insured dies.
Death Benefit The amount we pay to the Beneficiary under the Policy
when the Insured dies.
Death Proceeds Death Benefit plus any insurance on the Insured's
life that was provided by riders to your Policy.
Fixed Account An investment option that provides a fixed rate of
interest.
G-1
<PAGE>
Fund A Fund is a series of a registered management
investment company. Each Sub-Account invests in a
Fund that has the same investment objective as the
Sub-Account.
Indebtedness The sum of the value of your Loan Account plus
accrued and unpaid interest on the loan.
Insured The person on whose life we provide insurance
coverage under your Policy.
Loan Account The portion of your Account Value that is collateral
for your loans.
Minimum Issue Limit The minimum amount of insurance you must purchase and
maintain. If the Insured is in a standard premium
class, the Minimum Issue Limit is $25,000. If the
Insured is in a preferred premium class, the Minimum
Issue Limit is $100,000.
Monthly Anniversary Day The date each month on which we deduct the Monthly
Deduction and Monthly Expense Charge. This is
generally the same date each month as the Policy
Date, so long as that date is a day on which
processing occurs.
Monthly Deduction The Monthly Deduction includes the amount deducted
for the cost of insurance charge plus the cost of any
additional benefits provided under your Policy by
rider.
Monthly Expense Charge The Monthly Expense Charge covers the cost of
administering your Policy.
Net Cash Surrender Value Your Account Value minus any surrender charge and any
Indebtedness.
Net Premiums The amount of premium payment you paid less the
premium expense charge and less the tax charges.
Payee The person who actually receives the payment of
proceeds from us under one of the Income Plans.
Depending on the circumstances, the Payee might mean
you, the Beneficiary, the Contingent Beneficiary,
your estate or another designated person.
Policy The Columbus Life Flexible Premium Variable Universal
Life Policy, including the application and any
amendments, any supplemental application, riders or
endorsements.
G-2
<PAGE>
Policy Anniversary The same date each year as the Policy Date.
Policy Date The date from which Policy months, years and
anniversaries are measured.
Policy Schedule The schedule that begins on page 3 of your Policy. It
contains specific information about your Policy such
as the Specified Amount, your planned premium, the
death benefit option you selected, required payments
for guaranteed continuation of your Policy and the
maximum amounts of various charges.
Policy Year A year that starts on the your Policy Date or an
anniversary of your Policy Date.
Separate Account 1 A separate account of Columbus Life Insurance Company
that supports your Policy.
Specified Amount The amount of insurance coverage provided by the
Policy.
Sub-Accounts A division of Separate Account 1. Each Sub-Account
invests in a Fund, which has the same investment
objective as the Sub-Account.
Surrender Charge If the Specified Amount of your Policy decreases, you
will pay a surrender charge under certain
circumstances.
G-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
COLUMBUS LIFE FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY
SUPPLEMENTAL PROSPECTUS
MAY 1, 2000
Columbus Life Insurance Company
Separate Account 1
Columbus Life Insurance Company (Columbus Life) is providing you with this
Supplemental Prospectus that supplements and should be read with the prospectus
for the Columbus Life Flexible Premium Variable Universal Life Insurance Policy
dated May 1, 2000 (Core Prospectus). The Core Prospectus contains details
regarding your Policy. Please read the Core Prospectus and this Supplemental
Prospectus carefully and keep them for future reference.
This Supplemental Prospectus describes the Touchstone Income Opportunity
Sub-Account, an additional investment option of the Policy available only to
Policy owners who were:
o Actively participating in an automatic investment program or an
automatic asset allocation program on April 30, 2000 and
o Allocating payments to the Touchstone Income Opportunity Sub-Account
through that automatic investment program or automatic asset allocation
program.
This additional investment option will be available to you only through your
previously established automatic investment program or automatic asset
allocation program. This investment option will terminate when you no longer
have money in the Income Opportunity Sub-Account.
The Securities and Exchange Commission maintains a web site (http://www.sec.gov)
that contains certain other material that is legally part of the registration
statement for Columbus Life Insurance Company Separate Account 1 (Separate
Account 1) and other information about Separate Account 1. You can view these
documents at the Public Reference Room of the Securities and Exchange Commission
or obtain copies, for a fee, by writing to the Public Reference Room of the
Securities and Exchange Commission, 450 Fifth Street N.W., Washington, D.C.
20549. You can also call the Securities and Exchange Commission at 800.SEC.0330.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Policies or determined if this
Supplemental Prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
The Policy is not a deposit or obligation of any bank. No bank has guaranteed or
endorsed the Policy. The Policy is not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, the National Credit Union
Share Insurance Fund or any other agency.
Investments in variable life insurance policies involve investment risk,
including possible loss of principal and interest.
<PAGE>
2
TABLE OF CONTENTS
PAGE
Cover Page 1
Table Of Contents 2
Glossary 3
Charges 5
Information About The Investment Option 7
<PAGE>
GLOSSARY
3
ACCOUNT VALUE
- --------------
The sum of the value of your investments in the Sub-Accounts, the value of
your investment in the Fixed Account and the value of the collateral for your
loans.
ACCUMULATION UNIT
- -----------------
A unit of measure used to calculate a Policy owner's share of a Sub-Account.
ACCUMULATION UNIT VALUE
- ------------------------
The dollar value of an Accumulation Unit in a Sub-Account.
ATTAINED AGE
- -------------
We determine the Attained Age of the Insured at various times for various
reasons. At the time we issue your Policy, the Insured's Attained Age is the
Insured's age on the Policy Date. After we issue your Policy, the Insured's
Attained Age generally is the Insured's age on the last Policy Anniversary on
or before the Monthly Anniversary Date. If you increase the Specified Amount
after we issue your Policy, the Insured's Attained Age, for purposes of
determining cost of insurance charges applicable to the increase, is the
Insured's age on the last anni8versary of the increase on or before that
Monthly Anniversary Day.
COLUMBUS LIFE, WE, OUR AND US
- ------------------------------
Columbus Life Insurance Company.
DEATH PROCEEDS
- ---------------
The death benefit provided under the Policy, plus any insurance provided by
riders to the Policy.
FIXED ACCOUNT
- --------------
An investment option that provides a fixed-rate of interest.
FUND
- -----
A series of a registered management investment company. Each Sub-Account
invests in a Fund that has the same investment objective as the Sub-Account.
INSURED
- --------
The person on whose life we provide insurance coverage under your Policy.
LOAN ACCOUNT
- -------------
The portion of your Account Value that is collateral for your loans.
MONTHLY ANNIVERSARY DAY
- ------------------------
The date each month on which we deduct the Monthly Deduction and Monthly
Expense Charge. This is generally the same date each month as the Policy Date,
so long as that date is a day on which processing occurs.
MONTHLY DEDUCTION
- ------------------
The Monthly Deduction includes the amount deducted for the cost of insurance
charge plus the cost of any additional benefits provided under your Policy by
rider.
MONTHLY EXPENSE CHARGE
- -----------------------
The Monthly Expense Charge covers the cost of administering your Policy.
NET PREMIUMS
- -------------
The amount of premium payment you paid less the premium expense charge and
less the tax charges.
POLICY
- -------
Columbus Life Flexible Premium Variable Universal Life Insurance Policy,
including the application and any amendments, riders or endorsements.
POLICY ANNIVERSARY
- -------------------
The same date each year as the Policy Date.
<PAGE>
4
POLICY DATE
- ------------
The date from which Policy months, years and anniversaries are measured.
POLICY SCHEDULE
- ----------------
The schedule that begins on page 3 of your Policy. It contains specific
information about your Policy such as the Specified Amount, your planned
premium, the death benefit option you selected, required payments for
guaranteed continuation of your Policy and the maximum amounts of various
charges.
POLICY YEAR
- ------------
A year that starts on the your Policy Date or an anniversary of your Policy
Date.
SPECIFIED AMOUNT
- -----------------
The amount of insurance coverage provided by the Policy.
SUB-ACCOUNT
- ------------
The Sub-Account invests in the Fund, which has the same investment objective
as the Sub-Account.
SURRENDER CHARGE
- -----------------
If the Specified Amount of your Policy decreases, you will pay a surrender
charge under certain circumstances.
YOU AND YOUR
- -------------
The owner of the Policy.
<PAGE>
5
CHARGES
The following describes the fees and expenses that you may pay directly or
indirectly if you purchase a policy. More complete information about these fees
and expenses is located in the "Charges" section of the Core Prospectus on pages
34 through 39.
POLICY CHARGES AND DEDUCTIONS
<TABLE>
<CAPTION>
<S> <C>
PERCENT OF PREMIUM CHARGES
o Premium Expense Charges 4.75% (maximum of 5.50%) of premium payments
o Tax Charges Varies by state of residence (maximum
of 3.50% of premium payments)
MONTHLY DEDUCTIONS FROM ACCOUNT VALUE
o Cost of Insurance Charges Depends on the Insured's Attained Age, gender and
underwriting class, and your Specified
Amount, Account Value and death benefit option
o Monthly Expense Charges $6.00 (maximum of $7.00)
SEPARATE ACCOUNT CHARGES
o Mortality and Expense 0.90% effective annual rate (maximum of 1.00%)
Risk Charge deducted daily from the Accumulation Unit Value
of each Sub-Account
TRANSACTION CHARGES
o Transfer Charges $0 for first 12 transfers among Sub-Accounts each
Policy Year; $10 for each additional transfer in a
Policy Year - deducted from Account Value at
time of transfer
SURRENDER CHARGES
o Full Surrender Applies during the first 14 years since your Policy
Date or since the date of any increase in Specified
Amount if you surrender your Policy, or if it
terminates at the end of a grace period because no
continuation provision applies and we did not receive
sufficient premium to keep it in effect - the full
surrender charge shown in your most recent Policy
Schedule and in Supplement D to this prospectus is
deducted from Account Value at time of surrender
(maximum of $44.90 per $1,000 decrease in Specified
Amount)
<PAGE>
6
<CAPTION>
<S> <C>
Other Decrease in Specified Amount Applies during the first 14 years since your
(Upon Your Request or as a Result Policy Date or since the date of any increase
of Partial Surrender or Withdrawal) in Specified Amount if you request a decrease
in Specified Amount, or the Specified Amount
decreases as a result of partial surrender or
withdrawal - a pro rata portion of the full
surrender charge shown in your most recent
Policy schedule and in Supplement D to this
prospectus is deducted from Account Value at
time of surrender or withdrawal (maximum of
$44.90 per $1,000 decrease in Specified Amount),
plus a $50 withdrawal fee for your second and
each additional withdrawal in a Policy Year.
</TABLE>
FUND EXPENSES
Touchstone Income Opportunity Fund Expenses
(as a percentage of average daily net assets
and after expense reimbursement)
===============================================================================
Advisor Fee Other Expenses Total Expenses
TOUCHSTONE INCOME OPPORTUNITY FUND* 0.65% 0.20% 0.85%**
- -------------------------------------------------------------------------------
* The fee and expense figures shown for the Fund are based on amounts incurred
during the fiscal year ended December 31, 1999.
** During 1999, fee waiver and expense reimbursement arrangements had the effect
of reducing expenses actually paid by the Fund. Touchstone Advisors, Inc. has
agreed to waive certain fees or reimburse the Fund so that the Fund's expenses
do not exceed the percentage listed in this table. This agreement will remain in
place until at least December 31, 2000. If the waiver and reimbursement
arrangements had not been in place, the total expenses of the Fund would have
been 1.29%.
<PAGE>
7
INFORMATION ABOUT THE INVESTMENT OPTION
The Sub-Account and the Fund
After April 30, 2000, you can allocate your Net Premiums to the Touchstone
Income Opportunity Sub-Account (Income Opportunity Sub-Account) only through
your previously established automatic investment program or automatic asset
allocation program. The Income Opportunity Sub-Account invests in the Touchstone
Income Opportunity Fund (Income Opportunity Fund).
The Income Opportunity Sub-Account buys shares of the Income Opportunity Fund at
net asset value without a sales charge. Dividends and capital gains
distributions from the Income Opportunity Fund are reinvested at net asset value
without a sales charge and held by the Income Opportunity Sub-Account as an
asset. The Income Opportunity Sub-Account redeems Income Opportunity Fund shares
at net asset value to the extent necessary to make payment of Death Proceeds or
other payments under the Policy.
The following table contains general information about the investment advisor,
investment objective and principal investment strategies of the Income
Opportunity Fund. The Income Opportunity Fund advisor and sub-advisor cannot
guarantee that the Income Opportunity Fund will meet its investment objectives
nor is there any guarantee that your Account Value will equal or exceed the
total of your Net Premiums.
The Income Opportunity Fund has a name and investment objective that is very
similar the name of a publicly available mutual fund managed by the same advisor
and sub-advisor. The Income Opportunity Fund is not publicly available and will
not have the same performance as the publicly available mutual fund. Different
performance will result from differences in various factors that affect the
operation of the Income Opportunity Fund, such as implementation of investment
policies, Income Opportunity Fund expenses and size of the Income Opportunity
Fund. In addition, your investment return from your Policy will be less than the
investment return of a shareholder in the publicly available fund because you
will pay additional charges related to your Policy, such as the mortality and
expense risk charge.
Touchstone Income Opportunity Fund
(Touchstone Income Opportunity Sub-Account)
Fund Family: Touchstone Variable Series Trust
Fund Advisor: Touchstone Advisors, Inc.
311 Pike Street
Cincinnati, Ohio 45202
Fund Sub-Advisor: Alliance Capital Management L.P.
Investment The Fund seeks to achieve a high level of
Objective: current income as its main goal. The Fund
may also seek to increase the value of its
shares, if consistent with its main goal.
Principal Investment The Fund invests primarily in debt
Strategies: securities. These debt securities will
generally be more risky non-investment grade
corporate and government securities (up to
100% of total assets). Non-investment grade
debt securities are often referred to as
"junk bonds" and are considered speculative.
Fund Custodian: Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
<PAGE>
8
Fund Underwriter: Touchstone Securities, Inc.
311 Pike Street
Cincinnati, Ohio 45202
More complete information about the Income Opportunity Fund, including
information about its expenses, is included in its prospectus, which is attached
to this Supplemental Prospectus. Please read the Income Opportunity Fund's
prospectus carefully.
Changes in the Sub-Account and the Funds
As described in the Core Prospectus, we may substitute a new Fund or similar
investment option for the Fund in which a Sub-Account invests. We would make a
substitution to ensure the underlying Fund continues to be a suitable
investment. A substitution may be triggered by unsatisfactory investment
performance, a change in laws or regulations, a change in the Fund's investment
objectives or restrictions, a change in the availability of the Fund for
investment, or any other reason. Before any substitution, we will obtain any
required approvals, including approval from the SEC or from Policy owners.
WE ARE CURRENTLY SEEKING APPROVAL FROM THE SEC TO SUBSTITUTE SHARES OF
THE TOUCHSTONE HIGH YIELD FUND DESCRIBED IN THE CORE PROSPECTUS FOR
SHARES OF THE TOUCHSTONE OPPORTUNITY FUND. AFTER WE RECEIVE THE
APPROVAL FROM THE SEC, WE WILL AUTOMATICALLY REDEEM THE SHARES OF THE
TOUCHSTONE INCOME OPPORTUNITY FUND HELD BY THE INCOME OPPORTUNITY
SUB-ACCOUNT AND USE THE REDEMPTION PROCEEDS TO BUY SHARES OF THE
TOUCHSTONE HIGH YIELD FUND.
