A Message to Variable Life Policyowners
We are now in the third year of significant increases in the U.S. Stock
Markets, as measured by the Dow Jones Industrial Average and the Standard &
Poor's 500 Index. Propelled by a second quarter increase of 17.1%, the Dow's
increase for the six months ended June 30, 1997 was 20.1%. The S&P increased
17.5% in the first quarter, and 20.6% for the first half of 1997. Both the
Dow Jones Industrial Average and the S&P 500 are unmanaged indices.
The yield on the 30 year Treasury Bond has decreased recently, so that at the
middle of July, 1997 it was approximately 6.5%. Short term rates, as measured
by the 3 month Treasury Bill, are approximately 5%, which is slightly lower
than a year ago.
The U.S. Gross Domestic Product for the second quarter of 1997 increased
approximately 2.2% while inflation remains low with the Consumer Price Index
increasing by 2.3% year-over-year on June 30, 1997.
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 June 30, 1997, the invested assets were allocated 96.0%
to 56 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 June 30, 1997, this portfolio held 20 different
issues of the highest quality commercial paper with maturities ranging from 1
week to 2 months.
The Investment Grade Bond Account. Bonds represented 84.9% of the investable
funds on June 30, 1997 with the remainder in a high quality money market fund.
The portfolio was comprised of 22 bond issues, with scheduled maturities
ranging from 15 months to 52 years.
The Asset Allocation Account. At June 30, 1997 invested assets were allocated
52.2% to common stocks. 42.0% to bonds with the remainder in a high quality
money market fund. There were 56 different common stock issues in the
portfolio and 46 different bond positions.
The Outlook. For the balance of 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 7 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.
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
June 30, 1997
(Unaudited)
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) $ 12,444,567 $ 4,869,326 $ 1,202,657 $ 5,707,175 $ 24,223,725
Policy loans 1,050,460 682,183 6,474 427,688 2,166,805
------------ ------------ ------------ ------------ ------------
Total assets 13,495,027 5,551,509 1,209,131 6,134,863 26,390,530
------------ ------------ ------------ ------------ ------------
Liabilities:
Net accrued for policy related
transactions due to ReliaStar Bankers 275,363 44,797 22,257 232,721 575,138
Amounts payable to ReliaStar Bankers 375,000 125,000 1,000,000 1,000,000 2,500,000
------------ ------------ ------------ ------------ ------------
Total liabilities 650,363 169,797 1,022,257 1,232,721 3,075,138
------------ ------------ ------------ ------------ ------------
Net assets - for variable life
insurance policies $ 12,844,664 $ 5,381,712 $ 186,874 $ 4,902,142 $ 23,315,392
============ ============ ============ ============ ============
Investments basis data:
Shares Owned 835,274 4,869,326 120,862 454,099
Cost $ 9,378,138 $ 4,869,326 $ 1,217,225 $ 4,968,742
</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 Six Months Ended June 30, 1997
(Unaudited)
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 109,110 $ 116,520 $ 36,536 $ 105,566 $ 367,732
Expenses:
Mortality and expense risk charges 28,703 12,226 2,926 13,501 57,356
------------ ------------ ------------ ------------ ------------
Net investment income 80,407 104,294 33,610 92,065 310,376
Net unrealized gains (losses) on investments 1,292,520 - (9,250) 306,366 1,589,636
Net realized gains (losses) on investments 84,115 - (533) 14,289 97,871
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 1,457,042 104,294 23,827 412,720 1,997,883
From policy related transactions:
Transfers in for net premiums 345,313 304,131 16,120 355,040 1,020,604
Transfers between sub-accounts 6,681 (8,745) 2,198 (134) -
Transfers for withdrawal/surrender (442,227) (181,372) (6,109) (190,503) (820,211)
Transfer of investment and operating
results to ReliaStar Bankers (200,863) (111,305) (24,222) (205,040) (541,430)
------------ ------------ ------------ ------------ ------------
Net increase in net assets 1,165,946 107,003 11,814 372,083 1,656,846
Net assets, beginning of period 11,678,718 5,274,709 175,060 4,530,059 21,658,546
------------ ------------ ------------ ------------ ------------
Net assets, end of period $ 12,844,664 $ 5,381,712 $ 186,874 $ 4,902,142 $ 23,315,392
============ ============ ============ ============ ============
</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 Six Months Ended June 30, 1996
(Unaudited)
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 131,432 $ 118,565 $ 41,257 $ 114,033 $ 405,287
Expenses:
Mortality and expense risk charges 25,732 12,451 3,255 13,198 54,636
------------ ------------ ------------ ------------ ------------
Net investment income 105,700 106,114 38,002 100,835 350,651
Net unrealized gains (losses) on investments 738,421 - (74,659) 27,190 690,952
Net realized gains (losses) on investments 112,451 - (2,455) 45,103 155,099
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations 956,572 106,114 (39,112) 173,128 1,196,702
From policy related transactions:
Transfers in for net premiums 359,218 318,936 17,877 383,297 1,079,328
Transfers between sub-accounts 12,975 (14,358) 1,629 (246) -
Transfers for withdrawal/surrender (400,989) (165,367) (2,071) (202,620) (771,047)
Transfer of investment and operating
results from (to) ReliaStar Bankers (180,783) (129,835) 29,428 (158,541) (439,731)
------------ ------------ ------------ ------------ ------------
Net increase in net assets 746,993 115,490 7,751 195,018 1,065,252
Net assets, beginning of period 9,937,227 5,081,267 158,765 3,933,006 19,110,265
------------ ------------ ------------ ------------ ------------
Net assets, end of period $ 10,684,220 $ 5,196,757 $ 166,516 $ 4,128,024 $ 20,175,517
============ ============ ============ ============ ============
</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 Six Months Ended June 30, 1995
(Unaudited)
Sub-accounts
Common Money Asset Total
Stock Market Bond Allocation Sub-accounts
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income:
Reinvested dividends $ 130,991 $ 139,772 $ 39,701 $ 109,672 $ 420,136
Expenses:
Mortality and expense risk charges 20,601 12,415 2,880 10,851 46,747
------------ ------------ ------------ ------------ ------------
Net investment income 110,390 127,357 36,821 98,821 373,389
Net unrealized gains on investments 1,146,583 - 86,737 474,231 1,707,551
Net realized gains on investments 21,777 - - 5,314 27,091
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations 1,278,750 127,357 123,558 578,366 2,108,031
From policy related transactions:
Transfers in for net premiums 404,382 295,025 17,925 431,469 1,148,801
Transfers between sub-accounts 16,614 (2,467) - (14,147) -
Transfers for withdrawal/surrender (304,209) (285,875) (4,565) (216,853) (811,502)
Transfer of investment and operating
results to ReliaStar Bankers (221,284) (118,647) (112,337) (282,679) (734,947)
------------ ------------ ------------ ------------ ------------
Net increase in net assets 1,174,253 15,393 24,581 496,156 1,710,383
Net assets, beginning of period 7,768,078 4,980,307 131,113 2,956,237 15,835,735
------------ ------------ ------------ ------------ ------------
Net assets, end of period $ 8,942,331 $ 4,995,700 $ 155,694 $ 3,452,393 $ 17,546,118
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ReliaStar Bankers Security Variable Life Separate Account I - Notes to
Financial Statements - June 30, 1997
(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 six months ended June 30, 1997, were:
Cost of Shares Proceeds from
Sub-account Acquired Shares Sold
----------- -------------- -------------
Common Stock $ 109,110 $ 467,598
Money Market 116,520 330,305
Bond 36,536 23,571
Asset Allocation 105,566 166,286
------- -------
Total $ 367,732 $ 987,760
(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 $417,800, $411,600 and $426,400 for all
sub-accounts for the six months ended June 30, 1997, 1996 and 1995 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.
Washington Square Securities, Inc., 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 Washington Square Securities, Inc., the Series Fund
and Washington Square Advisers, Inc.
