As filed with the Securities and Exchange Commission on May ___, 1997
Registration No. 333-19123
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
(Exact Name of Registrant)
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road
Woodbury, New York 11797
(Name and Address of principal executive office of depositor)
---------------------------------
Richard R. Crowl
Senior Vice President and General Counsel
ReliaStar Bankers Security Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55440
Copy to:
Robert B. Saginaw
Counsel
ReliaStar Bankers Security Life Insurance Company
20 Washington Avenue South
Minneapolis, MN 55440
Approximate date of proposed public offering:
As soon as practicable after the effective date of the
Registration Statement.
Flexible Premium Variable Life Insurance Policies -- Registration of an
indefinite amount of securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940.
---------------------------------
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
-----------------------------------
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
CROSS REFERENCE SHEET
(Reconciliation and Tie Sheet)
<TABLE>
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ITEM NUMBER OF FORM
N-8B-2 HEADING IN THE PROSPECTUS
------ -------------------------
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1 Cover Page
2 Cover Page
3 Not Applicable
4 Distribution of the Policies
5 ReliaStar Bankers Security Life Insurance Company
and the Variable Account
6 The Variable Account
7 Not Applicable
8 Not Applicable
9 Not Applicable
10 Summary; Death Benefit; Payment and Allocation of Premiums;
Death Benefit Guarantee; Accumulation Value; Policy Lapse
and Reinstatement; Surrender Benefits; Investments of the
Variable Account; Transfers; Policy Loans; Free Look and
Conversion Rights; Voting Rights; General Provisions;
Appendix A; Appendix B
11 Deductions and Charges; Investments of the
Variable Account
12 Investments of the Variable Account
13 Deductions and Charges
14 The Policies; General Definitions; Distribution of
the Policies
15 Payment and Allocation of Premiums; Investments of
the Variable Account
16 Payment and Allocation of Premiums; Surrender
Benefits; Investments of the Variable Account
17 Surrender Benefits; Policy Loans; Free Look and
Conversion Rights; General Provisions
18 The Variable Account; Investments of the Variable
Account; Payment and Allocation of Premiums
19 Voting Rights; General Provisions
20 Not Applicable
21 Policy Loans
22 Not Applicable
23 Bonding Arrangements
24 Definitions; General Provisions
25 ReliaStar Bankers Security Life Insurance Company
26 Not Applicable
27 ReliaStar Bankers Security Life Insurance Company;
Other Contracts Issued by Us
28 Management
29 ReliaStar Bankers Security Life Insurance Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
36 Not Applicable
37 Not Applicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41 Distribution of the Policies
42 Not Applicable
43 Not Applicable
44 Investments of the Variable Account; Payment and
Allocation of Premiums; Deductions and Charges
45 Not Applicable
46 Investments of the Variable Account; Deductions
and Charges
47 Investments of the Variable Account
48 ReliaStar Bankers Security Life Insurance Company;
State Regulation
49 Not Applicable
50 The Variable Account
51 Cover Page; The Policies; Death Benefit; Payment
and Allocation of Premiums; Deductions and
Charges; Policy Lapse and Reinstatement; General
Provisions; Free Look and Conversion Rights
52 Investments of the Variable Account
53 Federal Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Not Applicable
</TABLE>
Select*Life NY
May 15, 1997 PROSPECTUS
Flexible Premium Variable
Life Insurance Policy
[GRAPHIC OMITTED]
RELIASTAR
ReliaStar Bankers Security Life
[GRAPHIC OMITTED]
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road
Woodbury, New York 11797
--------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
RELIASTAR BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I
OF
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
This Prospectus describes a flexible premium variable life insurance policy
(the "Policy") offered by ReliaStar Bankers Security Life Insurance Company
("we", "us", "our", or "the Company"). This Policy is designed to provide
lifetime insurance protection up to Age 95, provided the Policy's Cash Surrender
Value (that is, the amount that would be paid to you upon surrender of the
Policy) is sufficient to pay certain monthly charges imposed under the Policy
(including the cost of insurance and certain administrative charges). It also is
designed to provide maximum flexibility in connection with premium payments and
death benefits by giving the Policy owner ("you", "your") the opportunity to
allocate net premiums among investment alternatives with different investment
objectives. A Policy owner may, subject to certain restrictions, including
limitations on premium payments, vary the frequency and amount of premium
payments and increase or decrease the level of death benefits payable under the
Policy. This flexibility allows a Policy owner to provide for changing insurance
needs under a single insurance contract.
The Policy provides for a death benefit payable at the Insured's death. As
long as the Policy remains in force, the death benefit will never be less than
the current Face Amount less any Policy loans and unpaid charges. The minimum
Face Amount of the Policy is currently $25,000. The Face Amount may be
increased, subject to certain limitations, provided that the increase is not
less than $5,000. Generally, the Policy will remain in force as long as the
Policy's Cash Surrender Value (that is, the amount that would be paid to you
upon surrender of the Policy) is sufficient to pay certain monthly charges
imposed in connection with the Policy (including the cost of insurance and
certain administrative charges). In addition, the Policy will remain in force
until the Insured reaches Age 65 (or five Policy Years, if longer), without
regard to the Cash Surrender Value, if on each Monthly Anniversary the total
premiums paid on the Policy, less any partial withdrawals and Policy loans,
equals or exceeds the total required Minimum Monthly Premium payments specified
in your Policy (which is a feature of the Policy called the "Death Benefit
Guarantee").
Net premiums paid under the Policy are allocated, according to your
instructions, either to the ReliaStar Bankers Security Variable Life Separate
Account I (the "Variable Account"), which is one of our separate accounts or,
with the exception of policies issued in New Jersey, to our General Account (the
"Fixed Account"). Any amounts allocated to the Variable Account will be
allocated to one or more Sub-Accounts of the Variable Account. The assets of
each Sub-Account will be invested solely in the shares of one of the four
portfolios of the Variable Insurance Products Fund ("VIP"), in one of the three
portfolios of the Variable Insurance Products Fund II ("VIP II"), in one of the
two funds available through the Northstar Variable Trust or in one of the three
funds available through Putnam Variable Trust (collectively the "Funds"). The
accompanying prospectus for each of the Funds describes the investment
objectives and attendant risks of each of the Funds and portfolios.
(Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE. A
CURRENT PROSPECTUS FOR EACH OF THE FUNDS MUST ACCOMPANY THIS PROSPECTUS AND
SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY _____, 1997.
If net premiums are allocated to the Variable Account, the amount of the
Policy's death benefit may, and the Policy's Accumulation Value (that is, the
total amount that a Policy provides for investment at any time) will, reflect
the investment performance of the Sub-Accounts of the Variable Account that you
select. You bear the entire investment risk for any amounts allocated to the
Variable Account; no minimum Accumulation Value in the Variable Account is
guaranteed. Regardless of how net premiums are allocated, the Policy's death
benefit may, and the Policy's Accumulation Value will, also depend upon the
frequency and amount of premiums paid, any partial withdrawals, loans, and the
charges and deductions assessed in connection with the Policy.
The Policy provides for a "free look" period after the issuance of the
Policy. See "Free Look and Conversion Rights -- Free Look Rights."
THE CHARGES IMPOSED UPON EARLY SURRENDER OR LAPSE WILL BE SIGNIFICANT. FOR
EXAMPLE, IF YOU MAKE PREMIUM PAYMENTS NO GREATER THAN THE MINIMUM MONTHLY
PREMIUM PAYMENTS SPECIFIED IN YOUR POLICY, YOU CAN EXPECT THAT DURING AT LEAST
THE EARLY POLICY YEARS, ALL OR SUBSTANTIALLY ALL OF YOUR PREMIUM PAYMENTS WILL
BE REQUIRED TO PAY THE SURRENDER CHARGE AND OTHER CHARGES ASSOCIATED WITH THE
POLICY. AS A RESULT, YOU SHOULD PURCHASE A POLICY ONLY IF YOU HAVE THE FINANCIAL
CAPABILITY TO KEEP IT IN FORCE FOR A SUBSTANTIAL PERIOD. ALSO, CHARGES IMPOSED
UPON SURRENDER OR THE LAPSE OF THE POLICY WILL USUALLY EXCEED THE ACCUMULATION
VALUE OF THE POLICY DURING THE EARLY POLICY YEARS, WHICH MEANS THAT PAYMENTS
SUFFICIENT TO MAINTAIN THE DEATH BENEFIT GUARANTEE WILL BE REQUIRED TO AVOID
LAPSE DURING THIS PERIOD OF TIME. THESE SAME CONSIDERATIONS APPLY AFTER A
REQUESTED INCREASE IN FACE AMOUNT, WHICH CREATES THE POSSIBILITY OF ADDITIONAL
CHARGES UPON SURRENDER OR LAPSE OF THE POLICY. SEE "PAYMENT AND ALLOCATION OF
PREMIUMS - AMOUNT AND TIMING OF PREMIUMS", "DEATH BENEFIT GUARANTEE", AND
"DEDUCTIONS AND CHARGES - SURRENDER CHARGE."
REPLACING EXISTING INSURANCE WITH A POLICY DESCRIBED IN THIS PROSPECTUS MAY
NOT BE TO YOUR ADVANTAGE. IN ADDITION, IT MAY NOT BE TO YOUR ADVANTAGE TO
PURCHASE THIS POLICY TO OBTAIN ADDITIONAL INSURANCE PROTECTION IF YOU ALREADY
OWN ANOTHER FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OR SOLICITATION IN ANY
JURISDICTION IN WHICH SUCH OFFERING OR SOLICITATION MAY NOT LAWFULLY BE MADE. NO
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING FUND PROSPECTUSES AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS ENTIRE PROSPECTUS SHOULD BE READ TO COMPLETELY UNDERSTAND THE POLICY
BEING OFFERED.
THE PRIMARY PURPOSE OF THE POLICY IS TO PROVIDE INSURANCE PROTECTION FOR
THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICY IS IN ANY
WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
<TABLE>
<CAPTION>
<S> <C>
DEFINITIONS........................................................................................................................6
PART 1. SUMMARY
How does the Policy compare to traditional life insurance?...............................................................10
What is the Death Benefit?...............................................................................................10
What flexibility do you have to adjust the amount of the Death Benefit?..................................................11
What is the Death Benefit Guarantee?.....................................................................................11
If the Death Benefit Guarantee is not in effect, what will cause the Policy to lapse?....................................11
What is the Fixed Account?...............................................................................................11
What is the Variable Account?............................................................................................11
What are the minimum and maximum premium payments allowed?...............................................................11
How are premiums allocated to the investment options?....................................................................12
Who are the investment advisers of the Funds?............................................................................12
What charges do we make against each premium payment?....................................................................12
What charges do we make against the Accumulation Value?..................................................................12
What charges do we make upon lapse or total surrender of the Policy?.....................................................12
What is the value of the Policy if you surrender it?.....................................................................13
Can you make partial withdrawals?........................................................................................13
What are the free look and conversion rights?............................................................................13
Can you transfer between the Sub-Accounts and/or the Fixed Account?......................................................13
Can you borrow against the value of the Policy?..........................................................................14
Are Death Benefit proceeds taxable income to the beneficiary?............................................................14
Are Accumulation Value increases included in your taxable income?........................................................14
Will exercising certain Policy rights have tax consequences?.............................................................14
Who sells the Policies?..................................................................................................14
PART 2. DETAILED INFORMATION
ReliaStar Bankers Security Life Insurance Company........................................................................14
The Variable Account.....................................................................................................15
Performance Information..................................................................................................15
The Policies.............................................................................................................16
Death Benefit............................................................................................................16
Death Benefit Options...........................................................................................17
Which Death Benefit Option to Choose............................................................................19
Requested Changes in Face Amount................................................................................19
Insurance Protection............................................................................................20
Change in Death Benefit Option..................................................................................21
Accelerated Benefit.............................................................................................22
Payment and Allocation of Premiums.......................................................................................22
Issuing the Policy..............................................................................................22
Allocation of Premiums..........................................................................................23
Amount and Timing of Premiums...................................................................................24
Planned Periodic Premiums.......................................................................................24
Unscheduled Additional Premiums.................................................................................25
Paying Premiums by Mail.........................................................................................25
Death Benefit Guarantee..................................................................................................25
Accumulation Value.......................................................................................................26
Deductions and Charges...................................................................................................27
Premium Expense Charge..........................................................................................27
Monthly Deduction...............................................................................................27
Surrender Charge................................................................................................28
Charges Against the Variable Account............................................................................29
Partial Withdrawal and Transfer Charges.........................................................................30
Reduction of Charges............................................................................................30
Policy Lapse and Reinstatement...........................................................................................31
Surrender Benefits.......................................................................................................31
Total Surrender.................................................................................................31
Partial Withdrawal..............................................................................................32
Transfers................................................................................................................32
Telephone/Fax Transfer Requests.................................................................................33
Dollar Cost Averaging Service...................................................................................33
Portfolio Rebalancing Service...................................................................................34
Policy Loans.............................................................................................................34
Free Look and Conversion Rights..........................................................................................36
Free Look Rights................................................................................................36
Conversion Rights...............................................................................................37
Investments of the Variable Account......................................................................................37
Fidelity's Variable Insurance Products Fund (VIP)...............................................................38
Fidelity's Variable Insurance Products Fund II (VIP II).........................................................39
Northstar Variable Trust (Northstar)............................................................................39
Putnam Variable Trust...........................................................................................40
Addition, Deletion, or Substitution of Investments..............................................................40
Voting Rights............................................................................................................40
General Provisions.......................................................................................................41
Benefits at Age 95..............................................................................................41
Ownership.......................................................................................................41
Proceeds........................................................................................................42
Beneficiary.....................................................................................................42
Postponement of Payments........................................................................................42
Settlement Options..............................................................................................42
Incontestability................................................................................................43
Misstatement of Age and Sex.....................................................................................43
Suicide.........................................................................................................41
Termination.....................................................................................................44
Amendment.......................................................................................................44
Reports.........................................................................................................44
Dividends.......................................................................................................45
Collateral Assignment...........................................................................................45
Optional Insurance Benefits.....................................................................................45
Federal Tax Matters......................................................................................................45
Policy Proceeds.................................................................................................45
Taxation of Distributions.......................................................................................46
Taxation of Policies Held by Pension, Certain Deferred Compensation Plans
and Other Arrangements........................................................................................47
Taxation of ReliaStar Bankers Security Life Insurance Company...................................................47
Other Considerations............................................................................................48
Legal Developments Regarding Employment -- Related Benefit Plans.........................................................48
Distribution of the Policies.............................................................................................48
Management...............................................................................................................49
Directors and Officers..........................................................................................49
State Regulation.........................................................................................................51
Legal Proceedings........................................................................................................51
Bonding Arrangements.....................................................................................................51
Legal Matters............................................................................................................51
Experts ................................................................................................................52
Registration Statement Contains Further Information......................................................................52
Financial Statements.....................................................................................................52
Appendix A - The Fixed Account..........................................................................................A-1
Appendix B - Calculation of Accumulation Value..........................................................................B-1
Appendix C - Illustration of Accumulation Values, Surrender Charges,
Cash Surrender Values and Death Benefits.......................................................................C-1
Appendix D - Maximum Surrender Charge Per $1,000 of Face Amount.........................................................D-1
Appendix E - Surrender Charge Whole Life Premium Per $1,000 of Face Amount..............................................E-1
Fund Prospectuses
Fidelity's Variable Insurance Products Fund (VIP):
Money Market Portfolio..............................................................................VIP-1
High Income Portfolio...............................................................................VIP-1
Equity-Income Portfolio.............................................................................VIP-1
Growth Portfolio....................................................................................VIP-1
Fidelity's Variable Insurance Products Fund II (VIP II):
Investment Grade Bond Portfolio.....................................................................VIP-1
Index 500 Portfolio.................................................................................VIP-1
Contrafund Portfolio................................................................................VIP-1
Northstar Variable Trust (Northstar):
Northstar Income and Growth Fund..............................................................Northstar-1
Northstar Multi-Sector Bond Fund..............................................................Northstar-1
Putnam Variable Trust:
Putnam VT Diversified Income Fund...................................................................PVT-1
Putnam VT Growth and Income Fund....................................................................PVT-1
Putnam VT Voyager Fund..............................................................................PVT-1
</TABLE>
DEFINITIONS
ACCUMULATION VALUE. The total value attributable to a specific Policy, which
equals the sum of the Variable Accumulation Value (the total of the values
in each Sub-Account of the Variable Account) and the Fixed Accumulation
Value (the value in the Fixed Account). See "Accumulation Value" at page 26
and Appendix B.
AGE. The Insured's age at the last birthday determined as of the beginning of
each Policy Year.
CASH SURRENDER VALUE. The Accumulation Value less any Surrender Charge, Loan
Amount and unpaid Monthly Deductions.
CASH VALUE. The Accumulation Value less any Surrender Charge.
CODE. Internal Revenue Code of 1986, as amended.
DEATH BENEFIT. The amount determined under the applicable Death Benefit Option
(the Level Amount Option or the Variable Amount Option). The proceeds
payable to the beneficiary of the Policy upon the death of the Insured
under either Death Benefit Option will be reduced by any Loan Amount and
any unpaid Monthly Deductions. See "Death Benefit" at page 16.
DEATH BENEFIT GUARANTEE. A feature of the Policy guaranteeing that the Policy
will not lapse before the Insured reaches Age 65 (or five Policy Years, if
longer) if, on each Monthly Anniversary, the total premiums paid on the
Policy, less any partial withdrawals and any Loan Amount, equals or exceeds
the total required Minimum Monthly Premium payments specified in your
Policy, including the Minimum Monthly Premium for the current Monthly
Anniversary. See "Death Benefit Guarantee" at page 25.
DEATH BENEFIT OPTION. Either of two death benefit options available under the
Policy (the Level Amount Option and the Variable Amount Option). See "Death
Benefit --Death Benefit Options" at page 17.
FACE AMOUNT. The minimum Death Benefit under the Policy as long as the Policy
remains in force. See "Death Benefit" at page 16.
FIXED ACCOUNT. The assets of ReliaStar Bankers Security Life Insurance Company
other than those allocated to the Variable Account or any other separate
account. See Appendix A.
FIXED ACCUMULATION VALUE. The value attributable to a specific Policy to the
extent such amount is attributable to the Fixed Account (our General
Account). Unlike the Variable Accumulation Value, the Fixed Accumulation
Value will not reflect the investment performance of the Funds. See
"Accumulation Value" at page 26 and Appendix B.
FUNDS. Any open-end management investment company (or portfolio thereof) or unit
investment trust (or series thereof) in which a Sub-Account invests as
described herein. See "Investments of the Variable Account" at page 37.
INSURED. The person upon whose life the Policy is issued.
ISSUE DATE. The date insurance coverage under a Policy begins.
LEVEL AMOUNT OPTION. One of two Death Benefit Options available under the
Policy. Under this option, the Death Benefit is the greater of the current
Face Amount or the corridor percentage of Accumulation Value on the
Valuation Date on or next following the date of the Insured's death. See
"Death Benefit--Death Benefit Options" at page 17.
LOAN AMOUNT. The sum of all unpaid Policy loans including unpaid interest due
thereon. See "Policy Loans" at page 34.
MINIMUM FACE AMOUNT. The minimum Face Amount shown in the Policy (currently
$25,000).
MINIMUM MONTHLY PREMIUM. A monthly premium amount specified in the Policy and
determined by us at issuance of the Policy. The initial Minimum Monthly
Premium will depend upon the Insured's sex, Age at issue, Rate Class,
optional insurance benefits added by rider, and the Initial Face Amount. A
requested increase or decrease in the Face Amount, a change in the Death
Benefit Option, or the addition or termination of a Policy rider may change
the Minimum Monthly Premium. The Minimum Monthly Premium determines the
payments required to maintain the Death Benefit Guarantee. See "Death
Benefit Guarantee" at page 25.
MONTHLY ANNIVERSARY. The same date in each succeeding month as the Policy Date.
Whenever the Monthly Anniversary falls on a date other than a Valuation
Date, the Monthly Anniversary will be considered to be the next Valuation
Date. The first Monthly Anniversary is on the Policy Date.
MONTHLY DEDUCTION. A monthly charge deducted from the Accumulation Value of the
Policy. This charge includes the cost of insurance, the Monthly
Administrative Charge, the Monthly Mortality and Expense Risk Charge, and
any charges for optional insurance benefits. See "Deductions and Charges -
Monthly Deduction" at page 27.
MONTHLY ADMINISTRATIVE CHARGE. A monthly charge to reimburse us for expenses
incurred in administering the Policy. This charge is part of the Monthly
Deduction. The amount of this charge is currently $7.50 per month and is
guaranteed not to exceed the product of $5.00 and the ratio (not to exceed
2.00) of (a) the Consumer Price Index (for all urban households) for the
preceding September to (b) the Consumer Price index for September 1985. See
"Deductions and Charges--Monthly Deduction" at page 27.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE. A monthly charge to compensate us for
certain mortality and expense risks we assume under the Policy. The
Mortality and Expense Risk Charge is anticipated to be charged at an annual
rate of .75 of 1% (.75%) of the Variable Accumulation Value of the Policy
but in no event will it exceed .9 of 1% (.90%) for the duration of the
Policy. See "Deductions and Charges - Monthly Mortality and Expense Risk
Charge" at page 28.
NET PREMIUM. The gross premium less a Premium Expense Charge deducted from each
premium.
NORTHSTAR. Northstar Variable Trust
Northstar Income and Growth Fund
Northstar Multi-Sector Bond Fund
PLANNED PERIODIC PREMIUM. The scheduled premium selected by you of a level
amount at a fixed interval. The initial Planned Periodic Premium you select
will be shown in the Policy. See "Payment and Allocation of Premiums --
Planned Periodic Premiums" at page 24.
POLICY, POLICIES. The flexible premium variable life insurance Policy offered by
us and described in this Prospectus.
POLICY ANNIVERSARY. The same date in each succeeding year as the Policy Date.
Whenever the Policy Anniversary falls on a date other than a Valuation
Date, the Policy Anniversary will be considered to be the next Valuation
Date.
POLICY DATE. The Policy Date is used in determining Policy Years, Policy Months,
Monthly Anniversaries, and Policy Anniversaries. The Policy Date will be
shown in the Policy.
POLICY MONTH. A month beginning on the Monthly Anniversary.
POLICY YEAR. A year beginning on the Policy Anniversary.
PREMIUM EXPENSE CHARGE. An amount deducted from each premium payment. The
Premium Expense Charge is currently 5.00% of each premium payment. See
"Deductions and Charges --Premium Expense Charge" at page 27.
PREMIUM RELATED SURRENDER CHARGE REDUCTION. A reduction to the Surrender Charge
when total premiums paid are less than the Surrender Charge Whole Life
Premium. See "Deductions and Charges--Surrender Charge" at page 28.
PUTNAM VARIABLE TRUST
Putnam VT Diversified Income Fund
Putnam VT Growth and Income Fund
Putnam VT Voyager Fund
RATE CLASS. A group of Insureds we determine based on our expectation that they
will have similar mortality experience.
SEC. Securities and Exchange Commission.
SIGNATURE GUARANTEE. A guarantee of your signature by a member firm of the New
York, American, Boston, Midwest, Philadelphia, or Pacific Stock Exchange,
or by a commercial bank (not a savings bank) which is a member of the
Federal Deposit Insurance Corporation, or, in certain cases, by a member
firm of the National Association of Securities Dealers, Inc. that has
entered into an appropriate agreement with us.
SUB-ACCOUNT. A sub-division of the Variable Account. Each Sub-Account invests
exclusively in the shares of a specified Fund.
SURRENDER CHARGE. A charge imposed upon total surrender or lapse of the Policy
during the first 15 Policy Years and the first 15 years following any
requested increase in Face Amount. See "Deductions and Charges --Surrender
Charge" at page 28.
SURRENDER CHARGE WHOLE LIFE PREMIUM. An amount used in calculating the Premium
Related Surrender Charge Reduction The Surrender Charge Whole Life Premium
will equal the amount obtained by dividing the Face Amount or the amount of
a requested increase, as the case may be, by $1,000, and multiplying the
result by the applicable factor from Appendix E. See "Deductions and
Charges--Surrender Charge" at page 28.
UNIT VALUE. The unit measure by which the value of the Policy's interest in each
Sub-Account is determined. See Appendix B.
VALUATION DATE. Each day on which the New York Stock Exchange is open for
business except for a day that a Sub-Account's corresponding Fund does not
value its shares. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day; Presidents' Day;
Good Friday; Memorial Day; July Fourth; Labor Day; Thanksgiving Day; and
Christmas Day. See Appendix B.
VALUATION PERIOD. The period between two successive Valuation Dates, commencing
at the close of business of a Valuation Date and ending at the close of
business of the next Valuation Date. See Appendix B.
VARIABLE ACCOUNT. ReliaStar Bankers Security Variable Life Separate Account I, a
separate investment account established by us to receive and invest Net
Premiums paid under the Policy. See "The Variable Account" at page 15.
VARIABLE ACCUMULATION VALUE. The value attributable to a specific Policy to the
extent such amount is attributable to the Variable Account. See
"Accumulation Value" at page 26 and Appendix B.
VARIABLE AMOUNT OPTION. One of two Death Benefit Options available under the
Policy. Under this option, the Death Benefit is the greater of the Face
Amount plus the Accumulation Value of the Policy, or the Accumulation Value
multiplied by the corridor percentage on the Valuation Date on or next
following the date of the Insured's death. See "Death Benefit --Death
Benefit Options" at page 17.
VIP. Variable Insurance Products Fund
Money Market Portfolio
High Income Portfolio
Equity-Income Portfolio
Growth Portfolio
VIP II. Variable Insurance Products Fund II
Investment Grade Bond Portfolio
Index 500 Portfolio
Contrafund Portfolio
WE, US, OUR. ReliaStar Bankers Security Life Insurance Company.
YOU, YOUR. The Policy owner as designated in the application for the Policy or
as subsequently changed. If a Policy has been absolutely assigned, the
assignee is the Policy owner. A collateral assignee is not the Policy
owner.
PART 1. SUMMARY
This is a brief summary of the Policy's features. More detailed information
follows later in this Prospectus.
HOW DOES THE POLICY COMPARE TO TRADITIONAL LIFE INSURANCE?
Like traditional life insurance:
* The Policy provides a guaranteed minimum amount of life insurance
coverage.
* As long as you meet the requirements for the Death Benefit Guarantee,
your Policy will remain in force until the Insured reaches Age 65 (or
five Policy Years, if longer).
* You can surrender the Policy while the Insured is living and receive
its Cash Surrender Value.
* The Policy has a loan value.
* The Fixed Accumulation Value is guaranteed.
Unlike traditional life insurance:
* You choose where the Net Premiums for the Policy are invested.
* You may transfer existing values among the investment options.
* The Variable Accumulation Value may increase or decrease based on the
investment performance of the Funds you select.
* You choose between two Death Benefit Options.
* You choose the amount and frequency of your premium payments.
* After the first Policy Year, you can increase or decrease the Face
Amount.
WHAT IS THE DEATH BENEFIT?
You choose one of two Death Benefit Options --the Level Amount Option or
the Variable Amount Option. The Death Benefit under the Level Amount Option is
the greater of the Face Amount or the corridor percentage multiplied by the
Accumulation Value on the Valuation Date on or next following the date of the
Insured's death. The Death Benefit under the Variable Amount Option is equal to
the greater of the Face Amount plus the Accumulation Value, or the corridor
percentage multiplied by the Accumulation Value on the Valuation Date on or next
following the date of the Insured's death. See "Death Benefit."
The proceeds payable upon the death of the Insured under either Death
Benefit Option will be reduced by any Loan Amount and any unpaid Monthly
Deductions.
The Death Benefit will never be less than the Face Amount as long as the
Policy is in force and there is no Loan Amount or unpaid Monthly Deductions.
Under certain circumstances a part of the Death Benefit may be paid to you
when the Insured has been diagnosed as having a terminal illness. See
"Accelerated Benefit."
WHAT FLEXIBILITY DO YOU HAVE TO ADJUST THE AMOUNT OF THE DEATH BENEFIT?
After the second Policy Year, you have flexibility to adjust the Death
Benefit by increasing or decreasing the Face Amount. You cannot decrease the
Face Amount below the Minimum Face Amount shown in the Policy. Any increase in
the Face Amount must be at least $5,000 and may require additional evidence of
insurability satisfactory to us and will result in additional charges. See
"Death Benefit --Requested Changes in Face Amount."
Generally, you may also change the Death Benefit Option at any time after
the second Policy Year. See "Death Benefit --Change in Death Benefit Option."
For a discussion of available techniques to adjust the amount of insurance
protection to satisfy changing insurance needs, see "Death Benefit --Insurance
Protection."
WHAT IS THE DEATH BENEFIT GUARANTEE?
Until the Insured reaches Age 65 (or five Policy Years, if longer), if you
meet the requirements for the Death Benefit Guarantee we will not lapse your
Policy, even if the Cash Surrender Value is not sufficient to cover the Monthly
Deduction that is due. See "Death Benefit Guarantee."
IF THE DEATH BENEFIT GUARANTEE IS NOT IN EFFECT, WHAT WILL CAUSE THE POLICY TO
LAPSE?
The Policy will only lapse if the Cash Surrender Value is less than the
Monthly Deduction due and if a grace period of 61 days expires without a
sufficient payment. The Policy thus differs in two important respects from
traditional life insurance. First, the failure to pay a Planned Periodic Premium
will not automatically cause the Policy to lapse. Second, even if Planned
Periodic Premiums have been paid, the Policy may lapse. See "Policy Lapse and
Reinstatement --Lapse."
WHAT IS THE FIXED ACCOUNT?
The Fixed Account consists of all of our assets other than those in our
separate accounts (including the Variable Account). We credit interest of at
least 4% per year on any amounts you have in the Fixed Account. From time to
time we may guarantee interest in excess of 4%. Interests in the Fixed Account
have not been registered under the Securities Act of 1933 nor is the Fixed
Account subject to the restrictions of the Investment Company Act of 1940. See
Appendix A, "The Fixed Account."
WHAT IS THE VARIABLE ACCOUNT?
The ReliaStar Bankers Security Variable Life Separate Account I is one of
our separate accounts. Only premiums from our variable life insurance policies
are invested in the Variable Account. See "The Variable Account."
The Variable Account is divided into Sub-Accounts. Premiums allocated to
each Sub-Account are invested in shares, at net asset value, of the Fund
corresponding to that Sub-Account. The Variable Accumulation Value of the Policy
will vary with, among other things, the investment performance of the Funds to
which Policy premiums are allocated and the charges deducted from the Variable
Accumulation Value. See "Accumulation Value."
WHAT ARE THE MINIMUM AND MAXIMUM PREMIUM PAYMENTS ALLOWED?
With certain restrictions, you can choose when you pay premiums and how
much each payment will be. In most cases, however, payment of cumulative
premiums sufficient to maintain the Death Benefit Guarantee will be required to
keep the Policy in force during at least the first several Policy Years. See
"Death Benefit Guarantee." We may choose not to accept a payment of less than
$25.00. We do, however, reserve the right to limit the amount of any payment and
certain maximum limits apply. We will return to you any premium paid to the
extent that total premiums paid, both scheduled and unscheduled, would exceed
the current maximum premium payments allowed for life insurance under Federal
tax law. See "Payment and Allocation of Premiums --Amount and Timing of
Premiums."
HOW ARE PREMIUMS ALLOCATED TO THE INVESTMENT OPTIONS?
You choose the premium allocation on the application. You can allocate
premiums to the Fixed Account and/or one or more Sub-Accounts of the Variable
Account. The Fixed Account is not available to allocate premiums under policies
issued in New Jersey. The initial allocation remains in effect for any future
premium payments until you change it. See "Payment and Allocation of Premiums
- --Allocation of Premiums."
WHO ARE THE INVESTMENT ADVISERS OF THE FUNDS?
Fidelity Management & Research Company is the investment adviser of VIP's
four portfolios and of VIP II's three portfolios.
Northstar Investment Management Corporation, an affiliate of ours, is the
investment adviser of Northstar's two funds.
Putnam Investment Management, Inc. ("Putnam Management") is the investment
adviser of Putnam Variable Trust's three funds.
For the expenses of each Fund see "Deductions and Charges - Charges Against
the Variable Account."
WHAT CHARGES DO WE MAKE AGAINST EACH PREMIUM PAYMENT?
We deduct an amount (the Premium Expense Charge) from each premium and
credit the remaining premium (the Net Premium) to the Fixed Account or to the
Variable Account in accordance with your instructions. The Premium Expense
Charge is 5.00% of each premium payment. See "Deductions and Charges - Premium
Expense Charge."
WHAT CHARGES DO WE MAKE AGAINST THE ACCUMULATION VALUE?
The Accumulation Value of the Policy is subject to several charges --the
Monthly Deduction and transfer and partial withdrawal charges.
The Monthly Deduction will be deducted monthly from both the Fixed
Accumulation Value and the Variable Accumulation Value and includes the cost of
insurance, the Monthly Administrative Charge, the Monthly Mortality and Expense
Risk Charge, and charges for optional insurance benefits (other than any Waiver
of Monthly Deduction rider). The cost of insurance will be determined by
multiplying the applicable cost of insurance rate(s) by the net amount at risk.
The Monthly Administrative Charge is currently $7.50 per month and is guaranteed
not to exceed the product of $5.00 and the ratio (not to exceed 2.00) of (a) the
Consumer Price Index (for all urban households) for the preceding September to
(b) the Consumer Price Index for September 1985. The Monthly Mortality and
Expense Risk Charge is anticipated to be equal to one-twelfth of .75 of 1%
(.75%) of the Variable Accumulation Value (that is, the total value attributable
to a specific Policy in the Sub-Accounts of the Variable Account) but in no
event will it exceed .9 of 1% (.90%) for the duration of the Policy. The charges
for optional insurance benefits will vary depending upon the benefit(s)
selected. See "Deductions and Charges --Monthly Deduction."
There is currently no charge imposed for each transfer but we presently
charge $10.00 for each partial withdrawal. The charge for transfers is
guaranteed not to exceed $25.00 per transfer for transfers in excess of 12 per
Policy Year for the duration of the Policy. The charge for partial withdrawals
is guaranteed not to exceed $25.00 for the duration of the Policy. See
"Deductions and Charges --Partial Withdrawal and Transfer Charges."
WHAT CHARGES DO WE MAKE UPON LAPSE OR TOTAL SURRENDER OF THE POLICY?
During the first 15 years the Policy is in force and the first 15 years
following a requested increase in the Face Amount, there is a charge if the
Policy lapses or you surrender the Policy (the Surrender Charge). See
"Deductions and Charges --Surrender Charge" and Appendixes D and E.
The maximum Surrender Charge on the Initial Face Amount and on any
requested increases in Face Amount will be determined on the Policy Date and on
the effective date of any such requested increase, as the case may be. This
maximum charge then remains level during the first five years in the relevant
15-year period, and then reduces in equal monthly increments until it becomes
zero at the end of 15 years. Thus, if the Policy remains in force during the
entire relevant 15-year period, you do not pay this charge.
The Surrender Charge on the Initial Face Amount will depend upon the
Initial Face Amount, the Insured's Age on the Policy Date, the Insured's sex,
and the Insured's Rate Class. The Surrender Charge on any requested increase in
Face Amount will depend upon the Face Amount of the increase, the Insured's Age
on the effective date of the increase, the Insured's sex, and the Insured's Rate
Class on the effective date of the increase.
The Surrender Charge imposed upon early surrender or lapse will be
significant. As a result, you should purchase a Policy only if you have the
financial capability to keep it in force for a substantial period of time.
WHAT IS THE VALUE OF THE POLICY IF YOU SURRENDER IT?
In general, the Cash Surrender Value is the amount you would receive if you
surrender the Policy. To determine the Cash Surrender Value, your Accumulation
Value is reduced by the Surrender Charge, if any, and any Loan Amount and unpaid
Monthly Deductions.
CAN YOU MAKE PARTIAL WITHDRAWALS?
Yes, you can withdraw part of your Cash Surrender Value. Each partial
withdrawal must be at least $500. You will not incur a Surrender Charge, but
partial withdrawals are subject to a processing charge. We currently make a
$10.00 charge for each partial withdrawal. The charge is guaranteed not to
exceed $25.00 per partial withdrawal. Only one partial withdrawal is allowed in
any Policy Year. See "Surrender Benefits --Partial Withdrawal."
WHAT ARE THE FREE LOOK AND CONVERSION RIGHTS?
You have a limited free look period during which you have a right to return
the Policy and receive a refund of all premiums paid. See "Free Look and
Conversion Rights -- Free Look Rights." The Policy must be returned to us by
midnight of the 20th day after you receive it.
Also, the Policy may in effect be converted in whole or in part to a "fixed
benefit" policy (providing benefits that do not vary with the investment
performance of the Variable Account) at any time during the first two Policy
Years by transferring all or part of the Accumulation Value of the Policy from
the Variable Account to the Fixed Account. For policies issued in Connecticut
and New Jersey, the conversion right may be exercised by transferring to a
different permanent fixed benefit life insurance policy offered by us in those
states. See "Free Look and Conversion Rights --Conversion Rights." Similar
conversion rights will be available for requested increases in the Face Amount.
See "Free Look and Conversion Rights."
CAN YOU TRANSFER BETWEEN THE SUB-ACCOUNTS AND/OR THE FIXED ACCOUNT?
Subject to certain restrictions, you can transfer all or part of your
Accumulation Value between the investment options of the Policy. We currently
allow up to twelve transfers per year. Transfers from the Fixed Account are
subject to certain additional restrictions. We reserve the right to limit you to
12 transfers per year and to make a charge for each transfer in excess of 12.
(Transfers to or from the Fixed Account are not available for policies issued in
New Jersey.) We currently make no charge for each transfer. This charge is
guaranteed not to exceed $25.00 per transfer for transfers in excess of 12 per
year. To the extent, however, that you request a transfer from the Variable
Account to the Fixed Account in connection with exercising your conversion
rights under the Policy, the limit on the number of transfers and the charge
will not apply. See "Free Look and Conversion Rights--Conversion Rights" and
"Transfers."
CAN YOU BORROW AGAINST THE VALUE OF THE POLICY?
At any time after the first Policy Year, you can borrow the Cash Value of
the Policy less any existing Loan Amount. Each loan must be at least $500.
Interest is payable in advance for each Policy Year and accrues daily at an
effective annual rate that will not exceed 6.00% (which is 5.66% when payable in
advance). After the tenth Policy Year, we will charge interest at an annual rate
of 4.00% (which is 3.85% when payable in advance) on the portion of your Loan
Amount that is not in excess of (a) the Accumulation Value, less (b) the total
of all premiums paid net of all partial withdrawals. See "Policy Loans."
ARE DEATH BENEFIT PROCEEDS TAXABLE INCOME TO THE BENEFICIARY?
Under current Federal tax law, as long as the Policy qualifies as life
insurance the Death Benefit under the Policy will be subject to the same Federal
income tax treatment as proceeds of traditional life insurance. Therefore, the
Death Benefit should not be taxable income to the beneficiary. See "Federal Tax
Matters --Policy Proceeds."
ARE ACCUMULATION VALUE INCREASES INCLUDED IN YOUR TAXABLE INCOME?
Under current Federal tax law, as long as the Policy qualifies as life
insurance, Accumulation Value increases will also be subject to the same Federal
income tax treatment as traditional life insurance cash values. Therefore, any
increases should accumulate on a tax deferred basis. See "Federal Tax Matters
- --Policy Proceeds."
WILL EXERCISING CERTAIN POLICY RIGHTS HAVE TAX CONSEQUENCES?
A change of owners, a partial withdrawal, a total surrender, or a Policy
loan may have tax consequences depending on the particular circumstances. See
"Federal Tax Matters --Policy Proceeds."
WHO SELLS THE POLICIES?
The Policies are sold by licensed insurance agents who are also registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 and who are members of the National Association of Securities Dealers,
Inc. Washington Square Securities, Inc., an affiliate of ours, is the Principal
Underwriter of the Policies. See "Distribution of the Policies."
PART 2. DETAILED INFORMATION
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
We are a stock life insurance company incorporated under the laws of the
State of New York in 1917 under the name The Morris Plan Insurance Society. In
1946 we adopted the name Bankers Security Life Insurance Society, and in 1996 we
adopted our present name. We are authorized to transact business in all states,
the District of Columbia, and the Dominican Republic. We were the first company
to write credit life insurance and until 1950 our business was confined to
credit life insurance on a group and individual basis initiated in connection
with loans made by banks and other lenders. In 1950 we began writing ordinary
life insurance. In 1962 we acquired, through merger, Postal Life Insurance
Company, a New York chartered stock life insurance company. In 1971 we acquired,
through merger, Congressional Life Insurance Company, a New York chartered stock
life insurance company. In 1996 we acquired, through merger, The North Atlantic
Life Insurance Company of America, also a New York chartered stock life
insurance company.
Our principal office is located at 1000 Woodbury Road, Suite 102, P.O. Box
9004, Woodbury, New York 11797.
On December 20, 1979, we became a wholly-owned subsidiary of United
Services Life Insurance Company ("United Services") which became an indirect,
wholly owned subsidiary of ReliaStar Financial Corp. ("ReliaStar"), formerly The
NWNL Companies, Inc., when ReliaStar acquired USLICO Corporation on January 20,
1995. ReliaStar is a holding company whose subsidiaries specialize in life
insurance and related financial services businesses.
THE VARIABLE ACCOUNT
The Variable Account is a Separate Account of ours, established by the
Board of Directors on March 23, 1982 pursuant to the laws of the State of New
York. The Variable Account will receive and invest the Net Premiums paid and
allocated to it under this Policy. In addition, the Variable Account currently
receives and invests net premiums for another class of scheduled premium
variable life insurance policy and may do so for additional classes in the
future. The Variable Account meets the definition of a "separate account" under
the federal securities laws and has been registered with the SEC as a unit
investment trust under the Investment Company Act of 1940. The registration does
not involve supervision by the SEC of the management or investment policies or
practices of the Variable Account, us, or the Funds.
We own the assets of the Variable Account. However, the New York laws under
which the Variable Account was established provide that the Variable Account
cannot be charged with liabilities arising out of any other business we may
conduct. We are required to maintain assets which are at least equal to the
reserves and other liabilities of the Variable Account. We may transfer assets
which exceed these reserves and liabilities to our general account (the Fixed
Account).
For a description of the Fixed Account, see Appendix A to this Prospectus.
PERFORMANCE INFORMATION
Performance information for the Sub-Accounts of the Variable Account and
the Funds available for investment by the Variable Account may appear in
advertisements, sales literature, or reports to Policy owners or prospective
purchasers. Performance information for the Sub-Accounts will reflect deductions
of Fund expenses and be adjusted to reflect the Mortality and Expense Risk
Charge, but will not reflect deductions for the cost of insurance or the
Surrender Charge. Quotations of performance information for the Funds will be
accompanied by performance information for the Sub- Accounts. Performance
information for the Funds will take into account all fees and charges at the
Fund level, but will not reflect any deductions from the Variable Account.
Performance information reflects only the performance of a hypothetical
investment during a particular time period in which the calculations are based.
Performance information showing total returns and average annual total returns
may be provided for periods prior to the date a Sub-Account commenced operation.
Such performance information will be calculated based on the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
Funds, with the level of charges at the Variable Account level that were in
effect at the inception of the Sub-Accounts. Performance information should be
considered in light of the investment objectives and policies, characteristics
and quality of the portfolio of the Fund in which the Sub-Account invests, and
the market conditions during the given period of time, and should not be
considered as a representation of what may be achieved in the future.
We may also provide individualized hypothetical illustrations of Policy
Accumulation Value, Cash Surrender Value and Death Benefit based on historical
investment returns of the Funds. These illustrations will reflect deductions for
Fund expenses and Policy and Variable Account charges, including the Monthly
Deduction, Premium Expense Charge and the Surrender Charge. These hypothetical
illustrations will be based on the actual historical experience of the Funds as
if the Sub-Accounts had been in existence and a Policy issued for the same
periods as those indicated for the Funds.
Performance of the Sub-Accounts and/or the Funds as reported from time to
time in advertisements and sales literature may be compared to other variable
life insurance issuers in general or to the performance of particular types of
variable life insurance policies investing in mutual funds, or investment series
of mutual funds with investment objectives similar to each of the Sub-Accounts,
whose performance is reported by Lipper Analytical Services, Inc. ("Lipper") and
Morningstar, Inc. ("Morningstar") or reported by other series, companies,
individuals or other industry or financial publications of general interest,
such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK, BARRON'S,
KIPLINGER'S PERSONAL FINANCE, and FORTUNE. Lipper and Morningstar are
independent services which monitor and rank the performances of variable life
insurance issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable annuity issuers as
well as variable life insurance issuers. The performance analysis prepared by
Lipper and Morningstar ranks such issuers on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges, redemption fees
or certain expense deductions at the separate account level into consideration.
We may also compare the performance of each Sub-Account in advertising and
sales literature to the Standard & Poor's Index of 500 common stocks and the Dow
Jones Industrials, which are widely used measures of stock market performance.
We may also compare the performance of each Sub-Account to other widely
recognized indices. Unmanaged indices may assume the reinvestment of dividends,
but typically do not reflect any "deduction" for the expense of operating or
managing an investment portfolio.
THE POLICIES
The Policies are flexible premium variable life insurance contracts with
death benefits, cash values, and other features of traditional life insurance
contracts. They are "flexible premium" because premiums do not have to be paid
according to a fixed schedule. They are "variable" because, to the extent
Accumulation Value is attributable to the Variable Account, Accumulation Values
and, under certain circumstances, the Death Benefit will increase and decrease
based on the investment performance of the Funds in which the Sub-Accounts to
which you allocate your premium payments invest.
DEATH BENEFIT
Like traditional life insurance, we pay a death benefit if the Insured dies
while the Policy is in force. The proceeds payable upon the death of the Insured
will be the Death Benefit (see "Death Benefit Options" below) reduced by any
Loan Amount and unpaid Monthly Deductions. All or part of the proceeds may be
paid in cash to your beneficiaries or under one or more of the settlement
options we offer. See "General Provisions --Settlement Options."
The Policy provides two Death Benefit Options: the Level Amount Option and
the Variable Amount Option. You choose the Death Benefit Option on the
application for the Policy. Subject to certain limitations, you can change the
Death Benefit Option after issuance of the Policy. See "Death Benefit --Change
in Death Benefit Option."
The Death Benefit may vary with the Policy's Accumulation Value. Under the
Level Amount Option, the Death Benefit will only vary with the Accumulation
Value whenever the Accumulation Value multiplied by the corridor percentage (see
"Death Benefit Options --Level Amount Option") exceeds the Face Amount of the
Policy. The Death Benefit under the Variable Amount Option will always vary with
the Accumulation Value because the Death Benefit equals the Face Amount plus the
Accumulation Value, or the corridor percentage of the Accumulation Value. Under
either Death Benefit Option, however, the Death Benefit will never be less than
the current Face Amount of the Policy and will be payable only as long as the
Policy remains in force.
In addition to affecting the amount of the Death Benefit as described
above, the Accumulation Value generally determines how long the Policy remains
in force. See "Policy Lapse and Reinstatement." This means that, to the extent
Accumulation Value is attributable to the Variable Account, the investment
performance of the Variable Account (and the underlying Funds) may affect the
duration of the Policy by affecting the amount of Accumulation Value. You bear
the investment risk with respect to any amounts allocated to the Variable
Account. If, however, the Death Benefit Guarantee is in effect (see "Death
Benefit Guarantee"), the Policy will stay in force until the Insured reaches Age
65 (or five Policy Years, if longer) without regard to the investment
performance under the Policy.
Appendix C illustrates Accumulation Values, Surrender Charges, Cash
Surrender Values, and Death Benefits assuming different levels of premium
payments and investment returns for selected Ages and Face Amounts.
DEATH BENEFIT OPTIONS
The Level Amount Option and the Variable Amount Option are described below.
LEVEL AMOUNT OPTION. The Death Benefit is the greater of the current Face
Amount of the Policy or the corridor percentage multiplied by the Accumulation
Value on the Valuation Date on or next following the date of the Insured's
death. The corridor percentage is 250% for an Insured Age 40 or below, and the
percentage declines with increasing Ages as shown below in the Corridor
Percentage Table. Accordingly, under the Level Amount Option the Death Benefit
will remain level unless the corridor percentage of Accumulation Value exceeds
the current Face Amount, in which case the amount of the Death Benefit will vary
as the Accumulation Value varies.
ILLUSTRATION OF LEVEL AMOUNT OPTION. For purposes of this illustration,
assume that the Insured is under Age 40, and that there is no Loan Amount. Under
the Level Amount Option, a Policy with a $100,000 Face Amount will generally
have a $100,000 Death Benefit. However, because the Death Benefit must be equal
to or be greater than 250% of the Accumulation Value, any time the Accumulation
Value of the Policy exceeds $40,000, the Death Benefit will exceed the $100,000
Face Amount. Each additional dollar added to the Accumulation Value above
$40,000 will increase the Death Benefit by $2.50. Thus, if the Accumulation
Value exceeds $40,000 and increases by $100 because of investment performance or
premium payments, the Death Benefit will increase by $250. A Policy owner with
an Accumulation Value of $50,000 will be entitled to a Death Benefit of $125,000
($50,000 X 250%); an Accumulation Value of $75,000 will yield a Death Benefit of
$187,500 ($75,000 X 250%); and an Accumulation Value of $100,000 will yield a
Death Benefit of $250,000 ($100,000 X 250%).
Similarly, as long as the Accumulation Value exceeds $40,000, each dollar
taken out of the Accumulation Value will reduce the Death Benefit by $2.50. If,
for example, the Accumulation Value is reduced from $75,000 to $70,000 because
of partial withdrawals, charges, or negative investment performance, the Death
Benefit will be reduced from $187,500 to $175,000. If at any time, however, the
Accumulation Value multiplied by the corridor percentage is less than the Face
Amount, the Death Benefit will equal the current Face Amount of the Policy.
The corridor percentage becomes lower as the Insured's Age increases. If
the current Age of the Insured in the illustration above were, for example, 50
(rather than under Age 40), the corridor percentage would be 185%. The Death
Benefit would not exceed the $100,000 Face Amount unless the Accumulation Value
exceeded approximately $54,055 (rather than $40,000), and each $1 then added to
or taken from the Accumulation Value would change the Death Benefit by $1.85
(rather than $2.50).
CORRIDOR PERCENTAGE TABLE
INSURED'S AGE ON CORRIDOR PERCENTAGE
PREVIOUS POLICY ANNIVERSARY OF ACCUMULATION VALUE
--------------------------- ---------------------
40 or younger 250%
41 243
42 236
43 229
44 222
45 215
46 209
47 203
48 197
49 191
50 185
51 178
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
62 126
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
73 109
74 107
75-90 105
91 104
92 103
93 102
94 101
95 100
VARIABLE AMOUNT OPTION. The Death Benefit is equal to the greater of the
current Face Amount plus the Accumulation Value of the Policy, or the corridor
percentage multiplied by the Accumulation Value on the Valuation Date on or next
following the date of the Insured's death. The corridor percentage is 250% for
an Insured Age 40 or below, and the percentage declines with increasing Ages as
shown in the Corridor Percentage Table above. Accordingly, under the Variable
Amount Option the amount of the Death Benefit will always vary as the
Accumulation Value varies.
ILLUSTRATION OF VARIABLE AMOUNT OPTION. For purposes of this illustration,
assume that the Insured is under Age 40 and that there is no Loan Amount. Under
the Variable Amount Option, a Policy with a Face Amount of $100,000 will
generally pay a Death Benefit of $100,000 plus the Accumulation Value. Thus, for
example, a Policy with an Accumulation Value of $20,000 will have a Death
Benefit of $120,000 ($100,000 + $20,000); an Accumulation Value of $40,000 will
yield a Death Benefit of $140,000 ($100,000 + $40,000). The Death Benefit,
however, must be at least 250% of the Accumulation Value. As a result, if the
Accumulation Value of the Policy exceeds approximately $66,667, the Death
Benefit will be greater than the Face Amount plus the Accumulation Value. Each
additional dollar of the Accumulation Value above $66,667 will increase the
Death Benefit by $2.50. Thus, if the Accumulation Value exceeds $66,667 and
increases by $100 because of investment performance or premium payments, the
Death Benefit will increase by $250. A Policy owner with an Accumulation Value
of $75,000 will be entitled to a Death Benefit of $187,500 ($75,000 X 250%); an
Accumulation Value of $100,000 will yield a Death Benefit of $250,000 ($100,000
X 250%); and an Accumulation Value of $125,000 will yield a Death Benefit of
$312,500 ($125,000 X 250%).
Similarly, any time the Accumulation Value exceeds $66,667, each dollar
taken out of the Accumulation Value will reduce the Death Benefit by $2.50. If,
for example, the Accumulation Value is reduced from $75,000 to $70,000 because
of partial withdrawals, charges, or negative investment performance, the Death
Benefit will be reduced from $187,500 to $175,000. If at any time, however, the
Accumulation Value multiplied by the corridor percentage is less than the Face
Amount plus the Accumulation Value, then the Death Benefit will be the current
Face Amount plus the Accumulation Value of the Policy.
The corridor percentage becomes lower as the Insured's Age increases. If
the current Age of the Insured in the illustration above were, for example, 50
(rather than under 40), the corridor percentage would be 185%. The amount of the
Death Benefit would be the sum of the Accumulation Value plus $100,000 unless
the Accumulation Value exceeded approximately $117,647 (rather than $66,667),
and each $1 then added to or taken from the Accumulation Value would change the
Death Benefit by $1.85 (rather than $2.50).
WHICH DEATH BENEFIT OPTION TO CHOOSE
If you prefer to have premium payments and favorable investment performance
reflected partly in the form of an increasing Death Benefit, you should choose
the Variable Amount Option. If you are satisfied with the amount of your
existing insurance coverage and prefer to have premium payments and favorable
investment performance reflected to the maximum extent in the Accumulation
Value, you should choose the Level Amount Option.
REQUESTED CHANGES IN FACE AMOUNT
Subject to certain limitations, you may request an increase or decrease in
the Face Amount. No increase or decrease in the Face Amount will be permitted
during the first Policy Year.
INCREASES. For an increase in the Face Amount, a written request must be
submitted to us. We may also require additional evidence of insurability
satisfactory to us. The effective date of the increase will be the Monthly
Anniversary on or next following our approval of the increase. The increase may
not be less than $5,000 and no increase will be permitted after the Insured
reaches Age 75. We will deduct any charges associated with the increase (the
increases in the cost of insurance and the Surrender Charge upon lapse or total
surrender -- see "Effect of Requested Changes in Face Amount" below) from the
Accumulation Value, whether or not you pay an additional premium in connection
with the increase. You will be entitled to limited conversion rights with
respect to requested increases in Face Amount. See "Free Look and Conversion
Rights."
DECREASES. For a decrease in the Face Amount, a written request must also
be submitted to us. Any decrease in the Face Amount will be effective on the
Monthly Anniversary on or next following our receipt of a written request. The
Face Amount remaining in force after any requested decrease may not be less than
the Minimum Face Amount shown in the Policy. Under our current policies, the
Minimum Face Amount is $25,000, but we reserve the right to establish a
different Minimum Face Amount in the future. If, following a decrease in Face
Amount, the Policy would no longer qualify as life insurance under Federal tax
law (see "Federal Tax Matters -- Policy Proceeds"), the decrease will be limited
to the extent necessary to meet these requirements.
For purposes of determining the cost of insurance, decreases in the Face
Amount will be applied to reduce the current Face Amount in the following order:
(a) The Face Amount provided by the most recent increase;
(b) The next most recent increases successively; and
(c) The Face Amount when the Policy was issued.
By reducing the current Face Amount in this manner, the Rate Class
applicable to the most recent increase in Face Amount will be eliminated first,
then the Rate Class applicable to the next most recent increase, and so on, for
the purposes of calculating the cost of insurance. This assumption will affect
the cost of insurance under the Policy only if different Rate Classes have been
applied to the current Face Amount. A Rate Class is a group of Insureds we
determine based upon our expectation that they will have similar mortality
experience. We currently place Insureds into standard Rate Classes or into
substandard Rate Classes that involve a higher mortality risk (for example, a
200% Rate Class or a 300% Rate Class). In an otherwise identical Policy, an
Insured in the standard Rate Class will have a lower cost of insurance than an
Insured in a substandard Rate Class with higher mortality risks. See "Deductions
and Charges -- Monthly Deduction."
For example, assume that the Initial Face Amount was $50,000 with a
standard Rate Class, and that successive increases of $25,000 (at a Rate Class
of 200%) and $50,000 (at a Rate Class of 300%) were added. If a decrease of
$50,000 or less is requested, the amount of insurance at a 300% Rate Class will
be reduced first. If a decrease of more than $50,000 is requested, the amount at
a 300% Rate Class will be eliminated, and the excess over $50,000 will next
reduce the amount of insurance at a 200% Rate Class.
EFFECT OF REQUESTED CHANGES IN FACE AMOUNT. An increase or decrease in Face
Amount will affect the Monthly Deduction because the cost of insurance depends
upon the Face Amount. The charge for certain optional insurance benefits may
also be affected. See "Deductions and Charges -- Monthly Deduction." An increase
in the Face Amount will increase the Surrender Charge, but a decrease in the
Face Amount will not reduce the Surrender Charge. The Surrender Charge is,
however, imposed only upon lapse or total surrender of the Policy and not upon a
requested decrease in Face Amount. See "Deductions and Charges -- Surrender
Charge."
An increase in the Face Amount will increase the Minimum Monthly Premium as
of the effective date of the increase. Therefore, additional premium payments
may be required to maintain the Death Benefit Guarantee. A decrease in the Face
Amount will reduce the Minimum Monthly Premium as of the effective date of the
decrease. See "Death Benefit Guarantee."
The additional Surrender Charge on a requested increase in the Face Amount
will reduce the Cash Surrender Value (which is the Accumulation Value less any
Surrender Charge, Loan Amount and unpaid Monthly Deductions). If the resulting
Cash Surrender Value is not sufficient to cover the Monthly Deduction, the
Policy may lapse unless the Death Benefit Guarantee is in effect. See "Policy
Lapse and Reinstatement -- Lapse" and "Death Benefit Guarantee."
INSURANCE PROTECTION
You may increase or decrease the pure insurance protection provided by the
Policy (that is, the difference between the Death Benefit and the Accumulation
Value) in one of several ways as insurance needs change. These ways include
increasing or decreasing the Face Amount of insurance, changing the level of
premium payments, and, to a lesser extent, making a partial withdrawal under the
Policy. Although the consequences of each of these methods will depend upon the
individual circumstances, they may be generally summarized as follows:
(a) A decrease in the Face Amount will, subject to the corridor percentage
limitations (see "Death Benefit -- Death Benefit Options"), decrease the
pure insurance protection without reducing the Accumulation Value. If the
Face Amount is decreased, the Policy charges generally will decrease as
well. (Note that the Surrender Charge will NOT be reduced. See "Deductions
and Charges -- Surrender Charge.")
(b) An increase in the Face Amount (which is generally subject to underwriting
approval -- see "Death Benefit -- Requested Changes in Face Amount") will
likely increase the amount of pure insurance protection, depending on the
amount of Accumulation Value and the resultant corridor percentage
limitation. If the insurance protection is increased, the Policy charges
generally will increase as well.
(c) A partial withdrawal will reduce the Death Benefit. See "Surrender Benefits
-- Partial Withdrawal." However, it has a limited effect on the amount of
pure insurance protection and charges under the Policy, because the
decrease in the Death Benefit is usually equal to the amount of
Accumulation Value withdrawn. The primary use of a partial withdrawal is to
withdraw Accumulation Value. Furthermore, it results in a reduced amount of
Accumulation Value and increases the possibility that the Policy will
lapse.
(d) Under the Level Amount Option, until the corridor percentage of
Accumulation Value exceeds the Face Amount, (i) an increased level of
premium payments will reduce the amount of pure insurance protection, and
(ii) a reduced level of premium payments will increase the amount of pure
insurance protection.
(e) Under the Variable Amount Option, until the corridor percentage of
Accumulation Value exceeds the Face Amount plus the Accumulation Value, the
level of premium payments will not affect the amount of pure insurance
protection. (However, both the Accumulation Value and the Death Benefit
will be increased if premium payments are increased, and reduced if premium
payments are reduced.)
(f) Under either Death Benefit Option, if the Death Benefit is the corridor
percentage of Accumulation Value, then (i) an increased level of premium
payments will increase the amount of pure insurance protection (subject to
underwriting approval -- see "Payment and Allocation of Premiums -- Amount
and Timing of Premiums"), and (ii) a reduced level of premium payments will
reduce the pure insurance protection.
THE TECHNIQUES DESCRIBED IN THIS SECTION FOR CHANGING THE AMOUNT OF
PURE INSURANCE PROTECTION UNDER THE POLICY (FOR EXAMPLE, CHANGING THE
FACE AMOUNT, MAKING A PARTIAL WITHDRAWAL, AND CHANGING THE AMOUNT OF
PREMIUM PAYMENTS) MUST BE CONSIDERED TOGETHER WITH THE OTHER
RESTRICTIONS AND CONSIDERATIONS DESCRIBED ELSEWHERE IN THIS
PROSPECTUS.
CHANGE IN DEATH BENEFIT OPTION
After the first two Policy Years, and at least two years after any increase
in Face Amount, you may change the Death Benefit Option once each Policy Year.
The change is effective on the Monthly Anniversary on or next following the date
we receive your request. You must submit a written request to change the Death
Benefit Option. A change in the Death Benefit Option will also change the Face
Amount. If the Death Benefit Option is changed from the Level Amount Option to
the Variable Amount Option, the Face Amount will be decreased by an amount equal
to the Accumulation Value on the effective date of the change. You cannot change
from the Level Amount Option to the Variable Amount Option if the resulting Face
Amount would fall below the Minimum Face Amount (currently $25,000).
If the Death Benefit Option is changed from the Variable Amount Option to
the Level Amount Option, the Face Amount will be increased by an amount equal to
the Policy's Accumulation Value on the effective date of the change.
An increase or decrease in Face Amount resulting from a change in the Death
Benefit Option will affect the future Monthly Deductions because the cost of
insurance depends upon the Face Amount. The charge for certain optional
insurance benefits may also be affected. See "Deductions and Charges -- Monthly
Deduction." The Surrender Charge, however, will not be affected by an increase
or decrease in Face Amount resulting from a change in Death Benefit Option.
Changes in the Death Benefit Option do not require additional evidence of
insurability.
ACCELERATED BENEFIT
Under certain circumstances, the Accelerated Benefit allows a Policy owner
to accelerate benefits from the Policy that would be otherwise payable upon the
death of the Insured. The benefit may vary state-by-state and your registered
representative should be consulted as to whether and to what extent the rider is
available in a particular state and on any particular Policy.
Generally, we will provide an Accelerated Benefit if the Insured has a
terminal illness that will result in the death of the Insured within 12 months,
as certified by a physician.
The Accelerated Benefit will not be more than 50% of the amount that would
be payable at the death of the Insured. The Accelerated Benefit will first be
used to pay off any outstanding Policy loans and interest due. The remainder of
the Accelerated Benefit will be in a lump sum to the Policy owner. Limitations,
as described in the Accelerated Benefit Rider, may apply.
A lien will be established against the Policy for the amount of the
Accelerated Benefit plus the administrative charge, plus interest on the lien.
Any proceeds from the Policy will be first used to repay this lien. The Policy
owner's access to the Cash Value will be reduced by the amount of the lien. The
proceeds payable to the beneficiary will be reduced by the amount of the lien.
The administrative charge will not exceed $300 and will be assessed at the
time the benefit is accelerated.
The premium payable on the Policy will not be affected by the Accelerated
Benefit.
Receipt of a benefit under the Accelerated Benefit Rider may give rise to
Federal or State income tax. A competent tax adviser should be consulted for
further information.
The above information is not intended to be a complete summary of the
Rider. All of the terms and provisions of the Accelerated Benefit are set forth
in the Rider and should be referred to in order to fully ascertain its benefits
and limitations.
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUING THE POLICY
To apply for a Policy, an individual must complete an application and
personally deliver it to our licensed agent. The minimum Face Amount is
currently $25,000, but we reserve the right to specify a different minimum Face
Amount in the future for issuing a new Policy. We will generally only issue a
Policy to an applicant Age 75 or less who supplies evidence of insurability
satisfactory to us. Acceptance is subject to our underwriting rules and we
reserve the right to reject an application for any reason permitted by law.
SPONSORED MARKET PLANS. Policies may be purchased under sponsored
arrangements where permitted by state law. A "sponsored arrangement" includes an
arrangement where an employer permits group solicitation of its employees or an
association permits group solicitations of its members for the purchase of
Policies on an individual basis.
All participants in sponsored arrangements are individually underwritten.
Persons purchasing under a sponsored arrangement may apply for simplified
underwriting. If simplified underwriting is granted, the cost of insurance may
increase as a result of higher than anticipated mortality experience. However,
any such increase will not cause the cost of insurance charge to exceed the
guaranteed rates set forth in the Policy.
COVERAGE. Coverage under a Policy begins on the later of the Issue Date or
the date we receive at least the minimum initial premium (see immediately
following section). In general, if the applicant pays at least the minimum
initial premium with the application, the Issue Date will be the later of the
date of the application or the date of any medical examination required by our
underwriting procedures. However, if underwriting approval has not occurred
within 45 days after we receive the application or if you authorize premiums to
be paid by bank account monthly deduction, the Issue Date will be the date of
underwriting approval.
If you authorize premiums to be paid by government allotment, the Issue
Date generally will be, subject to our underwriting approval, the first day of
the month in which we receive the first Minimum Monthly Premium through
government allotment, whether or not a Minimum Monthly Premium is collected with
the application. If a Minimum Monthly Premium is collected with the application,
it will be allocated to the Sub-Accounts of the Variable Account and the Fixed
Account on the Valuation Date next following the Issue Date.
MINIMUM INITIAL PREMIUM. The minimum initial premium is three Minimum
Monthly Premiums. See "Death Benefit Guarantee." If, however, you authorize
premiums to be paid by bank account monthly deduction or government allotment,
we will accept one Minimum Monthly Premium together with the required
authorization forms. The Minimum Monthly Premium is specified in the Policy and
determines the payments required to maintain the Death Benefit Guarantee.
CREDITING NET PREMIUMS. We will credit Net Premiums to the Sub-Accounts of
the Variable Account and to the Fixed Account (except for policies issued in New
Jersey) on the basis of the applicant's allocation on the latest of the
following dates:
* The Valuation Date following the date of underwriting approval.
* The Valuation Date on or next following the Policy Date.
* The Valuation Date on or next following the date we have received at
least the required minimum initial premium payment.
* In the case of Policies issued under government allotment programs,
the Valuation Date next following the Issue Date.
Until the date on which Net Premiums are credited as described above,
premium payments will be held in our General Account. No interest will be earned
on these premium payments during this period of time.
REFUNDING PREMIUM. We will return all premiums paid without interest if any
of the following occur:
* We send notice to the applicant that the insurance is declined.
* The applicant refuses an offer for an alternative policy.
* The applicant does not supply required medical exams or tests within
30 days of the date of the application.
* The applicant returns the Policy under the limited free look right.
See "Free Look and Conversion Rights -- Free Look Rights."
ALLOCATION OF PREMIUMS
You choose the initial allocation of your Net Premiums (your gross premiums
less the Premium Expense Charge) to the Fixed Account and the Sub-Accounts of
the Variable Account on the application for the Policy. (The Fixed Account is
not available for Net Premium allocation under policies issued in New Jersey.)
You may change the allocation at any time by notifying us in writing. Changes
will not be effective until the date we receive your request and will only
affect premiums we receive on or after that date. The premium allocation may be
100% to the Fixed Account or the Sub-Accounts or divided among the Fixed Account
and the Sub-Accounts in whole percentage points totaling 100%. We reserve the
right to adjust any allocation to eliminate fractional percentages. Changing the
Net Premium allocation will not affect the allocation of existing Accumulation
Value.
AMOUNT AND TIMING OF PREMIUMS
The amount and frequency of premium payments will affect the Accumulation
Value, the Cash Surrender Value, and how long the Policy will remain in force
(including affecting whether the Death Benefit Guarantee is in effect -- see
"Death Benefit Guarantee"). After the initial premium, you may determine the
amount and timing of subsequent premium payments within the following
restrictions:
* IN MOST CASES, PAYMENT OF CUMULATIVE PREMIUMS SUFFICIENT TO MAINTAIN
THE DEATH BENEFIT GUARANTEE WILL BE REQUIRED TO KEEP THE POLICY IN
FORCE DURING AT LEAST THE FIRST SEVERAL POLICY YEARS. SEE "DEATH
BENEFIT GUARANTEE."
* We may choose not to accept any premium less than $25.00.
* We reserve the right to limit the amount of any premium payment. In
general, during the first Policy Year we will not accept total premium
payments in excess of $250,000 on the life of any Insured, whether
such payments are received on a Policy or on any other insurance
policy issued by us or our affiliates. Also, we will not accept any
premium payment in excess of $50,000 on any Policy after the first
Policy Year. At our discretion, however, we may waive any of these
premium limitations.
* We may require additional evidence of insurability satisfactory to us
if any premium would increase the difference between the Death Benefit
and the Accumulation Value (that is, the net amount at risk). A
premium payment would increase the net amount at risk if at the time
of payment the Death Benefit would be based upon the applicable
percentage of Accumulation Value. See "Death Benefit -- Death Benefit
Options."
* In no event may the total of all premiums paid, both scheduled and
unscheduled, exceed the current maximum premium payments allowed for
life insurance under Section 7702 of the Federal Internal Revenue
Code. If at any time a premium is paid which would result in total
premiums exceeding the current maximum premiums allowed, we will only
accept that portion of the premium which would make total premiums
equal the maximum. Any part of the premium in excess of that amount
will be returned, and no further premiums will be accepted until
allowed by the current maximum premium limitations.
* If you contemplate a large premium payment under this Policy, and you
wish to avoid Modified Endowment Contract classification, you may
contact us in writing before making the payment and we will tell you
the maximum amount which can be paid into the Policy. See "Federal Tax
Matters -- Policy Proceeds."
PLANNED PERIODIC PREMIUMS
You may choose a Planned Periodic Premium schedule which indicates a
preference as to future amounts and frequency of payment. The Planned Periodic
Premiums may be paid annually, semi-annually, quarterly or, if you choose, you
can pay the Planned Periodic Premiums by bank account monthly deduction or
government allotment.
The amount and frequency of your initial Planned Periodic Premium will be
shown in the Policy. You may change the Planned Periodic Premium at any time by
written request. We may limit the amount of any increase if such an increase
would result in planned periodic premiums that are larger than (a) the maximum
premium we would accept under the terms of the Amount and Timing of Premium
Payments provision in the Policy or (b) the planned periodic premium which would
total more than $50,000 per year.
As mentioned above, the amount and frequency of premium payments will
affect Accumulation Value, Cash Surrender Value, and how long the Policy will
remain in force. Failure to make any Planned Periodic Premium payment will not,
however, necessarily result in lapse of the Policy. On the other hand, making
Planned Periodic Premium payments will not guarantee that the Policy remains in
force. See "Death Benefit Guarantee" and "Policy Lapse and Reinstatement."
UNSCHEDULED ADDITIONAL PREMIUMS
Premiums, other than Planned Periodic Premiums, may be paid at any time
while the Policy is in force. We may limit the number and amount of these
additional payments.
PAYING PREMIUMS BY MAIL
Planned Periodic Premiums and Unscheduled Additional Premiums may be paid
to the Company by mailing them to:
ReliaStar Bankers Security Life Insurance Company
P.O. Box 802511
Chicago, Illinois 60680-2511
DEATH BENEFIT GUARANTEE
If you meet the requirements described below, we guarantee that we will not
lapse the Policy even if the Cash Surrender Value is not sufficient to cover the
Monthly Deduction that is due. This feature of the Policy is called the "Death
Benefit Guarantee." The Death Benefit Guarantee expires at the Insured's Age 65
(or five Policy Years, if longer).
In general, the two most significant benefits from the Death Benefit
Guarantee are as follows. First, during the early Policy Years, the Cash
Surrender Value will generally not be sufficient to cover the Monthly Deduction,
so that the Death Benefit Guarantee will be necessary to avoid lapse of the
Policy. See "Policy Lapse and Reinstatement." This occurs because the Surrender
Charge usually exceeds the Accumulation Value in these years. In this regard,
you should consider that if you request an increase in Face Amount, an
additional Surrender Charge would apply for the fifteen years following the
increase, which could create a similar possibility of lapse as exists during the
early Policy Years. Second, to the extent the Cash Surrender Value declines due
to poor investment performance, or due to an additional Surrender Charge after a
requested increase, the Cash Surrender Value may not be sufficient even in later
Policy Years to cover the Monthly Deduction, so that the Death Benefit Guarantee
may also be necessary in later Policy Years to avoid lapse of the Policy. THUS,
EVEN THOUGH THE POLICY PERMITS PREMIUM PAYMENTS THAT ARE LESS THAN THE MINIMUM
MONTHLY PREMIUMS, YOU MAY LOSE THE SIGNIFICANT PROTECTION PROVIDED BY THE DEATH
BENEFIT GUARANTEE BY PAYING LESS THAN THE MINIMUM MONTHLY PREMIUMS.
REQUIREMENTS
The Death Benefit Guarantee will be in effect if the sum of all premiums
paid minus any partial withdrawals and any loans are equal to or greater than
the sum of the Minimum Monthly Premiums since the Policy Date, including the
Minimum Monthly Premium for the current Monthly Anniversary.
The requirements for the Death Benefit Guarantee must be satisfied as of
each Monthly Anniversary, even though you do not have to pay premiums monthly.
EXAMPLE: The Policy Date is January 1, 1997. The Minimum Monthly Premium is
$100 per month. No Policy loans or partial withdrawals are taken and no Face
Amount changes have occurred.
Case 1. You pay $100 each month. The Death Benefit Guarantee is
maintained.
Case 2. You pay $1,000 on January 1, 1997. The $1,000 maintains the Death
Benefit Guarantee without your paying any additional premiums for
the next 10 months (through October 31, 1997). However, you must
pay at least $100 by November 1, 1997 to maintain the Death
Benefit Guarantee through November 30, 1997.
The amount of the initial Minimum Monthly Premium will be determined by us
at issuance of the Policy and will be shown in the Policy. The initial Minimum
Monthly Premium will depend upon the Insured's sex, Age at issue, Rate Class,
optional insurance benefits added by rider, and the Initial Face Amount.
The following Policy changes may change the Minimum Monthly Premium:
* A requested increase or decrease in the Face Amount. See "Death
Benefit -- Requested Changes in Face Amount."
* A change in the Death Benefit Option. See "Death Benefit -- Change in
Death Benefit Option."
* The addition or termination of a Policy rider. See "General Provisions
-- Optional Insurance Benefits."
We will notify you in writing of any changes in the Minimum Monthly
Premium.
If, as of any Monthly Anniversary, you have not made sufficient premium
payments to maintain the Death Benefit Guarantee, we will send you notice of the
premium payment required to maintain it. If we do not receive the required
premium payment within 61 days from the date of our notice, the Death Benefit
Guarantee will terminate. THE DEATH BENEFIT GUARANTEE CANNOT BE REINSTATED.
Even if the Death Benefit Guarantee terminates, the Policy will not
necessarily lapse. For a discussion of the circumstances under which the Policy
may lapse, see "Policy Lapse and Reinstatement."
ACCUMULATION VALUE
The Accumulation Value of the Policy (that is, the total value attributable
to a specific Policy in the Variable Account and the Fixed Account) is equal to
the sum of the Variable Accumulation Value (the amount attributable to the
Variable Account) plus the Fixed Accumulation Value (the amount attributable to
the Fixed Account). The Accumulation Value should be distinguished from the Cash
Surrender Value that would actually be paid to you upon total surrender of the
Policy, which is the Accumulation Value less any Surrender Charge, Loan Amount
and unpaid Monthly Deductions. See "Surrender Benefits -- Total Surrender." The
Accumulation Value should also be distinguished from the Cash Value, which
determines the amount available for Policy loans, and is the Accumulation Value
less any Surrender Charge. See "Policy Loans."
The Variable Accumulation Value will increase or decrease to reflect the
investment performance of the Funds in which Sub-Accounts of the Variable
Account have been invested. The Variable Accumulation Value will also be
increased by (a) any Net Premiums credited to the Variable Account and (b) any
transfers from the Fixed Account. The Variable Accumulation Value will also be
reduced by (a) the Monthly Deduction attributable to the Variable Account, (b)
partial withdrawals from the Variable Account, (c) any transfer and partial
withdrawal charges attributable to the Variable Account, and (d) any amounts
transferred from the Variable Account to the Fixed Account (including amounts
transferred from the Variable Account to the Fixed Account as security for
Policy loans -- see "Policy Loans"). The Variable Accumulation Value will
generally vary daily.
The Fixed Accumulation Value will be increased by (a) any Net Premiums
credited to it in the Fixed Account, (b) any interest credited to it in the
Fixed Account (determined at our discretion, but guaranteed not to be less than
4%), and (c) any amounts transferred from the Variable Account to it in the
Fixed Account (including amounts transferred to the Fixed Account as security
for Policy loans -- see "Policy Loans"). The Fixed Accumulation Value will be
reduced by (a) the Monthly Deduction attributable to it in the Fixed Account,
(b) partial withdrawals from it in the Fixed Account, (c) any transfer and
partial withdrawal charges attributable to the Fixed Account, and (d) any
amounts transferred from the Fixed Account to the Variable Account.
For a detailed discussion of the calculation of Accumulation Value, see
Appendix B. An illustration of various Accumulation Values, Surrender Charges,
Cash Surrender Values, and Death Benefits, assuming different levels of premium
payments and various investment returns for selected Ages and Face Amounts, is
shown in Appendix C.
DEDUCTIONS AND CHARGES
Some of these charges are deducted from each premium payment. Certain other
charges are deducted monthly from both the Fixed Account and the Variable
Account, or from the Variable Account only. A charge is also made for each
partial withdrawal and a charge may be made for each transfer.
PREMIUM EXPENSE CHARGE
We deduct a Premium Expense Charge, which is 5% of each premium payment.
The amount remaining after we have deducted the Premium Expense Charge is called
the Net Premium. The Net Premium is then credited to the Fixed Account and the
Sub-Accounts of the Variable Account according to your allocation.
MONTHLY DEDUCTION
We deduct the charges described below from the Accumulation Value of the
Policy on a monthly basis. The total of these charges is called the Monthly
Deduction.
The Monthly Deduction will be deducted on each Monthly Anniversary from the
Fixed Account and the Sub-Accounts of the Variable Account on a proportionate
basis depending on their relative Accumulation Values at that time. For purposes
of determining these proportions, the Fixed Accumulation Value is reduced by the
Loan Amount. Because the cost of insurance portion of the Monthly Deduction can
vary from month to month, the Monthly Deduction itself will vary in amount from
month to month.
If the Cash Surrender Value is not sufficient to cover the Monthly
Deduction on a Monthly Anniversary and the Death Benefit Guarantee is not in
effect, the Policy may lapse. See "Death Benefit Guarantee" and "Policy Lapse
and Reinstatement."
COST OF INSURANCE. We will determine the monthly cost of insurance by
multiplying the applicable cost of insurance rate or rates by the net amount at
risk under the Policy. The net amount at risk under the Policy for a Policy
Month is (a) the Death Benefit at the beginning of the Policy Month divided by
1.004074 (which reduces the net amount at risk, solely for purposes of computing
the cost of insurance, by taking into account assumed monthly earnings at an
annual rate of 5%), less (b) the Accumulation Value immediately before the
Monthly Deduction, minus the cost of any rider benefits other than any Waiver of
Monthly Deduction rider, for the month. As a result, the net amount at risk may
be affected by changes in the Accumulation Value or in the Death Benefit.
The Rate Class of an Insured may affect the cost of insurance. A Rate Class
is a group of Insureds we determine based upon our expectation that they will
have similar mortality experience. We currently place Insureds into standard
Rate Classes or into substandard Rate Classes that involve a higher mortality
risk. In an otherwise identical Policy, an Insured in a standard Rate Class will
have a lower cost of insurance than an Insured in a Rate Class with higher
mortality risks.
If there is an increase in the Face Amount and the Rate Class applicable to
the increase is different from that for the Initial Face Amount or any prior
requested increases in Face Amount, the net amount at risk will be calculated
separately for each Rate Class. For purposes of determining the net amount at
risk for each Rate Class, the Accumulation Value will first be assumed to be
part of the Initial Face Amount. If the Accumulation Value is greater than the
Initial Face Amount, it will then be assumed to be part of each increase in
order, starting with the first increase.
Cost of insurance rates will be based on the sex, Issue Age, Policy Year
and Rate Class(es) of the Insured. The actual monthly cost of insurance rates
will reflect our expectations as to future experience. They will not, however,
be greater than the guaranteed cost of insurance rates shown in the Policy,
which are based on the Commissioner's 1980 Standard Ordinary Mortality Tables
for smokers or nonsmokers, respectively.
MONTHLY ADMINISTRATIVE CHARGE. Each month we deduct an administrative
charge of $7.50 which is guaranteed not to exceed the product of $5.00 and the
ratio (not to exceed 2.00) of (a) the Consumer Price Index (for all urban
households) for the preceding September to (b) the Consumer Price Index for
September 1985.
MONTHLY MORTALITY AND EXPENSE RISK CHARGE. Each month it is currently
anticipated that we will deduct this charge at an annual rate of .75 of 1%
(.75%) of the Variable Accumulation Value but in no event will it exceed .9 of
1% (.90%).
OPTIONAL INSURANCE BENEFIT CHARGES. Each month we deduct charges for any
optional insurance benefits added to the Policy by rider. See "General
Provisions -- Optional Insurance Benefits."
SURRENDER CHARGE
During the first 15 years the Policy is in force and the first 15 years
following a requested increase in the Face Amount, there is a Surrender Charge
if you surrender the Policy or the Policy lapses. The maximum Surrender Charge
for the Initial Face Amount or any requested increase in Face Amount will be
determined on the Policy Date or on the effective date of any requested increase
respectively. The Surrender Charge remains level for the first five years in the
relevant 15 year period, and then reduces in equal monthly increments until it
becomes zero at the end of 15 years. Thus if the Policy remains in force during
the entire relevant 15-year period, you do not pay the Surrender Charge. The
Surrender Charge will vary depending on the Age of the Insured, the sex of the
Insured, and the Rate Class of the Insured (on the Policy Date or on the
effective date of an increase in Face Amount).
The Surrender Charge for the Initial Face Amount or any requested increase
in Face Amount is determined by multiplying (i) the applicable Surrender Charge
per $1,000 Face Amount from Appendix D by (ii) the Initial Face Amount or the
Face Amount of the increase, as applicable, and by (iii) the applicable
percentage from the Surrender Charge Percentage Table below, and then dividing
this amount by 1000. Then the Surrender Charge is reduced by the Premium Related
Surrender Charge Reduction.
The Premium Related Surrender Charge Reduction will apply only to the
Surrender Charge for the Initial Face Amount when the cumulative premiums are
less than the Surrender Charge Whole Life Premium. The Premium Related Surrender
Charge Reduction will be zero when the cumulative premiums equal or exceed the
Surrender Charge Whole Life Premium. The Premium Related Surrender Charge
Reduction also will be zero for any requested increase in Face Amount. The
Premium Related Surrender Charge Reduction for the Initial Face Amount is
calculated by multiplying 70% by the excess of (i) the Surrender Charge Whole
Life Premium over (ii) the cumulative premiums. The Surrender Charge Whole Life
premium is calculated by multiplying (i) the applicable Surrender Charge Whole
Life premium per $1000 of Face Amount from Appendix E by (ii) the Initial Face
Amount, and then dividing by 1000.
EXAMPLE. The following example illustrates how the Surrender Charge is
determined. Assume that a male nonsmoker, Age 35 buys a Policy with an initial
Face Amount of $100,000 and he surrenders the Policy during the third Policy
Year at which time he has paid cumulative premiums of $2,000.
Based on these assumptions the Surrender Charge will be the result of
multiplying (i) $16.20 (from Appendix D for a male nonsmoker Age 35) by (ii)
$100,000 (the Initial Face Amount) and by (iii) 100% (the applicable percentage
from the Surrender Charge Percentage Table), and then dividing by 1000, which
results in a Surrender Charge of $1,620 ($16.20 x $100,000 x 100% / 1000).
The Surrender Charge Whole Life Premium is determined by multiplying (i)
$11.64 (from Appendix E for a male nonsmoker Age 35) by (ii) $100,000 (the
Initial Face Amount), and then dividing by 1000, which results in a Surrender
Charge Whole Life Premium of $1,164 ($11.64 x $100,000 / 1000). The Surrender
Charge Whole Life Premium of $1,164 is less than the cumulative premium of
$2,000, so the Premium Related Surrender Charge Reduction is zero.
The additional Surrender Charge for requested increases in Face Amount will
be calculated in the same manner as illustrated in the example above, except
that the Premium Related Surrender Charge is zero for requested increases in
Face Amount.
SURRENDER CHARGE PERCENTAGE TABLE
IF SURRENDER OR LAPSE OCCURS IN THE LAST THE FOLLOWING PERCENTAGE OF THE
MONTH OF POLICY YEAR:* SURRENDER CHARGE WILL BE PAYABLE:**
---------------------- -----------------------------------
1 through 5 100%
6 90%
7 80%
8 70%
9 60%
10 50%
11 40%
12 30%
13 20%
14 10%
15 and later 0%
* For requested increases, years are measured from the date of the increase.
** The percentages reduce equally for each Policy Month during the years
shown. For example, during the seventh Policy Year, the percentage reduces
equally each month from 90% at the end of the sixth Policy Year to 80% at
the end of the seventh Policy Year.
CHARGES AGAINST THE VARIABLE ACCOUNT
Certain charges will be deducted as a percentage of the value of the net
assets of the Variable Account to compensate us for certain risks assumed in
connection with the Policy. These charges will not be deducted from assets in
the Fixed Account.
TAXES. Currently no charge is made to the Variable Account for Federal
income taxes that may be attributable to the Variable Account. We may, however,
make such a charge in the future. Charges for other taxes, if any, attributable
to the Variable Account may also be made.
INVESTMENT ADVISORY FEE AND OTHER FUND EXPENSES AFTER REIMBURSEMENT (b)
(c). Because the Variable Account purchases shares of the Funds, the net asset
value of the investments of the Variable Account will reflect the investment
advisory fees and other expenses incurred by the Funds. Set forth below is
information provided by each Fund on its total 1996 annual expenses as a
percentage of the Fund's average net assets. For more information concerning
these expenses, see the prospectuses for the Funds that accompany this
Prospectus.
<TABLE>
<CAPTION>
TOTAL INVESTMENT
MANAGEMENT OTHER FUND ANNUAL
FEES EXPENSES EXPENSES
---- -------- --------
<S> <C> <C> <C>
VIP Money Market Portfolio....................................0.21% 0.09% 0.30%
VIP High Income Portfolio ....................................0.59% 0.12% 0.71%
VIP Equity-Income Portfolio (a)...............................0.51% 0.07% 0.58%
VIP Growth Portfolio (a)......................................0.61% 0.08% 0.69%
VIP II Investment Grade Bond Portfolio........................0.45% 0.13% 0.58%
VIP II Index 500 Portfolio (b)................................0.13% 0.15% 0.28%
VIP II Contrafund Portfolio (a)...............................0.61% 0.13% 0.74%
Northstar Income and Growth Fund (c)..........................0.75% 0.05% 0.80%
Northstar Multi-Sector Bond Fund (c)..........................0.75% 0.05% 0.80%
Putnam VT Diversified Income Fund.............................0.70% 0.13% 0.83%
Putnam VT Growth and Income Fund..............................0.49% 0.05% 0.54%
Putnam VT Voyager Fund........................................0.57% 0.06% 0.63%
</TABLE>
(a) During 1996, a portion of the brokerage commissions that certain funds pay
was used to reduce funds' expenses. In addition, certain funds have entered
into arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, the total operating
expenses would have been .56% for Equity Income Portfolio, .67% for Growth
Portfolio, and .71% for Contrafund Portfolio. For more information on the
funds' Management Fees and Expenses, see the prospectus for the Fund.
(b) During 1996, the investment adviser to the Index 500 Portfolio reimbursed a
portion of the fund's expenses. Without the reimbursement, the fund's
management fee, other expenses and total expenses would have been .28%,
.15%, and .43%, respectively. Expense reimbursements are voluntary. There
is no assurance of ongoing reimbursement. For more information on the
fund's Management Fees and Expenses, see the prospectus for the Fund.
(c) The investment adviser to the Northstar Variable Trust has agreed to
reimburse the two Northstar Funds for any expenses in excess of 0.80% of
each Fund's average daily net assets. In the absence of the investment
adviser's expense reimbursements, the actual expenses that would have been
paid by each Fund during its fiscal year ended December 31, 1996 would have
been 1.40% for Income and Growth Fund and 1.68% for Multi-Sector Bond Fund.
Expense reimbursement is voluntary. There is no assurance of ongoing
reimbursement.
PARTIAL WITHDRAWAL AND TRANSFER CHARGES
We currently make no charge for transfers. We currently charge $10.00 for
each partial withdrawal. The charge for transfers is guaranteed not to exceed
$25.00 per transfer for transfers in excess of 12 per Policy Year for the
duration of the Policy. The charge for partial withdrawals is guaranteed not to
exceed $25.00 for the duration of the Policy. The transfer charge will not be
imposed on transfers that occur as a result of Policy loans or the exercise of
conversion rights.
REDUCTION OF CHARGES
Any of the charges under the Policy, as well as the minimum Face Amount set
forth in this Prospectus, may be reduced because of special circumstances that
result in lower sales, administrative, or mortality expenses. For example,
special circumstances may exist in connection with group or sponsored
arrangements, sales to our policyholders or those of affiliated insurance
companies, or sales to employees or clients of members of our affiliated group
of insurance companies. The amount of any reductions will reflect the reduced
sales effort and administrative costs resulting from, or the different mortality
experience expected as a result of, the special circumstances. Reductions will
not be unfairly discriminatory against any person, including the affected Policy
owners and owners of all other policies funded by the Variable Account.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike traditional life insurance policies, the failure to make a
Planned Periodic Premium will not by itself cause the Policy to lapse. If the
Death Benefit Guarantee is not in effect, the Policy will lapse if, as of any
Monthly Anniversary, the Cash Surrender Value is less than the Monthly Deduction
due, and a grace period of 61 days expires without a sufficient premium payment.
A sufficient premium payment is any premium payment such that the Net Premium is
larger than the sum of 1 + 2 where 1 is the amount by which the Accumulation
Value is less than the Surrender Charge as of the beginning of the grace period
and 2 is the sum of past due Monthly Deductions.
During the early Policy Years, the Cash Surrender Value will generally not
be sufficient to cover the Monthly Deduction, so that premium payments
sufficient to maintain the Death Benefit Guarantee will be required to avoid
lapse. See "Death Benefit Guarantee."
The Policy does not lapse, and the insurance coverage continues, until the
expiration of a 61-day grace period which begins on the date we send you written
notice indicating that the Cash Surrender Value is less than the Monthly
Deduction due. Our written notice to you will indicate the amount of the payment
required to avoid lapse. Failure to make a sufficient premium payment within the
grace period will result in lapse of the Policy without value.
If the Insured dies during the grace period, the proceeds payable will
equal the amount of the Death Benefit on the Valuation Date on or next following
the date of the Insured's death, reduced by any Loan Amount and any unpaid
Monthly Deductions.
If the Death Benefit Guarantee is in effect, we will not lapse the Policy.
See "Death Benefit Guarantee."
REINSTATEMENT. Reinstatement means putting a lapsed Policy back in force.
You may reinstate a lapsed Policy by written request any time within five years
after it has lapsed if it has not been surrendered for its Cash Surrender Value.
To reinstate the Policy and any riders you must submit evidence of
insurability satisfactory to us and you must pay a premium large enough such
that the Net Premium is as large as the sum of the Surrender Charge after
reinstatement, plus the Monthly Deductions for the date of reinstatement and the
following Monthly Anniversary.
The Death Benefit Guarantee cannot be reinstated. See "Death Benefit
Guarantee."
SURRENDER BENEFITS
Subject to certain limitations, you may make a total surrender of the
Policy or a partial withdrawal of the Policy's Cash Surrender Value by sending
us a written request. The amount available for a total surrender or partial
withdrawal will be determined at the end of the Valuation Period during which
your written request is received. Any amounts payable from the Variable Account
upon total surrender or partial withdrawal will generally be paid within seven
days of receipt of your written request. Postponement of payments may, however,
occur in certain circumstances. See "General Provisions -- Postponement of
Payments."
TOTAL SURRENDER
By making a written request, you may surrender the Policy at any time for
its Cash Surrender Value. The Cash Surrender Value is the Accumulation Value of
the Policy reduced by any Surrender Charge, Loan Amount and unpaid Monthly
Deductions. If the Cash Surrender Value at the time of a surrender exceeds
$25,000, the written request must include a Signature Guarantee. An illustration
of Accumulation Values, Surrender Charges, Cash Surrender Values, and Death
Benefits assuming different levels of premium payments and investment returns
for selected Ages and Face Amounts, is shown in Appendix C.
PARTIAL WITHDRAWAL
After the first Policy Year, you may also withdraw part of the Policy's
Cash Surrender Value by sending us a written request. If the amount being
withdrawn exceeds $25,000, the written request must include a Signature
Guarantee. Only one partial withdrawal is allowed in any Policy Year. We
currently make a $10.00 charge for each partial withdrawal. This charge is
guaranteed not to exceed $25.00 for each partial withdrawal. See "Deductions and
Charges -- Partial Withdrawal and Transfer Charges." The amount of any partial
withdrawal must be at least $500 and, during the first 15 Policy Years, may not
be more than 20% of the Cash Surrender Value on the date we receive your written
request.
Unless you specify a different allocation, we make partial withdrawals from
the Fixed Account and the Sub-Accounts of the Variable Account on a
proportionate basis based upon the Accumulation Value. These proportions will be
determined at the end of the Valuation Period during which your written request
is received. For purposes of determining these proportions, any outstanding Loan
Amount is first subtracted from the Fixed Accumulation Value.
EFFECT OF PARTIAL WITHDRAWALS. The Accumulation Value will be reduced by
the amount of any partial withdrawal. The Death Benefit will also be reduced by
the amount of the withdrawal, or, if the Death Benefit is based on the corridor
percentage of Accumulation Value (see "Death Benefit -- Death Benefit Options"),
by an amount equal to the corridor percentage times the amount of the partial
withdrawal.
If the Level Amount Option is in effect, the Face Amount will be reduced by
the amount of the partial withdrawal. When increases in the Face Amount have
occurred previously, we reduce the current Face Amount by the amount of the
partial withdrawal in the following order:
(a) The Face Amount provided by the most recent increase;
(b) The next most recent increases successively; and
(c) The Face Amount when the policy was issued.
(This assumption also applies to requested decreases in Face Amount -- see
"Death Benefit -- Requested Changes in Face Amount.") Thus, partial withdrawals
may affect the way in which the cost of insurance is calculated and the amount
of pure insurance protection under the Policy. See "Death Benefit -- Requested
Changes in Face Amount", "Deductions and Charges -- Monthly Deduction" and
"Death Benefit -- Insurance Protection."
We do not allow a partial withdrawal if the Face Amount after a partial
withdrawal would be less than the Minimum Face Amount (currently $25,000).
If the Variable Amount Option is in effect, a partial withdrawal does not
affect the Face Amount.
A partial withdrawal may also cause the termination of the Death Benefit
Guarantee because the amount of the partial withdrawal is deducted from the
total premiums paid in calculating whether sufficient premiums have been paid in
order to maintain the Death Benefit Guarantee.
Like partial withdrawals, Policy loans are a means of withdrawing funds
from the Policy. See "Policy Loans." A partial withdrawal or a Policy loan may
have tax consequences depending on the circumstances of such withdrawal or loan.
See "Federal Tax Matters -- Policy Proceeds."
TRANSFERS
You may transfer all or part of the Variable Accumulation Value between the
Sub-Accounts or to the Fixed Account subject to any conditions the Funds whose
shares are involved may impose. (Transfers to or from the Fixed Account are not
available for Policies issued in New Jersey.) Transfer requests must be in
writing unless you have completed a telephone/fax transfer authorization form.
You may also direct us to automatically make periodic transfers under the Dollar
Cost Averaging or Portfolio Rebalancing services as described below.
To transfer all or part of the Variable Accumulation Value from a
Sub-Account, Accumulation Units are redeemed and their values are reinvested in
other Sub-Accounts, or the Fixed Account, as directed in your request. We will
effect transfers, and determine all values in connection with transfers, at the
end of the Valuation Period during which we receive your request, except as
otherwise specified for the Dollar Cost Averaging or Portfolio Rebalancing
services. With respect to future Net Premium payments, however, your current
premium allocation will remain in effect unless (i) you have requested the
Portfolio Rebalancing service, or (ii) you are transferring all of the Variable
Accumulation Value from the Variable Account to the Fixed Account in exercise of
conversion rights. See "Free Look and Conversion Rights -- Conversion Rights."
Transfers from the Fixed Account to the Variable Account are subject to the
following additional restrictions: (i) your transfer request must be postmarked
no more than 30 days before or after the Policy Anniversary in any year, and
only one transfer is permitted during this period, (ii) the Fixed Accumulation
Value after the transfer must be at least equal to the Loan Amount, (iii) no
more than 50% of the Fixed Accumulation Value, less any Loan Amount, may be
transferred unless the balance, after the transfer, would be less than $1,000,
in which event the full Fixed Accumulation Value, less any Loan Amount, may be
transferred, and (iv) you must transfer at least the lesser of $500 or the total
Fixed Accumulation Value, less any Loan Amount. See Appendix A. Some of these
restrictions may be waived for transfers due to the Portfolio Rebalancing
service.
TELEPHONE/FAX TRANSFER REQUESTS. You may request a transfer by
telephone/fax on any Valuation Date after you complete a telephone/fax transfer
authorization form. If you elect to complete the authorization form, you agree
that we will not be liable for any loss, liability, cost or expense when we act
in accordance with the telephone/fax transfer instructions that are received
and, if by telephone, are recorded on voice recording equipment. If a
telephone/fax transfer request is later determined not to have been made by you
or was made without your authorization, and loss results from such unauthorized
transfer, you bear the risk of this loss. Any requests via fax are considered
telephone requests and are bound by the conditions in the telephone/fax transfer
authorization form you sign. Any fax request should include your name, daytime
telephone number, Policy number and the names of the Sub-Accounts from which and
to which money will be transferred and the allocation percentage. We will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. In the event we do not employ such procedures, we may be liable for any
losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone/fax instructions, providing written confirmation of such
instructions, and/or tape recording telephone instructions.
DOLLAR COST AVERAGING SERVICE. You may request this service if your Face
Amount is at least $100,000 and your Accumulation Value, less any Loan Amount,
is at least $5,000. If you request this service, you direct us to automatically
make specific periodic transfers of a fixed dollar amount from any of the
Sub-Accounts to one or more of the Sub-Accounts or to the Fixed Account. No
transfers from the Fixed Account are permitted under this service. Transfers of
this type may be made on a monthly, quarterly, semi-annual, or annual basis.
This service is intended to allow you to use "Dollar Cost Averaging", a long
term investment method which provides for regular investments over time. We make
no guarantees that Dollar Cost Averaging will result in a profit or protect
against loss. You may discontinue this service at any time by notifying us in
writing.
If you are interested in the Dollar Cost Averaging service you may obtain a
separate application form and full information concerning this service and its
restrictions from us or our registered representative.
If you are using the Dollar Cost Averaging service, this service will be
discontinued immediately (i) on receipt of any request to begin a Portfolio
Rebalancing service, (ii) if the Policy is in the grace period on any date when
Dollar Cost Averaging transfers are scheduled, or (iii) if the specified
transfer amount from any Sub-Account is more than the Accumulation Value in that
Sub-Account.
We reserve the right to discontinue, modify, or suspend this service. Any
such modification or discontinuation would not affect any Dollar Cost Averaging
service requests already commenced.
PORTFOLIO REBALANCING SERVICE. You may request this service if your Face
Amount is at least $200,000 and your Accumulation Value, less any Loan Amount,
is at least $10,000. If you request this service, you direct us to automatically
make periodic transfers to maintain your specified percentage allocation of
Accumulation Value, less any Loan Amount, among the Sub-Accounts of the Variable
Account and the Fixed Account; your allocation of future Net Premium payments
will also be changed to be equal to this specified percentage allocation.
Transfers made under this service may be made on a quarterly, semi-annual, or
annual basis. This service is intended to maintain the allocation you have
selected consistent with your personal objectives.
The Accumulation Value in each Sub-Account of the Variable Account and the
Fixed Account will grow or decline at different rates over time. Portfolio
Rebalancing will periodically transfer Accumulation Values from those accounts
that have increased in value to those accounts that have increased at a slower
rate or declined in value. If all accounts decline in value, it will transfer
Accumulation Values from those that have decreased less in value to those that
have decreased more in value. We make no guarantees that Portfolio Rebalancing
will result in a profit or protect against loss. You may discontinue this
service at any time by notifying us in writing.
If you are interested in the Portfolio Rebalancing service you may obtain a
separate application form and full information concerning this service and its
restrictions from us or our registered representative.
If you are using the Portfolio Rebalancing service, this service will be
discontinued immediately (i) on receipt of any request to change the allocation
of premiums to the Fixed Account and Sub-Account of the Variable Account, (ii)
on receipt of any request to begin a Dollar Cost Averaging service, (iii) upon
receipt of any request to transfer Accumulation Value among the Fixed Account or
Sub-Accounts, or (iv) if the policy is in the grace period or the Accumulation
Value, less any Loan Amount, is less than $7,500 on any Valuation Date when
Portfolio Rebalancing transfers are scheduled.
We reserve the right to discontinue, modify, or suspend this service. Any
such modification or discontinuation could affect Portfolio Rebalancing services
currently in effect, but only after 30 days notice to affected Policy owners.
TRANSFER LIMITS. We currently allow 12 transfers in a Policy Year. We
reserve the right to limit you to no more than 12 transfers per Policy Year. All
transfers that are effective on the same Valuation Date will be treated as one
transfer transaction. Transfers made due to the Dollar Cost Averaging or
Portfolio Rebalancing services do not currently count toward the limit on number
of transfers.
TRANSFER CHARGES. While there is currently no charge imposed on a transfer
we reserve the right to make a charge not to exceed $25.00 per transfer for
transfers in excess of 12 per Policy Year for the duration of the Policy. See
"Deductions and Charges -- Partial Withdrawal and Transfer Charges." In no
event, however, will any charge be imposed in connection with the exercise of a
conversion right or transfers occurring as the result of Policy Loans. All
transfers are also subject to any charges and conditions imposed by the Fund
whose shares are involved. All transfers that are effective on the same
Valuation Date will be treated as one transfer transaction.
POLICY LOANS
GENERAL. As long as the Policy remains in effect, you may borrow money from
us at any time after the first Policy Year using the Policy as security for the
loan. You may not borrow at any time more than the Loan Value of the Policy,
which is equal to the Cash Value less the existing Loan Amount. Each Policy loan
must be at least $500.
Loan requests may be made in writing or by telephoning us on any Valuation
Date. Any loan request in excess of $25,000 will require a Signature Guarantee
and telephone loan requests cannot exceed $10,000. No election form is currently
required to make telephone loan requests. We will employ reasonable procedures
to confirm that loan requests made by telephone are genuine. In the event we do
not employ such procedures, we may be liable for any losses due to unauthorized
or fraudulent instructions. Such procedures may include, among others, requiring
forms of personal identification prior to acting upon telephone instructions,
providing written confirmations of such instructions and/or tape recording
telephone instructions.
Policy loans have priority over the claims of any assignee or other person.
A Policy loan may be repaid in whole or in part at any time while the Insured is
living.
The loan proceeds will normally be paid to you within seven days after we
receive your request. Payment of loan proceeds to you may be postponed under
certain circumstances. See "General Provisions -- Postponement of Payments."
When you make a payment on a Policy loan, you must tell us that you are
making a loan payment; otherwise, we will treat it as a premium payment and it
will be subject to the Premium Expense Charge. See "Deductions and Charges -
Premium Expense Charge." We reserve the right to treat a loan payment as a
premium payment if doing so will prevent your policy from lapsing or prevent
borrowing from your policy to pay premiums.
The total of your outstanding Policy loans including unpaid interest due
thereon is called the "Loan Amount."
IMMEDIATE EFFECT OF POLICY LOANS. When we make a Policy loan, an amount
equal to the Policy loan (which includes interest payable in advance) will be
segregated within the Accumulation Value of your Policy and held in the Fixed
Account as security for the loan (this includes loans taken on policies issued
in New Jersey). As described below, you will pay interest to us on the Policy
loan, but we will also credit interest to you on the amount held in the Fixed
Account as security for the loan. The amount segregated in the Fixed Account as
security for the Policy loan will be included as part of the Fixed Accumulation
Value under the Policy, but will (as described below) be credited with interest
on a basis different from other amounts in the Fixed Account.
Unless you specify differently, amounts held as security for the Policy
loan will come proportionately from the Fixed Accumulation Value and the
Variable Accumulation Value (with the proportions being determined as described
below). Assets equal to the portion of the Policy loan coming from the Variable
Accumulation Value will be transferred from the Sub-Accounts of the Variable
Account to the Fixed Account, THEREBY REDUCING THE ACCUMULATION VALUE HELD IN
THE SUB-ACCOUNTS. These transfers are not treated as transfers for the purposes
of the transfer charge or the limit on the number of transfers.
ILLUSTRATION OF DETERMINATION OF PROPORTIONS. The segregated amount that
will be security for a Policy loan will come from the Fixed Accumulation Value
and the Variable Accumulation Value in the same proportion that the sum of (a)
the Policy's Fixed Accumulation Value, less any existing Loan Amount, and (b)
the Policy's Variable Accumulation Value, bear to the Policy's total
Accumulation Value less any existing Loan Amount (determined, in each case, at
the end of the Valuation Period during which your request is received).
This can be illustrated as follows. Assume that the Fixed Accumulation
Value is $5,000 and the Variable Accumulation Value is $6,000, with Sub-Account
XXX = $2,000, and Sub-Account YYY = $4,000. Assume that the existing Loan Amount
is $1,000, and the new Policy loan request is $5,000. For purposes of
determining the proportions, we first subtract the existing Loan Amount from the
Fixed Accumulation Value, and then we add the Variable Accumulation Value, which
in our example would be ($5,000 - $1,000) + $6,000 = $10,000. The proportionate
percentages of the Policy loan coming from the Fixed Accumulation Value and the
Variable Accumulation Value are then determined as a percentage of this total,
which would be $4,000/$10,000 = 40% from the Fixed Accumulation Value, and
$6,000/$10,000 = 60% from the Variable Accumulation Value. The percentage
deducted from the Variable Accumulation Value would be distributed as follows:
$2,000/$10,000 = 20% from Sub-Account XXX; and $4,000/$10,000 = 40% from
Sub-Account YYY. The actual amounts coming from the various Accounts in
connection with the new $5,000 Policy loan would be 40% X $5,000 = $2,000 from
the Fixed Account; 20% X $5,000 = $1,000 from Sub-Account XXX; and 40% X $5,000
= $2,000 from Sub-Account YYY.
EFFECT ON INVESTMENT PERFORMANCE. Amounts coming from the Variable Account
as security for Policy loans will no longer participate in the investment
performance of the Variable Account. All amounts held in the Fixed Account as
security for Policy loans (that is, the Loan Amount) will only be credited with
interest at an effective annual rate currently equal to 4.00%. NO ADDITIONAL
INTEREST WILL BE CREDITED TO THESE AMOUNTS. On the Policy Anniversary, any
interest credited on these amounts will be credited to the Fixed Account and the
Variable Account according to the premium allocation then in effect. See
"Payment and Allocation of Premiums -- Allocation of Premiums."
Although Policy loans may be repaid in whole or in part at any time before
the Insured's Age 95, Policy loans will permanently affect the Policy's
potential Accumulation Value. As a result, to the extent that the Death Benefit
depends upon the Accumulation Value (see "Death Benefit -- Death Benefit
Options"), Policy loans will also affect the Death Benefit under the Policy.
This effect could be favorable or unfavorable depending on whether the
investment performance of the assets allocated to the Sub-Account(s) is less
than or greater than the interest being credited on the assets transferred to
the Fixed Account while the loan is outstanding. Compared to a Policy under
which no loan is made, values under the Policy will be lower when such interest
credited is less than the investment performance of assets held in the
Sub-Account(s).
EFFECT ON POLICY COVERAGE. If, on any Monthly Anniversary, the Loan Amount
is greater than the Accumulation Value less the then applicable Surrender
Charge, we will notify you. If we do not receive sufficient payment within 61
days from the date we send notice to you, the Policy will lapse and terminate
without value. Our written notice to you will indicate the amount of the payment
required to avoid lapse. The Policy may, however, later be reinstated. See
"Policy Lapse and Reinstatement."
A Policy loan may also cause termination of the Death Benefit Guarantee,
because the Loan Amount is deducted from the total premiums paid in calculating
whether sufficient premiums have been paid in order to maintain the Death
Benefit Guarantee. See "Death Benefit Guarantee."
Proceeds payable upon the death of the Insured will be reduced by any Loan
Amount.
INTEREST. The interest rate charged on Policy loans will be an annual rate
of 5.66%, payable in advance. After the tenth Policy Year, we will charge
interest at an annual rate of 3.85%, payable in advance, on that portion of your
Loan Amount that is not in excess of (a) the Accumulation Value, less (b) the
total of all premiums paid and all partial withdrawals. Any excess of this
amount will be charged interest at the annual rate of 5.66%.
Interest is payable in advance (for the rest of the Policy Year) at the
time any Policy loan is made and at the beginning of each Policy Year thereafter
(for that entire Policy Year). If interest is not paid when due, it will be
deducted from the Cash Surrender Value as an additional Policy loan (see
"Immediate Effect of Policy Loans" above) and will be added to the existing Loan
Amount.
Because we charge interest in advance, any interest that we have not earned
will be refunded to you upon lapse or surrender of the Policy or repayment of
the Policy Loan.
REPAYMENT OF LOAN AMOUNT. The Loan Amount may be repaid any time while the
Insured is living. See "General Provisions --Benefits at Age 95." If not repaid,
the Loan Amount will be deducted by us from any amount payable under the Policy.
As described above, unless you provide us with notice to the contrary, any
payments on the Policy will generally be treated as premium payments, which are
subject to the Premium Expense Charge, rather than repayments on the Loan
Amount. Any repayments on the Loan Amount will result in amounts being
reallocated from the Fixed Account and to the Sub-Accounts of the Variable
Account according to your current premium allocation.
TAX CONSIDERATIONS. A Policy loan may have tax consequences depending on
the circumstances of the loan. See "Federal Tax Matters -- Policy Proceeds."
FREE LOOK AND CONVERSION RIGHTS
FREE LOOK RIGHTS
The Policy provides for an initial free look period during which you have a
right to return the Policy for cancellation and receive a refund of all premiums
paid. You must return the Policy to us or your agent and ask us to cancel the
Policy by midnight of the 20th day after receiving it.
CONVERSION RIGHTS
During the first two Policy Years and the first two years following a
requested increase in Face Amount, we provide you with an option to convert the
Policy or any requested increase in Face Amount to a life insurance policy under
which the benefits do not vary with the investment experience of the Variable
Account. For policies issued in all states, except Connecticut and New Jersey,
this option is made available by permitting you to transfer all or a part of
your Variable Accumulation Value to the Fixed Account. For policies issued in
Connecticut and New Jersey, you may exchange this Policy for a different
permanent fixed benefit life insurance policy that is offered by us in those
states. The two conversion right options are discussed below.
GENERAL OPTION. In all states except Connecticut and New Jersey, you may
exercise your conversion right by transferring all or any part of your Variable
Accumulation Value to the Fixed Account. If, at any time during the first two
Policy Years or the first two years following a requested increase in Face
Amount, you request transfer from the Variable Account to the Fixed Account and
indicate that you are making the transfer in exercise of your conversion right,
the transfer will not be subject to the transfer charge and will not count
against the limit on the number of transfers. At the time of such transfer,
there is no effect on the Policy's Death Benefit. Face Amount, net amount at
risk, Rate Class(es) or Issue Age -- only the method of funding the Accumulation
Value under the Policy will be affected. See "Death Benefit", "Accumulation
Value" and Appendix A, "The Fixed Account."
If you transfer all of the Variable Accumulation Value from the Variable
Account to the Fixed Account and indicate that you are making this transfer in
exercise of your Conversion Right, we will automatically credit all future
premium payments on the policy to the Fixed Account unless you request a
different allocation.
CONNECTICUT AND NEW JERSEY. During the first two policy years and during
the first 24 months following a requested increase in Face Amount, you may
convert the Policy or the Face Amount increase to any fixed benefit whole life
insurance policy offered by us. No evidence of insurability will be required for
the conversion. In order to convert to a new policy, we must receive a written
conversion request; if the entire Policy is being converted, the Policy must be
surrendered to us; the conversion must be made while the Policy is in force; and
any outstanding Loan Amount must be repaid.
The new policy will have the same Issue Age and premium class as the
Policy. If the entire Policy is being converted, the effective date of the
conversion will be the date on which we receive both your written conversion
request and the Policy. If you are converting a Face Amount increase, the
effective date of the conversion will be the date on which we receive your
written conversion request.
On the effective date of the conversion, the new policy will have, at your
option, either:
(a) A death benefit which is equal to the Death Benefit of the Policy on
the effective date of the conversion, or in the case of a Face Amount
increase, a death benefit equal to the increase in Face Amount; or
(b) A net amount at risk which equals the Death Benefit of the Policy on
the effective date of the conversion, less the Accumulation Value on
that date, or in the case of a Face Amount increase, a net amount at
risk which equals the Face Amount increase on the effective date of
conversion less the Accumulation Value on that date which is
considered to be part of the Face Amount increase.
The conversion will be subject to an equitable adjustment in payments and
Policy values to reflect variances, if any, in the payments and Policy values
under the Policy and the new policy. An additional premium payment may be
required. The new Policy's provisions and charges will be the same as those that
would have been in effect had the new Policy been issued on the Policy Date.
INVESTMENTS OF THE VARIABLE ACCOUNT
There are currently twelve investment alternatives available under the
Variable Account. Fidelity Management & Research Company is the investment
adviser for the four portfolios of VIP and the three portfolios of VIP II.
Northstar Investment Management Corporation is the investment adviser of the two
Northstar Funds. Putnam Management is the investment adviser for the three funds
of Putnam Variable Trust.
We reserve the right to establish additional Sub-Accounts of the Variable
Account, each of which could invest in a new Fund with a specified investment
objective. The Variable Account would then consist of more than the current
twelve investment options. You would only be permitted, however, to participate
in a total of seventeen investment options over the lifetime of your Policy. You
would not have to choose your investment options in advance, but upon
participation in the seventeenth Fund since the issue of the Policy you would
only be able to transfer within the seventeen Funds already utilized and which
are still available.
The Company or its affiliates may receive compensation from an affiliate or
affiliates of certain of the Funds based upon an annual percentage of the
average net assets held in that Fund by the Company and by certain of the
Company's insurance company affiliates. These amounts are intended to compensate
the Company or the Company's affiliates for administrative, record keeping,
distribution, and other services provided by the Company and its affiliates to
Funds and/or the Funds' affiliates. Payments of such amounts by an affiliate or
affiliates of the Funds do not increase the fees paid by the Funds or their
shareholders.
The company recently has entered into agreements with Fidelity Investments
Institutional Operations Company and Fidelity Distributors Corporation which
provide that, assuming aggregated net asset goals are met, the Company or its
affiliates will receive a quarterly payment for administrative, record keeping,
and distribution services provided by the Company or such affiliates in
connection with the sale and servicing of certain of the Fidelity VIP and VIP II
Funds.
The Funds currently offered are described below. A brief summary of
investment objectives is contained in the description of each Fund. In addition,
you should read the prospectuses of the Funds, which are combined with this
prospectus, for more detailed information and particularly, a more thorough
explanation of investment objectives, because several of the Funds and
portfolios may have objectives that are quite similar. There is no assurance
that any Fund will achieve its investment objective(s). There is a possibility
that one Fund might become liable for any misstatement, inaccuracy or incomplete
disclosure in another Fund's prospectus.
The Fund shares may be available to fund benefits under both variable
annuity and variable life contracts and policies. This could, in the future,
result in an irreconcilable conflict between the interests of the holders of the
different types of variable contracts. The Funds have advised us that they will
monitor for such conflicts and will promptly provide us with information
regarding any such conflicts should they arise or become imminent and we will
promptly advise the Funds if we become aware of any such conflicts. If any such
material irreconcilable conflict arises we will arrange to eliminate and remedy
such conflict up to and including establishing a new management investment
company and segregating the assets underlying the variable policies and
contracts at no cost to the holders of the policies and contracts. For a brief
explanation of the conflicts that may be involved in such situations, refer to
the section entitled "FMR and Its Affiliates" in the VIP and VIP II Prospectuses
and the section entitled "Sales and Redemptions" in the Putnam Variable Trust
Prospectus.
The Funds described below distribute dividends and capital gains. However,
distributions are automatically reinvested in additional Fund shares, at net
asset value. The Sub-Account receives the distributions which are then reflected
in the Unit Value of that Sub-Account. See "Accumulation Value."
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND (VIP)
VIP is a mutual fund trust currently including five investment portfolios,
each with a different investment objective. Presently, the following four
portfolios are available within this Policy.
MONEY MARKET PORTFOLIO seeks to obtain as high a 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
instruments of domestic and foreign issuers. An investment in the portfolio is
not insured or guaranteed by the U.S. Government, and there can be no assurance
that the Portfolio will maintain a stable net asset value per share of $1.00.
HIGH INCOME PORTFOLIO seeks to obtain a high level of current income by
investing primarily in high-yielding, lower-rated fixed-income securities
(sometimes referred to as "junk bonds"), while also considering growth of
capital. Lower-rated fixed-income securities are considered speculative and
involve greater risk of default than higher-rated fixed-income securities and
are more sensitive to the issuer's capacity to pay. Consult the VIP Prospectus
for further information on the risks associated with the portfolio's investment
in lower-rated fixed-income securities.
EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities the portfolio
will also consider the potential for capital appreciation. The portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's Composite Index of 500 Stocks.
GROWTH PORTFOLIO seeks to achieve capital appreciation. The portfolio
normally purchases common stocks, although its 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.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
VIP II is a mutual fund trust currently including five investment
portfolios, each with a different investment objective. Presently, the following
three portfolios are available within this Policy.
INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of current income as
is consistent with the preservation of capital by investing in a broad range of
investment-grade fixed-income securities.
INDEX 500 PORTFOLIO seeks to provide investment results that correspond to
the total return (i.e., the combination of capital changes and income) of common
stocks publicly traded in the United States. In seeking this objective, the
portfolio attempts to duplicate the composition and total return of the Standard
& Poor's Composite Index of 500 Stocks while keeping transaction costs and other
expenses low. The portfolio is designed as a long-term investment option.
CONTRAFUND PORTFOLIO seeks capital appreciation by investing in companies
believed to be undervalued due to an overly pessimistic appraisal by the public.
The portfolio invests primarily in common stock and securities convertible into
common stock, but it has the flexibility to invest in any type of security that
may produce capital appreciation.
NORTHSTAR VARIABLE TRUST (NORTHSTAR)
Northstar is a diversified management investment company currently offering
four investment funds, each with a different investment objective. The following
two Northstar Funds are available under this Policy.
NORTHSTAR INCOME AND GROWTH FUND is a diversified portfolio with an
investment objective of seeking current income balanced with the objective of
achieving capital appreciation. This Fund will seek to achieve its objective
through investments in common and preferred stocks, convertible securities,
investment grade corporate debt securities and government securities, selected
for their prospects of producing income and capital appreciation. Wilson/Bennett
Capital Management, Inc. ("Wilson/Bennett") is the sub-adviser to this Fund and
is responsible for the day-to-day investment management of the Fund, subject to
the supervision of the investment adviser and the Trustees of the Fund. All fees
and expenses of the subadvisory arrangement are borne by the investment adviser.
NORTHSTAR MULTI-SECTOR BOND FUND is a diversified portfolio with an
investment objective of maximizing current income. This Fund will seek to
achieve its objective by investment in the following sectors of the fixed income
securities markets: (a) securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities;
(b) investment grade corporate debt securities; (c) investment grade or
comparable quality debt securities issued by foreign corporate issuers, and
securities issued by foreign governments and their political subdivisions,
limited to 35% of assets determined at the time of investment; and (d) high
yield _ high risk fixed income securities of U.S. and foreign issuers, limited
to 50% of assets determined at the time of investment.
PUTNAM VARIABLE TRUST
Putnam Variable Trust is a mutual fund currently offering sixteen
investment funds, each with a different investment objective. Presently, only
the following three funds are available under this Policy.
PUTNAM VT DIVERSIFIED INCOME FUND seeks high current income consistent with
capital preservation by investing in the following three sectors of the fixed
income securities markets: a U.S. Government Sector, a High Yield Sector (which
invests primarily in securities that are commonly known as "junk bonds") and an
International Sector. Consult the Putnam Variable Trust Prospectus for further
information on the risks associated with this Fund's investments in high-yield
higher-risk fixed income securities.
PUTNAM VT GROWTH AND INCOME FUND seeks capital growth and current income by
investing primarily in common stocks that offer potential for capital growth,
current income, or both.
PUTNAM VT VOYAGER FUND seeks capital appreciation primarily from a
portfolio of common stocks that Putnam Management believes have potential for
capital appreciation that is significantly greater than that of market averages.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law and, if
required, approval by the Insurance Department, to make additions to, deletions
from, or substitutions for the shares that are held by the Variable Account or
that the Variable Account may purchase. We reserve the right to eliminate the
shares of any of the Funds and to substitute shares of another Fund or of
another open-end, registered investment company. We will not substitute any
shares attributable to your interest in a Sub-Account of the Variable Account
without notice and prior approval of the SEC, to the extent required by the
Investment Company Act of 1940 or other applicable law. Nothing contained herein
shall prevent the Variable Account from purchasing other securities of other
Funds or classes of policies, or from permitting a conversion between Funds or
classes of policies on the basis of requests made by Policy owners.
We also reserve the right to establish additional Sub-Accounts of the
Variable Account, each of which would invest in a new Fund, or in shares of
another investment company, with a specified investment objective. New Sub-
Accounts may be established when, in our sole discretion, marketing needs or
investment conditions warrant, and any new Sub-Accounts will be made available
to existing Policy owners on a basis to be determined by us. We may also
eliminate one or more Sub-Accounts if, in our sole discretion, marketing, tax,
or investment conditions warrant.
In the event of any such substitution or change, we may make such changes
in this and other policies as may be necessary or appropriate to reflect such
substitution or change. You may transfer the portion of the Accumulation Value
affected without payment of a Transfer Charge. If deemed by us to be in the best
interests of persons having voting rights under the Policies, the Variable
Account may be operated as a management company under the Investment Company Act
of 1940, it may be deregistered under that Act in the event such registration is
no longer required, or it may be combined with our other separate accounts.
VOTING RIGHTS
You have the right to instruct us how to vote the Fund shares attributable
to the Policy at regular meetings and special meetings of the Funds. We will
vote the Fund shares held in Sub-Accounts according to the instructions
received, as long as:
* The Variable Account is registered as a unit investment trust under
the Investment Company Act of 1940; and
* The assets of the Variable Account are invested in Fund shares.
If we determine that, because of applicable law or regulation, we do not
have to vote according to the voting instructions received, we will vote the
Fund shares at our discretion.
All persons entitled to voting rights and the number of votes they may cast
are determined as of a record date, selected by us, not more than 90 days before
the meeting of the Fund. All Fund proxy materials and appropriate forms used to
give voting instructions will be sent to persons having voting interests.
Any Fund shares held in the Variable Account for which we do not receive
timely voting instructions, or which are not attributable to Policy owners, will
be voted by us in proportion to the instructions received from all Policy owners
having a voting interest in the Fund. Any Fund shares held by us or any of our
affiliates in general accounts will, for voting purposes, be allocated to all
separate accounts having voting interests in the Fund in proportion to each
account's voting interest in the respective Fund, and will be voted in the same
manner as are the respective account's votes.
Owning the Policy does not give you the right to vote at meetings of our
stockholders.
DISREGARD OF VOTING INSTRUCTIONS. We may, when required by state insurance
regulatory authorities, disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the
subclassification or investment objective of any Fund or to approve or
disapprove an investment advisory contract for any Fund. In addition, we may
disregard voting instructions in favor of changes initiated by a Policy owner in
the investment policy or the investment adviser of any Fund if we reasonably
disapprove of such changes. A change would be disapproved only if the proposed
change is contrary to state law or prohibited by state regulatory authorities or
we determine that the change would have an adverse effect on the Variable
Account in that the proposed investment policy for a Fund may result in
speculative or unsound investments. In the event we do disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next annual report to owners.
GENERAL PROVISIONS
BENEFITS AT AGE 95
If the Insured is living at Age 95 and the Policy is in force, the Cash
Surrender Value of the Policy will automatically be applied to purchase single
premium paid-up life insurance, unless you notify us in writing on or before the
Insured's attained Age 95 that the Cash Surrender Value should be paid in cash.
OWNERSHIP
While the Insured is alive, subject to the Policy's provisions you may:
* Change the amount and frequency of premium payments.
* Change the allocation of premiums.
* Change the Death Benefit Option.
* Change the Face Amount.
* Make transfers between accounts.
* Surrender the Policy for cash.
* Make a partial withdrawal for cash.
* Receive a cash loan.
* Assign the Policy as collateral.
* Change the beneficiary.
* Transfer ownership of the Policy.
* Enjoy any other rights the Policy allows.
PROCEEDS
At the Insured's death, the proceeds payable include the Death Benefit then
in force:
* Plus any additional amounts provided by rider on the life of the
Insured;
* Plus any Policy loan interest that we have collected but not earned;
* Minus any Loan Amount; and
* Minus any unpaid Monthly Deductions.
BENEFICIARY
You may name one or more beneficiaries on the application when you apply
for the Policy. You may later change beneficiaries by written request. If no
beneficiary is surviving when the Insured dies, the Death Benefit will be paid
to you, if surviving, or otherwise to your estate.
POSTPONEMENT OF PAYMENTS
Payments from the Variable Account for Death Benefits, cash surrender,
partial withdrawal, or loans will generally be made within seven days after we
receive all the documents required for the payments.
We may, however, delay making a payment when we are not able to determine
the Variable Accumulation Value because (i) the New York Stock Exchange is
closed, other than customary weekend or holiday closings, or trading on the New
York Stock Exchange is restricted by the SEC, (ii) the SEC by order permits
postponement for the protection of Policyholders, or (iii) an emergency exists,
as determined by the SEC, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to determine the
value of the Variable Account's net assets. Transfers and allocation to and
against any Sub-Account of the Variable Account may also be postponed under
these circumstances.
Any of the payments described above which are made from the Fixed Account
may be delayed up to six months from the date we receive the documents required.
We will pay interest at the same rate we are currently paying on proceeds at
death from the date of the request to the date of payment if we delay payment
more than 10 days. No additional interest will be credited to any delayed
payments. The time a payment from the Fixed Account may be delayed and the rate
of interest paid on such amounts may vary among states.
SETTLEMENT OPTIONS
Settlement Options are ways you can choose to have the Policy's proceeds
paid. These options apply to proceeds paid:
* At the Insured's death.
* On total surrender of the Policy.
The proceeds are paid to one or more payees. The proceeds may be paid in a
lump sum or may be applied to one of the following Settlement Options. Proceeds
will be paid in one sum unless one or more Options are requested and we agree to
it. A combination of options may be used. At least $2,500 must be applied to any
option for each payee under that option. Under an installment Option, each
payment must be at least $25.00. We may adjust the interval between payments to
make each payment at least $25.00.
Proceeds applied to any Option no longer earn interest at the rate applied
to the Fixed Account or participate in the investment performance of the Funds.
Option 1 -- Proceeds are left with us to earn interest. Withdrawals and any
changes are subject to our approval.
Option 2 -- Proceeds and interest are paid in equal installments of a
specified amount until the proceeds and interest are all paid.
Option 3 -- Proceeds and interest are paid in equal installments for a
specified period until the proceeds and interest are all paid.
Option 4 -- The proceeds provide an annuity payment with a specified number
of months "certain." The payments are continued for the life of the primary
payee. If the primary payee dies before the certain period is over, the
remaining payments are paid to a contingent payee.
Option 5 -- The proceeds provide a life income for two payees. When one
payee dies, the surviving payee receives two-thirds of the amount of the
joint monthly payment for life.
Option 6 -- The proceeds are used to provide an annuity based on the rates
in effect when the proceeds are applied. We do not apply this Option if a
similar option would be more favorable to the payee at that time.
INTEREST ON SETTLEMENT OPTIONS. We base the interest rate for proceeds
applied under Options 1 and 2 on the interest rate we declare on funds that we
consider to be in the same classification based on the Option, restrictions on
withdrawal, and other factors. The interest rate will never be less than an
effective annual rate of 3.50%.
In determining amounts to be paid under Options 3 and 4, we assume interest
at an effective annual rate of 3.50%. Also, for Option 3 and "certain" periods
under Option 4, we credit any excess interest we may declare on funds that we
consider to be in the same classification based on the Option, restrictions on
withdrawal, and other factors.
INCONTESTABILITY
After the Policy has been in force during the Insured's lifetime for two
years from the Policy's Issue Date, we cannot claim the Policy is void or refuse
to pay any proceeds unless the Policy has lapsed.
If you make a Face Amount increase or a premium payment which requires
proof of insurability, the corresponding Death Benefit increase has its own
two-year contestable period measured from the date of the increase.
If the Policy is reinstated, the contestable period is measured from the
date of reinstatement with respect to statements made on the application for
reinstatement.
MISSTATEMENT OF AGE AND SEX
If the Insured's Age or sex or both are misstated (except where unisex
rates apply), the Death Benefit will be the amount that the most recent cost of
insurance would purchase using the current cost of insurance rate for the
correct Age and sex.
SUICIDE
If the Insured commits suicide within two years of the Policy's Issue Date,
we do not pay the Death Benefit. Instead, we refund all premiums paid for the
Policy and any attached riders, minus any Loan Amounts and partial withdrawals.
If you make a Face Amount increase or a premium payment which requires
proof of insurability, the corresponding Death Benefit increase has its own
two-year suicide limitation for the proceeds associated with that increase. If
the Insured commits suicide, whether sane or insane, within two years of the
effective date of the increase, we pay the Death Benefit prior to the increase
and refund the cost of insurance for that increase.
TERMINATION
The Policy terminates when any of the following occurs:
* The Policy lapses. See "Policy Lapse and Reinstatement."
* The Insured dies.
* The Policy is surrendered for its Cash Surrender Value.
* The Policy is amended according to the amendment provision described
below and you do not accept the amendment.
AMENDMENT
We reserve the right to amend the Policy, subject to the approval of the
Insurance Department, in order to include any future changes relating to the
following:
* Any SEC rulings and regulations.
* The Policy's qualification for treatment as a life insurance policy
under the following:
- The Internal Revenue Code of 1986, as amended.
- Internal Revenue Service rulings and regulations.
- Any requirements imposed by the Internal Revenue Service.
REPORTS
ANNUAL STATEMENT. We will send you an Annual Statement once each year free
of charge, showing the Face Amount, Death Benefit, Accumulation Value, Cash
Surrender Value, Loan Amount, premiums paid, Planned Periodic Premiums, interest
credits, partial withdrawals, transfers, and charges since the last statement.
Additional statements are available upon request. We may make a charge not
to exceed $50.00 for each additional Annual Statement you request.
PROJECTION REPORT. Upon request, we will provide you a report projecting
future results based on the Death Benefit Option you specify, the Planned
Periodic Premiums you specify, the Accumulation Value of your Policy at the end
of the prior Policy Year, and any other assumptions specified by you or us
(subject to any SEC limitations). We may make a charge not to exceed $50.00 for
each Projection Report you request.
DIVIDENDS
The Policy does not entitle you to participate in our surplus. We do not
pay you dividends under the Policy.
The Sub-Account receives any dividends paid by the related Fund. Any such
dividend is credited to you through the calculation of the Sub-Account's daily
Unit Value.
COLLATERAL ASSIGNMENT
You may assign the benefits of the Policy as collateral for a debt. This
limits your rights to the Cash Surrender Value and the beneficiary's rights to
the proceeds. An assignment is not binding on us until we receive written
notice.
OPTIONAL INSURANCE BENEFITS
The Policy can include additional benefits, in the form of riders to the
Policy, if our requirements for issuing such benefits are met. We currently
offer the following benefit riders:
ACCELERATED BENEFIT RIDER. Under certain circumstances a part of the Death
Benefit may be paid to you when the Insured has been diagnosed as having a
terminal illness. This Rider may not be available in all states. Ask your
registered representative about the availability of this Rider in your state.
See "Accelerated Benefit Rider."
ACCIDENTAL DEATH BENEFIT RIDER. Provides an additional benefit if the
Insured dies from an accidental injury.
ADDITIONAL INSURED RIDER. Provides a 10 year, guaranteed level premium and
level term coverage for the Insured, the Insured's spouse, or a child of the
Insured.
WAIVER OF MONTHLY DEDUCTION RIDER. The Monthly Deduction for the Policy is
waived while the Insured is totally disabled under the terms of the rider.
CHILDREN'S INSURANCE RIDER. Provides up to $10,000 of term life insurance
on the life of each of the Insured's children.
COST OF LIVING INCREASE RIDER. Provides optional increases in Face Amount
on the life of the Insured every two years based on the cost of living without
evidence of insurability.
WAIVER OF SPECIFIED PREMIUM RIDER. Contributes a specified amount of
premium to the Policy each month while the Insured is totally disabled under the
terms of the rider. This rider may not be available in all states. Ask your
registered representative about the availability of this rider in your state.
FEDERAL TAX MATTERS
The following discussion is not intended to be a complete description of
the tax status of the Policies. Rather, it provides information about how we
believe the tax laws apply in the most commonly occurring circumstances. The tax
treatment of certain aspects of the Policies, such as surrenders and partial
withdrawals, is uncertain or may be changed by regulations adopted in the
future. For these reasons, Policy owners are advised to consult with their own
tax advisers with regard to the tax implications of the Policies.
POLICY PROCEEDS
GENERAL. The Policy should qualify as a life insurance contract as long as
it satisfies certain definitional tests under Section 7702 and 817(d) of the
Internal Revenue Code (the "Code") and as long as the underlying investments for
the Contract satisfy diversification requirements under section 817(h) of the
Code (see "Diversification Requirements"). Section 7702 of the Code provides
that the Policy will so qualify if it satisfies a cash value accumulation test
or a guideline premium requirement and falls within a cash value corridor. The
qualification of the Policy under Section 7702 depends in part upon the Death
Benefit payable under the Policy at any time. To the extent a change in the
Policy, such as a decrease in Face Amount or a change in Death Benefit Option,
would cause the Policy not to qualify, we will not make the change. Also, if at
any time a premium is paid which would result in total premiums exceeding the
current maximum premiums allowed, we will only accept that portion of the
premium which would make total premiums equal the maximum. See "Payment and
Allocation of Premiums -- Amount and Timing of Premiums."
MODIFIED ENDOWMENT CONTRACTS. In 1988 Congress created a new classification
of life insurance policies known as "Modified Endowment Contracts." Policy
loans, partial surrenders and partial withdrawals of cash from a policy which is
classified as a Modified Endowment Contract are taxable as ordinary income to
the Policy owner. Additionally, taxable distributions, if made before the Policy
owner is 591/2, are subject to a Federal income tax penalty of 10%.
Modified Endowment Contract classification may be avoided by limiting the
amount of premiums paid under the Policy. If you contemplate a large premium
payment under this Policy, and you wish to avoid Modified Endowment Contract
classification, you may contact us in writing before making the payment and we
will tell you the maximum amount which can be paid into the Policy.
DIVERSIFICATION REQUIREMENTS. Flexible premium variable life insurance
policies such as these Policies will be treated as life insurance contracts
under the Code as long as the separate accounts funding them are "adequately
diversified" under section 817(h) of the Code and regulations issued by the
Treasury Department. If the Variable Account is determined to be not adequately
diversified, Policy owners in the Variable Account will be treated as the owners
of the underlying assets and thus currently taxable on earnings and gains. The
investment adviser of the respective mutual fund investment options has
responsibility for maintaining the investment diversification required under the
Code.
DEATH BENEFITS. The Death Benefit proceeds payable under either the Level
Amount Option or the Variable Amount Option will be excludable from the gross
income of the beneficiary under Section 101(a) of the Code.
TAXATION OF DISTRIBUTIONS
SURRENDERS AND PARTIAL WITHDRAWALS. A surrender or lapse of the Policy may
have tax consequences. Upon surrender, the owner will not be taxed on the Cash
Surrender Value except for the amount, if any, that exceeds the gross premiums
paid less the untaxed portion of any prior withdrawals. The amount of any Policy
loan will, upon surrender or lapse, be added to the Cash Surrender Value and
treated, for this purpose, as if it had been received. The treatment of a
preferred loan is unclear; such a loan may be considered a withdrawal instead of
an indebtedness of the Policy owner. A loss incurred upon surrender is generally
not deductible. The tax consequences of a surrender may differ if the proceeds
are received under any income payment settlement option.
A complete surrender of the Policy will, and a partial withdrawal may,
under Section 72(e)(5) of the Code, be included in your gross income to the
extent that the distribution exceeds your investment in the Policy. Withdrawals
or partial surrenders generally are not taxable unless the total of such
withdrawals exceeds total premiums paid to the date of withdrawal less the
untaxed portion of any prior withdrawals. During the first 15 policy years,
however, an additional amount may be taxable if the partial surrender results in
or is necessitated by a reduction in benefits. A qualified tax adviser should be
consulted regarding the tax consequences of any surrender or partial withdrawal
during the first 15 policy years.
The increase in Accumulation Value of the Policy will not be included in
gross income unless and until there is a total surrender or partial withdrawal
under the Policy. A complete surrender of the Policy will, and a partial
withdrawal may, under Section 72(e)(5) of the Code, be included in your gross
income to the extent the distribution exceeds your investment in the Policy.
The Unemployment Compensation Amendments of 1992 require us to withhold
Federal income tax at the rate of 20% on most distributions from qualified
plans, unless the distribution is an "eligible rollover distribution" as defined
by the Unemployment Compensation Act of 1992 and the Policy owner files a
written request with us for a direct rollover to an individual retirement
account as described in 408(b) of the Code, or as applicable, to another
qualified plan or a Section 403(b) arrangement that accepts rollovers.
POLICY LOANS. Under Section 72(e)(5) of the Code, loans received under the
Policy will be generally recognized as loans for tax purposes and will not be
considered to be distributions subject to tax. Pursuant to Section 163 of the
Code, interest paid to us with respect to the loan may or may not be deductible,
depending upon a number of factors. If the Policy is a Modified Endowment
Contract, a Policy loan or assignment of any portion of the Accumulation Value
will be taxable in an amount equal to the lesser of the amount of the
loan/assignment or the excess of Accumulation Value over the Owner's investment
in the Policy. Due to the complexity of these factors, a Policy owner should
consult a competent tax adviser as to the deductibility of interest paid on any
Policy loans.
OTHER TAXES. Federal estate taxes and state and local estate, inheritance
and other taxes may become due depending on applicable law and your
circumstances or the circumstances of the Policy beneficiary if you or the
Insured dies. Any person concerned about the estate implications of the Policy
should consult a competent tax adviser.
TAXATION OF POLICIES HELD BY PENSION, CERTAIN DEFERRED COMPENSATION PLANS AND
OTHER ARRANGEMENTS
PENSION AND PROFIT-SHARING PLANS. If a Policy is purchased by a trust which
forms part of a pension or profit-sharing plan qualified under Section 401(a) of
the Code for the benefit of participants covered under the plan, the Federal
income tax treatment of such Policies will be somewhat different from that
described above. A competent tax adviser should be consulted on these matters.
DEFERRED COMPENSATION PLANS FOR PUBLIC EMPLOYEES AND EMPLOYEES OF TAX
EXEMPT ORGANIZATIONS. Section 457 of the Code permits state and local government
employers and tax exempt employers to establish deferred compensation plans for
eligible employees and independent contractors. Eligible plans limit the amount
of compensation which may be deferred. Distribution from eligible plans may
occur only upon the death of the employee, attainment of age 701/2, separation
from service or in the event of an unforseeable emergency. Amounts deferred may
be transferred directly to another eligible deferred compensation plan. The
employer will be the Owner and Beneficiary of all policies issued to an eligible
plan. Policies are subject to the claims of the employer's general creditors.
Death Benefit proceeds payable to the employer, some or all of which are
subsequently paid by the employer to the employee's beneficiary under the plan
will not be excludable from gross income under Section 101(a) or Section 101(b)
of the Code and will be taxable as ordinary income. An employee has no present
legal right or vested interest in such policies; an employee is entitled to
distributions only in accordance with eligible plan provisions.
OTHER ARRANGEMENTS. In addition, the Policy may be used in various
arrangements, including nonqualified deferred compensation or salary continuance
plans, split dollar insurance plans, executive bonus plans, retiree medical
benefit plans and others. The tax consequences of such plans may vary depending
on the particular facts and circumstances of each individual arrangement.
Therefore, if you are contemplating the use of a Policy in any arrangement the
value of which depends in part on its tax consequences, you should be sure to
consult a qualified tax advisor regarding the tax attributes of the particular
arrangements.
TAXATION OF RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
We do not initially expect to incur any income tax burden upon the earnings
or the realized capital gains attributable to the Variable Account. Based on
this expectation, no charge is being made currently to the Variable Account for
Federal income taxes which may be attributable to the Account. If, however, we
determine that we may incur such tax burden, we may assess a charge for such
burden from the Variable Account.
We may also incur state and local taxes, in addition to premium taxes, in
several states. At present these taxes are not significant. If there is a
material change in state or local tax laws, charges for such taxes, if any,
attributable to the Variable Account, may be made.
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as tax advice. Any
person concerned about these tax implications should consult a competent tax
adviser. This discussion is based on our understanding of the present Federal
income tax laws as they are currently interpreted by the IRS. No representation
is made as to the likelihood of continuation of these current laws and
interpretations. It should be further understood that the foregoing discussion
is not exhaustive and that special rules not described in this Prospectus may be
applicable in certain situations. Moreover, no attempt has been made to consider
any applicable state or other tax laws.
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS
The Policy is based on actuarial tables which distinguish between men and
women and therefore provide different benefits to men and women of the same Age.
Employers and employee organizations should consider, in consultation with legal
counsel, the impact of the Supreme Court decision of July 6, 1983 in ARIZONA
GOVERNING COMMITTEE V. NORRIS. That decision stated that optional annuity
benefits provided under an employee's deferred compensation plan could not,
under Title VII of the Civil Rights Act of 1964, vary between men and women on
the basis of sex. Employers and employee organizations should also consider, in
consultation with legal counsel, the impact of Title VII generally, and
comparable state laws that may be applicable, on any employment-related
insurance or benefit plan for which a Policy may be purchased.
Because of the NORRIS decision, the charges under the Policy that vary
depending on sex may in some cases not vary on the basis of the Insured's sex.
Unisex rates to be provided by us will apply, if requested on the application,
for tax-qualified plans and those plans where an employer believes that the
NORRIS decision applies. In this case, references made to the mortality tables
applicable to this Policy are to be disregarded and substituted with an 60% male
40% female blend of the 1980 Commissioner's Standard Ordinary Smoker and
Non-Smoker Mortality Tables, Age Last Birthday.
DISTRIBUTION OF THE POLICIES
We intend to sell the Policies in all jurisdictions where we are licensed.
The Policies will be sold by licensed insurance agents who are also registered
representatives of broker-dealers registered with the SEC under the Securities
Exchange Act of 1934 who are members of the National Association of Securities
Dealers, Inc.
The Policies will be distributed by the general distributor, Washington
Square Securities, Inc., (WSSI), a Minnesota corporation, which is an affiliate
of ours. WSSI is a securities broker-dealer registered with the SEC and is a
member of the National Association of Securities Dealers, Inc. It is primarily a
mutual funds dealer and has dealer agreements under which it markets shares of
more than 50 mutual funds. It also markets limited partnerships and other
tax-sheltered or tax-deferred investments, and acts as general distributor
(principal underwriter) for variable annuity products issued by us. The Policies
may also be sold through other broker-dealers authorized by WSSI and applicable
law to do so. Registered representatives of such broker-dealers may be paid on a
different basis than described below.
Registered representatives who sell the Policies will receive commissions
based on a commission schedule. In the first Policy Year, commissions generally
will be no more than 50% of the premiums paid up to the annualized Minimum
Monthly Premium. In any subsequent Policy Year, commissions generally will be
2% of premiums paid in that year. Corresponding commissions will be paid upon
a requested increase in Face Amount. In addition, a commission of .25% of the
average monthly Accumulation Value during each Policy Year may be paid. Further,
registered representatives may be eligible to receive certain overrides, expense
allowances and other benefits based on the amount of earned commissions.
<TABLE>
<CAPTION>
MANAGEMENT
PRINCIPAL OCCUPATION
DIRECTORS AND OFFICERS AND BUSINESS EXPERIENCE
---------------------- -----------------------
<S> <C>
Stephen A. Carb* Partner of Carb, Luria, Glassner, Cook & Kufeld (law firm) since 1962.
James Cochran** Executive Vice President of ReliaStar Bankers Security Life Insurance Company
since 1996; Executive Vice President and Chief Operating Officer of ReliaStar
United Services Life Insurance Company ("RUSL") since 1996: Senior Vice
President, Product Development and Strategic Planning of RUSL from 1995 to 1996;
Senior Vice President, Product Development from 1990 to 1995.
R. Michael Conley*** Senior Vice President of ReliaStar Financial Corp. since 1991; Senior Vice
President, ReliaStar Employee Benefits of ReliaStar Life Insurance Company since
1986; President of NWNL Benefits Corporation since 1988; Executive Vice
President of ReliaStar Bankers Security Life Insurance Company since 1996;
Director of various subsidiaries of ReliaStar Financial Corp.
Richard R. Crowl*** Senior Vice President, General Counsel and Secretary of ReliaStar Financial
Corp. since 1996; Senior Vice President and General Counsel of ReliaStar Life
Insurance Company, ReliaStar Bankers Security Life Insurance Company, Northern
Life Insurance Company, and ReliaStar United Services Life Insurance Company
since 1996; Executive Vice President and General Counsel of Washington Square
Advisers, Inc. since 1986; Vice President and Associate General Counsel of
ReliaStar Financial Corp. from 1989 to 1996; Vice President and Associate
General Counsel of ReliaStar Life Insurance Company from 1985 to 1996; Director
and Senior Vice President of various subsidiaries of ReliaStar Financial Corp.
John H. Flittie*** Vice Chairman, President and Chief Operating Officer of ReliaStar Life Insurance
Company since 1996; President and Chief Operating Officer of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company since 1993; Vice Chairman, Chief
Executive Officer and President of ReliaStar Bankers Security Life Insurance
Company since 1996; Vice Chairman of ReliaStar United Services Life Insurance
Company and ReliaStar Bankers Security Life Insurance Company since 1995; Senior
Executive Vice President and Chief Operating Officer of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company from 1992 to 1993; Senior Executive
Vice President and Chief Operating Officer of ReliaStar Financial Corp. from
1991 to 1992; Executive Vice President and Chief Financial Officer of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company from 1989 to 1991; Director
of Community First BankShares, Inc. and Director and Officer of various
subsidiaries of ReliaStar Financial Corp.
James T. Hale* Senior Vice President of Dayton Hudson Corporation since 1981.
Wayne R. Huneke*** Senior Vice President, Chief Financial Officer and Treasurer of ReliaStar
Financial Corp. and ReliaStar Life Insurance Company since 1994; Vice President,
Treasurer and Chief Accounting Officer from 1990 to 1994; Director and Officer
of various subsidiaries of ReliaStar Financial Corp.
Kenneth U. Kuk*** Senior Vice President of ReliaStar Financial Corp. and ReliaStar Life Insurance
Company since 1996; Vice President, Strategic Marketing of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company since 1996; Vice President of
Investments of ReliaStar Financial Corp. from 1991 to 1996; President of
Washington Square Advisers, Inc. since 1995; Chairman of ReliaStar Mortgage
Corporation since 1988; Director of National Commercial Finance Association and
Director and Officer of various subsidiaries of ReliaStar Financial Corp.
Richard E. Nolan* Senior Counsel of Davis Polk & Wardwell (law firm) since 1996 and Partner from
1990 to 1996.
Fioravante G. Perrotta* Retired 1996; Formerly Senior Partner of Rogers & Wells (law firm) since 1970.
Robert C. Salipante*** Senior Vice President of Personal Financial Services of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company since 1996; Executive Vice President
of ReliaStar Bankers Security Life Insurance Company since 1996; Senior Vice
President of Individual Division and Technology of ReliaStar Life Insurance
Company since 1996; Senior Vice President of Strategic Marketing and Technology
of ReliaStar Financial Corp. and ReliaStar Life Insurance Company from 1994 to
1996; Senior Vice President and Chief Financial Officer of ReliaStar Financial
Corp. and ReliaStar Life Insurance Company from 1992 to 1994; Executive Vice
President of Ameritrust Corporation from 1988 to 1992; Director and Officer of
various subsidiaries of ReliaStar Financial Corp.
David J. Sloane** Executive Vice President and Chief Operating Officer of ReliaStar Bankers Security
Life Insurance Company since 1990.
John G. Turner*** Chairman and Chief Executive Officer of ReliaStar Financial Corp. and ReliaStar
Life Insurance Company since 1993; Chairman of ReliaStar United Services Life
Insurance Company and ReliaStar Bankers Security Life Insurance Company since
1995; Chairman of Northern Life Insurance Company since 1992; Chairman,
President and Chief Executive Officer of ReliaStar Financial Corp. and ReliaStar
Life Insurance Company in 1993; President and Chief Executive Officer of
ReliaStar Financial Corp. and ReliaStar Life Insurance Company from 1991 to
1993; President and Chief Operating Officer of ReliaStar Financial Corp. from
1989 to 1991; President and Chief Operating Officer of ReliaStar Life Insurance
Company from 1986 to 1991; Director and Officer of various subsidiaries of
ReliaStar Financial Corp.
Charles B. Updike* Partner of Schoeman, Marsh & Updike (law firm) since 1976.
Ross M. Weale* President of Waccabuc Enterprise, Inc. (management consulting firm) since 1996;
President and Chief Executive Officer of Country Bank (financial institution)
from 1986 to 1996.
Steven W. Wishart*** Senior Vice President and Chief Investment Officer of ReliaStar Financial Corp.
since 1989; Senior Vice President of ReliaStar Life Insurance Company since
1981; President and Chief Executive Officer of ReliaStar Investment Research,
Inc. (formerly WSCR, Inc.) since 1996; President of Washington Square Capital
Inc. from 1981 to 1996; President of WSCR, Inc. from 1986 to 1996; Director of
National Benefit Resources Group Services Inc. and Director and Officer of
various subsidiaries of ReliaStar Financial Corp.
</TABLE>
* Director
** Officer
*** Director and Officer
The Executive Committee of our Board of Directors consists of Directors Turner,
Flittie, Hale, Huneke, and Weale.
The Compliance Committee of our Board of Directors consists of Directors Weale,
Carb, Hale, Nolan, Perrotta, and Updike.
STATE REGULATION
We are subject to the laws of the State of New York governing insurance
companies and to regulation and supervision by the Insurance Department of the
State of New York. An annual statement in a prescribed form is filed with the
Insurance Department each year, and in each state we do business, covering our
operations for the preceding year and our financial condition as of the end of
that year. Our books and accounts are subject to review by the Insurance
Division and a full examination of our operations is conducted periodically
(usually every three years) by the National Association of Insurance
Commissioners. This regulation does not, however, involve supervision or
management of our investment practices or policies.
In addition, we are subject to regulation under the insurance laws of other
jurisdictions in which we operate.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party. We
are engaged in litigation of various kinds; however, our management does not
believe that any of this litigation is of material importance in relation to our
total assets.
BONDING ARRANGEMENTS
An insurance company blanket bond is maintained providing $25,000,000
coverage for our officers and employees and those of Washington Square
Securities, Inc., (WSSI), subject to a $500,000 deductible.
LEGAL MATTERS
Legal matters in connection with the Variable Account and the Policy
described in this Prospectus have been passed upon by Robert B. Saginaw,
Esquire, Attorney for the Company.
EXPERTS
The statement of assets and liabilities of ReliaStar Bankers Security
Variable Life Separate Account I as of December 31, 1996, the related statement
of operations and changes in net assets for the years ended December 31, 1996
and 1995, and the annual financial statements of ReliaStar Bankers Security Life
Insurance Company included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports which are included
herein, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The statement of operations and changes in net assets for the year ended
December 31, 1994 included in this Prospectus has been audited by KPMG Peat
Marwick LLP, independent auditors, as stated in their report which is included
herein, and has been so included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Steven
P. West, F.S.A., M.A.A.A., as stated in the opinion filed as an exhibit to the
Registration Statement.
REGISTRATION STATEMENT CONTAINS FURTHER INFORMATION
A Registration Statement has been filed with the SEC under the Securities
Act of 1933 with respect to the Policies. This Prospectus does not contain all
information included in the Registration Statement, its amendments and exhibits.
For further information concerning the Variable Account, the Funds, the Policies
and us, please refer to the Registration Statement.
Statements in this Prospectus concerning provisions of the Policy and other
legal documents are summaries. Please refer to the documents as filed with the
SEC for a complete statement of the provisions of those documents.
Information may be obtained from the SEC's principal office in Washington,
D.C., for a fee it prescribes, or examined there without charge.
FINANCIAL STATEMENTS
The financial statements for the Variable Account reflect the operations of
the Variable Account and its Sub-Accounts as of December 31, 1996 and for each
of the three years in the period then ended. Although the financial statements
are audited, the periods they cover are not necessarily indicative of the longer
term performance of the assets held in the Variable Account.
The financial statements of ReliaStar Bankers Security Life Insurance
Company which are included in this Prospectus should be distinguished from the
financial statements of the Variable Account and should be considered only as
bearing upon the ability of ReliaStar Bankers Security Life Insurance Company to
meet its obligations under the Policies. They should not be considered as
bearing on the investment performance of the assets held in the Variable
Account.
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
<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.
<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.
<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.
<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.
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.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Policyowners
ReliaStar Bankers Security Variable Life Separate Account I:
We have audited the accompanying statement of operations and changes in net
assets of ReliaStar Bankers Security Variable Life Separate Account I (formerly
Bankers Security Variable Life Separate Account) (Separate Account I) for the
year ended December 31, 1994. This financial statement is the responsibility of
the Separate Account I's management. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 statement referred to above presents fairly, in
all material respects, the results of operation and changes in net assets of the
ReliaStar Bankers Security Variable Life Separate Account I for the year ended
December 31, 1994, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Washington, D.C.
February 2, 1995
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholder
ReliaStar Bankers Security Life Insurance Company
(A Wholly Owned Subsidiary of ReliaStar United Services Life Insurance Company)
Woodbury, New York
We have audited the accompanying balance sheets of ReliaStar Bankers
Security Life Insurance Company as of December 31, 1996 and 1995, and the
related statements of income, shareholder's equity and cash flows for each of
the two years in the period ended December 31, 1996. 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 financial position of ReliaStar Bankers Security
Life Insurance Company as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, on January 17, 1995 the
Company was acquired by ReliaStar Financial Corp. (ReliaStar) and consequently
the financial statements reflect a new basis of accounting. In addition, in
December 1995 The North Atlantic Life Insurance Company of America, a subsidiary
of ReliaStar was merged into the Company. The merger was accounted for in a
manner similar to a pooling of interests.
Minneapolis, Minnesota
March 31, 1997
<TABLE>
<CAPTION>
BALANCE SHEETS
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed Maturity Securities (Amortized Cost: 1996, $1,297.5; 1995, $1,308.6) $1,356.7 $1,413.4
Equity Securities (Cost: 1996, $6.5; 1995, $5.8) 7.3 6.6
Mortgage Loans on Real Estate 276.3 233.9
Real Estate 1.6 7.2
Policy Loans 73.4 68.5
Other Invested Assets 5.6 4.9
Short-Term Investments 8.7 14.7
- ----------------------------------------------------------------------------------------------------------------
Total Investments 1,729.6 1,749.2
- ----------------------------------------------------------------------------------------------------------------
Cash (4.7) 13.6
Accounts and Notes Receivable 6.1 13.4
Reinsurance Receivable 26.1 32.1
Deferred Policy Acquisition Costs 131.8 113.5
Present Value of Future Profits 53.3 39.7
Property and Equipment, Net 7.9 7.8
Accrued Investment Income 25.1 25.7
Goodwill 16.9 17.3
Other Assets 1.5 8.4
Assets Held in Separate Accounts 403.3 272.9
- ----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,396.9 $2,293.6
================================================================================================================
LIABILITIES
Future Policy and Contract Benefits $1,575.0 $1,607.3
Pending Policy Claims 22.5 24.0
Other Policyholder Funds 8.7 5.7
Income Taxes 28.6 30.4
Other Liabilities 23.5 29.4
LIABILITIES RELATED TO SEPARATE ACCOUNTS 400.8 269.8
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 2,059.1 1,966.6
- ----------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
Common Stock (1.4 Million Shares Issued and Outstanding) 2.8 2.8
Additional Paid-In Capital 165.4 165.4
Net Unrealized Investment Gains 28.0 41.8
Retained Earnings 141.6 117.0
- ----------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 337.8 327.0
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,396.9 $2,293.6
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF INCOME
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Premiums $ 47.1 $ 53.4
Net Investment Income 137.0 134.0
Realized Investment Gains 3.5 .4
Policy and Contract Charges 65.7 59.4
Other Income 2.0 1.7
- ----------------------------------------------------------------------------------------------------------------
Total 255.3 248.9
- ----------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Benefits to Policyholders 154.1 163.2
Sales and Operating Expenses 44.8 30.9
Amortization of Deferred Policy Acquisition Costs
and Present Value of Future Profits 18.0 18.4
Dividends and Experience Refunds to Policyholders - .4
- ----------------------------------------------------------------------------------------------------------------
Total 216.9 212.9
- ----------------------------------------------------------------------------------------------------------------
Income before Income Taxes 38.4 36.0
Income Tax Expense 13.8 13.4
- ----------------------------------------------------------------------------------------------------------------
NET INCOME $ 24.6 $ 22.6
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF SHAREHOLDER'S EQUITY
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK
Beginning and End of Year $ 2.8 $ 2.8
- ------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Beginning of Year 165.4 47.4
Purchase Accounting Adjustment - 78.8
Merger with Affiliate - 39.2
- ------------------------------------------------------------------------------------------------------------
End of Year 165.4 165.4
- ------------------------------------------------------------------------------------------------------------
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Beginning of Year 41.8 (13.1)
Purchase Accounting Adjustment - 13.1
Merger with Affiliate - (9.9)
Change for the Year (13.8) 51.7
- ------------------------------------------------------------------------------------------------------------
End of Year 28.0 41.8
- ------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Beginning of Year - (1.9)
Purchase Accounting Adjustment - 1.9
- ------------------------------------------------------------------------------------------------------------
End of Year - -
- ------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Beginning of Year 117.0 113.4
Purchase Accounting Adjustment - (113.4)
Merger With Affiliate - 94.4
Net Income 24.6 22.6
- ------------------------------------------------------------------------------------------------------------
End of Year 141.6 117.0
- ------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDER'S EQUITY $ 337.8 $ 327.0
============================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF CASH FLOWS
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 24.6 $ 22.6
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Interest Credited to Insurance Contracts 75.1 77.2
Future Policy Benefits (59.6) (39.2)
Capitalization of Policy Acquisition Costs (26.5) (26.1)
Amortization of Deferred Policy Acquisition Costs
and Present Value of Future Profits 18.0 18.4
Deferred Income Taxes 6.2 3.9
Net Change in Receivables and Payables 9.0 (12.0)
Other Assets 7.9 (.1)
Realized Investment Gains, Net (3.5) (.4)
OTHER (.2) (.1)
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 51.0 44.2
- ----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from Sales of Fixed Maturity Securities 24.6 15.7
Proceeds from Maturities or Repayment of Fixed Maturity Securities
Available-for-Sale 134.6 67.7
Held-to-Maturity - 41.9
Cost of Fixed Maturity Securities Acquired
Available-for-Sale (146.5) (107.5)
Held-to-Maturity - (41.8)
Sale (Purchases) of Equity Securities, Net (.7) 2.3
Proceeds of Mortgage Loans Sold, Matured or Repaid 40.9 36.0
Cost of Mortgage Loans Acquired (83.4) (57.3)
Sales of Real Estate, Net 6.8 .1
Policy Loans Issued, Net (4.9) (8.6)
Sales of Other Invested Assets, Net .8 16.3
Sales (Purchases) of Short-Term Investments, Net 6.0 (11.0)
Cash Acquired with Merger of Affiliate - .6
- ----------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (21.8) (45.6)
- ----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Deposits to Insurance Contracts 134.9 154.3
Maturities and Withdrawals from Insurance Contracts (182.4) (141.9)
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities (47.5) 12.4
- ----------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash (18.3) 11.0
Cash at Beginning of Year 13.6 2.6
- ----------------------------------------------------------------------------------------------------------------
Cash at End of Year $ (4.7) $ 13.6
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY)
NOTE 1. CHANGES IN ACCOUNTING PRINCIPLES
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF
Effective January 1, 1996, ReliaStar Bankers Security Life Insurance Company
(Bankers Security or the Company) adopted Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Measurement of an impairment
loss for long-lived assets and identifiable intangibles that an entity expects
to hold and use should be based on the fair value of the asset. Long-lived
assets and certain identifiable intangibles to be disposed of must be reported
at the lower of carrying amount or fair value less cost to sell. The adoption of
this standard did not have a significant effect on the financial results of the
Company.
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures." SFAS No. 114 and
SFAS No. 118 require a company to measure impairment based upon the present
value of expected future cash flows discounted at the loan's effective interest
rate, the loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. If foreclosure is probable, the measurement of
impairment must be based upon the fair value of the collateral. The adoption of
these standards did not have a significant effect on the financial results of
the Company.
NOTE 2. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is principally engaged in the business of providing life insurance,
annuities and related financial service products. The Company operates primarily
in the United States and is authorized to conduct business in all 50 states.
BASIS OF PRESENTATION
The Company is a wholly-owned subsidiary of ReliaStar United Services Life
Insurance Company (United Services) which is a wholly-owned subsidiary of
ReliaStar Life Insurance Company (ReliaStar Life) whose ultimate parent is
ReliaStar Financial Corp. (ReliaStar). Bankers Security, United Services and
ReliaStar Life were formerly known as Bankers Security Life Insurance Society,
United Services Life Insurance Company and Northwestern National Life Insurance
Company, respectively. Prior to January 17, 1995 the Company's ultimate parent
was USLICO Corporation (USLICO).
On January 17, 1995, ReliaStar acquired USLICO and contributed all of the
capital stock of United Services and Bankers Security to ReliaStar Life. The
North Atlantic Life Insurance Company of America (NALIC), an affiliate of the
Company and a wholly-owned subsidiary of ReliaStar Life was merged into the
Company pursuant to a statutory merger (the Merger) which became effective as of
December 28, 1995. The financial statements for the year ended December 31, 1995
reflect the effects of the merger of NALIC into the Company, which was accounted
for in a manner similar to a pooling of interests, as of January 1, 1995.
The financial statements also reflect a new basis of accounting for the accounts
of the Company (excluding NALIC). Under the new basis of accounting the assets
and liabilities of the Company (excluding NALIC) were valued at their estimated
fair value as of the date USLICO was acquired. The excess of the purchase price
allocated to the Company (excluding NALIC) over the fair value of the net assets
acquired is reflected as goodwill on the balance sheets. This is known as the
purchase method of accounting under Accounting Principles Board Opinion No. 16
pushed down to the subsidiary's financial statements (push-down accounting).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENTS
Fixed maturity securities (bonds and redeemable preferred stocks) are classified
as available-for-sale and are valued at fair value.
Equity securities (common stocks and nonredeemable preferred stocks) are valued
at fair value.
Mortgage loans on real estate are carried at amortized cost less an impairment
allowance for estimated uncollectible amounts.
Investment real estate owned directly by the Company is carried at cost less
accumulated depreciation and allowances for estimated losses. Real estate
acquired through foreclosure is carried at the lower of fair value less
estimated costs to sell or cost.
Short-term investments are carried at amortized cost.
Unrealized investment gains and losses of equity securities and fixed maturity
securities classified as available-for-sale, net of related deferred policy
acquisition costs (DAC), present value of future profits (PVFP) and tax effects,
are accounted for as a direct increase or decrease in shareholder's equity.
Realized investment gains and losses enter into the determination of net income.
Realized investment gains and losses on sales of securities are determined on
the specific identification method. Write-offs of investments that decline in
value below cost on other than a temporary basis and the change in the allowance
for mortgage loans and wholly owned real estate are included with realized
investment gains and losses in the Statements of Income.
The Company records write-offs or allowances for its investments based upon an
evaluation of specific problem investments. The Company reviews, on a continual
basis, all invested assets (including marketable bonds, private placements,
mortgage loans and real estate investments) to identify investments where the
Company has credit concerns. Investments with credit concerns include those the
Company has identified as problem investments, which are issues delinquent in a
required payment of principal or interest, issues in bankruptcy or foreclosure,
and restructured or foreclosed assets. The Company also identifies investments
as potential problem investments, which are investments where the Company has
serious doubts as to the ability of the borrowers to comply with the present
loan repayment terms.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, net of accumulated depreciation of
$1.9 million and $1.1 million at December 31, 1996 and 1995, respectively. The
Company provides for depreciation of property and equipment using straight-line
and accelerated methods over the estimated useful lives of the assets. Buildings
are generally depreciated over 35 to 50 years. Depreciation expense for 1996 and
1995 amounted to $.3 million and $.4 million, respectively.
SEPARATE ACCOUNTS
The Company operates separate accounts. The assets (principally investments) and
liabilities (principally to contractholders) of each account are clearly
identifiable and distinguishable from other assets and liabilities of the
Company. Assets are carried at fair value.
PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS
RECOGNITION OF TRADITIONAL LIFE, GROUP AND ANNUITY PREMIUM REVENUE AND BENEFITS
TO POLICYHOLDERS - Traditional life insurance products include those products
with fixed and guaranteed premiums and benefits, and consist principally of
whole life and term insurance policies and certain annuities with life
contingencies (immediate annuities). Life insurance premiums and immediate
annuity premiums are recognized as premium revenue when due. Group insurance
premiums are recognized as premium revenue over the time period to which the
premiums relate. Benefits and expenses are associated with earned premiums so as
to result in recognition of profits over the life of the contracts. This
association is accomplished by means of the provision for liabilities for future
policy benefits and unearned premiums and the amortization of DAC and PVFP.
RECOGNITION OF UNIVERSAL LIFE-TYPE CONTRACTS REVENUE AND BENEFITS TO
POLICYHOLDERS - Universal life-type policies are insurance contracts with terms
that are not fixed and guaranteed. The terms that may be changed could include
one or more of the amounts assessed the policyholder, premiums paid by the
policyholder or interest accrued to policyholder balances. Amounts received as
payments for such contracts are not reported as premium revenues.
Revenues for universal life-type policies consist of charges assessed against
policy account values for deferred policy loading and the cost of insurance and
policy administration. Policy benefits and claims that are charged to expense
include interest credited to contracts and benefit claims incurred in the period
in excess of related policy account balances.
RECOGNITION OF INVESTMENT CONTRACT REVENUE AND BENEFITS TO POLICYHOLDERS -
Contracts that do not subject the Company to risks arising from policyholder
mortality or morbidity are referred to as investment contracts. Certain deferred
annuities are considered investment contracts. Amounts received as payments for
such contracts are not reported as premium revenues.
Revenues for investment contracts consist of investment income and policy
administration charges. Contract benefits that are charged to expense include
benefit claims incurred in the period in excess of related contract balances,
and interest credited to contract balances.
POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are primarily related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable. Such costs include commissions, certain costs of
policy issuance and underwriting and certain variable agency expenses.
Costs deferred related to traditional life insurance are amortized over the
premium paying period of the related policies, in proportion to the ratio of
annual premium revenues to total anticipated premium revenues. Such anticipated
premium revenues are estimated using the same assumptions used for computing
liabilities for future policy benefits.
Costs deferred related to universal life-type policies and investment contracts
are amortized over the lives of the policies, in relation to the present value
of estimated gross profits from mortality, investment, surrender and expense
margins.
PRESENT VALUE OF FUTURE PROFITS
The present value of future profits reflects the estimated fair value of the
insurance business in-force at the date the Company was acquired by ReliaStar,
and represents the portion of the cost to acquire the Company that was allocated
to the value of future cash flows from insurance contracts existing at the date
of acquisition. Such value is the present value of the actuarially determined
projected net cash flows from the acquired insurance contracts. The weighted
average discount rate used to determine such value was approximately 15%.
An analysis of the PVFP asset account is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, Beginning of Year $39.7 -
Acquisition - $75.6
Imputed Interest 3.8 4.4
Amortization (8.4) (8.5)
Impact of Net Unrealized Investment Gains and Losses 18.2 (31.8)
- ------------------------------------------------------------------------------------------------------------------
BALANCE, END OF YEAR $53.3 $39.7
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Based on current conditions and assumptions as to future events on acquired
policies in-force, the Company expects that the net amortization of the initial
PVFP balance will be between 5% and 6% in each of the years 1997 through 2001.
The interest rates used to determine the amount of imputed interest on the
unamortized PVFP balance ranged from 5% to 8%.
GOODWILL
Goodwill is the excess of the amount paid to acquire the Company over the fair
value of the net assets acquired. Goodwill is amortized on straight-line basis
over 40 years. The carrying value of goodwill is monitored for impairment of
value based on the Company's estimated future earnings. The carrying value of
goodwill is reduced and a charge to income is recorded when an impairment in
value is identified. No such goodwill impairment charges have been recorded.
FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for traditional life contracts are
calculated using the net level premium method and assumptions as to investment
yields, mortality, withdrawals and dividends. The assumptions are based on
projections of past experience and include provisions for possible unfavorable
deviation. These assumptions are made at the time the contract is issued or, for
purchased contracts, at the date of acquisition.
Liabilities for future policy and contract benefits on universal life-type and
investment contracts are based on the policy account balance.
The liabilities for future policy and contract benefits for group disabled life
reserves and long-term disability reserves are based upon interest rate
assumptions and morbidity and termination rates from published tables, modified
for Company experience.
INCOME TAXES
The Company files a consolidated Federal income tax return with United Services.
The provision for income taxes includes amounts currently payable and deferred
income taxes resulting from the cumulative differences in the assets and
liabilities determined on a tax return and financial statement basis.
INTEREST RATE SWAP AGREEMENTS
Interest rate swap agreements are used as hedges for asset/liability management
of adjustable rate and short-term invested assets. The Company does not enter
into any interest rate swap agreements for trading purposes. The interest rate
swap transactions involve the exchange of fixed and floating rate interest
payments without the exchange of underlying principal amounts and do not contain
other optional provisions. The difference between amounts paid and amounts
received on interest rate swaps is reflected in net investment income.
NOTE 3. INVESTMENTS
Investment income summarized by type of investment was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed Maturity Securities $108.7 $109.5
Equity Securities .4 .6
Mortgage Loans on Real Estate 23.3 20.1
Real Estate .9 1.4
Policy Loans 5.0 4.4
Other Invested Assets .5 2.8
Short-Term Investments 1.9 1.1
- ------------------------------------------------------------------------------------------------------------------
Gross Investment Income 140.7 139.9
Investment Expenses (3.7) (5.9)
- ------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $137.0 $134.0
==================================================================================================================
Net pretax realized investment gains (losses) were as follows:
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Net Gains (Losses) on Sales of Investments
Fixed Maturity Securities $1.2 $ .2
Equity Securities - 1.6
Foreclosed Real Estate .7 -
Other 1.6 .4
- ------------------------------------------------------------------------------------------------------------------
3.5 2.2
- ------------------------------------------------------------------------------------------------------------------
Provisions for Losses:
Fixed Maturity Securities - (.2)
Equity Securities - (.2)
Mortgage Loans - (1.0)
Foreclosed Real Estate - (.4)
- ------------------------------------------------------------------------------------------------------------------
- (1.8)
- ------------------------------------------------------------------------------------------------------------------
PRETAX REALIZED INVESTMENT GAINS $3.5 $ .4
==================================================================================================================
</TABLE>
Gross realized investment gains of $1.5 million and $.7 million and gross
realized investment losses of $.3 million and $.5 million were recognized on
sales of fixed maturity securities during the years ended December 31, 1996 and
1995, respectively. All 1996 and 1995 fixed maturity security sales were from
the available-for-sale portfolio.
The amortized cost and fair value of investments in fixed maturity securities by
type of investment were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
GROSS UNREALIZED
AMORTIZED ---------------- FAIR
(IN MILLIONS) COST GAINS (LOSSES) VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Government and Government
Agencies and Authorities $ 38.2 $ 1.7 - $ 39.9
States, Municipalities and Political Subdivisions 9.9 .4 $ (.1) 10.2
Foreign Governments 13.4 .8 - 14.2
Public Utilities 122.9 8.6 (.3) 131.2
Corporate Securities 863.8 41.3 (3.4) 901.7
Mortgage-Backed/Structured Finance Securities 249.1 10.7 (.5) 259.3
Redeemable Preferred Stock .2 - - .2
- ------------------------------------------------------------------------------------------------------------------
TOTAL $1,297.5 $63.5 $(4.3) $1,356.7
==================================================================================================================
DECEMBER 31, 1995
-----------------
GROSS UNREALIZED
AMORTIZED ---------------- FAIR
(IN MILLIONS) COST GAINS (LOSSES) VALUE
- ------------------------------------------------------------------------------------------------------------------
United States Government and Government
Agencies and Authorities $ 42.5 $ 3.4 - $ 45.9
States, Municipalities and Political Subdivisions 9.8 .4 - 10.2
Foreign Governments 13.4 1.4 - 14.8
Public Utilities 129.8 15.0 $ (.1) 144.7
Corporate Securities 838.8 70.4 (2.3) 906.9
Mortgage-Backed/Structured Finance Securities 274.1 16.8 (.2) 290.7
Redeemable Preferred Stock .2 - - .2
- ------------------------------------------------------------------------------------------------------------------
TOTAL $1,308.6 $107.4 $(2.6) $1,413.4
==================================================================================================================
The amortized cost and fair value of fixed maturity securities by contractual
maturity are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
AMORTIZED FAIR AMORTIZED FAIR
(IN MILLIONS) COST VALUE COST VALUE
- ------------------------------------------------------------------------------------------------------------------
Due in One Year or Less $ 31.8 $ 32.1 $ 18.7 $ 18.9
Due After One Year Through Five Years 482.4 499.4 412.9 438.3
Due After Five Years Through Ten Years 394.9 416.8 447.3 488.6
Due After Ten Years 132.7 142.0 155.6 176.9
Mortgage-Backed/Structured Finance Securities 255.7 266.4 274.1 290.7
- ------------------------------------------------------------------------------------------------------------------
TOTAL $1,297.5 $1,356.7 $1,308.6 $1,413.4
==================================================================================================================
</TABLE>
The fair values for the marketable bonds are determined based upon the quoted
market prices for bonds actively traded. The fair values for marketable bonds
without an active market are obtained through several commercial pricing
services which provide the estimated fair values. Fair values of privately
placed bonds which are not considered problems are determined utilizing a
commercially available pricing model. The model considers the current level of
risk-free interest rates, current corporate spreads, the credit quality of the
issuer and cash flow characteristics of the security. Utilizing this data, the
model generates estimated market values which the Company considers reflective
of the fair value of each privately placed bond. Fair values for privately
placed bonds which are considered problems are determined through consideration
of factors such as the net worth of the borrower, the value of collateral, the
capital structure of the borrower, the presence of guarantees and the Company's
evaluation of the borrower's ability to compete in the relevant market.
At December 31, 1996, the largest industry concentration of the private
placement portfolio was consumer non-cyclical, where 23.6% of the portfolio was
invested, and the largest industry concentration of the marketable bond
portfolio was mortgage-backed/structured finance, where 23.4% of the portfolio
was invested. At December 31, 1996, the largest geographic concentration of
commercial mortgage loans was in the midwest region of the United States, where
approximately 31.4% of the commercial mortgage loan portfolio was invested.
At December 31, 1996 and 1995, gross unrealized appreciation of equity
securities was $.9 million and $1.0, respectively, and gross unrealized
depreciation was $.1 million and $.2 million, respectively.
Invested assets which were nonincome producing (no income received for the 12
months preceding the balance sheet date) were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Fixed Maturity Securities $ .1 -
Mortgage Loans on Real Estate .3 -
Real Estate 2.1 -
- -------------------------------------------------------------------------------------------------------------------
Total $2.5 -
===================================================================================================================
</TABLE>
Allowances for losses on investments are reflected on the Balance Sheets as a
reduction of the related assets and were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage Loans $1.0 $1.4
Foreclosed Real Estate .8 -
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1996, and 1995, the total investment in impaired mortgage loans
(before allowances for credit losses), the related allowance for credit losses
and the average investment related to impaired mortgage loans and the interest
income recognized on impaired mortgage loans during 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Impaired Mortgage Loans
<S> <C> <C>
Total Investment $2.7 $2.7
Allowance for Credit Losses 1.1 1.4
Average Investment 1.3 1.4
Interest Income Recognized .3 .3
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
No increases to the allowance for credit losses account were recorded during
1996 and 1995, and the amount of decreases to the allowance account were $.3
million and $.1 million for the years ended December 31, 1996 and 1995,
respectively. The Company does not accrue interest income on impaired mortgage
loans when the likelihood of collection is doubtful. Cash receipts for interest
payments are recognized as income in the period received.
Noncash investing activities consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate Assets Acquired Through Foreclosure $.4 $2.2
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Effective December 31, 1995, the Company adopted the implementation guidance
contained in the Financial Accounting Series Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." Concurrent with the adoption of this implementation
guidance, the Company reclassified all of its held-to-maturity securities to
available-for-sale based upon a reassessment of the appropriateness of the
classifications of all securities held at that time. The amortized cost and net
unrealized appreciation of the securities reclassified were approximately $265
million and $12 million, respectively, at December 31, 1995.
The components or net unrealized investment gains reported in shareholders'
equity are shown below:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Unrealized Investment Gains $61.5 $106.7
DAC/PVFP Adjustment (18.5) (42.4)
Deferred Income Taxes (15.0) (22.5)
- ----------------------------------------------------------------------------------------------------------------
Net Unrealized Investment Gains $28.0 $41.8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4. INCOME TAXES
The income tax liability as reflected on the Balance Sheets consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Income Taxes $ (.6) $ .3
Deferred Income Taxes 29.2 30.1
- ------------------------------------------------------------------------------------------------------------------
TOTAL $28.6 $30.4
==================================================================================================================
</TABLE>
The provision for income taxes reflected on the Statements of Income consisted
of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Currently Payable $ 7.6 $ 9.5
Deferred 6.2 3.9
- ------------------------------------------------------------------------------------------------------------------
TOTAL $13.8 $13.4
==================================================================================================================
</TABLE>
The Internal Revenue Service has accepted, without examination, the Company's
tax returns for all years through 1993.
Deferred income taxes reflect the impact for financial statement reporting
purposes of "temporary differences" between the financial statement carrying
amounts and tax bases of assets and liabilities. The "temporary differences"
that give rise to a significant portion of the deferred tax liabilities relate
to the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Future Policy and Contract Benefits $(30.7) $(31.7)
Investment Write-offs and Allowances (4.8) (6.6)
Other (6.7) (6.6)
- ------------------------------------------------------------------------------------------------------------------
Gross Deferred Tax Asset (42.2) (44.9)
- ------------------------------------------------------------------------------------------------------------------
Deferred Policy Acquisition Costs 31.7 28.9
Present Value of Future Profits 23.4 25.0
Net Unrealized Investment Gains 5.1 11.4
OTHER 11.2 9.7
- ------------------------------------------------------------------------------------------------------------------
Gross Deferred Tax Liability 71.4 75.0
- ------------------------------------------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITY $29.2 $ 30.1
==================================================================================================================
</TABLE>
Federal income tax regulations allowed certain special deductions for 1983 and
prior years which are accumulated in a memorandum tax account designated as
"policyholders' surplus." Generally, this policyholders' surplus account will
become subject to tax at the then current rates only if the accumulated balance
exceeds certain maximum limitations or if certain cash distributions are deemed
to be paid out of the account. At December 31, 1996, the Company has accumulated
approximately $11.3 million in its separate policyholders' surplus accounts.
Deferred taxes have not been provided on this temporary difference.
The difference between the U.S. federal income tax rate and the Company's tax
provision rate is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Statutory Tax Rate 35.0% 35.0%
Other .9 2.2
- ------------------------------------------------------------------------------------------------------------------
EFFECTIVE TAX RATE 35.9% 37.2%
==================================================================================================================
</TABLE>
Cash paid for federal income taxes was $9.0 million and $13.4 million for 1996
and 1995, respectively.
NOTE 5. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company participates in noncontributory defined benefit retirement plans
sponsored by ReliaStar Life covering substantially all employees. The plans,
which may be terminated as to accrual of additional benefits at any time by the
Board of Directors, provide benefits to employees upon retirement.
The benefits under the plans are based on years of service and the employee's
compensation during the last five years of employment. The Company's policy is
to fund the minimum required contribution necessary to meet the present and
future obligations of the plans. Contributions are intended to provide not only
for benefits attributed to service to date but also for those expected to be
earned in the future. Contributions are made to a tax-exempt trust. Plan assets
consist principally of investments in stock and bond mutual funds, common stock
and corporate bonds. Included in plan assets are 616,491 shares of ReliaStar
common stock with a fair value of $35.6 million.
The Company, United Services, ReliaStar Life and ReliaStar also have unfunded
noncontributory defined benefit plans providing for benefits to employees in
excess of limits for qualified retirement plans and for benefits to nonemployee
members of the ReliaStar Board of Directors.
Net periodic pension expense for ReliaStar and its subsidiaries included the
following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Service Cost - Benefits Earned During the Year $ 3.8 $ 3.4
Interest Cost on Projected Benefit Obligation 13.6 11.9
Actual Return on Plan Assets (23.0) (33.7)
Net Amortization and Deferral 8.4 19.1
- ------------------------------------------------------------------------------------------------------------------
Net Periodic Pension Expense $ 2.8 $ .7
==================================================================================================================
</TABLE>
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
The following table sets forth for ReliaStar and its subsidiaries the funded
status of the plans as of December 31:
<TABLE>
<CAPTION>
FUNDED PLANS UNFUNDED PLANS
------------ --------------
(IN MILLIONS) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated Benefit Obligation
Vested $(164.7) $(157.1) $(11.8) $(10.7)
Nonvested (4.0) (5.1) (.5) (1.2)
Effect of Projected Future Compensation Increases (12.7) (10.6) (2.1) (2.1)
- ----------------------------------------------------------------------------------------------------------------
Projected Benefit Obligation (181.4) (172.8) (14.4) (14.0)
Plan Assets at Fair Value 184.9 169.9 - -
- ----------------------------------------------------------------------------------------------------------------
Plan Assets Greater (Less) Than Projected Benefit Obligation 3.5 (2.9) (14.4) (14.0)
Unrecognized Net Loss and Prior Service Cost 19.0 24.2 5.3 6.2
Unrecognized Transition Obligation (Asset) (.4) (.8) - .1
Additional Minimum Liability - - (3.5) (4.2)
- ----------------------------------------------------------------------------------------------------------------
Net Pension Asset (Liability) $ 22.1 $ 20.5 $(12.6) $(11.9)
================================================================================================================
</TABLE>
The above amounts are for ReliaStar and its subsidiaries as the Company's
portion is not determinable.
The projected benefit obligation was determined using an assumed discount rate
of 7.50% and 7.25% at January 1, 1997 and 1996, respectively, and a
weighted-average assumed long-term rate of compensation increase of 4.5%. The
assumed long-term rate of return on plan assets was 10%.
Prior to 1996, the Company's employees (excluding NALIC) participated in the
USLICO qualified non-contributory defined benefit pension plan covering
substantially all of its employees. The plan provided pension benefits that were
based on the employee's years of service and compensation during three
consecutive years in the last 10 years of employment preceding retirement.
These retirement plans for the Company's employees (excluding NALIC) have been
frozen at the benefit levels as of December 31, 1995. Retirement plan benefits
for employees are currently being provided under the ReliaStar plans.
Net periodic pension expense for all employee retirement plans of the Company
was $.4 million for the year ended December 31, 1996 and a pension credit
totaling $.4 million for the year ended December 31, 1995.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company participates in the postretirement health care and life insurance
benefits plans sponsored by ReliaStar Life or retired employees (and their
eligible dependents). Substantially all of the Company's employees will become
eligible for those benefits if they meet specified age and service requirements
and reach retirement age while working for the Company, unless the plans are
terminated or amended. The postretirement health care plan is contributory, with
retiree contributions adjusted annually; the life insurance plan provides a flat
amount of noncontributory life benefits and optional contributory coverage.
During 1996, ReliaStar Life amended these plans to reduce the level of benefits
provided to current and future retirees. The amendment resulted in a reduction
of the accumulated postretirement benefit obligation for ReliaStar and its
subsidiaries of approximately $9.9 million. The plan amendment will also reduce
current and future net periodic postretirement benefit costs as the unrecognized
prior service cost is amortized.
The postretirement health care plans currently are not funded. The accumulated
postretirement benefit obligation (APBO) and the accrued postretirement benefit
liability were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ 7.3 $ .4
Fully Eligible Active Plan Participants .9 .5
Other Active Plan Participants 1.6 .8
- ------------------------------------------------------------------------------------------------------------------
Unfunded APBO 9.8 1.7
Unrecognized Prior Service Cost 8.9 -
Unrecognized Gain (Loss) 1.5 (.4)
- ------------------------------------------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT LIABILITY $20.2 $1.3
==================================================================================================================
</TABLE>
The above amounts for 1996 are for ReliaStar and its subsidiaries as the
Company's portion is not determinable. Amounts for the prior period are for the
Company only.
Net periodic postretirement benefit costs consisted of the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Service Cost - Benefits Earned $ .6 $.1
Interest Cost on APBO 1.0 .1
Amortization of Prior Service Cost (1.2) -
- ------------------------------------------------------------------------------------------------------------------
NET PERIODIC POSTRETIREMENT BENEFIT COSTS $ .4 $.2
==================================================================================================================
</TABLE>
The above amounts for 1996 are for ReliaStar and its subsidiaries as the
Company's portion is not determinable. Amounts for the prior period are for the
Company only.
The assumed health care cost trend rate used in measuring the APBO as of January
1, 1997 was 7.0%, decreasing gradually to 5.0% in the year 1999 and thereafter.
The assumed health care cost trend rate used in measuring the APBO as of January
1, 1996 was 10.0%, decreasing gradually to 5.0% in the year 2010 and thereafter.
The assumed discount rate used in determining the APBO was 7.50% and 7.25% at
January 1, 1997 and 1996, respectively. The assumed health care cost trend rate
has a significant effect on the amounts reported. For example, a
one-percentage-point increase in the assumed health care cost trend rate for
each year would increase the APBO for ReliaStar and its subsidiaries as of
December 31, 1996 approximately $.3 million and 1996 net postretirement health
care cost for ReliaStar and its subsidiaries by approximately $.1 million.
Net periodic postretirement benefit costs charged to expense by the Company was
$.2 million for the years ended December 31, 1996 and 1995.
SUCCESS SHARING PLAN AND ESOP
The Success Sharing Plan and ESOP (Success Sharing Plan) was designed to
increase employee ownership and reward employees when certain Company
performance objectives are met. Essentially all employees are eligible to
participate in the Success Sharing Plan. Employees of United Services and
Bankers Security (excluding NALIC) were first eligible to participate in the
Success Sharing Plan effective January 1, 1996. The Success Sharing Plan has
both qualified and nonqualified components. The nonqualified component is equal
to 25% of the annual award and is paid in cash to employees. The qualified
component is equal to 75% of the annual award, with 25% contributed to a
deferred investment account and the remaining 50% contributed to the ESOP
portion of the Success Sharing Plan. Costs charged to expense for the Success
Sharing Plan were $.7 million and $1.0 million for the years ended December 31,
1996 and 1995, respectively.
STOCK-BASED COMPENSATION
Officers and key employees of the Company participate in stock-based
compensation plans of ReliaStar. ReliaStar applies Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock-based compensation plans.
Accordingly, the Company has recorded no compensation expense for these
stock-based compensation plans other than for restricted stock and
performance-based awards.
NOTE 6. RELATED PARTY TRANSACTIONS
The Company and its affiliates have entered into agreements whereby affiliates
and the Company provide certain management, administrative, legal, and other
services for each other. The net amounts billed to the Company were $22.4
million and $9.0 million during 1996 and 1995, respectively. The costs allocated
to the Company under these agreements may not be indicative of costs the Company
might incur if these services were not provided by the Company's affiliates.
ReliaStar Life reinsures certain life policies written by the Company. Premiums
ceded under these agreements were $2.3 million and $2.8 million for the years
ended December 31, 1996 and 1995, respectively, and the net amount recoverable
by the Company under this reinsurance agreement was $3.3 million at December 31,
1996 and 1995.
NOTE 7. SHAREHOLDER'S EQUITY
DIVIDEND RESTRICTIONS
The ability of the Company to pay cash dividends to its parent is restricted by
law or subject to approval of the insurance regulatory authorities of the state
of New York. These authorities recognize only statutory accounting practices for
the ability of an insurer to pay dividends to its shareholders.
Under New York insurance law regulating the payment of dividends by the Company,
any such payment must be paid solely from the earned surplus of the Company and
advance notice thereof must be provided to the Superintendent of the New York
Department of Insurance (the Superintendent). Earned surplus means the earned
surplus as determined in accordance with statutory accounting practices
(unassigned funds), less the amount of such earned surplus which is attributable
to unrealized capital gains. Further, without approval of the Superintendent,
the Company may not pay in any calendar year any dividend which, when combined
with other dividends paid within the preceding 12 months, exceeds the lesser of
(i) 10% of the Company's statutory surplus at the prior year end or (ii) 100% of
the Company's statutory net investment income for the prior calendar year.
STATUTORY SURPLUS AND NET INCOME
Net income of the Company, as determined in accordance with statutory accounting
practices was $11.9 million and $13.5 million for 1996 and 1995, respectively.
The Company's statutory capital and surplus was $149.9 million and $139.6
million at December 31, 1996 and 1995, respectively.
NOTE 8. REINSURANCE
The Company is a member of reinsurance associations established for the purpose
of ceding the excess of life insurance over retention limits. Reinsurance
contracts do not relieve the Company from its obligations to policyholders.
Failure of reinsurers to honor their obligations could result in losses to the
Company; consequently, allowances are established for amounts deemed
uncollectible. The amount of the allowance for uncollectible reinsurance
receivables was immaterial at December 31, 1996 and 1995. The Company evaluates
the financial condition of its reinsurers and monitors concentrations of credit
risk to minimize its exposure to significant losses from reinsurer insolvencies.
At December 31, 1996, approximately 64% of the Company's reinsurance ceded was
with one reinsurer. The Company's retention limit is $300,000 per life for
individual coverage. For group coverage and reinsurance assumed, the retention
is $75,000 per life with per occurrence limitations, subject to certain
maximums. As of December 31, 1996, $3.2 billion of life insurance in force was
ceded to other companies. The Company has assumed $2.2 billion of life insurance
in force from other companies as of December 31, 1996.
The effect of reinsurance on premiums and recoveries is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Direct Premiums $59.8 $66.6
Reinsurance Assumed 2.1 2.2
Reinsurance Ceded (14.8) (15.4)
- ------------------------------------------------------------------------------------------------------------------
NET PREMIUMS $47.1 $53.4
==================================================================================================================
REINSURANCE RECOVERIES $ 7.4 $ 7.8
==================================================================================================================
</TABLE>
NOTE 9. LIABILITY FOR UNPAID ACCIDENT AND HEALTH CLAIMS AND CLAIM ADJUSTMENT
EXPENSE
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1 $11.3 $14.1
Less Reinsurance Recoverables 3.4 6.3
- ------------------------------------------------------------------------------------------------------------------
Net Balance at January 1 7.9 7.8
Incurred Related to:
Current Year 3.3 6.2
Prior Year (.2) 2.3
- ------------------------------------------------------------------------------------------------------------------
Total Incurred 3.1 8.5
Paid Related to:
Current Year .9 2.4
Prior Year 2.7 6.0
- ------------------------------------------------------------------------------------------------------------------
Total Paid 3.6 8.4
Net Balance at December 31 7.4 7.9
Plus Reinsurance Recoverables 2.1 3.4
- ------------------------------------------------------------------------------------------------------------------
Balance at December 31 $ 9.5 $11.3
==================================================================================================================
</TABLE>
The liability for unpaid accident and health claims and claim adjustment
expenses is included in Future Policy and Contract Benefits on the Balance
Sheets.
NOTE 10. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is a defendant in a number of lawsuits arising out of the normal
course of the business of the Company, some of which include claims for punitive
damages. In the opinion of management, the ultimate resolution of such
litigation will not result in any material adverse impact to the financial
condition of the Company.
FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to reduce its exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit and
interest rate swaps. Those instruments involve, to varying degrees, elements of
credit, interest rate, or liquidity risk in excess of the amount recognized in
the Balance Sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments. For interest rate swap transactions, the
contract or notional amounts do not represent exposure to credit loss. The
Company's exposure to credit loss is limited to those swaps where the Company
has an unrealized gain.
Unless otherwise noted, the Company does not require collateral or other
security to support financial instruments with credit risk.
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL AMOUNT
DECEMBER 31
-----------
(IN MILLIONS) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial Instruments Whose Contract
Amounts Represent Credit Risk
Commitments to Extend Credit $26.4 $9.0
Financial Instruments Whose Notional
or Contract Amounts Exceed the Amount
of Credit Risk
Interest Rate Swap Agreements 112.0 120.0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
COMMITMENTS TO EXTEND CREDIT - Commitments to extend credit are legally binding
agreements to lend to a customer. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. They
generally may be terminated by the Company in the event of deterioration in the
financial condition of the borrower. Since some of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future liquidity requirements. The Company evaluates each
customer's creditworthiness on a case-by-case basis.
INTEREST RATE SWAP AGREEMENTS - The Company also enters into interest rate swap
agreements to manage interest rate exposure. The primary reason for the interest
rate swap agreements is to extend the duration of adjustable rate investments.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Changes in market interest rates impact income
from adjustable rate investments and have an opposite (and approximately
offsetting) effect on the reported income from the swap portfolio. The risks
under interest rate swap agreements are generally similar to those of futures
contracts. Notional principal amounts are often used to express the volume of
these transactions but do not represent the much smaller amounts potentially
subject to credit risk.
LEASES
The Company has operating leases for office space and certain computer
processing and other equipment. Rental expense for these items was $1.2 million
and $.1 million for 1996 and 1995, respectively.
Future minimum aggregate rental commitments at December 31, 1996 for operating
leases were as follows:
(IN MILLIONS)
- --------------------------------------------------------------------------------
1997 - $1.3 2000 - $1.2
1998 - $1.3 2001 - $1.2
1999 - $1.3 2002 and thereafter - $3.0
- --------------------------------------------------------------------------------
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures are made in accordance with the requirements of SFAS
No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS No. 107
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates, in many cases, could not be realized in immediate
settlement of the instrument.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996 and 1995. Although Management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date; therefore, current estimates of
fair value may differ significantly from the amounts presented herein.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
FIXED MATURITY SECURITIES - The estimated fair value disclosures for debt
securities satisfy the fair value disclosure requirements of SFAS No. 107. (see
Note 3.)
EQUITY SECURITIES - Fair value equals carrying value as these securities are
carried at quoted market value.
MORTGAGE LOANS ON REAL ESTATE - The fair values for mortgage loans on real
estate are estimated using discounted cash flow analyses, using interest rates
currently being offered in the marketplace for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are aggregated for
purposes of the calculations.
CASH SHORT-TERM INVESTMENTS AND POLICY LOANS - The carrying amounts for these
assets approximate the assets' fair values.
OTHER FINANCIAL INSTRUMENTS REPORTED AS ASSETS - The carrying amounts for these
financial instruments (primarily premiums and other accounts receivable and
accrued investment income) approximate those assets' fair values.
INVESTMENT CONTRACT LIABILITIES - The fair value for deferred annuities was
estimated to be the amount payable on demand at the reporting date, as those
investment contracts have no defined maturity and are similar to a deposit
liability. The amount payable at the reporting date was calculated as the
account balance less applicable surrender charges.
The fair values for supplementary contracts without life contingencies and
immediate annuities were estimated using discounted cash flow analyses. The
discount rate was based upon treasury rates plus a pricing margin.
The carrying amounts reported for other investment contracts, which includes
participating pension contracts and retirement plan deposits, approximate those
liabilities' fair value.
CLAIM AND OTHER DEPOSIT FUNDS - The carrying amounts for claim and other deposit
funds approximate the liabilities' fair value.
OTHER FINANCIAL INSTRUMENTS REPORTED AS LIABILITIES - The carrying amounts for
other financial instruments (primarily normal payables of a short-term nature)
approximate those liabilities' fair values.
INTEREST RATE SWAPS - The fair value for interest rate swaps was estimated using
discounted cash flow analyses. The discount rate was based upon rates currently
being offered for similar interest rate swaps available from similar
counterparties.
The carrying amounts and estimated fair values of the Company's financial
instruments as of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- ------------------------
CARRYING FAIR CARRYING FAIR
(IN MILLIONS) AMOUNT VALUE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Instruments Recorded as Assets
Fixed Maturity Securities $ 1,356.7 $ 1,356.7 $ 1,413.4 $ 1,413.4
Equity Securities 7.3 7.3 6.6 6.6
Mortgage Loans on Real Estate
Commercial 218.9 224.7 186.0 196.5
Residential and Other 57.4 58.7 47.9 49.1
Policy Loans 73.4 73.4 68.5 68.5
Cash and Short-Term Investments 4.0 4.0 28.3 28.3
Other Financial Instruments Recorded
as Assets 38.9 38.9 39.1 39.1
Financial Instruments Recorded as Liabilities
Investment Contracts
Deferred Annuities (770.4) (748.6) (836.2) (806.2)
Supplementary Contracts and Immediate
Annuities (2.9) (2.8) (4.4) (4.0)
Other Investment Contracts (12.3) (12.3) (.4) (.4)
Claim and Other Deposit Funds (1.1) (1.1) - -
Other Financial Instruments Recorded
as Liabilities (15.5) (15.5) (25.2) (25.2)
Off-Balance-Sheet Financial Instruments
Interest Rate Swaps - 1.4 - 4.7
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.
NOTE 12. SUBSEQUENT EVENT
On February 23, 1997, ReliaStar signed a definitive agreement to acquire and
merge Security-Connecticut Corporation (SRC) into ReliaStar. SRC is a holding
company with two primary subsidiaries: Security Connecticut Life Insurance
Company of Avon, Connecticut, and Lincoln Security Life Insurance Company (LSL)
of Brewster, New York. As of December 31, 1996, LSL had assets of $365 million
and total shareholders equity of $45 million. Completion of the merger is
expected in the second or third quarter of 1997, and is subject to normal
closing conditions, including approval by SRC shareholders and various
regulatory approvals. It is management's current intent, pending regulatory
approval, to merge LSL with and into the Company.
APPENDIX A
THE FIXED ACCOUNT
The Fixed Account consists of all of our assets other than those in our
separate accounts. We have complete ownership and control of all of the assets
of the Fixed Account.
Because of exemptions and exclusions contained in the Securities Act of
1933 and the Investment Company Act of 1940, the Fixed Account has not been
registered under these acts. Neither the Fixed Account nor any interest in it is
subject to the provisions of these acts and as a result the SEC has not reviewed
the disclosures in this Prospectus relating to the Fixed Account. However,
disclosures relating to the Fixed Account are subject to generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
We guarantee both principal and interest on amounts credited to the Fixed
Account. We credit interest at an effective annual rate of at least 4%,
independent of the investment experience of the Fixed Account. From time to
time, we may guarantee interest at a rate higher than 4%.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS
OF 4% PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION. YOU ASSUME THE RISK
THAT INTEREST CREDITED TO THE FIXED ACCOUNT MAY NOT EXCEED THE MINIMUM GUARANTEE
OF 4% FOR A GIVEN YEAR.
We do not use a specific formula for determining excess interest credits.
However, we consider the following:
* General economic trends,
* Rates of return currently available on our investments,
* Rates of return anticipated in our investments, regulatory and tax
factors, and
* Competitive factors.
We are not aware of any statutory limitations to the maximum amount of
interest we may credit and our Board of Directors has not set any limitations.
The Fixed Accumulation Value of the Policy is the sum of the Net Premiums
credited to it in the Fixed Account. It is increased by transfers and Loan
Amounts from the Variable Account, and interest credits. It is decreased by
Monthly Deductions and partial withdrawals taken from it in the Fixed Account
and transfers to the Variable Account. The Fixed Accumulation Value will be
calculated at least monthly on the monthly anniversary date.
You may transfer all or part of your Fixed Accumulation Value to the
Sub-Accounts of the Variable Account, subject to the following transfer
limitations:
* The request to transfer must be postmarked no more than 30 days before
the Policy Anniversary and no later than 30 days after the Policy
Anniversary. Only one transfer is allowed during this period.
* The Fixed Accumulation Value after the transfer must be at least equal
to the Loan Amount.
* No more than 50% of the Fixed Accumulation Value (minus any Loan
Amount) may be transferred unless the balance, after the transfer,
would be less than $1,000. If the balance would be less than $1,000,
the full Fixed Accumulation Value (minus any Loan Amount) may be
transferred.
* You must transfer at least:
- $500, or
- the total Fixed Accumulation Value (minus any Loan Amount) if less
than $500.
We make the Monthly Deduction from your Fixed Accumulation Value in
proportion to the total Accumulation Value of the Policy.
The Surrender Charge described in the Prospectus applies to the total
Accumulation Value, which includes the Fixed Accumulation Value. If the Owner
surrenders the Policy for its Cash Surrender Value, the Fixed Accumulation Value
will be reduced by any applicable Surrender Charge, any Loan Amount and unpaid
Monthly Deductions applicable to the Fixed Account.
APPENDIX B
CALCULATION OF ACCUMULATION VALUE
The Accumulation Value of the Policy is equal to the sum of the Variable
Accumulation Value plus the Fixed Accumulation Value.
VARIABLE ACCUMULATION VALUE
The Variable Accumulation Value is the total of your values in each
Sub-Account. The value for each Sub-Account is equal to:
1 multiplied by 2, where:
1
Is your current number of Accumulation Units (described below).
2
Is the current Unit Value (described below).
The Variable Accumulation Value will vary from Valuation Date to Valuation
Date (described below) reflecting changes in 1 and 2 above.
ACCUMULATION UNITS. When transactions are made which affect the Variable
Accumulation Value, dollar amounts are converted to Accumulation Units. The
number of Accumulation Units for a transaction is found by dividing the dollar
amount of the transaction by the current Unit Value.
The number of Accumulation Units for a Sub-Account increases when:
* Net Premiums are credited to that Sub-Account; or
* Transfers from the Fixed Account or other Sub-Accounts are credited to
that Sub-Account.
The number of Accumulation Units for a Sub-Account decreases when:
* You take out a Policy loan from that Sub-Account;
* You take a partial withdrawal from that Sub-Account;
* We take a portion of the Monthly Deduction from that Sub-Account; or
* Transfers are made from that Sub-Account to the Fixed Account or other
Sub-Accounts.
UNIT VALUE. The Unit Value for a Sub-Account on any Valuation Date is equal
to the previous Unit Value times the Net Investment Factor for that Sub-Account
(described below) for the Valuation Period (described below) ending on that
Valuation Date.
NET INVESTMENT FACTOR. The Net Investment Factor is a number that reflects
charges to the Policy and the investment performance during a Valuation Period
of the Fund in which a Sub-Account is invested. If the Net Investment Factor is
greater than one, the Unit Value is increased. If the Net Investment Factor is
less than one, the Unit Value is decreased. The Net Investment Factor for a
Sub-Account is determined by dividing 1 by 2.
(1 / 2), where:
1
Is the result of:
* The net asset value per share of the Fund shares in which the
Sub-Account invests, determined at the end of the current Valuation
Period;
* Plus the per share amount of any dividend or capital gain
distributions made on the Fund shares in which the Sub-Account invests
during the current Valuation Period;
* Plus or minus a per share charge or credit for any taxes reserved
which we determine has resulted from the investment operations of the
Sub-Account and to be applicable to the Policy.
2
Is the result of:
* The net asset value per share of the Fund shares held in the
Sub-Account, determined at the end of the last prior Valuation Period;
* Plus or minus a per share charge or credit for any taxes reserved for
during the last prior Valuation Period which we determine resulted
from the investment operations of the Sub-Account and was applicable
to the Policy.
VALUATION DATE; VALUATION PERIOD. A Valuation Date is each day on which the
New York Stock Exchange is open for business except for a day that a
Sub-Account's corresponding Fund does not value its shares. The New York Stock
Exchange is currently closed on weekends and on the following holidays: New
Year's Day; Presidents' Day; Good Friday; Memorial Day; July Fourth; Labor Day;
Thanksgiving Day; and Christmas Day. A Valuation Period is the period between
two successive Valuation Dates, commencing at the close of business of a
Valuation Date and ending at the close of business on the next Valuation Date.
FIXED ACCUMULATION VALUE
The Fixed Accumulation Value on the Policy Date is your Net Premium
credited to the Fixed Account on that date minus the Monthly Deduction
applicable to the Fixed Accumulation Value for the first Policy Month.
After the Policy Date, the Fixed Accumulation Value is calculated as:
1 + 2 + 3 + 4 - 5 - 6, where:
1
Is the Fixed Accumulation Value on the preceding Monthly Anniversary, plus
interest from the Monthly Anniversary to the date of the calculation.
2
Is the total of your Net Premiums credited to the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date premiums are credited
to the date of the calculation.
3
Is the total of your transfers from the Variable Account to the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation.
4
Is the total of your Loan Amount transferred from the Variable Account since the
preceding Monthly Anniversary.
5
Is the total of your transfers to the Variable Account from the Fixed Account
since the preceding Monthly Anniversary, plus interest from the date of transfer
to the date of the calculation.
6
Is the total of your partial withdrawals from the Fixed Account since the
preceding Monthly Anniversary, plus interest from the date of withdrawal to the
date of the calculation.
If the date of the calculation is a Monthly Anniversary, we also reduce the
Fixed Accumulation Value by the applicable Monthly Deduction for the Policy
Month following the Monthly Anniversary.
The minimum interest rate applied in the calculation of the Fixed
Accumulation Value is an effective annual rate of 4%. Interest in excess of the
minimum rate may be applied in the calculation of your Fixed Accumulation Value
in a manner which our Board of Directors determines.
APPENDIX C
ILLUSTRATION OF ACCUMULATION VALUES, SURRENDER CHARGES,
CASH SURRENDER VALUES, AND DEATH BENEFITS
The following tables illustrate how the Accumulation Values, Cash Surrender
Values, and Death Benefits of a Policy may change with the investment experience
of the Variable Account. The tables show how the Accumulation Values, Cash
Surrender Values, and Death Benefits of a Policy issued to an Insured of a given
Age (who pays the given Planned Periodic Premiums annually) would vary over time
if the investment return of the assets held in the Funds were a uniform, gross,
after-tax, annual rate of 0 percent, 6 percent or 12 percent.
The tables on pages C-2 through C-7 illustrate a Policy issued to a male
Age 40, in a standard Rate Class and qualifying for non-smoker rates. The
Accumulation Values, Cash Surrender Values, and Death Benefits would be lower if
the Insured were in a substandard Rate Class or did not qualify for the
nonsmoker rates because the cost of insurance would be increased. The
Accumulation Values, Cash Surrender Values and Death Benefits would be different
from those shown if the gross annual investment returns averaged 0 percent, 6
percent, and 12 percent over a period of years, but fluctuated above and below
those averages for individual Policy Years.
Within the tables, the second and fifth columns illustrate the Accumulation
Value of the Policy over the designated period. The Accumulation Value is the
total amount that a Policy provides for investment at any time. The third and
sixth columns illustrate the Cash Surrender Value of a Policy over the
designated period. The Cash Surrender Value is equal to the Accumulation Value
less any Surrender Charges, Loan Amount (assumed to be zero in these
illustrations) and unpaid Monthly Deductions (also assumed to be zero). The
fourth and seventh columns illustrate the Death Benefit of a Policy over the
designated period. The second, third, and fourth columns assume that throughout
the life of the Policy, the monthly charge for the cost of insurance, the
Monthly Mortality and Expense Charge and the Monthly Administrative Charge are
based upon the maximums (i.e. guaranteed) permitted in the policy. The maximum
allowable cost of insurance rates are based on the 1980 Commissioners Standard
Ordinary Mortality Tables for Nonsmokers and Smokers. The fifth, sixth, and
seventh columns assume that the monthly charge for cost of insurance, the
Monthly Mortality and Expense Charge, and the Monthly Administrative Charge are
based on the current amounts expected to be charged. The Death Benefits also
vary between tables depending upon whether the Level Amount Death Benefit Option
(Tables at pages C-2 through C-4) or the Variable Amount Death Benefit Option
(Tables at pages C-5 through C-7) is illustrated.
The amounts shown for the Accumulation Values, Cash Surrender Values, and
Death Benefits reflect the fact that the net investment return of the
Sub-Accounts of the Variable Account is lower than the gross, after-tax return
on the assets held in the Funds as a result of the Funds' operating expenses.
The values shown take into account the daily total operating expenses paid by
the available portfolios of the VIP, VIP II, Northstar and Putnam Variable Trust
which together are assumed to be at an average annual rate of 0.70% for all
years. This figure is derived based on an average of the Funds' 1996 operating
expenses net of any limitations on such expenses paid by the Funds. Thus, the
illustrated gross annual investment rates of return of 0 percent, 6 percent, and
12 percent correspond to approximate net annual rates of return of -0.70%,
5.30%, and 11.30%, respectively. Without any expense reimbursement arrangements,
total operating expenses would be an average annual rate of 0.79%. Hypothetical
Cash Surrender Values, Accumulation Values, and the Death Benefit may be lower
without the expense reimbursement. Expense reimbursements are voluntary. While
it is currently anticipated that expense reimbursements will continue past the
current year, there is no assurance of ongoing reimbursements.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes attributable to the Variable Account because we do not
currently make any such charges. However, such charges may be made in the future
and, in that event, the gross annual investment return would have to exceed 0
percent, 6 percent, or 12 percent by an amount sufficient to cover the tax
charges in order to produce the Accumulation Values, Cash Surrender Values, and
Death Benefits illustrated. (See section entitled "Federal Tax Matters" in the
Prospectus).
The tables illustrate the Policy values that would result based upon the
hypothetical rates of return if premiums are paid as indicated, if all Net
Premiums are allocated to the Variable Account, and if no Policy loans have been
made. The tables are also based on the assumptions that the Policy owner has not
requested an increase or decrease in the Face Amount, that no partial
withdrawals have been made, that no transfers have been made, and total
operating expenses of the Funds continue as anticipated. Actual results will
depend on the expenses and performance of the investment choice made by the
owner.
Upon request, we will provide a comparable illustration based upon the
proposed Insured's Age, sex, underwriting classification, the Face Amount and
Planned Periodic Premium schedule requested, and any available riders requested.
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 0%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
--------------------------------------------------- ---------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
CASH CASH
POLICY ACCUMULATION SURRENDER ACCUMULATION SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
-------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 770 0 100,000* 820 0 100,000*
2 1,512 0 100,000* 1,614 0 100,000*
3 2,226 396 100,000 2,383 553 100,000
4 2,910 1,080 100,000 3,123 1,293 100,000
5 3,563 1,733 100,000 3,834 2,004 100,000
6 4,183 2,536 100,000 4,513 2,866 100,000
7 4,769 3,305 100,000 5,162 3,698 100,000
8 5,320 4,039 100,000 5,778 4,497 100,000
9 5,834 4,736 100,000 6,358 5,260 100,000
10 6,308 5,393 100,000 6,901 5,986 100,000
11 6,739 6,007 100,000 7,404 6,672 100,000
12 7,122 6,573 100,000 7,863 7,314 100,000
13 7,452 7,086 100,000 8,274 7,908 100,000
14 7,721 7,538 100,000 8,628 8,445 100,000
15 7,925 7,925 100,000 8,923 8,923 100,000
16 8,057 8,057 100,000 9,150 9,150 100,000
17 8,112 8,112 100,000 9,308 9,308 100,000
18 8,084 8,084 100,000 9,390 9,390 100,000
19 7,966 7,966 100,000 9,390 9,390 100,000
20 7,747 7,747 100,000 9,297 9,297 100,000
AGE
70 0 0 0 1,610 1,610 100,000
**
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
** POLICY TERMINATES PRIOR TO AGE 75.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 0%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 6%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
--------------------------------------------------- ---------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
CASH CASH
POLICY ACCUMULATION SURRENDER ACCUMULATION SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
-------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 826 0 100,000* 878 0 100,000*
2 1,673 0 100,000* 1,782 0 100,000*
3 2,539 709 100,000 2,712 882 100,000
4 3,425 1,595 100,000 3,667 1,837 100,000
5 4,330 2,500 100,000 4,646 2,816 100,000
6 5,252 3,605 100,000 5,649 4,002 100,000
7 6,191 4,727 100,000 6,677 5,213 100,000
8 7,146 5,865 100,000 7,728 6,447 100,000
9 8,115 7,017 100,000 8,803 7,705 100,000
10 9,098 8,183 100,000 9,899 8,984 100,000
11 10,090 9,358 100,000 11,015 10,283 100,000
12 11,088 10,539 100,000 12,149 11,600 100,000
13 12,087 11,721 100,000 13,296 12,930 100,000
14 13,080 12,897 100,000 14,451 14,268 100,000
15 14,063 14,063 100,000 15,612 15,612 100,000
16 15,028 15,028 100,000 16,771 16,771 100,000
17 15,972 15,972 100,000 17,927 17,927 100,000
18 16,889 16,889 100,000 19,077 19,077 100,000
19 17,771 17,771 100,000 20,215 20,215 100,000
20 18,609 18,609 100,000 21,333 21,333 100,000
AGE
70 20,673 20,673 100,000 30,313 30,313 100,000
75 10,075 10,075 100,000 30,536 30,536 100,000
80 0 0 0 20,925 20,925 100,000
**
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
** POLICY TERMINATES PRIOR TO AGE 85.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 6%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
LEVEL DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 12%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
--------------------------------------------------- ---------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
CASH CASH
POLICY ACCUMULATION SURRENDER ACCUMULATION SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
-------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 883 0 100,000* 936 0 100,000*
2 1,841 11 100,000 1,957 127 100,000
3 2,880 1,050 100,000 3,069 1,239 100,000
4 4,009 2,179 100,000 4,281 2,451 100,000
5 5,235 3,405 100,000 5,601 3,771 100,000
6 6,565 4,918 100,000 7,040 5,393 100,000
7 8,011 6,547 100,000 8,611 7,147 100,000
8 9,582 8,301 100,000 10,326 9,045 100,000
9 11,292 10,194 100,000 12,199 11,101 100,000
10 13,152 12,237 100,000 14,245 13,330 100,000
11 15,177 14,445 100,000 16,481 15,749 100,000
12 17,381 16,832 100,000 18,927 18,378 100,000
13 19,779 19,413 100,000 21,602 21,236 100,000
14 22,390 22,207 100,000 24,526 24,343 100,000
15 25,233 25,233 100,000 27,728 27,728 100,000
16 28,333 28,333 100,000 31,236 31,236 100,000
17 31,719 31,719 100,000 35,088 35,088 100,000
18 35,425 35,425 100,000 39,323 39,323 100,000
19 39,489 39,489 100,000 43,989 43,989 100,000
20 43,952 43,952 100,000 49,137 49,137 100,000
AGE
70 125,144 125,144 145,167 143,908 143,908 166,933
75 206,403 206,403 220,852 239,659 239,659 256,435
80 337,865 337,865 354,758 396,193 396,193 416,003
85 542,609 542,609 569,740 645,581 645,581 677,860
90 852,156 852,156 894,765 1,037,676 1,037,676 1,089,560
95 1,347,036 1,347,036 1,360,507 1,675,840 1,675,840 1,692,599
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
VARIABLE DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 0%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
--------------------------------------------------- ---------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
CASH CASH
POLICY ACCUMULATION SURRENDER ACCUMULATION SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
-------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 768 0 100,768* 818 0 100,819*
2 1,505 0 101,506* 1,608 0 101,609*
3 2,212 382 102,213 2,370 540 102,371
4 2,887 1,057 102,888 3,102 1,272 103,103
5 3,529 1,699 103,529 3,801 1,971 103,802
6 4,134 2,487 104,135 4,466 2,819 104,467
7 4,703 3,239 104,703 5,097 3,633 105,098
8 5,232 3,951 105,233 5,691 4,410 105,692
9 5,721 4,623 105,721 6,246 5,148 106,247
10 6,165 5,250 106,166 6,760 5,845 106,761
11 6,563 5,831 106,563 7,228 6,496 107,229
12 6,907 6,358 106,907 7,648 7,099 107,649
13 7,192 6,826 107,192 8,013 7,647 108,014
14 7,411 7,228 107,411 8,316 8,133 108,317
15 7,557 7,557 107,558 8,551 8,551 108,552
16 7,625 7,625 107,626 8,712 8,712 108,713
17 7,608 7,608 107,609 8,794 8,794 108,795
18 7,503 7,503 107,503 8,793 8,793 108,794
19 7,300 7,300 107,301 8,702 8,702 108,703
20 6,990 6,990 106,990 8,509 8,509 108,510
AGE
**
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
** POLICY TERMINATES PRIOR TO AGE 70.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 0%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
VARIABLE DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 6%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
--------------------------------------------------- ---------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
CASH CASH
POLICY ACCUMULATION SURRENDER ACCUMULATION SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
-------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 824 0 100,824* 876 0 100,877*
2 1,665 0 101,666* 1,775 0 101,776*
3 2,524 694 102,525 2,697 867 102,698
4 3,399 1,569 103,399 3,641 1,811 103,642
5 4,288 2,458 104,288 4,604 2,774 104,605
6 5,189 3,542 105,190 5,587 3,940 105,588
7 6,101 4,637 106,102 6,589 5,125 106,590
8 7,023 5,742 107,023 7,607 6,326 107,608
9 7,950 6,852 107,951 8,640 7,542 108,641
10 8,881 7,966 108,882 9,684 8,769 109,685
11 9,811 9,079 109,811 10,737 10,005 110,738
12 10,733 10,184 110,733 11,795 11,246 111,796
13 11,639 11,273 111,640 12,849 12,483 112,850
14 12,522 12,339 112,522 13,892 13,709 113,893
15 13,372 13,372 113,373 14,918 14,918 114,919
16 14,180 14,180 114,181 15,916 15,916 115,917
17 14,938 14,938 114,938 16,881 16,881 116,882
18 15,636 15,636 115,637 17,804 17,804 117,805
19 16,263 16,263 116,264 18,677 18,677 118,678
20 16,803 16,803 116,803 19,482 19,482 119,483
AGE
70 12,117 12,117 112,118 21,329 21,329 121,330
75 0 0 0 13,187 13,187 113,186
**
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
** POLICY TERMINATES PRIOR TO AGE 80.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE 6%
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE TO AGE 95
MALE ISSUE AGE: 40
NON-SMOKER
$1,200 ANNUAL PREMIUM
$100,000 FACE AMOUNT
VARIABLE DEATH BENEFIT OPTION
ASSUMED HYPOTHETICAL GROSS ANNUAL
INVESTMENT RATE OF RETURN: 12%
<TABLE>
<CAPTION>
GUARANTEED COSTS CURRENT COSTS
--------------------------------------------------- ---------------------------------------------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
CASH CASH
POLICY ACCUMULATION SURRENDER ACCUMULATION SURRENDER
YEAR VALUE VALUE DEATH BENEFIT VALUE VALUE DEATH BENEFIT
-------- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 880 0 100,881* 934 0 100,935*
2 1,833 3 101,833 1,949 119 101,950
3 2,863 1,033 102,863 3,052 1,222 103,053
4 3,977 2,147 103,978 4,250 2,420 104,251
5 5,182 3,352 105,183 5,550 3,720 105,551
6 6,484 4,837 106,484 6,961 5,314 106,962
7 7,890 6,426 107,891 8,494 7,030 108,495
8 9,410 8,129 109,410 10,157 8,876 110,158
9 11,051 9,953 111,052 11,962 10,864 111,963
10 12,823 11,908 112,824 13,921 13,006 113,922
11 14,735 14,003 114,736 16,044 15,312 116,045
12 16,794 16,245 116,795 18,346 17,797 118,347
13 19,009 18,643 119,009 20,836 20,470 120,837
14 21,386 21,203 121,386 23,525 23,342 123,526
15 23,935 23,935 123,935 26,431 26,431 126,432
16 26,665 26,665 126,665 29,564 29,564 129,565
17 29,587 29,587 129,587 32,945 32,945 132,946
18 32,716 32,716 132,717 36,592 36,592 136,593
19 36,063 36,063 136,063 40,525 40,525 140,526
20 39,637 39,637 139,637 44,761 44,761 144,762
AGE
70 89,294 89,294 189,295 110,581 110,581 210,582
75 123,359 123,359 223,359 166,914 166,914 266,915
80 158,872 158,872 258,873 245,321 245,321 345,322
85 186,260 186,260 286,261 354,201 354,201 454,202
90 182,204 182,204 282,204 507,489 507,489 607,490
95 107,881 107,881 207,881 726,885 726,885 826,886
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) ASSUMES A $1,200 PREMIUM (WHICH EXCEEDS THE ANNUALIZED MINIMUM MONTHLY
PREMIUM) IS PAID AT THE BEGINNING OF EACH POLICY YEAR. VALUES WILL BE DIFFERENT
IF PREMIUMS ARE PAID WITH A DIFFERENT FREQUENCY OR IN DIFFERENT AMOUNTS.
(2) ASSUMES THAT NO POLICY LOANS OR PARTIAL WITHDRAWALS HAVE BEEN MADE.
EXCESSIVE LOANS OR WITHDRAWALS MAY CAUSE THE POLICY TO LAPSE BECAUSE OF
INSUFFICIENT CASH SURRENDER VALUE.
*BASED ON (1) AND (2) ABOVE, THE DEATH BENEFIT GUARANTEE IS IN EFFECT DURING THE
YEARS SHOWN. THEREFORE, THE POLICY REMAINS IN FORCE EVEN THOUGH THE CASH
SURRENDER VALUE IS ZERO.
THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY, AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT
RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYHOLDER, AND THE
DIFFERENT INVESTMENT RETURNS FOR THE FUNDS. THE ACCUMULATION VALUE, CASH
SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE
SHOWN ABOVE IF THE ACTUAL INVESTMENT RESULTS APPLICABLE TO THE POLICY AVERAGE
12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY US OR BY THE FUNDS
THAT THESE HYPOTHETICAL RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
<TABLE>
<CAPTION>
APPENDIX D
MAXIMUM SURRENDER CHARGE PER $1,000 OF FACE AMOUNT
Insured's Age at Insured's Age at
Policy Date or Policy Date or
Effective Date of Charge Per $1,000 of Face Amount Effective Date Charge Per $1,000 of Face Amount
Increase, as (Initial Face Amount or Amount of of Increase, as (Initial Face Amount or Amount of
Appropriate Requested Increase) Appropriate Requested Increase)
- ------------------- -------------------------------------- ------------------ --------------------------------------
Male Female Male Female
Nonsmoker Nonsmoker Nonsmoker Nonsmoker
AND STANDARD AND STANDARD AND STANDARD AND STANDARD
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
0 6.00 6.00 38 17.40 16.10
1 6.10 6.00 39 17.80 16.50
2 6.20 6.00 40 18.30 16.80
3 6.30 6.00 41 18.80 17.20
4 6.40 6.00 42 19.30 17.60
5 6.50 6.00 43 19.80 18.10
6 6.60 6.00 44 20.40 18.50
7 6.80 6.00 45 20.90 19.00
8 7.00 6.00 46 21.60 19.50
9 7.20 6.20 47 22.20 20.00
10 7.50 6.40 48 22.90 20.60
11 7.80 6.60 49 23.70 21.20
12 8.00 6.80 50 24.50 21.80
13 8.20 7.00 51 25.30 22.40
14 8.50 7.20 52 26.20 23.10
15 8.80 7.40 53 27.20 23.90
16 9.00 7.60 54 28.20 24.60
17 9.20 7.80 55 29.30 25.50
18 9.50 8.00 56 30.40 26.30
19 9.80 8.20 57 31.60 27.20
20 10.00 8.50 58 32.90 28.20
21 10.30 8.90 59 34.30 29.30
22 10.90 9.20 60 35.70 30.40
23 11.30 9.50 61 37.30 31.60
24 11.90 10.00 62 39.00 32.90
25 12.50 10.50 63 40.70 34.30
26 12.80 11.10 64 42.60 35.80
27 13.40 11.70 65 44.60 37.30
28 13.80 12.30 66 46.70 38.90
29 14.40 12.70 67 48.90 40.60
30 14.70 13.00 68 48.60 42.40
31 15.00 13.60 69 48.30 44.40
32 15.30 14.20 70 48.10 46.60
33 15.60 14.60 71 47.80 47.90
34 15.90 14.80 72 47.60 47.50
35 16.20 15.10 73 47.40 47.10
36 16.60 15.40 74 47.20 46.70
37 17.00 15.80 75 46.90 46.20
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX E
SURRENDER CHARGE WHOLE LIFE PREMIUM PER $1,000 OF FACE AMOUNT
The following table provides the Surrender Charge Whole Life Premium factors
that are used in determining the Premium Related Surrender Charge Reduction. See
section entitled "Surrender Charge" in the Prospectus.
Insured's Age Surrender Charge Whole Life Premium Insured's Age Surrender Charge Whole Life Premium
at Policy Date Per $1,000 of at Policy Date Per $1,000 of
Initial Face Amount Initial Face Amount
------------ --------------------------- ------------ ---------------------------
Male Female Male Female
Nonsmoker Nonsmoker Nonsmoker Nonsmoker
and Smoker and Smoker and Smoker and Smoker
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
0 $3.31 $2.81 38 $13.31 $11.43
1 3.34 2.85 39 13.93 11.94
2 3.45 2.94 40 14.58 12.47
3 3.55 3.04 41 15.27 13.02
4 3.67 3.13 42 16.00 13.61
5 3.79 3.24 43 16.77 14.22
6 3.92 3.35 44 17.58 14.87
7 4.06 3.46 45 18.44 15.55
8 4.21 3.58 46 19.36 16.27
9 4.36 3.71 47 20.32 17.03
10 4.53 3.85 48 21.35 17.83
11 4.70 3.99 49 22.44 18.67
12 4.87 4.13 50 23.60 19.57
13 5.05 4.29 51 24.84 20.52
14 5.24 4.45 52 26.15 21.52
15 5.42 4.61 53 27.55 22.59
16 5.61 4.78 54 29.04 23.71
17 5.80 4.96 55 30.63 24.91
18 6.00 5.14 56 32.31 26.18
19 6.21 5.33 57 34.11 27.54
20 6.42 5.53 58 36.03 28.99
21 6.65 5.74 59 38.08 30.55
22 6.89 5.96 60 40.28 32.23
23 7.14 6.19 61 42.63 34.03
24 7.41 6.44 62 45.15 35.98
25 7.69 6.69 63 47.84 38.06
26 8.00 6.96 64 50.72 40.29
27 8.32 7.24 65 53.79 42.67
28 8.66 7.53 66 57.09 45.23
29 9.02 7.84 67 60.62 47.98
30 9.40 8.16 68 64.41 50.96
31 9.80 8.50 69 68.50 54.21
32 10.22 8.86 70 72.90 57.75
33 10.67 9.24 71 77.65 61.62
34 11.14 9.63 72 82.75 65.84
35 11.64 10.05 73 88.20 70.41
36 12.17 10.49 74 94.00 75.36
37 12.73 10.95 75 100.17 80.71
</TABLE>
[GRAPHIC OMITTED]
RELIASTAR
ReliaStar Bankers Security Life Insurance Company
1000 Woodbury Road
Woodbury, NY 11797
SELECT*LIFE NY PROSPECTUS (MAY 15, 1997)
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
"REASONABLENESS" REPRESENTATION PURSUANT TO 26(e)(2)(A)
OF THE INVESTMENT COMPANY ACT OF 1940
Depositor represents that the fees and charges deducted under the flexible
premium variable life insurance policy, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by ReliaStar Bankers Security Life Insurance Company.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Registrant has duly caused Pre-Effective Amendment No. 1 of
this Registration Statement to be signed on its behalf, in the City of Woodbury,
and State of New York, on the 5th day of May, 1997.
RELIASTAR BANKERS SECURITY VARIABLE LIFE
SEPARATE ACCOUNT I
(Registrant)
By: RELIASTAR BANKERS SECURITY LIFE INSURANCE
COMPANY
(Depositor)
By:/S/ JOHN H. FLITTIE
--------------------------------
John H. Flittie
Vice Chairman, Chief Executive Officer,
and President
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Depositor has caused Pre-Effective Amendment No. 1 of this Registration
Statement to be signed on its behalf, in the City of Woodbury and State of New
York, on this 5th day of May, 1997.
RELIASTAR BANKERS SECURITY LIFE INSURANCE
COMPANY
(Depositor)
By:/S/ JOHN H. FLITTIE
--------------------------------
John H. Flittie
Vice Chairman, Chief Executive Officer,
and President
As required by the Securities Act of 1933, Pre-Effective Amendment No. 1 of this
Registration Statement has been signed on this 5th day of May, 1997 by the
following directors and officers of Depositor in the capacities indicated:
/S/ JOHN H. FLITTIE Vice Chairman, Chief Executive Officer, and President
- -------------------
John H. Flittie
/S/ REBECCA B. CRUNK Vice President, Treasurer, and Controller
- -------------------
Rebecca B. Crunk
Stephen A. Carb Wayne R. Huneke John G. Turner
R. Michael Conley Kenneth U. Kuk Charles B. Updike
Richard R. Crowl Richard E. Nolan Ross M. Weale
John H. Flittie Fioravante G. Perrotta Steven W. Wishart
James T. Hale Robert C. Salipante
* A majority of the Board of Directors
*Robert B. Saginaw, by signing his name hereto, does hereby sign this document
on behalf of each of the above-named directors of ReliaStar Bankers Security
Life Insurance Company pursuant to powers of attorney duly executed by such
persons.
/S/ ROBERT B. SAGINAW
---------------------------------------
Robert B. Saginaw, Attorney-In-Fact
PART II
Contents of Registration Statement
This Registration Statement comprises the following papers and documents:
The Facing Sheet.
The general form of Prospectus, consisting of 97 pages.
Undertakings to file reports.
Rule 484 Undertaking.
"Reasonableness" representation pursuant to Section 26(e)(2)(A) of the
Investment Company Act of 1940.
The signatures.
Written consents of the following persons:
1. Robert B. Saginaw - Filed as EX-99.2.
2. Steve P. West, FSA, MAAA - Filed as EX-99.C6.
3.(a) Deloitte & Touche LLP - Filed as EX-99.C1A.
(b) KPMG Peat Marwick LLP - Filed as EX-99.C1B.
The following exhibits:
1. The following exhibits correspond to those required by Paragraph A of the
instructions as to exhibits in Form N-8B-2:
A. (1) Resolutions of Board of Directors of ReliaStar Bankers Security Life
Insurance Company ("RBSL") establishing the ReliaStar Bankers Security
Variable Life Separate Account I.*
(2) Not applicable.
(3) (a) Form of General Distributor Agreement between Washington Square
Securities Inc. and RBSL.
(b) Specimens of WSSI Selling Agreements.
(4) Not applicable.
(5) Form of Policy available (together with available Policy riders).*
(6) (a) Amended Charter of ReliaStar Bankers Security Life Insurance
Company.*
(6) (b) Amended By-laws of ReliaStar Bankers Security Life Insurance
Company.*
(7) Not applicable.
(8) (a) Participation Agreement with Fidelity's Variable Insurance
Products Fund and Fidelity Distributors Corporation and Form of
Amendment No. 1.*
(8) (b) Participation Agreement with Fidelity's Variable Insurance
Products Fund II and Fidelity Distributors Corporation and Form of
Amendment No. 1.*
(8) (c) Form of Service Contract with Fidelity Distributors Corporation.
(8) (d) Form of Service Agreement with Fidelity Investments Institutional
Operations Company, Inc.
(8) (e) Form of Participation Agreement with Putnam Variable Trust
(formerly known as Putnam Capital Manager Trust) and Putnam Mutual
Funds Corp.
(8) (f) Form of Management Services Agreement with ReliaStar Life
Insurance Company (formerly known as Northwestern National Life
Insurance Company).*
(9) Not applicable.
(10) Policy application.*
2. Opinion and consent of Robert B. Saginaw, Esquire, as to the legality of
the Securities being registered. See EX-99.2.
3. Not applicable.
4. Not applicable.
EX-99.C1A. Auditors' Consent - Deloitte & Touche LLP.
EX-99.C1B. Auditors' Consent - KPMG Peat Marwick LLP.
EX-99.C2. Not applicable.
EX-99.C3. Not applicable.
EX-99.C4. See EX-99.2.
EX-99.C5. Not applicable.
EX-99.C6. Actuarial Opinion and Consent.
EX-99.D1. Memorandum describing ReliaStar Bankers Security Life's
issuance, transfer and redemption procedures for the Policies
and ReliaStar Bankers Security Life's procedure for conversion
to the fixed account of the policy.*
EX-24. Powers of Attorney.
Stephen A. Carb*
Richard R. Crowl*
John H. Flittie*
James T. Hale*
Wayne R. Huneke*
Kenneth U. Kuk*
Richard E. Nolan*
Fioravante G. Perrotta*
Robert C. Salipante*
John G. Turner*
Charles B. Updike*
Ross M. Weale*
Steven W. Wishart*
R. Michael Conley
EX-27. Financial Data Schedule.
* Incorporated by reference to Registrant's Form S-6 Registration Statement,
File No. 333-19123, filed December 31, 1996.
DISTRIBUTION AGREEMENT
AGREEMENT made this _______ day of _______________, 1997, between ReliaStar
Bankers Security Life Insurance Company, a New York corporation, (ReliaStar
Bankers) on its own behalf and on behalf of the separate accounts of ReliaStar
Bankers as set forth in Exhibit A (Variable Account) and Washington Square
Securities, Inc. (WSSI) which is a member of the National Association of
Securities Dealers, Inc. (NASD) and is registered as a broker-dealer with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 (the "1934 Act").
WHEREAS, ReliaStar Bankers sells variable life insurance and variable
annuity contracts (Contracts), assets for which are allocated to a Variable
Account. ReliaStar Bankers proposes to accept premium payments on existing
Contracts and to sell additional Contracts pursuant to the effectiveness of
Registration Statements relating to the Contracts and Variable Account filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, each Variable Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, WSSI is an affiliate of ReliaStar Bankers, and ReliaStar Bankers
desires to retain WSSI as the General Distributor and Principal Underwriter to
distribute and sell to the public the Contracts issued by ReliaStar Bankers and
WSSI is willing to render such services.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
1. PRINCIPAL UNDERWRITER.
ReliaStar Bankers hereby appoints WSSI, during the term of this Agreement,
subject to the registration requirements of the 1933 Act and the 1940 Act to be
the General Distributor and Principal Underwriter for the sale of Contracts to
the public in each state and other jurisdictions in which the contracts may be
lawfully sold. WSSI shall offer the Contracts for sale and distribution at
prices set by ReliaStar Bankers, through its own representatives and through
other broker dealers contracted under a Selling Agreement as described in
Paragraph 2 of this Agreement.
2. SELLING AGREEMENTS.
WSSI is hereby authorized to enter into separate written agreements, on such
terms and conditions as WSSI and ReliaStar Bankers determine are not
inconsistent with this Agreement, with other broker-dealers that agree to
participate as a broker-dealer in the distribution of the Contracts and to use
their best efforts to solicit applications for Contracts. Any such broker-dealer
(hereinafter "Broker"), shall be registered as a broker-dealer under the 1934
Act and shall be a member of the NASD. ReliaStar Bankers shall undertake to
appoint Broker's qualified agents or representatives as life insurance agents of
ReliaStar Bankers, provided that ReliaStar Bankers reserves the right to refuse
to appoint any proposed representative or agent, or once appointed, to terminate
such appointment.
3. SUITABILITY.
ReliaStar Bankers desires to ensure that Contracts will be sold to purchasers
for whom the Contract will be suitable. WSSI shall take reasonable steps to
ensure that the registered representatives of WSSI shall not make
recommendations to an applicant to purchase a Contract in the absence of
reasonable grounds to believe the purchase of the Contract is suitable for such
applicant, and shall impose similar obligations upon Brokers.
4. CONFORMITY WITH REGISTRATION STATEMENT AND APPROVED SALES MATERIALS.
In performing its duties as General Distributor, WSSI will act in conformity
with the Prospectus and with the instructions and directions of ReliaStar
Bankers, the requirements of the 1933 Act, the 1940 Act, the 1934 Act, and all
other applicable federal and state laws and regulations. WSSI shall not give any
information nor make any representations, concerning any aspect of the Contract
or of ReliaStar Banker's operations to any persons or entity unless such
information or representations are contained in the Registration Statement and
the pertinent prospectus filed with the Securities and Exchange Commission, or
are contained in sales or promotional literature approved by ReliaStar Bankers.
WSSI will not use and will take reasonable steps to ensure by representatives
will not use any sales promotion material and advertising which has not been
previously approved by ReliaStar Bankers. WSSI shall impose similar obligations
upon Brokers contracted under a Selling Agreement as described in Paragraph 2 of
this Agreement.
5. APPLICATIONS.
Completed applications for Contracts solicited by WSSI through its agents or
representatives shall be transmitted directly to ReliaStar Bankers. All payments
under the Contracts shall be made by check payable to ReliaStar Bankers or by
other method acceptable to ReliaStar Bankers, and if received by WSSI, shall be
held at all times in a fiduciary capacity and remitted promptly to ReliaStar
Bankers.
6. STANDARD OF CARE.
WSSI shall be responsible for exercising reasonable care in carrying out the
provisions of this Agreement.
7. RECORDS AND REPORTS.
ReliaStar Bankers shall maintain and preserve such records as are required of
it, WSSI and the Variable Account, by applicable laws and regulations with
regard to the offer and sale of variable life insurance. The books, accounts,
and records of ReliaStar Bankers, the Variable Account and WSSI shall be
maintained by ReliaStar Bankers so as to clearly and accurately disclose the
nature and details of the transactions. ReliaStar Bankers agrees that it will
maintain and preserve all such records in conformity with the requirements of
the 1934 Act, to the extent such requirements are applicable to variable life
insurance. ReliaStar Bankers further agrees that all such records shall be and
are maintained and held in conformity with the 1934 Act and said records are and
shall remain at all times available to WSSI.
8. COMPENSATION.
ReliaStar Bankers shall arrange for the payment of commissions to those Brokers
that sell Contracts under agreements entered into pursuant to Section 2, hereof,
and to wholesalers that solicit brokers to sell Contracts under agreements
entered into pursuant to Section 2, hereof, in amounts as may be agreed to by
ReliaStar Bankers and WSSI specified in such written agreements.
9. INVESTIGATION AND PROCEEDINGS.
WSSI and ReliaStar Bankers agree to cooperate fully in any regulatory
investigation or proceeding or judicial proceeding arising in connection with
the contracts distributed under this Agreement. WSSI further agrees to furnish
regulatory authorities with any information or reports in connection with such
services which may be requested in order to ascertain whether the operations of
ReliaStar Bankers and the Variable Account are being conducted in a manner
consistent with Applicable laws and regulations. WSSI and ReliaStar Bankers
further agree to cooperate fully in any securities regulatory investigation or
proceeding with respect to ReliaStar Bankers, WSSI, their affiliates and their
agents or representatives to the extent that such investigation or proceeding is
in connection with Contracts distributed under this Agreement. Without limiting
the foregoing:
(a) WSSI will be notified promptly of any customer complaint or notice of
any regulatory investigation or proceeding or judicial proceeding
received by ReliaStar Bankers with respect to WSSI or any agent or
representative of a Broker which may affect ReliaStar Banker's
issuance of any Contract sold under this Agreement; and
(b) WSSI will promptly notify ReliaStar Bankers of any customer complaint
or notice of any regulatory investigation or proceeding received by
WSSI or its affiliates with respect to WSSI or any agent or
representative a Broker in connection with any Contract distributed
under this Agreement or any activity in connection with any such
Contract.
10. EMPLOYEES.
WSSI will not employ in any material connection with the handling of the
Variable Accounts assets any person who, to the knowledge of WSSI:
(a) in the last 10 years has been convicted of any felony or misdemeanor
arising out of conduct involving embezzlement, fraudulent conversion,
or misappropriation of funds or securities, or involving violations of
Section 1341, 1342, or 1343 of Title 18, United States Code; or
(b) within the last 10 years has been found by any state regulatory
authority to have violated or has acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(c) within the last 10 years has been found by any federal or state
regulatory authorities to have violated or have acknowledged violation
of any revision of federal or state securities laws involving fraud,
deceit, or knowing misrepresentation.
11. TERMINATION.
This Agreement may be terminated at any reason, for any either party on 60 days'
written notice to the other party, without the payment of any penalty. Upon
termination of this Agreement, all authorizations, rights and obligations shall
cease except the obligation to settle accounts hereunder, including commissions
on purchase payments subsequently received for Contracts in effect at time of
termination, and the agreements contained in Sections 8 and 9 hereof.
12. ASSIGNMENT.
This Agreement is not assignable by either party.
13. REGULATION.
This Agreement shall be subject to the provisions of the 1940 Act and the 1934
Act and the rules, regulations and rulings thereunder, and of the applicable
rules and regulations of the NASD, and applicable state insurance law and other
applicable law, from time to time in effect, and the terms hereof shall be
interpreted and construed in accordance therewith.
14. NOTICES.
Notices of any kind to be given to WSSI by ReliaStar Bankers or the Variable
Account shall be in writing and shall be duly given if mailed, first class
postage prepaid, or delivery to the President of WSSI at 20 Washington Avenue
South, Minneapolis, MN 55401, or at such other address or to such individual as
shall be specified by WSSI. Notices of any kind to be given to ReliaStar Bankers
or the Variable Account shall be in writing and shall be duly given if mailed,
first class postage prepaid, or delivered to them at 1000 Woodbury Road,
Woodbury, New York 11797, Attention: Senior Vice President, Individual Insurance
Division, or at such other address or to such individual as shall be specified
by ReliaStar Bankers.
15. SEVERABILITY.
If any provisions of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
16. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with and governed
by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
RELIASTAR BANKERS SECURITY
LIFE INSURANCE COMPANY
By:_______________________________
Name: Richard R. Crowl
Title: Senior Vice President and General Counsel
WASHINGTON SQUARE SECURITIES, INC.
By:_______________________________
Name: Robert B. Saginaw
Title: Vice President
EXHIBIT A
CONTRACTS
<TABLE>
<CAPTION>
FORM NUMBER OF CONTRACT FUNDED BY VARIABLE
NAME OF VARIABLE ACCOUNT ACCOUNT
- ------------------------------------------------------- ---------------------------------------------
<S> <C>
ReliaStar Bankes Security Variable Annuity Funds A, ORD 75-34 and state exceptions
B, C
ReliaStar Bankers Security Variable Annuity Funds D, ORD 75-32 and state exceptions
E, F, G, H, I
ReliaStar Bankers Security Variable Annuity Fund M ORD-80-1924 and state exceptions
ReliaStar Bankers Security Variable Annuity Funds P & B-ORD-1928-90 and state exceptions
Q
ReliaStar Bankers Security Variable Life Separate 85-251 and state exceptions
Account I
ReliaStar Bankers Security Variable Life Separate Level premium policies
Account I VL82-1195, VL84-1103,
VL84-1102; single premium policy VL84-1101;
and state exceptions
</TABLE>
"A"
BROKER-DEALER AGENCY
SELLING AGREEMENT
This Agreement is made among the following three parties:
1. RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
Woodbury, New York 11797
a New York domiciled stock life insurance company
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
an affiliate of Insurer, registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and a member
of the National Association of Securities Dealers, Inc.
("NASD") (hereinafter "GENERAL DISTRIBUTOR"); and,
3. ______________________________________
______________________________________
Street
______________________________________
City State ZIP
registered as a broker-dealer with the SEC and a member of the
NASD and licensed as an insurance agency (hereinafter
"BROKER-DEALER").
RECITALS:
WHEREAS, Broker-Dealer is licensed as an insurance agency in order to
satisfy state insurance law requirements with respect to the sale of traditional
life insurance policies as well as variable insurance products which are
registered securities with the SEC.
WHEREAS, the parties wish to enter into an agreement for the distribution
of Variable Contracts and Traditional Life Insurance Policies by Broker-Dealer;
and
WHEREAS, Insurer has appointed General Distributor as principal underwriter
and distributor (as those terms are defined by the Investment Company Act of
1940) of the Variable Contracts and has authorized General Distributor to enter
into selling agreements with registered broker-dealers for the solicitation and
sale of Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer's
registered representatives who are licensed as life insurance/variable contract
agents in appropriate jurisdictions ("Representatives") solicit and sell
Variable Contracts and Traditional Life Insurance Policies; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts and Traditional
Life Insurance Policies.
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties now agree as follows:
1. DEFINITIONS
In this Agreement,
(a) The words "Variable Contract" shall mean those variable life insurance
policies and variable annuity contracts identified in Section 1 of
Compensation Schedule A attached hereto, and as may hereafter be
amended.
Insurer may in its sole discretion and without notice to
Broker-Dealer, suspend sales of any Variable Contracts or amend any
policies or contracts evidencing such Variable Contracts if, in
Insurer's opinion, such suspension or amendment is: (1) necessary for
compliance with federal, state, or local laws, regulations, or
administrative order(s); or, (2) necessary to prevent administrative
or financial hardship to Insurer. In all other situations, Insurer
shall provide 30 days notice to Broker-Dealer prior to suspending
sales of any Variable Contracts or amending any policies or contracts
evidencing such Variable Contracts.
Insurer may issue and propose additional or successor products, in
which event Broker-Dealer will be informed of the product and its
related Commission Schedule. If Broker-Dealer does not agree to
distribute such product(s), it must notify Insurer in writing within
30 days of receipt of the Commission Schedule for such product(s). If
Broker-Dealer does not indicate disapproval of the new product(s) or
the terms contained in the related Commission Schedule, Broker-Dealer
will be deemed to have thereby agreed to distribute such product(s)
and agreed to the related Commission Schedule which shall be attached
to and made a part of this Agreement.
(b) The words "Traditional Life Insurance Policy" shall mean those life
insurance policies and annuity contracts identified in Section 2 of
Compensation Schedule A attached hereto, and as may hereafter be
amended.
Insurer may in its sole discretion and without notice to
Broker-Dealer, suspend sales of any Traditional Life Insurance
Policies or amend any policies or contracts evidencing such
Traditional Life Insurance Policies if, in Insurer's opinion, such
suspension or amendment is: (1) necessary for compliance with federal,
state, or local laws, regulations, or administrative order(s); or, (2)
necessary to prevent administrative or financial hardship to Insurer.
In all other situations, Insurer shall provide 30 days notice to
Broker-Dealer prior to suspending sales of any Traditional Life
Insurance Policies or amending any policies or contracts evidencing
such Traditional Life Insurance Policies.
Insurer may issue and propose additional or successor products, in
which event Broker-Dealer will be informed of the product and its
related Compensation Schedule. If Broker-Dealer does not agree to
distribute such product(s), it must notify Insurer in writing within
30 days of receipt of the Compensation Schedule for such product(s).
If Broker-Dealer does not indicate disapproval of the new product(s)
or the terms contained in the related Compensation Schedule,
Broker-Dealer will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Compensation Schedule which shall
be attached to and made a part of this Agreement.
2. AGENCY APPOINTMENT
On the effective date, Insurer and General Distributor appoint
Broker-Dealer and Broker-Dealer accepts the appointment to solicit sales of
and to sell Variable Contracts and Traditional Life Insurance Policies,
pursuant to the terms of this Agreement.
3. DUTIES OF BROKER-DEALER
(a) SUPERVISION OF REPRESENTATIVES. Broker-Dealer shall have full
responsibility for the training and supervision of all Representatives
who are engaged directly or indirectly in the offer or sale of the
Variable Contracts, and all such persons shall be subject to the
control of Broker-Dealer with respect to such persons' securities
regulated activities in connection with the Variable Contracts.
Broker-Dealer will cause the Representatives to be trained in the sale
of the Variable Contracts, will cause such Representatives to qualify
under applicable federal and state laws to engage in the sale of the
Variable Contracts; will cause such Representatives to be registered
representatives of Broker-Dealer before such Representatives engage in
the solicitation of applications for the Variable Contracts; and will
cause such Representatives to limit solicitation of applications for
the Variable Contracts to jurisdictions where Insurer has authorized
such solicitation. Broker-Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any Representative
ceases to be a registered representative of Broker-Dealer or ceases to
maintain the proper licensing required for the sale of the Variable
Contracts. All parties shall be liable for their own negligence and
misconduct under this paragraph.
(b) REPRESENTATIVES INSURANCE COMPLIANCE. Broker-Dealer, prior to allowing
its Representatives to solicit for sales or sell the Variable
Contracts and Traditional Life Insurance Policies, shall require such
representatives to be validly insurance licensed, registered and
appointed by Insurer as a variable contract/life insurance agent in
accordance with the jurisdictional requirements of the place where the
solicitations and sales take place as well as the solicited person's
or entity's place of residence.
Broker-Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell Variable
Contracts and Traditional Life Insurance Policies. Broker-Dealer shall
fulfill all Insurer requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance agents of
Insurer. All such licensing/appointment papers shall be submitted to
Insurer or its designee by Broker-Dealer. Notwithstanding such
submission, Insurer shall have sole discretion to appoint, refuse to
appoint, discontinue, or terminate the appointment of any
Representative as an insurance agent of Insurer.
(c) COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE
SECURITIES LAWS. Broker-Dealer shall fully comply with the
requirements of the National Association of Securities Dealers, Inc.,
the Securities Exchange Act of 1934 and all other applicable federal
and state laws. In addition, Broker-Dealer will establish and maintain
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by General
Distributor, Broker-Dealer shall furnish such records as may be
necessary to establish such diligent supervision.
(d) NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and standards
imposed by Broker-Dealer on its Representatives, Broker-Dealer shall
advise General Distributor of this fact and shall immediately notify
such Representative that he or she is no longer authorized to sell the
Variable Contracts or Traditional Life Insurance Policies and
Broker-Dealer shall take whatever additional action may be necessary
to terminate the sales activities of such Representative relating to
such contracts and policies.
(e) PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING. Broker-Dealer
shall be provided, without any expense to Broker-Dealer, with
prospectuses relating to the Variable Contracts and such other
supplementary sales material as General Distributor determines is
necessary or desirable for use in connection with sales of the
Variable Contracts and Traditional Life Insurance Policies.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO THE
VARIABLE CONTRACTS AND TRADITIONAL LIFE INSURANCE POLICIES, INCLUDING
WITHOUT LIMITATION GENERIC ADVERTISING MATERIAL WHICH DOES NOT REFER
TO INSURER BY NAME, SHALL BE USED BY BROKER-DEALER UNLESS THE SPECIFIC
ITEM HAS BEEN APPROVED IN WRITING BY GENERAL DISTRIBUTOR PRIOR TO SUCH
USE.
In addition, Broker-Dealer shall not print, publish or distribute any
advertisement, circular or any document relating to Insurer unless
such advertisement, circular or document shall have been approved in
writing by Insurer prior to such use.
Upon termination of this Agreement, all prospectuses, sales promotion
material, advertising, circulars, documents and software relating to
the sales of Insurer's contracts shall be promptly turned over to
Insurer free from any claim or retention of rights by the
Broker-Dealer.
Insurer represents that the prospectus and registration statement
relating to the Variable Contracts contain no untrue statements of
material fact or omission to state material fact, the omission of
which makes any statement contained in the prospectus and registration
statement misleading. Insurer agrees to indemnify Broker-Dealer from
and against any claims, liabilities and expenses which may be incurred
under the Securities Act of 1933, the Investment Company Act of 1940,
common law or otherwise arising out of a breach of the agreement in
this paragraph.
Broker-Dealer agrees to hold harmless and indemnify Insurer and
General Distributor against any and all claims, liabilities and
expenses which Insurer or General Distributor may incur from
liabilities arising out of or based upon any alleged or untrue
statement other than statements contained in the registration
statement, prospectus or approved sales material of any Variable
Contract.
In accordance with the requirements of the laws of the several states,
Broker-Dealer shall maintain complete records indicating the manner
and extent of distribution of any such solicitation material, shall
make such records and files available to staff of Insurer or its
designated agent in field inspections and shall make such material
available to personnel of state insurance departments, the NASD or
other regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker-Dealer holds
Insurer, General Distributor and their affiliates harmless from any
liability arising from the use of any material which either (a) has
not been specifically approved by Insurer in writing, or (b) although
previously approved, has been disapproved, in writing, for further
use.
(f) SECURING APPLICATIONS. All applications for Variable Contracts and
Traditional Life Insurance Policies shall be made on application forms
supplied by Insurer and all payments collected by Broker-Dealer or any
Representative thereof shall be remitted promptly in full, together
with such application forms and any other required documentation,
directly to Insurer at the address indicated on such application or to
such other address as Insurer may, from time-to-time, designate in
writing. Broker-Dealer shall review all such applications for accuracy
and completeness. Checks or money orders in payment on any such
Variable Contract or Traditional Life Insurance Policy shall be drawn
to the order of "ReliaStar Bankers Security Life Insurance Company."
All applications are subject to acceptance or rejection by Insurer at
its sole discretion. All records or information obtained hereunder by
Broker-Dealer shall not be disclosed or used except as expressly
authorized herein, and Broker-Dealer will keep such records and
information confidential, to be disclosed only as authorized or if
expressly required by federal or state regulatory authorities.
(g) COLLECTION OF PURCHASE PAYMENTS. Broker-Dealer agrees that all money
or other consideration tendered with or in respect of any application
for a Variable Contract or Traditional Life Insurance Policy and the
Variable Contract or Traditional Life Insurance Policy when issued is
the property of Insurer and shall be promptly remitted in full to
Insurer without deduction or offset for any reason, including by way
of example but not limitation, any deduction or offset for
compensation claimed by Broker-Dealer.
(h) POLICY DELIVERY. Insurer will transmit Variable Contracts and
Traditional Life Insurance Policies to Broker-Dealer for delivery to
Policyowners. Broker-Dealer hereby agrees to deliver all such Variable
Contracts to Policyowners within ten (10) days of their receipt by
Broker-Dealer from Insurer. Broker-Dealer agrees to indemnify and hold
harmless Insurer for any and all losses caused by Broker-Dealer's
failure to perform the undertakings described in this paragraph.
Broker-Dealer hereby authorizes Insurer to set off any amount it owes
Insurer under this paragraph against any and all amounts otherwise
payable to Broker-Dealer by Insurer.
(i) FIDELITY BOND. Broker-Dealer represents that all directors, officers,
employees and Representatives of Broker-Dealer who are licensed
pursuant to this Agreement as Insurer's agents for state insurance law
purposes or who have access to funds of Insurer, including but not
limited to funds submitted with applications for the Variable
Contracts and Traditional Life Insurance Policies, or funds being
returned to owners, are and shall be covered by a blanket fidelity
bond, including coverage for larceny and embezzlement, issued by a
reputable bonding company. This bond shall be maintained by
Broker-Dealer at Broker-Dealer's expense. Such bond shall be, at
least, of the form, type and amount required under the NASD Rules of
Fair Practice. Insurer may require evidence, satisfactory to it, that
such coverage is in force and Broker-Dealer shall give prompt written
notice to Insurer of any notice of cancellation or change of coverage.
Broker-Dealer assigns any proceeds received from the fidelity bonding
company to Insurer to the extent of Insurer's loss due to activities
covered by the bond. If there is any deficiency amount, whether due to
a deductible or otherwise, Broker-Dealer shall promptly pay Insurer
such amount on demand and Broker-Dealer hereby indemnifies and holds
harmless Insurer from any such deficiency and from the costs of
collection thereof (including reasonable attorneys' fees).
4. COMPENSATION
(a) VARIABLE CONTRACTS. Insurer, on behalf of General Distributor, shall
pay a dealer concession to Broker-Dealer on all sales of Variable
Contracts through its Representatives, in accordance with the form of
Compensation Schedule A attached hereto, which is in effect when
purchase payment on such Variable Contracts are received by Insurer.
Dealer concessions will be paid as a percentage of premiums received
in cash or other legal tender and accepted by Insurer on applications
obtained by Broker-Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker-Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such Compensation to the Broker-Dealer.
Broker-Dealer agrees to hold Insurer and General Distributor harmless
from all claims of its Representatives for compensation in respect of
Representative's sales of Variable Contracts.
(b) TRADITIONAL LIFE INSURANCE POLICIES. Insurer shall pay commissions to
Broker-Dealer on all sales of Traditional Life Insurance Policies
through its Representatives in accordance with the form of
Compensation Schedule A attached hereto, which is in effect when
purchase payments on such Traditional Life Insurance Policies are
received by Insurer. Commissions will be paid as a percentage of
premiums received in cash or other legal tender and accepted by
insurer on applications obtained by Broker-Dealer's Representatives
unless otherwise indicated in Compensation Schedule A. Upon
termination of this Agreement, all compensation payable hereunder
shall cease; however, Broker-Dealer shall continue to be liable for
any chargebacks or for any other amounts advanced by or otherwise due
Insurer hereunder.
Insurer will pay all such compensation to the Broker-Dealer.
Broker-Dealer agrees to hold Insurer harmless from all claims of its
Representatives for compensation in respect of Representative's sales
of Traditional Life Insurance Policies.
(c) COMMISSION STATEMENTS. Broker-Dealer will be provided with copies of
its Representatives' commission statements together with
Broker-Dealer's own commission statement for each commission payment
period in which commissions are payable. Broker-Dealer agrees that,
except as to clerical errors and material undisclosed facts, if any,
such statements constitutes a complete and accurate statement of the
commission account unless written notice is provided to Insurer within
120 days after the date of the statement, which notice specifically
sets forth the objections or exceptions thereto.
(d) COMPENSATION SCHEDULES. The initial Compensation Schedule A is
attached.
Insurer and General Distributor reserve the right to change, amend, or
cancel any Compensation Schedule as to business produced after such
change by mailing notice of such change in the form of a new
Compensation Schedule to Broker-Dealer. Such change shall be
effective, unless otherwise specified, ten (10) days after the notice
is mailed.
(e) RIGHTS OF REJECTION AND SETTLEMENT. Insurer reserves the right to
reject any and all applications and collections submitted, to
discontinue writing any form of policy, to take possession of and
cancel any policy and return the premium or any part of it, and to
make any compromise settlement in respect of a policy. Broker-Dealer
will not be entitled to receive or retain any compensation on premiums
or parts of premiums Insurer does not receive and retain because of
such rejection, discontinuance, cancellation, or compromise
settlement. If compensation has been paid to which Broker-Dealer is
not entitled, any amount credited will be charged back, and if the
account balance is insufficient to cover the credited amount,
Broker-Dealer as applicable agrees to promptly repay the credited
amount.
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty
(30) days prior written notice; and may be terminated, for failure to
perform satisfactorily or other cause, by any party immediately; and shall
be terminated if Broker-Dealer ceases to be registered as a Broker-Dealer
under the Securities Exchange Act of 1934 and a member of the NASD or, if
Broker-Dealer ceases to maintain its insurance agent license(s) in good
standing in the jurisdictions in which it conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the NASD's
arbitration facilities. If the subject matter of the dispute, claim or
controversy is not within the scope of matters which may arbitrated through
the NASD arbitration facilities, then such dispute, claim or controversy
shall, upon the written request of any party, be submitted to three
arbitrators, one to be chosen by each party, and the third by the two so
chosen. If either party refuses or neglects to appoint an arbitrator within
thirty (30) days after the receipt of the written notice from the other
party requesting it to do so, the requesting party may appoint two
arbitrators. If the two arbitrators fail to agree in the selection of a
third arbitrator within thirty (30) days of their appointment, each of them
shall name two, of whom the other shall decline one and the decision shall
be made by drawing lots. All arbitrators shall be active or retired
executive officers of insurance companies not under the control of any
party to this Agreement. Each party shall submit its case to the
arbitrators within thirty (30) days of the appointment of the third
arbitrator. The arbitration shall be held in Minneapolis, Minnesota at the
times agreed upon by the arbitrators. The decision in writing of any two
arbitrators, when filed with the parties hereto shall be final and binding
on both parties. Judgment may be entered upon the final decision of the
arbitrators in any court having jurisdiction. Each party shall bear the
expense of its own arbitrator and shall jointly and equally bear with the
other party the expense of the third arbitrator and of the arbitration.
7. GENERAL PROVISIONS
(a) ADDITIONS, AMENDMENTS, MODIFICATIONS & WAIVERS. This Agreement shall
not be effective until approved by Insurer and General Distributor.
Insurer and General Distributor reserve the right to amend this
Agreement at any time, and the submission of an application by
Broker-Dealer after notice of any such amendment has been sent shall
constitute Broker-Dealer's agreement to any such amendment. No
additions, amendments or modifications of this Agreement or any waiver
of any provision will be valid unless approved, in writing, by one of
Insurer's duly authorized officers. In addition, no approved waiver of
any default, or failure of performance by Broker-Dealer will affect
Insurer's or General Distributor's rights with respect to any later
default or failure of performance.
(b) INDEPENDENT CONTRACTOR RELATIONSHIP. This Agreement does not create
the relationship of employer and employee between the parties to this
Agreement. Insurer and General Distributor are independent contractors
with respect to Broker-Dealer and its Representatives.
(c) ASSIGNMENTS. Broker-Dealer will not assign or transfer, either wholly
or partially, this Agreement or any of the benefits accrued or to
accrue under it, without the written prior consent of a duly
authorized officer of the Insurer and General Distributor.
(d) SERVICE OF PROCESS. If Broker-Dealer receives or is served with any
notice or other paper concerning any legal action against Insurer or
General Distributor, Broker-Dealer agrees to notify Insurer
immediately (in any event not later than the first business day after
receipt) by telephone and further agrees to transmit any papers that
are served or received by facsimile to (612) 342-7531 and by overnight
mail to Insurer's Office of General Counsel.
(e) SEVERABILITY. It is understood and agreed by the parties to this
Agreement that if any part, term or provision of this Agreement is
held to be invalid or in conflict with any law or regulation, the
validity of the remaining portions or provisions will not be affected,
and the parties' rights and obligations will be construed and enforced
as if this Agreement did not contain the particular part, term or
provision held to be invalid.
(f) GOVERNING LAW. It is agreed by the parties to this Agreement that the
Agreement and all of its provisions will be governed by the laws of
the State of Minnesota.
(g) LIMITATIONS. No party other than Insurer shall have the authority on
behalf of Insurer to make, alter, or discharge any policy, contract,
or certificate issued by Insurer, to waive any forfeiture or to grant,
permit, nor extend the time for making any payments nor to guarantee
earnings or rates, nor to alter the forms which Insurer may prescribe
or substitute other forms in place of those prescribed by Insurer, nor
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of Insurer, nor to open any bank
account in the full legal name of Insurer, any derivation thereof or
any tradename thereof.
8. TERRITORY
Broker-Dealer's territory is limited geographically to those jurisdictions
in which the Variable Contracts and Traditional Life Insurance Policies may
lawfully be offered, provided that Broker-Dealer's right to solicit sales
of and to sell the Variable Contracts and Traditional Life Insurance
Policies in such jurisdictions is not exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
IN WITNESS WHEREOF, we set our hands this ____ day of _________________,
199__.
INSURER:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: ________________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: ______________________________
Title: ___________________________
BROKER-DEALER:
By: ______________________________
Title: ___________________________
"B"
BROKER-DEALER AGENCY
SELLING AGREEMENT
This Agreement is made among the following four parties:
1. RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
Woodbury, New York 11797
a New York domiciled stock life insurance company
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
an affiliate of Insurer, registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and a member of
the National Association of Securities Dealers, Inc. ("NASD")
(hereinafter "GENERAL DISTRIBUTOR"); and,
3. ______________________________
______________________________
Street
______________________________
City State ZIP
registered as a broker-dealer with the SEC and a Member
of the NASD (hereinafter "BROKER-DEALER"); and,
4. ______________________________
______________________________
Street
______________________________
City State ZIP
an affiliate of Broker-Dealer and a licensed insurance agency
(hereinafter "AGENCY").
RECITALS:
WHEREAS, Broker-Dealer has become affiliated with Agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
WHEREAS, the parties wish to enter into an agreement for the distribution
of Variable Contracts and Traditional Life Insurance Policies by Broker-Dealer
and Agency; and
WHEREAS, Insurer has appointed General Distributor as principal underwriter
and distributor (as those terms are defined by the Investment Company Act of
1940) of the Variable Contracts and has authorized General Distributor to enter
into selling agreements with registered broker-dealers for the solicitation and
sale of Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer's
registered representatives who are affiliated with Agency and who are licensed
as life insurance/variable contract agents in appropriate jurisdictions
("Representatives") solicit and sell Variable Contracts and Traditional Life
Insurance Policies; and,
WHEREAS, Insurer proposes to authorize Agency's employees who are not
registered representatives of Broker-Dealer but who are licensed as life
insurance agents in appropriate jurisdictions ("Agents") to solicit and sell
Traditional Life Insurance Policies; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts; and,
WHEREAS, Insurer proposes to have Agency provide certain supervisory and
administrative services as hereinafter described with respect to the
solicitation and sales of Traditional Life Insurance Policies by its Agents and
by Representatives who are affiliated with Agency.
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties now agree as follows:
1. DEFINITIONS
In this Agreement,
(a) The words "Variable Contract" shall mean those variable life insurance
policies and variable annuity contracts identified in Section 1 of
Compensation Schedule A attached hereto, and as may hereafter be
amended.
Insurer may in its sole discretion and without notice to
Broker-Dealer, suspend sales of any Variable Contracts or amend any
policies or contracts evidencing such Variable Contracts if, in
Insurer's opinion, such suspension or amendment is: (1) necessary for
compliance with federal, state, or local laws, regulations, or
administrative order(s); or, (2) necessary to prevent administrative
or financial hardship to Insurer. In all other situations, Insurer
shall provide 30 days notice to Broker-Dealer prior to suspending
sales of any Variable Contracts or amending any policies or contracts
evidencing such Variable Contracts.
Insurer may issue and propose additional or successor products, in
which event Broker-Dealer will be informed of the product and its
related Commission Schedule. If Broker-Dealer does not agree to
distribute such product(s), it must notify Insurer in writing within
30 days of receipt of the Commission Schedule for such product(s). If
Broker-Dealer does not indicate disapproval of the new product(s) or
the terms contained in the related Commission Schedule, Broker-Dealer
will be deemed to have thereby agreed to distribute such product(s)
and agreed to the related Commission Schedule which shall be attached
to and made a part of this Agreement.
(b) The words "Traditional Life Insurance Policy" shall mean those life
insurance policies and annuity contracts identified in Section 2 of
Compensation Schedule A attached hereto, and as may hereafter be
amended.
Insurer may in its sole discretion and without notice to
Broker-Dealer, suspend sales of any Traditional Life Insurance
Policies or amend any policies or contracts evidencing such
Traditional Life Insurance Policies if, in Insurer's opinion, such
suspension or amendment is: (1) necessary for compliance with federal,
state, or local laws, regulations, or administrative order(s); or, (2)
necessary to prevent administrative or financial hardship to Insurer.
In all other situations, Insurer shall provide 30 days notice to
Broker-Dealer prior to suspending sales of any Traditional Life
Insurance Policies or amending any policies or contracts evidencing
such Traditional Life Insurance Policies.
Insurer may issue and propose additional or successor products, in
which event Broker-Dealer will be informed of the product and its
related Compensation Schedule. If Broker-Dealer does not agree to
distribute such product(s), it must notify Insurer in writing within
30 days of receipt of the Compensation Schedule for such product(s).
If Broker-Dealer does not indicate disapproval of the new product(s)
or the terms contained in the related Compensation Schedule,
Broker-Dealer will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Compensation Schedule which shall
be attached to and made a part of this Agreement.
2. AGENCY APPOINTMENTS
On the effective date,
(a) Insurer and General Distributor appoint Broker-Dealer and
Broker-Dealer accepts the appointment to solicit sales of and to sell
Variable Contracts only, pursuant to the terms of this Agreement.
(b) Insurer appoints Agency, and Agency accepts the appointment to solicit
sales of and to sell Traditional Life Insurance Policies only,
pursuant to the terms of this Agreement.
3. DUTIES OF BROKER-DEALER
(a) SUPERVISION OF REPRESENTATIVES. Broker-Dealer shall have full
responsibility for the training and supervision of all Representatives
who are engaged directly or indirectly in the offer or sale of the
Variable Contracts, and all such persons shall be subject to the
control of Broker-Dealer with respect to such persons' securities
regulated activities in connection with the Variable Contracts.
Broker-Dealer will cause the Representatives to be trained in the sale
of the Variable Contracts, will cause such Representatives to qualify
under applicable federal and state laws to engage in the sale of the
Variable Contracts; will cause such Representatives to be registered
representatives of Broker-Dealer before such Representatives engage in
the solicitation of applications for the Variable Contracts; and will
cause such Representatives to limit solicitation of applications for
the Variable Contracts to jurisdictions where Insurer has authorized
such solicitation. Broker-Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any Representative
ceases to be a registered representative of Broker-Dealer or ceases to
maintain the proper licensing required for the sale of the Variable
Contracts. All parties shall be liable for their own negligence and
misconduct under this paragraph.
(b) REPRESENTATIVES INSURANCE COMPLIANCE. Broker-Dealer, prior to allowing
its Representatives to solicit for sales or sell the Variable
Contracts, shall require such representatives to be validly insurance
licensed, registered and appointed by Insurer as a variable contract
agent in accordance with the jurisdictional requirements of the place
where the solicitations and sales take place as well as the solicited
person's or entity's place of residence.
Broker-Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell the
Variable Contracts. Broker-Dealer shall fulfill all Insurer
requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance agents of
Insurer. All such licensing/appointment papers shall be submitted to
Insurer or its designee by Broker-Dealer. Notwithstanding such
submission, Insurer shall have sole discretion to appoint, refuse to
appoint, discontinue, or terminate the appointment of any
Representative as an insurance agent of Insurer.
(c) COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE
SECURITIES LAWS. Broker-Dealer shall fully comply with the
requirements of the National Association of Securities Dealers, Inc.,
the Securities Exchange Act of 1934 and all other applicable federal
and state laws. In addition, Broker-Dealer will establish and maintain
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by General
Distributor, Broker-Dealer shall furnish such records as may be
necessary to establish such diligent supervision.
(d) NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and standards
imposed by Broker-Dealer on its Representatives, Broker-Dealer shall
advise General Distributor of this fact and shall immediately notify
such Representative that he or she is no longer authorized to sell the
Variable Contracts and Broker-Dealer shall take whatever additional
action may be necessary to terminate the sales activities of such
Representative relating to the Variable Contracts.
(e) PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING. Broker-Dealer
shall be provided, without any expense to Broker-Dealer, with
prospectuses relating to the Variable Contracts and such other
supplementary sales material as General Distributor determines is
necessary or desirable for use in connection with sales of the
Variable Contracts.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO THE
VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC ADVERTISING
MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME, SHALL BE USED BY
BROKER-DEALER UNLESS THE SPECIFIC ITEM HAS BEEN APPROVED IN WRITING BY
GENERAL DISTRIBUTOR PRIOR TO SUCH USE.
In addition, Broker-Dealer shall not print, publish or distribute any
advertisement, circular or any document relating to Insurer unless
such advertisement, circular or document shall have been approved in
writing by Insurer prior to such use.
Upon termination of this Agreement, all prospectuses, sales promotion
material, advertising, circulars, documents and software relating to
the sales of the Variable Contracts shall be promptly turned over to
Insurer free from any claim or retention of rights by the
Broker-Dealer.
Insurer represents that the prospectus and registration statement
relating to the Variable Contracts contain no untrue statements of
material fact or omission to state material fact, the omission of
which makes any statement contained in the prospectus and registration
statement misleading. Insurer agrees to indemnify Broker-Dealer from
and against any claims, liabilities and expenses which may be incurred
under the Securities Act of 1933, the Investment Company Act of 1940,
common law or otherwise arising out of a breach of the agreement in
this paragraph.
Broker-Dealer agrees to hold harmless and indemnify Insurer and
General Distributor against any and all claims, liabilities and
expenses which Insurer or General Distributor may incur from
liabilities arising out of or based upon any alleged or untrue
statement other than statements contained in the registration
statement, prospectus or approved sales material of any Variable
Contract.
In accordance with the requirements of the laws of the several states,
Broker-Dealer shall maintain complete records indicating the manner
and extent of distribution of any such solicitation material, shall
make such records and files available to staff of Insurer or its
designated agent in field inspections and shall make such material
available to personnel of state insurance departments, the NASD or
other regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker-Dealer holds
Insurer, General Distributor and their affiliates harmless from any
liability arising from the use of any material which either (a) has
not been specifically approved in writing, or (b) although previously
approved, has been disapproved, in writing, for further use.
(f) SECURING APPLICATIONS. All applications for Variable Contracts shall
be made on application forms supplied by Insurer and all payments
collected by Broker-Dealer or any Representative thereof shall be
remitted promptly in full, together with such application forms and
any other required documentation, directly to Insurer at the address
indicated on such application or to such other address as Insurer may,
from time-to-time, designate in writing. Broker-Dealer shall review
all such applications for accuracy and completeness. Checks or money
orders in payment on any such Variable Contract shall be drawn to the
order of "ReliaStar Bankers Security Life Insurance Company." All
applications are subject to acceptance or rejection by Insurer at its
sole discretion. All records or information obtained hereunder by
Broker-Dealer shall not be disclosed or used except as expressly
authorized herein, and Broker-Dealer will keep such records and
information confidential, to be disclosed only as authorized or if
expressly required by federal or state regulatory authorities.
(g) COLLECTION OF PURCHASE PAYMENTS. Broker-Dealer agrees that all money
or other consideration tendered with or in respect of any application
for a Variable Contract and the Variable Contract when issued is the
property of Insurer and shall be promptly remitted in full to Insurer
without deduction or offset for any reason, including by way of
example but not limitation, any deduction or offset for compensation
claimed by Broker-Dealer.
(h) POLICY DELIVERY. Insurer will transmit Variable Contracts to
Broker-Dealer for delivery to Policyowners. Broker-Dealer hereby
agrees to deliver all such Variable Contracts to Policyowners within
ten (10) days of their receipt by Broker-Dealer from Insurer.
Broker-Dealer agrees to indemnify and hold harmless Insurer for any
and all losses caused by Broker-Dealer's failure to perform the
undertakings described in this paragraph. Broker-Dealer hereby
authorizes Insurer to set off any amount it owes Insurer under this
paragraph against any and all amounts otherwise payable to
Broker-Dealer by Insurer.
(i) FIDELITY BOND. Broker-Dealer represents that all directors, officers,
employees and Representatives of Broker-Dealer who are licensed
pursuant to this Agreement as Insurer's agents for state insurance law
purposes or who have access to funds of Insurer, including but not
limited to funds submitted with applications for the Variable
Contracts or funds being returned to owners, are and shall be covered
by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall
be maintained by Broker-Dealer at Broker-Dealer's expense. Such bond
shall be, at least, of the form, type and amount required under the
NASD Rules of Fair Practice. Insurer may require evidence,
satisfactory to it, that such coverage is in force and Broker-Dealer
shall give prompt written notice to Insurer of any notice of
cancellation or change of coverage.
Broker-Dealer assigns any proceeds received from the fidelity bonding
company to Insurer to the extent of Insurer's loss due to activities
covered by the bond. If there is any deficiency amount, whether due to
a deductible or otherwise, Broker-Dealer shall promptly pay Insurer
such amount on demand and Broker-Dealer hereby indemnifies and holds
harmless Insurer from any such deficiency and from the costs of
collection thereof (including reasonable attorneys' fees).
4. DUTIES OF AGENCY
(a) SUPERVISION OF AGENTS AND REPRESENTATIVES. Agency shall have full
responsibility for the training and supervision of all Agents and
Representatives who are engaged directly or indirectly in the offer or
sale of Traditional Life Insurance Policies. Agency will cause the
Agents and Representatives to be trained in the sale of Traditional
Life Insurance Policies, will cause such Agents and Representatives to
qualify under applicable state insurance laws to engage in the sale of
life insurance before such Agents and Representatives engage in the
solicitation of applications for Traditional Life Insurance Policies;
and will cause such Agents and Representatives to limit solicitation
of applications for Traditional Life Insurance Policies to
jurisdictions where Insurer has authorized such solicitation. Agency
shall cause such Agents' and Representatives' qualifications to be
certified to the satisfaction of Insurer and shall notify Insurer if
any Agent or Representative ceases to be an employee of Agency or
ceases to maintain the proper licensing required for the sale of
Traditional Life Insurance Policies. All parties shall be liable for
their own negligence and misconduct under this paragraph.
(b) AGENT INSURANCE COMPLIANCE. Agency, prior to allowing Agents or
Representatives to solicit for sales or sell Traditional Life
Insurance Policies, shall require such agents to be validly insurance
licensed, registered and appointed by Insurer as a life insurance
agent in accordance with the jurisdictional requirements of the place
where the solicitations and sales take place as well as the solicited
person's or entity's place of residence.
Agency shall assist Insurer in the appointment of Agents and
Representatives under the applicable insurance laws to sell
Traditional Life Insurance Policies. Agency shall fulfill all Insurer
requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance agents of
Insurer. All such licensing/appointment papers shall be submitted to
Insurer or its duly appointed agent by Agency. Notwithstanding such
submission, Insurer shall have sole discretion to appoint, refuse to
appoint, discontinue, or terminate the appointment of any Agent or
Representative as an insurance agent of Insurer.
(c) SALES PROMOTION MATERIAL AND ADVERTISING. Agency shall be provided,
without any expense to Agency, such sales promotion and advertising
materials as Insurer determines is necessary or desirable for use in
connection with sales of Traditional Life Insurance Policies.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO
TRADITIONAL LIFE INSURANCE POLICIES, INCLUDING WITHOUT LIMITATION
GENERIC ADVERTISING MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME,
SHALL BE USED BY AGENCY UNLESS THE SPECIFIC ITEM HAS BEEN APPROVED IN
WRITING BY INSURER PRIOR TO SUCH USE.
In addition, Agency shall not print, publish or distribute any
advertisement, circular or any document relating to Insurer unless
such advertisement, circular or document shall have been approved in
writing by Insurer prior to such use.
Upon termination of this Agreement, all sales promotion material,
advertising, circulars, documents and software relating to the sales
of Traditional Life Insurance Policies shall be promptly turned over
to Insurer free from any claim or retention of rights by the Agency.
In accordance with the requirements of the laws of the several states,
Agency shall maintain complete records indicating the manner and
extent of distribution of any such solicitation material, shall make
such records and files available to staff of Insurer or its designated
agent in field inspections and shall make such material available to
personnel of state insurance departments other regulatory agencies
which have regulatory authority over Insurer. Agency holds Insurer and
its affiliates harmless from any liability arising from the use of any
material which either (a) has not been specifically approved in
writing, or (b) although previously approved, has been disapproved, in
writing, for further use.
(d) SECURING APPLICATIONS. All applications for Traditional Life Insurance
Policies shall be made on application forms supplied by Insurer and
all payments collected by Agency or any Agent, Broker-Dealer or any
Representative thereof shall be remitted promptly in full, together
with such application forms and any other required documentation,
directly to Insurer at the address indicated on such application or to
such other address as Insurer may, from time-to-time, designate in
writing. Agency shall review all such applications for accuracy and
completeness. Checks or money orders in payment on any such
Traditional Life Insurance Policy shall be drawn to the order of
ReliaStar Bankers Security Life Insurance Company." All applications
are subject to acceptance or rejection by Insurer at its sole
discretion. All records or information obtained hereunder by Agency
shall not be disclosed or used except as expressly authorized herein,
and Agency will keep such records and information confidential, to be
disclosed only as authorized or if expressly required by federal or
state regulatory authorities.
(e) COLLECTION OF PURCHASE PAYMENTS. Agency agrees that all money or other
consideration tendered with or in respect of any application for a
Traditional Life Insurance Policy and the Traditional Life Insurance
Policy when issued is the property of Insurer and shall be promptly
remitted in full to Insurer without deduction or offset for any
reason, including by way of example but not limitation, any deduction
or offset for compensation claimed by Agency.
(f) POLICY DELIVERY. Insurer may, upon written request of Agency, transmit
Traditional Life Insurance Policies to Agency or Broker-Dealer for
delivery to Policyowners. Agency and Broker-Dealer hereby agree to
deliver all such Traditional Life Insurance Policies to Policyowners
within ten (10) days of their receipt by Agency or Broker-Dealer from
Insurer. Agency and Broker-Dealer agree to indemnify and hold harmless
Insurer for any and all losses caused by Agency's or Broker-Dealer's
failure to perform the undertakings described in this paragraph.
Agency and Broker-Dealer hereby authorize Insurer to set off any
amount it owes Insurer under this paragraph against any and all
amounts otherwise payable to Agency or Broker-Dealer by Insurer.
5. COMPENSATION
(a) VARIABLE CONTRACTS. Insurer, on behalf of General Distributor, shall
pay a dealer concession to Broker-Dealer on all sales of Variable
Contracts through such Representatives, in accordance with the form of
Compensation Schedule A attached hereto, which is in effect when
purchase payment on such Variable Contracts are received by Insurer.
Dealer concessions will be paid as a percentage of premiums received
in cash or other legal tender and accepted by Insurer on applications
obtained by Broker-Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker-Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such Compensation to and in the name of
Broker-Dealer. Broker-Dealer agrees to hold Insurer and General
Distributor harmless from all claims of its Representatives for
compensation in respect of such Representative's sales of Variable
Contracts.
(b) TRADITIONAL LIFE INSURANCE POLICIES. Insurer shall pay commissions to
Broker-Dealer on all sales of Traditional Life Insurance Policies
through Agents and Representatives in accordance with the form of
Compensation Schedule A attached hereto, which is in effect when
purchase payments on such Traditional Life Insurance Policies are
received by Insurer. Commissions will be paid as a percentage of
premiums received in cash or other legal tender and accepted by
insurer on applications obtained by Agency's Agents or Broker-Dealer's
Representatives unless otherwise indicated in Compensation Schedule A.
Upon termination of this Agreement, all compensation payable hereunder
shall cease; however, Broker-Dealer shall continue to be liable for
any chargebacks or for any other amounts advanced by or otherwise due
Insurer hereunder.
Insurer will pay all such Compensation to and in the name of
Broker-Dealer. Agency hereby assigns to Broker-Dealer all compensation
which would otherwise be paid to Agency in respect of Representative's
and Agent's sales of Traditional Life Insurance Policies. Agency
agrees to hold Insurer harmless from all claims Agents or
Representatives have for compensation in respect of Agent's or
Representative's sales of Traditional Life Insurance Policies.
(c) COMMISSION STATEMENTS. Broker-Dealer will be provided with copies of
its Representatives' commission statements together with
Broker-Dealer's own commission statements for each commission payment
period in which commissions are payable. Broker-Dealer agrees that,
except as to clerical errors and material undisclosed facts, if any,
such statements constitutes a complete and accurate statement of the
commission account unless written notice is provided to Insurer within
120 days after the date of the statement, which notice specifically
sets forth the objections or exceptions thereto.
(d) COMPENSATION SCHEDULES. The initial Compensation Schedule A is
attached.
Insurer and General Distributor reserve the right to change, amend, or
cancel any Compensation Schedule as to business produced after such
change by mailing notice of such change in the form of a new
Compensation Schedule to Broker-Dealer. Such change shall be
effective, unless otherwise specified, ten (10) days after the notice
is mailed.
(e) RIGHTS OF REJECTION AND SETTLEMENT. Insurer reserves the right to
reject any and all applications and collections submitted, to
discontinue writing any form of policy, to take possession of and
cancel any policy and return the premium or any part of it, and to
make any compromise settlement in respect of a policy. Broker-Dealer
will not be entitled to receive or retain any compensation on premiums
or parts of premiums Insurer does not receive and retain because of
such rejection, discontinuance, cancellation, or compromise
settlement. If compensation has been paid to which Broker-Dealer is
not entitled, any amount credited will be charged back, and if the
account balance is insufficient to cover the credited amount,
Broker-Dealer as applicable agrees to promptly repay the credited
amount.
6. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty
(30) days prior written notice; and may be terminated, for failure to
perform satisfactorily or other cause, by any party immediately; and shall
be terminated if Broker-Dealer ceases to be registered as a Broker-Dealer
under the Securities Exchange Act of 1934 and a member of the NASD or, if
Agency ceases to maintain its insurance agent license(s) in good standing
in the jurisdictions in which it conducts business.
7. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the NASD's
arbitration facilities. If the subject matter of the dispute, claim or
controversy is not within the scope of matters which may arbitrated through
the NASD arbitration facilities, then such dispute, claim or controversy
shall, upon the written request of any party, be submitted to three
arbitrators, one to be chosen by each party, and the third by the two so
chosen. If either party refuses or neglects to appoint an arbitrator within
thirty (30) days after the receipt of the written notice from the other
party requesting it to do so, the requesting party may appoint two
arbitrators. If the two arbitrators fail to agree in the selection of a
third arbitrator within thirty (30) days of their appointment, each of them
shall name two, of whom the other shall decline one and the decision shall
be made by drawing lots. All arbitrators shall be active or retired
executive officers of insurance companies not under the control of any
party to this Agreement. Each party shall submit its case to the
arbitrators within thirty (30) days of the appointment of the third
arbitrator. The arbitration shall be held in Minneapolis, Minnesota at the
times agreed upon by the arbitrators. The decision in writing of any two
arbitrators, when filed with the parties hereto shall be final and binding
on both parties. Judgment may be entered upon the final decision of the
arbitrators in any court having jurisdiction. Each party shall bear the
expense of its own arbitrator and shall jointly and equally bear with the
other party the expense of the third arbitrator and of the arbitration.
8. GENERAL PROVISIONS
(a) ADDITIONS, AMENDMENTS, MODIFICATIONS & WAIVERS. This Agreement shall
not be effective until approved by Insurer and General Distributor.
Insurer and General Distributor reserve the right to amend this
Agreement at any time, and the submission of an application by either
Broker-Dealer or Agency after notice of any such amendment has been
sent shall constitute Broker-Dealer's or Agency's, as applicable,
agreement to any such amendment. No additions, amendments or
modifications of this Agreement or any waiver of any provision will be
valid unless approved, in writing, by one of Insurer's duly authorized
officers. In addition, no approved waiver of any default, or failure
of performance by Broker-Dealer or Agency will affect Insurer's or
General Distributor's rights with respect to any later default or
failure of performance.
(b) INDEPENDENT CONTRACTOR RELATIONSHIP. This Agreement does not create
the relationship of employer and employee between the parties to this
Agreement. Insurer and General Distributor are independent contractors
with respect to Broker-Dealer, its Representatives, Agency and its
Agents.
(c) ASSIGNMENTS. Neither Broker-Dealer nor Agency will assign or transfer,
either wholly or partially, this Agreement or any of the benefits
accrued or to accrue under it, without the written prior consent of a
duly authorized officer of the Insurer and General Distributor.
(d) SERVICE OF PROCESS. If Broker-Dealer or Agency receives or is served
with any notice or other paper concerning any legal action against
Insurer or General Distributor, Broker-Dealer or Agency agrees to
notify Insurer immediately (in any event not later than the first
business day after receipt) by telephone and transmit any papers that
are served or received by facsimile to (612) 342-7531 and by overnight
mail to Insurer's Office of General Counsel.
(e) SEVERABILITY. It is understood and agreed by the parties to this
Agreement that if any part, term or provision of this Agreement is
held to be invalid or in conflict with any law or regulation, the
validity of the remaining portions or provisions will not be affected,
and the parties' rights and obligations will be construed and enforced
as if this Agreement did not contain the particular part, term or
provision held to be invalid.
(f) GOVERNING LAW. It is agreed by the parties to this Agreement that the
Agreement and all of its provisions will be governed by the laws of
the State of Minnesota.
(g) LIMITATIONS. No party other than Insurer shall have the authority on
behalf of Insurer to make, alter, or discharge any policy, contract,
or certificate issued by insurer, to waive any forfeiture or to grant,
permit, nor extend the time for making any payments nor to guarantee
earnings or rates, nor to alter the forms which Insurer may prescribe
or substitute other forms in place of those prescribed by Insurer, nor
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of Insurer, nor to open any bank
account in the full legal name of Insurer, any derivation thereof or
any tradename thereof.
9. TERRITORY
Broker-Dealer's territory is limited geographically to those jurisdictions
in which the Variable Contracts may lawfully be offered, provided that
Broker-Dealer's right to solicit sales of and to sell the Variable
Contracts in such jurisdictions is not exclusive.
Agency's territory is limited geographically to those jurisdictions in
which the Traditional Life Insurance policies may be lawfully be offered,
provided that Agency's and Broker-Dealer's right to solicit sales of and to
sell the Traditional Life Insurance Policies in such territory is not
exclusive.
10. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
IN WITNESS WHEREOF, we set our hands this ____ day of _________________,
199__.
INSURER:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: ________________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: ________________________________
Title: _____________________________
BROKER-DEALER:
____________________________________
By: ________________________________
Title: _____________________________
AGENCY:
____________________________________
By: ________________________________
Title: _____________________________
"C"
BROKER-DEALER AGENCY SELLING AGREEMENT
FOR VARIABLE CONTRACTS
This Agreement is made among the following three parties:
1. RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
Woodbury, New York 11797
a New York domiciled stock life insurance company
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
an affiliate of Insurer, registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and a member of
the National Association of Securities Dealers, Inc. ("NASD")
(hereinafter "GENERAL DISTRIBUTOR"); and,
3. ______________________________
______________________________
Street
______________________________
City State ZIP
registered as a broker-dealer with the SEC and a member of the
NASD and licensed as an insurance agency (hereinafter
"BROKER-DEALER").
RECITALS:
WHEREAS, Broker-Dealer is licensed as an insurance agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
WHEREAS, the parties wish to enter into an agreement for the distribution
of Variable Contracts by Broker-Dealer; and
WHEREAS, Insurer has appointed General Distributor as principal underwriter
and distributor (as those terms are defined by the Investment Company Act of
1940) of the Variable Contracts and has authorized General Distributor to enter
into selling agreements with registered broker-dealers for the solicitation and
sale of Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer's
registered representatives who are licensed as life insurance/variable contract
agents in appropriate jurisdictions ("Representatives") solicit and sell
Variable Contracts and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts.
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties now agree as follows:
1. VARIABLE CONTRACTS
In this Agreement, the words "Variable Contract" shall mean those variable life
insurance policies and variable annuity contracts identified in Section 1 of the
Compensation Schedule attached hereto, and as may hereafter be amended.
Insurer may in its sole discretion and without notice to Broker-Dealer, suspend
sales of any Variable Contracts or amend any policies or contracts evidencing
such Variable Contracts if, in Insurer's opinion, such suspension or amendment
is: (1) necessary for compliance with federal, state, or local laws,
regulations, or administrative order(s); or, (2) necessary to prevent
administrative or financial hardship to Insurer. In all other situations,
Insurer shall provide 30 days notice to Broker-Dealer prior to suspending sales
of any Variable Contracts or amending any policies or contracts evidencing such
Variable Contracts.
Insurer may issue and propose additional or successor products, in which event
Broker-Dealer will be informed of the product and its related Commission
Schedule. If Broker-Dealer does not agree to distribute such product(s), it must
notify Insurer in writing within 30 days of receipt of the Commission Schedule
for such product(s). If Broker-Dealer does not indicate disapproval of the new
product(s) or the terms contained in the related Commission Schedule,
Broker-Dealer will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Commission Schedule which shall be attached
to and made a part of this Agreement.
2. AGENCY APPOINTMENT
On the effective date, Insurer and General Distributor appoint
Broker-Dealer and Broker-Dealer accepts the appointment to solicit sales of and
to sell Variable Contracts, pursuant to the terms of this Agreement.
3. DUTIES OF BROKER-DEALER
(a) SUPERVISION OF REPRESENTATIVES. Broker-Dealer shall have full
responsibility for the training and supervision of all Representatives
who are engaged directly or indirectly in the offer or sale of the
Variable Contracts, and all such persons shall be subject to the
control of Broker-Dealer with respect to such persons' securities
regulated activities in connection with the Variable Contracts.
Broker-Dealer will cause the Representatives to be trained in the sale
of the Variable Contracts, will cause such Representatives to qualify
under applicable federal and state laws to engage in the sale of the
Variable Contracts; will cause such Representatives to be registered
representatives of Broker-Dealer before such Representatives engage in
the solicitation of applications for the Variable Contracts; and will
cause such Representatives to limit solicitation of applications for
the Variable Contracts to jurisdictions where Insurer has authorized
such solicitation. Broker-Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any Representative
ceases to be a registered representative of Broker-Dealer or ceases to
maintain the proper licensing required for the sale of the Variable
Contracts. All parties shall be liable for their own negligence and
misconduct under this paragraph.
(b) REPRESENTATIVES INSURANCE COMPLIANCE. Broker-Dealer, prior to allowing
its Representatives to solicit for sales or sell the Variable
Contracts, shall require such representatives to be validly insurance
licensed, registered and appointed by Insurer as a variable
contract/life insurance agent in accordance with the jurisdictional
requirements of the place where the solicitations and sales take place
as well as the solicited person's or entity's place of residence.
Broker-Dealer shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell Variable
Contracts. Broker-Dealer shall fulfill all Insurer requirements in
conjunction with the submission of licensing/appointment papers for
all applicants as insurance agents of Insurer. All such
licensing/appointment papers shall be submitted to Insurer or its
designee by Broker-Dealer. Notwithstanding such submission, Insurer
shall have sole discretion to appoint, refuse to appoint, discontinue,
or terminate the appointment of any Representative as an insurance
agent of Insurer.
(c) COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE
SECURITIES LAWS. Broker-Dealer shall fully comply with the
requirements of the National Association of Securities Dealers, Inc.,
the Securities Exchange Act of 1934 and all other applicable federal
and state laws. In addition, Broker-Dealer will establish and maintain
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by General
Distributor, Broker-Dealer shall furnish such records as may be
necessary to establish such diligent supervision.
(d) NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and standards
imposed by Broker-Dealer on its Representatives, Broker-Dealer shall
advise General Distributor of this fact and shall immediately notify
such Representative that he or she is no longer authorized to sell the
Variable Contracts and Broker-Dealer shall take whatever additional
action may be necessary to terminate the sales activities of such
Representative relating to such contracts and policies.
(e) PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING. Broker-Dealer
shall be provided, without any expense to Broker-Dealer, with
prospectuses relating to the Variable Contracts and such other
supplementary sales material as General Distributor determines is
necessary or desirable for use in connection with sales of the
Variable Contracts.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO THE
VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC ADVERTISING
MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME, SHALL BE USED BY
BROKER-DEALER UNLESS THE SPECIFIC ITEM HAS BEEN APPROVED IN WRITING BY
GENERAL DISTRIBUTOR PRIOR TO SUCH USE.
In addition, Broker-Dealer shall not print, publish or distribute any
advertisement, circular or any document relating to Insurer unless
such advertisement, circular or document shall have been approved in
writing by Insurer prior to such use.
Upon termination of this Agreement, all prospectuses, sales promotion
material, advertising, circulars, documents and software relating to
the sales of Insurer's contracts shall be promptly turned over to
Insurer free from any claim or retention of rights by the
Broker-Dealer.
Insurer represents that the prospectus and registration statement
relating to the Variable Contracts contain no untrue statements of
material fact or omission to state material fact, the omission of
which makes any statement contained in the prospectus and registration
statement misleading. Insurer agrees to indemnify Broker-Dealer from
and against any claims, liabilities and expenses which may be incurred
under the Securities Act of 1933, the Investment Company Act of 1940,
common law or otherwise arising out of a breach of the agreement in
this paragraph.
Broker-Dealer agrees to hold harmless and indemnify Insurer and
General Distributor against any and all claims, liabilities and
expenses which Insurer or General Distributor may incur from
liabilities arising out of or based upon any alleged or untrue
statement other than statements contained in the registration
statement, prospectus or approved sales material of any Variable
Contract.
In accordance with the requirements of the laws of the several states,
Broker-Dealer shall maintain complete records indicating the manner
and extent of distribution of any such solicitation material, shall
make such records and files available to staff of Insurer or its
designated agent in field inspections and shall make such material
available to personnel of state insurance departments, the NASD or
other regulatory agencies, including the SEC, which have regulatory
authority over Insurer or General Distributor. Broker-Dealer holds
Insurer, General Distributor and their affiliates harmless from any
liability arising from the use of any material which either (a) has
not been specifically approved by Insurer in writing, or (b) although
previously approved, has been disapproved, in writing, for further
use.
(f) SECURING APPLICATIONS. All applications for Variable Contracts shall
be made on application forms supplied by Insurer and all payments
collected by Broker-Dealer or any Representative thereof shall be
remitted promptly in full, together with such application forms and
any other required documentation, directly to Insurer at the address
indicated on such application or to such other address as Insurer may,
from time-to-time, designate in writing. Broker-Dealer shall review
all such applications for accuracy and completeness. Checks or money
orders in payment on any such Variable Contract shall be drawn to the
order of "ReliaStar Bankers Security Life Insurance Company." All
applications are subject to acceptance or rejection by Insurer at its
sole discretion. All records or information obtained hereunder by
Broker-Dealer shall not be disclosed or used except as expressly
authorized herein, and Broker-Dealer will keep such records and
information confidential, to be disclosed only as authorized or if
expressly required by federal or state regulatory authorities.
(g) COLLECTION OF PURCHASE PAYMENTS. Broker-Dealer agrees that all money
or other consideration tendered with or in respect of any application
for a Variable Contract and the Variable Contract when issued is the
property of Insurer and shall be promptly remitted in full to Insurer
without deduction or offset for any reason, including by way of
example but not limitation, any deduction or offset for compensation
claimed by Broker-Dealer.
(h) POLICY DELIVERY. Insurer will transmit Variable Contracts to
Broker-Dealer for delivery to Policyowners. Broker-Dealer hereby
agrees to deliver all such Variable Contracts to Policyowners within
ten (10) days of their receipt by Broker-Dealer from Insurer.
Broker-Dealer agrees to indemnify and hold harmless Insurer for any
and all losses caused by Broker-Dealer's failure to perform the
undertakings described in this paragraph. Broker-Dealer hereby
authorizes Insurer to set off any amount it owes Insurer under this
paragraph against any and all amounts otherwise payable to
Broker-Dealer by Insurer.
(i) FIDELITY BOND. Broker-Dealer represents that all directors, officers,
employees and Representatives of Broker-Dealer who are licensed
pursuant to this Agreement as Insurer's agents for state insurance law
purposes or who have access to funds of Insurer, including but not
limited to funds submitted with applications for the Variable
Contracts, or funds being returned to owners, are and shall be covered
by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall
be maintained by Broker-Dealer at Broker-Dealer's expense. Such bond
shall be, at least, of the form, type and amount required under the
NASD Rules of Fair Practice. Insurer may require evidence,
satisfactory to it, that such coverage is in force and Broker-Dealer
shall give prompt written notice to Insurer of any notice of
cancellation or change of coverage.
Broker-Dealer assigns any proceeds received from the fidelity bonding
company to Insurer to the extent of Insurer's loss due to activities
covered by the bond. If there is any deficiency amount, whether due to
a deductible or otherwise, Broker-Dealer shall promptly pay Insurer
such amount on demand and Broker-Dealer hereby indemnifies and holds
harmless Insurer from any such deficiency and from the costs of
collection thereof (including reasonable attorneys' fees).
4. COMPENSATION
(a) VARIABLE CONTRACTS. Insurer, on behalf of General Distributor, shall
pay a dealer concession to Broker-Dealer on all sales of Variable
Contracts through its Representatives, in accordance with the form of
the Compensation Schedule attached hereto, which is in effect when
purchase payment on such Variable Contracts are received by Insurer.
Dealer concessions will be paid as a percentage of premiums received
in cash or other legal tender and accepted by Insurer on applications
obtained by Broker-Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker-Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such Compensation to the Broker-Dealer.
Broker-Dealer agrees to hold Insurer and General Distributor harmless
from all claims of its Representatives for compensation in respect of
Representative's sales of Variable Contracts.
(b) COMMISSION STATEMENTS. Broker-Dealer will be provided with copies of
its Representatives' commission statements together with
Broker-Dealer's own commission statement for each commission payment
period in which commissions are payable. Broker-Dealer agrees that,
except as to clerical errors and material undisclosed facts, if any,
such statements constitutes a complete and accurate statement of the
commission account unless written notice is provided to Insurer within
120 days after the date of the statement, which notice specifically
sets forth the objections or exceptions thereto.
(c) COMPENSATION SCHEDULES. The initial Compensation Schedule is attached.
Insurer and General Distributor reserve the right to change, amend, or
cancel any Compensation Schedule as to business produced after such
change by mailing notice of such change in the form of a new
Compensation Schedule to Broker-Dealer. Such change shall be
effective, unless otherwise specified, ten (10) days after the notice
is mailed.
(d) RIGHTS OF REJECTION AND SETTLEMENT. Insurer reserves the right to
reject any and all applications and collections submitted, to
discontinue writing any form of policy, to take possession of and
cancel any policy and return the premium or any part of it, and to
make any compromise settlement in respect of a policy. Broker-Dealer
will not be entitled to receive or retain any compensation on premiums
or parts of premiums Insurer does not receive and retain because of
such rejection, discontinuance, cancellation, or compromise
settlement. If compensation has been paid to which Broker-Dealer is
not entitled, any amount credited will be charged back, and if the
account balance is insufficient to cover the credited amount,
Broker-Dealer as applicable agrees to promptly repay the credited
amount.
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days prior written notice; and may be terminated, for failure to perform
satisfactorily or other cause, by any party immediately; and shall be terminated
if Broker-Dealer ceases to be registered as a Broker-Dealer under the Securities
Exchange Act of 1934 and a member of the NASD or, if Broker-Dealer ceases to
maintain its insurance agent license(s) in good standing in the jurisdictions in
which it conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the NASD's arbitration
facilities. If the subject matter of the dispute, claim or controversy is not
within the scope of matters which may arbitrated through the NASD arbitration
facilities, then such dispute, claim or controversy shall, upon the written
request of any party, be submitted to three arbitrators, one to be chosen by
each party, and the third by the two so chosen. If either party refuses or
neglects to appoint an arbitrator within thirty (30) days after the receipt of
the written notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree in the
selection of a third arbitrator within thirty (30) days of their appointment,
each of them shall name two, of whom the other shall decline one and the
decision shall be made by drawing lots. All arbitrators shall be active or
retired executive officers of insurance companies not under the control of any
party to this Agreement. Each party shall submit its case to the arbitrators
within thirty (30) days of the appointment of the third arbitrator. The
arbitration shall be held in Minneapolis, Minnesota at the times agreed upon by
the arbitrators. The decision in writing of any two arbitrators, when filed with
the parties hereto shall be final and binding on both parties. Judgment may be
entered upon the final decision of the arbitrators in any court having
jurisdiction. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expense of the third
arbitrator and of the arbitration.
7. GENERAL PROVISIONS
(a) ADDITIONS, AMENDMENTS, MODIFICATIONS & WAIVERS. This Agreement shall
not be effective until approved by Insurer and General Distributor.
Insurer and General Distributor reserve the right to amend this
Agreement at any time, and the submission of an application for the
purchase of a Variable Contract by Broker-Dealer after notice of any
such amendment has been sent shall constitute Broker-Dealer's
agreement to any such amendment. No additions, amendments or
modifications of this Agreement or any waiver of any provision will be
valid unless approved, in writing, by one of Insurer's duly authorized
officers. In addition, no approved waiver of any default, or failure
of performance by Broker-Dealer will affect Insurer's or General
Distributor's rights with respect to any later default or failure of
performance.
(b) INDEPENDENT CONTRACTOR RELATIONSHIP. This Agreement does not create
the relationship of employer and employee between the parties to this
Agreement. Insurer and General Distributor are independent contractors
with respect to Broker-Dealer and its Representatives.
(c) ASSIGNMENTS. Broker-Dealer will not assign or transfer, either wholly
or partially, this Agreement or any of the benefits accrued or to
accrue under it, without the written prior consent of a duly
authorized officer of the Insurer and General Distributor.
(d) SERVICE OF PROCESS. If Broker-Dealer receives or is served with any
notice or other paper concerning any legal action against Insurer or
General Distributor, Broker-Dealer agrees to notify Insurer
immediately (in any event not later than the first business day after
receipt) by telephone and further agrees to transmit any papers that
are served or received by facsimile to (612) 342-7531 and by overnight
mail to Insurer's Office of General Counsel.
(e) SEVERABILITY. It is understood and agreed by the parties to this
Agreement that if any part, term or provision of this Agreement is
held to be invalid or in conflict with any law or regulation, the
validity of the remaining portions or provisions will not be affected,
and the parties' rights and obligations will be construed and enforced
as if this Agreement did not contain the particular part, term or
provision held to be invalid.
(f) GOVERNING LAW. It is agreed by the parties to this Agreement that the
Agreement and all of its provisions will be governed by the laws of
the State of Minnesota.
(g) LIMITATIONS. No party other than Insurer shall have the authority on
behalf of Insurer to make, alter, or discharge any policy, contract,
or certificate issued by Insurer, to waive any forfeiture or to grant,
permit, nor extend the time for making any payments nor to guarantee
earnings or rates, nor to alter the forms which Insurer may prescribe
or substitute other forms in place of those prescribed by Insurer, nor
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of Insurer, nor to open any bank
account in the full legal name of Insurer, any derivation thereof or
any tradename thereof.
8. TERRITORY
Broker-Dealer's territory is limited geographically to those jurisdictions in
which the Variable Contracts may lawfully be offered, provided that
Broker-Dealer's right to solicit sales of and to sell the Variable Contracts in
such jurisdictions is not exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
IN WITNESS WHEREOF, we set our hands this ____ day of _________________,
199__.
INSURER:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: ________________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: ________________________________
Title: _____________________________
BROKER-DEALER:
____________________________________
By: ________________________________
Title: _____________________________
"D"
BROKER-DEALER AGENCY SELLING AGREEMENT
FOR VARIABLE CONTRACTS
This Agreement is made among the following four parties:
1. RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
1000 Woodbury Road, Suite 102
Woodbury, New York 11797
a New York domiciled stock life insurance company
(hereinafter "INSURER"); and,
2. WASHINGTON SQUARE SECURITIES, INC.
20 Washington Avenue South
Minneapolis, Minnesota 55401-1900
an affiliate of Insurer, registered as a broker-dealer with
the Securities and Exchange Commission ("SEC") and a
member of the National Association of Securities Dealers, Inc.
("NASD") (hereinafter "GENERAL DISTRIBUTOR"); and,
3. ______________________________________
______________________________________
Street
______________________________________
City State ZIP
registered as a broker-dealer with the SEC and a member
of the NASD (hereinafter "BROKER-DEALER"); and,
4. ______________________________________
______________________________________
Street
______________________________________
City State ZIP
an affiliate of Broker-Dealer and a licensed insurance agency
(hereinafter "AGENCY").
RECITALS:
WHEREAS, Broker-Dealer has become affiliated with Agency in order to
satisfy state insurance law requirements with respect to the sale of variable
insurance products which are registered securities with the SEC.
WHEREAS, the parties wish to enter into an agreement for the distribution
of Variable Contracts by Broker-Dealer and Agency; and
WHEREAS, Insurer has appointed General Distributor as principal underwriter
and distributor (as those terms are defined by the Investment Company Act of
1940) of the Variable Contracts and has authorized General Distributor to enter
into selling agreements with registered broker-dealers for the solicitation and
sale of Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer's
registered representatives who are affiliated with Agency and who are licensed
as life insurance/variable contract agents in appropriate jurisdictions
("Representatives") solicit and sell Variable Contracts; and,
WHEREAS, Insurer and General Distributor propose to have Broker-Dealer
provide certain supervisory and administrative services as hereinafter described
with respect to the solicitation and sales of Variable Contracts; and,
NOW THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties now agree as follows:
1. VARIABLE CONTRACTS
In this Agreement, The words "Variable Contract" shall mean those variable life
insurance policies and variable annuity contracts identified in Section 1 of the
Compensation Schedule attached hereto, and as may hereafter be amended.
Insurer may in its sole discretion and without notice to Broker-Dealer, suspend
sales of any Variable Contracts or amend any policies or contracts evidencing
such Variable Contracts if, in Insurer's opinion, such suspension or amendment
is: (1) necessary for compliance with federal, state, or local laws,
regulations, or administrative order(s); or, (2) necessary to prevent
administrative or financial hardship to Insurer. In all other situations,
Insurer shall provide 30 days notice to Broker-Dealer prior to suspending sales
of any Variable Contracts or amending any policies or contracts evidencing such
Variable Contracts.
Insurer may issue and propose additional or successor products, in which event
Broker-Dealer will be informed of the product and its related Commission
Schedule. If Broker-Dealer does not agree to distribute such product (s), it
must notify Insurer in writing within 30 days of receipt of the Commission
Schedule for such product(s). If Broker-Dealer does not indicate disapproval of
the new product(s) or the terms contained in the related Commission Schedule,
Broker-Dealer will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Commission Schedule which shall be attached
to and made a part of this Agreement.
2. AGENCY APPOINTMENTS
On the effective date, Insurer and General Distributor appoint Broker-Dealer and
its affiliated Agency and Broker-Dealer and Agency accept the appointment to
solicit sales of and to sell Variable Contracts only, pursuant to the terms of
this Agreement.
3. DUTIES OF BROKER-DEALER
(a) SUPERVISION OF REPRESENTATIVES. Broker-Dealer shall have full
responsibility for the training and supervision of all Representatives
who are engaged directly or indirectly in the offer or sale of the
Variable Contracts, and all such persons shall be subject to the
control of Broker-Dealer with respect to such persons' securities
regulated activities in connection with the Variable Contracts.
Broker-Dealer will cause the Representatives to be trained in the sale
of the Variable Contracts, will cause such Representatives to qualify
under applicable federal and state laws to engage in the sale of the
Variable Contracts; will cause such Representatives to be registered
representatives of Broker-Dealer before such Representatives engage in
the solicitation of applications for the Variable Contracts; and will
cause such Representatives to limit solicitation of applications for
the Variable Contracts to jurisdictions where Insurer has authorized
such solicitation. Broker-Dealer shall cause such Representatives'
qualifications to be certified to the satisfaction of General
Distributor and shall notify General Distributor if any Representative
ceases to be a registered representative of Broker-Dealer or ceases to
maintain the proper licensing required for the sale of the Variable
Contracts. All parties shall be liable for their own negligence and
misconduct under this paragraph.
(b) REPRESENTATIVES INSURANCE COMPLIANCE. Broker-Dealer, prior to allowing
its Representatives to solicit for sales or sell the Variable
Contracts, shall require such representatives to be validly insurance
licensed, registered and appointed by Insurer as a variable contract
agent in accordance with the jurisdictional requirements of the place
where the solicitations and sales take place as well as the solicited
person's or entity's place of residence.
Broker-Dealer and Agency shall assist Insurer in the appointment of
Representatives under the applicable insurance laws to sell the
Variable Contracts. Broker-Dealer shall fulfill all Insurer
requirements in conjunction with the submission of
licensing/appointment papers for all applicants as insurance agents of
Insurer. All such licensing/appointment papers shall be submitted to
Insurer or its designee by Broker-Dealer. Notwithstanding such
submission, Insurer shall have sole discretion to appoint, refuse to
appoint, discontinue, or terminate the appointment of any
Representative as an insurance agent of Insurer.
(c) COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE
SECURITIES LAWS. Broker-Dealer shall fully comply with the
requirements of the National Association of Securities Dealers, Inc.,
the Securities Exchange Act of 1934 and all other applicable federal
and state laws. In addition, Broker-Dealer will establish and maintain
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of the Representatives as
required by applicable law or regulation. Upon request by General
Distributor, Broker-Dealer shall furnish such records as may be
necessary to establish such diligent supervision.
(d) NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE. In the event a
Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and standards
imposed by Broker-Dealer on its Representatives, Broker-Dealer shall
advise General Distributor of this fact and shall immediately notify
such Representative that he or she is no longer authorized to sell the
Variable Contracts and Broker-Dealer shall take whatever additional
action may be necessary to terminate the sales activities of such
Representative relating to the Variable Contracts.
(e) PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING. Broker-Dealer
shall be provided, without any expense to Broker-Dealer, with
prospectuses relating to the Variable Contracts and such other
supplementary sales material as General Distributor determines is
necessary or desirable for use in connection with sales of the
Variable Contracts.
NO SALES PROMOTION MATERIALS OR ANY ADVERTISING RELATING TO THE
VARIABLE CONTRACTS, INCLUDING WITHOUT LIMITATION GENERIC ADVERTISING
MATERIAL WHICH DOES NOT REFER TO INSURER BY NAME, SHALL BE USED BY
BROKER-DEALER OR AGENCY UNLESS THE SPECIFIC ITEM HAS BEEN APPROVED IN
WRITING BY GENERAL DISTRIBUTOR PRIOR TO SUCH USE.
In addition, neither Broker-Dealer nor Agency shall print, publish or
distribute any advertisement, circular or any document relating to
Insurer unless such advertisement, circular or document shall have
been approved in writing by Insurer prior to such use.
Upon termination of this Agreement, all prospectuses, sales promotion
material, advertising, circulars, documents and software relating to
the sales of the Variable Contracts shall be promptly turned over to
Insurer free from any claim or retention of rights by the
Broker-Dealer or Agency.
Insurer represents that the prospectus and registration statement
relating to the Variable Contracts contain no untrue statements of
material fact or omission to state material fact, the omission of
which makes any statement contained in the prospectus and registration
statement misleading. Insurer agrees to indemnify Broker-Dealer from
and against any claims, liabilities and expenses which may be incurred
under the Securities Act of 1933, the Investment Company Act of 1940,
common law or otherwise arising out of a breach of the agreement in
this paragraph.
Broker-Dealer and Agency agree to hold harmless and indemnify Insurer
and General Distributor against any and all claims, liabilities and
expenses which Insurer or General Distributor may incur from
liabilities arising out of or based upon any alleged or untrue
statement other than statements contained in the registration
statement, prospectus or approved sales material of any Variable
Contract.
In accordance with the requirements of the laws of the several states,
Broker-Dealer and Agency shall maintain complete records indicating
the manner and extent of distribution of any such solicitation
material, shall make such records and files available to staff of
Insurer or its designated agent in field inspections and shall make
such material available to personnel of state insurance departments,
the NASD or other regulatory agencies, including the SEC, which have
regulatory authority over Insurer or General Distributor.
Broker-Dealer and Agency, jointly and severally hold Insurer, General
Distributor and their affiliates harmless from any liability arising
from the use of any material which either (a) has not been
specifically approved in writing, or (b) although previously approved,
has been disapproved, in writing, for further use.
(f) SECURING APPLICATIONS. All applications for Variable Contracts shall
be made on application forms supplied by Insurer and all payments
collected by Broker-Dealer or any Representative thereof shall be
remitted promptly in full, together with such application forms and
any other required documentation, directly to Insurer at the address
indicated on such application or to such other address as Insurer may,
from time-to-time, designate in writing. Broker-Dealer shall review
all such applications for accuracy and completeness. Checks or money
orders in payment on any such Variable Contract shall be drawn to the
order of "ReliaStar Bankers Security Life Insurance Company." All
applications are subject to acceptance or rejection by Insurer at its
sole discretion. All records or information obtained hereunder by
Broker-Dealer shall not be disclosed or used except as expressly
authorized herein, and Broker-Dealer will keep such records and
information confidential, to be disclosed only as authorized or if
expressly required by federal or state regulatory authorities.
(g) COLLECTION OF PURCHASE PAYMENTS. Broker-Dealer agrees that all money
or other consideration tendered with or in respect of any application
for a Variable Contract and the Variable Contract when issued is the
property of Insurer and shall be promptly remitted in full to Insurer
without deduction or offset for any reason, including by way of
example but not limitation, any deduction or offset for compensation
claimed by Broker-Dealer.
(h) POLICY DELIVERY. Insurer will transmit Variable Contracts to
Broker-Dealer for delivery to Policyowners. Broker-Dealer hereby
agrees to deliver all such Variable Contracts to Policyowners within
ten (10) days of their receipt by Broker-Dealer from Insurer.
Broker-Dealer agrees to indemnify and hold harmless Insurer for any
and all losses caused by Broker-Dealer's failure to perform the
undertakings described in this paragraph. Broker-Dealer hereby
authorizes Insurer to set off any amount it owes Insurer under this
paragraph against any and all amounts otherwise payable to
Broker-Dealer by Insurer.
(i) FIDELITY BOND. Broker-Dealer represents that all directors, officers,
employees and Representatives of Broker-Dealer who are licensed
pursuant to this Agreement as Insurer's agents for state insurance law
purposes or who have access to funds of Insurer, including but not
limited to funds submitted with applications for the Variable
Contracts or funds being returned to owners, are and shall be covered
by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall
be maintained by Broker-Dealer at Broker-Dealer's expense. Such bond
shall be, at least, of the form, type and amount required under the
NASD Rules of Fair Practice. Insurer may require evidence,
satisfactory to it, that such coverage is in force and Broker-Dealer
shall give prompt written notice to Insurer of any notice of
cancellation or change of coverage.
Broker-Dealer assigns any proceeds received from the fidelity bonding
company to Insurer to the extent of Insurer's loss due to activities
covered by the bond. If there is any deficiency amount, whether due to
a deductible or otherwise, Broker-Dealer shall promptly pay Insurer
such amount on demand and Broker-Dealer hereby indemnifies and holds
harmless Insurer from any such deficiency and from the costs of
collection thereof (including reasonable attorneys' fees).
4. COMPENSATION
(a) VARIABLE CONTRACTS. Insurer, on behalf of General Distributor, shall
pay a dealer concession to Broker-Dealer on all sales of Variable
Contracts through such Representatives, in accordance with the form of
the Compensation Schedule attached hereto, which is in effect when
purchase payment on such Variable Contracts are received by Insurer.
Dealer concessions will be paid as a percentage of premiums received
in cash or other legal tender and accepted by Insurer on applications
obtained by Broker-Dealer's Representatives unless otherwise indicated
in Compensation Schedule A. Upon termination of this Agreement, all
compensation payable hereunder shall cease; however, Broker-Dealer
shall continue to be liable for any chargebacks or for any other
amounts advanced by or otherwise due Insurer hereunder.
Insurer will pay all such Compensation to and in the name of
Broker-Dealer or its affiliated Agency. Broker-Dealer agrees to hold
Insurer and General Distributor harmless from all claims of its
Representatives for compensation in respect of such Representative's
sales of Variable Contracts.
(b) COMMISSION STATEMENTS. Broker-Dealer will be provided with copies of
its Representatives' commission statements together with
Broker-Dealer's own commission statements for each commission payment
period in which commissions are payable. Broker-Dealer agrees that,
except as to clerical errors and material undisclosed facts, if any,
such statements constitutes a complete and accurate statement of the
commission account unless written notice is provided to Insurer within
120 days after the date of the statement, which notice specifically
sets forth the objections or exceptions thereto.
(c) COMPENSATION SCHEDULES. The initial Compensation Schedule is attached.
Insurer and General Distributor reserve the right to change, amend, or
cancel any Compensation Schedule as to business produced after such
change by mailing notice of such change in the form of a new
Compensation Schedule to Broker-Dealer. Such change shall be
effective, unless otherwise specified, ten (10) days after the notice
is mailed.
(d) RIGHTS OF REJECTION AND SETTLEMENT. Insurer reserves the right to
reject any and all applications and collections submitted, to
discontinue writing any form of policy, to take possession of and
cancel any policy and return the premium or any part of it, and to
make any compromise settlement in respect of a policy. Broker-Dealer
will not be entitled to receive or retain any compensation on premiums
or parts of premiums Insurer does not receive and retain because of
such rejection, discontinuance, cancellation, or compromise
settlement. If compensation has been paid to which Broker-Dealer is
not entitled, any amount credited will be charged back, and if the
account balance is insufficient to cover the credited amount,
Broker-Dealer as applicable agrees to promptly repay the credited
amount.
5. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days prior written notice; and may be terminated, for failure to perform
satisfactorily or other cause, by any party immediately; and shall be terminated
if Broker-Dealer ceases to be registered as a Broker-Dealer under the Securities
Exchange Act of 1934 and a member of the NASD or, if Agency ceases to maintain
its insurance agent license(s) in good standing in the jurisdictions in which it
conducts business.
6. ARBITRATION
Any dispute, claim or controversy arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the NASD's arbitration
facilities. If the subject matter of the dispute, claim or controversy is not
within the scope of matters which may arbitrated through the NASD arbitration
facilities, then such dispute, claim or controversy shall, upon the written
request of any party, be submitted to three arbitrators, one to be chosen by
each party, and the third by the two so chosen. If either party refuses or
neglects to appoint an arbitrator within thirty (30) days after the receipt of
the written notice from the other party requesting it to do so, the requesting
party may appoint two arbitrators. If the two arbitrators fail to agree in the
selection of a third arbitrator within thirty (30) days of their appointment,
each of them shall name two, of whom the other shall decline one and the
decision shall be made by drawing lots. All arbitrators shall be active or
retired executive officers of insurance companies not under the control of any
party to this Agreement. Each party shall submit its case to the arbitrators
within thirty (30) days of the appointment of the third arbitrator. The
arbitration shall be held in Minneapolis, Minnesota at the times agreed upon by
the arbitrators. The decision in writing of any two arbitrators, when filed with
the parties hereto shall be final and binding on both parties. Judgment may be
entered upon the final decision of the arbitrators in any court having
jurisdiction. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expense of the third
arbitrator and of the arbitration.
7. GENERAL PROVISIONS
(a) ADDITIONS, AMENDMENTS, MODIFICATIONS & WAIVERS. This Agreement shall
not be effective until approved by Insurer and General Distributor.
Insurer and General Distributor reserve the right to amend this
Agreement at any time, and the submission of an application for the
purchase of a Variable Contract by either Broker-Dealer or Agency
after notice of any such amendment has been sent shall constitute
Broker-Dealer's or Agency's, as applicable, agreement to any such
amendment. No additions, amendments or modifications of this Agreement
or any waiver of any provision will be valid unless approved, in
writing, by one of Insurer's duly authorized officers. In addition, no
approved waiver of any default, or failure of performance by
Broker-Dealer or Agency will affect Insurer's or General Distributor's
rights with respect to any later default or failure of performance.
(b) INDEPENDENT CONTRACTOR RELATIONSHIP. This Agreement does not create
the relationship of employer and employee between the parties to this
Agreement. Insurer and General Distributor are independent contractors
with respect to Broker-Dealer, its Representatives, Agency and its
Agents.
(c) ASSIGNMENTS. Neither Broker-Dealer nor Agency will assign or transfer,
either wholly or partially, this Agreement or any of the benefits
accrued or to accrue under it, without the written prior consent of a
duly authorized officer of the Insurer and General Distributor.
(d) SERVICE OF PROCESS. If Broker-Dealer or Agency receives or is served
with any notice or other paper concerning any legal action against
Insurer or General Distributor, Broker-Dealer or Agency agrees to
notify Insurer immediately (in any event not later than the first
business day after receipt) by telephone and transmit any papers that
are served or received by facsimile to (612) 342-7531 and by overnight
mail to Insurer's Office of General Counsel.
(e) SEVERABILITY. It is understood and agreed by the parties to this
Agreement that if any part, term or provision of this Agreement is
held to be invalid or in conflict with any law or regulation, the
validity of the remaining portions or provisions will not be affected,
and the parties' rights and obligations will be construed and enforced
as if this Agreement did not contain the particular part, term or
provision held to be invalid.
(f) GOVERNING LAW. It is agreed by the parties to this Agreement that the
Agreement and all of its provisions will be governed by the laws of
the State of Minnesota.
(g) LIMITATIONS. No party other than Insurer shall have the authority on
behalf of Insurer to make, alter, or discharge any policy, contract,
or certificate issued by insurer, to waive any forfeiture or to grant,
permit, nor extend the time for making any payments nor to guarantee
earnings or rates, nor to alter the forms which Insurer may prescribe
or substitute other forms in place of those prescribed by Insurer, nor
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of Insurer, nor to open any bank
account in the full legal name of Insurer, any derivation thereof or
any tradename thereof.
8. TERRITORY
Broker-Dealer's territory is limited geographically to those jurisdictions in
which the Variable Contracts may lawfully be offered, provided that
Broker-Dealer's right to solicit sales of and to sell the Variable Contracts in
such jurisdictions is not exclusive.
9. EFFECTIVE DATE
This Agreement shall be effective ________________, 199__.
IN WITNESS WHEREOF, we set our hands this ____ day of _________________,
199__.
INSURER:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By: ________________________________
Title: _____________________________
GENERAL DISTRIBUTOR:
WASHINGTON SQUARE SECURITIES, INC.
By: ________________________________
Title: _____________________________
BROKER-DEALER:
____________________________________
By: ________________________________
Title: _____________________________
AGENCY:
____________________________________
By: ________________________________
Title: _____________________________
SCHEDULE A
BROKER/DEALER AGENCY COMPENSATION SCHEDULE
FOR RELIASTAR BANKERS SECURITY VARIABLE CONTRACTS
EFFECTIVE
I
This Compensation Schedule shall be used to determine compensation payable to
the Broker/Dealer under the Broker-Dealer Agency Selling Agreement for Variable
Contracts through Broker-Dealer from the Effective Date of this Schedule until
it is suspended, canceled, changed or replaced.
This Schedule is applicable to the following Variable Contracts:
1. FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY 85-251 AND STATE EXCEPTIONS
Broker-Dealer shall be paid a total dealer concession according to the following
schedule:
ISSUE AGES 0 - 65 ISSUE AGES 66-75
----------------- ----------------
1st Year 90.00% 81.00%
Excess Premium
(1st Year) 3.60% 3.60%
Basic Renewal and
Lifetime Renewal
Commissions 3.60% 3.60%
II
GENERAL RULES PERTAINING TO VARIABLE CONTRACTS
1. CHANGE OF DEALER AUTHORIZATION. No compensation of any kind shall be
payable in respect of Variable Contracts following Insurer's or General
Distributor's receipt of a change of dealer authorization applicable to
such Variable contract.
2. CHANGE IN REPRESENTATIVE'S STATUS. Broker-Dealer agrees that in the event a
Representative ceases to be an associated person of Broker-Dealer or ceases
to be validly licensed or registered, Broker- Dealer shall not receive any
compensation based on any Variable Contract, its values or on premiums or
purchase payments thereafter received by ReliaStar Bankers Security Life
Insurance Company and/or WSSI from such former Representative's customers.
Provided, however, if within 60 days after such Representative ceases to be
a representative of Broker-Dealer, Broker-Dealer designates another
registered representative of Broker-Dealer to service the former
Representative's business, the compensation not paid shall be payable to
Broker-Dealer. If an assigned Representative's replacement is not
designated within such 60 day period, Broker-Dealer may not thereafter
designate a replacement Representative for such Variable contracts and
shall not be entitled to such compensation.
3. EXCLUSIVE COMPENSATION. Broker-Dealer agrees that no compensation of any
kind other than as described herein is payable by Insurer or General
Distributor in respect of Broker-Dealer's sales of Variable Contracts.
4. VESTING. First year commissions and Basic Renewal commissions in respect of
Variable Contracts issued after the effective date and prior to the
termination date of Broker-Dealer's appointment are vested in Broker-Dealer
and will be paid to Broker-Dealer as and when the related premium is
received by the issuer and applied to the Variable Contract issued, and
provided, however, that no First Year commissions or Basic Renewal
Commissions (Policy years 2 through 10), including those on cost of living
or any other policy increases, will be paid after Broker-Dealer's
appointment has been terminated for more than ten years.
5. REPLACEMENT BUSINESS. If any policy is issued to replace a policy
previously issued by Insurer or an affiliate, commissions will accrue only
if and to the extent that Insurer's established practices provide for
commissions on such replacements.
6. COMMISSIONS. Commissions shall accrue on Variable Contracts Issued as and
when premiums are received by Insurer and applied as premiums due or
payable on such policies, except as Insurer's practices may otherwise
provide.
7. CHARGE-BACKS. In any case, where Insurer has credited a commission to
Broker-Dealer on the basis of a premium on a Variable Contract issued and
the premium is returned to the purchaser Insurer will charge back such
commissions.
8. ADDITIONAL BENEFITS AND RIDERS. Commissions will be credited based on
premiums for additional benefits (for example, waiver of premium and term
riders) added at issue of a policy at the same rate as applied to the base
policy premium.
SERVICE CONTRACT
WITH RESPECT TO SHARES OF:
( ) Variable Insurance Products Fund - High Income Portfolio
( ) Variable Insurance Products Fund - Equity-Income Portfolio
( ) Variable Insurance Products Fund - Growth Portfolio
( ) Variable Insurance Products Fund - Overseas Portfolio
( ) Variable Insurance Products Fund II - Investment Grade Bond Portfolio
( ) Variable Insurance Products Fund II - Asset Manager Portfolio
( ) Variable Insurance Products Fund II - Contrafund Portfolio
( ) Variable Insurance Products Fund II - Asset Manager: Growth Portfolio
( ) Variable Insurance Products Fund III - Growth Opportunities Portfolio
( ) Variable Insurance Products Fund III - Balanced Portfolio
( ) Variable Insurance Products Fund III - Growth & Income Portfolio
To Fidelity Distributors Corporation:
We desire to enter into a Contract with you for activities in connection with
the distribution of shares and the servicing of shareholders of the Fund noted
above (the "Fund") of which you are the principal underwriter as defined in the
Investment Company Act of 1940 (the "Act") and for which you are the agent for
the continuous distribution of shares.
THE TERMS AND CONDITIONS OF THIS CONTRACT ARE AS FOLLOWS:
1. We shall provide distribution and certain shareholder services for our
clients who own Fund shares ("clients"), which services may include, without
limitations: sale of shares of the Fund; answering client inquiries regarding
the Fund; assistance to clients in changing dividend options, account
designations and addresses; performance of subaccounting; processing purchase
and redemption transactions, including automatic investment and redemption of
client account cash balances; providing periodic statements showing a client's
account balance and the integration of such statements with other transactions;
arranging for bank wires; and providing such other information and services as
you reasonably may request.
2. We shall provide such office space and equipment, telephone facilities and
personnel (which may be all or any part of the space, equipment and facilities
currently used in our business, or all or any personnel employed by us) as is
necessary or beneficial for providing information and services to shareholders
of the Fund, and to assist you in servicing accounts of clients.
3. We agree to indemnify and hold you, the Fund, and the Fund's adviser and
transfer agent harmless from any and all direct or indirect liabilities or
losses resulting from requests, directions, actions or inactions, of or by us or
our officers, employees or agents regarding the purchase, redemption, transfer
or registration of shares for our clients. Such indemnification shall survive
the termination of this Contract.
Neither we nor any of our officers, employees or agents are authorized to make
any representation concerning Fund shares except those contained in the then
current Fund Prospectus, copies of which will be supplied by you to us; and we
shall have no authority to act as agent for the Fund or for you.
4. In consideration of the services and facilities described herein, we shall be
entitled to receive, and you shall cause to be paid to us by yourself or by
Fidelity Management & Research Company, investment adviser of the Fund, such
fees as are set forth in the accompanying "Fee Schedule for Qualified
Recipients." We understand that the payment of such fees has been authorized
pursuant to a Service Plan approved by the Board of Trustees of the Fund, and
those Trustees who are not "interested persons" of the Fund (as defined in the
Act) and who have no direct or indirect financial interest in the operation of
the Service Plan or in any agreements related to the Service Plan (hereinafter
referred to as "Qualified Trustees"), and shareholders of the Fund, that such
fees will be paid out of the fees paid to the Fund's investment adviser, said
adviser's past profits or any other source available to said adviser; that the
cost of the Fund for such fees shall not exceed the amount of the advisory and
service fee; and that such fees are subject to change during the term of this
Contract and shall be paid only so long as this Contract is in effect.
5. We agree to conduct our activities in accordance with any applicable federal
or state laws, including securities laws and any obligation thereunder to
disclose to our clients the receipt of fees in connection with their investment
in the Fund.
6. You reserve the right, at your discretion and without notice, to suspend the
sale of shares or withdraw the sale of shares of the Fund.
7. This Contract shall continue in force for one year from the effective date
(see below), and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically subject to termination
without penalty at any time if a majority of the Fund's Qualified Trustees vote
to terminate or not to continue the Service Plan. This Contract is also
terminable without penalty at any time the Service Plan is terminated by vote of
a majority of the Fund's outstanding voting securities upon 60 days' written
notice thereof to us. This Contract may also be terminated by us, for any
reason, upon 15 days' written notice to you. Notwithstanding anything contained
herein, in the event that the Service Plan shall terminate or we shall fail to
perform the distribution and shareholder servicing functions contemplated by
this Contract, such determination to be made in good faith by the Fund or you,
this Contract is terminable effective upon receipt of notice thereof by us. This
Contract will also terminate automatically in the event of its assignment (as
defined in the Act).
8. All communications to you shall be sent to you at your offices, 82 Devonshire
Street, Boston, MA 02109. Any notice to us shall be duly given if mailed or
telegraphed to us at the address shown in this Contract.
9. This Contract shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
Very truly yours,
________________________________________________________________________________
Name of Qualified Recipient (Please Print or Type)
________________________________________________________________________________
Street City State Zip Code
By:_____________________________________________________________________________
Authorized Signature
Date:________________________
NOTE: Please return two signed copies of this Service Contract to Fidelity
Distributors Corporation. Upon acceptance, one countersigned copy will be
returned to you.
FOR INTERNAL USE ONLY:
EFFECTIVE DATE: JANUARY 1, 1997
SERVICE AGREEMENT
This Agreement is entered into and effective as of the 1st day of January,
1997, by and between FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC.
("FIIOC") and RELIASTAR LIFE INSURANCE COMPANY, ("Company").
WHEREAS, FIIOC provides transfer agency and other services to Fidelity's
Variable Insurance Products Fund, Variable Insurance Products Fund II and
Variable Insurance Products Fund III (collectively "Funds"); and
WHEREAS, the services provided by FIIOC on behalf of the Funds include
responding to inquires about the Funds, including the provision of information
about the Funds' investment objectives, investment policies, portfolio holdings,
etc.; and
WHEREAS, Company, ReliaStar Bankers Security Life Insurance Company and
Northern Life Insurance Company (together "Affiliates") hold shares of the Funds
in order to fund certain variable annuity contracts, group annuity contracts,
and/or variable life insurance policies, the beneficial interests in which are
held by individuals, plan trustees, or others who look to Affiliates to provide
information about the Funds similar to the information provided by FIIOC; and
WHEREAS, Affiliates and one or more of the Funds have entered into one or
more Participation Agreements, under which Affiliates agree not to provide
information about the Funds except for information provided by the Funds or
their designees; and
WHEREAS, FIIOC desires that Company shall cause Affiliates to be able to
respond to inquiries about the Funds from individual variable annuity owners,
participants in group annuity contracts issued by Affiliates and owners and
participant under variable life insurance polices issued by Affiliates, and
prospective customers for any of the above; and
WHEREAS, FIIOC and Company recognize that Affiliates' efforts in responding
to customer inquiries will reduce the burden that such inquires would place on
FIIOC should such inquiries be directed to FIIOC; and
WHEREAS, FIIOC and Company have previously entered into a similar agreement
and are desirous of replacing said agreement with a new agreement.
NOW, THEREFORE, the parties do agree as follows:
1. INFORMATION TO BE PROVIDED TO AFFILIATES. FIIOC agrees to provide to
Affiliates, on a periodic basis, directly or through a designee, information
about the Funds' investment objectives, investment policies, portfolio holdings,
performance, etc. The content and format of such information shall be as FIIOC,
in its sole discretion, shall choose. FIIOC may change the format and/or content
of such informational reports, and the frequency with which such information is
provided. For purposes of Section 4.2 of each of Affiliates' Participation
Agreement(s) with the Funds, FIIOC represents that it is the designee of the
Funds, and Affiliates may therefore use the information provided by FIIOC
without seeking additional permission from the Funds.
2. USE OF INFORMATION BY AFFILIATES. Affiliates may use the information
provided by FIIOC in communications to individuals, plan trustees, or others who
have legal title or beneficial interest in the annuity or life insurance
products issued by Affiliates, and to prospective purchasers of such products or
beneficial interests thereunder. If such information is contained as part of
larger pieces of sales literature, advertising, etc., such pieces shall be
furnished for review to the Funds in accordance with the terms of Affiliates'
Participation Agreements with the Funds. Nothing herein shall give Affiliates
the right to expand upon, reformat or otherwise alter the information provided
by FIIOC. Affiliates acknowledge that the information, provided them by FIIOC
may need to be supplemented with additional qualifying information, regulatory
disclaimers, or other information before it may be conveyed to persons outside
Affiliates.
3. COMPENSATION TO COMPANY. In recognition of the fact that Company will
cause Affiliates to respond to inquiries that otherwise would be handled by
FIIOC, FIIOC agrees to pay the Affiliates, in proportion to their Fund holdings,
a quarterly fee computed as follows:
At the close of each calendar quarter, FIIOC will determine the Average
Daily Assets held in the Funds by Affiliates. Average Daily Assets shall be the
sum of the daily assets for each calendar day in the quarter divided by the
number of calendar days in the quarter. The Average Daily Assets shall be
multiplied by 0.0004 (4 basis points) and that sum shall be divided by four. The
resulting number shall be the quarterly fee for that quarter, which shall be
paid to Company during the following month.
Should any Participation Agreement(s) between an Affiliate and any Fund(s)
be terminated effective before the last day of a quarter, Company shall be
entitled to a fee for that portion of the quarter during which the Participation
Agreement was still in effect, unless such termination is due to misconduct on
the part of the Affiliate. For such a stub quarter, Average Daily Assets shall
be the sum of the daily assets for each calendar day in the quarter through and
including the date of termination of the Participation Agreement(s), divided by
the number of calendar days in that quarter for which the Participation
Agreement was in effect. Such Average Daily Assets shall be multiplied by 0.0004
(4 basis points) and that number shall be multiplied by the number of days in
such quarter that the Participation Agreement was in effect, then divided by
three hundred sixty-five. The resulting number shall be the quarterly fee for
the stub quarter, which shall be paid to Company during the following month.
Notwithstanding the foregoing, compensation for each calendar quarter will
not exceed one million dollars ($1,000,000).
4. TERMINATION. This Agreement may be terminated by Company at any time
upon written notice to FIIOC. FIIOC may terminate this Agreement at any time
upon ninety (90) days' written notice to Company. FIIOC may terminate this
Agreement immediately upon written notice to Company (1) if required by any
applicable law or regulation, (2) if so required by action of the Fund(s) Board
of Trustees, (3) if Company engages in any material breach of this Agreement or
(4) if an Affiliate engages in any conduct which would constitute a material
breach of this Agreement were the Affiliate a party to the Agreement. This
Agreement shall terminate immediately and automatically with respect to an
Affiliate upon the termination of that Affiliate's Participation Agreement(s)
with the Funds, and in such event no notice need be given hereunder.
5. INDEMNIFICATION. Company agrees to indemnify and hold harmless FIIOC for
any misuse by any Affiliate, their agents and/or brokers, and any persons
controlling Company, under common control with Company, or controlled by
Company, of the information provided by FIIOC under this Agreement.
6. APPLICABLE LAW. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
7. ASSIGNMENT. This Agreement may not be assigned, except that it shall be
assigned automatically to any successor to FIIOC as the Funds' transfer agent,
and any such successor shall be bound by the terms of this Agreement.
8. TERMINATION OF EARLIER AGREEMENT. Company and FIIOC agree that the
previous Service Agreement between the parties, dated November 1, 1995, be, and
it hereby is, terminated as of the date of this Agreement.
IN WITNESS WHEREOF, the parties have set their hands as of the date first
written above.
FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC.
By: ___________________________
Thomas J. Fryer
Vice President
RELIASTAR LIFE INSURANCE COMPANY
By: ___________________________
Name: ___________________________
Title: ___________________________
FEE SCHEDULE FOR QUALIFIED RECIPIENTS OF
Variable Insurance Products Fund - High Income Portfolio
Variable Insurance Products Fund - Equity-Income Portfolio
Variable Insurance Products Fund - Growth Portfolio
Variable Insurance Products Fund - Overseas Portfolio
Variable Insurance Products Fund II - Investment Grade Bond Portfolio
Variable Insurance Products Fund II - Asset Manager Portfolio
Variable Insurance Products Fund II - Contrafund Portfolio
Variable Insurance Products Fund II - Asset Manager: Growth Portfolio
Variable Insurance Products Fund III - Growth Opportunities Portfolio
Variable Insurance Products Fund III - Balanced Portfolio
Variable Insurance Products Fund III - Growth & Income Portfolio
(1) Those who have signed the Service Agreement, who meet the requirements
of paragraph (4) below, and who render distribution, administrative support and
recordkeeping services as described therein, will hereafter be referred to as
"Qualified Recipients."
(2) Qualified Recipients who perform distribution services for their
clients including, without limitations, sale of Portfolio shares, answering
routine client inquiries about the Portfolio(s), completing Portfolio
applications for the client, and producing Portfolio sales brochures or other
marketing materials, will earn a quarterly fee at an annualized rate of 0.06%
(six basis points) of the average aggregate net assets of their clients invested
in the Portfolios.
(3) The fees paid to each Qualified Recipient will be calculated and paid
quarterly. Checks will be mailed to each Qualified Recipient by the 30th of the
following month.
(4) In order to be assured of receiving payment under this Agreement for a
given calendar quarter, a Qualified Recipient must have insurance company
clients with a minimum of $100 million of average net assets in the aggregate in
the mutual fund portfolios shown below. For any calendar quarter during which
assets in these portfolios are in the aggregate less than $100 million, the
amount of qualifying assets may be considered to be zero for the purpose of
computing the payments due.
Variable Insurance Products Fund - Equity-Income Portfolio
Variable Insurance Products Fund - Growth Portfolio
Variable Insurance Products Fund - Overseas Portfolio
Variable Insurance Products Fund II - Asset Manager Portfolio
Variable Insurance Products Fund II - Contrafund Portfolio
Variable Insurance Products Fund II - Asset Manager: Growth Portfolio
Variable Insurance Products Fund III - Growth Opportunities Portfolio
Variable Insurance Products Fund III - Balanced Portfolio
Variable Insurance Products Fund III - Growth & Income Portfolio
PARTICIPATION AGREEMENT
AMONG
PUTNAM VARIABLE TRUST
PUTNAM MUTUAL FUNDS, CORP.
AND
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 8th day of January, 1997,
by and among RELIASTAR BANKERS SECURITY COMPANY (hereinafter the "Company"), a
New York corporation, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each such account hereinafter referred to as the "Account"), and
PUTNAM VARIABLE TRUST, a Massachusetts business trust organized under the laws
of Massachusetts (hereinafter the "Trust") and PUTNAM MUTUAL FUNDS CORP.
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Trust engages in business as an open-end diversified
management investment company and is available to act as the investment vehicle
for separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, the "Variable Insurance Products") to
be offered by insurance companies which have entered into Participation,
agreements with the Trust and the Underwriter (hereinafter "Participating
Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission, dated December 29, 1993 (File No. 812-8612) granting the Company and
certain variable annuity and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the
Investment Company Act of 1940, as amended (hereinafter the "1940 Act"), and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Trust to be sold to and held by certain variable annuity
and variable life insurance separate account of the Company (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and the sale of its shares is registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Putnam Investment Management, Inc. (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940; and
WHEREAS, the Company has registered or will register certain variable life
and variable annuity contracts under the 1933 Act and any applicable state
securities and insurance law; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Funds on behalf of
each Account to fund certain of the aforesaid variable life and variable annuity
contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Trust and the Underwriter agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1 The Underwriter agrees, subject to the Trust's rights under Section
1.2, to sell to the Company those shares of the Trust which each Account orders,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the shares of the
Trust. For purposes of this Section 1.1, the Company shall be the designee of
the Trust for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust receives
notice of such order by 9:30 a.m. Boston time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Trust calculates its net asset value pursuant
to the rules of the Securities and Exchange Commission.
1.2 The Trust agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and its Accounts on
those days on which the Trust calculates its net asset value pursuant to rules
of the Securities and Exchange Commission and the Trust shall use reasonable
efforts to calculate such net asset value on each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Trustees of the
Trust (hereinafter the "Trustees") may refuse to sell shares of any Fund to any
person, or suspend or terminate the offering of shares of any Fund if such
action is required by law or by regulatory authorities having jurisdiction or if
the Trustees determine, in the exercise of their fiduciary responsibilities,
that suspending or terminating the sale of Fund shares would be in the best
interests of shareholders.
1.3 The Trust and the Underwriter agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Fund will be sold to the general public.
1.4 The Trust agrees to redeem its shares in accordance with the terms of
its then current prospectus. For purposes of this Section 1.4, the Company shall
be the designee of the Trust for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for redemption on the
next following Business Day by 9:30 a.m. Boston time.
1.5 The Company agrees to purchase and redeem the shares of each Fund
offered by the then current prospectus of the Trust and in accordance with the
provisions of such prospectus. The Company agrees that all net amounts available
under the variable life and variable annuity contracts with the form number(s)
which are listed on Schedule A attached hereto and incorporated herein by this
reference, as such Schedule A may be amended from time to time hereafter by
mutual written agreement of all the parties hereto (the "Contracts"), shall be
invested in the Trust, in such other registered investment companies advised by
the Adviser ("Putnam Funds") as may be mutually agreed to in writing by the
parties hereto, or in the Company's general account, provided that such amounts
may also be invested in an investment company other than the Trust or a Putnam
Fund if (a) such other investment company was available as a funding vehicle for
the Contracts prior to the date of this Agreement and the Company so informs the
Trust and Underwriter prior to their signing this Agreement; or (b) the Company
gives the Trust and the Underwriter 60 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contract.
1.6 The Company shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, upon receipt by the Trust of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Trust.
1.7 Issuance and transfer of the Trust's shares will be by book entry only.
Share certificates will not be issued to the Company or any Account, Shares
ordered from the Trust will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.8 The Underwriter shall furnish same-day notice (by wire or telephone,
followed by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Underwriter
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.9 The Trust shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that at all times during the term
of this Agreement the Contracts are or will be registered under the 1933 Act;
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and the sale of the
Contracts shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under Section 4240 of the New York
Insurance Laws and has registered or, prior to any issuance or sale of the
Contracts, will register each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2 The Trust represents and warrants that at all times during the term of
this Agreement Trust shares sold pursuant to this Agreement shall be registered
under the 1933 Act, duly authorized for issuance and sold by the Trust to the
Company in compliance with all applicable federal laws and that the Trust is and
shall remain registered under the 1940 Act. The Underwriter represents that
Trust shares are duly authorized for issuance in compliance with the applicable
laws of the State of New York and all applicable state securities laws. The
Trust shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust or the Underwriter in connection with their sale
by the Trust to the Company.
2.3 The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will use its best efforts to maintain such
qualification (under Subchapter M or any successor provision) and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
2.4 The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Trust and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5 To the extent that the Trust decides to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act, it undertakes to have a board of
trustees, a majority of whom are not interested persons of the Trust, approve
any plan under Rule 12b-1 to finance distribution expenses.
2.6 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Trust shares
in accordance with the laws of the State of New York and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8 The Trust represents that it is lawfully organized and validly existing
under the laws of Massachusetts and that it does and will comply in all material
respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered, to the extent required, in all material respects under
all applicable federal and state securities laws and that the Adviser shall
perform its obligations for the Trust in compliance in all material respects
with the laws of the State of New York and any applicable state and federal
securities laws.
2.10 The Trust and Underwriter represent and warrant that all of their
respective directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Trust are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Trust, in an amount not less than the minimal coverage as required
currently by entities subject to the requirements of Rule 17g-1 of the 1940 Act
or related provisions as may be promulgated from time to time. The aforesaid
bond shall include coverage for larceny and embezzlement and shall be issued by
a reputable bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1 The Trust shall provide such documentation (including a final copy of
its prospectus as set in type at the Trust's expense) and other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Trust is amended) to have the prospectus for the
Contracts and the Trust's prospectus printed together in one document (such
printing to be at the Company's expense).
3.2 The Trust's prospectus shall state that the Statement of Additional
Information for the Trust is available from the Underwriter or its designee (or
in the Trust's discretion, the Prospectus shall state that such Statement is
available from the Trust), and the Underwriter (or the Trust), at its expense,
shall print and provide such Statement free of charge to the Company and to any
owner of a Contract or prospective owner who requests such Statement.
3.3 The Trust, at its expense, shall provide the Company with copies of its
proxy material reports to stockholders and other communications to stockholders
in such quantity as the Company shall reasonably require for distributing to
Contract owners.
3.4 The Company shall vote all Trust shares as required by law and the,
Shared Funding Exemptive Order. The Company reserves the right to vote Trust
shares held in any segregated asset account in its own right, to the extent
permitted by law and the Shared Funding Exemptive Order. The Company shall be
responsible for assuring that each of its separate accounts participating in the
Trust calculates voting privileges in a manner consistent with all legal
requirements.
3.5 The Trust will comply with all applicable provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Trust will act in accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of trustees and with whatever rules the Commission may promulgate with
respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Underwriter each piece of sales literature or other promotional material in
which the Trust or its investment adviser or the Underwriter is named at least
15 days prior to its use. No such material shall be used if the Underwriter
objects to such use within five Business Days after receipt of such material.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Trust shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in annual or semi-annual reports or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust or its designee or by the Underwriter, except with the written permission
of the Trust or the Underwriter or the designee of either.
4.3 The Underwriter or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least 15 days prior to its use. No such material shall be used if
the Company or its designee objects to such use within five Business Days after
receipt of such material.
4.4 Neither the Trust nor the Underwriter shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Trust will provide to the Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, and the Underwriter will
provide at least one complete copy of all sales literature and other promotional
materials that relate to the Trust or its shares, excluding sales literature and
other promotional materials relating to separate accounts of other participating
insurance companies, promptly following the filing of such document with the
Securities and Exchange Commission or other regulatory authorities.
4.6 The Company will provide to the Trust and the Underwriter at least one
complete copy of all registration statements, prospectuses, Statements of
Additional Information, reports, solicitations for voting instructions, sales
literature and other promotional materials (to the Underwriter only),
applications for exemptions, requests for no action letters, and all amendments
to any of the above, that relate to the Contracts or each Account, promptly
following the filing of such document with the Securities and Exchange
Commission.
4.7 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all registered representatives.
ARTICLE V. FEES AND EXPENSES
5.1 The Trust and Underwriter shall pay no fee or other compensation to the
Company under this agreement, except that if the Trust or any Fund adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing and such
payments will be made out of existing fees otherwise payable to the Underwriter,
past profits of the Underwriter or other resources available to the Underwriter.
No such payments shall be made directly by the Trust. As of the date of this
Agreement, no such payments are contemplated.
5.2 All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Underwriter, in accordance
with applicable state laws prior to their sale to the Company. The Trust shall
bear the expenses for the cost of registration and qualification of the Trust's
shares, preparation and filing of the Trust's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Trust's shares.
5.3 The Company shall bear the expenses of printing and distributing the
Trust's prospectus in connection with sales of the Contracts and of distributing
the Trust's proxy materials and reports to owners of the Contracts.
5.4 Notwithstanding any other provision of this Agreement, the Trust shall
be responsible for the registration and qualification of its shares and of the
Trust itself under the laws of any jurisdiction only in connection with the
sales of shares directly to the Company. The Trust shall not be responsible, and
the Company shall take full responsibility for, determining any jurisdiction in
which any qualification or registration of Trust shares or the Trust by the
Trust may be required in connection with the sale of the Contracts and advising
the Trust thereof at such time and in such manner as is necessary to permit the
Trust to comply.
ARTICLE VI. DIVERSIFICATION
6.1 Each Fund will maintain a diversified pool of investments that would,
if the Fund were a segregated asset account, satisfy the diversification
provisions of Treas. Reg. Section 1.8175(b)(1) or (2). The Underwriter shall be
jointly and severally liable, with the Trust for any losses, claims, litigation,
damages or expenses resulting to the Company due to the failure to satisfy the
diversification requirements described in this Section 6.1.
ARTICLE VII. POTENTIAL CONFLICTS
7.1 The Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the Contract owners of all
separate accounts investing in the Trust. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities law or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
Contract owners; or (f) a decision by an insurer to disregard the voting
instructions of Contract owners. The Trust shall promptly inform the Company if
the Trustees determine that an irreconcilable material conflict exists and the
implications thereof.
7.2 The Company will report any potential or existing conflicts of which it
is aware to the Board. The Company will assist the Trustees in carrying out
their responsibilities under the Shared Funding Exemptive Order, by providing
the Trustees with all information reasonably necessary for the Trustees to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Trustees whenever Contract owner voting
instructions are disregarded.
7.3 If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take, at the Company's expense, whatever steps
are necessary to remedy or eliminate the irreconcilable material conflict, up to
and including: (1) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Fund and reinvesting such assets in a
different investment medium including (but not limited to) another Fund of the
Trust, or submitting the question whether such segregation should be implemented
to a vote of all affected Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity Contract owners, life insurance
Contract owners, or variable Contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected Contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented, and until the end of
that six month period the Underwriter and Trust shall, to the extent permitted
by law and any exemptive relief previously granted to the Trust, continue to
accept and implement orders by the Company for the purchase (or redemption) of
shares of the Trust.
7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company to disregard Contract
owner voting instructions and that decision represents a minority position that
would preclude a majority vote, then the Company may be required, at the Trust's
direction, to withdraw the affected Account's investment in the Trust; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Until the end of the foregoing six month
period, the Underwriter and Trust shall, to the extent permitted by law and any
exemptive relief previously granted to the Trust, continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Trust.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict. Neither the Trust nor
the Underwriter shall be required to establish a new funding medium for the
Contracts, nor shall the Company be required to do so, if an offer to do so has
been declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict. In the event that the Trustees
determine that any proposed action does not adequately remedy any irreconcilable
material conflict, then the Company will withdraw the Account's investment in
the Trust and terminate this Agreement within six (6) months (or such shorter
period as may be required by law or any exemptive relief previously granted to
the Trust) after the Trustees inform the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
7.7 The responsibility to take remedial action in the event of the
Trustees' determination of a material irreconcilable conflict and to bear the
cost of such remedial action shall be the obligation of the Company, and the
obligation of the Company set forth in this Section 7 shall be carried out with
a view only to the interests of Contract owners.
7.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
7.9 The Company has reviewed the Shared Funding Exemption Order and hereby
assumes all obligations referred to therein which are required, as conditions to
such Order, to be assumed or undertaken by the Company.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a) The Company agrees to indemnify and hold harmless the Trust and the
Underwriter and each of the Trustees, directors of the Underwriter and officers
of the Trust or the Underwriter and each person, if any, who controls the Trust
or the Underwriters within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Trust's shares or
the Contracts or the performance by the parties of their obligations hereunder
and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement, Prospectus or Statement of Additional Information for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by or on behalf
of the Trust for use in the Registration Statement, Prospectus or Statement
of Additional Information for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Trust's
Registration Statement or prospectus, or in sales literature for Trust
shares not supplied by the Company, or persons under its control) or
wrongful conduct of the Company or persons under its control, with respect
to the sale or distribution of the Contracts or Trust Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, prospectus, or sales
literature of the Trust or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Trust or the Underwriter by or on behalf of
the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b) The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party to the extent such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Trust, whichever is applicable.
8.1(c) The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), on the basis of which the Indemnified Party should reasonably
know of the availability of indemnity hereunder in respect of such claim, but
failure to notify the Company of any such claim shall not relieve the Company
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Company
shall be entitled to participate, at its own expense, in the defense of such
action. The Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Company to such party of the Company's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.1(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust Shares or the Contracts or the operation of
the Trust.
8.1(e) The provisions of this Section 8.l shall survive any termination of
this Agreement.
8.2 INDEMNIFICATION BY THE UNDERWRITER
8.2(a) The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in thereof) or settlements are related to the sale or
acquisition of the Trust's shares or the Contracts or the performance by the
parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, Prospectus, Statement of Additional Information or sales
literature of the Trust prepared by or approved by the Trust or
Underwriter(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter or Trust by
or on behalf of the Company for use in the Registration Statement,
Prospectus, or Statement of Additional Information for the Trust or in
sales literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or representations
(other than amendments or representations contained in the Registration
Statement, Prospectus, Statement of Additional Information or sales
literature for the Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Trust, Adviser or Underwriter
or persons under their control, with respect to the sale or distribution of
the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, Prospectus,
Statement of Additional Information or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Trust; or
(iv) arise as a result of any failure, whether intentional or
unintentional or in good faith or otherwise, to comply with the
diversification requirements specified in Article VI of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Underwriter, as limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Underwriter of any such claim
shall not relieve the Underwriter from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Underwriter will be entitled to participate, at its
own expense, in the defense thereof. The Underwriter also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Underwriter to such party of the Underwriter's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Underwriter
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
8.2(d) The Company agrees to promptly notify the Underwriter of the Trust
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.2(e) The provisions of this Section 8.2 shall survive any termination of
this Agreement.
8.3 INDEMNIFICATION BY THE TRUST
8.3(a) The Trust agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Trust) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Trustees or any member
thereof are related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Trust, as limited by and in accordance with the provisions of Sections
8.3(b) and 8.3(c) hereof.
8.3(b) The Trust shall not be liable under the indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Trust, the Underwriter or each Account,
whichever is applicable.
8.3(c) The Trust shall not be liable under this indemnification provision
with respect to any claim made against any Indemnified Party unless such
Indemnified Party shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent) on the basis of which the Indemnified Party should reasonably
know of the availability of indemnity hereunder in respect of such claim, but
failure to notify the Trust of any such claim shall not relieve the Trust from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Trust
will be entitled to participate, at its own expense, in the defense thereof. The
Trust also shall be entitled to assume the defense thereof with counsel
satisfactory to the party named in the action. After notice from the Trust to
such party of the Trust's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Trust will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.3(d) The Company and the Underwriter agree promptly to notify the Trust
of the commencement of any litigation or proceedings against them or any of
their respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts or the sale or acquisition of shares of the
Trust.
8.3(e) The provisions of this Section 8.3 shall survive any termination of
this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice to the
other parties; provided, however, such notice shall not be given earlier than
one year following the date of this Agreement; or
(b) at the option of the Company to the extent that shares of the Funds are
not reasonably available to meet the requirements of the Contracts, provided,
however, that such termination shall apply only to the Fund(s) not reasonably
available. Prompt notice of the election to terminate for such cause shall be
furnished by the Company; or
(c) at the option of the Trust or the Underwriter in the event that formal
administrative proceedings are instituted against the Company by the NASD, the
Securities and Exchange Commission, the Superintendent of Insurance of the State
of New York or any other regulatory body regarding the Company's duties under
this Agreement or related to the sales of the Contracts, with respect to the
operation of any Account, or the purchase of the Trust shares, provided,
however, that the Trust or the Underwriter determines in its sole judgment
exercised in good faith, that any such administrative proceedings will have
material adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(d) at the option of the Company in the event that formal administrative
proceedings are instituted against the Trust or Underwriter by the NASD, the
Securities and Exchange Commission, or any state securities or insurance
department or any other regulatory body, provided, however, that the Company
determines in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Trust or Underwriter to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract owners
having an interest in such Account (or any subaccount) to substitute the shares
of another investment company for the corresponding Fund shares of the Trust in
accordance with the terms of the Contracts for which those Fund shares had been
selected to serve as the underlying investment media. The Company will give 30
days' prior written notice to the Trust of the date of any proposed vote to
replace the Trust's shares; or
(f) at the option of the Company, in the event any of the Trust's shares
are not registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by the Company; or
(g) at the option of the Company, if the Trust ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Trust may fail to so qualify; or
(h) at the option of the Company, if the Trust falls to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of either the Trust or the Underwriter, if (1) the Trust
or the Underwriter, respectively, shall determine, in its sole judgment
reasonably exercised in good faith, that the Company has suffered a material
adverse change in its business or financial condition or is the subject of
material adverse publicity such material adverse change or material adverse
publicity will have a material adverse impact upon the business and operations
of either the Trust or the Underwriter, (2) the Trust or the Underwriter shall
notify the Company in writing of such determination and its intent to terminate
this Agreement, and (3) after considering the actions taken by the Company and
any other changes in circumstances since the giving of such notice, such
determination of the Trust or the Underwriter shall continue to apply on the
sixtieth (60th) day following the giving of such notice, which sixtieth day
shall be the effective date of termination; or
(j) at the option of the Company, if (1) the Company shall determine, in
its sole judgment reasonably exercised in good faith, that either the Trust or
the Underwriter has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity will have a material
adverse impact upon the business and operations of the Company, (2) the Company
shall notify the Trust and the Underwriter in writing of such determination and
its intent to terminate the Agreement, and (3) after considering the actions
taken by the Trust and/or the Underwriter and any other changes in circumstances
since the giving of such notice, such determination shall continue to apply or,
the sixtieth (60th) day following the giving of such notice, which sixtieth day
shall be the effective date of termination; or
(k) at the option of either the Trust or the Underwriter, if the Company
gives the Trust and the Underwriter the written notice specified in Section
1.5(b) hereof and at the time such notice was given there was no notice of
termination outstanding under any other provision of this Agreement; provided,
however, any termination under this Section 10.1(k) shall be effective forty
five (45) days after the notice specified in Section 1.5(b) was given; or
(l) with respect to any Fund, upon 30 days advance written notice from the
Underwriter to the Copmany, upon a decision by the Underwriter to cease offering
shares of the Fund for sale.
10.2 It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 NOTICE REQUIREMENT. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for such termination.
Furthermore,
(a) In the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1(a), 10.1(i), 10.1(j) or 10.1(k) of
this Agreement, such prior written notice shall be given in advance of the
effective date of termination as required by such provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice shall be
given at least ninety (90) days before the effective date of termination.
10.4 EFFECT OF TERMINATION. Notwithstanding any termination of this
agreement, subject to Section 1.2 of this Agreement, the Trust and the
Underwriter shall, at the option of the Company, continue to make available
additional shares of the Trust pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitations subject to Section 1.2 of this Agreement, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
10.5 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Trust and the Underwriter the opinion of counsel for the Company,
reasonably satisfactory to the Trust, to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, subject to Section 1.2
of this Agreement, the Company shall not prevent Contract owners from allocating
payments to a Fund that was otherwise available under the Contracts without
first giving the Trust or the Underwriter 90 days notice of its intention to do
so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
One Post Office Square
Boston, MA 02109
Attention: John R. Verani
If to the Company:
20 Washington Avenue South
Minneapolis, Minnesota 55440
Attention: Robert B. Saginaw
If to the Underwriter:
One Post Office Square
Boston, MA 02109
Attention: General Counsel
ARTICLE XII. MISCELLANEOUS
12.1 A copy of the Agreement and Declaration of Trust of the Fund is on
file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Fund as Trustees and not individually and that the obligations
of or arising out of this instrument are not binding upon any of the Trustees or
shareholders individually but binding only upon the assets and property of the
Fund.
12.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until without the express written
consent of the affected party such time as it may come into the public domain.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable life insurance operations of the Company are
being conducted in a manner consistent with the California Variable Life
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8 Notwithstanding any other provision of this Agreement, the obligations
of the Trust and the Underwriter are several and, without limiting in any way
the generality of the foregoing, neither party shall have any liability for any
action or failure to act by the other party, or any person acting on such other
party's behalf.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
Company:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By its authorized officer,
(SEAL)
By: /S/ RICHARD R. CROWL
--------------------
Name: RICHARD R. CROWL
Title: SENIOR VICE PRESIDENT
AND GENERAL COUNSEL
Date: 1-10-97
Trust:
(SEAL)
PUTNAM VARIABLE TRUST
By its authorized officer,
By: /S/ JOHN R. VERENI
------------------
Name: JOHN R. VERENI
Title: VICE PRESIDENT
Date: 1-16-97
Underwriter:
(SEAL)
PUTNAM MUTUAL FUNDS CORP.
By its authorized officer,
By: /S/ JEFF MILLER
---------------
Name: JEFF MILLER
Title: MANAGING DIRECTOR
Date: 1-16-96
SCHEDULE A
CONTRACTS
1. ReliaStar Bankers Security Variable Life Separate Account I
(a) Flexible Premium Variable Life Insurance Policy. Contract Form Number:
85-251 and State Exceptions.
[LOGO]
ReliaStar Life
Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
May 5, 1997
ReliaStar Bankers Security Life Insurance Company
1000 Woodbury Road, Suite 102
Woodbury, NY 11797
Dear Madam/Sir:
In connection with the proposed registration under the Securities Act of 1933,
as amended, of a flexible premium variable life insurance policy (the "Policy")
and interests in ReliaStar Bankers Security Variable Life Separate Account I
(the "Variable Account"), I have examined documents relating to the
establishment of the Variable Account by the Board of Directors of our
affiliated company, ReliaStar Bankers Security Life Insurance Company (the
"Company"), as a separate account for assets applicable to variable contracts,
pursuant to New York Insurance Law Section 4240, as amended, and the
Registration Statement, on Form S-6 (the "Registration Statement") and I have
examined such other documents and have reviewed such matters as I deemed
necessary for this opinion, and I advise you that in my opinion:
1. The Variable Account is a separate account of the Company duly created
and validly existing pursuant to the laws of the State of New York.
2. The Policy, when issued in accordance with the Prospectus constituting
a part of the Registration Statement and upon compliance with
applicable local law, will be legal and binding obligations of the
Company in accordance with their respective terms.
3. The portion of the assets held in the Variable Account equal to
reserves and other contract liabilities with respect to the Variable
Accounts are not chargeable with liabilities arising out of any other
business the Company may conduct.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Legal Matters" in the
Prospectus constituting a part of the Registration Statement and to the
references to me wherever appearing therein.
Very truly yours,
/s/ Robert B. Saginaw
- ---------------------
Robert B. Saginaw
Counsel
[LOGO]
ReliaStar Life
Insurance Company
20 Washington Avenue South
Minneapolis, MN 55401
May 5, 1997
ReliaStar Bankers Security Life Insurance Company
1000 Woodbury Road, Suite 102
Woodbury, NY 11797
Madam/Sir:
This opinion is furnished in connection with the registration by our affiliated
company, ReliaStar Bankers Security Life Insurance Company, of a flexible
premium variable life insurance policy (the "Contract") under the Securities Act
of 1933, as amended. The Contract, including, if applicable, variations thereof
used in various states, is described in the Prospectus constituting a part of
the Registration Statement on Form S-6, as amended.
The form of Contract was reviewed by me, and I am familiar with the Registration
Statement and Exhibits thereto.
In my opinion:
The illustrations of Accumulation Values, Surrender Charges, Cash
Surrender Values, and Death Benefits, included in the section
entitled, "Illustration of Accumulation Values, Surrender Charges,
Cash Surrender Values, and Death Benefits" in Appendix C of the
Prospectus constituting part of the Registration Statement, based on
the assumptions stated in the illustrations, are consistent with the
provision of the Contract (including, as appropriate, any state
variation thereof). The rate structure of the Contract has not been
designed so as to make the relationship between premiums and benefits,
as shown in the illustrations, appear more favorable to a prospective
purchaser of a Contract for a male age 40 than to prospective
purchasers of the Contract for other ages or for females. In any state
where charges cannot be based upon the insured's sex, the rate
structure of the Contract has not been designed so as to make the
relationship between premium and benefits, as shown in the
illustrations, appear more favorable to a prospective purchaser of the
Contract for an insured age 40 than to prospective purchasers of the
Contract for other ages.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
Prospectus constituting a part of the Registration Statement.
Sincerely,
/s/ Steven P. West, FSA, MAAA
- -----------------------------
Steven P. West, FSA, MAAA
Actuary
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Policy Holders
ReliaStar Bankers Security Variable Life Separate Account I:
We consent to the use in the Pre-Effective Amendment No. 1 to Registration
Statement on Form S-6 (File No. 333-19123) of ReliaStar Bankers Security
Variable Life Separate Account I filed under the Securities Act of 1933 of our
report dated January 31, 1997 on the audit of the financial statements of
ReliaStar Bankers Security Variable Life Separate Account I as of December 31,
1996 and for each of the two years in the period then ended and our report dated
March 31, 1997 on the audit of the financial statements of ReliaStar Bankers
Security Life Insurance Company as of and for the years ended December 31, 1996
and 1995 appearing in the Prospectus, which is a part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
May 6, 1997
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Policyowners
ReliaStar Bankers Security Variable Life Separate Account I:
We consent to the use in the Pre-Effective Amendment No. 1 to Registration
Statement on Form S-6 (File No. 333-19123) of the ReliaStar Bankers Security
Variable Life Separate Account I (formerly Bankers Security Variable Life
Separate Account I) filed under the Securities Act of 1933 and the Investment
Company Act of 1940, respectively, of our report dated February 2, 1995 on the
audit of the statement of operations and changes in net assets of ReliaStar
Bankers Security Variable Life Separate Account I for the year ended December
31, 1994, appearing in the Prospectus, which is part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
/s/ KPMG Peat Marwick LLP
May 8, 1997
RELIASTAR BANKERS SECURITY LIFE INSURANCE COMPANY
POWER OF ATTORNEY OF DIRECTOR AND/OR OFFICER
The undersigned director and/or officer of RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY, a New York corporation, does hereby make, constitute and
appoint RICHARD R. CROWL, MICHAEL S. FISCHER, JAMES E. NELSON, ROBERT B.
SAGINAW, STEWART GREGG, JEFFREY A. PROULX, DEBORAH A. LJUNGKULL AND JODY A. ROSE
and each or any one of them, the undersigned's true and lawful
attorneys-in-fact, with full power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Company to a Registration Statement
or Registration Statements, under the Securities Act of 1933 (1933 Act) and the
Investment Company Act of 1940 (1940 Act) and any other forms applicable to such
registrations, and all amendments, including pre-effective and post-effective
amendments, thereto, to be filed by said Company with the Securities and
Exchange Commission, Washington, DC, in connection with the registration under
the 1933 and 1940 Acts, as amended, of variable annuity and variable life
contracts and accumulation units in related Separate Accounts and to file those
Separate Accounts with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the undersigned's hand
this 18th day of February, 1997.
/S/ R. MICHAEL CONLEY
---------------------
R. Michael Conley
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMTION EXTRACTED FROM THE RELIASTAR
BANKERS SECURITY VARIABLE LIFE SEPARATE ACCOUNT I ANNUAL REPORT FOR THE YEAR
ENDED 12/31/96, ANNUAL REPORT (FORM N-SAR) FILING PURSUANT TO SECTION 15(d) OF
THE 1934 ACT AND SECTION 30 (b) OF THE 1940 ACT, FORM 24F-2 ANNUAL NOTICE OF
SECURITIES SOLD PURSUANT TO RULE 24f-2 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000701383
<NAME> BSL - VARIABLE LIFE
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 20956
<INVESTMENTS-AT-VALUE> 23156
<RECEIVABLES> 0
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</TABLE>
