A Message to Variable Life Policyowners
There were significant increases in the Stock Markets in both 1995 and 1996.
In 1996, the Dow Jones Industrial Average increased 26.0% in value and the
Standard & Poor's 500 Index increased by 20.3%. Both the Dow Jones Industrial
Average and the S&P 500 are unmanaged indices.
The yield on the 30 year Treasury Bond has increased recently, so that at the
end of January, 1997 it was approximately 7%. Short term rates, as measured
by the 3 month Treasury Bill, are yielding 5.4% now, which is slightly ahead
of a year ago.
The U.S. Gross Domestic Product for 1996 increased approximately 3% while
inflation remains low with the Consumer Price Index increasing by 3.3% in
1996.
The Variable Life Insurance Policies which are the subject of this report are
distributed by Washington Square Securities, Inc. ("WSSI"), 20 Washington
Avenue South, Minneapolis, Minnesota 55401, (612) 372-5507. WSSI, a
registered broker-dealer, is an affiliated company of ReliaStar Bankers
Security Life Insurance Company, the issuer of your insurance policy.
The Stock Account. At December 31, 1996, the invested assets were allocated
99% to 57 different stock positions with the remainder in a high quality money
market fund. Our emphasis within the stock portfolio continues to be in
issues which we believe will perform well in the current environment and tend
to hold their values during market weakness.
The Money Market Account. On December 31, 1996, this portfolio held 22
different issues of the highest quality commercial paper with maturities
ranging from 1 week to 2 months.
The Investment Grade Bond Account. Bonds represented 93% of investable funds
on December 31, 1996, with the remainder in a high quality money market fund.
The portfolio was comprised of 22 bond issues, with scheduled maturities
ranging from 21 months to 29 years.
The Asset Allocation Account. At December 31, 1996, invested assets were
allocated 52% to common stocks, 43% to bonds, with the remainder in a high
quality money market fund. There were 57 different common stock issues in the
portfolio and 46 different bond positions.
The Outlook. For 1997, we expect economic growth to continue near the trend
rate and continuing moderate inflation with interest rates remaining near
current levels. At the time of this report, macroeconomic indicators are
showing mixed signs. While the business expansion has been underway for
almost six years, it is likely to be sustained throughout 1997. Nevertheless,
profits are expected to grow albeit at a slower rate than in the past few
years.
Beginning on page 8, there appears a report of the USLICO Series Fund whose
portfolios support the separate account assets. Total return charts for the
Fund's Portfolios are presented at pages 8, 9 and 10.
Name Change. Please note that on July 1, 1996, Bankers Security Life
Insurance Society changed its name to ReliaStar Bankers Security Life
Insurance Company. ReliaStar Bankers Security is part of a group of companies
owned by ReliaStar Financial Corp.
Respectfully,
James G. Cochran
Executive Vice President
ReliaStar Bankers Security Life Insurance Company
<PAGE>
<TABLE>
ReliaStar Bankers Security Variable Life Separate Account I
Statement of Assets and Liabilities
December 31, 1996
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in USLICO Series
Fund Portfolios (see below) $ 11,426,420 $ 5,083,111 $ 1,199,475 $ 5,447,240 $ 23,156,246
Policy loans 1,024,694 663,172 5,815 363,266 2,056,947
------------ ------------ ------------ ------------ ------------
Total assets 12,451,114 5,746,283 1,205,290 5,810,506 25,213,193
------------ ------------ ------------ ------------ ------------
Liabilities:
Net accrued for policy related
transactions due to ReliaStar Bankers 397,396 346,574 30,230 280,447 1,054,647
Amounts payable to ReliaStar Bankers 375,000 125,000 1,000,000 1,000,000 2,500,000
------------ ------------ ------------ ------------ ------------
Total liabilities 772,396 471,574 1,030,230 1,280,447 3,554,647
------------ ------------ ------------ ------------ ------------
Net assets - for variable life
insurance policies $ 11,678,718 $ 5,274,709 $ 175,060 $ 4,530,059 $ 21,658,546
============ ============ ============ ============ ============
Investments basis data:
Shares Owned 862,089 5,083,111 119,651 459,625
Cost $ 9,652,511 $ 5,083,111 $ 1,204,793 $ 5,015,173
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
ReliaStar Bankers Security Variable Life Separate Account I
Statement of Operations and Changes in Net Assets
For the Year Ended December 31, 1996
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 1,730,933 $ 239,222 $ 79,033 $ 616,657 $ 2,665,845
Expenses:
Mortality and expense risk charges 52,648 25,332 6,246 26,396 110,622
------------ ------------ ------------ ------------ ------------
Net investment income 1,678,285 213,890 72,787 590,261 2,555,223
Net unrealized gains (losses) on investments 218,820 - (45,487) (58,160) 115,173
Net realized gains (losses) on investments 112,451 - (2,455) 45,103 155,099
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 2,009,556 213,890 24,845 577,204 2,825,495
From policy related transactions:
Transfers in for net premiums 750,758 525,344 26,137 771,955 2,074,194
Transfers between sub-accounts 7,794 (9,177) 1,629 (246) -
Transfers for withdrawal/surrender (629,285) (289,528) (7,385) (389,029) (1,315,227)
Transfer of investment and operating
results to ReliaStar Bankers (397,332) (247,087) (28,931) (362,831) (1,036,181)
------------ ------------ ------------ ------------ ------------
Net increase in net assets 1,741,491 193,442 16,295 597,053 2,548,281
Net assets, beginning of year 9,937,227 5,081,267 158,765 3,933,006 19,110,265
------------ ------------ ------------ ------------ ------------
Net assets, end of year $ 11,678,718 $ 5,274,709 $ 175,060 $ 4,530,059 $ 21,658,546
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
ReliaStar Bankers Security Variable Life Separate Account I
Statement of Operations and Changes in Net Assets
For the Year Ended December 31, 1995
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 766,217 $ 265,384 $ 88,556 $ 374,017 $ 1,494,174
Expenses:
Mortality and expense risk charges 43,747 24,562 6,089 23,138 97,536
----------- ----------- ----------- ----------- ------------
Net investment income 722,470 240,822 82,467 350,879 1,396,638
Net unrealized gains on investments 1,606,225 - 113,035 649,668 2,368,928
Net realized gains on investments 21,777 - - 5,314 27,091
----------- ----------- ----------- ----------- ------------
Net increase in net assets resulting
from operations 2,350,472 240,822 195,502 1,005,861 3,792,657
From policy related transactions:
Transfers in for net premiums 806,287 520,818 27,169 859,175 2,213,449
Transfers between sub-accounts 16,931 (2,784) - (14,147) -
Transfers for withdrawal/surrender (569,134) (411,810) (15,701) (364,839) (1,361,484)
Transfer of investment and operating
results to ReliaStar Bankers (435,407) (246,086) (179,318) (509,281) (1,370,092)
----------- ----------- ----------- ----------- ------------
Net increase in net assets 2,169,149 100,960 27,652 976,769 3,274,530
Net assets, beginning of year 7,768,078 4,980,307 131,113 2,956,237 15,835,735
----------- ----------- ----------- ----------- ------------
Net assets, end of year $ 9,937,227 $ 5,081,267 $ 158,765 $ 3,933,006 $ 19,110,265
=========== =========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
ReliaStar Bankers Security Variable Life Separate Account I
Statement of Operations and Changes in Net Assets
For the Year Ended December 31, 1994
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 751,944 $ 167,844 $ 79,455 $ 326,897 $ 1,326,140
Expenses:
Mortality and expense risk charges 38,943 23,541 5,721 19,168 87,373
------------ ------------ ------------ ------------ ------------
Net investment income 713,001 144,303 73,734 307,729 1,238,767
Net unrealized losses on investments (645,732) - (123,218) (399,781) (1,168,731)
Net realized gains(losses) on investments 14,527 - (2,933) - 11,594
------------ ------------ ------------ ------------ ------------
Net increase(decrease) in net assets resulting
from operations 81,796 144,303 (52,417) (92,052) 81,630
From policy related transactions:
Transfers in for net premiums 862,124 683,395 28,067 919,831 2,493,417
Transfers between sub-accounts 21,000 (39,241) 131 18,110 -
Transfers for withdrawal/surrender (633,567) (301,779) (8,746) (270,052) (1,214,144)
Transfer of investment and operating
results from(to) ReliaStar Bankers (261,278) (273,280) 35,467 (264,132) (763,223)
------------ ------------ ------------ ------------ ------------
70,075 213,398 2,502 311,705 597,680
Net assets, beginning of year 7,698,003 4,766,909 128,611 2,644,532 15,238,055
------------ ------------ ------------ ------------ ------------
Net assets, end of year $ 7,768,078 $ 4,980,307 $ 131,113 $ 2,956,237 $ 15,835,735
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ReliaStar Bankers Security Variable Life Separate Account I - Notes to
Financial Statements - December 31, 1996
(1) Organization - ReliaStar Bankers Security Variable Life Separate Account
I ("Separate Account I") was established by ReliaStar Bankers Security Life
Insurance Company ("ReliaStar Bankers"), previously Bankers Security Life
Insurance Society, in 1986 under New York insurance laws. Separate Account I
operates as a unit investment trust under the Investment Company Act of 1940
and is used to fund certain benefits for variable life insurance policies
issued by ReliaStar Bankers. The assets of Separate Account I and its sub-
accounts are the property of ReliaStar Bankers. The portion of Separate
Account I assets applicable to the variable life policies will not be charged
with liabilities arising out of any other business ReliaStar Bankers may
conduct. The net assets maintained in the sub-accounts provide the basis for
the periodic determination of the amount of increased or decreased benefits
under the policies. The net assets may not be less than the amount required
under the state insurance law to provide for death benefits (without regard to
the minimum death benefit guarantee) and other policy benefits. Additional
assets are held in ReliaStar Bankers' general account to cover the contingency
that the guaranteed minimum death benefit might exceed the death benefit which
would have been payable in the absence of such guarantee.
In January 1995, ReliaStar Bankers became an indirect wholly-owned subsidiary
of ReliaStar Financial Corp. ("ReliaStar"), a financial services company based
in Minneapolis, Minnesota. Prior to that time ReliaStar Bankers was an
indirect wholly-owned subsidiary of USLICO Corporation. USLICO Series Fund
("Series Fund") is an open-end diversified management investment company whose
shares are sold only to ReliaStar Bankers and other affiliates separate
accounts.
(2) Summary of Significant Accounting Policies
(a) Valuation of Investments - Investments in shares of the Series Fund are
valued at the reported net asset value of the respective portfolios. The
aggregate cost of the investments acquired and the aggregate proceeds of
investments sold, for the year ended December 31, 1996, were:
Cost of Shares Proceeds from
Sub-account Acquired Shares Sold
Common Stock $ 1,730,933 $ 496,949
Money Market 239,222 119,626
Bond 79,033 170,973
Asset Allocation 616,657 388,530
Total $ 2,665,845 $ 1,176,078
(b) Security Transactions - Purchases and sales are recorded on the trade
date.
(c) Federal Income Taxes - ReliaStar Bankers is taxed as a life insurance
company under the Internal Revenue Code of 1986, as amended (the "Code").
Since the sub-accounts are not separate entities from ReliaStar Bankers, and
their operations form a part of ReliaStar Bankers, they will not be taxed
separately as a "regulated investment company" under Sub-chapter M of the
Code. Under existing Federal income tax law, investment income of the sub-
accounts, to the extent that it is applied to increase reserves under a
contract, is not taxed and may be compounded for reinvestment without
additional tax to ReliaStar Bankers.
(d) Charges Deducted from Premiums - Transfers to the sub-accounts of
Separate Account I for net premiums represent gross premiums payable for a
policy year, less deductions for sales loads, administrative expenses, premium
taxes, risk charges and additional premiums, if any, for optional insurance
benefits.
(e) Amounts Payable to ReliaStar Bankers - The amounts payable to ReliaStar
Bankers in each sub-account arises from the amount allocated from ReliaStar
Bankers to facilitate commencement of operations.
(f) Dividends - Dividends received on the shares held by the sub-accounts
of Separate Account I are reinvested to purchase additional shares of the
applicable portfolio of the Series Fund.
(g) Transfer of Investment and Operating Results from(to) ReliaStar Bankers
- - The sub-accounts transfer their investment and operating results in excess
of amounts required to meet policyholder reserve and liability amounts to
ReliaStar Bankers. When investment and operating results are insufficient to
meet reserve requirements, ReliaStar Bankers transfers to the sub-accounts
amounts sufficient to fund the deficiency. Also included in this transfer are
cost of insurance charges totaling $789,100, $805,900 and $862,400 for all
sub-accounts for the years ended December 31, 1996, 1995 and 1994
respectively.
(3) Administration and Related Party Transactions - A daily charge is made by
ReliaStar Bankers against each sub-account's investments for mortality and
expense risks at an effective annual rate of .50%. The mortality risk assumed
is that insureds may live for a shorter period of time than estimated and,
therefore, a greater amount of death benefits than expected will be payable in
relation to the amount of premiums received. The expense risk assumed is that
expenses incurred in issuing and administering the policies will be greater
than estimated. Other costs of administering Separate Account I are absorbed
by ReliaStar Bankers.
ReliaStar Financial Marketing Corporation, a direct wholly-owned ReliaStar
subsidiary, acts as principal underwriter (as defined in the Investment
Company Act of 1940) of Separate Account I's policies. Washington Square
Advisers, Inc., previously known as Washington Square Capital, Inc., also a
direct wholly-owned ReliaStar subsidiary, serves as investment adviser to the
Series Fund with respect to short-term and fixed maturity securities.
Newbold's Asset Management, Inc. serves as investment sub-adviser to the
Series Fund with respect to equity securities.
Certain officers and directors of ReliaStar and ReliaStar Bankers are also
officers and directors of ReliaStar Financial Marketing Corporation, the
Series Fund and Washington Square Advisers, Inc.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Reliastar Bankers Security Life Insurance Company
and ReliaStar Bankers Security Variable Life Separate Account I Policyowners:
We have audited the accompanying statement of assets and liabilities of
ReliaStar Bankers Security Variable Life Separate Account I as of December 31,
1996, and the related statements of operations and changes in net assets for
the years ended December 31, 1996 and 1995. These financial statements are
the responsibility of the management of ReliaStar Bankers Security Life
Insurance Company. Our responsibility is to express an opinion on these
financial statements based on our audits. The statement of operations and
changes in net assets for the year ended December 31, 1994 was audited by
other auditors whose report dated February 2, 1995 expressed an unqualified
opinion on the statement.
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 financial position of the ReliaStar Bankers
Security Variable Life Separate Account I as of December 31, 1996, and the
results of its operations and changes in net assets for the years ended
December 31, 1996 and 1995, in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Minneapolis, MN
January 31, 1997
