<PAGE> 1
'33 ACT FILE NO. 33-7094
'40 ACT FILE NO. 811-3365
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 32 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 108 [X]
(CHECK APPROPRIATE BOX OR BOXES.)
SECURITY FIRST LIFE SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
SECURITY FIRST LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
11365 WEST OLYMPIC BOULEVARD, LOS ANGELES, CALIFORNIA 90064
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 312-6100
RICHARD C. PEARSON
PRESIDENT
SECURITY FIRST LIFE INSURANCE COMPANY
11365 WEST OLYMPIC BOULEVARD, LOS ANGELES, CALIFORNIA 90064
(NAME AND ADDRESS OF AGENT FOR SERVICE)
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE SPACE)
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485
[X] ON MAY 1, 1999 PURSUANT TO PARAGRAPH (b) OF RULE 485
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a) OF RULE 485
[ ] ON [DATE] PURSUANT TO PARAGRAPH (a) OF RULE 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
THE COMPANY HAS ELECTED PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940 TO REGISTER AN INDEFINITE NUMBER OF SECURITIES. THE MOST RECENT RULE
24-F-2 NOTICE WAS FILED ON MARCH 3, 1999.
<PAGE> 2
SECURITY FIRST LIFE SEPARATE ACCOUNT A
CROSS REFERENCE SHEET
PART A - PROSPECTUS
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption in Prospectus
- ----------------------- ---------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Definitions Glossary
3. Synopsis of Highlights Summary of the Contract
4. Condensed Financial Information Condensed Financial Information;
Financial Information
5. General Description of Registrant, Description of Security First Life
Depositor, and Portfolio Companies Insurance Company, The Separate Account
and The Funds; Voting Rights; Servicing
Agent
6. Deductions and Expenses Contract Charges
7. General Description of Variable Annuity Descriptions of the Contracts;
Contracts Accumulation Period; Annuity Benefits
8. Annuity Period Annuity Benefits
9. Death Benefit Death Benefits
10. Purchases and Contract Value Description of the Contracts;
Accumulation Period; Principal
Underwriter
11. Redemptions Accumulation Period
12. Taxes Federal Income Tax Status
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Statement of Table of Contents of the Statement of
Additional Information Additional Information
</TABLE>
<PAGE> 3
PART B - STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History The Insurance Company; The Separate
Account: The Trust and The Funds
18. Services Servicing Agent; Safekeeping of
Securities; Independent Auditors
19. Purchase of Securities Being Offered Purchase of Securities Being Offered
20. Underwriters Distributions of the Contracts
21. Calculation of Performance Data Calculation of Performance Data
22. Annuity Payments Annuity Payments
23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this registration statement.
<PAGE> 4
[FRONT PAGE]
PROSPECTUS
May 1, 1999
THE SECURITY FIRST INVESTORS CHOICE VARIABLE ANNUITY CONTRACTS
issued through
SECURITY FIRST LIFE SEPARATE ACCOUNT A
by
SECURITY FIRST LIFE INSURANCE COMPANY
----------------------------------------------------------------------
This Prospectus gives you important information about the individual flexible
payment fixed and variable annuity contracts issued through Security First Life
Separate Account A by Security First Life Insurance Company (the "Contracts").
Please read it carefully before you invest and keep it for future reference. The
Contracts provide annuity benefits through distributions made from certain
retirement plans that qualify for special Federal income tax treatment
("qualified plans"), as well as from distributions made under retirement plans
that do not qualify for special tax treatment ("non-qualified plans").
You decide how to allocate your money among the available investment choices.
You may choose to allocate your payments to the General Account, which is a
fixed account (not described in this Prospectus) that offers an interest rate
guaranteed by Security First Life Insurance Company ("Security First Life"), or
to Security First Life Separate Account A (the "Separate Account"). The Separate
Account, in turn, invests in the following underlying mutual funds:
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND
Money Market Portfolio
Equity Income Portfolio
Growth Portfolio
Overseas Portfolio
<PAGE> 5
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio
Contrafund Portfolio
Index 500 Portfolio
SECURITY FIRST TRUST
T. Rowe Price Growth and Income Series
U.S. Government Income Series
Equity Series
Bond Series
ALGER AMERICAN FUND
Small Capitalization Portfolio
You can choose any combination of these investment choices. Your Contract Value
will vary daily to reflect the investment experience of the funding options
selected. These mutual funds are described in detail in the fund prospectuses
that are attached to or delivered with this Prospectus. Please read these
prospectuses carefully before you invest. This Prospectus is not valid unless
accompanied by the mutual fund prospectuses.
For more information:
If you would like more information about the Contract, you can obtain a copy of
the Statement of Additional Information ("SAI") dated May 1, 1999. The SAI is
legally considered a part of this Prospectus as though it were included in the
Prospectus. The Table of Contents of the SAI appears on page ____ of the
Prospectus. To request a free copy of the SAI or to ask questions, write or
call:
Security First Life Insurance Company
P.O. Box 92193
Los Angeles, California 90009
Phone: (800) 284-4536
The Securities and Exchange Commission ("SEC") has a website
(http://www.sec.gov) which you may visit to view this Prospectus, the SAI, or
additional material that also is legally considered a part of this Prospectus,
as well as other information.
2
<PAGE> 6
The SEC has not approved or disapproved these securities nor determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
[Side Bar: An investment in any of these variable annuities involves investment
risk. You could lose money you invest. The Contracts and the mutual funds are:
- not bank deposits or obligations
- not federally insured or guaranteed
- not endorsed by any bank or government agency
- not guaranteed to achieve their investment objective]
3
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Glossary
Summary of the Contracts
Fee Tables and Examples
Condensed Financial Information
Financial and Performance Information
Description of Security First Life Insurance Company, The General Account
The Separate Account, The Funds and Service Providers
The Security First Life Insurance Company
The General Account
The Separate Account
The Funds
Principal Underwriter
Servicing Agent
Custodian
Contract Charges
Premium Taxes
Surrender Charge
Administration Fees
Mortality and Expense Risk Charge
Federal, State and Local Taxes
Free Look Period
Description of the Contracts
Assignment
Purchase Payments
Transfers
Dollar Cost Averaging
Reallocation Election
Modification of the Contracts
Accumulation Period
Crediting Accumulation Units in the Separate Account
Surrender from the Separate Account
Account Statements
Annuity Benefits
Variable Annuity Payments
Election of Annuity Date and Form of Annuity
Frequency of Payment
Level Payments Varying Annually
Annuity Unit Values
Death Benefits
Death Before the Annuity Date
Death After the Annuity Date
Federal Tax Considerations
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
General Taxation of Annuities
Non-qualified Contracts
Qualified Contracts
Withholding
Voting Rights
Year 2000 Issue
Legal Proceedings
Additional Information
Table of Contents of Statement of Additional Information
</TABLE>
Security First Life does not intend to offer the Contracts anywhere or to anyone
to whom they may not lawfully be offered or sold. Security First Life has not
authorized any information or representations about the Contracts other than the
information in this Prospectus, the attached prospectuses, or supplements to the
prospectuses or any supplemental sales material Security First Life authorizes.
5
<PAGE> 9
GLOSSARY
These terms have the following meanings when used in this Prospectus:
ACCUMULATION UNIT - A measuring unit used to determine the value of your
interest in a Separate Account Series under a Contract at any time before
Annuity payments commence.
ANNUITANT - The person on whose life Annuity payments under a Contract are
based.
ANNUITY - A series of income payments made to an Annuitant for a defined period
of time.
ANNUITIZATION or ANNUITY DATE - The date on which Annuity payments begin.
ANNUITY UNIT - A measuring unit used to determine the amount of Variable Annuity
payments based on a Separate Account Series under a Contract after such payments
have commenced.
ASSUMED INVESTMENT RETURN - The investment rate selected by the Annuitant for
use in determining the Variable Annuity payments.
BENEFICIARY - The person who has the right to a Death Benefit upon your death.
BUSINESS DAY - Each Monday through Friday except for days the New York Stock
Exchange is not open for trading.
CONTRACT - The agreement between you and Security First Life covering your
rights.
CONTRACT DATE - The date your Contract was issued to you.
CONTRACT VALUE - The sum of your interests in the Separate Account Series and
the General Account. Your interest in the Separate Account Series is the sum of
the values of the Accumulation Units. Your interest in the General Account is
the accumulated value of the amounts allocated to the General Account plus
credited interest as guaranteed in the Contract, less any prior withdrawals
and/or amounts applied to Annuity options.
CONTRACT YEAR - A 12-month period starting on the Contract Date and on each
anniversary of the Contract Date.
FIXED ANNUITY - An Annuity providing guaranteed level payments. These payments
are not based upon the investment experience of the Separate Account.
FREE LOOK PERIOD - The 10-day period when you first receive your Contract.
During this time period, you may cancel your Contract for a full refund of all
6
<PAGE> 10
Purchase Payments (or the greater of Purchase Payments or the Contract Value in
some states).
FREE WITHDRAWAL AMOUNT - The amount that can be withdrawn in a Contract Year
without incurring a surrender charge.
FUND - A diversified, open-end management investment company, or series thereof,
registered under the Investment Company Act of 1940 ("1940 Act") which serves as
the underlying investment medium for a Series in the Separate Account.
GENERAL ACCOUNT - All assets of Security First Life other than those in the
Separate Account or any of its other segregated asset accounts.
NORMAL ANNUITY DATE- The date on which Annuity payments begin if you do not
select another date. It is the later of the Contract anniversary nearest the
Annuitant's 85th birthday or the 10th anniversary of the Contract Date.
OWNER - You, the person who has title to the Contract.
PURCHASE PAYMENT - The amounts paid by you to Security First Life in order to
provide benefits under the Contract.
SEPARATE ACCOUNT - The segregated asset account entitled "Security First Life
Separate Account A" which has been established by Security First Life under
Delaware law to receive and invest amounts allocated by you and by other
contract owners and to provide Variable Annuity benefits under the Contracts.
The Separate Account is registered as a unit investment trust under the 1940
Act.
SERIES - The Accumulation Unit values and Annuity Unit values maintained
separately for each Fund whose securities are owned by the Separate Account.
VALUATION DATE - Any Business Day used by the Separate Account to determine the
value of part or all of its assets for purposes of determining Accumulation and
Annuity Unit values for the Contract. Accumulation Unit values will be
determined each Business Day. There will be one Valuation Date in each calendar
week for Annuity Unit values. Security First Life will establish the Valuation
Date at its discretion, but until notice to the contrary is given, that date
will be the last Business Day in a week.
VALUATION PERIOD - The period of time from one Valuation Date through the next
Valuation Date.
VARIABLE ANNUITY - An Annuity providing payments that will vary annually in
accordance with the net investment experience of the applicable Separate Account
Series.
7
<PAGE> 11
SUMMARY OF THE CONTRACTS
The Contracts
The Contracts may be offered to:
- Qualified Plans such as:
- Section 403(b) tax-sheltered annuities
- Section 457 deferred compensation plans
- Section 401 pension and profit sharing plans
- individual retirement annuities
- traditional Individual Retirement Accounts ("IRAs")
- Roth IRAs
[Side Bar: Please see the section "Qualified Contracts" on page ____ for more
information.]
- Plans that do not qualify for special tax treatment
(Non-qualified Contracts)
- Individuals seeking to accumulate money for retirement
Purchase Payments
Purchase Payments under the Contracts are made to the General Account, the
Separate Account, or allocated between them. You cay buy a Contract for $1,000
and add as little as $100 at any time (for IRAs, the minimum is $500 for an
initial Purchase Payment and $100 for each additional payment). There is no
initial sales charge; however, the charges and deductions described under
"Contract Charges" on page ___ will be deducted from the Contract Value.
You can transfer amounts allocated to the Separate Account:
- between any of the mutual fund investment choices, at any time
and as many times as you choose
- to the General Account at any time before the amount has been
applied to a variable annuity option
You can transfer amounts allocated to the General Account:
- to the Separate Account only to be applied to a Variable Annuity
option
[Side Bar: Please see "Transfers" on page ____ for more information.]
8
<PAGE> 12
Separate Account
Purchase Payments allocated to the Separate Account are invested at net asset
value in Accumulation Units in one or more of twelve Series, each of which
invests in one of the following twelve Funds:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Funds Advisers/Subadvisers
-----------------------------------------------------------------------------------------------
<S> <C>
FIDELITY INVESTMENTS Fidelity Management and Research Company
VARIABLE INSURANCE PRODUCTS FUND ("FMR")
-----------------------------------------------------------------------------------------------
Money Market Portfolio FMR
-----------------------------------------------------------------------------------------------
Equity Income Portfolio FMR
-----------------------------------------------------------------------------------------------
Growth Portfolio FMR
-----------------------------------------------------------------------------------------------
Overseas Portfolio FMR
-----------------------------------------------------------------------------------------------
FIDELITY INVESTMENTS
VARIABLE INSURANCE PRODUCTS FUND II FMR
-----------------------------------------------------------------------------------------------
Asset Manager Portfolio FMR
-----------------------------------------------------------------------------------------------
Contrafund Portfolio FMR
-----------------------------------------------------------------------------------------------
Index 500 Portfolio FMR
-----------------------------------------------------------------------------------------------
SECURITY FIRST TRUST Security First Investment Management
Corporation ("Security Management")
-----------------------------------------------------------------------------------------------
T. Rowe Price Growth and Income Series Price Associates, Inc.
-----------------------------------------------------------------------------------------------
U.S. Government Income Series BlackRock Financial Management, Inc.
("BlackRock")
-----------------------------------------------------------------------------------------------
Equity Series BlackRock
-----------------------------------------------------------------------------------------------
Bond Series Neuberger Berman, LLC ("NB")
-----------------------------------------------------------------------------------------------
ALGER AMERICAN FUND Fred Alger Management, Inc. ("Alger
Management")
-----------------------------------------------------------------------------------------------
Small Capitalization Portfolio Alger Management
</TABLE>
[Side Bar: Please see "The Separate Account" on page ____ and "The Funds" on
page ____ for more information.]
9
<PAGE> 13
Charges and Deductions
The following fees and expenses apply to your Contract:
<TABLE>
<CAPTION>
Fee or expense Amount of fee
- ---------------------------------------------------------------------------------------
<S> <C>
Daily deductions
- Administration fee (deducted from .00041%
your interest in the Separate (.15% per year)
Account)
- Mortality and Expense Risks fee .003425%
(1.25% per year)
Surrender charge (contingent deferred sales charge)
- Deducted if you request a full or 7% of Purchase Payment
partial withdrawal of Purchase and amounts credited to
Payments from the Separate it. This charge decreases
Account within seven years 1% each year after the
after the Purchase Payment is made Purchase Payment is made
</TABLE>
As described later in this Prospectus, this charge will not apply to:
- the first withdrawal in any year of up to 10% of your
interest in the Separate Account and 10% of your interest
in the General Account; or
- withdrawals made if you are confined to a hospital for at
least 30 consecutive days or to a skilled nursing home for
at least 90 consecutive days.
<TABLE>
<CAPTION>
Fee or expense Amount of fee
- ---------------------------------------------------------------------------------------
<S> <C>
Premium Taxes
- Payable to a state or government 0% - 2.35%
agency with respect to your Contract. (3.50% in Nevada)
It may be deducted on or after the date
the tax is incurred.
Currently, Security First Life
deducts these taxes upon
annuitization.
</TABLE>
[Side Bar: Please see "Charges and Deductions" on page ___ for more
information.]
10
<PAGE> 14
Free Look Period
You may cancel your Contract within 10 days after you receive it (or longer
depending on state law) for a full refund of all Purchase Payments (or the
greater of Purchase Payments or the Contract Value in some states). Purchase
Payments allocated to the Separate Account will be initially allocated to the
Money Market Portfolio during the Free Look Period.
[Side Bar: Please see "Free Look Period" on page ____ for more information.]
Variable Annuity Payments
You select the Annuity Date, an Annuity payment option and an assumed investment
return. You may change any of your selections before your Annuity Date. Your
monthly Annuity payments will start on the Annuity Date. Payments will vary from
year to year based on a comparison of the assumed investment returns you
selected with the actual investment experience of the Series in which the
Contract Value is invested.
If your monthly payments from a particular Series are less than $50, Security
First Life may change the frequency of your payments so that each payment will
be at least $50 from that Series.
Surrender
You may surrender all or part of your Contract Value before the Annuity Date.
You may not make a partial withdrawal if it would cause your interest in any
Series or the General Account to fall below $500.
However, if you are withdrawing the entire amount allocated to a Series; these
restrictions do not apply.
You may be assessed a surrender charge. In addition, any earnings surrendered
will be taxed as ordinary income and may be subject to a penalty tax under the
Internal Revenue Code. Certain restrictions apply for qualified Contracts.
[Side Bar: Please see "Surrender Charge" on page ___ and "Federal Tax
Considerations" on page ___ for more information.
11
<PAGE> 15
Death Benefit
One of the insurance guarantees we provide you under your Contract is that your
Beneficiary(ies) will be protected against market downturns. You name your
Beneficiary(ies). If you die before the Annuity Date, your Beneficiary(ies) will
receive a death benefit that is the greatest of:
- the total of all Purchase Payments less any partial withdrawals;
or
- the Contract Value at settlement; or
- if the Contract is issued when you (and all co-owners) are age
70 or younger, the greater of the Contract Value at the seventh
anniversary of Contract Date or each following fifth
anniversary.
Your Beneficiary(ies) may choose to receive this benefit in a lump sum or to
apply it to certain of the available annuity forms contained in this Contract.
[Side Bar: Please see "Death Benefits" on page ____ for more information.]
FEE TABLE AND EXAMPLES
The purpose of these fee tables and examples is to assist you in understanding
the various costs and expenses that you will bear, directly or indirectly, under
your Contract.
Expense Data
The table reflects expenses of the Separate Account as well as expenses of the
underlying Funds that make up the investment options for the Separate Account.
In addition to the expenses listed below, premium taxes may be applicable.*
Please see Fund prospectuses for a more complete description of the various
costs and expenses of the Funds.
* Under state law, premium taxes may be deducted from each Purchase Payment or
upon annuitization. At this time Security First Life deducts the premium tax
only from amounts annuitized.
[The following information assumes that the entire Contract Value is in the
Separate Account:]
12
<PAGE> 16
FEE TABLES
Your Expenses
<TABLE>
<CAPTION>
Years since
Purchase Payment
was received Percentage
------------ ----------
<S> <C> <C>
Surrender Charge (Deferred Sales Charge) (as a less than 1 7%
percentage of amounts accumulated with
respect to a purchase payment)
1 but not 2 6%
2 but not 3 5%
3 but not 4 4%
4 but not 5 3%
5 but not 6 2%
6 but not 7 1%
7 or more 0%
Separate Account Annual Expenses
(As a percentage of average Contract Value.
Deducted daily from the Separate Account.)
Administration Fee .15%
Mortality and Expense Risk Fees 1.25%
Total Separate Account Annual 1.40%
Expenses
</TABLE>
Fund Annual Expenses
(As a percentage of average net assets)
(Net of reimbursement)
<TABLE>
<CAPTION>
Money Equity Asset
Market Income Growth Overseas Manager Contrafund
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(a) Management Fee .21% .49% .59% .74% .54% .59%
- -----------------------------------------------------------------------------------------------------------------
(b) Other Expenses .10% .08% .07% .15% .10% .07%
- -----------------------------------------------------------------------------------------------------------------
(c) Total Annual Expenses .31% .57% .66% .89% .64% .66%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Small
Index 500 Growth & Income U.S. Government Capitalization
Portfolio Series Income Series Equity Series Bond Series Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(a) Management Fee .24% .50% .53% .80% .50% .85%
- --------------------------------------------------------------------------------------------------------------------------------
(b) Other Expenses .04% .07% .13% .11% .23% .04%
- --------------------------------------------------------------------------------------------------------------------------------
(c) Total Annual Expenses .28% .57% .66% .91% .73% .89%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Examples
<TABLE>
CONDITIONS
SEPARATE You would pay the
ACCOUNT following expenses TIME PERIODS
SERIES on a $1,000 investment ----------------------------------------
assuming 5% annual 1 Year 3 Years 5 Years 10 Years
return on assets: ----------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market (a) upon surrender at the (a) $82 $103 $125 $202
Portfolio end of the stated time
period
(b) 17 54 93 202
(b) if the Contract WAS NOT
surrendered
- -------------------------------------------------------------------------------------------------------
Equity Income SAME (a) 85 111 138 231
Portfolio
(b) 20 62 107 231
- -------------------------------------------------------------------------------------------------------
Growth Portfolio SAME (a) 86 114 143 241
(b) 21 65 112 241
- -------------------------------------------------------------------------------------------------------
Overseas Portfolio SAME (a) 88 121 154 265
(b) 23 72 124 265
- -------------------------------------------------------------------------------------------------------
Asset Manager SAME (a) 86 113 141 237
Portfolio
(b) 21 64 110 237
- -------------------------------------------------------------------------------------------------------
Small Capitalization (a) 88 120 153 263
Portfolio
(b) 23 72 123 263
- -------------------------------------------------------------------------------------------------------
Contrafund Portfolio SAME (a) 86 115 144 243
(b) 21 66 113 243
- -------------------------------------------------------------------------------------------------------
Index 500 Portfolio SAME (a) 82 103 123 199
(b) 17 53 91 199
- -------------------------------------------------------------------------------------------------------
T. Rowe Price Growth SAME (a) 85 111 138 230
& Income Series
(b) 20 62 106 230
- -------------------------------------------------------------------------------------------------------
U.S. Government SAME (a) 86 114 142 239
Income Series
(b) 21 65 111 239
- -------------------------------------------------------------------------------------------------------
Bond Series (a) 86 116 146 246
(b) 22 67 114 246
- -------------------------------------------------------------------------------------------------------
Equity Series SAME (a) 88 121 154 265
(b) 23 72 124 265
- -------------------------------------------------------------------------------------------------------
</TABLE>
EXPLANATION OF FEE TABLE AND EXAMPLES
1. The purpose of these tables and examples is to assist you in understanding
the various costs and expenses that you will bear directly or indirectly.
The table reflects expenses of the Separate Account as well as the
underlying funds. For additional information see "Contract Charges,"
beginning on page ___.
2. The investment adviser to the Index 500 Portfolio voluntarily reimbursed
certain expenses of the Portfolio. If there had been no reimbursement,
total expenses would have been .35% (see the Variable Insurance Products
Fund II prospectus for more information.)
3. The examples do not represent past or future expenses. Actual expenses may
be greater or less than those shown.
14
<PAGE> 18
CONDENSED FINANCIAL INFORMATION
The following table sets forth condensed financial information on
Accumulation Units with respect to Contracts issued under this prospectus
through the Separate Account. The information is derived from the financial
statements of the Separate Account for the year ended December 31, 1998 which
have been audited by Deloitte & Touche LLP, the Separate Account's independent
auditors. The financial statements for each of the years ended December 31, 1997
have been audited by Ernst & Young LLP, independent auditors. The information
should be read in conjunction with the financial statements, related notes and
other financial information in the Statement of Additional Information.
<TABLE>
<CAPTION>
Twelve Twelve Twelve Twelve Twelve Five Twelve Twelve
Months Months Months Months Months Months Months Months
Ended Ended Ended Ended Ended Ended Ended Ended
Separate Account Series 7/31/89 7/31/90 7/31/91 7/31/92 7/31/93 12/31/93 12/31/94 12/31/95
----------------------- ------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series B (Bond Series)
Beg. AUV $......................... 5.21 5.77 5.90 6.27 7.07 7.66 7.78 7.42
End. AUV $......................... 5.77 5.90 6.27 7.07 7.66 7.78 7.42 8.55
End. No. Non-Qualified AUs......... 14,195 35,914 29,408 34,855 45,488 45,035 35,534 45,117
End. No. Qualified AUs............. 60,665 129,756 167,461 165,862 227,551 255,421 52,134 61,437
Series G (T. Rowe Price Growth and
Income Series)
Beg. AUV $......................... 5.23 6.96 6.26 6.84 7.70 8.27 8.70 8.85
End. AUV $......................... 6.96 6.26 6.84 7.70 8.27 8.70 8.85 11.46
End. No. Non-Qualified AUs......... 122,310 152,193 103,701 121,098 157,339 170,454 179,634 219,556
End. No. Qualified AUs............. 120,735 396,570 598,731 826,262 1,300,789 1,510,626 265,635 318,557
Series FA (Asset Manager Portfolio)
Beg. AUV $ (5/13/93)............... 5.00 5.15 5.62 5.21
End. AUV $......................... 5.15 5.62 5.21 6.02
End. No. Non-Qualified AUs......... 14,874 297,065 639,669 636,600
End. No. Qualified AUs............. 14,679 233,747 881,502 1,048,666
Series FG (Growth Portfolio)
Beg. AUV $ (5/24/93)............... 5.00 5.06 5.40 5.33
End. AUV $......................... 5.06 5.40 5.33 7.13
End. No. Non-Qualified AUs......... 6,333 68,333 220,859 369,778
End. No. Qualified AUs............. 6,703 69,326 351,616 691,102
Series FI (Index 500 Portfolio)
Beg. AUV $ (6/30/93)............... 5.00 4.97 5.20 5.19
End. AUV $......................... 4.97 5.20 5.19 7.04
End. No. Non-Qualified AUs......... -- 9,764 31,543 73,445
End. No. Qualified AUs............. 2,334 8,392 30,822 120,370
Series FO (Overseas Portfolio)
Beg. AUV $ (5/24/93)............... 5.00 5.12 5.64 5.67
End. AUV $......................... 5.12 5.64 5.67 6.14
End. No. Non-Qualified AUs......... -- 11,178 82,312 71,276
End. No. Qualified AUs............. 491 8,248 107,910 146,405
Series FM (Money Market Portfolio)
Beg. AUV $ (1/1/94)................ 5.00 5.16
End. AUV $......................... 5.16 5.40
End. No. Non-Qualified AUs......... 47,324 177,174
End. No. Qualified AUs............. 9,656 326,232
Yield.............................. 4.45%
Series FE (Equity-Income Portfolio)
Beg. AUV $ (5/25/95)............... 5.00
End. AUV $......................... 6.13
End. No. Non-Qualified AUs.......... 48,543
End. No. Qualified AUs.............. 82,578
Series FC (Contrafund Portfolio)
Beg. AUV $ (5/16/95)............... 5.00
End. AUV $......................... 6.29
End. No. Non-Qualified AUs......... 98,145
End. No. Qualified AUs............. 143,884
Series Su (U.S. Govt. Income Series)
Beg. AUV $ (5/25/95)............... 5.00
End. AUV $......................... 5.43
End. No. Non-Qualified AUs......... 8,806
End. No. Qualified AUs............. 10,909
Series SV (Equity Series)
Beg. AUV $ (8/26/96)...............
End. AUV $.........................
End. No. Non-Qualified AUs.........
End. No. Qualified AUs.............
Series AS (Small Cap. Portfolio)
Beg. AUV $ (5/22/95)............... 5.00
End. AUV $......................... 6.54
End. No. Non-Qualified AUs......... 115,588
End. No. Qualified AUs............. 160,410
<CAPTION>
Twelve Twelve Twelve
Months Months Months
Ended Ended Ended
Separate Account Series 12/31/96 12/31/97 12/31/98
----------------------- -------- -------- --------
<S> <C> <C> <C>
Series B (Bond Series)
Beg. AUV $......................... 8.55 8.68 9.35
End. AUV $......................... 8.68 9.35 9.91
End. No. Non-Qualified AUs......... 69,877 204,160 511,384
End. No. Qualified AUs............. 100,373 164,131 374,239
Series G (T. Rowe Price Growth and
Income Series)
Beg. AUV $......................... 11.46 13.77 17.28
End. AUV $......................... 13.77 17.28 18.77
End. No. Non-Qualified AUs......... 386,916 967,084 1,413,847
End. No. Qualified AUs............. 482,496 798,400 1,196,732
Series FA (Asset Manager Portfolio)
Beg. AUV $ (5/13/93)............... 6.02 6.81 8.12
End. AUV $......................... 6.81 8.12 9.21
End. No. Non-Qualified AUs......... 777,592 1,342,714 1,938,660
End. No. Qualified AUs............. 1,250,934 1,595,340 2,152,005
Series FG (Growth Portfolio)
Beg. AUV $ (5/24/93)............... 7.13 8.08 9.84
End. AUV $......................... 8.08 9.84 13.54
End. No. Non-Qualified AUs......... 694,471 1,514,592 1,666,023
End. No. Qualified AUs............. 936,136 1,721,157 1,853,479
Series FI (Index 500 Portfolio)
Beg. AUV $ (6/30/93)............... 7.04 8.54 11.19
End. AUV $......................... 8.54 11.19 14.16
End. No. Non-Qualified AUs......... 337,427 1,141,079 1,728,113
End. No. Qualified AUs............. 428,500 1,017,697 1,556,431
Series FO (Overseas Portfolio)
Beg. AUV $ (5/24/93)............... 6.14 6.86 7.56
End. AUV $......................... 6.86 7.56 8.40
End. No. Non-Qualified AUs......... 147,181 331,263 421,902
End. No. Qualified AUs............. 204,998 340,816 398,497
Series FM (Money Market Portfolio)
Beg. AUV $ (1/1/94)................ 5.40 5.62 5.84
End. AUV $......................... 5.62 5.84 6.08
End. No. Non-Qualified AUs......... 667,110 905,605 928,083
End. No. Qualified AUs............. 622,087 1,041,656 1,285,755
Yield.............................. 3.95% 4.11% 3.60%
Series FE (Equity-Income Portfolio)
Beg. AUV $ (5/25/95)............... 6.13 6.93 8.76
End. AUV $......................... 6.93 8.76 9.64
End. No. Non-Qualified AUs.......... 389,764 1,144,054 1,748,353
End. No. Qualified AUs.............. 451,605 851,026 1,333,143
Series FC (Contrafund Portfolio)
Beg. AUV $ (5/16/95)............... 6.29 7.54 9.24
End. AUV $......................... 7.54 9.24 11.84
End. No. Non-Qualified AUs......... 427,465 968,105 1,303,672
End. No. Qualified AUs............. 530,576 1,026,836 1,353,368
Series Su (U.S. Govt. Income Series)
Beg. AUV $ (5/25/95)............... 5.43 5.56 5.87
End. AUV $......................... 5.56 5.87 6.22
End. No. Non-Qualified AUs......... 35,598 1,577,311 1,418,884
End. No. Qualified AUs............. 186,466 1,088,519 964,505
Series SV (Equity Series)
Beg. AUV $ (8/26/96)............... 5.00 5.59 7.14
End. AUV $......................... 5.59 7.14 8.67
End. No. Non-Qualified AUs......... 132,782 1,265,446 1,054,601
End. No. Qualified AUs............. 149,404 1,167,399 901,456
Series AS (Small Cap. Portfolio)
Beg. AUV $ (5/22/95)............... 6.54 6.73 7.40
End. AUV $......................... 6.73 7.40 8.43
End. No. Non-Qualified AUs......... 454,671 1,018,416 1,040,780
End. No. Qualified AUs............. 517,158 1,133,029 1,156,348
</TABLE>
- ---------------
AUV -- Accumulation Unit Value
AUs -- Accumulation Units
15
<PAGE> 19
FINANCIAL AND PERFORMANCE INFORMATION
Performance Information
From time to time, Security First may advertise the performance of a Series.
This performance information may include:
- the yield and effective yield of Series invested in the
Money Market Portfolio of the Separate Account
- average annual total returns for the other Series of the
Separate Account.
Yield is the net income generated by an investment in the Money Market Portfolio
for a specific seven-day period, expressed as a percentage of the value of the
Series' Accumulation Units. Yield is an annualized figure, which means that
Security First Life assumes that the Series will generate the same level of net
income over a one-year period and compounds that income on a semi-annual basis.
Because of the assumed compounding, the Money Market Series' effective yield
will be slightly higher than its yield. The computation of yield reflects all
recurring charges under the Contract to all Owner accounts, including the
mortality and expense risk charge and the administrative expense charge. Yield
does not reflect the possible imposition of early withdrawal charges.
Early withdrawal charges would reduce your performance experience.
Annual return measures the net income of a Series and any realized or unrealized
gains or losses of the underlying investments in the Series, over the period
stated.
Average annual total return figures are annualized and, therefore, represent the
average annual percentage change in the value of an investment in a Series over
the period stated. Average annual total returns are expressed for at least one,
five and ten year periods (or from a Series' inception if the Series has been in
existence for less than ten years).
The computation of average annual total returns reflects all recurring charges
and applicable fees under the Contract to all Owner accounts, including the
following:
- the mortality and expense risk charge,
- the administrative expense charge, and
- the applicable early surrender charge that may be charged
at the end of the period in question.
[Side Bar: All performance numbers are based upon historical earnings. These
numbers are not intended to indicate future results. Yields and average annual
total returns are determined in accordance with the computation methods required
by
16
<PAGE> 20
the Securities and Exchange Commission (the "SEC") in the Form N-4 Registration
Statement. These methods are described in detail in the Statement of Additional
Information.]
Financial Information
Financial Statements of the Separate Account and Security First Life are
contained in the Statement of Additional Information. Please see the first page
of this Prospectus for information on how to obtain a copy of the Statement.
DESCRIPTION OF SECURITY FIRST LIFE INSURANCE COMPANY, THE GENERAL ACCOUNT, THE
SEPARATE ACCOUNT, THE FUNDS AND SERVICE PROVIDERS
Security First Life Insurance Company
Security First Life is a stock life insurance company founded in 1960 and
organized under the laws of the State of Delaware. Its principal executive
offices are located at 11365 West Olympic Boulevard, Los Angeles, California
90064. Security First Life is authorized to transact the business of life
insurance, including annuities, and is currently licensed to do business in 49
states and the District of Columbia. Security First Life is a wholly-owned
subsidiary of Security First Group, Inc. ("SFG"). SFG in turn is a wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"), a New York mutual
life insurance company.
MetLife is one of the world's largest financial services companies and the
second largest life insurance company in the United States in terms of total
assets, with approximately $215.3 billion worth of total assets as of December
31, 1998. As a mutual insurance company, MetLife has no shareholders. However,
MetLife announced in November 1998 its intention to convert to a stock company.
The "demutualization" plan will be subject to approval by the Board of
Directors, the New York State Insurance Department and policyholders. As of May
1, 1999, MetLife does not know the complete details of the plan or when or if it
will take effect.
The General Account
All of the assets of Security First Life, except for those in the Separate
Account and other segregated asset accounts, make up the assets of the General
Account. You may allocate amounts to the General Account when you purchase your
Contract or you may transfer amounts from the Separate Account at a later date.
Amounts allocated to the General Account are credited with interest at an
interest rate that is guaranteed by Security First Life. Instead of you bearing
the risk of fluctuations in the value of the assets as is the case for amounts
invested in the
17
<PAGE> 21
Separate Account, Security First Life bears the full investment risk for amounts
in the General Account. Security First Life has sole discretion to invest the
assets of the General Account, subject to applicable law. The General Account
provisions of the Contract are not intended to be offered by this Prospectus.
Please see the terms of your actual Contract for more information.
The Separate Account
Security First Life established the Separate Account on May 29, 1980 in
accordance with the Delaware Insurance Code. The purpose of the Separate Account
is to hold the variable assets that underlie the Contracts and some other
variable annuity contracts that Security First Life offers. The Separate Account
is registered with the SEC as a unit investment trust under the 1940 Act.
The assets of the Separate Account are held in Security First Life's name on
behalf of the Separate Account and legally belong to Security First Life.
Although the Separate Account, and each of the Series that make up the Separate
Account, are considered as part of Security First Life's general business, the
Separate Account's assets are solely for the benefit of those who invest in the
Separate Account and no one else, including Security First Life's creditors. All
the income, gains and losses (realized and unrealized) resulting from these
assets are credited to or charged against the Contracts issued from this
Separate Account without regard to Security First Life's other business. Under
state law and the terms of your Contract, the assets of the Separate Account
will not be responsible for liabilities arising out of Security First Life's
other business. Furthermore, Security First Life is obligated to pay all money
it owes under the Contracts even if that amount exceeds the assets in the
Separate Account. However, the amount of variable annuity payments is guaranteed
only to the extent of the level amount calculated at the beginning of each
annuity year(See Annuity Benefits - Level Payments Varying Annually, page ___).
The Separate Account is divided into a number of investment Series of
Accumulation and Annuity Units. Twelve of these Series are available under the
Contracts as investment choices. Each Series invests in the shares of only one
of the Funds.
18
<PAGE> 22
The Funds
Your investment choices are:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Fund Investment Objective Investment Adviser
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
VIP Money Market Portfolio The Fund seeks to obtain as high a FMR
level of current income as is
consistent with preserving capital
and providing liquidity The
portfolio will invest only in high
quality U.S. dollar denominated
money market securities of
domestic and foreign issuers.
- -----------------------------------------------------------------------------------------------
VIP Equity Income Portfolio The Fund seeks reasonable income FMR
by investing primarily in
income-producing equity
securities. In choosing these
securities, the Fund will also
consider the potential for capital
appreciation. The Fund's goal is
to achieve a yield which exceeds
the composite yield on the
securities comprising the Standard
& Poor's 500 Composite Stock Price
Index.
- -----------------------------------------------------------------------------------------------
VIP Growth Portfolio The Fund seeks to achieve capital FMR
appreciation normally through the
purchase of common stocks
(although the portfolio's
investments are not restricted to
any one type of security).
Capital appreciation may also be
found in other types of
securities, including bonds and
preferred stocks.
- -----------------------------------------------------------------------------------------------
VIP Overseas Portfolio The Fund seeks long-term growth of FMR
capital primarily through
investments in foreign securities.
Overseas Portfolio provides a
means for investors to diversify
their own portfolios by
participating in companies and
economies outside of the United
States.
- -----------------------------------------------------------------------------------------------
VIP II Asset Manager Portfolio The Fund seeks high total return FMR
with reduced risk over the
long-term by allocating its assets
among stocks, bonds, and
short-term, fixed income
instruments.
- -----------------------------------------------------------------------------------------------
VIP II Contrafund Portfolio The Fund seeks capital FMR
appreciation by investing in
companies that the investment
adviser believes to be undervalued
due to an overly pessimistic
appraisal by the public.
</TABLE>
19
<PAGE> 23
<TABLE>
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
VIP II Index 500 Portfolio The Fund seeks investment results FMR
that correspond to the total
return (i.e., the combination of
capital changes and income) of
common stocks publicly traded in
the United States, as represented
by the Standard & Poor's 500
Composite Stock Price Index while
keeping transaction costs and other
expenses low.
- ----------------------------------------------------------------------------------------------------
SFT T. Rowe Price Growth & Income The Fund seeks capital growth and Security Management; Price
Series a reasonable level of current Associates (subadviser)
income. While this series will
generally invest in common stocks
and other equities, it may,
depending on economic conditions,
reduce such investments and
substitute fixed income
instruments.
- --------------------------------------------------------------------------------------------------------
SFT U.S. Government Income Series The Fund seeks to provide current Security Management; BlackRock
income. The Series pursues this (subadviser)
this objective by investing in a
professionally managed,
diversified portfolio limited
primarily to U.S. government
securities.
- --------------------------------------------------------------------------------------------------------
SFT Equity Series The Fund seeks to provide growth Security Management; BlackRock
of capital and income. The Series (subadviser)
is managed to take advantage of
trends in the stock market that
favor different styles of stock
selection (value or growth) and
different sizes of companies.
- --------------------------------------------------------------------------------------------------------
SFT Bond Series The Fund seeks to achieve the Security Management; NB
highest investment income over the (subadviser)
long-term consistent with the
preservation of principal through
investment primarily in marketable
debt instruments. Growth of
principal and income will also be
objectives with respect to up to
10% of the Bond Series' assets
which may be invested in common
and preferred stocks.
- --------------------------------------------------------------------------------------------------------
Alger Small Capitalization Portfolio The Fund seeks long-term capital Alger Management
appreciation by investing in a
diversified, actively managed
portfolio of equity securities,
primarily of companies within the
range of companies included in the
Russell 2000 Growth Index. Income
is a consideration in the
investments but is not an
investment objective of the
Portfolio.
</TABLE>
Each Series buys and sells shares of the corresponding mutual fund. These Funds
invest in stocks, bonds and other investments as indicated above. All dividends
declared by the Funds are earned by the Separate Account and reinvested.
Therefore, no dividends are distributed to you under the Contract. Instead,
dividends generally increase the Accumulation or Annuity Unit Value. You pay no
transaction expenses (i.e., front-end or back-end load sales charges) as a
result of the Separate Account's purchase or sale of these mutual fund shares.
The Funds listed above are available only by purchasing annuities and life
insurance policies offered by Security First Life or by other insurance
companies and are never sold directly to the public. The shares of each Fund are
purchased, without sales charge, for the corresponding Series at the next net
asset value per share determined by a Fund after your payment is received by
Security First Life. Fund shares will be redeemed by the Series to the extent
necessary for Security First Life to make annuity or other payments under the
Contracts.
20
<PAGE> 24
Each of the Funds is a portfolio or series of an open-end management investment
company registered with the SEC under the 1940 Act. Registration does not
involve supervision by the SEC of the investment or investment policies of the
Funds. There can be no guarantee that a Fund will meet its investment
objectives.
The Funds are available to other registered separate accounts offering variable
annuity and variable life products in addition to Security First Life's Separate
Account. In the future, a conflict may develop between one or more separate
accounts invested in the same Fund. The conflict could develop due to change in
the law affecting variable annuity products or from differences in voting
instructions of owners of the different separate accounts. Security First Life
monitors the Series for this type of conflict and will remedy the situation if
such a conflict develops. This may include the withdrawal of amounts invested in
the Funds by you and other Contract Owners.
[Side Bar: While the Series and their comparably named Funds may have names,
investment objectives and management which are identical or similar to publicly
available mutual funds, these are not those mutual funds. The Funds most likely
will not have the same performance experience as any publicly available mutual
fund.]
Substitution of Fund shares
Security First Life may substitute shares of another fund for Fund shares
directly purchased and apply future Purchase Payments under the Contracts to the
purchase of these substituted shares if the shares of a Fund are no longer
available or further investment in such shares is determined to be inappropriate
by Security First Life's management in view of the purposes of the Contracts.
However, no substitution is allowed unless a majority of the Owners entitled to
vote (those who have invested in the Series) and the SEC approves the
substitution under the 1940 Act.
[Side Bar: The Funds are more fully described in the Fund prospectuses and
21
<PAGE> 25
their Statements of Additional Information. The prospectuses are attached
to or accompanied by this Prospectus. The Statements of Additional
Information are available upon your request.]
Principal Underwriter
Security First Financial, Inc., 11365 West Olympic Boulevard, Los Angeles,
California 90064, a broker-dealer registered under the Securities Exchange Act
of 1934 and a member of the National Association of Securities Dealers, Inc., is
the principal underwriter for the Contracts. Security First Financial, Inc. is a
Delaware corporation and a subsidiary of SFG.
Servicing Agent
SFG provides Security First Life with administrative services, including: office
space, supplies, utilities, office equipment, travel expenses and periodic
reports.
Custodian
Security First Life is the custodian of the assets of the Separate Account. The
assets of each Series will be physically segregated by Security First Life and
held separate from the assets of the other Series and of any other firm, person
or corporation. The assets of the Separate Account are further protected by
fidelity bonds which cover all of Security First Life's officers and employees.
CONTRACT CHARGES
Security First Life deducts the charges described below. Security First Life
represents that the charges are reasonable for the service and benefits
provided, costs and expenses incurred, and risks assumed under the Contracts.
Services and benefits Security First Life provides include:
- the ability for you to make withdrawals and surrenders
under the Contracts;
- the death benefit paid at your death, the Annuitant's
death, or the death of the first of joint Contract owners;
- the available funding options and related programs
(including dollar-cost averaging, portfolio rebalancing,
and systematic withdrawal programs);
- administration of the annuity options available under the
Contracts; and
22
<PAGE> 26
- the distribution of various reports to Contract owners.
Costs and expenses incurred by Security First Life include:
- costs associated with various overhead and other expenses
from providing the services and benefits under the
Contracts;
- sales and marketing expenses; and
- other costs of doing business.
Risks assumed by Security First Life include:
- risks that Annuitants may live longer than estimated when
the annuity factors under the Contracts were established;
- that the amount of the death benefit will be greater than
the Contract value or the maximum of all step-up values
for the Enhanced Death Benefit; and
- that the costs of providing the services and benefits
under the contracts will exceed the charges deducted.
Security First Life may also deduct a charge for taxes, if applicable.
Unless otherwise specified, charges are deducted proportionately from all
funding options in which you are invested.
These charges may not be changed under the Contract, and Security First Life may
profit from these charges in the aggregate.
Premium Taxes
Some states assess premium taxes on the Purchase Payments you make. Generally,
premium taxes range from 0% to 2.35% (3.50% in Nevada), depending on the state.
The Contracts permit Security First Life to deduct any applicable premium taxes
from the Contract Value at or after the time they are incurred. Security First
Life currently does not deduct for these taxes at the time you make a Purchase
Payment. However, Security First Life will deduct the total amount of premium
taxes, if any, from the Contract Value when you elect to begin receiving Annuity
payments (Annuitization).
Surrender Charge
No sales charge is deducted from any Purchase Payment. During the accumulation
phase, you can withdraw part or all of the Contract Value. In the first partial
surrender in each Contract year, you can withdraw up to 10% of your Contract
Value in the General Account and 10% of the Contract Value in the Separate
Account free of surrender charges. If you withdraw money in excess of 10% of
your Contract Value, you might have to pay a surrender charge on the excess
amount.
23
<PAGE> 27
The following schedule shows the surrender charges that apply during the seven
years following each Purchase Payment:
<TABLE>
<CAPTION>
-------------------------------------------------------------
Number of Years
Since Purchase Payment Surrender
Date Charge
-------------------------------------------------------------
<S> <C>
Less than 1 year 7%
-------------------------------------------------------------
1 year but less than 2 6%
-------------------------------------------------------------
2 years but less than 3 5%
-------------------------------------------------------------
3 years but less than 4 4%
-------------------------------------------------------------
4 years but less than 5 3%
-------------------------------------------------------------
5 years but less than 6 2%
-------------------------------------------------------------
6 years but less than 7 1%
-------------------------------------------------------------
7 years or more 0%
-------------------------------------------------------------
</TABLE>
[The surrender charge is calculated by subtracting from the Series or General
Account from which you are withdrawing a Purchase Payment an amount determined
as follows:
the surrender amount
-----------------------------------------------------------
1 - the percentage surrender charge expressed as a decimal]
Accumulation Units are cancelled on a first-in, first-out basis, and the amount
credited to your Contract Value with respect to each Purchase Payment will be
subject to the surrender charge. In no event will a surrender charge imposed on
Accumulation Units be more than 9% of Purchase Payments allocated to the
Separate Account. The effect of this varying schedule of percentage charges is
that amounts that you leave in the Separate Account for longer periods of time
are subject to a lower charge than amounts immediately surrendered.
Example of application of surrender charge. Assume your Contract Value is
$100,000 at the beginning of Contract year 2 and you withdraw $30,000. Because
that amount is more than your 10% free surrender amount, you would pay a
surrender charge of $1,200 on the remaining $20,000 (6% of $30,000 - $10,000).
24
<PAGE> 28
Keep in mind that withdrawals may be taxable, and if made before age 59 1/2, may
be subject to a 10% Federal penalty tax described on page ___. For tax purposes,
withdrawals are considered to come from earnings first.
If you make a partial surrender, you will receive a check in the amount
requested. The surrender charge, if any, will be deducted from the Series from
which the partial surrender was taken. If the amount in a particular Series is
completely surrendered, the charge will be taken from the remaining Series in
which you have an interest.
[Side Bar: The surrender charge covers marketing expenses for the sale of
Contracts, such as commissions to sales personnel and other promotion and
acquisition expenses.]
Exceptions to surrender charge
In some cases, Security First Life will not charge you the surrender charge when
you make a withdrawal. You do not pay the surrender charge:
- on transfers made within your Contract
- on withdrawals of Purchase payments you made over seven
years ago
- If you die during the pay-in phase, your Beneficiary(ies)
will receive the full death benefit without deduction
- If you withdraw no more than 10% of your account balance
in any Contract Year
- If you are confined to a hospital for at least 30
consecutive days or a skilled nursing home for at least 90
consecutive days. The withdrawal must be in a lump sum and
must be requested within 60 days after termination of
confinement
- When you are an officer, director or full time employee of
Security First Life or its affiliates. In this case, the
purchase of the Contract is for personal investment
purposes only
25
<PAGE> 29
Administration Fees
An administration fee of .00041% (.15% per year) is deducted from your interest
in the Separate Account on a daily basis.
26
<PAGE> 30
Contract administration expenses include:
- the cost of policy issuance
- rent
- stationery and postage
- telephone and travel expenses
- salaries
- legal, administrative, actuarial and accounting fees
- periodic reports
- office equipment, and custodial expenses
Mortality and Expense Risk Charge
Security First Life charges a fee for bearing certain mortality and expense
risks under the policy. Examples of these risks include a guarantee of annuity
rates, the death benefits, and assuming the risk that the expense charges and
fees are less than actual administrative and operating expenses. As compensation
for assuming these risks, Security First Life will make a daily deduction from
the value of the Separate Account's assets equal to 1.25% per year.
If Security First Life has gains from the receipt of the mortality and expense
risk charges over its cost of assuming these risks, it may use the gains as it
sees fit. This may include the reduction of expenses incurred in distributing
the Contracts.
Security First Life may voluntarily waive a portion of the mortality and
administrative expense risk charges. Any waiver of these expenses may be
terminated at any time.
Federal, State and Local Taxes
Security First Life may in the future deduct charges from the Contract Value for
any taxes it incurs because of the Contracts. However, no deductions are being
made at the present time.
[Side Bar: Please note that deductions are made and expenses paid out of the
underlying Funds' assets, as well. A description of these fees and expenses are
described in each Fund's prospectus.]
27
<PAGE> 31
Free Look Period
You may cancel your Contract within a certain time period. This is known as a
"free look." Your Free Look Period is the 10-day period (or longer in certain
states) starting when you receive your Contract. If you decide to cancel your
Contract, Security First Life must receive your request to cancel in writing at
its administrative office within the 10-day period. If the Contract is mailed to
Security First Life, it will be considered to be returned on the postmark date.
If the Contract is sent by certified or registered mail, the date of
certification or registration will be considered the date of its return to
Security First Life.
The returned Contract will be treated as if Security First Life never issued it,
and Security First Life will refund your Purchase Payments or, if required by
state law, the greater of the Purchase Payments or the Contract Value. Purchase
Payments that you make to the Separate Account will be allocated to the Money
Market Portfolio for the number of days of the Free Look Period required by the
state in which you live. At the end of the Free Look Period, the account value
in the Money Market Portfolio will be reallocated to the Series of the Separate
Account that you selected in your Contract application.
DESCRIPTION OF THE CONTRACTS
Assignment
Your Contract provides that you may freely assign your rights under it. However,
if you hold your Contract in connection with a Section 401 or 403 plan, a Roth
IRA, or a traditional IRA, you cannot assign or transfer the Contract.
Purchase Payments
You may make a Purchase Payment at any time. Your minimum initial Purchase
Payment must be $1,000. Each additional Purchase Payment must at least $100. For
IRAs, the initial Purchase Payment is $500 and each additional payment is $100.
You will receive a confirmation of each Purchase Payment received.
28
<PAGE> 32
Transfers
Accumulation Units
You may transfer Accumulation Units among the Funds or to the General Account at
any time. You may not make a transfer from the General Account to Accumulation
Units, unless you make a reallocation election or an enhanced dollar cost
averaging election.
Your transfer instructions must be in writing or, if permitted by Security First
Life, by telephone. If Security First Life permits Accumulation Units to be
transferred by telephone, you will be required to complete an authorization on
the contract application or on another form that Security First Life will
provide. Security First Life will employ reasonable procedures to confirm that
telephone instructions are genuine. This will include a requirement that you
provide one or more forms of personal identification when requesting a transfer.
Security First Life will not be liable for following instructions it reasonably
believes to be genuine.
Your Accumulation Units will be transferred on the first valuation after receipt
of written or telephone instructions. Accumulation Unit values are determined at
the close of trade on the New York Stock Exchange, which is currently 4:00 p.m.
Eastern time. If your transfer instructions are received up to that time your
transfer will be effected at the value calculated on that date. If your
instructions are received after the close of trading on a valuation day, your
transfer instructions will be carried out at the value next calculated.
Annuity Units
You may transfer Annuity Units among the Series at any time with no charge. You
may not transfer Annuity Units to the General Account. However, any amounts that
you have in the General Account that have not been applied to a fixed annuity
income option may be transferred to Annuity Units in one or more Series for a
variable payout. Transfers of Annuity Units may only be requested in writing and
will be effective on the first valuation following receipt of the instructions.
Minimum Transfer
A minimum of $500 must be transferred from any Series or from the General
Account, except as permitted under a reallocation election or dollar cost
averaging program. The value of the Accumulation and Annuity Units transferred
will be calculated as of the close of business on the day that the transfer
occurs.
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<PAGE> 33
Dollar Cost Averaging
Dollar cost averaging (or "automated transfers") allows you to transfer a set
dollar amount to other funding options on a monthly, quarterly, semi-annual or
annual basis so that more accumulation units are purchased in a funding option
if the cost per unit is low and less accumulation units are purchased if the
cost per unit is high. Therefore, a lower average cost per unit may be achieved
over the long run. There is no additional charge to participate in dollar cost
averaging.
You may participate in this program if your Contract Value is $5,000 or more.
Under the program, your Accumulation Units from the Series invested in the Money
Market Portfolio will be periodically transferred to other Series that you
select. The program allows you to invest in non-money market Series over any
time period that you choose instead of investing in these other Series all at
once.
You choose whether the transfer will be made monthly, quarterly, semi-annually
or annually. The minimum transfer amount is $100. You may terminate the program
at any time by sending a written notice to Security First Life. (Security First
Life reserves the right to limit the number of Series to which transfers can be
made.)
Security First Life's Enhanced Dollar Cost Averaging Program (the "EDCA
Program")
From time to time, Security First Life may credit increased interest rates to
you under programs established at no additional charge at Security First Life's
discretion. If you are a new Contract owner, you may enroll in Security First
Life's EDCA Program, a special pre-authorized transfer program. Under this
program, you may allocate a Purchase Payment of at least $10,000 into the
General Account and pre-authorize transfers from the General Account to any of
the Series of the Separate Account under either a 6-month or 12-month transfer
program. Under either program, the initial Purchase Payment and accrued interest
must be transferred to the selected Series in substantially equal monthly
installments over the 6- or 12-month period.
Reallocation Election
If your Contract Value is $5,000 or more, you may elect to systematically
reallocate values invested in Accumulation Units among the Series and in the
General Account in order to achieve an allocation ratio that you establish. Your
request must be made in writing on a form provided by Security First Life.
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<PAGE> 34
(The reallocation election is not available under either the dollar cost
averaging program or the EDCA Program.)
Transfers will occur quarterly. All transfers will be made on the third business
day of the month in which the annual or quarterly anniversary of your Contract
occurs. No transfer from the General Account shall exceed 20% of your interest
invested in the General Account in any year. You may change the allocation
ratios once each Contract Year. Any transfer among Series outside of the
election will cause the election to terminate.
Modification of the Contracts
Security First Life must make Annuity payments involving life contingencies at
no less than the minimum guaranteed Annuity rates incorporated into the
Contracts, even if actual mortality experience is different.
Security First Life is legally bound under the Contract to maintain these
Annuity purchase rates. Security First Life must also abide by the Contract's
provisions concerning:
- death benefits
- deductions from Purchase Payments
- deductions from Contract Values for transaction charges
- deductions from the Separate Account for mortality and
expense risk and administrative fees
- guaranteed rates with respect to fixed benefits
Security First Life may change such provisions without your consent to the
extent permitted by the Contract, but only:
- with respect to any Purchase Payments received as a tax
free exchange under the Code after the effective date of
the change;
- with respect to benefits and values provided by Purchase
Payments made after the effective date of the change to
the extent that such Purchase Payments in any Contract
Year exceed the first year's Purchase Payments; or
- to the extent necessary to conform the Contract to any
Federal or state law, regulation or ruling.
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If you have any questions about any of the provisions of your Contract, you may
write or call:
Security First Life Insurance Company
P.O. Box 92193
Los Angeles, California 90009
1 (800) 284-4536
ACCUMULATION PERIOD
Crediting Accumulation Units in the Separate Account
Security First Life will credit Accumulation Units to a Series upon receipt
of your Purchase Payment or transfer. Security First Life determines the number
of Accumulation Units to be credited to a Series by dividing the net amount
allocated to a Series out of your Purchase Payment by the value of an
Accumulation Unit in the Series next computed following receipt of the Purchase
Payment or transfer.
Separate Account Accumulation Unit current values
The current value of Accumulation Units of a particular Series depends upon the
investment experience of the Fund in which the Series invests its assets. The
value of Accumulation Units is determined each business day at the close of
trading on the New York Stock Exchange (currently 4:00 p.m. Eastern time ). The
value is calculated by multiplying the value of an Accumulation Unit in the
Series on the immediately preceding valuation date by the net investment factor
for the period since that day. You bear the risk that the aggregate current
value invested in the Series may at any time be less than, equal to or more than
the amount that you originally allocated to the Series.
[Side Bar: The net investment factor is an index of the percentage change
(adjusted for distributions by the Fund and the deduction of the administration
fee, and mortality and expense risk fee) in the net asset value of the Fund in
which a Series is invested, since the preceding Valuation Date. The net
investment factor may be greater or less than 1 depending upon the Fund's
investment performance.
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Surrender from the Separate Account
You may surrender all or a portion of the cash value of your Contract at any
time prior to the Annuity Date. A surrender may result in adverse federal income
tax consequences to you including current taxation on the distribution and a
penalty tax on the early withdrawal. These consequences are discussed in more
detail under "Federal Tax Considerations" on page ___. You should consult your
tax adviser before making a withdrawal.
The cash value of your interest in the Separate Account prior to the Annuity
Date is determined by multiplying the number of Accumulation Units for each
Series credited to your Contract by the current value of an Accumulation Unit in
the Series and subtracting any applicable surrender charges or fees. Security
First Life will determine the value of the number of Accumulation Units
withdrawn at the next computed Accumulation Unit value.
If you request a partial surrender from more than one Series you must specify
the allocation of the partial surrender among the Series. You may not make a
partial surrender if a withdrawal would cause your interest in any Series or the
General Account to have an after surrender value of less than $500.
However, if you are withdrawing the entire amount allocated to a Series these
restrictions do not apply.
Payment of Surrender Amount
Payment of any amount surrendered from a Series will be made to you within seven
days of the date that Security First Life receives your written request.
Security First Life may suspend surrenders when:
- The SEC restricts trading on the New York Stock Exchange
or the Exchange is closed for other than weekends or
holidays.
- The SEC permits the suspension of withdrawals.
- The SEC determines that an emergency exists that makes
disposal of portfolio securities or valuation of assets of
the Funds not reasonably practicable.
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Account Statements
You will receive a written account statement each calendar quarter in which a
transaction occurs before the Annuity Date. Even if you do not engage in any
transactions you will receive at least one written account statement per year.
The statement shows:
- all transactions for the period being reported
- the number of Accumulation Units that are credited to your
Contract in each Series
- the current Accumulation Unit value for each Series
- your Contract Value as of the end of the reporting period
Security First Life is careful to ensure the accuracy of calculations and
transfers to and within the Separate Account. However, errors may still occur.
You should review your statements and confirmations of transactions carefully
and promptly advise Security First Life of any discrepancy. Allocations and
transfers reflected in a statement will be considered final at the end of 60
days from the date of the statement.
ANNUITY BENEFITS
Variable Annuity Payments
Your interest in the Series may be applied to provide you with a Variable
Annuity. The dollar amount of the Variable Annuity payments that you receive
will reflect the investment experience of the Series but will not be affected by
adverse mortality experience which may exceed the mortality risk charge
established under the Contract.
Assumed Investment Return
Unless you elect otherwise, the Assumed Investment Return is 4.25% per year. If
the laws and regulations of your State allow, you may elect an Assumed
Investment Return of 3.50%, 5% or 6%. The Assumed Investment Return does not
bear any relationship to the actual net investment experience of the Series.
Your choice of Assumed Investment Return affects the pattern of your Annuity
payments. Your Annuity payments will vary from the Assumed Investment Return
depending on whether the investment experience of the Series in which you have
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<PAGE> 38
an interest is better or worse than the Assumed Investment Return. The higher
your Assumed Investment Return, the higher your first Annuity payment will be.
Your next payments will only increase in proportion to the amount the investment
experience of your chosen Series exceeds the Assumed Investment Return and
Separate Account charges. Likewise, your payments will decrease if the
investment experience of your chosen Series is less than the Assumed Investment
Return and Separate Account charges. A lower Assumed Investment Return will
result in a lower initial Annuity payment, but subsequent Annuity payments will
increase more rapidly or decline more slowly as changes occur in the investment
experience of the Series. Conversely, a higher Assumed Investment Return would
result in a higher initial payment than a lower Assumed Investment Return, but
later payments will rise more slowly or fall more rapidly.
Election of Annuity Date and Form of Annuity
You choose the Annuity Date and the form of Annuity payment.
Election of Annuity Date
If you do not choose an Annuity Date at least thirty-one days before
Annuitization, your Normal Annuity Date automatically will be the later of:
- the Contract anniversary nearest to the Annuitant's 85th
birthday, or
- the 10th anniversary of the Contract Date.
You may select an optional Annuity Date that is earlier than the Normal Annuity
Date described above. This Annuity Date may be the first day of any month before
the Normal Annuity Date.
Please note that the Qualified Contracts may require a different Normal Annuity
Date and may prohibit the selection of certain optional Annuity Dates.
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Form of Annuity
[Side Bar: There are three people who are involved in payments under your
Annuity:
- you, the Owner
- the Annuitant
- the Beneficiary
The Owner and the Annuitant may be the same person.]
Currently, Security First Life provides you with five forms of Annuity payments.
Each Annuity payment option, except Option 5, is available on both a Fixed and
Variable Annuity basis. Option 5 is available on a Fixed basis only.
Option 1 - Life Annuity
You receive Annuity payments monthly during the lifetime of the Annuitant. These
payments stop with the last payment due before the death of the Annuitant.
Because Security First Life does not guarantee a minimum number of payments
under this arrangement, this option offers the maximum level of monthly
payments involving a life contingency.
Option 2 - Life Annuity with 120, 180, or 240 Monthly Payments Certain
You receive a guaranteed minimum number of monthly Annuity payments during the
lifetime of the Annuitant. In addition, Security First Life guarantees that you,
(or your Beneficiary, if you are the Annuitant) will receive monthly payments
for the remainder of the period certain, if the Annuitant dies during that
period.
Option 3 - Installment Refund Life Annuity
An Annuity payable monthly during the lifetime of an individual. You receive a
guaranteed minimum number of monthly payments which are equal to the amount of
your Contract Value allocated to this option divided by the first monthly
payment. If you die before receiving the minimum number of payments, the
remaining payments will be made to your Beneficiary.
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<PAGE> 40
Option 4 - Joint and Last Survivor Life Annuity
You receive Annuity payments monthly during the lifetime of you and another
payee (the joint payee) and during the lifetime of the survivor of the two of
you. Security First Life stops making payments with the last payment before the
death of the last surviving payee. Security First Life does not guarantee a
minimum number of payments under this arrangement. The election of this option
is ineffective if either of you dies before Annuitization. In that case, the
survivor becomes the sole payee, and Security First Life does not pay death
proceeds because of the death of the other payee.
Option 5 - Payments for a Designated Period (Fixed Annuity Only)
Security First Life makes Annuity payments monthly to you or another
properly-designated payee, or to the Beneficiary at your or another payee's
death, for a selected number of years ranging from five to thirty. The amount of
each payment will be based on an interest rate determined by Security First Life
that will not be less than 3.50% per year. You may not commute Fixed Annuity
payments to a lump sum under this option.
If you do not choose a form of Annuity payment, Option 2, a life annuity with a
guaranteed minimum of 120 monthly payments, will automatically be applied to
your Contract. You may make changes to an optional form of Annuity payment at
any time until 31 days before the Annuity date.
The first year's Annuity payment described in Options 1 - 4 are calculated on
the basis of:
- the mortality table specified in the Contract
- the age and where permitted the sex of the Annuitant
- the type of Annuity payment option selected, and
- the assumed investment return selected.
The fixed Annuity payments described in Option 5 are calculated on the basis of:
- the number of years in the payment period, and
- the interest rate guaranteed with respect to the option.
Fixed Annuities are funded through the General Account of Security First Life.
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<PAGE> 41
Frequency of Payment
Your payments under all options will be made on a monthly basis unless you and
Security First Life have agreed to a different arrangement.
Payments from each Series must be at least $50 each. If a payment from a Series
will be less than $50, Security First Life has the right to decrease the
frequency of payments so that each payment from a Series will be at least $50.
Level Payments Varying Annually
Your variable Annuity payments are determined yearly rather than monthly. As a
result, you will receive a uniform monthly Annuity payment for each Annuity
year. The level of payments for each year is based on the investment performance
of the Series up to the Valuation Date as of which the payments are determined
for the year. As a result, the amounts of the Annuity payments will vary with
the investment performance of the Series from year to year rather than from
month to month. Your monthly variable Annuity payments for the first year will
be calculated on the last Valuation Date of the second calendar week before the
Annuity date. The amount of your monthly variable Annuity payments will be
calculated using a formula described in the Contract. On each anniversary of the
Annuity date, Security First Life will determine the total monthly payments for
the year then beginning. These payments will be determined by multiplying the
number of Annuity units in each Series from which payments are to be made by the
annuity unit value of that Series for the valuation period in which the first
payment for that period is due.
After calculating the amount due to you, Security First Life transfers the
amount of the year's Variable Annuity payments to a General Account at the
beginning of the year. Although the amount in the Separate Account is credited
to you and transferred to the General Account, you do not have any property
rights in this amount. You do have a contractual right to receive your Annuity
payments.
The monthly Annuity payments for the year are made from the General Account with
interest using the standard assumed investment return of 4.25% or the Assumed
Investment Return that you selected. As a result, Security First Life will
experience profits or losses on the amounts placed in the General Account in
providing level monthly payments to you during the year that meet the Assumed
Investment Return that you selected. For example, if the net investment income
and gains in the General Account are lower than the Assumed Investment Return
selected, Security First Life will experience a loss.
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<PAGE> 42
You will not benefit from any increases or be disadvantaged from any decreases
in any Annuity Unit Values during the year because the Annuity payments for that
year are set at the beginning of the year. These increases and decreases will be
reflected in the calculation of Annuity payments for the following year.
Annuity Unit Values
This is how Security First Life calculates the Annuity Unit Value for each
Series:
- First, Security First Life determines the change in
investment experience (including any investment-related
charge) for the underlying Fund from the previous
valuation date to the current valuation date.
- Next, it subtracts the daily equivalent of your
insurance-related charge (general administrative expense
and mortality and expense risk charges) for each day since
the last day the Annuity Unit Value was calculated.
- Then, it divides the result by the quantity of one plus
the weekly equivalent of your Assumed Investment Return.
- Finally, the previous Annuity Unit Value is multiplied by
this result.
DEATH BENEFITS
Death Before the Annuity Date
If you chose another person other than yourself as the Annuitant under your
contract and the Annuitant dies, you become the Annuitant. If you die before the
Annuity Date, whether or not you are the Annuitant, your Beneficiary(ies) will
receive a death benefit that is the greatest of:
- the total of all Purchase Payments less any partial
withdrawals, including amounts already applied to produce
Annuity payments
- the Contract Value of settlement
- in the event the Contract is issued to you (or you and
co-owners) on or before you (or they) attain age 70, the
greater of the Contract Value at the end of the seventh
Contract Year or the
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<PAGE> 43
Contract Value at the end of each following fifth Contract
Year. (In each case increased by later Purchase Payments
and reduced by later withdrawals or amount applied to an
annuity pay out.)
[Side Bar: If you own a joint Contract with another person or persons, the death
of either you or your co-owner will constitute the death of the Owner for
Contract purposes.]
Your Beneficiary(ies) receive the death benefit as either:
1) A lump sum that must be made within five (5) years of your
death.
or
2) Annuity income under Annuity Income Options One, Two or
Five described in Article 7 of the Contract.
If your Beneficiary(ies) chooses one of the Annuity income options:
- Payments must begin within one year of your death
(However, your spouse may delay commencement of
payments up to the date that you would have reached
70 1/2.)
- The guaranteed period under Option Two or the
designated period under Option Five may not be longer
than the Beneficiary's life expectancy under
applicable tables specified by the Internal Revenue
Service.
- The Contract Value on the date of the first Annuity
payment will be used to determine the amount of the
death benefit.
If your spouse is your sole Beneficiary, he or she may choose to succeed to your
rights as Owner rather than to take the death benefit. If you have more than one
Beneficiary living at the time of your death, each will share the proceeds of
the death benefit equally unless you elect otherwise.
If you outlive all of your Beneficiaries, the death benefit will be paid to your
estate in a lump sum. No Beneficiary shall have the right to assign or transfer
any future payments under the Options, except as provided in the election or by
law.
You will also be considered to have outlived your Beneficiary(ies) in the
following situations:
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- Your Beneficiary(ies) and you die at the same time.
- Your Beneficiary(ies) dies within 15 days of your death
and proof of your death is received by Security First Life
before the date due.
Proof of death includes a certified death certificate, or attending physician's
statement, a decree of a court of competent jurisdiction as to the finding of
death, or other documents that Security First Life agrees to accept as proof of
death.
Death After the Annuity Date
If the Annuitant dies on or after the Annuity Date, the amounts payable to the
Beneficiary(ies) or other properly designated payees will consist of any
continuing payments under the Annuity Payment option in effect. In this case,
the Beneficiary will:
- have all the remaining rights and powers under a Contract,
and
- be subject to all the terms and conditions of the
Contract.
If none of your Beneficiaries survive the Annuitant, the value of any remaining
payments certain on the death of Annuitant, calculated on the basis of the
assumed investment return that you previously chose, will be paid in a lump sum
to the Annuitant's estate unless other provisions have been made and approved by
Security First Life. This value is calculated on the next day of payment
following receipt of due proof of death.
Unless otherwise restricted, a Beneficiary receiving variable payments under
Option Two or Three may elect at any time to receive the present value of the
remaining number of Annuity payments certain in a lump sum payment after the
death of an Annuitant. The present value of the remaining Annuity payments will
be calculated on the basis of the assumed investment return previously selected.
This lump sum payment election is not available to a Beneficiary receiving Fixed
Annuity payments.
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FEDERAL TAX CONSIDERATIONS
The following general discussion of the federal income tax consequences under
this Contract is not intended to cover all situations and is not meant to
provide tax advice. Because of the complexity of the law and the fact that the
tax results will vary depending on many factors, you should consult your tax
adviser regarding your personal situation. Additional tax information is
included in the SAI. (Neither this Prospectus nor the SAI addresses state,
local or foreign tax matters.)
GENERAL TAXATION OF ANNUITIES
Congress has recognized the value of saving for retirement by providing certain
tax benefits, in the form of tax deferral, for money put into an annuity. The
Internal Revenue Code (the "Code") governs how this money is ultimately taxed.
There are different rules for Qualified and Non-qualified Contracts and
depending on how the money is distributed, as briefly described below.
You generally will not be taxed on increases in the value of your Contract until
a distribution occurs - either as a withdrawal or as an Annuity payment. This
concept is known as tax deferral. In addition, Security First Life will not be
taxed on the investment income and capital gains of the Separate Account.
[SIDE BAR: A QUALIFIED CONTRACT is a Contract that is purchased for certain
types of tax-advantaged retirement plans (previously defined as
"qualified plans").
For purposes of this Prospectus, qualified plans include:
- SECTION 401 PLANS (pension and profit-sharing plans, including plans for
the self-employed)
- SECTION 403(b) PLANS (tax-deferred annuities)
- SECTION 457 PLANS (deferred compensation plans)
- TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES ("IRAs")
- ROTH IRAs
A NON-QUALIFIED CONTRACT is a Contract that is purchased on an individual basis
with after-tax dollars and not under one of the programs listed above in the
description of a Qualified Contract.]
[SIDE BAR: Please note that the terms of your particular plan, IRA or Roth IRA
may limit your rights otherwise available under the Contract.]
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NON-QUALIFIED CONTRACTS
If you are the owner of a Non-qualified Contract, you do not receive any tax
benefit (deduction or deferral of income) on Purchase Payments (for example,
there is no deduction available for Purchase Payments), but you will not be
taxed on increases in the value of your Contract until a distribution occurs --
either as a withdrawal (that is, a distribution made prior to Annuitization) or
as Annuity payments.
Any direct or indirect borrowing against the value of the Contract or pledging
of the Contract as security for a loan will be treated as a cash distribution
under the tax law. A lump sum taken in lieu of remaining Annuity payments will
be treated as a withdrawal for tax purposes.
If a Non-qualified Contract is owned by someone other than an individual (for
example, by a corporation), the Contract will generally not be treated as an
annuity for tax purposes. For these entities, any increases in the value of the
Contract attributable to Purchase Payments made after February 28, 1986 are
includible in the Owner's annual income.
WITHDRAWALS
If you make a partial withdrawal, for tax purposes, the amount withdrawn will
generally be treated as first coming from earnings and then from your Purchase
Payments. These withdrawn earnings are includible in your gross income and are
taxed at ordinary income rates.
[SIDE BAR: Earnings are the income that your Contract generates.
There is income in the Contract to the extent the Contract Value exceeds your
investment in the Contract. The investment in the Contract equals the total
Purchase Payments you paid less any amount received previously which was
excludible from gross income.]
ANNUITY DISTRIBUTIONS
When you receive an Annuity payment, part of each payment is considered a
return of your Purchase Payments and will not be taxed. The remaining portion
of the Annuity payment (that is, any earnings) is included in your gross income
and will be considered ordinary income for tax purposes.
How the Annuity payment is divided between taxable and non-taxable portions
depends upon the period over which the Annuity payments are expected to be
made. Annuity payments received after you have received all of your premium
payments are fully includible in income.
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EARLY SURRENDER PENALTY
The Code also provides that income distributed as an Annuity or lump sum
withdrawal from a Non-qualified Contract may be subject to a penalty. The
amount of the penalty is equal to 10% of the amount that is includible in
income. Some withdrawals will be exempt from the penalty. They include any
amounts:
- paid on or after the date you reach age 59-1/2;
- paid to your Beneficiary(ies) after you die;
- paid if you become totally disabled (as that term is defined in
the Code);
- paid in a series of substantially equal payments made annually
(or more frequently) under a life or joint life expectancy Annuity;
- paid under an immediate Annuity;
- which come from Purchase Payments made prior to August 14, 1982.
(Other exceptions to the penalty may be available, and if you are not yet age
59-1/2, you should consult your tax advisor to determine whether you have met
all of the requirements for any particular exception.)
The penalty also will be imposed if you elect to receive payments in
substantially equal installments as a life or life expectancy Annuity prior to
age 59-1/2 and then change the method of distribution before you reach the age
of 59-1/2. You will be assessed the penalty even after age 59-1/2 if payments
have not continued for five years.
If you are issued multiple annuity contracts within a calendar year by one
company or its affiliates, the tax law may treat these contracts as one annuity
contract for purposes of determining your tax on any distribution. This
treatment may result in adverse tax consequences for you.
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QUALIFIED CONTRACTS
The full amount of all distributions received from a Section 401, 403(b), 457
plan or IRA (except for a return of non-deductible employee or IRA
contributions) are generally included in your gross income and are taxed at
ordinary income rates unless the distribution is transferred in an eligible
rollover to the Contract. In certain cases, distributions received from a Roth
IRA are also included in gross income.
Generally, distributions are included in your income in the year in which they
are paid. However, in the case of a Section 457 plan, a distribution is
includible in the year it is paid or when it is made available, depending upon
whether certain Code requirements are met. In very limited situations, a lump
sum distribution from a Section 401 plan may qualify for special tax treatment,
including special forward income averaging, special long term capital gain
treatment or deferral with respect to net unrealized appreciation.
MANDATORY MINIMUM DISTRIBUTIONS
If you are a participant in a Section 401, 403(b) or 457 plan or a traditional
IRA, you generally must begin receiving withdrawals from your Contract Value or
Annuity payments for life or a period not exceeding the life expectancy of you
or you and a beneficiary by April 1 of the calendar year following the year you
turn 70-1/2 (or, in some cases, the year you retire, if later).
In addition, distributions under Section 401, 403(b) and 457 plans and IRAs must
satisfy the minimum incidental death benefit requirements of the Code, which
impose additional minimum distribution requirements during life. However, if the
distributions described in the preceding paragraph are made to you over your
life expectancy or the joint life expectancy of you and your spouse, the minimum
incidental death benefit requirements are treated as satisfied.
If you are the owner of a Roth IRA, distributions are not required during your
lifetime.
EARLY SURRENDER PENALTY
If you receive a taxable distribution from a Section 401 plan, Section 403(b)
plan or IRA under your Contract before you reach age 59-1/2, this amount may be
subject to a 10% penalty tax in addition to ordinary income tax.
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[As indicated in the chart below, some distributions prior to age 59 1/2 are
exempt from the penalty. Some of these exceptions include any amounts received:
<TABLE>
<CAPTION>
Type of Plan
--------------------------------------------------------------------------
401 403(b) IRA
--------------------------------------------------------------------------
<S> <C> <C> <C>
After you die x x x
(paid to your Beneficiary(ies)
--------------------------------------------------------------------------
After you become totally disabled (as x x x
defined in the Code)
--------------------------------------------------------------------------
If you separate from service after you x x
reach age 55
--------------------------------------------------------------------------
In a series of substantially equal x x x
payments made annually (or more (after
frequently) under a life or joint life separation
expectancy Annuity from service)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Pursuant to a domestic relations order x x
--------------------------------------------------------------------------
</TABLE>
(Other exceptions to the penalty may be available, and if you are not yet age
59 1/2, you should consult your tax advisor to determine whether you have met
all of the requirements for any particular exception.)
The penalty also will be imposed if you elect to receive payments in
substantially equal installments as a life or joint life expectancy Annuity
prior to age 59 1/2 and then change the method of distribution before you reach
the age of 59 1/2. You will be assessed the penalty even after age 59 1/2 if
payments have not continued for five years.
Distributions before age 59 1/2 generally are not permitted under Section 457
plans. You may not receive distributions until you reach the age 70 1/2 unless
you separate from service or are faced with an unforeseeable emergency.
Distributions from Section 457 plans as not subject to the penalty tax for
early withdrawals.
ROLLOVERS OF PLAN CONVERSIONS
You may roll over distributions (other than certain distributions, such as
required distributions) from one plan or arrangement to another plan or
arrangement without incurring any Federal income tax under some circumstances.
These circumstances are as follows:
Distribution from: May be Rolled into:
------------------ -------------------
46
<PAGE> 50
<TABLE>
<S> <C>
- -----------------------------------------------------------------
o Section 401 plan another Section 401 plan;
or
an IRA
- -----------------------------------------------------------------
o Section 403(b) plan another Section 403(b) plan;
or
an IRA
- -----------------------------------------------------------------
o IRA another IRA;
a Roth IRA (under certain
conditions); or
a Section 401 or 403(b) plan
if the IRA contains only
permissible rollover amounts
- -----------------------------------------------------------------
</TABLE>
DEDUCTIONS FOR PLAN CONTRIBUTIONS
You may deduct your contributions to Section 401 plans and Section 403(b) plans
in the year when made up to the limits specified in the Code. These plans may
also permit non-deductible employee contributions. Any non-deductible employee
contribution that you make will be received tax free as a portion of each
Annuity payment.
WITHHOLDING
MANDATORY 20% WITHHOLDING FOR "ELIGIBLE ROLLOVER DISTRIBUTIONS"
If you are participating in a Section 401 plan or a Section 403(b) plan,
Security First Life is required to withhold 20% of the taxable portion of your
withdrawal that constitutes an "eligible rollover distribution" for Federal
income tax purposes.
Generally, an "eligible rollover distribution" is any taxable amount that you
receive from a Qualified Contract, except for distributions that are:
o paid over your life or the joint life expectancy of you and
your Beneficiary(ies);
o paid over a period of 10 years or more;
o necessary to satisfy the minimum distribution requirements; or
o certain contributions from Section 401 and Section 403(b) plans
paid as hardship distributions.
The requirements discussed below under "Other tax withholding" will apply to
any distribution that is not an eligible rollover distribution.
You may not elect out of the 20% withholding requirement. However, Security
First Life is not required to withhold the money if an eligible rollover
distribution is rolled over into
47
<PAGE> 51
an IRA or other eligible retirement plan, or is directly transferred in a
trustee-to-trustee transfer to either arrangement.
OTHER TAX WITHHOLDING
Different withholding rules apply to taxable withdrawals such as Annuity
payments and partial withdrawals that are not eligible rollover distributions.
The withholding rules are determined at the time of payment. You may elect out
of these withholding requirements at any time. You may also revoke a
non-withholding election made with respect to Annuity payments at any time and
tax withholding will begin again at that time. Security First Life will notify
you at least annually of your right to revoke or reinstate tax withholding.
TAXPAYER IDENTIFICATION NUMBER ("TIN")
You are required by law to provide Security First Life (as payor) with your
correct TIN. If you are an individual, the TIN is your social security number.
48
<PAGE> 52
VOTING RIGHTS
As the owner of the Separate Account, Security First Life is the legal owner of
the shares of the funding options. Based upon Security First Life's current view
of applicable law, you have voting interests under your Contract concerning Fund
shares and are entitled to vote on Fund proposals at all regular and special
shareholders meetings. Therefore, you are entitled to give us instructions for
the number of shares which are deemed attributable to your Contract.
Security First Life will vote all shares of the underlying Funds as directed by
you and other Contract Owners who have voting interests in the Funds. Security
First Life will send you and other Contract Owners, at a last known address, all
periodic reports, proxy materials and written requests for instructions on how
to vote those shares. When Security First Life receives these instructions, it
will vote all of the shares in proportion to the instructions. If Security First
Life does not receive your voting instructions, it will vote your interest in
the same proportion as represented by the votes it receives from the other
Owners. If Security First Life determines that it is permitted to vote the
shares in its own right due to changes in the law or in the interpretation of
the law it may do so.
Security First Life is under no duty to inquire into voting instructions or into
the authority of the person issuing such instructions. All instructions will be
valid unless Security First Life has actual knowledge that they are not.
When Annuity payments begin, the Annuitant will have all voting rights in regard
to Fund shares.
There are certain circumstances under which Security First Life may disregard
voting instructions. However, in this event, a summary of our action and the
reasons for such action will appear in the next semiannual report.
The number of votes that each person having the right to vote receives is
determined on a record date that is set no more than 90 days before the meeting.
Voting instructions will be requested at least 10 days before the meeting. Only
Owners or Annuitants on the record date may vote.
The number of shares to which you are entitled to vote is calculated by dividing
the portion of your Contract Value allocated to that Fund on the record date by
the net asset value of a Fund share on the same date.
49
<PAGE> 53
YEAR 2000 ISSUE
Security First Life and its service providers, including the underlying Fund
options, depend on the smooth operation of their computer systems. Many computer
and software systems in use today cannot recognize the Year 2000, but revert to
1900 or some other date, due to the manner in which dates were encoded and
calculated. That failure could have a negative impact on Security First Life and
the Separate Account, including the calculation of your interest in the Series,
on the Funds' handling of securities trades, pricing and account services, as
well as on the companies in which the Funds will invest. Security First Life is
monitoring the efforts of the service providers to prepare their systems for the
Year 2000 and expects that each Series' service providers will be adapted before
that date. There can be no guarantee, however, that Security First Life or its
service providers will be successful or that the steps taken by Security First
Life will be sufficient to avoid any adverse impact on the Separate Account and
each of its Series.
LEGAL PROCEEDINGS
There are no present or pending material legal proceedings affecting the
Separate Account. Security First Life, in the ordinary course of its business,
is engaged in litigation of various kinds which in its judgment is not of
material importance in relation to its total assets.
ADDITIONAL INFORMATION
You may contact Security First Life at the address and phone number on the cover
of this Prospectus for further information. A copy of the Statement of
Additional Information, dated May 1, 1999, which provides more detailed
information about the contracts, may also be obtained. The table of contents for
the Statement of Additional Information is attached at page ____.
A Registration Statement has been filed with the SEC under the Securities Act of
1933 for the Contracts offered by this Prospectus. This Prospectus does not
contain all of the information in the Registration Statement. Please refer to
this Registration Statement for further information about the Separate Account,
Security First Life and the Contracts. Any statements in this Prospectus about
the contents of the Contracts and other legal instruments are only summaries.
Please see the filed versions of these documents for a complete statement of any
terms.
50
<PAGE> 54
----------------------------------------------
PROSPECTUS
MAY 1, 1999
----------------------------------------------
THE SECURITY FIRST PRIVATE CLIENT ADVISOR CONTRACTS
issued through
SECURITY FIRST LIFE SEPARATE ACCOUNT A
by
SECURITY FIRST LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
This Prospectus gives you important information about the individual flexible
payment fixed and variable annuity contracts issued through Security First Life
Separate Account A by Security First Life Insurance Company (the "Contracts").
Please read it carefully before you invest and keep it for future reference. The
Contracts provide annuity benefits through distributions made from certain
retirement plans that qualify for special Federal income tax treatment
("qualified plans"), as well as from distributions made under retirement plans
that do not qualify for special tax treatment ("non-qualified plans").
You decide how to allocate your money among the available investment choices.
Your payments will be allocated to Separate Account A (the "Separate Account").
The Separate Account, in turn, invests in the following underlying mutual funds:
BARR ROSENBERG SERIES TRUST
Barr Rosenberg Market Neutral Fund
HOTCHKIS AND WILEY VARIABLE TRUST
International VIP Portfolio
OPPENHEIMER VARIABLE ACCOUNTS FUND
Oppenheimer Money Fund
LEVCO SERIES TRUST
LEVCO Equity Fund
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
Growth Portfolio
OFFITBANK VARIABLE INSURANCE FUND, INC.
High Yield Fund
Total Return Fund
PIMCO VARIABLE INSURANCE TRUST
Capital Appreciation Portfolio
ROYCE CAPITAL FUND
Royce Capital Appreciation Portfolio
You can choose any combination of these investment choices. Your Contract Value
will vary daily to reflect the investment experience of the funding options
selected. These mutual funds are described in detail in the fund prospectuses
that are attached to or delivered with this Prospectus. Please read these
prospectuses carefully before you invest. THIS PROSPECTUS IS NOT VALID UNLESS
ACCOMPANIED BY THE MUTUAL FUND PROSPECTUSES.
<PAGE> 55
<TABLE>
<S> <C>
An investment in any of For more information:
these variable annuities If you would like more information about the contract, you
involves investment risk. can obtain a copy of the Statement of Additional Information
You could lose money you ("SAI") dated May 1, 1999. The SAI is legally considered a
invest. The Contracts and part of this Prospectus as though it were included in the
the mutual funds are: Prospectus. The Table of Contents of the SAI appears on page
- - not bank deposits or of the Prospectus. To request a free copy of the SAI or to
obligations ask questions, write or call:
- - not federally insured or
guaranteed Security First Life Insurance Company
- - not endorsed by any bank P.O. Box 92193
or government agency Los Angeles, California 90009
- - not guaranteed to achieve Phone: (800) 284-4536
their investment objective
The Securities and Exchange Commission ("SEC") has a website
(http://www.sec.gov) which you may visit to view this
Prospectus, the SAI, or additional material that also is
legally considered a part of this Prospectus, as well as
other information.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES NOR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
</TABLE>
<PAGE> 56
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Glossary.................................................... 4
Summary of the Contracts.................................... 6
Fee Tables and Examples..................................... 9
Condensed Financial Information............................. 11
Financial and Performance Information....................... 12
Description of Security First Life Insurance Company, The
General Account, The Separate Account, The Funds and
Service Providers......................................... 12
Security First Life Insurance Company.................. 12
The General Account.................................... 13
The Separate Account................................... 13
The Funds.............................................. 14
Principal Underwriter.................................. 15
Servicing Agent........................................ 15
Custodian.............................................. 16
Contract Charges............................................ 16
Premium Taxes.......................................... 17
Sales Charge........................................... 17
Mortality and Expense Risk Charge...................... 17
Federal, State and Local Taxes......................... 17
Free Look Period....................................... 17
Description of the Contracts................................ 18
Assignment............................................. 18
Purchase Payments...................................... 18
Transfers.............................................. 18
Dollar Cost Averaging.................................. 19
Reallocation Election.................................. 19
Modification of the Contracts.......................... 19
Accumulation Period......................................... 20
Crediting Accumulation Units in the Separate Account... 20
Surrender from the Separate Account.................... 20
Account Statements..................................... 21
Annuity Benefits............................................ 21
Variable Annuity Payments.............................. 21
Election of Annuity Date and Form of Annuity........... 22
Frequency of Payment................................... 23
Level Payments Varying Annually........................ 23
Annuity Unit Values.................................... 24
</TABLE>
2
<PAGE> 57
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Death Benefits.............................................. 24
Death Before the Annuity Date.......................... 24
Death After the Annuity Date........................... 25
Federal Tax Considerations.................................. 26
General Taxation of Annuities.......................... 26
Non-qualified Contracts................................ 26
Qualified Contracts.................................... 27
Withholding............................................ 29
Voting Rights............................................... 30
Year 2000 Issue............................................. 31
Legal Proceedings........................................... 31
Additional Information...................................... 31
Table of Contents of Statement of Additional Information
</TABLE>
Security First Life does not intend to offer the Contracts anywhere or to anyone
to whom they may not lawfully be offered or sold. Security First Life has not
authorized any information or representations about the Contracts other than the
information in this Prospectus, the attached prospectuses, or supplements to the
prospectuses or any supplemental sales material Security First Life authorizes.
3
<PAGE> 58
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
These terms have the following meanings when used in this Prospectus:
ACCUMULATION UNIT -- A measuring unit used to determine the value of your
interest in a Separate Account Series under a Contract at any time before
Annuity payments commence.
ANNUITANT -- The person on whose life Annuity payments under a Contract are
based.
ANNUITY -- A series of income payments made to an Annuitant for a defined period
of time.
ANNUITIZATION OR ANNUITY DATE -- The date on which Annuity payments begin.
ANNUITY UNIT -- A measuring unit used to determine the amount of Variable
Annuity payments based on a Separate Account Series under a Contract after such
payments have commenced.
ASSUMED INVESTMENT RETURN -- The investment rate selected by the Annuitant for
use in determining the Variable Annuity payments.
BENEFICIARY -- The person who has the right to a Death Benefit upon your death.
BUSINESS DAY -- Each Monday through Friday except for days the New York Stock
Exchange is not open for trading.
CONTRACT -- The agreement between you and Security First Life covering your
rights.
CONTRACT DATE -- The date your Contract was issued to you.
CONTRACT VALUE -- The sum of your interests in the Separate Account Series. Your
interest in the Separate Account Series is the sum of the values of the
Accumulation Units.
CONTRACT YEAR -- A 12-month period starting on the Contract Date and on each
anniversary of the Contract Date.
FIXED ANNUITY -- An Annuity providing guaranteed level payments. These payments
are not based upon the investment experience of the Separate Account.
FREE LOOK PERIOD -- The 10-day period when you first receive your Contract.
During this time period, you may cancel your Contract for a full refund of all
Purchase Payments (or the greater of Purchase Payments or the Contract Value in
some states).
FUND -- A diversified, open-end management investment company, or series
thereof, registered under the Investment Company Act of 1940 ("1940 Act") which
serves as the underlying investment medium for a Series in the Separate Account.
GENERAL ACCOUNT -- All assets of Security First Life other than those in the
Separate Account or any of its other segregated asset accounts.
NORMAL ANNUITY DATE -- The date on which Annuity payments begin if you do not
select another date. It is the later of the Contract anniversary nearest the
Annuitant's 100th birthday or the 10th anniversary of the Contract Date.
OWNER -- You, the person who has title to the Contract.
PURCHASE PAYMENT -- The amounts paid by you to Security First Life in order to
provide benefits under the Contract.
SEPARATE ACCOUNT -- The segregated asset account entitled "Security First Life
Separate Account A" which has been established by Security First Life under
Delaware law to receive and invest amounts allocated by you and by other
contract owners and to provide Variable Annuity benefits under the Contracts.
The Separate Account is registered as a unit investment trust under the 1940
Act.
4
<PAGE> 59
SERIES -- The Accumulation Unit values and Annuity Unit values maintained
separately for each Fund whose securities are owned by the Separate Account.
VALUATION DATE -- Any Business Day used by the Separate Account to determine the
value of part or all of its assets for purposes of determining Accumulation and
Annuity Unit values for the Contract. Accumulation Unit values will be
determined each Business Day. There will be one Valuation Date in each calendar
week for Annuity Unit values. Security First Life will establish the Valuation
Date at its discretion, but until notice to the contrary is given, that date
will be the last Business Day in a week.
VALUATION PERIOD -- The period of time from one Valuation Date through the next
Valuation Date.
VARIABLE ANNUITY -- An Annuity providing payments that will vary annually in
accordance with the net investment experience of the applicable Separate Account
Series.
5
<PAGE> 60
- --------------------------------------------------------------------------------
SUMMARY OF THE CONTRACTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Please see the section THE CONTRACTS
"Qualified Contracts" on
page for more information. The Contracts may be offered to:
- Qualified Plans such as:
-- Section 403(b) tax-sheltered annuities
-- Section 457 deferred compensation plans
-- Section 401 pension and profit sharing plans
-- individual retirement annuities
-- traditional Individual Retirement Accounts ("IRAs")
-- Roth IRAs
- Plans that do not qualify for special tax treatment
(Non-qualified Contracts)
- Individuals seeking to accumulate money for retirement
</TABLE>
<TABLE>
<S> <C>
Please see "Transfers" on PURCHASE PAYMENTS
page for more information.
Purchase Payments under the Contracts are made to the
Separate Account. You can buy a Contract for $100,000 and
add as little as $25,000 at any time. There is no sales
charge; however, the charges and deductions described under
"Contract Charges" on page ___ will be deducted from the
Contract Value. You can transfer amounts allocated to the
Separate Account between any of the mutual fund investment
choices, at any time and as many times as you choose.
</TABLE>
6
<PAGE> 61
<TABLE>
<S> <C>
Please see "The Separate SEPARATE ACCOUNT
Account" on page and "The
Funds" on page for more Purchase Payments allocated to the Separate Account are
information. invested at net asset value in Accumulation Units in one or
more of nine Series, each of which invests in one of the
following nine Funds:
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
FUNDS ADVISERS/SUBADVISERS
<S> <C>
- --------------------------------------------------------------------------------------------
BARR ROSENBERG SERIES TRUST Rosenberg Institutional Equity Management
- --------------------------------------------------------------------------------------------
Barr Rosenberg Market Neutral Fund
- --------------------------------------------------------------------------------------------
HOTCHKIS & WILEY VARIABLE TRUST Hotchkis & Wiley, a Division of Merrill Lynch
Asset Management, LP
- --------------------------------------------------------------------------------------------
International VIP Portfolio
- --------------------------------------------------------------------------------------------
LEVCO SERIES TRUST John A. Levin & Co., Inc.
- --------------------------------------------------------------------------------------------
LEVCO Equity Fund
- --------------------------------------------------------------------------------------------
NAVELLIER VARIABLE INSURANCE SERIES FUND, Navellier & Associates, Inc.
INC.
- --------------------------------------------------------------------------------------------
Growth Portfolio
- --------------------------------------------------------------------------------------------
OFFITBANK VARIABLE INSURANCE FUND, INC. OFFITBANK
- --------------------------------------------------------------------------------------------
High Yield Fund
- --------------------------------------------------------------------------------------------
Total Return Fund
- --------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS OppenheimerFunds, Inc.
- --------------------------------------------------------------------------------------------
Oppenheimer Money Fund
- --------------------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE TRUST Cadence Capital Management
- --------------------------------------------------------------------------------------------
Capital Appreciation Portfolio
- --------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND Royce & Associates, Inc.
- --------------------------------------------------------------------------------------------
Royce Total Return Portfolio
- --------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 62
<TABLE>
<S> <C> <C>
Please see "Charges and CHARGES AND DEDUCTIONS
Deductions" on page for
more information. The following fees and expenses apply to your
Contract:
FEE OR EXPENSE AMOUNT OF FEE
----------------------------------------------------------------------
DAILY DEDUCTIONS
- Mortality and Expense Risks fee*............... .003425%
(1.25% per year)
---------------
* Until further notice, Security First Life will waive the daily
mortality and expense risk charge to 0.00106849% (0.39% per year), and
this reduction is permanent for Contracts issued before the
termination or reduction of the waiver. (See "Mortality and Expense
Risk Charge," page .)
FEE OR EXPENSE AMOUNT OF FEE
----------------------------------------------------------------------
PREMIUM TAXES
Payable to a state or government agency.......... 0% - 2.35%
with respect to your Contract. It may be deducted (3.50% in Nevada)
on or after the date the tax is incurred.
Currently, Security First Life deducts these
taxes upon annuitization
</TABLE>
<TABLE>
<S> <C>
Please see "Free Look FREE LOOK PERIOD
Period" on page for more
information. You may cancel your Contract within 10 days after you
receive it (or longer depending on state law) for a full
refund of all Purchase Payments (or the greater of Purchase
Payments or the Contract Value in some states). All Purchase
Payments will be initially allocated to the Oppenheimer
Money Fund during the Free Look period.
VARIABLE ANNUITY PAYMENTS
You select the Annuity Date, an Annuity payment option and
an assumed investment return. You may change any of your
selections before your Annuity Date. Your monthly Annuity
payments will start on the Annuity Date. Payments will vary
from year to year based on a comparison of the assumed
investment returns you selected with the actual investment
experience of the Series in which the Contract Value is
invested.
If your monthly payments from a particular Series are less
than $50, Security First Life may change the frequency of
your payments so that each payment will be at least $50 from
that Series.
Please see "Federal Tax SURRENDER
Considerations" on page
for more information. You may surrender all or part of your Contract Value before
the Annuity Date. You may not make a partial surrender if it
would cause your interest in any Series to fall below $500.
However, if you are withdrawing the entire amount allocated
to a Series; these restrictions do not apply.
Any earnings surrendered will be taxed as ordinary income
and may be subject to a penalty tax under the Internal
Revenue Code. Certain restrictions apply for qualified
Contracts.
</TABLE>
8
<PAGE> 63
<TABLE>
<S> <C>
Please see "Death Benefits" DEATH BENEFIT
on page for more
information. One of the insurance guarantees we provide you under your Contract is that your
Beneficiary(ies) will be protected against market downturns. You name your
Beneficiary(ies). If you die before the Annuity Date, your Beneficiary(ies) will
receive a death benefit that is the greater of:
- the total of all Purchase Payments less any partial withdrawals; or
- the Contract Value at settlement
If you (or any co-owner) is 76 or older on the Contract Date, the death benefit will
equal the Contract Value at settlement.
Your Beneficiary(ies) may choose to receive this benefit in a lump sum or to apply
it to certain of the available annuity forms contained in this Contract.
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE AND EXAMPLES
- --------------------------------------------------------------------------------
The purpose of these fee tables and examples is to assist you in understanding
the various costs and expenses that you will bear, directly or indirectly, under
your Contract.
EXPENSE DATA
The table reflects expenses of the Separate Account as well as expenses of the
underlying Funds that make up the investment options for the Separate Account.
In addition to the expenses listed below, premium taxes may be applicable.*
Please see Fund prospectuses for a more complete description of the various
costs and expenses of the Funds.
- ---------------
* Under State law, premium taxes may be deducted from each Purchase Payment or
upon annuitization. At this time Security First Life deducts the premium tax
only from amounts annuitized.
FEE TABLES
YOUR EXPENSES
Participant Transaction Expenses -- None
SEPARATE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE CONTRACT VALUE AND INCLUDING EXPENSE WAIVER.)
(DEDUCTED DAILY FROM THE SEPARATE ACCOUNT.)
<TABLE>
<S> <C>
Mortality and Expense Risk Fee.............................. .39% per year
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES...................... .39% per year
</TABLE>
9
<PAGE> 64
FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
(NET OF ANY WAIVER OR REIMBURSEMENT)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
HOTCHKIS &
BARR WILEY
ROSENBERG INTERNATIONAL LEVCO NAVELLIER OFFITBANK OFFITBANK
MARKET VIP EQUITY GROWTH HIGH YIELD TOTAL RETURN
NEUTRAL FUND PORTFOLIO FUND PORTFOLIO FUND FUND
- -------------------------------------------------------------------------------------------------------------------------
(a) Management Fee 1.90% .75% .85% .85% .85% .50%
- -------------------------------------------------------------------------------------------------------------------------
(b) Other Expenses .10% .30% .25% .65% .30% .30%
- -------------------------------------------------------------------------------------------------------------------------
(c) Total Annual
Expenses 2.00% 1.05% 1.10% 1.50% 1.15% .80%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
PIMCO CAPITAL* ROYCE TOTAL
OPPENHEIMER APPRECIATION RETURN
MONEY FUND PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------
(a) Management Fee .45% .83% 1.00%
- --------------------------------------------------------------------------------------------------------
(b) Other Expenses .05% .02% .35%
- --------------------------------------------------------------------------------------------------------
(c) Total Annual Expenses .50% .85% 1.35%
- --------------------------------------------------------------------------------------------------------
</TABLE>
* PIMCO has agreed to reduce its administrative fee to the extent that total
Portfolio operating expenses are .85%.
Total yearly expenses have been reduced as a result of voluntary or contractual
fee waivers or expense assumptions by the investment adviser and/or
administrator. If the reduction had not occurred, total yearly expenses would
have been:
- Barr Rosenberg Market Neutral Fund -- 2.00%;
- Hotchkis & Wiley International VIP Portfolio -- 1.35%;
- LEVCO Equity Fund -- 18.08%;
- Navellier Growth Portfolio -- 5.0%;
- OFFITBANK High Yield Fund -- 1.38%;
- OFFITBANK Total Return Fund -- 5.25%;
- Royce Total Return Portfolio -- 2.99%.
10
<PAGE> 65
EXAMPLES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONDITIONS
YOU WOULD PAY THE FOLLOWING
SEPARATE EXPENSES ON A $1,000 TIME PERIODS
ACCOUNT INVESTMENT ASSUMING 5% ANNUAL ---------------------------------------
SERIES RETURN ON ASSETS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Barr Rosenberg Market See Text from Table (a) $ 24 $ 75 $128 $273
Neutral Fund (b) 24 75 128 273
- --------------------------------------------------------------------------------------------------------
Hotchkis & Wiley SAME (a) 15 46 79 172
International VIP (b) 15 46 79 172
Portfolio
- --------------------------------------------------------------------------------------------------------
LEVCO Equity SAME (a) 15 47 81 178
Fund (b) 15 47 81 178
- --------------------------------------------------------------------------------------------------------
Navellier Growth SAME (a) 19 59 102 221
Portfolio (b) 19 59 102 221
- --------------------------------------------------------------------------------------------------------
OFFITBANK High Yield SAME (a) 16 49 84 183
Fund (b) 16 49 84 183
- --------------------------------------------------------------------------------------------------------
OFFITBANK Total Return SAME (a) 12 38 65 144
Fund (b) 12 38 65 144
- --------------------------------------------------------------------------------------------------------
Oppenheimer Money SAME (a) 9 28 49 110
Fund (b) 9 28 49 110
- --------------------------------------------------------------------------------------------------------
PIMCO Capital SAME (a) 13 39 68 150
Appreciation Portfolio (b) 13 39 68 150
- --------------------------------------------------------------------------------------------------------
Royce Total Return SAME (a) 18 55 94 205
Portfolio (b) 18 55 94 205
- --------------------------------------------------------------------------------------------------------
</TABLE>
EXPLANATION OF FEE TABLES AND EXAMPLES
1. Security First Life has determined to voluntarily reduce its mortality and
expense risk charge to 0.39% per year. Without this reduction, the charge would
have been 1.25% per year. This may be terminated at any time, but any change in
this reduction will not affect Contracts issued prior to the change.
2. The purpose of these tables and examples is to aid you in understanding the
various costs and expenses that you will bear directly or indirectly. The table
reflects expenses of the Separate Account as well as the underlying Funds.
Premium taxes are not reflected.
3. THE EXAMPLES ARE NOT REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- --------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The Security First Private Client Advisor is a new variable insurance Contract
being offered by Security First Life. The Series that invest in the Funds were
created in 1999. Therefore, no financial information is available at this time.
11
<PAGE> 66
- --------------------------------------------------------------------------------
FINANCIAL AND PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
All performance numbers are PERFORMANCE INFORMATION
based upon historical
earnings. These numbers are From time to time, Security First Life may advertise the
not intended to indicate performance of a Series. This performance information may
future results. Yields and include:
average annual total returns
are determined in accordance - the YIELD and EFFECTIVE YIELD of Series invested in the
with the computation methods OPPENHEIMER MONEY FUND of the Separate Account
required by the Securities
and Exchange Commission (the - AVERAGE ANNUAL TOTAL RETURNS for the other Series of the
"SEC") in the Form N-4 Separate Account.
Registration Statement.
These methods are described YIELD is the net income generated by an investment in the
in detail in the Statement OPPENHEIMER MONEY FUND for a specific seven-day period,
of Additional Information. expressed as a percentage of the value of the Series'
Accumulation Units. Yield is an annualized figure, which
means that Security First Life assumes that the Series will
generate the same level of net income over a one-year period
and compounds that income on a semi-annual basis.
Because of the assumed compounding, the Oppenheimer Money
Fund's effective yield will be slightly higher than its
yield. The computation of yield reflects all recurring
changes under the Contract to all Owner accounts, including
the mortality and expense risk charge.
ANNUAL RETURN measures the net income of a Series and any
realized or unrealized gains or losses of the underlying
investments in the Series, over the period stated. AVERAGE
ANNUAL TOTAL RETURN figures are annualized and, therefore,
represent the average annual percentage change in the value
of an investment in a Series over the period stated. Average
annual total returns are expressed for at least one, five
and ten year periods (or from a Series' inception if the
Series has been in existence for less than ten years).
The computation of average annual total returns reflects all
recurring charges and applicable fees under the Contract to
all Owner accounts, including the mortality and expense risk
charge
FINANCIAL INFORMATION
Financial Statements of the Separate Account and Security
First Life are contained in the Statement of Additional
Information. Please see the first page of this Prospectus
for information on how to obtain a copy of the Statement.
</TABLE>
- --------------------------------------------------------------------------------
DESCRIPTION OF SECURITY FIRST LIFE INSURANCE COMPANY,
THE GENERAL ACCOUNT, THE SEPARATE ACCOUNT,
THE FUNDS AND SERVICE PROVIDERS
- --------------------------------------------------------------------------------
SECURITY FIRST LIFE INSURANCE COMPANY
Security First Life is a stock life insurance company founded in 1960 and
organized under the laws of the State of Delaware. Its principal executive
offices are located at 11365 West Olympic Boulevard, Los Angeles, California
90064. Security First Life is authorized to transact the business of life
insurance, including annuities, and is currently licensed to do business in 49
states and the District of Columbia.
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<PAGE> 67
Security First Life is a wholly-owned subsidiary of Security First Group, Inc.
("SFG"). SFG in turn is a wholly-owned subsidiary of Metropolitan Life Insurance
Company ("MetLife"), a New York mutual life insurance company.
MetLife is one of the world's largest financial services companies and the
second largest life insurance company in the United States in terms of total
assets, with approximately $215.30 billion worth of total assets as of December
31, 1998. As a mutual insurance company, MetLife has no shareholders. However,
MetLife announced in November 1998 its intention to convert to a stock company.
The "demutualization" plan will be subject to approval by the Board of
Directors, the State of New York Insurance Department and policyholders. As of
May 1, 1999, MetLife does not know the complete details of the plan or when or
if it will take effect.
THE GENERAL ACCOUNT
All of the assets of Security First Life, except for those in the Separate
Account and other segregated asset accounts, make up the assets of the General
Account. Security First Life has sole discretion to invest the assets of the
General Account, subject to applicable law.
THE SEPARATE ACCOUNT
Security First Life established the Separate Account on May 29, 1980 in
accordance with the Delaware Insurance Code. The purpose of the Separate Account
is to hold the variable assets that underlie the Contracts and some other
variable annuity contracts that Security First Life offers. The Separate Account
is registered with the SEC as a unit investment trust under the 1940 Act.
The assets of the Separate Account are held in Security First Life's name on
behalf of the Separate Account and legally belong to Security First Life.
Although the Separate Account, and each of the Series that make up the Separate
Account, are considered as part of Security First Life's general business, the
Separate Account's assets are solely for the benefit of those who invest in the
Separate Account and no one else, including Security First Life's creditors. All
the income, gains and losses (realized and unrealized) resulting from these
assets are credited to or charged against the Contracts issued from this
Separate Account without regard to Security First Life's other business. Under
state law and the terms of your Contract, the assets of the Separate Account
will not be responsible for liabilities arising out of Security First Life's
other business. Furthermore, Security First Life is obligated to pay all money
it owes under the Contracts even if that amount exceeds the assets in the
Separate Account. HOWEVER, THE AMOUNT OF THESE VARIABLE ANNUITY PAYMENTS IS
GUARANTEED ONLY TO THE EXTENT OF THE LEVEL AMOUNT CALCULATED AT THE BEGINNING OF
EACH ANNUITY YEAR (See Annuity Benefits -- Level Payments Varying Annually, page
).
The Separate Account is divided into a number of investment Series of
Accumulation and Annuity Units. Nine of these Series are available under the
Contracts as investment choices. Each Series invests in the shares of only one
of the Funds.
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<PAGE> 68
THE FUNDS
Your investment choices are:
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER
- ----------------------------------------------------------------------------------------------------------
Barr Rosenberg Market 1. The Fund seeks long-term capital appreciation Rosenberg Institutional
Neutral Fund while maintaining minimal exposure to general equity Equity Management
market risk. The Fund seeks a total return greater
than the return on 3-month United States ("U.S.")
Treasury Bills.
- ----------------------------------------------------------------------------------------------------------
Hotchkis & Wiley 2. The Fund seeks to provide current income and Hotchkis & Wiley, a division
International VIP long-term growth of income accompanied by growth of of Merrill Lynch Asset
Portfolio capital. The Fund will attempt to achieve its Management, L.P.
objective by investing at least 65% of its total
assets in equity securities in at least three
non-U.S. markets.
- ----------------------------------------------------------------------------------------------------------
LEVCO Equity Fund 3. The Fund seeks to achieve long-term growth of John A. Levin & Co., Inc.
capital through an emphasis on the preservation of
capital and an attempt to control volatility as
measured against the Standard & Poors Composite 500
Stock Index. The Fund pursues this objective by
investing its assets primarily in common stocks and
other securities, preferred stock, warrants, and
rights.
- ----------------------------------------------------------------------------------------------------------
Navellier Growth 4. The Fund seeks to achieve long-term growth of Navellier & Associates, Inc.
Portfolio capital primarily through investment in companies
with appreciation potential. The Fund invests in
equity securities traded in all U.S. Markets,
including dollar denominated foreign securities
traded in U.S. Markets.
- ----------------------------------------------------------------------------------------------------------
OFFITBANK High Yield 5. The Fund primarily seeks high current income. OFFITBANK
Fund Capital appreciation is a secondary objective. The
Fund seeks to achieve its objective by investing,
under normal circumstances, at least 65% of its
total assets in U.S. corporate fixed income
securities (including debt securities, convertible
securities, and preferred stocks) which are rated
below investment grade or are not rated at the time
of investment.
- ----------------------------------------------------------------------------------------------------------
OFFITBANK Total 6. The Fund seeks to maximize total return from a OFFITBANK
Return Fund combination of capital appreciation and current
income. The Funds seek to achieve this objective by
investing primarily in a diversified portfolio of
fixed-income securities of varying maturities and by
giving the investment adviser discretion to deploy
the Fund's assets among certain segments of the
fixed-income market that the investment adviser
believes will best contribute to achievement of the
Fund's objectives.
- ----------------------------------------------------------------------------------------------------------
Oppenheimer Money 7. The Fund seeks the maximum current income from OppenheimerFunds, Inc.
Fund investments in "money market" securities consistent
with low capital risk and the maintenance of
liquidity.
- ----------------------------------------------------------------------------------------------------------
PIMCO Cap. App. Fund 8. The Fund seeks growth of capital. The Fund seeks Cadence Capital Management
to achieve this objective by investing primarily in
common stocks of companies that have improving
fundamentals (such as growth of earnings and
dividends) and whose stock is reasonably valued by
the market. Stocks for the Fund are selected from a
universe of the approximately 1,000 largest market
capitalization stocks, all of which are those
companies with market capitalization of at least
$1.0 billion at the time of investment.
- ----------------------------------------------------------------------------------------------------------
Royce Total Return 9. The Fund seeks an equal focus on both long-term Royce & Associates
Portfolio growth of capital and current income. The Fund seeks
to achieve this objective through investments in a
diversified portfolio of dividend-paying common
stocks of companies selected on a value basis.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 69
<TABLE>
<S> <C>
While the Series and their Each Series buys and sells shares of the corresponding
comparably named Funds may mutual fund. These Funds invest in stocks, bonds and other
have names, investment investments as indicated above. All dividends declared by
objectives and management the Funds are earned by the Separate Account and reinvested.
which are identical or Therefore, no dividends are distributed to you under the
similar to publicly Contract. Instead, dividends generally increase the
available mutual funds, Accumulation or Annuity Unit Value. You pay no transaction
these are not those mutual expenses (i.e., front-end or back-end load sales charges) as
funds. The Funds most likely a result of the Separate Account's purchase or sale of these
will not have the same mutual fund shares. The Funds listed above are available
performance experience as only by purchasing annuities and life insurance policies
any publicly available offered by Security First Life or by other insurance
mutual fund. companies and are never sold directly to the public. The
shares of each Fund are purchased, without sales charge, for
the corresponding Series at the next net asset value per
share determined by a Fund after your payment is received by
Security First Life. Fund shares will be redeemed by the
Series to the extent necessary for Security First Life to
make annuity or other payments under the Contracts.
Each of the Funds is a portfolio or series of an open-end
management investment company registered with the SEC under
the 1940 Act. Registration does not involve supervision by
the SEC of the investment or investment policies of the
Funds. There can be no guarantee that a Fund will meet its
investment objectives.
The Funds are more fully The Funds are available to other registered separate
described in the Fund accounts offering variable annuity and variable life
prospectuses and their products in addition to Security First Life's Separate
Statements of Additional Account. In the future, a conflict may develop between one
Information. The or more separate account invested in the same Fund. The
prospectuses are attached to conflict could develop due to change in the law affecting
or accompanied by this variable annuity products or from differences in voting
Prospectus. The Statements instructions of owners of the different separate accounts.
of Additional Information Security First Life monitors the Series for this type of
are available upon your conflict and will remedy the situation if such a conflict
request. develops. This may include the withdrawal of amounts
invested in the Funds by you and other Contract Owners.
SUBSTITUTION OF FUND SHARES
Security First Life may substitute shares of another fund
for Fund shares directly purchased and apply future Purchase
Payments under the Contracts to the purchase of these
substituted shares if the shares of a Fund are no longer
available or further investment in such shares is determined
to be inappropriate by Security First Life's management in
view of the purposes of the Contracts. However, no
substitution is allowed unless the SEC approves the
substitution under the 1940 Act.
PRINCIPAL UNDERWRITER
Security First Financial, Inc., 11365 West Olympic
Boulevard, Los Angeles, California 90064, a broker-dealer
registered under the Securities Exchange Act of 1934 and a
member of the National Association of Securities Dealers,
Inc., is the principal underwriter for the Contracts.
Security First Financial, Inc. is a Delaware corporation and
a subsidiary of SFG.
SERVICING AGENT
SFG provides Security First Life with administrative
services, including: office space, supplies, utilities,
office equipment, travel expenses and periodic reports.
</TABLE>
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<PAGE> 70
CUSTODIAN
Security First Life is the custodian of the assets of the Separate Account. The
assets of each Series will be physically segregated by Security First Life and
held separate from the assets of the other Series and of any other firm, person
or corporation. The assets of the Separate Account are further protected by
fidelity bonds which cover all of Security First Life's officers and employees.
- --------------------------------------------------------------------------------
CONTRACT CHARGES
- --------------------------------------------------------------------------------
Security First Life deducts the charges described below. Security First Life
represents that the charges are reasonable for the service and benefits
provided, costs and expenses incurred, and risks assumed under the Contracts.
SERVICES AND BENEFITS SECURITY FIRST LIFE PROVIDES INCLUDE:
- the ability for you to make withdrawals and surrenders under the
Contracts;
- the death benefit paid at your death, the Annuitant's death, or the death
of the first of joint Contract owners;
- the available funding options and related programs (including dollar-cost
averaging, portfolio rebalancing, and systematic withdrawal programs);
- administration of the annuity options available under the Contracts; and
- the distribution of various reports to Contract owners.
COSTS AND EXPENSES INCURRED BY SECURITY FIRST LIFE INCLUDE:
- losses associated with various overhead and other expenses from providing
the services and benefits under the Contracts;
- sales and marketing expenses; and
- other costs of doing business.
RISKS ASSUMED BY SECURITY FIRST LIFE INCLUDE:
- risks that Annuitants may live longer than estimated when the annuity
factors under the Contracts were established;
- that the amount of the death benefit will be greater than the Contract
value or the maximum of all step-up values for the Death Benefit; and
- that the costs of providing the services and benefits under the contracts
will exceed the charges deducted.
Security First Life may also deduct a charge for taxes, if applicable.
Unless otherwise specified, charges are deducted proportionately from all
funding options in which you are invested.
These charges may not be changed under the Contract, and Security First Life may
profit from these charges in the aggregate.
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<PAGE> 71
<TABLE>
<S> <C>
PREMIUM TAXES
Some states assess premium taxes on the Purchase Payments
you make. Generally, premium taxes range from 0% to 2.35%
(3.50% in Nevada), depending on the state. The Contracts
permit Security First Life to deduct any applicable premium
taxes from the Contract Value at or after the time they are
incurred. Security First Life currently does not deduct for
these taxes at the time you make a Purchase Payment.
However, Security First Life will deduct the total amount of
premium taxes, if any, from the Contract Value when you
elect to begin receiving Annuity payments (Annuitization).
SURRENDER CHARGE
No sales charge is deducted from any Purchase Payment.
MORTALITY AND EXPENSE RISK CHARGE
Security First Life charges a fee for bearing certain
mortality and expense risks under the policy. Examples of
these risks include a guarantee of annuity rates, the death
benefits, certain Contract expenses, and assuming the risk
that the expense charges and fees are less than actual
administrative and operating expenses. As compensation for
assuming these risks, Security First Life will make a daily
deduction from the value of the Separate Account's assets
equal to 1.25% per year.
If Security First Life has gains from the receipt of the
mortality and expense risk charges over its cost of assuming
these risks, it may use the gains as it sees fit. This may
include the reduction of expenses incurred in distributing
the Contracts.
</TABLE>
<TABLE>
<S> <C>
Please note that Security First Life may voluntarily waive a portion of the
deductions are made and mortality and expense risk charges. Any waiver may be
expenses paid out of the terminated at any time. Until further notice, Security First
underlying Funds' assets, Life has determined to reduce its mortality and expense risk
as well. A description of charge to 0.39% per year. This reduction in the mortality
these fees and expenses and expense risk charges is permanent for Contracts issued
are described in each prior to the termination or reduction of the waiver.
Fund's prospectus.
FEDERAL, STATE AND LOCAL TAXES
Security First Life may in the future deduct charges from
the Contract Value for any taxes it incurs because of the
Contracts. However, no deductions are being made at the
present time.
FREE LOOK PERIOD
You may cancel your Contract within a certain time period.
This is known as a "free look." Your Free Look Period is the
10-day period (or longer in certain states) starting when
you receive your Contract. If you decide to cancel your
Contract, Security First Life must receive your request to
cancel in writing at its administrative office within the
10-day period. If the Contract is mailed to Security First
Life, it will be considered to be received on the postmark
date. If the Contract is sent by certified or registered
mail, the date of certification or registration will be
considered the date of its return to Security First Life.
</TABLE>
17
<PAGE> 72
The returned Contract will be treated as if Security First Life never issued it,
and Security First Life will refund your Purchase Payments or, if required by
state law, the greater of the Purchase Payments or the Contract Value. Purchase
Payments that you make to the Separate Account will be allocated to the
Oppenheimer Money Fund for the number of days of the Free Look Period required
by the state in which you live. At the end of the Free Look Period, the account
value in the Oppenheimer Money Fund will be reallocated to the Series of the
Separate Account that you selected in your Contract application.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
ASSIGNMENT
Your Contract provides that you may freely assign your rights under it. However,
if you hold your Contract in connection with a Section 401 or 403 plan, a Roth
IRA, or a traditional IRA, you cannot assign or transfer the Contract.
PURCHASE PAYMENTS
You may make a Purchase Payment at any time. Your minimum initial Purchase
Payment must be $100,000. Each additional Purchase Payment must at least
$25,000. You will receive a confirmation of each Purchase Payment received.
TRANSFERS
ACCUMULATION UNITS
You may transfer Accumulation Units among the Funds at any time. Your transfer
instructions must be in writing or, if permitted by Security First Life, by
telephone. If Security First Life permits Accumulation Units to be transferred
by telephone, you will be required to complete an authorization on the contract
application or on another form that Security First Life will provide. Security
First Life will employ reasonable procedures to confirm that telephone
instructions are genuine. This will include a requirement that you provide one
or more forms of personal identification when requesting a transfer. Security
First Life will not be liable for following instructions it reasonably believes
to be genuine.
Your Accumulation Units will be transferred on the first valuation after receipt
of written or telephone instructions. Accumulation Unit values are determined at
the close of trade on the New York Stock Exchange, which is currently 4:00 p.m.
Eastern time. If your transfer instructions are received up to that time your
transfer will be effected at the value calculated on that date. If your
instructions are received after the close of trading on a valuation day, your
transfer instructions will be carried out at the value next calculated.
ANNUITY UNITS
You may transfer Annuity Units among the Series at any time without charge.
Transfers of Annuity Units may only be requested in writing and will be
effective on the first valuation following receipt of the instructions.
MINIMUM TRANSFER
A minimum of $500 must be transferred from any Series, except as permitted under
a reallocation election or dollar cost averaging program. The value of the
Accumulation and Annuity Units transferred will be calculated as of the close of
business on the day that the transfer occurs.
18
<PAGE> 73
DOLLAR COST AVERAGING
Dollar cost averaging (or "automated transfers") allows you to transfer a set
dollar amount to other funding options on a monthly, quarterly, semi-annual or
annual basis so that more accumulation units are purchased in a funding option
if the cost per unit is low and less accumulation units are purchased if the
cost per unit is high. Therefore, a lower-than-average cost per unit may be
achieved over the long run.
You may participate in this program at no charge if your Contract Value is
$25,000 or more. Under the program, your Accumulation Units from the Series
invested in the Oppenheimer Money Fund will be periodically transferred to other
Series that you select. The program allows you to invest in non-money market
Series over any time period that you choose instead of investing in these other
Series all at once.
You choose whether the transfer will be made monthly, quarterly, semi-annually
or annually. The minimum transfer amount is $100. You may terminate the program
at any time by sending a written notice to Security First Life. (Security First
Life reserves the right to limit the number of Series to which transfers can be
made.)
REALLOCATION ELECTION
If your Contract Value is $25,000 or more, you may elect at no additional charge
to systematically reallocate values invested in Accumulation Units among the
Series in order to achieve an allocation ratio that you establish. Your request
must be made in writing on a form provided by Security First Life. (The
reallocation election is not available under the dollar cost averaging program.)
Transfers will occur quarterly. All transfers will be made on the third business
day of the month in which the annual or quarterly anniversary of your Contract
occurs. You may change the allocation ratios once each Contract Year. Any
transfer among Series outside of the election will cause the election to
terminate.
MODIFICATION OF THE CONTRACTS
Security First Life must make Annuity payments involving life contingencies at
no less than the minimum guaranteed Annuity rates incorporated into the
Contracts, even if actual mortality experience is different.
Security First Life is legally bound under the Contract to maintain these
Annuity purchase rates. Security First Life must also abide by the Contract's
provisions concerning:
- death benefits
- deductions from Purchase Payments
- deductions from the Separate Account for mortality and expense risk fees
- guaranteed rates with respect to fixed benefits
Security First Life may change such provisions without your consent to the
extent permitted by the Contract, but only:
- with respect to any Purchase Payments received as a tax free exchange
under the Code after the effective date of the change;
- with respect to benefits and values provided by Purchase Payments made
after the effective date of the change to the extent that such Purchase
Payments in any Contract Year exceed the first year's Purchase Payments;
or
- to the extent necessary to conform the Contract to any Federal or state
law, regulation or ruling.
If you have any questions about any of the provisions of your Contract, you may
write or call:
Security First Life Insurance Company
P.O. Box 92193
Los Angeles, California 90009
1 (800) 284-4536
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<PAGE> 74
- --------------------------------------------------------------------------------
ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The NET INVESTMENT FACTOR is CREDITING ACCUMULATION UNITS IN THE SEPARATE ACCOUNT
an index of the percentage
change (adjusted for Security First Life will credit Accumulation Units to a
distributions by the Fund Series upon receipt of your Purchase Payment or transfer.
and the deduction of the Security First Life determines the number of Accumulation
mortality and expense risk Units to be credited to a Series by dividing the net amount
fee) in the net asset value allocated to a Series out of your Purchase Payment by the
of the Fund in which a value of an Accumulation Unit in the Series next computed
Series is invested, since following receipt of the Purchase Payment or transfer.
the preceding Valuation
Date. The net investment SEPARATE ACCOUNT ACCUMULATION UNIT CURRENT VALUES
factor may be greater or
less than 1 depending upon The current value of Accumulation Units of a particular
the Fund's investment which the Series invests its assets. The value of
performance Accumulation Units is determined each business day at the
close of trading on the New York Stock Exchange (currently
4:00 p.m. Eastern time). The value is calculated by
multiplying the value of an Accumulation Unit in the Series
on the immediately preceding valuation date by the net
investment factor for the period since that day. You bear
the risk that the aggregate current value invested in the
Series may at any time be less than, equal to or more than
the amount that you originally allocated to the Series.
SURRENDER FROM THE SEPARATE ACCOUNT
You may surrender all or a portion of the Contract Value of
your Contract at any time prior to the Annuity Date. A
surrender may result in adverse federal income tax
consequences to you including current taxation on the
distribution and a penalty tax on the early withdrawal.
These consequences are discussed in more detail under
"Federal Tax Considerations" on page . You should
consult your tax adviser before making a withdrawal.
The Contract Value of your interest in the Separate Account
prior to the Annuity Date is determined by multiplying the
number of Accumulation Units for each Series credited to
your Contract by the current value of an Accumulation Unit
in the Series. Security First Life will determine the value
of the number of Accumulation Units withdrawn at the next
computed Accumulation Unit value.
If you request a partial surrender from more than one Series
you must specify the allocation of the partial surrender
among the Series. You may not make a partial surrender if a
withdrawal would cause your interest in any Series to have
an after surrender value of less than $500.
However, if you are withdrawing the entire amount allocated
to a Series this restriction does not apply.
PAYMENT OF SURRENDER AMOUNT
Payment of any amount surrendered from a Series will be made
to you within seven days of the date that Security First
Life receives your written request.
Security First Life may suspend surrenders when:
- The SEC restricts trading on the New York Stock Exchange
or the Exchange is closed for other than weekends or
holidays.
</TABLE>
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<PAGE> 75
<TABLE>
<S> <C>
- The SEC permits the suspension of withdrawals.
- The SEC determines that an emergency exists that makes disposal of portfolio
securities or valuation of assets of the Funds not reasonably practicable.
</TABLE>
ACCOUNT STATEMENTS
You will receive a written account statement each calendar quarter in which a
transaction occurs before the Annuity Date. Even if you do not engage in any
transactions you will receive at least one written account statement per year.
The statement shows:
- all transactions for the period being reported
- the number of Accumulation Units that are credited to your Contract in
each Series
- the current Accumulation Unit value for each Series
- your Contract Value as of the end of the reporting period
Security First Life is careful to ensure the accuracy of calculations and
transfers to and within the Separate Account. However, errors may still occur.
You should review your statements and confirmations of transactions carefully
and promptly advise Security First Life of any discrepancy. Allocations and
transfers reflected in a statement will be considered final at the end of 60
days from the date of the statement.
- --------------------------------------------------------------------------------
ANNUITY BENEFITS
- --------------------------------------------------------------------------------
VARIABLE ANNUITY PAYMENTS
Your interest in the Series may be applied to provide you with a Variable
Annuity. The dollar amount of the Variable Annuity payments that you receive
will reflect the investment experience of the Series but will not be affected by
adverse mortality experience which may exceed the mortality risk charge
established under the Contract.
ASSUMED INVESTMENT RETURN
Unless you elect otherwise, the Assumed Investment Return is 4.25% per year. If
the laws and regulations of your State allow, you may elect an Assumed
Investment Return of 3.50%, 5% or 6%. The Assumed Investment Return does not
bear any relationship to the actual net investment experience of the Series.
Your choice of an Assumed Investment Return affects the pattern of your Annuity
payments. Your Annuity payments will vary from the Assumed Investment Return
depending on whether the investment experience of the Series in which you have
an interest is better or worse than the Assumed Investment Return. The higher
your Assumed Investment Return, the higher your first Annuity payment will be.
Your next payments will only increase in proportion to the amount the investment
experience of your chosen Series exceeds the Assumed Investment Return and
Separate Account charges. Likewise, your payments will decrease if the
investment experience of your chosen Series is less than the Assumed Investment
Return and Separate Account charges. A lower Assumed Investment Return will
result in a lower initial Annuity payment, but subsequent Annuity payments will
increase more rapidly or decline more slowly as changes occur in the investment
experience of the Series. Conversely, a higher Assumed Investment Return would
result in a higher initial payment than a lower Assumed Investment Return, but
later payments will rise more slowly or fall more rapidly.
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<PAGE> 76
<TABLE>
<S> <C>
ELECTION OF ANNUITY DATE AND FORM OF ANNUITY
You choose the Annuity Date and the form of Annuity payment.
ELECTION OF ANNUITY DATE
If you do not choose an Annuity Date at least thirty-one
days before Annuitization, your Normal Annuity Date
automatically will be the later of:
- the Contract anniversary nearest to the Annuitant's 100th
birthday, or
- the 10th anniversary of the Contract Date.
You may select an optional Annuity Date that is earlier than
the Normal Annuity Date described above. This Annuity Date
may be the first day of any month before the Normal Annuity
Date.
Please note that the Qualified Contracts may require a
different Normal Annuity Date and may prohibit the selection
of certain optional Annuity Dates.
There are three people who FORM OF ANNUITY
are involved in payments
under your Annuity: Currently, Security First Life provides you with five forms
of Annuity payments. Each Annuity payment option, except
- - you, the Owner Option 5, is available on both a Fixed and Variable Annuity
basis. Option 5 is available on a Fixed basis only.
- - the Annuitant
OPTION 1 -- LIFE ANNUITY
- - the Beneficiary
You receive Annuity payments monthly during the lifetime of
The Owner and the Annuitant the Annuitant. These payments stop with the last payment due
may be the same person. before the death of the Annuitant. Because Security First
Life does not guarantee a minimum number of payments under
this arrangement, this option offers the maximum level of
monthly payments involving a life contingency.
OPTION 2 -- LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY
PAYMENTS CERTAIN
You receive a guaranteed minimum number of monthly Annuity
payments during the lifetime of the Annuitant. In addition,
Security First Life guarantees that you, (or your
Beneficiary, if you are the Annuitant) will receive monthly
payments for the remainder of the period certain, if the
Annuitant dies during that period.
OPTION 3 -- INSTALLMENT REFUND LIFE ANNUITY
An Annuity payable monthly during the lifetime of an
individual. You receive a guaranteed minimum number of
monthly payments which are equal to the amount of your
Contract Value allocated to this option divided by the first
monthly payment. If you die before receiving the minimum
number of payments, the remaining payments will be made to
your Beneficiary.
OPTION 4 -- JOINT AND LAST SURVIVOR LIFE ANNUITY
You receive Annuity payments monthly during the lifetime of
you and another payee (the joint payee) and during the
lifetime of the survivor of the two of you. Security First
Life stops making payments with the last payment before the
death of the last surviving payee. Security First Life does
not guarantee a minimum number of payments under this
arrangement. The election of this option is ineffective if
either of you dies before Annuitization. In that case, the
survivor becomes the sole payee, and Security First Life
does not pay death proceeds because of the death of the
other payee.
</TABLE>
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<PAGE> 77
OPTION 5 -- PAYMENTS FOR A DESIGNATED PERIOD (FIXED ANNUITY ONLY)
Security First Life makes Annuity payments monthly to you or another
properly-designated payee, or to the Beneficiary at your or another payee's
death, for a selected number of years ranging from five to thirty. The amount of
each payment will be based on an interest rate determined by Security First Life
that will not be less than 3.50% per year.
If you do not choose a form of Annuity payment, Option 2, a life annuity with a
guaranteed minimum of 120 monthly payments, will automatically be applied to
your Contract. You may make changes to an optional form of Annuity payment at
any time until 31 days before the Annuity date.
The first year's Annuity payment described in Options 1 - 4 are calculated on
the basis of:
- - the mortality table specified in the Contract
- - the age and where permitted the sex of the Annuitant
- - the type of Annuity payment option selected, and
- - the assumed investment return selected.
The fixed Annuity payments described in Option 5 are calculated on the basis of:
- - the number of years in the payment period, and
- - the interest rate guaranteed with respect to the option.
Fixed Annuities are funded through the General Account of Security First Life.
FREQUENCY OF PAYMENT
Your payments under all options will be made on a monthly basis unless you and
Security First Life have agreed to a different arrangement.
Payments from each Series must be at least $50 each. If a payment from a Series
will be less than $50, Security First Life has the right to decrease the
frequency of payments so that each payment from a Series will be at least $50.
LEVEL PAYMENTS VARYING ANNUALLY
Your variable Annuity payments are determined yearly rather than monthly. As a
result, you will receive a uniform monthly Annuity payment for each Annuity
year. The level of payments for each year is based on the investment performance
of the Series up to the Valuation Date as of which the payments are determined
for the year. As a result, the amounts of the Annuity payments will vary with
the investment performance of the Series from year to year rather than from
month to month. Your monthly variable Annuity payments for the first year will
be calculated on the last Valuation Date of the second calendar week before the
Annuity date. The amount of your monthly variable Annuity payments will be
calculated using a formula described in the Contract. On each anniversary of the
Annuity date, Security First Life will determine the total monthly payments for
the year then beginning. These payments will be determined by multiplying the
number of Annuity units in each Series from which payments are to be made by the
annuity unit value of that Series for the valuation period in which the first
payment for that period is due.
After calculating the amount due to you, Security First Life transfers the
amount of the year's Variable Annuity payments to a General Account at the
beginning of the year. Although the amount in the Separate Account is credited
to you and transferred to the General Account, you do not have any property
rights in this amount. You do have a contractual right to receive your Annuity
payments.
The monthly Annuity payments for the year are made from the General Account with
interest using the standard Assumed Investment Return of 4.25% or the Assumed
Investment Return that you selected. As a result, Security First Life will
experience profits or losses on the amounts placed in the General Account in
23
<PAGE> 78
providing level monthly payments to you during the year that meet the Assumed
Investment Return that you selected. For example, if the net investment income
and gains in the General Account are lower than the Assumed Investment Return
selected, Security First Life will experience a loss.
You will not benefit from any increases or be disadvantaged from any decreases
in any Annuity Unit Values during the year because the Annuity payments for that
year are set at the beginning of the year. These increases and decreases will be
reflected in the calculation of Annuity payments for the following year.
ANNUITY UNIT VALUES
[This is how Security First Life calculates the Annuity Unit Value for each
Series:
- First, Security First Life determines the change in investment experience
(including any investment-related charge) for the underlying Fund from
the previous valuation date to the current valuation date.
- Next, it subtracts the daily equivalent of your mortality and expense
risk charges for each day since the last day the Annuity Unit Value was
calculated.
- Then, it divides the result by the weekly equivalent of your Assumed
Investment Return.
- FINALLY, THE PREVIOUS ANNUITY UNIT VALUE IS MULTIPLIED BY THIS RESULT.]
24
<PAGE> 79
- --------------------------------------------------------------------------------
DEATH BENEFITS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
If you own a Contract with DEATH BEFORE THE ANNUITY DATE
another person or persons,
the death of either you or If you chose another person other than yourself as the
your co-owner will Annuitant under your contract and the Annuitant dies, you
constitute the death of the become the Annuitant. If you die before the Annuity Date,
Owner for Contract purposes. whether or not you are the Annuitant, your Beneficiary(ies)
will receive a death benefit that is the greatest of:
- the total of all Purchase Payments less any partial
withdrawals, including amounts already applied to produce
Annuity payments; or
- the Contract Value of settlement
if you (or any co-owners) is age 76 or older on the Contract
Date, the death benefit will equal the Contract Value at
settlement.
Your Beneficiary(ies) receive the death benefit as either:
(1) A lump sum that must be made within five (5) years of
your death.
or
(2) Annuity income under Annuity Income Options One, Two or
Five.
If your Beneficiary(ies) chooses one of the Annuity income
options:
- Payments must begin within one year of your death
(However, under a Qualified Contract your spouse may delay
commencement of payments up to the date that you would
have reached 70 1/2.)
- The guaranteed period under Option Two or the designated
period under Option Five may not be longer than the
Beneficiary's life expectancy under applicable tables
specified by the Internal Revenue Service.
- The Contract Value on the date of the first Annuity
payment will be used to determine the amount of the death
benefit.
If your spouse is your sole Beneficiary, he or she may
choose to succeed to your rights as Owner rather than to
take the death benefit. If you have more than one
Beneficiary living at the time of your death, each will
share the proceeds of the death benefit equally unless you
elect otherwise.
If you outlive all of your Beneficiaries, the death benefit
will be paid to your estate in a lump sum. No Beneficiary
shall have the right to assign or transfer any future
payments under the Options, except as provided in the
election or by law.
You will also be considered to have outlived your
Beneficiary(ies) in the following situations:
- Your Beneficiary(ies) and you die at the same time.
- Your Beneficiary(ies) dies within 15 days of your death
and proof of your death is received by Security First Life
before the date due.
Proof of death includes a certified death certificate, or
attending physician's statement, a decree of a court of
competent jurisdiction as to the finding of death, or other
documents that Security First Life agrees to accept as proof
of death.
</TABLE>
25
<PAGE> 80
DEATH AFTER THE ANNUITY DATE
If the Annuitant dies on or after the Annuity Date, the amounts payable to the
Beneficiary(ies) or other properly designated payees will consist of any
continuing payments under the Annuity Payment option in effect. In this case,
the Beneficiary will:
- have all the remaining rights and powers under the Contract, and
- be subject to all the terms and conditions of the Contract.
If none of your Beneficiaries survive the Annuitant, the value of any remaining
payments certain on the death of Annuitant, calculated on the basis of the
assumed investment return that you previously chose, will be paid in a lump sum
to the Annuitant's estate unless other provisions have been made and approved by
Security First Life. This value is calculated on the next day of payment
following receipt of due proof of death.
26
<PAGE> 81
- --------------------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
A QUALIFIED CONTRACT is a The following general discussion of the federal income tax
Contract that is purchased consequences under this Contract is not intended to cover
under certain types of all situations, and is not meant to provide tax advice.
tax-advantaged retirement Because of the complexity of the law and the fact that the
plans. tax results will vary depending on many factors, you should
consult your tax adviser regarding your personal situation.
For purposes of this Additional tax information is included in the SAI. (Neither
Prospectus, qualified plans this Prospectus nor the SAI addresses state, local or
include: foreign tax matters.)
- - SECTION 401 PLANS (pension GENERAL TAXATION OF ANNUITIES
and profit-sharing plans,
including plans for the Congress has recognized the value of saving for retirement
self-employed) by providing certain tax benefits, in the form of tax
deferral, for money put into an annuity. The Internal
- - SECTION 403(b) PLANS Revenue Code (the "Code") governs how this money is
(tax-deferred annuities) ultimately taxed. There are different rules for qualified
and Non-qualified Contracts and depending on how the money
- - SECTION 457 PLANS is distributed, as briefly described below.
(deferred compensation
plans) You generally will not be taxed on increases in the value of
your Contract until a distribution occurs -- either as a
- - TRADITIONAL INDIVIDUAL withdrawal or as an Annuity payment. This concept is known
RETIREMENT ACCOUNTS AND as tax deferral. In addition, Security First Life will not
ANNUITIES ("IRAS") be taxed on the investment income and capital gains of the
Separate Account.
- - ROTH IRAS
NON-QUALIFIED CONTRACTS
Please note that the terms
of your particular plan, IRA If you are the owner of a Non-qualified Contract, you do not
or Roth IRA may limit your receive any tax benefit (deduction or deferral of income) on
rights otherwise available Purchase Payments (for example, there is no deduction
under the Contract. available for Purchase Payments), but you will not be taxed
on increases in the value of your Contract until a
A NON-QUALIFIED CONTRACT is distribution occurs -- either as a withdrawal (that is, a
a Contract that is purchased distribution made prior to Annuitization) or as Annuity
on an individual basis with payments.
after-tax dollars and not
under one of the programs Any direct or indirect borrowing against the value of the
listed above in the Contract or pledging of the Contract as security for a loan
description of a Qualified will be treated as a cash distribution under the tax law. A
Contract. lump sum taken in lieu of remaining Annuity payments will be
treated as a withdrawal for tax purposes.
If a Non-qualified Contract is owned by someone other than
an individual (for example, by a corporation), the Contract
will generally not be treated as an annuity for tax
purposes. For these entities, any increases in the value of
the Contract attributable to Purchase Payments made after
February 28, 1986 are includible in the Owner's annual
income.
</TABLE>
27
<PAGE> 82
<TABLE>
<S> <C>
Earnings are the income that WITHDRAWALS
your Contract generates.
If you make a partial withdrawal, for tax purposes, the
There is income in the amount withdrawn will generally be treated as first coming
Contract to the extent the from earnings and then from your Purchase Payments. These
Contract Value exceeds your withdrawn earnings are includible in your gross income and
investment in the Contract. are taxed at ordinary income rates.
The investment in the
Contract equals the total ANNUITY DISTRIBUTIONS
Purchase Payments you paid When you receive an Annuity payment, part of each payment is
less any amount received considered a return of your Purchase Payments and will not
previously which was be taxed. The remaining portion of the Annuity payment (that
excludable from gross is, any earnings) is included in your gross income and will
income. be considered ordinary income for tax purposes.
How the Annuity payment is divided between taxable and
non-taxable portions depends upon the period over which the
Annuity payments are expected to be made. Annuity payments
received after you have received all of your premium
payments are fully includible in income.
EARLY SURRENDER PENALTY
The Code also provides that income distributed as an Annuity
or lump sum withdrawal from a Non-qualified Contract may be
subject to a penalty. The amount of the penalty is equal to
10% percent of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include
any amounts:
- paid on or after the date you reach age 59 1/2;
- paid to your beneficiary(ies) after you die;
- paid if you become totally disabled (as that term is
defined in the Code);
- paid in a series of substantially equal payments made
annually (or more frequently) under a life or joint life
expectancy Annuity;
- paid under an immediate Annuity;
- which come from Purchase Payments made prior to August 14,
1982.
(Other exceptions to the penalty may be available, and if
you are not yet age 59 1/2, you should consult your tax
advisor to determine whether you have met all of the
requirements for any particular exception.)
The penalty also will be imposed if you elect to receive
payments in substantially equal installments as a life or
life expectancy annuity prior to age 59 1/2 and then change
the method of distribution before you reach the age of
59 1/2. You will be assessed the penalty even after age
59 1/2 if payments have not continued for five years.
If you are issued multiple annuity contracts within a
calendar year by one company or its affiliates, the tax law
may treat these contracts as one annuity contract for
purposes of determining your tax on any distribution. This
treatment may result in adverse tax consequences for you.
QUALIFIED CONTRACTS
The full amount of all distributions received from a Section
401, 403(b), 457 plan or IRA (except for a return of
non-deductible employee or IRA contributions) are generally
included in your gross income and are taxed at ordinary
income rates unless the distribution is transferred to an
eligible
</TABLE>
28
<PAGE> 83
rollover account or Contract. In certain cases, distributions received from a
Roth IRA are also included in gross income.
Generally, distributions are included in your income in the year in which they
are paid. However, in the case of a Section 457 plan, a distribution is
includible in the year it is paid or when it is made available, depending upon
whether certain Code requirements are met. In very limited situations, a lump
sum distribution from a Section 401 plan may qualify for special tax treatment,
including special forward income averaging, special long term capital gain
treatment or deferral with respect to net unrealized appreciation.
MANDATORY MINIMUM DISTRIBUTIONS
If you are a participant in a Section 401, 403(b), 457 plan or traditional IRA,
you generally must begin receiving withdrawals from your Contract Value or
Annuity payments for life or a period not exceeding the life expectancy of you
or you and a beneficiary by April 1 of the calendar year following the year you
turn 70 1/2 (or, in some cases, the year you retire, if later).
In addition, distributions under Section 401, 403(b) and 457 plans and IRAs must
satisfy the minimum incidental death benefit requirements of the Code, which
impose additional minimum distribution requirements during life. However, if the
distributions described in the preceding paragraph are made to you over your
life expectancy or the joint life expectancy of you and your spouse, the minimum
incidental death benefit requirements are treated as satisfied.
If you are the owner of a Roth IRA, distributions are not required during your
lifetime.
EARLY SURRENDER PENALTY
If you receive a taxable distribution from a Section 401 plan, Section 403(b)
plan or IRA under your Contract before you reach age 59 1/2, this amount may be
subject to a 10% penalty tax in addition to ordinary income tax.
As indicated in the chart below, some distributions prior to age 59 1/2 are
exempt from the penalty. Some of these exceptions include any amounts received:
<TABLE>
<S> <C> <C> <C>
TYPE OF PLAN
- -----------------------------------------------------------------------------------------------------------
401 403(B)* IRA
- -----------------------------------------------------------------------------------------------------------
After you die X X X
(paid to your Beneficiary(ies))
- -----------------------------------------------------------------------------------------------------------
After you become totally disabled
(as defined in the Code) X X X
- -----------------------------------------------------------------------------------------------------------
If you separate from service after you reach age 55 X X
- -----------------------------------------------------------------------------------------------------------
In a series of substantially equal payments made X X X
annually (or more frequently) under a life or joint (after
life expectancy Annuity separation
from service)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Pursuant to a domestic relations order X X
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(Other exceptions to the penalty may be available, and if you are not yet age
59 1/2, you should consult your tax advisor to determine whether you have met
all of the requirements for any particular exception.)
The penalty also will be imposed if you elect to receive payments in
substantially equal installments as a life or joint life expectancy Annuity
prior to age 59 1/2 and then change the method of distribution before you reach
the age of 59 1/2. You will be assessed the penalty even after age 59 1/2 if
payments have not continued for five years.
29
<PAGE> 84
Distributions before age 59 1/2 generally are not permitted under Section 457
plans. You may not receive distributions until you reach the age of 70 1/2
unless you separate from service or are faced with an unforeseeable emergency.
Distributions from Section 457 plans are not subject to the penalty tax for
early withdrawals.
ROLLOVERS OF PLAN CONVERSIONS
You may roll over distributions (other than certain distributions, such as
required distributions) from one plan or arrangement to another plan or
arrangement without incurring any Federal income tax under some circumstances.
These circumstances are as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
DISTRIBUTION FROM: MAY BE ROLLED INTO:
- --------------------------------------------------------------------------------------------
- Section 401 plan Another Section 401 plan;
or
an IRA
- --------------------------------------------------------------------------------------------
- Section 403(b) plan Another Section 403(b) plan;
or
an IRA
- --------------------------------------------------------------------------------------------
- IRA Another IRA;
a Roth IRA (under certain conditions); or
a Section 401 or 403(b) plan if the IRA contains only
permissible rollover amounts
- --------------------------------------------------------------------------------------------
</TABLE>
DEDUCTIONS FOR PLAN CONTRIBUTIONS
You may deduct your contributions to Section 401 plans and Section 403(b) plans
in the year when made up to the limits specified in the Code. These plans may
also permit non-deductible employee contributions. Any non-deductible employee
contribution that you make will be received tax free as a portion of each
Annuity payment.
WITHHOLDING
MANDATORY 20% WITHHOLDING FOR "ELIGIBLE ROLLOVER DISTRIBUTIONS"
If you are participating in a Section 401 retirement plan or a Section 403(b)
plan, Security First Life is required to withhold 20% of the taxable portion of
your withdrawal that constitutes an "eligible rollover distribution" for Federal
income tax purposes.
Generally, an "eligible rollover distribution" is any taxable amount that you
receive from a Qualified Contract, except for distributions that are:
- paid over your life or the joint life expectancy of you and your
Beneficiary(ies);
- paid over a period of 10 years or more;
- necessary to satisfy the minimum distribution requirements; or
- certain contributions from Section 401 and Section 403(b) plans paid as
hardship distributions.
The requirements discussed below under "Other tax withholding" will apply to any
distribution that is not an eligible rollover distribution.
You may not elect out of the 20% withholding requirement. However, Security
First Life is not required to withhold the money if an eligible rollover
distribution is rolled over into an IRA or other eligible retirement plan, or is
directly transferred in a trustee-to-trustee transfer to either arrangement.
30
<PAGE> 85
OTHER TAX WITHHOLDING
Different withholding rules apply to taxable withdrawals such as Annuity
payments and partial withdrawals that are not eligible rollover distributions.
The withholding rules are determined at the time of payment. You may elect out
of these withholding requirements at any time. You also may revoke a
non-withholding election made with respect to Annuity payments at any time and
tax withholding will begin again at that time. Security First Life will notify
you at least annually of your right to revoke or reinstate tax withholding.
TAXPAYER IDENTIFICATION NUMBER ("TIN")
You are required by law to provide Security First Life (as payor) with your
correct TIN. If you are an individual, the TIN is your social security number.
- --------------------------------------------------------------------------------
VOTING RIGHTS
- --------------------------------------------------------------------------------
As the owner of the Separate Account, Security First Life is the legal owner of
the shares of the funding options. Based upon Security First Life's current view
of applicable law, you have voting interests under your Contract concerning Fund
shares and are entitled to vote on Fund proposals at all regular and special
shareholders meetings. Therefore, you are entitled to give us instructions for
the number of shares which are deemed attributable to your Contract.
Security First Life will vote all shares of the underlying Funds as directed by
you and other Contract Owners who have voting interests in the Funds. Security
First Life will send you and other Contract Owners, at a last known address, all
periodic reports, proxy materials and written requests for instructions on how
to vote those shares. When Security First Life receives these instructions, it
will vote all of the shares in proportion to the instructions. If Security First
Life does not receive your voting instructions, it will vote your interest in
the same proportion as represented by the votes it receives from the other
Owners. If Security First Life determines that it is permitted to vote the
shares in its own right due to changes in the law or in the interpretation of
the law it may do so.
Security First Life is under no duty to inquire into voting instructions or into
the authority of the person issuing such instructions. All instructions will be
valid unless Security First Life has actual knowledge that they are not.
When Annuity payments begin, the Annuitant will have all voting rights in regard
to Fund shares.
There are certain circumstances under which Security First Life may disregard
voting instructions. However, in this event, a summary of our action and the
reasons for such action will appear in the next semiannual report.
The number of votes that each person having the right to vote receives is
determined on a record date that is set no more than 90 days before the meeting.
Voting instructions will be requested at least 10 days before the meeting. Only
Owners or Annuitants on the record date may vote.
The number of shares to which you are entitled to vote is calculated by dividing
the portion of your Contract Value allocated to that Fund on the record date by
the net asset value of a Fund share on the same date.
31
<PAGE> 86
- --------------------------------------------------------------------------------
YEAR 2000 ISSUE
- --------------------------------------------------------------------------------
Security First Life and its service providers, including the underlying Fund
options, depend on the smooth operation of their computer systems. Many computer
and software systems in use today cannot recognize the Year 2000, but revert to
1900 or some other date, due to the manner in which dates were encoded and
calculated. That failure could have a negative impact on Security First Life and
the Separate Account, including the calculation of your interest in the Series,
on the Funds' handling of securities trades, pricing and account services, as
well as on the companies in which the Funds will invest. Security First Life is
monitoring the efforts of the service providers to prepare their systems for the
Year 2000 and expects that each Series service provider will be adapted before
that date. There can be no guarantee, however, that Security First Life or its
service providers will be successful or that the steps taken by Security First
Life will be sufficient to avoid any adverse impact on the Separate Account and
each of its Series.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
There are no present or pending material legal proceedings affecting the
Separate Account. Security First Life, in the ordinary course of its business,
is engaged in litigation of various kinds which in its judgment is not of
material importance in relation to its total assets.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
You may contact Security First Life at the address and phone number on the cover
of this Prospectus for further information. A copy of the Statement of
Additional Information, dated May 1, 1999, which provides more detailed
information about the contracts, may also be obtained. The table of contents for
the Statement of Additional Information is attached at page .
A Registration Statement has been filed with the SEC under the Securities Act of
1933 for the Contracts offered by this Prospectus. This Prospectus does not
contain all of the information in the Registration Statement. Please refer to
this Registration Statement for further information about the Separate Account,
Security First Life and the Contracts. Any statements in this Prospectus about
the contents of the Contracts and other legal instruments are only summaries.
Please see the filed versions of these documents for a complete statement of any
terms.
39
<PAGE> 87
'33 Act File No. 33-7094
STATEMENT OF
ADDITIONAL INFORMATION
SECURITY FIRST LIFE SEPARATE ACCOUNT A
----------------------------------------------------------
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS
----------------------------------------------------------
SECURITY FIRST LIFE INSURANCE COMPANY
MAY 1, 1999
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus. A copy of the prospectus, dated May 1, 1999,
may be obtained without charge by writing to Security First Life Insurance
Company, P.O. Box 92193, Los Angeles, California 90009 or by telephoning 1 (800)
284-4536.
SF 135 - R2C
<PAGE> 88
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Insurance Company 3
The Separate Account 3
Net Investment Factor 3
Annuity Payments 3
Additional Federal Income Tax Information 5
Obtaining Tax Advice 6
Underwriters, Distribution of the Contracts 6
Calculation of Performance Data 6
Voting Rights 8
Safekeeping of Securities 8
Servicing Agent 8
Independent Auditors 8
Legal Matters 8
State Regulation of Security First Life 9
Financial Statements 9
</TABLE>
2
<PAGE> 89
THE INSURANCE COMPANY
Security First Life Insurance Company ("Security First Life") is a wholly owned
subsidiary of Security First Group, Inc. ("SFG"). SFG, the parent of Security
First Life, is a wholly-owned subsidiary of Metropolitan Life Insurance Company
("MetLife"), a New York mutual life insurance company. MetLife, with assets of
$215.3 billion at December 31, 1998, is the second largest life insurance
company in the United States in terms of total assets. As a mutual life
insurance company, MetLife has no shareholders. However, MetLife announced in
November 1998 its intention to convert to a stock company. The "demutualization"
plan will be subject to approval of the board of Directors, the state of New
York Insurance Department and policyholders. As of May 1, 1999, MetLife does not
know the complete details of the plan or when or if it will take place.
THE SEPARATE ACCOUNT
The Security First Life Separate Account A ("Separate Account") presently funds
the Contracts described in this Prospectus and individual and group variable
annuity contracts on Forms SF135R2V, SF135R2C, SF 224FL, SF 226R1, SF 230, SF
234, SF 236FL and SF 1700. These variable annuity contracts are described in
other prospectuses. The individual combination fixed and variable annuity
contracts ("Contracts") described in this Statement of Additional Information
and related prospectuses are distinct contracts from the above described group
variable annuity contracts.
Amounts allocated to the Separate Account under the Contracts are invested in
the securities of twelve Funds: (i) the Money Market Portfolio, Equity-Income
Portfolio, Growth Portfolio and Overseas Portfolio of the Fidelity Investments
Variable Insurance Products Fund; (ii) the Asset Manager Portfolio, Contrafund
Portfolio and Index 500 Portfolio of the Fidelity Investments Variable Insurance
Products Fund II; (iii) the U.S. Government Income Series, the Equity Series,
the Bond Series and the T. Rowe Price Growth and Income Series of the Security
First Trust; and (iv) the Small Capitalization Portfolio of The Alger American
Fund. The Separate Account is divided into a number of Series of Accumulation
and Annuity Units, twelve of which are offered under the Contracts: Series FM
(Money Market Portfolio), Series FE (Equity-Income Portfolio), Series FG (Growth
Portfolio), Series FO (Overseas Portfolio), Series FA (Asset Manager Portfolio),
Series FC (Contrafund Portfolio), Series FI (Index 500 Portfolio), Series SU
(U.S. Government Income Series), Series SV (Equity Series), Series B (Bond
Series), Series G (T. Rowe Price Growth and Income Series) and Series AS (Small
Capitalization Portfolio).
NET INVESTMENT FACTOR
The Separate Account net investment factor is an index of the percentage change
(adjusted for distributions by the Fund and the deduction of the actuarial risk
fee) in the net asset value of each Fund in which the Series in invested, since
the preceding Business Day. The Separate Account net investment factor for each
Series of Accumulation Units is determined for any Business Day by dividing (i)
the net asset value of a share of the Fund which is represented by such Series
at the close of business on such day, plus the per share amount of any
distributions made by such Fund on such day by (ii) the net asset value of a
share of such Fund determined as of the close of business on the preceding
Business Day and then subtracting from the result the daily factors for
mortality and expense risks (.003836%) for each calendar day between the
preceding Business Day and the end of the current Business Day.
ANNUITY PAYMENTS
Basis of Variable Benefits
3
<PAGE> 90
The Variable Annuity benefits rates used in determining Annuity Payments under
the Contracts are based on actuarial assumptions, reflected in tables in the
Contracts, as to the expected mortality and adjusted age and the form of Annuity
selected. The mortality basis for these tables is Security First Life's Modified
Select Annuity Mortality Table, projected to the year 2000 on Projection Scale
C, with interest at 4.25% for all functions involving life contingencies and the
portion of any period certain beyond 10 years, and 3.25% for the first 10 years
of any certain period. Adjusted age in those tables means actual age to the
nearest birthday at the time the first payment is due, adjusted according to the
following table:
<TABLE>
<CAPTION>
CALENDAR YEAR OF BIRTH ADJUSTED AGE IS
---------------------- ---------------
<S> <C>
Before 1916 Actual Age
1916 - 1935 Actual Age Minus 1
1936 - 1955 Actual Age Minus 2
1956 - 1975 Actual Age Minus 3
1976 - 1995 Actual Age Minus 4
</TABLE>
Determination of Amount of Monthly Variable Annuity Payments For First Year
The Separate Account value used to establish the monthly Variable Annuity
Payment for the first year consists of the value of Accumulation Units of each
Series of the Separate Account credited to a Contract Owner on the last day of
the second calendar week before the Annuity Date. The Contracts contain tables
showing monthly payment factors and Annuity premium rates per $1,000 of Separate
Account value to be applied under Options 1 through 4.
At the beginning of the first payment year an amount is transferred from the
Separate Account to the General Account and level monthly Annuity Payments for
the year are made out of the General Account for that year. That amount to be
transferred is determined by multiplying the Annuity premium rate per $1,000 set
forth in Contract tables by the number of thousands of dollars of Separate
Account value credited to a Contract Owner. The level monthly payment for the
first payment year is then determined by multiplying the amount transferred (the
Annuity premium) by the monthly payment factor in the same table. In the event
the Contract involved has Separate Account Accumulation Units in more than one
Series, the total monthly Annuity Payment for the first year is the sum of the
monthly Annuity Payments, determined in the same manner as above, for each
Series.
At the time the first year's monthly payments are determined, a number of
Annuity Units for each Separate Account Series is also established for the
Annuitant by dividing the monthly payment derived from that Series for the first
year by the Separate Account Annuity Unit values for the Series on the last
Business Day of the second calendar week before the first Annuity Payment is
due. The number of Annuity Units remains fixed during the Annuity period unless
Annuity Units are converted to another Series.
Determination of Amount of Monthly Variable Annuity Payments for Second and
Subsequent Years
As of each anniversary of the Annuity Date, Security First Life will determine
the amount of the monthly Variable Annuity Payments for the year then beginning.
Separate determinations will be made for each Separate Account Payments for the
year then beginning. Separate determinations will be made for each Separate
Account Series in which the Annuitant has Annuity Units, with the total Annuity
Payment being the sum of the payments derived from the
4
<PAGE> 91
Series. The amount of monthly payments for any Separate Account Series for any
year after the first will be determined by multiplying the number of Annuity
Units for that Series by the Annuity Unit value for that Series for the
Valuation Period in which the first payment for the year is due. It will be
Security First Life's practice to mail Variable Annuity Payments no later than
seven days after the last day of the Valuation Period upon which they are based
or the monthly anniversary thereof.
The objective of a Variable Annuity contract is to provide level payments during
periods when the economy is relatively stable and to reflect as increased
payments only the excess of investment results flowing from inflation or an
increase in productivity. The achievement of this objective will depend in part
upon the validity of the assumption that the net investment return of the
Separate Account equals the Assumed Investment Return during periods of stable
prices. Subsequent years' payments will be smaller than, equal to or greater
than the first year's payments depending on whether the actual net investment
return for the Separate Account is smaller than equal to or greater than the
Assumed Investment Return.
Annuity Unit Value
The initial value of an Annuity Unit is $5 for each Series for the first
Valuation Period as of which the first Variable Annuity Payment from such Series
is made. The value of an Annuity Unit for each Series on any later date is
determined by multiplying the value of an Annuity Unit at the end of the
preceding Valuation Period by the "Annuity change factor" for the second
preceding Valuation Period. The Annuity change factor is an adjusted measurement
of the investment performance of the Fund since the end of the preceding
Valuation Period. The Annuity change factor is determined by dividing the value
of an Accumulation Unit at the end of the Valuation Period by the value of an
Accumulation Unit at the end of the preceding Valuation Period and multiplying
the result by a neutralization factor.
Variable Annuity Payments for each year after the first reflect variations in
the investment performance of the Separate Account above and below an Assumed
Investment Return. This assumed investment rate is included for purposes of
actuarial computations and does not relate to the actual investment performance
of the underlying Fund. Therefore, the Assumed Investment Return must be
"neutralized" in computing the Annuity change factor. For weekly Valuation
Periods and a 4.25% Assumed Investment Return, the neutralization factor is
0.9991999.
ADDITIONAL FEDERAL INCOME TAX INFORMATION
Security First Life is required to withhold federal income tax on Contract
distributions (such as Annuity Payments, lump sum distributions or partial
surrenders). However, recipients of Contract distributions are allowed to make
an election not to have federal income tax withheld. After such election is made
with respect to Annuity Payments, an Annuitant may revoke the election at any
time, and thereafter commence withholding. In such a case, Security First Life
will notify the payee at least annually of his or her right to change such
election.
The withholding rate followed by Security First Life will be applied only
against the taxable portion of Contract distributions. Federal tax will be
withheld from Annuity Payments pursuant to the recipient's withholding
certificate. If no withholding certificate is filed with Security First Life,
federal tax will be withheld from Annuity Payments on the basis that the payee
is married with three withholding exemptions. Federal tax on the taxable portion
of a partial or total surrender (i.e., non-periodic distribution) generally will
be withheld at a flat 10% rate. In the case of a plan qualified under Sections
401(a) or 403(a) of the Code, if the balance to the credit of a participant in a
plan is distributed within one taxable year to the recipient ("total
5
<PAGE> 92
distribution"), the amount of withholding will approximate the federal income
tax on a lump sum distribution. If a total distribution is made from such a plan
or a tax-sheltered annuity on account of the participant's death, the amount of
withholding will reflect the exclusion from federal income tax for
employer-provided death benefits.
Security First Life is required to withhold 20% of certain taxable amounts
constituting "eligible rollover distributions" to participants (including lump
sum distributions) in retirement plans under Code Section 401 and tax deferred
annuities under Code Section 403(b). This withholding requirement does not apply
to distributions from such plans and annuities in the form of a life and life
expectancy annuity (individual or joint), an annuity with a designated period of
10 years or more, or any distribution required by the minimum distribution
requirements of Code Section 401(a)(9). Withholding on these latter types of
distribution will continue to be made under the rules described in the prior
paragraph. A participant cannot elect out of the 20% withholding requirement.
However, if an eligible rollover distribution is rolled over into an eligible
retirement plan or IRA in the case of a 401 plan or to another eligible contract
in the case of a 403(b) plan in a direct trustee-to-trustee transfer, no
withholding will be required.
Payees are required by law to provide Security First Life (as payor) with their
correct taxpayer identification number ("TIN"). If the payee is an individual,
the TIN is the same as his or her social security number. If the payee elects
not to have federal income tax withheld on an Annuity Payment or a nonperiodic
distribution and a correct TIN has not been provided, such election is
ineffective, and such payment will be subject to withholding as noted above.
OBTAINING TAX ADVICE
It should be recognized that the federal income tax information in the
prospectus and this Statement of Additional Information is not exhaustive and is
for information purposes only. The discussions do not purport to cover all
situations involving the purchase of an annuity or the election of an option
under the Contract. Tax results may vary depending upon individual situations
and special rules may apply in certain cases. State and local tax results may
also vary. For these reasons a qualified tax adviser should be consulted.
UNDERWRITERS, DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold as a continuous offering by individuals who are
appropriately licensed as insurance agents of Security First Life for the sale
of life insurance and Variable Annuity Contracts in the state where the sale is
made. In addition, these individuals will be registered representatives of the
principal underwriter, Security First Financial, Inc., or of other
broker-dealers registered under the Securities Exchange Act of 1934 whose
registered representatives are authorized by applicable law to sell Variable
Annuity Contracts issued by Security First Life. Commissions on sales of
contracts range from 0% to 8.5%. Agents are paid from the General Account of
Security First Life. Such commissions bear no direct relationship to any of the
charges under the Contracts. It is expected that the Contracts will be sold in
49 states and the District of Columbia. No direct underwriting commissions are
paid to Security First Financial, Inc.
CALCULATION OF PERFORMANCE DATA
a. Money Market Portfolio. The yield of the Money Market Portfolio of the
Separate Account for the seven day period ended December 31, 1998 was 3.6%. This
yield was computed by determining the net change, exclusive of capital changes
and income other than investment income, in the value of a hypothetical
pre-existing account having a balance of one
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Accumulation Unit of the Series at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from account values, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and multiplying the base period return by (365/7)
with the resulting yield figure carried to a least the nearest hundredth of one
percent.
The effective yield of the Money Market Portfolio of the Separate Account for
the seven day period ended December 31, 1998 was 3.67%. This effective yield was
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one
accumulation unit of the Series at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from account values, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula:
EFFECTIVE YIELD = (BASE PERIOD RETURN + 1)/\(365/7) - 1.
b. Other Series. The average annual total return as of December 31, 1998 of the
other Series in the Separate Account are as follows:
<TABLE>
<CAPTION>
Average Annual Total Returns
----------------------------
1 year 3 years 5 years 10 years Inception
------ ------- ------- -------- ---------
to Date
-------
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio 37.58% 23.84% 20.18% N/A 19.41%
Overseas Portfolio 11.15% 11.02% 8.29% N/A 9.53%
Asset Manager Portfolio 13.46% 15.21% 10.38% N/A 11.33%
Index 500 Portfolio 26.56% 26.21% 22.15% N/A 21.30%
Bond Series 6.01% 5.03% 4.96% 6.37% 6.22%
T. Rowe Price Growth and 8.62% 17.89% 16.62% 13.36% 11.80%
Income Series
Equity-Income Portfolio 10.08% 16.25% N/A N/A 19.11%
Contrafund Portfolio 28.18% 23.46% N/A N/A 26.12%
U.S. Govt. Income Series 5.99% 4.60% N/A N/A 6.01%
Small Capitalization 13.94% 8.81% N/A N/A 15.21%
Portfolio
</TABLE>
Average annual total return was computed by finding the average annual
compounded rates of return over the 1, 3, 5, and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P(1+T)(n) = ERV
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<PAGE> 94
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5, or 10 year periods (or fractional
portion thereof).
The computation of average annual total returns does take into consideration
recurring charges and any non-recurring charges applicable to a Contract which
is surrendered in full at the end of the stated holding period.
The Bond Series was reimbursed for excess expenses from inception to July 1985,
and repaid Security First for such reimbursements from August 1985 to July 1993.
Likewise, certain expenses of U.S. Government Income Series and Index 500
Portfolio have been reimbursed by their investment advisers. Reimbursement of
expenses to a series increases average annual total returns, and repayment of
such reimbursements reduces these returns.
VOTING RIGHTS
Unless otherwise restricted by the plan under which a Contract is issued each
Owner will have the right to instruct Security First Life with respect to voting
the Fund Shares which are the assets underlying the Owner's interest in the
Separate Account, at all regular and special shareholders meetings. An
Annuitant's voting power with respect to Fund shares held by the Separate
Account declines during the time the Annuitant is receiving a Variable Annuity
based on the investment performance of the Separate Account, because amounts
attributable to the Annuitant's interest are being transferred annually to the
General Account to provide the variable payments.
SAFEKEEPING OF SECURITIES
Custody of all assets of the Separate Account are held by Security First Life.
The assets of each Separate Account Series will be kept physically segregated by
Security First Life and held separate from the assets of any other firm, person,
or corporation. Additional protection for the assets of the Separate Account is
afforded by fidelity bonds covering all of Security First Life's officers and
employees.
SERVICING AGENT
An administrative services agreement has been entered into between Security
First Life and SFG under which the latter has agreed to perform certain of the
administrative services relating to the Contracts and for the Separate Account.
SFG performs substantially all of the recordkeeping and administrative services
for the Separate Account. Security First Life has not paid fees to SFG for these
services.
INDEPENDENT AUDITORS
The consolidated financial statements and the related financial statement
schedules of Security First Life Insurance Company and subsidiary at December
31, 1998 and the financial statements and the related financial statement
schedules of Security First Life Separate Account A at December 31, 1998
included elsewhere in the registration statement have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports appearing
elsewhere in the registration statement, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. The consolidated financial statements and related financial statement
schedules of Security First Life Insurance Company and subsidiary at December
31, 1997 and 1996 and the statements of changes in net assets of Security First
Life Separate Account A for the year ended December 31, 1997 included elsewhere
in the registration statement have been audited by Ernst & Young LLP,
independent auditors, as stated in their reports appearing elsewhere in the
registration statement, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
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<PAGE> 95
LEGAL MATTERS
Legal matters concerning federal securities laws applicable to the issue and
sale of the Contracts have been passed upon by Sullivan & Worcester LLP, 1025
Connecticut Avenue, N.W., Washington D.C. 20036. Prior to January 31, 1998, such
legal matters were passed upon by Routier and Johnson, P.C., 1700 K Street,
N.W., Suite 1003, Washington, D.C. 20006.
REGULATION OF SECURITY FIRST LIFE
Security First Life is subject to the laws of the state of Delaware governing
insurance companies and to regulation by the Delaware Commissioner of Insurance.
An annual statement, in a prescribed form, is filed with the Commissioner on or
before March 1 each year covering the operations of Security First Life for the
preceding year and its financial condition on December 31 of such year. Security
First Life's books and assets are subject to review or examination by the
Commissioner or his agents at all times, and a full examination of its
operations is usually conducted by the National Association of Insurance
Commissioners at least once in every three years. Security First Life was last
examined as of December 31, 1993. While Delaware insurance law prescribes
permissible investments for Security First Life, it does not prescribe
permissible investments for the Separate Account, nor does it involve
supervision of the investment management or policy of Security First Life.
In addition, Security First Life is subject to the insurance laws and
regulations of other jurisdictions in which it is licensed to operate. State
insurance laws generally provide regulations for the licensing of insurers and
their agents, govern the financial affairs of insurers, require approval of
policy forms, impose reserve requirements and require filing of an annual
statement. Generally, the insurance departments of these other jurisdictions
apply the laws of Delaware in determining permissible investments for Security
First Life.
FINANCIAL STATEMENTS
The financial statements of Security First Life contained herein should be
considered only for the purposes the of informing investors as to its ability to
carry out the contractual obligations as depositor under the Annuity Contracts
and as custodian as described elsewhere herein and in the Prospectus. The
financial statements of the Separate Account are also included in this Statement
of Additional Information.
9
<PAGE> 96
'33 Act File No. 33-7094
STATEMENT OF
ADDITIONAL INFORMATION
SECURITY FIRST LIFE SEPARATE ACCOUNT A
----------------------------------------------------------
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS
----------------------------------------------------------
SECURITY FIRST LIFE INSURANCE COMPANY
MAY 1, 1999
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus. A copy of the prospectus, dated May 1, 1999,
may be obtained without charge by writing to Security First Life Insurance
Company, P.O. Box 92193, Los Angeles, California 90009 or by telephoning 1 (800)
284-4536.
SF 135 - R2V
<PAGE> 97
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Insurance Company 3
The Separate Account 3
Net Investment Factor 3
Annuity Payments 3
Additional Federal Income Tax Information 5
Obtaining Tax Advice 6
Underwriters, Distribution of the Contracts 6
Calculation of Performance Data 6
Voting Rights 8
Safekeeping of Securities 8
Servicing Agent 8
Independent Auditors 8
Legal Matters 8
State Regulation of Security First Life 9
Financial Statements 9
</TABLE>
2
<PAGE> 98
THE INSURANCE COMPANY
Security First Life Insurance Company ("Security First Life") is a wholly owned
subsidiary of Security First Group, Inc. ("SFG"). SFG, the parent of Security
First Life, is a wholly-owned subsidiary of Metropolitan Life Insurance Company
("MetLife"), a New York mutual life insurance company. MetLife, with assets of
$215.3 billion at December 31, 1998, is the second largest life insurance
company in the United States in terms of total assets. As a mutual life
insurance company, MetLife has no shareholders. However, MetLife announced in
November 1998 its intention to convert to a stock company. The "demutualization"
plan will be subject to approval of the board of Directors, the state of New
York Insurance Department and policyholders. As of May 1, 1999, MetLife does not
know the complete details of the plan or when or if it will take place.
THE SEPARATE ACCOUNT
The Security First Life Separate Account A ("Separate Account") presently funds
the Contracts described in this Prospectus and individual and group variable
annuity contracts on Forms SF135R2V, SF135 R2C, SF 224FL, SF 226R1, SF 230,
SF 234, SF 236FL and SF1700. These variable annuity contracts are described in
other prospectuses. The individual combination fixed and variable annuity
contracts ("Contracts") described in this Statement of Additional Information
and related prospectuses are distinct contracts from the above described group
variable annuity contracts.
Amounts allocated to the Separate Account under the Contracts are invested in
the securities of nine Funds: (i) the Barr Rosenberg Market Neutral Fund of
the Barr Rosenberg Series Trust; (ii) the International VIP Portfolio for the
Hotchkis & Wiley Variable Trust; (iii) the LEVCO Equity Fund of the LEVCO
Series Trust; (iv) the Growth Portfolio of the Navellier Variable Insurance
Series; (v) the High Yield Fund and Total Return Fund of the Offitbank Variable
Insurance Fund, Inc.; (vi) the Oppenheimer Money Fund of the Oppenheimer
Variable Account Funds; (vii) the Capital Appreciation Portfolio of the PIMCO
Variable Insurance Trust; and (viii) the Royce Total Return Portfolio
of the Royce Capital Fund.
NET INVESTMENT FACTOR
The Separate Account net investment factor is an index of the percentage change
(adjusted for distributions by the Fund and the deduction of the actuarial risk
fee) in the net asset value of each Fund in which the Series in invested, since
the preceding Business Day. The Separate Account net investment factor for each
Series of Accumulation Units is determined for any Business Day by dividing (i)
the net asset value of a share of the Fund which is represented by such Series
at the close of business on such day, plus the per share amount of any
distributions made by such Fund on such day by (ii) the net asset value of a
share of such Fund determined as of the close of business on the preceding
Business Day and then subtracting from the result the daily factors for
administration fees, mortality and expense risks (.003425%) for each calendar
day between the preceding Business Day and the end of the current Business Day.
ANNUITY PAYMENTS
Basis of Variable Benefits
The Variable Annuity benefits rates used in determining Annuity Payments under
the Contracts are based on actuarial assumptions, reflected in tables in the
Contracts, as to the expected
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<PAGE> 99
mortality and adjusted age and the form of Annuity selected. The mortality basis
for these tables is Security First Life's Modified Select Annuity Mortality
Table, projected to the year 2000 on Projection Scale C, with interest at 4.25%
for all functions involving life contingencies and the portion of any period
certain beyond 10 years, and 3.25% for the first 10 years of any certain period.
Adjusted age in those tables means actual age to the nearest birthday at the
time the first payment is due, adjusted according to the following table:
<TABLE>
<CAPTION>
CALENDAR YEAR OF BIRTH ADJUSTED AGE IS
---------------------- ---------------
<S> <C>
Before 1916 Actual Age
1916 - 1935 Actual Age Minus 1
1936 - 1955 Actual Age Minus 2
1956 - 1975 Actual Age Minus 3
1976 - 1995 Actual Age Minus 4
</TABLE>
Determination of Amount of Monthly Variable Annuity Payments For First Year
The Separate Account value used to establish the monthly Variable Annuity
Payment for the first year consists of the value of Accumulation Units of each
Series of the Separate Account credited to a Contract Owner on the last day of
the second calendar week before the Annuity Date. The Contracts contain tables
showing monthly payment factors and Annuity premium rates per $1,000 of Separate
Account value to be applied under Options 1 through 4.
At the beginning of the first payment year an amount is transferred from the
Separate Account to the General Account and level monthly Annuity Payments for
the year are made out of the General Account for that year. That amount to be
transferred is determined by multiplying the Annuity premium rate per $1,000 set
forth in Contract tables by the number of thousands of dollars of Separate
Account value credited to a Contract Owner. The level monthly payment for the
first payment year is then determined by multiplying the amount transferred (the
Annuity premium) by the monthly payment factor in the same table. In the event
the Contract involved has Separate Account Accumulation Units in more than one
Series, the total monthly Annuity Payment for the first year is the sum of the
monthly Annuity Payments, determined in the same manner as above, for each
Series.
At the time the first year's monthly payments are determined, a number of
Annuity Units for each Separate Account Series is also established for the
Annuitant by dividing the monthly payment derived from that Series for the first
year by the Separate Account Annuity Unit values for the Series on the last
Business Day of the second calendar week before the first Annuity Payment is
due. The number of Annuity Units remains fixed during the Annuity period unless
Annuity Units are converted to another Series.
Determination of Amount of Monthly Variable Annuity Payments for Second and
Subsequent Years
As of each anniversary of the Annuity Date, Security First Life will determine
the amount of the monthly Variable Annuity Payments for the year then beginning.
Separate determinations will be made for each Separate Account Payments for the
year then beginning. Separate determinations will be made for each Separate
Account Series in which the Annuitant has Annuity Units, with the total Annuity
Payment being the sum of the payments derived from the Series. The amount of
monthly payments for any Separate Account Series for any year after the first
will be determined by multiplying the number of Annuity Units for that Series by
the Annuity Unit value for that Series for the Valuation Period in which the
first payment for the
4
<PAGE> 100
year is due. It will be Security First Life's practice to mail Variable Annuity
Payments no later than seven days after the last day of the Valuation Period
upon which they are based or the monthly anniversary thereof.
The objective of a Variable Annuity contract is to provide level payments during
periods when the economy is relatively stable and to reflect as increased
payments only the excess of investment results flowing from inflation or an
increase in productivity. The achievement of this objective will depend in part
upon the validity of the assumption that the net investment return of the
Separate Account equals the Assumed Investment Return during periods of stable
prices. Subsequent years' payments will be smaller than, equal to or greater
than the first year's payments depending on whether the actual net investment
return for the Separate Account is smaller than equal to or greater than the
Assumed Investment Return.
Annuity Unit Value
The initial value of an Annuity Unit is $5 for each Series for the first
Valuation Period as of which the first Variable Annuity Payment from such Series
is made. The value of an Annuity Unit for each Series on any later date is
determined by multiplying the value of an Annuity Unit at the end of the
preceding Valuation Period by the "Annuity change factor" for the second
preceding Valuation Period. The Annuity change factor is an adjusted measurement
of the investment performance of the Fund since the end of the preceding
Valuation Period. The Annuity change factor is determined by dividing the value
of an Accumulation Unit at the end of the Valuation Period by the value of an
Accumulation Unit at the end of the preceding Valuation Period and multiplying
the result by a neutralization factor.
Variable Annuity Payments for each year after the first reflect variations in
the investment performance of the Separate Account above and below an Assumed
Investment Return. This assumed investment rate is included for purposes of
actuarial computations and does not relate to the actual investment performance
of the underlying Fund. Therefore, the Assumed Investment Return must be
"neutralized" in computing the Annuity change factor. For weekly Valuation
Periods and a 4.25% Assumed Investment Return, the neutralization factor is
0.9991999.
ADDITIONAL FEDERAL INCOME TAX INFORMATION
Security First Life is required to withhold federal income tax on Contract
distributions (such as Annuity Payments, lump sum distributions or partial
surrenders). However, recipients of Contract distributions are allowed to make
an election not to have federal income tax withheld. After such election is made
with respect to Annuity Payments, an Annuitant may revoke the election at any
time, and thereafter commence withholding. In such a case, Security First Life
will notify the payee at least annually of his or her right to change such
election.
The withholding rate followed by Security First Life will be applied only
against the taxable portion of Contract distributions. Federal tax will be
withheld from Annuity Payments pursuant to the recipient's withholding
certificate. If no withholding certificate is filed with Security First Life,
federal tax will be withheld from Annuity Payments on the basis that the payee
is married with three withholding exemptions. Federal tax on the taxable portion
of a partial or total surrender (i.e., non-periodic distribution) generally will
be withheld at a flat 10% rate. In the case of a plan qualified under Sections
401(a) or 403(a) of the Code, if the balance to the credit of a participant in a
plan is distributed within one taxable year to the recipient ("total
distribution"), the amount of withholding will approximate the federal income
tax on a lump sum distribution. If a total distribution is made from such a plan
or a tax-sheltered annuity on account of the participant's death, the amount of
withholding will reflect the exclusion from federal
5
<PAGE> 101
income tax for employer-provided death benefits.
Security First Life is required to withhold 20% of certain taxable amounts
constituting "eligible rollover distributions" to participants (including lump
sum distributions) in retirement plans under Code Section 401 and tax deferred
annuities under Code Section 403(b). This withholding requirement does not apply
to distributions from such plans and annuities in the form of a life and life
expectancy annuity (individual or joint), an annuity with a designated period of
10 years or more, or any distribution required by the minimum distribution
requirements of Code Section 401(a)(9). Withholding on these latter types of
distribution will continue to be made under the rules described in the prior
paragraph. A participant cannot elect out of the 20% withholding requirement.
However, if an eligible rollover distribution is rolled over into an eligible
retirement plan or IRA in the case of a 401 plan or to another eligible contract
in the case of a 403(b) plan in a direct trustee-to-trustee transfer, no
withholding will be required.
Payees are required by law to provide Security First Life (as payor) with their
correct taxpayer identification number ("TIN"). If the payee is an individual,
the TIN is the same as his or her social security number. If the payee elects
not to have federal income tax withheld on an Annuity Payment or a nonperiodic
distribution and a correct TIN has not been provided, such election is
ineffective, and such payment will be subject to withholding as noted above.
OBTAINING TAX ADVICE
It should be recognized that the federal income tax information in the
prospectus and this Statement of Additional Information is not exhaustive and is
for information purposes only. The discussions do not purport to cover all
situations involving the purchase of an annuity or the election of an option
under the Contract. Tax results may vary depending upon individual situations
and special rules may apply in certain cases. State and local tax results may
also vary. For these reasons a qualified tax adviser should be consulted.
UNDERWRITERS, DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold as a continuous offering by individuals who are
appropriately licensed as insurance agents of Security First Life for the sale
of life insurance and Variable Annuity Contracts in the state where the sale is
made. In addition, these individuals will be registered representatives of the
principal underwriter, Security First Financial, Inc., or of other
broker-dealers registered under the Securities Exchange Act of 1934 whose
registered representatives are authorized by applicable law to sell Variable
Annuity Contracts issued by Security First Life. Commissions on sales of
contracts range from 0% to 8.5%. Agents are paid from the General Account of
Security First Life. Such commissions bear no direct relationship to any of the
charges under the Contracts. It is expected that the Contracts will be sold in
49 states and the District of Columbia. No direct underwriting commissions are
paid to Security First Financial, Inc.
6
<PAGE> 102
VOTING RIGHTS
Unless otherwise restricted by the plan under which a Contract is issued each
Owner will have the right to instruct Security First Life with respect to voting
the Fund Shares which are the assets underlying the Owner's interest in the
Separate Account, at all regular and special shareholders meetings. An
Annuitant's voting power with respect to Fund shares held by the Separate
Account declines during the time the Annuitant is receiving a Variable Annuity
based on the investment performance of the Separate Account, because amounts
attributable to the Annuitant's interest are being transferred annually to the
General Account to provide the variable payments.
SAFEKEEPING OF SECURITIES
Custody of all assets of the Separate Account are held by Security First Life.
The assets of each Separate Account Series will be kept physically segregated by
Security First Life and held
7
<PAGE> 103
separate from the assets of any other firm, person, or corporation. Additional
protection for the assets of the Separate Account is afforded by fidelity bonds
covering all of Security First Life's officers and employees.
SERVICING AGENT
An administrative services agreement has been entered into between Security
First Life and SFG under which the latter has agreed to perform certain of the
administrative services relating to the Contracts and for the Separate Account.
SFG performs substantially all of the recordkeeping and administrative services
for the Separate Account. Security First Life has not paid fees to SFG for these
services.
INDEPENDENT AUDITORS
The consolidated financial statements and the related financial statement
schedules of Security First Life Insurance Company and subsidiary at December
31, 1998 and the financial statements and the related financial statement
schedules of Security First Life Separate Account A at December 31, 1998
included elsewhere in the registration statement have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports appearing
elsewhere in the registration statement, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. The consolidated financial statements and the related financial
statement schedules of Security First Life Insurance Company and subsidiary at
December 31, 1997 and 1996 and the statements of changes in net assets of
Security First Life Separate Account A for the year ended December 31, 1997
included elsewhere in the registration statement have been audited by Ernst &
Young LLP, independent auditors, as stated in their reports appearing elsewhere
in the registration statement, and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
LEGAL MATTERS
Legal matters concerning federal securities laws applicable to the issue and
sale of the Contracts have been passed upon by Sullivan & Worcester LLP, 1025
Connecticut Avenue, N.W., Washington D.C. 20036. Prior to January 31, 1998, such
legal matters were passed upon by Routier and Johnson, P.C., 1700 K Street,
N.W., Suite 1003, Washington, D.C. 20006.
REGULATION OF SECURITY FIRST LIFE
Security First Life is subject to the laws of the state of Delaware governing
insurance companies and to regulation by the Delaware Commissioner of Insurance.
An annual statement, in a prescribed form, is filed with the Commissioner on or
before March 1 each year covering the operations of Security First Life for the
preceding year and its financial condition on December 31 of such year. Security
First Life's books and assets are subject to review or examination by the
Commissioner or his agents at all times, and a full examination of its
operations is usually conducted by the National Association of Insurance
Commissioners at least once in every three years. Security First Life was last
examined as of December 31, 1993. While Delaware insurance law prescribes
permissible investments for Security First Life, it does not prescribe
permissible investments for the Separate Account, nor does it involve
supervision of the
8
<PAGE> 104
investment management or policy of Security First Life.
In addition, Security First Life is subject to the insurance laws and
regulations of other jurisdictions in which it is licensed to operate. State
insurance laws generally provide regulations for the licensing of insurers and
their agents, govern the financial affairs of insurers, require approval of
policy forms, impose reserve requirements and require filing of an annual
statement. Generally, the insurance departments of these other jurisdictions
apply the laws of Delaware in determining permissible investments for Security
First Life.
FINANCIAL STATEMENTS
The financial statements of Security First Life contained herein should be
considered only for the purposes the of informing investors as to its ability to
carry out the contractual obligations as depositor under the Annuity Contracts
and as custodian as described elsewhere herein and in the Prospectus. The
financial statements of the Separate Account are also included in this Statement
of Additional Information.
9
<PAGE> 105
SECURITY FIRST LIFE INSURANCE
COMPANY AND SUBSIDIARY
(A WHOLLY OWNED SUBSIDIARY OF
METROPOLITAN LIFE INSURANCE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1998 AND 1997 AND FOR
THE YEARS ENDED DECEMBER 31, 1998,
1997 AND 1996 AND INDEPENDENT
AUDITORS' REPORTS
<PAGE> 106
[DELOITTE & TOUCHE LLP LETTERHEAD]
Report of Independent Auditors
Board of Directors
Security First Life Insurance Company
We have audited the accompanying consolidated balance sheet of Security First
Life Insurance Company and subsidiary (the Company) as of December 31, 1998, and
the related consolidated statements of income, stockholder's equity, 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. The consolidated financial
statements of the Company for the years ended December 31, 1997 and 1996, were
audited by other auditors whose report, dated February 11, 1998, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security First
Life Insurance Company and subsidiary at December 31, 1998, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
February 10, 1999
<PAGE> 107
[ERNST & YOUNG, LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Security First Life Insurance Company
We have audited the accompanying consolidated balance sheets of Security First
Life Insurance Company and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of income, stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security First
Life Insurance Company and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young, LLP
February 11, 1998
<PAGE> 108
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1998 1997
---------- ----------
(In thousands)
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed maturities $2,092,183 $2,353,087
Mortgage loans 165,167
Policy loans 28,715 24,209
Short-term investments 50,520 22,385
Other investments 1,152 1,089
---------- ----------
2,337,737 2,400,770
CASH AND CASH EQUIVALENTS 36,931 11,044
ACCRUED INVESTMENT INCOME 36,486 33,730
DEFERRED POLICY ACQUISITION COSTS 104,658 96,297
OTHER ASSETS
Assets held in separate accounts 1,492,885 1,022,850
Property under capital lease 8,940 9,496
Other 1,657 1,329
---------- -----------
1,503,482 1,033,675
---------- -----------
$4,019,294 $3,575,516
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE> 109
<TABLE>
<CAPTION>
December 31,
1998 1997
----------- ----------
(In thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholder liabilities $2,202,198 $2,243,441
Liabilities related to separate accounts 1,492,885 1,022,850
Obligation under capital lease 15,130 15,443
Notes payable to parent 35,000 35,000
Federal income taxes 38,800 44,998
Other 7,499 60
---------- ----------
3,791,512 3,361,792
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Preferred stock, $1 par value
Authorized, issued and outstanding -- 200,000 shares 200 200
Common stock, $200 par value
Authorized -- 15,000 shares
Issued and outstanding -- 11,000 shares 2,200 2,200
Additional paid-in capital 48,147 48,147
Retained earnings 149,305 128,347
Accumulated other comprehensive income 27,930 34,830
---------- ----------
227,782 213,724
---------- ----------
$4,019,294 $3,575,516
========== ==========
</TABLE>
3
<PAGE> 110
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
REVENUES
Net investment income $165,749 $171,066 $164,115
Annuity product income 22,125 19,533 10,006
Net realized investment gains (losses) 25,010 2,708 (2,179)
Gain on sale of subsidiary 3,879
Other 187 709
-------- -------- --------
TOTAL REVENUES 212,884 193,494 176,530
BENEFITS AND EXPENSES
Interest credited to policyholders 112,834 112,832 106,347
Benefits in excess of policyholder liabilities 4,876 1,953 4,960
Amortization of deferred policy acquisition
costs 35,609 20,080 13,542
Operating expenses 29,116 26,434 25,721
--------- -------- --------
TOTAL BENEFITS AND EXPENSES 182,435 161,299 150,570
--------- -------- --------
INCOME BEFORE INCOME TAX EXPENSE 30,449 32,195 25,960
Income tax expense (benefit)
Current 12,584 7,580 3,596
Deferred (3,093) 3,308 5,885
-------- -------- --------
9,491 10,888 9,481
--------- -------- --------
NET INCOME $ 20,958 $ 21,307 $ 16,479
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 111
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Preferred Common Paid-in Comprehensive Retained Comprehensive Stockholder's
Stock Stock Capital Income (Loss) Earnings Income (Loss) Equity
--------- ------ ---------- ------------- -------- ------------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $200 $2,200 $48,147 $ 90,561 $ 38,972 $180,080
Comprehensive income (loss):
Net income $ 16,479 16,479 16,479
Other comprehensive income (loss):
Unrealized investment gains, net of
related adjustments and income taxes (22,023) (22,023) (22,023)
--------
$ (5,544)
---- ------ ------- ======== -------- -------- --------
Balance at December 31, 1996 200 2,200 48,147 107,040 16,949 174,536
Comprehensive income:
Net income $ 21,307 21,307 21,307
Other comprehensive income:
Unrealized investment gains, net of
related adjustments and income taxes 17,881 17,881 17,881
--------
$ 39,188
---- ------ ------- ======== -------- -------- --------
Balance at December 31, 1997 200 2,200 48,147 128,347 34,830 213,724
Comprehensive income (loss):
Net income $ 20,958 20,958 20,958
Other comprehensive income (loss):
Unrealized investment gains, net of
related adjustments and income taxes (6,900) (6,900) (6,900)
--------
$ 14,058
---- ------ ------- ======== -------- -------- --------
Balance at December 31, 1998 $200 $2,200 $48,147 $149,305 $ 27,930 $227,782
==== ====== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 112
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
---------- ---------- -----------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 20,958 $ 21,307 $ 16,479
Adjustments to reconcile net income to net cash
provided by operations:
Net realized investment losses (gains) (25,010) (2,708) 2,179
Depreciation and amortization 175 876 1,772
Accretion of discount and amortization of
premium on investments (155) 906 1,988
Gain on sale of subsidiary (3,879)
Changes in operating assets and liabilities:
Accrued investment income (2,756) (933) (2,338)
Deferred policy acquisition costs 2,814 (21,891) (24,655)
Other assets (592) 25,156 (19,008)
Other liabilities 4,888 (3,718) 9,889
---------- ---------- -----------
NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES 322 18,995 (17,573)
INVESTING ACTIVITIES
Fixed maturity securities
Purchases (675,821) (695,092) (1,065,166)
Sales and maturities 940,671 652,723 934,171
Net sale (purchase) of other investments 79 1,959 (314)
Net sale (purchase) of short-term investments (28,135) 2,222 (17,583)
Issuance (repayment) of mortgage loans (165,167) 945
Issuance of policy loans, net (4,506) (2,776) (3,580)
Purchase of equipment (440) (320)
---------- ---------- -----------
NET CASH PROVIDED BY
(USED IN) INVESTING ACTIVITIES 67,121 (40,459) (152,792)
FINANCING ACTIVITIES
Receipts credited to policyholder accounts 689,536 729,696 693,095
Amounts returned to policyholders (730,779) (708,383) (518,002)
Repayment of note payable (1,000)
Reduction of capital lease obligation (313) (277) (246)
---------- ---------- -----------
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES (41,556) 21,036 173,847
---------- ---------- -----------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 25,887 (428) 3,482
Cash and cash equivalents at beginning of year 11,044 11,472 7,990
---------- ---------- -----------
CASH AND CASH
EQUIVALENTS AT END OF YEAR $ 36,931 $ 11,044 $ 11,472
========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 113
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- Security First Life Insurance Company (Security First
Life) and subsidiary (collectively, the Company) is a wholly-owned subsidiary of
Security First Group, Inc. (SFG). Effective October 31, 1997, SFG became a
wholly-owned subsidiary of Metropolitan Life Insurance Company. Prior to that
date, SFG was a wholly-owned subsidiary of London Insurance Group, Inc. The
Company sells a broad range of fixed and variable annuity contracts.
The Company's consolidated financial statements are prepared in conformity with
generally accepted accounting principles (GAAP) which differ in some respects
from statutory accounting practices prescribed or permitted by regulatory
authorities (statutory basis) and include the accounts of its wholly-owned
subsidiary, Security First Life Insurance Company of Arizona (SFL-Arizona).
Prior to December 31, 1996, the financial statements also included the accounts
of Fidelity Standard Life Insurance Company (Fidelity Standard Life), which was
sold as of that date. (See Note 8.) All significant intercompany transactions
and accounts are eliminated in consolidation.
INVESTMENTS -- Investments are reported on the following bases:
Fixed Maturities -- at fair value, which differs from the amortized cost of
such investments. Unrealized gains and losses on these investments (net of
related adjustments for deferred policy acquisition costs and applicable
deferred income taxes) are credited or charged to stockholder's equity and,
accordingly, have no effect on net income.
For those fixed maturities which are mortgage-backed, the Company
recognizes income using a constant effective yield based on anticipated
prepayments and the estimated economic life of the securities. When actual
prepayments differ significantly from anticipated prepayments, the
effective yield is recalculated to reflect actual payments to date and
anticipated future payments. The net investment in the security is adjusted
to the amount that would have existed had the new effective yield been
applied since the acquisition of the security. Such adjustment is included
in net investment income.
The Company classifies its fixed maturities as available-for-sale. The
Company does not maintain a trading portfolio.
Mortgage loans -- at amortized cost, net of valuation allowances, if any,
which approximates fair value.
Policy loans -- at unpaid balances, which approximate fair value.
Short-term investments -- at cost, which approximates fair value.
Other investments -- at fair value.
7
<PAGE> 114
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Realized gains and losses on disposal of investments are determined on a
specific identification basis.
CASH AND CASH EQUIVALENTS -- Cash equivalents consist of investments in money
market funds. The carrying amount of cash equivalents approximates fair value.
DEFERRED POLICY ACQUISITION COSTS -- Deferred policy acquisition costs consist
of commissions and other costs of acquiring annuities that vary with and are
primarily related to the acquisition of such business. Deferred policy
acquisition costs are being amortized in proportion to the present value of
estimated future gross margins which includes the impact of realized investment
gains and losses.
POLICYHOLDER LIABILITIES -- Policyholder liabilities for two-tier annuities are
the lower tier account values. Policyholder liabilities for the Company's
single-tier fixed annuity products are the account values. The fair value of
policyholder liabilities is estimated assuming all policyholders surrender their
policies. The carrying amounts and estimated fair values are as follows (in
thousands):
<TABLE>
<CAPTION>
Carrying Amount Estimated Fair Value
--------------- --------------------
<S> <C> <C>
December 31, 1998 $2,202,198 $2,141,415
December 31, 1997 2,243,441 2,172,159
</TABLE>
NOTES PAYABLE -- Notes payable are carried at their unpaid balances which
approximate fair value because the interest rates on these notes approximate
market rates.
INCOME TAXES -- Through October 30, 1997, the Company filed consolidated federal
income tax returns with SFG. After that date, the Company's return is not
consolidated with SFG. Income taxes for all periods are provided on the basis as
if the Company filed separately.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Such differences are related principally to the deferral of policy
acquisition costs, the valuation of fixed maturities and the provision for
policyholder liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
8
<PAGE> 115
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
SEPARATE ACCOUNTS -- The assets held in separate accounts represent funds that
are separately administered by the Company pursuant to variable annuity
contracts. The liabilities related to separate accounts consist of policyholder
liabilities for variable annuities. The separate account assets and liabilities
are reported at fair value. The Company receives a fee for administrative
services provided to the separate accounts. Investment risks associated with
fair value changes are borne by the contract holders.
ANNUITY REVENUES AND BENEFITS -- Annuity product income represents fees earned
from policyholders of annuity contracts, including surrender charges,
annuitization charges and administration fees. Benefits in excess of
policyholder liabilities consists of the difference between the policyholder
account values annuitized during the period and the related policyholder
liability balances.
ESTIMATES -- Certain amounts reported in the accompanying consolidated financial
statements are based on management's best estimates and judgments. Actual
results could differ from those estimates.
NEW ACCOUNTING STANDARDS -- Effective January 1, 1998, the Company adopted
Statement of Financial Accounting Standards No. 130 Reporting Comprehensive
Income (SFAS 130). SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. Adoption of
SFAS 130 had no effect on the Company's consolidated financial condition or
results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS 133). SFAS 133 requires, among other things, that
all derivatives be recognized in the consolidated balance sheets as either
assets or liabilities and measured at fair value. The corresponding derivative
gains and losses should be reported based upon the hedge relationship, if such a
relationship exists. Changes in the fair value of derivatives that are not
designated as hedges or that do not meet the hedge accounting criteria in SFAS
133 are required to be reported in operations. The Company is required to adopt
SFAS 133 as of January 1, 2000. The Company does not anticipate any impact on
its consolidated financial condition or results of operations from the adoption
of SFAS 133.
9
<PAGE> 116
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 2 -- STATUTORY CAPITAL AND RESTRICTIONS
Security First Life is required to file annual statements with various state
insurance regulatory authorities on a statutory basis. Prior to December 31,
1998, SFL-Arizona was also subject to this requirement.
The statutory-basis capital and surplus at December 31, 1998, 1997 and 1996, and
statutory-basis net income for those years are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Net
and Surplus Income
----------- ------
<S> <C> <C>
December 31, 1998
-----------------
Security First Life Insurance Company $128,508 $ 7,662
December 31, 1997
-----------------
Security First Life Insurance Company $117,623 $12,917
Security First Life Insurance Company of Arizona 14,107 257
December 31, 1996
-----------------
Security First Life Insurance Company $107,501 $13,449
Security First Life Insurance Company of Arizona 13,823 1,187
</TABLE>
Security First Life is incorporated and domiciled in Delaware. The payment of
dividends is subject to statutory limitations which are based on statutory-basis
net income and surplus levels. At December 31, 1998, the maximum amount of
dividends Security First Life could pay SFG without prior approval from state
insurance regulatory authorities is $12,612,000.
NOTE 3 -- INVESTMENTS
Unrealized investment gains reported in the accompanying financial statements
are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1998 1997
-------- --------
<S> <C> <C>
Unrealized investment gains $ 84,001 $105,251
Less: Adjustment for deferred policy
acquisition costs 41,491 52,500
Deferred income taxes 14,580 17,921
-------- --------
Net unrealized investment gains $ 27,930 $ 34,830
======== ========
</TABLE>
10
<PAGE> 117
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
Net realized investment gains (losses) reported in the accompanying financial
statements are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities
Gross gains $ 30,982 $ 8,338 $ 8,923
Gross losses (6,046) (5,691) (8,075)
-------- -------- --------
24,936 2,647 848
Other investments
Gross gains 133 197
Gross losses (59) (136) (3,027)
-------- -------- --------
74 61 (3,027)
-------- -------- --------
Net realized investment gains (losses) $ 25,010 $ 2,708 $ (2,179)
======== ======== ========
</TABLE>
Proceeds from sales of fixed maturities are $940,671,000, $648,338,000 and
$911,529,000 in 1998, 1997 and 1996, respectively.
The amortized cost and fair value of fixed maturities as of December 31, 1998
and 1997 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1998
- -----------------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 68,487 $ 4,499 $ (330) $ 72,656
Debt securities issued by foreign
governments 34,740 1,436 (1,188) 34,988
Corporate securities 1,266,178 68,987 (11,737) 1,323,428
Mortgage-backed securities 638,873 23,056 (818) 661,111
---------- ------- -------- ----------
$2,008,278 $ 97,978 $(14,073) $2,092,183
========== ======== ======== ==========
December 31, 1997
- -----------------
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 93,546 $ 9,275 $ (22) $ 102,799
Debt securities issued by foreign
governments 31,110 2,997 34,107
Corporate securities 1,297,937 67,350 (564) 1,364,723
Mortgage-backed securities 825,284 27,484 (1,310) 851,458
---------- -------- -------- ----------
$2,247,877 $107,106 $ (1,896) $2,353,087
========== ======== ======== ==========
</TABLE>
11
<PAGE> 118
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
The amortized cost and fair value of fixed maturities by contractual maturity at
December 31, 1998, are summarized below. Actual maturities will differ from
contractual maturities because certain borrowers have the right to call or
prepay obligations.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- -------
(In thousands)
<S> <C> <C>
Due in one year or less $ 32,695 $ 33,230
Due after one year through five years 378,576 390,934
Due after five years through ten years 559,646 576,041
Due after ten years 398,488 430,867
Mortgage-backed securities 638,873 661,111
---------- ----------
$2,008,278 $2,092,183
========== ==========
</TABLE>
The Company has recorded valuation reserves for impairment in the value of
investments of $5,000,000 at both December 31, 1998 and 1997.
Concentrations of credit risk with respect to fixed maturities are limited due
to the large number of issues owned and their dispersion across many different
industries and geographic areas. Accordingly, at December 31, 1998, the Company
had no significant concentration of credit risk.
The fair values for fixed maturities are primarily based on values obtained from
independent pricing services.
Mortgage loans are collateralized by properties located throughout the United
States. At December 31, 1998, approximately 17% and 16% of the mortgages were
collateralized by properties located in New York and California, respectively.
All of the mortgage loans at December 31, 1998, are in good standing, and the
Company was not holding any valuation allowances related to such loans. Mortgage
loans outstanding at December 31, 1998, are summarized as follows (in
thousands):
<TABLE>
<S> <C> <C>
Commercial $145,525 88%
Agricultural 19,642 12%
-------- ---
$165,167 100%
======== ===
</TABLE>
The carrying amount of policy loans approximates fair value because the interest
rates on these loans approximate market rates.
12
<PAGE> 119
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
On February 5, 1998, the Company entered into an interest-rate swap agreement
with a large broker/dealer for the purpose of minimizing exposures to
fluctuations in interest rates in its policyholder liabilities. An interest-rate
swap is an agreement in which two parties agree to exchange, at specific
intervals, interest payment streams calculated on an agreed-upon notional
principal amount with at least one stream based on a specific floating-rate
index. Under the interest-rate swap agreement, the broker/dealer agrees to pay
the Company, on a quarterly basis, an amount by which the 30-day Treasury
Constant Maturity Rate exceeds the interest-rate cap of 7.9% applied to the
notional amount of $250,000,000. The 30-day Treasury Constant Maturity rate was
4.54% as of December 31, 1998; hence, the fair value of the interest-rate swap
as of December 31, 1998 approximated zero. The interest-rate swap agreement
expires February 9, 2001.
Any income or expense from the interest-rate swap is recorded on an accrual
basis as an adjustment to the yield of the related interest-bearing liabilities
in the periods covered by the contract.
The Company is exposed to a potential loss in the event of non-performance by
the broker/dealer, although such non-performance is not anticipated.
The Company places its temporary cash investments with high-credit quality
financial institutions and, by corporate policy, limits the amount of credit
exposure to any one financial institution.
At December 31, 1998, investment securities having an amortized cost of
$6,037,000 were on deposit with various states in accordance with state
insurance department requirements.
Investment income by major category of investment is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Fixed maturities $ 162,836 $ 173,015 $ 165,997
Mortgage loans 3,288
Policy loans 1,294 1,325 1,283
Short-term investments 3,795 1,897 1,718
Other investments 443 858 553
Cash and cash equivalents 269 486
--------- --------- ---------
171,656 177,364 170,037
Investment expenses (5,907) (6,298) (5,922)
--------- --------- ---------
Net investment income $ 165,749 $ 171,066 $ 164,115
========= ========= =========
</TABLE>
The Company has no significant amounts of non-income producing investments.
13
<PAGE> 120
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 4 -- NOTES PAYABLE
Notes payable consist of the following as of December 31, 1998 and 1997 (in
thousands):
<TABLE>
<S> <C>
5% Surplus note due to SFG, interest payable monthly,
principal payable upon regulatory approval $25,000
8% Surplus note due to SFG, interest payable monthly,
principal payable upon regulatory approval 10,000
-------
$35,000
=======
</TABLE>
There are no principal payments due on the notes payable during the next five
years.
Interest paid by the Company totaled $2,150,000 in 1998, $2,083,000 in 1997 and
$2,133,000 in 1996.
NOTE 5 -- INCOME TAXES
The liability for federal income taxes includes deferred taxes of $36,772,000
and $43,154,000 at December 31, 1998 and 1997, respectively. Significant
components of these deferred taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $ 48,952 $ 30,459
Fixed maturities 16,788 37,922
Other assets 3,441 3,532
-------- --------
Total deferred tax liabilities 69,181 71,913
Deferred tax assets:
Policyholder liabilities 10,095 11,787
Liabilities for separate accounts 16,778 11,445
Other liabilities 5,296 5,251
Other, net 240 276
-------- --------
Total deferred tax assets 32,409 28,759
-------- --------
Net deferred tax liabilities $ 36,772 $ 43,154
======== ========
</TABLE>
Income taxes paid by the Company were $12,401,000 in 1998, $6,480,000 in 1997
and $1,972,000 in 1996.
14
<PAGE> 121
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 5 -- INCOME TAXES (continued)
The following is a reconciliation of the federal income tax at the statutory
rate of 35% with the income tax provision as shown in the accompanying financial
statements (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Federal income tax at 35% $ 10,657 $ 11,268
Dividends received deduction (905) (356)
True up of prior year taxes (261) 298
Other (322)
-------- --------
Provision for income tax expense $ 9,491 $ 10,888
======== ========
</TABLE>
NOTE 6 -- CAPITAL LEASE
Security First Life has a lease for office space that expires in 2014. This
lease is treated as a capital lease for financial reporting purposes.
The Company subleases space on an annual basis to SFG to use as its home office.
Related income offset against the lease costs was $1,660,000, $1,650,000 and
$1,656,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Future payments under the lease are as follows (in thousands):
<TABLE>
<S> <C>
1999 $ 2,166
2000 2,166
2001 2,166
2002 2,166
2003 2,166
Thereafter 22,553
--------
Total minimum rental payments 33,383
Amount representing interest 18,253
--------
Present value of minimum rental payments $ 15,130
========
</TABLE>
The property under capital lease is net of accumulated amortization of
$8,481,000 in 1998 and $7,901,000 in 1997. Lease amortization expense was
$580,000 in 1998, 1997 and 1996.
15
<PAGE> 122
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 7 -- RELATED PARTY TRANSACTIONS
The Company has marketing and administrative agreements with SFG under which SFG
provides all of the Company's marketing and policyholder administration
services. Amounts incurred under these agreements were $51,658,000, $58,199,000,
and $52,102,000 for 1998, 1997 and 1996, respectively. A substantial portion of
these amounts are commissions and are deferred as policy acquisition costs.
The Company has management agreements with SFG under which the latter provides
certain personnel, administrative services and office space. Amounts incurred
under these agreements were $3,883,000 in 1998 and 1997 and $4,308,000 in 1996.
The Company has investment advisory agreements with Security First Investment
Management Corporation, a subsidiary of SFG. Fees of $5,772,000, $5,711,000 and
$5,360,000 were paid in 1998, 1997 and 1996, respectively, pursuant to these
agreements.
NOTE 8 -- OTHER SIGNIFICANT EVENTS
Effective December 31, 1996, the Company sold all of the common stock of its
former subsidiary, Fidelity Standard Life. As a result of this transaction, the
Company recognized a gain in 1996 of $3,879,000.
Prior to the sale of Fidelity Standard Life, the Company assumed all of the
policyholder liabilities through several reinsurance agreements. No gain or loss
was recognized on this transaction.
NOTE 9 -- IMPACT OF YEAR 2000 (unaudited)
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 issue and has
developed and implemented a plan to resolve the issue. The Company currently
believes that, with modifications to existing software and converting to new
software and hardware, the Year 2000 issue will not pose significant operational
problems for the Company's computer systems. However, if such modifications and
conversions are not completed on a timely basis, the Year 2000 issue may have a
material impact on the operations of the Company. Furthermore, even if the
Company completes such modifications and conversions on a timely basis, there
can be no assurance that the failure by vendors or other third parties to solve
the Year 2000 issue will not have a material impact on the operations of the
Company.
16
<PAGE> 123
SECURITY FIRST LIFE SEPARATE
ACCOUNT A
STATEMENTS OF ADDITIONAL INFORMATION AS OF
DECEMBER 31, 1998 AND FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 AND
INDEPENDENT AUDITORS' REPORTS
<PAGE> 124
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Security First Life Insurance Company
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Security First Life Separate
Account A ("Separate Account") Series B, G, T, P, I, FA, FG, FI, FO, FM, SU,
SV, AS, SI, FC, FE, NG, NP and JW, as of December 31, 1998 and the related
statements of operations for the year then ended (as to Series NG, NP and JW,
for the period from commencement of operations through December 31, 1998) and
statements of changes in net assets for the period then ended. These financial
statements are the responsibility of the Separate Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements of the Separate Account Series for the
year ended December 31, 1997 were audited by other auditors whose report, dated
April 17, 1998, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective Series
constituting the Security First Life Separate Account A as of December 31, 1998
and the results of their operations for the year then ended (as to Series NG,
NP and JW, for the period from commencement of operations through December 31,
1998) and the changes in their net assets for the year or period then ended, in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
April 15, 1999
<PAGE> 125
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
To the Board of Directors
Security First Life Insurance Company
and Contract Owners
Security First Life Separate Account A
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Security First Life Separate Account A
(comprised of Series B, G, T, P, I, FA, FG, FI, FO, FM, SU, SV, AS, SI, FC and
FE) as of December 31, 1997, and the related statements of operations for the
year then ended and changes in net assets for each of the two years in the
period then ended. These financial statements are the responsibility of the
Separate Account's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence
with the respective mutual fund managers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Security First Life Separate
Account A (comprised of the above referenced Series) at December 31, 1997, the
results of their operations for the year then ended, and the changes in their
net assets for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG, LLP
Los Angeles, California
April 17, 1998
<PAGE> 126
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments
Security First Trust Bond Series (5,767,337
shares at net asset value of $4.03 per share;
cost $23,040,859) $ 23,261,494
Security First Trust T. Rowe Price Growth and
Income Series (19,611,017 shares at net asset
value of $15.81 per share; cost $277,296,637) $310,102,373
T. Rowe Price Growth Stock Fund, Inc.
(3,271,789 shares at net asset value of $32.07
per share; cost $84,761,937) $104,926,269
T. Rowe Price Prime Reserve Fund, Inc.
(806,242 shares at net asset value of $1.00
per share; cost $806,242) $ 806,242
T. Rowe Price International Stock Fund, Inc.
(1,173,570 shares at net asset value of $14.99
per share; cost $16,094,210) $ 17,591,819
Receivable from Security First Life Insurance
Company for purchases 46,757 252,199 58,700 20,238
Other assets 30,982 13,753 753
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 23,308,251 310,385,554 104,998,722 806,242 17,612,810
</TABLE>
1
<PAGE> 127
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
LIABILITIES Series B Series G Series T Series P Series I
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Payable to Security First Life Insurance
Company for mortality and expense risk $ 23,598 $ 301,526 $ 75,787 $ 663 $ 12,917
Payable to Security First Life Insurance
Company for redemptions 4,384 101,296 7,589 127 65
Payable to Mutual Funds 46,136 192,547
------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES 74,118 595,369 83,376 790 12,982
NET ASSETS
Cost to Investors
Series B Accumulation Units 23,013,498
Series G Accumulation Units 276,984,449
Series T Accumulation Units 84,751,014
Series P Accumulation Units 805,452
Series I Accumulation Units 16,102,219
Accumulated undistributed income
Net unrealized appreciation 220,635 32,805,736 20,164,332 1,497,609
------------ ------------ ------------ ------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF CAPITAL $ 23,234,133 $309,790,185 $104,915,346 $ 805,452 $ 17,599,828
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 128
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 1,169,497 $ 23,342,098 $ 12,864,453 $ 52,915 $ 647,378
Other investment income (expense) (1,116) (416,478) 53,270 426 7,771
------------ ------------ ------------ ------------ ------------
1,168,381 22,925,620 12,917,723 53,341 655,149
EXPENSES
Charges for mortality and expense risk 209,011 3,191,451 808,538 9,455 150,790
------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME 959,370 19,734,169 12,109,185 43,886 504,359
INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) (19,304) 7,584,807 3,061,047 843,474
Change in unrealized appreciation
(depreciation) on investments
during the year 84,731 (4,879,643) 6,257,690 990,607
------------ ------------ ------------ ------------
NET INVESTMENT GAINS 65,427 2,705,164 9,318,737 1,834,081
------------ ------------ ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 1,024,797 $ 22,439,333 $ 21,427,922 $ 43,886 $ 2,338,440
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 129
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income $ 959,370 $ 19,734,169 $ 12,109,185 $ 43,886 $ 504,359
Realized investment gains (losses) (19,304) 7,584,807 3,061,047 843,474
Change in unrealized appreciation (depreciation)
on investments during the year 84,731 (4,879,643) 6,257,690 990,607
------------- ------------- ------------- ------------- -------------
Increase in net assets resulting from
operations 1,024,797 22,439,333 21,427,922 43,886 2,338,440
Increase (decrease) in net assets resulting from
capital unit transactions 9,496,806 51,531,944 4,047,047 (394,702) (664,319)
------------- ------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 10,521,603 73,971,277 25,474,969 (350,816) 1,674,121
NET ASSETS AT BEGINNING OF YEAR 12,712,530 235,818,908 79,440,377 1,156,268 15,925,707
------------- ------------- ------------- ------------- -------------
NET ASSETS AT END OF YEAR $ 23,234,133 $ 309,790,185 $ 104,915,346 $ 805,452 $ 17,599,828
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 130
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income $ 532,821 $ 16,043,895 $ 9,157,584 $ 101,066 $ 708,759
Realized investment gains (losses) (124,988) 8,889,548 1,815,089 268,968
Change in unrealized appreciation (depreciation)
on investments during the year 410,594 16,749,933 4,506,669 (809,176)
------------ ------------ ------------ ------------ ------------
Increase in net assets resulting from
operations 818,427 41,683,376 15,479,342 101,066 168,551
Increase (decrease) in net assets resulting from
capital unit transactions 2,280,710 56,560,484 5,877,267 (1,463,226) 2,309,033
------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,099,137 98,243,860 21,356,609 (1,362,160) 2,477,584
NET ASSETS AT BEGINNING OF YEAR 9,613,393 137,575,048 58,083,768 2,518,428 13,448,123
------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF YEAR $ 12,712,530 $235,818,908 $ 79,440,377 $ 1,156,268 $ 15,925,707
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 131
SECURITY FIRST LIFE SEPARATE ACCOUNT A
SCHEDULES OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Carrying
Value Unrealized Cost
Series Name of Issue Shares (Note A) Appreciation (Note B)
- --------- -------------------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
B Security First Trust Bond Series -- capital shares 5,767,337 $ 23,261,494 $ 220,635 $ 23,040,859
G Security First Trust T. Rowe Price Growth and Income
Series -- capital shares 19,611,017 $310,102,373 $ 32,805,736 $277,296,637
T T. Rowe Price Growth Stock Fund, Inc. -- capital shares 3,271,789 $104,926,269 $ 20,164,332 $ 84,761,937
P T. Rowe Price Prime Reserve Fund, Inc. -- capital shares 806,242 $ 806,242 $ 806,242
I T. Rowe Price International Stock Fund, Inc. -- capital shares 1,173,570 $ 17,591,819 $ 1,497,609 $ 16,094,210
</TABLE>
Note A The carrying value of the investments is the reported net asset value
of the investment company's capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 132
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS Series FA Series FG Series FI Series FO Series FM
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investments
Fidelity Investments - VIP Asset Manager
Portfolio (10,119,630 shares at net
asset value of $18.16 per share;
cost $162,758,546) $183,772,485
Fidelity Investments - VIP Growth
Portfolio (6,292,589 shares at net
asset value of $44.87 per share;
cost $204,064,249) $282,348,490
Fidelity Investments - VIP Index 500
Portfolio (1,354,520 shares at net
asset value of $141.25 per share;
cost $145,916,900) $191,325,881
Fidelity Investments - VIP Overseas
Portfolio (889,127 shares at net
asset value of $20.05 per share;
cost $16,116,130) $ 17,826,989
Fidelity Investments - VIP Money Market
Portfolio (29,025,420 shares at net
asset value of $1.00 per share;
cost $29,025,420) $ 29,025,420
Receivable from Security First Life
Insurance Company for purchases 189,667 148,473 290,858 2,158 584,391
Other assets 12,815 46,465 40,749 6,628
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 183,974,967 282,543,428 191,657,488 17,835,775 29,609,811
</TABLE>
7
<PAGE> 133
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES (continued)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
LIABILITIES Series FA Series FG Series FI Series FO Series FM
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Payable to Security First Life Insurance
Company for mortality and expense risk $ 196,372 $ 286,875 $ 197,149 $ 18,650 $ 30,047
Payable to Security First Life Insurance
Company for redemptions 57,288 109,636 46,951 1,590 1,850
Payable to Mutual Funds 157,020 73,417 273,872 5,845 546,432
Other liabilities 41,724
------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES 410,680 469,928 517,972 26,085 620,053
NET ASSETS
Cost to Investors
Series FA Accumulation Units 162,550,348
Series FG Accumulation Units 203,789,259
Series FI Accumulation Units 145,730,535
Series FO Accumulation Units 16,098,831
Series FM Accumulation Units 28,989,758
Accumulated undistributed income
Net unrealized appreciation 21,013,939 78,284,241 45,408,981 1,710,859
------------ ------------ ------------ ------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF CAPITAL $183,564,287 $282,073,500 $191,139,516 $ 17,809,690 $ 28,989,758
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 134
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $17,362,918 $25,472,345 $ 3,945,680 $ 1,194,757 $ 1,313,600
Other investment income (expense) 71,466 155,214 175,112 8,947 (3,615)
----------- ----------- ----------- ----------- -----------
17,434,384 25,627,559 4,120,792 1,203,704 1,309,985
EXPENSES
Charges for mortality and expense risk 2,043,882 2,781,547 1,775,438 212,799 318,055
----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME 15,390,502 22,846,012 2,345,354 990,905 991,930
INVESTMENT GAINS
Realized investment gains 1,136,760 3,658,231 1,872,638 274,752
Change in unrealized appreciation on
investments during the year 3,869,393 47,453,828 29,570,696 487,659
----------- ----------- ----------- -----------
NET INVESTMENT GAINS 5,006,153 51,112,059 31,443,334 762,411
----------- ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $20,396,655 $73,958,071 $33,788,688 $ 1,753,316 $ 991,930
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 135
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income $ 15,390,502 $ 22,846,012 $ 2,345,354 $ 990,905 $ 991,930
Realized investment gains 1,136,760 3,658,231 1,872,638 274,752
Change in unrealized appreciation on
investments during the year 3,869,393 47,453,828 29,570,696 487,659
------------ ------------ ------------ ------------ ------------
Increase in net assets resulting from
operations 20,396,655 73,958,071 33,788,688 1,753,316 991,930
Increase in net assets resulting from capital
unit transactions 29,077,086 27,405,819 63,395,211 819,382 5,318,459
------------ ------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS 49,473,741 101,363,890 97,183,899 2,572,698 6,310,389
NET ASSETS AT BEGINNING OF YEAR 134,090,546 180,709,610 93,955,617 15,236,992 22,679,369
------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF YEAR $183,564,287 $282,073,500 $191,139,516 $ 17,809,690 $ 28,989,758
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 136
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operations
Net investment income $ 9,969,347 $ 2,575,955 $ 634,702 $ 794,340 $ 883,272
Realized investment gains 1,354,839 6,816,420 2,142,914 183,119
Change in unrealized appreciation on
investments during the year 8,000,602 19,046,439 12,199,875 153,795
------------ ------------ ------------ ------------ ------------
Increase in net assets resulting from
operations 19,324,788 28,438,814 14,977,491 1,131,254 883,272
Increase in net assets resulting from capital
unit transactions 23,348,022 39,688,474 47,598,152 3,587,791 4,463,628
------------ ------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS 42,672,810 68,127,288 62,575,643 4,719,045 5,346,900
NET ASSETS AT BEGINNING OF YEAR 91,417,736 112,582,322 31,379,974 10,517,947 17,332,469
------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF YEAR $134,090,546 $180,709,610 $ 93,955,617 $ 15,236,992 $ 22,679,369
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 137
SECURITY FIRST LIFE SEPARATE ACCOUNT A
SCHEDULES OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Carrying
Value Unrealized Cost
Series Name of Issue Shares (Note A) Appreciation (Note B)
-------- ------------------------------------------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
FA Fidelity Investments - VIP Asset Manager Portfolio --
capital shares 10,119,630 $183,772,485 $ 21,013,939 $162,758,546
FG Fidelity Investments - VIP Growth Portfolio -- capital
shares 6,292,589 $282,348,490 $ 78,284,241 $204,064,249
FI Fidelity Investments - VIP Index 500 Portfolio --
capital shares 1,354,520 $191,325,881 $ 45,408,981 $145,916,900
FO Fidelity Investments - VIP Overseas Portfolio --
capital shares 889,127 $ 17,826,989 $ 1,710,859 $ 16,116,130
FM Fidelity Investments - VIP Money Market Portfolio --
capital shares 29,025,420 $ 29,025,420 $ 29,025,420
</TABLE>
Note A The carrying value of the investments is the reported net asset value
of the investment company's capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 138
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS Series SU Series SV Series AS Series SI Series FC Series FE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investments
Security First Trust U.S.
Government Income Series
(6,505,978 shares at net
asset value of $5.25 per
share; cost $34,149,621) $ 34,158,509
Security First Trust Equity
Series (7,194,788 shares
at net asset value of
$7.89 per share; cost
$49,760,028) $ 56,749,430
Alger American Small
Capitalization Portfolio
(1,283,189 shares at net
asset value of $43.97 per
share; cost $51,365,937) $ 56,421,683
Scudder International
Portfolio (648,919 shares
at net asset value of
$14.56 per share; cost
$8,965,425) $ 9,448,260
Fidelity Investments - VIP
Contrafund Portfolio
(5,690,506 shares at net
asset value of $24.44 per
share; cost $103,402,077) $139,075,960
Fidelity Investments - VIP
Equity-Income Portfolio
(1,170,008 shares at net
asset value of $25.42 per
share; cost $26,278,976) $ 29,741,593
Receivable from Security First
Life Insurance Company for
purchases 2,943 8,888 51,729 14,090 171,247 3,550
Receivable from Mutual Funds 3,888
Other assets 122 8,109 12,411 63,032 2,723
------------ ------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 34,161,574 56,766,427 56,485,823 9,462,350 139,314,127 29,747,866
</TABLE>
13
<PAGE> 139
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES (continued)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
LIABILITIES Series SU Series SV Series AS Series SI Series FC Series FE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Payable to Security First Life
Insurance Company for
mortality and expense risk $ 36,724 $ 57,865 $ 59,975 $ 10,596 $ 148,811 $ 34,105
Payable to Security First Life
Insurance Company for
redemptions 685 4,341 17,513 2,836 26,477 2,256
Payable to Mutual Funds 4,124 16,996 33,100 11,500 179,881 4,953
Other liabilities 4,234 7,205 187
------------ ------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES 41,533 83,436 117,793 25,119 355,169 41,314
NET ASSETS
Cost to Investors
Series SU Accumulation Units 34,111,153
Series SV Accumulation Units 49,693,589
Series AS Accumulation Units 51,312,284
Series SI Accumulation Units 8,954,396
Series FC Accumulation Units 103,285,075
Series FE Accumulation Units 26,243,935
Accumulated undistributed income
Net unrealized appreciation 8,888 6,989,402 5,055,746 482,835 35,673,883 3,462,617
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS APPLICABLE TO
OUTSTANDING UNITS OF CAPITAL $ 34,120,041 $ 56,682,991 $ 56,368,030 $ 9,437,231 $138,958,958 $ 29,706,552
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 140
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 2,444,286 $ 9,117,291 $ 6,140,966 $ 913,895 $ 4,586,516 $ 1,164,772
Other investment income (expense) (3,709) (2,458) 37,798 (2,336) 123,830 15,662
------------ ------------ ------------ ------------ ------------ ------------
2,440,577 9,114,833 6,178,764 911,559 4,710,346 1,180,434
EXPENSES
Charges for mortality and expense risk 434,116 665,007 636,807 109,888 1,380,593 336,349
------------ ------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME 2,006,461 8,449,826 5,541,957 801,671 3,329,753 844,085
INVESTMENT GAINS (LOSSES)
Realized investment gains 470,994 2,605,216 102,996 64,102 366,723 138,866
Change in unrealized appreciation
(depreciation) on investments during
the year (431,106) (368,196) 1,125,962 276,761 23,673,455 1,165,945
------------ ------------ ------------ ------------ ------------ ------------
NET INVESTMENT GAINS 39,888 2,237,020 1,228,958 340,863 24,040,178 1,304,811
------------ ------------ ------------ ------------ ------------ ------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 2,046,349 $ 10,686,846 $ 6,770,915 $ 1,142,534 $ 27,369,931 $ 2,148,896
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 141
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 2,006,461 $ 8,449,826 $ 5,541,957 $ 801,671 $ 3,329,753 $ 844,085
Realized investment gains 470,994 2,605,216 102,996 64,102 366,723 138,866
Change in unrealized appreciation
(depreciation) on
investments during the year (431,106) (368,196) 1,125,962 276,761 23,673,455 1,165,945
------------ ------------ ------------ ------------ ------------ ------------
Increase in net assets
resulting from operations 2,046,349 10,686,846 6,770,915 1,142,534 27,369,931 2,148,896
Increase (decrease) in net
assets resulting from capital
unit transactions (2,489,172) (7,205,804) 8,370,663 1,953,836 36,638,201 10,085,157
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS (442,823) 3,481,042 15,141,578 3,096,370 64,008,132 12,234,053
NET ASSETS AT BEGINNING OF YEAR 34,562,864 53,201,949 41,226,452 6,340,861 74,950,826 17,472,499
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF YEAR $ 34,120,041 $ 56,682,991 $ 56,368,030 $ 9,437,231 $138,958,958 $ 29,706,552
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 142
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 1,169,968 $ 4,098,447 $ 702,124 $ 10,050 $ 448,558 $ 542,116
Realized investment gains (losses) 68,543 866,363 (1,107,270) 73,324 1,353,917 80,187
Change in unrealized appreciation on
investments during the year 346,517 4,977,323 3,933,637 74,470 8,445,340 1,848,038
------------ ------------ ------------ ------------ ------------ ------------
Increase in net assets
resulting from operations 1,585,028 9,942,133 3,528,491 157,844 10,247,815 2,470,341
Increase in net assets
resulting from capital unit
transactions 14,141,455 14,984,359 17,346,956 4,143,499 34,652,276 9,173,378
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS 15,726,483 24,926,492 20,875,447 4,301,343 44,900,091 11,643,719
NET ASSETS AT BEGINNING OF YEAR 18,836,381 28,275,457 20,351,005 2,039,518 30,050,735 5,828,780
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF YEAR $ 34,562,864 $ 53,201,949 $ 41,226,452 $ 6,340,861 $ 74,950,826 $ 17,472,499
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 143
SECURITY FIRST LIFE SEPARATE ACCOUNT A
SCHEDULES OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
Carrying
Value Unrealized Cost
Series Name of Issue Shares (Note A) Appreciation (Note B)
------ ------------- ------ -------- ------------ --------
<S> <C> <C> <C> <C> <C>
SU Security First Trust U.S.
Government Income Series --
capital shares 6,505,978 $ 34,158,509 $ 8,888 $ 34,149,621
SV Security First Trust
Equity Series -- capital
shares 7,194,788 $ 56,749,430 $ 6,989,402 $ 49,760,028
AS Alger American Small
Capitalization Portfolio --
capital shares 1,283,189 $ 56,421,683 $ 5,055,746 $ 51,365,937
SI Scudder International
Portfolio -- capital shares 648,919 $ 9,448,260 $ 482,835 $ 8,965,425
FC Fidelity Investments - VIP
Contrafund Portfolio --
capital shares 5,690,506 $ 139,075,960 $35,673,883 $ 103,402,077
FE Fidelity Investments - VIP
Equity-Income Portfolio --
capital shares 1,170,008 $ 29,741,593 $ 3,462,617 $ 26,278,976
</TABLE>
Note A The carrying value of the investments is the reported net asset
value of the investment company's capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 144
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
Series NG(*) Series NP(*) Series JW(*)
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments
Neuberger Berman Genesis Trust
(54,496 shares at net asset value of
$20.34 per share; cost $1,183,080) $1,108,451
Neuberger Berman Partners Trust
(79,123 shares at net asset value of
$18.07 per share; cost $1,470,122) $1,429,758
Janus Aspen Worldwide Growth Portfolio
(57,337 shares at net asset value of
$29.09 per share; cost $1,591,615) $1,667,938
Receivable from Security First Life Insurance
Company for purchases 27,040 5,886 6,744
Other assets 920 703 408
--------- --------- ---------
TOTAL ASSETS 1,136,411 1,436,347 1,675,090
</TABLE>
(*)Series NG and NP commenced operations on January 9, 1998; Series JW commenced
operations on January 8, 1998.
19
<PAGE> 145
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES (continued)
December 31, 1998
<TABLE>
<CAPTION>
Series NG(*) Series NP(*) Series JW(*)
------------ ------------ ------------
<S> <C> <C> <C>
LIABILITIES
Payable to Security First Life
Insurance Company
for mortality and
expense risk $ 790 $ 1,053 $ 1,188
Payable to Mutual Funds 6,744
----------- ----------- -----------
TOTAL LIABILITIES 790 1,053 7,932
NET ASSETS
Cost to Investors
Series NG Accumulation Units 1,210,250
Series NP Accumulation Units 1,475,658
Series JW Accumulation Units 1,590,835
Accumulated undistributed income
Net unrealized appreciation (depreciation) (74,629) (40,364) 76,323
----------- ----------- -----------
NET ASSETS APPLICABLE TO
OUTSTANDING UNITS OF CAPITAL $ 1,135,621 $ 1,435,294 $ 1,667,158
=========== =========== ===========
</TABLE>
(*)Series NG and NP commenced operations on January 9, 1998; Series JW commenced
operations January 8, 1998.
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 146
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
Period Ended December 31, 1998
<TABLE>
<CAPTION>
Series NG(*) Series NP(*) Series JW(*)
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 17,139 $ 35,353 $ 34,838
Other investment income 4,673 8,060 56
--------- --------- ---------
21,812 43,413 34,894
EXPENSES
Charges for mortality and expense risk 7,275 8,957 7,846
--------- --------- ---------
NET INVESTMENT INCOME 14,537 34,456 27,048
INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) (7,460) 9,874 (908)
Change in unrealized appreciation (depreciation)
on investments during the period (74,629) (40,364) 76,323
--------- --------- ---------
NET INVESTMENT GAINS (LOSSES) (82,089) (30,490) 75,415
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (67,552) $ 3,966 $ 102,463
========= ========= =========
</TABLE>
(*)Series NG and NP commenced operations on January 9, 1998; Series JW commenced
operations on January 8, 1998.
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 147
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
Period Ended December 31, 1998
<TABLE>
<CAPTION>
Series NG(*) Series NP(*) Series JW(*)
------------ ------------ ------------
<S> <C> <C> <C>
Operations
Net investment income $ 14,537 $ 34,456 $ 27,048
Realized investment gains (losses) (7,460) 9,874 (908)
Change in unrealized appreciation (depreciation)
on investments during the year (74,629) (40,364) 76,323
----------- ----------- -----------
Increase (decrease) in net assets resulting
from operations (67,552) 3,966 102,463
Increase in net assets resulting from capital
unit transactions 1,203,173 1,431,328 1,564,695
----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS 1,135,621 1,435,294 1,667,158
NET ASSETS AT BEGINNING OF PERIOD 0 0 0
----------- ----------- -----------
NET ASSETS AT END OF PERIOD $ 1,135,621 $ 1,435,294 $ 1,667,158
=========== =========== ===========
</TABLE>
(*)Series NG and NP commenced operations on January 9, 1998; Series JW commenced
operations on January 8, 1998.
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 148
SECURITY FIRST LIFE SEPARATE ACCOUNT A
SCHEDULES OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
Carrying Unrealized
Value Appreciation Cost
Series Name of Issue Shares (Note A) (Depreciation) (Note B)
- ------ --------------------------------- ------ -------- -------------- --------
<S> <C> <C> <C> <C> <C>
NG Neuberger & Berman
Genesis Trust -- capital shares 54,496 $ 1,108,451 $ (74,629) $ 1,183,080
NP Neuberger & Berman
Partners Trust -- capital shares 79,123 $ 1,429,758 $ (40,364) $ 1,470,122
JW Janus Aspen Worldwide
Growth Portfolio -- capital shares 57,337 $ 1,667,938 $ 76,323 $ 1,591,615
</TABLE>
Note A The carrying value of the investments is the reported net asset
value of the investment company's capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
23
<PAGE> 149
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 -- BASIS OF PRESENTATION
Security First Life Separate Account A (the Separate Account) was established on
May 29, 1980, as a separate account of Security First Life Insurance Company
(Security Life), the sponsor company, and is registered under the Investment
Company Act of 1940 as a unit investment trust. The Separate Account is designed
to provide annuity benefits pursuant to certain variable annuity contracts (the
Contracts) issued by Security Life.
In accordance with the terms of the Contracts, all payments allocated to the
Separate Account by the contract owners must be allocated to purchase shares of
any or all of four series of Security First Trust (the Trust), a Massachusetts
business trust, and fifteen mutual funds (the investment companies). The series
of the Trust are Bond Series, T. Rowe Price Growth and Income Series, Equity
Series, and U.S. Government Income Series and the mutual funds are T. Rowe Price
Growth Stock Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc., T. Rowe Price
International Stock Fund, Inc., Alger American Small Capitalization Portfolio,
Scudder International Portfolio, Fidelity Investments: VIP Asset Manager
Portfolio, VIP Growth Portfolio, VIP Index 500 Portfolio, VIP Overseas
Portfolio, VIP Contrafund Portfolio, VIP Equity-Income Portfolio, VIP Money
Market Portfolio; Neuberger & Berman Partners Trust, Neuberger & Berman Genesis
Trust, and Janus Aspen Worldwide Growth Portfolio. The Trust and the investment
companies are registered as diversified, open-end management investment
companies under the Investment Company Act of 1940. The Separate Account is
correspondingly divided into nineteen series of Accumulation Units, Series B, G,
SV, SU, T, P, I, AS, SI, FA, FG, FI, FO, FC, FE, FM, NP, NG and JW, relating to
investments in each of the investment companies, respectively.
All series of the Trust receive administrative services for a fee from Security
First Investment Management Corporation (Security Management). Security First
Financial, Inc. (Security Financial) is the principal underwriter for the
Contracts. Security Life, Security Management, and Security Financial are wholly
owned subsidiaries of Security First Group, Inc. (the Company) which became a
wholly owned subsidiary of Metropolitan Life Insurance Company on October 31,
1997. Investment advice is provided to the Security First Trust T. Rowe Price
Growth and Income Series by T. Rowe Price Associates, Inc., to the Security
First Trust Bond Series by Neuberger & Berman, and to the Security First Trust
Equity Series and to the Security First Trust U.S. Government Income Series by
Blackrock, Inc.
24
<PAGE> 150
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 1 -- BASIS OF PRESENTATION (continued)
The Separate Account and each series therein are administered and accounted for
as part of the business of Security Life. The investment income and capital
gains and losses of each Separate Account series are identified with the assets
held for that series in accordance with the terms of the Contracts, without
regard to investment income and capital gains and losses arising out of any
other business Security Life may conduct.
The Separate Account incurs no liability for remuneration to directors, advisory
boards, officers or such other persons who may from time to time perform
services for the Separate Account.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from these estimates.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS -- Investments are carried at fair value, which is
determined by multiplying the investment companies' shares owned by the Separate
Account by the reported net asset value per share of each respective investment
company. Realized investment gains and losses are determined on the first-in,
first-out cost basis.
EXPENSES AND CHARGES -- The Separate Account accrues charges incurred for the
mortality and expense risk assumed by Security Life. The charges are calculated
daily by multiplying the value of the assets of the Separate Account by the
daily mortality and expense risk rate. Security Life has the option of calling
for payment of such charges at any time. The following table illustrates the
rates for the respective contracts:
<TABLE>
<CAPTION>
Contract Type Annual Rate Daily Rate
------------- ----------- ----------
<S> <C> <C>
SF 135R2V; SF 224FL; SF 89; SF 234;
SF 236FL; SF 1700 Contracts .89% .0000244
SF 228DC Contracts 1.25% .0000342
SF 135R2S Contracts 1.15% .0000315
SF 230; SF 224R1; SF 226R1 Contracts 1.35% .0000370
SF 135R2C Contracts 1.40% .0000384
</TABLE>
25
<PAGE> 151
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (continued)
The following charges are deducted from a contract holder's account by Security
Life as a capital transaction by reducing the separate account units held, and
such charges are not an expense of the Separate Account. An administration
charge (contract charge) is deducted from each contract and paid to Security
Life at the end of each contract year prior to the annuity date, and when the
entire contract value is withdrawn on any date other than a contract
anniversary. In the event that a participant withdraws all or a portion of the
participant's account, a contingent deferred sales charge (CDSC) may be applied
to the amount of the contract value withdrawn to cover certain expenses relating
to the sale of contracts. The following table illustrates contract charges and
CDSC with respect to the various types of contracts:
<TABLE>
<CAPTION>
Maximum Contract
Contract Type Charge Per Year CDSC
- --------------- ------------------- ------------------------------------------------------------------------
<S> <C> <C>
SF 236FL - Based on elapsed time since premium received. Disappears on or after
5th anniversary.
SF 224FL $40.00 Based on elapsed time since premium received. Disappears on or after
6th anniversary.
SF 1700 $40.00 Based on elapsed time since premium received. Disappears on or after
6th anniversary.
SF 224R1, SF 230 * Based on elapsed time since premium received.
Disappears on or after 5th anniversary.
Group Form $49.00*** Seven percent of premium received. Disappears
226R1 after 5th anniversary.
SF 234 $29.50 Five percent of premium received. Disappears after 6th anniversary.
All other groups $19.50 Five percent of premium received. Disappears after 6th anniversary.
SF 135R2V ** None
SF 135R2S, SF 135R2C ** Based on elapsed time since premium received. Disappears on or after
7th anniversay.
</TABLE>
* $52.50 (currently being waived); annual administration fee of .10%
calculated on average account value (currently included in mortality and
risk expense).
** Annual administration fee of .15% calculated on average account value
(currently included in mortality and risk expense).
*** Annual distribution fee of .10% calculated on average account value
(currently included in mortality and risk expense).
26
<PAGE> 152
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (continued)
In addition, transaction charges of $10 are incurred for each surrender or
annuitization. Upon conversion of either accumulation or annuity units from one
series to another, a $10 conversion charge is incurred. The amount deducted for
contract charges and CDSC was $1,507,924 for the year ended December 31, 1998,
and $1,061,306 for the year ended December 31, 1997.
INCOME RECOGNITION AND REINVESTMENT -- Income is recognized as declared payable
by the investment companies. All distributions received are reinvested in the
investment companies.
NOTE 3 -- FEDERAL INCOME TAXES
The operations of the Separate Account form a part of, and are taxed with, the
operations of Security Life, which is taxed as a "life insurance company" under
the Internal Revenue Code, and as such, Security Life is liable for income
taxes, if any, which become payable with respect to the Separate Account's
operations.
Separate accounts are generally required to meet certain diversification
requirements for their assets. However, separate accounts which solely provide
benefits for "pension plan contracts" are exempt from the diversification
requirements. Pension plan contracts include: (i) tax qualified plans; (ii)
employee annuities; (iii) plans for employees of life insurance companies; (iv)
tax sheltered annuities of exempt organizations; (v) individual retirement
accounts or annuities, and (vi) deferred compensation plans of certain
governmental or tax-exempt organizations. The Contracts issued by Security Life
are offered in connection with both pension plan contracts and non-qualified
contracts, therefore the Separate Account is subject to the diversification
requirements. Management believes that the Separate Account has met the
diversification requirements.
27
<PAGE> 153
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4 -- CAPITAL TRANSACTIONS
Additions and deductions to units of capital consisting of the effect of capital
unit transactions were as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1998
(Period ended for Series NG, Additions to Capital Deductions from Capital
NP and JW): $ Units $ Units
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
SF 135R2C Contracts
Series B Accumulation Units 5,661,870 586,339 667,501 69,008
Series G Accumulation Units 18,587,275 1,028,586 3,261,930 183,491
Series FA Accumulation Units 12,640,621 1,475,140 2,744,662 322,529
Series FG Accumulation Units 7,939,511 709,561 4,745,913 425,808
Series FI Accumulation Units 16,587,093 1,328,050 2,528,382 202,282
Series FO Accumulation Units 1,820,892 222,444 606,856 74,118
Series FC Accumulation Units 8,834,454 870,830 2,112,211 208,731
Series FE Accumulation Units 11,666,102 1,262,113 1,580,945 175,697
Series FM Accumulation Units 74,497,555 12,516,888 72,551,400 12,196,311
Series SU Accumulation Units 1,773,861 293,960 3,468,890 576,401
Series SV Accumulation Units 549,778 73,591 4,248,198 550,379
Series AS Accumulation Units 2,938,629 385,967 2,594,226 340,284
Series SI Accumulation Units 34,054 4,354 399,306 50,363
SF 226R1; SF 228DC Contracts
Series B Accumulation Units 3,767,408 388,255 852,396 87,554
Series G Accumulation Units 37,098,561 2,020,606 5,212,041 290,088
Series FA Accumulation Units 19,908,766 2,321,746 5,619,560 654,644
Series FG Accumulation Units 24,131,767 2,143,757 6,894,858 618,046
Series FI Accumulation Units 37,483,454 3,003,376 5,386,701 430,376
Series FO Accumulation Units 149,136 18,320 42,972 4,974
Series FC Accumulation Units 31,516,136 3,114,402 4,839,268 477,640
Series FM Accumulation Units 7,774,626 1,302,972 4,799,882 804,893
Series AS Accumulation Units 11,665,418 1,548,161 4,037,065 535,714
Series SI Accumulation Units 2,855,424 358,196 752,264 96,335
SF 135R2V; SF 224FL; SF 234;
SF 236FL; SF 1700 Contracts
Series B Accumulation Units 2,580,211 123,343 1,305,423 62,689
Series G Accumulation Units 20,527,385 368,212 18,526,043 331,199
Series T Accumulation Units 17,373,764 343,212 13,326,717 264,645
Series P Accumulation Units 532,070 37,083 926,772 64,322
Series I Accumulation Units 4,430,482 469,729 5,094,801 542,972
Series FA Accumulation Units 6,829,737 825,486 3,796,814 457,686
Series FG Accumulation Units 12,369,795 1,151,843 6,914,156 643,533
Series FI Accumulation Units 17,647,925 1,452,345 5,152,510 424,392
Series FC Accumulation Units 987,646 177,994 147,089 26,818
</TABLE>
28
<PAGE> 154
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4 -- CAPITAL TRANSACTIONS (continued)
<TABLE>
<CAPTION>
Additions to Capital Deductions from Capital
$ Units $ Units
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Series FM Accumulation Units 3,382,358 557,315 3,514,480 579,854
Series NP Accumulation Units 1,751,780 334,968 320,452 62,140
Series NG Accumulation Units 1,404,420 290,387 201,247 44,072
Series JW Accumulation Units 1,797,327 303,304 232,632 42,260
SF 135R2S Contracts
Series FG Accumulation Units 514,546 47,572 2,685,226 243,801
Series FO Accumulation Units 495,222 71,896 996,040 143,417
Series FM Accumulation Units 956,436 157,359 1,093,591 180,631
Series SU Accumulation Units 1,434,144 237,762 2,278,227 375,735
Series SV Accumulation Units 615,172 64,592 4,122,556 423,862
SF 224R1; SF 230 Contracts
Series B Accumulation Units 623,686 66,864 311,049 33,553
Series G Accumulation Units 7,318,820 385,701 5,000,083 264,139
Series FA Accumulation Units 6,100,724 720,058 4,241,726 502,287
Series FG Accumulation Units 7,123,036 637,735 3,432,683 304,495
Series FI Accumulation Units 6,682,275 535,470 1,937,943 157,096
Series FC Accumulation Units 2,551,049 249,677 152,516 14,979
Series FM Accumulation Units 1,478,642 246,343 811,805 135,293
Series SU Accumulation Units 61,666 10,101 11,726 1,958
Series AS Accumulation Units 446,604 58,580 48,697 5,955
Series SI Accumulation Units 230,451 28,841 14,523 1,678
Year ended December 31, 1997:
SF 135R2C Contracts
Series B Accumulation Units 3,489,097 391,482 208,955 23,190
Series G Accumulation Units 27,974,005 1,827,071 1,007,953 61,587
Series FA Accumulation Units 22,037,238 3,083,772 1,118,816 145,718
Series FG Accumulation Units 29,266,279 3,456,848 2,096,800 221,099
Series FI Accumulation Units 21,704,130 2,243,395 880,069 84,619
Series FO Accumulation Units 5,206,390 713,113 321,230 41,040
Series FC Accumulation Units 16,309,026 2,064,971 617,179 70,030
Series FE Accumulation Units 9,709,051 1,220,079 535,673 66,368
Series FM Accumulation Units 91,417,945 15,908,209 80,431,227 13,960,948
Series SU Accumulation Units 16,459,936 2,907,217 1,379,636 241,387
Series SV Accumulation Units 14,910,993 2,340,582 1,268,768 189,923
Series AS Accumulation Units 14,561,015 2,303,839 1,072,603 152,394
Series SI Accumulation Units 1,406,153 199,513 59,297 8,138
</TABLE>
29
<PAGE> 155
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4 -- CAPITAL TRANSACTIONS (continued)
<TABLE>
<CAPTION>
Additions to Capital Deductions from Capital
$ Units $ Units
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
SF 226R1; SF 228DC Contracts
Series B Accumulation Units 1,454,857 161,968 2,222,593 255,587
Series G Accumulation Units 31,042,330 2,023,469 18,299,082 1,273,695
Series FA Accumulation Units 16,861,300 2,260,447 20,550,274 2,914,536
Series FG Accumulation Units 24,047,220 2,718,139 23,181,360 2,836,909
Series FI Accumulation Units 25,839,798 2,590,459 11,992,236 1,323,107
Series FO Accumulation Units 676,805 96,009 3,024,539 431,009
Series FC Accumulation Units 30,792,175 3,684,098 11,831,746 1,551,824
Series FM Accumulation Units 34,039,726 6,010,978 41,104,341 7,257,641
Series SU Accumulation Units 4,245,733 762,198 6,638,272 1,191,234
Series AS Accumulation Units 15,651,587 2,307,183 11,793,043 1,911,752
Series SI Accumulation Units 3,720,604 524,236 923,961 133,817
SF 135R2V; SF 224FL;
SF 234; SF 236FL; SF 1700 Contracts
Series B Accumulation Units 1,251,814 66,317 1,258,763 66,260
Series G Accumulation Units 22,168,547 464,927 10,162,988 208,324
Series T Accumulation Units 13,912,418 337,577 8,035,151 194,789
Series P Accumulation Units 1,356,696 98,277 2,819,922 202,716
Series I Accumulation Units 5,494,020 613,377 3,184,987 356,665
Series FA Accumulation Units 5,261,860 725,367 2,416,199 336,103
Series FG Accumulation Units 10,795,331 1,233,017 5,486,217 645,857
Series FI Accumulation Units 9,999,482 1,019,149 1,804,657 183,675
Series FM Accumulation Units 3,155,789 540,467 1,884,995 325,446
SF 135R2S Contracts
Series FG Accumulation Units 3,427,275 399,201 1,490,263 165,593
Series FO Accumulation Units 1,726,903 274,657 676,538 105,526
Series FM Accumulation Units 7,288,893 1,266,880 7,902,058 1,372,807
Series SU Accumulation Units 2,886,460 512,287 1,432,766 253,595
Series SV Accumulation Units 4,591,111 589,309 3,248,977 402,282
SF 224R1; SF 230 Contracts
Series B Accumulation Units 509,920 59,735 734,667 85,140
Series G Accumulation Units 8,895,697 547,437 4,050,072 249,469
Series FA Accumulation Units 6,970,487 948,458 3,697,574 504,142
Series FG Accumulation Units 7,792,635 871,059 3,385,626 379,160
Series FI Accumulation Units 5,441,074 544,189 709,370 68,289
Series FM Accumulation Units 455,713 79,801 571,817 71,385
</TABLE>
30
<PAGE> 156
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 5 -- UNITS OF CAPITAL
The following are the units outstanding and corresponding unit values as of
December 31, 1998:
<TABLE>
<CAPTION>
Units
Description Outstanding Unit Value
----------- ----------- ----------
<S> <C> <C>
SF 135R2C Contracts
Series B Accumulation Units 885,623 $ 9.91
Series G Accumulation Units 2,610,579 18.77
Series FA Accumulation Units 4,090,665 9.21
Series FG Accumulation Units 3,519,502 13.54
Series FI Accumulation Units 3,284,544 14.16
Series FO Accumulation Units 820,399 8.40
Series FC Accumulation Units 2,657,040 11.84
Series FE Accumulation Units 3,081,496 9.64
Series FM Accumulation Units 2,267,838 6.08
Series SU Accumulation Units 2,383,389 6.22
Series SV Accumulation Units 1,956,057 8.67
Series AS Accumulation Units 2,197,128 8.43
Series SI Accumulation Units 145,366 8.32
SF 226R1; SF228DC Contracts
Series B Accumulation Units 516,448 9.92
Series G Accumulation Units 4,623,935 18.79
Series FA Accumulation Units 8,505,603 9.21
Series FG Accumulation Units 8,140,376 13.55
Series FI Accumulation Units 6,150,094 14.17
Series FO Accumulation Units 48,352 8.41
Series FC Accumulation Units 8,532,096 11.85
Series FM Accumulation Units 1,150,279 6.08
Series AS Accumulation Units 4,365,889 8.44
Series SI Accumulation Units 914,883 8.33
SF 135R2V; SF 224FL; SF 234;
SF 236FL; SF 1700 Contracts
Series B Accumulation Units 330,437 21.42
Series G Accumulation Units 2,089,549 58.61
Series T Accumulation Units 1,803,252 58.18
Series P Accumulation Units 55,001 14.64
Series I Accumulation Units 1,752,665 10.04
Series FA Accumulation Units 2,697,371 8.97
Series FG Accumulation Units 3,646,839 13.16
Series FI Accumulation Units 2,698,332 13.92
Series FC Accumulation Units 151,176 6.44
Series FM Accumulation Units 863,998 6.19
Series NP Accumulation Units 272,828 5.26
Series NG Accumulation Units 246,315 4.61
Series JW Accumulation Units 261,044 6.39
</TABLE>
31
<PAGE> 157
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 5 -- UNITS OF CAPITAL (continued)
<TABLE>
<CAPTION>
Units
Description Outstanding Unit Value
----------- ----------- ----------
<S> <C> <C>
SF 135R2S Contracts
Series FG Accumulation Units 2,089,891 $13.36
Series FO Accumulation Units 1,457,239 7.21
Series FM Accumulation Units 226,877 6.16
Series SU Accumulation Units 3,090,590 6.22
Series SV Accumulation Units 3,635,365 10.93
SF 224R1; SF 230 Contracts
Series B Accumulation Units 236,557 9.54
Series G Accumulation Units 2,599,757 19.78
Series FA Accumulation Units 4,752,720 9.11
Series FG Accumulation Units 3,568,314 13.50
Series FI Accumulation Units 1,402,594 14.22
Series FC Accumulation Units 457,776 11.85
Series FM Accumulation Units 240,836 6.10
Series SU Accumulation Units 12,973 6.23
Series AS Accumulation Units 116,999 8.44
Series SI Accumulation Units 72,670 8.33
</TABLE>
NOTE 6 -- IMPACT OF YEAR 2000 (unaudited)
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 issue and has
developed and implemented a plan to resolve the issue. The Company currently
believes that, with modifications to existing software and converting to new
software and hardware, the Year 2000 issue will not pose significant operational
problems for the Company's computer systems. However, if such modifications and
conversions are not completed on a timely basis, the Year 2000 issue may have a
material impact on the operations of the Company. Furthermore, even if the
Company completes such modifications and conversions on a timely basis, there
can be no assurance that the failure by vendors or other third parties to solve
the Year 2000 issue will not have a material impact on the operations of the
Company.
32
<PAGE> 158
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements contained herein
(1) Security First Life Separate Account A
Part A - Condensed Financial Information
Part B - Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets,
Statement of Investments
(2) Security First Life Insurance Company
Part B - Depositor's financial statements with notes
(b) Exhibits
(10) Consents of Independent Auditors
(13) Organizational Chart
<PAGE>
ORGANIZATIONAL STRUCTURE OF METROPOLITAN AND SUBSIDIARIES
AS OF DECEMBER 31, 1998
The following is a list of subsidiaries of Metropolitan Life Insurance Company
("Metropolitan") as of December 31, 1998. Those entities which are listed at
the left margin (labelled with capital letters) are direct subsidiaries of
Metropolitan. Unless otherwise indicated, each entity which is indented under
another entity is a subsidiary of such indented entity and, therefore, an
indirect subsidiary of Metropolitan. Certain inactive subsidiaries have been
omitted from the Metropolitan Organizational listing. The voting securities
(excluding directors' qualifying shares, if any) of the subsidiaries listed are
100% owned by their respective parent corporations, unless otherwise indicated.
The jurisdiction of domicile of each subsidiary listed is set forth in the
parenthetical following such subsidiary.
A. Metropolitan Tower Corp. (Delaware)
1. Metropolitan Property and Casualty Insurance Company (Rhode Island)
a. Metropolitan Group Property and Casualty Insurance Company
(Rhode Island)
i. Metropolitan Reinsurance Company (U.K.) Limited (Great
Britain)
b. Metropolitan Casualty Insurance Company (Rhode Island)
c. Metropolitan General Insurance Company (Rhode Island)
d. Metropolitan Direct Property and Casualty Insurance Company
(Georgia)
e. Metropolitan P&C Insurance Services, Inc. (California)
f. Metropolitan Lloyds, Inc. (Texas)
g. Met P&C Managing General Agency, Inc. (Texas)
2. Metropolitan Insurance and Annuity Company (Delaware)
a. MetLife Europe I, Inc. (Delaware)
b. MetLife Europe II, Inc. (Delaware)
c. MetLife Europe III, Inc. (Delaware)
d. MetLife Europe IV, Inc. (Delaware)
e. MetLife Europe V, Inc. (Delaware)
3. MetLife General Insurance Agency, Inc. (Delaware)
a. MetLife General Insurance Agency of Alabama, Inc. (Alabama)
b. MetLife General Insurance Agency of Kentucky, Inc. (Kentucky)
c. MetLife General Insurance Agency of Mississippi, Inc.
(Mississippi)
d. MetLife General Insurance Agency of Texas, Inc. (Texas)
e. MetLife General Insurance Agency of North Carolina, Inc. (North
Carolina)
f. MetLife General Insurance Agency of Massachusetts, Inc.
(Massachusetts)
<PAGE>
4. Metropolitan Asset Management Corporation (Delaware)
(a.) MetLife Capital, Limited Partnership (Delaware).
Partnership interests in MetLife Capital, Limited
Partnership are held by Metropolitan (90%) and
Metropolitan Asset Management Corporation (10%).
(i.) MetLife Capital Credit L.P. (Delaware).
Partnership interests in MetLife Capital Credit
L.P. are held by Metropolitan (90%) and
Metropolitan Asset Management Corporation (10%).
(1) MetLife Capital CFLI Holdings, LLC (DE)
(a.) MetLife Capital CFLI Leasing, LLC
(DE)
b. MetLife Financial Acceptance Corporation (Delaware).
MetLife Capital Holdings, Inc. holds 100% of the voting
preferred stock of MetLife Financial Acceptance Corporation.
Metropolitan Property and Casualty Insurance Company holds
100% of the common stock of MetLife Financial Acceptance
Corporation.
c. MetLife Investments Limited (United Kingdom). 23rd Street
Investments, Inc. holds one share of MetLife Investments
Limited.
d. MetLife Investments Asia Limited (Hong Kong). One share of
MetLife Investments Asia Limited is held by W&C Services, Inc.,
a nominee of Metropolitan Asset Management Corporation.
5. SSRM Holdings, Inc. (Delaware)
a. GFM Investments Limited (Delaware)
b. State Street Research & Management Company (Delaware). Is a
sub-investment manager for the Growth, Income, Diversified
and Aggressive Growth Portfolios of Metropolitan Series
Fund, Inc.
i. State Street Research Investment Services, Inc.
(Massachusetts)
<PAGE>
c. SSR Realty Advisors, Inc. (Delaware)
i. Metric Management Inc. (Delaware)
ii. Metric Property Management, Inc. (Delaware)
(1) Metric Realty (Delaware). SSR Realty Advisors, Inc.
and Metric Property Management, Inc. each hold 50% of
the common stock of Metric Realty.
(a) Metric Institutional Apartment Fund II, L.P.
(California). Metric Realty holds a 1% interest
as general partner and Metropolitan holds an
approximately 14.6% limited partnership interest
in Metric Institutional Apartment Fund II, L.P.
(2) Metric Colorado, Inc. (Colorado). Metric Property
Management, Inc. holds 80% of the common stock of
Metric Colorado, Inc.
iii. Metric Capital Corporation (California)
iv. Metric Assignor, Inc. (California)
v. SSR AV, Inc. (Delaware)
6. MetLife Holdings, Inc. (Delaware)
a. MetLife Funding, Inc. (Delaware)
b. MetLife Credit Corp. (Delaware)
7. Metropolitan Tower Realty Company, Inc. (Delaware)
8. Met Life Real Estate Advisors, Inc. (California)
9. Security First Group, Inc. (DE)
a. Security First Life Insurance Company (DE)
b. Security First Insurance Agency, Inc. (MA)
c. Security First Insurance Agency, Inc. (NV)
d. Security First Group of Ohio, Inc. (OH)
e. Security First Financial, Inc. (DE)
f. Security First Investment Management Corporation (DE)
g. Security First Management Corporation (DE)
h. Security First Real Estate, Inc. (DE)
i. Security First Financial Agency, Inc. (TX)
10. Natiloportem Holdings, Inc. (Delaware)
B. Metropolitan Tower Life Insurance Company (Delaware)
C. MetLife Security Insurance Company of Louisiana (Louisiana)
<PAGE>
D. MetLife Texas Holdings, Inc. (Delaware)
1. Texas Life Insurance Company (Texas)
a. Texas Life Agency Services, Inc. (Texas)
b. Texas Life Agency Services of Kansas, Inc. (Kansas)
E. MetLife Securities, Inc. (Delaware)
F. 23rd Street Investments, Inc. (Delaware)
G. Services La Metropolitaine Quebec, Inc. (Quebec, Canada)
H. Santander Met, S.A. (Spain). Shares of Santander Met, S.A. are held by
Metropolitan (50%) and by an entity (50%) unaffiliated with Metropolitan.
1. Seguros Genesis, S.A. (Spain)
2. Genesis Seguros Generales, Sociedad Anomina de Seguros y Reaseguros
(Spain)
I. MetLife Saengmyoung Insurance Company Ltd. (Korea).
J. Metropolitan Life Seguros de Vida S.A. (Argentina)
K. Metropolitan Life Seguros de Retiro S.A. (Argentina).
L. Met Life Holdings Luxembourg (Luxembourg)
M. Metropolitan Life Holdings, Netherlands BV (Netherlands)
N. MetLife International Holdings, Inc. (Delaware)
O. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)
P. Metropolitan Marine Way Investments Limited (Canada)
Q. P.T. MetLife Sejahtera (Indonesia) Shares of P.T. MetLife Sejahtera are
held by Metropolitan (80%) and by an entity (20%) unaffiliated with
Metropolitan.
R. Seguros Genesis S.A. (Mexico) Metropolitan holds 85.49%, Metropolitan Tower
Corp. holds 7.31% and Metropolitan Asset Management Corporation holds 7.20%
of the common stock of Seguros Genesis S.A.
S. Metropolitan Life Seguros de Vida S.A. (Uruguay). One share of Metropolitan
Life Seguros de Vida S.A. is held by Alejandro Miller Artola, a nominee of
Metropolitan Life Insurance Company.
T. Metropolitan Life Seguros E Previdencia Privada S.A. (Brazil)
<PAGE>
U. Hyatt Legal Plans, Inc. (Delaware)
1. Hyatt Legal Plans of Florida, Inc. (Fl)
V. One Madison Merchandising L.L.C. (Connecticut) Ownership of membership
interests in One Madison Merchandising L.L.C. is as follows: Metropolitan
owns 99% and Metropolitan Tower Corp. owns 1%.
W. Metropolitan Realty Management, Inc. (Delaware)
1. Edison Supply and Distribution, Inc. (Delaware)
2. Cross & Brown Company (New York)
a. CBNJ, Inc. (New Jersey)
X. MetPark Funding, Inc. (Delaware)
Y. 2154 Trading Corporation (New York)
Z. Transmountain Land & Livestock Company (Montana)
AA. Farmers National Company (Nebraska)
1. Farmers National Commodities, Inc. (Nebraska)
2. Farmers National Marketing Group, LLC (Iowa) Ownership of membership
interests in Farmers National Marketing Group, LLC is as follows:
Farmers National Company (50%) and an entity unaffiliated with
Metropolitan (50%).
A.B. MetLife Trust Company, National Association. (United States)
A.C. Benefit Services Corporation (Georgia)
A.D. G.A. Holding Corporation (MA)
A.E. TNE-Y, Inc. (DE)
A.F. CRH., Inc. (MA)
A.G. NELRECO Troy, Inc. (MA)
A.H. TNE Funding Corporation (DE)
A.I. L/C Development Corporation (CA)
A.J. Boylston Capital Advisors, Inc. (MA)
1. New England Portfolio Advisors, Inc. (MA)
A.K. CRB Co., Inc. (MA) AEW Real Estate Advisors, Inc. holds 49,000 preferred
non-voting shares of CRB Co., Inc. AEW Advisors, Inc. holds 1,000
preferred non-voting shares of CRB Co., Inc.
A.L. New England Life Mortgage Funding Corporation (MA)
A.M. Mercadian Capital L.P. (DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian Capital
L.P.
A.N. Mercadian Funding L.P. (DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian
Funding L.P.
A.O. Tower Resources Group, Inc. (DE)
<PAGE>
A.P. MetLife New England Holdings, Inc. (DE)
1. Fulcrum Financial Advisors, Inc. (MA)
2. New England Life Insurance Company (MA)
a. New England Life Holdings, Inc. (DE)
i. New England Securities Corporation (MA)
(1) Hereford Insurance Agency, Inc. (MA)
(2) Hereford Insurance Agency of Alabama, Inc. (AL)
(3) Hereford Insurance Agency of Minnesota, Inc. (MN)
(4) Hereford Insurance Agency of Ohio, Inc. (OH)
(5) Hereford Insurance Agency of New Mexico, Inc. (NM)
ii. TNE Advisers, Inc. (MA)
iii. TNE Information Services, Inc. (MA)
(1) First Connect Insurance Network, Inc. (DE)
(2) Interative Financial Solutions, Inc. (MA)
iv. N.L. Holding Corp. (Del)(NY)
(1) Nathan & Lewis Securities, Inc. (NY)
(2) Nathan & Lewis Associates, Inc. (NY)
(a) Nathan and Lewis Insurance Agency of Massachusetts,
Inc. (MA)
(b) Nathan and Lewis Associates of Texas, Inc. (TX)
(3) Nathan & Lewis Associates--Arizona, Inc. (AZ)
(4) Nathan & Lewis of Nevada, Inc. (NV)
(5) Nathan and Lewis Associates Ohio, Incorporated (OH)
b. Exeter Reassurance Company, Ltd. (MA)
c. Omega Reinsurance Corporation (AZ)
d. New England Pension and Annuity Company (DE)
e. Newbury Insurance Company, Limited (Bermuda)
3. Nvest Corporation (MA)
a. Nvest, L.P. (DE) Nvest Corporation holds a 1.69% general partnership
interest and MetLife New England Holdings, Inc. 3.19% general
partnership interest in Nvest, L.P.
b. Nvest Companies, L.P. (DE) Nvest Corporation holds a 0.0002% general
partnerhship interest in Nvest Companies, L.P. Nvest, L.P. holds a
14.64% general partnership interest in Nvest Companies, L.P.
Metropolitan holds a 46.23% limited partnership interest in Nvest
Companies, L.P.
i. Nvest Holdings, Inc. (DE)
(1) Back Bay Advisors, Inc. (MA)
(a) Back Bay Advisors, L.P. (DE)
Back Bay Advisors, Inc.
holds a 1% general partner
interest and NEIC
Holdings, Inc. holds a 99%
limited partner interest
in Back Bay Advisors, L.P.
(2) R & T Asset Management, Inc. (MA)
(a) Reich & Tang Distributors, Inc. (DE)
(b) R & T Asset Management L.P.
R & T Asset Management, Inc.
holds a 0.5% general partner interest and
NEIC Holdings, Inc. hold a 99.5% limited
partner interest in &
Asset Management, L.P.
(c) Reich & Tang Services, Inc. (DE)
<PAGE>
(3) Loomis, Sayles & Company, Inc. (MA)
(a) Loomis Sayles & Company, L.P. (DE)
Loomis Sayles & Company, Inc.
holds a 1% general partner interest and
R & T Asset Management, Inc. holds a 99%
limited partner interest in Loomis Sayles &
Company, L.P.
(4) Westpeak Investment Advisors, Inc. (MA)
(a) Westpeak Investment Advisors, L.P. (DE)
Westpeak Investment Advisors, Inc.
holds a 1% general partner interest and
Reich & Tang holds a 99% limited
partner interest in Westpeak Investment
Advisors, L.P.
(i) Westpeak Investment Advisors Australia
Limited Pty.
(5) Vaughan, Nelson Scarborough & McCullough (DE)
(a) Vaughan, Nelson Scarborough & McCullough, L.P. (DE)
VNSM, Inc. holds a 1% general partner interest and
Reich & Tang Asset Management, Inc. holds a 99%
limited partner interest in Vaughan, Nelson
Scarborough & McCullough, L.P.
(i) VNSM Trust Company
(6) MC Management, Inc. (MA)
(a) MC Management, L.P. (DE)
MC Management, Inc. holds a 1% general partner
interest and R & T Asset Management, Inc.
holds a 99% limited partner interest in MC
Management, L.P.
(7) Harris Associates, Inc. (DE)
(a) Harris Associates Securities L.P. (DE)
Harris Associates, Inc. holds a 1% general partner
interest and Harris Associates L.P. holds a
99% limited partner interest in Harris Associates
Securities, L.P.
(b) Harris Associates L.P. (DE)
Harris Associates, Inc. holds a 0.33% general
partner interest and NEIC Operating Partnership,
L.P. holds a 99.67% limited partner interest in
Harris Associates L.P.
(i) Harris Partners, Inc. (DE)
(ii) Harris Partners L.L.C. (DE)
Harris Partners, Inc. holds a 1%
membership interest and
Harris Associates L.P. holds a 99%
membership interest in Harris Partners L.L.C.
(1) Aurora Limited Partnership (DE)
Harris Partners L.L.C. holds a 1% general
partner interest
<PAGE>
(2) Perseus Partners L.P. (DE) Harris Partners
L.L.C. holds a 1% general partner interest
(3) Pleiades Partners L.P. (DE) Harris
Partners L.L.C. holds a 1% general partner
interest
(4) Stellar Partners L.P. (DE)
Harris Partners L.L.C. holds a 1% general
partner interest
(5) SPA Partners L.P. (DE) Harris Partners
L.L.C. holds a 1% general partner interest
(8) Graystone Partners, Inc. (MA)
(a) Graystone Partners, L.P. (DE)
Graystone Partners, Inc. holds a 1%
general partner interest and New England
NEIC Operating Partnership, L.P.
holds a 99% limited partner interest in
Graystone Partners, L.P.
(9) NEF Corporation (MA)
(a) New England Funds, L.P. (DE) NEF Corporation holds a
1% general partner interest and NEIC Operating
Partnership, L.P. holds a 99% limited
partner interest in New England Funds, L.P.
(b) New England Funds Management, L.P. (DE) NEF
Corporation holds a 1% general partner interest and
NEIC Operating Partnership, L.P. holds a 99%
limited partner interest in New England Funds
Management, L.P.
(10) New England Funds Service Corporation
(11) AEW Capital Management, Inc. (DE)
(a) AEW Securities, L.P. (DE) AEW Capital Management, Inc. holds
a 1% general partnership and AEW Capital Management, L.P.
holds a 99% limited partnership interest in AEW Securities,
L.P.
ii. Nvest Associates, Inc.
iii. Snyder Capital Management, Inc.
(1) Snyder Capital Management, L.P. NEIC Operating
Partnership holds a 99.5% limited partnership
interest and Snyder Capital Management Inc. holds a
0.5% general partnership interest.
iv. Jurika & Voyles, Inc.
(1) Jurika & Voyles, L.P NEIC Operating Partnership,
L.P. holds a 99% limited partnership interest and
Jurika & Voyles, Inc. holds a 1% general partnership
interest.
v. Capital Growth Management, L.P. (DE)
NEIC Operating Partnership, L.P. holds a 50% limited partner
interest in Capital Growth Management, L.P.
vi. Nvest Partnerships, LLC ( )
<PAGE>
vii. AEW Capital Management L.P. (DE)
New England Investment Companies, L.P. holds a 99% limited partner
interest and AEW Capital Management, Inc. holds a 1% general
partner interest in AEW Capital Management, L.P.
(1) AEW II Corporation ( )
(2) AEW Partners III, Inc. ( )
(3) AEW TSF, Inc. ( )
(4) AEW Exchange Management, LLC
(5) AEWPN, LLC ( )
(6) AEW Investment Group, Inc. (MA)
(a) Copley Public Partnership Holding, L.P. (MA)
AEW Investment Group, Inc. holds a 25% general partnership
interest and AEW Capital Management, L.P. holds a 75%
limited partnership interest in Copley Public Partnership
Holding, L.P.
(b) AEW Management and Advisors L.P. (MA)
AEW Investment Group, Inc. holds a 25% general partnership
interest and AEW Capital Management, L.P. holds a 75% limited
partnership interest in AEW Management and Advisors L.P.
ii. AEW Real Estate Advisors, Inc. (MA)
1. AEW Advisors, Inc. (MA)
2. Copley Properties Company, Inc. (MA)
3. Copley Properties Company II, Inc. (MA)
4. Copley Properties Company III, Inc. (MA)
5. Fourth Copley Corp. (MA)
6. Fifth Copley Corp. (MA)
7. Sixth Copley Corp. (MA)
8. Seventh Copley Corp. (MA).
9. Eighth Copley Corp. (MA).
10. First Income Corp. (MA).
11. Second Income Corp. (MA).
12. Third Income Corp. (MA).
13. Fourth Income Corp. (MA).
14. Third Singleton Corp. (MA).
15. Fourth Singleton Corp. (MA)
16. Fifth Singleton Corp. (MA)
17. Sixth Singleton Corp. (MA).
18. BCOP Associates L.P. (MA)
AEW Real Estate Advisors, Inc. holds a 1% general
partner interest in BCOP Associates L.P.
ii. CREA Western Investors I, Inc. (MA)
1. CREA Western Investors I, L.P. (DE)
CREA Western Investors I, Inc. holds a 24.28% general
partnership interest and Copley Public Partnership Holding,
L.P. holds a 57.62% limited partnership interest in CREA
Western Investors I, L.P.
iii. CREA Investors Santa Fe Springs, Inc. (MA)
(7) Copley Public Partnership Holding, L.P. (DE)
AEW Capital Management, L.P. holds a 75% limited partner interest and
AEW Investment Group, Inc. holds a 25% general partner interest and
CREA Western Investors I, L.P holds a 57.62% Limited Partnership
interest.
<PAGE>
(8) AEW Real Estate Advisors, Limited Partnership (MA)
AEW Real Estate Advisors, Inc. holds a 25% general partnership interest
and AEW Capital Management, L.P. holds a 75% limited partnership
interest in AEW Real Estate Advisors, Limited Partnership.
(9) AEW Hotel Investment Corporation (MA)
(a.) AEW Hotel Investment, Limited Partnership (MA)
AEW Hotel Investment Corporation holds a 1% general
partnership interest and AEW Capital Management, L.P. holds a
99% limited partnership interest in AEW Hotel Investment,
Limited Partnership.
(10) Aldrich Eastman Global Investment Strategies, LLC (DE)
AEW Capital Management, L.P. holds a 25% membership interest and an
unaffiliated third party holds a 75% membership interest in Aldrich
Eastman Global Investment Strategies, LLC.
In addition to the entities listed above, Metropolitan (or where indicated an
affiliate) also owns an interest in the following entities, among others:
1) CP&S Communications, Inc., a New York corporation, holds federal radio
communications licenses for equipment used in Metropolitan owned facilities and
airplanes. It is not engaged in any business.
2) Quadreal Corp., a New York corporation, is the fee holder of a parcel of
real property subject to a 999 year prepaid lease. It is wholly owned by
Metropolitan, having been acquired by a wholly owned subsidiary of Metropolitan
in 1973 in connection with a real estate investment and transferred to
Metropolitan in 1988.
3) Met Life International Real Estate Equity Shares, Inc., a Delaware
corporation, is a real estate investment trust. Metropolitan owns approximately
18.4% of the outstanding common stock of this company and has the right to
designate 2 of the 5 members of its Board of Directors.
4) Metropolitan Structures is a general partnership in which Metropolitan owns
a 50% interest.
5) Metropolitan owns, via its subsidiary, AFORE Genesis Metropolitan S.A. de
C.V., approximately 61.7% of SIEFORE Genesis S.A. de C.V., a mutual fund.
6) Metropolitan owns varying interests in certain mutual funds distributed by
its affiliates. These ownership interests are generally expected to decrease as
shares of the funds are purchased by unaffiliated investors.
7) Metropolitan Lloyds Insurance Company of Texas, an affiliated association,
provides homeowner and related insurance for the Texas market. It is an
association of individuals designated as underwriters. Metropolitan Lloyds,
Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company ("MET
P&C"), serves as the attorney-in-fact and manages the association.
8) Metropolitan directly owns 100% of the non-voting preferred stock of Nathan
and Lewis Associates Ohio, Incorporated, an insurance agency. 100% of the voting
common stock of this company is held by an individual who has agreed to vote
such shares at the direction of N.L. Holding Corp. (DEL), an indirect wholly
owned subsidiary of Metropolitan.
<PAGE>
9) 100% of the capital stock of Hereford Insurance Agency of Oklahoma, Inc.
(OK) is owned by an officer. New England Life Insurance Company controls the
issuance of additional stock and has certain rights to purchase such officer's
shares.
10) 100% of the capital stock of Fairfield Insurance Agency of Texas, Inc. (TX)
is owned by an officer. New England Life Insurance Company controls the
issuance of additional stock and has certain rights to purchase such officer's
shares.
11) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited
partnerships, are investment vehicles through which investments in certain
entities are held. A wholly owned subsidiary of Metropolitan serves as the
general partner of the limited partnerships and Metropolitan directly owns a 99%
limited partnership interest in each MILP. The MILPs have various's ownership
interests in certain companies. The various MILPs own, directly or indirectly,
100% of the voting stock of the following company: Coating Technologies
International, Inc.
NOTE: THE METROPOLITAN LIFE ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE
JOINT VENTURES AND PARTNERSHIPS OF WHICH METROPOLITAN LIFE AND/OR ITS
SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE
SUBSIDIARIES HAVE ALSO BEEN OMITTED.
All previously filed Exhibits to Security First Life Separate Account A
registration statement and all post-effective amendments thereto are
specifically incorporated herein by reference.
Item 25. Directors and Officers of the Depositor
The officers and directors of Security First Life Insurance Company are listed
below. Their principal business address is 11365 West Olympic Boulevard, Los
Angeles, California 90064.
<TABLE>
<CAPTION>
Name Position and Offices with Depositor
- ---- -----------------------------------
<S> <C>
David A. Levene Chairman of the Board and Director
John K. Bruins Director
Steven T. Cates Director
Terence I. Lennon Director
Gail A. Praslick Director
Joseph A. Reali Director
Anthony J. Williamson Director
Joseph W. Jordan Director
Richard C. Pearson Director and President
Howard H Kayton Executive Vice President and Chief Actuary
Brian J. Finneran Senior Vice President
Jane F. Eagle Senior Vice President and Chief
Financial Officer
Peter R. Jones Senior Vice President
Cheryl M. MacGregor Senior Vice President
Alexander H. Masson Senior Vice President
Anthony J. Williamson Senior Vice President, Chief Investment Officer
</TABLE>
<PAGE> 159
<TABLE>
<CAPTION>
Name Position and Offices with Depositor
- ---- -----------------------------------
<S> <C>
George R. Bateman Vice President
James C. Turner Vice President
Leo Brown Assistant Vice President
Steven J. Brash Assistant Vice President
Cheryl J. Finney Associate General Counsel, Vice
President, and Assistant Secretary
Patrizia DiMolfetta Controller
James Bossert Assistant Controller
George J. Olah Treasurer
Louis Ragusa Secretary
Richard G. Mandel Assistant Secretary
Eugene A. Capobianco Assistant Vice President
Joseph A. Zdeb Assistant Vice President
Thomas V. Reedy Assistant Vice President
Ataollah Azarshahi Assistant Vice President
Harold B. Leff Assistant Vice President
Robert E. Dehais Assistant Vice President
</TABLE>
Item 26. Persons Controlled by or under Common Control with
Depositor of Registrant
The Registrant is a Separate Account of Security First Life Insurance Company
("depositor"). For a complete listing and diagram of all persons directly or
indirectly controlled by or under common control with the depositor, see Exhibit
13.
Item 27. Number of Contract Owners
As of April 27, 1999 there were 18,600 owners of the Contracts which are the
subject of this post-effective amendment.
Item 28. Indemnification
None
Item 29. Principal Underwriters
Security First Financial, Inc. is the principal underwriter for Security First
Life Separate Account A.
The following are the directors and officers of Security First Financial, Inc.
Their principal business address is 11365 West Olympic Boulevard, Los Angeles,
California 90064.
<TABLE>
<CAPTION>
Name Position with Underwriter
- ---- -------------------------
<S> <C>
Richard C. Pearson Director and President
Jane F. Eagle Director, Senior Vice President, Treasurer,
and Chief Financial Officer
Brian J. Finneran Senior Vice President
Peter R. Jones Senior Vice President
</TABLE>
<PAGE> 160
<TABLE>
<CAPTION>
Name Position with Underwriter
- ---- -------------------------
<S> <C>
Howard H. Kayton Senior Vice President and Chief Actuary
James C. Turner Vice President and Assistant Secretary
Cheryl J. Finney Vice President and Assistant Secretary
*Gary Virnick Director of Compliance
</TABLE>
* not an officer
<PAGE> 161
<TABLE>
<CAPTION>
Net
Underwriting Compensation on
Name of Principal Discount and Redemption or Brokerage
Underwriter Commissions* Annuitization Commission Compensation
- ----------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Security First None None None None
Financial, Inc.
</TABLE>
*Fee paid by Security First Life Insurance Company for serving as underwriter.
Item 30. Location of Accounts and Records
Security First Financial, Inc., underwriter for the registrant, is located at
11365 West Olympic Boulevard, Los Angeles, California 90064. It maintains those
accounts and records required to be maintained by it pursuant to Section 31(a)
of the Investment Company Act of 1940 and the rules promulgated thereunder.
Security First Life Insurance Company, the depositor for the registrant, is
located at 11365 West Olympic Boulevard, Los Angeles, California 90064. It
maintains those accounts and records required to be maintained by it pursuant to
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder and as custodian for the Registrant.
Security First Group, Inc. is located at 11365 West Olympic Boulevard, Los
Angeles, California 90064. It performs substantially all of the recordkeeping
and administrative services in connection with the Registrant.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Registrant makes the following undertakings:
Security First Life represents that the fees and charges deducted under the
Contracts described herein this registration statement are, in the aggregate,
reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by Security First Life.
<PAGE> 162
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has duly caused
this amended Registration Statement to be signed on its behalf in the City of
Los Angeles and State of California on this 26th day of April, 1999.
SECURITY FIRST LIFE SEPARATE ACCOUNT A
(Registrant)
By SECURITY FIRST LIFE INSURANCE COMPANY
(Sponsor)
By /s/ RICHARD C. PEARSON
------------------------------------
Richard C. Pearson, President
As required by the Securities Act of 1933, this Post-Effective amendment to its
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard C. Pearson President, Chief Executive April 26, 1999
- ------------------------------ Officer & Director
Richard C. Pearson, President
/s/ Jane F. Eagle Senior Vice President & April 26, 1999
- ------------------------------ Chief Financial Officer
Jane F. Eagle
David F. Levene* Director and April 26, 1999
- ------------------------------ Chairman of the Board
David F. Levene
John K. Bruins* Director April 26, 1999
- ------------------------------
John K. Bruins
Steven T. Cates* Director April 26, 1999
- ------------------------------
Steven T. Cates
Director _______, 1999
- ------------------------------
Joseph J. Jordan
</TABLE>
<PAGE> 163
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Terence I. Lennon* Director April 26, 1999
- ----------------------------
Terence I. Lennon
Gail A. Praslick* Director April 26, 1999
- ----------------------------
Gail A. Praslick
Joseph A. Reali* Director April 26, 1999
- ----------------------------
Joseph A. Reali
Anthony J. Williamson* Director April 26, 1999
- ----------------------------
Anthony J. Williamson
/s/ Richard C. Pearson
- ----------------------------
*(Richard C. Pearson as
Attorney-in-Fact for each
of the persons indicated)
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
Security First Life Separate Account A of
Security First Life Insurance Company
We consent to (a) the use in this Post-Effective Amendment No. 32 to
Registration Statement No. 33-7094 under the Securities Act of 1933 and in this
Amendment No. 108 to Registration Statement No. 811-3365 under the Investment
Company Act of 1940 on Form N-4 of our report dated February 10, 1999 regarding
Security First Life Insurance Company and subsidiary and our report dated
April 15, 1999 regarding Security First Life Separate Account A appearing in
the Financial Statements, which are included in Part B, the Statement of
Additional Information of such Registration Statements, (b) the reference to us
under the heading "Independent Auditors" in such Statement of Additional
Information and (c) the reference to us under the heading "Condensed Financial
Information" in the Prospectus, which is a part of such Registration Statements.
April 26, 1999
<PAGE> 2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "Independent Auditors" and to the use of our report on
Security First Life Insurance Company and Subsidiaries dated February 11, 1998
and Security First Life Separate Account A dated April 17, 1998 in the
Registration Statement (Form N-4, Post-Effective Amendment No. 32 under the
Securities Act of 1933 and No. 108 under the Investment Company Act of 1940)
and related Prospectus and Statement of Additional Information of Security
First Life Separate Account A.
Ernst & Young LLP
Los Angeles, California
April 26, 1999
